ex10-1.htm


    Exhibit
10.1

     

    
      UNITED
STATES DISTRICT COURT

      SOUTHERN
DISTRICT OF NEW YORK

      


      


      
        	
                 

                DEBORAH
      DONOGHUE,

                 

                Plaintiff,

                 

                - against -

                 

                CSX
      CORPORATION, et al.

                 

                Defendants,

              	
                    Civil
      Action No.

                 

                    08
      Civil 9252  (MGC)

                 

                    STIPULATION
      OF

                   SETTLEMENT      
      

                 

                 

              


      

      


      


      WHEREAS, plaintiff, Deborah Donoghue
(“Plaintiff”), a shareholder of CSX Corporation (“CSX”), brought this action
(the “Action”) pursuant to Section 16(b) of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), to recover so-called “short-swing” profits
alleged to have been realized by defendants The Children’s Investment Master
Fund (“TCI”), The Children’s Investment Fund Management (UK) LLP, The Children’s
Investment Fund Management (Cayman) Ltd., Christopher Hohn, Timothy O’Toole, 3G
Fund LP (“3G”), 3G Capital Partners Ltd., 3G Capital Partners LP, Alexandre
Behring and Gilbert H. Lamphere or some of them (collectively, the “Settling
Defendants”) in connection with their putative purchases and sales of CSX
securities;

      WHEREAS, the Settling Defendants deny
any wrongdoing whatsoever and this Stipulation of Settlement (“Stipulation”)
shall in no event be construed or deemed to be evidence of or an admission or
concession on the part of the Settling Defendants with respect to any claim, or
any fault or liability or wrongdoing or damages whatsoever, or any deficiency in
the defenses that the Settling Defendants have or may assert.  The
Plaintiff, CSX and the Settling Defendants (collectively, the “Parties”)
recognize, however, that the Action has been filed by Plaintiff and defended by
the Settling Defendants in good faith and with adequate basis in fact under Rule
11 of the Federal Rules of Civil Procedure, and that the Action is being
voluntarily settled after advice of counsel and negotiation between counsel for
the Parties;

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      WHEREAS, CSX and the Settling
Defendants are parties to an action entitled CSX Corporation v.
The Children’s
Investment Fund Management (UK) LLP, 08 Civil 2764 (LAK) (the “13D
Action”) in which the court issued a 115-page Opinion and Final Judgment (the
“Opinion”) after trial; the Opinion is currently on appeal to the United States
Court of Appeals for the Second Circuit;

      WHEREAS, Plaintiff’s theory of
liability in this Action is based on the June 11, 2008 Opinion in the 13D
Action, wherein the court found that:  (i) TCI’s transactions in total
return cash-settled equity swaps (the “equity swaps”) resulted in it being
deemed to be the beneficial owner, within the meaning of Rule 13d-3(b) of the
Exchange Act, of CSX common stock held by its swap counterparties as hedges to
the swaps; and (ii) TCI and 3G purchased and sold CSX common stock and/or
equity swaps and were members of a group under Section 13(d)(3) of the Exchange
Act along with other Settling Defendants;

      WHEREAS, Plaintiff asserts that by
reason of such beneficial ownership TCI may be deemed to beneficially own over
10 percent of CSX’s common stock;

      WHEREAS, Plaintiff asserts that 3G, by
virtue of its membership in a group, may be deemed to beneficially own over 10
percent of CSX’s common stock;

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      WHEREAS, the Settling Defendants
vigorously contest the findings in the 13D Action and have appealed the
Opinion;

      WHEREAS, Timothy O’Toole and Gilbert
Lamphere had no involvement in any of the trading activity alleged to give rise
to Section 16(b) liability and were incorrectly named as defendants in this
Action;

      WHEREAS, the United States Court of
Appeals for the Second Circuit heard argument in the 13D Action on August 25,
2008; the Parties recognize that, if the Second Circuit reverses the findings in
the 13D Action that the Settling Defendants beneficially owned CSX’s common
stock through their transactions in equity swaps, there will be no basis for
liability in this Action.  The Parties further recognize that CSX’s
theory of beneficial ownership in the 13D Action is novel, that a number of
amici have submitted
briefs in support and opposition to CSX’s position, and that the Securities and
Exchange Commission (the “SEC”), Division of Corporation Finance (the
“Division”), sent a letter to the trial court stating that “[t]he Division
believes that interpreting an investor’s beneficial ownership under Rule 13d-3
to include shares used in a counter-party’s hedge, absent unusual circumstances,
would be novel and would create significant uncertainties for investors who have
used equity swaps in accordance with accepted market practices understood to be
based on reasonably well-settled law”;

      WHEREAS, given the risks and
uncertainties of the outcome of the appeal in the 13D Action, CSX and Plaintiff
have concluded that it is in the interest of CSX to settle this Action on the
terms set forth herein (the “Settlement”);

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      WHEREAS, CSX obtained significant
discovery from the defendants in the 13D Action, including records reflecting
all of the Settling Defendants’ transactions in CSX equity securities and equity
swaps related to CSX stock; thereafter, CSX engaged an expert consultant to
prepare an analysis of potential damages under Section 16(b) arising from the
Settling Defendants’ transactions in equity swaps and common stock, which
reflects that the maximum recoverable damages under the Rules which govern the
calculation of recoverable profits under Section 16(b) of the Exchange Act, may
be as much as $128,000,000 for TCI and $9.6 million for 3G; and in connection
with the Parties’ settlement negotiations, CSX has shared its discovery and
analysis with Plaintiff’s counsel in this Action;

      WHEREAS, the Settling Defendants
believe that, even if the Second Circuit affirms the Opinion, they have several
meritorious defenses to Plaintiff’s Section 16(b) claims and that the potential
liability for the Section 16(b) claims is substantially lower than the $137.6
million calculated by Plaintiff and CSX;

      WHEREAS, the Parties engaged in
settlement negotiations among themselves which culminated in an agreement
whereby TCI will pay CSX the sum of $10,000,000 and 3G will pay CSX the sum of
$1,000,000;

      WHEREAS, CSX and its disinterested
directors (i.e., directors who have no financial interest in this litigation and
are not affiliated with or nominated by the Settling Defendants), who are
represented by their own independent counsel, realize that a settlement of this
litigation on the terms described herein is in the best interests of CSX and its
shareholders; and

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      WHEREAS, in evaluating the proposed
settlement provided for herein, Plaintiff and her counsel have
considered:  the substantial benefit being provided by the proposed
Settlement; the uncertainties of the outcome of this Action, which Plaintiff
recognizes turns on the outcome of the appeal in the 13D Action and TCI’s
separate defenses to Section 16(b) liability in this Action; CSX’s theory of
liability in the 13D Action is hotly contested and there is no precedent
directly on point; and that resolution of the claims in this Action, wherever
and however determined, likely would be submitted for appellate review, there
would be yet additional time until there would be a final adjudication of the
claims and defenses asserted, and additional legal fees, which could reduce the
amount of any ultimate recovery (whether on a litigated judgment, if Plaintiff
were to prevail, or by settlement).

      IT IS HEREBY STIPULATED AND AGREED, for
good and valuable consideration, the sufficiency of which is hereby
acknowledged, as follows:

      1.           As
soon as practicable after this Stipulation has been executed, the Parties
jointly shall move the Court for preliminary approval of this Settlement and the
form of notice to shareholders, and for entry of a Preliminary Order,
substantially in the form attached hereto as Exhibit A.

      2.           Following
entry of the Preliminary Order, (a) CSX shall file a Form 8-K with the SEC,
issue a press release, place a notice of settlement on its website, and send
notice of the proposed Stipulation substantially in the form attached hereto as
Exhibit B (the “Notice”) by U.S. First Class Mail, to its shareholders who filed
current Schedules 13D or 13G, or Form 13F, with the SEC, and (b) CSX and the
Settling Defendants (other than Timothy O’Toole and Gilbert Lamphere) shall send
a joint request to the Second Circuit Court of Appeals advising it of the
settlement of this Action and requesting that it defer further ruling on the
appeal of the 13D Action until the Settling Defendants have sent notice that
this Action has become Final or, in the event that it does not become Final,
that litigation of this Action has resumed.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      3.           If
the Settlement contemplated by this Stipulation is approved by the Court after
Notice and a hearing on the fairness of the Settlement, counsel for the Parties
shall request that the Court enter an Order and Final Judgment (the “Order and
Final Judgment”) substantially in the form annexed hereto as Exhibit
C.  The Order and Final Judgment shall become final (“Final”)
following entry, either by expiration of the time for appeal or review of such
Order or, if any appeal is filed and not dismissed, after the Order is affirmed
on appeal and is no longer subject to review upon appeal or by writ of
certiorari or motion for reconsideration.

      4.           (a)           On
or before the tenth business day after the Order approving the Settlement
becomes Final (i) TCI shall wire transfer to CSX the amount of ten million
dollars ($10,000,000) less the amount of attorney’s fees and reimbursement of
expenses, if any, awarded by the Court to Plaintiff’s counsel, which amount
shall be paid directly to Plaintiff’s counsel and (ii) 3G shall wire transfer to
CSX the amount of one million dollars ($1,000,000) (the “Settlement
Payments”).  The total Settlement Payments, including any award of
attorney’s fee and reimbursement of expenses, shall not exceed
$11,000,000.

      (b)           Entry
and Finality of the Order and Final Judgment is a condition precedent to TCI’s
and 3G’s obligation to make the Settlement Payment.

      (c)           In
the event the Court does not enter the Order approving the Settlement, or such
Order does not become Final, this Stipulation shall be null and void except as
to paragraphs 4(c), 6 and 13(a), and the Parties shall be returned to their
positions nunc pro tunc
as they existed on the date before the Settlement and without prejudice in any
way.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      5.           In
consideration of the Settlement Payment, CSX and Plaintiff on behalf of herself
and any and all owners of any security (as defined in Section 3(a)(10) of the
Exchange Act) of CSX or any other security or instrument, the value of which is
derived from the value of any CSX equity security, each release and discharge
the Settling Defendants, their present, future or former officers, directors,
members, employees, agents, attorneys, representatives, advisors and affiliates
or associates (as the latter two terms are defined in Rule 12b-2 of the Exchange
Act), trustees, parents, principals, subsidiaries, general or limited partners
or partnerships, investment advisory clients and brokers, and each of their
heirs, executors, administrators, successors and assigns (the “Related Parties”)
from any and all liability and damages under or based upon any and all claims,
rights, causes of action, suits, matters, demands, transactions and issues,
known or unknown, arising out of or relating to the assertions contained in the
Amended Complaint in this Action or that could have been asserted in this Action
(i) by Plaintiff on behalf of herself or any other person or entity, (ii) by CSX
and/or (iii) by any and all owners of any security (as defined in Section
3(a)(10) of the Exchange Act) of CSX or any other security or instrument the
value of which is derived from the value of any CSX equity security, or any of
them, whether individually, directly, representatively, derivatively or in any
other capacity for all claims arising out of or relating to any violation of
Section 16(b) of the Exchange Act and the rules and regulations promulgated
under Section 16 relating to trading in CSX securities, equity swaps and/or
other securities or instruments the value of which is derived from the value of
any CSX equity security, from the beginning of time up through the date that
this Settlement becomes Final under paragraph 3.  This release does
not extend to CSX’s claims and the defendants’ defenses in the 13D
Action.  Plaintiff’s counsel, David Lopez, covenants not to bring any
additional claims against the Settling Defendants and their Related Parties for
trading in CSX securities, including, without limitation equity swaps or any
other derivative security or instrument tied to the value of any CSX equity
security arising from or relating to transactions in such securities or
instruments up through the date that this Settlement becomes Final under
paragraph 3, regardless of the theory of liability.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      6.           This
Stipulation and all negotiations and papers related to it, and any proceedings
in connection with the Settlement, whether or not the Settlement becomes Final
or is consummated, are not and shall not be construed to be evidence of, or an
admission by, any of the Parties respecting the validity or invalidity of any of
the claims or defenses asserted by the Parties or of the Settling Defendants’
liability or lack thereof with respect to any such claim or defense or for any
damages sought in the Action, or of any wrongdoing or lack of wrongdoing by any
or all of them whatsoever, and shall not be offered for admission or received as
evidence of any such liability or wrongdoing or damages, or lack
thereof.  This covenant expressly applies to but is not limited to the
13D Action: CSX and the Settling Defendants agree that neither this Stipulation,
nor the proceedings or orders in this Action, shall be offered into evidence in
the 13D Action or any other action or proceeding, nor may they cite to this
Settlement as grounds for arguing the strength or infirmity of their claims or
defenses in the 13D Action.

      7.           Plaintiff’s
counsel will apply to the Court, on notice to counsel for the Settling
Defendants and CSX and to the shareholders of CSX, for attorney’s fees and
expenses in an amount of five hundred fifty thousand dollars ($550,000.00),
which application CSX has agreed to support.  Such attorney’s fees and
expenses as may be awarded by the Court are to be paid by TCI after the Order
becomes Final in accordance with paragraph 4(a) and shall reduce the amount of
the Settlement Payment to CSX as provided therein, so that, as described in
paragraph 4(a), the total payment by TCI will equal $10 million and the total
payment by 3G will equal $1 million.  The Settlement is in no way
contingent upon any attorney’s fees or expenses being awarded in any
amount.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      8.           This
Stipulation contains the entire agreement between the Parties concerning the
subject matter hereof and neither party is relying upon any representation,
promise or assertion not contained herein.

      9.           This
Stipulation may be executed in one or more counterparts, each of which shall be
deemed an original of this Stipulation and all of which, when taken together,
shall be deemed to constitute one and the same agreement provided that no party shall
be bound hereby unless and until all parties shall have executed and delivered
this Stipulation.

      10.           The
individuals signing this Stipulation represent that they have the authority to
execute this Stipulation, to grant the releases in this Stipulation and to
compromise and settle all their claims and their defenses relating to the
Action.

      11.           This
Stipulation may not be modified or amended, nor may any of its provisions be
waived, except by a writing signed by all Parties hereto.

      12.           The
Parties shall use their best efforts to execute such documents and shall take
such other reasonable action as is necessary to effectuate this Stipulation as
provided for herein.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      13.           The
Parties submit to the jurisdiction of this Court (a) for all purposes relating
to this Action; and (b) for resolving any disputes over this Stipulation and its
enforcement.

      


      Dated:      
New York, New York

         December 16, 2008

      


      
        	/s/ David
    Lopez	 
      	/s/ Michael
      Swartz
	
                David
      Lopez (DL-6779)

                LAW
      OFFICE OF DAVID LOPEZ

                171
      Edge of Woods Road, P.O. 323

                Southampton,
      New York 11968

                631.287.5520

              	 
      	
                Michael
      Swartz (MS-7069)

                SCHULTE
      ROTH & ZABEL LLP

                919
      Third Avenue

                New
      York, New York 10022

                212.756.2000

              
	 
      	 
      	 
      
	
                Attorney
      for Plaintiff

              	 
      	
                Attorneys
      For The Children’s 

                Investment
      Master Fund, The 

                Children’s
      Investment Fund 

                Management
      (UK) LLP, The 

                Children’s
      Investment Fund 

                Management
      (Cayman) Ltd., 

                Christopher
      Hohn and Timothy O’Toole

              
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                /s/
      Miranda Schiller

              	 
      	/s/
      David Marriott
	
                Miranda
      Schiller (MS-9456)

                WEIL,
      GOTSHAL & MANGES, LLP

                767
      Fifth Avenue

                New
      York, New York 10153

                212.310.8000

              	 
      	
                David
      Marriott (DM-7708)

                CRAVATH,
      SWAINE & MOORE

                Worldwide
      Plaza

                825
      Eighth Avenue

                New
      York, New York 10019

              
	 
      	 
      	 
      
	
                Attorneys
      for CSX Disinterested Directors

              	 
      	
                Attorneys
      for CSX Corporation

              
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	/s/
      Peter Doyle
	 
      	 
      	
                Peter
      Doyle (PD-1735)

                Kirkland
      & Ellis LLP

                Citigroup
      Center

                153
      East 53rd Street

                New
      York, New York  10022-4611

                 

                Attorneys
      for 3G Fund LP, 3G 

                Capital
      Partners Ltd., 3G Capital 

                Partners
      LP, Alexandre Behring, and 

                Gilbert
      H. Lamphere

              


      

      


      


      


       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

     

    EXHIBIT
A


     

    
       

      
        UNITED
STATES DISTRICT COURT

        SOUTHERN
DISTRICT OF NEW YORK

      

    

    
      


      
        	
                 

                DEBORAH
      DONOGHUE,

                 

                Plaintiff,

                 

                - against -

                 

                CSX
      CORPORATION, et al.

                 

                Defendants,

              	
                 

                    Civil
      Action No.

                    08
      Civil 9252  (MGC)

                 

                    

                 

              


      

       

      
        PRELIMINARY
ORDER IN CONNECTION

        WITH SETTLEMENT
PROCEEDINGS


        


        WHEREAS,
on December 16, 2008, the parties to the above-captioned action (the “Action”)
entered into a Stipulation of Settlement (the “Stipulation” or the “Settlement”)
which has been submitted for review and which, together with the exhibits
thereto, sets forth the terms and conditions for the proposed settlement of the
Action and all claims in the Amended Complaint and dismissal of the Amended
Complaint on the merits and with prejudice, upon the terms and conditions set
forth in the Stipulation; and the Court having read and considered the
Stipulation and the accompanying documents and brief in support of the
Settlement; and the parties to the Stipulation having consented to the entry of
this Order; and all capitalized terms used herein having the meanings defined in
the Stipulation,

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

         

        NOW
THEREFORE, IT IS HEREBY ORDERED this ______ day of December, 2008,
that:

        1.           A
hearing (the “Settlement Fairness Hearing”) is hereby scheduled to be held
before the Court on ____________________, 2009 at ___________ __.m. in Courtroom
____ at the United States Courthouse, 500 Pearl Street, New York, New York for
the following purposes:

        a)           to
determine whether the proposed Settlement is fair, reasonable and adequate and
should be approved by the Court;

        b)           to
determine whether the Order and Final Judgment, as provided for in the
Stipulation, should be entered, dismissing the Amended Complaint herein, on the
merits and with prejudice, and to determine whether the release by the Plaintiff
and by CSX, as set forth in the Stipulation, should be provided to the Settling
Defendants;

        c)           to
rule on Plaintiff’s application for an attorney’s fee and reimbursement of costs
and expenses; and

        d)           to
rule upon such other matters as the Court may deem appropriate.

        2.           The
Court reserves the right to approve the Settlement without further notice of any
kind and to adjourn the Settlement Fairness Hearing without further notice,
other than announcement thereof in open Court at the above time and
place.  The Court further reserves the right to enter its Order and
Final Judgment approving the Stipulation and dismissing the Complaint as to the
Settling Defendants on the merits and with prejudice, regardless of whether it
has awarded Plaintiff’s attorney’s fees and reimbursement of costs and
expenses.

         

        
          
            
            

          

          
            2

            
              

            

          

          
            
            

          

        

         

        3.           The
Court approves the form, substance and requirements of the “Notice of Pendency
of Derivative Action and Hearing on Proposed Settlement and Attorney’s Fee
Petition” (the “Notice”), as set forth in and attached as Exhibit B to the
Stipulation.

        4.           CSX
shall cause the Notice, substantially in the form annexed as Exhibit B to the
Stipulation, to be mailed by first class mail, postage prepaid, on or before
_______________, 2009, to all shareholders of CSX who filed a current Form 13F,
Schedule 13D or Schedule 13G with the Securities and Exchange Commission (the
“SEC”) and place a copy of the Notice on its website.  In addition,
the Notice shall be filed with the SEC on a Form 8-K within ___ days of entry of
this Order and CSX shall issue a press release on the same date in the form
attached as Exhibit ___ to the Stipulation.

        5.           The
form and method set forth herein of notifying CSX shareholders and owners of any
securities (as defined in Section 3(a)(10) of the Exchange Act) of CSX or of any
other security or instrument, the value of which is derived from the value of
any CSX equity security, of the Settlement and of its terms and conditions meet
the requirements of due process, constitute the best notice practicable under
the circumstances, and shall constitute due and sufficient notice to all persons
and entities entitled thereto.

        6.           CSX
shareholders and owners of any CSX securities (as defined in Section 3(a)(10) of
the Exchange Act) of CSX or of any other security or instrument, the value of
which is derived from the value of any CSX equity security, shall be bound by
all determinations and judgments in this Action, whether favorable or
unfavorable.

         

        
          
            
            

          

          
            3

            
              

            

          

          
            
            

          

        

         

        7.           The
Court will consider comments and/or objections to the Stipulation of Settlement,
and to the application for an award of an attorney’s fee and reimbursement of
costs and expenses to plaintiff’s counsel only if, on or before
_________________, 2009, such comments or objections and any supporting
papers:  (i) are filed in writing with the Clerk of the Court, United
States District Court, 500 Pearl Street, New York, New York 10007, and (ii)
copies of all such papers are served upon each of the following:

         

        
          
            	 
      	 
      	 
      
	
                    David
      Lopez

                    171
      Edge of Woods Road, P.O. 323

                    Southampton,
      New York 11968

                     

                  	 
      	
                    Michael
      Swartz 

                    Schulte,
      Roth & Zabel, LLP

                    919
      Third Avenue

                    New
      York, New York 10022

                  
	 
      	 
      	 
      
	
                    Attorney
      for Plaintiff

                         Deborah Donoghue

                  	 
      	
                    Attorneys
      For The Children’s 

                    Investment
      Master Fund, 

                    The
      Children’s Investment Fund 

                    Management
      (UK) LLP, The 

                    Children’s
      Investment Fund 

                    Management
      (Cayman) Ltd., 

                    Christopher
      Hohn and Timothy O’Toole

                  
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                    Miranda
      Schiller 

                    Weil,
      Gotshcal & Manges, LLP

                    767
      Fifth Avenue

                    New
      York, New York 10153

                     

                  	 
      	
                    David
      Marriott 

                    Cravath,
      Swaine & Moore LLP

                    Worldwide
      Plaza

                    825
      Eighth Avenue

                    New
      York, New York 10019

                  
	Attorneys
      for CSX Independent Directors	 
      	 
      
	
                     

                  	 
      	
                    Attorneys
      for CSX Corporation

                  
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                    Peter
      Doyle

                    Kirkland & Ellis LLP

                    Citigroup Center

                    153 East 53rd Street

                    New York, New York 10022-4611

                     

                    Attorneys for 3G Capital Partners Ltd.,

                      3G Capital Partners LP, 3G Fund LP,

                      Alexandre Behring, and Gilbert H. Lamphere

                  	 
      	
                     

                  


          

        

         

         

        
          
            
            

          

          
            4

            
              

            

          

          
            
            

          

        

        
           

           

          
            Attendance
at the hearing is not necessary; however, persons wishing to be heard orally in
opposition to the approval of the Stipulation and/or the request for attorney’s
fees are required to indicate, in their written objection, their intention to
appear at the hearing.  Persons who intend to object to the
Stipulation and/or counsel’s application for an award of an attorney’s fee and
reimbursement of costs and expenses and who desire to present evidence at the
Settlement Fairness Hearing, must include in their written objections the
identity of any witness they may call to testify and a list of any exhibits they
intend to introduce into evidence at the Settlement Fairness
Hearing.

            8.           If:  (a)
any specified condition to the Settlement set forth in the Stipulation is not
satisfied and the satisfaction of such condition is not waived in writing by
counsel for the Plaintiff, CSX and the Settling Defendants; (b) the Court
rejects, in any respect, the Order and Final Judgment in substantially the form
and content annexed to the Stipulation as Exhibit C, and/or counsel for
Plaintiff, CSX and the Settling Defendants all fail to consent to entry of
another form of order in lieu thereof; (c) the Court rejects the Stipulation,
including any amendment thereto approved by each of counsel for Plaintiff, CSX
and the Settling Defendants; or (d) the Court approves the Stipulation,
including any amendment thereto approved by each of counsel for Plaintiff, CSX
and the Settling Defendants, but such approval or Order and Final Judgment is
reversed, vacated or modified on appeal and such reversal, vacatur or
modification becomes final by lapse of time or otherwise, then, in any such
event, the Stipulation (except as to paragraphs 4(c), 6 and 13(a), which shall
survive, including any amendment(s) thereto), shall be null and void, of no
further force or effect, and without prejudice to any party, and may not be
introduced as an admission or other evidence against any party, or referred to
in this Action or other actions or proceedings by any person or entity, and each
party shall be restored, nunc
pro tunc to his, her or its respective position as it existed prior to
the execution of the Stipulation.

             

            
              
                
                

              

              
                5

                
                  

                

              

              
                
                

              

            

             

            9.           The
Court retains exclusive jurisdiction over the action to consider all further
matters arising out of or connected with the Stipulation or the enforcement
thereof, or proceedings in connection therewith.

          

           

          
            


            Dated:      
New York, New York

               December ____, 2008

             

            
              
                	 	 	 	 	 
	
                         

                      	 	 	
                         

                      	 
	
                         

                      	 	 	
                        Miriam
      Goldman Cedarbaum, U.S.D.J.

                      	 
	
                         

                      	 	 	
                         

                      	 


              

            

          

        

      

    

     

     

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
B

     

     

    
      
         

        
          UNITED
STATES DISTRICT COURT

          SOUTHERN
DISTRICT OF NEW YORK

        

      

      
        


        
          	
                   

                  DEBORAH
      DONOGHUE,

                   

                  Plaintiff,

                   

                  - against -

                   

                  CSX
      CORPORATION, et al.

                   

                  Defendants,

                	
                      

                      Civil
      Action No.

                      08
      Civil 9252  (MGC)

                   

                      

                   

                


        

        

          


          


          NOTICE
OF PENDENCY OF DERIVATIVE ACTION,

          AND
HEARING ON PROPOSED SETTLEMENT AND OF

          APPLICATION FOR AWARD OF
ATTORNEY’S FEES


          


          TO:           ALL
PERSONS OR ENTITIES WHO OWN DIRECTLY OR

          DERIVATIVELY
ANY SECURITY OF CSX CORPORATION


          


          PLEASE
READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY.

          YOUR
RIGHTS WILL BE AFFECTED BY PROCEEDINGS IN THIS ACTION.


          


          This
Notice is given pursuant to an Order of the United States District Court for the
Southern District of New York (the “Court”).  The purpose of this
Notice is to advise of a proposed Settlement (the “Settlement”) involving
defendants, The Children’s Investment Master Fund (“TCI”), The Children’s
Investment Fund Management (UK) LLP, The Children’s Investment Fund Management
(Cayman) Ltd., Christopher Hohn, Timothy O’Toole, 3G Fund LP (“3G”), 3G Capital
Partners Ltd., 3G Capital Partners LP, Alexandre Behring, and Gilbert Lamphere
(the “Settling Defendants”) in the above-captioned action (the
“Action”).  The terms of the Settlement are set forth in a Stipulation
of Settlement dated December 16, 2008, on file with the Court.  A
hearing will be held before Judge Miriam Goldman Cedarbaum in Courtroom _______
of the United States Courthouse, 500 Pearl Street, New York, New York on
________________, 2009 at ______ _.m. (the “Settlement Fairness Hearing”) to
determine whether the Settlement is fair, reasonable and adequate, and to
consider the application of Plaintiff for attorney’s fees.  The
Settlement provides for an aggregate payment by the Settling Defendants of
$11,000,000 (the “Settlement Payment”) to CSX Corporation
(“CSX”).  Counsel for the Plaintiff who brought this Action intends to
request that the Court award $550,000 for attorney’s fees and
expenses.  CSX has agreed to support this application.  Any
award of fees and expenses will be paid from the Settlement Payment and such
award will reduce the amount of the Settlement Payment to CSX.

           

          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

            

          

           

          THE
ACTION

          Nature
of the Claims and Defenses

          The
Action affected by this Settlement is based on an amended complaint which was
filed by the Plaintiff as a shareholder of CSX and derivatively for its benefit
against the Settling Defendants and which asserted claims under Section 16(b) of
the Securities Exchange Act of 1934, as amended (the “Exchange
Act”).  Section 16(b) permits an issuer of registered equity
securities to recover certain trading profits, as defined by the rules of the
Securities and Exchange Commission (“SEC”), resulting from the purchase and sale
of securities within a period of less than six months by, among others,
investors who beneficially owned in excess of 10 percent of the issuer’s
stock.  Recovery under the statute does not turn in any way on the
wrongdoing of the defendant; rather, it is based solely on the existence and
timing of “purchases” and “sales” under the definition of these terms set forth
by the SEC rules and judicial decisions.

           

          
            
              
              

            

            
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          Plaintiff’s
theory of liability in this action is based on a June 11, 2008 Opinion and Final
Judgment (“Opinion”) issued in an action entitled CSX Corp. v. The Children’s
Investment Fund Management (UK) LLP, et al., 08 Civ. 2764 (LAK) (the “13D
Action”), which was brought by CSX against defendants for alleged violations of
Section 13(d) and 14(a) of the Exchange Act.  CSX brought the 13D
Action in order to restrain the Settling Defendants
(other than Timothy O’Toole and Gilbert Lamphere) from voting or soliciting
proxies at CSX’s annual meeting on the grounds that they allegedly failed to
timely file a Schedule 13D disclosing, among other things, their acquisition of
5 percent of CSX’s common stock, and that they had formed a group with the
objective of waging a proxy fight to support their nominees to CSX’s Board of
Directors.  Although the court denied CSX’s motion to enjoin
defendants from voting or soliciting proxies, it made certain findings in the
13D Action that provide the basis of plaintiff’s theory of liability in this
Action.  First, the court found that TCI and 3G formed a group and
attained beneficial ownership surpassing the 5 percent threshold of stock
ownership and failed to timely disclose their ownership
plans.  Second, the court found that, under Rule 13d-3 of the Exchange
Act, TCI may be deemed to be the beneficial owner of CSX common stock owned by
several banks that had purchased CSX stock (the “Hedged Shares”) in order to
hedge transactions in cash-settled equity swaps (the “equity swaps”) that had
been initiated by TCI.  Based on the Opinion in the 13D Action,
plaintiff in this action alleges that each time TCI entered into an equity swap
contract with a bank, the purchase of the Hedged Shares by the bank constituted
a purchase by TCI under Section 16(b) of the Exchange Act because TCI was the
beneficial owner of those shares under Rule 13d-3.  Plaintiff further
alleges that each of those purchases is matchable against sales of the Hedged
Shares by the banks.  CSX established in the 13D Action that,
with minor exceptions, whenever TCI terminated a swap agreement or the swap
agreement expired, the counterparty bank sold about the same number of Hedged Shares and it
did so on or about
the same day that the swap
was terminated.  CSX and plaintiff contend that if TCI’s
transactions in equity swaps during 2007 are deemed to give rise to the
beneficial ownership of the Hedged Shares, the maximum disgorgable profits that
are recoverable from TCI are as high as $128 million.

           

          
            
              
              

            

            
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          Plaintiff’s
theory of liability against 3G hinges on another finding in the 13D Action that
3G was a member of a group along with TCI and the other Settling Defendants
within the meaning of Section 13(d)(3) of the Exchange Act so that its
beneficial ownership reached the 10 percent threshold that must be established
for Section 16(b) “insider” liability to attach.  While 3G purchased
and sold CSX common stock, its own beneficial ownership standing alone never
exceeded 10 percent of CSX outstanding stock.  Thus, Section 16(b)
liability may only be imputed to 3G if (i) it is deemed to be a member of a
group with TCI under Section 13(d)(3) of the Exchange Act so that its ownership
combined with that of other members of the group exceeds the 10 percent
threshold and (ii) TCI’s equity swaps give rise to beneficial ownership of
the Hedged Shares.  CSX and plaintiff contend that if those two
conditions are established, 3G’s trading in CSX common stock within six-month
periods during 2007 is matchable to yield disgorgable profits of approximately
$9.6 million.

          Thus,
assuming plaintiff could prove the merits of her claims, the maximum recovery on
her claims against both 3G and TCI under the current SEC rules governing
determination of recoverable profits is alleged to be approximately $137.6
million.

          The
Settling Defendants deny all allegations of any liability under Section 16(b)
and any other assertions of wrongdoing or violations of law.  The
Settling Defendants have appealed from the Opinion in the 13D Action and have
asked the Second Circuit to reverse and vacate the Opinion and, in particular,
the findings that form the bases of plaintiff’s theories of liability in this
Action -- i.e., that
TCI’s transactions in equity swaps gave rise to its beneficial ownership of the
Hedged Shares and that defendants were members of a Section 13(d)(3)
group.

           

          
            
              
              

            

            
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          The
parties recognize that CSX and plaintiff’s theory of liability (that TCI’s
transactions in cash-settled equity swaps give rise to beneficial ownership of
the Hedged Shares) is novel and that there is no prior case or rule directly on
point.  If the Second Circuit reverses this finding in the 13D Action,
there is no basis for liability in this Action against any of the
defendants.  Moreover, if the Second Circuit reverses the finding that
3G was a member of a group along with TCI, there is no basis for liability
against 3G because it did not beneficially own 10 percent of CSX common stock at
any time.

          The
significant risks and uncertainties arising from the appeal in the 13D Action,
and the possibility that a decision in that action is imminent, has prompted the
parties to engage in settlement discussions in this Action on an expedited basis
before defendants respond to the Complaint in this Action.  Following
entry of an order preliminarily approving the proposed settlement of this
Action, counsel for the Settling Defendants and CSX will request that the Second
Circuit withhold issuing its decision in the 13D Action until the date that the
proposed settlement becomes final, within the meaning of ¶ 3 of the
Settlement, or if the Settlement is not approved, upon entry of an order denying
final approval of the Settlement.

           

          
            
              
              

            

            
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          Discovery
And Settlement Negotiations

          CSX
obtained substantial discovery in the 13D Action, which proceeded through a full
trial on the merits.  Defendants’ transactions in CSX securities and
in equity swaps are described in detail in the 115-page Opinion in the 13D
Action.  In addition, counsel for CSX’s disinterested directors (i.e.,
directors who have no financial interest in this litigation and are not
affiliated with or nominated by the Settling Defendants) and counsel for CSX
engaged a financial expert to analyze and match all of the Settling Defendants’
transactions in equity swaps and common stock in order to derive the maximum
potential recoverable damages under the rules applicable to Section 16(b)
claims.  This assumes both that CSX ultimately prevails in the 13D
Action on its claims about defendants’ beneficial ownership and group status and
that the Settling Defendants do not prevail on any of their defenses in this
Action to plaintiff’s Section 16(b) claims, discussed below.

          On
December 2, 2008, CSX, its disinterested directors and plaintiff, entered into a
cooperation agreement which provided for CSX to share its work product and
damage analysis with plaintiff’s counsel and which provided that plaintiff’s
counsel may seek an award of fees and expenses up to 5 percent of any settlement
amount with a cap of $750,000.  Thereafter, counsel to CSX and its
disinterested directors shared with plaintiff’s counsel in this Action their
damage analysis, the trading records of the Settling Defendants, and the
contracts governing TCI’s equity swaps so that he could perform his own analysis
of the potential damages.  In December 2008, settlement negotiations
were conducted by counsel for plaintiff, the Settling Defendants, CSX and CSX’s
disinterested directors, who are separately represented.

           

          
            
              
              

            

            
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          In
agreeing to the Settlement, counsel for plaintiff, CSX and the CSX disinterested
directors, weighed the risk of an unfavorable outcome if prosecution of this
Action is continued; the fact that the claims involve novel legal issues of
first impression and ones that are the subject of a hotly-contested appeal in
the 13D Action in which numerous amici have filed briefs in
support of and opposition to CSX’s position; the fact that the SEC Division of
Corporation Finance (the “Division”) sent a letter to the trial court in the 13D
Action stating that “[t]he Division believes that interpreting an investor’s
beneficial ownership under Rule 13d-3 to include shares used in a
counter-party’s hedge, absent unusual circumstances, would be novel and would
create significant uncertainties for investors who have used equity swaps in
accordance with accepted market practices understood to be based on reasonably
well-settled law”; the fact that any ruling in this Action is likely to be
appealed and that yet additional time would elapse before the final resolution
of any such appeal; and counsel further weighed the risk of uncertainty inherent
in the outcome of the appeal in the 13D Action, and the attendant costs, against
the benefits and certainty of an immediate $11,000,000 cash
settlement.  CSX, its disinterested directors, and plaintiff each has
determined that the Settlement on the terms described herein is in the best
interests of CSX and its shareholders.

           

          
            
              
              

            

            
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          Counsel
for plaintiff, CSX and its disinterested directors also weighed defenses that
counsel for TCI stated it will raise to the claims in this Action, but which are
unrelated to the arguments TCI has raised in its appeal in the 13D
Action.  Among other things, TCI asserts that the alleged purchases
and sales at issue are exempt from Section 16(b) liability pursuant to (1) Rule
16b-6(b)’s exemption for converting derivative securities to direct ownership of
the underlying security, (2) Section 16(e)’s arbitrage exemption, (3) Rule
16a-13’s exemption for changes in the form of beneficial ownership, and (4) the
Kern County unorthodox
transaction doctrine.  Those defenses are based on TCI’s contention
that the alleged purchases and sales at issue arose from transactions in which
(a) TCI closed swap positions and acquired equivalent positions in CSX stock,
and (b) TCI closed swap positions with certain counterparties and opened the
same number of swap positions with other counterparties in order to reduce
credit risk.  Because the offsetting purchases and sales took place on
or about the same day, and because of CSX’s adversity to TCI during the period
in question, TCI could not have utilized inside information to speculate on any
movement in the price of CSX stock.  In addition, TCI claims that the
transactions at issue are exempt from Section 16(b) liability pursuant to
Section 23(a) of the Exchange Act because TCI entered into those transactions
based on its good faith reliance on, among other things, prior SEC guidance that
cash-settled equity swaps did not confer beneficial ownership over the Hedge
Shares.  Those defenses are discussed more fully in the brief in
support of CSX and plaintiff’s joint motion for preliminary approval of the
Settlement.  TCI further disputes the correctness of CSX’s method of
computing damages.  TCI contends that its defenses, if successful,
could substantially reduce or eliminate the amount recoverable by
CSX.

          The
Settlement is not and shall not be construed or deemed to be evidence or an
admission or concession on the part of the Settling Defendants of any fault or
liability whatsoever, and the Settling Defendants do not concede any merit to
plaintiff’s theories or any infirmity in the defenses that they have raised in
the 13D Action, or that they would assert in this Action if it was litigated to
judgment.

           

          
            
              
              

            

            
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          The
Terms of Settlement

          Pursuant
to the Settlement, the Settling Defendants have agreed to pay to CSX the sum of
$11,000,000.  In return this Action will be dismissed as against the
Settling Defendants on the merits and with prejudice.  In addition, if
the Settlement is approved, the Court will enter a final Order and Judgment
which provides for a dismissal of the Complaint and a release and bar order in
the following form:

          The
Amended Complaint, each claim for relief therein against the Settling Defendants
and their Related Parties and all claims for violations of Section 16(b) that
were asserted in this Action or could have been asserted in any amended
complaint against the Settling Defendants or their Related Parties, are hereby
dismissed on the merits, with prejudice and without costs, except as otherwise
provided in the award of an attorney’s fee, costs and disbursements provided for
herein; and the Settling Defendants and their Related Parties are hereby
discharged and released, except as noted in the final sentence hereof, from any
and all liability and damages under or based upon any and all claims, rights,
causes of action, suits, matters, demands, transactions and issues, known or
unknown, arising out of or relating to the assertions contained in the Amended
Complaint in this Action or that could have been asserted in this Action (i) by
Plaintiff on behalf of herself or any other person or entity, (ii) by CSX and/or
(iii) by any and all owners of any security (as defined in Section 3(a)(10) of
the Exchange Act) of CSX or any other security or instrument, the value of which
is derived from the value of any CSX equity security, or any of them, whether
individually, directly, representatively, derivatively or in any other capacity
for all claims arising out of or relating to any violation of Section 16(b) of
the Exchange Act and the rules and regulations promulgated under Section 16(b)
relating to trading in CSX securities, equity swaps and/or other equity
securities or instruments the value of which is derived from the value of any
CSX equity security, from the beginning of time up through the date that this
Settlement becomes Final under paragraph 3 of the
Settlement.  Plaintiff and her counsel in this Action are enjoined
from bringing any claims against the Settling Defendants and their Related
Parties for trading in CSX securities, including, without limitation, equity
swaps or any other derivative security or instrument tied to the value of any
CSX equity security arising from or relating to transactions in such securities
or instruments, up through the date that this Settlement becomes Final under
paragraph 3 of the Settlement, regardless of the theory of
liability.  Nothing herein extends to or releases CSX’s claims and the
defendants’ defenses in the 13D Action.

           

           

          
            
              
              

            

            
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          Because
the Action was brought derivatively on behalf of CSX, the Settlement Payments
will be paid to CSX, net of any award by the Court of an attorney’s fee and
reimbursement of expenses to plaintiff’s counsel.  There will be no
distribution to shareholders.

          If the
Settlement is approved by the Court, all claims that were asserted or could have
been asserted against the Settling Defendants in the Action will be dismissed on
the merits and with prejudice as to CSX and all of its shareholders and CSX and
its shareholders and plaintiff and her counsel will be forever barred from
prosecuting this Action or any other action raising any of the claims in this
Action against the Settling Defendants.

          If the
District Court does not approve the Settlement, or if the Order approving the
Settlement is reversed on appeal, then the rights and duties of the respective
parties to the terminated Settlement will revert to their respective statuses as
of the date immediately prior to the execution of the Settlement.

          NOTICE
OF SETTLEMENT HEARING

          The Court
has ordered that a hearing be held before the Hon. Miriam Goldman Cedarbaum,
United States District Judge for the Southern District of New York, at the
United States Courthouse, 500 Pearl Street, New York, New York, at _______ .m.,
on _____________, 2009 (or at such other time and place as the Court hereafter
may set, without further notice other than announcement thereof in open court at
the above time and place) concerning: (i) the fairness, reasonableness and
adequacy to CSX of the Settlement described above; and (ii) if the
Settlement is approved, the application of plaintiff’s counsel for an award of
an attorney’s fee and reimbursement of costs and expenses.

           

           

          
            
              
              

            

            
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      If you are the owner of a CSX security
or any other security or instrument, the value of which is derived from the
value of any CSX equity security, you may appear personally or by counsel and be
heard at the Settlement Hearing;  and you may support, object to or
express your views regarding the Settlement and/or plaintiff’s application for
an award of an attorney’s fee and reimbursement of costs and
expenses.  However, you will not be heard or entitled to contest the
approval of the Settlement or plaintiff’s application for an award of attorney’s
fees and reimbursement of costs and expenses unless, on or before
________________, 2009, you file a notice of intention to appear:
(i) setting forth the dates you purchased and the number of shares of CSX
common stock or security instrument, the value of which is derived from the
value of CSX common stock, that you own as of the date hereof; and
(ii) stating your objections, support or comments, in writing, with the
Clerk of the United States District Court for the Southern District of New York,
500 Pearl Street, New York, New York 10007, together with a list of any
witnesses you intend to call, a list of any exhibits you intend to present and
all briefs or other papers that support your objections or comments that you
will submit to this Court at the Settlement Hearing.  On or before
________________, 2009, you must also serve, in person or by mail, the notice of
intention to appear and attendant papers described in (i) and (ii) of this
paragraph on the following:

    

     

    
      
        
          	 
      	 
      	 
      
	
                  David
      Lopez (DL-6779)

                  171
      Edge of Woods Road, P.O. 323

                  Southampton,
      New York 11968

                	 
      	
                  Michael
      Swartz 

                  Schulte
      Roth & Zabel LLP

                  919
      Third Avenue

                  New
      York, New York 10022

                
	 
      	 
      	 
      
	
                  Attorney
      for Plaintiff

                     Deborah Donoghue

                	 
      	
                  Attorneys
      For The Children’s 

                  Investment
      Master Fund, 

                  The
      Children’s Investment Fund 

                  Management
      (UK) LLP, The 

                  Children’s
      Investment Fund 

                  Management
      (Cayman) Ltd., 

                  Christopher
      Hohn and Timothy O’Toole

                
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                  Miranda
      Schiller 

                  Weil,
      Gotshal & Manges, LLP

                  767
      Fifth Avenue

                  New
      York, New York 10153

                   

                	 
      	
                  David
      Marriott

                  Cravath,
      Swaine & Moore LLP

                  Worldwide
      Plaza

                  825
      Eighth Avenue

                  New
      York, New York 10019

                
	Attorneys
      for CSX Disinterested Directors	 
      	 
      
	
                   

                	 
      	
                  Attorneys
      for CSX Corporation

                
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                  Peter
      Doyle

                  Kirkland & Ellis LLP

                  Citigroup Center

                  153 East 53rd Street

                  New York, New York 1022-4611

                   

                  Attorneys for 3G Fund LP,

                  3G
      Capital Partners Ltd.,

                  3G
      Capital Partners LP,

                  Alexandre Behring, and Gilbert H. Lamphere

                	 
      	
                


        

      

       

    

     

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

     

     

    
      ATTORNEY’S
FEE AND DISBURSEMENTS

       

      At the Settlement Fairness Hearing, or
at such other time as the Court may direct, Plaintiff’s counsel intends to apply
to the Court for an award of attorney’s fee and expenses in the amount of
$550,000.  CSX, prior to the negotiation of the Settlement with the
Settling Defendants, agreed with Plaintiff’s counsel to a formula for computing
a fair and reasonable attorney’s fee based on 5 percent of the recovery and will
support such application.  This agreement is not binding on the
Court.  Any amounts awarded would be paid from the Settlement Payment,
after the Order approving the Settlement becomes final.

      FURTHER
INFORMATION

      This Notice is not
all-inclusive.  For the full details of the matters disclosed in the
Notice, including the Stipulation of Settlement described above, and for further
information concerning this Action, you may wish to refer to the pleadings or
other papers filed with the Court in this Action, all of which may be inspected
at the office of the Clerk of the United States District Court for the Southern
District of New York, 500 Pearl Street, New York, New York during normal
business hours.

      For further information regarding this
Notice, the Action or the proposed Settlement, CSX shareholders can contact, in
writing, Plaintiff’s counsel:

      David Lopez, Esq.

      171 Edge of Woods
Road,  P.O. Box 323

      Southampton, New York
11968

      


      PLEASE
DO NOT CALL OR WRITE THE COURT OR THE CLERK’S OFFICE 

      OTHER
THAN TO FILE NOTICES OF YOUR INTENTION TO SUPPORT OR 

      OPPOSE
THE SETTLEMENT WITH ACCOMPANYING DOCUMENTS

       

       

    

    
      


      Dated:      
New York, New York

         December ____, 2008

       

       

      
         

        
          
            	 	 	 	 	 
	
                     

                  	 	 	
                     

                  	 
	
                     

                  	 	 	
                    Clerk
      of the Court

                    United States District Court

                    Southern District of New York

                  	 
	
                     

                  	 	 	
                     

                  	 


          

        

         

         

         

        
          
            
            

          

          
            12

            
              

            

          

          
            
            

          

        

         

        
           

          EXHIBIT
C

           

          
            
               

              
                UNITED
STATES DISTRICT COURT

                SOUTHERN
DISTRICT OF NEW YORK

              

            

            
              


              
                	
                         

                        DEBORAH
      DONOGHUE,

                         

                        Plaintiff,

                         

                        - against -

                         

                        CSX
      CORPORATION, et al.

                         

                        Defendants,

                      	
                            

                            Civil
      Action No.

                            08
      Civil 9252  (MGC)

                         

                            

                         

                      


              

               

              

                
                  ORDER AND FINAL
JUDGMENT


                  On the
______ day of ________________, 2009, a hearing was held before this Court to
determine (1) whether the terms and conditions of the Stipulation of Settlement,
dated December 16, 2008, (the “Stipulation”) are fair, reasonable and adequate
for the settlement of all claims asserted by Deborah Donoghue (the “Plaintiff”),
derivatively on behalf of CSX Corporation (“CSX”), in the action now pending in
this Court under the above caption, including the release of the defendants The
Children’s Investment Master Fund, The Children’s Investment Fund Management
(UK) LLP, The Children’s Investment Fund Management (Cayman) Ltd., Christopher
Hohn, Timothy T. O’Toole, 3G Capital Partners Ltd., 3G Capital Partners LP, 3G
Fund LP, Alexandre Behring, and Gilbert Lamphere (collectively, the “Settling
Defendants”) and should be approved; (2) whether judgment should be entered
dismissing the Amended Complaint with prejudice; (3) whether and what to award
the Plaintiff’s counsel as a reasonable attorney’s fee and reimbursement of
costs and expenses.  All capitalized terms shall have the meaning set
forth in the Stipulation of Settlement.

                   

                  
                    
                      
                      

                    

                    
                      
                      

                      
                        

                      

                    

                    
                      
                      

                    

                  

                   

                  This
action (the “Action”) was brought by Plaintiff on behalf of CSX to recover
alleged “short-swing profits” under Section 16(b) of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”).  The Court, having
considered all matters submitted to it at the hearing and otherwise during the
course of proceedings in this Action; and it appearing that a Notice of Hearing
substantially in the form approved by the Court was mailed to all persons or
entities (the “CSX Shareholders”) who filed a current Form 13F, Schedule 13G or
Schedule 13D with the Securities and Exchange Commission (the “SEC”); CSX filed
a Form 8-K with the SEC on ____________ attaching the Notice, placed a Notice of
Settlement on its website and issued a press release on ___________ describing
the settlement; and after a review of the record herein, the Stipulation and
other papers submitted to the Court, and having concluded that the settlement
should be approved:

                  NOW,
THEREFORE, IT IS HEREBY ORDERED THAT:

                  
                    1.           The
Court has jurisdiction over the subject matter of this action, over the
Plaintiff, over CSX and over the Settling Defendants.

                    2.           Notice
of the pendency of this Action and the proposed settlement hereof was given as
set forth above.  The method of notifying the CSX shareholders and
holders of any securities (as defined in Section 3(a)(10) of the Exchange Act)
of CSX or of any other security or instrument, the value of which is derived
from any CSX equity security, of the pendency of this Action and of the
settlement and of the terms and conditions meet the requirements of Fed. R. Civ.
P. 23.1, Local Civil Rule 23.1 and due process, and constituted the best notice
practicable under the circumstances, and constituted due and sufficient notice
to all persons and entities thereto.

                     

                    
                      
                        
                        

                      

                      
                        2

                        
                          

                        

                      

                      
                        
                        

                      

                    

                     

                    3.           The
Stipulation of Settlement (a copy of which is annexed hereto as Exhibit A) is
hereby approved as fair, reasonable and adequate and in the best interests of
CSX and its shareholders.  The parties are directed to consummate the
settlement in accordance with the terms and provisions of the
Stipulation.

                    4.           This
Order and Final Judgment shall not constitute evidence or an admission by the
Settling Defendants or any other person that any transaction giving rise to
liability or damages under Section 16(b) occurred, or that any violations of law
or acts of other wrongdoing have been committed, and shall not be deemed to
create any inference that there is or was liability of any person
therefor.  The Settling Defendants do not admit, either expressly or
implicitly, that they or any one of them is subject to any liability whatsoever
by reason of any of the matters alleged in the Complaint or referenced in the
Stipulation of Settlement, or that there is any merit to any of the claims for
damages sought therein.  The Settling Defendants, on the contrary,
expressly deny and dispute the existence of any such liability or
damages.

                     

                    
                      
                        
                        

                      

                      
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                    5.           The
Amended Complaint, each claim for relief therein against the Settling Defendants
and all claims for violations of Section 16(b) that were asserted in this Action
or could have been asserted in any amended complaint against the Settling
Defendants and their Related Parties, are hereby dismissed on the merits, with
prejudice and without costs, except as otherwise provided in the award of an
attorney’s fee, costs and disbursements provided for herein; and the Settling
Defendants and their Related Parties are hereby discharged and released, except
as noted in the final sentence hereof, from any and all liability and damages
under or based upon any and all claims, rights, causes of action, suits,
matters, demands, transactions and issues, known or unknown, arising out of or
relating to the assertions contained in the Amended Complaint in this Action or
that could have been asserted in this Action (i) by Plaintiff on behalf of
herself or any other person or entity, (ii) by CSX and/or (iii) by any and all
owners of any security (as defined in Section 3(a)(10) of the Exchange Act) of
CSX or of any other security or instrument, the value of which is derived from
the value of any CSX equity security, or any of them, whether individually,
directly, representatively, derivatively or in any other capacity for all claims
arising out of or relating to any violation of Section 16(b) of the Exchange Act
and the rules and regulations promulgated under Section 16 relating to trading
in CSX securities, equity swaps and/or other securities or instruments the value
of which is derived from the value of any CSX equity security, from the
beginning of time up through the date that this Settlement becomes Final under
paragraph 3 of the Stipulation of Settlement.  Plaintiff and her
counsel in this Action are enjoined from bringing any claims under Section 16(b)
against the Settling Defendants and their Related Parties for trading in CSX
securities, including, without limitation equity swaps or any other derivative
security or instrument tied to the value of any CSX equity security arising from
or relating to transactions in such securities, up through the date that this
Settlement becomes Final under paragraph 3 of the Stipulation, regardless of the
theory of liability.  Nothing herein extends to or releases CSX’s
claims and the defendants’ defenses in the 13D Action.

                     

                    
                      
                        
                        

                      

                      
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                    6.           This
Order and Final Judgment is not intended to in any way affect the subject matter
of pending litigation between CSX and the Settling Defendants, captioned CSX Corporation vs. The Children’s
Investment Fund Management (UK) LLP, 08 Civil 2764 (LAK) now on appeal
before the United States Court of Appeals for the Second Circuit.

                    7.           The
Plaintiff, CSX and all owners of any security (as defined in Section 3(a)(10) of
the Exchange Act) of CSX or of any other security or instrument, the value of
which is derived from the value of any CSX equity security or any of them,
either individually, directly, derivatively, representatively or in any other
capacity, except as noted in the final sentence hereof, are permanently barred
and enjoined from instituting or prosecuting this or any other action, in this
or any other court or tribunal of this or any other jurisdiction, any and all
claims, rights, causes of action, suits, matters, demands, transactions and
issues, known or unknown, arising out of or relating to the assertions contained
in the Amended Complaint in this Action or that could have been asserted in this
Action (i) by Plaintiff on behalf of herself or any other person or entity, (ii)
by CSX and/or (iii) by any and all owners of any security (as defined in Section
3(a)(10) of the Exchange Act) of CSX or of any other security or instrument, the
value of which is derived from the value of any CSX equity security, or any of
them, whether individually, directly, representatively, derivatively or in any
other capacity, for all claims arising out of or relating to any violation of
Section 16(b) of the Exchange Act and the rules and regulations promulgated
under Section 16 relating to trading in CSX securities, equity swaps and/or
other securities or instruments the value of which is derived from the value of
any CSX equity security, from the beginning of time up through the date that the
Settlement becomes Final under paragraph 3 of the Stipulation, except for the
claims and defenses asserted in the 13D Action.

                     

                    
                      
                        
                        

                      

                      
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                    8.           Plaintiff’s
counsel is hereby awarded an attorney’s fee (inclusive of reimbursement of costs
and disbursements) in the sum of $_____________, which sum the Court finds to be
fair and reasonable and which shall be paid to Plaintiff’s counsel by the
Settling Defendants and deducted from the Settlement Payment to CSX after this
Order has become final as set forth in the Stipulation at Paragraph
4(a).

                    9.           Jurisdiction
is hereby reserved over all matters relating to the enforcement, administration
and performance of the Stipulation of Settlement.

                    
                      10.         The
Clerk of the Court is directed to enter and docket this Order and Final Judgment
in this Action.

                    

                     

                  

                  Dated:    New
York, New York

                  ________________, 2009

                  


                  


                  


                  SO
ORDERED:

                  


                  ____________________________________

                     Miriam
Goldman Cedarbaum, U.S.D.J.



              

            

          

        

         

         

         

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