<PAGE>
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 27, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------- ---------------
Commission file number 1-8022
------
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 ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. (X)
On January 24, 1997, the aggregate market value of the Registrant's voting
stock held by nonaffiliates (using the New York Stock Exchange closing price)
was $10.3 billion.
On January 24, 1997, there were 216,898,817 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The Proxy Statement for the annual meeting of security holders on April 17,
1997), is incorporated by reference for Part III.
<PAGE>
Item Captions and Index--Form 10-K Annual Report
Item No. Page
Part I
1. Business..............................................1, 8-18
2. Properties.......................................8-18, 24, 30
3. Legal Proceedings.......................................38-40
4. Submission of Matters to a Vote of Security Holders.......N/A
4a. Executive Officers of the Registrant.......................43
Part II
5. Market for the Registrant's Common Equity
and Related Stockholder Matters.........................45,46
6. Selected Financial Data.....................................1
7. Management's Discussion and Analysis of
Financial Condition and Results of Operations............8-18
8. Financial Statements and Supplementary Data.......See Item 14
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure....................N/A
Part III
10. Directors and Executive Officers of the Registrant........(a)
11. Executive Compensation....................................(a)
12. Security Ownership of Certain Beneficial Owners
and Management............................................(a)
13. Certain Relationships and Related Transactions............(a)
Part IV
14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K
a. Consolidated Statement of Earnings for the
Fiscal Years Ended Dec. 27, 1996, Dec. 29, 1995,
and Dec. 30, 1994 ......................................19
Consolidated Statement of Cash Flows for the
Fiscal Years Ended Dec. 27, 1996, Dec. 29, 1995,
and Dec. 30, 1994.......................................20
Consolidated Statement of Financial Position at
Dec. 27, 1996, and Dec. 29, 1995........................21
Consolidated Statement of Changes in Shareholders'
Equity for the Fiscal Years Ended Dec. 27, 1996,
Dec. 29, 1995, and Dec. 30, 1994........................22
Notes to Consolidated Financial Statements for the
Fiscal Years Ended Dec. 27, 1996, Dec. 29, 1995,
and Dec. 30, 1994 ...................................23-42
Report of Independent Auditors..........................42
b. Reports on Form 8-K
A report was filed on Oct. 17, 1996, reporting Item 5,
Other Events -- Agreement and Plan of Merger with
Conrail Inc., and Item 7, Financial Information and
Exhibits -- Documents related to Agreement and
Plan of Merger with Conrail Inc. filed as exhibits.
(a) Part III will be incorporated by reference from the registrant's 1997
Proxy Statement pursuant to instructions G(1) and G(3) of the General
Instructions to Form 10-K.
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
(Millions of Dollars, Except Per Share Amounts) 1996 1995(b) 1994(c) 1993(d) 1992
---------- --------- ---------- --------- ---------
<S> <C>
Summary of Operations(a)
Operating Revenue $10,536 $10,304 $ 9,409 $ 8,766 $ 8,549
Operating Expense 9,014 8,921 8,227 7,792 7,636
Productivity/Restructuring Charge(e) -- 257 -- 93 699
-------- ------- --------- -------- --------
Total Operating Expense 9,014 9,178 8,227 7,885 8,335
-------- ------- --------- -------- --------
Operating Income $ 1,522 $ 1,126 $ 1,182 $ 881 $ 214
-------- ------- --------- -------- --------
Net Earnings $ 855 $ 618 $ 652 $ 359 $ 20
======== ======= ======== ======== ========
Per Common Share(f)
Net Earnings $ 4.00 $ 2.94 $ 3.12 $ 1.73 $ .10
Cash Dividends $ 1.04 $ .92 $ .88 $ .79 $ .76
Market Price--High $ 53.13 $ 46.13 $ 46.19 $ 44.07 $ 36.82
--Low $ 42.25 $ 34.63 $ 31.57 $ 33.19 $ 27.25
======== ======= ======== ======== ========
Percentage Change from Prior Year(a)
Operating Revenue 2.3 % 9.5% 7.3% 2.5 % 1.6 %
Operating Expense (1.8)% 11.6% 4.3% (5.4)% (.7)%
Operating Expense, Excluding
Productivity/Restructuring Charge 1.0 % 8.4% 5.6% 2.0 % -- %
Cash Dividends Per Common Share 13.0 % 4.5% 11.4% 3.9 % 6.3 %
========== ======== ========= ========= =========
Summary of Financial Position
Cash, Cash Equivalents and
Short-Term Investments $ 682 $ 660 $ 535 $ 499 $ 530
Working Capital (Deficit) $ (685) $(1,056) $ (840) $ (704) $ (859)
Total Assets $ 16,965 $14,282 $ 13,724 $ 13,420 $ 13,049
Long-Term Debt $ 4,331 $ 2,222 $ 2,618 $ 3,133 $ 3,245
Shareholders' Equity $ 4,995 $ 4,242 $ 3,731 $ 3,180 $ 2,975
Book Value Per Common Share(f) $ 23.04 $ 20.15 $ 17.81 $ 15.27 $ 14.37
======== ======= ======== ======== ========
Employee Count(g)
Rail 28,559 29,537 29,729 30,461 30,916
Other 18,755 18,428 17,974 17,847 16,681
-------- ------- -------- --------- --------
Total 47,314 47,965 47,703 48,308 47,597
======== ======= ======== ========= ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
(a) In 1996, the company changed its earnings presentation to
exclude non-transportation activities from operating revenue and
expense. These activities, principally real estate and resort operations,
are now included in other income in the consolidated statement of earnings.
Prior-year amounts have been restated to conform to the 1996 presentation.
(b) In 1995, the company recognized a net investment gain of $77 million,
$51 million after tax, 24 cents per share, on the issuance of an equity
interest in a Sea-Land terminal and related operations in Asia and the
write-down of various investments.
(c) 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, 20
cents per share.
(d) 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, 26 cents per share. Of this amount, $51
million, 24 cents per share, related to applying the newly enacted
statutory income tax rate to deferred tax balances as of Jan. 1, 1993.
(e) In 1995, the company recorded a $257 million pretax charge to recognize
the estimated costs of initiatives to revise, restructure and
consolidate specific operations and administrative functions at
its rail and container-shipping units. The restructuring charge
reduced net earnings by $160 million, 76 cents per share. 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, 30 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, $2.19
per share.
(f) Amounts per common share for 1992 through 1995 have been restated to
reflect the 2-for-1 common stock split distributed to shareholders in
December 1995.
(g) Employee counts based on annual averages.
1
<PAGE>
Chairman's Message
1996 was a momentous year for CSX.
We achieved record financial performance.
We also took ground-breaking steps to
enhance the company's competitiveness,
satisfy customer requirements, develop
long-term growth prospects, and provide
superior shareholder value.
[Photo]
Before discussing the company's financial results and the performance of our
respective transportation units, let me review the proposed CSX/Conrail merger
- - the event that made 1996 the most important year since the company's creation
in 1980 from the merger of the Chessie and Seaboard rail systems. To better
understand the rationale for our strategic merger agreement, it's important to
consider the impact consolidation has had on the rail industry in recent years.
Over the last two decades, deregulation and consolidation of the nation's
railroads into strong, efficient networks has nurtured a rail renaissance that
has greatly benefited customers, shareholders and the broader public interest in
efficient transportation. More recently, that process accelerated, with the 1995
merger of the Burlington Northern and Santa Fe railroads, and last year's merger
of the Union Pacific and Southern Pacific systems. Thus, the number of major
rail carriers serving the Western half of the country went from four to two in
less than a year.
These mergers unavoidably set in motion efforts to consolidate the three
major Eastern rail systems - CSX, Norfolk Southern and Conrail - into two
networks. Naturally, each of the Eastern carriers was concerned it might be left
without a partner should transcontinental mergers occur. Well aware that Norfolk
Southern had attempted to acquire Conrail in its entirety on several occasions
in recent years and was determined to do so again, CSX moved decisively to
protect its vital interests. On Oct. 14, 1996, we entered into a strategic
merger agreement with Conrail that called for CSX to acquire all outstanding
shares of Conrail stock in a combined cash-stock transaction.
We knew that Norfolk Southern would fight the merger. We also recognized that
concessions would have to be made because of Conrail's unique market position in
the Northeast, a situation created by the government out of necessity more than
20 years ago. Nevertheless, the logic for joining forces with Conrail was
compelling.
Conrail and CSX have complementary rail networks and business mixes. CSX
routes, located mainly in the Southeast and Midwest, complement Conrail's
routes in the Midwest and Northeast.
2
<PAGE>
Chairman's Message
Consolidating the two rail systems would create a more efficient rail network,
enabling the combined company to improve service quality, reduce costs and
attract new business. Expanded rail operations also would benefit other
CSX business units that exchange traffic with the railroad, just as the broad
scope of CSX's multimodal transportation services would strengthen our
expanded rail operations and open up new markets to rail customers.
As expected, Norfolk Southern vigorously contested the merger agreement and
initiated a hostile, competing bid for Conrail. Initial efforts to reach a
compromise with Norfolk Southern were unsuccessful. By mid-January 1997, we were
at a virtual stalemate - with CSX having acquired just under 20% of Conrail
stock and Norfolk Southern purchasing just under 10% of the company. Further
complicating matters, Conrail shareholders had rejected a proposal necessary to
put the proposed merger with CSX into effect.
Search for Resolution
Then, in late-January, Surface Transportation Board (STB) Chairwoman Linda
Morgan made public statements noting the regulatory board's preference for a
negotiated and balanced settlement of competitive issues in rail mergers. On
Jan. 31, CSX, Conrail and Norfolk Southern began discussions aimed at preserving
and enhancing competition and best serving the public interest. Norfolk Southern
then sent CSX and Conrail a proposal that would in essence equally divide
Conrail between Norfolk Southern and CSX.
On March 7, CSX and Conrail amended their merger agreement to increase the
price CSX will pay for each remaining share of Conrail to $115, payable in cash
to Conrail shareholders by June 2, 1997. The amended agreement also allowed
CSX to enter into negotiations with Norfolk Southern to craft a compromise.
We expect those discussions will lead to an agreement between CSX and
Norfolk Southern for a joint purchase of Conrail and a roughly even division
of its routes and assets. This would enable CSX and Norfolk Southern to
file a joint application before the STB, with the ultimate goal being two
exceptional rail systems in the East.
This likely outcome is one we have long sought and is consistent with our
own position since the mid-1980's when we successfully opposed the
acquisition of Conrail by Norfolk Southern. It will result in a stronger,
more comprehensive and competitive CSX rail system that will produce tremendous
advantages for all of CSX's constituencies.
Our customers will benefit from faster, more reliable service, more direct
single-line routings, an improved cost structure, and better equipment supply
and utilization. Our employees will benefit from greater employment and
advancement opportunities that flow from a stronger, growing enterprise. Our
shareholders will benefit from ownership of an expanded international
transportation company with a scale and efficiency to compete more effectively
at home and abroad. The public and the communities we serve also will benefit
from lower transportation costs, reduced reliance on truck-clogged local and
interstate highways, and an overall improvement in the safety, efficiency and
reliability of the U.S. transportation system. In addition, restoring
competitive balance to the Northeast will help to ensure that the regulatory
reforms that we all worked so dilligently to accomplish in the 1980s will be
preserved.
As this process unfolds, I want to assure you that we remain committed to two
absolute objectives. First, we will make every effort to protect your investment
and generate superior returns over the long term. Second, we will continue to
aggressively pursue our long-term strategy to maximize the performance of each
of our business units, in terms of operating income, return on invested capital
and free cash flow.
Record 1996 Results
All of CSX's major transportation units turned in strong performances in
1996, resulting in record consolidated results for operating revenue, operating
income and net earnings. CSX earned $855 million, or $4.00 per share, in
1996, compared with $618 million, or $2.94 per share, last year. Excluding
a restructuring charge and one-time gain recorded in 1995, earnings per share
rose nearly 16% in 1996 from 1995's pro forma figure of $3.46. Uncertainty
surrounding the CSX/Conrail merger agreement and the competing bid from Norfolk
Southern took its toll on the performance of CSX stock in 1996. After reaching a
new high of 53 1/8 in May, CSX stock closed the year at 42 1/4, down 7.4% from
last year's close. While disappointed by the stock's performance in 1996, we
are already seeing improvement as the Conrail situation is becoming clearer.
We expect CSX stock, over time, will more accurately reflect the company's
enhanced core earning power. We remain committed to our previously stated goal
of doubling the market value of CSX stock over the five-year period that began
in 1995.
Pro Forma Net Earnings
(Millions of Dollars, Except Per Share Amounts*)
1996 1995 1994
----------- ------------- ------------
Per Per Per
Description (All After Tax) Amt. Share Amt. Share Amt. Share
Net Earnings
as Reported $855 $4.00 $618 $2.94 $652 $3.12
Net Gains From
Investment
Transactions -- -- (51) (.24) (42) (.20)
Restructuring Charge -- -- 160 .76 -- --
---- ----- ---- ----- ---- -----
Pro Forma
Net Earnings $855 $4.00 $727 $3.46 $610 $2.92
==== ===== ==== ===== ==== =====
* Per-share amounts for 1995 and 1994 reflect stock split in December 1995.
3
<PAGE>
Chairman's Message
Rail Results
Our rail unit, CSX Transportation Inc. (CSXT), turned in another excellent
year, achieving record financial results and reducing its operating ratio by
nearly a full point.
CSXT stepped up the pace of its campaign to boost service reliability by
intensifying its efforts in three key areas: terminal improvements,
industrial switching and network operations. Progress in all three areas is
critical to the railroad's commitment to achieve operational
excellence, which in turn will allow CSXT to aggressively pursue growth
opportunities. The service reliability process produced remarkable results in
1996. For example, the terminal improvement plan initially called for upgrading
the performance of one terminal in 1996, but the results were so impressive that
the process was rolled out to 30 terminals by year-end.
Shippers are recognizing the railroad's service reliability improvements, and
prospects for profitable growth are brighter today than ever. Without in any way
diminishing its intensive focus on reducing costs, CSXT will continue to improve
its operational performance and service levels in 1997, while seeking to
maximize revenue growth and profitability. These efforts put CSXT on track
for another record year in 1997.
I am pleased to report that CSXT and the other major U.S. freight railroads
successfully negotiated five-year labor agreements in 1996. The landmark labor
contracts were reached without work stoppage or government intervention, a
departure from recent national bargaining rounds and an encouraging sign of
improved labor-management relations throughout the rail industry.
Safety continues to be a top priority at the railroad. In 1996, CSXT
continued to reduce its train accident rate, and the latest figures from the
Federal Railroad Administration place CSXT as the safest Class I railroad in the
nation in terms of train accidents. Despite dramatic improvements in safety over
the past seven years, the railroad recognizes that much work remains to be done
to further reduce accidents and employee injuries.
Container-shipping Results
Our container-shipping unit, Sea-Land Service Inc. (Sea-Land), produced
record results despite rate weakness in key trade lanes and higher fuel costs.
Sea-Land capitalized on strong demand for containerized cargo and increased its
market share in every major trade lane while holding the line on expenses. As a
result, the company increased operating income 34% to $318 million, excluding
the 1995 restructuring charge.
During 1996, Sea-Land and Maersk Lines made considerable progress
implementing their global alliance, which will be fully operational by the end
of this year. The alliance optimizes the resources of two of the world's largest
and most respected shipping lines, allowing both companies to reduce costs and
improve service across their global network.
After years of debate, the U.S. Congress passed legislation that bolsters the
U.S. merchant marine. The Maritime Security Act establishes a program to provide
participating carriers operating assistance to partially offset the higher costs
of operating under the U.S. flag. Sea-Land has enrolled 15 vessels in the
program and will receive $2.1 million a year for each participating vessel.
4
<PAGE>
Chairman's Message
The outlook for the container-shipping industry is improving, with further
consolidation and government deregulation providing encouraging signs that the
business is responding more directly to rational market forces. We believe the
over-capacity that eroded the industry's profitability during 1996 will peak
in 1997, and we see the business fundamentals improving thereafter.
We are encouraged by Sea-Land's 1996 results, because they demonstrate the
company's ability to increase earnings substantially, even in a difficult rate
environment. Sea-Land came through this tough year with flying colors, showing
the company stands at the pinnacle of its industry, as the low-cost carrier and
leader in innovative technology and customer service. We are eager to show the
kind of break-out results Sea-Land can produce in a more favorable environment.
Other Transportation Results
American Commercial Lines Inc. (ACL), CSX's barge unit, turned in another
strong performance in 1996. The unit produced record operating income, up 6%
from last year's excellent performance, reflecting the increased size of ACL's
barge fleet and robust demand for export grain and other bulk commodities.
Higher demand for steel products and expanded operations in South America also
contributed to the strong performance.
CSX Intermodal Inc. (CSXI) responded aggressively to stiff truck competition
that has exerted downward pressure on intermodal rates since 1995. The company
consolidated its headquarters in Jacksonville, Fla., and reduced administrative
and overhead costs significantly. CSXI also redesigned its service network,
concentrating its efforts and resources in markets that produce the best returns
and growth opportunities, while reducing or eliminating service in lower-margin
freight lanes. These steps enabled CSXI to increase operating income 17% over
last year's results and helped position the company to achieve significant
service improvements and higher profits in 1997.
Customized Transportation Inc. (CTI), our fast-growing contract logistics
management company, continued to diversify its customer base, both in the United
States and abroad. Building upon its already strong reputation as a leading
provider of supply-chain management for the automotive industry, CTI expanded
its presence in non-automotive markets, including the electronics, retail and
chemical industries. Operating revenues rose 32% and operating income rose 36%,
both to record levels.
Looking to the Future
In 1997, each of CSX's transportation units expects to build upon its solid
1996 performance, and the result should be another record year for the
corporation. We expect a continuation of the favorable economic environment we
experienced last year--with modest economic growth and robust demand for
transportation services.
As global commerce continues to evolve, we believe the increasingly complex
distribution requirements of our customers will create significant
opportunities for CSX. Our transportation units, while continuing to focus on
improving the fundamentals of their business, are working together to identify
segments of the transportation market where our collective capabilities can
produce exceptional value for our customers and attractive returns for our
shareholders. The results we achieved in 1996 by integrating services for
certain global customers are encouraging. We will expand this integrated account
approach in 1997, positioning CSX to meet the widest possible range of
customers' global transportation service needs.
We are confident about the outlook for our business. We remain focused on
controlling costs, maximizing returns on invested capital and generating
strong free cash flow. At the same time, we will pursue creative strategies to
enhance CSX's ability to meet customer requirements and achieve profitable
growth. As always, our efforts are guided by our overriding commitment
to produce superior shareholder value over the long term.
Sincerely,
/s/ John W. Snow
John W. Snow
Chairman and Chief Executive Officer
5
<PAGE>
Public Policy Statement
The need for business and
government to become more
efficient as we prepare for
the 21st century was a
key factor in public policy
debates in 1996. While we
expect these considerations
to remain in 1997, we also
anticipate renewed challenges
to decisions favorable to
business and economic
opportunity.
In 1996 there were two events of major significance to the transportation
enterprises of CSX. The Congress and the Administration agreed on a bipartisan
basis to create a public-private partnership that will maintain and strengthen a
fleet of merchant ships operating under U.S. flag with U.S. crews. To maintain
strategic sealift capability, ships enrolled in the Maritime Security
Program will receive an annual payment that will enable them to compete with
foreign-flagged ships. Sea-Land has 15 ships signed up for the program and will
receive annual payments of $31.5 million for making its highly efficient
maritime logistics network available to the U.S. government in times of
emergency.
The Surface Transportation Board, the successor to the Interstate Commerce
Commission, handed down a landmark decision in the Union Pacific-Southern
Pacific merger case, whose principles made it possible for CSX and Conrail to
enter into agreement on a strategic, friendly merger. The Board's decision
affirmed the goals of the Staggers Rail Act of 1980, which sought to free the
railroads from the stranglehold of regulation and to operate as other businesses
do. This matter is discussed more extensively in the Chairman's message.
The relation of government to the maritime industry will be a central
transportation issue in the 105th Congress. In 1995, an important step toward
less regulation of ocean shipping was taken when the Congress directed the Coast
Guard to reduce regulations that today place American carriers at a competitive
disadvantage to foreign carriers. With this new authority, the Coast Guard will
be able to conform U.S.-vessel standards to the same international standards by
which the vessels of other nations are evaluated.
CSX and Sea-Land have supported a staged reduction in the economic
regulation of U.S. container-shipping lines and pressed for reform of the
Shipping Act of 1984. While Congress is expected to take up these needed
changes again, they have aroused strong opposition from some ports, foreign
shipping lines and labor unions. At the same time, advocates for foreign
carriers may use the goal of "deregulation" to further their efforts to gain
access to America's domestic waterborne commerce by seeking repeal of the
Jones Act. U.S.-flag carriers, which serve U.S. ports under the terms of the
Jones Act, should not be forced to compete with foreign carriers that enjoy
similar protection in their countries and do not have to comply with the
basic wage, tax, safety and health laws of the United States.
A new attempt will be made in this Congress to enact legislation to carry
out the provisions of an international agreement ending ship subsidies by
foreign governments to their national shipyards. An important element of the
agreement is the ending of the 50% duty U.S. ships must pay on repairs done in
overseas shipyards. We support efforts to make U.S. shipyards competitive in the
world marketplace and to eliminate unfair burdens on U.S. ships.
While the central rail issue for CSX in 1997 will obviously be resolving
issues surrounding Conrail, other pressing issues will affect the entire rail
industry. Mergers may well be used as an excuse by shipper groups and others to
seek new regulation of railroads and to roll back the regulatory freedoms that
have brought about the renaissance of railroads. This effort may include seeking
to require railroads to allow other carriers to operate over their lines. To
allow railroads access to the rail lines of their competitors would require a
whole new set of regulatory actions to establish the terms and conditions and
the rates for this use.
The safety of railroads, already tightly regulated by the federal
government, may again become an issue when the Congress takes up the
reauthorization of the Rail Safety Act. A series of highly publicized train
accidents at the beginning of 1996 cast a shadow over the industry's
excellent record of improving safety. CSX continues to believe that requiring
railroads to meet performance standards for safety brings more positive results
than the current command and control system. The most serious safety problem for
the rail industry and the public remains rail-highway grade crossings. CSX will
join with the rest of the industry in seeking the cooperation of federal, state
and local governments to solve this persistent problem.
As an international transportation company, CSX will continue to support
decisions by the Congress and the administration that will foster greater
economic growth and greater freedom from regulation in the domestic and the
world marketplace. We remain committed to fair and open trade, to a balanced
federal budget, to a more equitable and simpler tax system and to the goal of a
smaller, more efficient government.
6
<PAGE>
Financial Policy
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 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 objectives.
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 - CSX business units are expected to earn returns on capital in excess
of the CSX cost of capital. 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
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 for lower tax rates.
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 trade financial
instruments actively for profit or loss.
Dividends - The cash dividend is reviewed regularly in the context of
inflation and competitive dividend yields. The dividend may be increased
periodically if cash flow projections and reinvestment opportunities show
the higher payout level will best benefit shareholders.
The company cannot always guarantee that its goals will be met, despite its
best efforts. For example, revenue and operating expenses are affected by the
state of the economy both in general and in the industries it serves, and
changes in regulatory policy can drastically change the cost and feasibility of
certain company operations. The impact of factors such as these, along with the
uncertainty inherently involved in predicting future events, should be carefully
borne in mind when reading company projections or other forward-looking
statements in this report.
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 internal controls designed to provide
reasonable assurance that assets are safeguarded and that transactions are
properly authorized by management and recorded in conformity with generally
accepted accounting principles. Controls include accounting tests, written
policies and procedures and a code of corporate conduct routinely communicated
to all employees. An internal audit staff monitors compliance with and the
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 42.
7
<PAGE>
Analysis of Operations
CSX Corporation is a leader
in providing multimodal freight
transportation and contract logistics services
around the world. The company's focus,
advanced at each of its business units,
is on providing customers with efficient,
competitive transportation and related trade
services and delivering superior value
to CSX shareholders.
Average Return on Equity
(Percent)
[GRAPH]
'92 '93 '94 '95 '96
0.7 11.7 18.6 15.5 18.9
*Excluding after-tax productivity/restructuring
charges and the impact of the 1993 tax-rate
increase, return on equity in 1992, 1993 and 1995
would have been 13.3%, 14.0% and 19.1%, respectively.
CSX Transportation Inc.
CSXT is a major eastern railroad, providing rail freight transportation and
distribution services over 18,504 route miles of track in 20 states in the
East, Midwest and South; and in Ontario, Canada. CSXT accounted for 47%
of CSX's operating revenue, 74% of operating income and 63% of invested
capital in 1996.
Sea-Land Service Inc.
Sea-Land is a worldwide leader in container-shipping transportation and
logistics services. The carrier operates a fleet of 99 container ships and
approximately 208,000 containers in U.S. and foreign trade and serves 120 ports.
In addition, Sea-Land operates 28 marine terminal facilities across its global
network. Sea-Land accounted for 38% of CSX's operating revenue, 21% of operating
income and 19% of invested capital in 1996.
American Commercial Lines Inc.
ACL is the nation's leader in barge transportation, operating 137 towboats
and more than 3,700 barges on U.S. and South American waterways. ACL accounted
for 6% of CSX's operating revenue, 7% of operating income and 4% of invested
capital in 1996.
CSX Intermodal Inc.
CSXI provides transcontinental intermodal transportation services and operates a
network of dedicated intermodal facilities across North America. CSXI
contributed 6% of CSX's operating revenue and 2% of operating income in 1996.
Customized Transportation Inc.
CTI is a provider of contract logistics, distribution, warehousing, assembly and
just-in-time delivery services. In 1996, CTI provided 3% of CSX's operating
revenue and 1% of operating income.
Non-transportation
Resort holdings include the Mobil Five-Star and AAA Five-Diamond hotel, The
Greenbrier in White Sulphur Springs, W.Va., and the Grand Teton Lodge
Company in Moran, Wyo. CSX Real Property Inc. is responsible for sales, leasing
and development of CSX-owned properties. CSX holds a majority interest in Yukon
Pacific Corporation, which is promoting construction of the Trans-Alaska Gas
System to transport Alaska's North Slope natural gas to Valdez for export to
Asian markets.
8
<PAGE>
Analysis of Operations
Average Return on Assets
(Percent)
[GRAPH]
'92 '93 '94 '95 '96
0.2 2.7 4.8 4.4 5.9
*Excluding after-tax productivity/restructuring
charges and the impact of the 1993 tax-rate
increase, return on assets in 1992, 1993 and 1995
would have been 3.6%, 3.6% and 5.6%, respectively.
Cash Provided by Operations
(Millions of Dollars)
[GRAPH]
'92 '93 '94 '95 '96
$939 $962 $1,326 $1,567 $1,440
Fixed Charge Coverage
[GRAPH]
'92 '93 '94 '95 '96
1.0 2.3 3.1 3.2 4.0
*Excluding after-tax productivity/restructuring charges,
fixed charge coverage in 1992, 1993 and 1995 would have
been 2.5x, 2.5x and 3.7x, respectively.
CSX had excellent results in 1996.
The company posted another record year
while overcoming several challenges,
including: severe winter conditions, which
affected first-quarter rail operations;
rate pressures in several of Sea-Land's
major trade lanes; and higher-than-
expected fuel prices experienced by all
units. Modest revenue gains, combined
with continued cost-control efforts,
contributed to a 10% increase in operating
income, excluding the 1995 restructuring
charge. The railroad controlled costs while
benefiting from strength in several
commodities and selective price increases.
Sea-Land achieved record results by
offsetting rate pressures with cost-cutting
measures and market-share gains.
Discussion of Earnings
Net earnings in 1996 totaled $855 million, $4.00 per share, compared with
$618 million, $2.94 per share, in 1995, and $652 million, $3.12 per share, in
1994.
The 1995 net earnings included the effect of a second-quarter restructuring
charge to recognize CSXT's write-down of obsolete telecommunications assets and
related employee-separation costs. The charge also included the cost of
reflagging five Sea-Land vessels and the consolidation of its corporate and
divisional headquarters in Charlotte, N.C. The 1995 results included a gain from
the issuance of an equity interest in a Sea-Land terminal and related operations
in Asia. Earnings for 1994 included the accelerated recognition of the remaining
gain on a 1988 sale of track in south Florida.
Consolidated operating revenue increased $232 million, 2% above 1995. CSXT
contributed $90 million of the additional revenue, largely resulting from
strong performances by its coal and auto business units. Sea-Land generated $43
million of the revenue increase, due to higher volumes in major trade lanes.
ACL produced $68 million in additional revenue, primarily due to continued
strong demand for export grain and the acquisition of Conti-Carriers &
Terminals Inc.
In 1995, operating revenue increased $895 million, or 10%, over 1994's
results. Sea-Land contributed $516 million of the additional revenue, resulting
from higher volumes in its major trade lanes and moderate rate increases. CSXT
generated $194 million of the revenue increase, due to improved pricing and
merchandise traffic mix. ACL produced $105 million in additional revenue,
capitalizing on strong international demand for U.S. grain.
All 1995 and 1994 per-share amounts in the text have been adjusted to reflect
the 2-for-1 stock split that occured in the fourth quarter of 1995.
9
<PAGE>
Analysis of Operations
In 1996, all CSX units continued their efforts to control costs through
performance improvement initiatives. Consolidated operating expense in 1996
decreased $164 million from 1995, which included the $257 million pretax
restructuring charge incurred by CSXT and Sea-Land. Operating expense in 1995
was $951 million higher than the 1994 level, primarily due to the restructuring
charge and higher volumes.
Consolidated operating income for 1996 was $1.5 billion, compared with $1.1
billion in 1995 and $1.2 billion in 1994. Absent the restructuring charge, 1995
operating income would have been $1.4 billion.
Other income totaled $43 million, compared with $118 million in 1995 and
$105 million in 1994. In 1995, other income included a $77 million pretax
net investment gain, primarily from the issuance of an equity interest in a
Sea-Land terminal facility and related operations in Asia. In 1994, other
income included the $69 million accelerated pretax gain on the sale of track in
south Florida.
Discussion of Cash Flows
Cash provided by operating activities totaled $1.4 billion in 1996, compared
with $1.6 billion in 1995 and $1.3 billion in 1994. Cash provided by operating
activities was adequate to fund net property investments and cash dividends in
1996, 1995 and 1994. In addition, CSX funded scheduled long-term debt payments
of $486 million, $343 million and $447 million in 1996, 1995 and 1994,
respectively.
Payments related to the 1991/92 productivity charge covering labor
agreements providing for two-member train crews and payments provided for in the
1995 restructuring charge affected cash provided by operations. The company has
paid $940 million related to these productivity and restructuring charges to
date, $88 million of which was in 1996.
CSX continues to emphasize asset utilization and capital productivity.
Capital investments were $1.2 billion in 1996 and 1995, and $875 million in
1994.
<TABLE>
<CAPTION>
Operating Results
(Millions of Dollars)
1996
----------------------------------------------------------------
<S> <C>
Container Inter- Contract Elim./
Total Rail Shipping modal Barge Logistics Other
----------------------------------------------------------------
Operating Revenue $10,536 $4,909 $4,051 $674 $622 $316 $ (36)
----------------------------------------------------------------
Operating Expense
Labor and Fringe Benefits 3,161 1,881 900 63 138 124 55
Materials, Supplies and Other(a) 2,530 867 1,126 92 242 49 154
Building and Equipment Rent 1,143 365 630 73 35 40 --
Inland Transportation 995 -- 750 395 -- 64 (214)
Depreciation 611 394 135 15 36 9 22
Fuel 574 275 192 1 59 13 34
Restructuring Charge -- -- -- -- -- -- --
----------------------------------------------------------------
Total Expense 9,014 3,782 3,733 639 510 299 51
----------------------------------------------------------------
Operating Income (Loss) $ 1,522 $1,127 $ 318 $ 35 $112 $ 17 $(87)
----------------------------------------------------------------
Pro Forma Operating Income (Loss)(b) $ 1,522 $1,127 $ 318 $ 35 $112 $ 17 $(87)
----------------------------------------------------------------
Operating Ratio(b) 77.0% 92.1% 94.8% 82.0% 94.5%
----------------------------------------------------------------
Average Employment 28,559 8,982 1,090 3,418 2,120
----------------------------------------------------------------
Property Additions $ 764 $ 307 $ 24 $ 91 $ 15
----------------------------------------------------------------
1995
-------------------------------------------------------------
Container Inter- Contract Elim./
Total Rail Shipping modal(c) Barge Logistics Other
-------------------------------------------------------------
Operating Revenue $10,304 $4,819 $4,008 $707 $554 $240 $(24)
-------------------------------------------------------------
Operating Expense
Labor and Fringe Benefits 3,133 1,847 934 85 122 92 53
Materials, Supplies and Other(a) 2,622 941 1,166 94 232 46 143
Building and Equipment Rent 1,134 373 636 72 20 33 --
Inland Transportation 970 -- 730 411 -- 41 (212)
Depreciation 588 367 139 14 32 6 30
Fuel 474 227 165 1 42 10 29
Restructuring Charge 257 196 61 -- -- -- --
-------------------------------------------------------------
Total Expense 9,178 3,951 3,831 677 448 228 43
-------------------------------------------------------------
Operating Income (Loss) $ 1,126 $ 868 $ 177 $ 30 $ 106 $ 12 $ (67)
-------------------------------------------------------------
Pro Forma Operating Income (Loss)(b) $ 1,383 $ 1,064 $ 238 $ 30 $ 106 $ 12 $ (67)
-------------------------------------------------------------
Operating Ratio(b) 77.9% 94.1% 95.8% 80.9% 94.7%
-------------------------------------------------------------
Average Employment 29,537 9,168 1,434 2,914 1,853
-------------------------------------------------------------
Property Additions $ 765 $ 269 $ 57 $ 33 $ 8
-------------------------------------------------------------
1994
----------------------------------------------------------------
Container Inter- Contract Elim./
Total Rail Shipping modal(c) Barge Logistics Other
----------------------------------------------------------------
Operating Revenue $9,409 $4,625 $3,492 $684 $449 $182 $ (23)
----------------------------------------------------------------
Operating Expense
Labor and Fringe Benefits 3,005 1,828 859 89 104 71 54
Materials, Supplies and Other(a) 2,311 918 919 83 191 44 156
Building and Equipment Rent 1,087 374 600 67 19 27 --
Inland Transportation 839 -- 676 372 -- 14 (223)
Depreciation 564 352 132 11 32 6 31
Fuel 421 224 119 1 40 10 27
Restructuring Charge -- -- -- -- -- -- --
----------------------------------------------------------------
Total Expense 8,227 3,696 3,305 623 386 172 45
----------------------------------------------------------------
Operating Income (Loss) $1,182 $ 929 $ 187 $ 61 $ 63 $ 10 $ (68)
----------------------------------------------------------------
Pro Forma Operating Income (Loss)(b) $1,182 $ 929 $ 187 $ 61 $ 63 $ 10 $ (68)
----------------------------------------------------------------
Operating Ratio(b) 79.9% 94.6% 91.1% 86.0% 94.5%
----------------------------------------------------------------
Average Employment 29,729 9,437 1,626 2,644 1,475
----------------------------------------------------------------
Property Additions $ 641 $ 133 $ 50 $ 12 $ 7
----------------------------------------------------------------
</TABLE>
(a) A portion of intercompany interest income received from the CSX
parent company has been classified as a reduction of Materials, Supplies &
Other by the container-shipping unit. This amount was $64 million, $65
million and $64 million in 1996, 1995 and 1994, respectively, and the
corresponding charge is included in Eliminations/Other.
(b) Excludes restructuring charge.
(c) Intermodal results for 1995 and 1994 were restated to conform
to the 1996 presentation. Beginning in 1996, the container-shipping
unit assumed primary responsibility for direct purchase of transportation
from non-affiliated rail carriers. Prior to 1996, the intermodal unit
purchased these services for the container-shipping unit.
10
<PAGE>
Analysis of Operations
Cash dividends per common share were $1.04, compared with 92 cents in 1995
and 88 cents in 1994.
In 1997, the company expects its operations to continue generating
significant cash flow to fund working capital requirements, capital
expenditures, debt repayment and dividends. Cash flow for 1997 also will be
affected by the proposed Conrail Acquisition (see right column).
Discussion of Financial Position
Cash, cash equivalents and short-term investments totaled $682 million at
Dec. 27, 1996, vs. $660 million at Dec. 29, 1995.
The working capital deficit decreased $371 million during 1996, primarily
due to lower current maturities of long-term debt. The company had a year-end
working capital deficit of $685 million in 1996, compared with $1.06 billion in
1995.
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.
Long-term debt increased $2.1 billion from 1995 to $4.3 billion at Dec. 27,
1996, primarily due to borrowings to finance the company's acquisition of
approximately 19.9% of Conrail's outstanding shares in November. (See "Conrail
Acquisition," right column.)
The 1996 ratio of debt-to-total capitalization increased to 46% from 34% in
1995.
Conrail Acquisition
CSX is negotiating the final details of a transaction to combine key
components of the current Conrail Inc. operations into the CSX system.
Discussions with Norfolk Southern Corporation are expected to lead to a roughly
equal division of the Conrail system between the two remaining major rail
carriers in the East. The broad increase in geographic scope the acquisition
will bring will be a significant advantage to CSX, creating the ability to
enhance revenues through improved service and efficiency following operational
integration.
The final terms of the acquisition will remain subject to a number of
conditions and approvals, including approval by the Surface Transportation Board
(STB), which has the authority to modify contract terms and impose additional
conditions. As a result, the assumptions made in this analysis of operations
concerning key items such as the definitive form of the transaction, its likely
timing, and the future operations of the combined system all involve forecasts
and estimates about future events. These forecasts and estimates are subject not
only to the usual uncertainty involved in predicting the effects of future
economic conditions, but also the outcome of the current negotiations and
extensive regulatory proceedings.
11
<PAGE>
Prior to the current negotiations, CSX and Conrail had agreed on Oct. 14,
1996, to a strategic merger in which a good deal of Conrail assets would have
been retained in the combined CSX/Conrail entity, although CSX believed
concessions would have to be made. This combination, not unexpectedly, was
challenged by customers and others, including Norfolk Southern, which announced
a conditional all-cash offer for Conrail shares at a price that eventually rose
to $115 per share.
As a first step toward completion of that proposed merger, CSX consummated a
tender offer for 19.9% of the outstanding Conrail stock on Nov. 20, 1996, for
$110 in cash per share, or about $2 billion.
On Dec. 6, 1996, CSX commenced a second offer, also at $110 cash per share,
which would have brought its total holdings to 40% of the outstanding Conrail
shares. This second offer was conditioned on a vote by Conrail shareholders to
allow Conrail to opt out of a Pennsylvania statute that would otherwise preclude
CSX from holding 20% or more of its outstanding shares.
On Jan. 17, 1997, Conrail's shareholders voted against the opt-out,
preventing CSX from acquiring the additional shares. This event, along with
public comments on competition and the preference for a negotiated settlement of
competitive issues from the Chairwoman of the STB, prompted CSX, Conrail and
Norfolk Southern to commence discussions aimed at resolving those issues. Those
discussions led to the current proposed structure, in which all of the
outstanding shares of Conrail will be acquired for cash at $115 per share, with
roughly half of the system to be shared with Norfolk Southern. This will result
in both CSX and Norfolk Southern having vital access to markets in the
Northeast, and will achieve the goal of maintaining a balanced competitive rail
market in the East.
The exercise of actual control over Conrail or any of its rail operations by
either CSX or Norfolk Southern is not legally permitted until an order is issued
by the STB. In the meantime, the shares of Conrail will be held in a voting
trust.
CSX arranged a five-year, $4.8 billion bank credit facility in November 1996
to finance the Conrail transaction and meet general working capital needs. This
credit facility is expected to be modified once the final form of the Conrail
acquisition is determined. A significant portion of the related commercial paper
and other borrowings used to purchase Conrail shares in 1996 is intended to be
replaced with long-term debt once the acquisition is completed.
At the end of 1996, CSX held 19.9% of Conrail stock purchased through the
first tender offer. Under applicable accounting rules, this minority interest
was accounted for under the cost method as an investment in an unconsolidated
subsidiary. The method of accounting applicable to CSX holdings of Conrail stock
for future periods may differ, based on the timing and final structure of the
related transactions.
Management believes that approval and completion of the combination will
result in growth of the rail revenue base through expansion of single-line
service, and the company's ability to compete more effectively on certain routes
along which large quantities of goods are now transported by truck. Single-line
service is preferred by shippers over joint-line service because of lower
transaction costs, reduced delays, less damage from interchange operations and
single-carrier accountability.
The addition of Conrail lines to the CSX network also will improve
operational efficiency through better asset utilization. Optimization of train
sizes, increased length of haul, shorter routes to many destinations and reduced
empty movements all could be expected to drive cost reductions for the combined
rail networks.
Because of the time needed to obtain needed regulatory and other approvals,
the company does not expect integrated operations of the two companies to have
an effect on fiscal periods before 1998. The primary impact of the proposed
transaction prior to the integration of operations is likely to be the after-tax
effect on both earnings and cash flows of interest on debt used to acquire and
hold Conrail shares, partially offset by Conrail dividends. The average interest
rate on this debt in 1996 was approximately 6%. The degree of negative impact
during 1997 will depend on the specific timing of related transactions.
12
<PAGE>
ANALYSIS OF OPERATIONS
Other Matters
Environmental management is an important part of CSX's business planning.
CSX focuses on finding the most efficient, cost-effective solutions for
dealing responsibly with waste materials generated from past and present
business operations. The solutions range from simple recycling to sophisticated
remediation.
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 and local statutes.
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 that may pay some
or all of such costs associated with site investigation and cleanup or
from whom such costs may be recovered.
The wide range of costs of possible remediation alternatives, changing
cleanup technology, the length of time over which these matters develop and
evolving governmental standards make it impossible to estimate precisely the
company's potential liability for the costs associated with the assessment and
remediation of contaminated sites.
The rail unit has identified and maintains reserves for approximately 270
sites at which the company is or may be liable for remediation costs. The
company reviews its environmental reserves at least quarterly to determine
whether additional provisions are necessary. Based on current information, the
company believes its reserves are adequate to meet remedial actions and 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 and monitoring efforts amounted to $44 million in 1996.
This compares with $43 million in 1995 and $39 million in 1994. During 1997,
the company expects to incur remedial environmental expenditures in the range
of $40 to $50 million.
The company and its subsidiaries are subject to a number of legal
proceedings and potential actions in addition to those related to environmental
issues. Based upon information currently available, these actions are not
expected to have a materially adverse impact on results of operations or
financial condition of the company.
CSX employs risk management strategies to address business and financial
market risks, but there are no significant hedging or derivative financial
instruments used in its risk management program. The company may alter this
position in response to evolving business and market conditions.
Financial management periodically assesses the interest rate sensitivity of
its portfolio of investments and borrowings, and may use financial instruments
to manage the net interest exposure.
Management monitors fuel oil prices for volatility. It also monitors
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 operating risks and exposures, not to trade financial instruments
actively.
Rail Results
CSX Transportation Inc. (CSXT) posted record operating income in 1996, up 6%
from 1995 and 21% from 1994, excluding the charge in 1995. The results are
primarily due to strong performances by the coal and auto business units,
continued selective rate increases and ongoing cost-control efforts.
Improved pricing and volume strength combined to produce operating revenue
of $4.9 billion, a 2% increase over 1995 and a 6% increase over 1994.
Shipments of coal, CSXT's major commodity, remained strong in 1996, with
total coal volume increasing to 163.6 million tons vs. 158.5 million tons in
1995 and 153.7 million tons in 1994.
RAIL OPERATING REVENUE
(Millions of Dollars)
[GRAPH]
'92 '93 '94 '95 '96
$4,434 $4,380 $4,625 $4,819 $4,909
13
<PAGE>
ANALYSIS OF OPERATIONS
Total merchandise traffic of 2.9 million carloads remained level with 1995
and increased 4% over 1994.
Chemical traffic remained strong, due to steady demand for plastic
production. Traffic remained steady with 1995's level and increased 6% over
1994.
Driven by strong demand for trucks and sport utility vehicles, the
automotive market experienced a 3% increase in carloads and a like increase in
revenues in 1996.
A late harvest caused grain shipments to be less robust than in the prior
year. This resulted in a 9% decrease in carloads and a 4% decrease in revenues
for agricultural products. Compared with 1994, carloads in 1996 decreased 3%,
while revenue rose 2%.
Demand for phosphates and fertilizer remained solid. Carloads were level
with 1995, while revenue decreased 1%. This compares with a 9% increase in
carloads and a 10% increase in revenue over 1994.
Rail Commodities by Carload
Carloads Revenue
(Thousands) (Millions of Dollars)
--------------------- -------------------------
1996 1995 1994 1996 1995 1994
--------------------- -------------------------
Automobiles 367 357 354 $ 520 $ 503 $ 493
Chemicals 408 406 386 719 700 685
Minerals 428 414 419 379 375 365
Food & Consumer 167 179 176 199 207 204
Agricultural Products 254 280 263 323 336 318
Metals 277 301 292 290 291 285
Forest Products 443 456 442 472 464 444
Phosphates & Fertilizer 511 512 470 279 282 254
Coal 1,711 1,678 1,678 1,584 1,523 1,465
---------------------- -----------------------
Total 4,566 4,583 4,480 4,765 4,681 4,513
======================
Other Revenue 144 138 112
------------------------
Total Operating Revenue $4,909 $4,819 $4,625
========================
Throughout the year, CSXT continued its emphasis on cost control. Despite
bad weather earlier in the first quarter and a 20% rise in the average price of
diesel fuel, rail operating expense rose only 1% over 1995, excluding the 1995
second-quarter charge, and 2% over 1994. On that basis, the railroad lowered its
operating ratio (the ratio of operating expense to operating revenue) from 77.9%
to 77.0% -- a record for the unit.
The ongoing efforts of the unit's Performance Improvement Teams (PITs)
resulted in cost savings of more than $106 million. PIT initiatives also
resulted in more cost-effective procedures for locomotive and car repair, as
well as maintenance of way.
Labor and fringe benefits expense increased 2% to $1.88 billion, vs. $1.85
billion in 1995 and $1.83 billion in 1994. Rail management successfully
negotiated, without a strike, a union contract that provides for competitive
increases in labor and fringe benefits over the next five years.
Rail Assets
Owned or leased units as of Dec. 27, 1996
Freight Cars
Box Cars 14,872
Open-Top Hoppers 24,760
Covered Hoppers 18,248
Gondolas 24,533
Other Cars 15,379
------
Total 97,792
======
Locomotives 2,781
Track
Route Miles 18,504
Track Miles 31,365
Safety continues to be a top priority at CSXT. During 1996, the railroad
reduced train accidents 3% over 1995, and the latest published figures from the
Federal Railroad Administration place CSXT as the safest Class I freight
railroad in the nation. Employee safety performance in 1996 dipped slightly
compared with 1995's record year. While zero injuries continues to be the
ultimate goal, employees have made tremendous gains by reducing personal
injuries by 79% over the past seven years.
Of equal importance is CSXT's emphasis on public safety. In 1996, the
railroad continued its industry leadership in the area of rail-highway grade
crossing safety, where the number of collisions dropped 23%. This dramatic
improvement is attributed to two factors: public education and the elimination
of unneeded crossings. CSXT employees delivered hundreds of presentations during
1996 to raise the motoring public's awareness of crossing safety.
14
<PAGE>
ANALYSIS OF OPERATIONS
RAIL OPERATING EXPENSE
(Millions of Dollars)
[GRAPH]
'92 '93 '94 '95 '96
$4,313 $3,634 $3,696 $3,951 $3,782
Productivity/restructuring charges in 1992 and 1995 were $619 million and $196
million, respectively.
These public education efforts touched thousands of lives throughout CSXT's
20-state system, ranging from school children to school bus and commercial truck
drivers. In addition, more than 500 redundant or unneeded crossings were
eliminated last year.
Greater asset utilization in 1996 enhanced CSXT's continued efforts to
constrain capital expenditures. Rail capital additions were $764 million in 1996
vs. $765 million in 1995 and $641 million in 1994. In 1996, CSXT took delivery
of 138 new fuel-efficient 4,400-horsepower AC locomotives, each of which has
the power of two older units. CSXT became the first railroad in North America
to place into service the new 6,000-horsepower AC model, the world's most
powerful single-engine locomotive. The company is presently testing three
AC6000s in anticipation of taking delivery of 50 more in 1997. As of year-end
1996, CSXT's fleet of approximately 2,800 locomotives included 255 AC units.
CSXT expects continued earnings growth in 1997, with modest volume and
revenue increases across its major lines of business. The unit will continue its
focus on becoming a High Performance Organization, which involves process
re-engineering of core operations. In particular, the railroad will continue
improving terminal throughput to optimize asset utilization and on-time
performance. Thirty terminals were re-engineered in 1996, and 24 are scheduled
to be completed by mid-1997. In addition, the unit will continue its emphasis on
cutting costs and achieving profitable growth.
Container-shipping Results
Intensified rate competition in major trade lanes and short-term
over-capacity made 1996 a challenging year for the container-shipping industry.
In spite of a difficult pricing environment, Sea-Land Service Inc. (Sea-Land)
capitalized on increasing global demand for containerized cargo and grew its
market share in every major trade lane while improving its cargo mix. The
carrier also enjoyed one of the best utilization rates in the container-
shipping industry.
Sea-Land generated $318 million of operating income in 1996, vs. $238
million in 1995, excluding its portion of the 1995 second-quarter restructuring
charge. In 1994, Sea-Land generated $187 million in operating income.
Volume increased to 1.5 million loads, 7% over 1995's level, driven by
continued strong demand and market share gains in virtually all major trade
lanes. In 1994, volume totaled 1.3 million loads.
Total operating revenue increased to $4.1 billion, a 1% increase over 1995's
revenue and 16% higher than in 1994.
Average revenue per container fell 5%, reflecting higher capacity in major
trade lanes, particularly Asia-Middle East-Europe and Eastbound Pacific.
However, Sea-Land was more than able to mitigate the effects of a difficult
rate environment through increased volume and effective cost-cutting
measures.
Sea-Land's operating expense declined to $3.7 billion from $3.8 billion in
1995, excluding that year's restructuring charge. In 1994, operating expense
totaled $3.3 billion. The unit improved its operating ratio through its
continued emphasis on cost containment and productivity improvement.
In 1996, Sea-Land eliminated operating expenses of $136 million through the
efforts of its cost-intervention teams, which targeted improvements in terminal
and vessel operations, inland transportation and network management. The teams'
recommendations include both short-term tactical considerations and long-term
strategic goals. The intervention teams expect to achieve productivity
improvements of similar magnitude in 1997.
CONTAINER-SHIPPING
OPERATING REVENUE
(Millions of Dollars)
[GRAPH]
'92 '93 '94 '95 '96
$3,148 $3,246 $3,492 $4,008 $4,051
15
<PAGE>
ANALYSIS OF OPERATIONS
After six years of discussion and debate, the U.S. Congress passed the
Maritime Security Act by an overwhelming margin. This shipping bill
establishes a program to provide participating carriers with $1 billion in
operating assistance over 10 years to help offset the higher environmental,
safety and wage costs of operating as a U.S.-flag carrier. Sea-Land has
applied to the program, and the government has accepted 15 of its ships.
Sea-Land will receive $2.1 million a year for each ship participating
in the program.
Implementation of the global alliance with the Danish shipping line Maersk
began in the third quarter of 1996. A revised vessel network plan, incorporating
163 vessels and 348,000 TEUs (20-foot equivalent units) of container capacity,
provides improved frequency and scope of service within the major sectors of
Sea-Land's global network. Several million dollars of cost-reduction
benefits have been realized as a result of terminal and equipment
rationalization programs. Other cost-reduction opportunities have been
identified and targeted for implementation in 1997 and beyond.
CONTAINER-SHIPPING
LOAD VOLUME
(Thousands)
[GRAPH]
'92 '93 '94 '95 '96
1,150 1,180 1,288 1,442 1,541
Container-shipping Assets
Owned or leased units as of Dec. 27, 1996
Containers
40- and 20-foot Dry Vans 174,941
45-foot Dry Vans 10,505
Refrigerated Vans 18,495
Other Specialized Equipment 4,460
-------
Total 208,401
=======
Chassis 70,075
Container Ships 99
Terminals
Exclusive-Use 14
Preferential Berthing Rights 14
Capital expenditures in 1996 included $252 million for new asset deployments
and $55 million for containers formerly leased. The new deployments included
vessels, terminal property and equipment and systems enhancements. The 1996
expenditures compare with $269 million in 1995 and $133 million in 1994.
In 1997, the growth in global trade is expected to continue at a healthy
rate, although a difficult rate environment is expected to persist. Overall
capacity is anticipated to increase at a pace slightly ahead of market growth.
Within the competitive arena, it is anticipated that a realignment of existing
alliances between various shipping lines will occur. Additional mergers within
the industry also remain a possibility.
Sea-Land will continue meeting the challenges of a difficult rate
environment with continued emphasis on controlling costs through its
intervention teams and performance improvement initiatives. The unit also will
continue its efforts to gain market share in the more profitable market segments
by focusing on the changing needs of shippers. Improving the mix of higher
margin freight will remain an ongoing priority.
Barge Results
The 1996 operating income of $112 million at American Commercial Lines Inc.
(ACL) topped last year's record by 6%. The 1996 results were 78% higher than
1994's operating income. Key factors for 1996's excellent performance were
continued strong demand for export grain and other bulk commodities and the
acquisition of the marine assets of Conti-Carriers & Terminals Inc. (CCTI),
which increased ACL's fleet size by 400 barges and eight towboats.
Total operating revenue at ACL increased 12% to $622 million, compared
with $554 million in 1995 and $449 million in 1994. Barge ton miles totaled
55.8 billion, an increase of 3.6 billion over 1995 and 4.5 billion over
1994.
Barge Operating Revenue
(Millions of Dollars)
[GRAPH]
'92 '93 '94 '95 '96
$433 $417 $449 $554 $622
16
<PAGE>
Analysis of Operations
Barge Assets
Owned or leased units as of Dec. 27, 1996
Towboats 137
Barges
Covered/Open-Top Hoppers 3,481
Tankers 237
-----
Total 3,718
=====
Marine Services
River Terminals 11
Fleet Operations 17
Shipyards 2
The CCTI acquisition, completed in January 1996, has been successfully
integrated into ACL's operations, delivering higher revenues to ACL and savings
to customers. This acquisition is an excellent example of a customer outsourcing
its barging functions, creating a "win-win" situation for both ACL and the
customer.
Demand for non-grain commodities, such as import steel and raw materials for
steel mini-mills, remained strong, resulting in better backhaul opportunities
from the Gulf of Mexico.
Coal tonnage and revenue decreased during the year as the company continued
to shift equipment into higher-margin markets.
Operating expense increased 14% to $510 million, primarily due to additional
volumes and higher fuel prices. Fuel price per gallon increased 24%,
representing an additional $11 million in expense over 1995.
ACL remains focused on continuous improvement to reduce operating costs
through the quality improvement process. Performance Improvement Team
initiatives generated approximately $4 million in annualized savings in 1996 and
have targeted additional savings for 1997.
Safety remains a high priority. ACL reduced its incident rate by 10%
during the year, reflecting a safer work environment overall and resulting
in accident-related cost reductions of $1.5 million.
Capital additions at ACL in 1996 totaled $91 million, compared with $33
million in 1995 and $12 million in 1994. Spending in 1996 included $21 million
for the acquisition of CCTI, $31 million for new domestic marine equipment
and $26 million for expansion in South America.
ACL enters 1997 with a positive outlook. The 1996 fall harvests of corn and
soybean crops were among the largest in U.S. history, indicating traffic
levels for these commodities should be strong. Coal should remain a solid base
business for the barge line, although an existing long-term coal contract may
be restructured. ACL also anticipates continued strong demand for liquid
commodities and steel feedstock for mini-mills.
Intermodal Results
With the implementation of aggressive measures to counter severe competition
from the trucking industry, CSX Intermodal Inc. (CSXI) experienced a steady
turnaround in 1996. Operating income increased 17% to $35 million in 1996 from
$30 million in 1995. In 1994, operating income was $61 million. Revenue
decreased 5% to $674 million, while volume totaled 980,000 trailers and
containers, level with 1995. In 1994, operating revenue was $684 million, and
volume was 986,000 trailers and containers.
Intermodal Assets
Owned or leased units as of Dec. 27, 1996
Equipment
Domestic Containers 4,002
Rail Trailers 5,124
Facilities
CSX Intermodal Terminals 33
Motor Carrier Operations Terminals 28
Intermodal Operating Revenue
(Millions of Dollars)
[GRAPH]
'92 '93 '94 '95 '96
$535 $599 $684 $707 $674
CSXI has responded aggressively to the stiff competition caused by an over-
capacity of trucks. In July, the unit consolidated its headquarters in
Jacksonville, Fla., and reduced headcount by 30%. CSXI also
implemented comprehensive service changes throughout its nationwide network
to enhance service reliability, transit times and train capacity. The network
redesign is aimed at achieving better cost controls and productivity gains
from CSXI's operations while expanding services in key markets with the
greatest growth potential.
Capital expenditures totaled $24 million in 1996 vs. $57 million in 1995 and
$50 million in 1994. During 1996, CSXI acquired property for a new terminal in
Atlanta and expanded terminal facilities at its gateway New Orleans terminal.
In 1997, CSXI will focus on containing costs and growing its business in key
lanes. The unit expects substantial improvement in operating income.
17
<PAGE>
Analysis of Operations
Contract Logistics Results
Customized Transportation Inc. (CTI) achieved record revenue and operating
income during 1996. Revenue rose to $316 million, 32% over 1995 and 73% over
1994. Operating income increased to $17 million, 36% over 1995 and 73% above
1994.
CTI continues as a leading logistics provider of materials management,
transportation, warehousing and staging activities. In 1996, the unit improved
its position with current customers and developed business in new industries,
such as electronics, retail and chemical. It executed 48 million transactions
for its customers at an error-free rate of 99.9745% in 1996.
In 1997, CTI will maintain an emphasis on the redesign and re-engineering of
supply chain processes for its customers and will follow its customers as they
expand internationally. Growth rates and financial performance are anticipated
to remain strong in the coming year.
Contract Logistics
Operating Revenue
(Millions of Dollars)
[GRAPH]
'93 '94 '95 '96
$145 $182 $240 $316
Consolidated Outlook
CSX enters 1997 with confidence and an optimistic outlook. Modest economic
growth and low inflation are expected to continue in the United States and
Europe. Economic growth in Japan, following a sluggish 1996, should begin to
improve gradually. The price of diesel fuel, which was unusually high in 1996,
is expected to return to more normal levels as Iraqi oil re-enters the market on
a limited basis.
The railroad will capitalize on anticipated steady growth in the U.S.
economy to improve its overall performance, while maintaining its focus on cost
control. The continued growth in global demand for containerized cargo bodes
well for Sea-Land, although some concerns remain about rate pressures
continuing, possibly until mid-year.
CSX anticipates its 1997 capital spending to be less than 1996 levels, while
it will continue to reinvest in core business assets. CSXT will fund equipment
and track programs at nearly comparable levels, including delivery of 75
alternating current locomotives. Sea-Land will continue toward completion of its
Champion Class vessel program with three vessels to be delivered in 1997 and the
last one in the first quarter of 1998.
CSX units are committed to achieving their stretch targets, even though some
units are subject to such unpredictable external factors as adverse weather
conditions, work stoppages at major customer facilities and shifting economic
conditions in the United States and abroad. Continued emphasis will be placed
on controlling costs, enhancing core earning power and increasing shareholder
returns.
18
<PAGE>
<TABLE>
<CAPTION>
Fiscal Years Ended
Consolidated Statement of Earnings
Dec. 27, Dec. 29, Dec. 30,
(Millions of Dollars, Except Per Share Amounts) 1996 1995 1994
-------- ------- --------
<S> <C>
Operating Income
Operating Revenue $10,536 $10,304 $ 9,409
Operating Expense 9,014 8,921 8,227
Restructuring Charge -- 257 --
------ ------ -------
Total Operating Expense 9,014 9,178 8,227
------ ------ --------
Operating Income 1,522 1,126 1,182
Other Income and Expense
Other Income 43 118 105
Interest Expense 249 270 281
------ ------ ------
Earnings
Earnings Before Income Taxes 1,316 974 1,006
Income Tax Expense 461 356 354
------ ------ ------
Net Earnings $ 855 $ 618 $ 652
====== ====== ======
Per Common Share
Earnings Per Share $ 4.00 $ 2.94 $ 3.12
====== ====== ======
Average Common Shares Outstanding (Thousands) 213,633 210,270 209,303
======= ======= =======
Cash Dividends Paid Per Common Share $ 1.04 $ .92 $ .88
======= ======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
19
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Cash Flows
Fiscal Years Ended
Dec. 27, Dec. 29, Dec. 30,
(Millions of Dollars) 1996 1995 1994
-------- -------- --------
<S> <C>
Operating Activities
Net Earnings $ 855 $ 618 $ 652
Adjustments to Reconcile Net Earnings to Net Cash Provided
Depreciation 620 600 577
Deferred Income Taxes 166 (26) 176
Restructuring Charge Provision -- 257 --
Productivity/Restructuring Charge Payments (88) (155) (159)
Other Operating Activities 12 10 56
Changes in Operating Assets and Liabilities
Accounts Receivable (67) (82) (60)
Other Current Assets (65) (22) 20
Accounts Payable 84 170 9
Other Current Liabilities (77) 197 55
------- ----- -----
Net Cash Provided by Operating Activities 1,440 1,567 1,326
------- ----- -----
Investing Activities
Property Additions (1,223) (1,156) (875)
Proceeds from Property Dispositions 84 97 170
Acquisition of Conrail Common Stock (1,965) -- --
Purchases of Long-Term Marketable Securities (45) (114) (66)
Proceeds from Sales of Long-Term Marketable Securities 137 97 54
Other Investing Activities 25 22 (144)
------- ------ -----
Net Cash Used by Investing Activities (2,987) (1,054) (861)
------- ------ -----
Financing Activities
Short-Term Debt -- Net 187 (53) 37
Long-Term Debt Issued 2,118 121 92
Long-Term Debt Repaid (486) (343) (447)
Cash Dividends Paid (223) (194) (184)
Other Financing Activities (1) 11 4
------- ------ -----
Net Cash Provided (Used) by Financing Activities 1,595 (458) (498)
------- ------ -----
Net Increase (Decrease) in Cash and Cash Equivalents 48 55 (33)
Cash, Cash Equivalents and Short-Term Investments
Cash and Cash Equivalents at Beginning of Year 320 265 298
------- ----- -----
Cash and Cash Equivalents at End of Year 368 320 265
Short-Term Investments at End of Year 314 340 270
------- ----- -----
Cash, Cash Equivalents and Short-Term
Investments at End of Year $682 $ 660 $ 535
======= ===== =====
Supplemental Cash Flow Information
Interest Paid -- Net of Amounts Capitalized $ 265 $ 275 $ 306
======= ===== =====
Income Taxes Paid $ 381 $ 253 $ 175
======= ===== =====
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
20
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Financial Position
Dec. 27, Dec. 29,
(Millions of Dollars) 1996 1995
<S> <C> -------- --------
Assets
Current Assets
Cash, Cash Equivalents and Short-Term Investments $ 682 $ 660
Accounts Receivable 894 832
Materials and Supplies 229 220
Deferred Income Taxes 139 148
Other Current Assets 128 75
------- -------
Total Current Assets 2,072 1,935
Properties -- Net 11,906 11,297
Investment in Conrail 1,965 --
Affiliates and Other Companies 345 312
Other Long-Term Assets 677 738
------- -------
Total Assets $16,965 $14,282
======= =======
Liabilities
Current Liabilities
Accounts Payable $ 1,189 $ 1,121
Labor and Fringe Benefits Payable 499 526
Casualty, Environmental and Other Reserves 306 298
Current Maturities of Long-Term Debt 101 486
Short-Term Debt 335 148
Other Current Liabilities 327 412
----- -----
Total Current Liabilities 2,757 2,991
Casualty, Environmental and Other Reserves 715 813
Long-Term Debt 4,331 2,222
Deferred Income Taxes 2,720 2,560
Other Long-Term Liabilities 1,447 1,454
------ ------
Total Liabilities 11,970 10,040
------ ------
Shareholders' Equity
Common Stock, $1 Par Value 217 210
Other Capital 1,433 1,319
Retained Earnings 3,452 2,822
Minimum Pension Liability (107) (109)
------- ------
Total Shareholders' Equity 4,995 4,242
------- ------
Total Liabilities and Shareholders' Equity $16,965 $14,282
======= ======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
21
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Changes in Shareholders' Equity
Common Shares Minimum
Outstanding Common Other Retained Pension
(Millions of Dollars, Except Shares) (Thousands) Stock Capital Earnings Liability Total
-------------- ------ ------- -------- --------- ------
<S> <C>
Balance Dec. 31, 1993 104,143 $104 $1,307 $1,927 $(158) $3,180
Net Earnings -- -- -- 652 -- 652
Dividends -- Common -- -- -- (184) -- (184)
Common Stock--
Stock Purchase and Loan Plan
Stock Canceled (68) -- (4) -- -- (4)
Purchase Loans -- Net -- -- 9 -- -- 9
Other Stock Issued -- Net 647 1 56 -- -- 57
Minimum Pension Liability -- -- -- -- 25 25
Other -- Net -- -- -- (4) -- (4)
------- ------ ------ ------ ------ ------
Balance Dec. 30, 1994 104,722 105 1,368 2,391 (133) 3,731
Net Earnings -- -- -- 618 -- 618
Dividends -- Common -- -- -- (194) -- (194)
Common Stock--
Stock Purchase and Loan Plan
Stock Canceled (155) (1) (11) -- -- (12)
Purchase Loans -- Net -- -- 12 -- -- 12
Other Stock Issued -- Net 716 1 55 -- -- 56
Minimum Pension Liability -- -- -- -- 24 24
2-for-1 Stock Split 105,212 105 (105) -- -- --
Other -- Net -- -- -- 7 -- 7
------- ------ ------ ------ ------ ------
Balance Dec. 29, 1995 210,495 210 1,319 2,822 (109) 4,242
Net Earnings -- -- -- 855 -- 855
Dividends -- Common -- -- -- (223) -- (223)
Common Stock--
Stock Purchase and Loan Plan
Stock Issued 7,652 8 356 -- -- 364
Stock Canceled and Exchanged (2,786) (3) (67) -- -- (70)
Purchase Loans -- Net -- -- (240) -- -- (240)
Other Stock Issued -- Net 1,524 2 65 -- -- 67
Minimum Pension Liability -- -- -- -- 2 2
Other -- Net -- -- -- (2) -- (2)
------- ------ ------ ------ ------ ------
Balance Dec. 27, 1996 216,885 $217 $1,433 $3,452 $(107) $4,995
======= ====== ====== ====== ====== ======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES.
Nature of Operations
CSX Corporation (CSX) is a global freight transportation company with
principal business units providing rail, container-shipping, intermodal, barging
and contract logistics services. Rail transportation services are provided
principally throughout the eastern United States and account for nearly half of
the company's operating revenue, with coal, bulk products and manufactured
products each contributing a relatively equal share of rail revenue. Coal
shipments primarily supply domestic utility and export markets.
Container-shipping services are provided in the United States and more than 80
countries and territories throughout the world and account for more than
one-third of the company's operating revenue. Intermodal, barging and contract
logistics services are provided principally within the United States and
together account for the company's remaining operating revenue.
Principles of Consolidation
The Consolidated Financial Statements include CSX and its majority-owned
subsidiaries. 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.
Fiscal Year
The company's fiscal reporting period ends on the last Friday in December.
The financial statements presented are for the fiscal periods ended Dec. 27,
1996, Dec. 29, 1995, and Dec. 30, 1994. Each fiscal year consists of four
13-week quarters.
Common Stock Split
On Oct. 11, 1995, the company's board of directors declared a 2-for-1 common
stock split distributed on Dec. 21, 1995, to shareholders of record at the close
of business on Dec. 4, 1995. In the accompanying Consolidated Statement of
Earnings and Notes to the Consolidated Financial Statements, all references to
shares of common stock and per share amounts for periods prior to the stock
split have been restated.
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
The company has sold, directly and through Trade Receivables Participation
Certificates (Certificates), ownership interests in designated pools of accounts
receivable originated by CSX Transportation Inc. (CSXT), its rail unit.
During 1993, $200 million of Certificates were issued at 5.05%,
due September 1998. The Certificates represent undivided interests in a master
trust holding an ownership interest in a revolving pool of rail freight
accounts receivable. The proceeds from the issuance of the Certificates were
used to reduce the amount of accounts receivable sold under a previous
agreement. At Dec. 27, 1996, the Certificates were collateralized by $248
million of accounts receivable held in the master trust. The company has the
ability to issue $50 million in additional Certificates through September 1998
at prevailing market terms.
In addition, the company has a revolving agreement with a financial
institution to sell with recourse on a monthly basis an undivided percentage
ownership interest in designated pools of freight and other accounts receivable.
The agreement provides for the sale of up to $200 million in accounts receivable
and expires in September 1998.
The company has retained the responsibility for servicing and collecting
accounts receivable held in trust or sold. At Dec. 27, 1996, and Dec. 29, 1995,
accounts receivable have been reduced by $372 million, representing Certificates
and accounts receivable sold. The net costs associated with sales of
Certificates and receivables were $30 million, $32 million and $29 million
in 1996, 1995 and 1994, respectively.
23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All Tables in Millions of Dollars, Except Per Share Amounts)
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 $97 million and $88 million have been applied as a reduction of
accounts receivable at Dec. 27, 1996, and Dec. 29, 1995, respectively.
Materials and Supplies
Materials and supplies consist primarily of fuel and items for maintenance
of property and equipment, and are carried at average cost.
Properties
Main line track on the rail system is depreciated on a group basis using a
unit-of-property method. All other property and equipment is depreciated on a
straight-line basis over estimated useful lives of three to 50 years.
Regulations maintained by the Surface Transportation Board (STB) of the U.S.
Department of Transportation require periodic formal studies of ultimate service
lives for all railroad assets. Resulting service life estimates are subject to
review and approval by the STB. Significant premature retirements for all
properties, which would include major casualty losses, abandonments, sales and
obsolescence of assets, are recorded as gains or losses at the time of their
occurrence. Expenditures that significantly increase asset values or extend
useful lives are capitalized. Repair and maintenance expenditures are charged to
operating expense when the work is performed. All properties are stated at cost.
Properties and other long-lived assets are reviewed for impairment whenever
events or business conditions indicate the carrying amount of such assets may
not be fully recoverable. Initial assessments of recoverability are based on
estimates of undiscounted future net cash flows associated with an asset or a
group of assets. Where impairment is indicated, the assets are evaluated for
sale or other disposition, and their carrying amount is reduced to fair value
based on discounted net cash flows or other estimates of fair value.
Revenue Recognition
Transportation revenue is recognized proportionately as shipments move from
origin to destination.
Environmental Costs
Environmental costs relating to current operations are expensed or
capitalized as appropriate. Expenditures relating to remediating an existing
condition caused by past operations, and that 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.
Derivative 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.
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 also
are deferred and recognized in income in the same period as the hedged
transaction. There were no significant derivative financial instruments
outstanding at Dec. 27, 1996.
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. Weighted average shares and
earnings per share for 1995 and 1994 have been restated to reflect the 2-for-1
common stock split distributed to shareholders in December 1995.
24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All Tables in Millions of Dollars, Except Per Share Amounts)
Stock-Based Compensation
The company records expense for stock-based compensation in accordance with
the provisions of APB Opinion No. 25 "Accounting for Stock Issued to Employees"
and related Interpretations. Disclosures required with respect to the
alternative fair value measurement and recognition methods prescribed by
Financial Accounting Standards Board (FASB) Statement No. 123 "Accounting for
Stock-Based Compensation" are presented in Note 11 -- Stock Plans.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires that management make estimates in
reporting the amounts of certain revenues and expenses for each fiscal year and
certain assets and liabilities at the end of each fiscal year. Actual results
may differ from those estimates.
Prior-Year Data
Certain prior-year data have been reclassified to conform to the 1996
presentation.
Accounting Pronouncements
The FASB has issued Statement No. 125 "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," which
establishes new guidelines for accounting and disclosure related to transfers of
trade accounts receivable and other financial assets. In addition, the American
Institute of Certified Public Accountants has issued Statement of Position No.
96-1 "Environmental Remediation Liabilities," which provides revised guidance on
accounting and disclosure relative to environmental obligations. The company
will adopt both pronouncements in 1997 and does not expect either pronouncement
to have a material impact on its financial statements.
NOTE 2. MERGER AGREEMENT.
On Oct. 14, 1996, CSX entered into an agreement with Conrail, Inc. (Conrail)
pursuant to which the companies would combine in a strategic merger transaction.
The terms of the agreement provided for CSX to acquire 40% of the outstanding
Conrail Common Stock and ESOP Preferred Stock (the Conrail shares) for cash and
the remaining 60% in exchange for CSX common stock. Norfolk Southern Corporation
(Norfolk Southern) challenged the CSX/Conrail merger agreement and announced an
all-cash competing offer to acquire Conrail at a price which was ultimately
increased to $115 per share. CSX and Conrail subsequently negotiated several
amendments to the merger agreement, generally to provide increased consideration
to Conrail shareholders in exchange for their shares. On Nov. 20, 1996, CSX
completed an initial cash tender offer for approximately 19.9% of the Conrail
shares at $110 per share, acquiring approximately 17.9 million of the
shares at a total cost of $1.965 billion. The shares were placed in a voting
trust as provided for in the merger agreement. Borrowings in connection with a
$4.8 billion bank credit facility negotiated by CSX subsequent to the
announcement of the merger were used to finance the initial cash tender offer.
CSX initiated a second conditional cash tender offer for an additional 20.1%
of the Conrail shares, but was prevented from completing this or subsequent
steps of the merger transaction when a Jan. 17, 1997 vote by Conrail
shareholders defeated a proposal to opt out of the Pennsylvania Control
Transaction Law (the Pennsylvania statute). A favorable vote on the opt-out
proposal would have removed restrictions limiting CSX's ownership to less than
20% of the Conrail shares under the terms contemplated by the merger agreement.
The outcome of the Conrail shareholder vote coupled with public comments by the
Chairwoman of the STB favoring a negotiated settlement of competitive issues
surrounding the proposed merger prompted joint discussions between CSX, Conrail,
and Norfolk Southern. These discussions, which began in late January, led to the
negotiation of an amendment to the CSX/Conrail merger agreement on March 7,
1997. The amended agreement provides for the acquisition of the remaining
Conrail shares for cash at $115 per share and, among other things, allows CSX to
unilaterally enter into negotiations with Norfolk Southern. It is anticipated
that when these negotiations are completed, CSX and Norfolk Southern will share,
roughly equally, the Conrail rail system.
25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All Tables in Millions of Dollars, Except Per Share Amounts)
CSX will reflect the terms of the amended merger agreement in a revised
tender offer. Since the revised offer provides cash consideration for all
Conrail shares, it is no longer subject to a vote by Conrail shareholders to opt
out of the Pennsylvania statute. The revised tender offer is expected to be
completed no later than June 2, 1997. The transactions ultimately agreed to by
the three companies are subject to regulatory approval by the STB. The Conrail
shares currently held by CSX and the shares to be acquired pursuant to the
revised merger agreement will be held in the voting trust until such time as a
regulatory decision is rendered. CSX's financing arrangements will be
revised or renegotiated to accommodate the final structure agreed to by the
companies.
At Dec. 27, 1996, CSX has accounted for its 19.9% investment in Conrail
using the cost method. Dividends totaling $8 million received on those shares in
1996 are reported in other income in the consolidated statement of earnings. The
method of accounting applicable to CSX holdings of Conrail shares for future
periods may differ, depending on the timing and final structure of the related
transactions.
NOTE 3. 1995 RESTRUCTURING CHARGE.
In the second quarter of 1995, the company recorded a $257 million pretax
restructuring charge to recognize the estimated costs of specific initiatives at
CSXT and at Sea-Land Service Inc. (Sea-Land), its container-shipping unit. The
charge reduced 1995 net earnings by $160 million, 76 cents per share.
CSXT Initiative
CSXT recorded its $196 million portion of the pretax restructuring charge to
recognize the costs associated with a contractual agreement with a major
telecommunications vendor to replace, manage and technologically enhance its
existing private telecommunications network. The initiative resulted in a
write-down of assets rendered technologically obsolete and a provision for
separation and labor protection payments to affected employees.
The agreement, which originally was to expire in May 2005, provided for the
vendor to supply and manage new technology to replace CSXT's existing
telecommunications system, thereby rendering it commercially obsolete. These
assets, comprising CSXT's internal companywide telecommunications network
including existing microwave and fiber optic communications systems, have no
alternative use and their net realizable value is not significant. As a result
of the agreement, the net book value of the assets to be replaced was reduced by
$163 million.
During 1996, CSXT and the vendor amended the agreement to change
the termination date to June 30, 1998, to increase the payments required over
the revised service period, and to relieve the vendor's obligations to
replace certain technology. CSXT is currently evaluating options for
proceeding with further telecommunications initiatives.
Sea-Land Initiatives
The restructuring initiatives at Sea-Land represented $61 million of the
total charge and included its global integration program and the reflagging of
five U.S.-flag vessels to the registry of the Marshall Islands in accordance
with approval from the Maritime Administration. Sea-Land's global integration
program resulted in the consolidation of worldwide senior management functions,
the relocation of the corporate headquarters to Charlotte, N.C., and the
integration of information technologies. The vessel reflagging initiative
primarily involves crew separations on the five vessels.
26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All Tables in Millions of Dollars, Except Per Share Amounts)
Summary
The 1995 restructuring charge and related activity through Dec. 27, 1996, is
as follows:
Separation Lease and
and Labor Facility
Obsolete Protection Exit
Assets Costs Costs Total
---- ---- --- ----
Restructuring Charge $163 $80 $14 $257
Amounts Utilized through Dec. 27, 1996 163 28 8 199
---- ---- --- ----
Remaining Reserve as of Dec. 27, 1996 $ -- $ 52 $ 6 $ 58
==== ==== === ====
The total provision for separation and labor protection payments relates to
approximately 800 affected employees and was based on existing collective
bargaining agreements with members of clerical, electrical, and signal crafts
and seafarer trades. Through Dec. 27, 1996, approximately 530 employee
separations have been finalized. The company expects the remaining affected
employees to be impacted within the next four years.
NOTE 4. OPERATING EXPENSE.
1996 1995 1994
------ ------ ------
Labor and Fringe Benefits $3,161 $3,133 $3,005
Materials, Supplies and Other 2,530 2,622 2,311
Building and Equipment Rent 1,143 1,134 1,087
Inland Transportation 995 970 839
Depreciation 611 588 564
Fuel 574 474 421
Restructuring Charge -- 257 --
------ ------ ------
Total $9,014 $9,178 $8,227
====== ====== ======
Selling, General and Administrative Expense
Included in Above Items $1,297 $1,351 $1,265
====== ====== ======
27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 5. OTHER INCOME.
1996 1995 1994
---- ---- ----
Interest Income $48 $ 62 $ 57
Income from Real Estate and Resort Operations(a) 62 54 58
Net Gain (Loss) on Investment Transactions(b) (4) 77 --
Gain on South Florida Track Sale(c) -- -- 91
Net Costs for Accounts Receivable Sold (30) (32) (29)
Minority Interest (42) (32) (21)
Loss on Redemption of Debt -- -- (13)
Equity Earnings (Losses) of Other Affiliates 6 (3) (10)
Dividend Income 9 1 1
Miscellaneous (6) (9) (29)
--- ---- ----
Total $43 $118 $105
=== ==== ====
(a) Gross revenue from real estate and resort operations was $186 million, $178
million and $190 million in 1996, 1995 and 1994, respectively.
(b) In December 1995, the company recognized a net investment gain of
$77 million on the issuance of an equity interest in a Sea-Land terminal and
related operations in Asia and the write-down of various investments.
The equity interest portion of the transaction resulted in proceeds of
$105 million and a pretax gain of $93 million, $61 million after-tax, 29
cents per share. Sea-Land's interest in the terminal operations was
reduced from approximately 67% to 57%.
(c) In December 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, $42
million after-tax, 20 cents per share. The scheduled payment resulted in a
$22 million gain in 1994.
NOTE 6. INCOME TAXES.
Earnings from domestic and foreign operations and related income tax expense
are as follows:
1996 1995 1994
------ ---- ------
Earnings Before Income Taxes:
-- Domestic $1,158 $765 $ 893
-- Foreign 158 209 113
------ ---- ------
Total $1,316 $974 $1,006
====== ==== ======
Income Tax Expense (Benefit):
Current -- Federal $ 250 $337 $ 144
-- Foreign 30 26 20
-- State 15 19 14
------ ---- ------
Total Current 295 382 178
------ ---- ------
Deferred-- Federal 166 (26) 165
-- Foreign -- -- 2
-- State -- -- 9
------ ---- ------
Total Deferred 166 (26) 176
------ ---- ------
Total Expense $ 461 $356 $ 354
====== ==== ======
28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All Tables in Millions of Dollars, Except Per Share Amounts)
Income tax expense reconciled to the tax computed at statutory rates is as
follows:
1996 1995 1994
----------- ----------- ------------
Tax at Statutory Rates $461 35% $341 35% $352 35%
State Income Taxes 10 1 12 1 15 1
Prior Years' Income Taxes (27) (2) -- -- (10) (1)
Other Items 17 1 3 1 (3) --
---- --- ---- --- ---- ---
Total Expense $461 35% $356 37% $354 35%
==== === ==== === ==== ===
The significant components of deferred tax assets and liabilities include:
Dec. 27, Dec. 29,
1996 1995
-------- --------
Deferred Tax Assets
Productivity/Restructuring Charges $ 171 $ 178
Employee Benefit Plans 434 417
Deferred Gains and Related Rents 195 166
Other 252 300
------ ------
Total 1,052 1,061
------ ------
Deferred Tax Liabilities
Accelerated Depreciation 3,095 3,042
Other 538 431
------ ------
Total 3,633 3,473
------ ------
Net Deferred Tax Liabilities $2,581 $2,412
====== ======
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 changes in the minimum pension liability in 1996 and
1995.
The company has not recorded domestic deferred or additional foreign income
taxes applicable to undistributed earnings of foreign subsidiaries that are
considered to be indefinitely reinvested. Such earnings amounted to $279 million
and $314 million at Dec. 27, 1996, and Dec. 29, 1995, respectively. These
amounts may become taxable upon their remittance as dividends or upon the sale
or liquidation of these foreign subsidiaries. It is not practicable to determine
the amount of net additional income tax that may be payable if such earnings
were repatriated.
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 1990. Returns for 1991 through 1993
are currently under examination. Management believes adequate provision has been
made for any adjustments that might be assessed.
29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 7. PROPERTIES.
<TABLE>
<CAPTION>
Dec. 27, 1996 Dec. 29, 1995
---------------------------- ------------------------------
Accumulated Accumulated
Cost Depreciation Net Cost Depreciation Net
------ ------------ ------- ----- ------------ -------
<S> <C>
Rail:
Road $ 9,308 $2,619 $ 6,689 $ 9,157 $2,620 $ 6,537
Equipment 4,220 1,427 2,793 3,829 1,417 2,412
------- ------ ------- ------- ------ -------
Total Rail 13,528 4,046 9,482 12,986 4,037 8,949
Container-shipping 2,437 1,017 1,420 2,175 906 1,269
Other 1,455 451 1,004 1,512 433 1,079
------- ------ ------- ------- ------ -------
Total $17,420 $5,514 $11,906 $16,673 $5,376 $11,297
======= ====== ======= ======= ====== =======
</TABLE>
NOTE 8. CASUALTY, ENVIRONMENTAL AND OTHER RESERVES.
Activity related to casualty, environmental and other reserves is as
follows:
<TABLE>
<CAPTION>
Casualty and Environmental Separation
Other Reserves(a)(b) Reserves(a) Liabilities(a)(c) Total
----- ---- ----- -------
<S> <C>
Balance Dec. 31, 1993 $604 $131 $642 $1,377
Charged to Expense and Other Additions 247 32 -- 279
Payments and Other Reductions (272) (23) (d)(248) (543)
---- ---- ---- ------
Balance Dec. 30, 1994 579 140 394 1,113
Charged to Expense and Other Additions 279 22 80 381
Payments and Other Reductions (288) (25) (70) (383)
---- ---- ---- ------
Balance Dec. 29, 1995 570 137 404 1,111
Charged to Expense and Other Additions 254 16 -- 270
Payments and Other Reductions (290) (36) (34) (360)
---- ---- ---- ------
Balance Dec. 27, 1996 $534 $117 $370 $1,021
==== ==== ==== ======
</TABLE>
(a) Balances include current portions of casualty and other, environmental and
separation reserves, respectively, of $234 million, $20 million and $52
million at Dec. 27, 1996; $241 million, $20 million and $37 million at Dec.
29, 1995; and $234 million, $20 million and $22 million at Dec. 30, 1994.
(b) Casualty reserves are estimated based upon the first reporting of
an accident or personal injury to an employee. Liabilities for accidents
are based upon field reports and liabilities for personal injuries are based
upon the type and severity of the injury and the use of current trends
and historical data.
(c) Separation liabilities include $318 million at Dec. 27, 1996, $344
million at Dec. 29, 1995, and $376 million at Dec. 30, 1994, related to
productivity charges recorded in 1991 and 1992 to provide for the
estimated costs of implementing work-force reductions, improvements in
productivity and other cost reductions at the company's major transportation
units. The remaining liabilities are expected to be paid out over the next
20 to 25 years.
(d) Includes the transfer of $156 million in 1994 to a separation-related
pension obligation, representing the future cost of pensions for certain
train crew employees impacted by the buyout of trip-based compensation
provided for in the 1992 productivity charge.
30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 9. DEBT AND CREDIT AGREEMENTS.
<TABLE>
<CAPTION>
Average Interest Rates Dec. 27, Dec. 29,
Type and Maturity Dates at Dec. 27, 1996 1996 1995
----- ------ -------
<S> <C>
Commercial Paper and Borrowings Under Bank Credit Agreement 6% $2,300 $ 300
Notes Payable (1999-2021) 8% 498 895
Debentures (2000-2022) 9% 650 649
Equipment Obligations (1997-2011) 8% 739 606
Mortgage Bonds (1998-2003) 4% 76 76
Other Obligations, including Capital Leases (1997-2021) 7% 169 182
----- ------ ------
Total 7% 4,432 2,708
=====
Less Debt Due Within One Year 101 486
------ ------
Total Long-Term Debt $4,331 $2,222
====== ======
</TABLE>
To provide financing for its acquisition of Conrail shares and to
accommodate working capital needs, the company entered into a $4.8 billion bank
credit agreement in November 1996. Under the agreement, the company may borrow
directly from the participating banks or utilize the credit facility to support
the issuance of commercial paper. Direct borrowings from the participating
banks can be obtained, at the company's option, under a competitive bid
process among the banks or under a revolving credit arrangement with interest
either at LIBOR plus a margin determined by the company's credit ratings or
at an alternate base rate, as defined in the agreement. The terms of the
agreement provided for $800 million to become available immediately to replace
existing credit agreements totaling $880 million, which supported the
company's outstanding commercial paper. The remaining $4 billion of credit
under the facility is available for the purchase of Conrail shares, of which
$1.965 billion was used to acquire approximately 19.9% of Conrail's outstanding
shares in November 1996. At Dec. 27, 1996, the company had borrowings related to
the credit facility of $2.635 billion ($300 million direct borrowings and
$2.335 billion commercial paper outstanding), of which $2.3 billion has been
classified as long-term debt based upon the company's ability and
intention to maintain this debt outstanding for more than one year. The
company pays annual fees to the participating banks that may range from .06%
to .15% of the total commitment, depending upon its credit ratings. The
credit agreement, which expires in November 2001, also includes certain
covenants and restrictions, such as limitations on debt as a percentage of total
capitalization and restrictions on the sale or disposition of certain assets.
Commercial paper classified as short-term debt was $335 million at Dec. 27,
1996, and $148 million at Dec. 29, 1995. The weighted-average interest rate for
the short-term commercial paper outstanding at year-end was 6% for 1996 and
1995.
In September 1992, the company filed a shelf registration statement with the
Securities and Exchange Commission to provide for the issuance of up to $450
million in senior debt securities, warrants to purchase debt securities or
currency warrants. This shelf registration included a combined prospectus
covering amounts remaining to be issued as debt securities under a previous
shelf registration. As of Dec. 27, 1996, an aggregate of $250 million of debt is
available for issuance under the company's shelf registration statement and
combined prospectus.
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.
Excluding long-term commercial paper, the company has long-term debt
maturities for 1997 through 2001 aggregating $101 million, $145 million, $95
million, $328 million and $65 million, respectively. A portion of the company's
rail unit properties are pledged as security for various rail-related, long-term
debt issues.
31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 10. COMMON AND PREFERRED 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. In December 1995, shareholders received one additional share
of common stock for each share held, pursuant to a 2-for-1 stock split approved
by the board of directors. At Dec. 27, 1996, common shares issued and
outstanding totaled 216,885,140.
The company also 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 discussed below. All preferred shares rank senior to common shares
both as to dividends and liquidation preference. No preferred shares were
outstanding at Dec. 27, 1996.
Pursuant to a Shareholder Rights Plan adopted by the board of directors in
1988 and amended in 1990, each outstanding share of common stock also evidences
one preferred share purchase right ("right"). 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 in exchange
for the rights. The rights are not exercisable or transferable apart from the
related common shares 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 the company's outstanding 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 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 or group of 20% or more of the outstanding
common stock.
NOTE 11. STOCK PLANS.
The company maintains several stock plans designed to encourage ownership of
its stock and provide incentives for employees to contribute to its success.
Compensation expense for stock-based awards under these plans is determined by
the awards' intrinsic value accounted for under the principles of APB Opinion
No. 25 and related Interpretations. Compensation expense recognized for
stock-based awards in 1996 was $36 million. Had compensation expense been
determined based upon fair values at the date of grant for awards under these
plans, consistent with the methods of FASB Statement No. 123, the company's net
income and earnings per share would have been reduced to the pro forma amounts
indicated below:
1996 1995
----- -----
Net Income As Reported $ 855 $ 618
Pro Forma $ 832 $ 610
Earnings Per Share As Reported $4.00 $2.94
Pro Forma $3.90 $2.90
The pro forma fair value method of accounting was applied only to
stock-based awards granted after Dec. 30, 1994. Because all stock-based
compensation expense for 1996 and 1995 was not restated and because stock-based
awards granted may vary from year to year, the resulting pro forma compensation
cost may not be representative of that to be expected in future years.
Stock Purchase and Loan Plan
The Stock Purchase and Loan Plan provides for the purchase of common stock
and related rights by eligible officers and key employees of the company and
entitles them to obtain loans with respect to the shares purchased. The Plan,
which originated in 1991, is intended to further the long-term stability and
financial success of the company by providing a method for eligible employees to
increase significantly their ownership of common stock. Amendments to the Plan
were approved by the company's shareholders and implemented in 1996, providing
for continuation of the Plan through February 2006, and increasing the common
stock reserved for issuance from 4.4 million to 9 million shares.
32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All Tables in Millions of Dollars, Except Per Share Amounts)
Under the revised Plan, upon maturity of purchase loans issued in 1991 and
1992, existing participants either withdrew shares from the Plan, applied all or
part of their equity in shares purchased in the original Plan as a down payment
to acquire additional shares, or extended their participation at existing levels
for up to one year. In addition, shares were offered to certain employees who
were not previously eligible to participate in the Plan. In connection with the
Plan amendments, from Aug. 1, 1996, through Dec. 27, 1996, 72,497 shares were
withdrawn from the Plan, 2,630,727 shares were exchanged and canceled, and
7,651,970 new shares were sold to participants at an average market price of
$47.52 per share. In consideration for the shares purchased, participants have
provided down payments of not less than 5% nor more than 25% of the purchase
price in the form of cash, recourse notes or equity earned in the original Plan.
The remaining purchase price is in the form of non-recourse loans secured by the
shares issued.
All non-recourse loans under the Plan are or were subject to certain
adjustments after a vesting period based upon targeted increases in the market
price of CSX common stock. The market price thresholds for loans to employees
who extended their participation in the original plan have been met in prior
years and, upon maturity at July 31, 1997, or earlier repayment, all interest
(less dividends applied to accrued interest) will be forgiven and the loan
balances will be reduced by 25% of the purchase price. Loans to participants who
exchanged shares or entered the Plan in 1996 are due July 31, 2001, and also are
subject to forgiveness of a portion of the principal and accrued interest
balances; however, at Dec. 27, 1996, none of the related market price thresholds
had been met.
At Dec. 27, 1996, there were 187 participants in the Plan. Transactions
involving the Plan are as follows:
Shares Average
(000's) Price(a)
------- --------
Outstanding at Dec. 30, 1994 3,869 $18.67
Canceled or Withdrawn (446) $19.25
------- --------
Outstanding at Dec. 29, 1995 3,423 $18.64
Issued 7,652 $47.52
Exchanged, Canceled or Withdrawn (2,964) $18.73
------- --------
Outstanding at Dec. 27, 1996 8,111 $46.26
======= ========
1996 1995 1994
------- -------- -------
Down Payment (Recourse) Loans Outstanding $ 7 $ 4 $ 4
Purchase (Non-Recourse) Loans Outstanding $ 296 $ 60 $ 68
Average Interest Rate 6.64% 7.75% 7.75%
Compensation Expense for the Year $ 13 $ 26 $ 4
====== ======= =======
(a) Represents average cost to participants, net of cumulative note forgiveness.
The weighted-average fair value benefit to participants for a share issued
in 1996 under the Stock Purchase and Loan Plan was $15.65, and was estimated as
of the date of grant using the Black-Scholes option pricing model with the
following assumptions: risk-free interest rate of 6.5%; dividend yield of 2.4%;
volatility factor of 21.5%; and an expected life of 6 years.
1987 Long-Term Performance Stock Plan
The CSX Corporation 1987 Long-Term Performance Stock Plan provides for
awards in the form of stock options, Stock Appreciation Rights (SARs),
Performance Share Awards (PSAs) and Incentive Compensation Program shares (ICPs)
to eligible officers and employees. Awards granted under the Plan are determined
by the board of directors based on the financial performance of the company.
At Dec. 27, 1996, there were 440 current or former employees with
outstanding grants under the Plan. A total of 19,661,492 shares were reserved
for issuance, of which 5,396,274 were available for new grants (7,503,922 at
Dec. 29, 1995). The remaining shares are assigned to outstanding stock options,
SARs and PSAs.
33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All Tables in Millions of Dollars, Except Per Share Amounts)
All stock options have been granted with 10-year terms and vest at the end
of one year of continued employment. The exercise price for options granted
equals the market price of the underlying stock on the date of grant. Options
under recent grants become exercisable based on the achievement of performance
goals. A summary of the company's stock option activity, and related information
for the fiscal years ended Dec. 27, 1996, Dec. 29, 1995, and Dec. 30, 1994,
follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------------------- ----------------------- -----------------------
Shares Weighted-Avg. Shares Weighted-Avg. Shares Weighted-Avg.
(000s) Exercise Price (000s) Exercise Price (000s) Exercise Price
-------- ------ ----------------------- ------- ---------
<S> <C>
Outstanding at Beginning of Year 11,881 $32.76 10,206 $30.97 7,390 $26.80
Granted 1,978 $51.43 2,165 $40.25 3,212 $39.99
Canceled or Expired (42) $27.69 (57) $38.95 (68) $32.81
Exercised (715) $42.08 (433) $27.18 (328) $24.92
------- ------ ------
Outstanding at End of Year 13,102 $35.82 11,881 $32.76 10,206 $30.97
======= ====== ====== ====== ====== ======
Exercisable at End of Year 10,139 $31.90 8,017 $28.79 7,014 $26.85
======= ====== ====== ====== ====== ======
Weighted-Average Fair Value
of Options Granted $ 13.78 $11.33
======= ======
</TABLE>
The following table summarizes information about stock options outstanding
at Dec. 27, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------- -----------------------
Weighted-Avg.
Number Remaining Weighted-Avg. Number Weighted-Avg.
Range of Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
------ --- ------ ------ ------
<S> <C>
$15 to $20 2,584 3.1 $17.40 2,584 $17.40
$30 to $39 5,453 6.5 $35.55 5,453 $35.55
$40 to $52 5,065 8.5 $45.51 2,102 $40.25
------ ------
$15 to $52 13,102 6.6 $35.82 10,139 $31.90
====== === ====== ====== ======
</TABLE>
The fair value of options granted in 1996 and 1995 was estimated as of the
dates of grant using the Black-Scholes option pricing model with the following
weighted-average assumptions used for grants in 1996 and 1995, respectively:
risk-free interest rates of 6.3% and 6.8% and volatility factors of 22% and 23%.
Dividend yields of 2.4% and expected lives of 6 years were used in both years.
The value of PSAs is contingent on the 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 Dec. 27, 1996, there were 728,600 shares
reserved for outstanding PSAs. In 1996 and 1995, respectively, 110,600 and
122,200 PSAs were granted to employees. The weighted-average fair value of those
shares was $44.44 for 1996 and $32.56 for 1995.
At Dec. 27, 1996, there were 435,073 SARs outstanding with a
weighted-average exercise price of $15.85. In 1996 and 1994, respectively,
69,494 and 56,740 SARs were exercised at weighted-average exercise prices of
$15.68 and $15.63; there were no exercises in 1995. There were no grants of SARs
in 1996, 1995 or 1994.
34
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All Tables in Millions of Dollars, Except Per Share Amounts)
Stock Award Plan
Under the 1990 Stock Award Plan, all officers and employees of the company
are eligible to receive shares of CSX common stock as an incentive award and
certain key employees are eligible to receive them as a deferral award. All
awards of common stock are issued based on terms and conditions approved by the
company's board of directors. At Dec. 27, 1996, there were 1,340,369 shares
reserved for issuance under this Plan, of which 513,369 were available for new
grants. In 1996 and 1995, respectively, 633,587 shares and 348,278 shares were
granted under the Plan. The weighted-average fair value of those shares was
$45.63 for 1996 and $35.78 for 1995.
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 the company's
common stock at market value by payroll deductions. To encourage stock
ownership, 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. Sales of stock prior to the
completion of the holding period result in forfeiture of the matching stock
purchase. Officers and key employees who qualify for the Stock Purchase and Loan
Plan are not eligible to participate in this Plan. At Dec. 27, 1996, there were
706,899 shares of common stock available for purchase under this Plan. Employees
purchased 40,985 shares in 1996 and 46,224 shares in 1995 under the plan at
weighted-average market prices of $47.39 and $40.31 for 1996 and 1995,
respectively.
The company also maintains the Employees Stock Purchase and Dividend
Reinvestment Plan and the Shareholders Dividend Reinvestment Plan, adopted in
1981, under which 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 stock ownership, employees receive a
5% discount on all purchases under this program. At Dec. 27, 1996, there were
5,128,605 shares reserved for issuance under these Plans.
Stock Plan for Directors
The Stock Plan for Directors, approved by the shareholders in 1992, governs
in part the manner in which directors' fees and retainers are paid. A minimum of
40% of the retainer fees must be paid in common stock of the company. In
addition, 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
Dec. 27, 1996, there were 959,236 shares of common stock reserved for issuance
under this Plan.
NOTE 12. FAIR VALUE OF FINANCIAL INSTRUMENTS.
Fair values of the company's financial instruments are estimated by
reference to quoted prices from market sources and financial institutions, as
well as other valuation techniques. Long-term debt and the company's investment
in Conrail common stock are the only financial instruments of the company with
fair values significantly different from their carrying amounts. At Dec. 27,
1996, the fair value of long-term debt, including current maturities, was $4.56
billion, compared with a carrying amount of $4.43 billion. At Dec. 29, 1995, the
fair value of long-term debt, including current maturities, was $2.94 billion,
compared with a carrying amount of $2.71 billion. The fair value of long-term
debt has been estimated using discounted cash flow analyses based upon the
company's current incremental borrowing rates for similar types of financing
arrangements.
The company's investment in approximately 17.9 million shares of Conrail
common stock was acquired at a price of $110 per share, resulting in an
aggregate carrying amount of $1.965 billion. At Dec. 27, 1996, the closing
market price of Conrail common stock was $100 per share, resulting in an
aggregate market value of $1.786 billion. As of Dec. 27, 1996, the terms of the
voting trust agreement under which the shares were held prohibited the company
from selling any of the Conrail shares without Conrail's written approval prior
to the earlier of Dec. 31, 1998, or a regulatory decision by the STB that denies
completion of the company's merger with Conrail under the terms contemplated at
that date.
The company had no significant hedging or derivative financial instruments
employed at Dec. 27, 1996, or Dec. 29, 1995.
35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 13. EMPLOYEE BENEFIT PLANS.
Pension Plans
The company sponsors defined benefit pension plans, principally for
salaried personnel. The plans provide eligible employees with retirement
benefits based principally on years of service and compensation rates near
retirement. Annual contributions to the plans are sufficient to meet 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:
1996 1995 1994
---- ---- ----
Service Cost $ 37 $ 28 $ 36
Interest Cost on Projected Benefit Obligation 93 91 89
Actual Return on Plan Assets (89) (190) (10)
Net Amortization and Deferral 18 117 (45)
Foreign Plans 4 4 4
---- ----- ----
Pension Expense $63 $ 50 $ 74
==== ===== ====
The funded status of the plans and the amounts reflected in the accompanying
statement of financial position at year-end are:
<TABLE>
<CAPTION>
Assets Exceed Benefits Benefits Exceed Assets
(at Valuation Date) (at Valuation Date)
Sept. 30, Dec. 29, Sept. 30, Dec. 29,
1996 1995 1996 1995
--------- -------- --------- --------
<S> <C>
Assets and Obligations --
Vested Benefits $44 $24 $1,161 $1,086
Non-Vested Benefits 1 1 59 69
--- --- ------ ------
Accumulated Benefit Obligation 45 25 1,220 1,155
Effect of Anticipated Future Salary Increases 1 1 105 122
--- --- ------ ------
Projected Benefit Obligation 46 26 1,325 1,277
Fair Value of Plan Assets 63 39 1,047 957
--- --- ------ ------
Funded Status 17 13 (278) (320)
Unrecognized Initial Net Obligation (Asset) -- (3) 18 25
Unrecognized Prior Service Cost 1 2 (3) 11
Unrecognized Net Loss 6 4 257 276
Recognition of Minimum Liability -- -- (176) (200)
Cash Contributions, Oct. 1 through Year-End -- * 2 *
--- --- ------ ------
Net Pension Asset (Obligation) at Year-End $24 $16 $ (180) $ (208)
=== === ====== =======
</TABLE>
* In 1996, the company changed the measurement date for pension assets and
liabilities from the end of the fiscal year to Sept. 30. The change in
measurement date had no effect on 1996 or prior years' pension expense.
36
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All Tables in Millions of Dollars, Except Per Share Amounts)
Pension expense is determined based upon an actuarial valuation as of the
beginning of each year. The following actuarial assumptions were used in
determining net pension expense and projected benefit obligations:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C>
Discount Rate at Valuation Date 7.50% 7.50% 8.25%
Estimated Long-Term Rate of Salary Increases at Valuation Date 5.00% 5.00% 5.00%
Expected Long-Term Rate of Return on Assets During the Period 9.50% 9.75% 8.75%
</TABLE>
The aggregate minimum pension liability was reduced by $24 million in 1996,
primarily due to the increase in fair value of plan assets.
Savings Plans
The company maintains savings plans for virtually all full-time salaried
employees and certain employees covered by collective bargaining agreements.
Eligible employees may contribute from 1% to 15% of their annual compensation in
1% multiples to these plans. The company 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, the
company contributes fixed amounts for each participating employee covered by
certain collective bargaining agreements. Expense associated with these plans
was $23 million, $29 million and $31 million for 1996, 1995 and 1994,
respectively.
Other Post-Retirement Benefit Plans
In addition to the defined benefit pension plans, the company sponsors three
plans that provide medical and life insurance benefits to most full-time
salaried employees upon their retirement. The post-retirement medical plans are
contributory, with retiree contributions adjusted annually, and contain other
cost-sharing features such as deductibles and coinsurance. The net benefit
obligation for medical plans anticipates future cost-sharing changes consistent
with the company's expressed intent to increase retiree contribution rates
annually in line with expected medical cost inflation rates. The life insurance
plan is non-contributory.
The company's current policy is to fund the cost of the post-retirement
medical and life insurance benefits on a pay-as-you-go basis, as in prior years.
The amounts recorded for the combined plans in the company's statement of
financial position at Dec. 27, 1996, and Dec. 29, 1995, are as follows:
<TABLE>
<CAPTION>
Medical Life Insurance
(At Valuation Date) (At Valuation Date)
Sept. 30, Dec. 29, Sept. 30, Dec. 29,
1996 1995 1996 1995
--------- -------- --------- --------
<S> <C>
Accumulated Post-Retirement Benefit Obligation:
Retirees $214 $188 $60 $69
Fully Eligible Active Participants 34 30 3 3
Other Active Participants 38 45 2 3
---- ---- --- ---
Accumulated Post-Retirement Benefit Obligation 286 263 65 75
Unrecognized Prior Service Cost 10 17 4 5
Unrecognized Net (Loss) Gain (48) (41) 1 (11)
Claim Payments, Oct. 1 through Year-End (6) * (1) *
---- ---- --- ---
Net Post-Retirement Benefit Obligation at Year-End $242 $239 $69 $69
==== ==== === ===
</TABLE>
* In 1996, the company changed the measurement date for valuing its
post-retirement benefit obligation to Sept. 30. The change in measurement
date had no effect on 1996 or prior years' net expense for post-retirement
benefits.
37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All Tables in Millions of Dollars, Except Per Share Amounts)
Net expense for post-retirement benefits was $30 million, $27 million and
$29 million for 1996, 1995 and 1994, respectively. The net post-retirement
benefit obligation was determined using the assumption that the health care cost
trend rate for medical plans was 10% for 1996-1997, decreasing gradually to 5.5%
by 2005 and remaining at that level thereafter. A 1% increase in the assumed
health care cost trend rate would increase the accumulated post-retirement
benefit obligation for medical plans as of Dec. 27, 1996, by $21 million and net
post-retirement benefit expense for 1996 by $3 million. The discount rate used
in determining the accumulated post-retirement benefit obligation was 7.50% for
1996 and 1995, and 8.25% for 1994.
Other Plans
Under collective bargaining agreements, the company participates in a number
of union-sponsored, multiemployer 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 multiemployer 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 $224 million, $239 million and $209
million, respectively, were made to these plans in 1996, 1995 and 1994.
NOTE 14. COMMITMENTS AND CONTINGENCIES.
Lease Commitments
The company 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 Dec. 27, 1996, minimum building and equipment
rentals under non-cancelable operating leases totaled approximately $418 million
for 1997, $390 million for 1998, $337 million for 1999, $286 million for 2000,
$272 million for 2001 and $2.2 billion thereafter.
Rent expense on operating leases, including net daily rental charges on
railroad operating equipment of $245 million, $257 million and $258 million in
1996, 1995 and 1994, respectively, amounted to $1.2 billion in 1996 and 1995,
and $1.1 billion in 1994.
Purchase Commitments
CSXT entered into agreements during 1993 and 1996 to purchase 380
locomotives. These large orders cover normal locomotive replacement needs for
1994 through 1997 and introduced alternating current traction technology to the
locomotive fleet. CSXT has taken delivery of 50 direct current and 255
alternating-current locomotives through Dec. 27, 1996. The remaining 75
alternating-current units will be delivered in 1997.
During 1994 and 1995, Sea-Land entered into agreements for the construction
of nine high-performance, fuel-efficient container vessels. Estimated capital
expenditures for these vessels total $525 million, of which $312 million has
been expended through Dec. 27, 1996, with the remaining $213 million expected to
be incurred over the next two years. Five of the vessels have been delivered
through Dec. 27, 1996.
Other Commitments
During 1995, CSXT entered into an agreement with a major
telecommunications vendor to supply and manage its telecommunications needs
through May 2005. As discussed in Note 3 - Restructuring Charge, the agreement
was amended in 1996 to significantly reduce the service period, increase
contractual payment amounts over the revised service period, and relieve
the vendor of obligations to replace certain telecommunications technology.
The amended agreement provides for a revised termination date of June 30, 1998,
and requires minimum payments totaling $56 million over the remaining service
period.
38
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All Tables in Millions of Dollars, Except Per Share Amounts)
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 were immaterial to the company's results of operations
and financial position at Dec. 27, 1996.
The company has been advised that activities of a subsidiary that
administered student loans and that was sold by the company in 1992 are under
review to determine whether, and to what extent, damages should be asserted
against the company for government insurance payments on uncollected loans
related to alleged processing deficiencies or errors that may have occurred
prior to the time the subsidiary was sold. The company believes it has no
material liability for any claim that might be asserted, but the final outcome
of the review and the amount of potential damages are not yet reasonably
estimable. Based upon information currently available to the company, it is
believed any adverse outcome will not be material to the company's results of
operations or financial position.
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 portion of the
insurance coverage, $25 million limit above $25 million per occurrence from rail
and certain other operations, is provided by a company partially owned by CSX.
CSXT is a party to various proceedings involving private parties and
regulatory agencies related to environmental issues. CSXT has been identified as
a potentially responsible party (PRP) at approximately 105 environmentally
impaired sites that are or may be subject to remedial action under the Federal
Superfund statute (Superfund) or similar state statutes. A number of these
proceedings are based on allegations that CSXT, or its predecessor railroads,
sent hazardous substances to the facilities in question for disposal. Such
proceedings arising under Superfund or similar state statutes can 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.
CSXT is involved in a number of administrative and judicial proceedings and
other clean-up efforts at approximately 270 sites, including the sites addressed
under the Federal Superfund statute or similar state statutes, at which it is
participating in the study and/or clean-up of alleged environmental
contamination. The assessment of the required response and remedial costs
associated with most sites is extremely complex. Cost estimates are based on
information available for each site, financial viability of other PRPs, where
available, and existing technology, laws and regulations. CSXT's best estimates
of the allocation method and percentage of liability when other PRPs are
involved are based on assessments by consultants, agreements among PRPs, or
determinations by the U.S. Environmental Protection Agency or other regulatory
agencies.
At least once each quarter, CSXT 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 PRPs at the location. The ultimate liability for remediation can
be difficult to determine with certainty because of the number and
creditworthiness of PRPs involved. Through the assessment process, CSXT
monitors the creditworthiness of such PRPs in determining ultimate liability.
Based upon such reviews and updates of the sites with which it is involved,
CSXT has recorded, and reviews at least quarterly for adequacy, reserves to
cover estimated contingent future environmental costs with respect to such
sites. The recorded liabilities for estimated future environmental costs at Dec.
27, 1996, and Dec. 29, 1995, were $117 million and $137 million, respectively.
These recorded liabilities include amounts representing CSXT's estimate of
unasserted claims, which CSXT believes to be immaterial. 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 any
significant ongoing monitoring costs, but excludes any anticipated insurance
recoveries. The majority of the Dec. 27, 1996, environmental liability is
expected to be paid out over the next five to seven years, funded by cash
generated from operations.
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. In addition, latent conditions at
any given location could result in exposure, the amount and materiality of which
cannot presently be reliably estimated. 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, and that the ultimate liability for these matters will not
materially affect its overall results of operations and financial condition.
39
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All Tables in Millions of Dollars, Except Per Share Amounts)
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 15. 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: 1996 1995(b) 1994(b)
------ ------- -------
Operating Revenue $4,051 $4,008 $3,492
Operating Expense-- Public 3,648 3,755 3,279
-- Affiliated (a) 122 107 57
------ ------- ------
Operating Income $ 281 $ 146 $ 156
====== ====== ======
Net Earnings $ 84 $ 86 $ 73
====== ====== ======
Dec. 27, Dec. 29,
Summary of Financial Position: 1996 1995
-------- --------
Current Assets -- Public $ 747 $ 713
-- Affiliated (a) 1 2
Other Assets -- Public 1,829 1,674
-- Affiliated (a) 14 --
Current Liabilities -- Public 725 684
-- Affiliated (a) 115 48
Other Liabilities -- Public 756 718
-- Affiliated (a) 347 200
Equity 648 739
======== =======
(a) Amounts represent activity with CSX affiliated companies.
(b) Beginning in 1996, Sea-Land assumed primary responsibility for
direct purchase of transportation from non-affiliated rail carriers. These
services were previously purchased through a CSX-affiliated company.
Operating expense for 1995 and 1994 has been restated to report this
activity as public expense.
SL Alaska Trade Company (SLATCO) is a special purpose, unconsolidated
subsidiary of Sea-Land with trust-related assets of $117 million securing $106
million of debt maturing on Oct. 1, 2005. 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.
40
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All Tables in Millions of Dollars, Except Per Share Amounts)
NOTE 16. BUSINESS SEGMENTS.
<TABLE>
<CAPTION>
Operating Revenue Operating Income
Fiscal Years Ended Fiscal Years Ended Identifiable Assets
-------------------------------- ------------------------------- ---------------------
Dec. 27, Dec. 29, Dec. 30, Dec. 27, Dec. 29, Dec. 30, Dec. 27, Dec. 29,
1996 1995 1994 1996 1995 1994 1996 1995
-------- -------- -------- -------- --------- -------- -------- ---------
<S> <C>
Transportation $10,536 $10,304 $9,409 $1,522 $1,126 $1,182 $16,071 $13,304
======= ======= ====== ====== ====== ====== ======= =======
Non-Transportation Segment $ 220 $ 200 $ 199 43 46 50 $ 894 $ 978
======= ======= ====== ======= =======
Other (Net) -- 72 55
------ ------ ------
Total Other Income 43 118 105
Interest Expense 249 270 281
------ ------ ------
Earnings Before Income Taxes $1,316 $ 974 $1,006
====== ======= ======
</TABLE>
The principal components of the business segments are:
Transportation - Rail, container-shipping, barge, intermodal and contract
logistics operations. The container-shipping operation reported revenue of $4.1
billion for 1996, $4.0 billion for 1995 and $3.5 billion for 1994. Approximate
revenue allocation by port of origin for 1996, 1995 and 1994 was: North America
- -- 43%; Asia -- 32%; Europe -- 17%; and Other -- 8%. Foreign business activities
outside the container-shipping operation do not contribute materially to the
company's financial results.
Non-Transportation - Real estate sales and rentals, resort management and resort
operations.
NOTE 17. QUARTERLY DATA (Unaudited).
1996
-----------------------------------
1st 2nd(a) 3rd 4th
------ ------ ------ ------
Operating Revenue $2,514 $2,672 $2,647 $2,703
====== ====== ====== ======
Operating Income $ 296 $ 408 $ 392 $ 426
====== ====== ====== ======
Net Earnings $ 146 $ 234 $ 222 $ 253
====== ====== ====== ======
Earnings Per Share $ .69 $ 1.11 $ 1.04 $ 1.17
====== ====== ====== ======
41
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All Tables in Millions of Dollars, Except Per Share Amounts)
1995
------------------------------------
1st 2nd(c) 3rd 4th(d)
------ ------ ------ ------
Operating Revenue $2,444 $2,549 $2,601 $2,710
====== ====== ====== ======
Operating Income $ 276 $ 84 $ 369 $ 397
====== ====== ====== ======
Net Earnings $ 121 $ 19 $ 202 $ 276
====== ====== ====== ======
Earnings Per Share(b) $ .58 $ .09 $ .96 $ 1.31
====== ====== ====== ======
(a) In the second quarter of 1996, the company changed its earnings presentation
to exclude non-transportation activities from operating revenue and expense.
These activities, principally real estate and resort operations, are now
included in other income in the consolidated statement of earnings. Amounts
for prior quarters have been restated to conform to the new presentation.
(b) Earnings per share amounts for 1995 have been restated to reflect the
2-for-1 stock split distributed to shareholders in December 1995.
(c) The company recorded a $257 million pretax restructuring charge in the
second quarter of 1995 to recognize the estimated costs of initiatives at
its rail and container-shipping units to revise, restructure and consolidate
specific operations and administrative functions. The charge included a
write-down of technologically obsolete telecommunications assets and
provisions for employee separations and exit obligations. The restructuring
charge reduced net earnings by $160 million, 76 cents per share.
(d) In December 1995, the company recognized a net investment gain of $77
million on the issuance of an equity interest in a Sea-Land terminal and
related operations in Asia and the write-down of various investments. The
equity interest portion of the transaction resulted in proceeds of $105
million, a pretax gain of $93 million, and increased net earnings by $61
million, 29 cents per share.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of CSX Corporation
We have audited the accompanying consolidated statements of financial
position of CSX Corporation and subsidiaries as of December 27, 1996 and
December 29, 1995, and the related consolidated statements of earnings, cash
flows, and changes in shareholders' equity for each of the three fiscal years in
the period ended December 27, 1996. 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 19-42) present fairly, in all material respects, the
consolidated financial position of CSX Corporation and subsidiaries at December
27, 1996 and December 29, 1995, and the consolidated results of their operations
and their cash flows for each of the three fiscal years in the period ended
December 27, 1996, in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
---------------------
Ernst & Young LLP
Richmond, Virginia
January 31, 1997, except for Note 2,
as to which the date is March 7, 1997
42
<PAGE>
BOARD OF DIRECTORS AND CORPORATE OFFICERS
BOARD OF DIRECTORS
Elizabeth E. Bailey(b,d)
John C. Hower Professor of Public Policy and Management
The Wharton School, University of Pennsylvania, Philadelphia, Pa.
Robert L. Burrus Jr.(d,e)
Partner and Chairman
McGuire, Woods, Battle & Boothe, Richmond, Va.
Bruce C. Gottwald(d,e)
Chairman and CEO
Ethyl Corporation, Richmond, Va.
John R. Hall(b,c)
Retired Chairman and CEO
Ashland Inc., Ashland, Ky.
Robert D. Kunisch(a,c)
Chairman, President and CEO
PHH Corporation, Hunt Valley, Md.
Hugh L. McColl Jr.(b,d)
CEO
NationsBank Corp., Charlotte, N.C.
James W. McGlothlin(a,e)
Chairman and CEO
The United Company, Bristol, Va.
Southwood J. Morcott(a,b,d)
Chairman and CEO
Dana Corporation, Toledo, Ohio
Charles E. Rice(a,b,c)
Chairman and CEO
Barnett Banks Inc., Jacksonville, Fla.
William C. Richardson(c,e)
President and CEO
W.K. Kellogg Foundation, Battle Creek, Mich.
Frank S. Royal, M.D.(c)
Physician and Health Care Authority, Richmond, Va.
John W. Snow(a)
Chairman, President and CEO
CSX Corporation, Richmond, Va.
Key to committees of the board
a - Executive b - Audit c - Compensation d - Pension
e - Organization & Corporate Responsibility
CSX CORPORATE OFFICERS
John W. Snow, 57* Chairman, President and CEO, elected February 1991
Mark G. Aron, 54* Executive Vice President-Law and Public Affairs, elected April
1995(1)
Paul R. Goodwin, 54* Executive Vice President-Finance and Chief Financial
Officer, elected April 1995(2)
Arnold I. Havens, 49 Vice President-Federal Affairs, elected February 1997
Thomas E. Hoppin, 55 Vice President-Corporate Communications, elected July 1986
Richard H. Klem, 52* Vice President-Corporate Strategy, elected May 1992(3)
William F. Miller, 54 Vice President-Audit and Advisory Services, elected
September 1996
Jesse R. Mohorovic, 54* Vice President-Executive Department, elected February
1995(4)
James P. Peter, 46 Vice President-Taxes, elected June 1993
Woodruff M. Price, 61 Vice President-Public Policy, elected February 1997
James L. Ross, 58* Vice President and Controller, elected May 1996(5)
Alan A. Rudnick, 49 Vice President-General Counsel and Corporate Secretary,
elected June 1991
Michael J. Ruehling, 49 Vice President-State Relations, elected January 1995
James A. Searle Jr., 50 Vice President-Administration, elected April 1996
Peter J. Shudtz, 48 General Counsel, elected September 1991
William H. Sparrow, 53* Vice President-Financial Planning, elected February
1996(6)
Gregory R. Weber, 51* Vice President and Treasurer, elected May 1996(7)
43
<PAGE>
UNIT OFFICERS
CSX TRANSPORTATION INC.
Alvin R. (Pete) Carpenter, 55* President and CEO, since January 1992
John Q. Anderson, 45* Executive Vice President-Sales & Marketing, since May
1996(8)
Donald D. Davis, 57* Senior Vice President-Employee Relations, since November
1990
Gerald L. Nichols, 61* Executive Vice President and COO, since February
1995(9) Michael J. Ward, 46* Executive Vice President-Finance and CFO, since
June 1996(10)
SEA-LAND SERVICE INC.
John P. Clancey, 52* President and CEO, since August 1991
Andrew B. Fogarty, 51* Senior Vice President-Finance and Planning, since June
1996(11)
Robert J. Grassi, 50* Senior Vice President-Atlantic, AME Services, since June
1996(12)
Richard E. Murphy, 52* Senior Vice President-Corporate Marketing, since June
1996(13)
Charles G. Raymond, 53* Senior Vice President and Chief Transportation Officer,
since May 1995(14)
CSX INTERMODAL INC.
Ronald T. Sorrow, 50* Chairman, President and CEO, since January 1997(15)
AMERICAN COMMERCIAL LINES INC.
Michael C. Hagan, 50* President and CEO, since May 1992(16)
CUSTOMIZED TRANSPORTATION INC.
David G. Kulik, 48 President and CEO, since December 1994
THE GREENBRIER
Ted J. Kleisner, 52 President and Managing Director, since January 1989
YUKON PACIFIC CORPORATION
Jeff B. Lowenfels, 48 President and CEO, since February 1995
* Executive officers of the corporation. Executive officers of CSX Corporation
are elected by the CSX board of directors and hold office until the next
annual election of officers. Officers of CSX business units are elected
annually by the respective boards of directors of the business units. There
are no family relationships or any arrangement or understanding between any
officer an any other person pursuant to which such officer was selected. All
of the executive officers listed have held their current positions for at
least 5 years except as noted below:
1) Prior to April 1995, Mr. Aron served as Sr. VP-Law and Public Affairs.
2) Prior to April 1995, Mr. Goodwin served as an officer of CSXT as Exec.
VP-Finance and Administration from February 1995 to April 1995; as Sr.
VP-Finance from April 1992 to February 1995; and prior thereto as Sr.
VP-Finance.
3) Prior to May 1992, Mr. Klem served as VP-Economic Analysis and Corporate
Strategy.
4) Prior to February 1995, Mr. Mohorovic served as VP-Corporate Communications,
CSXT, from April 1994 to February 1995, and prior thereto as VP-Corporate
Communications, Sea-Land.
5) Prior to May 1996, Mr. Ross served as CSX VP-Special Projects from October
1995 to May 1996, and prior thereto as a Partner with Ernst & Young, LLP.
6) Prior to February 1996, Mr. Sparrow served as VP-Capital Planning and
Budgeting from May 1994 to February 1996 and prior thereto as VP and
Treasurer.
7) Prior to May 1996, Mr. Weber served as VP, Controller and Treasurer, from May
1994 to May 1996, and prior thereto as VP and Controller.
8) Prior to May 1996, Mr. Anderson served as Sr. VP for Burlington Northern
Santa Fe Railway from 1995 to May 1996 and prior thereto as Executive VP of
Burlington Northern Railroad.
9) Prior to February 1995, Mr. Nichols served as Sr. VP-Administration of CSXT.
10) Prior to June 1996, Mr. Ward served as an officer of CSXT as Sr. VP-Finance
from April 1995 to June 1996; General Manager-C&O Business Unit from 1994 to
April 1995; and prior thereto as VP-Coal.
11) Prior to June 1996, Mr. Fogarty served as CSX VP-Audit and Advisory
Services from March 1995 to June 1996, and prior thereto as CSX
VP-Executive Department.
12) Prior to June 1996, Mr. Grassi served as Sea-Land Sr. VP-Finance and
Planning.
13) Prior to June 1996, Mr. Murphy served as Sea-Land VP-Atlantic and AME
from 1995 to June 1996; Sr. VP-Pacific Services from 1993 to 1995; and
prior thereto as VP-Pacific Services.
14) Prior to May 1995, Mr. Raymond served as Sea-Land Sr. VP-Operations and
Inland Transportation.
15) Prior to January 1997, Mr. Sorrow served as CSXI President and CEO
from January 1996 to January 1997 and prior thereto as VP-Sales and
Marketing of CSXI.
16) Prior to May 1992, Mr. Hagan served as President and COO of ACL.
44
<PAGE>
CORPORATE INFORMATION
Headquarters
One James Center
901 East Cary Street
Richmond, VA 23219-4031
(804) 782-1400
(http://www.csx.com)
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 Stocks
A total of 300 million shares of common stock is authorized, of which
216,885,140 shares were outstanding as of Dec. 27, 1996. 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 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.
Closing Price of Common Stock at Fiscal Year-End
(Dollars)
[GRAPH]
'92 '93 '94 '95 '96
$34.38 $40.94 $34.82 $45.63 $42.88
Common Stock Price Range and Dividends Per Share
Fiscal Year 1996
---------------------------------------
Quarter 1st 2nd 3rd 4th
---------------------------------------
Market Price
High $48.50 $53.13 $53.00 $52.38
Low $42.25 $44.13 $42.25 $42.50
Dividends Per Share $ .26 $ .26 $ .26 $ .26
=======================================
Fiscal Year 1995
---------------------------------------
Quarter 1st 2nd 3rd 4th
Market Price ---------------------------------------
High $39.88 $41.00 $44.63 $46.13
Low $34.63 $36.00 $37.44 $39.06
Dividends Per Share $ .22 $ .22 $ .22 $ .26
=======================================
Fiscal Year 1994
--------------------------------------
Quarter 1st 2nd 3rd 4th
Market Price --------------------------------------
High $46.19 $41.63 $39.57 $37.25
Low $39.94 $35.50 $33.00 $31.57
Dividends Per Share $ .22 $ .22 $ .22 $ .22
=======================================
Fiscal Year 1993
---------------------------------------
Quarter 1st 2nd 3rd 4th
Market Price ---------------------------------------
High $39.98 $39.07 $40.13 $44.07
Low $33.57 $33.19 $33.94 $37.44
Dividends Per Share $ .19 $ .19 $ .19 $ .22
=======================================
Fiscal Year 1992
--------------------------------------
Quarter 1st 2nd 3rd 4th
Market Price --------------------------------------
High $31.00 $33.75 $33.88 $36.82
Low $27.44 $27.75 $28.32 $27.25
Dividends Per Share $ .19 $ .19 $ .19 $ .19
=======================================
(All data adjusted for 2-for-1 split of common stock effective Dec. 21, 1995.)
Common Stock Shares Outstanding, Number of Registered Shareholders
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C>
Number of shareholders: 55,176 55,528 57,355 59,714 62,820
======= ======= ======= ======= =======
</TABLE>
Shares Outstanding as of Jan. 24, 1997: 216,898,817
Common Stock Shareholders as of Jan. 24, 1997: 55,074
45
<PAGE>
SHAREHOLDER INFORMATION
Shareholder Services
Shareholders with questions about their accounts should contact the transfer
agent at the address or telephone number shown below.
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 A3504
Chicago, IL 60690
(800) 521-5571
(312) 461-4061, 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
Elisabeth Gabrynowicz
Director-Corporate
Communications
P.O. Box 85629
Richmond, VA 23285-5629
(804) 782-6775
Investor Relations
Joseph C. Wilkinson
Director-Investor Relations
CSX Corporation
P.O. Box 85629
Richmond, VA 23285-5629
(804) 782-1553
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.
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
above.
46
<PAGE>
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 14th day of
March 1997.
CSX Corporation
By: /s/ JAMES L. ROSS
-------------------------------------
James L. Ross
Vice President and Controller
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)*
Paul R. Goodwin Executive Vice President-Finance
(Principal Financial Officer)*
Elizabeth E. Bailey Director*
Robert L. Burrus Jr. Director*
Bruce C. Gottwald Director*
John R. Hall Director*
Robert D. Kunisch Director*
Hugh L. McColl Jr. Director*
James W. McGlothlin Director*
Southwood J. Morcott Director*
Charles E. Rice Director*
William C. Richardson Director*
Frank S. Royal, M.D. Director*
/s/ PETER J. SHUDTZ
- -----------------------------------
* Peter J. Shudtz, Attorney-in-Fact
March 14, 1997
47
<PAGE>
CSX CORPORATION
Statement of Differences
1. The printed Annual Report and Form 10-K contains numerous graphs and
photographs not incorporated into the electronic Form 10-K.
2. The 10-K cover sheet and index, presented on pages 43 and 44 of the
printed document, have been repositioned to the front of the electronic
document.
48
<PAGE>
Index to Exhibits
Description
(3.1) Articles of Incorporation (incorporated by reference
as Exhibit 3 to Form 10-K dated Feb. 15, 1991)
(3.2) Bylaws
(10.1) CSX Stock Plan for Directors*
(10.2) Special Retirement Plan for CSX Directors*
(10.3) Corporate Director Deferred Compensation Plan*
(10.4) CSX Directors' Charitable Gift Plan* (incorporated by
reference to Exhibit 10.4 to Form 10-K dated March 4, 1994)
(10.5) CSX Directors' Matching Gift Plan*
(10.6) Form of Agreement with J.W. Snow, A.R. Carpenter,
J.P. Clancey, P.R. Goodwin and G.L. Nichols*
(incorporated by reference to Exhibit 10.6 to Form 10-K
dated March 3, 1995)
(10.7) Form of Amendment to Agreement with A.R. Carpenter,
P.R. Goodwin and G.L. Nichols*
(10.8) Form of Amendment to Agreement with J.P. Clancey*
(10.9) Form of Retention Agreement with A.R. Carpenter
and J.P. Clancey* (incorporated by reference to
Exhibit 10.3 to Form 10-K dated Feb. 28, 1992)
(10.10) Agreement with J.W. Snow* (incorporated by reference
to Exhibit 10.9 to Form 10-K dated March 4, 1994)
(10.11) Amendment to Agreement with J.W. Snow*
(10.12) Agreement with J.W. Snow*
(10.13) Loan Agreement with A.R. Carpenter*
(incorporated by reference to Exhibit 10.9 to Form 10-K
dated March 1, 1996)
(10.14) Stock Purchase and Loan Plan* (incorporated by reference to
Exhibit 99 to Form S-8 dated July 31, 1996)
(10.15) 1987 Long-Term Performance Stock Plan*
(10.16) 1985 Deferred Compensation Program for Executives
of CSX Corporation and Affiliated Companies*
(10.17) Supplementary Savings Plan and Incentive Award
Deferral Plan for Eligible Executives of CSX
Corporation and Affiliated Companies*
(10.18) Special Retirement Plan of CSX Corporation and
Affiliated Companies*
(10.19) Supplemental Retirement Plan of CSX Corporation
and Affiliated Companies*
(10.20) 1994 Senior Management Incentive Compensation Plan* (incorporated by
reference to Exhibit 10.16 to Form 10-K dated March 3, 1995)
(21) Subsidiaries of the Registrant
(23) Consent of Independent Auditors
(27) Financial Data Schedule -- Schedule II
* Management Contract or Compensatory Plan or Arrangement.
Exhibit 3.2
BY-LAWS
OF
CSX CORPORATION
(Amended as of April 25, 1996)
--------------------
ARTICLE I.
Stockholders' Meetings.
SECTION 1. Annual Meeting. The annual meeting of the stockholders
of the Corporation shall be held on such date in March, April, May or June as
the Board of Directors may designate, either within or without the State of
Virginia.
SECTION 2. Special Meetings. Special meetings of the stockholders
may be called from time to time by the Board of Directors or the Chief Executive
Officer of the Corporation. Special meetings shall be held solely for the
purposes specified in the notice of meeting.
SECTION 3. Time and Place. The time and place of each meeting of
the stockholders shall be stated in the notice of the meeting.
SECTION 4. Quorum. The holders of a majority of the outstanding
shares of Capital Stock entitled to vote shall constitute a quorum at any
meeting of the stockholders. Less than a quorum may adjourn the meeting to a
fixed time and place, no further notice of any adjourned meeting being required.
Each stockholder shall be entitled to one vote in person or by proxy for each
share entitled to vote then outstanding and registered in his name on the books
of the Corporation.
SECTION 5. Notice of Meeting and Record Date. Notice shall be
delivered by the Corporation not less than ten (10) days nor more than sixty
(60) days before the date of the meeting, either personally or by mail, to each
stockholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail with
postage thereon prepaid, addressed to the stockholder at his address as it
appears on the stock transfer books of the Corporation. Such further notice
shall be given as may be required by law. Notice of meetings may be waived in
accordance with law. Any previously scheduled meeting of the stockholders may be
postponed, by resolution of the Board of Directors at any time prior to the time
previously scheduled for such meeting of stockholders. The Board of Directors
may fix in advance a date to determine shareholders entitled to notice or to
vote at any meeting of shareholders, to receive any dividend, or for any
purpose, such date to be not more than 70 days before the meeting or action
requiring a determination of shareholders.
SECTION 6. Conduct of Meeting. The Chairman of the Board shall
preside over all meetings of the stockholders and prescribe rules of procedure
therefor. If he is not present, or if there is none in office, the President
shall preside. If the Chairman of the Board and the President are not present, a
Vice President shall preside, or, if none be present, a Chairman shall be
elected by the meeting. The Secretary of the Corporation shall act as Secretary
of the meeting, if he is present. If he is not present, the Chairman shall
appoint a Secretary of the meeting. The Chairman of the meeting shall appoint
one or more inspectors of election who shall determine the qualification of
voters, the validity of proxies, and the results of ballots. The Chairman of the
meeting or a majority of the shares so represented may adjourn the meeting from
time to time, whether or not there is a quorum, and may determine the date, time
and place that a meeting so adjourned is to reconvene. The Chairman of the
meeting shall determine the time reasonably allotted to each speaker at the
meeting.
<PAGE>
SECTION 7. Notice of Stockholder Business. At an annual meeting of
the stockholders, only such business shall be conducted as shall have been
brought before the meeting (a) by or at the direction of the Board of Directors
or (b) by any stockholder of the Corporation who complies with the notice
procedures set forth in this Section 7. For business to be properly brought
before an annual meeting by a stockholder, the stockholder must have given
timely notice thereof in writing to the Secretary of the Corporation. To be
timely, a stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the Corporation, not less than 30 days nor
more than 60 days prior to the meeting; provided, however, that in the event
that less than 40 days' notice or prior public disclosure of the date of the
meeting is given or made to the stockholders, notice by the stockholder to be
timely must be received not later than the close of business on the 10th day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure was made. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting (a) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (b) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business, (c) the class
and number of shares of the Corporation which are beneficially owned by the
stockholder and (d) any material interest of the stockholder in such business.
Notwithstanding anything in the By-laws to the contrary, no business shall be
conducted at an annual meeting except in accordance with the procedures set
forth in this Section 7. The Chairman of an annual meeting shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting and in accordance with the provisions of this Section
7, and if he should so determine, he shall so declare to the meeting and any
such business not properly brought before the meeting shall not be transacted.
ARTICLE II.
Board of Directors.
SECTION 1. Number, term and election. The Board of Directors shall
be elected at the annual meeting of the stockholders or at any special meeting
held in lieu thereof. The number of Directors shall be twelve. This number may
be increased or decreased at any time by amendment of these By-laws, but shall
always be a number of not less than four. No person shall be eligible for
election as a Director, nor shall any Director be eligible for reelection, if he
shall have attained the age of 70 years at the time of such election, except
that the Board, in its sole discretion, may waive such ineligibility for a
period not to exceed one year. Inside Directors, including Chief Executive
Officers, shall retire from the Board immediately upon leaving active service,
or age 65, whichever is first. Further, only CSX senior corporate officers shall
be eligible for election as Director. Outside Directors shall hold office until
removed or until the next annual meeting of the stockholders is held and their
successors are elected.
SECTION 2. Notice of Stockholder Nominees. Only persons who are
nominated in accordance with the procedures set forth in the By-laws shall be
eligible for election as Directors. Nominations of persons for election to the
Board of Directors of the Corporation may be made at a meeting of stockholders
(a) by or at the direction of the Board of Directors or (b) by any stockholder
of the Corporation entitled to vote for the election of Directors at the meeting
who complies with the notice procedures set forth in this Section 2. Nominations
by stockholders shall be made pursuant to timely notice in writing to the
Secretary of the Corporation. To be timely, a stockholder's notice shall be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than 30 days nor more than 60 days prior to the meeting;
provided, however, that in the event that less than 40 days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
2
<PAGE>
notice by the stockholder to be timely must be so received not later than the
close of business on the 10th day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was made. Such
stockholder's notice shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or reelection as a Director, all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of Directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a Director if elected); and (b) as to the
stockholder giving the notice (i) the name and address, as they appear on the
Corporation's books, of such stockholder and (ii) the class and number of shares
of the Corporation which are beneficially owned by such stockholder. At the
request of the Board of Directors any person nominated by the Board of Directors
for election as a Director shall furnish to the Secretary of the Corporation
that information required to be set forth in the stockholder's notice of
nomination which pertains to the nominee. No person shall be eligible for
election as Director of the Corporation unless nominated in accordance with the
procedures set forth in the By-laws. The Chairman of the meeting shall, if the
facts warrant, determine and declare to the meeting that a nomination was not
made in accordance with the procedures prescribed by the By-laws, and if he
should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
SECTION 3. Quorum. A majority of the Directors shall constitute a
quorum. Less than a quorum may adjourn the meeting to a fixed time and place, no
further notice of any adjourned meeting being required.
SECTION 4. Removal and vacancies. The stockholders at any meeting,
by a vote of the holders of a majority of all the shares of Capital Stock at the
time outstanding and having voting power, may remove any Director and fill any
vacancy. Vacancies arising among the Directors, including a vacancy resulting
from an increase by the Board of Directors in the number of directors, so long
as the increase so created is not more than two, may be filled by the remaining
Directors, though less than a quorum of the Board, unless sooner filled by the
stockholders. Vacancies filled by the Directors may be subject to such rules,
regulations, and criteria as the Board may from time to time prescribe.
SECTION 5. Meetings and notices. Regular meetings of the Board of
Directors shall be held each month, unless cancelled by the Board of Directors,
at such place and at such time as the Board of Directors may from time to time
designate. Special meetings of the Board of Directors may be held at any place
and at any time upon the call of the Chairman of the Board or of any three
members of the Board of Directors. Notice of any meetings shall be given by
mailing or delivering such notice to each Director at his residence or business
address or by telephoning or telegraphing it to him at least twenty-four hours
before the meeting. Any such notice shall state the time and place of the
meeting. Meetings may be held without notice if all of the Directors are present
or those not present waive notice before or after the meeting.
Any action required to be taken at a meeting of the Board may be
taken without a meeting if a consent in writing setting forth the action so to
be taken, shall be signed by all the Directors and filed with the Secretary.
Such consent shall have the same force and effect as a unanimous vote.
Any action required to be taken at a meeting of the Board may be
taken by means of a conference telephone or similar communications equipment
whereby all persons participating in the meeting can hear each other, and
participation by such means shall constitute presence in person at such meeting.
When such meeting is conducted, a written record shall be made of the action
taken at such meeting.
ARTICLE III.
Executive Committee.
SECTION 1. Number and Chairman. The Board of Directors shall by
vote of a majority of the whole number herein fixed designate an Executive
Committee, consisting of the Chairman of the Board, the President of the
Corporation, the Chairman of each of the Committees of the Board, and, for a
period determined by the Board of Directors not to exceed 12 months from
3
<PAGE>
termination of his or her service as Chairman of a Committee, any current member
of the Board of Directors who had been Chairman of a Committee of the Board. The
Chairman of the Board of Directors shall be the Chairman of the Committee.
SECTION 2. Authority and quorum. The Committee, when the Board of
Directors is not in session, shall have and may exercise all the authority of
the Board of Directors, except as may be prohibited by Section 13.1-40 of the
Code of Virginia, as it may from time to time be amended. A majority of the
Committee shall constitute a quorum for the transaction of business, and the
affirmative vote of the majority of those present shall be necessary for any
action by the Committee. The Committee shall cause to be kept a full and
accurate record of its proceedings at each meeting and report the same at the
next meeting of the Board. In the absence of the Chairman of the Committee, a
temporary chairman shall be designated by the Committee to preside at such
meeting.
SECTION 3. Meetings and notices. Meetings of the Committee may be
called at any time by the Chairman of the Board or any three members of the
Committee and shall be held at such time and place as shall be stated in the
notice of the meeting. Notice of any meeting of the Committee shall be given by
delivering or mailing such notice to each member of his residence or business
address or by telephoning or telegraphing it to him not less than twenty-four
hours before the meeting. Any such notice shall state the time and place of the
meeting. Meetings may be held without notice if all of the members of the
Committee are present or those not present waive notice before or after the
meeting.
Action may be taken by the Executive Committee without a meeting
in the manner provided by Section 4 of Article II.
SECTION 4. Removal. Members of the Committee may be removed as
members thereof and replaced by the affirmative vote of a majority of the
Directors in office at any regular or special meeting of the Board of Directors.
ARTICLE IV.
Committees of the Board.
(other than the Executive Committee)
The Board of Directors shall by vote of a majority of the whole
number herein fixed establish an Audit Committee, a Compensation Committee, an
Organization and Corporate Responsibility Committee, and a Pension Committee,
each committee consisting of at least two directors whose designation and terms
of office shall be by resolution of the Board. The Board may also create from
time to time such additional committees as it may deem appropriate. The
committees shall meet and perform such duties and functions as the Board may
prescribe.
ARTICLE V.
Officers.
At the first meeting of the Board of Directors held after the
annual meeting of the stockholders, the Board of Directors shall elect officers
of the Corporation as follows:
A Chairman of the Board, who shall be the
Chief Executive Officer,
4
<PAGE>
A President, who shall be the Chief Operating Officer,
A Vice Chairman,
One or more Vice Presidents, any of whom may be
designated as an Executive Vice President, a Senior
Vice President or a Vice President with a functional
title,
A General Counsel,
A Secretary, and
A Treasurer
All officers elected by the Board of Directors shall, unless
removed by the Board of Directors as hereinafter set forth, hold office until
the first meeting of the Board of Directors after the next annual meeting of the
stockholders and until their successors are elected. Any two or more offices may
be held by the same person, except the offices of President and Secretary.
The Chairman of the Board may appoint such additional subordinate
officers as he may deem necessary for the efficient conduct of the affairs of
the Corporation.
The powers, duties, and responsibilities of officers and employees
of the Corporation not prescribed in these By-laws shall be established from
time to time by the Board of Directors or by the Chairman of the Board.
Any officer shall be subject to removal at any time if elected by
the Board of Directors, by the affirmative vote of a majority of all of the
members of the Board of Directors, or, if appointed by the Chairman of the
Board, by the Chairman of the Board.
ARTICLE VI.
Chairman of the Board.
The Chairman of the Board of Directors shall be elected from among
the Directors. He shall preside at all meetings of the Board of Directors.
Subject to the direction of the Board of Directors, he shall have general
charge, control, and supervision of all the business and operations of the
Corporation.
The Board of Directors may elect a Vice Chairman of the Board from
among the members thereof. He shall have such powers, duties and
responsibilities as may be assigned to him by the Board of Directors or the
Chairman of the Board.
ARTICLE VII.
President.
The President shall be elected from among the Directors. He shall
have such powers, duties, and responsibilities as may be assigned to him by the
Board of Directors or the Chairman of the Board.
ARTICLE VIII.
Vice Presidents.
5
<PAGE>
The powers, duties, and responsibilities of the Vice Presidents
shall be fixed by the Chairman of the Board with the approval of the Board of
Directors. From time to time, the Board of Directors may assign to a Vice
President the duty of acting for the President in case of his absence or
inability to act.
ARTICLE IX.
General Counsel.
The General Counsel shall have general charge of the legal affairs
of the Corporation, and shall cause to be kept adequate records of all suits or
actions of every nature to which the Corporation may be a party or in which it
has an interest, with sufficient data to show the nature of the case and
proceedings therein. He shall prepare or cause to be prepared legal opinions on
any subject necessary for the affairs of the Corporation, and shall perform such
other duties as the Board of Directors, the Chairman of the Board, or the Senior
Vice President-Corporate Services may designate.
ARTICLE X.
Secretary.
SECTION 1. The Secretary shall attend all meetings of the
stockholders, the Board of Directors, and the Executive Committee and record
their proceedings, unless a temporary secretary be appointed. He shall give due
notice as required of all meetings of the stockholders, Directors, and Executive
Committee. He shall keep or cause to be kept at a place or places required by
law a record of the stockholders of the Corporation, giving the names and
addresses of all stockholders and the number, class, and series of the shares
held by each. He shall be custodian of the seal of the Corporation, and of all
records, contracts, leases, and other papers and documents of the Corporation,
unless otherwise directed by the Board of Directors, and shall perform such
other duties as may be assigned to him by the Board of Directors, the Chairman
of the Board, or the Senior Vice President-Corporate Services.
SECTION 2. In case of the Secretary's absence or incapacity, the
Chairman of the Board shall designate an appropriate officer to perform the
duties of the Secretary.
ARTICLE XI.
Treasurer.
SECTION 1. The Treasurer shall receive, keep and disburse all
moneys belonging or coming to the Corporation, shall keep regular, true and full
accounts of all receipts and disbursements and make detailed reports thereof. He
shall also perform such other duties in connection with the administration of
the financial affairs of the Corporation as the Senior Vice President-Finance
shall assign to him.
SECTION 2. In case of the Treasurer's absence or incapacity, the
Senior Vice President-Finance shall designate an appropriate officer to perform
the duties of the Treasurer.
6
<PAGE>
ARTICLE XII.
Compensation.
The compensation of the officers elected by the Board of Directors
shall be fixed by the Board of Directors. The compensation of all other officers
shall be fixed by the Chairman of the Board or the President or heads of
departments subject to the control of the Chairman of the Board.
No salary of more than a maximum level, fixed from time to time by
the Board of Directors, shall be established except with approval of the Board
of Directors.
ARTICLE XIII.
Depositaries.
The money and negotiable instruments of the Corporation shall be
kept in such bank or banks as the Senior Vice President-Finance or the Vice
President and Treasurer shall from time to time direct or approve. All checks
and other instruments for the disbursement of funds shall be executed manually
or by facsimile by such officers or agents of the Corporation as may be
authorized by the Board of Directors.
ARTICLE XIV.
Seal.
The seal of the Corporation, of which there may be any number of
counterparts, shall be circular in form and shall have inscribed thereon the
name of the Corporation, the year of its organization and the words, "Corporate
Seal Virginia." The Board may also authorize to be used, as the seal of the
Corporation, any facsimile thereof.
ARTICLE XV.
Fiscal Year.
The fiscal year of the Corporation shall begin immediately after
midnight of the last Friday of December, and shall end at midnight on the last
Friday of December of each calendar year.
ARTICLE XVI.
Amendments to By-laws.
These By-laws may be amended or repealed at any regular or special
meeting of the Board of Directors by the vote of a majority of the Directors
present. They may also be repealed or changed, and new By-laws made, by the
stockholders, provided notice of the proposal to take such action shall have
been given in the notice of the meeting. The stockholders may prescribe that any
By-law made by them shall not be altered, amended or repealed by the Board of
Directors.
* * * * * * * * * *
7
<PAGE>
Richmond, VA
April 25, 1996
8
<PAGE>
I, RACHEL E. GEIERSBACH, Assistant Corporate Secretary of CSX
CORPORATION, do hereby certify that the foregoing is a true and correct copy of
the CSX By-Laws, as amended at a meeting of the Board of Directors of CSX
Corporation held in the City of White Sulphur Springs, West Virginia, on the
25th day of April, 1995, at which a quorum was present and voted, and that such
By-Laws have not been rescinded, amended, or modified, and are in full force and
effect on the date hereof.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed
the corporate seal.
Assistant Corporate Secretary of
CSX CORPORATION
(SEAL)
Richmond, VA
October 4, 1995
9
Exhibit 10.1
CSX CORPORATION
STOCK PLAN FOR DIRECTORS
(As Amended through December 11, 1996)
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 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
<PAGE>
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), except that a
Participant may elect that shares which would be distributed to him or her upon
a Change of Control may continue to be held in trust for distribution in
accordance with elections made by the Participant in accordance with subsections
(c) and (d) of this Section 6.
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.
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 of Control. "Change of Control" shall mean any of the
following:
(a) Stock Acquisition. The acquisition, by any individual, entity or
group [within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")] (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% 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
2
<PAGE>
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:
(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
(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 10; 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.
3
<PAGE>
11. General Restrictions. The issuance of shares or the delivery of
certificates for such shares to Participants hereunder shall be subject to the
requirement that, if at any time the General Counsel of the Company shall
reasonably determine, in his discretion, that the listing, registration or
qualification of such shares upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental body, is necessary
or desirable as a condition of, or in connection with, such issuance or delivery
thereunder, such issuance or delivery shall not take place unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not reasonably acceptable to the General
Counsel.
12. Shares Available. Shares of Common Stock issuable under the Plan
shall be taken from authorized but unissued or treasury shares of the Company as
shall from time to time be necessary for issuance pursuant to the Plan.
13. Change in Capital Structure. In the event of any change in the Common
Stock by reason of any stock dividend, split, combination of shares, exchange of
shares, warrants or rights offering to purchase Common Stock at a price below
its fair market value, reclassification, recapitalization, merger, consolidation
or other change in capitalization, appropriate adjustment shall be made by the
Committee (as defined in Section 14 below) in the number and kind of shares
subject to the Plan and any other relevant provisions of the Plan, whose
determination shall be binding and conclusive on all persons.
14. Administration. The Plan shall be administered by the Compensation and
Pension Committee of the Board, unless the Board shall appoint another committee
of the Board to administer the Plan (the "Committee"), which shall have full
authority to construe and interpret the Plan, to establish, amend and rescind
rules and regulations relating to the Plan, and to take all such actions and
make all such determinations in connection with the Plan as it may deem
necessary or desirable. The Board may from time to time make such amendments to
the Plan as it may deem proper and in the best interest of the Company without
further approval of the Company's shareholders, provided that to the extent
required to qualify transactions under the Plan for exemption under Rule 16b-3
promulgated under the Securities Exchange Act of 1934 ("Rule 16b-3") no
amendment to the Plan shall be adopted without further approval of the Company's
shareholders in the manner prescribed in Section 3 hereof and, provided further,
that if and to the extent required for the Plan to comply with Rule 16b-3, no
amendment to the Plan shall be made more than once in any six-month period that
would change the amount, price or timing of the grants of Common Stock hereunder
other than to comport with changes in the Internal Revenue Code, the Employee
Retirement Income Security Act, or the rules thereunder.
15. Governing Law. The Plan and all actions taken thereunder shall be
governed by and construed in accordance with the laws of the Commonwealth of
Virginia.
4
Exhibit 10.2
SPECIAL RETIREMENT PLAN
FOR
CSX DIRECTORS
As Amended and Restated January 1, 1995
(As Amended through December 11, 1996)
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" means 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
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, 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
<PAGE>
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 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.
2
<PAGE>
(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 of 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 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 years 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.
3
<PAGE>
(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.
(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 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 a Valuation Date coinciding with nor next preceding the date
of Change of Control, to the extent such amounts are not already in the Trust.
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 such 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, the trustee
of the Trust shall, within 45 days of such Change of Control, pay to each
Participant not making an election under subsection (c), 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 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
4
<PAGE>
provided for in 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 in no event later than December 31, 1996, 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. New Participants in the Plan may elect in a time and manner
determined by the Committee, but in no event later than 90 days after becoming a
Participant, to have amounts and benefits determined and payable under the terms
of the Plan as if a Change of Control had not occurred. A Participant who has
made an election, as set forth in the two preceding sentences, may, at any time
and from time to time, change that election ; provided, however, a change of
election that is made within one year of a Change of Control shall be invalid.
(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 any such 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.
5
Exhibit 10.3
CSX CORPORATION
CORPORATE DIRECTOR DEFERRED COMPENSATION PLAN
EFFECTIVE NOVEMBER 1, 1980
As Amended and Restated Effective January 1, 1995
(As Amended through December 11, 1996)
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 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:
<PAGE>
(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
(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.
2
<PAGE>
(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.
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.
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.
3
<PAGE>
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.
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
4
<PAGE>
(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.
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. 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
5
<PAGE>
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, the
trustee of the Trust shall, within 45 days of such Change of
Control, pay to each Participant not making an election under
10.3 below, 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.
10.3 Each Participant may elect in a time and manner
determined by the Administrator but in no event later than
December 31, 1996, 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 90
days after becoming a Participant, to have amounts and benefits
determined and payable under the terms of the Plan as if a Change
of Control had not occurred. A Participant who has made an
election, as set forth in the two preceding sentences, may, at any
time and from time to time, change that election; provided,
however, a change of election that is made within one year of a
Change of Control shall be invalid.
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.
6
<PAGE>
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.
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.
7
Exhibit 10.5
o DIRECTORS' MATCHING GIFT PROGRAM
CSX Corporation Directors' Matching Gift Program ("Program") reflects
CSX's commitment to the communities in which the Company and its subsidiaries
operate. As part of its program of corporate philanthropy, the Company
contributes through the Program to education, civic, cultural, and health and
human service programs.
o FOR CURRENT DIRECTORS OF THE COMPANY
CSX will match Director contributions from a minimum of $25 to an
aggregate maximum of $25,000 annually to civic, cultural, educational, and
health and human services institutions on a two-for-one basis subject to certain
restrictions. The contributions to be matched must be personal gifts from the
Director's own funds, paid in cash or securities. Pledges do not qualify for
matches.
The Program is available to all active Directors of the Company.
Individuals who have retired from service as Directors of the Company may
participate in this program through the sixth anniversary of their retirement.
Gifts by participants may be made jointly with their spouses.
o ELIGIBLE ORGANIZATIONS
Gifts are eligible for match only if they fall within the guidelines
for CSX Corporation's charitable contributions.
To be eligible to receive a match, an organization or institution must
qualify as exempt from taxation pursuant to Section 501(c)(3) of the Internal
Revenue Code.
Certain restrictions apply to organizations which qualify for matching
gifts. The following do not fall within the CSX Corporation guidelines for
charitable contributions:
o Gifts to organizations which discriminate in violation of law
in provision of benefits on the basis of race, religion,
national origin, gender, or physical disability.
o Gifts to schools below college level.
o Gifts to educational institutions principally for the support
of sports and other non-academic activities.
o Gifts to organizations whose principal purpose is sectarian in
nature or whose beneficiaries are determined on sectarian
considerations.
o Political contributions of any nature.
o Activities forbidden by law.
CSX Corporation reserves the right to determine whether gifts to
organizations fall within guidelines for CSX Corporation's charitable
contributions.
PROGRAM ADMINISTRATION
The Program is administered by the CSX Corporation Corporate Secretary
and the Board of Directors of CSX Corporation and may be suspended, revoked,
terminated or amended at any time. Determination of eligibility of any
organization or institution to receive matching funds under this program will be
made by CSX Corporation under authority of the Board of Directors.
Questions as to interpretation, application, administration or other
aspects of the program, including eligibility, should be addressed to Mr. Alan
A. Rudnick, Vice President-General Counsel and Corporate Secretary, CSX
Corporation, 901 East Cary Street, Richmond VA 23219, phone (804) 782-1525, fax
(804) 783-1356.
<PAGE>
INSTRUCTIONS
Part A of the Application in this folder should be completed by the
Director and the entire folder should accompany the Director's gift to an
eligible organization or institution.
The qualifying organization or institution, upon receipt of the gift
and this folder, should complete Part B of the Application and return the entire
original folder to the Administrator of Corporate Contributions at the address
below.
Upon request, the beneficiary organization or institution will provide
evidence of its tax exempt status under Section 501(c)(3) of the Internal
Revenue Code.
All applications for matching gifts received during any calendar year
will be paid when administratively convenient but not less than semi-annually.
Additional Matching Gift forms may be secured from the Administrator of
Corporate Contributions. Requests for information and all correspondence
relating to the Directors' Matching Gift Program should be addressed to:
Ms. Anita H. Hill
Administrator - Corporate Contributions
CSX Corporation
P. O. Box 85629
Richmond, Virginia 23285-5629
Part A -- Director's Section
(To be completed by Director, who is to send this entire pamphlet, together with
gift, to charitable institution)
<TABLE>
<S> <C>
Date _____________________
Enclosed is my personal donation of $_________________ to ____________________________________________________
Name of Charitable Institution
______________________________________________________________________________________________________________
Address of Charitable Institution
I hereby authorize the institution named above to report this gift to the
Administrator - Corporate Contributions of CSX Corporation, for the purpose of
qualifying for a contribution in accordance with the provisions of the Company's
Matching Gift Program.
Name _______________________________________________ Social Security No. ______________________________
Street Address _____________________________________ City ______________________ State ________ Zip _______
Director's Signature __________________________________________________________________
Part B -- Beneficiary's Section
(To be completed by an appropriate financial officer of the charitable
institution, and returned to the Administrator - Corporate Contributions; P.O. Box
85629, Richmond, VA 23285-5629.)
I hereby certify that a donation of $________________ was received on
_____________________________________,19___, from ______________________________
________________________________ in favor of this institution;
Name of Donor
And I further certify that this institution meets all the requirements for
eligibility as set forth in CSX Corporation's Matching Gift program.
Contributions to the beneficiary institution shown are tax deductible by CSX
Corporation pursuant to Section 501(c)(3) of the Internal Revenue Code, and that
the beneficiary institution will provide evidence of this status upon request.
___________________________________________________ ___________________________________________
Name of Charitable Institution Signature
_____________________________________________________ ___________________________________________
Address of Charitable Institution (Name (print or type in full)
____________________________________________________ Title _______________________________________
____________________________________________________ Date _______________________________________
</TABLE>
Exhibit 10.7
AMENDMENT TO EMPLOYMENT AGREEMENT
AMENDMENT, dated this 14th day of January, 1997, by and
between CSX CORPORATION, a Virginia corporation (the "Company") and FirstName
LastName (the "Executive").
WHEREAS the Company and the Executive are parties to an
Employment Agreement dated as of the first day of February, 1995 (the
"Agreement");
WHEREAS the Company and the Executive desire to amend the
Agreement to deal appropriately with the transactions contemplated by the
Agreement and Plan of Merger by and among Conrail, Inc., a Pennsylvania
corporation, Green Acquisition Corp., a Pennsylvania corporation, and the
Company dated as of October 14, 1996, as subsequently amended.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Section 2 of the Agreement is amended by adding a new
clause f. at the end thereof to read in its entirety as follows:
"f. Final Regulatory Action (as defined in Section
3.b.) approving the merger (the "Conrail Merger") contemplated by the
Agreement and Plan of Merger by and among Conrail, Inc., a Pennsylvania
corporation, Green Acquisition Corporation, a Pennsylvania corporation,
and the Company dated as of October 14, 1996, as subsequently amended."
2. Section 5.c. of the Agreement is amended so that clause
(iii) shall read in its entirety as follows:
"other than in the case of the Conrail Merger, 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;"
3. Section 5.c. of the Agreement is further amended by adding
a new clause (iii) at the end of the final paragraph thereof, and such final
paragraph of Section 5.c. shall read in its entirety as follows:
"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
1
<PAGE>
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, or (iii) in the case of the Conrail Merger,
during the 30-day period immediately following the second anniversary
of the Final Regulatory Action approving the Conrail Merger."
4. The Agreement shall remain in full force and effect in all
other respects. The Executive acknowledges that this Amendment does not alter
the Executive's rights under any other plan, policy or program of the Company,
and the Conrail Merger shall not constitute a Change of Control under any such
plan, program or policy.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its Board of Directors,
the Company as caused these presents to be executed in its name and on its
behalf, all as of the day and year first above written.
-----------------------------------------
FirstName LastName
CSX CORPORATION
By:
--------------------------------------
John W. Snow
Chairman, President and Chief Executive Officer
2
Exhibit 10.8
AMENDMENT TO EMPLOYMENT AGREEMENT
AMENDMENT, dated this 14th day of January, 1997, by and
between CSX CORPORATION, a Virginia corporation (the "Company") and FirstName
LastName (the "Executive").
WHEREAS the Company and the Executive are parties to an
Employment Agreement dated as of the first day of February, 1995 (the
"Agreement");
WHEREAS the Company and the Executive desire to amend the
Agreement to deal appropriately with the transactions contemplated by the
Agreement and Plan of Merger by and among Conrail, Inc., a Pennsylvania
corporation, Green Acquisition Corp., a Pennsylvania corporation, and the
Company dated as of October 14, 1996, as subsequently amended.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Section 2 of the Agreement is amended by adding a new
clause f. at the end thereof to read in its entirety as follows:
"f. Final Regulatory Action (as defined in Section
3.b.) approving the merger (the "Conrail Merger") contemplated by the
Agreement and Plan of Merger by and among Conrail, Inc., a Pennsylvania
corporation, Green Acquisition Corporation, a Pennsylvania corporation,
and the Company dated as of October 14, 1996, as subsequently amended."
2. Section 5.c. of the Agreement is amended so that clause
(iii) shall read in its entirety as follows:
"other than in the case of the Conrail Merger, 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;"
3. The Agreement shall remain in full force and effect in all
other respects. The Executive acknowledges that this Amendment does not alter
the Executive's rights under any other plan, policy or program of the Company,
and the Conrail Merger shall not constitute a Change of Control under any such
plan, program or policy.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its Board of Directors,
the Company as caused these presents to be executed in its name and on its
behalf, all as of the day and year first above written.
-----------------------------------------
FirstName LastName
1
<PAGE>
CSX CORPORATION
By:
--------------------------------------
John W. Snow
Chairman, President and Chief Executive Officer
2
Exhibit 10.11
AMENDMENT TO THE AGREEMENT
dated as of February 9, 1994
between
CSX CORPORATION
and
JOHN W. SNOW
THIS AMENDMENT (this "Amendment") is dated as of the
thirteenth day of October, 1996 and is between CSX CORPORATION a Virginia
corporation ("CSX") and JOHN W. SNOW (the "Executive").
WHEREAS, CSX and the Executive have entered into an incentive
agreement to award the Executive certain non-qualified employee stock options,
subject to certain vesting restrictions and forfeiture provisions;
WHEREAS, the Board of Directors of CSX on February 14, 1996
determined to amend certain of CSX's existing incentive agreements, including
that the Agreement, to, among other things, achieve uniformity in such
agreements and to clarify that certain excise tax gross-up provisions would
apply to payments under such agreements;
WHEREAS, CSX and Executive have determined to amend the
Agreement as set forth herein. Accordingly, CSX and the Executive agree as
follows:
SECTION 1. Definitions. Capitalized terms used in this
Amendment and not defined herein shall have the meanings assigned to such terms
in the Agreement.
SECTION 2. Amendments of the Agreement. The Agreement is
hereby amended pursuant to and in compliance with the Agreement as follows:
a. The last sentence of Section 4 shall be deleted in its
entirety, and the following substituted therefor:
"The foregoing restrictions shall immediately terminate and be
of no further force or effect in the event of the Executive's
death or his Separation from Employment due to Disability as
described in the Plan."
b. The following new Section 5 shall be added following existing
Section 4, and all subsequent subsections shall be renumbered
accordingly.
"5. Change of Control. In the event and at such time as a
Change of Control (as defined in the Employment Agreement
between Executive and CSX dated as of February 1, 1995)
occurs, (i) the restrictions contained in this Agreement shall
immediately terminate and be of no further force or effect and
(ii) the Executive's right to receive any and all benefits not
yet received pursuant to this Agreement shall be accelerated
to the date of such Change of Control."
SECTION 3. Effectiveness. This Amendment shall become
effective as of the date hereof.
SECTION 4. Integration; Confirmation. On and after the
Amendment Date, each reference in the Agreement to "this Agreement," "herein,"
"hereunder" or words of similar import, and each reference in any other document
delivered in connection with the Agreement shall be deemed to be a reference to
the Agreement as amended by this Amendment, and the Agreement as so amended
shall be read as a single integrated document. Except as specifically amended by
this Amendment, all other terms and provisions of the Agreement shall continue
in full force and effect and unchanged and are hereby confirmed in all respects.
1
<PAGE>
SECTION 5. Counterparts. This Amendment may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
SECTION 6. Governing Law. This Amendment shall be construed in
accordance with and governed by the law of the Commonwealth of Virginia.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by their respective authorized officers as of the
day and year first above written.
CSX CORPORATION
By:
--------------------------------------
Mark G. Aron
Title: Executive Vice President
Law and Public Affairs
JOHN W. SNOW
-----------------------------------------
2
Exhibit 10.12
EMPLOYMENT AGREEMENT
AGREEMENT by and between CSX Corporation, a Virginia corporation
(the "Company") and John W. Snow (the "Executive"), dated as of the 14th day of
October, 1996.
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
pending the merger of the Company and Conrail Inc., a Pennsylvania corporation
(the "Merger") pursuant to the Agreement and Plan of Merger dated as of October
14, 1996 and to provide the surviving corporation after the Merger with
continuity of management. 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. Effective Date. The "Effective Date" shall mean the date on
which the Effective Time of the Merger (as defined in the Merger Agreement)
occurs.
2. Employment Period. 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 fifth anniversary of
the Effective Date (the "Employment Period"). The Employment Period shall, for
the purposes of this agreement, be divided into a period beginning on the
Effective Date and ending on the second anniversary thereof (the "First
Employment Segment"), a period beginning on the second anniversary of the
Effective Date and ending on the fourth anniversary thereof (the "Second
Employment Segment") and a period beginning on the fourth anniversary of the
Effective Date and ending on the fifth anniversary thereof (the "Third
Employment Segment").
3. Terms of Employment. (a) Position and Duties. (i) (A) During
the First Employment Segment, the Executive shall serve as Chairman of the
Board, and Chief Executive Officer of the Company, with such authority, duties
and responsibilities as are commensurate with such position and as may be
consistent with such position as may be assigned to him by the Board; (B) during
the second Employment Segment, the Executive shall serve as Chairman of the
<PAGE>
Board, with such authority, duties and responsibilities as are commensurate with
such position; (C) during the Third Employment Segment, the Executive shall
serve as Chairman Emeritus; and (D) the Executive's services shall be performed
at the Company's headquarters during the Employment Period.
(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 substantially all of his 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 not significantly interfere with the
performance of 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. (A) During the First
Employment Segment, 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 in respect
of the twelve-month period immediately preceding the month in which the
Effective Date occurs; (B) during the Second Employment Segment and Third
Employment Segment, the Executive shall receive an Annual Base Salary in an
amount no less than the base salary paid or payable, including any base salary
which has been earned but deferred, by the Company to the Chief Executive
Officer of the Company during the Second Employment Segment in respect of such
period. 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
2
<PAGE>
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) Incentive, Savings and Retirement Plans. During
the Employment Period, the Executive shall be entitled to participate in all
bonus, 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 during the Second Employment Segment and the Third
Employment Segment shall the Executive receive an amount in connection with any
such plan, practice, policy or program less than the amount received in
connection with such plan, practice, policy or program by the Company's Chief
Executive Officer.
(iii) 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 to other senior
executives of the Company and its affiliated companies, but in no event during
the Second Employment Segment and the Third Employment Segment to a lesser
extent than the Company's Chief Executive Officer and/or such executive's
family, as the case may be.
(iv) 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 Company's policies.
(v) Fringe Benefits. During the Employment Period, the
Executive shall be entitled to fringe benefits, including, without limitation,
payment of club dues, and, if applicable, use of an automobile and payment of
related expenses, to the extent applicable to other senior executives of the
Company and its affiliated companies, but in no event to a lesser extent than,
during the Second Employment Segment and the Third Employment Segment than the
Company's Chief Executive Officer.
(vi) 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 as provided generally at any time
3
<PAGE>
thereafter with respect to other senior executives of the Company and its
affiliated companies.
(vii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with the plans,
policies, programs and practices of the Company and its affiliated companies as
in effect generally at any time with respect to other senior executives of the
Company and its affiliated companies but in any event not less than four weeks
per annum during the Employment Period.
(viii) Post-Employment Benefits. Following the
termination of the Employment Period, the Executive shall be provided for life
with an office and administrative assistance and other benefits and perquisites
as is the practice of the Company to provide to its ex-Chairman as of the date
hereof.
4. 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 11(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 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
4
<PAGE>
(ii) the willful engaging by the Executive in illegal
conduct or gross misconduct which is materially and demonstrably injurious to
the Company, or
(iii) conviction of a felony (which through lapse of
time or otherwise is not subject to appeal) or guilty or nolo contendere plea by
the Executive with respect thereto, or
(iv) a material willful breach of the covenants
contained in Section 9.
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 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) through (iv) above, and specifying the particulars
thereof in detail and that in the case of the conduct described in subparagraphs
(i) and (iv) above, Executive failed to cure such conduct within 30 days of his
receipt of written notice from the Company detailing such conduct.
(c) Good Reason. The Executive's employment may be terminated by
the Executive for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean in the absence of a written consent of the Executive:
(i) the removal of the Executive during the Employment
Period from any of the positions described in Section 3(a) except as
specifically contemplated by Section 3(a) or the assignment to the Executive of
any duties inconsistent in any material respect with the Executive's position
(including status, offices, titles and reporting requirements), authority,
5
<PAGE>
duties or responsibilities as contemplated by Section 3(a) of this Agreement, or
any other action by the Company which results in a material 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 material failure by the Company to comply with
any of the provisions of Section 3(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 more than 35 miles from that provided in Section
3(a)(i)(C) 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
(v) any failure by the Company to comply with and
satisfy Section 10(c) of this Agreement.
For purposes of this Section 3(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 11(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 or Cause shall not waive any right of
6
<PAGE>
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.
(e) 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, the date of receipt of the Notice of Termination or
any later date specified therein within 30 days of such notice, 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.
5. Obligations of the Company upon Termination. (a) Good Reason;
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:
(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 highest annual bonus paid to
the Executive for any of the three years prior to the Date of
Termination (the "Recent Annual Bonus") and (y) a fraction, the
numerator of which is the number of days in the fiscal year in
which the Date of Termination occurs through the Date of
Termination, and the denominator of which is 365 and (3) any
compensation previously deferred (other than pursuant to a
qualified plan) 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 greater of (1) the amount equal to the product
of (i) the number of months remaining in the Employment Period
on the Date of Termination (the "Continuation Period"), divided
7
<PAGE>
by twelve and (ii) the sum of (x) the Executive's Annual Base
Salary and (y) the Recent Annual Bonus, and (2) the amount equal
to the product of (i) three and (ii) the sum of (x) the
Executive's Annual Base Salary and (y) the Recent 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 or, if longer, for the Continuation Period, assuming
for this purpose that all accrued benefits are fully vested,
and, assuming that the Executive's compensation in each such
year is that required by Section 3(b)(i) and assuming an annual
bonus equal to the Recent Annual Bonus, 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, if longer, if the Continuation Period, 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 3(b)(iii) 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 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 or, if longer,
for the Continuation Period, and to have retired on the last day of such period;
8
<PAGE>
(iii) 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 any amount which (i) is
earned by, but has not been paid to, the Executive and (ii) would have been paid
or vested in the calendar year in which the Executive's termination of
employment occurs (such other amounts and benefits shall be hereinafter referred
to as the "Other Benefits").
(iv) all stock-based awards shall become immediately
vested and in the case of stock options, or other exercisable awards, shall
remain exercisable for at least 90 days following the Date of Termination or
such longer period as may be provided in any applicable plan or award agreement.
(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 5(b) shall
include death benefits 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. In addition, all stock based awards that would have vested
by the end of the fiscal year in which such termination occurs shall become
immediately vested and, in the case of stock options and other exercisable
awards, shall remain exercisable for at least 90 days following the date of such
termination or such longer period as may be provided in any applicable plan or
award agreement.
(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 5(c)
9
<PAGE>
shall include, and the Executive shall be entitled after the Disability
Effective Date to receive, disability and other benefits as in effect at any
time thereafter generally with respect to other peer executives of the Company
and its affiliated companies and their families. In addition, all stock based
awards that would have vested by the end of the fiscal year in which such
termination occurs shall become immediately vested and, in the case of stock
options and other exercisable awards, shall remain exercisable for at least 90
days following the date of such termination or such longer period as may be
provided in any applicable plan or award agreement.
(d) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated for Cause or the Executive terminates his
employment without Good Reason 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 (other than pursuant to a qualified plan), and (z) Other Benefits, in
each case to the extent theretofore unpaid, except in the event that the
Executive gives notice of termination without good reason within thirty (30)
days of the fourth anniversary of the Effective Date.
6. 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
11(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.
7. 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, except as
10
<PAGE>
provided in Section 5(a)(ii), 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
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").
8. 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 8) (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
and employment 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.
(b) Subject to the provisions of Section 8(c), all
determinations required to be made under this Section 8, 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 and Young LLP or such other certified public accounting firm reasonably
acceptable to the Company 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. All fees and expenses of the Accounting Firm shall be borne solely
11
<PAGE>
by the Company. Any Gross-Up Payment, as determined pursuant to this Section 8,
shall be paid by the Company to the Executive within five days of (i) the later
of the due date for the payment of any Excise Tax, and (ii) 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 8(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;
12
<PAGE>
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 8(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 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 8(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 8(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 8(c), a
determination is made that the Executive shall not be entitled to any refund
13
<PAGE>
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.
9. Confidential Information. (a) 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 or in order to
enforce his rights under this Agreement or as necessary to defend himself
against a claim asserted directly or indirectly by the Company or its
affiliates, 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 9 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement.
(b) In the event of a breach or threatened breach of this
Section 9, the Executive agrees that the Company shall be entitled to injunctive
relief in a court of appropriate jurisdiction to remedy any such breach or
threatened breach, the Executive acknowledges that damages would be inadequate
and insufficient.
(c) Any termination of the Executive's employment or of this
Agreement shall have no effect on the continuing operation of this Section 9.
10. 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
14
<PAGE>
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.
11. 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:
John W. Snow
122 Tempsford Lane
Richmond, VA 23226
If to the Company:
One James Center
901 East Cary Street
Richmond, VA 23219
Attention: Executive Vice President -
Law & Public Affairs
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.
15
<PAGE>
(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
pursuant to Section 4(c)(i)-(v) 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,
notwithstanding the terms and conditions of the agreement between the Executive
and the Company dated as of February 1, 1995 (the "Severance Agreement") the
terms and conditions of this Agreement shall be controlling during the
Employment Period and the Merger shall not constitute a Change of Control for
purposes of the Severance Agreement; provided, however, that the Severance
Agreement shall become effective in the event of any Change of Control (as
defined in the Severance Agreement) subsequent to the consummation of the
Merger.
(g) The Company shall indemnify and hold the Executive and his
legal representatives harmless to the fullest extent permitted by applicable
law, from and against all judgements, fines, penalties, excise taxes, amounts
paid in settlement, losses, expenses, costs, liabilities and legal fees if the
Executive is made, or threatened to be made a party to any threatened or pending
or completed action, suit, proceeding, whether civil, criminal, administrative
or investigative, including an action by or in the right of the Company or its
affiliates to procure a judgement in its favor, by reason of the fact that the
Executive is or was serving as a director or officer of the Company or its
affiliates or in any capacity at the request of the Company or its affiliates
for any other corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise. The right to indemnification provide in this paragraph
(g) shall not be deemed exclusive of any other rights to which Executive may
16
<PAGE>
have or hereafter be entitled under any law or the charter or by-laws of the
Company or its affiliates or otherwise, both as to action in Executive's
official capacity and as to action in another capacity while holding such
office, and shall continue after Executive has ceased to be a director or
officer and shall inure to the benefit of Executive's heirs, executors and
administrators. Any reimbursement obligation arising hereunder shall be
satisfied on an as incurred basis. In addition, the Company agrees to continue
to maintain customary and appropriate directors and liability insurance during
the Employment Period and the Executive shall be entitled to the protection of
any such insurance policies on no less favorable a basis than is provided to any
other officer or director of the Company or its affiliates.
(h) To the extent the provisions of this Agreement operate to
amend the terms of or awards outstanding under certain benefit or incentive
award plans, and the terms of such plans or awards require approval of such
amendment by the Company or its affiliated companies, or an authorized
representative thereof, and/or the Executives consent thereto (including the
Executive's consent to amend the terms of outstanding awards, if any), (i) the
offering of this Agreement pursuant to the direction of the Board shall
constitute the express authorization of the Company and its affiliated companies
and their approval of the amendment of such plan or award in the manner set
forth herein, and (ii) the Executive's consent to the terms hereof shall signify
his consent to the amendment of such plan or award, as required, as of the date
hereof.
17
<PAGE>
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.
---------------------------------
JOHN W. SNOW
CSX CORPORATION
By______________________________
<PAGE>
FIRST AMENDMENT TO
EMPLOYMENT AGREEMENT
WHEREAS, John W. Snow (the "Executive") entered into an
employment agreement with CSX Corporation, a Virginia corporation ("CSX"), dated
as of October 14, 1996 which is effective as of the effective date of the merger
of Conrail Inc., a Pennsylvania corporation ("Conrail"), and CSX pursuant to an
Agreement and Plan of Merger dated as of October 14, 1996 (the "Employment
Agreement") between Conrail, Green Acquisition Corp., a Pennsylvania
corporation, and CSX (the "Merger Agreement"); and
WHEREAS, the parties to the Employment Agreement wish to
modify the Employment Agreement in certain respects;
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, receipt of which is hereby acknowledged,
the parties hereto agree as follows:
1. Section 1 of the Employment Agreement shall be amended to
provide that the "Effective Date" shall mean the "Control Date" (as such term is
defined in the Second Amendment to the Merger Agreement).
2. Except as hereinabove provided, the Employment Agreement
shall continue in full force and effect.
IN WITNESS WHEREOF, the parties have executed this First
Amendment to the Employment Agreement as of the 18th day of December, 1996.
------------------------------
John W. Snow
CSX Corporation
By____________________________
Name:
Title:
Exhibit 10.15
CSX CORPORATION
1987 Long-Term Performance Stock Plan
As Amended and Restated Effective April 25, 1996
(As Amended through December 11, 1996)
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
20.
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.
g. "Company": The term Company means CSX Corporation.
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
1
<PAGE>
"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. "Functional Group": The term Functional Group means a group of
employees, identified by the Compensation Committee, in its sole
discretion, to be subject to a common set of Performance Objectives.
o. "Incentive": The term Incentive means any incentive under the Plan
described in Section 6.
p. "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.
q. "Participant": The term Participant means an individual designated by
the Committee as a Participant pursuant to Section 5.
r. "Performance Objective": The term Performance Objective shall mean a
performance objective established in writing by the Committee within
ninety (90) days of 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 Performance Objective is attained. With respect to
Incentives granted to Covered Employees, the material terms of the
Performance Objective shall be disclosed to, and must be subsequently
approved by, a vote of the shareholders of the Company, consistent
with the requirements of Section 162(m) of the Code and the
regulations thereunder. The Performance Objectives for any Performance
Period shall be based on one or more of the following measures, as
determined by the Committee in writing within ninety (90) days of the
commencement 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
<PAGE>
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.
4. The creation by the Company of specific levels of Total
Shareholder Return ("TSR"). TSR for the Company means total
return to shareholders as measured by stock price
appreciation plus dividends.
s. "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.
t. "Plan": The term Plan means this CSX Corporation 1987 Long-Term
Performance Stock Plan as amended or restated from time to time.
u. "Retirement": The term Retirement means termination of employment with
immediate commencement of retirement benefits under the Company's
defined benefit pension plan.
v. "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.
w. "Trust": The term Trust means the CSX Corporation Executive Stock
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.
3. Number of Shares
Subject to the provisions of Section 16 of this Plan, the maximum number
of shares which may be issued pursuant to the Incentives shall be 16,000,000
shares of the Company's common stock, par value $1.00 per share. Such shares
shall be authorized and unissued shares of the Company's common stock. Subject
to the provisions of Section 16, if any Incentive granted under the Plan shall
terminate or expire for any reason without having been exercised in full, the
unissued shares subject thereto shall again be available for the purposes of the
Plan. Similarly, shares which have been issued, but which the Company retains or
which the Participant tenders to the Company in satisfaction of income and
payroll tax withholding obligations or in satisfaction of the exercise price of
any option shall remain authorized and shall again be available for the purposes
of the Plan, provided, however, that any such previously issued shares shall not
be the subject of any grant under the Plan to any officer of the Company who, at
the time of such grant, is subject to the short-swing trading provisions of
Section 16 of the Exchange Act.
4. Administration
The Plan shall be administered by the Committee. The Committee shall
consist of three or more members of the Board of Directors. No member of the
Committee shall be eligible to receive any Incentives under the Plan while a
member of the Committee. A majority of the Committee shall constitute a quorum.
The Committee shall recommend to the Board individuals to receive Incentives,
including the type and amount thereof, unless the Board shall have delegated to
the Committee the authority and power to select persons to whom Incentives may
be granted, to establish the type and amount thereof, and to make such grants.
Subject to the express provisions of the Plan, the Committee shall have
authority to construe any agreements entered into with any person in respect of
any Incentive or Incentives, to prescribe, amend and rescind rules and
3
<PAGE>
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; (f) Restricted Stock; and (g)
Incentive Compensation Program Shares, all as described below and pursuant to
the terms set forth in Sections 7-12 hereof. With respect to Items (a)-(c), the
maximum number of shares of common stock of the Company with respect to which
these Incentives may be granted any Plan Year to any Participant will be
750,000. With respect to Items (d)-(f), the maximum number of shares of common
stock of the Company with respect to which these Incentives may be granted
during any Plan Year to any Participant will be 150,000.
7. Incentive Stock Options
Incentive Stock Options (ISOs) will consist of options to purchase shares
of the Company's common stock at purchase prices not less than 100 percent of
the Fair Market Value of such common stock on the date of grant. ISOs will be
exercisable upon the date or dates specified in an option agreement entered into
with a Participant but not earlier than one year after the date of grant of the
options and not later than 10 years after the date of grant of the options;
provided, however, that whether or not the one-year holding requirement is
satisfied, any Exercisability Requirements must be satisfied. For options
granted after December 31, 1986, the aggregate Fair Market Value, determined at
the date of grant, of shares for which ISOs are exercisable for the first time
by a Participant during any calendar year shall not exceed $100,000.
Notwithstanding the provisions of Section 5 of this Plan, no individual
will be eligible for or granted an ISO if that individual owns stock of the
Company possessing more than 10 percent of the total combined voting power of
all classes of the stock of the Company or its subsidiaries.
Any Participant who is an option holder may exercise his option to
purchase stock in whole or in part upon the date or dates specified in the
option agreement offered to him. In no case may an option be exercised for a
fraction of a share. Except as set forth in this Section 7 and in Sections 12
through 15, no option holder may exercise an option unless at the time of
4
<PAGE>
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.
8. Non-Qualified Stock Options
Non-Qualified Stock Options (NQSOs) will consist of options to purchase
shares of the Company's common stock at purchase prices not less than 100
percent of the Fair Market Value of such common stock on the date of grant.
NQSOs will be exercisable upon the date or dates specified in an option
agreement entered into with a Participant but not earlier than one year after
the date of grant of the options and not later than 10 years after the date of
grant of the options; provided, however, that whether or not the one-year
holding requirement is satisfied, any Exercisability Requirements must be
satisfied.
Any Participant may exercise an option to purchase stock upon the date or
dates specified in the option agreement offered to him. In no case may an option
be exercised for a fraction of a share. Except as set forth in this Section 8
and in Sections 12 through 15, no option holder may exercise an option unless at
the time of exercise he has been in the continuous employ of the Company or one
of its subsidiaries since the grant of his option. An option holder under this
Plan shall have no rights as a shareholder with respect to any shares subject to
such option until such shares have been issued.
For purposes of this Section 8, written notice of exercise must be
received by the Corporate Secretary of the Company, not earlier than one year
nor later than 10 years after the option is granted. Such notice must state the
number of shares being exercised and must be accompanied by payment of the full
purchase price of such shares. Payment for the shares for which an option is
exercised may be made by (1) a personal check or money order payable to CSX
Corporation; (2) a tender by the employee (in accordance with procedures
established by the Company) of shares of the Company's common stock having a
Fair Market Value on the date of tender equaling the purchase price of the
shares for which the option is being exercised; (3) the delivery of a properly
executed exercise notice, together with irrevocable instructions to a broker to
promptly deliver to the Company either sale proceeds of shares sold to pay the
purchase price or the amount loaned by the broker to pay the purchase price; or
(4) any combination of (1), (2) and (3).
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.
5
<PAGE>
The Committee may also grant, in addition to, or in lieu of options to
purchase stock, SARs which will entitle the Participant to receive a payment
upon surrender of that right, or portion of that right in accordance with the
provisions of the Plan, equaling the difference between the Fair Market Value of
a stated number of shares of Company common stock on the date of the grant and
the Fair Market Value of a comparable number of shares of Company common stock
on the day of surrender, adjusted for stock dividends declared between the time
of the grant of the SAR and its surrender. The Committee shall have the right to
limit the amount of appreciation with respect to any or all of the SARs granted.
Payment made upon the exercise of the SARs may be in cash or shares of Company
common stock, or partly in shares and partly in cash, as the Committee in its
sole discretion shall determine. For purposes of this Section 9, written notice
must be received by the Corporate Secretary of the Company not earlier than one
year nor later than 10 years after the SAR is granted. Such notice must state
the number of SARs being surrendered and the method of settlement desired within
the guidelines established from time to time by the Committee. The SAR holder
will receive settlement based on the Fair Market Value on the day the written
request is received by the Corporate Secretary of the Company.
In certain situations as determined by the Committee, for purposes of
this Section 9, written notice must be received by the Corporate Secretary of
the Company between the third and twelfth business days after the public release
of the Company's quarterly earnings report, or between such other, different
period as may hereinafter be established by the Securities and Exchange
Commission. For such settlements, a Participant subject to a restricted exercise
period shall receive settlement based on the highest Fair Market Value during
the period described in the foregoing sentence.
The Committee may not grant an SAR or other rights under this Section 9
in connection with an incentive stock option if such grant would cause the
option or the Plan not to qualify under Section 422A of the Code or if it is
prohibited by such section or Treasury regulations issued thereunder. Any
grant of an SAR or other rights which would disqualify either the option as
an ISO or the Plan, or which is prohibited by Section 422A of the Code or
Treasury regulations issued thereunder, is and will be considered as void
and vesting no rights in the grantee. It is a condition for eligibility for the
benefits of the option and of the Plan that the Participant agree that in the
event an SAR or other right granted should be determined to be void as
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. PUAs and PSAs may be awarded to
individual Participants or to a Functional Group. Awards to a Functional Group
shall be subject to distribution by the Chief Executive Officer of the Company,
or by his designees, to individuals within such group. At the time of the grant,
the Committee shall establish in writing and communicate to Participants, and to
members of a Functional Group who can be identified, 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 Company, and (b) payments to be made in
Company common stock may be deferred pursuant to an election filed on forms
prescribed and provided by and filed with the Company. 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
6
<PAGE>
may subsequently become entitled to receive. On forms provided by and filed with
the Company, the Participant shall also specify whether, when the deferral
period expires or when the restrictions below lapse, payment will be in a lump
sum or installments over a period not exceeding twenty (20) years. The Committee
shall prescribe the time periods during which the election must be filed in
order to be effective. Elections to defer, once effective, are irrevocable.
Changes regarding the date of payment, the period over which payments are to be
made and the method of payment are subject to substantial penalties. However, a
One-Time Change of Distribution Election may be made to change the timing or the
form of payment without penalty. Any such election which changes a distribution
election specified "termination of employment" or "the earlier of termination or
a specified age" shall be void in the event the Participant's employment
terminates within twelve (12) months following the date of the election.
If a Participant has made an effective election to defer the payment of
shares of common stock, the Company shall, within a reasonable period of time
after the deferral election is made, transfer shares of common stock or other
assets equal in value to the number of shares as to which payment is deferred to
the Trust to secure the Company's obligation to pay shares of common stock to
the Participant in the future. However, in any event, the Company shall make any
previously deferred payment of shares to the Participant 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 therefore.
The Committee may grant RSAs at any time or from time to time to a
Participant selected by the Committee in its sole discretion. The Committee
shall establish at the time of grant of each RSA a Performance Period and
Performance Objectives to be achieved during the Performance Period.
At the time of grant, the Performance Period and Performance Objectives
shall be set forth either in agreements or in guidelines communicated to the
Participant in such form consistent with this Plan as the Committee shall
approve from time to time.
Following the conclusion of each Performance Period and prior to payment,
the Committee shall determine the extent to which Performance Objectives have
been attained or a degree of achievement between maximum and minimum Performance
Objectives during the Performance Period in order to determine the level of
payment to be made, if any, and shall record such results in the minutes of the
meeting of the Committee. In no instance will payment be made if the Performance
Objectives are not attained.
At the time that an RSA is granted, the Committee shall establish in the
written agreement a restriction period applicable to all shares covered by such
grant. Subject to the provisions of the next following paragraph, the
Participant shall have all of the rights of a stockholder of record with respect
to the shares covered by the grant to receive dividends or other distributions
in respect of such shares (provided, however, that any shares of stock of the
Company distributed with respect to such shares shall be subject to all of the
restrictions applicable to such shares) and to vote such shares on all matters
7
<PAGE>
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. Incentive Compensation Program Shares
A Participant who receives base compensation in excess of a dollar level
to be determined by the Committee and who is eligible to receive an award under
the Company's Incentive Compensation Program ("ICP") may elect, by filing the
prescribed election form with the Company in accordance with rules established
by the Committee, to receive all or part of his annual ICP award in shares of
the Company's common stock, rather than cash; provided, however, the Participant
must agree that his receipt of the stock will be deferred until his retirement
or termination of employment, with a minimum deferral period of three (3) years.
Elections to defer are irrevocable. A Participant who makes such election shall,
at the time that the stock is deferred, receive an additional award of stock
equal to a percentage, established by the Committee from time to time, of the
amount that he elected to have deferred, but not to exceed 25% (the "Stock
Premium"). The Participant's election to defer shall also apply to the Stock
Premium.
If a Participant made an effective election to defer the payment of
shares of common stock and receive the Stock Premium, the Company shall, within
a reasonable period of time after the deferral election is made, transfer shares
of common stock or other assets equal in value to the number of shares as to
which payment is deferred to the Trust to secure the Company's obligation to pay
shares of common stock to the Participant in the future. However, in any event,
the Company shall make any previously deferred payment of shares to the
Participant 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 and the three (3) year deferral requirement; or
8
<PAGE>
d. a Change in Control."
13. Separation From Employment
If the Participant's Separation From Employment is because of Disability
or death, the right of the Participant or his successor in interest to exercise
an ISO, NQSO or SAR shall terminate not later than five years after the date of
such Disability or death, but in no event later than 10 years from the date of
grant; provided, however, that if such Participant is eligible to retire with
the ability to begin immediately receiving retirement benefits under the
Company's pension plan, his or his successor in interest's right to exercise any
ISOs, NQSOs or SARs shall be determined as if his Separation From Employment was
because of Retirement.
If the Participant's Separation From Employment is because of his
Retirement, the right of the Participant or his successor in interest to
exercise an ISO, NQSO or SAR shall terminate not later than 10 years from the
date of grant.
Unless the Committee deems it necessary in individual cases (except with
respect to Covered Employees) to extend a Participant's exercise period, if a
Participant's Separation From Employment is for any reason other than
Retirement, Disability or death, the right of the Participant to exercise an
ISO, NQSO or SAR shall terminate not later than one year from the date of
Separation From Employment, but in no event later than 10 years after the date
of grant.
At the time of his Separation From Employment for any reason other than
Cause, a Participant shall vest in a portion of any Incentives granted under
sections 7 (ISOs), 8 (NQSOs) or 9 (SARs) that he has held for less than one year
from the date of the grant. The portion of such Incentives in which the
Participants shall vest shall be determined by multiplying all shares subject to
such Incentives by a fraction, the numerator of which shall be the number of
Completed Months of employment following the date of grant and the denominator
of which shall be twelve.
A Participant who vests in any Incentives under the preceding paragraph
may not exercise such Incentives prior to the satisfaction of the 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 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 prior to the end of the Performance Period 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 canceled.
Notwithstanding anything to the contrary in this Plan, if a Participant
or former Participant (a) becomes the owner, director or employee of a
competitor of the Company or its subsidiaries, (b) has his employment terminated
by the Company or one of its subsidiaries on account of actions by the
Participant which are detrimental to the interests of the Company or its
subsidiaries, or (c) engages in conduct subsequent to the termination of his
employment with the Company or its subsidiaries which the Committee determines
to be detrimental to the interests of the Company or its subsidiaries then the
Committee may, in its sole discretion, pay the Participant or former Participant
a single sum payment equal to the amount of his unpaid benefits which were
awarded and deferred under Sections 10 or 12 of the Plan; provided, however, if
the deferral has been for less than three (3) years under Section 12, the
Participant shall not be eligible to receive the Stock Premium. The single sum
payment shall be made as soon as practicable following the date the Participant
or former Participant becomes an owner, director or employee of a competitor,
9
<PAGE>
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 or former Participant under this Plan.
14. 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 15 and shall be exercisable
(including any action of surrender and exercise of rights under Section 9)
during the Participant's lifetime only by the Participant who is the holder of
the Incentive or by his guardian or legal representative.
15. 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.
16. 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.
17. Adjustment of Shares
In the event of any change (through recapitalization, merger,
consolidation, stock dividend, split-up, combination or exchanges of shares or
otherwise) in the character or amount of the Company's common stock prior to
exercise of any Incentive granted under this Plan, the Incentives, to the extent
not exercised, shall entitle the Participant who is the holder to such number
and kind of securities as he would have been entitled to had he actually owned
the stock subject to the Incentives at the time of the occurrence of such
change. If any such event should occur, prior to exercise of an Incentive
granted hereunder, which shall increase or decrease the amount of common stock
outstanding and which the Committee, in its sole discretion, shall determine
equitably requires an adjustment in the number of shares which the Incentive
holder should be permitted to acquire, such adjustment as the Committee shall
determine may be made, and when so made shall be effective and binding for all
purposes of the Plan.
Incentives may also be granted having terms and provisions which vary
from those specified in the Plan provided that any Incentives granted pursuant
to this paragraph are granted in substitution for, or in connection with the
assumption of, then existing Incentives granted by another corporation and
assumed or otherwise agreed to be provided for by the Company pursuant to or by
reason of a transaction involving a corporate merger, consolidation, acquisition
of property or stock, separation, reorganization or liquidation to which the
Company or a subsidiary corporation is a party.
10
<PAGE>
18. 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.
19. 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 17) 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.
20. 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; (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 of Control, however,
Participants may defer those case payments, as stock, into the Trust, consistent
with the deferral provisions of Section 10; and (v) the three (3) year holding
requirement of the Stock Premium for deferred ICP shall be deemed satisfied.
b. A "Change in 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 20(b); or
11
<PAGE>
(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;
(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 20(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. Each Participant who has elected to defer the payment of PSAs
pursuant to Section 10 or an ICP award pursuant to Section 12, may elect in a
time and manner determined by the Committee, but in no event
12
<PAGE>
later than December 31, 1996 or the occurrence of a Change in Control, if
earlier, to have amounts and benefits currently deferred, and to be deferred,
under the Plan determined and payable under the terms of the Plan as if a Change
in Control had not occurred. New Participants in the Plan may elect in a time
and manner determined by the Committee, but in no event later than ninety (90)
days after becoming a Participant, to have amounts and benefits currently
deferred, and to be deferred, under the Plan determined and payable under the
terms of the Plan as if a Change in Control had not occurred. A Participant who
has made an election, as set forth in the two preceding sentences, may at any
time and from time to time, change that election; provided, however, a change of
election that is made within one year of a Change in Control shall be invalid.
d. If a Change in Control has occurred, the Committee shall cause the
Company to contribute to the Trust, within seven (7) days of such Change in
Control, a lump sum payment equal to the aggregate value of the amount each
Participant deferred pursuant to Sections 10 and 12 (including the Stock Premium
under Section 12) to the extent such amounts are not already in the Trust.
21. 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.
22. 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, to the extent permitted by applicable laws, 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.
23. 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.
13
Exhibit 10.16
DEFERRED COMPENSATION PROGRAM
FOR EXECUTIVES OF CSX CORPORATION
AND AFFILIATED COMPANIES
As Amended and Restated January 1, 1995
(As Amended through December 11, 1996)
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 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,
<PAGE>
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
(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
<PAGE>
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.
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
3
<PAGE>
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.
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
4
<PAGE>
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 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
5
<PAGE>
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.
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);
6
<PAGE>
(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
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
7
<PAGE>
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).
(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.
8
<PAGE>
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 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, 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.
9
<PAGE>
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 Section 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. 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, the trustee of the
Trust shall, within 45 days of such Change of Control, pay to each Participant
not making an election under 16.3 below, 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 payment shall be determined by the Corporation's
accountants after consultation with the entity then maintaining the Program's
records.
16.3 Each Participant may elect in a time and manner determined by the
Committee, but in no event later than December 31, 1996, or the occurrence of 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 in the Program may elect in a time and manner
determined by the Committee, but in no event later than 90 days after becoming a
Participant, to have amounts and benefits determined and payable under the terms
of the Program as if a Change of Control had not occurred. A Participant who has
made an election, as set forth in the two preceding sentences, may, at any time
10
<PAGE>
and from time to time, change that election; provided, however, a change of
election that is made within one year of a Change of Control shall be invalid.
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.
11
Exhibit 10.17
SUPPLEMENTARY SAVINGS AND INCENTIVE AWARD DEFERRAL PLAN
FOR ELIGIBLE EXECUTIVES OF
CSX CORPORATION AND AFFILIATED COMPANIES
As Amended and Restated January 1, 1995
(As Amended through December 11, 1996)
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
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
<PAGE>
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
</TABLE>
ii
<PAGE>
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.
<PAGE>
ARTICLE I. 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 "PostSecondary 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 Board shall be considered
as
<PAGE>
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
(d) Regulated Business Combination. Approval by the shareholders of
the Corporation of a Business Combination that is subject, as a matter of
law or
2
<PAGE>
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
3
<PAGE>
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
(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
4
<PAGE>
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.
(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 PostSecondary
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).
5
<PAGE>
(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.
(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.
6
<PAGE>
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.
(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.
7
<PAGE>
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.
(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.
8
<PAGE>
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.
(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.
9
<PAGE>
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
(iii) 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 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
10
<PAGE>
No Matching Credits shall be credited to a Member's Post-Secondary
Education Subaccount.
ARTICLE 5. MAINTENANCE OF ACCOUNTS
5.1 Adjustment of Account:
(a) As of each Valuation Date each Account (and, if applicable, each
Subaccount) 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 Subaccounts 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 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%.
11
<PAGE>
(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,
12
<PAGE>
(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 if 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 requirements for a one-time deferral request under
Section 6.1(c)(i), or unless the
13
<PAGE>
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.
(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
14
<PAGE>
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 Section 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).
(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 Subaccounts and one or more Retirement Sub-accounts, or any
combination thereof,
15
<PAGE>
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.
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
16
<PAGE>
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. 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 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.
17
<PAGE>
(b) In the event a Change of Control has occurred, the trustee of
the Trust shall, within 45 days of such Change of Control, pay to each
Member or former Member not making an election under (c) below, 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 December 31, 1996,
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 90 days
after becoming a Member, to have amounts and benefits determined and
payable under the terms of the Plan as if a Change of Control had not
occurred. A Member or former Member who has made an election, as set forth
in the two preceding sentences, may, at any time and from time to time,
change that election; provided, however, a change of election that is made
within one year of a Change of Control shall be invalid.
(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.
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.
18
<PAGE>
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.
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
19
<PAGE>
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.
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
20
<PAGE>
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 Subaccount."
(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 Subaccounts 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 December 31,
1990 pursuant to his Salary Deferral Agreement to one or more of the
Post-Secondary Education Subaccounts 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 PostSecondary Education Sub-accounts. Except as
provided in this Section 9.2(b) or 9.2(c) below, a Member or former Member
may not change the time or form of distribution of his Post-Secondary
Education Sub-accounts.
21
<PAGE>
(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 Subaccounts, 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.
22
Exhibit 10.18
SPECIAL RETIREMENT PLAN
OF CSX CORPORATION AND AFFILIATED CORPORATIONS
As Amended and Restated January 1, 1995
(As Amended through December 11, 1996)
<PAGE>
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
APPENDIX I PARTICIPANTS GRANTED ADDITIONAL
CREDITABLE SERVICE PURSUANT TO
SECTION V(4)(b)
<PAGE>
Special Retirement Plan
of CSX Corporation and Affiliated Corporations
As Amended and Restated January 1, 1995
(As Amended through December 11, 1996)
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 Subsection unless they are
otherwise entitled to benefits under other provisions of this Special Plan.
<PAGE>
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 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
<PAGE>
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.
(e) In the event of a Change of Control, as defined in Section XI,
the age 55 and length of service requirements contained in
Section III, Subsection (2)(c), shall be waived for those
Participants who are employed by the Company at the time of the
Change of Control.
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.
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:
<PAGE>
(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 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.
<PAGE>
(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 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.
<PAGE>
(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.
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
<PAGE>
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.
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
<PAGE>
finds that any Participant has been discharged for having performed acts
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. 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, the trustee of the
Trust shall, within 45 days of such Change of Control, pay to each Participant
not making an election under subsection (3), 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:
(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.
<PAGE>
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 in no event later than December 31, 1996, 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. New Participants in the Plan may elect in a time and
manner determined by the Compensation Committee, but in no event later than 90
days after becoming a Participant, to have amounts and benefits determined and
payable under the terms of this Special Plan as if a Change of Control had not
occurred. A Participant who has made an election, as set forth in the two
preceding sentences, may, at any time and from time to time, change that
election; provided, however, a change of election that is made within one year
of a Change of Control shall be invalid.
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 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
<PAGE>
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;
(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.
<PAGE>
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.
<PAGE>
APPENDIX I
PARTICIPANTS GRANTED ADDITIONAL CREDITABLE SERVICE
PURSUANT TO SECTION V(4)(b)
(Named Individually)
Exhibit 10.19
Supplemental Retirement Benefit Plan
of CSX Corporation and Affiliated Corporations
As Amended and Restated January 1, 1995
(As Amended through December 11, 1996)
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."
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.
<PAGE>
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.
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,
2
<PAGE>
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.
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
<PAGE>
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.
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
4
<PAGE>
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.
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. 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
assumptions 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, the trustee of the
Trust shall, within 45 days of such Change of Control, page to each Participant
not making an election under subsection (3), 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).
(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
5
<PAGE>
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, in no event later than December 31, 1996, 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. New Participants in the Plan may elect in a time
and manner determined by the Compensation Committee, but in no event later than
90 days after becoming a Participant, to have amounts and benefits determined
and payable under the terms of this Supplemental Plan as if a Change of Control
had not occurred. A Participant who has made an election, as set forth in the
two preceding sentences, may, at any time and from time to time, change that
election; provided, however, a change of election that is made within one year
of a Change of Control shall be invalid.
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 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
6
<PAGE>
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 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
Supplemental Plan.
7
<PAGE>
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.
Subsidiaries of the Registrant Exhibit 21
As of Dec. 27, 1996, Registrant was the beneficial owner of 100% of the
common stock the following significant subsidiaries:
CSX Transportation Inc. (a Virginia corporation),
Sea-Land Service Inc. (a Delaware corporation),
CSX Intermodal Inc. (a Delaware corporation) and
American Commercial Lines Inc. (a Delaware corporation).
As of Dec. 27, 1996, 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.
Consent of Independent Auditors Exhibit 23
We consent to the incorporation by reference in the following Registration
Statements of our report dated January 31, 1997 (except for Note 2, as to which
the date is March 7, 1997), 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 27, 1996:
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
333-09213 Form S-8
333-19523 Form S-4
/s/ ERNST & YOUNG LLP
----------------------
Ernst & Young LLP
Richmond, Virginia
March 12, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-27-1996
<PERIOD-END> DEC-27-1996
<CASH> 682
<SECURITIES> 0
<RECEIVABLES> 991
<ALLOWANCES> 97
<INVENTORY> 229
<CURRENT-ASSETS> 2,072
<PP&E> 17,420
<DEPRECIATION> 5,514
<TOTAL-ASSETS> 16,965
<CURRENT-LIABILITIES> 2,757
<BONDS> 4,331
0
0
<COMMON> 217
<OTHER-SE> 4,778
<TOTAL-LIABILITY-AND-EQUITY> 16,965
<SALES> 0
<TOTAL-REVENUES> 10,536
<CGS> 0
<TOTAL-COSTS> 9,014
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 249
<INCOME-PRETAX> 1,316
<INCOME-TAX> 461
<INCOME-CONTINUING> 855
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 855
<EPS-PRIMARY> 4.00
<EPS-DILUTED> 0
</TABLE>