UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
CSX Corporation
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
[LOGO]
CSX
CORPORATION
March 18, 2002
Dear CSX Shareholder:
You are cordially invited to attend our Annual Meeting of Shareholders on
Tuesday, April 23, 2002, at 10:00 a.m. (EDT), at The Desmond Hotel and
Conference Center, 660 Albany-Shaker Road, Albany, New York. Your Board of
Directors and management look forward to greeting those shareholders able to
attend.
The proposals to be acted upon at the Meeting include the election of 12
directors and the appointment of independent auditors. The Board of Directors
believes that these proposals are in the best interests of the Company and its
shareholders and recommends a vote for each of these proposals.
Also to be acted upon at the Meeting is a shareholder proposal regarding
poison pill provisions. The Board of Directors believes this proposal is not in
the best interests of the Company and its shareholders and recommends a vote
against this proposal.
If you plan to attend the Meeting, please mark the appropriate box on your
proxy card, or indicate your attendance if you vote by telephone or by the
Internet. You may also complete and mail the Annual Meeting response card
included for that purpose.
Whether or not you are able to attend the Meeting, it is important that
your shares are represented, no matter how many shares you own. Therefore, you
are urged to vote promptly.
/s/ John W. Snow
John W. Snow
Chairman of the Board,
President and Chief Executive Officer
Notice of Annual Meeting of Shareholders
Richmond, Virginia
March 18, 2002
To Our Shareholders:
The Annual Meeting of Shareholders of CSX Corporation will be held at The
Desmond Hotel and Conference Center, 660 Albany-Shaker Road, Albany, New York,
on Tuesday, April 23, 2002, at 10:00 a.m. (EDT), for the purpose of considering
and acting upon the following matters:
1. Election of 12 directors;
2. Appointment of Ernst & Young LLP as independent certified public
accountants for 2002;
3. Shareholder proposal regarding poison pill provisions; and
4. Such other matters as may properly come before the Meeting.
The above matters are described in the Proxy Statement. You are urged, after
reading the Proxy Statement, to vote your shares by proxy using one of the
following methods: (a) over the Internet, (b) by telephone using the
instructions on the enclosed proxy card, or (c) mark, sign, date, and return the
enclosed Proxy by mail to assure that your shares are represented at the
Meeting.
Only shareholders of record at the close of business on February 22, 2002,
will be entitled to vote at the Meeting, either in person or by proxy. This
Proxy Statement is being mailed to those shareholders on or about March 18,
2002.
By Order of the Board of Directors
/s/ Stephen R. Larson
Stephen R. Larson
Vice President-General Counsel & Corporate Secretary
1
PROXY STATEMENT
General Information
The enclosed Proxy is solicited by the Board of Directors of CSX Corporation
("CSX" or the "Company"). A Proxy may be revoked by a shareholder at any time
before it is voted by notice in writing delivered to the CSX Corporate
Secretary, by timely receipt of another proxy (including an Internet or
telephone vote), or by voting in person at the Annual Meeting.
CSX is the parent of CSX Transportation, Inc. ("CSXT"); CSX Lines LLC; CSX
World Terminals LLC; CSX Intermodal, Inc.; and The Greenbrier Resort Management
Company. The address of CSX's principal executive offices is One James Center,
901 East Cary Street, Richmond, Virginia 23219-4031.
Shares Outstanding and Voting Rights
As of February 22, 2002, CSX had outstanding 214,304,426 shares of common
stock entitled to one vote per share. A majority of the shares entitled to vote,
represented in person or by proxy, will constitute a quorum for the transaction
of business. Only shareholders of record at the close of business on February
22, 2002, will be entitled to vote. CSX is not aware of any matters to come
before the Meeting other than those set forth in the accompanying Notice and
this Proxy Statement.
1. ELECTION OF DIRECTORS
Twelve directors are to be elected to hold office until the next Annual
Meeting of Shareholders is held and their successors are elected. However, the
term of any director other than the chairman who is also a CSX officer ends if
he or she ceases to be an employee of the Company. Votes will be cast, unless
otherwise specified, for the election of those named below. If, at the time of
the Meeting, any nominee should be unable to serve as a director, such votes
will be cast for such substitute nominee as may be nominated by the Board of
Directors. All of the nominees listed other than Mr. Ward were previously
elected directors by the shareholders. Three current directors of the Company,
H. Furlong Baldwin, Claude S. Brinegar, and E. Bradley Jones, are ineligible for
re-election under the Company's bylaws.
As of the date of this Proxy Statement, the Board of Directors has no reason
to believe that any of the nominees named will be unable or unwilling to serve.
There are no family relationships among any of these nominees or among any of
these nominees and any officer, nor any arrangement or understanding between any
nominee and any other person pursuant to which the nominee was selected.
In the election of directors, those receiving the greatest number of votes
shall be elected, even if such votes do not constitute a majority. Certain
information regarding each nominee follows. Each nominee has consented to being
named in the Proxy Statement and to serve if elected.
2
[PHOTO] Elizabeth E. Bailey, 63, is the John C. Hower Professor of Public Policy
and Management, The Wharton School of the University of Pennsylvania. She is a
director of Philip Morris Companies, Inc., and Teachers Insurance and Annuity
Association-College Retirement Equities Fund. Dr. Bailey has been a director of
CSX since November 1989. She is Chair of the Board's Public Affairs Committee
and a member of the Nominating and Organization Committee and the Executive
Committee.
[PHOTO] Robert L. Burrus, Jr., 67, is a partner in and Chairman of McGuireWoods
LLP, a law firm. Mr. Burrus is a director of Concepts Direct, Inc.; S&K Famous
Brands, Inc.; and Smithfield Foods, Inc. Mr. Burrus has been a director of CSX
since April 1993 and is a member of the Board's Nominating and Organization
Committee and the Pension Committee.
[PHOTO] Bruce C. Gottwald, 68, has been Chairman of Ethyl Corporation, a
worldwide producer of petroleum additives, since May 2001. Prior to May 2001, he
was Chairman and Chief Executive Officer of Ethyl Corporation. Mr. Gottwald has
been a director of CSX since April 1988 and is Chair of the Board's Pension
Committee and a member of the Compensation Committee and the Executive
Committee.
[PHOTO] John R. Hall, 69, is the former Chairman of the Board of Directors of
Bank One Corporation, a bank holding company, a position he held from December
1999 to March 2000. Previously, Mr. Hall was Chairman of Arch Coal, Inc., a coal
mining company, from July 1997 to December 1998; and, prior to February 1997, he
was Chairman and Chief Executive Officer of Ashland Inc., a diversified energy
company with operations in petroleum refining and marketing, chemicals, highway
construction, oil and gas exploration and coal. He is a director of Bank One
Corporation; The Canada Life Assurance Company; Humana Inc.; UCAR International
Inc.; and United States Enrichment Corp. Mr. Hall has been a director of CSX
since May 1994 and is a member of the Board's Audit Committee, Compensation
Committee and the Nominating and Organization Committee.
[PHOTO] Robert D. Kunisch, 60, has been Special Partner in ABS Capital Partners,
Inc., a private equity investment firm, since January 2001, and Adviser to the
senior management of Cendant Corporation, a global provider of consumer and
business services primarily in the membership, travel and real estate services
segments, since January 2000. From December 1997 to January 2000, Mr. Kunisch
was Vice Chairman of Cendant Corporation. Prior to December 1997, he was
Chairman, President and Chief Executive Officer of PHH Corporation, a provider
of value-added business services, including vehicle management, real estate, and
mortgage banking services. Mr. Kunisch has been a director of CSX since October
1990 and is a member of the Board's Compensation Committee and the Nominating
and Organization Committee.
3
[PHOTO] James W. McGlothlin, 61, is Chairman and Chief Executive Officer of The
United Company, a diversified energy company. He is a director of Birmingham
Steel Corporation. He has been a director of CSX since November 1989 and is a
member of the Board's Audit Committee and Pension Committee.
[PHOTO] Southwood J. Morcott, 63, was the Chairman and Chief Executive Officer
of Dana Corporation, a manufacturer of automotive and truck parts and provider
of commercial credit until his retirement as CEO in April 1999 and as Chairman
in April 2000. He is a director of Johnson Controls, Inc.; Navistar
International Corporation; and Phelps Dodge Corporation. Mr. Morcott has been a
director of CSX since July 1990 and is a member of the Board's Pension Committee
and the Public Affairs Committee.
[PHOTO] Charles E. Rice, 66, has been Chairman of Mayport Venture Partners LLC,
a venture capital firm, since January 2001. From December 1998 to January 2001,
he was Vice Chairman, Corporate Development, of Bank of America Corp., a bank
holding company. From April 1998 through October 1998, he was Chairman of
NationsBank, Inc., a bank holding company. Previously, he was Chairman and Chief
Executive Officer of Barnett Banks, Inc., a bank holding company. He is a
director of Post Properties, Inc., and Sprint Corporation. Mr. Rice has been a
director of CSX since April 1990 and is Chair of the Board's Compensation
Committee and a member of the Public Affairs Committee and the Executive
Committee.
[PHOTO] William C. Richardson, 61, is President and Chief Executive Officer of
the W.K. Kellogg Foundation, a major philanthropic institution. He is a director
of The Bank of New York Company, Inc., and The Kellogg Company. Dr. Richardson
has been a director of CSX since December 1992 and is Chair of the Board's
Nominating and Organization Committee and a member of the Public Affairs
Committee and the Executive Committee.
[PHOTO] Frank S. Royal, M.D., 62, is a physician in private practice in
Richmond, Virginia, and a health care expert. He is a director of Chesapeake
Corporation; Dominion Resources, Inc.; HCA, The Healthcare Corporation; and
SunTrust Banks, Inc. Dr. Royal has been a director of CSX since January 1994
and is Chair of the Board's Audit Committee and a member of the Compensation
Committee and the Executive Committee.
[PHOTO] John W. Snow, 62, is Chairman of the Board, President and Chief
Executive Officer of CSX. Mr. Snow is a director of Circuit City Stores, Inc.;
Johnson & Johnson; United States Steel Corporation; and Verizon Communications.
Mr. Snow has been a director of CSX since April 1988 and is Chair of the Board's
Executive Committee.
[PHOTO] Michael J. Ward, 51, has been President of CSX Transportation, Inc., the
Company's rail subsidiary, since November 2000, having previously served as its
Executive Vice President-Operations from April through November 2000. Prior to
April 2000, Mr. Ward served CSX Transportation as Executive Vice President-Coal
Service Group from August 1999 to April 2000, as Executive Vice President-Coal
and Merger Planning from October 1998 to August 1999, and as Executive Vice
President-Finance and Chief Financial Officer prior to October 1998. He is a
director of Ashland, Inc.
4
Meetings of the Board
During 2001, there were six meetings of the CSX Board of Directors. Each
director attended 75 percent or more of the meetings of the Board of Directors
and committees on which he or she served during the period he or she was a
director, with the exception of Messrs. Gottwald (67 percent) and McGlothlin (73
percent).
Corporate Governance
The CSX Board of Directors is committed to governance principles and
practices that facilitate the Board in fulfilling its fiduciary duties to
shareholders and to the Company. Much of the Board's work is conducted through
committees as described below. The role and jurisdiction of each committee is
set forth in written charters, and the appropriateness of the committee
structure is reviewed regularly. The Board has established and maintains
qualification guidelines for candidates for director. Reviews of each director's
performance and continuing qualification for Board membership, as well as the
Board's performance as a working group, are conducted on a regular basis.
Committees of the Board
CSX's Board of Directors has the following committees to assist it in the
discharge of its responsibilities. The biographical information in "Election of
Directors" includes committee memberships currently held by each nominee.
The Executive Committee meets only on call and has authority to act for the
Board on most matters during the intervals between Board meetings. The Executive
Committee has six members. It held no meetings in 2001.
The Audit Committee approves and recommends independent auditors to the
Board and to the shareholders. Its primary functions, on behalf of the Board,
include monitoring the Company's accounting and financial reporting practices,
determining that the Company has adequate internal control structure, policies,
procedures and external and internal auditing activities to assure that the
Company is operating in accordance with its prescribed policies and procedures.
Specifically, the Committee, through meetings with and reports from management,
the auditors, or both, reviews the scope of the auditors' examination, audit
reports and CSX's internal auditing procedures; reviews and monitors policies
established to prohibit unethical, questionable or illegal activities by those
associated with CSX; receives reports from management and outside auditors
regarding matters that can have an adverse economic impact on the Company;
receives reports from internal and outside auditors on matters that could impact
the Company's internal control and financial reporting and integrity; and
reviews the compensation paid to the auditors for annual audit and non-audit
services and the effect of such compensation and services on the independence of
the auditors. The Audit Committee has five members, none of whom is a Company
employee and each of whom the Board of Directors has determined to be
independent. It held four meetings in 2001.
The primary functions of the Compensation Committee are to establish the
Company's compensation philosophy and to review and approve, or recommend
approval of, compensation and compensation plans, including certain benefits for
key employees (as determined by this Committee from time to time), to establish
performance objectives for certain executives, and to certify the attainment of
those objectives in connection with the payment of performance-based
compensation within the meaning of Internal Revenue Code Section 162(m). In
addition, the Committee monitors the administration of certain executive
compensation and benefit programs. The Compensation Committee has five members,
none of whom is a Company employee and all of whom are "outside directors"
within the meaning of regulations promulgated pursuant to Internal Revenue Code
Section 162(m). It held five meetings in 2001.
The Pension Committee monitors funding and administration of certain
tax-qualified benefit plans of the Company. The Committee has authority to amend
certain tax-qualified plans. The Pension Committee has five members and held one
meeting in 2001.
The Nominating and Organization Committee of the Board recommends candidates
for election to the Board and reviews and recommends changes in Board
composition, committee structure, director qualification, and director
compensation and retirement. This Committee recommends and monitors corporate
governance practices and also conducts regular evaluations of director
performance and of the effectiveness of the Board as a working group. The
Nominating and Organization Committee also reviews significant changes in
corporate structure, succession in senior management, and other internal matters
of broad corporate importance. The Committee has six members, none of whom is a
Company employee. It held four meetings in 2001.
5
In fulfilling its responsibility for making nominations to the Board of
Directors, the Nominating and Organization Committee will review recommendations
as to possible nominees received from shareholders and other qualified sources.
Shareholder recommendations must be in writing addressed to the Chairman of the
Nominating and Organization Committee, c/o Corporate Secretary, CSX Corporation,
One James Center, 901 East Cary Street, Richmond, Virginia 23219-4031, and
should include a statement setting forth the qualifications and experience of
the proposed candidate and basis for nomination.
The Public Affairs Committee reviews and makes recommendations with respect
to public policy issues facing the Company and its subsidiaries. It reports
periodically to the Board on the Company's activities in fulfilling social
responsibilities and complying with public policy. In addition, this Committee
reviews CSX's relationship to the broader social environment in which the
Company operates, including certain major litigation, legislation, and other
governmental and legal actions that could affect CSX. This six-member Committee
was new in 2001 and held one meeting during the year.
Directors' Compensation
For services rendered during the year 2001, non-employee directors received
a retainer of $35,000 per year, at least 40 percent of which is paid in CSX
stock as described below. The Chair of each Board committee receives an
additional annual retainer of $5,000. Retainers are prorated for service of less
than a full year. Each non-employee director also receives $1,000 for each Board
and committee meeting attended and is reimbursed for expenses incurred in
connection with services as a director. Directors will receive a retainer of
$40,000 per year for services beginning in 2002. Other components of director
compensation are expected to remain unchanged during 2002.
CSX non-employee directors must participate in the CSX Corporation Stock
Plan for Directors (the "Stock Plan"). Pursuant to the Stock Plan, directors are
paid not less than 40 percent of their annual retainer in CSX common stock and
can annually elect to receive up to 100 percent of the remaining portion of
their retainers and meeting fees in stock. Payments made in stock pursuant to
the Stock Plan also can be deferred for income tax purposes into the CSX
Directors' Stock Trust ("Directors' Trust"), established for that purpose. The
Directors' Trust is subject to the claims of creditors of CSX Corporation. In
2001, each non-employee director received a stock grant of 500 shares of CSX
common stock with a market value on date of grant of $35.075 per share, the
average between the high and low prices reported on the New York Stock Exchange
on December 12, 2001, which were eligible for deferral into the Directors'
Trust. Each non-employee director also received 4,000 stock options that vest
one year after the date of grant, with an exercise price of $35.075 and a term
of 10 years.
For all deferred stock compensation, each director elects, in accordance
with Internal Revenue Service requirements, a distribution schedule for such
deferred stock compensation. Distributions of deferred stock compensation cannot
occur before the later of the director's retirement from the Board or reaching
age 65, and distribution periods cannot exceed 20 years.
A non-employee director may elect to participate in the Corporate Director
Deferred Compensation Plan (the "Deferred Compensation Plan"), under which he or
she can defer all or a portion of cash compensation paid by CSX until he or she
ceases to be a director and has reached age 65, after which he or she will be
paid in installments over a period not to exceed 15 years. Amounts so deferred
may be designated by the director to be credited to an Interest Account, a CSX
Phantom Stock Account, or a combination. The Interest Account accrues interest,
compounded quarterly, at rates that are reviewed and adjusted from time to time.
An Enhanced Interest Account, to which deferrals could be directed in 1989 and
1990, accrues interest at a higher than market rate compounded annually. The
rate may be adjusted from time to time. Participants in the Enhanced Interest
Account also are covered by an additional $10,000 death benefit. The balances in
the Phantom Stock Accounts represent cash balances equal to the value of such
CSX stock, including reinvested dividends, which would have been in the account
had the deferred cash compensation actually been used to purchase CSX stock. Mr.
Morcott and Dr. Royal have directed deferred cash compensation to be invested in
the Phantom Stock Account where the cash balances accumulated as of December 28,
2001, represent the equivalent of 1,996 shares and 406 shares of CSX stock,
respectively.
6
The Deferred Compensation Plan provides that if the Board determines that a
change of control of CSX has occurred, as defined in the Plan, Plan participants
will receive, within seven days of such determination, a lump sum cash payment
equal to the balance credited to directors' accounts. The Stock Plan provides
that upon a change of control, shares, the receipt of which was deferred and
held in trust, will be distributed unless the participant has elected to remain
in the Plan. Upon a change of control of CSX, amounts sufficient to pay any
undistributed payments pursuant to the Deferred Compensation Plan and the Stock
Plan will be put into a trust until distribution under the terms of the plans
and participants' distribution elections. The trust will be subject to claims of
creditors of CSX Corporation. Directors may elect, within a specified period of
time prior to any change of control event, to continue participation in the
Deferred Compensation Plan and the Stock Plan as if a change of control had not
occurred. Once such an election has been made and a change of control occurs,
the election can be revoked, subject to a five percent penalty on distribution.
CSX directors participate in the CSX Directors' Charitable Gift Plan ("Gift
Plan"). Participation in the Gift Plan begins when an individual has completed
five consecutive years of service as a CSX director. Under the Gift Plan, the
Company will make, on behalf of each participant, contributions totaling $1
million to charitable institutions designated by that participant. Contributions
to designated charities are made in installments, with $100,000 payable upon the
director's retirement and the balance payable in installments of $100,000 per
year, commencing at the time of the participant's death. The Company funds the
charitable contributions through company-owned life insurance on the lives of
certain participants. Premiums on the life insurance policies are paid by the
Company. The directors who participate in the Gift Plan are: Dr. Bailey, Dr.
Richardson, Dr. Royal, and Messrs. Burrus, Gottwald, Hall, Kunisch, McGlothlin,
Morcott, Rice, and Snow.
Directors also can participate in a CSX Directors' Matching Gift Program.
Directors' contributions to organizations exempt from taxation pursuant to
Section 501(c)(3) of the Internal Revenue Code, and which qualify for support
under internal guidelines for CSX charitable contributions, are matched on a
two-for-one basis. The maximum amount of contributions that can be matched in
any year is $25,000 per director. Directors who participated in the Matching
Gift Program during 2001 and the amounts paid by the Company for contributions
made by these directors in 2001 are: Dr. Bailey -$6,000; Mr. Brinegar - $40,500;
Mr. Burrus - $50,000; Mr. Gottwald - $50,000; Mr. Hall - $50,000; Mr. Jones -
$50,000; Mr. Kunisch - $50,000; Mr. Morcott - $10,000; Mr. Rice - $50,000; Dr.
Richardson - $49,580; Dr. Royal - $50,000; and Mr. Snow - $50,000.
Certain Relationships and Related Transactions
Robert L. Burrus, Jr., a director of the Company, is a partner in and
Chairman of McGuireWoods LLP, a law firm that regularly provides legal services
to the Company and its subsidiaries.
John R. Hall, a director of the Company, purchased a founding membership in
The Greenbrier Sporting Club during 2001 at the standard offering price of
$100,000. The Greenbrier Sporting Club is sponsored by a wholly-owned subsidiary
of the Company. The founding membership entitles Mr. Hall to a reduction in dues
and certain other benefits, all on the same terms as all other founding members.
Contractual Obligations
The Company has entered into change of control employment agreements (the
"Employment Agreements") with certain executives, including Messrs. Ward,
Goodwin, and Aron. The Employment Agreements generally provide that if the
executive is terminated other than for cause within three years after a change
of control of the Company, or if the executive terminates employment for good
reason within such three-year period or voluntarily during the 30-day period
following the six-month anniversary of the change of control (or, in the case of
a change of control transaction subject to Surface Transportation Board review,
following the 12-month anniversary of the approval of the transaction by the
Surface Transportation Board), the executive is entitled to receive severance
benefits. Severance benefits include a lump sum severance payment equal to three
times the sum of the executive's base salary and highest annual bonus for the
three years preceding the change of control (or, if higher, the most recently
established target bonus), together with certain other payments and benefits,
including a prorated bonus for the year of termination, the present value of
additional pension bene-
7
fits the executive would have earned if employment had continued for three more
years and all benefits had vested, continuation of employee welfare benefits for
three years, an additional payment to make the executive whole for certain
excise taxes imposed on certain change of control payments, if any, the right to
receive the Black-Scholes value of options that terminate unexercised, and the
right to up to $20,000 of outplacement services.
In 1995, the Company entered into a similar agreement with Mr. Grassi,
President and Chief Executive Officer of CSX World Terminals. Upon the Company's
sale of the international container shipping business in 1999, and before
becoming eligible for benefits under the Agreement, Mr. Grassi entered into a
second agreement whereby he deferred his ability to receive the benefits until
his termination from CSX. Upon his termination from CSX, Mr. Grassi will be paid
an amount equal to three times the sum of his base salary and highest annual
bonus for the three years preceding the change in control (or, if higher, the
highest annual bonus for the three years that will precede retirement), together
with certain other payments and benefits, including a prorated bonus for the
year of termination paid at the same rate as the highest bonus described above,
the present value of additional pension benefits the executive would have earned
if employment had continued for three more years and all benefits had vested,
and continuation of employee welfare benefits for himself and his spouse for
three years.
As of July 16, 2001, the Company and Mr. Snow entered into an employment
agreement (the "Employment and Consulting Agreement") that provides Mr. Snow
with the benefits described above with respect to Messrs. Ward, Goodwin and Aron
in the event of a change of control of the Company, and also provides terms of
Mr. Snow's employment for the remainder of his career at the Company. The
Employment and Consulting Agreement provides Mr. Snow with a salary of
$1,250,000 and bonus opportunity equal to 120 percent of his annual salary; a
one-time grant of stock options of 800,000 shares and 200,000 shares of
restricted stock (each as disclosed in the applicable tables in this Proxy
Statement); a $25,000,000 split-dollar life insurance policy; continuation of
his employee benefits during his employment; and continuation of all perquisites
while serving as Chairman of the Board. During the term of the Employment and
Consulting Agreement, the Board may ask Mr. Snow to retire as Chief Executive
Officer. Mr. Snow will continue as Chairman of the Board until his retirement
from the Board at the conclusion of the April 2004 shareholder meeting. While
serving as Chairman after his retirement as Chief Executive Officer, Mr. Snow
will receive a retainer equal to his pre-retirement base salary in lieu of any
other director compensation. Mr. Snow will receive no further stock option or
restricted stock awards during the remainder of his career with the Company. The
Employment and Consulting Agreement also provides the terms of a consulting
arrangement for two years following Mr. Snow's retirement from the Board of
Directors. In exchange for his services as a consultant, Mr. Snow will be
compensated at an annual rate of $500,000 during the first year of consulting
and at an annual rate of $250,000 for the second year of consulting. In
addition, consistent with treatment of prior Chief Executive Officers of the
Company, Mr. Snow will be provided with certain employee benefits and
perquisites including office space and secretarial support, maintenance of
country club memberships, executive physicals, discounts at The Greenbrier, and
use of private aircraft for the remainder of his life. The Employment and
Consulting Agreement also provides that Mr. Snow may not compete against the
Company for the remainder of his life without the consent of his successor as
Chief Executive Officer.
If Mr. Snow's employment is terminated other than for cause or by Mr. Snow
for good reason, or for death or disability, the Company is required to pay, to
the extent not previously paid, a lump sum cash payment equal to the payments
otherwise payable under the contract. In the event of death or disability, the
Company also will provide employee benefits. In the event of termination by Mr.
Snow for good reason or other than for cause, the Company will provide employee
benefits and the perquisites described above.
As previously reported, in June 1999, the Company entered into an
employment agreement (the "Stock Agreement") with Mr. Snow. This Stock Agreement
will expire in June 2002 or, if later, with the appointment of his successor as
Chief Executive Officer of the Company. Under the Stock Agreement, Mr. Snow
personally was required to purchase 250,000 shares on the open market for which
he received a matching grant of 250,000 shares of restricted stock from the
Company. Mr. Snow receives credit toward his pension benefits ratably over the
restricted period for the restricted stock, to the extent performance goals have
been met, as if the shares were paid as cash bonuses based on the stock price
when the restricted shares were issued. Mr. Snow's employment may be terminated
for cause by the Company or for good reason by Mr. Snow, in each case as
prescribed in his Stock Agreement. Upon termination of employment for cause by
the Company or other
8
than good reason by Mr. Snow, the Company will have no further obligations to
Mr. Snow after the date of termination under the Stock Agreement. If Mr. Snow's
employment is terminated other than for cause, such as termination due to death,
disability, or by Mr. Snow for good reason, all shares of restricted stock
subject to the Stock Agreement will vest immediately. If Mr. Snow's employment
is terminated for cause, he forfeits the restricted shares.
In 2000, the Company guaranteed the personal bank loan used by Mr. Snow to
fund the purchase of stock required under his Stock Agreement. Also in 2000, Mr.
Snow's Stock Agreement was amended to provide that, upon a change of control, he
would be indemnified (on an after-tax basis) against any loss resulting from the
difference between outstanding loan balances (including interest paid on the
loan) and the combined value of restricted stock issued and the matching stock
he was required to purchase pursuant to his Stock Agreement (including dividends
paid on such stock).
In 2001, the Company and Mr. Ward entered into a five-year employment
agreement which included the award of 165,000 shares of restricted stock to Mr.
Ward as an incentive to remain with the Company. The stock award vests on the
fifth anniversary of the grant. If Mr. Ward voluntarily terminates his
employment with the Company prior to the end of the five years, the shares will
be forfeited to the Company. Generally, if the Company elects to terminate Mr.
Ward's employment for reasons other than for cause, Mr. Ward dies or becomes
disabled, or Mr. Ward terminates employment for good reason within five years of
the grant, the Company will remove the restrictions on a prorated portion of the
restricted shares and pay Mr. Ward the salary otherwise payable to him for the
balance of the agreement and pay Mr. Ward one-half of the target annual
incentive otherwise payable for the balance of the agreement.
In 2001, the Company and Mr. Aron entered into an employment agreement
providing Mr. Aron with terms of employment through his anticipated retirement
at the end of April 2002 and ensuring the retention of Mr. Aron's services as a
consultant to the company for a two-year period beginning upon his retirement.
The agreement provides Mr. Aron with compensation for his consulting services
equal to his base salary immediately preceding his retirement from the Company.
In addition, during the term of the consulting period, Mr. Aron will be provided
continued car allowance, club memberships, discounts at The Greenbrier, and
office and secretarial services. If Mr. Aron's employment is terminated before
April 30, 2002, without cause, he will continue to receive his pay and certain
benefits through that date. The agreement also prohibits Mr. Aron from competing
with the Company through April 30, 2004. If a change of control of the Company
occurred on or before April 30, 2002, Mr. Aron's change of control agreement
(the Employment Agreement above) would supersede this agreement.
Section 16(a) Beneficial Ownership Reporting Compliance
The Securities Exchange Act of 1934 requires the Company's executive
officers and directors, and any persons owning more than 10 percent of a class
of the Company's stock, to file certain reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC"). Based solely on
its review of the copies of Forms 3, 4 and 5 received by it, the Company
believes that the Company's executive officers and directors complied with the
SEC's reporting requirements with respect to transactions during the last fiscal
year.
9
Report of the Audit Committee
The Audit Committee has reviewed and discussed the Company's audited
financial information with management and has discussed with the independent
auditors the matters required to be discussed by SAS 61. In addition, the Audit
Committee has received the written disclosures and letter from Ernst & Young LLP
("E&Y"), the Company's independent accountants, as required by Independence
Standards Board Standard No. 1. The Committee has discussed E&Y's independence
with E&Y. Based on its review and on the discussions described above, the Audit
Committee has recommended to the full Board of Directors that the audited
financial statements be included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 28, 2001.
Audit Committee
Frank S. Royal, Chair
H. Furlong Baldwin
Claude S. Brinegar
John R. Hall
James W. McGlothlin,
the entire Committee
Richmond, Virginia
February 12, 2002
Audit Fees
The aggregate fees billed for professional services rendered for the audit
of the Company's consolidated financial statements for the fiscal year ending
December 28, 2001 were $2,367,000.
Financial Information Systems Design and Implementation Fees
There were no fees billed for the professional services described in
Paragraph (c)(4)(ii) of Rule 2-01 of Regulation S-X (17 CFR 210.2-01(c)(4)(ii))
rendered by E&Y for the fiscal year ended December 28, 2001.
All Other Fees
All other fees paid to E&Y, for the fiscal year ending December 28, 2001,
aggregated $2,260,000, and included audit-related services of $1,108,000 and
other services of $1,152,000.
The Audit Committee has concluded that the provision of services covered in
the sections captioned "All Other Fees" are compatible with maintaining E&Y's
independence.
10
Security Ownership of Certain Beneficial Owners, Directors, and Executive
Officers
Amount and Nature of Beneficial Ownership
----------------------------------------------------
Shares for which
Beneficial Ownership Percent
Shares can be Acquired Total of
Name of Beneficially within 60 Days Beneficial Class
Title of Class Beneficial Owner (Note 1) Owned (Note 2) Ownership (Note 3)
---------------------------------------------------------------------------------------------------------------------------
CSX Corp. Elizabeth E. Bailey 10,830 6,000 16,830 *
Common Stock H. Furlong Baldwin 10,242 6,000 16,242 *
$1 Par Value Claude S. Brinegar 7,392 6,000 13,392 *
Robert L. Burrus, Jr. 15,648 6,000 21,648 *
Bruce C. Gottwald 27,695 6,000 33,695 *
John R. Hall 21,256 6,000 27,256 *
E. Bradley Jones 4,910 6,000 10,910 *
Robert D. Kunisch (Note 4) 18,690 6,000 24,690 *
James W. McGlothlin (Note 5) 230,698 6,000 236,698 *
Southwood J. Morcott 17,228 6,000 23,228 *
Charles E. Rice 20,403 6,000 26,403 *
William C. Richardson 7,380 6,000 13,380 *
Frank S. Royal 12,367 6,000 18,367 *
John W. Snow 1,722,676 (Note 6) 2,558,667 4,281,343 1.97%
Paul R. Goodwin 122,062 318,934 440,996 *
Michael J. Ward 249,715 (Note 6) 230,134 479,849 *
Mark G. Aron 195,238 362,267 557,505 *
Robert J. Grassi 68,089 (Note 6) 103,400 171,489 *
Executive officers as a group 3,056,816 (Note 7) 3,008,300 6,065,116 2.80%
(14 including those named above)
and all directors and nominees
Capital Research and Management 14,173,400 -- 14,173,400 6.61%
Company (Note 8)
333 South Hope Street
Los Angeles, CA 90071
AXA Financial, Inc. (Note 9) 23,319,502 -- 23,319,502 10.88%
1290 Avenue of the Americas
New York, NY 10104
---------------------------------------------------------------------------------------------------------------------------
Notes to Security Ownership of Certain Beneficial Owners, Directors, and
------------------------------------------------------------------------
Executive Officers
------------------
Note 1 Except as otherwise noted, the persons listed have sole voting power
as to all shares listed, including shares held in trust under certain
deferred compensation plans, and have investment power except with
respect to all shares held in trust under deferred compensation plans,
investment of which is governed by the terms of the trust. Ownership
information is as of February 22, 2002.
Note 2 Represents shares under options exercisable within 60 days.
Note 3 Based on 214,304,426 shares outstanding on February 22, 2002, plus
shares deemed outstanding for which beneficial ownership can be
acquired with in 60 days by that individual or group. An asterisk (*)
indicates that ownership is less than one percent of class.
Note 4 Mr. Kunisch's ownership includes 1,000 shares of common stock held in a
limited partnership in which Mr. Kunisch holds an ownership interest.
Note 5 Mr. McGlothlin's ownership includes 200,000 shares of common stock as a
result of stock holdings by affiliates of Mr. McGlothlin in which he
shares voting and investment power.
Note 6 The ownership of Messrs. Snow and Ward includes restricted shares of
common stock in the amount of 450,000 shares and 165,000 shares,
respectively. Mr. Snow's ownership includes 194,811 shares of common
stock owned jointly with his wife. Mr. Grassi's ownership includes
3,920 shares of common stock held in a family trust over which he
has voting and investment power. Mr. Ward's ownership includes 16,804
shares owned by his wife.
Note 7 This column includes ownership by executive officers other than those
named above including: 15,412 shares of common stock owned by executive
officers' spouses.
11
Note 8 Information reported is derived from a Schedule 13G of Capital Research
and Management Company dated February 11, 2002, and filed with the SEC.
As reported in the Schedule 13G, the person filing the statement has the
sole power to dispose of or to direct the disposition of 14,173,400
shares.
Note 9 Information reported is derived from a Schedule 13G filed jointly by
AXA Financial, Inc., as a parent company of Alliance Capital Management,
L.P., and The Equitable Life Insurance Society of the United States and
an affiliate of AXA Konzern AG (Germany) AXA Rosenberg Investment
Management LLC, dated February 11, 2002, and filed with the SEC. As
reported in the Schedule 13G, the person filing the statement has the
sole power to vote or to direct the vote of 12,446,800 shares, shared
power to vote or direct the vote of 2,616,696 shares, the sole power to
dispose of or to direct the disposition of 23,265,781 shares, and the
shared power to dispose of or direct the disposition of 53,721 shares.
Executive Compensation
The individuals named below include the Company's Chief Executive Officer
and the other four executive officers of the Company who were the most highly
compensated executive officers of the Company as of the last day of the fiscal
year ending December 28, 2001. Information is provided for the fiscal years
ending on December 28, 2001; December 29, 2000; and December 31, 1999.
Summary Compensation Table
Long-Term Compensation
-------------------------------------------
Annual Compensation Awards Payouts
-----------------------------------------------------------------------------------------------------
Other Securities
Annual Restrict Underlying All Other
Compen- Stock Options/ Compen-
Name and sation ($) Award(s)($) SARs (#) LTIP sation ($)
Principal Position Year Salary ($) Bonus ($) (Note 1) (Note 2) (Note 3) Payouts ($) (Note 4)
-----------------------------------------------------------------------------------------------------------------------------------
John W. Snow 2001 $ 1,200,003 $ 1,000,000 $ 393,277 $ 7,132,000 800,000 $ 0 $ 359,780
Chairman, President 2000 1,000,008 0 977,509 0 301,480 0 6,057,360
& CEO 1999 1,000,008 0 424,356 0 290,000 696,247 273,239
Paul R. Goodwin 2001 520,833 281,250 252,893 0 110,000 0 96,294
Vice Chairman- 2000 491,667 0 269,237 0 82,960 0 1,520,055
& CFO 1999 475,000 0 121,337 0 100,000 204,779 29,577
Michael J. Ward 2001 475,000 285,000 221,683 5,322,900 175,000 0 27,191
President- 2000 366,669 0 204,708 0 42,460 0 838,831
CSXT 1999 315,258 0 92,713 0 40,000 159,778 273,390
Mark G. Aron 2001 445,833 240,750 160,251 0 100,000 0 127,057
Vice Chairman 2000 425,000 0 348,680 0 60,660 0 1,579,397
1999 425,000 0 214,291 0 80,000 204,779 112,094
Robert J. Grassi 2001 331,667 217,900 62,606 0 50,000 0 10,950
CSX World Terminals 2000 290,000 270,000 154,627 0 68,110 0 696,952
President & CEO 1999 275,000 131,875 106,787 0 31,000 0 1,649,148
-----------------------------------------------------------------------------------------------------------------------------------
Notes to Summary Compensation Table
-----------------------------------
Note 1 The perquisites or other personal benefits exceeding 25 percent of the
total perquisites and other personal benefits afforded to named officers
were for the years and in the cases of individuals as follows: (a)
during 2001, for Mr. Snow, $117,900 for life insurance premiums; for Mr.
Goodwin, $103,873 for club dues; for Mr. Aron, $23,700 for life
insurance; (b) during 2000, for Mr. Snow, $207,237 for life insurance
premiums for 2000 and part of 1999; for Mr. Goodwin, $44,640 for life
insurance premiums for 2000 and part of 1999; for Mr. Ward, $20,164 for
life insurance premiums for 2000 and part of 1999; for Mr. Aron, $39,509
for life insurance premiums for 2000 and part of 1999, and $52,783 for
club dues; (c) during 1999, for Mr. Snow, $35,565 for life insurance
premiums; for Mr. Aron, $51,684 for club dues.
12
Note 2 For 2001, the values shown reflect the awards of restricted stock to
Messrs. Snow and Ward pursuant to the employment agreements described in
"Contractual Obligations." The value of Mr. Snow's one-time award of
200,000 shares of restricted stock for the three-year period leading up
to his retirement as Chairman of the Company is based on $37.40 per
share, the closing price of CSX stock on the New York Stock Exchange on
July 11, 2001, the date of grant. As of December 28, 2001, the value of
Mr. Snow's restricted stock award, based on $35.12 per share closing
price of CSX stock on the New York Stock Exchange on that date, was
$7,024,000. The value of Mr. Ward's award of 165,000 shares of
restricted stock that will vest in five years from February 13, 2001,
the date of grant, is based on $32.26 per shares, the closing price of
CSX stock on the New York Stock Exchange on that date. As of December
28, 2001, the value of Mr. Ward's restricted stock award based on the
closing price of CSX stock on the New York Stock Exchange on that date
was $5,794,800. Messrs. Snow and Ward are entitled to receive dividends
during the restriction period of their respective awards.
Prior to 2000, management employees could elect to receive all or a
portion of their bonuses in CSX stock. Employees who elected to
receive cash bonuses in stock and deferred them for tax purposes
received a premium of 15 percent paid in stock. These stock premiums
were discontinued in 2000. Stock paid as bonuses and premiums was
issued to the CSX Executives' Stock Trust ("Executives' Trust") and
is restricted from sale until employment with CSX is terminated,
but not before a minimum of three years has passed following the
stock issuance except in cases of death, disability, or change in
control. Employees who deferred their bonuses in the form of stock in
to the Executives' Trust receive cash dividend equivalent payments or
may elect to have dividends reinvested by the Executives' Trust in
CSX stock. As of December 28, 2001, restricted stock balances
attributable to the deferred bonuses and their corresponding
values, based on the closing price of CSX stock on the New York Stock
Exchange on that date, were: Mr. Snow - 147,086 shares ($5,165,660);
Mr. Goodwin - 18,808 shares ($660,537); Mr. Ward - 5,398 shares
($208,543); Mr. Aron - 11,739 shares ($412,274); Mr. Grassi - 2,496
shares ($87,660).
Note 3 This column represents the number of employee stock options granted.
Stock appreciation rights ("SARs") were not granted in 2001, 2000, or
1999.
Note 4 Amounts shown include: (a) the above-market portion of earnings on a
deferred compensation program available to executives only during 1985,
1986, 1988, and 1989. For 2001, these amounts are: for Mr. Snow,
$323,266; for Mr. Goodwin, $20,625; for Mr. Ward, $11,941; for Mr. Aron,
$113,677; (b) the Company's matching contributions made in conjunction
with deferrals of salary or bonuses to the CSX Tax Savings Thrift Plan
and the CSX Supplementary Savings and Incentive Award Deferral Plan. The
amounts contributed for 2001 are: for Mr. Snow, $36,000; for Mr.
Goodwin, $15,625; for Mr. Ward, $14,250; for Mr. Aron, $13,375; for Mr.
Grassi, $9,950; (c) for 2000, includes amounts reimbursed from the
termination of the Stock Purchase and Loan Plan ("SPLP"); (d) for 1999,
includes payments received by Messrs. Ward and Grassi as consideration
for amendments to their SPLP Agreements and for Mr. Grassi, the change
of control payment earned but deferred pursuant to his Employment
Agreement (see "Contractual Obligations").
Stock Option Grants
The following table reflects stock options granted to the named executives in
2001.
Option/SAR Grants in Last Fiscal Year (Note 1)
Individual Grants Grant Date Value
--------------------------------------------------------------------------------
Number of Securities Percent of Total
Underlying Options/SARs Granted Exercise or
Options/SARs to Employees in Base Price Expiration Grant Date
Name Granted (#) (Note 1) Fiscal Year (Note 4) ($/Share) Date Present Value ($)
------------------------------------------------------------------------------------------------------------------------------------
John W. Snow 800,000 (Note 2) 15.9% $ 38.775 July 16, 2011 $ 8,000,000 (Note 2)
Paul R. Goodwin 110,000 (Note 3) 2.2% 39.595 May 16, 2011 1,195,700 (Note 3)
Michael J. Ward 175,000 (Note 3) 3.5% 39.595 May 16, 2011 1,902,230 (Note 3)
Mark G. Aron 100,000 (Note 3) 2.0% 39.595 May 16, 2011 1,087,000 (Note 3)
Robert J. Grassi 50,000 (Note 3) 1.0% 39.595 May 16, 2011 543,500 (Note 3)
------------------------------------------------------------------------------------------------------------------------------------
Notes to Option/SAR Grant Table
-------------------------------
Note 1 SARs were not granted during 2001.
Note 2 Stock options granted to Mr. Snow on July 16, 2001, pursuant to the CSX
Omnibus Incentive Plan ("COIP"), under the terms of his Employment
Agreement, at an exercise price of $38.775, which was the fair market
value as of the date of the grant. The options vest and become
exercisable on the date of the Company's 2004 Annual Meeting. The
present value of stock options granted on July 16, 2001, has been
reported using the Black-Scholes option pricing model. The values
presented are based on the following assumptions: exercise price -
$38.775 (mean price on grant date); market price on grant date -
$38.775; assumed exercise date - July 16, 2007; risk-free rate of return
- 4.78 percent (10-year U.S. Treasury bond rate as of July 16, 2001);
dividend yield - 2.30 percent (five-year quarterly average); volatility
assumption - 0.268 percent.
13
Note 3 Stock options granted to the named executive officer and certain
other executives on May 17, 2001, pursuant to the COIP, at an exercise
price of $39.595, which was the fair market value as of the date of the
grant. The options vest and become exercisable in three equal tranches
on the third, fourth and fifth anniversaries of the grant date. The
present value of stock options granted on May 17, 2001, has been
reported using the Black-Scholes option pricing model. The values
presented are based on the following assumptions: exercise price -
$39.595 (mean price on grant date); market price on grant date -
$39.595; assumed exercise date - May 17, 2007; risk-free rate of return
- 4.98 percent (10-year U.S. Treasury bond rate as of May 17, 2001);
dividend yield-2 .30 percent (five-year quarterly average); volatility
assumption - 0.268 percent.
Note 4 A total of 5,039,250 employee stock options were granted during 2001.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money
Options/SARs at FY-End (#) Options/SARs at FY-End ($) (Note 1)
--------------------------------------------------------------------------------------------------------------------------
Shares
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
--------------------------------------------------------------------------------------------------------------------------
John W. Snow 0 $ 0 1,762,000 2,243,880 $ 556,824 $ 4,125,754
Paul R. Goodwin 25,800 177,470 107,601 470,959 0 1,135,308
Michael J. Ward 0 0 72,667 405,193 13,153 581,065
Mark G. Aron 25,800 209,849 107,601 468,959 0 830,132
Robert J. Grassi 0 0 133,134 134,576 55,536 932,085
--------------------------------------------------------------------------------------------------------------------------
Notes to Aggregated Option/SAR Exercises Table
----------------------------------------------
Note 1 Value of unexercised options/SARs at fiscal year-end represents the
difference between the exercise price of any outstanding in-the-money
option/SAR grants and $34.935, the mean value of CSX common stock on
December 28, 2001.
Long-Term Incentive Awards
None of the Named Executive Officers received long-term incentive awards
during 2001.
14
Pension Plans
The following table sets forth the estimated annual single life annuity
benefits payable, before offsets for Social Security and Railroad Retirement
annuities, by CSX and certain of its subsidiaries to any officer or salaried
employee upon retirement from active employment at age 60 after selected periods
of service and in specified compensation groups.
Pension Plan Table
Average Compensation
During Five Consecutive
Years of Highest Pay 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years 44 Years
---------------------------------------------------------------------------------------------------------------
$ 200,000 $ 45,000 $ 60,000 $ 75,000 $ 90,000 $ 105,000 $ 120,000 $ 132,000
400,000 90,000 120,000 150,000 180,000 210,000 240,000 264,000
600,000 135,000 180,000 225,000 270,000 315,000 360,000 396,000
800,000 180,000 240,000 300,000 360,000 420,000 480,000 528,000
1,000,000 225,000 300,000 375,000 450,000 525,000 600,000 660,000
1,200,000 270,000 360,000 450,000 540,000 630,000 720,000 792,000
1,400,000 315,000 420,000 525,000 630,000 735,000 840,000 924,000
1,600,000 360,000 480,000 600,000 720,000 840,000 960,000 1,056,000
1,800,000 405,000 540,000 675,000 810,000 945,000 1,080,000 1,188,000
2,000,000 450,000 600,000 750,000 900,000 1,050,000 1,200,000 1,320,000
2,200,000 495,000 660,000 825,000 990,000 1,155,000 1,320,000 1,452,000
2,400,000 540,000 720,000 900,000 1,080,000 1,260,000 1,440,000 1,584,000
2,600,000 585,000 780,000 975,000 1,170,000 1,365,000 1,560,000 1,716,000
2,800,000 630,000 840,000 1,050,000 1,260,000 1,470,000 1,680,000 1,848,000
3,000,000 675,000 900,000 1,125,000 1,350,000 1,575,000 1,800,000 1,980,000
3,200,000 720,000 960,000 1,200,000 1,440,000 1,680,000 1,920,000 2,112,000
3,400,000 765,000 1,020,000 1,275,000 1,530,000 1,785,000 2,040,000 2,244,000
3,600,000 810,000 1,080,000 1,350,000 1,620,000 1,890,000 2,160,000 2,376,000
3,800,000 855,000 1,140,000 1,425,000 1,710,000 1,995,000 2,280,000 2,508,000
4,000,000 900,000 1,200,000 1,500,000 1,800,000 2,100,000 2,400,000 2,640,000
4,200,000 945,000 1,260,000 1,575,000 1,890,000 2,205,000 2,520,000 2,772,000
4,400,000 990,000 1,320,000 1,650,000 1,980,000 2,310,000 2,640,000 2,904,000
4,600,000 1,035,000 1,380,000 1,725,000 2,070,000 2,415,000 2,760,000 3,036,000
---------------------------------------------------------------------------------------------------------------
Retirement benefits from funded and unfunded non-contributory pension plans
(Pension Plans) of CSX and certain of its subsidiaries are based on both length
of service and compensation. The compensation covered by the Pension Plans is
compensation paid by CSX or its subsidiaries to a participant on a regular
monthly or annual salary basis, and bonuses or similar awards for personal
services rendered in a position that is not under the scope of a labor
agreement. Compensation items listed in the Summary Compensation Table covered
by the Pension Plans are base salary and bonus as well as, in the case of Mr.
Snow, the value of the restricted shares issued under the Stock Agreement
described in "Contractual Obligations." In the case of employees who took their
bonus in Company stock, as explained in Note 2 to the Summary Compensation
Table, the amount of the bonus for Pension Plan computations is the cash value
of the bonus prior to addition of the premium for receipt of the bonus in stock.
The average compensation during the five consecutive years of highest pay
covered by the Pension Plans for Mr. Snow is currently $3,744,615 (which
includes amounts creditable under his Stock Agreement assuming the performance
criteria is met).
The benefits are computed at the time of retirement under a defined benefit
formula based on years of service and average salary and bonus for the highest
60 consecutive months of service. The formula also takes into account retirement
benefits under the Social Security Act and Railroad Retirement Act attributable
to service by the participant for the employer. The Pension Plans provide for
retirement from active employment commencing at age 60 without diminution of
benefits. Retirement from active employment beginning at age 55 is permitted
with reduced pension payments. Certain partic-
15
ipants in the Pension Plans may be eligible to receive an additional year of
unfunded credit for each year of actual service beginning at age 45 and, in
certain instances, such credit for periods prior to employment by CSX or its
subsidiaries, with a 44-year maximum of total service.
The Pension Plans permit the Chief Executive Officer and a limited number
of other key executives named by him to take the unfunded portion of their
pensions in a lump sum payment. The amount of the payment is calculated on an
actuarial present value, using an interest rate set periodically by the Pension
Committee, which currently is five percent.
As of December 31, 2001, the individuals named in the Summary Compensation
Table had the following credited years of service: Mr. Snow, 44 years; Mr.
Goodwin, 44 years; Mr. Ward, 24 years; Mr. Aron, 44 years; Mr. Grassi, 35 years.
The amounts in the table have not been restricted to those within the
maximum annual retirement benefit that is currently permissible under the
Internal Revenue Code, which is $160,000 for 2002. Also, in calculating a
participant's benefit, annual compensation in excess of a limit set annually by
the Secretary of the Treasury may not be considered. That limit is $200,000 for
2002. Pension amounts in excess of such limitations are payable from the
non-qualified Special and Supplemental Plans, which are not funded.
****************
Comparison of Five-Year Cumulative Total Return*
CSX Corporation, S&P 500, Dow Jones Transportation Average
[GRAPH]
CSX Corporation S&P Dow Jones Transportation
--------------- --- ------------------------
12/96 100 100 100
12/97 130 133 148
12/98 103 171 144
12/99 80 208 138
12/00 70 189 138
12/01 96 166 126
* $ 100 Invested on December 31, 1996, in stock or index - including
reinvestment of dividends.
The graph depicts prices for years ending December 31 for CSX Corporation,
rather than the Company's fiscal year-end, in order to be consistent with the
S&P 500 and Dow Jones Transportation Average year-end valuations.
Source: Research Data Group, Inc.
16
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
This report describes the philosophy, objectives and components of the
Company's executive officer compensation program and the manner in which
compensation determinations for 2001 were made for the Company's Chief Executive
Officer, Mr. John W. Snow, and other executive officers, including the executive
officers whose compensation is reported in the Summary Compensation Table of
this Proxy Statement (the Named Executive Officers).
The Compensation Committee (the "Committee") of the Company's Board of
Directors is composed of the directors named below, none of whom is an officer
or employee of the Company, and all of whom are outside directors within the
meaning of Section 162(m) of the Internal Revenue Code. The Committee is
responsible for setting and administering the Company's compensation philosophy,
objectives and policies, and for establishing and administering compensation
plans and programs for executive officers of the Company. Based on
recommendations of the Committee, the Board is responsible for approving the
compensation for the Chief Executive Officer.
Overall Compensation Philosophy and Objectives
The Company's executive compensation programs are designed to provide
competitive annual and long-term compensation and to encourage executive
officers to focus on maximizing shareholder value through superior performance.
The programs are based on the philosophy that the financial interests of the
Company's executive officers should be aligned closely with those of its
shareholders and that overall compensation should be linked to the short-term
and long-term performance of the Company, of individual business units of the
Company, and of the individual executive officer.
Accordingly, the Company's executive compensation programs are structured
and administered applying the following principles:
. Competitiveness. Consistent with the Company's performance, total
compensation for executive officers is targeted to produce pay
competitive with the total compensation paid by a comparison group of
companies that compete for executives of similar talent, including
several direct competitors. The Committee believes that providing
competitive total compensation opportunities for executive officers is
an important element in the Company's ability to attract and retain
motivated and effective executives.
In determining executive officer compensation for 2001, the Committee
used market data regarding the compensation paid for similar positions
by 61 other companies with annual revenues ranging from $6 billion to
$10 billion, as provided through a survey conducted by a nationally
recognized independent compensation consulting firm. These comparison
companies included a broad cross section of companies which can be
expected to compete directly with the Company for employees, investors
and business, and do not focus specifically on companies that form the
Dow Jones Transportation Average (described in the Performance Graph
included in this Proxy Statement). Since the job market for the
Company's executives is not limited to the Company's industry, and
since the Company's most direct competitors for executive talent are
not necessarily all of the companies that would be included in a peer
group established to compare shareholder returns, the comparison group
is not the same as the peer group index in the Comparison of Five Year
Cumulative Total Return graph included in this Proxy Statement.
. Performance-Based. A substantial portion of the total compensation
package for executive officers is at risk and consists of
performance-based cash and equity incentives that link executive
compensation to Company financial and non-financial results, and
individual performance. Performance incentives provide rewards for
achieving strategic, operating and financial results, motivate
executive officers and encourage a dedicated focus on building value
for shareholders over time.
. Aligned with Interests of Shareholders. A significant portion of each
executive officer's total compensation is linked directly to the
achievement of specific, measurable performance results which are
intended to create both short-term and long-term value for the
shareholders. In addition, executive officers are expected to acquire
and hold significant amounts of the Company's stock. At year-end, CSX
executives and employees owned directly or beneficially approximately
17 million shares, which is approximately 8 percent of all shares
outstanding.
17
Components of Compensation
The total compensation package for executive officers during 2001 was
composed of three key elements:
. Base Salary
. Short-Term Incentives
. Long-Term Incentives
In establishing and administering each of these components, the Committee
considers: (1) current market data regarding the compensation paid for similar
positions by the comparison companies, and (2) achievement against Company
financial and non-financial objectives, and individual performance objectives
that are established for each performance period by the Committee. The
Committee's intent is to provide total compensation packages for executive
officers approximating the 65th percentile of the total compensation paid for
similar positions by the comparison companies, when competitive performance
results are achieved. The Company's total compensation components are described
below.
Base Salary
The Committee determines a salary for each Named Executive Officer and
certain other executive officers based upon the Committee's assessment of the
individual's performance and contribution to the Company's objective performance
goals. Base salaries for 2001 and 2002 generally were targeted to be at the 50th
percentile of salaries paid for similar positions by the comparison companies.
Base salaries of executive officers are reviewed in February of each year with
adjustments, if any, based upon the then-current market data for the comparison
companies, individual executive performance and the executive's contributions to
the Company. Based upon the criteria described above, each of the named
executive officers except Mr. Ward received a pay increase in 2001. Mr. Ward
received a salary increase concurrent with his promotion in December 2000. As
part of the ongoing succession process and reflecting both individual
performance and competitive pay levels, the Committee increased Mr. Ward's
salary in 2002 to $600,000. In addition, considering both individual performance
and competitive pay levels, the committee increased the salaries of two other
named executive officers, Messrs. Goodwin and Grassi, by 4.8 percent and 8.8
percent, respectively.
Short-Term Incentives
The short-term compensation incentives available for executive officers of
the Company are composed of annual cash incentive bonuses and, in certain
circumstances, additional discretionary cash bonuses in recognition of
exceptional strategic contributions and performance. These short-term incentives
are established and awarded with the objective of bringing total annual cash
compensation (base salary plus bonus) to approximately the 75th percentile of
the comparison companies, assuming achievement of competitive performance
levels.
Named Executive Officers are awarded annual cash incentive bonuses under
the Company's shareholder-approved Senior Executive Incentive Plan ("SEIP")
based on Company operating income results. The Committee has the authority, in
its sole discretion, to make adjustments to bonus awards under the SEIP to
reflect (1) the impact of unplanned events, (2) performance below other
financial or strategic objectives (including earnings per share, the Company's
operating ratio, operating income and cash available to the Company, and the
performance of the Company's subsidiaries), and (3) an executive's individual
performance based on such factors as the Committee deems appropriate.
For 2001, the formula for annual cash incentive payout based upon operating
income resulted in an award of an annual cash incentive bonus to each of the
Named Executive Officers. After considering all performance factors, Mr. Snow
recommended that the Committee reduce such awards for all executive officers.
Based upon overall corporate results, where the Company fell short of its
financial objectives, yet achieved a significant turnaround in the operating
results of the Company, the Committee approved awards of $1,000,000, $281,250,
$285,000 and $240,750 to Messrs. Snow, Goodwin Ward, and Aron, respectively.
Based upon the performance of CSX World Terminals LLC, where the business unit
also missed its performance target, but achieved significant results in light of
weak international demand, the Committee approved an incentive payment of
$217,900 for Mr. Grassi. In each instance, the Committee exercised its
discretion under the SEIP to make downward adjustments, reducing the annual cash
incentive bonuses otherwise payable under the SEIP.
18
Other executive officers and key employees of the Company are awarded
annual cash incentive bonuses under the Company's Management Incentive
Compensation Plan ("MICP"). Awards are based on the Committee's evaluation of
the executive's performance and such other objective measures and other factors
as the Committee deems appropriate. For 2001, each executive officer other than
the Named Executive Officers received a cash incentive bonus under the MICP.
Long-Term Incentives
The long-term compensation incentives available for executive officers of
the Company are composed primarily of equity-based incentive awards. In 2001,
awards granted under the CSX Omnibus Incentive Plan (the "COIP") included stock
options and restricted stock. The primary form of long-term incentive
compensation provided to the Named Executive Officers is non-qualified stock
options, where the executive only gains from the award when all shareholders
gain from increased stock price. Prior to 2001, Named Executive Officers also
participated in a long-term cash plan, which was subsequently discontinued.
The long-term incentive compensation opportunity granted to each executive
officer, including Named Executive Officers, is based upon individual executive
performance and impact on the Company and competitive market grant levels for
similar positions made by the comparison companies. The stock option awards help
link the long-term interests of executive officers with those of shareholders.
In aligning the interests of executives with those of shareholders, the
Committee is also aware of the potential impact of option awards on future
equity appreciation. It is the Committee's belief that the current annual
program of competitive awards allows the Company to manage the level of option
awards outstanding and provide all CSX shareholders with improved returns.
In 2001, the Committee approved the grant of stock options, based on the
criteria described above, to the Named Executive Officers. These grants are set
forth in "Option/SAR Grants in Last Fiscal Year." The Committee also
recommended, and the Board approved, grants of stock options to executive
officers other than Named Executive Officers and approximately 1,300 other key
employees in 2001. The Compensation Committee concluded that the stock option
grants were appropriate for the purpose of ensuring executive officer retention
and providing incentives during the turnaround of the Company in the
post-Conrail environment. In 2001, as part of an effort to help retain Mr. Ward
and to recognize Mr. Ward's contribution to the ongoing turnaround of the rail
operations, the Committee also approved the award of 165,000 shares of
restricted stock to Mr. Ward. The shares vest on the fifth anniversary of the
grant and are described in the Contractual Obligations section, above.
In 1998, the Company established the Market Value Cash Plan (the "Cash
Plan") to allow participants to receive current cash payments based on sustained
increases in the market price for the Company's Common Stock. The Named
Executive Officers and most of the executive officer group elected to waive
their rights to certain benefits available to them under the Company's Stock
Purchase and Loan Plan ("SPLP") in order to participate in the Cash Plan. Under
the Cash Plan, participants were awarded units that are used to determine the
cash amount to be paid when each of a series of predetermined Company stock
price targets are met and sustained for a period of at least 15 business days.
During 2001, the performance targets were not met. Accordingly, during 2001, no
payments were made under the Cash Plan. No further awards under the Cash Plan
are expected. Outstanding awards under the plan expire in 2003.
19
Stock Ownership Guidelines for 2001
In addition to long-term incentive awards, the Committee believes that to
link the interests of executive officers to those of the Company's shareholders,
it is also necessary to require that executive officers own a significant amount
of the Company's stock. The Committee has adopted the following formal stock
ownership guidelines:
Position Minimum Aggregate Value Equivalent
------------------------------------------------------------------------
Chief Executive Officer 6 times base salary
Vice Chairmen, Business Unit 4 times base salary
Presidents and Executive Vice Presidents
Senior Vice Presidents 3 times base salary
Vice Presidents 2 times base salary
Assistant Vice Presidents, 1 times base salary
General Managers and Equivalent
These guidelines are generally at or above the stock ownership guidelines
of the comparison companies. As of December 28, 2001, each Named Executive
Officer owned more than the required amount of the Company's stock.
2001 Compensation for the Chief Executive Officer
For 2001, the Company's most highly compensated executive was John W. Snow,
Chairman and Chief Executive Officer. Mr. Snow's performance was reviewed by the
Committee in 2001, and discussed with the non-employee directors of the Company
and Mr. Snow. Upon review of Mr. Snow's compensation, the compensation of peer
executives in industry, and Mr. Snow's performance, the Committee increased Mr.
Snow's salary to $1,250,000 per year in May 2001.
Under the SEIP, operating income performance of the Company resulted in an
award of an annual cash incentive bonus for 2001 for Mr. Snow of approximately
$2,900,000. Under the Employment and Consulting Agreement described above (see
"Contractual Obligations"), Mr. Snow was entitled to a target annual bonus
opportunity of 120 percent of salary earnings if objectives were met, or
$1,440,000. Using the same performance and other factors on which awards were
made to other Named Executive Officers and pursuant to the executive
compensation strategy described earlier in this report and Proxy Statement, the
Committee exercised its discretion to make downward adjustments under the SEIP
and awarded Mr. Snow an annual cash incentive bonus of $1,000,000, or
approximately 69 percent of his target incentive level. Mr. Snow is generally
eligible to participate in the same compensation plans available to other Named
Executive Officers of the Company.
As part of Mr. Snow's planned retirement in 2004, the Nominating and
Organization Committee of the Board of Directors asked the Committee to conduct
a review of Mr. Snow's employment arrangement and to develop specific
recommendations for review by the Board of Directors to ensure retention of Mr.
Snow through the transition. The Committee met several times in 2001 to develop
recommendations that were presented and discussed with all non-employee Board
members, and approved by the Board of Directors without modification. The
resulting actions are presented in "Contractual Obligations", and include
specific compensation actions reflecting Mr. Snow's performance, competitive pay
practices for chief executives of organizations of similar size to the Company,
and the criticality of Mr. Snow's services to the Company. Part of the
Board-approved actions include one-time stock option and restricted stock
awards, the combined present value of which is intended to provide a competitive
long-term incentive opportunity over the remaining three years of Mr. Snow's
career. Mr. Snow will receive no further equity awards or salary increases for
the remainder of his career at CSX, although he will remain eligible for annual
cash incentive awards under the Company's SEIP. The combination of salary,
annual incentives and the present value of long-term incentives is intended to
provide Mr. Snow with total direct compensation approximating the 65th
percentile of total direct compensation paid to the chief executive officers by
the comparison companies.
Policy on Deductibility of Compensation
Section 162(m) of the Internal Revenue Code imposes a $1 million limit on
the amount that the Company may deduct for compensation paid to the Chief
Executive Officer or any other Named Executive Officer who is employed on the
last
20
day of the year. However, performance-based compensation, paid pursuant to a
plan that has been approved by shareholders, is excluded from the $1 million
limit if, among other requirements, the compensation is payable only upon
attainment of pre-established objective performance goals and the Board
committee that establishes such goals consists only of outside directors (as
defined for purposes of Section 162(m)). The SEIP and the COIP have been
approved by the shareholders of the Company.
The Committee and the Board have considered these requirements. While the
tax impact of any compensation arrangement is one factor to be considered, such
impact is evaluated by the Committee and the Board in light of the Company's
overall compensation philosophy and objectives. The Company's compensation
program for Named Executive Officers has both objective and discretionary
elements. Generally, the Committee wishes to maximize the Company's federal
income tax deductions for compensation expense and has therefore structured the
short-term and long-term incentive elements of executive compensation to meet
the requirements for deductibility under Section 162(m). However, the Committee
and the Board believe that there are circumstances where the provision of
compensation that is not fully deductible may be more consistent with the
compensation philosophy and objectives of the Company and/or may be in the best
interests of the Company and its shareholders. The Committee's ability to
exercise discretion and to retain flexibility in this regard may in certain
circumstances outweigh the advantages of qualifying compensation as deductible
under Section 162(m).
The Committee believes that the compensation of executive officers has been
appropriately structured and administered so that a substantial component of
total compensation is dependent upon, and directly related to, the Company's
performance and total returns to its shareholders.
Compensation Committee
Charles E. Rice, Chairman
Bruce C. Gottwald
John R. Hall
Robert D. Kunisch
Frank S. Royal, M.D.
the entire Committee
Richmond, Virginia
February 13, 2002
21
2. APPOINTMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As recommended by the Audit Committee, the Board of Directors designated,
subject to ratification by the shareholders, the firm of Ernst & Young LLP as
independent auditors to audit and report on CSX's financial statements for the
fiscal year 2002. Action by shareholders is not required by law in the
appointment of independent auditors, but their appointment is submitted by the
Board in order to give shareholders the final choice in the designation of
independent auditors.
Ernst & Young LLP has no direct or indirect financial interest in CSX or in
any of its subsidiaries, nor has it had any connection with CSX or any of its
subsidiaries in the capacity of promoter, underwriter, voting trustee, director,
officer or employee. Representatives of Ernst & Young LLP will be present at the
meeting of shareholders and will be afforded an opportunity to make a statement
if they desire to do so. It also is expected they will be available to respond
to appropriate questions.
The Board of Directors recommends a vote FOR Proposal No. 2.
3. SHAREHOLDER PROPOSAL REGARDING POISON PILL PROVISIONS
Mr. John Chevedden on behalf of Chris Rossi, Custodian for Victor Rossi,
Redondo Beach, CA, has informed the Company that he intends to present the
following proposal at the Annual Meeting of Shareholders:
"Shareholders request that our Board of Directors seek shareholder approval
prior to adopting any poison pill and also redeem or terminate any pill now in
effect unless it has been approved by a shareholder vote at the next shareholder
meeting.
The poison pill is an important issue for shareholder vote even if our
company does not now have a poison pill or plan to adopt a poison pill in the
future. Currently our board can adopt a poison pill and/or redeem a current
poison pill and adopt a new poison pill:
1) At any time
2) In a short period of time
3) Without shareholder approval
Negative Effects of Poison Pills on Shareholder Value
A study by the Securities and Exchange Commission found evidence that the
negative effect of poison pills to deter profitable takeover bids outweigh
benefits.
Source: Office of the Chief Economist, Securities and Exchange Commission, The
Effect of the Poison Pills on the Wealth of Target Shareholders, October 23,
1986.
Additional support for this Proposal Topic
.. Pills adversely affect shareholder value.
Power and Accountability, Nell Minow and Robert Monks Source:
www.thecorporatelibrary.com/power
.. The Council of Institutional Investors recommends shareholder approval of
all poison pills.
www.cii.org/ciicentral/policies.htm & www.cii.org
Institutional Investor Support for Shareholder Vote
Many institutional investors believe poison pills should be voted on by
shareholders. A poison pill can insulate management at the expense of
shareholders. A poison pill is such a powerful tool that shareholders should be
able to vote on whether it is appropriate. We believe a shareholder vote on
poison pills will avoid any unbalanced concentration of power in our directors
who could focus on narrow interest at the expense of the vast majority of
shareholders.
22
Institutional Investor Support Is High-Caliber Support
This proposal topic has significant institutional support. Shareholder
right to vote on poison pill resolutions achieved a 57% average yes-vote from
shareholders at 26 major companies in 2000 (Percentage based on yes-no votes).
Institutional investor support is high-caliber support. Institutional
investors have the advantage of a specialized staff and resources, long-term
focus, fiduciary duty and independent perspective to thoroughly study the issues
involved in this proposal topic.
Shareholder Vote Precedent Set by Other Companies
In recent years, various companies have been willing to redeem poison pills
or at least allow shareholders to have a meaningful vote on whether a poison
pill should remain in force. We believe that our company should do so as well.
68% Vote at a Major Company
This proposal topic won 68% of the yes-no vote at the Burlington Northern
Santa Fe (BNI) 2001 annual meeting. The text of the BNI proposal, which has
further information on poison pills, is available at:
The Corporate Library website: www.thecorporatelibrary.com
At this URL page:
http://asp.thecorporatelibrary.net/proposals/FullText.asp?Company_ID-10583&
Resolution_ID-515&Proxy_Season-2001
In the interest of shareholder value vote yes:
SHAREHOLDER VOTE ON POISON PILLS YES ON 3
CSX MANAGEMENT RESPONSE
CSX has maintained a Shareholder Rights Plan for many years, which is the
type of plan often referred to as a "Poison Pill" and challenged by the
foregoing proposal. The Board believes that rights plans can significantly
enhance shareholder value in the event of an acquisition or change of control of
the Company. The Rights Plan provides the Board of Directors with more time to
negotiate and to make decisions in a transaction involving control of the
Company.
Rights Plans are designed to protect and enhance shareholder value. They
have no relationship to management compensation. Since the introduction of
rights plans in 1984, economists and market analysts have debated the economic
impact of rights plans on the market price of a company's stock, as well as on
takeovers and takeover premiums. Increasingly, empirical data indicates that on
balance shareholders of corporations with rights plans do better in the event of
a change of control than do shareholders whose companies do not have rights
plans. There is also empirical evidence that stock prices of corporations with
rights plans suffer no harm as a result of them. A 1994 study by University of
Rochester economists Robert Comment and G. William Schwert replicated the
analysis of an earlier SEC study. These writers, however, used a database that
was four times the size of the database of the 1986 SEC study and concluded that
adoptions of rights plans have no meaningful price effect on adopting companies.
In addition, a 1997 study prepared by Jamil Aboumeri of the Georgeson and
Company Research Department determined that companies with Rights Plans received
$13 billion in additional takeover premiums during the period from 1992-1996,
and shareholders of companies without Rights Plans may have given up $14.5
billion in value. Virtually every major investment banking firm that has studied
the subject has concluded that adoption of a rights plan has no effect on the
stock prices of companies that are not the subject of takeover speculation.
Thus, the evidence suggests that rights plans serve their principal
objectives--protection against inadequate offers and abusive tactics and
increased bargaining power resulting in higher value for shareholders in certain
cases.
CSX is organized under the laws of the Commonwealth of Virginia. Virginia's
law requires each director to make decisions based on his or her best business
judgment. Rights plans are specifically authorized under Virginia law. In
adopting the Rights Plan, the Board gave careful consideration to the effect of
the Rights Plan on the Company's shareholders and, after consultation with
outside financial and legal advisors, concluded that the Rights Plan would
benefit the Company's shareholders. The Company continues to hold this view.
23
Rights plans give corporations and their shareholders more time in which to
make decisions respecting a sale of control, a question of fundamental
importance. Thus, a rights plan can strengthen the ability of the Company's
directors in certain cases to fulfill their duties under Virginia law to act in
the best interests of the company. Further, a rights plan can deter coercive
takeover tactics and certain types of self-dealing transactions that may not be
in the best interests of a company and its shareholders. A rights plan should
not interfere with negotiated transactions, nor preclude unsolicited takeovers.
For the foregoing reasons the Board recommends that shareholders vote
AGAINST Proposal No. 3.
ADDITIONAL INFORMATION
Voting Procedures
Votes are tabulated by three Inspectors of Election. The Company's bylaws
provide that a majority of the outstanding shares of stock entitled to vote
constitute a quorum at any meeting of shareholders. In accordance with the law
of Virginia, the Company's state of incorporation, and the Company's bylaws,
directors are elected by a plurality of votes cast by the shares entitled to
vote at a meeting at which a quorum is present. For all other proposals,
abstentions and broker "non-votes" are not considered to be voting "for" or
"against" any proposal or any person nominated for director. The affirmative
vote of the majority of shares represented at the meeting and entitled to vote
will be required for approval of all other items.
Date for Receipt of Shareholder Proposals
Shareholder proposals for inclusion in the Proxy Statement for the 2003
Annual Meeting of Shareholders must be received at the principal executive
offices of CSX on or before November 18, 2002. If CSX Corporation does not
receive notice at its principal executive offices on or before January 17, 2003,
of a shareholder proposal for consideration at the 2003 Annual Meeting of
Shareholders, the proxies named by the CSX Board of Directors with respect to
that meeting shall have discretionary voting authority with respect to that
proposal.
Solicitation of Proxies
The cost of soliciting proxies is being paid by CSX. In addition to
solicitation by mail, officers and regular employees of CSX, for no additional
compensation, may request the return of proxies by personal conversations or by
telephone or telecopy. It also is expected that, for a fee of $12,500 plus
reimbursement of certain out-of-pocket expenses, additional solicitation will be
made by personal interview, telephone or telecopy under the direction of the
proxy solicitation firm of MacKenzie Partners, Inc., 156 Fifth Avenue, New York,
New York 10010.
March 18, 2002
By Order of the Board of Directors
Stephen R. Larson
Vice President-General Counsel and Corporate Secretary
24
[CSX Corporation Logo]
[ ] Mark this box with an X if you have made changes to your name or address details
below.
CONTROL NUMBER
[ ]
Holder Account Number
[ ]
Use a black pen. Print in CAPITAL letters inside the grey
areas as shown in this example. [ ]
------------------------------
Annual Meeting Proxy Card
------------------------------
A Election of Directors PLEASE REFER TO THE REVERSE SIDE FOR INTERNET AND TELEPHONE VOTING INSTRUCTIONS.
The Board of Directors of CSX Corporation recommends a Vote FOR the listed
nominees.
For Withhold
01 - E.E. Bailey [ ] [ ]
02 - R.L. Burrus, Jr. [ ] [ ]
03 - B.C. Gottwald [ ] [ ]
04 - J.R. Hall [ ] [ ]
05 - R.D. Kunisch [ ] [ ]
06 - J.W. McGlothlin [ ] [ ]
07 - S.J. Morcott [ ] [ ]
08 - C.E. Rice [ ] [ ]
09 - W.C. Richardson [ ] [ ]
10 - F.S. Royal, M.D. [ ] [ ]
11 - J.W. Snow [ ] [ ]
12 - M. J. Ward [ ] [ ]
B Issues
The Board of Directors recommends a vote FOR item 2, and AGAINST item 3.
2. Appointment of Ernst & Young LLP as independent For Against Abstain
certified public accountants. [ ] [ ] [ ]
3. Shareholder proposal regarding poison pill provisions. [ ] [ ] [ ]
Yes
WILL ATTEND MEETING. [ ]
C Authorized Signatures - Sign Here - This section must be completed for your
instructions to be executed.
Sign name exactly as your name appears above. Joint owners sign individually;
corporation proxies sign by authorized officer. Indicate if signor is executor,
administrator, trustee, etc.
Signature 1 Signature 2 Date (dd/mm/yyyy)
-------------------------------------------------------------------------------------
Proxy - CSX Corporation
This proxy is Solicited on Behalf of The Board of Directors For The Annual
Meeting on April 23, 2002.
The undersigned hereby appoints John W. Snow, Mark G. Aron, and Stephen R.
Larson, or any one of them, with the power of substitution in each, or the
designated Trustee of any applicable employee benefit plan, proxies to vote all
stock of the undersigned on the following proposals and, in their discretion,
upon such other matters as may properly come before the Annual Meeting of
Shareholders to be held at The Desmond Hotel & Conference Center, Albany, NY,
on April 23, 2002, and at all adjournments thereof.
(Continued and to be signed on reverse side.)
To Our Shareholders:
TO VOTE: Whether or not you are able to attend the Annual Meeting of
Shareholders, it is important that your shares be represented, no matter how
many shares you own. Listed below are instructions on how to vote for the
election of directors and all other proposals. You may vote by telephone, over
the Internet, or by mail.
TO RECEIVE FUTURE ANNUAL REPORTS AND PROXY STATEMENTS BY INTERNET: To take
advantage of this offer, please go to the following web address:
www.csxconsent.com and follow the prompts, or follow the instructions provided
as you vote by phone or Internet. You must have access to a computer with
Internet access to be eligible. Selecting this option means that you will no
longer receive a printed copy of the CSX Annual Report and Proxy Statement
unless you request one. Next year you will receive a printed proxy card that
will direct you to the Internet web site where the annual report and proxy
statement will be posted. By consenting to electronic delivery you will help
CSX reduce printing and postage costs, supporting a company-wide effort to
reduce overhead.
You may cancel your enrollment in this process at any time by written
notification to Computershare Investor Services, 2 North LaSalle Street,
Chicago, IL 60602.
TO VIEW THE ANNUAL REPORT AND PROXY STATEMENT ONLINE: Please visit our website:
www.csx.com/aboutus/financial.
TO ATTEND THE ANNUAL MEETING: The Annual Meeting of Shareholders will be held
on April 23, 2002 at 10:00 a.m. at The Desmond Hotel & Conference Center, 660
Albany-Shaker Road, Albany, New York, 12211. If you would like to attend the
meeting, please check the "Will Attend Meeting" box on the reverse side and
mail in the postage-paid envelope. If you are voting by telephone or Internet,
please follow the prompt to indicate your attendance. You may obtain your
admission ticket at the CSX Annual Meeting registration desk between 7:00 a.m.
and 10:00 a.m. on the morning of the meeting. Refreshments will be served
beginning at 8:00 a.m. TICKETS WILL NOT BE MAILED IN ADVANCE OF THE ANNUAL
MEETING.
Internet, Telephone and Mailing Instructions
The methods below are quick, easy and available 24 Hours a day 7 days a week
through Monday, April 22, 2002.
Instead of mailing your proxy, you may choose one of the two voting methods
outlined below to vote your proxy. Have this proxy card in hand when you call.
To vote using the Telephone
(within U.S. and Canada)
o Call toll free 1-877-587-0759 prior to 12:00 midnight (E.S.T.), Monday,
April 22, 2002, on a touch tone telephone.
o Option 1: To vote as the Board of Directors recommends on ALL proposals:
Press 1. When asked, please confirm your vote by pressing 1.
o Option 2: If you choose to vote on each proposal separately, press 0
and follow the simple recorded instructions.
To vote using the Internet
o Go to the following web site prior to 12:00 midnight (E.S.T.), Monday,
April 22, 2002: www.computershare.com/us/proxy
o Enter the information requested on your computer screen, including
your six-digit Control Number located on the reverse side of this card.
o Then follow the simple instructions on the screen.
To vote by Mail
o Complete and sign the Proxy card.
o Return the proxy card in the postage-paid envelope addressed to CSX, P.O.
Box 7050, Rockford, Illinois 61125-9944.
PLEASE DO NOT VOTE BY MORE THAN ONE METHOD; THE LAST VOTE RECEIVED WILL BE THE
OFFICIAL VOTE.
Mailed proxies should be received no later than Monday, April 22, 2002.
THANK YOU FOR VOTING