CSX Corporation
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY
STATEMENT
SCHEDULE 14A INFORMATION
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Exchange Act of 1934 (Amendment No.
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CSX Corporation
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Form, Schedule or Registration Statement No.:
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March 30, 2006
Dear Shareholder:
On behalf of the Board of Directors and the management of CSX Corporation, I invite you to
attend the 2006 Annual Meeting of Shareholders. The Meeting will be held on Wednesday, May 3, 2006,
at 10:00 a.m. (CDT), at the Arthur R. Outlaw Convention Center, One South Water Street, Mobile,
Alabama.
We want all shareholders to be represented at the Meeting. If you vote your shares by proxy,
please indicate whether you plan to attend the Meeting. Whether you plan to attend, it is important
that your shares be represented, no matter how many shares you own. We encourage you to vote
promptly, following the instructions on your Proxy Card.
We look forward to seeing you at the Meeting.
Michael Ward
Chairman of the Board, President
and Chief Executive Officer
CSX Corporation
2006 Annual Shareholder Meeting
Arthur R. Outlaw Convention Center
One South Water Street Mobile, Ala. 36602
From Interstate 10, take the Water Street Exit to downtown, exit 26B.
Continue on South Water Street to the Arthur R. Outlaw Convention Center.
Notice of Annual Meeting of Shareholders
Jacksonville, Florida
March 30, 2006
To Our Shareholders:
The Annual Meeting of Shareholders of CSX Corporation will be held at the Arthur R.
Outlaw Convention Center, One South Water Street, Mobile, Alabama, on Wednesday, May 3, 2006, at
10:00 a.m. (CDT), for the purpose of considering and acting upon the following matters:
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Election of 10 directors; |
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Ratification of Ernst & Young LLP as Independent Registered Public Accounting Firm
for 2006; |
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Company proposal regarding reapproval of the CSX Omnibus Incentive Plan; |
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Company proposals regarding elimination of supermajority voting requirements; |
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Shareholder proposal regarding separate Chairman and CEO; and |
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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) mark, sign,
date, and return your Proxy Card by mail; or (b) vote by telephone or by the Internet using the
instructions on your Proxy Card.
Only shareholders of record at the close of business on March 3, 2006, 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 30, 2006.
By Order of the Board of Directors
Ellen M. Fitzsimmons
Senior Vice President-Law and Public Affairs
and Corporate Secretary
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Table of Contents
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2
Proxy Statement for 2006 Annual Meeting of Shareholders
About the Annual Meeting
What is the purpose of the Annual Meeting?
At our Annual Meeting (the Meeting), shareholders will act upon the matters outlined in
the Notice of Meeting on the first page of this Proxy Statement, including the election of
directors, ratification of the Companys Independent Registered Public Accounting Firm (the
Independent Auditors), and consideration of the shareholder proposal and three Company
proposals. In addition, management will report on the performance of the Company and respond
to questions from shareholders.
Where will the Meeting be held?
The Meeting will be held on Wednesday, May 3, 2006, at 10:00 a.m. (CDT), at the Arthur R.
Outlaw Convention Center, One South Water Street, Mobile, Alabama. The Arthur R. Outlaw
Convention Center is accessible to persons with disabilities. If you have a disability, we
can provide reasonable assistance to help you participate in the meeting upon request.
Who is soliciting my vote?
The Board of Directors of CSX (the Board) is soliciting your vote for the 2006 Meeting.
What will I be voting on?
At the Meeting, shareholders will vote on:
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Election of Directors |
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Ratification of Ernst & Young LLP as Independent Auditors for 2006 |
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Three Company proposals: one regarding reapproval of the CSX Omnibus Incentive
Plan and two regarding elimination of supermajority voting requirements |
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One shareholder proposal regarding Separate Chairman and CEO |
How many votes do I have?
You will have one vote for every share of CSX stock you owned at the close of business on
March 3, 2006 (the Record Date).
How many votes can be cast by all shareholders?
As of the Record Date, CSX had outstanding 220,582,789 shares of common stock entitled to
vote. Only shareholders of record at the close of business on March 3, 2006, will be
entitled to vote. Each share is entitled to one vote on each matter to be presented at the
meeting.
How many shares must be present to hold the Meeting?
The Companys bylaws provide that a majority of the outstanding shares of stock entitled to
vote constitutes a quorum at any meeting of shareholders. If a share is represented for any
purpose at the Meeting, it is deemed to be present for the transaction of all business.
Abstentions, withheld votes and shares held of record by a broker or its nominee that are
voted on any matter are included in determining the number of votes present. Broker shares
that are not voted on any matter at the Meeting will not be included in determining whether
a quorum is present. As of the Record Date, 110,291,395 shares constitute a majority of the
outstanding shares.
4
We urge you to vote by proxy even if you plan to attend the Meeting so that we will know as
soon as possible that enough shares will be present for us to hold the Meeting.
What are the voting procedures?
Election of Directors. The Companys state of incorporation is Virginia. Under
Virginia law and the Companys 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. This means that the
10 nominees for election as directors who receive the greatest number of votes cast at the
Meeting will be elected. In accordance with the Companys amended Corporate Governance
Guidelines, in an uncontested election, any nominee for director who receives a greater
number of votes withheld from his or her election than votes for such election shall
promptly tender his or her resignation following certification of the shareholder vote. For
more information on the procedures in these circumstances, see Principles of Corporate
Governance below.
Elimination of Supermajority Vote. The Company proposals (Items 4 and 5) to
eliminate supermajority voting default rules have two different voting procedures. Amending
the voting requirements for mergers or share exchanges, certain sales or dispositions of
assets, and dissolution, listed as Item 4 on your proxy card, will require approval by the
majority vote of the outstanding shares of the Company entitled to vote for the election of
directors.
Amending the voting requirements for affiliated transactions with interested shareholders,
listed as Item 5 on your proxy card, will require the affirmative vote of a majority of the
shares entitled to vote thereon. Under the Virginia Stock Corporation Act, shares that are
owned by interested shareholders, generally defined as those that beneficially own more than
10% of any class of the outstanding voting shares of the Company, are not entitled to vote
with respect to this amendment. Therefore, the affirmative vote of a majority of the shares
of the shareholders of the Company (other than shares held by interested shareholders) is
required to approve an amendment to the affiliated transactions voting rules.
All abstentions, broker non-votes, and failures to return a proxy card will have the same
effect as a vote against these proposals.
Other Proposals. For all other proposals, the proposal will pass if the votes cast
in favor of the proposal exceed the votes cast against the proposal.
Except as noted above, abstentions and broker non-votes are not considered to be voting
for or against any proposal and will have no effect on the outcome of any proposal.
How do I vote?
You can vote either in person at the Meeting or by proxy without attending the Meeting. The
shares represented by a properly executed proxy will be voted as you direct.
To vote by proxy, you must do one of the following:
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Fill out your Proxy Card, date and sign it, and return it by mail, |
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Vote by telephone using the instructions on your Proxy Card, or |
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Vote by Internet using the instructions on your Proxy Card. |
If you want to vote in person at the Meeting, and you hold your CSX stock in street name
(that is, through a bank or broker), you must obtain a proxy from your bank or broker and
bring that proxy to the Meeting.
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Can I change my vote?
Yes. A proxy may be revoked by a shareholder any time before it is voted by written notice
delivered to the CSX Corporate Secretary, by timely receipt of a later signed proxy
(including an Internet or telephone vote), or by voting in person at the Meeting.
What if I dont vote for some of the matters listed on my Proxy Card?
If you return a signed Proxy Card without indicating your vote, your shares will be voted
for the nominees for director listed on the card, for Ernst and Young LLP as Independent
Auditors for 2006, for the three Company proposals regarding reapproval of the CSX Omnibus
Incentive Plan and elimination of supermajority voting requirements, and against the
shareholder proposal regarding Separate Chairman and CEO.
How are votes counted?
Votes are counted by inspectors of election designated by the Corporate Secretary.
Who pays for soliciting proxies?
The cost of soliciting proxies is being paid by CSX. In addition to solicitation by mail,
officers and other designated 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 approximately $10,500 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 Georgeson
Shareholder Communications, Inc., 17 State Street, New York, New York 10004.
Could other matters be decided at the Meeting?
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. If any other matters properly arise at the
Meeting, the proxies will be voted at the discretion of the proxy holders.
What is the deadline for consideration of shareholder proposals for the 2007 Annual Meeting?
A shareholder who wants to submit a proposal to be included in the Proxy Statement for the
2007 Annual Meeting of Shareholders must send it to CSX Corporation, Office of the Corporate
Secretary, 500 Water Street, C160, Jacksonville, Florida, 32202, so that it is received on
or before December 4, 2006.
A shareholder who wants to submit a proposal that will not be in the proxy statement but
will be considered at the 2007 Annual Meeting, pursuant to our bylaws, must send it to the
principal executive offices of CSX so that it is received not earlier than the close of
business on January 3, 2007 nor later than the close of business on February 2, 2007. The
proxies named by the Board with respect to the 2007 Annual Meeting shall have discretionary
voting authority with respect to any shareholder proposals received after February 2, 2007.
Does the Board of Directors consider director nominees recommended by shareholders?
Yes, the Governance Committee of the Board will review recommendations as to possible
nominees received from shareholders and other qualified sources. Shareholder recommendations
should be in writing addressed to the Chair of the Governance Committee, CSX Corporation,
500 Water Street, C160, Jacksonville, Florida, 32202, and should include a statement about
the qualifications and experience of the proposed nominee, as discussed further below under
Item 1 Election of Directors Committees of the
Board Governance.
6
What happens if the Meeting is postponed or adjourned?
Your proxy will still be good and may be voted at the reconvened meeting. You will still be
able to change or revoke your proxy until it is voted.
Do I need a ticket to attend the Meeting?
Yes, you will be issued an admission ticket at the Shareholder Registration Desk at the
Meeting. If you hold your shares in your name, please be prepared to provide proper
identification, such as a drivers license. If you hold your shares through a bank or
broker, you will need proof of ownership, such as a recent account statement or letter from
your bank or broker, along with proper identification.
How can I find CSXs proxy materials and annual report on the Internet?
This Proxy Statement and the 2005 Annual Report are available on the Companys Internet
website (www.csx.com).
7
Item 1: Election of Directors
Ten directors are to be elected to hold office until the next Annual Meeting of
Shareholders is held and their successors are elected. Votes will be cast, unless otherwise
specified, for the election of the nominees 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. All of the nominees are current directors standing for
re-election and were previously elected by the shareholders. One current director, Mr. Charles E.
Rice, who served on the Audit Committee and the Finance Committee in 2005, is retiring from the
Board and is not standing for re-election.
As of the date of this Proxy Statement, the Board 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 executive officer, nor is there any
arrangement or understanding between any nominee and any other person pursuant to which the nominee
was selected.
In the election of directors, the nominees 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.
The Board of Directors recommends a vote FOR the following nominees.
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Elizabeth E. Bailey, 67, is the John C. Hower Professor of Business and Public Policy, at The
Wharton School of the University of Pennsylvania. She is also a director of Altria Group, Inc.,
and of Teachers Insurance and Annuity Association. Dr. Bailey has been a director of CSX since
November 1989.
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Senator John B. Breaux, 62, is Senior Counsel with Patton Boggs LLP, a law firm. Senator Breaux
joined Patton Boggs upon his retirement from the United States Senate in 2005 after serving there
since his election in 1986. Prior to that, he spent 14 years in the United States House of
Representatives serving on the Public Works and Transportation Committee. In the Senate, he served
on the Finance Committee and the Commerce Committee where he was chair of the subcommittee on
Surface Transportation. He also serves as Senior Managing Director of the Clinton Group and
Managing Director of Riverstone Holdings. Senator Breaux has been a director of CSX since May
2005.
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Edward J. Kelly, III, 52, is the Chairman, President and Chief Executive Officer of Mercantile
Bankshares Corporation, a bank holding company, having been elected as Chairman in March 2003 and
as President and Chief Executive Officer in March 2001. Prior to that he served as Managing
Director of J.P. Morgan Chase and predecessor firms. He is also a director of Hartford Financial
Services Group. Mr. Kelly has been a director of CSX since July 2002.
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Robert D. Kunisch, 64, has been Special Partner in ABS Capital Partners, Inc., a private equity
investment firm, since January 2001, and Consultant to the senior management of Cendant
Corporation, a global provider of consumer and business services, since January 2001. Mr. Kunisch
has been a director of CSX since October 1990.
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Southwood J. Morcott, 67, 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 also a director of Johnson Controls,
Inc., and of Navistar International Corporation. Mr. Morcott has been a director of CSX since July
1990.
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David M. Ratcliffe, 57, is the Chairman of the Board, President and Chief Executive Officer of
Southern Company, a producer and provider of electric power, having been elected as Chairman and
Chief Executive Officer in July 2004 and as President in April 2004. Prior to that, he was
President and Chief Executive Officer of Georgia Power Company and Executive Vice President of
Southern Company, having served as President of Georgia Power from May 1999 until January 2004.
Mr. Ratcliffe also serves as Chairman of the Federal Reserve Bank of Atlanta Board of Directors.
Mr. Ratcliffe has been a director of CSX since January 2003.
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William C. Richardson, 65, is Immediate Past President and Chief Executive Officer of the W.K.
Kellogg Foundation, a major philanthropic institution. Dr. Richardson also serves as Co-Trustee of
the W.K. Kellogg Trust. He is also a director of The Bank of New York Company, Inc., the Kellogg
Company, and Exelon Corporation. Dr. Richardson has been a director of CSX since December 1992.
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Frank S. Royal, M.D., 66, is a physician in private practice in Richmond, Virginia, and a
health-care expert. He is also a director of Chesapeake Corporation, Dominion Resources, Inc., HCA
Inc., Smithfield Foods, Inc., and SunTrust Banks, Inc. Dr. Royal has been a director of CSX since
January 1994.
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Donald J. Shepard, 59, has been Chairman of the Executive Board and Chief Executive Officer of
AEGON N.V., a holding company of insurance and insurance-related companies, since April 2002. From
1989 until April 2002, Mr. Shepard served as President and Chief Executive Officer of AEGON USA,
Inc., a subsidiary of AEGON N.V. In addition, since February 1989, Mr. Shepard has served on the
Board of Directors of AEGON USA, Inc. and as Chairman of that Board from 1992 to July 1999 and from
May 2000 to April 2002 and has been a member of the Executive Board of AEGON N.V. since 1992. He
is also a director of Mercantile Bankshares Corporation. Mr. Shepard has been a director of CSX
since January 2003.
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Michael J. Ward, 55, is the Chairman of the Board, President and Chief Executive Officer of CSX,
having been elected as Chairman and Chief Executive Officer in January 2003 and as President in
July 2002. He has served CSX Transportation, Inc., the Companys rail subsidiary, as President
since November 2000 and as President and Chief Executive Officer since October 2002. Prior to
that, Mr. Ward served CSX Transportation as Executive Vice President-Operations from April through
November 2000. He is also a director of Ashland, Inc. Mr. Ward has been a director of CSX since
April 2002.
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9
Director Independence
The Board annually evaluates the independence of each of its directors and, acting through its
Governance Committee, the performance of each of its directors. The Board concluded that each
director acted in the interests of shareholders and the Company. In addition, the Board has
determined that nine of the 10 nominees for election as directors are independent under the listing
standards of the New York Stock Exchange. In making this determination, the Board considered
transactions or relationships, if any, between each director or his or her immediate family and the
Company or its subsidiaries, as well as the listing standards. The purpose of this review was to
determine whether any such relationships or transactions were material and thus inconsistent with a
determination that the director is independent.
During its deliberations, the Board specifically considered the relationship between the
Company and the Southern Company, a producer and provider of electric power. Mr. Ratcliffe, a
director and a nominee, currently is the Chairman of the Board, President and Chief Executive
Officer of the Southern Company. CSX Transportation , a wholly-owned subsidiary of the Company,
delivers coal to generating plants operated by subsidiaries of the Southern Company. Revenue
received from the Southern Company does not constitute a material part of the Companys or Southern
Companys gross revenues.
As a result of its review, the Board affirmatively determined, based on its understanding of
any relationships or transactions, that each of the director nominees is independent, other than
Mr. Ward, who is President and Chief Executive Officer of the Company.
Principles of Corporate Governance
The Board is committed to governance principles and practices that facilitate fulfilling its
fiduciary duties to shareholders and to the Company. The Board has adopted Corporate Governance
Guidelines that reflect the high standards that those who deal with the Company as employees,
investors, clients, customers, vendors or in other capacities can and should expect. Key corporate
governance principles observed by the Board and the Company include:
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Nomination of a slate of directors for election to the Companys Board that is
substantially independent, as that term is defined in applicable laws and stock
exchange listing standards. |
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Establishment of qualification guidelines for candidates for director and review of
each directors performance and continuing qualification for Board membership. |
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Membership of the Governance, Compensation and Audit Committees comprised solely of
independent directors. |
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Authority for each Board committee to retain outside, independent advisors and
consultants when appropriate. |
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Adoption of a Code of Ethics, meeting applicable rules and regulations, that covers
all directors, officers and employees of CSX, including the Companys Chief Executive
Officer, Chief Financial Officer and Controller. |
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Adoption of a Policy Regarding Shareholder Rights Plans, establishing parameters
around the adoption of any future shareholder rights plan, including the expiration of
any such plan within one year of adoption if the plan does not receive shareholder
approval or ratification. |
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Adoption of a Policy Regarding Shareholder Approval of Severance Agreements,
requiring shareholder approval of certain future severance agreements with senior
executives that provide for benefits in an amount exceeding a threshold set forth in
the Policy. |
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Amendment of the Corporate Governance Guidelines on February 8, 2006, incorporating
a policy regarding director elections. Under the amended Corporate Governance
Guidelines, in an uncontested election, any nominee for director who receives a greater
number of votes withheld from his or her election than votes for such election
shall promptly tender his or her resignation following certification of the shareholder
vote. The Governance Committee will evaluate the tender of the resignation, taking the
best interests of CSX and its shareholders into account, and will make a recommendation
to the Board of Directors. The Board of Directors will then decide whether to accept
the resignation within 90 days of the certification of election. |
CSXs Corporate Governance Guidelines, Code of Ethics, the charters of each standing
committee, and policies adopted by the Board are available on the Companys Internet website
(www.csx.com). Shareholders may also request a free copy of any of these documents by writing to
CSX Corporation, Office of the Corporate Secretary, 500 Water Street, C160, Jacksonville, Florida
32202.
Any waivers of or changes to the Code of Ethics that apply to our directors or executive
officers will be disclosed on CSXs Internet website (www.csx.com). There were no such waivers or
changes in 2005.
Shareholders who wish to communicate with the Board generally, or with a particular director,
may forward correspondence to CSX Corporation, Office of the Corporate Secretary, 500 Water Street,
C160, Jacksonville, Florida 32202.
Pursuant to procedures established by the non-management directors of the Board, the Office of
the Corporate Secretary will forward appropriate correspondence to the Board or a particular
director. Appropriate correspondence generally includes any legitimate, non-harassing inquiries or
statements. Interested parties who wish to communicate directly with non-management directors may
forward correspondence to Presiding Director, CSX Board of Directors, CSX Corporation, 500 Water
Street, C160, Jacksonville, Florida 32202.
Meetings of the Board and Executive Sessions
During 2005, there were six meetings of the Board. Each director attended 75 percent or more
of the meetings of the Board and the meetings of the committees on which he or she served.
The non-management directors meet alone in executive session at each Board meeting.
Non-management directors are all those who are not Company officers. These executive sessions are
chaired by a Presiding Director who is an independent director selected annually by the Governance
Committee. Dr. Richardson currently serves as the Presiding Director. In addition, the independent
directors have periodic special meetings without management in connection with regularly scheduled
Board meetings.
While the Company does not have a formal policy regarding director attendance at Annual
Meetings, the Company encourages directors to attend the Annual Meeting. Every director attended
the 2005 Annual Meeting.
11
Committees of the Board
CSX has five standing committees: the Audit Committee, the Compensation Committee, the Finance
Committee, the Governance Committee and the Public Affairs Committee. Each of these committees
has a written charter approved by the Board of Directors, a copy of which can be found on the
Companys Internet website (www.csx.com). In addition, the Board has an Executive Committee, which
is discussed below. The members of the committees are identified in the following table.
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Executive |
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Governance |
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Public Affairs |
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Elizabeth E. Bailey |
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Chair |
John B. Breaux |
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Edward J. Kelly, III |
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Chair |
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|
|
|
|
|
|
Robert D. Kunisch |
|
|
|
|
|
|
X |
|
|
|
X |
|
|
|
|
|
|
Chair |
|
|
|
|
Southwood J. Morcott |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
X |
|
David M. Ratcliffe |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
X |
|
Charles E. Rice* |
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
William C.
Richardson |
|
|
X |
|
|
|
X |
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank S. Royal |
|
|
|
|
|
Chair |
|
|
X |
|
|
|
|
|
|
|
X |
|
|
|
|
|
Donald J. Shepard |
|
|
|
|
|
|
X |
|
|
|
X |
|
|
Chair |
|
|
|
|
|
|
|
|
Michael J. Ward |
|
|
|
|
|
|
|
|
|
Chair |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Retiring as director in May 2006 |
Executive Committee
The Executive Committee meets only as needed and has authority to act for the Board on most
matters during the intervals between Board meetings. The Executive Committee has seven members,
consisting of the Chairman of the Board, the chairs of each of the five substantive committees, and
Dr. Richardson, the Presiding Director. The Committee did not meet in 2005.
Audit Committee
The Audit Committee selects Independent Auditors and submits its choice to the shareholders
for ratification. Its primary functions include oversight of the integrity of the Companys
financial statements, the Companys compliance with legal and regulatory requirements, the
Independent Auditors qualifications and independence, and the performance of the Independent
Auditors and the Companys internal audit function.
Specifically, the Committee retains, appoints, oversees and approves compensation of the
Companys Independent Auditors, reviews the scope and methodology of the Independent Auditors
proposed audits, reviews the Companys financial statements, and monitors the Companys internal
control over financial reporting by, among other things, discussing certain aspects thereof with
the Independent Auditors and management. In addition, the Committee pre-approves all audit and
non-audit services to be provided by the Independent Auditors as discussed under Fees Paid to
Independent Registered Public Accounting Firm Pre-Approval Policies and Procedures. Finally, the
Committee maintains procedures for the receipt and treatment of complaints regarding the Companys
accounting, internal accounting controls or auditing matters. The Audit Committee charter is
attached as Appendix A to this Proxy Statement.
The Audit Committee has four members, each of whom the Board has determined to be independent
pursuant to the independence standards promulgated by the New York Stock Exchange and the
Securities and Exchange Commission (SEC). The Committee held eight meetings in 2005.
The Board has determined that the Company has at least one audit committee financial expert,
as that term is defined by SEC rules and regulations, serving on the Audit Committee. Mr. Kelly is
the Committees financial expert and is independent pursuant to the standards promulgated by the
New York Stock Exchange and the SEC. Please refer to the Report of the Audit Committee below for
additional information regarding the Audit Committee.
Compensation Committee
The primary functions of the Compensation Committee are to: (i) establish the Companys
philosophy with respect to executive compensation and benefits; (ii) periodically review the
Companys compensation practices and policies, benefit plans, and perquisites applicable to all
employees and executives to ensure consistency with the Companys compensation philosophy; (iii)
assure the Companys benefit plans, practices, programs and policies maintained for employees and
directors comply with all applicable laws; (iv) in consultation with the Board, review and approve
corporate goals and objectives relevant to compensation and benefits for the Chief Executive
Officer, and evaluate the Chief Executive Officers performance in light of those goals and
objectives, and, either as a committee or together with the other independent directors, as
directed by the Board, set the level of compensation
12
of the Chief Executive Officer based on such
evaluation; (v) review and recommend approval of management compensation and Company compensation
plans, including benefits for key employees as determined by this
Committee from time to time; and (vi) establish performance objectives for certain executives,
and 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 and management compensation and benefit programs.
The Compensation Committee has four members, all of whom are outside directors within the
meaning of regulations promulgated pursuant to Internal Revenue Code Section 162(m) and are
independent pursuant to the independence standards promulgated by the New York Stock Exchange. The
Committee held seven meetings in 2005. Please refer to the Report of the Compensation Committee on
Executive Compensation below for additional information regarding the functions and operations of
the Compensation Committee.
Finance Committee
The Finance Committee provides general oversight and review of financial matters affecting the
Company, including the monitoring of corporate debt, cash flow, and liabilities for and the funding
and investment policies and performance relating to assets maintained in conjunction with employee
benefit plans maintained by the Company and its affiliates. This three-member Committee held four
meetings in 2005.
Governance Committee
The Governance Committee of the Board identifies individuals qualified to become board members
and recommends candidates for election to the Board. In addition, the Committee develops criteria
regarding director qualification and reviews and recommends changes in Board composition, committee
structure, and director compensation. The Committee develops, recommends and monitors corporate
governance principles and conducts regular evaluations of director performance and of the
effectiveness of the Board as a working group. The Governance Committee also reviews significant
changes in corporate structure, succession in senior management, and other internal matters of
broad corporate importance.
The Committee has four members. The Committee is composed solely of independent directors
pursuant to the independence standards promulgated by the New York Stock Exchange. The Committee
held seven meetings in 2005.
The Governance Committee generally identifies nominees for directors based upon outside
research and suggestions from directors and officers of the Company. The Committee will also
consider persons recommended by shareholders of the Company in selecting director nominees.
Potential nominees suggested by shareholders will be evaluated by the Committee on the same basis
as individuals identified directly by the Committee or from other sources. As a group, the Board is
expected to represent a broad diversity of experience in business matters and to be able to assess
and evaluate the role and policies of the Company in the face of changing conditions in the
economy, regulatory environment and customer expectations. While there is not a formal list of
qualifications, nominees for Board membership are expected to be prominent individuals with
demonstrated leadership ability and to possess outstanding integrity, values and judgment. Nominees
must be willing to devote the substantial time required to carry out the duties and
responsibilities of directors. In addition, each Board member is expected to represent the broad
interests of the Company and its shareholders as a group, and not any particular constituency. The
Committee uses these and other relevant criteria to evaluate potential nominees.
Shareholders who wish to recommend a director nominee must do so in accordance with the
Companys bylaws. In general, written notice of a proposed shareholder nomination must be delivered
to the Company at least 90 days but no more than 120 days before the Annual Meeting. Nominations
must be accompanied by a description of the proposed nominees qualifications and experience and
his or her consent to serve if elected. Such recommendations must also indicate the nominating
shareholders name and address and the class and number of shares that he or she owns.
13
Public Affairs Committee
The Public Affairs Committee reviews and makes recommendations concerning the Companys
practices and programs designed to address important public policy issues that may impact the
Company, its shareholders, and the general public. This five-member Committee held five meetings
during 2005.
Directors Compensation
General
During 2005, non-employee directors received an annual retainer of $75,000, at least 50
percent of which was payable in CSX stock pursuant to the CSX Corporation Stock Plan for Directors
(the Stock Plan). The Chair of each Board committee other than the Audit Committee received an
additional $10,000. The Chair of the Audit Committee received an additional $15,000, and each
member of the Audit Committee also received an additional $5,000. In December 2005, each
non-employee director also received a deferred grant of 2,500 shares of CSX stock, which had a
market value of $122,825 based on an average price per share of $49.13 on the date of grant.
Directors also are eligible to receive other compensation and benefits as discussed below.
During 2005, each director was eligible to defer all or a portion of his or her directors
fees, including cash compensation and stock, under the CSX Directors Deferred Compensation Plan
(the Directors Plan). Deferrals are subject to Section 409A of the Internal Revenue Code
(Section 409A). Deferrals are credited to an unfunded account and may be invested in eight
investment choices, including a CSX common stock equivalent account. These investment choices
parallel the investment options offered to employees under the Companys 401(k) plan.
In addition, a participant may elect that in the event of a change of control of CSX, as
defined under Section 409A, the participant will receive a lump sum payment equal to the balance
credited to his or her accounts. Upon a change of control, as defined under the Directors Plan,
amounts sufficient to pay any undistributed benefits will be placed in a trust until distributed
under the terms of the Directors Plan pursuant to participants distribution elections. The trust
is a grantor trust, and its assets are subject to the claims of CSXs creditors.
Deferrals of director fees and other awards earned prior to 2005 are not subject to Section
409A. Those deferrals will continue to be administered in accordance with the terms of the
Directors Plan in effect as of December 31, 2004.
Stock Ownership Guidelines
The Board has adopted Stock Ownership Guidelines to better align the interests of non-employee
directors with the interests of stockholders. These guidelines require that all non-employee
directors own shares of CSX. Within five years of election to the Board, a non-employee director is
expected to acquire and hold an amount of CSX common stock equal in value to five times the amount
of such non-employee directors annual retainer. If the annual retainer increases, the
non-employee directors will have five years from the time of the increase to acquire any additional
shares needed to satisfy the guidelines. Further information on the Stock Ownership Guidelines is
available on the Companys Internet website (www.csx.com).
Charitable Gift Plan
CSX directors elected before 2004 participate in the CSX Directors Charitable Gift Plan
(Gift Plan), which is partially funded by Company-owned life insurance. Under the Gift Plan, if a
director serves for five consecutive years, the Company will make contributions totaling $1 million
on his or her behalf to charitable institutions designated by the director. Contributions to
designated charities are made in installments, with $100,000 payable upon the directors retirement
and the balance payable in installments of $100,000 per year, starting at the time of the
directors death.
14
Matching Gift Plan and Other Benefits
Directors also may participate in the CSX Directors Matching Gift Program (Matching Gift
Program). The Company will match $2 for every $1 that a director contributes to organizations
that qualify for support under guidelines established by CSX up to a maximum annual CSX
contribution of $50,000 per director. Retired directors may participate through the end of their
year of retirement.
During 2005, 74 charitable organizations received contributions totaling $642,062 as part of
the Matching Gift Program. The underlying amounts varied by director, but did not exceed $50,000 on
behalf of any director.
The Company makes available to directors personal excess liability insurance at no expense to
the directors. In addition, directors are entitled to certain discounts when visiting the
Company-owned resort. During 2005, the value of the excess liability insurance and the discounts
described above, including reimbursement of certain related taxes, varied by director but did not
exceed $11,925 for any director and $53,744 in the aggregate for all current non-employee
directors.
Section 16(a) Beneficial Ownership Reporting Compliance
The Securities Exchange Act of 1934 requires the Companys executive officers and directors,
and any persons owning more than 10 percent of a class of the Companys stock, to file certain
reports of ownership and changes in ownership with the SEC. Based solely on its review of the
copies of Forms 3, 4 and 5 received by it, the Company believes that the Companys executive
officers and directors complied with the SECs reporting requirements with respect to transactions
which occurred during fiscal 2005, except that, due to an administrative oversight, Messrs. Ingram
and Munoz and Ms. Fitzsimmons inadvertently failed to timely file Form 4s with respect to
transactions involving the surrender of shares of restricted stock in connection with tax
withholding upon vesting of restricted stock. All of these transactions were filed or corrected on
subsequent amended filings.
Report of the Audit Committee
The Audit Committee has reviewed and discussed the Companys audited financial information
with management and has discussed with the Independent Auditors the matters required to be
discussed by Statement of Auditing Standards No. 61, as amended. In addition, the Audit Committee
has received the written disclosures and letter from Ernst & Young LLP, the Companys Independent
Registered Public Accounting Firm, as required by Independence Standards Board Standard No. 1. The
Committee has discussed Ernst &Youngs independence with them. Based on its review and on the
discussions described above, the Audit Committee has recommended to the full Board that the audited
financial statements be included in the Companys Annual Report on Form 10-K for the fiscal year
ended December 30, 2005.
|
|
|
|
|
Audit Committee |
|
|
Edward J. Kelly, III, Chair |
|
|
Elizabeth E. Bailey |
|
|
Charles E. Rice |
|
|
William C. Richardson |
|
|
|
|
|
Jacksonville, Florida |
|
|
February 21, 2006 |
15
Five Year Cumulative Comparison Graph
The following graph provides an indicator of cumulative total shareholder returns, assuming
reinvestment of dividends, for the Company as compared to the S&P 500 Stock Index and the Dow Jones
U.S. Transportation Average Index.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG CSX CORPORATION, THE S & P 500 INDEX
AND THE DOW JONES US TRANSPORTATION AVERAGE INDEX
*$100 invested on 12/31/100 in stock or index-including reinvestment of dividends. Fiscal year ending December 31.
Copyright © 2006, Standard & Poors, a division of The McGraw-Hill Companies, Inc. All rights reserved.
www.researchdatagroup.com/S&P.htm
16
Security Ownership of Certain Beneficial Owners, Directors and Executive Officers
The following table shows the number of shares of CSX common stock beneficially owned as of
March 3, 2006, by each director, nominee for director, executive officer named in the Summary
Compensation Table and the directors and executive officers of the Company as a group.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of Beneficial Ownership |
|
|
|
|
|
|
|
Shares for which |
|
|
|
|
|
|
Shares |
|
Beneficial Ownership |
|
Total |
|
Percent |
Name of |
|
Beneficially |
|
can be Acquired |
|
Beneficial |
|
of |
Beneficial Owner1 |
|
Owned |
|
within 60 Days2 |
|
Ownership |
|
Class3 |
|
Elizabeth E. Bailey |
|
|
23,355 |
|
|
|
10,000 |
|
|
|
33,355 |
|
|
|
* |
|
Sen. John B. Breaux |
|
|
3,656 |
|
|
|
0 |
|
|
|
3,656 |
|
|
|
* |
|
Edward J. Kelly, III |
|
|
11,966 |
|
|
|
0 |
|
|
|
11,966 |
|
|
|
* |
|
Robert D. Kunisch4 |
|
|
33,598 |
|
|
|
10,000 |
|
|
|
43,598 |
|
|
|
* |
|
Southwood J. Morcott |
|
|
31,212 |
|
|
|
10,000 |
|
|
|
41,212 |
|
|
|
* |
|
David M. Ratcliffe |
|
|
10,476 |
|
|
|
0 |
|
|
|
10,476 |
|
|
|
* |
|
Charles E. Rice5 |
|
|
38,146 |
|
|
|
10,000 |
|
|
|
48,146 |
|
|
|
* |
|
William C. Richardson |
|
|
19,879 |
|
|
|
10,000 |
|
|
|
29,879 |
|
|
|
* |
|
Frank S. Royal |
|
|
26,771 |
|
|
|
10,000 |
|
|
|
36,771 |
|
|
|
* |
|
Donald J. Shepard |
|
|
14,637 |
|
|
|
0 |
|
|
|
14,637 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Ward |
|
|
252,000 |
6 |
|
|
361,601 |
|
|
|
613,601 |
|
|
|
* |
|
Clarence W. Gooden |
|
|
87,971 |
6 |
|
|
16,599 |
|
|
|
104,570 |
|
|
|
* |
|
Tony L. Ingram |
|
|
92,550 |
6 |
|
|
0 |
|
|
|
92,550 |
|
|
|
* |
|
Oscar Munoz |
|
|
77,422 |
6 |
|
|
0 |
|
|
|
77,422 |
|
|
|
* |
|
Ellen M. Fitzsimmons |
|
|
58,401 |
6 |
|
|
1,333 |
|
|
|
59,734 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive officers as a group7 |
|
|
595,745 |
|
|
|
395,320 |
|
|
|
991,065 |
|
|
|
* |
|
(a total of 6 including those named above)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and all directors and nominees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AXA Financial, Inc.8 |
|
|
20,415,957 |
|
|
|
|
|
|
|
|
|
|
|
9.4 |
% |
1290 Avenue of the Americas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York, NY 10104 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 also have investment power except with respect to certain shares held in
trust under deferred compensation plans, investment of which is governed by the
terms of the trust. Ownership information is as of March 3, 2006. |
|
2. |
|
Represents shares under options exercisable within 60 days. |
|
3. |
|
Based on 220,582,789 shares outstanding on March 3, 2006, plus shares deemed
outstanding for which beneficial ownership can be acquired within 60 days by that
individual or group. An asterisk (*) indicates that ownership is less than one
percent of class. |
|
4. |
|
Mr. Kunischs ownership includes 1,014 shares of stock held in a limited partnership
in which Mr. Kunisch owns an interest. |
|
5. |
|
Retiring as of May 3, 2006. |
|
6. |
|
The ownership of Mr. Ward includes 62,858 shares owned by his wife. The ownership of
Mr. Gooden includes 17,000 restricted shares of stock granted under the CSX Omnibus
Incentive Plan and 17,429 shares held in a family members trust over which he has
voting and investment power. The ownership of Mr. Ingram includes 20,000 restricted
shares of stock granted under the CSX Omnibus Incentive Plan. The ownership of Mr.
Munoz includes 15,000 restricted shares of stock granted under the CSX Omnibus
Incentive Plan. The ownership of Ms. Fitzsimmons includes 32,465 restricted shares
of stock granted under the CSX Omnibus Incentive Plan. |
|
7. |
|
This entry includes ownership by executive officers including those named above. |
17
8. |
|
Information reported is derived from a Schedule 13G prepared by AXA Assurances
I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle and AXA Courtage Assurance Mutuelle,
as a group, acting as a parent holding company, AXA, as a parent holding company,
and AXA Financial, Inc., as a parent holding company of Alliance Capital Management,
L.P., AXA Equitable Life Insurance Company, and Frontier Trust Company (Advest
Trust), dated February 14, 2006, and filed jointly 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 11,067,254 shares, shared power to vote or direct the vote of
2,630,731 shares, the sole power to dispose of or to direct the disposition of
20,401,787 shares, and shared power to dispose of or to direct the disposition of
14,170 shares. |
Executive Compensation
The individuals named below include the Companys 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 30, 2005.
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Compensation |
|
Long-Term Compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards |
|
Payouts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
Restricted |
|
Securities |
|
|
|
|
|
All |
Name and |
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual |
|
Stock |
|
Underlying |
|
|
|
|
|
Other |
Principal |
|
|
|
|
|
|
|
|
|
|
|
|
|
Compens- |
|
Award(s) |
|
Options/ |
|
LTIP |
|
Compen- |
Position |
|
Year |
|
Salary($) |
|
Bonus ($) |
|
ation($)1 |
|
($)2 |
|
SARs (#)3 |
|
Payouts($)4 |
|
sation($)5 |
|
Michael J. Ward |
|
|
2005 |
|
|
|
947,792 |
|
|
|
1,832,000 |
|
|
|
104,735 |
|
|
|
0 |
|
|
|
|
|
|
|
19,794,390 |
|
|
|
7,375 |
|
Chairman, President |
|
|
2004 |
|
|
|
850,000 |
|
|
|
850,000 |
|
|
|
416,594 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
26,500 |
|
and CEO |
|
|
2003 |
|
|
|
808,333 |
|
|
|
0 |
|
|
|
2,057 |
|
|
|
0 |
|
|
|
400,000 |
|
|
|
0 |
|
|
|
40,693 |
|
Clarence W. Gooden |
|
|
2005 |
|
|
|
445,921 |
|
|
|
721,875 |
|
|
|
4,219 |
|
|
|
0 |
|
|
|
0 |
|
|
|
7,125,980 |
|
|
|
13,413 |
|
Executive Vice President |
|
|
2004 |
|
|
|
357,867 |
|
|
|
300,000 |
|
|
|
3,135 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
12,736 |
|
and CCO |
|
|
2003 |
|
|
|
285,700 |
|
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
|
30,000 |
|
|
|
0 |
|
|
|
8,249 |
|
Tony L. Ingram |
|
|
2005 |
|
|
|
483,174 |
|
|
|
619,500 |
|
|
|
2,912 |
|
|
|
0 |
|
|
|
0 |
|
|
|
7,125,980 |
|
|
|
9,093 |
|
Executive Vice President |
|
|
2004 |
|
|
|
358,696 |
|
|
|
260,000 |
|
|
|
19,552 |
|
|
|
759,000 |
|
|
|
0 |
|
|
|
0 |
|
|
|
287,819 |
|
and COO
CSX Transportation,Inc.6 |
|
|
2003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oscar Munoz |
|
|
2005 |
|
|
|
546,513 |
|
|
|
835,313 |
|
|
|
1,409 |
|
|
|
0 |
|
|
|
0 |
|
|
|
7,125,980 |
|
|
|
16,988 |
|
Executive Vice President |
|
|
2004 |
|
|
|
500,000 |
|
|
|
385,000 |
|
|
|
801 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
141,000 |
|
and CFO7 |
|
|
2003 |
|
|
|
329,545 |
|
|
|
0 |
|
|
|
5,238 |
|
|
|
803,625 |
|
|
|
125,000 |
|
|
|
0 |
|
|
|
154,436 |
|
Ellen M. Fitzsimmons |
|
|
2005 |
|
|
|
406,929 |
|
|
|
528,000 |
|
|
|
|
|
|
|
779,823 |
|
|
|
0 |
|
|
|
2,375,327 |
|
|
|
266,595 |
|
Senior Vice President- |
|
|
2004 |
|
|
|
341,667 |
|
|
|
230,000 |
|
|
|
|
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
8,229 |
|
Law & Public Affairs
and Corporate Secretary |
|
|
2003 |
|
|
|
290,833 |
|
|
|
0 |
|
|
|
2,206 |
|
|
|
0 |
|
|
|
50,000 |
|
|
|
0 |
|
|
|
6,387 |
|
1. |
|
This column includes, among other amounts, the aggregate incremental
cost to the Company of providing personal benefits to the named
executive officers for each of the last three years. These personal
benefits include personal use of Company aircraft by Mr. Ward ($68,850
in 2005 and $64,216 in 2004). The Company requires the CEO to use
Company aircraft for personal as well as business travel. None of the
other named executive officers received personal benefits is excess of
$50,000. |
|
|
|
For 2004, the amount reported for Mr. Ward also includes $319,730
distributed from a deferred compensation program available to
executives only during 1985, 1986, 1988, and 1989.
|
18
2. |
|
The values shown in this column are based on the average of the high
and low price of CSX stock on the New York Stock Exchange on the
respective dates of grant. As of December 30, 2005, the aggregate
number of restricted shares of CSX stock held by each of the named
executive officers and the dollar value of such shares based on the
average of the high and low price of CSX stock on the New York Stock
Exchange on that date was as follows: Mr. Ward, 165,000 shares, which
vested on February 13, 2006 ($8,385,300); Mr. Gooden, 17,000 shares
($863,940), Mr. Ingram, 20,000 shares ($1,016,400); Mr. Munoz, 15,000
shares ($762,300); and Ms. Fitzsimmons, 32,465 shares ($1,649,871).
Messrs. Ward, Gooden, Ingram and Munoz and Ms. Fitzsimmons are entitled
to receive dividends during the restriction period of their respective
awards. |
|
3. |
|
This column reflects the number of CSX shares underlying employee stock
options granted in 2003. Stock options were not granted in 2004 or
2005. Stock appreciation rights (SARs) were not granted in 2003, 2004
or 2005. |
|
4. |
|
This column represents the dollar value, calculated based on the
average of the high and low share price of CSX common stock on the last
day of the 2005 fiscal year, of performance units earned under the
Long-Term Incentive Program (LTIP) for the multi-year award cycle
completed at the end of fiscal 2005. Except to the extent that cash
amounts exceeded limits in the CSX Omnibus Incentive Plan, all
performance units under the LTIP were paid fifty percent in cash and
fifty percent in CSX shares. The LTIP payout is primarily based on
CSXs exceeding a two-year cumulative modified cash flow performance
target for the 2004-2005 cycle, as discussed under Report of the
Compensation Committee on Executive Compensation Long-Term
Incentives. |
|
5. |
|
Amounts shown for 2005 include the Companys matching contributions
made in conjunction with deferrals of salary or bonuses to the Tax
Savings Thrift Plan for Employees of CSX Corporation and Affiliated
Companies and the CSX Executive Deferred Compensation Plan (Mr. Ward,
$6,375; Mr. Gooden, $12,413; Mr. Ingram, $8,493; Mr. Munoz, $15,988;
and Ms. Fitzsimmons, $5,571) and the value of a stock award of 5,155
shares made on December 22, 2005 (Ms. Fitzsimmons, $259,941). |
|
6. |
|
Mr. Ingram started his employment with CSX Transportation in March 2004. |
|
7. |
|
Mr. Munoz started his employment with the Company in May 2003. |
Stock Option/SAR Grants
The Company did not make any stock option or SAR grants during 2005.
Stock Options
The following table reflects the number of stock options exercised by the named
executives in 2005, the total gain realized upon exercise, the number of stock options held at the
end of the year, and the realizable gain of the stock options that have exercise prices lower than
the fair market value of CSX stock.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities Underlying |
|
Value of Unexercised In-the- |
|
|
Shares Acquired on |
|
|
|
|
|
Unexercised Options/SARs At |
|
Money Options/SARs At |
|
|
Exercise |
|
Value Realized |
|
Fiscal Year-End (#) |
|
Fiscal Year-End($)1 |
Name |
|
(#) |
|
($) |
|
Exercisable |
|
Unexcercisable |
|
Exercisable |
|
Unexercisable |
|
Michael J. Ward |
|
|
62,460 |
|
|
|
1,126,976 |
|
|
|
286,601 |
|
|
|
699,999 |
|
|
|
2,726,370 |
|
|
|
9,850,928 |
|
Clarence W. Gooden |
|
|
60,510 |
|
|
|
755,330 |
|
|
|
42,268 |
|
|
|
73,365 |
|
|
|
176,677 |
|
|
|
1,037,754 |
|
Tony L. Ingram |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Oscar Munoz |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
125,000 |
|
|
|
0 |
|
|
|
2,334,375 |
|
Ellen M.
Fitzsimmons |
|
|
0 |
|
|
|
0 |
|
|
|
54,785 |
|
|
|
87,165 |
|
|
|
655,869 |
|
|
|
1,369,558 |
|
1. |
|
Value of unexercised options at fiscal year-end represents the
difference between the exercise price of any outstanding
in-the-money option grants and $50.82, the average of the high and
low price of CSX stock on the New York Stock Exchange on December
30, 2005.
|
19
Pension Plans
The following table sets forth the estimated annual single life annuity benefit payable,
before offsets for Social Security and Railroad Retirement benefits, 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 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 |
|
Retirement benefits from qualified and non-qualified non-contributory pension plans of CSX and
certain of its subsidiaries (Pension Plans) are based on 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 certain bonuses or similar awards for
personal services rendered in a position that is not subject to a labor agreement. Compensation
items listed in the Summary Compensation Table covered by the Pension Plans are base salary and
bonus.
For employees hired before January 1, 2003, 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 covered service. The formula also takes into account benefits
payable under the Social Security and Railroad Retirement Acts 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 participants in the Pension Plans are
eligible to receive an additional year of unfunded credit for each year of actual service beginning
at age 45 and, in certain instances, credit for periods prior to employment by CSX or its
subsidiaries, with a 44-year maximum of total service.
As of December 31, 2005, the individuals named in the Summary Compensation Table had the
following credited years of service under the Pension Plans: Mr. Ward, 38 years; Mr. Gooden, 34
years; Mr. Ingram, 36 years; Mr. Munoz, 2 years; and Ms. Fitzsimmons, 14 years.
The Pension Plans permit the Chief Executive Officer and a limited number of other key
executives named by him to receive the unfunded portion of their pensions in a lump sum payment.
Messrs. Ward and Gooden have the ability to take the lump sum payment under that provision.
Currently there is no plan to make this option available to other executives. The amount of the
payment is calculated as an actuarial present value, using an interest rate set periodically by the
Finance Committee, which currently is five percent.
The amounts in the table have not been restricted to the maximum annual retirement benefit
that may be paid under qualified plans under the Internal Revenue Code, which is $175,000 for 2006.
Also, in calculating a participants benefit, annual compensation in excess of a limit set annually
by the Secretary of the Treasury may not
20
be taken into account. That limit is $220,000 for 2006. Pension amounts in excess of such
limitations are payable from the Companys non-qualified Special and Supplemental Plans. The
Company is not required to maintain reserves for such plans absent a Change of Control as defined
thereunder.
Employees who become eligible to participate in the Pension Plans on or after January 1, 2003,
generally accrue pension benefits under a cash balance formula. This formula is intended to produce
benefits generally comparable to those in the table set forth above. Benefits accrued under the
formula are expressed in the form of a hypothetical account balance. Each month a participants
hypothetical cash balance account is increased by (1) a Pay Credit (a percentage of each
participants eligible pay for that month based on the sum of the participants age and years of
service), and (2) interest credits based on the participants account balance as of the end of the
prior month. Interest is credited on a monthly basis using the 10-year Treasury bond rate. Vested
pension benefits under the cash balance component may be distributed as a lump sum or as an annuity
upon termination of employment or retirement. Pension amounts in excess of Internal Revenue Code
limitations are payable from the non-qualified Special and Supplemental Plans. Messrs. Munoz and
Ingram are the only named executive officers covered by the cash balance formula.
Pursuant to the terms of his employment arrangement, Mr. Ingram is eligible for an unfunded
pension benefit under the terms of the Companys traditional defined benefit formula. This benefit
is calculated using prior credited service earned at Norfolk Southern Railway Company and covered
compensation using CSX base pay and bonus. In addition to offsets for Social Security and Railroad
Retirement benefits, the amount of Mr. Ingrams pension benefit is offset by pension benefits paid
to Mr. Ingram from Norfolk Southern pension plans and his cash balance benefit described above.
Equity Compensation Plan Information
The following table sets forth information about the Companys equity compensation plans as of
December 30, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of securities to be |
|
|
|
|
|
Number of securities |
|
|
issued upon exercise of |
|
Weighted-average exercise |
|
remaining available for future |
|
|
outstanding options, warrants |
|
price of outstanding options, |
|
issuance under equity |
Plan category |
|
and rights (000s) |
|
warrants and rights |
|
compensation plans (000s)1,2 |
|
Equity compensation plans
approved by security holders |
|
|
16,381 |
|
|
$ |
40.35 |
|
|
|
7,384 |
|
Equity compensation plans not
approved by security holders |
|
|
607 |
|
|
$ |
44.85 |
|
|
|
|
|
Total |
|
|
16,988 |
|
|
|
|
|
|
|
7,384 |
|
1. |
|
The number of shares remaining available for future issuance under
plans approved by shareholders includes 592,703 shares available for
stock option grants, payment of director compensation, and stock
grants pursuant to the CSX Stock Plan for Directors; and 6,791,492
shares available for grant in the form of stock options, performance
units, restricted stock, stock appreciation rights, and stock awards
pursuant to the CSX Omnibus Incentive Plan. |
|
2. |
|
The 1990 Stock Award Plan (1990 Plan) is the only CSX equity
compensation plan that has not been approved by shareholders. The
1990 Plan became effective September 12, 1990. Its purpose is to
further the long term stability and financial success of CSX by
rewarding selected meritorious employees with awards of Company stock.
Each stock award and grant of options under the 1990 Plan must be
approved or ratified by the Board. |
Employment, Change of Control and Similar Agreements
Change of Control Agreements
The Company has traditionally provided change of control employment agreements (Employment
Agreements) for certain key executives. On December 30, 2004, the Company entered into revised
Employment Agreements with each of the named executive officers and other members of senior
management. The Employment
21
Agreements are effective only upon consummation of a change of control, and generally have no
effect on any other employment agreement or arrangement an officer may have with the Company.
Each revised Employment Agreement has an initial two or three-year term, subject to annual
one-year extensions on each anniversary date unless the Company gives the executive 60 days prior
notice that the term will not be extended. In addition, the Company may end the term on an earlier
date if the Company gives the executive at least one years advance notice. All Employment
Agreements with named executive officers are three year agreements.
Upon consummation of a transaction resulting in a Change of Control, each Employment
Agreement provides for a minimum two or three-year term of employment and sets forth the specific
terms of employment, including annual and incentive compensation, participation in employee pension
benefit and welfare plans, fringe and other benefits.
Following a Change of Control, the Agreements generally provide that if the executive is
terminated by the Company other than for Cause or Disability, or if the executive terminates
employment for Good Reason or Constructive Termination then the executive will receive: (i) a
payment in cash of (a) the executives salary, bonus and vacation through the date of termination
to the extent not paid, (b) two or three times the sum of the executives annual salary and bonus
(the higher of the highest bonuses paid for the prior three calendar years or the most recently
established target bonus), and (c) in some cases, an amount equal to the actuarial equivalent of
the value of three additional years of service under the Companys Pension Plans; and (ii)
eligibility for certain employee or fringe benefits for up to two or three years after the
employees termination date. If any payment pursuant to the Agreement is subject to an excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, then the executive will
usually receive an additional payment in an amount equal to such excise tax, which may be grossed
up for taxes.
Under the Employment Agreements, certain executives (including each of the named executive
officers) also have a right to terminate employment for any reason and trigger the above benefits
for a 30-day period within certain windows after a Change of Control. If the executive is
terminated for Cause or Disability or dies, the executive will receive: (i) a payment in cash
of the executives salary, bonus and vacation through the date of termination to the extent not
paid, and (ii) any other benefits to which the executive is entitled under any plan, program,
policy or practice.
Employment Agreements
In 2001, the Company and Mr. Ward entered into an employment agreement that expired, in
accordance with its terms, in February 2006. The agreement provided for a minimum base salary and
an annual bonus opportunity and included an award of 165,000 shares of restricted stock as an
incentive to remain with the Company. The stock award vested upon expiration of the agreement.
In addition, in 2002, the Company and Mr. Ward entered into an agreement that addresses the
disparity in retirement and spousal benefits between Social Security and Railroad Retirement
benefits resulting from the transfer of Mr. Wards employment from CSX Transportation to CSX
Corporation. While the CSX Pension Plan provides a make-up benefit for employees who are affected
by such a transfer, it does not cover the entire difference. This agreement is intended to put Mr.
Ward in the same position as he would have been in had he not been transferred.
Pursuant to an agreement entered into in 2003, Mr. Munoz is employed as Executive Vice
President and Chief Financial Officer of the Company. The agreement provides for an annual base
salary of no less than $500,000. The agreement also provides for an annual target bonus of 90% of
his base salary. Mr. Munoz received an initial stock option grant of 125,000 shares, which vest
ratably over five years. In addition, Mr. Munoz was granted 25,000 shares of restricted stock that
vest at the rate of 5,000 shares on the first, second and third anniversary of his employment. The
last 10,000 shares vest on the fourth anniversary. Since the date of the restricted stock award,
10,000 shares have vested. Mr. Munoz was also provided a signing bonus of $250,000, with one half
payable in May 2003 and the balance in May 2004. Mr. Munoz is also entitled to participate in
employee benefit plans and to receive perquisites generally made available to senior executives of
the Company.
The agreement provides that if Mr. Munoz is terminated by the Company other than for cause or
disability on or before May 5, 2006, Mr. Munoz will be paid a severance benefit equal to two times
the sum of his annual base
22
salary plus the bonus for the year of termination, and any unvested options will vest
immediately. If Mr. Munoz is terminated by the Company other than for cause or disability from May
6, 2006 through May 6, 2008, Mr. Munoz will be paid a severance benefit equal to two times his then
annual base salary, and any unvested options will vest immediately. If Mr. Munoz is terminated by
the Company after May 6, 2008, Mr. Munoz will receive a lump sum severance benefit in the amount
equal to his then annual base salary. If Mr. Munoz voluntarily terminates his employment with the
Company before the end of the agreement, the Company shall have no further obligations other than
to pay any accrued obligations to Mr. Munoz within 30 days of termination and any vested accrued
benefits he has earned under the Companys employee benefit plans.
Pursuant to an agreement entered into in March 2004, Mr. Ingram is employed as Executive Vice
President and Chief Operating Officer of CSX Transportation. The agreement provides for an annual
base salary of no less than $450,000 and an annual target bonus of 90% of his base salary. Mr.
Ingram also received a $250,000 signing bonus and a 25,000 share restricted stock grant. The
restricted stock vests at the rate of 5,000 shares on the first, second and third anniversary of
his employment. The last 10,000 shares vest on the fourth anniversary. Since the date of the
restricted stock award, 5,000 shares have vested. Mr. Ingram also participated in the Companys
2004/2005 Long-Term Incentive Program. Mr. Ingram is also entitled to participate in employee
benefit plans and to receive perquisites generally made available to senior executives of the
Company.
If Mr. Ingram is terminated by the Company for other than cause or disability between March
14, 2006 and March 14, 2009, the Company will pay him an amount equal to two times his base pay and
any remaining unvested restricted stock granted on the date of his employment will vest. If Mr.
Ingram is terminated by the Company after March 14, 2009, the Company will pay him a severance
payment equal to one years base pay. If Mr. Ingram voluntarily terminates his employment with the
Company before the end of the agreement, the Company shall have no further obligations other than
to pay any accrued obligations to Mr. Ingram within 30 days of termination and any vested benefit
he has earned under the Companys employee benefit plans.
Other Agreements
The Company also maintains nonqualified deferred or equity based compensation plans for the
benefit of its executives and certain other employees. In December 2004, the Board amended these
plans and approved mirror plans to preserve the deferred taxation of benefits as intended by the
plans as a result of Section 409A. The terms of such plans will be finalized during 2006 based
on guidance provided by the Internal Revenue Service and Treasury Department under Section 409A.
23
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee oversees CSXs compensation plans and policies, administers its
stock plans, and annually reviews and approves all compensation decisions relating to executive
officers, including those for the Chairman and Chief Executive Officer and the other executive
officers named in the Summary Compensation Table (the Named Executive Officers). The Committee
submits its decisions regarding compensation for the Chairman and Chief Executive Officer to the
independent Directors of the Board for ratification.
The Compensation Committees Charter, which is established and periodically reviewed by the
Board, sets forth these responsibilities. The Committees membership is determined by the Board.
The Committee is composed entirely of independent Directors. There were seven meetings of the
Committee in 2005, one of which involved executive sessions with no CSX employees present.
The Committees work is supported by the Executive Compensation group in the Companys Human
Resources Department and, in accordance with the Committees Charter, the Committee has engaged an
independent compensation consultant, who does not advise the Company, to advise the Committee on
all matters related to Chief Executive Officer and other executive compensation. The independent
compensation consultant generally attends all Committee meetings where evaluations of the
effectiveness of overall executive compensation programs are conducted or where compensation for
executive officers is addressed or approved. In addition, the Committee has the authority to
engage the services of additional outside advisors, experts and others to assist the Committee.
Overview of Compensation Philosophy and Objectives
The Committee members believe that the quality, skills and dedication of the senior executive
officers of the Company are critical factors affecting the long-term value of the Company. Key
compensation goals are designed to: attract talented, motivated, highly-performing executives;
retain key leaders; reward past performance; incent future performance; and align the long-term
interests of executives with those of CSXs investors. The Committee uses a variety of compensation
elements to achieve these goals, including base salary, short- and long-term incentives, employee
benefits, and perquisites. Compensation decisions are made within the context of three guiding
principles: (i) total compensation for executives should be competitive with compensation for
comparison companies, (ii) a substantial portion of the total compensation should be at risk and
consist of performance-based cash and equity incentives that link to Company financial and
non-financial results, and (iii) a significant portion of each executive officers total
compensation should be linked directly to achieving results that create shareholder value.
Decisions regarding senior executive officer compensation are primarily based upon an
assessment of each senior executive officers leadership performance and potential to enhance
long-term shareholder value. The Committee members rely upon their judgment about each
individualand not on rigid guidelines or formulas, or short-term changes in business
performancein determining the amount and mix of the compensation elements for each senior
executive officer. Key factors affecting Committee judgments include: the executives contribution
to the Companys performance in the area of safety; the executives performance compared to the
goals and objectives established for the executive at the beginning of the year; the nature, scope
and level of the executives responsibilities; the executives contribution to the Companys
financial results; the executives effectiveness in leading Company initiatives to increase
customer service, productivity, cash flow and profitability; the executives contribution to the
Companys commitment to corporate responsibility, including the executives success in creating a
culture of unyielding integrity and compliance with applicable law and CSX ethics policies; and the
executives commitment to corporate citizenship.
In determining executive officer compensation for 2005, the Committee used market data
regarding the compensation paid for similar positions by other large companies with annual revenues
ranging from $6 billion to $10 billion, as provided through surveys conducted by nationally
recognized independent compensation consulting firms. These comparison companies included a broad
cross-section of companies that can be expected to compete directly with the Company for employees,
investors and business. Because the job market for the Companys executives is not limited to the
Companys industry, and because the Companys most direct competitors for executive talent are not
necessarily all of the companies that would be included in a peer group established to
24
compare shareholder returns, the comparison group is not the same as the peer group index in
the Five Year Cumulative Comparison Graph included in this Proxy Statement.
Decisions concerning the specific compensation elements and total compensation paid or awarded
to CSXs senior executive officers, including the Chief Executive Officer, in 2005 were made within
this framework and after consultation with the Committees independent compensation consultant. The
Committee members also considered each executives current salary and prior-year bonus, the
appropriate balance between incentives for long-term and short-term performance, compensation paid
to the executives peers and the total compensation potentially payable to, and all of the benefits
accruing to, the executive, including (1) supplemental pension benefits, (2) the accumulated
potential value of prior equity-based grants, (3) dividend-equivalent payments payable on
restricted and performance-based equity grants, and (4) the amount and type of perquisites. In all
cases, the specific decisions involving 2005 total senior executive officer compensation were
ultimately based upon the Committees judgment about the individual executives performance and
potential future contributionsand about whether each particular payment or award would provide an
appropriate incentive and reward for performance that sustains and enhances long-term shareholder
value.
Components of Compensation
The total compensation plan for executive officers during 2005 was composed of four key
elements: (1) base salary; (2) perquisites; (3) short-term incentives; and (4) long-term
incentives. In addition, the executive officers participated in the Companys employee benefit
plans for which they were eligible.
In establishing and administering each of these elements, the Committee considers current
market data regarding the compensation paid for similar positions by the comparison companies,
achievement against Company financial and non-financial objectives, and individual performance
objectives that are established for each performance period by the Committee. The Committees
intent is to provide total direct 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 Companys total compensation components are
described below.
1. Base Salary. The Committee determines a salary for each executive officer and
certain other executive officers based upon the Committees assessment of the individuals
performance and contribution to the Companys performance goals. Base salaries for 2005 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 executives contributions to the Company.
2. Perquisites. The Company provides senior executive officers with a perquisites
allowance of $15,000 each year, which the Committee believes to be reasonable, competitive and
consistent with the Companys overall executive compensation program. Key executives throughout the
Company, including the Named Executive Officers, receive perquisites including executive physicals
and discounts at the Company-owned resort. In addition, officers designated by the Board of
Directors as Section 16(b) officers, pursuant to the Securities Exchange Act of 1934, are entitled
to financial advisory services paid for by the Company. Senior executive officers may also use
Company aircraft for personal travel on a limited basis. Pursuant to an executive security
program, the Committee requires the Chief Executive Officer to use Company aircraft for all air
travel, whether personal or business and believes the requirement to be in the Companys business
interest. The Committee believes the security costs relating to the policy described in this
paragraph are legitimate business expenses, but recognizes that these costs may be viewed as
personal benefits. In the interests of full disclosure, the Company is treating all of these costs
as personal benefits for executives and has reported them as such in the Other Annual
Compensation column in the table on page 18.
3. 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 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.
25
Named Executive Officers, including the Chief Executive Officer, are awarded annual cash
incentive bonuses under the Companys shareholder-approved Senior Executive Incentive Plan (SEIP)
based on Company operating income results. The bonus is generally determined by an individual
targeted bonus opportunity but shall not exceed the lesser of (1) $3,000,000 or (2) 0.3% of
operating income for the Chief Executive Officer or 0.2% of operating income for participants other
than the Chief Executive Officer. The Committee has the authority, in its sole discretion, to
determine bonus awards under the SEIP to reflect factors including (1) the impact of unplanned
events; (2) performance below other financial or strategic objectives (including earnings per
share, the Companys operating ratio, operating income and cash available to the Company, and the
performance of the Companys subsidiaries); and (3) an executives individual performance based on
such factors as the Committee deems appropriate. Based on 2005 operating income, the Named
Executive Officers achieved payment levels consistent with the levels achieved under the Management
Incentive Compensation Plan (MICP), as described below.
Most management employees of the Company are awarded annual cash incentive bonuses under the
MICP.Awards are based on the Committees evaluation of the achievement of operating income targets and
strategic initiatives, along with an evaluation of managements performance and such other
objective measures as the Committee deems appropriate. For 2005, qualifying employees of the
Company and its subsidiaries and affiliates each were generally eligible to receive a cash
incentive bonus under the MICP at a 150% funding level.
4. Long-Term Incentives.The Committee establishes long-term incentives with the
objective of having Total Direct Compensation at approximately the 65th percentile of comparison
companies, assuming management achieves competitive performance levels. Total Direct Compensation
is base salary plus short- and long-term incentives. The long-term incentive compensation
opportunity granted to each executive officer, including the Chief Executive Officer, is based upon
competitive market levels for similar positions at comparison companies.
In the last several years, there has been considerable public debate about the use of stock
options for long-term incentives, and there have been new accounting requirements for expensing
stock options. In this context, the Committee considered stock options as well as a number of
other alternatives for long-term incentives.
As a result, beginning in 2004, the Committee began awarding performance units to employees,
including the named executive officers. The Committee did not grant stock options to the named
executive officers in either 2004 or 2005. In making the change to performance units, the
Committee sought to create a more direct performance link between managements actions and
long-term rewards, while providing incentives at approximately the same levels and cost to the
company as stock options.
Specifically, in February 2004, the Board approved a Long-Term Incentive Program (the
2004-2005 LTIP) administered under the CSX Omnibus Incentive Plan (the COIP). This two-year
program expired on December 30, 2005 and was intended to enhance the linkage of executive
compensation with increased stock price and to emphasize performance factors more directly within
managements control, specifically Modified Free Cash Flow, as defined below. The value of the
performance units has been reflected as a compensation expense in the Companys financial
statements. In addition, the 2004-2005 LTIP encouraged executive retention. Awards were subject
to forfeiture if an executives employment terminated before payout for a reason other than death,
disability, or retirement.
The Committee in the 2004-2005 LTIP established a target award of performance units for each
of the named executive officers. Depending upon the Companys performance over the two-year
period, actual awards could range from 0 percent of the target award to 200 percent of the target
award if the Companys performance exceeded established performance targets.
The Committee selected two-year cumulative Modified Free Cash Flow (MCF) as the primary
performance target for the 2004-2005 LTIP. The Committee believed that during the program period
MCF would have a high correlation with the Companys overall financial position and stock price.
The awards to named executive officers also were subject to an upward or downward adjustment based
on the achievement of certain operating ratio targets, and the Compensation Committee had
discretion to reduce awards based on its assessment of managements achievement of established
strategic goals.
26
Under the 2004-2005 LTIP, the Committee defined MCF as operating income, plus
depreciation, minus certain capital expenditures. MCF did not include cash flows from business
unit sales, real estate sales, taxes, and working capital. MCF contemplated a specified level of
capital expenditures being made, and they were. In evaluating performance under the 2004-2005
LTIP, the Committee excluded discretionary capital spending for supplemental locomotive purchases
to meet new demand and also excluded recoverable costs associated with Hurricane Katrina in excess
of the insurance deductible.
Over the two-year performance period, MCF increased approximately 56 percent. As shown in the
Five Year Cumulative Comparison Graph on page 16, the total cumulative shareholder returns for the
Company increased by 44 percent over the same period. Attainment of this MCF measure resulted in a
payout in excess of each of the named executive officers target payout as reported in the
Long-Term Incentive Awards table in the Companys 2005 proxy statement but within the range
reported in the same proxy statement. In addition, based on a cumulative operating ratio target
multiplier, this payout percentage increased.
However, as a result of managements performance relative to certain strategic goals, the
Compensation Committee exercised its discretion to reduce the amount otherwise payable to the named
executive officers. The Committee paid awards 50 percent in cash and 50 percent in CSX shares,
except to the extent the cash portion of the payout would have exceeded the cap under the COIP, in
which case the Committee awarded additional shares of CSX stock in lieu of cash.
The Committee believes the performance-based awards under the 2004-2005 LTIP delivered
successful alignment with shareholder goals. The Committee also believes that the incentives
received by executives under the 2004-2005 LTIP were at approximately the same levels as stock
options would have delivered during the same period.
From time to time, the Committee awards shares of restricted stock. Generally, the Committee
makes such awards in connection with attracting and, through the use of multi-year vesting
schedules, retaining certain executive officers. The Committee believes that restricted stock
awards and performance units payable in shares of CSX stock also support the Committees executive
stock ownership guidelines and align the interests of executives with those of shareholders.
Stock Ownership Guidelines
The Committee believes that to link the interests of executive officers to those of the
Companys shareholders, it is important that executive officers own a significant amount of the
Companys stock. The Committee has established the following formal stock ownership guidelines.
These guidelines are generally at or above the stock ownership guidelines of the comparison
companies. Officers must retain 100% of net shares issued until the guidelines are achieved, and
may dispose of shares held in excess of the guidelines. However, senior executives must retain 50%
of new net shares issued after the guidelines are achieved, until retirement or termination. All
of the Named Executive Officers have met these ownership guidelines.
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Position |
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Minimum Value |
Chief Executive Officer
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|
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6 times base salary |
Executive Vice Presidents
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4 times base salary |
Senior Vice Presidents
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|
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3 times base salary |
Vice Presidents and Equivalent
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1 times base salary |
Basis for Compensation of Chief Executive Officer
For 2005, the Committee paid Mr. Ward $947,792 in salary, and a cash bonus of $1,832,000 under
the SEIP described above. Mr. Ward also received in 2005 a payout of $19,794,390 (in cash and
stock) under the 2004-2005 LTIP described above. With the exception of base salary, substantially
all of Mr. Wards total compensation is performance-based.
The Committee based its decisions on its assessment of Mr. Wards performance, measured in the
context of the financial, strategic, and operational objectives approved by the Committee in
February 2005. This assessment
27
included a review of significant accomplishments and strong
business performance in a dynamic environment, as well as stock price performance during 2004 and
2005.
In the Committees view, the overall performance and leadership provided by Mr. Ward, as Chief
Executive Officer, was excellent for the following reasons: his role in leading the Company to
strong financial results that met the financial targets established for him in the beginning of
2005; his leadership in driving consistent, continuous improvement in operating performance in the
context of challenges from high demand and the impact of Hurricane Katrina on the employees and
infrastructure in the Gulf Coast region and its implications for rail gateways throughout the
central United States; his leadership in driving revenue initiatives and building structured
cost-saving processes; his completion of a strategy to change CSXs portfolio of businesses to
enhance long-term investor value and focus on core Surface Transportation businesses; his actions
to ensure that the Company has a strong capital structure and cash flow; his development of
infrastructure strategies for key regions; his drive to improve CSXs contributions as a community
citizen, including public safety and security; his actions in making the Company a leader in
integrity, transparency and corporate governance; and his leadership in the industry as Chairman of
the American Association of Railroads at a time of significant evolution for rail transportation.
Given these factors, the Committee considered this total compensation appropriate. In
addition, the independent compensation consultant retained by the Committee reviewed the
Committees decision and determined that the total compensation provided to Mr. Ward and the other
Named Executive Officers was reasonable and appropriate.
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 anyone acting in such
capacity) and the four highest compensated officers (other than the Chief Executive Officer) who
are employed on the last day of the year. However, performance-based compensation, paid under 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 were approved by the
shareholders of the Company in 2000. The shareholders reapproval of the COIP under Section 162(m)
is being sought as explained in Item 3 of this Proxy.
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
in light of the Companys overall compensation philosophy and objectives. The Companys
compensation program for executive officers has both objective and discretionary elements.
Generally, the Committee wishes to maximize the Companys 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 believes that there are circumstances in which the provision of
compensation that is not fully deductible may be more consistent with the compensation philosophy
and objectives of the Committee and/or may be in the best interests of the Company and its
shareholders. The Committees ability to exercise discretion and to retain flexibility in this
regard may, in certain circumstances, outweigh the advantages of qualifying all 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 Companys performance and total
returns to its shareholders.
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Compensation Committee |
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Frank S. Royal, M.D., Chairman |
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Robert D. Kunisch |
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William C. Richardson |
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Donald J. Shepard |
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Jacksonville, Florida February 7, 2006 |
28
Item 2: Ratification of Independent Registered Public Accounting Firm
The Audit Committee of the Board appointed the firm of Ernst & Young LLP as Independent
Registered Public Accounting Firm (the Independent Auditors) to audit and report on CSXs
financial statements for the fiscal year 2006. Action by shareholders is not required by law in the
appointment of independent accountants. If shareholders do not ratify this appointment, however,
appointment will be reconsidered by the Audit Committee.
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.
Fees Paid to Independent Registered Public Accounting Firm
Ernst & Young LLP served as the Independent Auditors for the Company in 2005. Approximate fees
paid to Ernst & Young LLP are as follows:
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2005 |
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2004* |
Audit Fees:
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$ |
2,768,000 |
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$ |
4,403,000 |
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Include fees associated with the integrated audit, testing internal
controls over financial reporting (SOX 404), the reviews of the Companys
quarterly reports on Form 10-Q, statutory audits and other attestation
services related to regulatory filings. |
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Audit Related Fees:
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$ |
234,000 |
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$ |
412,000 |
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Principally include audits of employee benefit plans and subsidiary audits. |
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Tax Fees:
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$ |
4,000 |
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$ |
251,000 |
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Include fees for tax compliance, expatriate tax compliance, tax advice and
tax planning. |
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All Other Fees:
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$ |
9,000 |
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$ |
15,000 |
|
Include fees for a subscription to an accounting research tool. The Audit
Committee has concluded that the services covered under the caption All
Other Fees are compatible with maintaining Ernst &Youngs independent
status. |
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* 2004 fees were adjusted from prior year disclosure to reflect final billing of 2004 audit
services. |
Pre-Approval Policies and Procedures
The Audit Committee is responsible for the approval of all services performed by Ernst & Young
LLP. The Chairman of the Audit Committee has the authority to approve all engagements that will
cost less than $250,000 and, in such cases, will report any approvals to the full committee at the
next scheduled meeting. All engagements expected to cost $250,000 or more require pre-approval of
the full committee. In addition, it is Company policy that tax and other non-audit services should
not equal or exceed base audit fees plus fees for audit-related services.
The Board of Directors unanimously recommends that the shareholders vote FOR this proposal.
29
Item 3: Company Proposal Regarding Reapproval of the CSX Omnibus Incentive Plan
The Company provides incentives to increase shareholder value and to attract, motivate
and retain the most highly qualified employees. The CSX Omnibus Incentive Plan (COIP) gives the
Company the ability to provide incentives through issuance of cash, stock, restricted stock, stock
options, and other stock-based awards.
The COIP is designed to allow the grant of awards that qualify as performance-based
compensation under Section 162(m) of the Internal Revenue Code so that compensation paid under the
awards will be deductible for federal income tax purposes. This is consistent with the
Compensation Committees philosophy and objectives as described in its report that begins on page
24.
Shareholders approved the COIP at the 2000 annual meeting. Shareholders must reapprove the
material terms of the COIP to meet the conditions for the Company to continue to grant awards that
qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code.
The following paragraphs summarize the material terms of the COIP, including the COIPs
provisions regarding eligibility, the types of awards that may be made, the performance criteria
that may be applied to awards and the limits on the benefits that may be paid to an individual
participant. The summary is qualified in its entirety by reference to the full text of the COIP.
Shareholders may request a free copy of the COIP by writing to CSX Corporation, Office of the
Corporate Secretary, 500 Water Street, C160, Jacksonville, Florida 32202. Except for a change made
in conjunction with Code Section 409A to provide that any deferrals permitted under the COIP will
be made under the CSX Deferred Compensation Plan, a change in connection with FASB 123-R
eliminating cash settlements in the event of a change in control, and other changes concerning the
accounting treatment of the Plan, the terms of the COIP submitted for reapproval by the
shareholders are the same as those approved in 2000.
General
The COIP provides for grants or awards of stock options, restricted stock awards, restricted
stock units, performance grants, stock awards, stock appreciation rights and dividend equivalents
(collectively, Incentive Awards). Only present and future employees of CSX and its Subsidiaries,
a Foreign Affiliate or an Affiliate are eligible to receive Incentive Awards under the COIP.
Stock Subject to COIP; Adjustments
The Board has reserved a total of 6 million shares of common stock, plus any shares of common
stock that represent awards granted under any prior plan of CSX that are forfeited, expire or are
cancelled without delivery of shares, for issuance under the COIP. If an Incentive Award expires
or terminates unexercised or is forfeited, or if any shares are surrendered to CSX in connection
with an Incentive Award, the shares subject to such award and the surrendered shares will become
available for further awards under the COIP. Any shares that are issued under the Senior Executive
Incentive Plan will reduce the maximum number of shares available for delivery under the COIP.
Shares issued under the COIP through the settlement, assumption, or substitution of
outstanding awards or obligations to grant future awards as a condition of acquiring another entity
will not reduce the maximum number of shares available under the COIP. In addition, the number of
shares subject to the COIP (and the number of shares and terms of any Incentive Award) may be
adjusted in the event of any change in the outstanding Common Stock by reason of any stock
dividend, spin-off, split-up, reverse stock split, recapitalization, reclassification, merger,
consolidation, liquidation, business combination or exchange of shares or similar transaction.
Limitations on Incentive Awards
No more than 1,200,000 shares of the authorized shares may be allocated to Incentive Awards
granted or awarded to any individual Participant during any 36-month period. In addition, the
maximum number of shares that may be issued as Restricted Stock, Restricted Stock Units, Dividend
Equivalents and under Performance Grants, Stock Awards or Senior Executive Incentive Plan Grants is
limited to 1,200,000 shares. Any shares of Restricted Stock, Restricted Stock Units, Dividend
Equivalents, Performance Grants or Stock Awards that are forfeited will not count against this
limit.
30
The maximum cash payment that can be made for all Incentive Awards granted to any one
individual under the COIP is $3,000,000 times the number of 12-month periods in any performance
cycle for any single or combined performance goals. Any amount that is deferred by a Participant
is subject to this limit in the year in which the deferral is made but not in any later year in
which payment is made.
Administration
Prior to a change in control, the Compensation Committee of the Board of Directors administers
the COIP. Each member of the Compensation Committee, which for purposes of 162(m) must have at
least two members, must (a) meet the standards of independence necessary to be classified as an
outside director for purposes of Section 162(m) of the Code and (b) be a non-employee director
for the purposes of Rule 16b-3 under the Securities Exchange Act of 1934, as amended. Subject to
the terms of the COIP, the Compensation Committee has plenary authority to determine the terms of
Incentive Awards. Following a change in control, the Benefits Trust Committee of CSX, at its
discretion, may assume any and all of the duties of the Compensation Committee under the COIP.
Stock Options
The COIP authorizes the grant of Incentive Stock Options and Nonqualified Stock Options.
Incentive Stock Options are stock options that satisfy the requirements of Section 422 of the Code.
Nonqualified Stock Options are stock options that do not satisfy the requirements of Section 422
of the Code. Options granted under the COIP entitle the grantee, upon exercise, to purchase a
specified number of shares from CSX at a specified exercise price per share. The Compensation
Committee determines the period of time during which an Option may be exercised, as well as any
vesting schedule, except that no Option may be exercised more than 10 years after the date of
grant. The exercise price for shares of common stock covered by an Option cannot be less than 100
percent of the Fair Market Value of the common stock on the date of grant.
Under the COIP, a Participant may not surrender an option for the grant of a new option with a
lower exercise price. In addition, if a Participants option is cancelled before its termination
date, the Participant may not receive another option within six months of the cancellation date
unless the exercise price of the new option equals or exceeds the exercise price of the cancelled
option.
Restricted Stock Awards
The COIP also authorizes the grant of Restricted Stock awards on terms and conditions
established by the Compensation Committee, which may include performance conditions. The terms and
conditions will include the designation of a Restriction Period during which the shares are not
transferable and are subject to forfeiture. In general, the minimum Restriction Period applicable
to any award of Restricted Stock that is not subject to the achievement of one or more performance
standards is three years from the date of grant. The minimum restriction period for any award of
Restricted Stock that is subject to one or more performance standards is one year from the date of
grant, except that restriction periods of shorter duration may be approved for awards of Restricted
Stock or Restricted Stock Units combined with respect to up to 600,000 shares reserved for issuance
under the COIP.
Restricted Stock Units
Restricted Stock Units may be granted subject to terms and conditions, including the
achievement of one or more performance standards. In the case of Restricted Stock Units, no shares
are issued at the time of grant. Rather, upon the lapse of any applicable restriction, a
Restricted Stock Unit entitles a Participant to receive shares of common stock or a cash amount
equal to the Fair Market Value of a share of common stock on the date the restrictions lapse. The
requirements with respect to Restriction Periods for Restricted Stock Units are the same as those
for Restricted Stock Awards.
Performance Grants
The Compensation Committee may make Performance Grants to any Participant that are intended to
comply with Section 162(m) of the Code. Each Performance Grant will contain Performance Goals for
the award, including the Performance Criteria, the target and maximum amounts payable, and other
terms and conditions. Performance Criteria may include return on invested capital; free cash flow;
economic value added (net operating profit after tax
31
less cost of capital); total shareholder return; operating ratio; cost reduction (or limits on cost
increases); debt to capitalization; debt to equity; earnings; earnings before interest and taxes;
earnings before interest, taxes, depreciation and amortization; earnings per share (including or
excluding nonrecurring items); earnings per share before extraordinary items; income from
operations (including or excluding nonrecurring items); income from operations compared to capital
spending; net income (including or excluding nonrecurring items, extraordinary items and/or the
accumulative effect of accounting changes); net sales; price per share of common stock; return on
assets; return on capital employed; return on equity; return on investment; return on sales; and
sales volume.
The Compensation Committee will make all determinations regarding the achievement of
Performance Goals. Actual payments to a Participant under a Performance Grant will be calculated
by applying the achievement of Performance Criteria to the Performance Goal. Performance Grants
will be payable in cash, shares of common stock or a combination of cash and shares of common
stock. The Compensation Committee may reduce or eliminate, but not increase the payments except as
provided in the Performance Grant.
Stock Awards
The COIP authorizes the making of Stock Awards. The Compensation Committee will establish the
number of shares of common stock to be awarded and the terms applicable to each award, including
performance restrictions. No more than 1,200,000 shares of common stock, reduced by Restricted
Stock and Restricted Stock Unit awards, may be granted under the COIP without performance
restrictions.
The Compensation Committee may delegate to any individual or group employed by CSX or its
Subsidiaries the authority to grant Stock Awards as long as no individual Stock Award has a Fair
Market Value in excess of $100,000 on the date of grant.
Stock Appreciation Rights
The Compensation Committee may grant Stock Appreciation Rights (SARs) under the COIP.
Subject to the terms of the award, SARs entitle the Participant to receive a distribution in an
amount not to exceed the number of shares of common stock subject to the portion of the SAR
exercised multiplied by the difference between the market price of a share of common stock on the
date of exercise of the SAR and the market price of a share of common stock on the date of grant of
the SAR. Such distributions are payable in cash or shares of common stock, or a combination
thereof, as determined by the Compensation Committee.
Dividend Equivalents
The COIP authorizes the grants of Dividend Equivalents to any Participant either in
combination with, or separately from, Incentive Awards. A Dividend Equivalent permits the
Participant to receive payments equivalent to the dividends paid on the common stock. Dividend
Equivalents are payable in cash or shares of common stock, or a combination thereof, as determined
by the Compensation Committee.
Change in Control
Upon a change in control, all Options and Stock Appreciation Rights will become fully
exercisable, all terms and conditions on Restricted Stock and Restricted Stock Units will be deemed
satisfied, and all Performance Grants, Stock Awards and Dividend Equivalents will be deemed to be
fully earned. In addition, CSX, or its Subsidiary or Affiliate, will make an irrevocable
contribution to the Benefits Trust in an amount that is sufficient to pay each Participant the
unfunded portion of the benefits to which Participants are entitled, as of the date on which the
change in control occurred.
Duration, Amendment and Termination
The Board may suspend or terminate the COIP without shareholder approval or ratification at
any time or from time to time. Unless sooner terminated or extended, the COIP will terminate on
April 26, 2010.
The Board may also amend the COIP at any time or from time to time. No change may be made
that increases the total number of shares of common stock reserved for issuance pursuant to
Incentive Awards, or reduces the
32
minimum exercise price for options unless such change is authorized by the shareholders of CSX. A
termination or amendment of the COIP will not, without the consent of the Participant, adversely
affect a Participants rights under an Incentive Award previously granted to him or her. After a
change in control, all amendments to the Plan are subject to the approval of the Benefits Trust
Committee.
Restrictions on Transfer; Deferral
Except as otherwise permitted by the Compensation Committee and provided in the Incentive
Award, Incentive Awards may not be transferred or exercised by another person except by will or by
the laws of descent and distribution. The Compensation Committee may permit Participants to elect
to defer the issuance of common stock or the settlement of awards in cash under the CSX Deferred
Compensation Plan.
Federal Income Tax Information
The following is a general summary of the current federal income tax treatment of Incentive
Awards, which are authorized to be granted under the COIP, based upon the current provisions of the
Code and regulations promulgated thereunder. The rules governing the tax treatment of such awards
are technical, so the following discussion of tax consequences is necessarily general in nature and
does not purport to be complete. In addition, statutory provisions are subject to change, as are
their interpretations, and their application may vary in individual circumstances. Finally, this
discussion does not address the tax consequences under applicable state and local law.
Incentive Stock Options. A Participant will not recognize income on the grant or exercise of
an incentive stock option. However, the difference between the exercise price and the fair market
value of the stock on the date of exercise is an adjustment item for purposes of the alternative
minimum tax. If a Participant does not exercise an incentive stock option within certain specified
periods after termination of employment, the Participant will recognize ordinary income on the
exercise of an incentive stock option in the same manner as on the exercise of a nonqualified stock
option, as described below.
The general rule is that gain or loss from the sale or exchange of shares acquired on the
exercise of an incentive stock option will be treated as capital gain or loss. If certain holding
period requirements are not satisfied, however, the Participant generally will recognize ordinary
income at the time of the disposition. Gain recognized on the disposition in excess of the
ordinary income resulting therefrom will be capital gain, and any loss recognized will be a capital
loss.
Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock Units, Performance
Grants, Stock Awards, and Dividend Equivalents. A Participant generally is not required to
recognize income on the grant of a nonqualified stock option, a stock appreciation right,
Restricted Stock Units, a Performance Grant, a Stock Award, or Dividend Equivalents. Instead,
ordinary income generally is required to be recognized on the date the nonqualified stock option or
stock appreciation right is exercised, or in the case of Restricted Stock Units, Performance
Grants, Stock Awards, and Dividend Equivalents, upon the issuance of shares and/or the payment of
cash pursuant to the terms of the award. In general, the amount of ordinary income required to be
recognized, (a) in the case of a nonqualified stock option, is an amount equal to the excess, if
any, of the fair market value of the shares on the exercise date over the exercise price, (b) in
the case of a stock appreciation right, the amount of cash and/or the fair market value of any
shares received upon exercise plus the amount of taxes withheld from such amounts, and (c) in the
case of Restricted Stock Units, Performance Grants, Stock Awards, and Dividend Equivalents, the
amount of cash and/or the fair market value of any shares received in respect thereof, plus the
amount of taxes withheld from such amounts.
Restricted Stock. Unless a Participant who receives an award of Restricted Stock makes an
election under Section 83(b) of the Code as described below, the Participant generally is not
required to recognize ordinary income on the award of restricted stock. Instead, on the date the
shares vest (i.e., become transferable or no longer subject to forfeiture), the Participant will be
required to recognize ordinary income in an amount equal to the excess, if any, of the fair market
value of the shares on such date over the amount, if any, paid for such shares. If a Participant
makes a Section 83(b) election to recognize ordinary income on the date the shares are awarded, the
amount of ordinary income required to be recognized is an amount equal to the excess, if any, of
the fair market value of the shares on the date of award over the amount, if any, paid for such
shares. In such case, the Participant will not be required to recognize additional ordinary income
when the shares vest.
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Gain or Loss on Sale or Exchange of Shares. In general, gain or loss from the sale or
exchange of shares granted or awarded under the COIP will be treated as capital gain or loss,
provided that the shares are held as capital assets at the time of the sale or exchange. However,
if certain holding period requirements are not satisfied at the time of a sale or exchange of
shares acquired upon exercise of an incentive stock option (a disqualifying disposition), a
Participant generally will be required to recognize ordinary income upon such disposition.
Deductibility by Company. The Company generally is not allowed a deduction in connection with
the grant or exercise of an incentive stock option. However, if a Participant is required to
recognize income as a result of a disqualifying disposition, the Company will be entitled to a
deduction equal to the amount of ordinary income so recognized. In general, in the case of a
nonqualified stock option (including an incentive stock option that is treated as a nonqualified
stock option, as described above), a stock appreciation right, Restricted Stock, Restricted Stock
Units, Performance Grants, Stock Awards, and Dividend Equivalents, the Company will be allowed a
deduction in an amount equal to the amount of ordinary income recognized by a Participant, provided
that certain income tax reporting requirements are satisfied.
Parachute Payments. Where payments to certain employees that are contingent on a change in
control exceed limits specified in the Code, the employee generally is liable for a 20 percent
excise tax on, and the corporation or other entity making the payment generally is not entitled to
any deduction for, a specified portion of such payments. The Compensation Committee has in the
past, and may in the future, make awards as to which the vesting thereof is accelerated by a change
in control of the Company. Such accelerated vesting would be relevant in determining whether the
excise tax and deduction disallowance rules would be triggered with respect to certain Company
employees.
Performance-Based Compensation. Subject to certain exceptions, Section 162(m) of the Code
disallows federal income tax deductions for compensation paid by a publicly-held corporation to
certain executives to the extent the amount paid to an executive exceeds $1 million for the taxable
year. The COIP has been designed to allow the Compensation Committee to grant Stock Options, Stock
Appreciation Rights, and Performance Grants that qualify under an exception to the deduction limit
of Section 162(m) for performance-based compensation. The ability to grant Stock Options, Stock
Appreciation Rights, and Performance Grants that qualify as performance-based compensation for
Code Section 162(m) purposes requires the shareholders reapproval of the COIP.
Accounting Treatment
Under present accounting rules, the grant of options will result in a charge against CSXs
earnings, based upon the fair market value of the option at the date of the grant, over the vesting
period of the option. Stock grants (including performance units such as restricted shares or LTIP
shares) result in a charge against CSX earnings based on the grant date price of the awards given.
The charge will be recognized over the vesting period of the award, if applicable. The excess, if
any, from time to time of the fair market value of the common stock subject to SARs, over the
exercise price of the SARs, will result in a charge against CSXs earnings. The amount of the
charge will increase or decrease based on changes in the market value of the common stock and will
decrease to the extent SARs are canceled. CSX has not issued any SARs to date.
The Board of Directors unanimously recommends that the shareholders vote FOR this proposal.
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Items 4 and 5: Company Proposals Regarding Elimination of Supermajority Voting Requirements
APPROVAL OF AMENDMENTS TO AMENDED AND RESTATED ARTICLES OF INCORPORATION
ELIMINATING SUPERMAJORITY VOTING REQUIREMENTS
The Board in its continuing review of corporate governance matters, and after careful
consideration, has concluded that it is in the best interests of the Companys shareholders to
amend the Amended and Restated Articles of Incorporation (the Charter), eliminating supermajority
voting default rules.
The Charter is currently silent as to the level of shareholder approval for mergers or share
exchanges, certain sales or dispositions of assets, dissolution, and affiliated transactions with
interested shareholders, which the Virginia Stock Corporation Act (the VSCA) defines as 10%
beneficial holders of any class of voting shares of the Company. Under Virginia law, when a
charter is silent in respect of these transactions, two-thirds shareholder approval is required in
order to effect any of them.
Virginia law, however, allows corporations to lower these voting thresholds (but not to less
than a majority vote) by including a specific provision in the Articles of Incorporation providing
for a lower approval threshold. In order to lower the threshold to majority approval for these
transactions, the Charter must be amended to provide for such a lower threshold.
Accordingly, the Board has approved and recommends for approval by the Companys shareholders
amendments to the Charter that add new articles that provide that any action on a matter involving
the following items shall require the approval, by the affirmative vote, of a majority of the votes
entitled to be cast thereon:
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Any plan of merger or share exchange for which the VSCA requires shareholder
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Disposition of assets of the Company for which the VSCA requires shareholder
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The dissolution of the Company. |
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An affiliated transaction under the VSCA with interested shareholders, defined
as those beneficially owning more than 10% of any class of the outstanding voting
shares of the Company. |
The
proposed additions to the Charter are attached to this Proxy
Statement as Appendix A. The Company is not proposing these
additions to the Charter in response to any pending, planned or
contemplated transaction.
Amending the voting requirements for mergers or share exchanges, certain sales or dispositions
of assets, and dissolution, listed as Item 4 on your Proxy card, will require approval by the
majority vote of the outstanding shares of the Company entitled to vote for the election of
directors.
Amending the voting requirements for affiliated transactions with interested shareholders,
listed as Item 5 on your Proxy card, will require the affirmative vote of a majority of the shares
entitled to vote thereon. Under the VSCA, shares that are owned by interested shareholders are not
entitled to vote with respect to this amendment. Therefore, the affirmative vote of a majority of
the shares of the shareholders of the Company (other than shares held by interested shareholders)
is required to approve an amendment to the affiliated transactions voting rules.
All abstentions, broker non-votes, and failures to return a proxy card will have the same
effect as a vote against these proposals.
Approval by shareholders of one or both of the above proposals will result in the filing of
Amended and Restated Articles of Incorporation with the State of Virginia promptly after this
Annual Meeting. To the extent only one of the proposals is approved, the Amended and Restated
Articles of Incorporation as so filed with the State of Virginia will only reflect the proposal so
approved.
The Board of Directors unanimously recommends that the shareholders vote FOR these proposals.
35
SHAREHOLDER PROPOSAL
Item 6 has been proposed by an individual shareholder. For the reasons set forth below,
the Board of Directors recommends a vote AGAINST Item 6. Shareholders should be aware that, even
if approved, their proposals are not binding on the Board. Although the Board will consider the
shareholders wishes as expressed at the Annual Meeting, one or more of the proposals might not be
implemented if the Board, in its business judgment and the exercise of its fiduciary duties,
concludes that implementation is not in the best interests of the Company and its shareholders.
Promptly upon receiving an oral or written request from a shareholder, the Company will
provide to such shareholder the names, addresses, and numbers of shares held by each of the
shareholders who have made the following shareholder proposals. Requests for this information
should be directed to CSX Corporation, Office of the Corporate Secretary, 500 Water Street, C160,
Jacksonville, Florida 32202, (904) 366-4242.
Item 6: Shareholder Proposal Regarding Separate Chairman and CEO
The following shareholder proposal has been submitted to the Company:
RESOLVED: That stockholders of CSX Corporation, (CSX or the Company) ask the Board of Directors
to adopt a policy that the boards chairman be an independent director who has not previously
served as an executive officer of the Company. The policy should be implemented so as not to
violate any contractual obligation. The policy should also specify (a) how to select a new
independent chairman if a current chairman ceases to be independent during the time between annual
meetings of shareholders; and, (b) that compliance with the policy is excused if no independent
director is available and willing to serve as chairman.
SUPPORTING STATEMENT: It is the responsibility of the Board of Directors to protect shareholders
long-term interests by providing independent oversight of management, including the Chief Executive
Officer (CEO), in directing the corporations business and affairs. Currently at our Company, Mr.
Michael Ward holds both the positions of Chairman of the Board and CEO. We believe that this
current scheme may not adequately protect shareholders.
Shareholders of CSX require an independent leader to ensure that management acts strictly in
the best interests of the Company. By setting agendas, priorities and procedures, the position of
Chairman is critical in shaping the work of the Board of Directors. Accordingly, we believe that
having an independent director serve as chairman can help ensure the objective functioning of an
effective Board.
We believe that ensuring that the Chairman of the Board of our Company is independent, will
enhance Board leadership at CSX, and protect shareholders from future management actions that can
harm shareholders. Other corporate governance experts agree. As a Commission of The Conference
Board stated in a 2003 report, The ultimate responsibility for good corporate governance rests
with the Board of Directors. Only a strong, diligent and independent board of directors that
understands the key issues, provides wise counsel and asks management the tough questions is
capable of ensuring that the interests of shareowners as well as other constituencies are being
properly served.
We believe that the recent wave of corporate scandals demonstrates that no matter how many
independent directors there are on the Board, it is less able to provide independent oversight of
the officers if the Chairman of that Board is also CEO of the Company.
We, therefore, urge shareholders to vote FOR this important corporate governance reform.
CSX MANAGEMENT RESPONSE
CSX is and always has been committed to the highest standards of corporate governance, and for
years has been a leader in this area. Our governance policies and practices have led to a recent
Corporate Governance Quotient score from Institutional Shareholder
Services (ISS) in the 89.9
percentile for S&P 500 companies and the 97.8 percentile for companies in the transportation group.
36
The Board of Directors, which includes nine independent, non-management directors among its
ten members, believes that the positions of Chairman of the Board and CEO should be held by the
same person, except in unusual circumstances such as a transition in leadership. The Board believes
that having a single person serve as Chairman and CEO provides unified leadership and direction
that has close linkage to the Companys goals and operations. At the same time, the Board has in
place a number of procedures to assure regular, open and challenging dialogue and decision making,
which are discussed below.
An underlying premise of the proposal appears to be that the CEOs service as Chairman could
impair the Boards independence. The Board, however, does not believe its independence is
compromised by having a single person serve as Chairman and CEO. The functions of the Board are
carried out by the full Board, and when delegated, by the Board committees. Each director is a full
and equal participant in the major strategic and policy decisions of our Company. The insight and
advice that each independent director provides to our Company would not be enhanced simply because
he or she served as non-executive Chairman of the Board.
Our independent Board members meet alone in executive session at each Board meeting. These
sessions are chaired by a presiding director selected annually by the Governance Committee from
among independent directors. The duties of the presiding director are set forth in paragraph five
of the CSX Corporate Governance Guidelines. These Guidelines, as well as the policy for
shareholders to communicate with the presiding director, are available on the Companys Internet
website (www.csx.com).
The Board believes that our corporate governance structure, with its emphasis on independence,
makes it unnecessary to have a policy of separating the roles of Chairman of the Board and CEO.
The proposal would deprive the Board of its flexibility to organize its functions and conduct its
business in the manner it deems most efficient.
For the foregoing reasons, the Board of Directors recommends a vote AGAINST Item 6.
March 30, 2006
By Order of the Board of Directors
Ellen M. Fitzsimmons
Senior Vice President-Law and Public Affairs and Corporate Secretary
37
Appendix A: Proposed Amendments to
CSX Amended and Restated Articles of Incorporation
The proposed Amended and Restated Articles of Incorporation of CSX Corporation will hereby be
amended by adding the following two new articles upon shareholder approval:
Article X
AFFILIATED TRANSACTIONS
The Corporation shall not be governed by Article 14 (Affiliated Transactions) of the Virginia Stock
Corporation Act (the VSCA).
Article XI
OTHER VOTING MATTERS
Any action on a matter involving:
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a sale of all or substantially all the Corporations property for which the VSCA requires
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shall require the approval, by the affirmative vote, of a majority of the votes entitled to be cast
thereon.
A-1
Appendix B: Compensation Committee Charter
CSX CORPORATION
Board of Directors
Compensation Committee Charter
Purpose
Consistent with the Board of Directors (Board) commitment to build long-term shareholder
value, the Compensation Committee (Committee) shall be responsible for the development of CSX
Corporations (Corporation) philosophy with respect to executive compensation and benefits. The
Committee is also responsible for periodically reviewing the Corporations compensation practices
and policies, benefit plans, and perquisites applicable to all employees and executives as a group
to ensure that they are consistent with the Corporations compensation philosophy. The Committee
shall also be responsible for assuring that the benefit plans, practices, programs or policies
maintained for directors comply with all applicable laws.
The Committee shall provide over the names of the Committee members the required Compensation
Committee Report for the Corporations Proxy Statement for the Corporations Annual Meeting of
Shareholders.
Membership and Operations
The Committee shall consist of not fewer than two members, each of whom shall be a
non-employee director within the meaning of 17 CFR 240.16b-3, shall qualify as an outside
director within the meanings of regulations established pursuant to Section 162(m) of the Internal
Revenue Code, and shall be independent as defined in New York Stock Exchange Rule 303A. The
Committee shall meet at such times as it determines to be appropriate or at the call of the Chair
of the Committee.
The members of the Committee and the Chair shall be recommended by the Governance Committee
and elected by the Board annually and shall serve until their successors have been duly elected and
qualified.
The Committee may, in its discretion, delegate all or a portion of its duties and
responsibilities to a subcommittee of the Committee or, as specified below, to management.
Duties and Responsibilities
The Committee, shall, in its judgment:
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Consider, approve, and, where necessary, recommend to the Board for approval, the
adoption, amendment, or termination of compensation practices, policies, programs, and
employee benefit plans maintained by the Corporation or its affiliates for eligible
employees, including but not limited to qualified plans, cash and stock-based incentive
plans, nonqualified deferred compensation and retirement plans, welfare plans, and
perquisites. |
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amendment of benefit plans, practices, programs, or policies maintained for non-employee
directors and other non-employees. |
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or terminate any such plan, policy, or program subject to such limitations as the Committee
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implementation or administration of any such plan, policy or program. |
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Review and approve performance targets required for executive incentive plans; certify
the achievement of performance goals prior to payment of performance-based compensation to
individuals covered under Section 162(m) of the Internal Revenue Code; recommend approval
by the Board of awards to executives to be paid pursuant to any such plan, policy or
program; and take any actions delegated to the Committee under any such plan, policy, or
program. |
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Conduct an annual review of the performance of the Chief Executive Officer. The
Committee, in consultation with the Board and the Governance Committee, shall approve goals
and objectives for the Chief Executive Officer, evaluate his or her performance, and,
either as a committee or together with the other independent directors, as directed by the
Board, set his or her compensation level based on this evaluation. The Committee shall
discuss the results of the evaluation with the independent directors in executive session
and with the Chief Executive Officer. |
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Review the total compensation and benefits of certain key executives whom the Committee
determines in its sole discretion to review. In establishing compensation and benefits, the
Committee shall utilize where appropriate comparative data regarding executive compensation
practices. The Committee shall utilize flexible compensation structures to attract, retain,
motivate and appropriately reward executives, consistent with the Corporations executive
compensation philosophy. |
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Make recommendations to the Board with respect to management compensation,
incentive-compensation plans and equity-based plans. |
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Review and recommend to the Board for final approval grants of stock options, stock
appreciation rights, performance shares, and other stock-related incentives. |
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Report periodically to the Board regarding the foregoing activities. |
Evaluation
At least annually, the Committee shall conduct an evaluation of its performance in such manner as
the Committee deems appropriate.
Other
The Committee shall have available to it such support personnel, including management staff,
outside auditors, attorneys and consultants as it deems necessary to discharge its
responsibilities.
The Committee shall have sole authority to select, retain, and terminate any compensation
consultant or search firm used to assist it in the evaluation of the Chief Executive Officers or
any senior executives compensation and benefits, or to identify potential executive candidates,
including the sole authority to approve payments to any
consultant or search firm and other retention terms.
B-2
Printed on recycled paper.
VOTE VIA THE INTERNET OR TELEPHONE
24 HOURS A DAY, 7 DAYS A WEEK THROUGH 5:00 P.M. EST ON TUESDAY, MAY 2, 2006.
Your Internet or telephone vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card. If you vote your proxy via the
Internet or by telephone, please DO NOT mail back this proxy card. Proxies submitted by telephone
or the Internet must be received by 5:00 P.M. Eastern Time on Tuesday, May 2, 2006.
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TELEPHONE
1-866-776-5676
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INTERNET
https://www.proxyvotenow.com/csx
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MAIL
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Use a touch-tone telephone in the U.S.
or Canada to vote your proxy. Have your
proxy card in hand when you call. There
is NO CHARGE to you for the call.
Follow the simple recorded instructions.
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OR
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Use the Internet to view the Annual
Report, Proxy Statement and vote your
proxy. Have your proxy card in hand
when you access the web site. Follow
the simple instructions that are located
at this website.
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Complete, sign and date your proxy
card and return it in the postage-paid
envelope we have provided or return
it to CSX, Office of Corporate
Secretary, 500 Water Street,
C160, Jacksonville, FL 32202. |
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CALL TOLL-FREE TO VOTE
TO VOTE MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: x
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6 FOLD AND DETACH HERE 6
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THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR ITEMS 1, 2, 3, 4 AND 5, AND VOTE AGAINST
ITEM 6.
1. Election of Directors:
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01 E. E. Bailey, 02 Sen. J. B. Breaux, 03 E. J. Kelly, III, 04 R. D. Kunisch,
05 S. J. Morcott, 06 D. M. Ratcliffe, 07 W. C. Richardson,
08 F. S. Royal, M.D., 09 D. J. Shepard, 10 M. J. Ward |
(INSTRUCTIONS: To withhold authority to vote for any
individual nominee(s), mark the FOR WITH EXCEPTIONS box
and write the number of the excepted nominee(s) in the
space provided below.
*Exceptions(s): (Write the nominee(s) number(s) in the space provided below):
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Ratification of Ernst & Young as Independent Public
Accounting Firm for 2006
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Elimination of supermajority voting
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Shareholder proposal regarding separate
Chairman and CEO
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Note: Please sign below exactly as the name appears
above. When shares are held by joint owners, both should
sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a
corporation, please sign full corporate name by an
authorized corporate officer. If a partnership, please
sign in partnership name by authorized person.
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Date
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Shareholder sign here
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To Our shareholders:
TO ATTEND THE ANNUAL MEETING: The Annual Meeting of Shareholders will be held on Wednesday,
May 3, 2006, at 10:00 a.m., at the Arthur R. Outlaw Convention Center, One South Water Street,
Mobile, AL 36602. If you would like to attend the meeting, please mark the Will Attend Box box
that that appears below and mail in the enclosed postage-paid envelope. If you are voting by
Internet or telephone, please follow the prompt to indicate your
attendance. You may obtain your
admission ticket at the CSX Annual Meeting registration desk between 8:00 a.m. and 10:00 a.m. on
the morning of the meeting.
TO ACCESS FUTURE ANNUAL REPORTS AND PROXY STATEMENTS BY INTERNET: To take advantage of this
offer, please check the appropriate box below or follow the consent instructions as you vote your
proxy via the Internet or telephone. The web address for voting is www.proxyvotenow.com/csx and the
toll-free number is 1-866-776-5676. Selecting this option means that you will no longer receive a
printed copy of the CSX Corporation Annual Report and Proxy Statement unless you request one. Next
year you will receive a printed proxy card that will direct you to the website 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 costs.
You may cancel your enrollment in this process at any time by sending written notification to The
Bank of New York, Receive and Deliver Department, P.O. Box 11002, New York, NY 10286-1002.
TO VIEW THE ANNUAL REPORT AND PROXY STATEMENT: Please visit our website:
www.csx.com/investors.
TO VOTE: Whether or not you are able to attend the Annual Meeting of Stockholders, it is
important that your shares are represented, no matter how many shares you own. Listed on the
reverse are instructions on how to vote for the election of directors and all other proposals. You
may cast your vote via telephone, over the Internet, or by mail.
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CSX Corporation |
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500 Water Street
Jacksonville, FL 32202 |
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This Proxy is Solicited on Behalf of the Board of Directors for the Annual Meeting on May 3, 2006
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The undersigned hereby appoints MICHAEL J. WARD, ELLEN M. FITZSIMMONS, and NATHAN D. GOLDMAN, or
any 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 Arthur R. Outlaw Convention Center on May 3, 2006, and at all
adjournments thereof.
(To be signed on the other side of this form if voting by mail, or follow the instructions to vote via the Internet or by telephone)
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Mark the box to the right if you plan to attend the meeting.
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By marking the box to the right, I consent to future
access of the Annual Report and Proxy Statement
electronically via the Internet. I understand that CSX
may no longer distribute printed materials to me for
any future stockholder meeting until such consent is
revoked. I understand that I may revoke this consent
at any time by contacting CSXs transfer agent, The
Bank of New York, and that costs such as telephone
and internet access charges, will be my responsibility.
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Check the box to the right if you have included a change of
address on the card.
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CSX CORPORATION
P.O. BOX 11184
NEW YORK, N.Y. 10203-0184
VOTE VIA THE INTERNET OR TELEPHONE
24 HOURS A DAY, 7 DAYS A WEEK THROUGH 5:00 P.M. EST ON TUESDAY, MAY 2, 2006.
Your Internet or telephone vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card. If you vote your proxy via the
Internet or by telephone, please DO NOT mail back this proxy card. Proxies submitted by telephone
or the Internet must be received by 5:00 P.M. Eastern Time on Tuesday, May 2, 2006.
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TELEPHONE
1-866-776-5676
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INTERNET
https://www.proxyvotenow.com/csx
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MAIL
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Use a touch-tone telephone in the U.S.
or Canada to vote your proxy. Have your
proxy card in hand when you call. There
is NO CHARGE to you for the call.
Follow the simple recorded instructions.
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OR
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Use the Internet to view the Annual
Report, Proxy Statement and vote your
proxy. Have your proxy card in hand
when you access the web site. Follow
the simple instructions that are located
at this website.
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OR
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Complete, sign and date your proxy
card and return it in the postage-paid
envelope we have provided or return
it to CSX, Office of Corporate
Secretary, 500 Water Street,
C160, Jacksonville, FL 32202. |
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1-866-776-5676
CALL TOLL-FREE TO VOTE
TO VOTE MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: x
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6 FOLD AND DETACH HERE 6
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THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR ITEMS 1, 2, 3, 4 AND 5, AND VOTE AGAINST
ITEM 6.
1. Election of Directors:
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The Board |
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Recommends |
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FOR
ALL
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WITHHOLD
FROM ALL
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FOR WITH
*EXCEPTION(S)
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Nominees: |
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01 E. E. Bailey, 02 Sen. J. B. Breaux, 03 E. J. Kelly, III, 04 R. D. Kunisch,
05 S. J. Morcott, 06 D. M. Ratcliffe, 07 W. C. Richardson,
08 F. S. Royal, M.D., 09 D. J. Shepard, 10 M. J. Ward |
(INSTRUCTIONS: To withhold authority to vote for any
individual nominee(s), mark the FOR WITH EXCEPTIONS box
and write the number of the excepted nominee(s) in the
space provided below.
*Exceptions(s): (Write the nominee(s) number(s) in the space provided below):
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The Board |
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Recommends |
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FOR |
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AGAINST |
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ABSTAIN |
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2.
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Ratification of Ernst & Young as Independent Public
Accounting Firm for 2006
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The Board |
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Recommends |
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FOR |
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AGAINST |
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ABSTAIN |
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3.
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Reapproval of the CSX Omnibus Incentive Plan
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4.
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Elimination of supermajority voting
requirements merger or share exchange,
certain sales or dispositions, and dissolution
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5.
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Elimination of supermajority voting
requirements affiliated transactions
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The Board
Recommends
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6.
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Shareholder proposal regarding separate
Chairman and CEO
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Note: Please sign below exactly as the name appears
above. When shares are held by joint owners, both should
sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a
corporation, please sign full corporate name by an
authorized corporate officer. If a partnership, please
sign in partnership name by authorized person.
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Date
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Shareholder sign here
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Co-Owner sign here |
To Our shareholders:
TO ATTEND THE ANNUAL MEETING: The Annual Meeting of Shareholders will be held on Wednesday,
May 3, 2006, at 10:00 a.m., at the Arthur R. Outlaw Convention Center, One South Water Street,
Mobile, AL 36602. If you would like to attend the meeting, please mark the Will Attend Box box
that that appears below and mail in the enclosed postage-paid envelope. If you are voting by
Internet or telephone, please follow the prompt to indicate your
attendance. You may obtain your
admission ticket at the CSX Annual Meeting registration desk between 8:00 a.m. and 10:00 a.m. on
the morning of the meeting.
TO ACCESS FUTURE ANNUAL REPORTS AND PROXY STATEMENTS BY INTERNET: To take advantage of this
offer, please check the appropriate box below or follow the consent instructions as you vote your
proxy via the Internet or telephone. The web address for voting is www.proxyvotenow.com/csx and the
toll-free number is 1-866-776-5676. Selecting this option means that you will no longer receive a
printed copy of the CSX Corporation Annual Report and Proxy Statement unless you request one. Next
year you will receive a printed proxy card that will direct you to the website 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 costs.
You may cancel your enrollment in this process at any time by sending written notification to The
Bank of New York, Receive and Deliver Department, P.O. Box 11002, New York, NY 10286-1002.
TO VIEW THE ANNUAL REPORT AND PROXY STATEMENT: Please visit our website:
www.csx.com/investors.
TO VOTE: Whether or not you are able to attend the Annual Meeting of Stockholders, it is
important that your shares are represented, no matter how many shares you own. Listed on the
reverse are instructions on how to vote for the election of directors and all other proposals. You
may cast your vote via telephone, over the Internet, or by mail.
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CSX Corporation |
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500 Water Street Jacksonville, FL 32202 |
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This Proxy is Solicited on Behalf of the Board of Directors for the Annual Meeting on May 3, 2006
|
|
The undersigned hereby appoints MICHAEL J. WARD, ELLEN M. FITZSIMMONS, and NATHAN D. GOLDMAN, or
any 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 Arthur R. Outlaw Convention Center on May 3, 2006, and at all
adjournments thereof.
(To be signed on the other side of this form if voting by mail, or follow the instructions to vote via the Internet or by telephone)
|
|
|
Mark the box to the right if you plan to attend the meeting.
|
|
o |
|
|
|
By marking the box to the right, I consent to future
access of the Annual Report and Proxy Statement
electronically via the Internet. I understand that CSX
may no longer distribute printed materials to me for
any future stockholder meeting until such consent is
revoked. I understand that I may revoke this consent
at any time by contacting CSXs transfer agent, The
Bank of New York, and that costs such as telephone
and internet access charges, will be my responsibility.
|
|
o |
Check the box to the right if you have included a change of
address on the card.
|
|
o |
CSX CORPORATION
P.O. BOX 11184
NEW YORK, N.Y. 10203-0184