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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-8022
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CSX CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 62-1051971
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
901 East Cary Street, Richmond, VA. 23219-4031
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (804) 782-1400
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- ------------------------------- -----------------------------
Common Stock, $1 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes (X) No ( )
On January 27, 1995, the aggregate market value of the Registrant's voting
stock held by nonaffiliates was $7.4 billion.
On January 27, 1995, there were 104,734,016 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The Proxy Statement for the annual meeting of security holders on April 25,
1995, for Part III (Items 11, 12 and 13) is incorporated by reference.
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CSX CORPORATION
EDGAR Index - Form 10-K Annual Report
Item No. Page & Note Reference
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PART I
1. Business 4-7, 17-35 and Note 18 to
Consolidated Financial
Statements
2. Properties 4, 17-35 and Notes 7
and 10 to Consolidated
Financial Statements
3. Legal Proceedings Note 15 to Consolidated
Financial Statements
4. Not Applicable
PART II
5. Market for the Registrant's
Common Equity and Related
Stockholder Matters 77-81
6. Selected Financial Data 6-7
7. Management's Discussion and 17-35, and Notes 2, 3,
Analysis of Financial Condition 4, 6, 10, 13, 14,
and Results of Operations and 18 to Consolidated
Financial Statements
8. Financial Statements and
Supplementary Data
The response to this item is
submitted in Item 14.
9. Not Applicable
PART III
10. Directors and Executive Officers 72-76
of the Registrant
11. Executive Compensation (a)
12. Security Ownership of Certain (a)
Beneficial Owners and Management
13. Certain Relationships and Related (a)
Transactions
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CSX CORPORATION
EDGAR Index - Form 10-K Report
Item No. Page & Note Reference
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PART IV
14. Exhibits, Financial Statement
Schedules and Reports on Form 8-K
a. Consolidated Statement of
Earnings for the Years Ended
Dec. 30, 1994, Dec. 31, 1993 and 1992 36
Consolidated Statement of
Cash Flows for the Years Ended
Dec. 30, 1994, Dec. 31, 1993 and 1992 37-38
Consolidated Statement of
Financial Position at
Dec. 30, 1994, Dec. 31, 1993 and 1992 39
Notes to Consolidated Financial
Statements for the Years Ended
Dec. 30, 1994, Dec. 31, 1993 and 1992 40-70
Report of Independent Auditors 71
Index to Exhibits E-1
b. Reports on Form 8-K
None.
(a) Items Number 11, 12 and 13 will be incorporated by reference from the
registrant's 1995 Proxy Statement pursuant to instructions G(1) and
G(3) of the General Instructions to Form 10-K.
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CSX CORPORATE PROFILE
CSX Corporation is an international transportation company offering a
variety of rail, container-shipping, intermodal, trucking, barging, contract
logistics and related services worldwide. In 1994, the company earned $9.6
billion of operating revenue and $1.2 billion of operating income.
CSX Transportation Inc. (CSXT) provides rail transportation and
distribution services over 18,759 route miles and 32,462 track miles in 20
states in the East, Midwest and South; the District of Columbia; and Ontario,
Canada. CSXT is the largest hauler of coal in the United States and handles
one-third of all automobiles manufactured domestically. CSXT accounted for 48%
of CSX's 1994 operating revenue and 75% of operating income.
Sea-Land Service Inc. (Sea-Land) is a worldwide leader in
container-shipping transportation and related trade services. Sea-Land
operates a fleet of 93 container ships and approximately 188,000 containers in
U.S. and foreign trade and serves 120 ports in 80 countries and territories.
Sea-Land contributed 36% of CSX's 1994 operating revenue and 15% of operating
income.
CSX Intermodal Inc. (CSXI), the nation's only full-service, coast-to-
coast intermodal transportation company, operates a network of dedicated
intermodal terminals across North America. The company also offers
comprehensive trucking and chassis management and leasing services. CSXI
provided 9% of CSX's 1994 operating revenue and 5% of operating income.
American Commercial Lines Inc. (ACL) is a leader in barge
transportation, operating 117 towboats and approximately 3,300 barges on both
U.S. and foreign waterways. Additionally, ACL operates marine construction
facilities, river terminals and communication services. ACL accounted for 5%
of CSX's 1994 operating revenue and 5% of operating income.
Customized Transportation Inc. (CTI) is a premier provider of
dedicated contract logistics services. The company offers an array of premium
supply chain management services including distribution, warehousing,
processing and assembly, contract carriage and just-in-time delivery. CTI
provided 2% of CSX's 1994 operating revenue and 1% of operating income.
Non-Transportation: Resort holdings include The Greenbrier in White
Sulphur Springs, W.Va., and the Grand Teton Lodge Company in Moran, Wyo. CSX
Real Property Inc. is responsible for development, sales and leasing of CSX-
owned properties. CSX holds a majority interest in Yukon Pacific Corporation,
which is promoting construction of the Trans-Alaska Gas System (TAGS) to
transport Alaska's North Slope natural gas to Valdez for export to Asian
markets.
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1994 HIGHLIGHTS
CSX Corporation
- Generated return on invested capital in excess of cost of capital
for second consecutive year.
- Produced record free cash flow.
- Posted record financial results in revenue, operating income and
earnings.
- Increased annual dividend payout for 14th consecutive year.
CSX Transportation Inc.
- Achieved historic low operating ratio of 79.9%.
- Posted record operating income and free cash flow.
- Ranked No. 1 among Class I railroads with the lowest occurrence of
train accidents per million train miles.
- Won Chrysler Corporation Gold Pentastar quality service award for
second consecutive year.
Sea-Land Service Inc.
- Posted record earnings in third and fourth quarters.
- Increased loads 9%, to highest level ever.
- Completed major customer-service initiatives in the Asia-Middle
East and South America trades.
- Won Chrysler Corporation Gold Pentastar quality service award.
CSX Intermodal Inc.
- Achieved record volume of 1.3 million loads.
- Posted 15% increase in operating income.
- Initiated direct service between Chicago and New York.
- Completed initial track testing of Iron Highway train concept.
American Commercial Lines Inc.
- Increased operating income 40%, rebounding from 1993's floods.
- Posted record fourth-quarter earnings.
- Achieved record year in safety, reducing injury incident rate 25%.
- Improved northbound shipment volumes.
Customized Transportation Inc.
- Increased revenue 26%.
- Expanded services into new and non-traditional markets.
- Enhanced supply chain management capability through new software
development.
Non-Transportation
- The Greenbrier retained Mobil Five-Star rating for the 34th
consecutive year and the AAA Five-Diamond rating since its
inception 19 years ago.
- The Greenbrier hosted the 1994 Solheim Cup Matches.
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CSX CORPORATION AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(Millions of Dollars, Except Per Share Amounts)
1994(a) 1993(c) 1992 1991(d) 1990
------- ------- ------- ------- -------
SUMMARY OF OPERATIONS
Operating Revenue $ 9,608 $ 8,940 $ 8,734 $ 8,636 $ 8,205
------- ------- ------- ------- -------
Operating Expense 8,376 7,934 7,769 7,782 7,337
Productivity/Restructuring
Charge (b) --- 93 699 755 53
------- ------- ------- ------- -------
Total Operating Expense 8,376 8,027 8,468 8,537 7,390
------- ------- ------- ------- -------
Operating Income $ 1,232 $ 913 $ 266 $ 99 $ 815
------- ------- ------- ------- -------
Earnings (Loss) From
Continuing Operations $ 652 $ 359 $ 20 $ (76) $ 365
======= ======= ======= ======= =======
PER COMMON SHARE
Earnings (Loss) From
Continuing Operations $ 6.23 $ 3.46 $ .19 $ (.75) $ 3.63
======= ======= ======= ======= =======
Cash Dividends $ 1.76 $ 1.58 $ 1.52 $ 1.43 $ 1.40
======= ======= ======= ======= =======
Market Price - High $ 92.38 $ 88.13 $ 73.63 $ 58.00 $ 38.13
- Low $ 63.13 $ 66.38 $ 54.50 $ 29.75 $ 26.00
======= ======= ======= ======= =======
PERCENTAGE CHANGE FROM
PRIOR YEAR
Operating Revenue 7.5% 2.4% 1.1% 5.3% 5.9%
======= ======= ======= ======= =======
Operating Expense 4.3% (5.2)% (.8)% 15.5% 7.5%
======= ======= ======= ======= =======
Operating Expense,
excluding Productivity/
Restructuring Charge 5.6% 2.1% (.2)% 6.1% 6.7%
======= ======= ======= ======= =======
Cash Dividends Per Common
Share 11.4% 3.9% 6.3% 2.1% 9.4%
======= ======= ======= ======= =======
SUMMARY OF FINANCIAL POSITION
Cash, Cash Equivalents and
Short-Term Investments $ 535 $ 499 $ 530 $ 465 $ 609
======= ======= ======= ======= =======
Working Capital (Deficit) $ (840) $ (704) $ (859) $ (942) $ (578)
======= ======= ======= ======= =======
Total Assets $13,724 $13,420 $13,049 $12,798 $12,804
======= ======= ======= ======= =======
Long-Term Debt $ 2,618 $ 3,133 $ 3,245 $ 2,804 $ 3,025
======= ======= ======= ======= =======
Shareholders' Equity $ 3,731 $ 3,180 $ 2,975 $ 3,182 $ 3,541
======= ======= ======= ======= =======
Book Value Per Common
Share $ 35.63 $ 30.53 $ 28.75 $ 31.08 $ 35.93
======= ======= ======= ======= =======
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CSX CORPORATION AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS, CONTINUED
1994(a) 1993(c) 1992 1991(d) 1990
------- ------- ------- ------- -------
EMPLOYEE COUNT (e)
Rail 28,773 29,216 30,916 33,239 35,672
Other 17,974 17,847 16,681 16,644 15,259
------- ------- ------- ------- -------
Total 46,747 47,063 47,597 49,883 50,931
======= ======= ======= ======= =======
See Notes 1, 2 and 4 to Consolidated Financial Statements
(a) In 1994, the state of Florida elected to satisfy its remaining
unfunded obligation issued in 1988 to consummate the purchase of 80
miles of track and right of way. The transaction resulted in an
accelerated pretax gain of $69 million and increased net earnings by
$42 million, 40 cents per share.
(b) In 1993, the company recorded a $93 million pretax charge to
recognize the estimated costs of restructuring certain operations and
functions at its container-shipping unit. The restructuring charge
reduced net earnings by $61 million, 59 cents per share. In 1992,
the company recorded a charge to recognize the estimated costs of
buying out certain trip-based compensation elements paid to train
crews. The pretax charge amounted to $699 million and reduced net
earnings for 1992 by $450 million, $4.38 per share. In 1991, the
company recorded a charge to provide for the estimated costs of
implementing work-force reductions, improvements in productivity and
other cost reductions at its major transportation units. The pretax
charge amounted to $755 million and reduced 1991 net earnings by $490
million, $4.88 per share. In 1990, the company recorded a $53
million restructuring charge related to its container-shipping unit.
On an after-tax basis, the restructuring charge was $36 million, 37
cents per share.
(c) The company revised its estimated annual effective tax rate in 1993
to reflect the change in the federal statutory income tax rate from
34 to 35 percent. The effect of this change was to increase income
tax expense for 1993 by $56 million, 54 cents per share. Of this
amount, $51 million, 48 cents per share, related to applying the
newly enacted statutory income tax rates to deferred tax balances as
of January 1, 1993.
(d) During 1991, the company consummated the sale of a one-third interest
in Sea-Land Orient Terminals Ltd., the sale of the stock of RF&P
Corporation and other investment transactions. After taxes and
minority interest, the transactions resulted in a net gain of $32
million, 32 cents per share.
(e) Employee count based on annual averages.
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CHAIRMAN'S MESSAGE
By most measures, 1994 was an excellent year for CSX. The company
generated $9.6 billion in operating revenue, $1.2 billion in operating income
and $652 million in net earnings - all records and all contributing to CSX
exceeding its cost of capital for the second consecutive year and producing a
record $486 million in free cash flow. Furthermore, each of the company's core
transportation businesses strengthened its competitive position and its long-
term fundamental earning power.
From the standpoint of stock performance, however, 1994 was a
disappointment. After climbing to an all-time high of $92.375 per share in
February, CSX stock finished the year at $69.625, down 15 percent from its
1993 close. We believe external forces - especially rising interest rates and
investor concerns about potential inflation - were largely responsible for the
poor performance of CSX's stock and that of transportation and cyclical stocks
in general. In addition, uncertainty over possible mergers in the rail
industry contributed to the 17 percent average decline in the stock price of
the six largest U.S. railroad companies (excluding CSX).
Even with 1994's price decline, CSX's stock performance for the past
3- and 5-year periods easily exceeded that of the S&P 500 and other broad
market indexes. In fact, CSX's market value has more than doubled over the
past five years, from $3.5 billion at the end of 1989 to nearly $7.3 billion
at the end of 1994.
While disappointed in the performance of CSX stock in 1994, we
believe it is just a matter of time before the company's improving financial
strength and earnings outlook are more fully reflected in its stock price.
Indeed, we have more confidence than ever in CSX's ability to provide superior
shareholder returns over the long term.
Five years of progress
The past year marked the successful completion of a five-year plan to
improve the strength and profitability of our individual business units and,
consequently, the core earning power of CSX. Each of our units made great
strides by re-engineering processes, cutting costs, enhancing service
reliability and improving quality and safety. This progress has enabled CSX to
produce strong, sustainable earnings and free cash flows. Most important, for
the past two years CSX earned in excess of its cost of capital, which we view
as critical to the creation of shareholder value.
Having made great progress in improving the performance of our
individual units, CSX now is beginning to reap the fruits of our efforts to
promote and coordinate cross-unit activities. Increasingly, we are working
across units to reduce costs, improve safety, use technology more effectively,
share market knowledge and pursue opportunities beyond the means of any single
one of our businesses. Much remains to be done before CSX realizes its full
potential, but we are encouraged by the progress our units are making to more
fully leverage the combined strengths of CSX.
Key to our ability to serve customers and create value is the human
element - the vast range of talent, expertise and ingenuity that make this
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company special. With that in mind, CSX is making a concerted effort to
broaden the professional development of our work force. We are committed to
creating within CSX a unique learning environment to enhance the individual
skills and competencies of our people.
We have the resources, knowledge and vision to establish CSX as the
premier provider of global transportation services, a company recognized
worldwide for its ability to create value for its customers, shareholders and
employees. We are determined - indeed, eager - to demonstrate the true
potential of this company. The achievements made by CSX's business units
during 1994 certainly laid a solid foundation for further improvements.
Record results at CSXT
Our railroad, CSX Transportation Inc. (CSXT), recorded the best
performance in its history by continuing to control costs while setting
records in operating income and free cash flow.
Cross-functional performance improvement teams continued to
scrutinize virtually every aspect of the railroad's operation. These teams
have eliminated over $350 million in excess costs over the past three years,
and they are targeting more than $100 million in further cost reductions in
1995.
For the year, CSXT posted an operating ratio slightly below 80
percent, which means that the railroad produced more than 20 cents in
operating income for every dollar of revenue it generated. Though pleased with
its success in improving operating efficiency, CSXT's management team views
its achievement of a record-low operating ratio as merely a milepost along the
path to a significantly better performance in 1995 and beyond.
The railroad undertook a major effort to improve service in 1994 and
began re-engineering key components of its operation to meet customer needs.
By improving the performance and reliability of its locomotive fleet and
reducing cycle times for its car fleet, CSXT continues to enhance asset
utilization and reduce capital spending requirements. The result is a greater
return on invested capital and the ability to meet market needs with smaller
equipment fleets and at less cost.
A strong finish for Sea-Land
At our ocean container-shipping unit, Sea-Land Service Inc. (Sea-
Land), strong traffic across all major trade lanes helped offset the severe
consequences of a second-quarter strike by the Teamsters Union. Absent the
strike, Sea-Land would have posted its best annual earnings ever. The company
ended the year on a particularly strong note, reporting record earnings in
both the third and fourth quarters.
Sea-Land continued to make significant progress reducing costs and
improving profitability during 1994. The company has eliminated over $350
million of expense since the beginning of 1992 and is committed to
strengthening its competitive advantage by further reducing its cost base.
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In 1994, Sea-Land took steps to improve the efficiency of its vessel
operations and inland transportation. The company implemented an automation
process that enhances productivity at its terminals and expanded the coverage
of a dynamic yield management system that identifies optimum cargo selection.
Sea-Land also announced plans to relocate its corporate headquarters
to Charlotte, N.C., and to consolidate divisional functions there by this
summer. In addition to streamlining administration, this centrally managed
approach will enable Sea-Land to respond more effectively to customer needs on
a global basis.
Intermodal strength continues
CSX Intermodal Inc. (CSXI) continued its eight-year record of
improved results, with operating income rising 15 percent to $61 million. CSXI
completed improvements to many of its terminals, initiated direct service
between Chicago and New York City and continued to forge partnerships with
motor carriers, railroads and distributors.
In 1995, CSXI will continue improving and expanding its national
service network to pave the way for future growth. CSXI also plans to begin
field testing its "Iron Highway" integrated train concept, which holds great
promise for making intermodal transportation competitive for distances of 700
miles or less.
Barge line bounces back
Our barge unit, American Commercial Lines Inc. (ACL), rebounded from
1993's flood-impacted downturn to post strong 1994 results. Operating income
rose 40 percent to $63 million on the strength of a robust U.S. economy and
bumper grain harvest. ACL continued to re-engineer its work processes and to
explore river transportation opportunities abroad, similar to its successful
barge operation on the Orinoco River in Venezuela.
CTI aggressively pursues growth
Customized Transportation Inc. (CTI), a logistics company
specializing in supply-chain management, leveraged its reputation as a leading
supplier of contract logistics for the automotive industry to expand its
presence in non-automotive markets. Though the youngest and smallest of CSX's
transportation units, CTI is pursuing aggressive growth targets that are
expected to double its size in five years.
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Pro Forma Net Earnings
---------------------------------------------
(Millions of Dollars, Except Per Share Amounts)
1994 1993 1992
----------- ----------- -----------
Per Per Per
Description (All After Tax) Amt. Share Amt. Share Amt. Share
--------------------------- ---- ----- ---- ----- ---- -----
Net Earnings as Reported $652 $6.23 $359 $3.46 $ 20 $ .19
Accelerated Gain on
So. Florida Track Sale (42) (.40) --- --- --- ---
Statutory Tax Rate Adjustment --- --- 51 .48 --- ---
Restructuring/Productivity Charge --- --- 61 .59 450 4.38
---- ----- ---- ----- ---- -----
Pro Forma Total $610 $5.83 $471 $4.53 $470 $4.57
==== ===== ==== ===== ==== =====
Non-transportation units
Finally, our non-transportation units continued to add value to the
company. Our resorts unit, which includes The Greenbrier in West Virginia and
the Grand Teton Lodge Company in Wyoming, produced strong earnings while
upholding its reputation for unsurpassed quality and service. Meanwhile, our
realty group continued its efforts to obtain the best value for property not
needed for other operations.
Consolidated results
Together, all units enabled CSX to produce record earnings of $652
million, or $6.23 a share. Earnings for 1994 include an after-tax gain of $42
million resulting from an accelerated payment to CSXT by the state of Florida
for track purchased in 1988. The prior year's earnings were impacted by a
restructuring charge and the effect of retroactively applying an increase in
income tax rates. Excluding these items, 1994 earnings rose 30 percent over
the prior year.
We are pleased with the record-breaking results CSX delivered in
1994, and we are confident we will achieve further progress in 1995 and
beyond.
Favorable business climate
For the near term, we see a favorable business climate both in the
United States and abroad. We expect the domestic economy to remain strong,
which would benefit all of our business units, especially our rail, intermodal
and barge operations. We also anticipate that strengthening economic
conditions overseas will aid all of our transportation units, particularly
Sea-Land, which operates in some 80 countries.
We are encouraged by the recent trend by countries all over the world
to reduce government regulation and liberalize trade policies, as is discussed
further in the "Public Policy" section of this report. We are especially
enthusiastic about the North American Free Trade Agreement (NAFTA) and the
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General Agreement on Tariffs and Trade (GATT), which promise to reduce trade
barriers and boost economic growth.
CSX is well situated to take advantage of this favorable trend toward
increased world trade. Through our container-shipping unit, CSX is involved in
many of the fastest-growing regions of the world, including China, Central and
Southeast Asia and Latin America. Also, our rail and barge units move bulk
commodities such as coal, grain and fertilizer bound for export markets, and
much of our intermodal company's business involves moving double-stack trains
of international cargo across North America.
The next five years
For the next five years, the efforts of our individual units will
continue to be guided by their overriding commitment to be the best in their
respective industries. Each is focused on meeting customer requirements by
delivering the highest level of service at the lowest possible cost. And each
is committed to exceeding its cost of capital and providing superior returns.
To reach these objectives, CSX will target increasingly difficult
performance improvement goals. We will continue our relentless efforts to
reduce costs wherever possible, to allocate capital judiciously, to utilize
assets intelligently and to improve safety and service reliability. Continued
success in these areas should enable us to meet our financial targets and to
create as much, if not more, shareholder value in the next five years as we
have over the past five years.
All of our business units operate in challenging environments;
competition is fierce, customer expectations are increasing, and the cost of
capital is rising. But as Winston Churchill said, "Kites rise highest against
the wind - not with it." We welcome the winds of change and the turbulence of
competition; such an unsettled environment inspires our company to soar to new
heights.
Sincerely,
/s/ JOHN W. SNOW
- ----------------
John W. Snow
Chairman and Chief Executive Officer
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PUBLIC POLICY STATEMENT
The 1994 elections were a milestone in American history. The revolt
of the voters against big government sent a new pro-business majority to
Congress with a bold program for reducing the size of government, lowering tax
burdens and lessening the effects of regulation. A similar change also
occurred in many states.
For the business community at large and for CSX in particular, the
most encouraging aspect of this political transformation is the move against
excessive regulation. In recent years the system of federally imposed economic
and environmental regulation has grown at an alarming rate, under both
Republican and Democratic administrations. Some regulations have been proposed
without any showing of need or any realistic relationship to the risks they
seek to prevent.
The new political climate in Washington and in the states offers a
historic opportunity for change. The imperative to reduce the cost of
government to balance the federal budget has forced a re-examination of the
need for regulatory agencies like the Interstate Commerce Commission (ICC),
which regulates railroads, and the Federal Maritime Commission (FMC), which
regulates ocean shipping.
For railroads, already freed from much economic regulation by the
Staggers Act of 1980, the ICC has increasingly become an anachronism. The
renaissance of the railroad industry proves what can be done when excessive
regulation is eliminated; a healthy and competitive rail industry should now
be treated like any other business except in those increasingly rare
situations where there is a strong public purpose for some safety net of
regulatory review.
Maritime Reform
In contrast to the railroads, which operate entirely within the
United States, where they and their competitors are covered by the same laws
and respond to the same economic incentives, the liner carriers operate in
international commerce, where their competitors play by the rules of many
different nations and often are driven by non-economic considerations. Many
who attack the FMC and the current conference system ignore these differences.
While CSX supports a reduction of maritime regulation, we should not
act rashly in a way that would put U.S.-flag carriers at a competitive
disadvantage. Their foreign competitors are often state-owned enterprises or
work in close cooperation with their national governments. If U.S. laws are
made more stringent, the U.S.-flag carriers will obey them, but we can not
expect the same cooperation from foreign carriers.
CSX continues to support a program for maritime reform that either
provides for reasonable payments to help offset the higher costs of operating
under the U.S. flag or allows carriers to reflag vessels with the
understanding that the vessels would be made available to the federal
government for defense purposes in the event of a national emergency.
Authority for five such reflaggings was granted as this report went to press.
That action is encouraging, but it is inconceivable to us that the United
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States would jeopardize its ability to meet its national defense requirements
by refusing to support a U.S. merchant marine. Clearly, U.S. support of
private, U.S.-flag merchant ships would be a far more efficient use of federal
funds than would investing billions of dollars in government-owned vessels.
Rail Passenger Service
The deficit-reduction imperative will force the Congress and the
administration to take a hard look at the need for heavily subsidized rail
passenger service. CSX is required by law to play a somewhat reluctant host to
more Amtrak trains than any other railroad except Conrail. Many are not
justified by public demand, yet they constrict rail capacity or force track
maintenance standards that exceed those needed for freight operations. In
effect, we are obligated by law to subsidize indirectly Amtrak's passenger
service - whose yearly government subsidy now totals nearly a billion dollars.
We hope the new era will bring about a restructuring of Amtrak so that it
operates economically on fewer routes.
The system of excessive regulation also has spilled over into our
judicial system, which has become clogged with litigation. Tort reforms would
lessen the incentive to turn to the courts to solve every dispute.
Congressional review of the Federal Employers' Liability Act (FELA), the
antiquated system under which rail employees are compensated when injured on
the job, could at long last give railroads and their employees the opportunity
to move from this costly, adversarial system of dealing with employee injuries
to the no-fault system of workers compensation used by every other industry.
Finally, CSX plans to work with other businesses to seek a fairer and
less intrusive system of regulation. Fundamentally, we believe there needs to
be dramatic change in the entire approach of government to regulation, so that
regulations are imposed only when a compelling need exists and where the
likely benefits exceed the costs. We support pending legislation that would
require performance standards and realistic cost-benefit assessments of the
real risks involved in perceived environmental hazards or threats to safety.
One message the voters sent to Congress and to their state
legislatures in November is that they agree with Thomas Jefferson: "That
government is best which governs the least." That is a principle that should
direct our approach to government and its regulatory role.
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CSX CORPORATION AND SUBSIDIARIES
FINANCIAL SECTION
A Message to Shareholders on CSX'S Financial Principles
The management of CSX Corporation is dedicated to reporting the
company's financial condition and results of operations in an accurate, timely
and conservative manner in order to give shareholders all the information they
need to make decisions about investment in the company. CSX management also
strives to present to shareholders a clear picture of the company's financial
objectives and the principles that guide its employees in achieving those
goals.
In this section, financial information is presented to assist you in
understanding the sources of earnings and financial resources of the company
and the contributions of the major business units. In addition, certain
information needed to meet the Securities and Exchange Commission's Form 10-K
requirements has been included in the Notes to Consolidated Financial
Statements.
The key objective of CSX is to increase shareholder value by
improving the return on capital invested in its businesses and maximizing free
cash flow. The company defines "free cash flow" as the amount of cash
available for debt service and other purposes generated by operating
activities after deducting capital expenditures, present value of new leases
and cash dividends.
To achieve these goals, managers utilize the following guidelines in
conducting the financial activities of the company:
Capital expenditures -- CSX business units are expected to earn returns on
capital expenditures in excess of the CSX cost of capital, unless such
expenditures are necessary to meet safety, environmental or other regulatory
requirements. Business units that do not earn above the CSX cost of capital
and do not generate an adequate level of free cash flow over an appropriate
period of time will be evaluated for sale or other disposition.
Taxes -- CSX will pursue all available opportunities to pay the lowest
possible federal, state and foreign taxes, consistent with applicable laws and
regulations and the company's obligation to carry a fair share of the cost of
government. CSX also works through the legislative process to keep effective
tax rates as low as possible.
Debt ratings -- The company will strive to maintain its investment grade debt
ratings, which allow cost-effective access to major financial markets
worldwide. The company will work to manage its business operations in a manner
consistent with meeting this objective, including monitoring its debt levels
and the amount of fixed charges it incurs.
Financial instruments -- From time to time the company may employ financial
instruments as part of its risk management program. The objective would be to
manage specific risks and exposures and not to actively trade financial
instruments for profit or loss.
- 15 -
PAGE 16
Dividends -- Every quarter, the cash dividend will be reviewed in light of the
current rate of inflation and competitive dividend yields. The dividend may be
increased periodically if cash flow projections show the higher payout level
could be adequately maintained.
Management's Responsibility for Financial Reporting
The consolidated financial statements of CSX Corporation have been
prepared by management, which is responsible for their content and accuracy.
The statements present the results of operations, cash flows and financial
position of the company in conformity with generally accepted accounting
principles and, accordingly, include amounts based on management's judgments
and estimates.
CSX and its subsidiaries maintain an internal control structure
designed to provide reasonable assurance that assets are safeguarded and that
transactions are properly authorized by management and recorded in conformance
with generally accepted accounting principles. This structure includes
accounting controls, written policies and procedures and a code of corporate
conduct that stresses the highest ethical standards and is routinely
communicated to all employees. This structure also includes an internal audit
staff to monitor the compliance with and effectiveness of established policies
and procedures.
The Audit Committee of the board of directors, which is composed
solely of outside directors, meets periodically with management, internal
auditors and the independent auditors to review audit findings, adherence to
corporate policies and other financial matters.
The firm of Ernst & Young LLP, independent auditors, has been engaged
to audit and report on the company's consolidated financial statements. Its
audit was conducted in accordance with generally accepted auditing standards
and included a review of internal accounting controls to the extent deemed
necessary for the purpose of its report, which appears on page 71.
- 16 -
PAGE 17
ANALYSIS OF OPERATIONS
Through its business units, CSX Corporation operates a unique global
freight transportation network offering rail, container-shipping, intermodal
and inland barge transportation. CSX also provides a range of related
services, including logistics management, warehousing, distribution and inland
marine construction and repair.
CSX units enjoy a major presence in their respective industries,
which gives them the financial stability and market strength to withstand
economic downturns and domestic and international competition. Management
focus is on increasing shareholder returns and generating "economic value
added" (EVA). The EVA concept holds that companies create wealth only when
they generate returns above their cost of capital. Using EVA to measure
financial performance, CSX has reduced costs, utilized assets more
effectively, conserved capital, increased productivity and improved service.
Each unit of CSX is charged with meeting stretch targets for return
on invested capital, operating income and free cash flow. Their efforts to
improve the core earning power of their businesses yielded record results for
CSX in 1994 - generating returns greater than the company's cost of capital.
Discussion of Earnings
Net earnings totaled $652 million, $6.23 per share in 1994, compared
with $359 million, $3.46 per share in 1993, and $20 million, 19 cents per
share, in 1992. Earnings for 1994 included the accelerated recognition of an
after-tax gain of $42 million, 40 cents per share, on a 1988 sale of track in
south Florida. Excluding this gain, earnings for 1994 would have been $610
million, $5.83 per share.
The 1993 results included the effect of a $93 million pretax
restructuring charge to recognize the expense associated with reorganizing and
downsizing the container-shipping unit's European and North American
operations. After taxes, this charge was $61 million, 59 cents per share. Also
in 1993, CSX recognized $51 million, 48 cents per share, of income tax expense
related to applying the newly enacted statutory income tax rate to deferred
tax balances as of Jan. 1, 1993.
Earnings for 1992 included a charge principally to recognize the
estimated costs of buying out certain trip-based compensation paid to train
crews. The pretax charge amounted to $699 million and reduced net earnings for
1992 by $450 million, $4.38 per share.
Excluding the above-mentioned charges and the impact of the tax-rate
change, earnings for 1993 and 1992 would have been $471 million, $4.53 per
share, and $470 million, $4.57 per share, respectively. On a comparable basis,
annual earnings per share in 1994 were $1.30 higher than in 1993 and $1.26
higher than in 1992.
- 17 -
PAGE 18
PRODUCTIVITY/RESTRUCTURING CHARGES
----------------------------------
(Millions of Dollars)
-------------------
1993 1992 1991
---- ---- ----
Provision:
Severance Costs $32 $669 $634
Exit, Settlement and Other Costs 61 30 121
--- ---- ----
Total Provision 93 699 755
--- ---- ----
Payments and Other Reductions:
Severance Costs (24) (293) (634)
Exit, Settlement and Other Costs (42) (30) (121)
--- ---- ----
Balance Dec. 30, 1994 $27 $376 $---
=== ==== ====
Consolidated operating revenue increased to $9.6 billion, 7% higher
than 1993 and 10% above 1992. The higher 1994 revenue was led by the rail
unit's improvement in merchandise traffic and the rebound of coal loadings
from 1993's levels, which were affected adversely by a strike against selected
eastern coal producers. Strong volume at the container-shipping and intermodal
units and a solid second half of the year for the barge company supported
revenue increases across all transportation units.
Compared with 1992, all CSX transportation units generated higher
revenue. These increases were driven by improved economic activity and market
share gains achieved through service improvements.
Consolidated operating expense was $8.4 billion, compared with $8
billion in 1993 and $8.5 billion in 1992. Operating expense in 1993 included
the container-shipping unit's $93 million pretax restructuring charge, while
1992 operating expense included the $699 million pretax productivity charge.
Excluding the restructuring and productivity charges, 1994 operating
expense would have been 6% higher than 1993's expense of $7.9 billion and 8%
higher than 1992's $7.8 billion. Concerted cost-reduction efforts by all CSX
units enabled the company to contain much of the expense associated with
supporting the increased revenue and the effects of inflation. In particular,
significant expense reductions were achieved by Performance Improvement Teams
at the rail and container-shipping units.
Consolidated operating income for 1994 was $1.2 billion. This
compared with $913 million in 1993 and $266 million in 1992, including the
restructuring and productivity charges recorded in both years. Excluding those
charges, operating income would have been $1 billion in 1993 and $965 million
in 1992. The year-to-year comparisons include the impact of 1993's coal strike
and midwest flooding on rail and barge operations, respectively.
- 18 -
PAGE 19
Other income totaled $55 million, compared with $18 million in 1993
and $3 million in 1992. Other income for 1994 reflected the accelerated $69
million net pretax gain on the south Florida track sale, partially offset by
higher fees related to accounts receivable sold and premium payments related
to retiring $300 million of long-term debt. The gain recognition was the
result of the state of Florida prepaying its unfunded obligation to the
company.
Interest expense for 1994 was $281 million, $17 million below 1993's
level. A $312 million net decrease in outstanding debt and lower interest
rates on equipment obligations contributed to the reduced expense compared
with 1993.
Discussion of Cash Flows
Cash provided by operating activities totaled $1.3 billion in 1994.
This compares with $962 million in 1993 and $939 million in 1992. Cash
provided by operating activities, together with proceeds from disposition of
properties, was adequate to fund property additions and cash dividends in 1994
and 1993, as well as to allow a significant reduction of long-term debt in
1994.
Payments related to the 1992 and 1991 productivity charges to
implement two-member crew agreements on the rail system impacted cash provided
by operations in all three years. These agreements, which were successfully
negotiated by the end of 1993, provided for two-member train crews on through-
freight and yard assignments, the buyout of excess positions and buyouts for
productivity fund and short-crew allowances. The company has paid $760 million
related to its 1992 and 1991 productivity charges to date, largely due to the
implementation of these agreements. The rail unit is realizing the
efficiencies and savings anticipated as a result of reducing train crew sizes.
Payments also were made in conjunction with the container-shipping unit's
European and North American restructuring as well as other rail unit severance
programs.
Consistent with its original estimates, CSX expects a significant
decrease in the level of future cash payments for those productivity and
restructuring costs. In management's opinion, existing reserves are adequate
for these payments.
Property additions totaled $875 million for the year, compared with
$768 million in 1993 and $1 billion in 1992, which included $137 million for
the barge company's acquisition of the Valley Line assets. Efforts to reduce
expenses, improve asset utilization and enhance productivity, such as through
Performance Improvement Teams and increased equipment turn times, have helped
hold the line on capital spending in a period of increasing business activity.
CSX committed additional capital in the form of new and renewed
operating leases. The present value of future payments on these additional
equipment and facility leases totaled $116 million in 1994, $108 million in
1993 and $17 million in 1992. New capital investment totaled $991 million in
1994, compared with $876 million in 1993 and $1 billion in 1992.
- 19 -
PAGE 20
Cash dividends per common share rose to $1.76, compared with $1.58 in
1993 and $1.52 in 1992. The annualized dividend rate increased 11% from 1993's
level and 16% from 1992's level. The number of CSX outstanding shares rose
slightly, to 104.7 million, as a result of stock issued under the provisions
of incentive, benefit and dividend reinvestment plans.
In 1995, CSX anticipates continued strong cash flows from core
transportation operations sufficient to meet future operating and capital
needs as well as cash dividends and debt repayments. The company also plans to
continue its successful record of extracting cash value from disposition or
lease of rights of way, real estate and other non-core asset holdings. CSX
expects to have access to financial markets, as necessary, to fund operations,
working capital and other requirements.
Discussion of Financial Position
Cash, cash equivalents and short-term investments totaled $535
million at Dec. 30, 1994. This compares with $499 million and $530 million at
year-end 1993 and 1992, respectively.
The working capital deficit increased $136 million during 1994,
primarily due to higher current maturities of long-term debt. The company had
year-end working capital deficits of $840 million in 1994, $704 million in
1993 and $859 million in 1992.
A working capital deficit is not unusual for CSX and does not
indicate a lack of liquidity. CSX maintains adequate resources to satisfy
current liabilities when they are due and has sufficient financial capacity to
manage its day-to-day cash requirements.
In 1993, working capital was affected by the reclassification of
current deferred income taxes. Under Statement of Financial Accounting
Standards No. 109, CSX reclassified $108 million of its long-term deferred
income tax balances to a current account during 1993 to match the life of this
deferred benefit with the underlying components that gave rise to the deferred
income taxes.
Long-term debt declined $515 million to $2.6 billion in 1994,
reflecting a higher level of scheduled maturities and use of the company's
increased cash flow to reduce outstanding debt. This compared with long-term
debt of $3.1 billion in 1993 and $3.2 billion in 1992. The company issued debt
in 1992 to finance productivity payments and property acquisitions.
The ratio of debt-to-total capitalization was 40.8% at year-end 1994,
compared with 49.2% for 1993 and 51.7% for 1992. Cash provided by operations,
property dispositions and proceeds from the prepayment of its unfunded
obligation by the state of Florida generated the cash available to reduce the
outstanding long-term debt. CSX anticipates using excess cash to continue to
reduce long-term debt over the next two to three years.
- 20 -
PAGE 21
Other Matters
CSX accepts the challenge of addressing its environmental
responsibilities and managing related expenditures. Environmental management
is an important part of CSX's strategic planning. As a result, there is an
active focus on finding the most efficient, cost-effective solutions for
dealing responsibly with waste materials generated from past and present
business operations. These solutions range from simple recycling and cleanup
efforts to high-tech remediation initiatives.
The company is a party to numerous regulatory proceedings and private
actions. These arise from laws governing the remediation of contaminated
property, such as the federal Superfund statute, hazardous waste and
underground storage tank laws, and similar state laws.
The rail unit has been identified, together with other parties, as a
potentially responsible party in a number of governmental investigations and
actions relating to environmentally impaired sites. Such sites frequently
involve other waste generators and disposal companies to whom costs associated
with site investigation and cleanup may be allocated or from whom such costs
may be recovered.
Due to the number of parties involved at many of these sites, the
wide range of costs of the possible remediation alternatives, changing cleanup
technology, the length of time over which these matters develop and evolving
governmental standards, it is not always possible to estimate precisely the
company's liability for the costs associated with the assessment and
remediation of contaminated sites.
The rail unit maintained reserves for 106 environmental sites at
year-end 1994. The company periodically reviews its environmental reserves as
new developments arise to determine whether additional provisions are
necessary. Based on current information, the company believes its reserves are
adequate to meet remedial actions to comply with present laws and regulations.
Although CSX's financial results could be significantly affected in any
quarterly reporting period in which the company incurred substantial remedial
expenses at a number of these and other sites, CSX believes the ultimate
liability for these matters will not materially affect its overall results of
operations and financial condition.
Total expenditures associated with protecting the environment and
remedial environmental cleanup efforts amounted to $39 million in 1994. This
compares with $42 million in 1993 and $27 million in 1992.
CSX employs risk management strategies to address business and
financial market risks. However, CSX currently has no significant hedging or
derivative financial instruments in place as part of its risk management
programs. The company may change this position to respond to evolving business
and market conditions, particularly as such conditions influence interest
rates, fuel costs and foreign currency exposure.
The company monitors the interest rate sensitivity of its portfolio
of investments and borrowings, and from time to time may use financial
instruments to manage the net interest exposure.
- 21 -
PAGE 22
Similarly, CSX monitors fuel oil price volatility and fluctuations in
the value of the U.S. dollar in foreign exchange markets. While the company is
not currently hedging these risks with financial instruments, on occasion it
may do so. CSX's objective in employing such strategies would be to manage
those risks and exposures, not to actively trade financial instruments for
profit or loss.
RESOURCES AVAILABLE DECEMBER 30, 1994
-------------------------------------
(Millions of Dollars)
-------------------
Cash, Cash Equivalents and Short-Term Investments $ 535
Total Credit Lines Available 880
Outstanding Borrowings:
Commercial Paper (501)
-----
Total Liquidity $ 914
-----
Working Capital (Deficit) $(840)
=====
Rail Results
CSX Transportation Inc. (CSXT) posted three consecutive quarters of
record operating income in 1994. These results were due to strong traffic
across virtually all merchandise commodities and continued success in cost
reductions. CSXT also rebounded from the 1993 coal strikes to yield notable
increases in domestic coal tonnage. These results were achieved in spite of
lower export coal loadings.
Rail operating income in 1994 totaled $929 million, $183 million
above 1993's $746 million and $189 million above 1992's comparable $740
million. This latter figure excludes a net productivity charge of $619 million
associated with labor reductions. Including this charge, rail operating income
was $121 million in 1992.
CSXT also achieved an operating ratio, which is the ratio of
operating expense to operating revenue, of 79.9% in 1994, surpassing a major
performance goal of 80% set in 1991. The operating ratio was 83% in 1993 and
83.3% in 1992, excluding the productivity charge.
Operating revenue rose to $4.63 billion, a 6% increase from 1993 and
a 4% increase over 1992, driven primarily by a rebound in domestic coal
tonnage and exceptional merchandise traffic. Rail revenue totaled $4.38
billion in 1993 and $4.43 billion in 1992.
CSXT overcame severe winter conditions in early 1994 and weaker-
than-expected export coal traffic to increase coal tonnage to 153.7 million
tons vs. 144.1 million tons in 1993. Domestic coal shipments rose 8% as
utility demand, driven by the need to rebuild stockpiles depleted from the
1993 strikes and the harsh winter weather, surged during the year. CSXT's
export shipments faced a number of market obstacles, including decreased
demand and increased foreign competition. In 1994, export coal shipments
decreased to 16 million tons from 16.7 million tons in 1993.
- 22 -
PAGE 23
CSXT anticipates a modest recovery in the U.S. export coal market and
slightly better domestic coal loadings in 1995. The implementation of Phase I
of the Clean Air Act in 1995 is expected to provide a net tonnage gain for
CSXT, as an increase in the production of high-quality, low-sulfur coal at
CSXT-served mines should more than offset any displacement caused by the Act.
Total rail merchandise carloads and revenue increased 6% and 5%,
respectively, over 1993 levels, reflecting the strength of the U.S. economy
and successful efforts to expand market share. These same figures both rose
10% vs. 1992's volume and revenue.
CSXT's automotive carloads increased 9% from a strong 1993 traffic
base. This growth, driven by increased U.S. auto production, soaring consumer
demand and improved service, pushed automotive revenue up 7% in 1994.
Demand for plastic products from the auto industry, housing
construction and the consumer goods market helped spur a 4% carload growth in
the chemicals market. Bulk Intermodal Distribution (BIDS) terminals, where
customers transfer and store bulk chemicals, gave CSXT a significant
competitive advantage in this market. The customer response to this service is
reflected in the 5% increase in chemicals revenue for 1994.
Minerals traffic and revenue for the year improved 12% and 10%,
respectively, propelled by growth in highway construction and demand for sand
for auto castings.
Shipments in the food and consumer category, which includes
government traffic and consumer durables, increased 6%, reflecting strong
industrial production, particularly in appliances.
Agricultural products experienced a surge in export grain traffic
late in the year, but it was not enough to offset the devastating effect of
the 1993 floods that caused a short supply of grain through the first three
quarters of 1994. Strong domestic feed grain loadings to the Southeast poultry
farms provided a solid base of traffic during the year. Carloads declined 7%,
while revenue decreased only 3% as a result of favorable yield and mix
changes.
The metals industry enjoyed one of its best years ever, as strong
demand from steel mini-mills led to a 13% carload increase in 1994. New
service packages offered by CSXT improved market share and contributed to a
17% gain in revenue.
Forest products traffic, which includes lumber, paper and
construction materials, improved 2% due to continued housing demand and steady
recovery of the paper business. CSXT's market position in lumber was aided by
the addition of several new lumber distribution centers.
The phosphates and fertilizer category experienced an 11% growth in
traffic as export loads rose with increased foreign demand. The distance CSXT
hauls export shipments of phosphate from Florida's Bone Valley to the Port of
Tampa is far less than that for domestic moves to the U.S. Midwest, leading to
lower revenue-per-carload comparisons.
- 23 -
PAGE 24
Although merchandise traffic experienced significant gains in 1994,
CSXT anticipates continued strength in the principal markets it serves in the
U.S. industrial sector in 1995. Combined with selective price increases, a
modest improvement is expected in merchandise traffic and revenue in 1995.
The rail unit undertook an effort to re-engineer key components of
its service delivery to meet customer needs better and enhance service
reliability in 1994. In the future, the unit hopes to strengthen traffic
levels in the various commodity groups by further satisfying customers through
improved performance.
Rail operating expense for 1994 was $3.7 billion, a 2% increase over
1993 and level with 1992, excluding the previously mentioned 1992 productivity
charge. These results reflect the continuing efforts of the rail unit to
reduce expense and control cost while retaining its customer focus.
Labor and fringe benefits expense increased 2% to $1.83 billion, vs.
$1.8 billion in both 1993 and 1992. Despite the increased traffic levels,
which required a greater number of crew starts, and the impact of a 4% wage
increase, CSXT controlled labor and fringe benefits expense. The company will
continue to implement work-force reductions over the next few years.
As the implementation of two-member crews extends throughout the rail
system, the average crew size continues to fall. At year-end 1994, the average
crew size was 2.5 members. In the next few years, reductions in yard and local
crews will result in an average crew size of 2.25 members.
CSXT, as a participant in national bargaining, is actively engaged in
contract negotiations with rail labor organizations. CSXT seeks to improve the
future competitiveness of its labor force through these negotiations.
CSXT continued to reduce accidents and injuries in 1994, and it
remains one of the safest railroads in the industry. Reportable injuries to
employees were reduced 20% and train accidents fell 21% by year-end, helping
CSXT maintain one of the highest rankings among Class I railroads. The
company's progress in safety not only continues to save lives, but increases
the quality and reliability of rail service while driving out unnecessary
expense.
- 24 -
PAGE 25
CSX CORPORATION AND SUBSIDIARIES
--------------------------------
(All Tables in Millions of Dollars)
Table 1. TRANSPORTATION OPERATING RESULTS
1994
----
Container Elim/
Total Rail Shipping Intermodal Barge Other
------ ------ --------- ---------- ------ -----
Operating Revenue $9,410 $4,625 $3,492 $ 902 $ 449 $ (58)
------ ------ ------ ----- ----- -----
Operating Expense
Labor and Fringe Benefits 3,006 1,828 859 89 104 126
Materials, Supplies and
Other (a) 2,314 918 919 120 191 166
Building and Equipment
Rents 1,088 374 600 67 19 28
Inland Transportation 839 --- 676 553 --- (390)
Depreciation 564 352 132 11 32 37
Fuel 421 224 119 1 40 37
------ ------ ------ ----- ----- -----
Total 8,232 3,696 3,305 841 386 4
------ ------ ------ ----- ----- -----
Operating Income (Loss) $1,178 $ 929 $ 187 $ 61 $ 63 $ (62)
====== ====== ====== ===== ===== =====
Operating Income (Loss)(b) $1,178 $ 929 $ 187 $ 61 $ 63 $ (62)
====== ====== ====== ===== ===== =====
Operating Ratio(b) 79.9% 94.6% 93.2% 86.0%
====== ====== ===== =====
Average Employment 28,773 9,437 1,626 2,644
====== ====== ===== =====
Property Additions and
Present Value of New
Operating Leases $ 958 $ 675 $ 199 $ 50 $ 15 $ 19
====== ====== ====== ===== ===== =====
- 25 -
PAGE 26
1993
----
Container Elim/
Total Rail Shipping Intermodal Barge Other
------ ------ --------- ---------- ------ -----
Operating Revenue $8,767 $4,380 $3,246 $ 793 $ 417 $ (69)
------ ------ ------ ----- ----- -----
Operating Expense
Labor and Fringe Benefits 2,922 1,797 822 81 107 115
Materials, Supplies and
Other (a) 2,158 891 828 108 175 156
Building and Equipment
Rents 1,034 369 559 64 19 23
Inland Transportation 721 --- 608 475 --- (362)
Depreciation 558 352 127 11 29 39
Fuel 413 225 109 1 42 36
Productivity/
Restructuring Charge 93 --- 93 --- --- ---
------ ------ ------ ----- ----- -----
Total 7,899 3,634 3,146 740 372 7
------ ------ ------ ----- ----- -----
Operating Income (Loss) $ 868 $ 746 $ 100 $ 53 $ 45 $ (76)
====== ====== ====== ===== ===== =====
Operating Income (Loss)(b) $ 961 $ 746 $ 193 $ 53 $ 45 $ (76)
====== ====== ====== ===== ===== =====
Operating Ratio(b) 83.0% 94.1% 93.3% 89.2%
====== ====== ===== =====
Average Employment 29,216 9,440 1,510 2,747
====== ====== ===== =====
Property Additions and
Present Value of New
Operating Leases $ 818 $ 576 $ 172 $ 50 $ 13 $ 7
====== ====== ====== ===== ===== =====
- 26 -
PAGE 27
1992
----
Container Elim/
Total Rail Shipping Intermodal Barge Other
------ ------ --------- ---------- ------ -----
Operating Revenue $8,550 $4,434 $3,148 $ 739 $ 443 $(214)
------ ------ ------ ----- ----- -----
Operating Expense
Labor and Fringe Benefits 2,853 1,814 795 70 114 60
Materials, Supplies and
Other (a) 2,165 939 807 110 174 135
Building and Equipment
Rents 1,011 374 558 54 25 ---
Inland Transportation 678 --- 605 454 --- (381)
Depreciation 513 332 117 11 23 30
Fuel 424 235 115 1 47 26
Productivity/
Restructuring Charge 681 619 17 45 --- ---
------ ------ ------ ----- ----- -----
Total 8,325 4,313 3,014 745 383 (130)
------ ------ ------ ----- ----- -----
Operating Income (Loss) $ 225 $ 121 $ 134 $ (6) $ 60 $ (84)
====== ====== ====== ===== ===== =====
Operating Income (Loss)(b) $ 906 $ 740 $ 151 $ 39 $ 60 $ (84)
====== ====== ====== ===== ===== =====
Operating Ratio(b) 83.3% 95.2% 94.7% 86.5%
====== ====== ===== =====
Average Employment 30,916 9,495 1,382 2,905
====== ====== ===== =====
Property Additions and
Present Value of New
Operating Leases $ 986 $ 570 $ 236 $ 28 $ 152 $ ---
====== ====== ====== ===== ===== =====
(a) A portion of intercompany interest income received from the CSX
parent company has been classified as a reduction of materials,
supplies and other, by the container shipping unit. This amount was
$64 million in 1994, 1993 and 1992, respectively, and the
corresponding charge is included in eliminations and other.
(b) Excludes productivity/restructuring charges.
Performance Improvement Team initiatives reduced expenses by more
than $350 million from 1991 through 1994. Besides shrinking the cost base,
this program has helped conserve capital as improvements are realized in
reliability, performance and efficiency throughout the system. All areas of
rail operations and administration - from repair and maintenance of
locomotives and freight cars to purchases of office supplies - were targeted.
Further savings of more than $100 million have been targeted by CSXT for each
of the next three years.
CSXT will continue to lower its cost base in 1995 and beyond through
increased asset utilization, crew-size reductions, improved safety and
continued Performance Improvement Team savings.
- 27 -
PAGE 28
Rail capital additions for 1994 increased to $675 million from 1993's
$576 million and 1992's $570 million. These figures include the present value
of new operating leases. Capital expenditures for roadway improvements,
including track, terminals, technology and other equipment, totaled $401
million, or 59% of the total. CSXT's maintenance-of-way program installed or
replaced 289 miles of rail in 1994, compared with 400 miles in both 1993 and
1992. The remaining rail property additions included $131 million for
locomotives and $143 million for the car fleet.
Table 2. RAIL COMMODITIES BY CARLOADS AND REVENUE
Market
Share (a) Carloads Revenue
(Percent) (Thousands) (Millions of Dollars)
--------- -------------------- ----------------------
1994 1994 1993 1992 1994 1993 1992
---- ----- ----- ----- ----- ------ ------
Automotive 28 354 326 288 $ 493 $ 461 $ 413
Chemicals 39 386 371 356 685 652 619
Minerals 38 419 374 345 365 332 310
Food and Consumer 33 176 166 161 204 196 196
Agricultural Products 28 263 284 264 318 327 297
Metals 28 292 258 225 285 243 219
Forest Products 33 442 435 441 444 442 448
Phosphates and Fertilizer 76 470 423 457 254 256 268
Coal 40 1,678 1,566 1,760 1,465 1,363 1,565
----- ----- ----- ------ ------ ------
Total 4,480 4,203 4,297 4,513 4,272 4,335
===== ===== ===== ------ ------ ------
Other Revenue 112 108 99
------ ------ ------
Total Operating Revenue $4,625 $4,380 $4,434
====== ====== ======
(a) Market Share is defined as CSX carloads versus carloads handled by
all major Eastern railroads.
CSXT reduced its locomotive fleet size by 1% to 2,785 in 1994. Eighty
new locomotives were added to the fleet, including 30 alternating-current (AC)
locomotives. This new AC technology, which provides substantially better
tractive effort, or pulling power, will allow CSXT to replace an average of
two older units in its existing fleet with each new unit. These AC locomotives
are the first of 250 fuel-efficient units to be delivered to CSXT through
1997.
- 28 -
PAGE 29
Rail Assets
(Owned or leased as of December 30, 1994)
-----------------------------------------
Freight Cars
Boxcars 14,718
Open-top hoppers 35,609
Covered hoppers 18,789
Gondolas 20,623
Other cars 15,092
-------
Total 104,831
=======
Locomotives 2,785
Track
Route miles 18,759
Track miles 32,462
In late 1994, CSXT resumed repairing and rebuilding freight cars at
its Raceland Car Shop in Kentucky. The facility plans to refurbish or rebuild
4,000 coal hopper cars in 1995. Notwithstanding this program, enhanced
utilization through improved car turn times will yield a net reduction in the
overall car fleet.
CSXT is engaged in preliminary negotiations to obtain all its
telecommunication services from AT&T. The goal of this transaction would be to
provide CSXT with the strategic opportunity to obtain state-of-the-art
technology, equipment and services from AT&T, without diverting CSXT's capital
and management resources from its core business. The arrangement, if
consummated, would enable CSXT to leverage technological enhancements as they
become available in the rapidly changing telecommunications industry. The
transaction could result in a significant future charge to cover the writedown
of certain telecommunications assets and labor separation costs.
In 1995, CSXT expects to improve equipment utilization further and
increase capital expenditures by approximately 10%, the majority of which will
go to the Raceland car program.
Container-Shipping Results
Volume at Sea-Land Service Inc. surged to record levels in 1994
despite a three-week nationwide Teamsters strike in April that closed Sea-
Land's West Coast operations and disrupted shipments to and from Alaska,
Hawaii and Asia. Although the strike interrupted a solid first half of the
year, Sea-Land finished the year with heavy volume in the third and fourth
quarters.
The unit's ongoing expense reductions, coupled with efficiencies
gained from its Performance Improvement Team efforts and its 1993 Atlantic
restructuring, were tempered by the strike impact on earnings of approximately
$45 million.
- 29 -
PAGE 30
Despite the strike, Sea-Land delivered $187 million of operating
income. This compares with $193 million in 1993, excluding the $93 million
pretax restructuring charge, and $151 million in 1992, excluding a $17 million
pretax productivity charge. Record earnings were posted in the third and
fourth quarters as strengthening economies in Europe, Japan, China and the
Middle East helped revive commercial traffic. Including charges, operating
income was $100 million in 1993 and $134 million in 1992.
Container-shipping operating revenue rose to $3.5 billion, an 8%
improvement over 1993's revenue of $3.25 billion and 11% better than 1992's
$3.15 billion.
Double-digit volume gains over 1993 levels were recorded in the
Pacific, Americas and Asia/Middle East/Europe (AME) trade lanes, while overall
volume increased 9%.
Average revenue per container slipped 3% as competition increased and
cargo mix varied from prior years. Sea-Land anticipates a more favorable
supply/demand ratio in its markets in 1995 as added capacity in most trade
lanes will be offset by significant market growth.
Container volumes in both eastbound and westbound Pacific lanes
increased significantly. Eastbound traffic was driven by increasing consumer
demand in the United States, while westbound gains resulted primarily from a
resurgence in commercial cargoes and increasing military traffic. Sea-Land
expects continued strong volumes during 1995 in the Pacific, propelled by
solid U.S. demand for imports from southeast Asia, China and Hong Kong and
exports to these countries.
An increase in traffic from Central and South America, along with
continued solid U.S. exports, drove the Americas volume up sharply in 1994.
Sea-Land anticipates continued growth in this trade in 1995, especially with
the continuing expansion of the North American Free Trade Agreement (NAFTA).
Strong shipments in the AME service reflected growing trade between
Asia and Europe, and the Middle East and Indian subcontinent.
In all of Sea-Land's markets, rates continue to reflect an intensely
competitive environment. The conference system, which helps to stabilize
pricing in most major trade lanes, is under review by U.S. and international
regulatory authorities.
The recent passage of the General Agreement on Tariffs and Trade
(GATT) will encourage higher levels of international trade. Serving customers
through a global infrastructure, Sea-Land is well positioned to capitalize on
the opportunities presented by GATT and NAFTA.
Sea-Land's operating expense increased 8% to $3.3 billion, compared
with $3.05 billion in 1993 and $3 billion in 1992, excluding restructuring and
productivity charges. Sea-Land's efforts to reroute containers and ships
during the April strike and the post-strike repositioning of equipment for
normal operations, along with the higher traffic volume, resulted in increased
expense in 1994. Including restructuring and productivity charges, total
operating expense was $3.15 billion in 1993 and $3.01 billion in 1992.
- 30 -
PAGE 31
Container-Shipping Assets
(Owned or leased as of December 30, 1994)
Containers
40- and 20-foot dry vans 155,648
45-foot dry vans 9,265
Refrigeration vans 17,467
Other specialized equipment 5,310
-------
Total 187,690
=======
Container ships 93
Terminals
Exclusive-use 8
Preferred berthing rights 15
The increase in the cost of bunker fuel during the summer led to a 9%
rise in fuel expense. In addition, severe winter weather in the northeastern
United States led to higher-than-expected fuel costs in the first quarter of
1994.
Sea-Land's ongoing commitment to lower its cost base by re-
engineering operations resulted in more than $100 million of reduced expense
in 1994, bringing the three-year total to more than $350 million. These
reductions were achieved in terminal operations, maintenance, overhead and,
through the efforts of Performance Improvement Teams, in areas such as parts
inventories, equipment and accounts receivable. Sea-Land plans expense savings
of approximately $100 million in 1995 in areas such as terminal efficiency,
inventory reduction and labor.
Productivity improvement efforts were hampered by the strike as the
percentage of on-time vessel arrivals and lifts per hour declined. Sea-Land
expects these figures to bounce back in 1995. Overall terminal efficiency is
expected to improve with the implementation of Sea-Land's Terminal Automation
System (TAS) over the next few years. This system tracks cargo in the terminal
and is designed to decrease terminal throughput time.
In February 1995, Sea-Land received approval from the Maritime
Administration (MARAD) to reflag five U.S.-flag vessels to the registry of the
Marshall Islands. The unit estimates that this reflagging will result in a net
reduction in annual operating expense of approximately $2.5 million per ship.
Applications to reflag eight more Sea-Land vessels are pending at MARAD. Sea-
Land remains hopeful that Congress will approve legislation authorizing
payments to reimburse or compensate for the additional cost of operating and
maintaining U.S.-flag ships.
Capital additions for 1994 totaled $199 million, including $134
million in expenditures and $65 million in present value of new long-term
operating leases. The total compares with $172 million in 1993 and $236
million in 1992.
In 1994, Sea-Land contracted for the construction of five high-
performance, fuel-efficient container vessels and the modification of three
- 31 -
PAGE 32
Atlantic Class Vessels (ACVs) in its fleet. The three ACV modifications were
completed in 1994; two of the new ships will be delivered late in 1995 and
three in 1996. Approximately $57 million of capital was spent in 1994 on the
first phase of this $315 million vessel program.
The five new vessels will replace capacity in the trans-Pacific trade
while the modified ACVs, which serve the AME trade, will have increased speed
and efficiency with the same effective capacity. These new and refurbished
ships will enable Sea-Land to replace older, higher-cost assets while gaining
efficiency and improving service.
Sea-Land spent $44 million of capital to enhance its rolling stock of
containers and $24 million to upgrade and refurbish terminal facilities. The
remaining portion of capital was dedicated to technology and other areas.
In the fourth quarter of 1994, Sea-Land announced a global
integration program, including a relocation of its corporate headquarters from
Liberty Corner, N.J., to Charlotte, N.C. While the unit's estimate of the
total cost is not yet finalized, it is expected to be approximately $50
million.
Sea-Land will consolidate in Charlotte senior management functions
now performed at its Seattle, Rotterdam and New Jersey offices. This will
allow Sea-Land to streamline much of its administration and increase customer
responsiveness. Sea-Land plans to begin operations in Charlotte during the
summer of 1995.
The earthquake that struck Japan in January 1995 caused considerable
property damage and business disruption to Sea-Land's operation at the Port of
Kobe. Sea-Land responded quickly, becoming the first carrier to resume limited
operations out of Kobe in late February. Sea-Land also started a supplemental
service into the neighboring Port of Osaka and is making greater use of its
terminals in Yokohama, Nagoya and Tokyo. Company officials estimate that the
port will be fully operational by the fall of 1995. Currently, Sea-Land
expects strong traffic in the Pacific trade to largely offset the earthquake's
impact on operations.
Intermodal Results
Operating income at CSX Intermodal Inc. (CSXI) surged to $61 million
in 1994, 15% ahead of 1993's $53 million and 56% better than 1992's $39
million, excluding a productivity charge. Domestic and international traffic
segments both experienced record volume and revenue growth in 1994.
In 1992, CSXT transferred to CSXI $45 million of the productivity
charge related to locomotive-crew buyouts. Including this charge, CSXI
recorded an operating loss of $6 million in 1992.
CSXI launched several new service initiatives in 1994 that increased
its competitiveness and improved customer service. The most notable was the
inauguration in August of daily direct intermodal service between the New York
City area and Chicago.
- 32 -
PAGE 33
Operating revenue totaled $902 million, 14% higher than 1993 and 22%
more than 1992. Domestic loads increased 11% over 1993 levels as a result of
growing shipments from distributors, truckline partners and direct shippers.
International traffic, reflecting increased volumes from ocean carriers, rose
14%.
Intermodal Assets
(Owned or leased as of December 30, 1994)
Equipment
Domestic Containers 3,386
Rail Trailers 9,584
Facilities
CSX Intermodal Terminals 33
Motor Carrier Operations Terminals 28
CSX Services Facilities 18
CSXI forecasts continued volume growth and service expansions during
1995 as customers look for cost-effective transportation solutions. Also,
initiatives are already under way to develop and expand new geographic markets
and service options in 1995.
In 1994, operating expense was $841 million, compared with $740
million in 1993 and $700 million in 1992, excluding the previously mentioned
1992 charge. The higher volumes and initial costs associated with the market
expansion contributed to the increase. Including the 1992 charge, operating
expense was $745 million.
CSXI spent $50 million on capital expenditures in 1994, flat with
1993 and $22 million more than 1992. Improvements in terminals, equipment and
technology were the major focus of spending. Plans for 1995 call for several
major terminal expansions as well as the addition of new terminals at
strategic locations. These projects and others that support CSXI's rapid
growth, such as terminal automation and fleet expansion, are expected to boost
capital spending to almost $70 million in 1995.
CSXI also will continue developing and begin field testing its Iron
Highway intermodal train concept in 1995. This concept employs a continuous
platform with a split-ramp design that allows for rapid drive-on/drive-off
loading, thereby reducing terminal costs and providing a highly reliable,
cost-efficient service. The project made major strides in 1994, including the
completion of track testing and the announcement of line-of-road testing in
two corridors during 1995.
The Iron Highway holds great promise for making intermodal
competitive for motor carrier traffic in both short- and medium-haul
corridors. Traditional intermodal rail economics have not provided this
opportunity.
- 33 -
PAGE 34
Barge Results
Operating income at American Commercial Lines Inc. (ACL) rebounded to
$63 million as a result of northbound traffic growth, cost containment and an
increase in grain traffic and rates late in the year. This income compares
with $45 million in 1993 and $60 million in 1992.
Grain, one of the barge unit's key commodities, was devastated by the
flooding along the Mississippi River system in 1993. The resulting weak grain
market, along with the severe winter weather, created an operating challenge
for the barge line in early 1994. Given this environment, ACL successfully
refocused on non-grain commodities, such as import steel and raw materials for
steel mini-mills.
Total operating revenue at ACL increased 8% to $449 million as a
result of these efforts. This compared with $417 million and $443 million in
1993 and 1992, respectively.
Total volume rose over weak prior-year figures as barge ton miles
totaled 51 billion, an increase of 6 billion over 1993 and 3 billion more than
1992.
Coal tonnage and revenue increased slightly during the year as world
demand languished. ACL expects moderate growth in export coal in 1995 as world
demand strengthens with improved economies in Europe and Japan.
In 1995, the barge unit anticipates increased loadings on the
continued strength of the northbound markets. Also, the record harvest is
expected to push export demand for corn over 2 billion bushels, an increase of
nearly 50% over 1994.
Operating expense increased 4% to $386 million, driven by improved
traffic volumes and higher repair costs. However, 1994's expenses vs. 1992's
were nearly equivalent as the company offset costs associated with increased
volume by improving operating efficiencies. This expense level also reflects
ACL's ongoing re-engineering efforts.
The higher level of barging activity in 1994 increased fuel
consumption 9% while expense declined 5% due to lower prices. Compared with
1992, consumption rose 1% while expense decreased 15%.
Like the rail unit, the barge company has focused considerable
attention on employee safety awareness. In 1994, the incident rate of
reportable injuries to employees improved 25% over 1993.
Capital additions at ACL in 1994 totaled $15 million, compared with
$13 million in 1993 and $152 million in 1992, which included $137 million for
the acquisition of the Valley Line assets. Spending in 1994 focused primarily
on terminal expansions and tanker barges. ACL's capital expenditures in 1995
are expected to increase modestly as the company renews a covered hopper
construction program while continuing to upgrade its chemical tanker fleet.
- 34 -
PAGE 35
Barging Assets
(Owned or leased as of December 30, 1994)
Towboats 117
Barges
Covered/open-top hoppers 3,055
Tankers 240
-----
Total 3,295
=====
Marine Services
River terminals 11
Fleeting operations 15
Shipyards 2
CTI Results
Customized Transportation Inc. (CTI) joined CSX in early 1993 with a
10-year reputation as a leading supplier of contract logistics primarily for
the automotive industry.
Operating income at CTI was $10 million in 1994, compared with $6
million in 1993. CTI generated operating revenue of $182 million in 1994 vs.
$145 million in 1993. Approximately 71% of 1994 revenue was generated from
automotive-related markets. Revenue is expected to grow aggressively over the
next five years as CTI diversifies its customer base to include more non-
automotive clients.
Consolidated Outlook
CSX enters 1995 with confidence and an optimistic outlook. Following
the healthy growth of 1994, world economic expansion is expected to continue
throughout 1995, led by the United States and improved prospects in Japan and
Europe. With the capabilities provided by its global infrastructure, CSX
stands ready to capitalize on the continued economic momentum, and the company
expects to improve its earnings in 1995.
CSX will continue to improve its performance, even though some of its
units are subject to such unpredictable external factors as adverse weather
conditions, work stoppages at major customer facilities and shifting economic
conditions in the U.S. and foreign economies.
CSX, like many other U.S. industrial-based companies, is concerned
about the economic impact of higher interest rates. However, the company's
base of non-economically sensitive commodities, such as coal and agricultural
products, coupled with expense control efforts of its Performance Improvement
Teams, helps CSX weather economic fluctuations.
CSX units are committed to meeting their 1995 stretch targets to
improve operating ratios and returns on invested capital - thus enhancing
their core earning power and increasing shareholder returns. Equally
important, CSX management and employees are committed to continually improving
service for CSX customers worldwide.
- 35 -
PAGE 36
CSX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Millions of Dollars, Except Per Share Amounts)
Fiscal Year Ended
---------------------------------
Dec. 30, Dec. 31, Dec. 31,
1994 1993 1992
------ ------ ------
OPERATING REVENUE
Transportation $9,410 $8,767 $8,550
Non-Transportation 198 173 184
------ ------ ------
Total 9,608 8,940 8,734
------ ------ ------
OPERATING EXPENSE
Transportation 8,232 7,806 7,644
Non-Transportation 144 128 125
Productivity/Restructuring Charge --- 93 699
------ ------ ------
Total 8,376 8,027 8,468
------ ------ ------
OPERATING INCOME 1,232 913 266
Other Income 55 18 3
Interest Expense 281 298 276
------ ------ ------
EARNINGS (LOSS) BEFORE INCOME TAXES 1,006 633 (7)
Income Tax Expense (Benefit) 354 274 (27)
------ ------ ------
NET EARNINGS $ 652 $ 359 $ 20
====== ====== ======
EARNINGS PER SHARE $ 6.23 $ 3.46 $ .19
======= ======= =======
AVERAGE COMMON SHARES
OUTSTANDING (THOUSANDS) 104,652 103,915 102,907
======= ======= =======
COMMON SHARES OUTSTANDING
AT END OF YEAR (THOUSANDS) 104,722 104,143 103,476
======= ======= =======
CASH DIVIDENDS PAID PER COMMON SHARE $ 1.76 $ 1.58 $ 1.52
======= ======= =======
See accompanying Notes to Consolidated Financial Statements.
- 36 -
PAGE 37
CSX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions of Dollars)
Fiscal Year Ended
---------------------------
Dec. 30, Dec. 31, Dec. 31,
1994 1993 1992
------- ------- -------
OPERATING ACTIVITIES
Net Earnings $ 652 $ 359 $ 20
Adjustments to Reconcile Net Earnings to
Cash Provided
Depreciation 577 572 527
Deferred Income Taxes 176 181 (72)
Productivity/Restructuring Charge - Provision --- 93 699
- Payments (159) (293) (445)
Other Operating Activities 56 35 67
Changes in Operating Assets and
Liabilities
Accounts Receivable (60) (15) 145
Materials and Supplies (12) (10) 18
Other Current Assets 32 3 35
Accounts Payable and Other Current
Liabilities 64 37 (55)
----- ----- ------
Cash Provided by Operating Activities 1,326 962 939
----- ----- ------
INVESTING ACTIVITIES
Property Additions (875) (768) (1,041)
Proceeds from Property Dispositions 170 85 75
Short-Term Investments - Net (69) (45) 8
Purchases of Long-Term Marketable Securities (66) (137) ---
Other Investing Activities (21) (5) (27)
----- ----- ------
Cash Used by Investing Activities (861) (870) (985)
----- ----- ------
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PAGE 38
CSX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS, CONTINUED
(Millions of Dollars)
Fiscal Year Ended
---------------------------
Dec. 30, Dec. 31, Dec. 31,
1994 1993 1992
------- ------- -------
FINANCING ACTIVITIES
Short-Term Debt-Net 37 150 (154)
Long-Term Debt Issued 92 81 664
Long-Term Debt Repaid (447) (249) (260)
Cash Dividends Paid (184) (164) (157)
Other Financing Activities 4 14 37
----- ----- -------
Cash (Used) Provided by Financing Activities (498) (168) 130
----- ----- -------
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
(Decrease) Increase in Cash and Cash Equivalents (33) (76) 84
Cash and Cash Equivalents at Beginning of Year 298 374 290
----- ----- -------
Cash and Cash Equivalents at End of Year 265 298 374
Short-Term Investments 270 201 156
----- ----- -------
Cash, Cash Equivalents and Short-Term
Investments at End of Year $ 535 $ 499 $ 530
===== ===== =======
See accompanying Notes to Consolidated Financial Statements.
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PAGE 39
CSX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Millions of Dollars)
Dec. 30, Dec. 31, Dec. 31,
1994 1993 1992
------- ------- -------
ASSETS
Current Assets
Cash, Cash Equivalents and
Short-Term Investments $ 535 $ 499 $ 530
Accounts Receivable 706 668 605
Materials and Supplies 211 199 189
Deferred Income Taxes 151 108 ---
Other Current Assets 62 97 97
------- ------- -------
Total Current Assets 1,665 1,571 1,421
------- ------- -------
Properties and Other Assets
Properties-Net 11,044 10,788 10,636
Affiliates and Other Companies 302 268 264
Other Assets 713 793 728
------- ------- -------
Total Properties and Other Assets 12,059 11,849 11,628
------- ------- -------
Total Assets $13,724 $13,420 $13,049
======= ======= =======
LIABILITIES
Current Liabilities
Accounts Payable and Other Current
Liabilities $ 1,992 $ 1,965 $ 2,066
Current Maturities of Long-Term Debt 312 146 200
Short-Term Debt 201 164 14
------- ------- -------
Total Current Liabilities 2,505 2,275 2,280
------- ------- -------
Long-Term Debt 2,618 3,133 3,245
------- ------- -------
Deferred Income Taxes 2,570 2,341 2,082
------- ------- -------
Long-Term Liabilities and Deferred Gains 2,300 2,491 2,467
------- ------- -------
SHAREHOLDERS' EQUITY
Common Stock, $1 Par Value 105 104 103
Other Capital 1,368 1,307 1,250
Retained Earnings 2,391 1,927 1,729
Minimum Pension Liability Adjustment (133) (158) (107)
------- ------- -------
Total Shareholders' Equity 3,731 3,180 2,975
------- ------- -------
Total Liabilities and
Shareholders' Equity $13,724 $13,420 $13,049
======= ======= =======
See accompanying Notes to Consolidated Financial Statements.
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PAGE 40
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES.
Principles of Consolidation
The Consolidated Financial Statements reflect the results of
operations, cash flows and financial position of CSX and its majority-owned
subsidiaries as a single entity. All significant intercompany accounts and
transactions have been eliminated.
Investments in companies that are not majority-owned are carried at
either cost or equity, depending on the extent of control.
Change in Fiscal Year
Effective January 1, 1994, the company changed its fiscal reporting
period from a calendar year to a fiscal year ending on the last Friday in
December. The financial statements presented are for the fiscal years ended
December 30, 1994, and December 31, 1993 and 1992.
Cash, Cash Equivalents and Short-Term Investments
Cash in excess of current operating requirements is invested in
various short-term instruments carried at cost that approximates market value.
Those short-term investments having a maturity of three months or less at the
date of acquisition are classified as cash equivalents. Cash and cash
equivalents are net of outstanding checks that are funded daily from cash
receipts and maturing short-term investments.
Accounts Receivable
During 1993, a special purpose subsidiary of the company filed a
registration statement with the Securities and Exchange Commission covering
$250 million of Trade Receivable Participation Certificates ("Certificates")
evidencing undivided interests in a trade accounts receivable master trust.
The master trust assets include an ownership interest in a revolving portfolio
of rail freight accounts receivable.
Subsequently, the company issued $200 million of Certificates, at
5.05%, due September 1998. The Certificates are collateralized by $234
million of accounts receivable held in the master trust. The proceeds from
the issuance of the Certificates were used to reduce the amount of accounts
receivable sold under a previous agreement.
In addition, the company has a five-year revolving agreement with a
financial institution to sell with recourse on a monthly basis an undivided
percentage ownership interest in a designated pool of accounts receivable up
to a maximum of $200 million. CSX has retained the collection responsibility
with respect to accounts receivable held in trust or sold.
- 40 -
PAGE 41
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES, Continued
Accounts Receivable, Continued
At December 30, 1994, and December 31, 1993 and 1992, accounts
receivable have been reduced by $372 million, $380 million and $400 million,
respectively, representing Certificates and receivables sold.
The company maintains an allowance for doubtful accounts based upon
the expected collectibility of accounts receivable, including receivables
collateralizing Certificates and receivables sold. Allowances for doubtful
accounts of $84 million, $87 million and $96 million have been applied as a
reduction of accounts receivable at December 30, 1994, and December 31, 1993
and 1992, respectively.
Materials and Supplies
Materials and supplies are carried at average cost.
Properties
Properties are carried principally at cost. Provisions for
depreciation of rail property and equipment are based on estimated useful
service lives of seven to 42 years, computed primarily on the straight-line
composite method. Under this method, ordinary gains and losses on dispositions
are recorded to accumulated depreciation. Provisions for depreciation of
non-rail property and equipment are based on estimated useful service lives of
three to 45 years, computed on the straight-line unit basis method, and gains
and losses on dispositions are recorded in earnings as incurred.
Environmental Costs
Environmental costs that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to remediating an
existing condition caused by past operations, and which do not contribute to
current or future revenue generation, are expensed. Liabilities are recorded
when CSX's responsibility for environmental remedial efforts is deemed
probable, and the costs can be reasonably estimated. Generally, the timing of
these accruals coincides with the completion of a feasibility study or the
company's commitment to a formal plan of action.
Financial Instruments
Derivative financial instruments may be used from time to time by the
company in the management of its interest, foreign currency and commodity
exposures, and are accounted for on an accrual basis. Income and expense are
recorded in the same category as that of the underlying asset or liability.
There were no significant derivative financial instruments outstanding at
December 30, 1994.
- 41 -
PAGE 42
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES, Continued
Gains and losses related to hedges of existing assets or liabilities
are deferred and recognized over the expected remaining life of the related
asset or liability. Gains and losses related to hedges of anticipated
transactions are also deferred and recognized in income in the same period as
the hedged transaction.
Earnings Per Share
Earnings per share are based on the weighted average of common shares
outstanding. Dilution, which could result if all outstanding common stock
equivalents were exercised, is not significant.
Prior-Year Data
Certain prior-year data have been reclassified to conform to the 1994
presentation.
NOTE 2. PRODUCTIVITY AND RESTRUCTURING CHARGES.
1993 Restructuring Charge
The company recorded a $93 million pretax charge in the first quarter
of 1993 to recognize the estimated costs of restructuring certain operations
and functions at its container-shipping unit. Of the total charge, $32
million provided for employee separations and the remaining $61 million
related to various exit and settlement costs. The restructuring charge
reduced net earnings for 1993 by $61 million, 59 cents per share. As of
December 30, 1994, payments totaling $63 million have been recorded as a
reduction of the liability for the restructuring charge.
1992/1991 Productivity Charges
In the fourth quarter of 1991, the company recorded a charge to
provide for the estimated costs of implementing work force reductions,
improvements in productivity and other cost reductions at its major
transportation units. The charge amounted to $755 million on a pretax basis
and reduced 1991 net earnings by $490 million, $4.88 per share. In the second
quarter of 1992, the company recorded a charge principally to recognize the
estimated additional costs of buying out certain trip-based compensation paid
to train crews. The additional pretax charge amounted to $699 million and
reduced net earnings for 1992 by $450 million, $4.38 per share. Of the
combined charges, $1.3 billion was provided for negotiated employee
separations and associated liabilities and $151 million related to various
exit costs and claims expected to result from consolidation of terminal
operations and other negotiated settlements.
The $1.3 billion portion of the combined charges attributable to CSX
Transportation Inc. ("CSXT"), the company's rail unit, includes $1.2 billion
for reductions from three-to-two person train crews and for buying out
productivity funds and short-crew allowances. CSXT has reached labor
- 42 -
PAGE 43
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 2. PRODUCTIVITY AND RESTRUCTURING CHARGES, Continued
agreements across all portions of its rail system where it is allowed to
operate trains with two-member crews.
As of December 30, 1994, payments totaling $760 million have been
recorded as a reduction of the aggregate liabilities for the productivity
charges. The remaining liability consists of $376 million for employee
separations and associated costs.
NOTE 3. OPERATING EXPENSE.
1994 1993 1992
------- ------- -------
Labor and Fringe Benefits $ 3,154 $ 3,055 $ 2,986
Materials, Supplies and Other 2,137 1,977 1,992
Building and Equipment Rent 1,136 1,087 1,062
Inland Transportation 839 721 678
Depreciation 577 572 527
Fuel 421 413 424
Taxes Other Than Income and Payroll Taxes 112 109 100
Productivity/Restructuring Charge --- 93 699
------- ------- -------
Total $ 8,376 $ 8,027 $ 8,468
======= ======= =======
Selling, General and Administrative Expense
Included in Above Items $ 1,299 $ 1,202 $ 1,134
======= ======= =======
NOTE 4. OTHER INCOME.
1994 1993 1992
---- ---- ----
Interest Income $ 57 $ 52 $ 43
Gain on South Florida Track Sale(a) 91 20 7
Net Costs for Accounts Receivable Sold (29) (15) (17)
Minority Interest (21) (14) (15)
Loss on Redemption of Debt (13) --- ---
Equity Earnings of Other Affiliates (10) (7) 2
Miscellaneous (20) (18) (17)
----- ----- -----
Total $ 55 $ 18 $ 3
===== ===== =====
(a) On December 1, 1994, the state of Florida elected to satisfy its
remaining unfunded obligation issued in 1988 to consummate the
purchase of 80 miles of track and right of way. The transaction
resulted in cash proceeds of $102 million and an accelerated pretax
gain of $69 million. The scheduled payment resulted in a $22 million
gain in 1994.
- 43 -
PAGE 44
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 5. INCOME TAXES.
Effective January 1, 1993, the company adopted Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." SFAS
No. 109 superseded SFAS No. 96, "Accounting for Income Taxes," which the
company adopted in 1987. SFAS No. 109 requires that deferred income tax
assets and liabilities be classified as current or non-current based upon the
classification of the related asset or liability for financial reporting. Net
earnings for 1993 were not impacted by the adoption of SFAS No. 109. As
permitted under the new rules, prior-year financial statements have not been
restated.
Earnings from domestic and foreign operations and related income tax
expense are as follows: 1994 1993 1992
----- ----- -----
Earnings (Loss) Before Income
Taxes:
- Domestic $ 893 $ 570 $ (67)
- Foreign 113 63 60
------ ----- -----
Total $1,006 $ 633 $ (7)
====== ===== =====
Income Tax Expense (Benefit):
Current - Federal $ 144 $ 71 $ 27
- Foreign 20 18 15
- State 14 4 3
------ ----- -----
Total Current 178 93 45
------ ----- -----
Deferred - Federal 165 160 (72)
- Foreign 2 1 2
- State 9 20 (2)
------ ----- -----
Total Deferred 176 181 (72)
------ ----- -----
Total Expense (Benefit) $ 354 $ 274 $ (27)
====== ===== =====
- 44 -
PAGE 45
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 5. INCOME TAXES, Continued
Income tax expense reconciled to the tax computed at statutory rates
is as follows:
1994 1993 1992
---- ---- ---- ---- ---- ----
Tax at Statutory Rates $352 35% $222 35% $ (2) (34)%
State Income Taxes 15 1 16 2 1 (a)
Increase in Statutory Rate(b) --- --- 51 8 --- ---
Prior Years' Income Taxes (10) (1) (15) (2) (14) (a)
Other Items (3) --- --- --- (12) (a)
---- ---- ---- ---- ---- ----
Total Expense (Benefit) $354 35% $274 43% $(27) (a)%
==== ==== ==== ==== ==== ====
(a) Percentage is not meaningful.
(b) The company revised its annual effective tax rate in 1993 to reflect the
change in the federal statutory rate from 34 to 35 percent. The effect
of this change was to increase income tax expense by $51 million related
to applying the newly enacted statutory income tax rate to deferred tax
balances as of January 1, 1993.
- 45 -
PAGE 46
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 5. INCOME TAXES, Continued
The significant components of deferred tax assets and liabilities
after considering the adoption of SFAS No. 109 include:
Dec. 30, Dec. 31, Jan. 1,
1994 1993 1993
-------- -------- -------
Deferred Tax Assets
Productivity/Restructuring Charge $ 246 $ 299 $ 375
Employee Benefit Plans 336 351 282
Deferred Gains and Related Rents 166 162 159
Other 330 312 283
------ ------ ------
Total 1,078 1,124 1,099
------ ------ ------
Deferred Tax Liabilities
Accelerated Depreciation 3,045 2,979 2,799
Other 452 378 382
------ ------ ------
Total 3,497 3,357 3,181
------ ------ ------
Net Deferred Tax Liabilities $2,419 $2,233 $2,082
====== ====== ======
In addition to the annual provision for deferred income tax expense,
the change in the year-end net deferred income tax liability balances included
the income tax effect of the minimum pension liability adjustments in 1994,
1993 and 1992.
The company has not recorded domestic deferred or additional foreign
income taxes applicable to undistributed earnings of foreign subsidiaries that
are reinvested. Such earnings amounted to $257 million, $213 million and $188
million at December 30, 1994, and December 31, 1993 and 1992, respectively.
These amounts could become taxable upon their remittance as dividends or upon
the sale or liquidation of these foreign subsidiaries. It is not practical to
determine the amount of net additional income tax that would be payable if
such earnings were repatriated.
Income tax payments during 1994, 1993 and 1992 totaled $175 million,
$92 million and $71 million, respectively.
The company files a consolidated federal income tax return, which
includes its principal domestic subsidiaries. Examinations of the federal
income tax returns of CSX have been completed through 1987. Returns for 1988-
1990 are currently under examination. Management believes adequate provision
has been made for any adjustments that might be assessed.
- 46 -
PAGE 47
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 6. CHANGES IN SHAREHOLDERS' EQUITY.
Common Shares Minimum
Outstanding Common Other Retained Pension
(Thousands) Stock Capital Earnings Liability
------------- ------ ------- -------- ---------
Balance December 31, 1991 102,362 $102 $1,217 $1,866 $ (3)
Net Earnings --- --- --- 20 ---
Dividends - Common --- --- --- (157) ---
Common Stock -
Stock Purchase
and Loan Plan
Stock Issued - Net 103 --- 8 --- ---
Purchase Loans - Net --- --- (3) --- ---
Other Stock Issued - Net 1,011 1 28 --- ---
Minimum Pension Liability --- --- --- --- (104)
------- ---- ------ ------ -----
Balance December 31, 1992 103,476 103 1,250 1,729 (107)
Net Earnings --- --- --- 359 ---
Dividends - Common --- --- --- (164) ---
Common Stock -
Stock Purchase
and Loan Plan
Stock Issued - Net (82) --- (4) --- ---
Purchase Loans - Net --- --- 19 --- ---
Other Stock Issued - Net 749 1 42 --- ---
Minimum Pension Liability --- --- --- --- (51)
Other - Net --- --- --- 3 ---
------- ---- ------ ------ -----
Balance December 31, 1993 104,143 104 1,307 1,927 (158)
Net Earnings --- --- --- 652 ---
Dividends - Common --- --- --- (184) ---
Common Stock -
Stock Purchase
and Loan Plan
Stock Canceled (68) --- (4) --- ---
Purchase Loans - Net --- --- 9 --- ---
Other Stock Issued - Net 647 1 56 --- ---
Minimum Pension Liability --- --- --- --- 25
Other - Net --- --- --- (4) ---
------- ---- ------ ------ -----
Balance December 30, 1994 104,722 $105 $1,368 $2,391 $(133)
======= ==== ====== ====== =====
- 47 -
PAGE 48
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 7. PROPERTIES.
Balance Retirements, Balance
at Beginning Sales and at End
of Year Additions Other Changes of Year
------------ --------- ------------- -------
1994
Property:
Transportation $15,450 $ 846 $(412) $15,884
Non-Transportation 403 29 (1) 431
------- ------ ----- -------
Total $15,853 $ 875 $(413) $16,315
======= ====== ===== =======
Accumulated Depreciation:
Transportation $ 4,961 $ 564 $(364) $ 5,161
Non-Transportation 104 13 (7) 110
------- ------ ----- -------
Total $ 5,065 $ 577 $(371) $ 5,271
======= ====== ===== =======
Properties - December 30, 1994 $11,044
=======
Balance Retirements, Balance
at Beginning Sales and at End
of Year Additions Other Changes of Year
------------ --------- ------------- -------
1993
Property:
Transportation $15,312 $ 747 $(609) $15,450
Non-Transportation 390 21 (8) 403
------- ------ ----- -------
Total $15,702 $ 768 $(617) $15,853
======= ====== ===== =======
Accumulated Depreciation:
Transportation $ 4,973 $ 560 $(572) $ 4,961
Non-Transportation 93 12 (1) 104
------- ------ ----- -------
Total $ 5,066 $ 572 $(573) $ 5,065
======= ====== ===== =======
Properties - December 31, 1993 $10,788
=======
- 48 -
PAGE 49
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 7. PROPERTIES, Continued
Balance Retirement, Balance
at Beginning Sales and at End
of Year Additions Other Changes of Year
------------ --------- ------------- -------
1992
Property:
Transportation $14,783 $1,016 $(487) $15,312
Non-Transportation 393 25 (28) 390
------- ------ ----- -------
Total $15,176 $1,041 $(515) $15,702
======= ====== ===== =======
Accumulated Depreciation:
Transportation $ 4,916 $ 513 $(456) $ 4,973
Non-Transportation 83 14 (4) 93
------- ------ ----- -------
Total $ 4,999 $ 527 $(460) $ 5,066
======= ====== ===== =======
Properties - December 31, 1992 $10,636
=======
NOTE 8. ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES.
Dec. 30, Dec. 31, Dec. 31,
1994 1993 1992
------ ------ ------
Trade Accounts Payable $ 926 $ 917 $ 901
Labor and Fringe Benefits(a) 543 523 727
Income Taxes and Other 337 332 278
Casualty Reserves 186 193 160
------ ------ ------
Total $1,992 $1,965 $2,066
====== ====== ======
(a) Labor and Fringe Benefits includes separation liabilities of $22
million for 1994, $46 million for 1993 and $238 million for 1992.
- 49 -
PAGE 50
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 9. CASUALTY AND OTHER RESERVES, SEPARATION LIABILITIES AND DEFERRED
GAINS.
Long-term liabilities and deferred gains totaled $2.3 billion, $2.49
billion and $2.47 billion at year-end 1994, 1993 and 1992, respectively, and
included casualty reserves; deferred gains; pension and other post-retirement
obligations; productivity/restructuring charge liabilities; and other
liabilities.
Activity related to casualty and other reserves, separation
liabilities and deferred gains is as follows:
Deferred Gains
Casualty -----------------------------
and Other Separation Sale-Leaseback South Florida
Reserves(a) Liabilities(a) Transactions(c) Track Sale(d)
----------- -------------- --------------- -------------
Balance 12/31/91 $ 489 $ 701 $ 347 $ 129
Charged to Expense
and Other Additions 355 669 --- ---
Payments and Other
Reductions (336) (439)(b) (23) (7)
----- ----- ----- -----
Balance 12/31/92 508 931 324 122
Charged to Expense
and Other Additions 331 32 --- ---
Payments and Other
Reductions (275) (321)(b) (24) (20)
----- ----- ----- -----
Balance 12/31/93 564 642 300 102
Charged to Expense
and Other Additions 282 --- --- ---
Payments and Other
Reductions (302) (248)(b) (21) (102)
----- ----- ----- -----
Balance 12/30/94 $ 544 $ 394 $ 279 $ ---
===== ===== ===== =====
(a) Balances include current portions of casualty and other reserves and
separation liabilities, respectively, of $216 million and $22 million
at December 30, 1994; $223 million and $46 million at December 31,
1993; and $190 million and $238 million at December 31, 1992.
(b) Includes reallocation of $156 million in 1994, $95 million in 1993
and $62 million in 1992 to claims and other negotiated settlements.
(c) Deferred gains on sale-leaseback transactions are being amortized
over periods ranging from 2 to 21 years.
- 50 -
PAGE 51
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 9. CASUALTY AND OTHER RESERVES, SEPARATION LIABILITIES AND DEFERRED
GAINS, Continued.
(d) On December 1, 1994, the state of Florida elected to satisfy its
remaining unfunded obligation issued in 1988 to consummate the
purchase of 80 miles of track and right of way. The transaction
resulted in cash proceeds of $102 million and an accelerated pretax
gain of $69 million. The scheduled payment resulted in a $22 million
gain in 1994.
NOTE 10. DEBT AND CREDIT AGREEMENTS.
Type Average
(Maturity Dates) Interest Rates 1994 1993 1992
- ---------------- -------------- ------ ------ ------
Notes Payable
(1995-2021) 9% $1,122 $1,162 $1,242
Debentures
(1997-2022) 9% 649 945 945
Equipment Obligations
(1995-2010) 8% 594 644 672
Commercial Paper 4% 300 300 300
Mortgage Bonds
(1998-2003) 3% 78 84 137
Other Obligations
(1995-2011) 7% 187 144 149
------ ------ ------
Total 8% 2,930 3,279 3,445
Less Debt Due
Within One Year 312 146 200
------ ------ ------
Total Long-Term Debt $2,618 $3,133 $3,245
====== ====== ======
- 51 -
PAGE 52
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 10. DEBT AND CREDIT AGREEMENTS, Continued
During 1994, the company redeemed $300 million of 9.5%, 11.625% and
11.875% Sinking Fund Debentures. The redemption premium, unamortized debt
discount and issuance costs totaling $18 million were charged to expense.
In 1992, CSX issued $200 million of 8.625% debentures due 2022 under
a June 1991 shelf registration to provide for the issuance of up to $250
million of debt securities. In September 1992, the company filed a shelf
registration with the Securities and Exchange Commission to provide for the
issuance, from time to time, of up to $450 million of senior debt securities,
warrants to purchase debt securities or currency warrants. As of December 30,
1994, CSX had issued $250 million of debt under this registration, including
$100 million, 7% notes due 2002 and $150 million, 8.10% debentures due 2022.
The proceeds from the issuance of long-term debt securities in 1992 were
primarily used for the purchase of the assets of the Valley Line companies,
costs for implementation of work force reductions and costs related to
productivity improvements.
The company maintains revolving credit agreements with domestic and
foreign banks (aggregating $880 million) under which there were no borrowings
as of December 30, 1994. Substantially all of these agreements have underlying
debt maturities greater than 12 months. These agreements support $501 million
of privately placed commercial paper outstanding at December 30, 1994, of
which $300 million has been classified as long-term debt based upon the
company's ability and intention to maintain this debt outstanding for at least
one year.
Excluding long-term commercial paper, the company has long-term debt
maturities during the next five years aggregating $312 million in 1995, $487
million in 1996, $79 million in 1997, $119 million in 1998 and $76 million in
1999. Substantially all of the company's rail unit properties are pledged as
security for various rail-related, long-term debt issues.
Commercial paper classified as short-term debt was $201 million at
December 30, 1994, $164 million at December 31, 1993, and $4 million at
December 31, 1992. The average interest rate for the short-term commercial
paper outstanding at year-end was 6% for 1994, 3% for 1993 and 4% for 1992.
The average amount of short-term commercial paper outstanding (average monthly
interest rate) during 1994, 1993 and 1992 was $293 million (4%), $172 million
(3%), and $60 million (4%), respectively. The maximum amount of short-term
commercial paper outstanding was $449 million for 1994, $391 million for 1993
and $201 million for 1992.
Interest payments, net of amounts capitalized, totaled $306 million,
$304 million and $279 million, respectively, for 1994, 1993 and 1992.
- 52 -
PAGE 53
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 11. PREFERRED STOCK.
The company has total authorized preferred stock of 25 million
shares, of which 250,000 shares of Series A have been reserved for issuance,
and 3 million shares of Series B have been reserved for issuance under the
Shareholder Rights Plan. No shares have been issued as of December 30, 1994.
All preferred shares rank senior to common shares both as to
dividends and liquidation preference.
NOTE 12. COMMON STOCK.
The company has a single class of common stock, $1 par value, of
which 300 million shares are authorized. Each share is entitled to one vote in
all matters requiring a vote. The most recent quarterly dividend, paid in
December 1994, was 44 cents per share. For the years ended December 30, 1994,
and December 31, 1993 and 1992, respectively, dividends were paid at the rate
of $1.76, $1.58 and $1.52 per share.
Stock Purchase and Loan Plan
The 1991 Stock Purchase and Loan Plan provided for the issuance of
grants to 153 eligible officers and key employees at December 30, 1994. The
plan allowed for the purchase of common stock and related rights and also
entitled those employees to obtain loans with respect to those shares of
common stock. In July 1991, 2.2 million shares of common stock and related
rights were reserved for issuance under this Plan. Shares were granted in 1991
and 1992 at market price on date of grant. The shares were purchased with a 5%
down payment in the form of cash or recourse loans. The remaining 95% of the
purchase price was in the form of non-recourse loans secured by the shares
issued. The loans bear interest at rates set on the award date and are due on
July 31, 1996. The Plan is intended to further the long-term stability and
financial success of the company by providing a method for eligible employees
to significantly increase their ownership of common stock.
These loans were subject to certain adjustments after a vesting
period if the market price of CSX common stock equaled or exceeded certain
thresholds for a period of 10 consecutive business days. As of December 30,
1994, all interest (less dividends applied to accrued interest) and 25% of
each participant's loan balance has been forgiven.
- 53 -
PAGE 54
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 12. COMMON STOCK, Continued
Transactions involving the 1991 Stock Purchase and Loan Plan are
summarized as follows:
Shares Average
(000's) Price
------- -------
Outstanding at 12/31/91 2,007 $48.33
Granted 213 $64.33
Canceled (110) $48.33
----- ------
Outstanding at 12/31/92 2,110 $49.76
Canceled (82) $48.72
----- ------
Outstanding at 12/31/93 2,028 $40.43
Canceled (68) $65.59
----- ------
Outstanding at 12/30/94 1,960 $36.74
===== ======
1994 1993 1992
---- ---- ----
5% Down Payment Loans Outstanding $ 4 $ 5 $ 5
95% Purchase Loans Outstanding $ 68 $ 77 $100
Average Interest Rate 7.72% 7.72% 7.72%
Compensation Expense for the Year $ 4 $ 48 $ 22
Stock Purchase and Dividend Reinvestment Plans
The 1991 Employees Stock Purchase and Dividend Reinvestment Plan
provides a method and incentive for eligible employees to purchase shares of
common stock at market value by payroll deductions. Officers and key employees
who qualify for the 1991 Stock Purchase and Loan Plan are not eligible to
participate in this Plan. To encourage ownership of the company's stock,
employees receive a 17.65% matching payment on their contributions in the form
of additional stock purchased by the company. Each matching payment of stock
is subject to a two-year holding period. Sale of stock prior to the completion
of the holding period will result in forfeiture of the matching stock purchase
and dividends thereon. At December 30, 1994, there were 409,784 shares of
common stock available for issuance under this Plan.
Under the terms of the company's Dividend Reinvestment and Stock
Purchase Plans adopted in 1981, all employees and shareholders may purchase
CSX common stock at the average of daily high and low sale prices for the five
trading days ending on the day of purchase. To encourage ownership of the
company's stock, employees receive a 5% discount on all purchases under this
program. At December 30, 1994, there were 2,914,164 shares reserved for
issuance under these Plans.
- 54 -
PAGE 55
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 12. COMMON STOCK, Continued
Shareholder Rights Plan
In June 1988, the board of directors of the company adopted a
Shareholder Rights Plan and declared a dividend of one preferred share
purchase right ("right") for each outstanding share of CSX common stock held
as of June 8, 1988. The Shareholder Rights Plan was amended in 1990. Each
right entitles shareholders of record to purchase from the company, until the
earlier of June 8, 1998, or the redemption of the rights, one one-hundredth of
a share of Series B preferred stock at an exercise price of $100, subject to
certain adjustments or, under certain circumstances, to obtain additional
shares of common stock of the company in exchange for the rights. The rights
will not be exercisable or transferable apart from the CSX common stock until
the earlier of 10 days following the public announcement that a person or
affiliated group has acquired or obtained the right to acquire 20% or more of
CSX's common stock; or 10 days following the commencement or announcement of
an intention to make a tender offer or exchange offer, the consummation of
which would result in the ownership by a person or group of 20% or more of the
company's outstanding common stock. The board of directors may redeem the
rights at a price of one cent per right at any time prior to the acquisition
by a person of 20% or more of the outstanding CSX common stock.
1987 Long-Term Performance Stock Plan
The CSX Corporation 1987 Long-Term Performance Stock Plan, which
superseded the 1980 and 1981 stock option plans, provides for awards to a
group of 357 officers and employees. The awards are based on increases in the
current market value of CSX common stock over the market value at date of
grant or the financial performance of CSX, or both. During 1994, 5 million
additional shares of common stock were reserved for issuance under this Plan.
At December 30, 1994, a total of 10,738,768 shares were reserved for
issuance, of which 4,794,498 were available for new grants (1,200,578 at
December 31, 1993). The remaining shares are assigned to outstanding stock
options, Stock Appreciation Rights (SARs) and Performance Share Awards (PSAs).
Transactions involving stock options and SARs are summarized as follows:
- 55 -
PAGE 56
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 12. COMMON STOCK, Continued
Options SARs
-------------------- -------------------
Shares Average Units Average
(000s) Price (000s) Price
------ ------- ----- -------
Outstanding at 12/31/93 3,695 $53.59 284 $31.58
Granted 1,606 $79.97 --- ---
Canceled or Expired (34) $65.62 (4) $29.64
Exercised (164) $49.83 (28) $31.26
----- ------ ----- ------
Outstanding at 12/30/94 5,103 $61.93 252 $31.65
===== ====== ===== ======
Exercisable at 12/30/94 3,507 $53.70 252 $31.65
===== ====== ===== ======
Exercised in 1993 671 $40.05 54 $31.22
===== ====== ===== ======
Exercised in 1992 1,002 $33.18 77 $31.13
===== ====== ===== ======
The value of PSAs is contingent on achievement of performance goals
and completion of certain continuing employment requirements over a three-year
period. Each PSA earned will equal the fair market value of one share of CSX
common stock on the date of payment. At December 30, 1994, there were 588,850
shares reserved for outstanding PSAs.
Stock Award Plan
In 1990, the company implemented a Stock Award Plan whereby all
officers and employees of the company are eligible to receive shares of CSX
common stock as an incentive award. All awards of common stock shall be issued
based on terms and conditions approved by the Compensation Committee of the
company's board of directors. At December 30, 1994, there were 990,208 shares
reserved for issuance under the Plan, of which 664,710 were available for new
grants.
Directors' Stock Plan
In 1992, the board of directors of the company adopted a stock plan
for directors that changes the manner in which fees and retainers are paid. A
minimum of 40% of the retainer fees must be paid in common stock of the
company. In addition to the basic level of payment in stock, each director may
elect to receive up to 100% of the remaining retainer and fees in the form of
common stock of the company. The Plan permits each director to elect to
transfer stock into a trust that will hold the shares until the participant's
death, disability, retirement as a director, other cessation of services as a
director, or change in control of the company. At December 30, 1994, there
were 489,808 shares of common stock reserved for issuance under this Plan.
- 56 -
PAGE 57
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 13. FAIR VALUE OF FINANCIAL INSTRUMENTS.
The following table presents the carrying amounts and estimated fair
values of financial instruments as required by SFAS No. 107, "Disclosures
about Fair Value of Financial Instruments." SFAS 107 defines the fair value
of a financial instrument as the amount at which the instrument could be
exchanged in a current transaction between willing parties.
1994 1993 1992
Carrying Fair Carrying Fair Carrying Fair
Amount Value Amount Value Amount Value
-------- ----- -------- ----- --------- -----
Assets:
Cash, Cash
Equivalents and
Short-Term
Investments $ 535 $ 535 $ 499 $ 499 $ 530 $ 530
Accounts Receivable 706 706 668 668 605 605
Long-Term
Marketable
Securities 119 119 115 115 --- ---
Liabilities:
Accounts Payable 926 926 917 917 901 901
Short-Term Debt 201 201 164 164 14 14
Long-Term Debt 2,930 2,914 3,279 3,585 3,445 3,587
The following methods and assumptions were used by the company in
estimating fair values for financial instruments:
Cash, Cash Equivalents and Short-Term Investments
The carrying amounts approximate fair value because of the short-term
maturity of the instruments.
Current Assets and Current Liabilities
The carrying amounts reported in the statement of financial position
for current assets and current liabilities qualifying as financial instruments
approximate their fair values.
Long-Term Marketable Securities
The fair values of long-term marketable securities were based on the
quoted market prices as of the respective year-end dates.
Long-Term Debt and Short-Term Debt
The carrying amounts of the company's borrowings under its short-term
debt arrangements approximate their fair value. The fair values of the
company's long-term debt have been estimated using discounted cash flow
analyses based upon the company's current incremental borrowing rates for
similar types of borrowing arrangements.
- 57 -
PAGE 58
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 13. FAIR VALUE OF FINANCIAL INSTRUMENTS, Continued
Futures and Options Contracts
The company had no significant hedging of derivative financial
instruments employed at December 30, 1994, and December 31, 1993 and 1992.
NOTE 14. EMPLOYEE BENEFIT PLANS.
Pension Plans
CSX and its subsidiaries have defined benefit pension plans,
principally for salaried personnel. The plans provide for eligible employees
to receive benefits based principally on years of service with the company and
compensation rates near retirement. Contributions to the plans are made on the
basis of not less than the minimum funding standards set forth in the Employee
Retirement Income Security Act of 1974, as amended. Plan assets consist
primarily of common stocks, corporate bonds and cash and cash equivalents.
Pension costs for these plans include the following components:
1994 1993 1992
----- ----- -----
Service Cost $ 36 $ 28 $ 24
Interest Cost on Projected Benefit Obligation 89 88 86
Actual Return on Plan Assets (10) (95) (24)
Net Amortization and Deferral (45) 26 (70)
Foreign Pension Expense 4 4 4
----- ----- -----
Pension Expense $ 74 $ 51 $ 20
===== ===== =====
- 58 -
PAGE 59
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 14. EMPLOYEE BENEFIT PLANS, Continued
The funded status of the plans and the amounts reflected in the
accompanying statement of financial position at year-end are as follows:
1994
-------------------
Assets Benefits
Exceed Exceed
Benefits Assets
Assets and Obligations - -------- --------
Vested Benefits $ 19 $ 994
Non-Vested Benefits 1 58
------ ------
Accumulated Benefit Obligation 20 1,052
Effect of Anticipated Future
Salary Increases 1 125
------ ------
Projected Benefit Obligation 21 1,177
Fair Value of Plan Assets 33 822
------ ------
Funded Status 12 (355)
Unrecognized Initial Net Obligation (Asset) (3) 31
Unrecognized Prior Service Cost 1 15
Unrecognized Net Loss 6 316
Recognition of Minimum Liability --- (252)
------ ------
Net Pension Asset (Obligation) $ 16 $ (245)
====== ======
- 59 -
PAGE 60
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 14. EMPLOYEE BENEFIT PLANS, Continued
Pension Plans, Continued
1993
-------------------
Assets Benefits
Exceed Exceed
Benefits Assets
Assets and Obligations - -------- --------
Vested Benefits $ 20 $1,048
Non-Vested Benefits 1 44
------ ------
Accumulated Benefit Obligation 21 1,092
Effect of Anticipated Future
Salary Increases 1 166
------ ------
Projected Benefit Obligation 22 1,258
Fair Value of Plan Assets 33 862
------ ------
Funded Status 11 (396)
Unrecognized Initial Net Obligation (Asset) (4) 28
Unrecognized Prior Service Cost 1 10
Unrecognized Net Loss 6 398
Recognition of Minimum Liability --- (287)
------ ------
Net Pension Asset (Obligation) $ 14 $ (247)
====== ======
1992
-------------------
Assets Benefits
Exceed Exceed
Benefits Assets
Assets and Obligations - -------- --------
Vested Benefits $ 17 $ 911
Non-Vested Benefits 1 37
------ ------
Accumulated Benefit Obligation 18 948
Effect of Anticipated Future
Salary Increases 1 124
------ ------
Projected Benefit Obligation 19 1,072
Fair Value of Plan Assets 30 793
------ ------
Funded Status 11 (279)
Unrecognized Initial Net Obligation (Asset) (4) 32
Unrecognized Prior Service Cost 1 11
Unrecognized Net Loss 5 287
Recognition of Minimum Liability --- (229)
------ ------
Net Pension Asset (Obligation) $ 13 $ (178)
====== ======
- 60 -
PAGE 61
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 14. EMPLOYEE BENEFIT PLANS, Continued
Pension Plans, Continued
The projected benefit obligations were determined using assumed
discount rates of 8.25% for 1994, 7.25% for 1993 and 8.25% for 1992; and an
estimated long-term salary increase rate of 5% for 1994, 1993, and 1992. Net
pension cost was determined using expected long-term rates of return on assets
of 8.75% for 1994, 9.75% for 1993 and 10.5% for 1992. The effect of adjusting
the assumed discount rate for 1994, 1993 and 1992 changed the relative funded
status of a major plan and resulted in the recognition of an aggregate
additional minimum pension liability.
Savings Plans
The company has established savings plans for virtually all full-time
salaried employees and certain employees covered by collective bargaining
agreements of CSX and subsidiary companies. Eligible employees may contribute
from 1% to 15% of their annual compensation in 1% multiples to these plans.
CSX matches eligible employees' contributions in an amount equal to the lesser
of 50% of each participating employee's contributions or 3% of their annual
compensation. In addition, CSX contributes fixed amounts for each
participating employee covered by a collective bargaining agreement. Expense
for these plans for 1994, 1993 and 1992 was $31 million, $32 million and $29
million, respectively.
Other Post-Retirement Benefit Plans
In addition to the company's defined benefit pension plans, CSX has
three defined benefit post-retirement plans covering most full-time salaried
employees. Two plans provide medical benefits and another plan provides life
insurance benefits. The post-retirement health care plans are contributory,
with retiree contributions adjusted annually, and contain other cost-sharing
features such as deductibles and coinsurance. The accounting for the health
care plans anticipates future cost-sharing changes to the written plans that
are consistent with the company's expressed intent to increase the retiree
contribution rate annually for the expected medical inflation rate for that
year. The life insurance plan is non-contributory.
- 61 -
PAGE 62
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 14. EMPLOYEE BENEFIT PLANS, Continued
Other Post-retirement Benefit Plans, Continued
The company's current policy is to fund the cost of the
post-retirement health care and life insurance benefits on a pay-as-you-go
basis, as in prior years. The amounts recognized for the combined plans in the
company's statement of financial position at December 30, 1994, and December
31, 1993 and 1992 are as follows:
1994
--------------------
Life
Medical Insurance
Plans Plan
---- ----
Accumulated Post-Retirement
Benefit Obligation:
Retirees $172 $66
Fully Eligible Active Participants 26 3
Other Active Participants 39 3
---- ---
Accumulated Post-Retirement
Benefit Obligation 237 72
Unrecognized Prior Service Cost 23 6
Unrecognized Net Loss (25) (7)
---- ---
Net Post-Retirement
Benefit Obligation $235 $71
==== ===
1993
--------------------
Life
Medical Insurance
Plans Plan
---- ----
Accumulated Post-Retirement
Benefit Obligation:
Retirees $181 $73
Fully Eligible Active Participants 27 3
Other Active Participants 42 3
---- ---
Accumulated Post-Retirement
Benefit Obligation 250 79
Unrecognized Prior Service Cost 29 7
Unrecognized Net Loss (50) (14)
---- ---
Net Post-Retirement
Benefit Obligation $229 $72
==== ===
- 62 -
PAGE 63
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 14. EMPLOYEE BENEFIT PLANS, Continued
Other Post-retirement Benefit Plans, Continued
1992
--------------------
Life
Medical Insurance
Plans Plan
---- ----
Accumulated Post-Retirement
Benefit Obligation:
Retirees $149 $65
Fully Eligible Active Participants 24 3
Other Active Participants 32 2
---- ---
Accumulated Post-Retirement
Benefit Obligation 205 70
Unrecognized Prior Service Cost 36 7
Unrecognized Net Loss (13) (4)
---- ---
Net Post-Retirement Benefit Obligation $228 $73
==== ===
Net periodic post-retirement benefit expense for 1994, 1993 and
1992 was $29 million, $23 million and $29 million, respectively.
The weighted-average annual assumed rate of increase in the per
capita cost of covered benefits (i.e., health care cost trend rate) for the
medical plans is 11% for 1994-1995 and is assumed to decrease gradually to
5.5% by 2005 and remain at that level thereafter. The health care cost trend
rate assumption has a significant effect on the amounts reported. For example,
increasing the assumed health care cost trend rates by one percentage point in
each year would increase the accumulated post-retirement benefit obligation
for the medical plans as of December 30, 1994, by 9%, and net periodic
post-retirement benefit expense for 1994 by $3 million. The weighted-average
discount rate used in determining the accumulated post-retirement benefit
obligation was 8.25% for 1994, 7.25% for 1993 and 8.25% for 1992.
Other Plans
Under collective bargaining agreements, the company participates in a
number of union-sponsored, multi-employer benefit plans. Payments to these
plans are made as part of aggregate assessments generally based on number of
employees covered, hours worked, tonnage moved or a combination thereof. The
administrators of the multi-employer plans generally allocate funds received
from participating companies to various health and welfare benefit plans and
pension plans. Current information regarding such allocations has not been
provided by the administrators. Total contributions of $209 million, $211
million and $194 million, respectively, were made to these plans in 1994, 1993
and 1992.
- 63 -
PAGE 64
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 15. SUMMARY OF COMMITMENTS AND CONTINGENCIES.
Lease Commitments
CSX leases equipment under agreements with terms up to 21 years.
Non-cancelable, long-term leases generally include options to purchase at fair
value and to extend the terms. At December 30, 1994, minimum building and
equipment rentals under non-cancelable operating leases totaled approximately
$405 million for 1995, $378 million for 1996, $371 million for 1997, $347
million for 1998, $302 million for 1999 and $2.6 billion thereafter.
Rent expense on operating leases, including net daily rental charges
on railroad operating equipment of $258 million, $247 million and $205 million
in 1994, 1993 and 1992, respectively, amounted to $1.1 billion in 1994, 1993
and 1992. Deferred gains arising from sale-leaseback transactions are being
amortized from 2 to 21 years and have reduced rent expense by $21 million, $24
million and $23 million, in 1994, 1993 and 1992, respectively.
Purchase Commitments
CSXT entered into an agreement during 1993 to purchase 300
locomotives. This large single order covers CSXT's normal locomotive
replacement needs for 1994 through 1997. This purchase agreement will
introduce alternating current traction technology to CSXT's locomotive fleet.
CSXT took delivery of 50 direct current and 30 alternating current locomotives
in 1994, and the remaining 220 alternating current units will be delivered
during 1995-1997.
Sea-Land Service, Inc. ("Sea-Land"), the container-shipping unit of
CSX, has entered into agreements for the construction of five high-
performance, fuel-efficient container vessels. Estimated capital expenditures
for these vessels are $278 million, of which $20 million was expended in 1994,
with the remaining $258 million expected to be incurred over the next two to
three years.
Contingent Liabilities
The company and its subsidiaries are contingently liable individually
and jointly with others as guarantors of long-term debt and obligations
principally relating to leased equipment, joint ventures and joint facilities.
These contingent obligations amounted to approximately $81 million at December
30, 1994.
- 64 -
PAGE 65
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 15. SUMMARY OF COMMITMENTS AND CONTINGENCIES, Continued
Although the company obtains substantial amounts of commercial
insurance for potential losses for third-party liability and property damage,
reasonable levels of risk are retained on a self-insurance basis. A
substantial portion of the insurance coverage, up to $100 million per
occurrence from rail and certain other operations, is provided by companies
owned or partially owned by CSX.
CSXT is a party to various proceedings brought both by private
parties and regulatory agencies related to environmental issues. CSXT has
been identified as a potentially responsible party in a number of governmental
investigations and actions relating to environmentally impaired sites that are
or may be subject to remedial action under the Federal Superfund statute
("Superfund") or corresponding state statutes. The majority of these
proceedings are based on allegations that CSXT, or its railroad predecessors,
sent hazardous substances to the facilities in question for disposal. Such
proceedings arising under Superfund typically involve numerous other waste
generators and disposal companies and seek to allocate or recover costs
associated with site investigation and cleanup, which could be substantial.
The assessment of the required response and remedial costs associated
with these sites is extremely complex. Cost estimates are based on
information available for each site, financial viability of other potentially
responsible parties, and existing technology, laws and regulations.
CSXT frequently reviews its role, if any, with respect to each such
location, giving consideration to the nature of CSXT's alleged connection to
the location (e.g., generator, owner or operator), the extent of CSXT's
alleged connection (e.g., volume of waste sent to the location and other
relevant factors), the accuracy and strength of evidence connecting CSXT to
the location, and the number, connection and financial position of other named
and unnamed potentially responsible parties at the location. Further, CSXT
periodically reviews its exposure in all non-Superfund environmental
proceedings with which it is involved.
Based upon such reviews and updates of the sites with which it is
involved, CSXT has recorded, and periodically reviews for adequacy, reserves
to cover estimated contingent future environmental costs with respect to such
sites. The recorded liabilities for estimated future environmental costs at
December 30, 1994, and December 31, 1993 and 1992, were $140 million, $131
million and $77 million, respectively. The liability has been accrued for
future costs for all sites where the company's obligation is probable and
where such costs can be reasonably estimated. The liability includes future
costs for remediation and restoration of sites as well as for ongoing
monitoring costs, but excludes any anticipated insurance recoveries. The
majority of the December 30, 1994 environmental liability is expected to be
paid out over the next five years, funded by cash generated from operations.
- 65 -
PAGE 66
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 15. SUMMARY OF COMMITMENTS AND CONTINGENCIES, Continued
The company does not currently possess sufficient information to
reasonably estimate the amounts of additional liabilities, if any, on some
sites until completion of future environmental studies. Based upon
information currently available, however, the company believes that its
environmental reserves are adequate to accomplish remedial actions to comply
with present laws and regulations. The company believes that the ultimate
liability for these matters will not materially affect its overall results of
operations and financial condition.
Legal Proceedings
A number of legal actions, other than environmental, are pending
against CSX and certain subsidiaries in which claims are made in substantial
amounts. While the ultimate results of environmental investigations, lawsuits
and claims involving the company cannot be predicted with certainty,
management does not currently expect that these matters will have a material
adverse effect on the consolidated financial position, results of operations
and cash flows of the company.
NOTE 16. QUARTERLY DATA (Unaudited).
1994(a)
1st 2nd 3rd 4th(b)
------ ------ ------ ------
Operating Revenue $2,227 $2,371 $2,470 $2,540
====== ====== ====== ======
Operating Income $ 186 $ 304 $ 350 $ 392
====== ====== ====== ======
Net Earnings $ 74 $ 162 $ 177 $ 239
====== ====== ====== ======
Earnings Per Share $ .71 $ 1.55 $ 1.68 $ 2.29
====== ====== ====== ======
1993
1st(c) 2nd 3rd(d) 4th
------ ------ ------ ------
Operating Revenue $2,123 $2,264 $2,238 $2,315
====== ====== ====== ======
Operating Income $ 63 $ 278 $ 252 $ 320
====== ====== ====== ======
Net Earnings (Loss) $ (9) $ 154 $ 63 $ 151
====== ====== ====== ======
Earnings (Loss) Per Share $ (.09) $ 1.48 $ .61 $ 1.46
====== ====== ====== ======
- 66 -
PAGE 67
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 16. QUARTERLY DATA (Unaudited), Continued
1992
1st 2nd(e) 3rd 4th(f)
------ ------ ------ ------
Operating Revenue $2,086 $2,189 $2,214 $2,245
====== ====== ====== ======
Operating Income (Loss) $ 157 $ (445) $ 262 $ 292
====== ====== ====== ======
Net Earnings (Loss) $ 62 $ (322) $ 128 $ 152
====== ====== ====== ======
Earnings (Loss) Per Share $ .60 $(3.13) $ 1.25 $ 1.47
====== ====== ====== ======
(a) Effective January 1, 1994, the company changed its fiscal reporting
periods from four calendar quarters to four 13-week quarters. Fiscal
1994 began on January 1, 1994, and included 52 weeks. The four 13-
week quarters ended on April 1, July 1, September 30 and December 30,
1994.
(b) On December 1, 1994, the state of Florida elected to satisfy its
remaining unfunded obligation issued in 1988 to consummate the
purchase of 80 miles of track and right of way. The transaction
resulted in cash proceeds of $102 million, an accelerated pretax gain
of $69 million, and increased net earnings by $42 million, 40 cents
per share.
(c) The company recorded a $93 million pretax charge in the first quarter
of 1993 to recognize the estimated costs of restructuring certain
operations and functions at its container-shipping unit. The
restructuring charge reduced net earnings by $61 million, 59 cents
per share.
(d) The company revised its estimated annual effective tax rate in the
third quarter of 1993 to reflect the change in the federal statutory
rate from 34 to 35 percent. The effect of this change was to
increase income tax expense for the third quarter of 1993 by $54
million, 52 cents per share. Of this amount, $51 million, 48 cents
per share, related to applying the newly enacted statutory income tax
rate to deferred tax balances as of January 1, 1993.
(e) Includes impact of $699 million pretax productivity charge, $450
million after-tax, $4.38 per share, to reflect the estimated costs of
implementing work-force reductions.
(f) In the fourth quarter of 1992, the company adjusted its estimate of
the annual effective tax rate, which increased fourth-quarter
earnings by $5 million, 5 cents per share.
- 67 -
PAGE 68
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 17. SUMMARIZED FINANCIAL DATA - SEA-LAND SERVICE INC.
During 1987, Sea-Land entered into agreements to sell and lease back
by charter three new U.S.-built, U.S.-flag, D-7 class container ships. CSX has
guaranteed the obligations of Sea-Land pursuant to the related charters which,
along with the container ships, serve as collateral for debt securities
registered with the Securities and Exchange Commission ("SEC"). In accordance
with SEC disclosure requirements, summarized financial information for
Sea-Land and its consolidated subsidiaries is as follows:
Summary of Operations: 1994 1993 1992
--------------------- -------- -------- -------
Operating Revenue $3,492 $3,246 $3,148
Operating Expense - Public 3,101 2,972 2,843
- Affiliated (a) 235 202 188
------ ------ ------
Operating Income $ 156 $ 72 $ 117
====== ====== ======
Net Earnings $ 73 $ 12 $ 17
====== ====== ======
Summary of Financial Position: 1994 1993 1992
------------------------------ ------ ------ ------
Current Assets - Public $ 584 $ 515 $ 429
- Affiliated (a) 16 24 24
Other Assets - Public 1,527 1,497 1,492
- Affiliated (a) 101 115 123
Current Liabilities - Public 515 574 477
- Affiliated (a) 266 149 78
Other Liabilities - Public 671 673 722
- Affiliated (a) 75 113 141
Equity 701 642 650
(a) Amounts represent activity with CSX affiliated companies.
- 68 -
PAGE 69
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 17. SUMMARIZED FINANCIAL DATA - SEA-LAND SERVICE INC., Continued
SL Alaska Trade Company ("SLATCO") is a special purpose,
unconsolidated subsidiary of Sea-Land with assets of $116 million in a trust
account securing $106 million of debt maturing on October 1, 2015. The assets
of SLATCO are not available to creditors of Sea-Land or its subsidiaries, nor
are the SLATCO notes guaranteed by Sea-Land or any of its subsidiaries.
NOTE 18. BUSINESS SEGMENTS.
Operating Revenue Operating Income
-------------------------- -------------------------
Years Ended Years Ended
-------------------------- --------------------------
Dec. 30, Dec. 31, Dec. 31, Dec. 30, Dec. 31, Dec. 31,
1994 1993 1992 1994 1993 1992
------ ------ ------ ------ ------ ------
Transportation $9,410 $8,767 $8,550 $1,178 $ 868 $ 225
Non-Transportation 198 173 184 54 45 41
------ ------ ------ ------ ------ ------
Total $9,608 $8,940 $8,734 1,232 913 266
====== ====== ====== ------ ------ ------
Other Income 55 18 3
Interest Expense 281 298 276
------ ------ ------
Earnings (Loss) before Income Taxes $1,006 $ 633 $ (7)
====== ====== ======
Identifiable Assets
---------------------------
Dec. 30, Dec. 31, Dec. 31,
1994 1993 1992
------- ------- -------
Transportation $12,974 $12,511 $12,138
Non-Transportation 750 909 911
------- ------- -------
Total $13,724 $13,420 $13,049
======= ======= =======
- 69 -
PAGE 70
CSX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 18. BUSINESS SEGMENTS, Continued
The principal components of the business segments are:
Transportation -
Rail, international container-shipping, intermodal, barge and
contract logistics operations. The container-shipping operation reported
revenue of $3.5 billion for 1994, $3.2 billion for 1993 and $3.1 billion for
1992. Approximate revenue allocation by port of origin for 1994, 1993 and
1992 was: North America - 41%; Asia - 34%; Europe - 17%; and Other - 8%.
Non-Transportation -
Real estate sales and rentals, resort management and operations,
integrated computer services and eliminations of intersegment sales and
corporate-related items.
- 70 -
PAGE 71
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of CSX Corporation
We have audited the accompanying consolidated statement of financial
position of CSX Corporation and subsidiaries as of December 30, 1994, and
December 31, 1993 and 1992, and the related consolidated statements of
earnings and cash flows for the years then ended. These financial statements
are the responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above (appearing on pages 36-70) present fairly, in all material respects, the
consolidated financial position of CSX Corporation and subsidiaries at
December 30, 1994, and December 31, 1993 and 1992, and the consolidated
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
---------------------
Ernst & Young LLP
Richmond, Virginia
January 27, 1995
- 71 -
PAGE 72
BOARD OF DIRECTORS
- ------------------
Edward L. Addison (1,3,5)
Chairman and CEO
The Southern Company, Atlanta, Ga.
Elizabeth E. Bailey (2,4)
John C. Hower Professor of Public Policy and Management
The Wharton School
University of Pennsylvania, Philadelphia, Pa.
Robert L. Burrus, Jr. (4,5)
Partner and Chairman
McGuire, Woods, Battle & Boothe
Richmond, Va.
Bruce C. Gottwald (4,5)
Chairman and CEO
Ethyl Corporation, Richmond, Va.
John R. Hall (2)
Chairman and CEO
Ashland Oil Inc., Ashland, Ky.
Robert D. Kunisch (1,3)
Chairman, President and CEO
PHH Corporation, Hunt Valley, Md.
Hugh L. McColl, Jr. (2,4)
Chairman and CEO
NationsBank Corp., Charlotte, N.C.
James W. McGlothlin (1,5)
Chairman and CEO
The United Company, Bristol, Va.
Southwood J. Morcott (1,2,4)
Chairman, President and CEO
Dana Corporation, Toledo, Oh.
Charles E. Rice (1,2,3)
Chairman and CEO
Barnett Banks Inc., Jacksonville, Fla.
William C. Richardson (3)
President
The Johns Hopkins University
Baltimore, Md.
Frank S. Royal, M.D. (3)
Physician
Richmond, Va.
- 72 -
PAGE 73
BOARD OF DIRECTORS, CONTINUED
- -----------------------------
John W. Snow (1)
Chairman, President and CEO
CSX Corporation, Richmond, Va.
William B. Sturgill (1,5)
President
East Kentucky Investment Company,
Lexington, Ky.
Sir Denis Thatcher, Bt MBE TD
Counsellor to the Board
London, England
KEY TO COMMITTEES OF THE BOARD
- ------------------------------
1 - Executive
2 - Audit
3 - Compensation
4 - Pension
5 - Organization & Corporate Responsibility
- 73 -
PAGE 74
CSX CORPORATION OFFICERS
- ------------------------
John W. Snow, 55 *
Chairman, President and CEO
elected February 1991
Mark G. Aron, 52 *
Senior Vice President-Law and Public Affairs
elected January 1986
James Ermer, 52 *
Senior Vice President-Finance
elected April 1985
Andrew B. Fogarty, 49
Vice President-Audit and Advisory Services
elected March 1995
Thomas E. Hoppin, 53
Vice President-Corporate Communications
elected July 1986
Richard H. Klem, 50 *
Vice President-Corporate Strategy
elected May 1992
Jesse R. Mohorovic, 52 *
Vice President-Executive Department
elected February 1995
James P. Peter, 43
Vice President-Taxes
elected June 1993
Woodruff M. Price, 59
Corporate Vice President-Federal Affairs
elected May 1988
Alan A. Rudnick, 47
Vice President-General Counsel and Corporate Secretary
elected June 1991
Micheal J. Ruehling, 47
Vice President-State Relations
elected January 1995
James A. Searle Jr., 48
Vice President-Special Projects
elected August 1989
Peter J. Shudtz, 46
General Counsel
elected September 1991
- 74 -
PAGE 75
CSX CORPORATION OFFICERS, CONTINUED
- -----------------------------------
William H. Sparrow, 51 *
Vice President-Capital Planning and Budgeting
elected May 1994
Gregory R. Weber, 49 *
Vice President, Controller and Treasurer
elected April 1989
CSX UNIT OFFICERS
- -----------------
CSX Transportation Inc.
500 Water Street
Jacksonville, FL 32202
(904) 359-3100
Alvin R. (Pete) Carpenter, 53 *
President and CEO
since January 1992
Donald D. Davis, 55 *
Senior Vice President-Employee Relations
since April 1992
Paul R. Goodwin, 52 *
Executive Vice President-Finance and Administration
since February 1995
Gerald L. Nichols, 59 *
Executive Vice President and COO
since February 1995
Sea-Land Service Inc.
150 Allen Road
Liberty Corner, NJ 07938
(908) 558-6000
John P. Clancey, 50 *
President and CEO
since August 1991
Robert J. Grassi, 48 *
Senior Vice President-Finance and Planning
since October 1991
Wilford W. Middleton Jr., 56 *
Executive Vice President
since January 1990
- 75 -
PAGE 76
CSX UNIT OFFICERS, CONTINUED
- ----------------------------
Charles G. Raymond, 51 *
Senior Vice President-Operations
since September 1988
CSX Intermodal Inc.
200 International Circle
Hunt Valley, MD 21030
(410) 584-0100
M. McNeil Porter, 61 *
President and CEO
since September 1987
American Commercial Lines Inc.
1701 E. Market Street
Jeffersonville, IN 47130
(812) 288-0100
Michael C. Hagan, 48 *
President and CEO
since May 1992
Customized Transportation Inc.
10407 Centurion Parkway, N., Ste. 400
Jacksonville, FL 32256
(904) 928-1400
David G. Kulik, 46
President and CEO
since December 1994
The Greenbrier
White Sulphur Springs, WV 24986
(304) 536-1110
Ted J. Kleisner, 50
President and Managing Director
since January 1989
Yukon Pacific Corporation
1049 W. 5th Avenue
Anchorage, AK 99501
(907) 265-3100
Jeff B. Lowenfels, 46
President and CEO
since February 1995
* Executive officers of the corporation
- 76 -
PAGE 77
CORPORATE INFORMATION
Headquarters
One James Center
901 East Cary Street
Richmond, VA 23219-4031
(804) 782-1400
Market Information
CSX's common stock is listed on the New York, London and Swiss stock
exchanges and trades with unlisted privileges on the Midwest, Boston,
Cincinnati, Pacific and Philadelphia stock exchanges. The official trading
symbol is "CSX."
Description of Common and Preferred Stock
A total of 300 million shares of common stock is authorized, of which
104,721,988 shares were outstanding as of Dec. 30, 1994. Each share is
entitled to one vote in all matters requiring a vote of shareholders. There
are no pre-emptive rights.
A total of 25 million shares of preferred stock is authorized.
Series A consists of 250,000 shares of $7.00 Cumulative Convertible Preferred
Stock. All outstanding shares of Series A Preferred Stock were redeemed as of
July 31, 1992.
Series B consists of 3 million shares of Junior Participating
Preferred Stock, none of which has been issued. These shares will become
issuable only and when the rights distributed to holders of common stock under
the Preferred Share Rights Plan adopted by CSX on June 8, 1988, become
exercisable.
Common Stock Shares Outstanding, Number of Registered Shareholders
1994 1993 1992 1991 1990
------ ------ ------ ------ ------
Number of Shareholders: 57,355 59,714 62,820 66,032 66,658
====== ====== ====== ====== ======
Shares Outstanding as of Jan. 27, 1995: 104,734,016
Common Stock Shareholders as of Jan. 27, 1995: 57,267
- 77 -
PAGE 78
Common Stock Price Range and Dividends Per Share
Year 1994
----
Quarter 1st 2nd 3rd 4th
--- --- --- ---
Market Price
High $92.38 $83.25 $79.13 $74.50
Low $79.88 $71.00 $66.00 $63.13
Dividends Per Share $.44 $.44 $.44 $.44
Year 1993
----
Quarter 1st 2nd 3rd 4th
--- --- --- ---
Market Price
High $79.75 $78.13 $80.25 $88.13
Low $67.13 $66.38 $67.88 $74.88
Dividends Per Share $.38 $.38 $.38 $.44
Year 1992
----
Quarter 1st 2nd 3rd 4th
--- --- --- ---
Market Price
High $62.00 $67.50 $67.75 $73.63
Low $54.88 $55.50 $56.63 $54.50
Dividends Per Share $.38 $.38 $.38 $.38
Year 1991
----
Quarter 1st 2nd 3rd 4th
--- --- --- ---
Market Price
High $39.00 $47.88 $52.63 $58.00
Low $29.75 $36.50 $44.25 $47.75
Dividends Per Share $.35 $.35 $.35 $.38
Year 1990
----
Quarter 1st 2nd 3rd 4th
--- --- --- ---
Market Price
High $38.13 $36.00 $36.88 $31.88
Low $31.25 $31.38 $26.00 $26.13
Dividends Per Share $.35 $.35 $.35 $.35
- 78 -
PAGE 79
SHAREHOLDER INFORMATION
Shareholder Services
Shareholders with questions about their accounts should write to the
transfer agent at the address below or call (800) 521-5571. Illinois residents
should call (312) 461-5545.
General questions about CSX or information contained in company
publications should be directed to corporate communications at the address or
telephone number shown below.
Security analysts, portfolio managers or other investment community
representatives should contact investor relations at the address or telephone
number shown below.
Transfer Agent, Registrar and Dividend Disbursing Agent
Harris Trust Company
P.O. Box A3309
Chicago, IL 60690
(800) 521-5571
(312) 461-5545, in Illinois
Shareholder Relations
Anne B. Taylor
Administrator-Shareholder Services
CSX Corporation
P.O. Box 85629
Richmond, VA 23285-5629
(804) 782-1465
Corporate Communications
Suzanne S. Walston
Mgr.-Corporate Communications
CSX Corporation
P.O. Box 85629
Richmond, VA 23285-5629
(804) 782-1406
Investor Relations
Katherine E. Wilson
Director-Financial Planning
CSX Corporation
P.O. Box 85629
Richmond, VA 23285-5629
(804) 782-1553
- 79 -
PAGE 80
SHAREHOLDER INFORMATION, Continued
Stock Held in Brokerage Accounts
When a broker holds your stock, it is usually registered in the
broker's name, or "street name." We do not know the identity of individual
shareholders who hold stock in this manner. We know only that a broker holds a
certain number of shares that may be for any number of customers. If your
stock is in a street-name account, you are not eligible to participate in the
company's Dividend Reinvestment Plan. Also, you will receive your dividend
payments, annual reports and proxy materials through your broker. You should
notify your broker, not Harris Trust, if you wish to eliminate unwanted,
duplicate mailings and improve the timeliness on the delivery of these
materials and your dividend payments.
Lost or Stolen Stock Certificates
If your stock certificates are lost, stolen or in some way destroyed,
you should notify Harris Trust in writing immediately.
Multiple Dividend Checks and Duplicate Mailings
Some shareholders hold their stock on CSX records in similar but
different names (e.g. John A. Smith and J.A. Smith). When this occurs, we are
required to create separate accounts for each name. Although the mailing
addresses are the same, we are required to mail separate dividend checks to
each account. Duplicate mailings of annual reports can be eliminated if you
send the labels or copies of the labels from a CSX mailing to Harris Trust.
You should mark the labels to indicate names to be kept on the mailing list
and names to be deleted. However, this action will affect mailings of
financial materials only. Dividend checks and proxy materials will continue to
be sent to each account.
Consolidating Accounts
If you want to consolidate separate accounts into one account, you
should contact Harris Trust for the necessary forms and instructions. When
accounts are consolidated, it may be necessary to reissue the stock
certificates.
Dividends
CSX pays quarterly dividends on its common stock on or about the 15th
of March, June, September and December, when declared by the board of
directors, to shareholders of record approximately three weeks earlier. CSX
now offers direct deposit of dividends to shareholders who request it. If you
are interested, please contact Harris Trust at the address or phone number
shown above.
Replacing Dividend Checks
If you do not receive your dividend check within 10 business days
after the payment date or if your check is lost or destroyed, you should
notify Harris Trust so payment on the check can be stopped and a replacement
issued.
- 80 -
PAGE 81
SHAREHOLDER INFORMATION, Continued
Dividend Reinvestment
CSX provides dividend reinvestment and stock purchase plans for
shareholders of record and employees as a convenient method of acquiring
additional CSX shares by reinvestment of dividends or by optional cash
payments, or both.
The Shareholders Dividend Reinvestment Plan permits automatic
reinvestment of common stock dividends without payment of any brokerage
commission or service charge. In fact, under the plan, you may elect to
continue receiving dividend payments while making cash payments of up to
$1,500 per month for investment in additional CSX shares without any fee.
For a prospectus or other information on the plan, write or call the
Harris Trust Dividend Reinvestment Department at the address or telephone
number shown on page 79.
Proxy and Financial Supplement to the Annual Report
Proxy materials are forwarded to shareholders with this annual
report, and shareholders are urged to vote, sign and return their Proxy
promptly.
Copies of the Financial Supplement to the Annual Report will be
available to shareholders at the annual meeting, or may be reserved by
contacting Katherine E. Wilson at the address shown on page 79.
The Financial Supplement is not automatically mailed to shareholders.
- 81 -
PAGE 82 CSX CORPORATION FORM 10-K
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 3rd day of
March 1995.
CSX CORPORATION
By: /s/ GREGORY R. WEBER
----------------------------------------
Gregory R. Weber
Vice President, Controller and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signatures Title
---------- -----
John W. Snow Chairman of the Board, President,
Chief Executive Officer and Director
(Principal Executive Officer)(a)
James Ermer Senior Vice President-Finance
(Principal Financial Officer)(a)
Edward L. Addison Director(a)
Elizabeth E. Bailey Director(a)
Robert L. Burrus Jr. Director(a)
Bruce C. Gottwald Director(a)
John R. Hall Director(a)
Robert D. Kunisch Director(a)
Hugh L. McColl Jr. Director(a)
James W. McGlothlin Director(a)
Southwood J. Morcott Director(a)
Charles E. Rice Director(a)
William C. Richardson Director(a)
Frank S. Royal, M.D. Director(a)
William B. Sturgill Director(a)
(a) /s/ PETER J. SHUDTZ
---------------------------------
Peter J. Shudtz, Attorney-in-Fact
March 3, 1995
- 82 -
PAGE 83
CSX CORPORATION
Statement of Differences
1. The pages in the electronic filing do not correspond to the pages in
the printed document because there is more material on each page of
the printed document. There are, therefore, fewer printed pages.
The printed Annual Report and Form 10-K also contains numerous
charts, graphs and pictures not incorporated into the electronic Form
10-K.
2. Page references in the electronic Form 10-K refer to pages in the
electronic filing, while page references in the printed document
refer to pages in that document. The information on pages 32 and 33
of the printed document, i.e. the 10-K cover sheet and index, has
been repositioned on pages 1 and 2 of the electronic document with
the page references changed as discussed above.
- 83 -
PAGE 1
CSX CORPORATION
INDEX TO EXHIBITS
Description Value
- ----------- -----
Articles of Incorporation, incorporated by reference
(filed with Commission as an Exhibit under Form SE dated
February 20, 1991) EX-3.1
Bylaws, incorporated by reference
(filed with Commission as an Exhibit under Form S-8 dated
December 22, 1994) EX-3.2
CSX Stock Plan for Directors (a) EX-10.1
Special Retirement Plan for CSX Directors (a) EX-10.2
Corporate Director Deferred Compensation Plan (a) EX-10.3
CSX Directors' Charitable Gift Plan, incorporated by
reference (a)
(filed with Commission as an Exhibit under Form 10-K dated
March 4, 1994) EX-10.4
CSX Directors' Matching Gift Program, incorporated by
reference (a)
(filed with Commission as an Exhibit under Form 10-K dated
March 4, 1994) EX-10.5
Form of Agreement with J.W. Snow, A.R. Carpenter,
J.P. Clancey, and J.R. Davis and J. Ermer (a) EX-10.6
June 1989 Letter Agreement with J.R. Davis, incorporated
by reference (a)
(filed with Commission as an Exhibit under Form 10-K dated
March 4, 1994) EX-10.7
Form of Retention Agreement with A.R. Carpenter, J.P. Clancey
and J.R. Davis, incorporated by reference (a)
(filed with Commission as an Exhibit under Form SE dated
February 26, 1992) EX-10.8
Agreement with J.W. Snow, incorporated by reference (a)
(filed with Commission as an Exhibit under Form 10-K dated
March 4, 1994) EX-10.9
1991 Stock Purchase and Loan Plan (a) EX-10.10
1987 Long-Term Performance Stock Plan (a) EX-10.11
1985 Deferred Compensation Program for Executives
of CSX Corporation and Affiliated Companies (a) EX-10.12
- E-1 -
PAGE 2
CSX CORPORATION
INDEX TO EXHIBITS
Description Value
- ----------- -----
Supplementary Savings Plan and Incentive Award
Deferral Plan for Eligible Executives of CSX
Corporation and Affiliated Companies (a) EX-10.13
Special Retirement Plan of CSX Corporation
and Affiliated Companies (a) EX-10.14
Supplemental Retirement Plan of CSX Corporation
and Affiliated Companies (a) EX-10.15
1994 Senior Management Incentive Compensation Plan (a) EX-10.16
Subsidiaries of the Registrant EX-21
Consent of Independent Auditors EX-23
Financial Data Schedule - Schedule II (a) EX-27
(a) Management contract or compensation plan or arrangement.
(b) No other schedules are required to be filed.
- E-2 -
PAGE 1
Exhibit 10.1
CSX CORPORATION
STOCK PLAN FOR DIRECTORS
1. Name of Plan. This plan shall be known as the "CSX Corporation
Stock Plan for Directors" and is hereinafter referred to as the "Plan".
2. Purpose of Plan. The purpose of the Plan is to enable CSX
Corporation, a Virginia corporation (the "Company"), to attract and retain
persons of exceptional ability to serve as directors and to solidify the
common interests of its directors and shareholders in enhancing the value of
the Company's common stock ("Common Stock"). The Plan provides for payment in
Common Stock of a portion of the annual retainer paid to each director.
3. Effective Date and Term. The Plan shall be effective as of the
date it is adopted by the Board of Directors (the "Board") of the Company,
subject however to approval by at least a majority of the outstanding shares
of Common Stock present or represented and entitled to vote at a meeting of
shareholders of the Company not later than May 1, 1992, and shall remain in
effect until amended or terminated by action of the Board.
4. Eligible Participants. Each member of the Board from time to time
who is not a full-time employee of the Company or any of its subsidiaries
shall be a participant ("Participant") in the Plan.
5. Shares. (a) Commencing May 1, 1992, the annual retainer payable to
each Participant for service on the Board shall be payable in part in shares
of Common Stock subject to any applicable restrictions set forth in Section 6
hereof. Subject to paragraphs (b) and (c) below, each Participant shall be
paid 40 percent of the annual retainer payable to each Participant for service
on the Board (the "Designated Percentage") in shares of Common Stock. Such
shares of Common Stock shall be payable immediately following the Company's
Annual Meeting of Shareholders. The shares shall be deducted at their Fair
Market Value (as hereinafter defined), determined as of the business day
immediately preceding the date of the Company's Annual Meeting of
Shareholders, from the Participant's annual retainer.
(b) Any person who becomes a non-employee director following the
Company's Annual Meeting of Shareholders, whether by appointment or election
as a director or by change in status from a full-time employee, shall receive
shares of Common Stock as a portion of the compensation to be paid to such
Participant until the next Annual Meeting of Shareholders. The number of
shares of Common Stock issued to such Participant shall be determined by
dividing the product of the pro rata portion of the annual retainer to be paid
to such director and the Designated Percentage by the Fair Market Value on the
day such person becomes a Participant.
(c) Each Participant may also elect annually (the "Annual Election")
to receive (i) any or all of the remaining balance of his or her annual
retainer for service on the Board, (ii) any or all of his or her annual
retainer for service as a chairman of a committee of the Board, or (iii) any
or all other fees earned as a director of the Company in the form of shares of
Common Stock (the "Elective Grant"), subject to any applicable restrictions
- 1 -
PAGE 2
set forth in Section 6 hereof. The Annual Election must be in writing and
shall be delivered to the Corporate Secretary of the Company no later than the
last business day of the month during which the Annual Meeting of Shareholders
is held. The Annual Election shall be irrevocable in respect of the year to
which it pertains and shall specify the applicable percentage of the annual
retainer above the Designated Percentage that such Participant wishes to
receive in shares of Common Stock. The balance of the annual retainer to be
paid pursuant to the Elective Grant shall be paid on the first business day
(the "Elective Payment Date") that is at least six months and one day
following the last business day of the month during which the Annual Meeting
of Shareholders is held, and the number of shares of Common Stock to be
included in such Elective Grant shall be determined with reference to the Fair
Market Value of the Common Stock on the Elective Payment Date. All other
retainers and fees which are to be paid pursuant to the Elective Grant shall
be paid once every three months, commencing on the Elective Payment Date, and
the number of shares of Common Stock to be included in such Elective Grant
payment shall be determined with reference to the Fair Market Value of the
Common Stock on such payment date.
6. Restrictions on Shares. The shares issued under Section 5 shall,
at the Participant's election (which election must be in writing and shall be
delivered to the Corporate Secretary of the Company no later than the last
business day of the year prior to the year for which the election is to be
effective), 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) Death of the Participant;
(b) Disability of the Participant preventing continued service on the
Board;
(c) Retirement of the Participant from service as a Director of the
Company in accordance with the policy on retirement of non-employee Directors
then in effect;
(d) Cessation of service as a Director for any reason other than
those specified in Subsections 6(a), (b) and (c); or
(e) A Change in Control (as hereinafter defined).
The Participant's right to receive the shares issued under Section 5
shall not be affected by a termination of the trust described herein.
7. Share Certificates, Voting and Other Rights. The certificates for
shares issued hereunder shall be issued in the name of the Participant or the
trustee of the trust described in Section 6, as the case may be, and shall be
held by such Participant or such trustee in trust for the Participants;
provided, however, that each Participant shall be entitled to all rights of a
shareholder with respect to Common Stock for all such shares issued in his
name, including the right to vote the shares and the Participant or the
trustee, as the case may be, shall receive all dividends and other
distributions paid or made with respect thereto.
- 2 -
PAGE 3
8. Fair Market Value. "Fair Market Value" means, as of any given
date, the closing price of the stock in the New York Stock Exchange Composite
Transactions on such date as reported in the Wall Street Journal (or, if there
is no reported sale on such date, on the last preceding date on which any
reported sale occurred).
9. Fractions of Shares. The Company shall not issue fractions of
shares. Whenever under the terms of the Plan a fractional share would
otherwise be required to be issued, the Participant shall be paid in cash for
such fractional share based upon the same Fair Market Value which was utilized
to determine the number of shares to be issued on the relevant payment date.
10. Change in Control. "Change in Control" shall mean any of the
following:
(a) Stock Acquisition. The acquisition, by any individual, entity or
group [within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")] (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then outstanding shares of
common stock of the Company (the "Outstanding Company Common Stock"), or (ii)
the combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for purposes
of this subsection (a), the following acquisitions shall not constitute a
Change of Control: (i) any acquisition directly from the Company; (ii) any
acquisition by the Company; (iii) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any corporation
controlled by the Company; or (iv) any acquisition by any corporation pursuant
to a transaction which complies with clauses (i), (ii) and (iii) of subsection
(c) of this Section 10; or
(b) Board Composition. Individuals who, as of the date hereof,
constitute the Board of Directors (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board of Directors; provided,
however, that any individual becoming a director subsequent to the date hereof
whose election or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board of Directors; or
(c) Business Combination. Approval by the shareholders of the
Company of a reorganization, merger, consolidation or sale or other
disposition of all or substantially all of the assets of the Company or its
principal subsidiary that is not subject, as a matter of law or contract, to
approval by the Interstate Commerce Commission or any successor agency or
regulatory body having jurisdiction over such transactions (the "Agency") (a
"Business Combination"), in each case, unless, following such Business
Combination:
- 3 -
PAGE 4
(i) all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Company Common Stock
and Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or its
principal subsidiary or all or substantially all of the assets of the Company
or its principal subsidiary either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may be;
(ii) no Person (excluding any corporation resulting from such
Business Combination or any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of, respectively, the
then outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such ownership
existed prior to the Business Combination; and
(iii) at least a majority of the members of the board of directors
resulting from such Business Combination were members of the Incumbent Board
at the time of the execution of the initial agreement, or of the action of the
Board of Directors, providing for such Business Combination; or
(iv) Regulated Business Combination. Approval by the shareholders of
the Company of a Business Combination that is subject, as a matter of law or
contract, to approval by the Agency (a "Regulated Business Combination")
unless such Business Combination complies with clauses (i), (ii) and (iii) of
subsection (c) of this Section 10; or
(v) Liquidation or Dissolution. Approval by the shareholders of the
Company of a complete liquidation or dissolution of the Company or its
principal subsidiary.
- 4 -
PAGE 1
Exhibit 10.2
SPECIAL RETIREMENT PLAN
FOR
CSX DIRECTORS
[As amended and restated January 1, 1995]
1. Purpose. In order to attract and retain the services of Directors
of the highest caliber, to reward them for their services to the Company when
they cease to be active Directors, and to retain for the Company the value of
their advice and consultation, the Board of Directors adopted a special
retirement plan for Directors on April 21, 1981. The Plan, as amended
November 14, 1984, is further amended and restated to provide as follows:
2. Definitions. Whenever used in the Plan, the following terms shall
have the meanings set forth below unless the context clearly requires a
different meaning:
(a) Board. The Company's Board of Directors.
(b) Change of Control. A "Change of Control" shall mean any of
the following:
(i) Stock Acquisition. The acquisition, by any
individual, entity or group [within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")] (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 20% or more of either (A) the then outstanding shares of
common stock of the Company (the "Outstanding Company Common
Stock"), or (B) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this
subsection (i), the following acquisitions shall not constitute a
Change of Control: (A) any acquisition directly from the Company;
(B) any acquisition by the Company; (C) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained
by the Company or any corporation controlled by the Company; or
(C) any acquisition by any corporation pursuant to a transaction
which complies with clauses (A), (B) and (C) of subsection (iii)
of this Section 2(b); or
(ii) Board Composition. Individuals who, as of the date
hereof, constitute the Board of Directors (the "Incumbent Board")
cease for any reason to constitute at least a majority of the
Board of Directors; provided, however, that any individual
becoming a director subsequent to the date hereof whose election
or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding,
- 1 -
PAGE 2
for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board of Directors; or
(iii) Business Combination. Approval by the shareholders of
the Company of a reorganization, merger, consolidation or sale or
other disposition of all or substantially all of the assets of the
Company or its principal subsidiary that is not subject, as a
matter of law or contract, to approval by the Interstate Commerce
Commission or any successor agency or regulatory body having
jurisdiction over such transactions (the "Agency") (a "Business
Combination"), in each case, unless, following such Business
Combination:
(A) all or substantially all of the individuals and
entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own,
directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common
stock and the combined voting power of the then
outstanding voting securities entitled to vote
generally in the election of directors, as the case
may be, of the corporation resulting from such
Business Combination (including, without limitation, a
corporation which as a result of such transaction owns
the Company or its principal subsidiary or all or
substantially all of the assets of the Company or its
principal subsidiary either directly or through one or
more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to
such Business Combination of the Outstanding Company
Common Stock and Outstanding Company Voting
Securities, as the case may be;
(B) no Person (excluding any corporation resulting
from such Business Combination or any employee benefit
plan (or related trust) of the Company or such
corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more
of, respectively, the then outstanding shares of
common stock of the corporation resulting from such
Business Combination or the combined voting power of
the then outstanding voting securities of such
corporation except to the extent that such ownership
existed prior to the Business Combination; and
(C) at least a majority of the members of the board
of directors resulting from such Business Combination
were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action
- 2 -
PAGE 3
of the Board of Directors, providing for such Business
Combination; or
(iv) Regulated Business Combination. Approval by the
shareholders of the Company of a Business Combination that is
subject, as a matter of law or contract, to approval by the Agency
(a "Regulated Business Combination") unless such Business
Combination complies with clauses (A), (B) and (C) of subsection
(iii) of this Section 2(b); or
(v) Liquidation or Dissolution. Approval by the
shareholders of the Company of a complete liquidation or
dissolution of the Company or its principal subsidiary.
(c) Committee. The Executive Committee of the Board
(d) Company. CSX Corporation.
(e) Director. A person duly elected or appointed to, and
serving as an active member of, the Board.
(f) Director's Fees. The basic annual retainer fee paid to an
active Outside Director for his services, plus meeting fees, special fees for
serving as Chairman of a committee, but excluding travel expenses or any other
extraordinary form of compensation.
(g) Effective Date. April 21, 1981. The effective date of the
amendment and restatement is January 1, 1995. A Participant receiving
Retirement Payments on the date of the restatement will continue to receive
payments in accordance with the terms of the Plan as restated to the extent
not inconsistent with the terms of the Plan prior to the date of the
restatement.
(h) Eligible Service. The period of service with the Company or
any of its predecessor companies as an active Outside Director, measured in
years and months beginning with the day of the month in which the person first
becomes or performs services as an Outside Director and ending with the month
in which he ceases to be, or no longer performs services as, an Outside
Director. Service which need not be continuous.
(i) Employee Director. A person who serves or has served as an
active Director during a period when he or she is a salaried employee with the
Company or a subsidiary company.
(j) Outside Director. A Director who, with respect to any
period of service as an active Director taken into account under the Plan, is
not an Employee Director.
(k) Participant. An Outside Director or former Outside Director
who has met or can be expected to meet the requirements for and become
eligible for Retirement Payments under the Plan as determined under Section 3.
The term includes Outside Directors who on the Effective Date of the amendment
and restatement are receiving Retirement Payments under the Plan. An Employee
Director shall not be entitled to become a Participant in the Plan with
- 3 -
PAGE 4
respect to any period of service as a Director while an employee of the
Company or a predecessor company.
(l) Plan. The Special Retirement Plan for CSX Directors.
(m) Payment Date. The last day of each calendar quarter
beginning with the last day of the calendar quarter in which the Participant
becomes entitled to receive Retirement Payments and ending with the payment
for the last calendar quarter for the calendar year in which the Participant
ceases to be eligible for Retirement Payments under Section 3.
(n) Retirement Payment. An annual amount equal to 50% of the
Director's Fees paid during the Outside Director's final twelve months of
service as a Director with the Company payable in quarterly installments on
each Payment Date.
(o) Rule of 75. Any combination of age and year as of Eligible
Service that totals 75 or more.
(p) Trust. A grantor trust established by the Company which
will substantially conform to the terms of the Internal Revenue Service model
trust as described in Revenue Procedure
92-64, 1992-2 D.B. 422. Except as provided in Section 4, the Company is not
obligated to make any contribution to the Trust.
(q) Valuation Date. The last day of each calendar year and such
other dates as the Committee deems necessary or appropriate to value the
Participants' benefits under this Plan.
3. Eligibility for Retirement Payments.
(a) An Outside Director who no longer serves as a Director (for
any reason other than death) and has (i) attained the age of 68, or (ii) has
met the Rule of 75, shall be entitled to receive Retirement Payments. A
Participant who ceases to serve as a Director before attaining the age of 68
will be entitled to receive Retirement Payments when the Participant attains
the age of 68 or meets the Rule of 75, whichever event shall first occur. In
consideration of the receipt of Retirement Payments under the Plan, a
Participant agrees to be available for advice and consultation as requested by
the Board.
(b) A Participant entitled to compensation under (a) shall
receive Retirement Payments on each Payment Date as hereinafter provided. A
Participant who has completed 10 or more years of Eligible Service or has met
the Rule of 75, will be entitled to Retirement Payments for life. A
Participant who has not completed 10 years of Eligible Service and has not met
the Rule of 75, will be entitled to receive Retirement Payments for a period
equal to the lesser of (i) the Participant's life and (ii) the Participant's
period of Eligible Service. A Participant's right to compensation shall
terminate as of the last day of the calendar year in which his or her death
occurs, or, if the Participant has less than 10 years of Eligible Service and
has not met the Rule of 75, as of the end of the calendar year in which falls
the date that is the anniversary of the date the Participant's last period of
Eligible Service began.
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PAGE 5
(c) Any retirement payment due after the death of a Participant
shall be paid to the Participant's surviving spouse, or, if no spouse
survives, to the Participant's personal representative.
4. Change of Control.
(a) If a Change of Control has occurred, the Committee shall
cause the Company to contribute to the Trust within seven (7) days of such
Change of Control, a lump sum contribution equal to the greater of:
(i) the aggregate value of the amount each Participant
would be eligible to receive under (b), below; or
(ii) the present value of accumulated Plan benefits based
on the assumptions the Company's independent actuary deems
reasonable for this purpose as of the Valuation Date,
coinciding with or next preceding the date of Change of
Control, to the extent such amounts are not already in the
Trust; provided, however, amounts relating to those
Participants who receive a lump sum payment under subsection
(b), below, shall be excluded from the aggregate value
determination under (i) or (ii). The aggregate value of the
amount of the lump sum to be contributed to the Trust
pursuant to this Section 4 shall be determined by the
Company's independent actuaries. Thereafter, the Company's
independent actuaries shall annually determine as of a
Valuation Date for each Participant not receiving a lump sum
payment pursuant to subsection (b), below, the greater of:
(A) the amount such Participant would have received
under subsection (b) had such Participant not made the
election under subsection (c) below, if applicable;
and
(B) the present value of accumulated benefits based
on assumptions the actuary deems reasonable for this
purpose. To the extent that the value of the assets
held in the Trust relating to this Plan does not equal
the amount described in the preceding sentence, at the
time of the valuation, the Company shall make a lump
sum contribution to the Trust equal to the difference.
(b) In the event a Change of Control has occurred, each
Participant not making an election under subsection (c), below, shall receive,
and the Committee shall cause the Company to pay within seven (7) days of such
Change of Control, a lump sum payment equal to the present value of the
Retirement Payments the Participant is entitled to receive from the Company
pursuant to the terms of the Plan assuming when applicable for each
Participant as of the date of Change of Control that (i) the Participant will
complete his current term as a Director, (ii) the Participant will survive
during the period of his normal life expectancy, and (iii) the age requirement
for retirement and receipt of Retirement Payments is the age of the
Participant on the Change of Control date. Present value shall be determined
by using a discount rate equal to the applicable Federal rate provided for in
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PAGE 6
Section 7872(f)(2) of the Internal Revenue Code of 1986, as amended. The
amount of each Participant's lump sum payment shall be determined by the
Company's actuaries.
(c) Each Participant may elect in a time and manner determined
by the Committee but, for current Participants, in no event later than
September 1, 1995, or the occurrence of a Change of Control, if earlier, to
have amounts and benefits determined and payable under the terms of this Plan
as if a Change of Control had not occurred.
(d) Notwithstanding anything in this Plan to the contrary, each
Participant who has made an election under (c), above, may elect within 90
days following a Change of Control, in a time and manner determined by the
Committee, to receive a lump sum payment calculated under the provisions of
subsection (b), above, determined as of the Valuation Date next preceding such
payment, except that such amount shall be reduced by 5% and such reduction
shall be irrevocably forfeited to the Company by the Participant.
Furthermore, as a result of such election, the Participant shall no longer be
eligible to participate or otherwise benefit under the Plan. Payments under
this subsection (d) shall be made not later than seven (7) days following
receipt by the Company of the Participant's election. The Committee shall, no
later than seven (7) days after a Change of Control has occurred, cause
written notification to be given to each Participant eligible to make an
election under this subsection (d), that a Change of Control has occurred and
informing such Participant of the availability of the election.
5. Committee Powers. The Committee shall have full power and
authority to interpret, construe and administer this Plan, and all actions of
the Committee under the Plan shall be binding and conclusive on all persons
for all purposes.
6. Successors. The Plan shall be binding upon and inure to the
benefit of Participants. If the Company becomes a party to any merger,
consolidation, reorganization or in the event of a sale of substantially all
the assets of the Company, the Plan shall remain in full force and effect as
an obligation of the Company or its successor in interest.
7. Amendment and Termination. The Board reserves the right to amend
or terminate the Plan at any time without the consent of any Participant, but
no amendment or termination shall deprive any Participant of the right to
continue to receive payment under Section 3 once payments have begun.
Notwithstanding the foregoing, if a Change of Control occurs, each
Participant, regardless of age or Eligible Service shall be eligible for
benefits under the Plan, and the Plan may not be terminated and no amendment
may be made that would adversely affect the right of such any Participant to
receive Retirement Payments or Accelerated Retirement Payments under the Plan.
8. Construction. The Plan shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia. The masculine
pronoun shall mean the feminine wherever appropriate. The captions inserted
herein are inserted as a matter of convenience and shall not affect the
construction of the Plan.
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PAGE 1
Exhibit 10.3
CSX CORPORATION
CORPORATE DIRECTOR DEFERRED COMPENSATION PLAN
EFFECTIVE NOVEMBER 1, 1990
As Amended and Restated Effective January 1, 1995
1. Purpose
The purpose of this Plan is to permit members of the Board of
Directors of CSX Corporation to elect deferred receipt of director's fees.
This Plan is intended to constitute a deferred compensation plan for corporate
director's fees in accordance with Revenue Ruling 71-419, Cumulative Bulletin
1971-2, page 220.
2. Definitions
The following words or terms used herein shall have the following
meanings:
(a) "Administrator" -- means CSX Corporation
(b) "Board" -- Board of Directors of CSX
(c) "Change of Control" -- shall mean any of the following:
(i) Stock Acquisition. The acquisition, by any
individual, entity or group [within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")] (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 20% or more of either (A) the then outstanding shares of
common stock of the Corporation (the "Outstanding Corporation
Common Stock"), or (B) the combined voting power of the then
outstanding voting securities of the Corporation entitled to vote
generally in the election of directors (the "Outstanding
Corporation Voting Securities"); provided, however, that for
purposes of this subsection (i), the following acquisitions shall
not constitute a Change of Control: (A) any acquisition directly
from the Corporation; (B) any acquisition by the Corporation; (C)
any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Corporation or any corporation
controlled by the Corporation; or (D) any acquisition by any
corporation pursuant to a transaction which complies with clauses
(A), (B) and (C) of subsection (iii) of this Section 2(c); or
(ii) Board Composition. Individuals who, as of the date
hereof, constitute the Board of Directors (the "Incumbent Board")
cease for any reason to constitute at least a majority of the
Board of Directors; provided, however, that any individual
becoming a director subsequent to the date hereof whose election
or nomination for election by the Corporation's shareholders, was
approved by a vote of at least a majority of the directors then
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PAGE 2
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board of Directors; or
(iii) Business Combination. Approval by the shareholders of
the Corporation of a reorganization, merger, consolidation or sale
or other disposition of all or substantially all of the assets of
the Corporation or its principal subsidiary that is not subject,
as a matter of law or contract, to approval by the Interstate
Commerce Commission or any successor agency or regulatory body
having jurisdiction over such transactions (the "Agency") (a
"Business Combination"), in each case, unless, following such
Business Combination:
(A) all or substantially all of the individuals and
entities who were the beneficial owners, respectively,
of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities immediately
prior to such Business Combination beneficially own,
directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common
stock and the combined voting power of the then
outstanding voting securities entitled to vote
generally in the election of directors, as the case
may be, of the corporation resulting from such
Business Combination (including, without limitation, a
corporation which as a result of such transaction owns
the Corporation or its principal subsidiary or all or
substantially all of the assets of the Corporation or
its principal subsidiary either directly or through
one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to
such Business Combination of the Outstanding
Corporation Common Stock and Outstanding Corporation
Voting Securities, as the case may be;
(B) no Person (excluding any corporation resulting
from such Business Combination or any employee benefit
plan (or related trust) of the Corporation or such
corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more
of, respectively, the then outstanding shares of
common stock of the corporation resulting from such
Business Combination or the combined voting power of
the then outstanding voting securities of such
corporation except to the extent that such ownership
existed prior to the Business Combination; and
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PAGE 3
(C) at least a majority of the members of the board
of directors resulting from such Business Combination
were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action
of the Board of Directors, providing for such Business
Combination; or
(iv) Regulated Business Combination. Approval by the
shareholders of the Corporation of a Business Combination
that is subject, as a matter of law or contract, to approval
by the Agency (a "Regulated Business Combination") unless
such Business Combination complies with clauses (A), (B) and
(C) of subsection (iii) of this Section 2(c); or
(v) Liquidation or Dissolution. Approval by the
shareholders of the Corporation of a complete liquidation or
dissolution of the Corporation or its principal subsidiary.
(d) "CSX" or "Corporation" -- CSX Corporation
(e) "Director's Fees" -- any compensation, whether for Board
meetings or for Committee meetings or otherwise, earned by a
Member for services rendered as a Member during a particular
calendar year in which he has elected to be a Participant
(f) "Member" -- any person duly elected to the Board
(g) "Participant" -- any Member who elects to participate in the
Plan
(h) "Plan" -- Corporate Director Deferred Compensation Plan
(i) "Secretary" -- the Corporate Secretary of CSX
(j) "Trust" -- shall mean a grantor trust established by CSX
which will substantially conform to the terms of the
Internal Revenue Service model trust as described in Revenue
Procedure 92-64, 1992-2 C.B. 422. Except as provided in
Section 10, CSX is not obligated to make any contribution to
the Trust
(k) "Valuation Date" -- the last day of each calendar quarter
and such other dates as the Administrator deems necessary or
appropriate to value the Participants' benefits under this
Plan
(l) In any instance in which the male gender is used herein, it
shall also include persons of the female gender in
appropriate circumstances.
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PAGE 4
3. Merger Provisions
Any person who was a Participant under the Chessie System, Inc.
Corporate Director Deferred Compensation Plan or who was a director and had
made an election under the Seaboard Coast Line Industries, Inc. Nonfunded
Deferred Compensation Plan for Directors shall automatically become a
Participant under this Plan effective upon the merger of Chessie System, Inc.
and Seaboard Coast Line Industries, Inc. into the Corporation, provided that
such a person shall be a Member as defined in this Plan.
Director's Fees deferred previously under the terms of the aforesaid
director deferred compensation plans of Chessie System, Inc. and Seaboard
Coast Line Industries, Inc. shall remain subject to the terms and conditions
respectively provided therein, and the terms of this Plan shall only govern as
to Director's Fees earned on and after the date of merger into the
Corporation.
4. Participation
A Member may become a Participant for any calendar year by filing a
written Election to Participate in the Plan with the Secretary not later than
December 31 immediately prior to the year in which Director's Fees are to be
earned.
An Election to Participate may be made with respect to all or any
part of Director's Fees to be earned for any year or years to which such
Election to Participate may relate.
An Election to Participate, once filed, shall apply to Director's
Fees earned in subsequent years in which a Participant shall serve as a
Member, unless amended or revoked by written request to the Secretary.
Any person who becomes a Member and who was not a Member on the
preceding December 31 may file an Election to Participate before his term as a
Member begins.
5. Deferral of Director's Fees
CSX shall, during any year in which a Participant has an Election to
Participate on file with the Secretary, withhold and defer payment of all or
any specified part of Participant's Director's Fees in accordance with his
Election to Participate. Prior to the beginning of any year, a Participant
can elect to have all or any portion of the amounts withheld, including all
earnings thereon, or to be withheld, credited to an interest-accruing account
("Interest Account") and/or to an enhanced interest-accruing account for
calendar years 1986, 1987, 1989 and 1990 ("Enhanced Interest Account"), and/or
to a CSX phantom stock account ("Stock Account"). Such deferral election can
be made or changed before the beginning of any year.
Interest shall accrue on the Interest Account from the date the
deferred Director's Fee would otherwise have been paid to the Participant
until it is actually paid, such interest to be credited to the Participant's
account and compounded quarterly at the end of each calendar quarter. The
rate of interest will be reviewed periodically.
- 4 -
PAGE 5
Interest shall accrue on the Enhanced Interest Account from the first
day of the month following the deferral and shall compound thereafter at an
annual rate of 16% until all amounts are finally paid to the Participant.
Credits to the Stock Account shall be in full and fractional units
based on the closing price for CSX common stock as reported on the New York
Stock Exchange - Composite Listing ("NYSE") on the date the fees would
otherwise have been paid to the Participant. Dividends shall be credited in
full and fractional units to the account based on the number of units in the
account on the record date and calculated based on the closing price for CSX
common stock on the dividend payment date.
A Participant, while a Member, may elect prior to the beginning of
any year to transfer all or any portion of amounts deferred, including all
earnings thereon, to an Enhanced Interest Account, an Interest Account and/or
a Stock Account, provided, however, that no transfer may be made out of an
Enhanced Interest Account.
6. Distribution of Deferred Director's Fees
Amounts deferred under the Plan and credited to an Interest Account
or Stock Account shall be distributed to a Participant from the account(s)
maintained in respect of his account in a lump sum at the beginning of the
year following the year in which a Participant ceases to be a Member, unless
he shall elect installments as provided below. Amounts deferred and credited
to an Enhanced Interest Account shall be distributed over an installment
period elected by the Participant.
The value of a Participant's Interest Account shall be the sum of
amounts deferred and all interest accrued thereon. The value of an Enhanced
Interest Account shall be the sum of amounts deferred and all interest accrued
thereon. The value of a Stock Account shall be the value of the units in a
Participant's account based on the closing price for CSX common stock as
reported on the NYSE on the last business day of the year in which a
Participant ceases to be a Member, unless he shall elect annual or quarterly
installments as provided below. The value of a Stock Account will fluctuate
in value in line with the fluctuation in the price of CSX common stock. There
can be no assurance on the market value of the phantom units either at the
time of acquisition or at any time during the distribution period, nor can
there be any assurance as to the continuation of dividends.
Distribution of Deferred amounts shall begin with either the first
day of the calendar year immediately following the year in which a Participant
shall cease to be a Member for any reason other than death, or the first day
of the calendar year immediately following the year in which a Participant
shall cease to be a Member and shall have attained age 65, as the Member may
elect.
If installment payments are elected for Interest or Stock Accounts,
payments shall be made, as the Participant may elect, for either (a) five
years, (b) ten years, or (c) any other designated period which shall be not
less than the period he was a Participant nor exceed ten years. For Enhanced
Interest Accounts, the Participant may elect to receive payments over (a) five
years, (b) ten years, or (c) fifteen years.
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PAGE 6
For Interest Accounts and Stock Accounts, installments shall be on an
annual or quarterly basis as the member may elect. The amount of each
installment shall be determined by multiplying the value of the Participant's
account at the end of the calendar quarter immediately preceding the
installment date by a fraction, the numerator of which shall be one (1) and
the denominator of which shall be the number of installment payments over
which payment of such amount is to be made, less the number of installment
payments theretofore made.
For Enhanced Interest Accounts, payments shall be in level
installments on a monthly basis over the number of years (five, ten, or
fifteen) as elected by the Member.
The elections provided in this Section 6 shall be made in writing in
a Participant's Election to Participate and shall be subject to all other
provisions of the Plan relating thereto and to the deferral of receipt of
Director's Fees.
In the event a Participant shall die while he is a Member, the amount
appearing as the credit balance of his account, or the value of the units in
his Stock Account, shall be paid in either a lump sum or installments
(consistent with the election made by the Participant as described in this
Section 6) to his Designated Beneficiary. Each Participant may file with the
Secretary a Designation of Beneficiary for this purpose.
In the event a Participant shall die after he ceases to be a Member
and before he has received complete distribution from his account, any credit
balance of his account, including interest, or the value of the units in his
Stock Account, shall be paid to his Designated Beneficiary consistent with the
election made by the Participant as described in this Section 6.
In the event a Participant shall not file a Designation of
Beneficiary, or his Designated Beneficiary is not living at the Participant's
death, the balance credited to his account, including interest, shall be paid
in full to his estate not later than the tenth day of the calendar year
following his date of death.
7. Death Benefit
For Participants electing to have deferred Director's Fees credited
to an Enhanced Interest Account who die while a Member, a death benefit equal
to the greater of three times the amount of Director's Fees deferred or the
amount of Director's Fees deferred plus accumulated interest will be paid to
the Member's Designated Beneficiary. For Participants in an Enhanced Interest
Account who die after ceasing to be a Member, a lump sum death benefit of
$10,000 will be paid to the Designated Beneficiary. This death benefit shall
apply only to Director's Fees deferred after December 31, 1985 and which have
been credited to an Enhanced Interest Account. This death benefit shall not
apply to any amounts credited to an Enhanced Interest Account by reason of
transfer from an Interest Account and/or a Stock Account.
In the event a Participant shall not file a Designation of
Beneficiary, or the Designated Beneficiary is not living at the Participant's
death, the death benefit shall be paid to the Participant's estate.
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PAGE 7
8. Amendment or Termination of Election to Participate
A Participant may amend or terminate his Election to Participate by
written request to the Secretary, which shall become effective for the
calendar year following the year in which his request is made; provided,
however, that no amendment shall be made to contravene the deferral of
Director's Fees previously made under the provisions of this Plan.
In the event a Participant amends or terminates his Election to
Participate and remains a Member, he shall not be entitled to receive any
distribution from his account until he ceases to be a Member, and
distributions shall be made only as provided in Section 6 of this Plan.
9. Obligation of CSX
This Plan shall be unfunded and credits to the memorandum account(s)
of each Participant shall not be set apart for him nor otherwise made
available so that he may draw upon it at any time, except as provided in this
Plan. Neither any Participant nor his Designated Beneficiary shall have any
right, title, or interest in such credits or any claim against them. Payments
may only be made at such times and in the manner expressly provided in this
Plan. CSX's contractual obligation is to make the payments when due. No
notes or security for the payment of any Participant's account shall be issued
by CSX.
10. Change of Control
10.1 If a Change of Control has occurred, the Administrator shall
cause CSX to contribute to the Trust, within 7 days of such Change of Control,
a lump sum payment equal to the aggregate value of the amount each Participant
would be eligible to receive (determined under 10.2 below) as of the latest
Valuation Date coinciding with or preceding the date of Change of Control to
the extent such amounts are not already in the Trust; provided, however,
amounts relating to those Participants who receive a lump sum payment under
10.2 below shall be excluded from the aggregate value determination. The
aggregate value of the amount of the lump sum to be contributed to the Trust
pursuant to this Section 10 shall be determined by CSX's accountants after
consultation with the entity then maintaining the Plan's records. Thereafter,
CSX's accountants shall annually determine as of a Valuation Date for each
Participant not receiving a lump sum payment pursuant to section 10.2, below,
the amounts which would be payable under such subsection were a Change of
Control to occur at the date of such determination. To the extent that the
value of the assets held in the Trust relating to this Plan do not equal the
aggregate amount described in the preceding sentence, at the time of the
valuation, as determined by CSX's accountants, CSX shall make a lump sum
contribution to the Trust equal to the difference.
10.2 In the event a Change of Control has occurred, each
Participant not making an election under section 10.3, below, shall receive,
and the Administrator shall cause CSX to pay, within 7 days of such Change of
Control, a lump sum payment equal to the amount the Participant would have
been entitled to receive determined under Section 6 had he ceased to be a
Member and selected an immediate lump sum payment. The amount of each
Participant's lump sum payment shall be determined by CSX's accountants after
consultation with the entity then maintaining the Plan's records.
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PAGE 8
10.3 Each Participant may elect in a time and manner determined
by the Administrator but in no event later than September 1, 1995, or the
occurrence of a Change of Control, if earlier, to have amounts and benefits
determined and payable under the terms of the Plan as if a Change of Control
had not occurred. New Participants in the Plan may elect in a time and manner
determined by the Administrator but in no event later than a Change of Control
to have amounts and benefits determined and payable under the terms of the
Plan as if a Change of Control had not occurred.
10.4 Notwithstanding anything in the Plan to the contrary, each
Participant who has made an election under section 10.3, above, may elect
within 90 days following a Change of Control, in a time and manner determined
by the Administrator, to receive a lump sum payment calculated under the
provisions of 10.3, above, determined as of the Valuation Date next preceding
such payment, except that such calculated amount shall be reduced by 5% and
such reduction shall be irrevocably forfeited to CSX by the Participant.
Furthermore, as a result of such election, the Participant shall no longer be
eligible to participate or otherwise benefit from the Plan. Payments under
this section 10.4 shall be made not later than 7 days following receipt by CSX
of the Participant's election. The Administrator shall, no later than 7 days
after a Change of Control has occurred, give written notification to each
Participant eligible to make an election under this section 10.4, that a
Change of Control has occurred and informing such Participant of the
availability of the election.
11. Claims Against Participant's Account
No credits to the account of any Participant under this Plan shall be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, or charge, and any attempt to do so shall be void. Nor
shall any credit be subject to attachment or legal process for debts or other
obligations. Nothing contained in this Plan shall give any Participant any
interest, lien, or claim against any specific asset of CSX. No Participant or
his Designated Beneficiary shall have any rights other than as a general
creditor of CSX.
12. Competition by Participant
In the event a Participant ceases to be a Member and becomes a
proprietor, officer, partner, employee, director, or otherwise becomes
affiliated with any business that is in competition with the Corporation, the
entire balance credited to his account, including interest, or the value of
the units in his Stock Account, may, if directed by the Board in its sole
discretion, be paid immediately to him in a lump sum.
13. Payment of Credit Balance to Participant's Account
Notwithstanding anything herein to the contrary, the Board may, in
its sole discretion, direct payment in a lump sum, of any or all of the credit
balance appearing at the time in the account of a Participant, and/or of the
value of the units in his Stock Account.
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PAGE 9
14. Amendment or Termination
This Plan may be altered, amended, suspended, or terminated at any
time by the Board; provided, however, that no alteration, amendment,
suspension, or termination shall be made to this Plan which would result in
the distribution of amounts credited to the accounts of all Participants in
any manner other than is provided in this Plan without the consent of all
Participants.
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PAGE 1
Exhibit 10.6
FORM
EMPLOYMENT AGREEMENT
AGREEMENT by and between CSX CORPORATION, a Virginia corporation
(the "Company"), and [Executive] (the "Executive"), dated as of the first day
of February, 1995.
The Board of Directors of the Company (the "Board"), has
determined that it is in the best interests of the Company and its
shareholders to assure that the Company will have the continued dedication of
the Executive, notwithstanding the possibility, threat or occurrence of a
Change of Control (as defined below) of the Company. The Board believes it is
imperative to diminish the inevitable distraction of the Executive by virtue
of the personal uncertainties and risks created by a pending or threatened
Change of Control and to encourage the Executive's full attention and
dedication to the Company currently and in the event of any threatened or
pending Change of Control, and to provide the Executive with compensation and
benefits arrangements upon a Change of Control which ensure that the
compensation and benefits expectations of the Executive will be satisfied and
which are competitive with those of other corporations. Therefore, in order
to accomplish these objectives, the Board has caused the Company to enter into
this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
a. The "Effective Date" shall mean the first date during
the Term (as defined in Section 1(b)) on which a Change of Control
(as defined in Section 2) occurs. Anything in this Agreement to the
contrary notwithstanding, if the Executive's employment with the
Company is terminated by the Company without Cause prior to the date
on which the Change of Control occurs or the Executive ceases to be
an officer of the Company, and if it is reasonably demonstrated by
the Executive that such termination of employment or cessation of
status as an officer (i) was at the request of a third party who has
taken steps reasonably calculated to effect a Change of Control or
(ii) otherwise arose in connection with or anticipation of a Change
of Control, then, in each such case, for all purposes of this
Agreement the "Effective Date" shall mean the date immediately prior
to the date of such termination of employment or cessation of status
as an officer.
b. The "Term" shall mean the period commencing on the date
hereof and ending on the earlier to occur of (i) the third
anniversary of such date or (ii) the first day of the month next
following the Employee's normal retirement date ("Normal Retirement
Date") under the principal pension plan in which the Executive
participates (the "Retirement Plan"); provided, however, that
commencing on the date one year after the date hereof, and on each
annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal
- 1 -
PAGE 2
Date"), unless previously terminated, the Term shall be automatically
extended so as to terminate three years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall
give notice to the Executive that the Term shall not be so extended.
2. Change of Control. For the purpose of this Agreement, a
"Change of Control" shall mean:
a. Stock Acquisition. The acquisition by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (a "Person") of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for
purposes of this subsection (a), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly from
the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any corporation controlled by the
Company or (iv) any acquisition by any corporation pursuant to a
transaction which complies with clauses (i), (ii) and (iii) of
subsection (c) of this Section 2; or
b. Board Composition. Individuals who, as of the date
hereof, constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the
date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal
of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
c. Business Combination. Approval by the shareholders of
the Company of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the
Company or its principal subsidiary (a "Business Combination") that
is not subject, as a matter of law or contract, to approval by the
Interstate Commerce Commission or any successor agency or regulatory
body having jurisdiction over such transactions (the "Agency"), in
each case, unless, following such Business Combination:
(i) all 8or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination
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PAGE 3
beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as
a result of such transaction owns the Company or its principal
subsidiary or all or substantially all of the assets of the
Company or its principal subsidiary either directly or through one
or more subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Business Combination of
the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be;
(ii) no Person (excluding any corporation resulting from
such Business Combination or any employee benefit plan (or related
trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly,
20% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that
such ownership existed prior to the Business Combination; and
(iii) at least a majority of the members of the board of
directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
d. Regulated Business Combination. Approval by the
shareholders of the Company of a Business Combination that is
subject, as a matter of law or contract, to approval by the Agency (a
"Regulated Business Combination") unless such Business Combination
complies with clauses (i), (ii) and (iii) of subsection(c) of this
Section 2; or
e. Liquidation or Dissolution. Approval by the
shareholders of the Company of a complete liquidation or dissolution
of the Company or its principal subsidiary.
If any Change of Control is a Regulated Business Combination, but its
implementation involves another "Change of Control" that is not a Regulated
Business Combination within the meaning of this Section 2, then for all
purposes of this Agreement, such Change of Control shall not be deemed to be a
Regulated Business Combination, the provisions governing a Regulated Business
Combination shall not apply, and the provisions governing such other Change in
Control shall apply.
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PAGE 4
3. Employment Period.
a. Generally. Subject to Section 3(b), the Company
hereby agrees to continue the Executive in its employ, and the
Executive hereby agrees to remain in the employ of the Company
subject to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the third anniversary
of such date (the "Employment Period").
b. Regulated Business Combination. Notwithstanding the
foregoing, in the case of a Change of Control that is a Regulated
Business Combination, then for all purposes of this Agreement, the
"Employment Period" shall mean the longer of (i) the period
commencing on the Effective Date and ending on the third anniversary
of such date or (ii) the period commencing on the Effective Date and
ending thirteen months from the effective date of a final decision by
the Agency on the proposed Regulated Business Combination ("Final
Regulatory Action"), provided, however, that (x) if the Final
Regulatory Action is a denial of the Regulated Business Combination
then for all purposes of this Agreement the "Employment Period" shall
end upon the sixtieth (60th) day following such Final Regulatory
Action and (y) if the Final Regulatory Action is an approval of the
Regulated Business Combination, but the Regulated Business
Combination is not consummated by the first anniversary of the Final
Regulatory Action, then for all purposes of this Agreement the
"Employment Period" shall end upon such first anniversary of the
Final Regulatory Action.
4. Terms of Employment.
a. Position and Duties. (i) During the Employment
Period: (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and
assigned at any time during the 120-day period immediately preceding
the Effective Date, and (B) the Executive's services shall be
performed at the location where the Executive was employed
immediately preceding the Effective Date or any office or location
less than 35 miles from such location.
(ii) During the Employment Period, and excluding any periods
of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during
normal business hours to the business and affairs of the Company
and, to the extent necessary to discharge the responsibilities
assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a
violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees, (B) deliver
lectures, fulfill speaking engagements or teach at educational
institutions and (C) manage personal investments, so long as such
activities do not6 significantly interfere with the performance of
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PAGE 5
the Executive's responsibilities as an employee of the Company in
accordance with this Agreement. It is expressly understood and
agreed that to the extent that any such activities have been
conducted by the Executive prior to the Effective Date, the
continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective
Date shall not thereafter be deemed to interfere with the
performance of the Executive's responsibilities to the Company.
b. Compensation. (i) Base Salary. During the Employment
Period, the Executive shall receive an annual base salary ("Annual
Base Salary"), which shall be paid at a monthly rate, at least equal
to twelve times the highest monthly base salary paid or payable,
including any base salary which has been earned but deferred, to the
Executive by the Company and its affiliated companies in respect of
the twelve-month period immediately preceding the month in which the
Effective Date occurs. During the Employment Period, the Annual Base
Salary shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and
thereafter at least annually. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation to the
Executive under this Agreement. Annual Base Salary shall not be
reduced after any such increase, and the term Annual Base Salary as
utilized in this Agreement shall refer to Annual Base Salary as so
increased. As used in this Agreement, the term "affiliated
companies" shall include any company controlled by, controlling or
under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the
Employment Period, an annual bonus (the "Annual Bonus") in cash at
least equal to the Executive's highest cash bonus under the
Company's annual incentive plans, or any comparable bonus under
any predecessor or successor plan, for the last three full fiscal
years prior to the Effective Date (annualized in the event that
the Executive was not employed by the Company for the whole of
such fiscal year) (the "Recent Annual Bonus"). Each such Annual
Bonus shall be paid no later than the end of the third month of
the fiscal year next following the fiscal year for which the
Annual Bonus is awarded, unless the Executive shall elect to defer
the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate
in all incentive, savings and retirement plans, practices,
policies and programs applicable generally to other peer
executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide
the Executive with incentive opportunities (measured with respect
to both regular and special incentive opportunities, to the
extent, if any, that such distinction is applicable), savings
opportunities and retirement benefit opportunities, in each case,
less favorable, in the aggregate, than the most favorable of those
provided by the Company and its affiliated companies for the
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PAGE 6
Executive under such plans, practices, policies and programs as in
effect at any time during the 120-day period immediately preceding
the Effective Date or if more favorable to the Executive, those
provided generally at any time after the Effective Date to other
peer executives of the Company and its affiliated companies.
(iv) Welfare Benefit Plans. During the Employment Period,
the Executive and/or the Executive's family, as the case may be,
shall be eligible for participation in and shall receive all
benefits under welfare benefit plans, practices, policies and
programs provided by the Company and its affiliated companies
(including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable
generally to other peer executives of the Company and its
affiliated companies, but in no event shall such plans, practices,
policies and programs provide the Executive with benefits which
are less favorable, in the aggregate, than the most favorable of
such plans, practices, policies and programs in effect for the
Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its
affiliated companies.
(v) Expenses. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by the Executive in accordance with
the most favorable policies, practices and procedures of the
Company and its affiliated companies in effect for the Executive
at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies.
(vi) Fringe Benefits. During the Employment Period, the
Executive shall be entitled to fringe benefits, including, without
limitation, tax and financial planning services, payment of club
dues, and, if applicable, use of an automobile and payment of
related expenses, in accordance with the most favorable plans,
practices, programs and policies of the Company and its affiliated
companies in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if
more favorable to the Executive, as in effect generally at any
time thereafter with respect to other peer executives of the
Company and its affiliated companies.
(vii) Office and Support Staff. During the Employment
Period, the Executive shall be entitled to an office or offices of
a size and with furnishings and other appointments, and to
exclusive personal secretarial and other assistance, at least
equal to the most favorable of the foregoing provided to the
Executive by the Company and its affiliated companies at any time
during the 120-day period immediately preceding the Effective Date
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PAGE 7
or, if more favorable to the Executive, as provided generally at
any time thereafter with respect to other peer executives of the
Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with
the most favorable plans, policies, programs and practices of the
Company and its affiliated companies as in effect for the
Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its affiliated
companies.
5. Termination of Employment.
a. Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the
Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period
(pursuant to the definition of Disability set forth below), it may
give to the Executive written notice in accordance with Section 12(b)
of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the
Company shall terminate effective on the 30th day after receipt of
such notice by the Executive (the "Disability Effective Date"),
provided that, within the 30 days after such receipt, the Executive
shall not have returned to full-time performance of the Executive's
duties. For purposes of this Agreement, "Disability" shall mean the
absence of the Executive from the Executive's duties with the Company
on a full-time basis for 180 consecutive business days as a result of
incapacity due to mental or physical illness which is determined to
be total and permanent by a physician selected by the Company or its
insurers and acceptable to the Executive or the Executive's legal
representative.
b. Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of
this Agreement, "Cause" shall mean:
(i) the willful and continued failure of the Executive to
perform substantially the Executive's duties with the Company or
one of its affiliates (other than any such failure resulting from
incapacity due to physical or mental illness), after a written
demand for substantial performance is delivered to the Executive
by the Board or the Chief Executive Officer of the Company which
specifically identifies the manner in which the Board or Chief
Executive Officer believes that the Executive has not
substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal
conduct or gross misconduct which is materially and demonstrably
injurious to the Company.
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PAGE 8
For purposes of this provision, no act or failure to act, on the part
of the Executive, shall be considered "willful" unless it is done, or
omitted to be done, by the Executive in bad faith or without
reasonable belief that the Executive's action or omission was in the
best interests of the Company. Any act, or failure to act, based
upon authority given pursuant to a resolution duly adopted by the
Board or upon the instructions of the Chief Executive Officer or a
senior officer of the Company or based upon the advice of counsel for
the Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests of
the Company. The cessation of employment of the Executive shall not
be deemed to be for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice is provided to the Executive
and the Executive is given an opportunity, together with counsel, to
be heard before the Board), finding that, in the good faith opinion
of the Board, the Executive is guilty of the conduct described in
subparagraph (i) or (ii) above, and specifying the particulars
thereof in detail.
c. Good Reason. The Executive's employment may be
terminated by the Executive during the Employment Period for Good
Reason. For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive shall be
conclusive. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by Section
4(a) of this Agreement, or any other action by the Company which
results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and
which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(ii) any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring in
bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be based at
any office or location other than as provided in Section
4(a)(i)(B) hereof or the Company's requiring the Executive to
travel on Company business to a substantially greater extent than
required immediately prior to the Effective Date;
(iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by
this Agreement; or
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PAGE 9
(vi) any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement.
Anything in this Agreement to the contrary notwithstanding, a
termination by the Executive for any reason shall be deemed to be a
termination for Good Reason for all purposes of this Agreement if
such termination occurs (i) in the case of a Change of Control that
is not a Regulated Business Combination, during the 30-day period
immediately following the first anniversary of the Effective Date,
(ii) in the case of a Change of Control that is a Regulated Business
Combination consummated pursuant to Final Regulatory Action, during
the 30-day period immediately following the first anniversary of the
Final Regulatory Action (it being understood that the Executive will
have no rights under this paragraph in the case of a Change of
Control that is a Regulated Business Combination (x) denied by the
Agency or (y) for any other reason not consummated within one year of
Final Regulatory Action).
d. Regulated Business Combination. Notwithstanding the
foregoing, in the case of a Change of Control that is a Regulated
Business Combination, then for all purposes of this Agreement, during
that portion of the Employment Period prior to Final Regulatory
Action, the Executive may not exercise his rights to terminate his
employment under this Agreement for "Good Reason." The Executive may
only terminate his employment under this Agreement if he is
"Constructively Terminated" by the Company. Moreover, except to the
extent expressly set forth in the definition of "Constructive
Termination," the Executive shall have no remedy for any breach by
the Company of the provisions of Section 4; provided, however, that
any failure of the Company to comply in any material respect with the
provisions of Section 4 shall create a rebuttable presumption that a
Constructive Termination has occurred.
For purposes of this Agreement, a "Constructive Termination shall
mean:
(i) substantial diminution of the Executive's duties or
responsibilities as contemplated by Section 4(a) of this
Agreement, excluding for this purpose an isolated, insubstantial
and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof
given by the Executive;
(ii) either (x) a reduction in the Executive's cash
compensation (which shall mean his Annual Base Salary or Annual
Bonus) or (y) a discriminatory reduction in the Executive's other
incentive opportunities, benefits or perquisites described in
Section 4(b);
(iii) the Company's requiring the Executive to be based at
any office or location other than as provided in Section
4(a)(i)(B) hereof; or
(iv) any purported termination by the Company of the
Executive's employment otherwise than for Cause.
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PAGE 10
During that portion of the Employment Period after Final Regulatory
Action, the Executive may terminate his Employment under this
Agreement for "Good Reason.
e. Notice of Termination. Any termination by the Company for
Cause, or by the Executive for Good Reason or Constructive
Termination, shall be communicated by Notice of Termination to the
other party hereto given in accordance with Section 12(b) of this
Agreement. For purposes of this Agreement, a "Notice of Termination"
means a written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated, and (iii) if
the Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date (which date
shall be not more than thirty days after the giving of such notice).
The failure by the Executive or the Company to set forth in the
Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason, Cause or Constructive Termination shall not
waive any right of the Executive or the Company, respectively,
hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the Executive's
or the Company's rights hereunder.
f. Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by
the Executive for Good Reason or Constructive Termination, the date
of receipt of the Notice of Termination or any later date specified
therein, as the case may be, (ii) if the Executive's employment is
terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies
the Executive of such termination and (iii) if the Executive's
employment is terminated by reason of death or Disability, the Date
of Termination shall be the date of death of the Executive or the
Disability Effective Date, as the case may be.
6. Obligations of the Company upon Termination.
a. Good Reason or Constructive Termination; Other Than for
Cause, Death or Disability. If, during the Employment Period, the
Company shall terminate the Executive's employment other than for
Cause or Disability or the Executive shall terminate employment for
Good Reason or Constructive Termination:
(i) the Company shall pay to the Executive in a lump sum in
cash within 30 days after the Date of Termination the aggregate of
the following amounts:
A. the sum of (1) the Executive's Annual Base
Salary through the Date of Termination to the extent not
theretofore paid, (2) the product of (x) the higher of (I)
the Recent Annual Bonus and (II) the Annual Bonus paid or
payable, including any bonus or portion thereof which has
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PAGE 11
been earned but deferred (and annualized for any fiscal year
consisting of less than twelve full months or during which
the Executive was employed for less than twelve full
months), for the most recently completed fiscal year during
the Employment Period, if any (such higher amount being
referred to as the "Highest Annual Bonus") and (y) a
fraction, the numerator of which is the number of days in
the current fiscal year through the Date of Termination, and
the denominator of which is 365 and (3) any compensation
previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore
paid (the sum of the amounts described in clauses (1), (2),
and (3) shall be hereinafter referred to as the "Accrued
Obligations"); and
B. the amount equal to the product of (1) three and
(2) the sum of (x) the Executive's Annual Base Salary and
(y) the Highest Annual Bonus; and
C. an amount equal to the excess of (a) the
actuarial equivalent of the benefit under the Company's
qualified defined benefit retirement plan (the "Retirement
Plan") (utilizing actuarial assumptions no less favorable to
the Executive than those in effect under the Company's
Retirement Plan immediately prior to the Effective Date),
and any excess or supplemental retirement plan in which the
Executive participates (together, the "SERP") which the
Executive would receive if the Executive's employment
continued for three years after the Date of Termination
assuming for this purpose that all accrued benefits are
fully vested, and, assuming that the Executive's
compensation in each of the three years is that required by
Section 4(b)(i) and Section 4(b)(ii), over (b) the actuarial
equivalent of the Executive's actual benefit (paid or
payable), if any, under the Retirement Plan and the SERP as
of the Date of Termination;
(ii) for three years after the Executive's Date of
Termination, or such longer period as may be provided by the terms
of the appropriate plan, program, practice or policy, the Company
shall continue benefits to the Executive and/or the Executive's
family at least equal to those which would have been provided to
them in accordance with the plans, programs, practices and
policies described in Section 4(b)(iv) of this Agreement if the
Executive's employment had not been terminated or, if more
favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company
and its affiliated companies and their families, provided,
however, that if the Executive becomes reemployed with another
employer and is eligible to receive medical or other welfare
benefits under another employer provided plan, the medical and
other welfare benefits described herein shall be secondary to
those provided under such other plan during such applicable period
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PAGE 12
of eligibility. For purposes of determining eligibility (but not
the time of commencement of benefits) of the Executive for retiree
benefits pursuant to such plans, practices, programs and policies,
the Executive shall be considered to have remained employed until
three years after the Date of Termination and to have retired on
the last day of such period;
(iii) the Company shall, at its sole expense as incurred,
provide the Executive with outplacement services the scope and
provider of which shall be selected by the Executive in his sole
discretion; and
(iv) to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Executive any other
amounts or benefits required to be paid or provided or which the
Executive is eligible to receive under any plan, program, policy
or practice or contract or agreement of the Company and its
affiliated companies, including earned but unpaid stock and
similar compensation (such other amounts and benefits shall be
hereinafter referred to as the "Other Benefits").
b. Death. If the Executive's employment is terminated by reason
of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of
Accrued Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive's
estate or beneficiary, as applicable, in a lump sum in cash within 30
days of the Date of Termination. With respect to the provision of
Other Benefits, the term Other Benefits as utilized in this Section
6(b) shall include, without limitation, and the Executive's estate
and/or beneficiaries shall be entitled to receive, benefits at least
equal to the most favorable benefits provided by the Company and
affiliated companies to the estates and beneficiaries of peer
executives of the Company and such affiliated companies under such
plans, programs, practices and policies relating to death benefits,
if any, as in effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive's
estate and/or the Executive's beneficiaries, as in effect on the date
of the Executive's death with respect to other peer executives of the
Company and its affiliated companies and their beneficiaries.
c. Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period,
this Agreement shall terminate without further obligations to the
Executive, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations
shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(c)
shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits
at least equal to the most favorable of those generally provided by
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PAGE 13
the Company and its affiliated companies to disabled executives
and/or their families in accordance with such plans, programs,
practices and policies relating to disability, if any, as in effect
generally with respect to other peer executives and their families at
any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the
Executive's family, as in effect at any time thereafter generally
with respect to other peer executives of the Company and its
affiliated companies and their families.
d. Cause; Other than for Good Reason or Constructive
Termination. If the Executive's employment shall be terminated for
Cause during the Employment Period, this Agreement shall terminate
without further obligations to the Executive other than the
obligation to pay to the Executive (x) his Annual Base Salary through
the Date of Termination, (y) the amount of any compensation
previously deferred by the Executive, and (z) Other Benefits, in each
case to the extent theretofore unpaid. If the Executive voluntarily
terminates employment during the Employment Period, excluding a
termination for Good Reason or Constructive Termination, this
Agreement shall terminate without further obligations to the
Executive, other than for Accrued Obligations and the timely payment
or provision of Other Benefits. In such case, all Accrued
Obligations shall be paid to the Executive in a lump sum in cash
within 30 days of the Date of Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of its
affiliated companies and for which the Executive may qualify, nor, subject to
Section 12(f), shall anything herein limit or otherwise affect such rights as
the Executive may have under any contract or agreement with the Company or any
of its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract
or agreement except as explicitly modified by this Agreement.
8. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement and
such amounts shall not be reduced whether or not the Executive obtains other
employment. The Company agrees to pay as incurred, to the full extent
permitted by law, all legal fees and expenses which the Executive may
reasonably incur as a result of any contest (regardless of the outcome
thereof) by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement), plus in
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PAGE 14
each case interest on any delayed payment at the applicable Federal rate
provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as
amended (the "Code").
9. Certain Additional Payments by the Company.
a. Anything in this Agreement to the contrary notwithstanding
and except as set forth below, in the event it shall be determined
that any payment or distribution by the Company to or for the benefit
of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise,
but determined without regard to any additional payments required
under this Section 9) (a "Payment") would be subject to the excise
tax imposed by Section 4999 of the Code or any interest or penalties
are incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed
with respect to such taxes), including, without limitation, any
income taxes (and any interest and penalties imposed with respect
thereto) and Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments. Notwithstanding the foregoing
provisions of this Section 9(a), if it shall be determined that the
Executive is entitled to a Gross-Up Payment, but that the Executive,
after taking into account the Payments and the Gross-Up Payment,
would not receive a net after-tax benefit of at least $50,000 (taking
into account both income taxes and any Excise Tax) as compared to the
net after-tax proceeds to the Executive resulting from an elimination
of the Gross-Up Payment and a reduction of the Payments, in the
aggregate, to an amount (the "Reduced Amount") such that the receipt
of Payments would not give rise to any Excise Tax, then no Gross-Up
Payment shall be made to the Executive and the Payments, in the
aggregate, shall be reduced to the Reduced Amount.
b. Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9, including
whether and when a Gross-Up Payment is required and the amount of
such Gross-Up Payment and the assumptions to be utilized in arriving
at such determination, shall be made by Ernst & Young or such other
certified public accounting firm as may be designated by the
Executive (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within
15 business days of the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting
the Change of Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company. Any Gross-Up Payment, as
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PAGE 15
determined pursuant to this Section 9, shall be paid by the Company
to the Executive within five days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall
be binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder,
it is possible that Gross-Up Payments which will not have been made
by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 9(c) and
the Executive thereafter is required to make a payment of any Excise
Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.
c. The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would
require the payment by the Company of the Gross-Up Payment. Such
notification shall be given as soon as practicable but no later than
ten business days after the Executive is informed in writing of such
claim and shall apprise the Company of the nature of such claim and
the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Executive
in writing prior to the expiration of such period that it desires to
contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time
to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold
the Executive harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this
Section 9(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or
forgo any and all administrative appeals, proceedings, hearings and
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PAGE 16
conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Executive to pay the tax
claimed and sue for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company
directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive, on
an interest-free basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension of
the statute of limitations relating to payment of taxes for the
taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be
payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
d. If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 9(c), the Executive
becomes entitled to receive any refund with respect to such claim,
the Executive shall (subject to the Company's complying with the
requirements of Section 9(c)) promptly pay to the Company the amount
of such refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section
9(c), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company
does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to
the extent thereof, the amount of Gross-Up Payment required to be
paid.
10. Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its
affiliated companies, and their respective businesses, which shall have been
obtained by the Executive during the Executive's employment by the Company or
any of its affiliated companies and which shall not be or become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). After termination of the
Executive's employment with the Company, the Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law
or legal process, communicate or divulge any such information, knowledge or
data to anyone other than the Company and those designated by it. In no event
shall an asserted violation of the provisions of this Section 10 constitute a
basis for deferring or withholding any amounts otherwise payable to the
Executive under this Agreement.
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PAGE 17
11. Successors.
a. This Agreement is personal to the Executive and without the
prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
b. This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
c. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined
and any successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law, or
otherwise.
12. Miscellaneous.
a. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia, without
reference to principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and shall have no
force or effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto
or their respective successors and legal representatives.
b. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
If to the Company:
CSX Corporation
One James Center
Richmond, Virginia 23219
Attention: General Counsel
or to such other address as either party shall have furnished to the
other in writing in accordance herewith. Notice and communications
shall be effective when actually received by the addressee.
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PAGE 18
c. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
d. The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
e. The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to
terminate employment for Good Reason or Constructive Termination
pursuant to Section 5 of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of
this Agreement.
f. The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the
Executive and the Company, the employment of the Executive by the
Company is "at will" and, subject to Section 1(a) hereof, prior to
the Effective Date, the Executive's employment and/or this Agreement
may be terminated by either the Executive or the Company at any time
prior to the Effective Date, in which case the Executive shall have
no further rights under this Agreement. From and after the Effective
Date this Agreement shall supersede any other agreement between the
parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from its Board of Directors, the
Company has caused these presents to be executed in its name on its behalf,
all as of the day and year first above written.
--------------------
[Executive]
CSX CORPORATION
By _______________________
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PAGE 1
Exhibit 10.10
CSX CORPORATION
1991 Stock Purchase and Loan Plan
1. Purpose
The purpose of this 1991 Stock Purchase and Loan Plan (the "Plan") is
to further the long-term stability and financial success of CSX Corporation
(the "Company") by providing a method for employees to significantly increase
their ownership of Company Stock (as hereinafter defined). The Company
believes that ownership of Company Stock will stimulate the efforts of those
employees upon whose judgement and interest the Company is and will be largely
dependent for the successful conduct of its business and will further the
identification of those employees' interests with those of the Company's
shareholders.
2. Definitions
As used in the Plan, the following terms have the meanings indicated:
(a) "Applied Dividends" means dividends paid on pledged Company
Stock applied to reduce Interest as provided in Section
6(e).
(b) "Board" means the Board of Directors of the Company.
(c) "Business Day" means, if relevant to a determination of the
value of Company Stock, a day on which shares of Company
Stock are or could be traded on the New York Stock Exchange
(or other national stock exchange, or if not so listed,
could be traded over-the-counter). In all other cases, the
term means a day on which the offices of the Company are
open for the conduct of business in the normal course.
(d) "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
and any of its Subsidiaries, (ii) repeated violations by the
Participant of the Participant's executive responsibilities
which are demonstrably willful and deliberate on the
Participant's part and which are not remedied in a
reasonable period of time after receipt of written notice
from the Company or the Subsidiary or (iii) the conviction
of the Participant of a felony involving moral turpitude.
"Change of Control" shall mean any of the following:
(i) Stock Acquisition. The acquisition, by any individual,
entity or group [within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")] (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (A) the then
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PAGE 2
outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock"), or (B) the combined
voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (i),
the following acquisitions shall not constitute a Change of
Control: (A) any acquisition directly from the Company; (B)
any acquisition by the Company; (C) any acquisition by any
employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by
the Company; or (D) any acquisition by any corporation
pursuant to a transaction which complies with clauses (A),
(B) and (C) of subsection (iii) of this Section 2(e); or
(ii) Board Composition. Individuals who, as of the date hereof,
constitute the Board of Directors (the "Incumbent Board")
cease for any reason to constitute at least a majority of
the Board of Directors; provided, however, that any
individual becoming a director subsequent to the date hereof
whose election or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with
respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board of Directors;
or
(iii) Business Combination. Approval by the shareholders of the
Company of a reorganization, merger, consolidation or sale
or other disposition of all or substantially all of the
assets of the Company or its principal subsidiary that is
not subject, as a matter of law or contract, to approval by
the Interstate Commerce Commission or any successor agency
or regulatory body having jurisdiction over such
transactions (the "Agency") (a "Business Combination"), in
each case, unless, following such Business Combination:
(A) all or substantially all of the individuals and
entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own,
directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common
stock and the combined voting power of the then
outstanding voting securities entitled to vote
generally in the election of directors, as the case
may be, of the corporation resulting from such
Business Combination (including, without limitation, a
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PAGE 3
corporation which as a result of such transaction owns
the Company or its principal subsidiary or all or
substantially all of the assets of the Company or its
principal subsidiary either directly or through one or
more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to
such Business Combination of the Outstanding Company
Common Stock and Outstanding Company Voting
Securities, as the case may be;
(B) no Person (excluding any corporation resulting from
such Business Combination or any employee benefit plan
(or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common
stock of the corporation resulting from such Business
Combination or the combined voting power of the then
outstanding voting securities of such corporation
except to the extent that such ownership existed prior
to the Business Combination; and
(C) at least a majority of the members of the board of
directors resulting from such Business Combination
were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action
of the Board of Directors, providing for such Business
Combination; or
(iv) Regulated Business Combination. Approval by the
shareholders of the Company of a Business Combination that
is subject, as a matter of law or contract, to approval by
the Agency (a "Regulated Business Combination") unless such
Business Combination complies with clauses (A), (B) and (C)
of subsection (iii) of this Section 2(e); or
(v) Liquidation or Dissolution. Approval by the shareholders of
the Company of a complete liquidation or dissolution of the
Company or its principal subsidiary.
(f) "Commitment Date" means a date fixed by the Committee which
shall be the first day of the Commitment Period.
(g) "Commitment Period" means a period of twenty (20) Business
Days beginning with the Commitment Date during which a
Participant who has been granted a Purchase Award must
purchase the Company Stock.
(h) "Committee" means the Committee of the Board appointed to
administer the Plan as provided in Section 10.
(i) "Company" means CSX Corporation, a Virginia corporation.
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PAGE 4
(j) "Company Stock" means the Common Stock of the Company and
rights, options or warrants for the purchase of securities
of the Company which may be issued with shares of Common
Stock pursuant, and subject, to plans or agreements adopted
or entered into from time to time by the Company. If the
par value of the Company Stock is changed, or in the event
of a change in the capital structure of the Company (as
provided in Section 9), the shares resulting from such a
change shall be deemed to be the Company Stock within the
meaning of the Plan.
(k) "Disability" means the inability to perform the services for
which the Participant was employed as determined by the
Committee, and such determination shall be conclusive.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Insider" means (a) any person subject to Section 16(b) of
the Exchange Act, and (b) any person deemed to be an insider
by the Company.
(n) "Interest" means the Applicable Federal Rate, as determined
for purposes of IRC 1274(d).
(o) "Interest Spread" means, at the time of determination,
Interest accrued on the Purchase Loan reduced by Applied
Dividends.
(p) "IRC" means the Internal Revenue Code of 1986, as amended.
(q) "Market Price" means the fair market value of a share of
Company Stock based upon the closing price of the Company
Stock on the New York Stock Exchange (or other national
stock exchange, or if not so listed, the average of the
highest and lowest reported sales prices [or bid and asked
prices if there have been no sales] on the NASDAQ National
Issues Transactions Tape), as reported in the Wall Street
Journal.
(r) "Participant" means an employee of the Company who is
designated by the Committee as eligible to be a Participant
who receives a Purchase Award under the Plan.
(s) "Purchase Award" means an award to an employee to purchase a
specified number of shares of Company Stock with Purchase
Loan rights.
(t) "Purchase Loan" means an extension of credit to the
Participant by the Company evidenced by a non-recourse
promissory note for 95% of the Purchase Price of Company
Stock awarded to the Participant under the Plan, bearing
Interest, and secured by a pledge of the shares of Company
Stock purchased by the Participant.
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PAGE 5
(u) "Purchase Note" means a promissory note evidencing the
Purchase Loan for the balance of the Purchase Price without
recourse rights against the maker and with other terms and
conditions consistent with the Plan.
(v) "Purchase Price" means the average of the Market Price for
the five (5) consecutive Business Days immediately preceding
the day which the Committee fixes as the Commitment Date.
(w) "Retirement" means termination of employment (for reasons
other than Cause) on or after a Participant's 65th birthday.
(x) "Subsidiary" means, with respect to any corporation, a
corporation more than 50% of whose voting shares are owned
directly or indirectly by the Company.
3. Company Stock
Subject to Section 9 of the Plan (concerning changes in the capital
structure of the Company), there shall be reserved for issuance under the Plan
an aggregate of 2,200,000 shares of Company Stock, which shall be authorized
but unissued shares. Shares that have been awarded under the Plan but not
issued, or shares that have been issued but for whatever reason are returned
to the Company, may again be awarded under the Plan.
4. Eligible Employees
All present and future employees who hold positions Grade 22 (or
equivalent) or higher with the Company (or any Subsidiary of the Company,
whether now existing or hereafter created or acquired) shall be eligible to
receive a Purchase Award with Purchase Loan rights under the Plan. The
Committee shall have the power and complete discretion, as provided in
Sections 5 and 10, to select among eligible employees to receive a Purchase
Award and to authorize a Purchase Loan to such Participant for the purchase of
Company Stock. The grant of a Purchase Award and Purchase Loan shall not
obligate the Company or any Subsidiary of the Company to pay the Participant
any particular amount of remuneration, to continue the employment of the
Participant after the grant or to make further grants to the Participant at
any time thereafter.
5. Stock Purchase Awards
(a) On or as soon as practicable after the Commitment Date, the
Committee shall give notice to the Participant (or to the
class of Participants) eligible for an award stating (i) the
number of shares of Company Stock covered by each such
Purchase Award or a formula for determining the number of
shares of Company Stock covered by each such Purchase Award,
and (ii) the price, other terms and, if any, conditions
pertaining to each such Purchase Award and Purchase Loan
that must be satisfied by a Participant in order to exercise
the Purchase Award.
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PAGE 6
(b) A Participant shall exercise a Purchase Award and Purchase
Loan rights by delivering to the Company during the
Commitment Period (i) a notice stating the amount or
percentage of his down payment (which shall be 5% of the
Purchase Price) and his intention to deliver a Purchase Note
for the balance of the Purchase Price, and (ii) the down
payment and the Purchase Note.
6. Purchase Loans
The Company shall, subject to paragraph (i) below, upon the
Committee's recommendation, extend a Purchase Loan to a Participant upon
exercise of a Purchase Award subject to the following terms and conditions:
(a) The original principal amount of the Purchase Loan shall be
the difference between the Participant's down payment (which
shall be 5% of the Purchase Price) and the Purchase Price.
The down payment shall be in cash, or, if authorized by the
Committee (i) by delivery of shares of Company Stock having
a Market Price equal to the required down payment on date of
transfer to the Company, or (ii) by delivery to the Company
of a promissory note with terms and conditions fixed by the
Committee and with full recourse rights against the maker.
(b) The Purchase Loan shall be due and payable as provided in
the provisions of the Purchase Note executed by the
Participant. The term of the Purchase Note shall not exceed
a period of five (5) years. At the request of a
Participant, the time for repayment of the Purchase Loan and
Purchase Note shall be extended for up to one (1) year. The
Purchase Note may be prepaid without penalty at any time
after the third anniversary date of the Purchase Note (or
second anniversary date of the Purchase Note if the initial
term of the Purchase Note is four (4) years or less).
(c) The Purchase Loan shall be without recourse to the
Participant, shall be evidenced by the Participant's
Purchase Note and shall bear Interest. The Purchase Note
shall be in the form approved by the Committee and shall
contain such terms and conditions, which are not
inconsistent with the Plan, as the Committee shall determine
in its sole and absolute discretion, and the Purchase Note
shall be subject to the terms of the Plan even though not
set forth in the Purchase Note.
(d) Payment of the Purchase Note shall be secured by a pledge of
all the shares of Company Stock acquired by the Participant
upon the exercise of the Purchase Award to which the
Purchase Loan relates. The Participant shall effect such
pledge by delivering to the Company (i) the certificate or
certificates for the acquired shares of Company Stock,
accompanied by a duly executed stock power in blank, and
(ii) a properly executed stock pledge agreement in such form
as approved by the Committee.
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PAGE 7
(e) Dividends paid on shares of Company Stock pledged as
security for a Purchase Loan shall be first applied by the
Company to pay Interest accrued and unpaid on the
Participant's Purchase Note and then to repayment of the
Purchase Note.
(f) Within ten (10) Business Days after the maturity date of the
Purchase Loan, or on the date as of which the Participant
elects to prepay the Purchase Loan and Purchase Note as
provided in Section 6(b), the Participant shall repay in
full the then unpaid principal balance of the Purchase Note,
accrued and unpaid Interest, applicable federal and state
withholding taxes, and costs associated with the Purchase
Loan. If not fully paid when due, Participant agrees to
sell his pledged Company Stock to the Company at the Market
Price on the maturity date, if a Business Day (or at the
Market Price on the Business Day immediately preceding the
maturity date if the maturity date is not a Business Day).
The Participant agrees to sell to the Company, or the
Company may sell on the open market (except as hereinafter
provided), the number of shares of Company Stock pledged as
collateral necessary to repay in full the Purchase Note,
accrued and unpaid Interest, applicable federal and state
withholding taxes, and costs associated with the Purchase
Loan. If the pledged shares are sold on the open market,
the Company shall receive and apply the sale proceeds (net
of brokerage fees, collection fees and federal or state
withholding taxes on income applicable to the transaction)
realized from such sale toward repayment of the Purchase
Note, accrued and unpaid Interest, applicable federal and
state withholding taxes, and costs associated with the
Purchase Loan. If, pursuant to procedures established by
the Company for compliance with securities laws, the Company
believes that the purchase of pledged shares by the Company
in repayment of the Purchase Note, or the sale by the
Company of pledged shares of Company Stock on the open
market to repay the Purchase Note, would violate any
provision of applicable securities laws or cause the
Participant to incur a liability under Section 16(b) of the
Exchange Act, the maturity date may be extended by the
Committee until the first day the purchase by the Company of
the pledged shares or a sale of the pledged shares on the
open market can be made without violating such securities
laws or incurring such liability under Section 16(b).
Subject to the agreements of participants as provided in
Sections 7(c) and (d) below, any shares of Company Stock
remaining after repayment of the Purchase Note, accrued and
unpaid Interest, applicable federal and state withholding
taxes, and costs associated with the Purchase Loan, shall be
transferred to the Participant.
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PAGE 8
(g) The Purchase Price and the principal amount of a
Participant's Purchase Loan and Purchase Note, plus accrued
and unpaid Interest, shall be adjusted as follows if at any
time after the second anniversary date of the Purchase Note
(or first anniversary date if the initial term of the
Purchase Note is four (4) years or less) the Market Price of
Company Stock equals or exceeds the Purchase Price of the
Participant's Company Stock by the amount specified below
for a period of ten (10) consecutive Business Days:
Interest Purchase Price/
Reduction Note Reduction
Purchase Price + $5 Interest Spread 0
Purchase Price + $10 Interest Spread 5%
Purchase Price + $15 Interest Spread 15%
Purchase Price + $20 Interest Spread 25%
The provisions of this paragraph and any applicable adjustments to Interest
and the Purchase Note shall be applied at the time of repayment of the
Purchase Note. Decreases in the Market Price of Company Stock subsequent to
the completion of a measuring period shall be disregarded for purposes of the
adjustments authorized by this paragraph.
(h) In the event of a change in capital structure involving the
transfer of any of the pledged shares of Company Stock, as
provided in Section 9, such newly-acquired shares shall be
pledged to the Company as substitute or additional security.
(i) Notwithstanding anything in this Section 6 to the contrary,
the Company shall not be required to make a Purchase Loan to
a Participant if making such Purchase Loan will (i) cause
the Company to violate any covenant or other similar
provision in any indenture, loan agreement, or other
agreement, or (ii) violate any applicable federal, state or
local law.
(j) Upon exercise of a Purchase Award, the delivery of the
consideration to the Company for the exercise of the
Purchase Award and issuance by the Company of Company Stock
purchased pursuant to the Purchase Award, the Participant
shall be deemed a shareholder of the Company and (subject to
the terms of the Plan, the Purchase Loan, the Purchase Note
and related documents) shall be entitled (i) to dividends on
such Company Stock owned or pledged, and (ii) to exercise
all voting rights with respect to the Company Stock
purchased.
7. Termination of Employment; Change of Control; Prepayment of Purchase
Loan
If before the Purchase Note is repaid a Participant's employment
terminates, a Change of Control occurs, or the Committee authorizes repayment
of the Purchase Loan, the following provisions shall apply notwithstanding any
terms in the Purchase Note to the contrary:
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PAGE 9
(a) If the termination of employment is the result of death,
Disability or Retirement, or if a Change of Control occurs,
or with the consent of the Committee, the Participant (or
the Participant's estate or personal representative in the
event of death or incapacity) may either (i) prepay the
Purchase Note, or (ii) continue to participate in the Plan
until the maturity date of the Purchase Note.
(b) If the termination of employment is the result of a mutual
agreement between the Participant and the Company or is
involuntary for reasons other than Cause, or if the
Participant's employer ceases to be a Subsidiary in a
divisive transaction involving a sale of shares or
substantially all of the assets of the Subsidiary, the
maturity date of the Purchase Note shall be accelerated
without further action of the Committee or the Company to
the date of termination of employment, and (i) Section 6(g)
shall not apply, and (ii) the Participant agrees to sell his
pledged Company Stock to the Company at the greater of (x)
the Market Price on the date of termination of employment,
and (y) an amount equal to his down payment paid to the
Company pursuant to Section 6(a).
(c) If the termination of employment is voluntary by the
Participant or involuntary by the Company for Cause, the
maturity date of the Purchase Note shall accelerate without
further action of the Committee or the Company to the date
of termination of employment, Section 6(g) shall not apply,
and the Participant agrees to sell his pledged Company Stock
to the Company at the lesser of (i) the down payment paid to
the Company pursuant to Section 6(a), and (ii) the Market
Price on the date of termination of employment, and the
Company shall have the right to retain any excess Market
Price.
(d) A Participant may, with the consent of the Committee, prepay
the Purchase Loan before the third anniversary date of the
Purchase Note (or second anniversary date if the initial
term of the Purchase Note is four (4) years or less). In
such case Section 6(g) shall not apply and the Participant
agrees to sell the pledged Company Stock to the Company for
the lesser of (i) the down payment paid to the Company
pursuant to Section 6(a), and (ii) the Market Price on the
prepayment date fixed by the Committee, and the Company
shall have the right to retain any excess Market Price.
(e) If a Change of Control occurs, a Participant can elect to
prepay his or her Purchase Note at any time before the
maturity date and paragraph (d) shall not apply, and
paragraphs (b) and (c) shall not apply to a termination of
employment that occurs subsequent to a Change of Control.
8. Nontransferability of Purchase Awards
Purchase Awards shall not be transferable.
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PAGE 10
9. Change in Capital Structure
(a) If the number of outstanding shares of Company Stock is
increased or decreased as a result of a subdivision or
consolidation of shares, the payment of a stock dividend,
stock split, or any other change in capitalization effected
without receipt of consideration by the Company (including,
but not limited to, the creation or issuance to shareholders
generally of rights, options or warrants for the purchase of
common or preferred stock of the Company), the number and
kind of shares of stock or securities of the Company to be
subject to the Plan, the maximum number of shares or
securities which may be delivered under the Plan, and other
relevant provisions shall be appropriately adjusted by the
Committee, whose determination shall be binding and
conclusive on all persons.
(b) If the Company is a party to a consolidation or a merger in
which the Company is not the surviving corporation, a
transaction that results in the acquisition of substantially
all of the Company's outstanding stock by a single person or
entity, or a sale or transfer of substantially all of the
Company's assets, the Committee may take such actions with
respect to outstanding unexercised Purchase Awards as the
Committee deems appropriate.
(c) Notwithstanding anything in the Plan to the contrary, the
Committee may take the foregoing actions without the consent
of any Participant, and the Committee's determination shall
be conclusive and binding on all persons for all purposes.
10. Administration of the Plan
The Plan shall be administered by the Committee, consisting of not
less than three Directors of the Company appointed by the Board. Subject to
paragraph (d) below, the Committee shall be the Compensation and Pension
Committee of the Board unless the Board shall appoint another committee to
administer the Plan. The Committee shall have general authority to impose any
limitation or condition upon a Purchase Award the Committee deems appropriate
to achieve the objectives of the Purchase Award and the Plan, and in addition,
and without limitation and in addition to powers set forth elsewhere in the
Plan, shall have the following specific authority:
(a) The Committee shall have the power and complete discretion
to determine (i) which eligible employees shall receive a
Purchase Award with Purchase Loan rights, (ii) the number of
shares of Company Stock to be covered by each Purchase
Award, (iii) the fair market value of Company Stock, (iv)
the time or times when a Purchase Award shall be granted,
(v) whether a Disability exists, (vi) the manner in which
payment will be made upon the exercise of a Purchase Award,
and (vii) any additional requirements relating to Purchase
Awards that the Committee deems appropriate.
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PAGE 11
(b) The Committee may adopt rules and regulations for carrying
out the Plan and for the sale or other disposition of
Company Stock acquired pursuant to the Plan. The
interpretation and construction of any provision of the Plan
by the Committee shall be final and conclusive. The
Committee may consult with counsel, who may be counsel to
the Company, and shall not incur any liability for any
action taken in good faith in reliance upon the advice of
counsel.
(c) A majority of the members of the Committee shall constitute
a quorum, and all actions of the Committee shall be taken by
a majority of the members present. Any action may be taken
by a written instrument signed by all of the members, and
any action so taken shall be fully effective as if it had
been taken at a meeting.
(d) The Board from time to time may appoint members previously
appointed and may fill vacancies, however caused, in the
Committee. Insofar as it is necessary to satisfy the
requirements of Section 16(b) of the Exchange Act and Rule
16b-3 thereunder, no member of the Committee shall be
eligible to participate in the Plan or in any other plan of
the Company or any Parent or Subsidiary of the Company that
entitles participants to acquire stock, stock options or
stock appreciation rights of the Company or any Parent or
Subsidiary of the Company, and no person shall become a
member of the Committee if, within the preceding one-year
period, the person shall have been eligible to participate
in such a plan.
11. Effective Date of the Plan
This Plan shall be effective as of December 12, 1990 and shall be
submitted to the shareholders of the Company for approval. Until (a) the Plan
has been approved by the Company's shareholders, (b) the shares issuable under
the Plan have been registered with the Securities and Exchange Commission, (c)
if the Company's common stock is otherwise so listed, accepted for listing on
the New York Stock Exchange (or other national stock exchange) upon notice of
issuance, and (d) the requirements of any applicable state securities laws
have been met, no Purchase Award shall be granted or Purchase Loan authorized
by the Committee.
12. Termination, Modification
If not sooner terminated by the Board, this Plan shall terminate at
the close of business on December 12, 2000. No Purchase Awards shall be made
under this Plan after termination. The Board may terminate the Plan or may
amend the Plan in such respects as it shall deem advisable; provided, however,
that, if necessary to satisfy the requirements of Section 16(b) of the
Exchange Act, the New York Stock Exchange or applicable state law, the
shareholders of the Company must approve any amendment that would (a)
materially increase the benefits accruing to Participants under the Plan, (b)
materially increase the number of shares of Company Stock that may be issued
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PAGE 12
under the Plan, or (c) materially modify the requirements of eligibility for
participation in the Plan. A termination or amendment of the Plan shall not,
without the consent of the Participant, affect a Participant's rights under a
Purchase Award previously granted to him.
13. Notice
All notices and other communications required or permitted to be
given under this Plan shall be in writing and shall be deemed to have been
duly given if delivered personally or mailed first class, postage prepaid, as
follows: (a) if to the Company - at its principal business address to the
attention of the Secretary; (b) if to any Participant - at the last address of
the Participant known to the sender at the time the notice or other
communication is sent.
14. Governing Law
The terms of this Plan shall be governed by the laws of the
Commonwealth of Virginia.
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PAGE 1
Exhibit 10.11
Appendix A
CSX CORPORATION
1987 Long-Term Performance Stock Plan as Amended
and Restated December 14, 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.
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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 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
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PAGE 3
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 are disclosed in
Addendum I.
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. 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
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PAGE 4
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.
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.
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PAGE 5
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.
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.
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PAGE 6
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 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; (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).
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.
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PAGE 7
For purposes of this section 9, written notice must be received by
the Corporate Secretary of the Company between the beginning of the second
year and the end of the tenth year 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
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
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PAGE 8
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 to 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.
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.
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PAGE 9
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.
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
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PAGE 10
eligible to retire with the ability to immediately begin 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
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 his guardian or legal representative.
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PAGE 11
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.
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
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PAGE 12
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.
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.
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PAGE 13
b. "Change of Control" -- shall mean any of the following:
(i) Stock Acquisition. The acquisition, by any individual, entity
or group [within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")] (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (A) the then outstanding shares of
common stock of the Company (the "Outstanding Company Common Stock"), or (B)
the combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for purposes
of this subsection (i), the following acquisitions shall not constitute a
Change of Control: (A) any acquisition directly from the Company; (B) any
acquisition by the Company; (C) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any corporation
controlled by the Company; or (D) any acquisition by any corporation pursuant
to a transaction which complies with clauses (A), (B) and (C) of subsection
(iii) of this Section 19(b); or
(ii) Board Composition. Individuals who, as of the date hereof,
constitute the Board of Directors (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board of Directors; provided,
however, that any individual becoming a director subsequent to the date hereof
whose election or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board of Directors; or
(iii) Business Combination. Approval by the shareholders of the
Company of a reorganization, merger, consolidation or sale or other
disposition of all or substantially all of the assets of the Company or its
principal subsidiary that is not subject, as a matter of law or contract, to
approval by the Interstate Commerce Commission or any successor agency or
regulatory body having jurisdiction over such transactions (the "Agency") (a
"Business Combination"), in each case, unless, following such Business
Combination:
(A) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50%
of, respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or its
principal subsidiary or all or substantially all of the assets of the Company
or its principal subsidiary either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may be;
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PAGE 14
(B) no Person (excluding any corporation resulting from such
Business Combination or any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of, respectively, the
then outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such ownership
existed prior to the Business Combination; and
(C) at least a majority of the members of the board of directors
resulting from such Business Combination were members of the Incumbent Board
at the time of the execution of the initial agreement, or of the action of the
Board of Directors, providing for such Business Combination; or
(iv) Regulated Business Combination. Approval by the shareholders
of the Company of a Business Combination that is subject, as a matter of law
or contract, to approval by the Agency (a "Regulated Business Combination")
unless such Business Combination complies with clauses (A), (B) and (C) of
subsection (iii) of this Section 19(b); or
(v) Liquidation or Dissolution. Approval by the shareholders of the
Company of a complete liquidation or dissolution of the Company or its
principal subsidiary.
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.
Addendum I
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.
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PAGE 1
Exhibit 10.12
DEFERRED COMPENSATION PROGRAM
FOR EXECUTIVES OF CSX CORPORATION
AND AFFILIATED COMPANIES
AS AMENDED AND RESTATED
EFFECTIVE JANUARY 1, 1995
1. Purpose
The purpose of this Program is to provide eligible executives with an
opportunity to supplement their retirement income. This Program is intended
to benefit a select group of management or highly compensated employees.
2. Definitions
2.1 "Administrator" shall mean the Corporation.
2.2 "Affiliated Company" shall mean the Corporation and any
company or corporation directly or indirectly controlled by the Corporation
which the Committee designates for participation in this Program in accordance
with Section 13.2.
2.3 "Award" shall mean, for any year, the amount awarded to an
employee of an Affiliated Company for that year and, in the absence of a
Deferral Agreement with respect to such amount, payable to him in the
succeeding year under the MICP, including any special incentive award.
2.4 "Board" shall mean the Board of Directors of the
Corporation.
2.5 "Change of Control" shall mean any of the following:
(a) Stock Acquisition. The acquisition, by any
individual, entity or group [within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")] (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 20% or more of either (i) the then outstanding shares of
common stock of the Corporation (the "Outstanding Corporation
Common Stock"), or (ii) the combined voting power of the then
outstanding voting securities of the Corporation entitled to vote
generally in the election of directors (the "Outstanding
Corporation Voting Securities"); provided, however, that for
purposes of this subsection (a), the following acquisitions shall
not constitute a Change of Control: (i) any acquisition directly
from the Corporation; (ii) any acquisition by the Corporation;
(iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Corporation or any
corporation controlled by the Corporation; or (iv) any acquisition
by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this Section
XI(5); or
(b) Board Composition. Individuals who, as of the date
hereof, constitute the Board of Directors (the "Incumbent Board")
cease for any reason to constitute at least a majority of the
Board of Directors; provided, however, that any individual
becoming a director subsequent to the date hereof whose election
or nomination for election by the Corporation's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
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PAGE 2
individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board of Directors; or
(c) Business Combination. Approval by the shareholders of
the Corporation of a reorganization, merger, consolidation or sale
or other disposition of all or substantially all of the assets of
the Corporation or its principal subsidiary that is not subject,
as a matter of law or contract, to approval by the Interstate
Commerce Commission or any successor agency or regulatory body
having jurisdiction over such transactions (the "Agency") (a
"Business Combination"), in each case, unless, following such
Business Combination:
(i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively,
of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities immediately
prior to such Business Combination beneficially own,
directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common
stock and the combined voting power of the then
outstanding voting securities entitled to vote
generally in the election of directors, as the case
may be, of the corporation resulting from such
Business Combination (including, without limitation, a
corporation which as a result of such transaction owns
the Corporation or its principal subsidiary or all or
substantially all of the assets of the Corporation or
its principal subsidiary either directly or through
one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to
such Business Combination of the Outstanding
Corporation Common Stock and Outstanding Corporation
Voting Securities, as the case may be;
(ii) no Person (excluding any corporation resulting
from such Business Combination or any employee benefit
plan (or related trust) of the Corporation or such
corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more
of, respectively, the then outstanding shares of
common stock of the corporation resulting from such
Business Combination or the combined voting power of
the then outstanding voting securities of such
corporation except to the extent that such ownership
existed prior to the Business Combination; and
(iii) at least a majority of the members of the board
of directors resulting from such Business Combination
were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action
of the Board of Directors, providing for such Business
Combination; or
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PAGE 3
(d) Regulated Business Combination. Approval by the
shareholders of the Corporation of a Business Combination
that is subject, as a matter of law or contract, to approval
by the Agency (a "Regulated Business Combination") unless
such Business Combination complies with clauses (i), (ii)
and (iii) of subsection (c) of this Section XI(5); or
(e) Liquidation or Dissolution. Approval by the
shareholders of the Corporation of a complete liquidation or
dissolution of the Corporation or its principal subsidiary.
2.6 "Committee" shall mean the committee appointed pursuant to
Section 13.1 to administer the Program
2.7 "Corporation" shall mean CSX Corporation, a Virginia
corporation, and any successor thereto by merger, purchase or otherwise.
2.8 "Deferral Agreement" shall mean a completed agreement,
including any attachments and appendices thereto, in the form determined by
the Committee, between an Eligible Executive and the Affiliated Company of
which he is an employee, under which the Eligible Executive agrees to defer
all or a portion of his Award in accordance with the provisions of Section 3.
2.9 "Deferral Date" shall mean, with respect to any Deferral
Agreement entered into by an Eligible Executive, the first day of the month in
which the Award subject to the Deferral Agreement would be payable to the
Eligible Executive in the absence of such Deferral Agreement.
2.10 "Eligible Executive" shall mean, for any year, an employee
of an Affiliated Company who is in salary grades 22 through 40 as of (a)
December 30th of such year or (b) for calendar years beginning on or after
January 1, 1986, the date in such year he retired from the Affiliated
Companies or terminated on account of disability, as determined by the
Committee, provided, however, that the Committee, in its sole discretion, may
designate any other employee of an Affiliated Company as an Eligible Executive
for such year.
2.11 "Equivalent" shall mean of equal present or accumulated
value based on the interest rates set forth in the applicable Deferral
Agreements. In determining Equivalent values, only the value of benefits for
which the eligibility requirements have been met shall be included.
2.12 "MICP" shall mean the Affiliated Companies' Management
Incentive Compensation Plans, as from time to time in effect.
2.13 "Normal Retirement Date" for a Participant shall mean the
later of:
(a) the last day of the month in which his 62nd birthday occurs,
or
(b) the earlier of (i) the last day of the month preceding the
2nd anniversary of the Participant's earliest Deferral Date or
(ii) the last day of the month in which is 65th birthday occurs.
2.14 "Participant" shall mean an Eligible Executive who elects to
defer a portion of his Award in accordance with the provisions of Section 3.
2.15 "Program" shall mean this Deferred Compensation Program for
Executives of CSX Corporation and Affiliated Companies.
2.16 "Service" shall mean an employee's months of continuous
employment with the Affiliated Companies. In the event the employee has a
break in his continuous employment, his period of employment prior to the
break shall be credited to the employee in accordance with the rules governing
breaks in service under the CSX Corporation Pension Plan.
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PAGE 4
2.17 "Trust" shall mean the CSX Corporation Nonqualified Plan
Trust or such other trust which will substantially conform to the terms of the
Internal Revenue Service model trust as described in Revenue Procedure 92-64,
1992-2 C.B.422. Except as provided in Section 16, the Corporation is not
obligated to make any contribution to the Trust.
2.18 "Valuation Date" shall mean the last day of each calendar
quarter and such other dates as the Administrator deems necessary or
appropriate to value the Participants' benefits under this Program.
3. Deferral of Awards
3.1 At any time prior to the close of business on December 30 in
any calendar year, an Eligible Executive may elect to defer all or a portion
of his Award, if any, for that year. Such election shall be made by filing a
Deferral Agreement with the Committee on or before the close of business on
December 30 of the calendar year for which the Award is made. In the event
that December 30 does not fall on a weekday, such filing must be made by the
close of business on the last prior business day.
3.2 Subject to the provisions of Sections 3.3 and 3.4:
(a) an Eligible Executive in 1985 may elect to defer up to 100%
of his 1985 Award;
(b) an Eligible Executive in 1986 may elect to defer up to 100%
of his 1986 Award;
(c) an Eligible Executive in 1988 may elect to defer up to 100%
of his 1988 Award; and
(d) an Eligible Executive in 1989 may elect to defer up to 100%
of his 1989 Award.
3.3 The minimum amount which an Eligible Executive may defer in
any year shall be the lesser of $5,000 or the maximum amount determined under
Section 3.2. If an Eligible Executive elects to defer less than this amount,
his election shall not be effective.
3.4 In its sole discretion, the Committee may, at any time,
impose additional limits on the maximum amount which an Eligible Executive may
elect to defer under this Program in any year or may impose additional
requirements on the Eligible Executive's right to defer the maximum amount
under this Program in any year.
3.5 An Eligible Executive's election to defer all or a portion
of his Award shall be effective on the last day such deferral may be elected,
under Section 3.1, for the year for which the Award is made. An Eligible
Executive may revoke or change his election to defer all or a portion of his
Award at any time prior to the date the election becomes effective. Any such
revocation or change shall be made in a form and manner determined by the
Committee.
4. Normal Retirement Benefit
A Participant who retires from employment with the Affiliated
Companies on his Normal Retirement Date shall receive a benefit Equivalent to
the sum of the amounts set forth in the Participant's Deferral Agreement(s)
plus accrued interest. The benefit shall be paid in 180 equal monthly
installments commencing on the first day of the month next following the
Participant's retirement date, but in no event prior to the first day of the
month next following the Participant's last Deferral Date, unless the
Participant elects to receive his benefit in accordance with Section 9 of this
Program.
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PAGE 5
5. Delayed Retirement Benefit
A Participant who retires or otherwise terminates his employment with
the Affiliated Companies after his Normal Retirement Date shall receive a
benefit equal to the benefit he would have received under Section 4 had his
benefit commenced on his Normal Retirement Date, increased by 5/6 of 1% for
each complete calendar month between his Normal Retirement Date and the date
his benefit commences. The benefit shall be paid in 180 equal monthly
installments commencing on the first day of the month next following the
Participant's termination of employment, but in no event prior to the first
day of the month next following the Participant's last Deferral Date, unless
the Participant elects to receive his benefit in accordance with Section 9 of
this Program.
6. Early Retirement Benefit
A Participant who has attained age 55, has completed 120 months of
Service and terminates his employment with the Affiliated Companies prior to
his Normal Retirement Date shall receive a benefit commencing on the first day
of the month following his Normal Retirement Date but in no event prior to the
first day of the month following the Participant's last Deferral Date. The
Participant's benefit shall be equal to the benefit the Participant would have
received under Section 4 had he terminated his employment on his Normal
Retirement Date. However, the Participant may elect a lump sum under Section
9 or may elect, in a time and manner determined by the Committee, to have
payment of his benefit commence on the first day of any month preceding his
Normal Retirement Date, and following the latest of (i) his termination of
employment, (ii) 24 months after his earliest Deferral Date and (iii) the
first of the month following his last Deferral Date, in which event the amount
of his benefit shall be reduced by 5/6 of 1% for each complete calendar month
between the date his benefit commences and the first day of the month next
following his Normal Retirement Date. However, in no event shall the monthly
benefit be less than an amount Equivalent to the Participant's deferrals with
accrued interest. Benefits under this Section 6 shall be paid in 180 equal
monthly installments, unless the Participant elects to receive his benefit in
accordance with Section 9 of this Program.
7. Separation Benefit
7.1 A Participant who terminates his employment with the
Affiliated Companies prior to being eligible for a benefit under Sections 4 or
6, but after having completed 120 months of Service, shall receive a monthly
benefit commencing on the first day of the month next following his Normal
Retirement Date; provided, however, that a Participant shall not be eligible
for a benefit under this Section 7.1 if the Participant terminates employment
without the consent of the Affiliated Companies. The benefit shall be equal
to the monthly benefit the Participant would have received under Section 4 had
he terminated employment on his Normal Retirement Date. However, the
Participant may elect a lump sum pursuant to Section 9, or may elect, in a
time and manner determined by the Committee, to have monthly benefits commence
on the first day of any month, prior to his Normal Retirement Date, and
following the latest of (i) his termination of employment with the Affiliated
Companies, (ii) his 55th birthday or (iii) the last day of the month prior to
the 2nd anniversary of his earliest Deferral Date, in which event the amount
of his benefit shall be reduced by 5/6 of 1% for each complete calendar month
between the date his benefit commences and the first day of the month next
following his Normal Retirement Date. However, in no event shall the monthly
- 5 -
PAGE 6
benefit be less than an amount Equivalent to the Participant's deferred
amounts with accrued interest. Monthly benefits under this Section 7.1 shall
be paid in 180 equal monthly installments.
7.2 A Participant who terminates his employment with the
Affiliated Companies, other than on account of death, and is not eligible for
a benefit under Section 7.1 shall receive a single sum payment equal to the
sum of the amounts the Participant deferred under his Deferral Agreements plus
accrued interest. However, if the Participant terminates his employment with
the Affiliated Companies on account of a disability within the meaning of
Section 8.1, he shall receive a benefit under this Section 7.2 only if the
Participant elects, in a time and manner determined by the Committee, to
receive such benefit and to cease accruing Service under Section 8.1. The
single sum payment shall be made on the first day of the month next following
the Participant's termination of employment, or as soon as practicable
thereafter. The Participant shall not receive any other benefits under this
Program.
8. Disability
8.1 A Participant who, in the sole judgment of the Committee,
becomes totally and permanently disabled prior to his termination of
employment with the Affiliated Companies, and does not make an election under
Section 7.2 to receive a benefit under such Section, shall continue to accrue
Service during his period of disability as if he remained an active employee.
Such a Participant shall be eligible to receive a benefit under Sections 4, 6
or 7.1 when he meets the age and Service requirements for such a benefit.
8.2 The Committee may, in its sole discretion, require a
Participant to submit to a medical examination by a physician approved by the
Committee, or present other evidence satisfactory to the Committee, to
establish the existence or continuance of his disability. The Committee may
require such medical examination or other evidence not more than once per
year. A Participant who refuses to submit to any required medical examination
or to present any other required evidence under this Section 8.2 shall not be
disabled for purposes of this Program and shall only be eligible to receive
the benefit he would have received under the Program had he terminated his
employment with the Affiliated Companies immediately prior to the date of such
request.
9. Single Sum Payments
A Participant who is eligible to receive a benefit under Sections 4,
5, 6, 7.1 or 8.1 of the Program but whose benefits hereunder have not yet
commenced may, with the consent of the Administrator, elect, in a time and
manner determined by the Administrator, to receive his benefit in the form of
a single sum. The single sum shall be in the amount of the Participant's
deferred amounts plus accrued interest, provided that, in the case of a
Participant then eligible for immediate commencement of monthly benefits, such
single sum shall not be less than an amount Equivalent to the value of such
monthly benefits. Such single sum shall be paid on the first day of the
fourth month following the later of (i) the Participant's termination of
employment with the Affiliated Companies, or (ii) the date such election is
received by the Committee. Notwithstanding any other provision hereof, such
amount shall be determined as of a date three months prior to the date of
payment and shall not accrue interest beyond such earlier date.
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PAGE 7
10. Hardship Withdrawal
10.1 While employed by the Affiliated Companies, a Participant
may, in the event of a severe financial hardship, request a withdrawal of an
amount which does not exceed the single sum amount determined in Section 9.
The withdrawal shall be made in a time and manner determined by the
Administrator, and shall not be for a greater amount than the amount required
to meet the financial hardship, and shall be subject to approval by the
Administrator.
10.2 For purposes of this Section 10, financial hardship shall
include:
(a) Education of a dependent child where the Participant can
show that without the withdrawal under this Section 10 the
education would be unavailable to the child;
(b) Illness of the Participant or his dependents, resulting in
severe financial hardship to the Participant;
(c) The loss of the Participant's home or it contents, to the
extent not reimbursable by insurance or otherwise, if such loss
results in a severe financial hardship to the Participant; and
(d) Any other extraordinary circumstances of the Participant
approved by the Committee if such circumstances would result in a
present or impending critical financial need which the Participant
is unable to satisfy with funds reasonably available from other
sources.
10.3 If a Participant makes a withdrawal under this Section 10,
any other benefit which he may be entitled to under this Program on his
termination of employment shall be appropriately adjusted to take into account
the amount the Participant received under this Section 10.
11. Death Benefits
11.1 Except as provided in Section 11.10(b), if a Participant
dies while employed by an Affiliated Company, his beneficiary shall be
eligible to receive a single sum benefit equal to the greatest of:
(a) three times the sum of the amount(s) the Participant
deferred under his Deferral Agreement(s);
(b) the amounts the Participant deferred under his Deferral
Agreement(s) plus accrued interest; or
(c) an amount Equivalent to the monthly benefit the Participant
could have received under the Program, if any, had he terminated
his employment with the Affiliated Companies on the day
immediately preceding his death and elected to begin receiving the
benefit on the first day of the following month.
The benefit is payable on the first day of the month next
following the date of the Participant's death, and shall be in lieu of all
other benefits payable under this Program, other than any benefit payable
under Section 11.6.
11.2 If a Participant who has terminated his employment with the
Affiliated Companies after becoming eligible for a benefit under Sections 4, 5
or 6, dies prior to the commencement of any benefit under this Program, his
beneficiary shall receive a benefit under Section 11.1
11.3 If a Participant who is totally and permanently disabled
under Section 8.1 dies prior to receiving a benefit under this Program, his
beneficiary shall receive a benefit under Section 11.1
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PAGE 8
11.4 If a Participant who is eligible for a benefit under Section
7.1 dies prior to receiving a benefit, his beneficiary will receive a benefit
based on the greater of the amounts determined under Sections 11.1(b) and
11.1(c).
11.5 If a Participant dies after commencing to receive a benefit,
other than a benefit under Section 7.2, but prior to receiving all remaining
benefits due, the remaining benefits shall be paid to the Participant's
beneficiary or contingent beneficiary, whichever is applicable.
11.6 In addition to any other benefit payable under this Section
11, in the case of a Participant (i) who dies while employed by an Affiliated
Company after becoming eligible for benefits under Sections 4, 5, or 6 hereof,
or (ii) who terminates employment while eligible for a benefit under Section
4, 5 or 6 of the Program and then dies, his beneficiary shall be eligible to
receive a benefit of $10,000, payable in a single sum. This benefit shall be
payable as soon as practicable following the presentation to the
Administrator, and the Administrator's examination and approval of, any
information or material, including proof of death of the Participant, the
Administrator may request. Notwithstanding anything to the contrary, a
benefit shall not be payable on account of the death of a Participant who
received a single sum benefit under Sections 12 or 14 of the Program.
11.7 A Participant may, in a time and manner determined by the
Administrator, designate a beneficiary and one or more contingent
beneficiaries (which may include the Participant's estate) to receive any
benefits which may be payable under this Section 11. If the Participant fails
to designate a beneficiary or contingent beneficiary, or if the beneficiary
and the contingent beneficiaries fail to survive the Participant, such
benefits shall be paid to the Participant's estate. The Participant may also
designate a remainder beneficiary to receive any benefits which may be payable
under Section 11.9.
11.8 A Participant may revoke or change any designation made
under Section 11.7 in a time and manner determined by the Administrator.
11.9 If, pursuant to Section 11.7, payments commence to a
beneficiary or contingent beneficiary and if such beneficiary or contingent
beneficiary dies prior to receiving all payments due under this Plan, any
remaining payments shall be made to the Participant's remainder beneficiary.
If, at the date of such death, there is no surviving remainder beneficiary,
the remaining benefits hereunder shall be paid to the estate of the
beneficiary or contingent beneficiary previously in receipt of benefits
hereunder.
11.10 (a) If any benefits are payable under this Section 11 to
an individual other than the Participant's spouse or child
under age 21 (or child under age 25 who is a full-time
student at an accredited institution of higher education),
the benefit shall be paid in the form of a single sum.
(b) If benefits become payable to the Participant's spouse or
his child under age 21 (or his child under age 25 who is a full-
time student at an accredited institute of higher education), such
benefits (other than benefits under Section 11.6) shall be payable
in 180 monthly installments Equivalent to the single sum amount
determined under Section 11.1 through 11.5 hereof, as applicable.
Monthly benefits shall commence on the first day of the month
following the Participant's death. The Participant may elect, in
a time and manner determined by the Administrator to have any
amounts which may be payable under the Program paid in accordance
with Section 11.10(a).
- 8 -
PAGE 9
(c) Notwithstanding anything to the contrary in this Program, if
a Participant's child under age 21 (or child under age 25 who is a
full-time student at an accredited institute of higher education)
is receiving a benefit under this Program in the form of
installment payments, upon his attaining age 21 (or age 25 or
ceasing to be a full-time student at an accredited institute of
higher education) he shall receive a single sum Equivalent to his
remaining installments in lieu of receiving such remaining
installments.
12. Special Distribution Rules
12.1 Notwithstanding anything to the contrary in this Program, if
(a) a Participant becomes the owner, director or employee of a competitor of
the Affiliated Companies, (b) his employment is terminated by an Affiliated
Company on account of actions by the Participant which are detrimental to the
interests of any Affiliated Company, or (c) he engages in conduct subsequent
to the termination of his employment with the Affiliated Companies which the
Committee determines to be detrimental to the interests of an Affiliated
Company, then the Committee may, in its sole discretion, pay a Participant a
single sum payment equal to the sum of the amounts the Participant deferred
under his Deferral Agreements plus accrued interest, reduced by an amount
Equivalent to any payments the Participant may already have received under
this Program. However, if the Participant is receiving a benefit under the
Program, or could be receiving an immediate benefit under the Program, the
single sum shall not be less than an amount Equivalent to the remaining
monthly benefit the Participant is, or could be, receiving. The single sum
payment shall be made as soon as practicable following the Participant's
becoming an owner, director or employee of a competitor, his termination of
employment or the Committee's determination of detrimental conduct, as the
case may be, and shall be in lieu of all other benefits which may be payable
to the Participant under this Program.
12.2 Notwithstanding anything to the contrary contained herein,
the Corporation may delay payment of a benefit under this Program to any
Participant who is determined to be among the top five most highly paid
executives for the year the benefit under this Program would otherwise be
paid; provided, however, if a Participant's payment is delayed, the benefit to
which he is entitled will not decrease after the date it would otherwise be
distributed.
13. Administration
13.1 This Program shall be administered by the Compensation
Committee of the Board. Certain administrative functions, as set forth in
this Program, shall be the responsibility of the Administrator. The Committee
shall interpret the Program, establish regulations to further the purposes of
the Program and take any other action necessary to the proper operation of the
Program.
13.2 The Board, in its sole discretion and upon such terms as it
may prescribe, may permit any company or corporation directly or indirectly
controlled by the Corporation to participate in the Program for such periods
as the Committee may determine.
13.3 The Committee shall provide adequate notice in writing to
any Participant, beneficiary, contingent beneficiary or remainder beneficiary
whose claim for benefits under this Program has been denied, setting forth the
specific reasons for such denial. A reasonable opportunity shall be afforded
- 9 -
PAGE 10
to any such Participant, beneficiary, contingent beneficiary or remainder
beneficiary for a full and fair review by the Committee of its decision
denying the claim. The Committee's decision on any such review shall be final
and binding on the Participant, beneficiary, contingent beneficiary, remainder
beneficiary and all other interested persons.
13.4 All acts and decisions of the Committee shall be final and
binding upon all Participants and employees of the Affiliated Companies.
14. Termination and Amendment of the Program
14.1 The Board may, in its sole discretion, terminate this
Program and the related Deferral Agreement(s) at any time. In the event the
Program and related Deferral Agreement(s) are terminated, Participants shall
receive a single sum payment equal to the sum of the amounts they deferred
under their Deferral Agreements plus accrued interest, reduced by an amount
Equivalent to any payments the Participant may already have received under
this Program. However, if the Participant is receiving a benefit under the
Program, or could be receiving an immediate benefit under the Program, the
single sum shall not be less than an amount Equivalent to the monthly benefit
the Participant is, or could be, receiving. The single sum payment shall be
made as soon as practicable following the date the Program is terminated and
shall be in lieu of any other benefit which may be payable to the Participant
under this Program.
14.2 The Board, in its sole discretion, may amend this Program
and the related Deferral Agreements in any way on thirty (30) days prior
notice to the Participants. If any amendment to this Program or to the
Deferral Agreements shall adversely affect the rights of a Participant, the
Participant must consent in writing to such amendment prior to its effective
date. If the Participant does not consent to the amendment, the Program,
shall be deemed to be terminated with respect to the Participant and he shall
receive a single sum payment in accordance with Section 14.1.
14.3 Notwithstanding anything to the contrary in this Section 14,
the Board must act to terminate or amend the Program or the Deferral
Agreements in a uniform and nondiscriminatory manner.
15. Miscellaneous
15.1 The existence of this Program or a Deferral Agreement does
not constitute a contract for continued employment between an Eligible
Executive or a Participant and an Affiliated Company. The Affiliated
Companies reserve the right to modify an Eligible Executive's or Participant's
compensation and to terminate an Eligible Executive or a Participant for any
reason and at any time, notwithstanding the existence of this Program or of a
Deferral Agreement. The Affiliated Companies reserve the right not to grant
Awards to Eligible Executives and Participants for any reason.
15.2 A Participant's rights to benefit payments under the Plan
are not subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment or garnishment by creditors of the
Participant, his beneficiary, contingent beneficiaries, remainder beneficiary,
heirs or personal representative.
15.3 Except for Section 16 herein, nothing contained in this
Program or in a Deferral Agreement shall require the Affiliated Companies to
segregate any monies from their general funds, or to create any trusts, or to
make any special deposits for any amounts to be paid to any Participant,
beneficiary, contingent beneficiary or remainder beneficiary. Neither the
Participant, his beneficiary, contingent beneficiaries, remainder beneficiary,
- 10 -
PAGE 11
heirs or personal representatives shall have any right, title or interest in
or to any funds of the Affiliated Companies on account of this Program or on
account of having completed a Deferral Agreement.
15.4 All payments under this Program shall be net of an amount
sufficient to satisfy any federal, state or local withholding tax
requirements.
15.5 Prior to paying any benefit under this Program, the
Committee may require the Participant, beneficiary, contingent beneficiary or
remainder beneficiary to provide such information or material as the
Committee, in its sole discretion, shall deem necessary for it to make any
determination it may be required to make under this Program. The Committee
may withhold payment of any benefit under this Program until it receives all
such information and material and is reasonably satisfied of its correctness
and genuineness.
15.6 Each Participant shall have the status of a general
unsecured creditor of the Affiliated Companies, and this Program constitutes a
mere promise by the Affiliated Companies to make benefit payments in the
future.
15.7 The Program is intended to be unfunded for tax purposes and
for purposes of Title I of ERISA.
15.8 The masculine pronoun shall mean the feminine pronoun and
all singular shall include the plural wherever appropriate.
15.9 The terms of this Program and any Deferral Agreement shall
be governed by the laws of the Commonwealth of Virginia.
15.10 The invalidity or unenforceability of any provision of this
Program or of a Deferral Agreement shall in no way affect the validity or
enforceability of any other provision.
16. Change of Control
16.1 If a Change of Control has occurred, the Committee shall
cause the Corporation to contribute to the Trust, within 7 days of such Change
of Control, a lump sum payment equal to the aggregate value of the amount each
Participant would be eligible to receive (determined under 16.2 below) as of a
Valuation Date coinciding with or next preceding the date of Change of Control
to the extent such amounts are not already in the Trust; provided, however,
amounts relating to those Participants who receive a lump sum payment under
16.2 below shall be excluded from the aggregate value determination. The
aggregate value of the amount of the lump sum to be contributed to the Trust
pursuant to this Section 16 shall be determined by the Corporation's
accountants after consultation with the entity then maintaining the Program's
records. Thereafter, the Corporation's accountants shall annually determine
for each Participant not receiving a lump sum payment pursuant to subsection
16.2 below the amount which would be payable under such subsection were a
Change of Control to occur at the date of such determination. To the extent
that the value of the assets held in the Trust relating to this Program do not
equal the amount described in the preceding sentence, at the time of the
valuation, as determined by the Corporation's accountants, the Corporation
shall make a lump sum contribution to the Trust equal to the difference.
16.2 In the event a Change of Control has occurred, each
Participant not making an election under 16.3 below shall receive, and the
Committee shall cause the Corporation to pay within 7 days of such Change of
Control, a lump sum payment equal to the amount the Participant would have
been entitled to receive determined under Section 6 had he retired early and
selected a lump sum payment. The amount of each Participant's lump sum
- 11 -
PAGE 12
payment shall be determined by the Corporation's accountants after
consultation with the entity then maintaining the Program's records.
16.3 Each Participant in a manner determined by the Committee may
elect by September 1, 1995, but in no event later than a Change of Control if
earlier, to have amounts and benefits determined and payable under the terms
of the Program as if a Change of Control had not occurred. New Participants
of the Program may elect in a time and manner determined by the Committee but
in no event later than a Change of Control to have amounts and benefits
determined and payable under the terms of the Plan as if a Change of Control
had not occurred.
16.4 Notwithstanding anything in this Program to the contrary,
each Participant who has made an election under 16.3 above may elect within 90
days following a Change of Control, in a time and manner determined by the
Committee, to receive a lump sum payment calculated under the provisions of
16.2 above, except that such calculated amount shall be reduced by 5% and such
reduction shall be irrevocably forfeited to the Corporation by the
Participant. Furthermore, as a result of such election, the Participant shall
no longer be eligible to participate or otherwise benefit from the Program.
Payments under this subsection 16.4 shall be made not later than 7 days
following receipt by the Corporation of the Participant's election. The
Committee shall, no later than 7 days after a Change of Control has occurred,
give written notification to each Participant eligible to make an election
under this subsection 16.4, that a Change of Control has occurred and
informing such Participant of the availability of the election.
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PAGE 1
Exhibit 10.13
SUPPLEMENTARY SAVINGS AND INCENTIVE AWARD DEFERRAL PLAN
FOR ELIGIBLE EXECUTIVES OF
CSX CORPORATION AND AFFILIATED COMPANIES
As Amended and Restated January 1, 1995
TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . 1
1.1 Account. . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Administrator. . . . . . . . . . . . . . . . . . . . . . 1
1.3 Affiliated Company . . . . . . . . . . . . . . . . . . . 1
1.4 Award. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 Award Deferral Agreement . . . . . . . . . . . . . . . . 1
1.6 Board of Directors . . . . . . . . . . . . . . . . . . . 1
1.7 Change of Control. . . . . . . . . . . . . . . . . . . . 1
1.8 Code . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.9 Committee. . . . . . . . . . . . . . . . . . . . . . . . 4
1.10 Compensation . . . . . . . . . . . . . . . . . . . . . . 4
1.11 Corporation. . . . . . . . . . . . . . . . . . . . . . . 4
1.12 Deferral Agreement . . . . . . . . . . . . . . . . . . . 4
1.13 Distribution Option(s) . . . . . . . . . . . . . . . . . 5
1.14 Effective Date . . . . . . . . . . . . . . . . . . . . . 5
1.15 Eligible Executive . . . . . . . . . . . . . . . . . . . 5
1.16 Matching Credits . . . . . . . . . . . . . . . . . . . . 6
1.17 Member . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.18 MICP . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.19 Participating Company. . . . . . . . . . . . . . . . . . 6
1.20 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.21 Salary Deferrals . . . . . . . . . . . . . . . . . . . . 6
1.22 Salary Deferral Agreement. . . . . . . . . . . . . . . . 6
1.23 Salary Deferral Percentage . . . . . . . . . . . . . . . 6
1.24 SMICP. . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.25 Tax Savings Thrift Plan. . . . . . . . . . . . . . . . . 6
1.27 Valuation Date . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 2. MEMBERSHIP AND DEFERRAL AGREEMENTS. . . . . . . . . . 8
2.1 In General . . . . . . . . . . . . . . . . . . . . . . . 8
2.2 Modification of Initial Deferral Agreement . . . . . . . 8
2.3 Termination of Membership; Re-employment . . . . . . . . 9
2.4 Change in Status . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 3. AWARD DEFERRAL PROGRAM. . . . . . . . . . . . . . . . 11
3.1 Filing Requirements. . . . . . . . . . . . . . . . . . . 11
3.2 Amount of Deferral . . . . . . . . . . . . . . . . . . . 12
3.3 Crediting to Account . . . . . . . . . . . . . . . . . . 12
- 1-
PAGE 2
ARTICLE 4. SALARY DEFERRAL PROGRAM . . . . . . . . . . . . . . . 13
4.1 Filing Requirements. . . . . . . . . . . . . . . . . . . 13
4.2 Salary Deferral Agreement. . . . . . . . . . . . . . . . 13
4.3 Amount of Salary Deferrals . . . . . . . . . . . . . . . 13
4.4 Changing Salary Deferrals. . . . . . . . . . . . . . . . 15
4.5 Certain Additional Credits . . . . . . . . . . . . . . . 15
ARTICLE 5. MAINTENANCE OF ACCOUNTS . . . . . . . . . . . . . . . 17
5.1 Adjustment of Account. . . . . . . . . . . . . . . . . . 17
5.2 Investment Performance Elections . . . . . . . . . . . . 18
5.3 Changing Investment Elections. . . . . . . . . . . . . . 18
5.4 Vesting of Account . . . . . . . . . . . . . . . . . . . 19
5.5 Individual Accounts. . . . . . . . . . . . . . . . . . . 19
ARTICLE 6. PAYMENT OF BENEFITS . . . . . . . . . . . . . . . . . 20
6.1 Commencement of Payment. . . . . . . . . . . . . . . . . 20
6.2 Method of Payment. . . . . . . . . . . . . . . . . . . . 22
6.3 Applicability. . . . . . . . . . . . . . . . . . . . . . 25
6.4 Hardship Withdrawal. . . . . . . . . . . . . . . . . . . 25
6.5 Designation of Beneficiary . . . . . . . . . . . . . . . 25
6.6 Special Distribution Rules . . . . . . . . . . . . . . . 26
6.7 Status of Account Pending Distribution . . . . . . . . . 26
6.8 Installments and Withdrawals Pro-Rata. . . . . . . . . . 27
6.9 Change of Control. . . . . . . . . . . . . . . . . . . . 27
ARTICLE 7. AMENDMENT OR TERMINATION. . . . . . . . . . . . . . . 30
7.1 Right to Terminate . . . . . . . . . . . . . . . . . . . 30
7.2 Right to Amend . . . . . . . . . . . . . . . . . . . . . 30
7.3 Uniform Action . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 8. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . 31
8.1 No Funding . . . . . . . . . . . . . . . . . . . . . . . 31
8.2 No Contract of Employment. . . . . . . . . . . . . . . . 31
8.3 Withholding Taxes. . . . . . . . . . . . . . . . . . . . 31
8.4 Nonalienation. . . . . . . . . . . . . . . . . . . . . . 31
8.5 Administration . . . . . . . . . . . . . . . . . . . . . 31
8.6 Construction . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 9. POST-SECONDARY EDUCATION SUB-ACCOUNTS . . . . . . . . 34
9.1 Post-Secondary Education Sub-accounts. . . . . . . . . . 34
9.2 Distribution of Post-Secondary Education Sub-
accounts . . . . . . . . . . . . . . . . . . . . . . . . 35
9.3 Construction . . . . . . . . . . . . . . . . . . . . . . 36
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PAGE 3
INTRODUCTION
This Supplementary Savings and Incentive Award Deferral Plan for
Eligible Executives of CSX Corporation and Affiliated Companies (the "Plan")
is effective October 1, 1987. This restatement of the Plan is effective
January 1, 1995. This Plan is generally intended to provide certain
executives eligible to participate in the Tax Savings Thrift Plan for
Employees of CSX Corporation and Affiliated Companies (the "Savings Plan")
with an opportunity to defer a portion of their salary, and/or award(s) under
the Management Incentive Compensation Program ("MICP") and/or the Senior
Management Incentive Compensation Program ("SMICP") until their retirement or
other termination of employment and to restore employer matching contributions
lost under the Savings Plan because of the application of Sections 401(a)(17),
401(k), 401(m) and 415 of the Internal Revenue Code of 1986, as amended.
Commencing with respect to MICP awards paid and salary earned after 1990,
eligible executives may, if they so elect, designate all or a portion of such
deferrals to be used for payment of post-secondary education expenses for one
or more members of their families. The Plan is unfunded and is maintained by
CSX Corporation and Affiliated Companies primarily for the purpose of
providing deferred compensation for a select group of management or highly-
compensated employees. The Plan as restated effective January 1, 1995 reads
as hereinafter set forth.
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PAGE 4
ARTICLE 1. DEFINITIONS
1.1 Account shall mean the book-keeping account maintained for
each Member to record his Salary Deferrals, Matching Credits and the amount of
Awards he has elected to defer, as adjusted pursuant to Article 5. The
Account shall consist of the "Post-Secondary Education Sub-accounts", if any,
established pursuant to Article 9 and all amounts not in those accounts shall
be allocated to one or more "Retirement Sub-accounts". The Committee may
determine the maximum number of "Retirement Sub-accounts" which a Member may
have at any time. The Administrator may establish such other sub-accounts
within a Member's Account as it deems necessary to implement the provisions of
the Plan.
1.2 Administrator shall mean the Corporation. The duties of the
Administrator shall be performed by a person or persons designated by the
Chief Executive Officer of the Corporation to perform such duties.
1.3 Affiliated Company shall mean the Corporation and any
company or corporation directly or indirectly controlled by the Corporation.
1.4 Award shall mean, for any year, the amount awarded to an
employee of an Affiliated Company for that year (including any special
incentive award) and, in the absence of an Award Deferral Agreement with
respect to such amount, payable to him in the succeeding year under the MICP
and/or SMICP or other incentive award otherwise payable in cash as determined
by the Committee.
1.5 Award Deferral Agreement shall mean a Deferral Agreement
filed in accordance with the award deferral program described in Article 3.
1.6 Board of Directors or "Board" shall mean the Board of
Directors of the Corporation.
1.7 Change of Control shall mean any of the following:
(a) Stock Acquisition. The acquisition, by any
individual, entity or group [within the meaning of Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")] (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (i) the then outstanding shares of common stock of the
Corporation (the "Outstanding Corporation Common Stock"), or (ii) the
combined voting power of the then outstanding voting securities of
the Corporation entitled to vote generally in the election of
directors (the "Outstanding Corporation Voting Securities");
provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of Control: (i)
any acquisition directly from the Corporation; (ii) any acquisition
by the Corporation; (iii) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Corporation or
any corporation controlled by the Corporation; or (iv) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of subsection (c) of this
Section XI(5); or
(b) Board Composition. Individuals who, as of the date hereof,
constitute the Board of Directors (the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board of
Directors; provided, however, that any individual becoming a director
subsequent to the date hereof whose election or nomination for
election by the Corporation's shareholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent
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PAGE 5
Board shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of
an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board
of Directors; or
(c) Business Combination. Approval by the shareholders of the
Corporation of a reorganization, merger, consolidation or sale or
other disposition of all or substantially all of the assets of the
Corporation or its principal subsidiary that is not subject, as a
matter of law or contract, to approval by the Interstate Commerce
Commission or any successor agency or regulatory body having
jurisdiction over such transactions (the "Agency") (a "Business
Combination"), in each case, unless, following such Business
Combination:
(i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively,
of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities immediately
prior to such Business Combination beneficially own,
directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common
stock and the combined voting power of the then
outstanding voting securities entitled to vote
generally in the election of directors, as the case
may be, of the corporation resulting from such
Business Combination (including, without limitation, a
corporation which as a result of such transaction owns
the Corporation or its principal subsidiary or all or
substantially all of the assets of the Corporation or
its principal subsidiary either directly or through
one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to
such Business Combination of the Outstanding
Corporation Common Stock and Outstanding Corporation
Voting Securities, as the case may be;
(ii) no Person (excluding any corporation resulting from
such Business Combination or any employee benefit plan
(or related trust) of the Corporation or such
corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more
of, respectively, the then outstanding shares of
common stock of the corporation resulting from such
Business Combination or the combined voting power of
the then outstanding voting securities of such
corporation except to the extent that such ownership
existed prior to the Business Combination; and
(iii) at least a majority of the members of the board of
directors resulting from such Business Combination
were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action
of the Board of Directors, providing for such Business
Combination; or
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PAGE 6
(d) Regulated Business Combination. Approval by the
shareholders of the Corporation of a Business Combination that is
subject, as a matter of law or contract, to approval by the Agency (a
"Regulated Business Combination") unless such Business Combination
complies with clauses (i), (ii) and (iii) of subsection (c) of this
Section XI(5); or
(e) Liquidation or Dissolution. Approval by the shareholders of
the Corporation of a complete liquidation or dissolution of the
Corporation or its principal subsidiary.
1.8 Code shall mean the Internal Revenue Code of 1986, as
amended from time to time.
1.9 Committee shall mean the Compensation Committee of the Board
of Directors of CSX Corporation.
1.10 Compensation shall mean the "Base Compensation" of an
Eligible Executive as defined in the Tax Savings Thrift Plan, determined prior
to: (a) any Salary Deferrals under Article 4; and (b) any limit on
compensation imposed by Section 401(a)(17) of the Code.
1.11 Corporation shall mean CSX Corporation, a Virginia
corporation, and any successor thereto by merger, purchase or otherwise.
1.12 Deferral Agreement shall mean either an Award Deferral
Agreement or a Salary Deferral Agreement, or both if the context so requires.
A Deferral Agreement shall be a completed agreement between an Eligible
Executive and a Participating Company of which he is an employee under which
the Eligible Executive agrees to defer an Award or make Salary Deferrals under
the Plan, as the case may be. The Deferral Agreement shall be on a form
prescribed by the Committee and shall include any amendments, attachments or
appendices.
1.13 Distribution Option(s) shall mean, with respect to each
sub-account under the Plan, the election by the Member of (i) the event
triggering the commencement of distribution, and (ii) the form of payment.
Distribution Option elections are made on the initial Deferral Agreement with
respect to any sub-account.
1.14 Effective Date shall mean October 1, 1987 or with respect to
the Eligible Executives of a company which adopts the Plan, the date such
company becomes a Participating Company.
1.15 Eligible Executive shall mean an employee of a Participating
Company, provided that:
(a) prior to January 1, 1995, for purposes of the award deferral
described in Article 3, such employee is employed by a Participating
Company in salary grades 21 through 40 inclusive, as of December 30
of the calendar year in question; or
(b) on and after January 1, 1995, for purposes of the award
deferral program described in Article 3, such employee: (i) is
employed by a Participating Company and is receiving Compensation of
one hundred thousand dollars ($100,000) or more per year; or (ii)
retired from the Participating Companies or terminated employment
with the Participating Companies on account of disability, as
determined by the Committee, and was receiving Compensation of one
hundred thousand dollars ($100,000) or more per year at the time of
such retirement or termination; or
(c) prior to January 1, 1995, for purposes of the salary
deferral program described in Article 4, such employee is eligible
for membership in the Tax Savings Thrift Plan and is employed in
salary grades 21 through 40 inclusive; or
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PAGE 7
(d) on and after January 1, 1995 for purposes of the salary
deferral program described in Article 4, such employee is eligible
for membership in the Tax Savings Thrift Plan and is receiving
Compensation of one hundred thousand dollars ($100,000) or more per
year; or
(e) the Chief Executive Officer of the Corporation or his
designee may designate any other employee or former employee of an
Affiliated Company as an Eligible Executive; provided, however, only
those employees or former employees considered to be a select group
of management or highly compensated may be designated as Eligible
Executives under this Plan.
1.16 Matching Credits shall mean amounts credited to the Account
of a Member pursuant to Section 4.5.
1.17 Member shall mean, except as otherwise provided in Article
2, each Eligible Executive who has executed an initial Deferral Agreement as
described in Section 2.1.
1.18 MICP shall mean the Participating Companies' Management
Incentive Compensation Program.
1.19 Participating Company shall mean the Corporation and any
company or corporation directly or indirectly controlled by the Corporation,
which the Board designates for participation in the Plan in accordance with
Section 8.5(b).
1.20 Plan shall mean this Supplementary Savings and Incentive
Award Deferral Plan for Eligible Executives of CSX Corporation and Affiliated
Companies, as amended from time to time.
1.21 Salary Deferrals shall mean the amounts credited to a
Member's Account under Section 4.3.
1.22 Salary Deferral Agreement shall mean a Deferral Agreement
filed in accordance with the salary deferral program described in Article 4.
1.23 Salary Deferral Percentage shall mean a percentage of an
Eligible Executive's Base Compensation elected in a Salary Deferral Agreement,
pursuant to Section 4.1 hereof, and shall be an integral percentage not in
excess of fifty (50%) percent.
1.24 SMICP shall mean the Participating Companies' Senior
Management Incentive Compensation Program.
1.25 Tax Savings Thrift Plan shall mean the Tax Savings Thrift
Plan for Employees of CSX Corporation and Affiliated Companies, as amended
from time to time.
1.26 Trust shall mean the CSX Corporation Nonqualified Plan Trust
or such other trust which will substantially conform to the terms of the
Internal Revenue Service model trust as described in Revenue Procedure 92-64,
1992-2 C.B.422.
1.27 Valuation Date shall mean the last business day of each
calendar month following the Effective Date.
ARTICLE 2. MEMBERSHIP AND DEFERRAL AGREEMENTS
2.1 In General:
(a) An Eligible Executive shall become a Member as of the
date he files his initial Deferral Agreement with the Administrator.
However, such Deferral Agreement shall be effective for purposes of
deferring an Award or making Salary Deferrals only as provided in
Articles 3 and 4.
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PAGE 8
(b) A Deferral Agreement shall be in writing and properly
completed upon a form approved by the Administrator, which shall be
the sole judge of the proper completion thereof. Except as provided
in Section 4.1(d), such Agreement shall provide for the deferral of
an Award or for Salary Deferrals, shall specify the Distribution
Options, and may include such other provisions as the Administrator
deems appropriate. A Deferral Agreement shall not be revoked or
modified with respect to the allocation of prior deferrals except
pursuant to the establishment of a Post-Secondary Education Sub-
account as provided in Article 9. Distribution Options elected may
not be modified or revoked except as provided in Section 6.1 or 6.2.
(c) As a condition for membership the Administrator may
require such other information as it deems appropriate.
2.2 Modification of Initial Deferral Agreement
(a) A Member may elect to change, modify or revoke a
Deferral Agreement as follows:
(i) A Member may change the amount of Award he
elects to defer on an Award Deferral Agreement
prior to the Agreement's effective date as
provided in Article 3.
(ii) A Member may change the rate of his Salary
Deferrals, or suspend his Salary Deferrals on
account of severe financial hardship, as
provided in Article 4.
(iii) A Member may change the event entitling him to
distribution, as designated on his election of
Distribution Options, as provided in Section
6.1(c)(i).
(iv) A Member may change the event entitling him to
distribution as designated on his election of
Distribution Options, subject to the five
percent (5%) penalty described in Section
6.1(c)(ii).
(v) A Member may change the form of payment, as
designated on his election of Distribution
Options, as provided in Section 6.2(c)(i).
(vi) A Member may change the form of payment as
designated on his election of Distribution
Options, subject to the five percent (5%)
penalty described in Section 6.2(c)(ii).
(b) Notwithstanding any provision in Section 2.2(a) to the
contrary, the establishment of a Post-Secondary Education Sub-account
with respect to future Salary Deferrals and Awards as provided in
Article 9 shall not be deemed a change for the purposes of Section
2.2(a).
2.3 Termination of Membership; Re-employment:
(a) Membership shall cease, subject to Section 2.4, upon a
Member's termination of employment; provided that if a former
Eligible Executive is receiving severance payments under a
Participating Company's severance pay program or is eligible to defer
an Award under Article 3, he shall not be deemed to have terminated
employment until the later of the date the severance payments cease
or the date the Award would have been paid. Membership shall be
continued during a leave of absence approved by the Participating
Companies.
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PAGE 9
(b) Upon re-employment as an Eligible Executive, a former
Member may become a Member again as follows:
(i) in the case of a former Member who prior to re-
employment received the balance in his Account,
by executing a Deferral Agreement under Section
2.1 as though for all purposes of the Plan the
Affiliated Companies had never employed the
former Member;
(ii) in the case of a former Member who prior to re-
employment did not receive the balance in his
Account, by executing a Deferral Agreement under
Section 2.1; provided his Distribution Options
and beneficiary designation shall remain in
effect.
2.4 Change in Status:
(a) In the event that a Member ceases to be an Eligible
Executive with respect to Salary Deferrals but continues to be
employed by an Affiliated Company, his Salary Deferrals and Matching
Credits shall thereupon be suspended until such time as he shall once
again become an Eligible Executive. All other provisions of his
Salary Deferral Agreement shall remain in force and he shall continue
to be a Member of the Plan.
(b) In the event that a Member ceases to be an Eligible
Executive with respect to the deferral of Awards hereunder but
continues to be employed by an Affiliated Company, he shall continue
to be a Member of the Plan but shall not be eligible to defer any
portion of any future Awards until such time as he shall once again
become an Eligible Executive.
ARTICLE 3. AWARD DEFERRAL PROGRAM
3.1 Filing Requirements:
(a) At such time as the Administrator may prescribe prior
to the close of business on December 30 in any calendar year an
Eligible Executive may elect to defer all or a portion of his Award,
if any, for that year. Such election shall be made by filing an
Award Deferral Agreement with the Administrator on or before the
close of business on December 30 of the calendar year for which the
Award is made. In the event that December 30 does not fall on a
weekday, such filing must be made by the close of business on the
last prior business day.
(b) Notwithstanding Section 3.1(a), an individual who
becomes an Eligible Executive after the calendar year for which an
Award is made, but prior to the first day of the month in which such
Award is determined including required action by the Board, may elect
to defer all or a portion of that Award in accordance with this
Section 3.1(b). Such election shall be made by filing an Award
Deferral Agreement during the 30 day or shorter period beginning on
the date the individual becomes an Eligible Executive and ending no
later than the last day of the month preceding the month in which the
Award is determined.
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PAGE 10
(c) An Eligible Executive's election to defer all or a
portion of his Award shall be effective on the last day that such
deferral may be elected under Section 3.1(a) or 3.1(b) and shall be
effective only for the Award in question. An Eligible Executive may
revoke or change his election to defer all or a portion of his Award
at any time prior to the date the election becomes effective, as
described in the preceding sentence. Any such revocation or change
shall be made in a form and manner determined by the Administrator.
(d) An Eligible Executive shall not be entitled to defer
an Award on or after attaining the age, if any, which he has
designated under Section 6.1(c) or 6.1(d) for the purpose of
commencing distribution of his Account (or, if applicable, his
Retirement Sub-account). In the event a Member establishes a Post-
Secondary Education Sub-account pursuant to Article 9, he shall not
be entitled to defer all or any portion of an Award into such a Sub-
account after attaining the age which he has designated for the
purpose of commencing distribution from that Sub-account.
(e) An Eligible Executive shall not be entitled to defer
an Award if he is eligible to defer his award under another
nonqualified program of deferred compensation maintained by an
Affiliated Company.
3.2 Amount of Deferral:
(a) In its sole discretion, the Committee may establish
such maximum limit on the amount of Award an Eligible Executive may
defer for a calendar year as the Committee deems appropriate. Such
maximum limit shall appear on the Eligible Executive's Award Deferral
Agreement for the year.
(b) The minimum amount which an Eligible Executive may
defer in any year shall be the lesser of $5,000 or the maximum amount
determined under Section 3.2(a) above. If an Eligible Executive
elects to defer less than this amount, his election shall not be
effective.
3.3 Crediting to Account:
(a) The amount of Award which an Eligible Executive has
elected to defer for a calendar year shall be credited to his Account
as of the Valuation Date coincident with or next following the date
the Award would have been paid to the Eligible Executive.
(b) An additional credit shall be made to the Account as
of the Valuation Date described in Section 3.3(a) above, determined
as if the amount of Award deferred had earned the same rate of return
as the CSX Cash Pool Earnings Rate from the date the Award would have
been paid until the Valuation Date it is credited to the Eligible
Executive's Account. In lieu of the CSX Corporation Cash Pool
Earnings Rate, the Committee may designate, from time to time, such
other indices of investment performance or investment funds as the
measure of investment performance under this Section 3.3(b).
ARTICLE 4. SALARY DEFERRAL PROGRAM
4.1 Filing Requirements:
(a) An individual who is an Eligible Executive immediately
prior to the Effective Date may file a Salary Deferral Agreement with
the Administrator, within such period prior to the Effective Date and
in such manner as the Administrator may prescribe.
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PAGE 11
(b) An individual who becomes an Eligible Executive on or
after the Effective Date may file a Salary Deferral Agreement with
the Administrator during the calendar month he becomes an Eligible
Executive, in such manner as the Committee may prescribe.
(c) An Eligible Executive who fails to file a Salary
Deferral Agreement with the Administrator as provided in Sections
4.1(a) and 4.1(b) may file a Salary Deferral Agreement in any
subsequent month of December.
(d) An Eligible Executive who has not otherwise filed a
Deferral Agreement shall file a Salary Deferral Agreement under
Sections 4.1(a) or 4.1(b), whichever applies, in order to receive the
Matching Credits described in Section 4.5, provided that such
agreement need not provide for Salary Deferrals.
4.2 Salary Deferral Agreement: An Eligible Executive's Salary
Deferral Agreement shall authorize a reduction in his base pay with respect to
his Salary Deferrals under the Plan. The Agreement shall be effective for
payroll periods beginning on or after the later of: (a) the Effective Date; or
(b) the first day of the month following the date the Salary Deferral
Agreement is filed with the Administrator in accordance with Section 4.1.
Paychecks applicable to said payroll periods shall be reduced accordingly.
4.3 Amount of Salary Deferrals:
(a) On each Valuation Date following the effective date of
an Eligible Executive's Salary Deferral Agreement, his Sub-accounts
shall be credited with an amount of Salary Deferral, if any, for the
payroll period ending thereon, as he elects in his Salary Deferral
Agreement. Such Salary Deferral for any payroll period shall be
determined as the sum of his Basic Salary Deferral for such payroll
period determined under subparagraph (i) and his Additional Salary
Deferral for such month, determined under subparagraph (ii) as
follows:
(i) An Eligible Executive's Basic Salary Deferral
shall be determined by multiplying his
Compensation for a payroll period by the excess
of his Salary Deferral Percentage over the
percentage determined in subparagraph (ii) below
(ii) An Eligible Executive's Additional Salary
Deferral shall be determined by multiplying his
Compensation for a payroll period by a
percentage determined as (A) the excess of his
Salary Deferral Percentage over 15%, divided by
(B) .85.
provided, however, that no Basic Salary Deferral shall be made under
this Plan for any payroll period unless the Eligible Executive is
prevented from making elective deferrals under the Tax Savings Thrift
Plan for such payroll period as a result of Section 402(g) of the
Code, and provided further that, for the payroll period in which such
Basic Salary Deferral is first made, it shall be limited to the
excess of the amount otherwise determined for such payroll period
under Section 4.3(a)(i) over the Eligible Executive's elective
deferrals under the Tax Savings Thrift Plan for such payroll period.
If applicable, Additional Salary Deferrals shall be made for each
payroll period of the year to which the Salary Deferral Agreement
applies, without regard to whether the Eligible Executive makes
elective deferrals under the Tax Savings Thrift Plan and without
regard to any Basic Salary Deferrals under this Plan.
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PAGE 12
(b) An Eligible Executive shall not be entitled to make
Salary Deferrals on or after attaining the age, if any, which he has
designated under Section 6.1(c) or 6.1(d) for the purpose of
commencing distribution of his Account (or, if applicable, his
Retirement Sub-account). In the event a Member establishes a Post-
Secondary Education Sub-account pursuant to Article 9, he shall not
be entitled to make Salary Deferrals into such Sub-account after
attaining the age which he has designated for the purpose of
commencing distribution from that Sub-account.
4.4 Changing Salary Deferrals:
(a) An Eligible Executive's election on his Salary
Deferral Agreement of the rate at which he authorizes Salary
Deferrals under the Plan shall remain in effect in subsequent
calendar years unless he files with the Administrator an amendment to
his Salary Deferral Agreement modifying or revoking such election.
The amendment shall be filed by December 30 and shall be effective
for payroll periods beginning on or after the following January 1.
(b) Notwithstanding Section 4.4(a), an Eligible Executive
may, in the event of a severe financial hardship, request a
suspension of his Salary Deferrals under the Plan. The request shall
be made in a time and manner determined by the Administrator, and
shall be effective as of such date as the Administrator prescribes.
The Administrator shall apply standards, to the extent applicable,
identical to those described in Section 6.3 in making its
determination. The Eligible Executive may apply to the Administrator
to resume his Salary Deferrals with respect to payroll periods
beginning on or after the January 1 following the date of suspension,
in a time and manner determined by the Administrator; provided, that
the Administrator shall approve such resumption only if the
Administrator determines that the Eligible Executive is no longer
incurring such hardship.
4.5 Certain Additional Credits: On each Valuation Date, there
shall be credited Matching Credits to the Retirement Sub-account(s) of an
Eligible Executive determined as follows:
(a) For payroll periods prior to the inception of Basic
Salary Deferrals hereunder, the greater of (i) or (ii)
(b) For payroll periods during which Basic Salary
Deferrals are effective, the greater of (i) or (iii), minus (iv),
where
'(i)' is the employer matching contributions the
Eligible Executive would have received under the
Tax Savings Thrift Plan if the provisions of
Sections 401(k)(3), 401(m)(9) and 415 of the
Code had not applied to the Tax Savings Thrift
Plan; and
'(ii)' is an amount determined as 3% of the
Eligible Executive's additional Salary
Deferrals; and
'(iv)' is the employer matching contributions the
Eligible Executive would have received
under the Tax Savings Thrift Plan if his
deferrals under this Plan had been
contributed to the Tax Savings Thrift Plan
(in addition to those amounts actually
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PAGE 13
contributed to that Plan), based on
"Compensation" as defined in this Plan and
as if the provisions of Sections
401(a)(17), 401(k)(3), 401(m)(2),
401(m)(9) and 415 of the Code had not
applied to the Tax Savings Thrift Plan;
and
'(iv)' is the employer matching contributions
made on his behalf for the applicable
period to the Tax Savings Thrift Plan; and
No Matching Credits shall be credited to a Member's Post-Secondary
Education Sub-account.
ARTICLE 5. MAINTENANCE OF ACCOUNTS
5.1 Adjustment of Account:
(a) As of each Valuation Date each Account (and, if
applicable, each Sub-account) shall be credited or debited with the
amount of earnings or losses with which such Sub-account would have
been credited or debited, assuming it had been invested in one or
more investment funds, or earned the rate of return of one or more
indices of investment performance, designated by the Committee and,
if applicable, elected by the Member or former Member, for purposes
of measuring the investment performance of his Sub-accounts.
(b) The Committee shall designate at least one investment
fund or index of investment performance and may designate other
investment funds or investment indices to be used to measure the
investment performance of Accounts. The designation of any such
investment funds or indices shall not require the Affiliated
Companies to invest or earmark their general assets in any specific
manner. The Committee may change the designation of investment funds
or indices from time to time, in its sole discretion, and any such
change shall not be deemed to be an amendment affecting Members' or
former Members' rights under Section 7.2.
(c) For purposes of Section 5.1(a), the portion of a
Member's Retirement Sub-accounts attributable to Matching Credits
shall be credited or debited with earnings or losses based upon the
performance of "Fund E" (CSX Stock Fund) under the Tax Savings Thrift
Plan.
(d) As of February 1, 1989, there shall be credited to the
Account of each Eligible Executive who participated in the
Supplemental Benefit Plan of Sea-Land Corporation and Affiliated
Companies the amount of deferred compensation under that plan as of
January 31, 1989 attributable to amounts credited under that plan for
the purpose of restoring contributions to a defined contribution plan
which were limited by Section 415 of the Code. Such amounts shall be
treated as Salary Deferrals under the Plan, and unless transferred
pursuant to Section 5.3(a), shall earn the same rate of return as the
CSX Cash Pool Earnings Rate.
5.2 Investment Performance Elections:
(a) In the event the Committee designates more than one
investment fund or index of investment performance under Section 5.1,
each Member and, if applicable, former Member, shall file an initial
investment election with the Administrator with respect to the
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PAGE 14
investment of his Salary Deferrals within such time period and on
such form as the Administrator may prescribe. The election shall
designate the investment fund or funds or index or indices of
investment performance which shall be used to measure the investment
performance of the Member's Salary Deferrals. The election shall be
effective as of the beginning of the payroll period next following
the date the election is filed. The election shall be in increments
of 1%.
(b) In the event the Committee designates more than one
investment fund or index under Section 5.1, each Member shall file an
initial investment election each calendar year in which he defers an
Award with respect to the amount deferred. The election shall be
made within such time period and on such form as the Administrator
prescribes and shall be in increments of 1% of the amount deferred.
The election shall be effective on the Valuation Date on which the
amount determined is credited to the Member's Account.
(c) A Member may not elect separate investment funds or
indices of investment performance with respect to each Sub-account.
5.3 Changing Investment Elections:
(a) A Member may change his election in Section 5.2(a)
with respect to his future Salary Deferrals, no more than once each
calendar quarter, by filing an appropriate written notice with the
Administrator. The notice shall be effective as of the beginning of
the first payroll period following the date the notice is filed with
the Administrator.
(b) A Member or, if applicable, former Member may
reallocate the current balance of his Retirement and/or Post-
Secondary Education Sub-accounts, thereby changing the investment
fund or funds or index or indices of investment performance used to
measure the future investment performance of his existing Account
balance, by filing an appropriate written notice with the
Administrator. Each Retirement or Post-Secondary Education Sub-
account may be reallocated separately. The election shall be
effective as of the last business day of the calendar quarter
following the month in which the notice is filed. No election under
this Section 5.3(b) shall apply to the portion of a Member's Account
attributable to Matching Credits.
5.4 Vesting of Account: Each Member shall be fully vested in
his Account.
5.5 Individual Accounts: The Administrator shall maintain, or
cause to be maintained, records showing the individual balances of each
Account and each Sub-account. At least once a year, each Member and, if
applicable, former Member shall be furnished with a statement setting forth
the value of his Account and his Sub-accounts.
ARTICLE 6. PAYMENT OF BENEFITS
6.1 Commencement of Payment:
(a) The distribution of the Member's or former Member's
Account shall commence, pursuant to Section 6.2, on or after the
occurrence of (i), (ii), (iii) or (iv) below, as designated by the
Member as a Distribution Option election:
(i) the Member's termination of employment with the
Affiliated Companies,
- 14 -
PAGE 15
(ii) attainment of a designated age not earlier than
age 59-1/2 (on or after January 1, 1995 age 50)
nor later than age 70-1/2,
(iii) the earlier of (i) or (ii) above, or
(iv) the later of (i) or (ii) above.
In the event a Member elects either (ii) or (iii) above, he may not
elect an age less than three (3) years subsequent to his current age.
A Member or former Member shall not change his Distribution Option
election of the designation of the event which entitles him to
distribution of his Account, except as provided in Section 6.1(c)
below.
(b) Effective January 1, 1995, a Member or former Member
shall, pursuant to Section 6.9, be eligible to make a Distribution
Option election of the designation of the event which entitles him to
distribution of his Account in the event of a Change of Control.
(c) A Member or former Member may change his Distribution
Option election of the designation of the events which entitle him to
distribution of his Account under Section 6.1(a) and Section 6.1(b),
as follows:
(i) A Member or former Member may make a one-time
request to the Administrator to defer the
Member's designated distribution event under
Section 6.1(a). The requests must be filed in
writing with the Administrator at least one year
prior to when distribution would commence based
on the current designation. The deferral
requests must specify a distribution event
described in Section 6.1(a), shall be subject to
approval of the Administrator and, if approved,
shall be effective as of the date that is one
year after the request is filed with the
Administrator. If the Member's current
distribution event will occur upon his
termination of employment and the Member's
employment terminates within one year after the
deferral request is made, the deferral request
shall not be effective. A deferral request
under this Section 6.1(c)(i) shall not result in
a forfeiture of the Member's or former Member's
Account.
(ii) Notwithstanding Section 6.1(c)(i), a Member or
former Member may change his designated
distribution event under Section 6.1(a) or
6.1(b), no more frequently than once in any
calendar year, by filing with the Administrator
an amendment to his Distribution Option election
on or before December 30 (or the last preceding
business day id December 30 is not a weekday).
The change shall be limited to those events
entitling a Member to a distribution that are
described in Section 6.1(a), shall be subject to
approval of the Administrator and, if approved,
shall be effective as of the last Valuation Date
of the calendar year in which the change is
filed. Unless the election complies with the
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PAGE 16
requirements for a one-time deferral request
under Section 6.1(c)(i), or unless the
provisions of Section 6.1(e) apply, an election
under this Section 6.1(c)(ii) shall result in
the forfeiture of five percent (5%) of the
Member's or former Member's Account, determined
as of the Valuation Date upon which the election
is effective. A forfeiture under this Section
6.1(c)(ii) shall be in addition to a forfeiture
incurred by the Member, if any, under Section
6.2(c)(ii).
(d) Notwithstanding anything in this Section 6.1 or
Article 9 to the contrary, a Member's Account shall be distributed
upon his death.
(e) A Member may not change the designation of the event
which entitles him to distribution of one or more Post-Secondary
Education Sub-accounts, except that a Member may transfer the entire
amount in any Post-Secondary Education Sub-account to one or more
other Post-Secondary Education Sub-accounts and one or more of his
Retirement Sub-accounts, or any combination thereof, subject to
forfeiture of five percent (5%) of the Sub-account so transferred, as
provided in Article 9.
(f) Notwithstanding the foregoing, the Corporation may
delay payment of a benefit under this Plan to any Member who is
determined to be among the top five most highly paid executives for
the year the benefit under this Plan would otherwise be paid;
provided, however, if a Member's payment is delayed, the benefit to
which he is entitled will not decrease after the date it would
otherwise be distributed.
6.2 Method of Payment:
(a) A Member's or former Member's Retirement Sub-
account(s) shall be distributed to him, or in the event of his death
to his Beneficiary, in a cash single sum payment as soon as
administratively practicable following the January 1 coincident with
or next following the date the Member incurs the Distribution Option
elected under Section 6.1 or his date of death, as the case may be.
Matching Credits earned in respect to periods following the date of
such distributable event shall be paid directly to the Member in cash
as soon as practical. Notwithstanding the foregoing, a Member or
former Member may make a Distribution Option election to receive
distribution of his Account in semi-annual installments over a period
not to exceed twenty (20) years. Installments shall be determined as
of each June 30 and December 31 and shall be paid as soon as
administratively practicable thereafter. Installments shall commence
as of the July 1 or January 1 coincident with or next following the
date the Member incurs the distributable event elected as a
Distribution Option under Section 6.1, or as soon as administratively
practicable thereafter. The amount of each installment shall equal
the balance in the Account as of the Valuation Date of determination,
divided by the number of remaining installments (including the
installment being determined). The Distribution Option election
shall be irrevocable except as provided in Section 6.2(c) below. If
a Member or former Member dies before payment of the entire balance
of his Account, the remaining balance shall be paid in a single sum
to his Beneficiary as soon as administratively practicable following
the January 1 coincident with or next following his date of death.
- 16 -
PAGE 17
(b) Effective January 1, 1995, a Member or former Member
shall, pursuant to Section 6.9, be eligible to make a separate
Distribution Option election of the form of payment of his Account in
the event of a Change of Control.
(c) Notwithstanding Section 6.2(a) and Section 6.2(b), a
Member or former Member may change the Distribution Option election
of the form in which his Account is distributed, as follows:
(i) A Member or former Member may make a one-time
request to the Administrator to change the form
in which his Account is to be distributed under
Section 6.2(a). A Member or former Member may
also make a one-time request to change the form
in which his Account is to be distributed under
Seciton 6.2(b). The request must be filed in
writing with the Administrator at least one year
prior to when distribution would commence based
on the current designation. The requests must
specify a form of distribution described in
Section 6.2(a), shall be subject to approval of
the Administrator and, if approved, shall be
effective as of the date that is one year after
the request is filed with the Administrator. If
the Member's distribution event will occur upon
his termination of employment and the Member's
employment terminates within one year after the
request is filed, the request shall not be
effective. A request under this Section
6.2(c)(i) shall not result in a forfeiture of
the Member's or former Member's Account.
(ii) Notwithstanding Section 6.2(c)(i), a Member or
former Member may change the form in which his
Account is to be distributed under Section
6.2(a) or 6.2(b), no more frequently than once
in any calendar year, by filing with the
Administrator an amendment to his Distribution
Option election on or before December 30 (or the
last preceding business day if December 30 is
not a weekday). The change shall be limited to
those forms of distribution described in
paragraph 6.2(a), shall be subject to approval
of the Administrator and, if approved, shall be
effective as of the last Valuation Date of the
calendar year in which it is filed. Unless the
election complies with the requirements for a
one-time request under Section 6.2(c)(i), or
unless the provisions of Section 6.2(d) apply,
an election under this Section 6.2(c)(ii) shall
result in the forfeiture of five percent (5%) of
the Member's or former Member's Account,
determined as of the Valuation Date upon which
the election is effective. A forfeiture under
this Section 6.2(c)(ii) shall be in addition to
a forfeiture incurred by the Member, if any,
under Section 6.1(c)(ii).
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PAGE 18
(d) In the event the Member's Account consists of one or
more Retirement Sub-accounts and one or more Post-Secondary Education
Sub-accounts, the provisions of this Section 6.2 shall apply
exclusively to the Member's Retirement Sub-accounts. A Member may
not change the form in which his Post-Secondary Education Sub-
accounts are distributed, except that a Member may transfer the
entire amount in any Post-Secondary Education Sub-account to one or
more other Post-Secondary Education Sub-accounts and one or more
Retirement Sub-accounts, or any combination thereof, subject to
forfeiture of five percent (5%) of the Sub-account so transferred, as
provided in Article 9.
6.3 Applicability: In the event the Member's Account consists
of one or more Retirement Sub-accounts and one or more Post-Secondary
Education Sub-accounts, the provisions of Sections 6.1(a) and 6.1(c) and 6.2
shall apply exclusively to the Member's Retirement Sub-accounts.
6.4 Hardship Withdrawal
(a) While employed by the Participating Companies, a
Member or former Member may, in the event of a severe financial
hardship, request a withdrawal from his Account. The request shall
be made in a time and manner determined by the Administrator, shall
not be for a greater amount than the amount required to meet the
financial hardship, and shall be subject to approval by the
Administrator.
(b) For purposes of this Section 6.3 financial hardship
shall include:
(i) education of a dependent child where the Member
or former Member shows that without the
withdrawal under this Section the education
would be unavailable to the child;
(ii) illness of the Member or former Member or his
dependents, resulting in severe financial
hardship to the Member or former Member;
(iii) the loss of the Member's or former Member's home
or its contents, to the extent not reimbursable
by insurance or otherwise, if such loss results
in a severe financial hardship to the Member or
former Member;
(iv) any other extraordinary circumstances of the
Member or former Member approved by the
Administrator if such circumstances would result
in a present or impending critical financial
need which the Member or former Member is unable
to satisfy with funds reasonably available from
other sources.
6.5 Designation of Beneficiary: A Member or former Member may,
in a time and manner determined by the Administrator, designate a beneficiary
and one or more contingent beneficiaries (which may include the Member's or
former Member's estate) to receive any benefits which may be payable under
this Plan upon his death. If the Member or former Member fails to designate a
beneficiary or contingent beneficiary, or if the beneficiary and the
contingent beneficiaries fail to survive the Member or former Member, such
benefits shall be paid to the Member's or former Member's estate. A Member or
former Member may revoke or change any designation made under this Section 6.4
in a time and manner determined by the Administrator.
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PAGE 19
6.6 Special Distribution Rules: Notwithstanding anything to the
contrary in this Plan, if (a) a Member or former Member becomes the owner,
director or employee of a competitor of the Affiliated Companies, (b) his
employment is terminated by an Affiliated Company on account of actions by the
Member which are detrimental to the interests of the Affiliated Company, or
(c) he engages in conduct subsequent to the termination of his employment with
the Affiliated Companies which the Administrator determines to be detrimental
to the interests of an Affiliated Company, then the Administrator may, in its
sole discretion, pay the Member or former Member a single sum payment equal to
the balance in his Account. The single sum payment shall be made as soon as
practicable following the date the Member or former Member becomes an owner,
director or employee of a competitor, his termination of employment or the
Administrator's determination of detrimental conduct, as the case may be, and
shall be in lieu of all other benefits which may be payable to the Member or
former Member under this Plan.
6.7 Status of Account Pending Distribution: Pending
distribution, a former Member's Account (and, if applicable, a former Member's
Sub-accounts) shall continue to be credited with earnings and losses as
provided in Section 5.1. The former Member shall be entitled to change his
investment elections under Section 5.3 or apply for Hardship withdrawals under
Section 6.3 to the same extent as if he were a Member of the Plan. In the
event of the death of a Member or former Member, his Sub-accounts shall be
credited with earnings and losses as if the Sub-accounts had earned the same
rate of return as the CSX Corporation Cash Pool Earnings Rate or, in the sole
discretion of the Committee, the rate of return of such other index of
investment performance or investment fund which may be designated by the
Committee as a measure for investment performance of Members' or former
Members' Accounts (and, if applicable, their Sub-accounts), commencing with
the Valuation Date coincident with or next following the Member's or former
Member's date of death.
6.8 Installments and Withdrawals Pro-Rata: In the event of an
installment payment or hardship withdrawal, such payment or withdrawal shall
be made on a pro-rata basis from the portions of the Member's or former
Member's existing Account balance which are subject to different measures of
investment performance. In the event of a hardship withdrawal, the withdrawal
shall be made on a pro-rata basis from all of the Member's or former Member's
Sub-accounts.
6.9 Change of Control:
(a) If a Change of Control has occurred, the Committee
shall cause the Corporation to contribute to the Trust within 7 days
of such Change of Control, a lump sum payment equal to the aggregate
value of the amount each Member or former Member would be eligible to
receive (determined under (b) below) as of the latest Valuation Date
coinciding with or preceding the date of Change of Control to the
extent such amounts are not already in the Trust; provided, however,
amounts relating to those Members who receive a lump sum payment
under (b) below shall be excluded from the aggregate value
determination. The aggregate value of the amount of the lump sum to
be contributed to the Trust pursuant to this Section 6.9 shall be
determined by the Corporation's accountants after consultation with
the entity then maintaining the Plan's records, and shall be
projected, if necessary, to such Valuation Date from the last
valuation of Members' or former Members' Accounts for which
information is readily available. Thereafter, the Corporation's
- 19 -
PAGE 20
accountants shall annually determine as of a Valuation Date for each
Member or former Member not receiving a lump sum payment pursuant to
subsection (b) below the value of each Member or former Member's
Accounts. To the extent that the value of the assets held in the
Trust relating to this Plan do not equal the aggregate amount
described in the preceding sentence, at the time of the valuation, as
determined by the Corporation's accountants, the Corporation shall
make a lump sum contribution to the trust equal to the difference.
(b) In the event a Change of Control has occurred, each
Member or former Member not making an election under (c) below shall
receive, and the Committee shall cause the Corporation to pay within
7 days of such Change of Control, a lump sum payment equal to the
value of the Member's or former Member's Accounts (determined under
Article 5) as of the Valuation Date coinciding with or next preceding
the date of such Change of Control. The amount of each Member's or
former Member's lump sum payment shall be determined by the
Corporation's accountants after consultation with the entity then
maintaining the Plan's records, and shall be projected, if necessary,
to such Valuation Date from the last valuation of Member's or former
Member's accounts for which information is readily available.
(c) Each Member or former Member may elect in a time and
manner determined by the Committee but in no event later than
September 1, 1995, or the occurrence of a Change of Control, if
earlier, to have amounts and benefits determined and payable under
the terms of the Plan as if a Change of Control had not occurred.
New Members of the Plan may elect in a time and manner determined by
the Committee but in no event later than a Change of Control to have
amounts and benefits determined and payable under the terms of the
Plan as if a Change of Control had not occurred.
(d) Notwithstanding anything in the Plan to the contrary,
each Member or former Member who has made an election under (c) above
may elect within 90 days following a Change of Control, in a time and
manner determined by the Committee, to receive a lump sum payment
calculated under the provisions of 3 above determined as of the
Valuation Date next preceding such payment, except that such
calculated amount shall be reduced by 5% and such reduction shall be
irrevocably forfeited to the Corporation by the Member or former
Member. Furthermore, as a result of such election, the Member or
former Member shall no longer be eligible to participate or otherwise
benefit from the Plan. Payments under this subsection (d) shall be
made not later than 7 days following receipt by the Corporation of a
Member's or former Member's election. The Committee shall no later
than 7 days after a Change of Control has occurred give written
notification to each Member or former Member eligible to make an
election under this subsection (d), that a Change of Control has
occurred and informing such Member or former Member of the
availability of the election.
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PAGE 21
ARTICLE 7. AMENDMENT OR TERMINATION
7.1 Right to Terminate: The Board may, in its sole discretion,
terminate this Plan and the related Deferral Agreements at any time. In the
event the Plan and related Deferral Agreements are terminated, each Member,
former Member and Beneficiary shall receive a single sum payment equal to the
balance in his Account. The single sum payment shall be made as soon as
practicable following the date the Plan is terminated and shall be in lieu of
any other benefit which may be payable to the Member, former Member or
Beneficiary under this Plan.
7.2 Right to Amend: The Board may, in its sole discretion,
amend this Plan and the related Deferral Agreements on 30 days prior notice to
the Members and, where applicable, former Members. If any amendment to this
Plan or to the Deferral Agreements shall adversely affect the rights of a
Member or former Member, such individual must consent in writing to such
amendment prior to its effective date. If such individual does not consent to
the amendment, the Plan and related Deferral Agreements shall be deemed to be
terminated with respect to such individual and he shall receive a single sum
payment of his Account as soon thereafter as is practicable. Notwithstanding
the foregoing, the Committee's change in any investment funds or investment
index under Section 5.1(b) or the restriction of future deferrals under the
salary deferral program or award deferral program shall not be deemed to
adversely affect any Member's or former Member's rights.
7.3 Uniform Action: Notwithstanding anything in the Plan to the
contrary, any action to amend or terminate the Plan or the Deferral Agreements
must be taken in a uniform and nondiscriminatory manner.
ARTICLE 8. GENERAL PROVISIONS
8.1 No Funding: Nothing contained in this Plan or in a Deferral
Agreement shall cause this Plan to be a funded retirement plan. Neither the
Member, former Member, his beneficiary, contingent beneficiaries, heirs or
personal representatives shall have any right, title or interest in or to any
funds of the Trust or the Affiliated Companies on account of this Plan or on
account of having completed a Deferral Agreement. The assets held in the
Trust shall be subject to the claims of creditors of the Corporation, and the
Trust's assets shall be used to discharge said claims in the event of the
Corporation's insolvency. Each Member or former Member shall have the status
of a general unsecured creditor of the Affiliated Companies and this Plan
constitutes a mere promise by the Affiliated Companies to make benefit
payments in the future.
8.2 No Contract of Employment: The existence of this Plan or of
a Deferral Agreement does not constitute a contract for continued employment
between an Eligible Executive or a Member and an Affiliated Company. The
Affiliated Companies reserve the right to modify an Eligible Executive's or
Member's remuneration and to terminate an Eligible Executive or a Member for
any reason and at any time, notwithstanding the existence of this Plan or of a
Deferral Agreement.
8.3 Withholding Taxes: All payments under this Plan shall be
net of an amount sufficient to satisfy any federal, state or local withholding
tax requirements.
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PAGE 22
8.4 Nonalienation: The right to receive any benefit under this
Plan may not be transferred, assigned, pledged or encumbered by a Member,
former Member, beneficiary or contingent beneficiary in any manner and any
attempt to do so shall be void. No such benefit shall be subject to
garnishment, attachment or other legal or equitable process without the prior
written consent of the Affiliated Companies.
8.5 Administration:
(a) This Plan shall be administered by the Committee.
Certain administrative functions, as set forth in the Plan, shall be
the responsibility of the Administrator. The Administrator shall
interpret the Plan, establish regulations to further the purposes of
the Plan and take any other action necessary to the proper operation
of the Plan in accordance with guidelines established by the
Committee or, if there are no such guidelines, consistent with
furthering the purpose of the Plan.
(b) The Board, in its sole discretion and upon such terms
as it may prescribe, may permit any company or corporation directly
or indirectly controlled by the Corporation to participate in the
Plan.
(c) Prior to paying any benefit under this Plan, the
Administrator may require the Member, former Member, beneficiary or
contingent beneficiary to provide such information or material as the
Administrator, in its sole discretion, shall deem necessary for it to
make any determination it may be required to make under this Plan.
The Administrator may withhold payment of any benefit under this Plan
until it receives all such information and material and is reasonably
satisfied of its correctness and genuineness.
(d) The Administrator shall provide adequate notice in
writing to any Member, former Member, beneficiary or contingent
beneficiary whose claim for benefits under this Plan has been denied,
setting forth the specific reasons for such denial. A reasonable
opportunity shall be afforded to any such Member, former Member,
beneficiary or contingent beneficiary for a full and fair review by
the Administrator of its decision denying the claim. The
Administrator's decision on any such review shall be final and
binding on the Member, former Member, beneficiary or contingent
beneficiary and all other interested persons.
(e) All acts and decisions of the Administrator shall be
final and binding upon all Members, former Members, beneficiaries,
contingent beneficiaries and employees of the Affiliated Companies.
8.6 Construction
(a) The Plan is intended to constitute an unfunded
deferred compensation arrangement for a select group of management or
highly compensated employees and all rights hereunder shall be
governed by and construed in accordance with the laws of the
Commonwealth of Virginia to the extent not preempted by federal law.
(b) The masculine pronoun shall mean the feminine wherever
appropriate.
(c) The captions inserted herein are inserted as a matter
of convenience and shall not affect the construction of the Plan.
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PAGE 23
ARTICLE 9. POST-SECONDARY EDUCATION SUB-ACCOUNTS
9.1 Post-Secondary Education Sub-accounts:
(a) Notwithstanding any provision of this Plan to the
contrary, with respect to amounts deferred under Salary Deferral
Agreements and Award Deferral Agreements effective on or after
December 31, 1990, a Member may direct the Administrator to establish
a separate sub-account in the name of one or more of:
(i) each of the Member's children,
(ii) each of the Member's brothers, sisters, their
spouses, the Member's spouse, or
(iii) each of the foregoing's lineal descendants, for
the payment of their expenses directly or
indirectly arising from enrollment in a college,
university, or any other post-secondary
institution of higher learning. Each sub-
account established pursuant to this Section
9.1(a) shall be referred to as a "Post-Secondary
Education Sub-account."
(b) The Member may instruct the Administrator to allocate
all or a portion of any amount deferred under an Award Deferral
Agreement in respect to an Award granted after December 31, 1990 to
one or more of the Post-Secondary Education Sub-accounts established
pursuant to Section 9.1(a).
(c) A Member may instruct the Administrator to allocate
all or any portion of the amount he defers for periods commencing
after December31, 1990 pursuant to his Salary Deferral Agreement to
one or more of the Post-Secondary Education Sub-accounts established
pursuant to Section 9.1(a).
(d) Any elections pursuant to Sections 9.1(a) and 9.1(b)
shall be made in whole percentages.
(e) No Matching Credits shall be allocated to any Post-
Secondary Education Sub-account.
9.2 Distribution of Post-Secondary Education Sub-accounts:
(a) Amounts allocated to one or more of a Member's Post-
Secondary Education Sub-accounts shall be distributed to the Member
upon the attainment of the certain age of the Member, specifically
designated by the Member for this purpose with regard to that Sub-
account.
(b) A Member or former Member may transfer the entire
amount but not less than that amount in any Post-Secondary Education
Sub-account to one or more other Post-Secondary Education Sub-
accounts, a Retirement Sub-account, or any combination thereof, by
filing the appropriate form or forms with the Administrator not later
than the last business day of the calendar year preceding the year in
which distribution of that Post-Secondary Education Sub-account was
to begin. A transfer under this Section 9.2(b) shall result in the
forfeiture of five percent (5%) of the Member's or former Member's
Sub-account so transferred, determined as of the Valuation Date upon
which the transfer is effective. In no event may a Member transfer
all or any portion of the amount in a Retirement Sub-account to his
Post-Secondary Education Sub-accounts. Except as provided in this
Section 9.2(b) or 9.2(c) below, a Member or former Member may not
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PAGE 24
change the time or form of distribution of his Post-Secondary
Education Sub-accounts.
(c) In the event that the individual for whom a Post-
Secondary Education Sub-account is established dies while funds
remain in that Sub-account, a Member or former Member may transfer
without penalty the entire amount but not less than that amount in
that Sub-account in accordance with the provisions of (i) or (ii)
below:
(i) to one or more existing Post-Secondary Education
Sub-accounts and/or a new Post-Secondary
Education Sub-account established in accordance
with the provisions of Section 9.1 hereof; or
(ii) to a Retirement Sub-account.
If a Member or former Member elects to transfer funds in accordance
with (ii) and he has not previously established a Retirement Sub-
account, such a Sub-account shall be established automatically and
the Member or former Member promptly thereafter will be required to
execute an amendment to his Deferral Agreement which shall specify
the option under Section 6.1(a) which will entitle him to
distribution of the Retirement Sub-account and the form of
distribution under Section 6.2(a).
(d) A Member's or former Member's Post-Secondary Education
Sub-accounts shall be distributed to him, or in the event of his
death to his Beneficiary, in a cash single sum payment as soon as
administratively practicable following the January 1 coincident with
or next following the date the Member incurs the distributable event
or events elected under Section 9.2(a) or his date of death, as the
case may be. Notwithstanding the foregoing, a Member or former
Member may elect to receive distribution of one or more of his Post-
Secondary Education Sub-accounts in semi-annual installments over a
period not to exceed six (6) years. Installments shall be determined
as of each June 30 and December 31 and shall be paid as soon as
administratively practicable thereafter. Installments shall commence
as of the June 30 or December 31 coincident with or next following
the date the Member incurs the distributable event elected under
Section 9.2(a) with regard to a Sub-account, or as soon as
administratively practicable thereafter. The amount of each
installment shall equal the balance in the applicable Post-Secondary
Education Sub-account as of the Valuation Date of determination,
divided by the number of remaining installments (including the
installment being determined). If a Member or former Member dies
before payment of the entire balance of all of his Post-Secondary
Education Sub-accounts, the remaining balance or balances, as the
case may be, shall be paid in a single sum to his Beneficiary as soon
as administratively practicable following the January 1 coincident
with or next following his date of death.
9.3 Construction: To the extent any provision in this Article 9
is inconsistent with any other provision of this Plan, the provisions in
Article 9 shall govern.
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PAGE 1
Exhibit 10.14
SPECIAL RETIREMENT PLAN
OF CSX CORPORATION AND AFFILIATED CORPORATIONS
AS AMENDED AND RESTATED JANUARY 1, 1995
TABLE OF CONTENTS
Section I - INTRODUCTION . . . . . . . . . . . . . . . . . . 1
Section II - PARTICIPATION. . . . . . . . . . . . . . . . . . 3
Section III - CREDITABLE SERVICE . . . . . . . . . . . . . . . 3
Section IV - COMPENSATION AND AVERAGE COMPENSATION. . . . . . 6
Section V - SPECIAL RETIREMENT ALLOWANCES. . . . . . . . . . 7
Section VI - FUNDING METHOD . . . . . . . . . . . . . . . . . 13
Section VII - ADMINISTRATION OF SPECIAL PLAN . . . . . . . . . 15
Section VIII - MODIFICATION, AMENDMENT AND TERMINATION . . . . 15
Section IX - NON-ALIENATION OF BENEFITS . . . . . . . . . . . 18
Section X - MISCELLANEOUS PROVISIONS . . . . . . . . . . . . 19
Section XI - CHANGE OF CONTROL. . . . . . . . . . . . . . . . 20
Section XII - CONSTRUCTION . . . . . . . . . . . . . . . . . . 28
- 1 -
PAGE 2
Special Retirement Plan
of CSX Corporation and Affiliated Corporations
As Amended and Restated January 1, 1995
Section I - INTRODUCTION
1. The purpose of this retirement plan, hereinafter called the
"Special Plan," is to provide an incentive for corporate officers comprising a
select group of management or highly compensated employees to exert maximum
efforts for the Company's success and to remain in the service of the Company
until retirement.
2. The Special Plan as provided herein shall be effective as of March
1, 1983, and supersedes the Employees' Special Pension Plan of The Chesapeake
and Ohio Railway Company and the Plan for Additional Annuities for Qualifying
Members under the Supplemental Pension Plan of The Baltimore and Ohio Railroad
Company, hereinafter called the "Former Plans."
3. The "Company" as used herein shall refer to CSX Corporation and
such other of its affiliated corporations as shall adopt this Special Plan by
action of their Boards of Directors for the benefit of corporate officers who
are covered or may become covered by the Special Plan. The term "Compensation
Committee" shall refer to the Compensation Committee of the Board of Directors
of CSX Corporation (the "Board of Directors").
4. The incentives under the Special Plan shall consist of special
retirement allowances provided by the Company at retirement to certain
employees, hereinafter referred to as "Participants," who shall participate as
provided herein (eligibility for participation is set forth in Section II).
5. The Special Plan shall, where appropriate, refer to and have
meanings consistent with all of the relevant terms of any other regularly
maintained pension plan which currently provides or did provide immediately
prior to March 1, 1983, retirement benefits for non-contract employees of the
Company and is or was maintained by CSX Corporation or any of its affiliated
corporations whose officers participate in the Special Plan. Such existing
regularly maintained pension plans which provided benefits immediately prior
to March 1, 1983 for employees of the Company, and covered periods of service
granted in paragraphs 4(a) and 4(b) of Section V, or those which may be
established hereafter, as amended from time to time, shall be referred to
herein as the "Pension Plans." Accordingly, regardless of formal differences
which may exist between the Special Plan and the Pension Plans in the use of
terminology, the definitions and principles which are set forth in the Pension
Plans with respect to compensation, average compensation, credited service,
and similar terms shall be applied and construed hereunder in a manner
consistent with the purposes of the Special Plan and the Pension Plans. In
any instance in which the male gender is used herein, it shall also include
persons of the female gender in appropriate circumstances.
Section II - PARTICIPATION
1. Every person who was a Participant in the Former Plans as in
effect immediately prior to March 1, 1983, shall continue as a Participant in
the Special Plan on and after such date for the purpose of any applicable
provisions hereof.
2. On and after March 1, 1983, Participants shall include any
employees who participate in the Pension Plans and who are entitled to
benefits provided under Section V, Subsection 8 hereof; provided, however,
that the only benefit that such employees shall be eligible to receive under
this Special Plan shall be the benefit provided in accordance with such
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Subsection unless they are otherwise entitled to benefits under other
provisions of this Special Plan.
3. On and after March 1, 1983, additional persons eligible to be
Participants shall be those specified in Section V, Subsection 4(c).
Section III - CREDITABLE SERVICE
1. Creditable service under the Special Plan shall have the same
meaning and apply in the same manner as creditable service under the Pension
Plans, except that it shall also include any additional creditable service
which may have been or which may be granted to a Participant in accordance
with the provisions of Section V, Subsections 3 and/or 4 hereof. Provided,
however, notwithstanding any provisions of the Pension Plans to the contrary,
a Participant in the Special Plan who is in the employ of the Company and who
does not receive compensation in any calendar month due to amounts deferred
under the Company's Deferred Compensation Program, Supplementary Savings and
Incentive Award Deferral Plan, and any other amounts of compensation deferred
under any other arrangement approved by the Compensation Committee
nevertheless shall receive creditable service under the Special Plan.
2. Notwithstanding any other provisions of this Special Plan or the
Pensions Plans to the contrary, effective January 1, 1989:
(a) Prior to January 1, 1992, a Participant must have been
continuously employed by the Company for a period of not
less than 10 years to become entitled upon retirement to
receive payment of a special retirement allowance from this
Special Plan in respect of any additional creditable
service, pension supplement, pension or benefit granted
under Section V, Subsections 3(a) or 3(b) of this Special
Plan. After December 31, 1991, this Subsection (a) shall
only apply to Section V, Subsection 3(b); and,
(b) Prior to January 1, 1992, a Participant must have been
continuously employed by the Company for a period of not
less than 5 years to become entitled to receive payment of a
special retirement allowance from this Special Plan in
respect of any additional creditable service granted under
Section V, Subsection 4(d), of this Special Plan; provided,
however, a person who has already attained age 60 and then
first becomes employed by the Company, and who also becomes
and continuously remains a Participant from that date of
first employment until attainment of age 65, shall become
entitled upon retirement to receive payment of a special
retirement allowance from this Special Plan in respect of
any additional creditable service granted under Section V,
Subsection 4(d) of this Special Plan; and
(c) After December 31, 1991, a Participant must have been
continuously employed by the Company for a period of not
less than 10 years and must have attained age 55 to become
entitled to receive a special retirement allowance from this
Special Plan in respect to any additional creditable service
accrued after December 31, 1991, granted under Section V,
Subsection 4(d), of this Special Plan or a pension or
benefit granted after December 31, 1991 under Section V,
Subsection 3(a) of this Special Plan; provided, however, a
Participant who has at least 5 years of continuous service
and who dies while actively employed shall be entitled to
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the additional creditable service accrued after December 31,
1991; and provided, further, a Participant who terminates
employment with the consent of the Chief Executive Officer
of CSX Corporation ("Chief Executive Officer") prior to age
55 with 10 years of continuous service shall be entitled to
the additional creditable service accrued after December 31,
1991.
(d) In no event shall a Participant be eligible to receive a
payment in respect of any benefits granted under Section V,
Subsections 3(a), 3(b) or 4(d) of this Special Plan before
such date as the Participant attains the earliest retirement
age specified in the particular Pension Plan in which the
Participant also participates, unless an earlier payment
from the Special Plan is specifically authorized by the
Compensation Committee. The Compensation Committee shall
have full authority and sole discretion to interpret and
administer the foregoing rules, and any decision made by
such Committee shall be final and binding.
Section IV - COMPENSATION AND AVERAGE COMPENSATION
Compensation and average compensation under the Special Plan shall
have the same meanings and apply in the same manner as those terms do under
the Pension Plans, except as provided in Section V, Subsection 3(b) hereof;
provided, however, that amounts deferred under the Company's Deferred
Compensation Program, Supplementary Savings and Incentive Award Deferral Plan,
and any other amounts of compensation deferred under any other arrangement
approved by the Compensation Committee shall be included in the determination
of compensation and average compensation; and further provided, that
compensation and average compensation hereunder shall not be limited to the
amount of $150,000, or such other amount as adjusted by regulation, as imposed
by Sections 401(a)(17) and 415(d) of the Internal Revenue Code.
Section V - SPECIAL RETIREMENT ALLOWANCES
1. All of the provisions, conditions, and requirements set forth in
the Pension Plans with respect to the granting and payment of retirement
benefits thereunder shall be equally applicable to the granting of the special
retirement allowances hereunder to Participants in the Special Plan and to the
payment thereof from the Company's general assets or from the Trust (which is
defined and discussed in Section VI, subsection (3)). Except as otherwise may
be provided in this Special Plan, whenever a Participant's rights under the
Special Plan are to be determined, appropriate reference shall be made to the
particular Pension Plan in which such person is also a participant.
Notwithstanding the preceding sentence, if a special retirement allowance
under the Special Plan shall be paid to a surviving spouse in conformance with
the provisions of the Pension Plans, the final installment payment hereunder
shall be made only to the estate of such surviving spouse and shall not be
otherwise paid, regardless of any different provision for such payment which
may be prescribed in the Pension Plans.
2. All special retirement allowances being paid on March 1, 1983,
under the Former Plans as they existed immediately prior to such date shall be
continued and be paid hereunder, and, persons participating under the Former
Plans shall continue to participate hereunder in accordance with the terms and
conditions of the Former Plans and any applicable provisions of this Special
Plan.
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3. The Compensation Committee, upon the recommendation of the Chief
Executive Officer, may grant to an officer of the Company the following
benefits under the Special Plan:
(a) Additional creditable service, pensions or benefits
hereunder other than as provided in the Pension Plan, in
recognition of previous service deemed to be of special
value to the Company.
(b) A pension supplement hereunder in a particular instance as
determined by the Compensation Committee, to be calculated
on the basis of specific instructions which may depart only
for such purpose from any of the terms, conditions or
requirements of the Pension Plans, notwithstanding the
provisions of Section I, Subsection 5, and Section V,
Subsection 1, hereof.
4. The following additional creditable service under the Special Plan
shall be granted by the Company at retirement under the Pension Plans:
(a) To those Participants of the "Former Plans," creditable
service equal to that accrued under Section V, Subsection 4
of The Employees' Special Plan of The Chesapeake and Ohio
Railway Company or under paragraphs 1, 2 and 3 of the Plan
for Additional Annuities for Qualifying Members Under the
Supplemental Pension Plan of the Baltimore and Ohio Railroad
Company, provided that, effective upon a Participant's
retirement on or after March 1, 1983, creditable service
under the Special Plan and Pension Plans shall not exceed 44
years.
(b) To those Participants in the Special Plan who are listed in
Appendix I, and who are also participants in the Pension
Plans, additional creditable service under the Special Plan
will be granted as indicated for each individual as shown in
Appendix I, provided that additional creditable service
under the Special Plan and credited service under the
Pension Plans at retirement shall not exceed 44 years.
(c) On and after March 1, 1983, new admissions into the class of
persons who may become Participants in the Special Plan to
receive additional creditable service hereunder shall only
include participants in the Pension Plans who are appointed
by the Chief Executive Officer or his designee.
(d) In addition to the additional creditable service granted to
Participants under (a) or (b) above, beginning March 1,
1983, one year of additional creditable service shall be
granted for each year of actual service (with allowances for
months less than twelve) between ages 45 and 65 during which
a person is a Participant. Those who become qualified as
provided in (c) above shall have one year of additional
credited service granted, beginning no earlier than the date
they are both a Participant and at least age 45, for each
year of actual service (with allowances made for months less
than twelve) during which they remain a Participant, but
only up to age 65. Additional creditable service granted
under the Special Plan shall be combined with credited
service under the Pension Plan (but only if credited service
under the Pension Plans does not exceed 44 years), to result
in total credited service and additional creditable service
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under the Pension Plans and the Special Plan which shall not
exceed a maximum of 44 years. The position, compensation,
and other conditions upon which a non-contract employee's
participation herein is based shall be determined from time
to time in the absolute discretion of the Compensation
Committee. Effective December 31, 1993, there shall be no
new admissions into the class of persons who may receive
additional benefits pursuant to this subsection 4(d);
provided, however, the Chief Executive Officer may, by
express agreement, offer the additional benefits pursuant to
this subsection 4(d) to selected individuals.
(e) Anything to the contrary notwithstanding, any Participant in
the Special Plan receiving additional creditable service
under this Subsection 4, and whose responsibilities and
compensation are reduced, may, in the discretion of the
Compensation Committee or the Chief Executive Officer, cease
to receive any further additional creditable service
hereunder.
(f) A Participant's accrual of additional creditable service as
provided herein shall not be subject to termination except
as provided in subparagraph (e) above, or upon retirement or
termination of employment.
(g) Prior to January 1, 1992, a Participant who receives
benefits under a Salary Continuance and Long-Term Disability
Plan of the Company shall continue to accrue additional
creditable service hereunder subject to the same rules that
are applicable in such instances under the Pension Plans.
(h) It is the intent of this Section V that, for the purpose of
the Special Plan, the additional creditable service provided
hereunder when added to credited service under the Pension
Plans or otherwise, shall not in any case exceed 44 years in
the aggregate.
(i) To those Participants who become qualified as provided in
(a), (b) or (c) above, a special retirement allowance shall
be payable under the Special Plan to such Participants or
their surviving spouses equal to any amount due under the
Pension Plans which is not paid in full under the Pension
Plans.
5. The Company shall accrue and pay under this Special Plan as an
additional supplemental benefit any annual pension benefits that would have
been payable under the Pension Plans as in effect on September 1, 1974, or
thereafter, if Sections 415(b) and 401(a)(17) of the Internal Revenue Code,
and any other relevant provisions of law that impose limitations or have the
effect of limiting the accrual of benefits under the Pension Plans, had not
been enacted into law, unless such additional supplemental benefit is provided
by the Company through another plan created for that purpose.
6. The Company shall accrue reserves to the credit of the Special
Plan in advance to cover the costs of any additional creditable service,
pensions or benefits granted under Subsections 3 and 4 hereof, and such
pensions or benefits or special retirement allowances reflecting such credit
shall be paid under the Special Plan. Where additional creditable service is
granted, upon retirement in accordance with the provisions of the Pension
Plans, the Participant shall receive a special retirement allowance equal to
the difference between the retirement allowance computed under the Pension
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Plans and the amount which would be payable if the additional credit granted
hereunder had been included with the actual credited service in the
computation of the retirement allowance payable under the Pension Plans.
Where a pension or other benefit is granted to a Participant, such pension or
benefit shall be payable as a special retirement allowance from the Special
Plan.
7. In the event any Participant in the Special Plan receives as a
participant in the Pension Plans, a pension or retirement benefit payable in a
form other than a straight life annuity in accordance with the provisions of
the Pension Plans, his special retirement allowance under this Section V shall
also be payable in a similar form.
8. The Company shall accrue and pay under this Special Plan any
annual pension benefit which otherwise would have been payable under the
Pension Plans but for the Participant's deferral of compensation under the
Company's Deferred Compensation Program, Supplementary Savings and Incentive
Award Deferral Plan, or under any other deferred compensation arrangement
approved by the Compensation Committee.
Section VI - FUNDING METHOD
1. The benefits provided under the Special Plan shall be financed by
the Company and no contribution shall be required of Participants. The
Company shall accrue reserves on its books as follows:
(a) As of March 1, 1983, an amount shall be calculated with
respect to the Former Plans which shall be the actuarially
determined present value as of that date of all special
retirement allowances payable under the Former Plans and,
under a schedule approved by the Company's independent
accountant, the reserve previously accrued will be adjusted.
(b) As of March 1, 1983, the actuarially determined present
value as of that date of all special retirement allowances
payable under Section V, Subsection 4(b) shall be calculated
and, under a schedule approved by the Company's independent
accountant, a reserve equal to that amount established.
(c) During the year 1983, there shall be accrued the amount
required to allow regular interest on the adjusted reserve
provided in (a) and (b) above. Each year thereafter there
shall be accrued the amount required to allow regular
interest on the average reserves standing to the credit of
the Special Plan during the preceding year.
(d) Each year the reserves shall be adjusted to reflect the
payment of special retirement allowances during the year.
(e) Such additional reserves shall be accrued from time to time
as may be required in accordance with Section V, Subsections
3 and 4, on account of grants thereunder made after March 1,
1983.
(f) There shall be accrued from time to time, as required,
additional reserves on account of benefits pursuant to
Section V, Subsection 6.
(g) At such times as the Plan Administrator shall recommend, the
reserves accrued to the credit of the Special Plan shall be
adjusted on the basis of actuarial valuations to reflect the
experience under the Special Plan, or amendments thereto, or
changes in the rate of regular interest, or any other
actuarial assumptions.
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2. The Company shall provide all funds required for the
administration expenses of the Special Plan.
3. The Company will establish the CSX Corporation Nonqualified Plan
Trust or such other trust which will substantially conform to the terms of the
Internal Revenue Service model trust as described in Revenue Procedure 92-64,
1992-2C.B.422 ("Trust"). Except as provided in Section XI, the Company is not
obligated to make any contribution to the Trust.
4. The Special Plan is intended to be unfunded for tax purposes for
purposes of Title I of ERISA. Participants in the Special Plan have the
status of general unsecured creditors of the Company, and the Special Plan
constitutes a mere promise by the participating employer to make benefit
payments in the future.
Section VII - ADMINISTRATION OF SPECIAL PLAN
The Plan Administrator under ERISA for the Pension Plans of CSX
Corporation or of any affiliated corporation which shall adopt this Special
Plan and whose officers participate in the Special Plan shall be responsible
for the general administration of the Special Plan and for carrying out its
provisions.
Section VIII - MODIFICATION, AMENDMENT AND TERMINATION
The Special Plan represents a contractual obligation heretofore
entered into by the Company in consideration of services rendered and to be
rendered by Participants covered under the Special Plan. The Company reserves
the right at any time and from time to time to modify or amend in whole or in
part any or all of the provisions of this Special Plan, or to terminate this
Special Plan; provided, however, prior to December 1, 1991, no modification or
amendment shall be made to this Special Plan unless there have been
modifications or amendments to correlative provisions of the Pension Plans,
and any modifications or amendments to this Special Plan shall coincide with
the modifications or amendments of the Pension Plans (except nonconforming
revisions to administrative provisions shall be permitted); and provided,
further, that this Special Plan shall only be terminated if the Pension Plans
are terminated, subject to the following limitations:
1. In the event any modification or amendment adversely affects the
benefits to be received by a retired Participant and the designated surviving
spouse of a retired Participant, they shall be entitled to receive for life
the special retirement allowance they would have received had the Special Plan
not been modified or amended, and each designated surviving spouse of a
retired Participant shall become entitled to receive for life the special
retirement allowance that such designated surviving spouse would have received
had the Special Plan not been modified or amended.
2. In the event of the termination of this Special Plan, each retired
Participant and designated surviving spouse of a retired Participant shall be
entitled to receive for life the special retirement allowance they would have
received had the Special Plan not been terminated, and each designated
surviving spouse of a retired Participant shall become entitled to receive for
life the special retirement allowance that such designated surviving spouse
would have received had the Special Plan not been terminated.
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3. In the event any modification or amendment adversely affects the
benefit which an active Participant would have been entitled to receive if
such amendment or modification had not been made, such active Participant
shall, so long as he remains in the active service of the Company, only
continue to accrue creditable service and benefits prospectively in accordance
with the provisions of the Special Plan as so modified or amended, unless the
Participant shall earlier cease to receive any additional creditable service
as provided in Section V, Subsection 4(e).
4. In the event this Special Plan is terminated, each active
Participant, in consideration of his continued service to the Company until
the date of his termination from active employment by retirement or otherwise,
shall be entitled to retain his accrued additional service, or pension or
benefits as granted hereunder to such Participant, in accordance with the
provisions of this Special Plan in effect on the day prior to the date of
termination, unless the Participant shall earlier cease to receive any
additional creditable service as provided in Section V, Subsection 4(e).
5. In lieu of paying special retirement allowances in accordance with
the foregoing provisions, the Plan Administrator, at its election, may direct
the discharge of all obligations to retired Participants, designated spouses
of retired Participants, and active Participants by cash payments of
equivalent actuarial value or through the provision of immediate or deferred
annuities or other periodic payments of equivalent actuarial value, as it
shall in its sole discretion determine.
Section IX - NON-ALIENATION OF BENEFITS
No benefit under the Special Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or
charge, and any attempt to do so shall be void, except as specifically
provided in the Special Plan, nor shall any benefit be in any manner liable
for or subject to the debt, contracts, liabilities, engagements, or torts of
the person entitled to such benefit; and in the event that the Plan
Administrator shall find that any active or retired Participant or designated
spouse or spouse under the Special Plan has become bankrupt or that any
attempt has been made to anticipate, alienate, sell, transfer, assign, pledge,
encumber, or charge any of his benefits under the Special Plan, except as
specifically provided in the Special Plan, then such benefits shall cease to
accrue and shall be determined, and in that event, the Plan Administrator
shall hold or apply the same to or for the benefit of such active or retired
Participant or spouse, in such manner as the Plan Administrator may deem
proper.
Section X - MISCELLANEOUS PROVISIONS
1. Anything in the Special Plan to the contrary notwithstanding, if
the Plan Administrator finds that any retired Participant or spouse is engaged
in acts detrimental to the Company or is engaged or employed in any occupation
which is in competition with the Company, and if after due notice such retired
Participant or spouse continues to be so engaged or employed, the Plan
Administrator shall suspend the special retirement allowance of such person,
which suspension shall continue until removed by notice from the Plan
Administrator; provided, however, that if such suspension has continued for
one year, the Plan Administrator shall forthwith cancel such Participant's or
spouse's special retirement allowance. Furthermore, if the Plan Administrator
finds that any Participant has been discharged for having performed acts
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detrimental to the Company, then regardless of any other provision in the
Special Plan, no benefit shall be payable to or on account of any such
Participant's coverage under this Special Plan.
2. The establishment of the Special Plan shall not be construed as
conferring any legal rights upon any employee for a continuation of
employment, nor shall it interfere with the rights of the Company to discharge
any employee and to treat him without regard to the effect which such
treatment might have upon him as a Participant in the Special Plan.
Section XI - CHANGE OF CONTROL
1. If a Change of Control has occurred, the Compensation Committee
shall cause the Company to contribute to the Trust within 7 days of such
Change of Control, a lump sum contribution equal to the greater of:
(a) the aggregate value of the amount each Participant would be
eligible to receive under subsection (2), below; or
(b) the present value of accumulated Plan benefits based on the
assumptions the Company's independent actuary deems
reasonable for this purpose, as of a Valuation Date, as
defined in subsection (6), below, coinciding with or next
preceding the date of Change of Control, to the extent such
amounts are not already in the Trust; provided, however,
amounts relating to those Participants who receive a lump
sum payment under subsection (2), below, shall be excluded
from the aggregate value determination under (a) or (b).
The aggregate value of the amount of the lump sum to be
contributed to the Trust pursuant to this Section XI shall
be determined by the Company's independent actuaries.
Thereafter, the Company's independent actuaries shall
annually determine as of a Valuation Date for each
Participant not receiving a lump sum payment pursuant to
subsection (2), below, the greater of:
(i) the amount such Participant would have received under
subsection (2) had such Participant not made the election
under subsection (3), below, if applicable; and
(ii) the present value of accumulated benefits based on
assumptions the actuary deems reasonable for this purpose.
To the extent that the value of the assets held in the Trust
relating to this Special Plan does not equal the amount
described in the preceding sentence, at the time of the
valuation, the Company shall make a lump sum contribution to
the Trust equal to the difference.
2. In the event a Change of Control has occurred, each Participant
not making an election under subsection (3), below, shall receive, and the
Compensation Committee shall cause the Company to pay within 7 days of such
Change of Control, a lump sum payment equal to the actuarial present value of
the aggregate special retirement allowance each Participant (or any
beneficiary of a Participant) has accrued as of the Valuation Date preceding
the date of such Change of Control pursuant to the terms of Section V of this
Special Plan. If a Participant's benefit has not commenced as of such date,
such lump sum shall be determined assuming that:
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(a) The Participant's benefit would commence at the earliest
date he would qualify for early or normal retirement under
the Plan, were his employment with the Company to continue,
but in no event earlier than the later of age 55 or the date
of such Change on Control.
(b) The Participant would qualify for an early (or normal)
retirement benefit as of the date determined in (a).
(c) If married, the Participant would receive his benefit under
the 50% Joint and Survivor form of payment with the spouse
as beneficiary; if not married, the benefit would be payable
in the form of a single life annuity.
The actuarial present value shall be determined on the basis of the
UP 1984 Mortality Table, set back one year, and a discount rate equal to the
interest rate promulgated by the Pension Benefit Guaranty Corporation for use
in determining the sufficiency of single employer defined benefit pension
plans terminating on the date of such Change in Control.
3. Each Participant may elect in a time and manner determined by the
Compensation Committee but, for current Participants, in no event later than
September 1, 1995, or the occurrence of a Change of Control, if earlier, to
have amounts and benefits determined and payable under the terms of this
Special Plan as if a Change of Control had not occurred.
4. Notwithstanding anything in this Special Plan to the contrary,
each Participant who has made an election under subsection (3), above, may
elect within 90 days following a Change of Control, in a time and manner
determined by the Compensation Committee, to receive a lump sum payment
calculated under the provisions of subsection (2), above, determined as of the
Valuation Date next preceding such payment, except that such amount shall be
reduced by 5% and such reduction shall be irrevocably forfeited to the Company
by the Participant. Furthermore, as a result of such election, the
Participant shall no longer be eligible to participate or otherwise benefit
under the Special Plan. Payments under this subsection (4) shall be made not
later than 7 days following receipt by the Company of the Participant's
election. The Compensation Committee shall, no later than 7 days after a
Change of Control has occurred, cause written notification to be given to each
Participant eligible to make an election under this subsection (4), that a
Change of Control has occurred and informing such Participant of the
availability of the election.
5. As used in this Section XI the term "Change of Control" shall
mean:
(a) Stock Acquisition. The acquisition, by any individual,
entity or group [within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")] (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then
outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock"), or (ii) the combined
voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a),
the following acquisitions shall not constitute a Change of
Control: (i) any acquisition directly from the Company;
(ii) any acquisition by the Company; (iii) any acquisition
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by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by
the Company; or (iv) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (c) of this Section XI(5); or
(b) Board Composition. Individuals who, as of the date hereof,
constitute the Board of Directors (the "Incumbent Board")
cease for any reason to constitute at least a majority of
the Board of Directors; provided, however, that any
individual becoming a director subsequent to the date hereof
whose election or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with
respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board of Directors;
or
(c) Business Combination. Approval by the shareholders of the
Company of a reorganization, merger, consolidation or sale
or other disposition of all or substantially all of the
assets of the Company or its principal subsidiary that is
not subject, as a matter of law or contract, to approval by
the Interstate Commerce Commission or any successor agency
or regulatory body having jurisdiction over such
transactions (the "Agency") (a "Business Combination"), in
each case, unless, following such Business Combination:
(i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own,
directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common
stock and the combined voting power of the then
outstanding voting securities entitled to vote
generally in the election of directors, as the case
may be, of the corporation resulting from such
Business Combination (including, without limitation, a
corporation which as a result of such transaction owns
the Company or its principal subsidiary or all or
substantially all of the assets of the Company or its
principal subsidiary either directly or through one or
more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to
such Business Combination of the Outstanding Company
Common Stock and Outstanding Company Voting
Securities, as the case may be;
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(ii) no Person (excluding any corporation resulting from
such Business Combination or any employee benefit plan
(or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common
stock of the corporation resulting from such Business
Combination or the combined voting power of the then
outstanding voting securities of such corporation
except to the extent that such ownership existed prior
to the Business Combination; and
(iii) at least a majority of the members of the board of
directors resulting from such Business Combination
were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action
of the Board of Directors, providing for such Business
Combination; or
(d) Regulated Business Combination. Approval by the
shareholders of the Company of a Business Combination that
is subject, as a matter of law or contract, to approval by
the Agency (a "Regulated Business Combination") unless such
Business Combination complies with clauses (i), (ii) and
(iii) of subsection (c) of this Section XI(5); or
(e) Liquidation or Dissolution. Approval by the shareholders of
the Company of a complete liquidation or dissolution of the
Company or its principal subsidiary.
6. For purposes of this Section XI, the term "Valuation Date" means
the last day of each calendar year and such other dates as the Plan
Administrator deems necessary or appropriate to value the Participants'
benefits under this Special Plan.
Section XII - CONSTRUCTION
The Special Plan and the rights and obligations of the parties
hereunder shall be construed in accordance with the laws of the Commonwealth
of Virginia.
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Exhibit 10.15
Supplemental Retirement Benefit Plan
of CSX Corporation and Affiliated Corporations
As Amended and Restated Effective January 1, 1995
Section I - INTRODUCTION
1. The purpose of this plan, hereinafter called the "Supplemental
Plan", is to provide benefit payments to individuals who are participants (or
members, as the case may be) in funded, tax-qualified retirement benefit plans
maintained by CSX Corporation (the "Company") and certain of its affiliated
corporations (whose participation in the Supplemental Plan as a participating
employer is approved by the Board of Directors of any such affiliated
corporation and by the Compensation Committee of the Board of Directors of CSX
Corporation ("Compensation Committee")) and whose benefits would otherwise be
reduced by Section 415 of the Internal Revenue Code ("Code") of 1986, as
amended ("Code") which imposes limitations on benefits ("Code Limitations").
2. Notwithstanding the limitations on benefits imposed by Code
Limitations, supplemental benefits shall be provided under this Supplemental
Plan equal to the reduction of benefits which shall occur as a result of the
application of limitations included in a defined contribution plan or in a
defined benefit plan in accordance with Code Limitations.
3. This Supplemental Plan preserves and continues in effect all
provisions for accruals based upon limitations of benefits imposed by Code
Limitations, heretofore credited to Participants under Section V, paragraph
(subsection) 5, of the Special Retirement Plan of CSX Corporation and
Affiliated Corporations ("Special Plan"), the Supplemental Benefits Plan of
Sea-Land Corporation and Participating Companies, and the American Commercial
Lines Benefit Restoration Plan ("Predecessor Plans").
Section II - DEFINITIONS
1. Supplemental Benefit means the benefit described in Section IV of
this Supplemental Plan.
2. The Supplemental Plan shall, where appropriate, refer to and have
meanings consistent with all of the relevant terms of the CSX Pension Plan and
any other regularly maintained funded, tax-qualified pension plan of any other
corporation affiliated with the Company whose participation in the
Supplemental Plan as a participating employer is approved by the Board of
Directors of any such affiliated corporation and by the Compensation
Committee. Such existing regularly maintained pension plans which provided
benefits for employees of the Company or its affiliates prior to the Effective
Date of this Supplemental Plan document, or those which may be established
hereafter, as amended from time to time, shall be referred to herein as the
"Pension Plan."
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PAGE 2
3. Regardless of formal differences which may exist between the
Supplemental Plan and the Pension Plan or the Predecessor Plans in the use of
terminology, the definitions and principles which are set forth in the Pension
Plan or the Predecessor Plans with respect to compensation, average
compensation, credited service and similar terms shall be construed and
applied hereunder in a manner consistent with the purposes of this
Supplemental Plan and the Pension Plan or the Predecessor Plans. In any
instance in which the male gender is used herein, it shall also include
persons of the female gender in appropriate circumstances.
Section III - MEMBERSHIP
1. Every person who was a Participant in the Predecessor Plans for
the purpose of accruals of supplemental benefits heretofore notwithstanding
limitations of benefits imposed by Code Limitations, shall be a Participant in
this Supplemental Plan on and after the Effective Date.
2. Each employee who is a Participant in a Pension Plan on or after
the Effective Date shall participate in this Supplemental Plan to the extent
of the benefits provided herein.
3. A Participant's participation in this Supplemental Plan shall
terminate coincident with the termination of such individual's participation
in one of the Pension Plans; provided, however, in the event that the
Participant shall be reassigned or transferred into the employ of the Company
or any of its affiliates which also is a participating employer in this
Supplemental Plan, the Participant's participation shall be continued to the
extent of the benefits provided herein.
Section IV - SUPPLEMENTAL BENEFITS
1. All of the provisions, conditions and requirements set forth in
the Pension Plan with respect to the granting and payment of retirement
benefits thereunder shall be equally applicable to the payment of supplemental
benefits hereunder to Participants in the Supplemental Plan and to the payment
thereof from the employer's general assets. Whenever an individual
Participant's rights under the Supplemental Plan are to be determined,
appropriate reference shall be made to the particular Pension Plan in which
such person is also a participant. Notwithstanding the preceding sentence, if
a supplemental benefit under this Supplemental Plan shall be paid to a
surviving spouse or other surviving designated beneficiary in conformance with
the provisions of the Pension Plans, the final installment payment hereunder
shall be made to the estate of the surviving spouse or other surviving
designated beneficiary.
2. Each Participant shall receive a Supplemental Benefit under this
Supplemental Plan in an amount equal to the difference, if any, between (i)
the Participant's monthly retirement income benefit under the provisions of
the particular Pension Plan in which such person is also a participant
calculated before the application of any Code Limitations and (ii) the
Participant's monthly retirement income benefit determined after application
of the Code Limitations.
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PAGE 3
3. Notwithstanding any other provision of this Supplemental Plan to
the contrary, a Supplemental Benefit shall not be determined or paid which
would duplicate a payment of benefit provided to a Participant under the
Pension Plan, the Predecessor Plans or any other unfunded or funded retirement
plan of the Company or any of its affiliated corporations.
4. A Supplemental Benefit payable under the provisions of this
Supplemental Plan shall be paid in such forms and at such times as shall be
consistent with the payment of the Participant's retirement income benefit
under the particular Pension Plan in which such person is also a participant.
Notwithstanding the foregoing, the Company may delay payment of a Supplemental
Benefit under the Supplemental Plan to any Participant who is determined to be
among the top five most highly paid executives for the year that the
Supplemental Benefit payment would otherwise be paid; provided, however, if a
Participant's payment is delayed, that will not decrease the total
Supplemental Benefit to which he is entitled.
Section V - FUNDING METHOD
1. The Supplemental Benefit shall be paid exclusively from the
general assets of the employers participating in the Supplemental Plan or from
the CSX Corporation Nonqualified Plan Trust or such other trust which will
substantially conform to the terms of the model trust as described in Revenue
Procedure 92-64, 1992-2 C.B.422, established by CSX Corporation to secure the
obligations created herein ("Trust"). No Participant or other person shall
have any rights or claims against the assets of the employers or against the
Trust which are superior to or different from the right or claim of a general,
unsecured creditor of any participating employer.
2. The Supplemental Plan is intended to be unfunded for tax purposes
and for purposes of Title I of ERISA, and constitutes a mere promise by the
participating employer to make benefit payments in the future.
3. The employers participating in the Supplemental Plan shall provide
all funds required for the administrative expenses of the Supplemental Plan.
Section VI - ADMINISTRATION OF PLAN
1. The Plan Administrator of the CSX Pension Plan shall be the "Plan
Administrator" of this Supplemental Plan and shall be responsible for the
general administration of the Supplemental Plan and for carrying out its
provisions. Administration of this Supplemental Plan shall be carried out
consistent with the terms and conditions of the Pension Plan and the
Supplemental Plan and the decision of the Plan Administrator shall be binding
and conclusive on Participants, their beneficiaries, heirs and assigns.
Section VII - CERTAIN RIGHTS AND OBLIGATIONS
1. The Compensation Committee may terminate the Supplemental Plan
only upon the occurrence of conditions which require the termination of one or
more of the Pension Plans. The Board of Directors of CSX Corporation may
terminate an affiliated corporation from participation as a participating
employer for any reason at any time. The Board of Directors of any affiliated
corporation may terminate that corporation's participation as a participating
employer for any reason at any time.
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PAGE 4
2. The participating employers agree in the event that the
Supplemental Plan is terminated:
(a) Each retired Participant, surviving spouse of a retired
Participant or surviving designated beneficiary of a retired
Participant shall be entitled to receive for life the
Supplemental Benefit they would have received had the
Supplemental Plan not been terminated, and each surviving
spouse or surviving designated beneficiary of a deceased
Participant shall become entitled to receive for life the
Supplemental Benefit that such surviving spouse or surviving
designated beneficiary would have received had the
Supplemental Plan not been terminated; and
(b) Each active Participant shall be entitled to receive for
life the Supplemental Benefit he or she would have received
had the Supplemental Plan not been terminated, calculated on
the basis of the Supplemental Benefit which had accrued at
the time of termination; provided, however, that the
Participant shall become entitled to such Supplemental
Benefit only at the time and in accordance with the
provisions of the Supplemental Plan had it continued in
effect.
(c) In lieu of paying a Supplemental Benefit in accordance with
the foregoing provisions, the Plan Administrator, at its
election, may direct the discharge of all obligations to
retired Participants, surviving spouses or surviving
designated beneficiaries of deceased Participants, and
active Participants by cash payment of equivalent actuarial
value or through the provision of immediate or deferred
annuities or such other periodic payments of equivalent
actuarial value, as it shall in its sole discretion
determine.
3. Anything in the Supplemental Plan to the contrary notwithstanding,
if the Plan Administrator finds that any Participant, retired Participant or
spouse is engaged in acts detrimental to the Company or any of its affiliated
corporations, and if after due notice such Participant, the retired
Participant or spouse continues to be so engaged or employed, the Plan
Administrator shall suspend the Supplemental Benefit of such person, which
suspension shall continue until removed by notice from the Plan Administrator;
provided, however, that if such suspension has continued for one year, the
Plan Administrator shall forthwith cancel such Participant's or spouse's
Supplemental Benefit. Furthermore, if the Plan Administrator finds that any
Participant had been discharged for having performed acts detrimental to the
Company or any of its affiliated corporations, then regardless of any other
provision in the Pension Plan or the Supplemental Plan, no benefit shall be
payable to or on account of any such Participant's coverage under this
Supplemental Plan.
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PAGE 5
4. The establishment of the Supplemental Plan shall not be construed
as conferring any legal rights upon any employee for a continuation of
employment, nor shall it interfere with the rights of an employing corporation
to discharge any employee and to treat him without regard to the effect which
such treatment might have upon him as a Participant in the Supplemental Plan.
Section VIII - NON-ALIENATION OF BENEFITS
To the extent permitted by applicable law, no benefit under the
Supplemental Plan shall be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, or charge, and any attempt so
to do shall be void, except as specifically provided in the Supplemental Plan,
nor shall any benefit be in any manner liable for or subject to the debts,
contracts, liabilities, engagements, or torts of the person entitled to such
benefits; and in the event that the Plan Administrator shall find that any
active or retired Participant, surviving spouse or surviving designated
beneficiary under the Supplemental Plan has become bankrupt or that any
attempt has been made to anticipate, alienate, sell, transfer, assign, pledge,
encumber, or charge any of his benefits under the Supplemental Plan, expect as
specifically provided in the Supplemental Plan, then such benefits shall
cease, and in that event, the Plan Administrator shall hold or apply the same
to or for the benefit of such active or retired Participant, surviving spouse
or surviving designated beneficiary, in such manner as the Plan Administrator
may deem proper.
Section IX - AMENDMENTS
The Supplemental Plan represents a contractual obligation entered
into by a participating employer in consideration of services rendered and to
be rendered by Participants covered under the Supplemental Plan, and
1. Any Participant in this Supplemental Plan who remains in the
active service of a participating employer shall not be deprived of his or her
participation or benefit which shall accrue under the Supplemental Plan except
as provided hereunder.
2. No modification or amendment may be made which shall deprive any
Participant, the surviving spouse of a Participant or the surviving designated
beneficiary of a Participant, without the consent of such Participant,
surviving spouse of a Participant or the surviving designated beneficiary of a
Participant, of any Supplemental Benefit under the Supplemental Plan to which
he or she would otherwise be entitled by reason of the Supplemental Benefit
standing to his or her credit to the date of such modification or amendment,
and in the event of any modification or amendment which adversely affects such
Supplemental Benefit, the amount of all reserves required to be accrued on the
books of a participating employer shall thereupon be determined and accrued,
if the same has not already been done, and such Supplemental Benefit shall
become and remain a fixed liability of the participating employers for the
payment of such benefits accrued to the date of such modification or
amendments.
3. Subject to the foregoing, the Compensation Committee reserves the
right at any time and from time to time to modify or amend in whole or in part
any or all of the provisions of this Plan.
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PAGE 6
Section X - CHANGE OF CONTROL
1. If a Change of Control has occurred, the Compensation Committee
shall cause the Company to contribute to the Trust within 7 days of such
Change of Control, a lump sum contribution equal to the greater of:
(a) the aggregate value of the amount each Participant would be
eligible to receive, under Subsection (2), below; or
(b) the present value of accumulated Plan benefits based on the
assumptions the Company's independent actuary deems
reasonable for this purpose, as of the Valuation Date, as
defined in subsection (6), below, coinciding with or next
preceding the date of Change of Control, to the extent such
amounts are not already in the Trust; provided, however,
amounts relating to those Participants who receive a lump
sum payment under subsection (2), below, shall be excluded
from the aggregate value determination under (a) or (b).
The aggregate value of the amount of the lump sum to be
contributed to the Trust pursuant to this Section X shall be
determined by the Company's independent actuaries.
Thereafter, the Company's independent actuaries shall
annually determine as of a Valuation Date for each
Participant not receiving a lump sum payment pursuant to
subsection (2), below, the greater of:
(i) the amount such Participant would have received under
subsection (2) had such Participant not made the election
under subsection (3), below, if applicable; and
(ii) the present value of accumulated benefits based on
8assumptions the actuary deems reasonable for this purpose.
To the extent that the value of the assets held in the Trust
relating to this Supplemental Plan does not equal the amount
described in the preceding sentence, at the time of the
valuation, the Company shall make a lump sum contribution to
the Trust equal to the difference.
2. In the event a Change of Control has occurred, each Participant
not making an election under subsection (3), below, shall receive, and the
Compensation Committee shall cause the Company to pay within 7 days of such
Change of Control, a lump sum payment equal to the actuarial present value of
the aggregate supplemental benefit each Participant (or any beneficiary of a
Participant) has accrued as of the Valuation Date preceding the date of such
Change of Control. If a Participant's benefit has not commenced as of such
date, such lump sum shall be determined assuming that:
(a) The Participant's benefit would commence at the earliest
date he would qualify for early or normal retirement under
the Plan, were his employment with the Company to continue,
but in no event earlier than the later of age 55 or the date
of such Change of Control.
(b) The Participant would qualify for an early (or normal)
retirement benefit as of the date determined in (a).
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PAGE 7
(c) If married, the Participant would receive his benefit under
the 50% Joint and Survivor form of payment with the spouse
as beneficiary; if not married, the benefit would be payable
in the form of a single life annuity.
The actuarial present value shall be determined on the basis of the
UP 1984 Mortality Table, set back one year, and a discount rate equal to the
interest rate promulgated by the Pension Benefit Guaranty Corporation for use
in determining the sufficiency of single employer defined benefit pension
plans terminating on the date of such Change in Control.
3. Each Participant may elect in a time and manner determined by the
Compensation Committee but, for current Participants, in no event later than
September 1, 1995, or the occurrence of a Change of Control, if earlier, to
have amounts and benefits determined and payable under the terms of this
Supplemental Plan as if a Change of Control had not occurred.
4. Notwithstanding anything in this Supplemental Plan to the
contrary, each Participant who has made an election under subsection (3),
above, may elect within 90 days following a Change of Control, in a time and
manner determined by the Compensation Committee, to receive a lump sum payment
calculated under the provisions of subsection (2), above, determined as of the
Valuation Date next preceding such payment, except that such amount shall be
reduced by 5% and such reduction shall be irrevocably forfeited to the Company
by the Participant. Furthermore, as a result of such election, the
Participant shall no longer be eligible to participate or otherwise benefit
under the Supplemental Plan. Payments under this subsection (4) shall be made
not later than 7 days following receipt by the Company of the Participant's
election. The Compensation Committee shall, no later than 7 days after a
Change of Control has occurred, cause written notification to be given to each
Participant eligible to make an election under this subsection (4), that a
Change of Control has occurred and informing such Participant of the
availability of the election.
5. As used in this Section X, a "Change of Control" shall mean:
(a) Stock Acquisition. The acquisition by any individual,
entity or group [within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")] (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then
outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock"), or (ii) the combined
voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a),
the following acquisitions shall not constitute a Change of
Control: (i) any acquisition directly from the Company;
(ii) any acquisition by the Company; (iii) any acquisition
by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by
the Company; or (iv) any acquisition by any corporation
- 7 -
PAGE 8
pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (c) of this Section X(5); or
(b) Board Composition. Individuals who, as of the date hereof,
constitute the Board of Directors (the "Incumbent Board")
cease for any reason to constitute at least a majority of
the Board of Directors; provided, however, that any
individual becoming a director subsequent to the date hereof
whose election or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individuals whose initial assumption of office occurs as a
result of an actual or threatened election contest with
respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board of Directors;
or
(c) Business Combination. Approval by the shareholders of the
Company of a reorganization, merger or consolidation, or
sale or other disposition of all or substantially all of the
assets of the Company or its principal subsidiary that is
not subject, as a matter of law or contract, to approval by
the Interstate Commerce Commission or any successor agency
or regulatory body having jurisdiction over such
transactions (the "Agency") (a "Business Combination"), in
each case, unless, following such Business Combination:
(i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock
and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting
from such Business Combination (including, without
limitation, a corporation which as a result of such
transaction owns the Company or its principal subsidiary or
all or substantially all of the assets of the Company or its
principal subsidiary either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of
the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be;
(ii) no Person (excluding any corporation resulting from such
Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting
from such Business Combination) beneficially owns, directly
or indirectly 20% or more of, respectively, the then
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PAGE 9
outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of
such corporation except to the extent that such ownership
existed prior to the Business Combination; and
(iii) at least a majority of the members of the board of directors
resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board of Directors
providing for such Business Combination; or
(d) Regulated Business Combination. Approval by the
shareholders of the Company of a Business Combination that
is subject, as a matter of law or contract, to approval by
the Agency (a "Regulated Business Combination") unless such
Business Combination complies with clauses (i), (ii) and
(iii) of subsection (c) of this Section X(5); or (e)
Liquidation or Dissolution. Approval by the shareholders of
the Company of a complete liquidation or dissolution of the
Company or its principal subsidiary.
6. For purposes of this Section X, the term "Valuation Date" means
the last day of each calendar year and such other dates as the Plan
Administrator deems necessary or appropriate to value the Participants'
benefits under this Special Plan.
Section XI - CONSTRUCTION
The Supplemental Plan and the rights and obligations of the parties
hereunder shall be construed in accordance with the laws of the Commonwealth
of Virginia.
Section XII - EFFECTIVE DATE
The Effective Date of this Supplemental Benefit Plan shall be January
1, 1989.
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Exhibit 10.16
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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Exhibit 21
CSX CORPORATION
SUBSIDIARIES OF THE REGISTRANT
As of December 30, 1994, registrant was the beneficial owner of 100 percent of
the Common Stock of CSX Transportation Inc. (a Virginia corporation).
As of December 30, 1994, registrant was the beneficial owner of 100 percent of
the Common Stock of Sea-Land Service Inc. (a Delaware corporation).
As of December 30, 1994, registrant was the beneficial owner of 100 percent of
the Common Stock of CSX Intermodal Inc. (a Delaware corporation).
As of December 30, 1994, registrant was the beneficial owner of 100 percent of
the Common Stock of American Commercial Lines Inc. (a Delaware corporation).
As of December 30, 1994, the other subsidiaries included in registrant's
consolidated financial statements, and all other subsidiaries considered in
the aggregate as a single subsidiary, did not constitute a significant
subsidiary.
- 1 -
PAGE 1
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the following Registration
Statements of our report dated January 27, 1995, with respect to the
consolidated financial statements of CSX Corporation and subsidiaries included
in its Annual Report (Form 10-K) for the year ended December 30, 1994:
Registration Statement
Number Description
- ---------------------- -------------------------
33-2083 Post-Effective Amendment No. 1
to Form S-3
33-2084 Post-Effective Amendment No. 1
to Form S-3
33-16230 Form S-8
33-25537 Form S-8
33-29136 Form S-8
33-37449 Form S-8
33-41236 Form S-3
33-41498 Form S-8
33-41499 Form S-8
33-41735 Form S-8
33-41736 Form S-8
33-48841 Form S-3
33-49767 Form S-8
33-57029 Form S-8
/s/ ERNST & YOUNG LLP
---------------------
Ernst & Young LLP
Richmond, Virginia
February 27, 1995
- 1 -
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EPS are based on the weighted average of common shares outstanding for the
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0
0
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