-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MOEnA61ISZcg1UCL+UMeTeGRhoNPEOS375Y/imIfOSasPkYD322zsL4RmCl6gWgG bNzpD6DSAWeLs5cN+C7aSw== 0001104659-08-023012.txt : 20080407 0001104659-08-023012.hdr.sgml : 20080407 20080407165801 ACCESSION NUMBER: 0001104659-08-023012 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20080407 DATE AS OF CHANGE: 20080407 GROUP MEMBERS: 3G CAPITAL PARTNERS LTD. GROUP MEMBERS: 3G CAPITAL PARTNERS, L.P. GROUP MEMBERS: 3G FUND L.P. GROUP MEMBERS: ALEXANDRE BEHRING GROUP MEMBERS: CHRISTOPHER HOHN GROUP MEMBERS: GARY L. WILSON GROUP MEMBERS: GILBERT H. LAMPHERE GROUP MEMBERS: THE CHILDREN'S INVESTMENT FUND MANAGEMENT (CAYMAN) LTD. GROUP MEMBERS: THE CHILDREN'S INVESTMENT MASTER FUND GROUP MEMBERS: TIMOTHY T. O'TOOLE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CSX CORP CENTRAL INDEX KEY: 0000277948 STANDARD INDUSTRIAL CLASSIFICATION: RAILROADS, LINE-HAUL OPERATING [4011] IRS NUMBER: 621051971 STATE OF INCORPORATION: VA FISCAL YEAR END: 1226 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-39759 FILM NUMBER: 08743482 BUSINESS ADDRESS: STREET 1: 500 WATER STREET STREET 2: 15TH FLOOR CITY: JACKSONVILLE STATE: FL ZIP: 32202 BUSINESS PHONE: 9043593200 MAIL ADDRESS: STREET 1: 500 WATER STREET STREET 2: 15TH FLOOR CITY: JACKSONVILLE STATE: FL ZIP: 32202 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: Childrens Investment Fund Management (UK) LLP CENTRAL INDEX KEY: 0001362598 IRS NUMBER: 000000000 STATE OF INCORPORATION: X0 FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 7 CLIFFORD STREET CITY: LONDON STATE: X0 ZIP: W1S 2WE BUSINESS PHONE: 44 207 440 2388 MAIL ADDRESS: STREET 1: 7 CLIFFORD STREET CITY: LONDON STATE: X0 ZIP: W1S 2WE SC 13D/A 1 a08-8514_2sc13da.htm SC 13D/A

	UNITED STATES
	SECURITIES AND EXCHANGE COMMISSION
	Washington, D.C. 20549

	SCHEDULE 13D (Rule 13d-102)

INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT

TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO

RULE 13d-2(a)

Under the Securities Exchange Act of 1934
(Amendment No. 4)*

CSX Corporation

(Name of Issuer)

Common Stock

(Title of Class of Securities)

126408103

(CUSIP Number)

Mr. Christopher Hohn
The Children’s Investment
Fund Management (UK) LLP
7 Clifford Street
London W1S 2WE
United Kingdom
+44 20 7440 2330

Mr. Alexandre Behring
3G Capital Partners Ltd.
c/o 3G Capital Inc.
800 Third Avenue
31st Floor
New York, New York 10022
(212) 893-6727

With a copy to:

Marc Weingarten, Esq.
David Rosewater, Esq.
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
(212) 756-2000

Stephen Fraidin, Esq.
Andrew E. Nagel, Esq.
Kirkland & Ellis LLP
153 East 53rd Street
New York, New York 10022
(212) 446-4800

(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)

April 4, 2008

(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. o

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent.

^* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

CUSIP No. 126408103

	1.	Names of Reporting Persons The Children’s Investment Fund Management (UK) LLP

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			x
		(b)			o

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) AF

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o

	6.	Citizenship or Place of Organization England

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power -0-

			8.	Shared Voting Power 17,796,998

			9.	Sole Dispositive Power -0-

			10.	Shared Dispositive Power 17,796,998

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 4.4%

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) x

	13.	Percent of Class Represented by Amount in Row (11) 4.4%

	14.	Type of Reporting Person (See Instructions) PN

CUSIP No. 126408103

	1.	Names of Reporting Persons The Children’s Investment Fund Management (Cayman) Ltd.

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			x
		(b)			o

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) AF

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o

	6.	Citizenship or Place of Organization Cayman Islands

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power -0-

			8.	Shared Voting Power 17,796,998

			9.	Sole Dispositive Power -0-

			10.	Shared Dispositive Power 17,796,998

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 4.4%

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) x

	13.	Percent of Class Represented by Amount in Row (11) 4.4%

	14.	Type of Reporting Person (See Instructions) CO

CUSIP No. 126408103

	1.	Names of Reporting Persons The Children’s Investment Master Fund

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			x
		(b)			o

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) WC

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o

	6.	Citizenship or Place of Organization Cayman Islands

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power -0-

			8.	Shared Voting Power 17,796,998

			9.	Sole Dispositive Power -0-

			10.	Shared Dispositive Power 17,796,998

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 4.4%

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) o

	13.	Percent of Class Represented by Amount in Row (11) 4.4%

	14.	Type of Reporting Person (See Instructions) CO

CUSIP No. 126408103

	1.	Names of Reporting Persons Christopher Hohn

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			x
		(b)			o

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) AF

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o

	6.	Citizenship or Place of Organization United Kingdom

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power -0-

			8.	Shared Voting Power 17,796,998

			9.	Sole Dispositive Power -0-

			10.	Shared Dispositive Power 17,796,998

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 4.4%

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) x

	13.	Percent of Class Represented by Amount in Row (11) 4.4%

	14.	Type of Reporting Person (See Instructions) IN

CUSIP No. 126408103

	1.	Names of Reporting Persons 3G Capital Partners Ltd.

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			x
		(b)			o

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) AF

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o

	6.	Citizenship or Place of Organization Cayman Islands

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power -0-

			8.	Shared Voting Power 17,232,854

			9.	Sole Dispositive Power -0-

			10.	Shared Dispositive Power 17,232,854

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 4.3%

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) x

	13.	Percent of Class Represented by Amount in Row (11) 4.3%

	14.	Type of Reporting Person (See Instructions) CO

CUSIP No. 126408103

	1.	Names of Reporting Persons 3G Capital Partners, L.P.

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			x
		(b)			o

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) AF

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o

	6.	Citizenship or Place of Organization Cayman Islands

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power -0-

			8.	Shared Voting Power 17,232,854

			9.	Sole Dispositive Power -0-

			10.	Shared Dispositive Power 17,232,854

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 4.3%

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) o

	13.	Percent of Class Represented by Amount in Row (11) 4.3%

	14.	Type of Reporting Person (See Instructions) PN

CUSIP No. 126408103

	1.	Names of Reporting Persons 3G Fund L.P.

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			x
		(b)			o

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) WC

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o

	6.	Citizenship or Place of Organization Cayman Islands

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power -0-

			8.	Shared Voting Power 17,232,854

			9.	Sole Dispositive Power -0-

			10.	Shared Dispositive Power 17,232,854

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 4.3%

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) x

	13.	Percent of Class Represented by Amount in Row (11) 4.3%

	14.	Type of Reporting Person (See Instructions) PN

CUSIP No. 126408103

	1.	Names of Reporting Persons Alexandre Behring

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			x
		(b)			o

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) AF

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o

	6.	Citizenship or Place of Organization Brazil

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power -0-

			8.	Shared Voting Power 17,232,854

			9.	Sole Dispositive Power -0-

			10.	Shared Dispositive Power 17,232,854

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 4.3%

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) x

	13.	Percent of Class Represented by Amount in Row (11) 4.3%

	14.	Type of Reporting Person (See Instructions) IN

CUSIP No. 126408103

	1.	Names of Reporting Persons Gilbert H. Lamphere

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			x
		(b)			o

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) PF

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o

	6.	Citizenship or Place of Organization United States

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power 22,600

			8.	Shared Voting Power -0-

			9.	Sole Dispositive Power 22,600

			10.	Shared Dispositive Power -0-

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 22,600

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) o

	13.	Percent of Class Represented by Amount in Row (11) 0.0%

	14.	Type of Reporting Person (See Instructions) IN

CUSIP No. 126408103

	1.	Names of Reporting Persons Timothy T. O’Toole

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			x
		(b)			o

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) PF

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o

	6.	Citizenship or Place of Organization United States

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power 2,500

			8.	Shared Voting Power -0-

			9.	Sole Dispositive Power 2,500

			10.	Shared Dispositive Power -0-

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 2,500

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) o

	13.	Percent of Class Represented by Amount in Row (11) 0%

	14.	Type of Reporting Person (See Instructions) IN

CUSIP No. 126408103

Item 1.	Security and Issuer
This Amendment No. 4 is filed with respect to the shares of Common Stock, par value $1.00 per share (the “Shares”), of CSX Corporation (the “Issuer”), beneficially owned by the Reporting Persons (as defined in the Schedule 13D filed with the Securities and Exchange Commission on December 19, 2007, as heretofore amended (the “Schedule 13D”)) as of April 4, 2008 and amends and supplements the Schedule 13D. Except as set forth herein, the Schedule 13D is unmodified.

Item 4.	Purpose of Transaction
Item 4 of the Schedule 13D is amended and restated to include the following final paragraph: On April 4, 2008 each of the TCI Reporting Persons and the 3G Reporting Persons filed an answer with the federal district court for the Southern District of New York, attached herewith as Exhibits 99.6 and 99.7 and incorporated herein by reference. The answer denied the legal violations alleged by the Issuer and contained counterclaims against the Issuer and third party claims against its Chairman, CEO and President Michael Ward alleging multiple violations of state and federal law, which include the following:
	·	Violation of the federal securities laws in connection with the setting of performance grants on May 1, 2007 for 600 employees including the named executive officers of CSX while in possession of material non-public information, a practice commonly known as “spring loading.”
	·	Violation of the federal securities laws in connection with the May 2007 issuance of common stock to the Board while in possession of material non-public information, and again in December, during a blackout period set forth in the Issuer’s insider trading policy.
	·	Violation of state law for adopting a bylaw that prohibits shareholders’ ability to call special meetings for the purpose of electing or removing directors (the “Limited Special Meeting Bylaw”).
	·	Violation of the federal securities laws for materially misstating how the bylaw operates in both periodic reports and the annual proxy.
	·	Violations of the federal securities laws with regard to materially false and misleading statements made in numerous federal filings with the SEC regarding both the TCI Reporting Persons and the 3G Reporting Persons.
	·	Violation of the federal securities laws by Michael Ward in connection with his status as a control person of the Issuer due to his discretionary authority to control and influence the conduct of the Issuer, including the aforementioned federal securities laws violations.
Each of the TCI Reporting Persons and the 3G Reporting Persons seek equitable and injunctive relief including the following: (i) a declaration that the Issuer violated Section 14 of the Exchange Act; (ii) a direction requiring the Issuer to file truthful disclosures in proxy materials; (iii) a declaration that the Board was in violation of the Issuer’s insider trading policy, corporate governance guidelines, code of ethics, and bylaws; (iv) a direction that the Limited Special Meeting Bylaw be declared void; (v) an injunction on the Issuer from putting before the shareholders a proposal to ratify the Limited Special Meeting Bylaw; (vi) an injunction on the Issuer from voting proxies received prior to such time as the court ascertains that the Issuer has filed an accurate and compliant proxy statement; (vii) an injunction on the Issuer from committing violations of Rule 14a-9 in connection with any further solicitation relating to the 2008 Annual Meeting; (viii) a direction that the Board pay for preparation and filing of the Issuer’s amended proxy statement; and (ix) a grant of costs, including attorneys’ fees. Any descriptions herein of the answers are qualified in their entirety by reference to Exhibits 99.6 and 99.7 respectively.


Item 7.	Material to be Filed as Exhibits

Item 7 of the Schedule 13D is amended and restated as follows:

Exhibit 1.		Joint Filing Agreement (Previously Filed)

Exhibit 2.		Letter from TCIF UK to the CSX Board of Directors dated October 16, 2007 (Previously Filed)

Exhibit 3.		Letter from TCIF UK to the CSX Board of Directors dated October 22, 2007 (Previously Filed)

Exhibit 4.		Letter Agreement between TCIF UK and 3G Capital Ltd. dated December 12, 2007 (Previously Filed)

Exhibit 5.		Complaint Filed by the Issuer against the Reporting Persons, dated March 17, 2008 (Previously Filed)

Exhibit 99.6.		Answer and Counterclaims filed by the TCI Reporting Persons, dated April 4, 2008

Exhibit 99.7.		Answer and Counterclaims filed by the 3G Reporting Persons, dated April 4, 2008

CUSIP No. 126408103

SIGNATURES

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

Dated: April 7, 2008

	THE CHILDREN’S INVESTMENT FUND MANAGEMENT (UK) LLP

	/s/ Christopher Hohn
	Christopher Hohn
	Managing Partner

	THE CHILDREN’S INVESTMENT FUND MANAGEMENT (CAYMAN) LTD.

	/s/ David DeRosa
	David DeRosa
	Director

	THE CHILDREN’S INVESTMENT MASTER FUND

	/s/ David DeRosa
	David DeRosa
	Director


	/s/ Christopher Hohn
	Christopher Hohn

	3G CAPITAL PARTNERS LTD.

	/s/ Alexandre Behring
	Alexandre Behring
	Managing Director

	3G CAPITAL PARTNERS, L.P.
	By: 3G Capital Partners Ltd.
	Its: General Partner

	/s/ Alexandre Behring
	Alexandre Behring
	Managing Director

	3G FUND L.P.
	By: 3G Capital Partners, L.P.
	Its: General Partner

	By: 3G Capital Partners Ltd.
	Its: General Partner

	/s/ Alexandre Behring
	Alexandre Behring
	Managing Director

	/s/ Alexandre Behring
	Alexandre Behring

	/s/ Gilbert H. Lamphere
	Gilbert H. Lamphere

	/s/ Timothy T. O’Toole
	Timothy T. O’Toole

	/s/ Gary L. Wilson
	Gary L. Wilson

EX-99.6 2 a08-8514_2ex99d6.htm EX-99.6

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK


CSX CORPORATION,

	Plaintiff,

	v.

THE CHILDREN’S INVESTMENT FUND
MANAGEMENT (UK) LLP, THE CHILDREN’S		ECF CASE
INVESTMENT FUND MANAGEMENT		08 Civ. 02764 (LAK)(KNF)
(CAYMAN) LTD., THE CHILDREN’S
INVESTMENT MASTER FUND, 3G CAPITAL
PARTNERS LTD., 3G CAPITAL PARTNERS, L.P.,
3G FUND, L.P., CHRISTOPHER HOHN, SNEHAL
AMIN, AND ALEXANDRE BEHRING, A/K/A
ALEXANDRE BEHRING COSTA,


	Defendants.


THE CHILDREN’S INVESTMENT MASTER FUND,

	Counterclaim and Third-
	Party Plaintiff,

	v.

CSX CORPORATION AND MICHAEL WARD,

	Counterclaim and Third-
	Party Defendants.

ANSWER AND AFFIRMATIVE DEFENSES OF DEFENDANTS
THE CHILDREN’S INVESTMENT FUND MANAGEMENT (UK) LLP,
THE CHILDREN’S INVESTMENT FUND MANAGEMENT (CAYMAN) LTD.,
THE CHILDREN’S INVESTMENT MASTER FUND,
CHRISTOPHER HOHN, AND SNEHAL AMIN AND
COUNTERCLAIMS AND THIRD-PARTY CLAIMS OF
THE CHILDREN’S INVESTMENT MASTER FUND

Defendants The Children’s Investment Fund Management (UK) LLP, The Children’s Investment Fund Management (Cayman) Ltd., The Children’s Investment Master Fund, Christopher Hohn, and Snehal Amin (collectively the “TCI Defendants”), by their attorneys, Schulte Roth & Zabel LLP, hereby submit their answer to the Complaint (the “Complaint”) filed by CSX Corporation (“CSX”). The Children’s Investment Master Fund, by its attorneys, Schulte Roth & Zabel LLP, hereby submits its counterclaims against CSX, and third-party claims against Michael Ward (“Ward”).

ANSWER

As and for their answer to the specific allegations of the Complaint, TCI Defendants state and allege as follows:

1. Except to the extent that paragraph 1 sets forth legal conclusions as to which no answer is required, the TCI Defendants deny the allegations set forth in paragraph 1 of the Complaint and deny that CSX is entitled to any of the relief sought, except admit that CSX purports to seek injunctive and declaratory relief, and further admit that the TCI Defendants, together with defendants 3G Capital Partners Ltd., 3G Capital Partners, L.P., 3G Fund., L.P., and Alexandre Behring (collectively the “3G Defendants”), filed proxy solicitation materials which disclose their intentions to nominate a minority slate of directors for election to the CSX Board of Directors at the 2008 annual meeting of CSX shareholders, and to propose an amendment to CSX’s Amended and Restated Bylaws (“Bylaws”).

2 2. The TCI Defendants state that the allegations set forth in paragraph 2 of the Complaint state legal conclusions as to which no answer is required.

3. The TCI Defendants deny the allegations set forth in paragraph 3 of the Complaint.

4. The TCI Defendants deny the allegations set forth in the first and fourth sentences of paragraph 4 of the Complaint, except admit that the TCI Defendants and 3G Defendants (collectively the “Defendants”) filed a Schedule 13D on December 19, 2007; to the extent that the allegations purport to excerpt or describe the Schedule 13D, the TCI Defendants aver that the document speaks for itself and respectfully refer the Court to the document for its complete contents. The TCI Defendants further aver that, to the extent that any of the TCI Defendants made statements regarding TCI’s interest in CSX to CSX or any of its advisors, CSX and its advisors were aware that the interest TCI held in CSX was an economic interest through swap contracts.

5. Except to the extent that paragraph 5 sets forth legal conclusions as to which no answer required, the TCI Defendants deny the allegations set forth in paragraph 5 of the Complaint.

6. Except to the extent that paragraph 6 sets forth legal conclusions as to which no answer required, the TCI Defendants deny the allegations set forth in paragraph 6 of the Complaint, except admit that the Defendants filed proxy solicitation materials which disclose their intention to nominate a minority slate of directors for election to the CSX Board of Directors at the 2008 annual meeting of CSX shareholders.

3 7. Except to the extent that paragraph 7 sets forth legal conclusions as to which no answer required, the TCI Defendants deny the allegations set forth in paragraph 7 of the Complaint.

8. Except to the extent that paragraph 8 sets forth legal conclusions as to which no answer required, the TCI Defendants deny the allegations set forth in paragraph 8 of the Complaint, and further deny that CSX is entitled to any of the relief sought.

9. Except to the extent that paragraph 9 sets forth legal conclusions as to which no answer required, the TCI Defendants deny the allegations set forth in paragraph 9 of the Complaint, and further deny that CSX is entitled to any of the relief sought.

10. The TCI Defendants state that the allegations set forth in paragraph 10 of the Complaint state legal conclusions as to which no answer is required.

11. The TCI Defendants state that the allegations set forth in paragraph 11 of the Complaint state legal conclusions as to which no answer is required.

12. The TCI Defendants state that the allegations set forth in paragraph 12 of the Complaint state legal conclusions as to which no answer is required.

13. The TCI Defendants state that the allegations set forth in paragraph 13 of the Complaint state legal conclusions as to which no answer is required.

14. The TCI Defendants admit, upon information and belief, the allegations set forth in paragraph 14 of the Complaint.

15. The TCI Defendants admit the allegations set forth in paragraph 15 of the Complaint.

16. The TCI Defendants admit the allegations set forth in paragraph 16 of the Complaint.

4 17. The TCI Defendants admit the allegations set forth in paragraph 17 of the Complaint.

18. The TCI Defendants deny the allegations set forth in paragraph 18 of the Complaint, except admit that defendant Snehal Amin (“Amin”) is a citizen of the United States and a founding partner of TCIF UK.

19. The TCI Defendants admit the allegations set forth in paragraph 19 of the Complaint.

20. The TCI Defendants deny knowledge or information sufficient to form a belief as to the truth of the allegations set forth in paragraph 20 of the Complaint.

21. The TCI Defendants deny knowledge or information sufficient to form a belief as to the truth of the allegations set forth in paragraph 21 of the Complaint.

22. The TCI Defendants deny knowledge or information sufficient to form a belief as to the truth of the allegations set forth in paragraph 22 of the Complaint.

23. The TCI Defendants deny knowledge or information sufficient to form a belief as to the truth of the allegations set forth in paragraph 23 of the Complaint.

24. The TCI Defendants deny the allegations set forth in paragraph 24 of the Complaint, except admit that TCI called CSX several times, in an effort to develop an understanding of CSX’s business, that in December 2007, TCI requested to meet with CSX management and, at the request of CSX, met with CSX’s financial advisors from Morgan Stanley & Co. in New York on January 22, 2007.

25. The TCI Defendants deny the allegations set forth in paragraph 25 of the Complaint, except admit that TCI had several interactions with advisors and presented “proposals” to CSX management and their advisors. To the extent that the allegations purport to

5 excerpt or describe a document, the TCI Defendants aver that the document speaks for itself and respectfully refer the Court to the document for its complete contents.

26. The TCI Defendants deny the allegations set forth in paragraph 26 of the Complaint.

27. The TCI Defendants admit that Mr. Amin attended the conference referenced in paragraph 27, deny knowledge sufficient to form a basis as to the truth of the remaining allegations set forth in paragraph 27 of the Complaint, and further aver that at all relevant times, CSX’s Chief Financial Officer was aware that the interests TCI held in CSX was an economic interest through swap contracts.

28. The TCI Defendants admit the allegations set forth in the first sentence of paragraph 28 of the Complaint. The TCI Defendants make no response to the allegations set forth in the second sentence of paragraph 28, as they state legal conclusions as to which no answer is required.

29. The TCI Defendants deny knowledge sufficient to form a basis as to the truth of the allegations set forth in paragraph 29 of the Complaint, except admit that on March 29, 2007, Mr. Amin attended a meeting with CSX’s Chief Financial Officer and with CSX’s attorneys in New York, during which he stated in response to questions that, to the extent TCI owned shares of CSX, they would vote them, and that there was “no limit” to the type of action that the TCI Defendants would take to create value for the shareholders of CSX.

30. The TCI Defendants deny the allegations set forth in paragraph 30 of the Complaint, except admit that the TCI Defendants had calls with CSX’s outside advisors from Evercore Partners (“Evercore”).

6 31. The TCI Defendants deny the allegations set forth in paragraph 31 of the Complaint, except admit that Mr. Amin made a presentation during a May 8, 2007 Bear Stearns conference, during which he stated that, if CSX wished to sell itself in an LBO, financing would be available, and that he had an indicative financing proposal from a bank that could underwrite the debt.

32. The TCI Defendants admit the allegations set forth in paragraph 32 of the Complaint.

33. The TCI Defendants admit the allegations set forth in the first sentence of paragraph 33 of the Complaint, and deny knowledge or information sufficient to form a belief as to the truth of the allegations set forth in the second sentence of paragraph 33 of the Complaint.

34. The TCI Defendants deny knowledge or information sufficient to form a belief as to the truth of the allegations set forth in paragraph 34 of the Complaint.

35. The TCI Defendants admit the allegations set forth in paragraph 35 of the Complaint.

36. The TCI Defendants admit the allegations set forth in paragraph 36 of the Complaint.

37. The TCI Defendants deny knowledge or information sufficient to form a belief as to the truth of the allegations set forth in paragraph 37 of the Complaint.

38. The TCI Defendants deny knowledge or information sufficient to form a belief as to the truth of the allegations set forth in paragraph 38 of the Complaint.

39. The TCI Defendants deny knowledge or information sufficient to form a belief as to the truth of the allegations set forth in paragraph 39 of the Complaint.

7 40. The TCI Defendants deny knowledge or information sufficient to form a belief as to the truth of the allegations set forth in the first sentence of paragraph 40 of the Complaint. The TCI Defendants admit the allegations set forth in the second sentence of paragraph 40. The TCI Defendants make no response to the allegations set forth in the third sentence of paragraph 40, as they call for legal conclusions and require no response.

41. The TCI Defendants deny the allegations set forth in the first and second sentences of paragraph 41 of the Complaint, except admit that TCI attended the September 6, 2007 Analyst/Investor conference in New York, and further admit that after the conference, defendant Christopher Hohn (“Hohn”) attempted to speak with CSX’s Chief Financial Officer, as did numerous other attendees. The TCI Defendants deny knowledge and information sufficient to form a belief as to the allegations set forth in the third sentence of paragraph 41 of the Complaint, except admit that Mr. Hohn approached CSX’s advisors from Evercore and Morgan Stanley & Co. to discuss CSX.

42. The TCI Defendants admit the allegations set forth in paragraph 42 of the Complaint, upon information and belief, except deny knowledge or information sufficient to form a belief as to the truth of the allegation that Gilbert Lamphere purchased CSX common stock in connection with his becoming a nominee for the CSX Board.

43. The TCI Defendants admit the allegations set forth in paragraph 43 of the Complaint, except deny knowledge or information sufficient to form a belief that Timothy O’Toole purchased CSX common stock in connection with his becoming a nominee for the CSX Board.

44. The TCI Defendants deny knowledge or information sufficient to form a belief as to the truth of the allegations set forth in paragraph 44 of the Complaint.

8 45. The TCI Defendants make no response to the allegations set forth in paragraph 45 of the Complaint, as they consist of general descriptive statements to which no answer is required; to the extent a response is required, TCI Defendants deny knowledge or information sufficient to form a believe as to the truth of those allegations.

46. The TCI Defendants make no response to the allegations set forth in paragraph 46 of the Complaint, as they consist of general descriptive statements to which no answer is required; to the extent a response is required, TCI Defendants deny knowledge or information sufficient to form a believe as to the truth of those allegations.

47. The TCI Defendants deny knowledge or information sufficient to form a belief as to the truth of the allegations set forth in paragraph 47 of the Complaint.

48. The TCI Defendants deny knowledge or information sufficient to form a belief as to the truth of the allegations set forth in paragraph 48 of the Complaint.

49. The TCI Defendants deny knowledge or information sufficient to form a belief as to the truth of the allegations set forth in paragraph 49 of the Complaint.

50. The TCI Defendants deny the allegations set forth in paragraph 50 of the Complaint.

51. The TCI Defendants admit, upon information and belief, the allegations set forth in paragraph 51 of the Complaint.

52. The TCI Defendants admit the allegations set forth in paragraph 52 of the Complaint.

53. The TCI Defendants state that the allegations set forth in paragraph 53 of the Complaint state legal conclusions as to which no answer is required.

9 54. The TCI Defendants state that the allegations set forth in paragraph 54 of the Complaint state legal conclusions as to which no answer is required.

55. The TCI Defendants state that the allegations set forth in paragraph 55 of the Complaint state legal conclusions as to which no answer is required.

56. The TCI Defendants state that the allegations set forth in paragraph 56 of the Complaint state legal conclusions as to which no answer is required.

57. The TCI Defendants state that the allegations set forth in paragraph 57 of the Complaint state legal conclusions as to which no answer is required.

58. The TCI Defendants state that the allegations set forth in paragraph 58 of the Complaint state legal conclusions as to which no answer is required.

59. The TCI Defendants admit the allegations set forth in the first and second sentences of paragraph 59 of the Complaint. The TCI Defendants deny the allegations set forth in the third sentence of paragraph 59 of the Complaint. To the extent that the allegations purport to excerpt or describe certain filings made by the Defendants, the TCI Defendants aver that the filings speak for themselves and respectfully refer the Court to those filings for their complete contents.

60. The TCI Defendants deny the allegations set forth in paragraph 60 of the Complaint.

61. The TCI Defendants deny the allegations set forth in paragraph 61 of the Complaint, and reallege and incorporate by reference their answers to paragraphs 25, 28, 29, 31, 33, 34, and 35 of the Complaint.

62. The TCI Defendants deny the allegations set forth in paragraph 62 of the Complaint, and reallege and reincorporate by reference their answers to paragraphs 26, 29, and 30 of the Complaint.

63. The TCI Defendants deny the allegations set forth in paragraph 63 of the Complaint, except admit that TCI acquired just over 4 percent of CSX shares on the open market between April 3, 2007 and May 14, 2007, and continues to own those shares. The TCI Defendants deny information and belief sufficient to form a belief as to the truth of the allegations set forth in paragraph 63 as they pertain to the 3G Defendants.

64. The TCI Defendants deny the allegations set forth in paragraph 64 of the Complaint.

65. The TCI Defendants deny the allegations set forth in paragraph 65 of the Complaint.

66. The TCI Defendants state that the allegations set forth in paragraph 66 of the Complaint state legal conclusions as to which no answer is required.

67. The TCI Defendants deny the allegations set forth in paragraph 67 of the Complaint, except admit that on December 12, 2007, TCI and 3G agreed to coordinate their efforts with respect to their interest in CSX, and further aver that to the extent the allegations set forth in paragraph 67 state legal conclusions, no response is required.

68. The TCI Defendants deny the allegations set forth in paragraph 68 of the Complaint; to the extent that the allegations purport to excerpt or describe Defendants’ Schedule 13D and preliminary proxy statement on Schedule 14A, the TCI Defendants aver that the filings speak for themselves and respectfully refer the Court to those filings for their complete contents.

11 69. The TCI Defendants state that no response is required to the allegations set forth in paragraph 69 of the Complaint, as they purport to excerpt or describe Defendants’ December 19, 2007 Schedule 13D filing; the TCI Defendants aver that the filing speaks for itself and respectfully refer the Court to that filing for its complete contents.

70. The TCI Defendants deny the allegations set forth in paragraph 70 of the Complaint to the extent there is any implication that TCI and 3G formed a group, the existence of which, they were required to disclose earlier than December 12, 2007.

71. The TCI Defendants deny the allegations set forth in paragraph 71 of the Complaint, and reallege and incorporate by reference their answers to paragraphs 28, 36, 37, 39, 40, and 41 of the Complaint.

72. The TCI Defendants deny the allegations set forth in paragraph 72 of the Complaint.

73. Except to the extent that paragraph 73 of the Complaint states legal conclusions to which no response is required, the TCI Defendants deny the allegations set forth in paragraph 73 of the Complaint. To the extent that the allegations purport to excerpt or describe Defendants’ December 19, 2007 Schedule 13D filing, the TCI Defendants aver that the filing speaks for itself and respectfully refer the Court to the filing for its complete contents.

74. The TCI Defendants deny the allegations set forth in paragraph 74 of the Complaint; to the extent that the allegations purport to excerpt or describe Defendants’ December 19, 2007 Schedule 13D filing, the TCI Defendants aver that the filing speaks for itself and respectfully refer the Court to that filing for its complete contents.

75. The TCI Defendants deny the allegations set forth in paragraph 75 of the Complaint; to the extent that the allegations purport to excerpt or describe Defendants’

12 December 19, 2007 Schedule 13D filing, the TCI Defendants aver that the filing speaks for itself and respectfully refer the Court to that filing for its complete contents.

76. The TCI Defendants deny the allegations set forth in paragraph 76 of the Complaint; to the extent that the allegations purport to excerpt or describe Defendants’ December 19, 2007 Schedule 13D filing, the TCI Defendants aver that the filing speaks for itself and respectfully refer the Court to that filing for its complete contents.

77. The TCI Defendants state that to the extent the allegations set forth in paragraph 77 of the Complaint state legal conclusions, no answer is required; to the extent that the allegations purport to excerpt or describe Defendants’ December 19, 2007 Schedule 13D filing, the TCI Defendants aver that the filing speaks for itself and respectfully refer the Court to that filing for its complete contents. To the extent a response is required, the TCI Defendants deny the allegations set forth in paragraph 77 of the Complaint.

78. The TCI Defendants deny the allegations set forth in paragraph 78 of the Complaint; to the extent that the allegations purport to excerpt or describe Defendants’ December 19, 2007 Schedule 13D filing, the TCI Defendants aver that the filing speaks for itself and respectfully refer the Court to that filing for its complete contents.

79. The TCI Defendants deny the allegations set forth in paragraph 79 of the Complaint; to the extent that the allegations purport to excerpt or describe Defendants’ December 19, 2007 Schedule 13D filing, the TCI Defendants aver that the filing speaks for itself and respectfully refer the Court to that filing for its complete contents.

80. Except to the extent that Paragraph 80 of the Complaint states legal conclusions to which no response is required, the TCI Defendants deny the allegations set forth in paragraph 80 of the Complaint as they pertain to them and deny knowledge or information

13 sufficient to form a belief as to the truth of those allegations as they pertain to the 3G Defendants; to the extent that the allegations purport to excerpt or describe Defendants’ Schedule 13D, the TCI Defendants aver that the filing speaks for itself and respectfully refer the Court to that filing for its complete contents.

81. The TCI Defendants admit that they did not file the written agreements relating to the swap arrangements as exhibits to the Schedule 13D. The TCI Defendants further aver that to the extent the allegations set forth in paragraph 81 of the Complaint state legal conclusions, no response is required.

82. The TCI Defendants deny the allegations set forth in paragraph 82 of the Complaint, and aver that the schedule disclosing the information referenced in paragraph 82 was filed in the last amendment to Defendants’ Schedule 13D, in accordance with a representation made to the staff of the Securities and Exchange Commission (the “SEC”) on February 20, 2008 to disclose this information at the time that a 13D amendment was otherwise required to be filed. The TCI Defendants further aver that to the extent the allegations set forth in paragraph 82 of the Complaint state legal conclusions, no response is required.

83. The TCI Defendants admit that they did not file copies of the nominee agreements referenced in the December 19, 2007 Schedule 13D. The TCI Defendants further aver that to the extent the allegations set forth in paragraph 83 of the Complaint state legal conclusions, no response is required.

84. The TCI Defendants state that the allegations set forth in paragraph 84 of the Complaint state legal conclusions as to which no answer is required.

85. Except to the extent that Paragraph 85 of the Complaint states legal conclusions to which no response is required, the TCI Defendants deny the allegations set forth

14 in paragraph 85 of the Complaint, except admit that on March 10, 2008, Defendants filed their preliminary proxy statement on Schedule 14A; to the extent that the allegations purport to excerpt or describe the filing, the TCI Defendants aver that the relevant document speaks for itself and respectfully refer the Court to the filing for its complete contents.

86. Except to the extent that Paragraph 86 of the Complaint states legal conclusions to which no response is required, the TCI Defendants deny the allegations set forth in paragraph 86 of the Complaint, except admit that on March 10, 2008 Defendants filed a Schedule 14A; to the extent that the allegations purport to excerpt or describe filings made by the Defendants, the TCI Defendants aver that the filings speak for themselves and respectfully refer the Court to the filings for their complete contents.

87. Except to the extent that Paragraph 87 of the Complaint states legal conclusions to which no response is required, the TCI Defendants deny the allegations set forth in paragraph 87 of the Complaint, except admit that on March 10, 2008 Defendants filed a Schedule 14A; to the extent that the allegations purport to excerpt or describe the Schedule 14A, the TCI Defendants aver that the filing speaks for itself and respectfully refer the Court to the filing for its complete contents.

88. Except to the extent that Paragraph 88 of the Complaint states legal conclusions to which no response is required, the TCI Defendants deny the allegations set forth in paragraph 88 of the Complaint, except admit that on March 10, 2008 Defendants filed a Schedule 14A; to the extent that the allegations purport to excerpt or describe the Schedule 14A, the TCI Defendants aver that the filing speaks for itself and respectfully refer the Court to the filing for its complete contents.

15 89. Except to the extent that Paragraph 89 of the Complaint states legal conclusions to which no response is required, the TCI Defendants deny the allegations set forth in paragraph 89 of the Complaint, except admit that on March 10, 2008, Defendants filed a Schedule 14A; to the extent that the allegations purport to excerpt or describe the Schedule 14A, the TCI Defendants aver that the filing speaks for itself and respectfully refer the Court to the filing for its complete contents.

90. Except to the extent that Paragraph 90 of the Complaint states legal conclusions to which no response is required, the TCI Defendants deny the allegations set forth in paragraph 90 of the Complaint, except admit that on March 10, 2008, Defendants filed a Schedule 14A; to the extent that the allegations purport to excerpt or describe the Schedule 14A, the TCI Defendants aver that the filing speaks for itself and respectfully refer the Court to the filing for its complete contents.

91. The TCI Defendants deny the allegations set forth in paragraph 91 of the Complaint.

92. The TCI Defendants deny the allegations set forth in paragraph 92 of the Complaint, except admit that on March 10, 2008, Defendants filed a Schedule 14A; to the extent that the allegations purport to excerpt or describe the Schedule 14A, the TCI Defendants aver that the filing speaks for itself and respectfully refer the Court to the filing for its complete contents. The TCI Defendants further aver that to the extent the allegations set forth in paragraph 92 of the Complaint state legal conclusions, no response is required.

93. Except to the extent that Paragraph 93 of the Complaint sets forth legal conclusions to which no response is required, the TCI Defendants deny the allegations set forth in paragraph 93 of the Complaint, except admit that on March 10, 2008 Defendants filed a

16 Schedule 14A; to the extent that the allegations purport to excerpt or describe the Schedule 14A, the TCI Defendants aver that the filing speaks for itself and respectfully refer the Court to the filing for its complete contents.

94. The TCI Defendants state that no answer is required to the allegations set forth in paragraph 94 of the Complaint, as they purport to recite or restate requirements of the Bylaws; the TCI Defendants aver that those Bylaws speak for themselves and respectfully refer the Court to the Bylaws for their complete contents.

95. The TCI Defendants admit the allegations set forth in the first sentence of paragraph 95 of the Complaint. The TCI Defendants deny the allegations set forth in the second sentence of paragraph 95 of the Complaint; to the extent that the allegations purport to excerpt or describe the Stockholder Notice of Intent to Nominate Persons for Election as Directors to CSX (the “Notice”), the TCI Defendants aver that the relevant document speaks for itself and respectfully refer the Court to the Notice for its complete contents.

96. The TCI Defendants admit the allegations set forth in paragraph 96 of the Complaint.

97. The TCI Defendants admit the allegations set forth in paragraph 97 of the Complaint.

98. The TCI Defendants deny the allegations set forth in paragraph 98 of the Complaint. The TCI Defendants further aver that to the extent the allegations set forth in paragraph 98 of the Complaint state legal conclusions, no response is required.

COUNT I

99. The TCI Defendants reallege and incorporate by reference their answers to paragraphs 1-98 of the Complaint as if set forth fully herein.

17 100. Except to the extent that paragraph 100 of the Complaint sets for legal conclusions to which no response is required, the TCI Defendants deny the allegations set forth in paragraph 100 of the Complaint.

101. Except to the extent that paragraph 101 of the Complaint sets forth legal conclusions to which no response is required, the TCI Defendants deny the allegations set forth in paragraph 101 of the Complaint.

102. Except to the extent that paragraph 102 of the Complaint sets forth legal conclusions to which no response is required, the TCI Defendants deny the allegations set forth in paragraph 102 of the Complaint.

103. Except to the extent that paragraph 103 of the Complaint sets forth legal conclusions to which no response is required, the TCI Defendants deny the allegations set forth in paragraph 103 of the Complaint.

104. The TCI Defendants deny the allegations set forth in paragraph 104 of the Complaint.

105. Except to the extent that paragraph 105 of the Complaint sets forth legal conclusions to which no response is required, the TCI Defendants deny the allegations set forth in paragraph 105 of the Complaint.

106. Except to the extent that paragraph 106 of the Complaint sets forth legal conclusions to which no response is required, the TCI Defendants deny the allegations set forth in paragraph 106 of the Complaint.

COUNT II

107. The TCI Defendants reallege and incorporate by reference their answers to paragraphs 1-106 of the Complaint as if set forth fully herein.

18 108. Except to the extent that paragraph 108 of the Complaint sets forth legal conclusions to which no response is required, the TCI Defendants deny the allegations set forth in paragraph 108 of the Complaint.

109. Except to the extent that paragraph 109 of the Complaint sets forth legal conclusions to which no response is required, the TCI Defendants deny the allegations set forth in paragraph 109 of the Complaint.

110. Except to the extent that paragraph 110 of the Complaint sets forth legal conclusions to which no response is required, the TCI Defendants deny the allegations set forth in paragraph 110 of the Complaint.

111. Except to the extent that paragraph 111 of the Complaint sets forth legal conclusions to which no response is required, the TCI Defendants deny the allegations set forth in paragraph 111 of the Complaint.

112. Except to the extent that paragraph 112 of the Complaint sets forth legal conclusions to which no response is required, the TCI Defendants deny the allegations set forth in paragraph 112 of the Complaint.

113. Except to the extent that paragraph 113 of the Complaint sets forth legal conclusions to which no response is required, the TCI Defendants deny the allegations set forth in paragraph 113 of the Complaint.

114. Except to the extent that paragraph 114 of the Complaint sets forth legal conclusions to which no response is required, the TCI Defendants deny the allegations set forth in paragraph 114 of the Complaint.

19 115. Except to the extent that paragraph 115 of the Complaint sets forth legal conclusions to which no response is required, the TCI Defendants deny the allegations set forth in paragraph 115 of the Complaint.

116. The TCI Defendants deny the allegations set forth in paragraph 116 of the Complaint, and aver that the schedule disclosing the information regarding Defendants’ controlling persons was filed in the last amendment to Defendants’ Schedule 13D, in accordance with a representation made to the staff of the SEC on February 20, 2008 to disclose this information at the time that a 13D amendment was otherwise required to be filed. The TCI Defendants further aver that to the extent the allegations set forth in paragraph 116 of the Complaint state legal conclusions, no response is required.

117. The TCI Defendants admit that they did not file copies of the agreements governing their swap arrangements and copies of the nominee agreements as exhibits to their December 19, 2007 Schedule 13D. The TCI Defendants further aver that to the extent the allegations set forth in paragraph 117 of the Complaint state legal conclusions, no response is required.

118. Except to the extent that paragraph 118 of the Complaint sets forth legal conclusions to which no response is required, the TCI Defendants deny the allegations set forth in paragraph 118 of the Complaint as they relate to the TCI Defendants and deny information and belief sufficient to form a belief as to the truth of those allegations as they pertain to the 3G Defendants.

119. Except to the extent that paragraph 119 of the Complaint sets forth legal conclusions to which no response is required, the TCI Defendants deny the allegations set forth in paragraph 119 of the Complaint.

120. Except to the extent that paragraph 120 of the Complaint sets forth legal conclusions to which no response is required, the TCI Defendants deny the allegations set forth in paragraph 120 of the Complaint.

COUNT III

121. The TCI Defendants reallege and incorporate by reference their answers to paragraphs 1-120 of the Complaint as if set forth fully herein.

122. The TCI Defendants deny the allegations set forth in paragraph 122 of the Complaint as they pertain to them and deny knowledge or information sufficient to form a belief as to the truth of those allegations as they pertain to defendant Alexandre Behring’s control or influence over the conduct of any other defendants.

123. The TCI Defendants deny the allegations set forth in paragraph 123 of the Complaint.

124. The TCI Defendants deny the allegations set forth in paragraph 124 of the Complaint.

125. The TCI Defendants state that the allegations set forth in paragraph 125 of the Complaint state legal conclusions as to which no answer is required.

COUNT IV

126. The TCI Defendants reallege and incorporate by reference their answers to paragraphs 1-125 of the Complaint as if set forth fully herein.

127. The TCI Defendants state that the allegations set forth in paragraph 127 of the Complaint state legal conclusions as to which no answer is required.

128. The TCI Defendants state that the allegations set forth in paragraph 128 of the Complaint state legal conclusions as to which no answer is required; to the extent a response is required, TCI Defendants deny the allegations set forth in paragraph 128 of the Complaint.

21 129. The TCI Defendants state that no answer is required to the allegations set forth in paragraph 129 of the Complaint, as they purport to recite or restate requirements of the Bylaws; the TCI Defendants aver that those Bylaws speak for themselves and respectfully refer the Court to the Bylaws for their complete contents.

130. The TCI Defendants deny the allegations set forth in paragraph 130 of the Complaint, except admit that on January 8, 21, and 25, 2008, Defendants supplied to CSX Notices of their intent to nominate five persons for election to the CSX Board of Directors at the 2008 annual meeting of shareholders and to propose amendments to the Bylaws (collectively the “Notices”), in compliance with Article I, Section 11 of the Bylaws.

131. Except to the extent that paragraph 131 of the Complaint states conclusions of law to which no response is required, the TCI Defendants deny the allegations set forth in paragraph 131 of the Complaint.

132. Except to the extent that paragraph 132 of the Complaint states conclusions of law to which no response is required, the TCI Defendants deny the allegations set forth in paragraph 132 of the Complaint.

AFFIRMATIVE DEFENSES

FIRST DEFENSE

133. The Complaint fails to state a claim upon which relief may be granted.

SECOND DEFENSE

134. The purported misrepresentations and omissions in the Complaint are not material.

THIRD DEFENSE

135. CSX and CSX shareholders have not suffered any injuries as a result of the conduct alleged in the Complaint.

FOURTH DEFENSE

136. The injuries CSX alleges in the Complaint were not caused by any conduct of the Defendants.

FIFTH DEFENSE

137. The claims in the Complaint are barred by the doctrines of waiver, acquiescence, and estoppel.

SIXTH DEFENSE

138. CSX’s equitable claims are barred by the doctrine of unclean hands.

SEVENTH DEFENSE

139. The Complaint fails to raise a justiciable case or controversy.

EIGHTH DEFENSE

140. The claims in the Complaint are barred by the doctrines of laches and delay.

NINTH DEFENSE

141. In proposing bylaw amendments and putting forth nominees for the CSX Board of Directors, TCI fully complied with the notice requirements contained in the Bylaws.

TENTH DEFENSE

142. CSX’s requirement that a shareholder provide notice that the shareholder intends to propose a bylaw amendment is inconsistent with Virginia law.

ELEVENTH DEFENSE

143. CSX’s claims are moot because the allegedly misleading statements have already been cured.

23

TWELFTH DEFENSE

144. CSX lacks standing to assert the claims contained in the Complaint.

THIRTEENTH DEFENSE

145. CSX’s claims are barred by the doctrine of in pari delicto.

24

COUNTERCLAIMS AND THIRD-PARTY CLAIM

Counterclaim and Third-Party Plaintiff The Children’s Investment Master Fund, as and for its Counterclaims against Counterclaim Defendant CSX and its Claim against Third-Party Defendant Michael Ward, alleges as follows:

INTRODUCTION

1. The lawsuit filed by CSX Corporation is the latest step in a long series of scorched earth tactical maneuvers by its Board of Directors and CEO Michael Ward aimed at preventing at any cost CSX’s owners from even considering proposals that would strengthen CSX’s corporate governance procedures and provide CSX shareholders with a long overdue, meaningful voice in shaping the company’s future direction. Indeed, the directors of CSX have gone to extraordinary lengths to entrench themselves in their current positions, including withholding from shareholders material facts regarding the Board’s violation of its own insider trading policies, code of ethics and bylaws, while at the same time enriching themselves by setting certain “spring-loaded” stock grants for CSX insiders while in possession of material nonpublic information.

2. CSX’s lawsuit has nothing whatsoever to do with CSX’s professed concern that shareholders have inadequate information to make an informed vote at the June 25, 2008 annual shareholders meeting (the “Shareholders Meeting”). To be sure, all of the material information about which CSX claims shareholders should be informed (e.g., TCI and 3G’s alleged beneficial ownership of CSX stock) already has been put before CSX shareholders in SEC filings, CSX press releases and media coverage of this dispute. Further, CSX could have alleged more than one year ago that TCI misstated its beneficial ownership of CSX stock. However, it strategically waited until after the record date had passed in order to evaluate the

25 shareholder base and likely outcome of the 2008 Board election. CSX has used this lawsuit to reset the record date to a future date in the hope of manipulating a more favorable vote outcome.

3. As set forth herein, CSX Corporation and CEO Michael Ward (the “CSX Defendants”) have committed violations of the federal securities laws through materially false and misleading disclosures concerning, among other things: (i) compensation set and awarded to directors and senior management of CSX while the Board and senior management were aware of material nonpublic information in violation of CSX’s Insider Trading Policy, (ii) the nature of the bylaw amendments that the company has submitted for shareholder approval, and (iii) TCI.

4. At the Shareholders Meeting, CSX shareholders will cast their proxies to elect directors to CSX’s Board and vote on certain proposals relating to corporate governance, some of which relate to the Bylaws. CSX shareholders, including TCI, have been critical of the Board’s failure to address a myriad of corporate governance issues, including that of excessive compensation to CSX senior management. As part of its public and private campaign to block TCI’s slate of directors and bylaw proposals, which call for greater shareholder input in corporate governance from consideration at the Shareholders Meeting, CSX has omitted material information from its own disclosures and engaged in a scurrilous campaign of unlawful falsehoods, in violation of federal and Virginia state law.

5. On the very day that CSX filed its lawsuit, its Chairman, President and Chief Executive Officer, Michael Ward, falsely proclaimed, “We filed this suit against TCI and 3G to ensure that all of our shareholders receive complete and accurate information about the group’s holdings, agreements, plans and motivations to which they are entitled under federal securities laws. We are committed to protecting the interests of all CSX shareholders.”

26 6. However, despite these self-proclaimed goals, the CSX Defendants said absolutely nothing to CSX’s shareholders regarding TCI’s alleged beneficial ownership interest in CSX common stock for over a year, even though, by their own admission, they were aware of those purported positions since February 2007 (Compl. ¶ 4), and had numerous opportunities to raise this issue to, in Mr. Ward’s words, “ensure that all of [CSX’s] shareholders receive complete and accurate information . . . .”

7. TCI has invested over $3 billion in the continued success of CSX through the purchase of common stock and through investment vehicles known as cash-settled “total return swaps,” a fact that was disclosed in TCI’s Schedule 13D filed on December 19, 2007. Pursuant to these cash-settled swap transactions, TCI entered into agreements with investment bank and broker-dealer counterparties (the “swap counterparties”) through which TCI’s investments with the swap counterparties were tied to the economic movement of CSX’s common stock. Through such swaps, TCI was exposed to any economic benefit or loss associated with being an owner of CSX shares, but had none of the ownership rights commonly associated with equity ownership, including the right to vote the shares referenced in the swaps. In fact, the swap agreements contain no requirement that the swap counterparties even own any underlying CSX shares.

8. Moreover, TCI did not enter into any agreements, arrangements or understandings of any kind with its swap counterparties concerning how those swap counterparties will vote the CSX shares they hold (if any). Nor did TCI enter into any agreements, arrangements or understandings that gave TCI the right to purchase the CSX shares (if any) held by those swap counterparties.

27 9. Indeed, all of the material information regarding TCI’s investment in CSX is public.

10. In CSX’s Form 10-Q for the quarter ending March 30, 2007, CSX included a disclosure indicating that it had received a Hart-Scott-Rodino notice from TCI and stated that TCI held economic exposure through derivative contracts tied to the value of the CSX stock.

11. On May 15, 2007, in its Form 13-F filing with the SEC, TCI disclosed beneficial ownership of 17,796,998 shares of CSX common stock. TCI made additional Form 13-F filings on August 14, 2007 and November 14, 2007 with identical disclosures regarding the size of its common stock investment.

12. On October 16, 2007, TCI wrote a public letter to the Board stating that it “currently owns 17.8 million shares, or 4.1% of CSX.” The Board responded to TCI’s letter on November 16, 2007 and did not raise any disagreement regarding TCI’s beneficial ownership.

13. Eight months after CSX disclosed that TCI had economic exposure to CSX, on December 19, 2007, TCI filed a Schedule 13D with the SEC that disclosed TCI’s beneficial ownership interest in CSX common stock, the same amount disclosed in May, August and November, as well as its swap positions. In that filing, TCI explicitly stated that it:

currently [has] contractual agreements with eight credit counterparties: Citigroup Global Markets Limited, Deutsche Bank AG, Goldman Sachs International, Merrill Lynch International, UBS AG, Credit Suisse Securities (Europe) Limited, JP Morgan Chase Bank and Morgan Stanley & Co. International plc (f/k/a Morgan Stanley & Co. International Limited), with regard to cash-settled equity swaps (the “TCI Total Return Swaps”) that reference Shares of the Issuer. The TCI Total Return Swaps constitute economic exposure to approximately 11% of the Shares. These contracts do not give [TCI] direct or indirect voting, investment or dispositive control over any securities of the Issuer and do not require the counterparties thereto to acquire, hold, vote or dispose

of any securities of the Issuer. Accordingly, [TCI] disclaim[s] any beneficial ownership in securities that may be referenced in such contracts or that may be held from time to time by any counterparties to the contracts.

14. Furthermore, on January 8, 2008, TCI submitted to CSX its notification of the TCI slate of directors for the CSX Board (the “Notice”). Following that, TCI engaged in discussions with CSX representatives about potential representation on the CSX Board. Over the course of several rounds of communications, TCI agreed to make many concessions. For its part, CSX repeatedly changed its terms and never made a firm offer. In the end, CSX representatives simply stopped returning telephone calls and ceased all communications on this issue.

15. TCI’s January 8, 2008 Notice provided details of both TCI’s ownership interest in CSX common stock and its total return swap positions. The Notice explicitly stated, “If, however, you believe that this Notice for any reason does not comply with the Bylaw Provisions or is otherwise insufficient or defective in any respect, [TCI] requests that you so notify it on or prior to . . . Monday, January 14, 2008.”

16. On January 15, 2008, TCI received a letter from Ellen M. Fitzsimmons, General Counsel of CSX, acknowledging receipt of the Notice (the “Response Letter”). The Response Letter pointed to only one supposed defect in the Notice, stating that CSX took the position that TCI could not reserve the right to nominate alternate nominees because the Bylaws prohibit such nominees.

17. The Response Letter made no mention of the beneficial ownership issue now at the core of CSX’s claims. Rather, the letter merely required that TCI provide copies of the nomination agreements.

29 18. In a letter dated January 16, 2008, TCI specifically noted that, other than TCI’s reservation of rights to nominate alternate nominees, the Response Letter “does not reference any deficiency with regard to the Notice and therefore we deem the Corporation’s response to be an acknowledgement that advance notice has been properly given under Section 11(a)(ii) of the Bylaws of the Corporation.” TCI included the requested nomination agreements with its letter.

19. CSX did not deny the acknowledgement or otherwise respond to the January 16, 2008 letter.

20. In fact, in a public letter from the Board to Chris Hohn, dated February 14, 2008, CSX acknowledged TCI’s “ownership of only 4% of the shares.”

21. On March 17, 2008, CSX filed this lawsuit, alleging for the first time that there were deficiencies in the Notice. CSX deliberately waited to bring this lawsuit until two months after receiving TCI’s January 16, 2008 letter and weeks after its record date of February 27, 2007 had passed. CSX had assessed the likelihood that it would lose Board seats to the TCI/3G slate of nominees. Rather than going to the ballot box, CSX seeks legal intervention in order to (i) deprive TCI of the opportunity to address CSX’s purported concerns in a timely manner; (ii) deprive CSX shareholders of an opportunity to vote at the Shareholders Meeting for anyone other than CSX’s slate of directors; and (iii) deprive CSX shareholders of a choice between competing bylaw proposals at the Shareholders Meeting. CSX strategically waited until after the record date had passed in order to evaluate the shareholder base and likely outcome of the 2008 Board election. CSX has used this lawsuit to reset the record date to a future date in the hope of manipulating a more favorable vote outcome.

30 22. Under the Bylaws, a shareholder must notify the company with regard to any matter it wishes to raise at the annual meeting no less than 90 days prior to the one year anniversary of the previous year’s annual meeting date (the “Notice Period”). Thus, under the Bylaws, the last date on which TCI (or any other shareholder for that matter) could have submitted a notice in compliance with CSX’s Bylaws was February 1, 2008.

23. Although the CSX Defendants, who purportedly believed that TCI had a beneficial ownership interest in TCI for at least a year (Compl. ¶ 4), could have notified TCI of alleged deficiencies in the Notice immediately after TCI submitted the Notice to CSX, the CSX Defendants deliberately said nothing, choosing instead to file this lawsuit outside the Notice Period, thereby preventing TCI from responding to any of CSX’s concerns in time to have its slate of directors considered for the Shareholders Meeting.

24. In short, Mr. Ward’s March 17, 2008 statement that he and the company were merely motivated by their desire to ensure that CSX shareholders “receive complete and accurate information about [TCI’s] holdings, agreement, plans and motivations” prior to the annual shareholder meeting was false. The CSX Defendants’ true (but undisclosed) intention was to deprive TCI of its ability to submit a minority slate of directors and certain Bylaw amendments for shareholder approval at the Shareholders Meeting. The CSX Defendants seek nothing less than to silence their critics.

25. CSX’s filing of this lawsuit is only the Board’s most recent step in its campaign to entrench itself by whatever means necessary. Thus, contrary to the representation made by CSX in its November 16, 2007 response to a TCI letter, that the “Board constantly challenges the CSX management to improve the company’s performance [and] [a]s part of that process, the Board is always receptive to ideas from shareholders,” the Board rebuffed TCI’s

31 requests to meet to discuss TCI’s concern with the company’s management, corporate governance issues and executive compensation policies. The Board’s failure to respond is further contrary to CSX’s Corporate Governance Guidelines, which directs the presiding director to be “available for direct communications with major shareholders as appropriate,” Indeed, it is only after the Board and key management refused numerous overtures by TCI to engage in a dialogue regarding ways to generate shareholder value and improve corporate governance that TCI decided to propose its own slate and bylaw proposals.

26. In addition, as part of CSX’s public campaign to entrench the Board, the CSX Defendants made numerous false and misleading statements and omissions in CSX’s Schedule 14A Preliminary Proxy Statement, filed on February 21, 2008, and amended on February 22, 2008 (the “CSX Proxy”), including disclosures regarding: (i) CSX’s use of material nonpublic information to personally enrich the Board and CSX executives, including Mr. Ward, through the improper use of executive compensation plans; (ii) CSX’s proposal concerning special shareholder meetings; and (iii) the intentions and goals of TCI.

THE PARTIES

27. Counterclaim Plaintiff The Children’s Investment Master Fund is a Cayman Islands company.

28. Counterclaim Defendant CSX Corporation is a Virginia corporation with its principal place of business in Jacksonville, Florida.

29. Third-Party Defendant Michael Ward is the Chairman, President and CEO of CSX Corporation. At all relevant times, Mr. Ward maintained discretionary authority to control or influence the conduct of CSX Corporation and is a controlling person within the meaning of Section 20(a) of the Securities Exchange of 1934 (the “Exchange Act”).

JURISDICTION AND VENUE

30. This Court has jurisdiction over the subject matter of this action based upon 28 U.S.C. §§ 1331, 1332, 1367 and Section 27 of the Exchange Act, 15 U.S.C. § 78aa.

31. Venue in this district is proper pursuant to Section 27 of the Exchange Act, 15 U.S.C. § 78aa, and 28 U.S.C. § 1391(d).

CSX’s Proxy Statement is False and Misleading

32. Section 14(a) of the Exchange Act and the Rules promulgated thereunder prohibit the solicitation of proxies based on false and misleading information. Specifically, Rule 14a-9 provides that “[n]o solicitation subject to this regulation shall be made by means of any proxy statement . . . containing any statement which, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading.” 17 C.F.R. § 240.14a-9.

33. Proxy statements issued pursuant to Section 14(a) of the Exchange Act are made on Schedule 14A, which mandates the disclosure of specific information. 17 C.F.R. § 240.14a-101. Item 8 of Schedule 14A incorporates by reference Item 402 of Regulation S-K, which requires that the proxy statement explain “all material elements of the registrant’s compensation of the named executive officers.” Regulation S-K, Item 402 (b)(1). Item 402 specifically provides that disclosure with respect to compensation include “[h]ow the determination is made as to when awards are granted, including awards of equity-based compensation . . . .” In accordance with the Securities and Exchange Commission’s interpretation, Item 402(b)(2)(iv) of Regulation S-K requires a corporation to disclose the existence of a program, plan or practice that coordinates the timing of a grant with material nonpublic information.

33 34. Independent of the specific requirements of Item 402 of Regulation S-K, CSX has an obligation to disclose in its proxy solicitation materials the relevant information regarding equity-based performance grants set and awarded to certain executives and non-management directors because such information is material to the shareholders’ decision to elect the board that approved those very same stock grants.

35. In addition, CSX’s Insider Trading Policy expressly provides that “[n]o CSX officer, employee or director (including an officer, employee or director of any CSX subsidiary) may purchase, sell or otherwise conduct transactions in any CSX security while he or she is aware of material nonpublic information about CSX.”

36. Further, Article II, Section 2(b) of the Bylaws, adopted on September 12, 2007, provides that directors must “comply with all applicable corporate governance, conflict of interest, confidentiality and securities ownership and trading policies and guidelines of the Corporation.”

37. Similarly, CSX’s Code of Ethics, which applies to members of the Board and all officers and employees of CSX, professes a commitment “to maintaining high ethical and legal standards in every aspect of its business practices” and instructs directors, officers and employees to “avoid even the appearance of impropriety in matters involving legal obligations, the Code of Ethics or other Company policies and procedures.”

CSX’s Proxy Statement Omits Material Information
About Its Executive Compensation Plans

38. As set forth in greater detail below, the CSX Defendants violated Rule 14a-9 by failing to disclose material facts regarding (i) the determination of performance grants to be awarded to management under its Long Term Incentive Plan (“LTIP”); and (ii) the determination of the amount of stock awarded to Directors as part of their compensation under

34 CSX’s Stock Plan for directors (the “Stock Plan”), including the fact that such determinations were made while the Board was in possession of material nonpublic information.

39. Pursuant to CSX’s shareholder-approved Omnibus Incentive Plan, the Board may award CSX executives and employees a variety of equity-based performance compensation. Nothing in the Omnibus Incentive Plan, approved by the shareholders, permits equity grants to be set or issued while the company is aware of material nonpublic information in violation of CSX’s Insider Trading Policy.

40. The Board currently issues equity grants to Named Executive Officers (“NEOs”) (including the company’s CEO Michael Ward, CFO Oscar Munoz, COO Tony Ingram and CCO Clarence Gooden) and other employees under the LTIP which enables the Board to pre-set an amount of CSX common stock for issuance as incentive compensation and award such stock following the attainment of certain performance criteria. The number of shares to be awarded is determined based on the value of the incentive compensation grant divided by the trading price of CSX stock, i.e., the average of the high and low price of CSX stock (the “Trading Price”), on the grant date.

41. On May 1, 2007, immediately prior to the public disclosure of material information, CSX set its stock grants under the LTIP for more than 600 employees, including Mr. Ward and the other NEOs, a practice commonly referred to as “spring-loading.” On May 2, 2007, CSX announced a dividend, and on May 8, 2007, CSX made a series of significant public announcements, the substance of which the Board, Mr. Ward and certain other NEOs were aware on or prior to May 1: (i) a $1 billion or 50% increase in the CSX stock repurchase plan; (ii) a 25% increase in its quarterly dividend; (iii) a commitment to making significant core capital

35 investments; and (iv) a financial projection that by 2010 earnings per share would increase by 15%-17% on a compound annual growth rate basis.

42. Not surprisingly, once this material information was released, the share price of CSX common stock increased significantly, resulting in a Trading Price on May 8 that was 7.4% higher than the Trading Price on May 1.

43. In contrast, in 2006, the company set its LTIP performance share award grants based on a Trading Price immediately following the public release of material information.

44. Had the 2007 LTIP grants been set as they were in 2006, the number of shares of common stock pre-set for issuance would have been approximately 7.4% lower than the number of shares actually set for issuance. Unfortunately, that was not how the Board proceeded with respect to the 2007 LTIP grants. Instead, in violation of CSX’s Insider Trading Policy, Corporate Governance Guidelines, and CSX’s Code of Ethics, the Board set the grants on a date on which it was aware of material nonpublic information that was soon to be publicly released. This resulted in the Board setting a materially larger share grant than it would have had it complied with the company’s own corporate governance rules.

45. CEO, President and Board Chairman Michael Ward — the highest compensated executive in the rail industry — had a performance grant of $4,000,010 worth of CSX shares set aside for him under the 2007-2009 LTIP, based on CSX’s Trading Price of $43.32 on May 1, which translates into 92,347 shares of CSX stock. Had Mr. Ward’s performance grant been set using the day of the May 8, 2007 Trading Price, he would have been awarded only 85,994 shares.

46. CFO Oscar Munoz, COO Tony Ingram and CCO Clarence Gooden each had performance grants of $1,499,998 worth of CSX shares set aside under the 2007-2009 LTIP,

36 based on CSX’s Trading Price of $43.32 on May 1, which translates into 34,630 shares of CSX stock. Had those NEOs’ performance grants been set using the day of the May 8, 2007 Trading Price, they would have each been awarded only 32,248 shares.

47. The CSX Defendants’ use of the May 1, 2007 grant date to set its performance grants under the LTIP violated CSX’s Insider Trading Policy. Moreover, the Board, Mr. Ward and certain other NEOs, in a subsequent attempt to hide their poor governance practices from the shareholders, violated the disclosure requirements under the federal securities laws.

48. Specifically, CSX violated Rule 14a-9 by failing to disclose in the CSX Proxy, which was approved by Mr. Ward, material facts regarding the determination of the performance grants, including (i) that the company set its performance grants while in possession of material nonpublic information; (ii) that the Omnibus Plan, adopted by the shareholders, did not include any provision that would allow the Board to set grants while in possession of such material nonpublic information; (iii) that the setting of the grants violated the company’s Corporate Governance Guidelines and Insider Trading Policy and Code of Ethics; and (iv) how the award pursuant to the LTIP is determined. These omissions are material because (1) they are required by Item 402 of Regulation S-K; and (2) they are material to the shareholders’ decision to elect the directors that approved these actions, especially during a contested proxy solicitation focused on corporate governance and executive compensation issues.

49. CSX also violated CSX’s Insider Trading Policy, Code of Ethics and Bylaws in awarding certain grants under the Stock Plan. The company’s disclosure in its Proxy with respect to those grants violated the federal securities law because it failed to disclose facts required by Item 402 of Regulation S-K. Independent of Item 402 of Regulation S-K, the CSX

37 Defendants violated Section 14(a) of the Exchange Act and Rule 14a-9 by failing to disclose information about these stock grants that is material to the CSX shareholders’ decision to elect the Board that approved those grants.

50. Specifically, pursuant to the CSX Stock Plan, at least 50% of each non-management directors’ annual retainer must be in the form of CSX stock. The number of shares that a Director receives as the stock component of his compensation pursuant to the plan is based on the market value of CSX stock as of the date immediately preceding the annual shareholders meeting. The shares, in turn, are automatically issued on the date of the meeting.

51. Notwithstanding the automatic features of the annual grant, under CSX’s Corporate Governance Guidelines, the Board must review its entire compensation structure, including the Stock Plan, and set the compensation for non-management directors, at least once every three years. In addition, the Board retains discretion to amend at any time the Stock Plan by a majority vote.

52. Upon information and belief, the Board met on May 1, 2007 to review and renew directors’ compensation and made no changes to their compensation packages, thereby effectively reconfirming the Stock Plan.

53. The 2007 annual shareholders meeting was held on May 2. Therefore, under the Stock Plan, the number of shares that the directors were awarded pursuant to the annual stock grant was determined on May 1, 2007, the day immediately prior to the annual shareholders meeting and dividend announcement, and only one week before the company made a series of public announcements, as set forth at paragraph 41.

54. At the time the Board reconfirmed the Stock Plan, it was aware that the shares that would be issued to directors under the Stock Plan would increase in value as a result

38 of CSX’s May 2, 2007 dividend announcement and May 8, 2007 press release regarding: (i) a $1 billion or 50% increase in the CSX stock repurchase plan; (ii) a 25% increase in its quarterly dividend; (iii) a commitment to making significant core capital investments; and (iv) a financial projection that by 2010 earnings per share would increase by 15%-17% on a compound annual growth rate basis. The Board, therefore, was in possession of material nonpublic information at the time it reconfirmed the Stock Plan, thereby approving the award to directors of shares the Board knew would significantly increase in value mere days after receiving them.

55. In addition to the annual stock grant, directors are empowered to grant themselves shares on a discretionary basis at any time “upon such terms as [the Board] deems fit.” In December 2007, the CSX Defendants, acting through the Board — the highest compensated board in the rail industry — exercised that discretion to award each of CSX’s 11 independent directors a grant of 5000 shares of common stock, in direct violation of the CSX’s Insider Trading Policy, which explicitly prohibits directors from engaging in transactions of CSX securities between the first day of the last calendar month of a quarter through the second day following an earnings release (the “Blackout Period”). December is the last calendar month of a quarter and CSX reported its fourth quarter 2007 earnings on January 22, 2008.

56. In addition to violating the company’s Insider Trading Policy, the CSX Defendants’ discretionary grant of common stock to the Board during the Blackout Period also violated Article II, Section 2(b) of CSX’s Bylaws, which provides that directors must “comply with all applicable corporate governance, conflict of interest, confidentiality and securities ownership and trading policies and guidelines of the Corporation.”

57. The only disclosure of the annual stock grants in the CSX Proxy is a statement that “[d]uring 2007, each non-employee director received an annual retainer of

39 $75,000, at least 50% of which was payable by CSX stock pursuant to the CSX Corporation Stock Plan for Directors.” The disclosure of the discretionary stock grant in the CSX Proxy consists of a statement that “each non-employee director also received a grant of 5,000 shares of CSX stock, which had a market value of $217,625 (based on an average of the high and low price per share on the date of grant of $43.525).” These statements violate Rule 14a-9 because they are false and misleading in that they omit material facts such as (i) that the amount of the annual stock grant was determined while the Board was in possession of material nonpublic information; (ii) that the discretionary grant was awarded during the Blackout Period; (iii) when the shares were awarded to the Board; (iv) the date the shares included in the annual stock grant pursuant to the Stock Plan were valued; (v) how the awards pursuant to the Stock Plan are accomplished; and (vi) that the shares were awarded in violation of the company’s Insider Trading Policy, Corporate Governance Guidelines, and Code of Ethics.

CSX Has Subverted Shareholders’ Attempts
To Improve Corporate Governance

58. At CSX’s June 25, 2008 Shareholders Meeting, the shareholders will be presented with various competing proposals to amend the Bylaws of the company to permit the shareholders to call special shareholder meetings. CSX’s disclosure about the proposals in the CSX Proxy violates Rule 14a-9 because, as described below, CSX makes false and misleading statements and omits material disclosures regarding those proposals.

59. A proposal that the Board amend the Bylaws to permit shareholders to call special shareholder meetings was put to a shareholder vote at CSX’s 2007 annual shareholders meeting on May 2, 2007 (the “2007 Proposal”). That proposal, which was a non-binding proposal, contained no restrictions on shareholders’ ability to call special meetings other than that shareholders calling the special meeting hold between 10% to 25% of the outstanding shares.

40 60. Shareholders, including TCI, have been concerned about CSX’s poor corporate governance standards. Indeed, in a November 16, 2007 response to a TCI letter, which was filed with CSX’s Form 8-K of the same date, CSX noted that “TCI criticizes [the] corporate governance” of CSX, and that “TCI’s recent letters and public statements express the view that there is a fundamental lack of quality in CSX’s business results, management and Board.”

61. The non-binding 2007 Proposal made its purpose clear — to give shareholders the ability to exercise greater influence over elections of directors. The proposal outlined a myriad of problems with the Board, including that the company “had no Independent Chairman”; “CEO pay was $23 million in one year”; one of the directors “was rated a ‘problem director’”; and “directors also served on 5 boards rated D by The Corporate Library.”

62. Another concern addressed by the 2007 Proposal was shareholder control over timing “when events unfold quickly and issues may become moot by the next annual meeting.” Management opposed the 2007 Proposal.

63. In opposing the 2007 Proposal, CSX management stated:

The Board believes that [the unqualified right of shareholders to call for special meetings] should not be available to a minority of shareholders, particularly since shareholders already have an opportunity to bring matters before shareholder meetings on an annual basis . . . . Enabling a small minority of shareholders to call special meetings could impose substantial administrative and financial burdens on the Company, and significantly disrupt the conduct of the Company’s business.

64. CSX’s position was soundly rejected by shareholders and the 2007 Proposal was approved by a margin of more than two-to-one. Despite this overwhelming approval, the Board failed to adopt a bylaw codifying the position taken in the 2007 Proposal that shareholders should have the power to call special meetings. This rejection is particularly troublesome given the fact that in 2007 two other bylaw amendments, one of which addressed

41 shareholder proposals and was approved by a smaller majority than the 2007 Proposal, were adopted by the Board after the 2007 shareholder meeting.

65. The assurances in the company’s November 16, 2007 letter to TCI that the “Board constantly challenges the CSX management team to improve the company’s performance [and] [a]s part of that process, the Board is always receptive to ideas from shareholders” and Mr. Ward’s statement in a February 8, 2006 press release that “[CSX] support[s] the clear trend among large publicly owned corporations to adopt director election policies that are responsive to shareholder preferences” is belied by the Board’s failure to take the action overwhelmingly requested by shareholders by their approval of the 2007 Proposal.

66. In the same vein, notwithstanding CSX’s Corporate Governance Guidelines, which directs the presiding director to be “available for direct communication with major shareholders as appropriate,” the Board declined a TCI request, made through CSX’s advisor Evercore, that the Board meet with TCI to discuss proposals to improve corporate governance standards and other issues relating to management of the company.

67. Approximately ten months after shareholders approved the 2007 Proposal, on January 14, 2008, pursuant to Rule 14a-8(j) of the Exchange Act, CSX wrote a letter (the “CSX Letter”) requesting permission from the SEC to exclude from proxy materials for the company’s 2008 Shareholders Meeting a proposal put forth by CSX shareholder Ram Trust Services, Inc. (the “Ram Proposal”) to amend the Bylaws to allow shareholders holding 15% of the outstanding shares to call a special meeting. The CSX Letter is yet another example of the company’s lack of responsiveness to its shareholders.

68. The Ram Proposal stated, “We believe shareholders should have the ability to call a special meeting when they think a matter is sufficiently important to merit timely consideration. We believe this is good corporate governance.”

69. In the CSX Letter requesting permission to omit the Ram Proposal from its proxy materials, CSX falsely stated that the company was about to adopt an amendment to the Bylaws (the “February Amendment”) that “substantially implements the [Ram] Proposal.” The CSX Letter also falsely represented to the SEC that “the CSX Amendment addresses the primary objectives and underlying concerns of the [Ram] Proposal . . . . The only differences between the CSX Amendment and the [Ram] Proposal are the addition of procedural, informational and timing limitations in the CSX Amendment, none of which conflicts with the primary objectives and underlying concerns of the [Ram] Proposal.” These representations were false for the reasons set forth at paragraphs 81-83.

70. The February Amendment referred to in the CSX Letter was approved by the Board on February 4, 2008. On March 13, 2008, the SEC rejected CSX’s request to exclude the Ram Proposal from its proxy materials for the company’s 2008 Shareholders Meeting, apparently concluding that CSX had not “substantially implemented” the Ram Proposal, by adopting the February Amendment.

71. In fact, rather than accomplishing the same result as the Ram Proposal, the February Amendment operates (i) to preclude, as a practical matter, any shareholder who actually wants to invoke its provisions from calling a special meeting; (ii) to prevent a special meeting from being called for the purpose of electing shareholder-nominated candidates to the Board or removing incumbent directors; and (iii) to create a special loophole allowing the Board — without

43 shareholder approval — to change the special meeting requirements to further block shareholders from mounting special meetings.

72. Further, the February Amendment contains no requirement that CSX hold a special meeting within any specific timeframe after receipt of a shareholder request that it do so. Because the timing of the special meetings is in the Board’s complete discretion, the February Amendment permits the Board to delay special meetings and roll shareholder proposals into annual meetings, notwithstanding shareholder demands. Further, because under Virginia law the directors’ terms expire each year at the annual shareholders meeting, under CSX’s bylaws, which provide for re-election of the entire Board at the same time, an annual meeting would never be an occasion to remove a director since such director’s term would already be complete.

73. In addition, unlike the Ram Proposal, the February Amendment restricts the subject matter for which a special shareholder meeting may be called. Specifically, the February Amendment bars raising any subject matter “within 12 months after any annual or special meeting of shareholders at which the same matter was included on the agenda, or if the same matter will be included on the agenda at an annual meeting to be held within 90 days after the receipt by the Corporation of such request.”

74. The February Amendment further states “the election or removal of directors shall be deemed the same matter with respect to all matters involving the election or removal of directors.” Directors are elected at annual meetings; therefore, defining “same matter” as it is defined in the February Amendment operates to bar shareholders from calling a special meeting for the purpose of electing shareholder-nominated directors or seeking to remove existing directors.

44 75. As the Board made clear in its February 14, 2008 letter to TCI, the Board specifically intended to bar shareholders from calling special meetings for the purpose of electing or removing directors, stating “[a]s the term implies, ‘special’ meetings are the place for shareholders to consider extraordinary matters, not the regular annual business of director elections.”

The February Amendment Violates Virginia Law

76. The February Amendment violates Virginia law, which protects the rights of shareholders by expressly mandating that “[t]he shareholders may remove one or more directors with or without cause, unless the articles of incorporation provide that directors may be removed only with cause.” VA Code § 13.1-680.

77. CSX’s Articles of Incorporation do not limit the circumstances under which directors may be removed; therefore, CSX directors may be removed with or without cause.

78. Under Virginia law, the directors’ terms expire each year at the annual shareholders meeting. Thus, under the Bylaws, which provide for re-election of the entire Board at the same time, an annual meeting would never be an occasion to remove a director since such director’s term would already be complete.

79. In addition, under Virginia law, “[t]he bylaws of a corporation may contain any provision for managing the business and regulating the affairs of the corporation that is not inconsistent with the law or the Articles of Incorporation.” VA Code § 13.1-624.

80. Because it operates to bar a special shareholder meeting from being called for the purpose of removing existing directors and electing shareholder-nominated directors, the February Amendment is inconsistent with Virginia law as it infringes upon shareholders’ rights guaranteed by Virginia Code § 13.1-680 and thus violates Virginia Code § 13.1-624.

CSX’s Proxy Disclosure Regarding The Competing Bylaw
Proposals Is Materially False and Misleading

81. On January 25, 2008, TCI submitted to CSX a supplemental notice stating its intent to place on its proxy two proposals to amend the Bylaws (together the “TCI Proposal”): (1) a proposal similar to the Ram Proposal; and (2) a proposal that would repeal any amendments to the Bylaws enacted between January 1, 2008 and the date of the 2008 Shareholders Meeting. The second part of the TCI Proposal would have the effect of repealing the February Amendment.

82. On February 21, 2008, CSX submitted to the SEC the CSX Proxy for the 2008 Shareholders Meeting, which included a proposal that shareholders ratify the February Amendment (the “Limited Special Meeting Proposal”).

83. Unlike the Ram Proposal and the TCI Proposal, the February Amendment for which the Limited Special Meeting Proposal seeks ratification imposes extreme procedural hurdles on shareholders who wish to call a special meeting. Thus, under the February Amendment:

(a) a special meeting may be called only by record holders of shares representing at least 15% of the combined voting power of the outstanding shares of all classes of capital stock entitled to vote at the time the Secretary receives the written request to call such special meeting;

(b) in the event that a shareholder of record calls a special meeting on behalf of certain beneficial owners, such shareholder must present CSX with information about those beneficial owners and about representations made by the beneficial owners, which is likely to be a practical impossibility in many circumstances; and

(c) if the shareholders of record (including all beneficial owners on whose behalf a shareholder of record is making the request) fail to hold 15% beneficially at the time of the special meeting, the request to call the special meeting is deemed to be revoked.

46 84. As of January 7, 2008, more than 96% of the total outstanding shares of CSX were held in a form commonly known as “street name” ownership, which refers to shares held of record on the books of the Depository Trust Company (the “DTC”) in special accounts registered in the name of investment banks and custodians on behalf of ultimate beneficial owners. Because at CSX, only the DTC is the record holder of the shares; an individual or small group of investors wishing to call for a special meeting would need to access other beneficial owners by engaging in a consent solicitation conducted through the investment banks and custodians, who, on behalf of the beneficial owners, can request that DTC, as “holder of record” submit notice to CSX.

85. Although the DTC would honor the requests of the investment banks to approach a company for the purposes of seeking a special meeting on behalf of beneficial owners, because of legal and regulatory restrictions the investment banks and custodians are prevented from disclosing information about the beneficial owners of the shares they hold under applicable law unless they receive explicit consent directly from the beneficial owners.

86. Thus, CSX’s condition that a record holder of 15% of the shares provide to CSX information about beneficial owners known to be protected from disclosure via operation of law makes it practically impossible for any such request to be made requiring information about beneficial owners.

87. As a result, the February Amendment would operate to block shareholders from ever making a successful request on CSX to call a special meeting pursuant to a consent solicitation.

88. In addition, the February Amendment’s condition that the shareholders who request a special meeting hold their shares both on the date that CSX receives notice of their

47 request and on the meeting date is extraordinarily unusual, if not unprecedented. Moreover, nowhere in the Bylaws is this condition imposed with respect to shareholder matters presented at annual meetings.

89. A shareholder who calls for a special meeting based on consent obtained from other shareholders would be required to obtain the agreement of those other shareholders to continue to hold their shares through the meeting date and would be automatically barred from holding a special meeting if any consenting shareholder sold shares to bring the total amount of consenting shares below the 15% threshold.

90. In addition, unlike the TCI and Ram Proposals described at paragraphs 67 and 81, the February Amendment for which CSX seeks approval restricts the purpose for which a special shareholders meeting may be called.

91. Moreover, the Board included in the February Amendment an amendment to Article VIII of the Bylaws (the “Article VIII Provision”), which allows the Board to impose additional restrictions on shareholders’ rights without shareholders’ approval. The Article VIII Provision provides:

(a) Except as specified in clause (b) below, these Bylaws may be amended or repealed at any regular or special meeting of the Board of Directors by the vote of a majority of the Directors present. These Bylaws may also be repealed or changed, and new Bylaws made by, the shareholders, provided notice of the proposal to take such action shall have been given in the notice of the meeting.

(b) Article I, Section 2(b) of these Bylaws [regarding special meetings] may only be amended to increase (i) the percentage of shares required to be held by shareholders to request a special meeting of shareholders or (ii) the 12 months or 90 days referred to in clause (x) of the second paragraph of such Section 2(b), or repealed, with the approval of the shareholders. This clause (b) may only be repealed or amended with the approval of the shareholders.

48 92. Although on its face, the language appears to limit the Board’s power to amend the Bylaws by which it purportedly provided for special shareholders meeting, in Article VIII(a), the Board specifically reserves the power to unilaterally impose additional restrictions on shareholders’ ability to call a special meeting, limiting the circumstances for which shareholder approval is required to those specified in Article VIII(b).

93. The CSX Proxy placed the CSX Limited Special Meeting Proposal on the ballot in opposition to the Ram Proposal and the TCI Proposal. The most significant differences in the conditions a shareholder must satisfy to call a special shareholder meeting are set forth in the chart below:

	CSX Limited Special Meeting Proposal	TCI Proposal	Ram Proposal
Requisite percentage of shareholders to call a special meeting	15%	15%	15%
Types of shareholders permitted	Record holders	Shareholders of capital stock entitled to vote	Outstanding voting stock
Limitations on the subject matter of the meetings	Not available for the election or removal of directors or matters decided within the last 12 months or to be decided in next 90 days	None	None
Requirements of the shareholders requesting the meeting at the time of the meeting	Shares representing at least the requisite percentage must continue to be beneficially held through the meeting date	None	None

94. CSX makes several materially false and misleading statements in its Proxy regarding the CSX Limited Special Meeting Proposal, including statements about (i) how the

49 Limited Special Meeting Proposal relates to the 2007 Proposal, (ii) how the Limited Special Meeting Proposal operates, and (iii) how it compares to the TCI Proposal and Ram Proposal.

95. The CSX Proxy states:

The Board believes that the Amendments address the views of shareholders reflected in the vote at the 2007 annual meeting to permit shareholders to cause special shareholder meetings to be held, while providing procedural safeguards to protect the resources of the Company and shareholders’ investment from the substantial administrative and financial burdens, and disruptive effects, that serial shareholder meetings on the same matter would impose on the Company . . . . The Board believes that the limitations on the purpose of special meetings requested by shareholders contained in the Amendments will cause shareholders to be judicious with the time and resources of the Company and their fellow shareholders in their use of the special meeting bylaw provision, as a special meeting of shareholders is very expensive, time-consuming and disruptive, with substantial costs and significant time required to be devoted by senior management and the Board.

96. In the CSX Proxy, CSX falsely states that the CSX Limited Special Meeting Proposal “address[es] the views of shareholders reflected in the vote at the 2007 annual meeting to permit shareholders to cause special shareholder meetings to be held.” This statement is false and misleading because it is a disingenuous effort to appear responsive to the shareholders’ previously expressed wishes underlying the 2007 Proposal while putting forth the CSX Limited Special Meeting Proposal that, for all practical purposes and contrary to those wishes that were approved overwhelmingly by shareholders, may be impossible for shareholders to use.

97. The statements regarding the “procedural safeguards” included in the CSX Limited Special Meeting Proposal are false and misleading because they omit:

(a) clear disclosure that only shareholders of record may make a request for a special meeting;

50 (b) a description of the “safeguards” identifying the practical barriers any shareholder seeking to perfect this right would face;

(c) the requirement that shares must be held through the meeting date, which is an extraordinary requirement that differs from the requirements of the annual meeting; and

(d) any description of the annual meeting procedures that would allow shareholders to evaluate CSX’s accuracy in asserting that the procedural “safeguards” for special meetings are “similar” to the procedural requirements for presenting shareholder matters at annual meetings.

98. CSX also omits material disclosure describing the power that the Board has given to itself in Article VIII to amend, without shareholder approval, the bylaws relating to special meetings. That power allows the Board to significantly hinder shareholders’ ability to request special meetings.

99. In the CSX Proxy, CSX falsely describes the Ram Proposal and the TCI Proposal, stating that they “provide no mechanism, and may limit the ability of the Board to put in place a mechanism, to verify that the persons requesting a special shareholder meeting are in fact shareholders of the Company.” This statement is false because the TCI Proposal explicitly incorporates the procedural requirements for annual meetings, and requires shareholder information and representations as set forth in Section 11(a)(ii)(C) of the Bylaws. This statement also is false and misleading because there is no legal or factual basis to support the statement that the Ram and TCI Proposals “may” limit the ability of the Board to put in place such a mechanism or to explain why any such additional mechanism would be needed.

100. The CSX Proxy misleadingly states that, at the 2008 Annual Meeting of Shareholders, “shareholders will be asked to approve the bylaw amendments adopted by the Board of Directors relating to the right of shareholders to request a special shareholder meeting.” This statement is false and misleading because the CSX Limited Special Meeting Proposal does

51 not provide a shareholder with any viable right to call special meetings, but instead makes it a practical impossibility.

101. CSX’s statement in the CSX Proxy that shareholders will vote on “[a]pproval of the bylaw amendments adopted by the Board of Directors allowing shareholders to request special shareholder meetings,” is false and misleading because it omits material facts regarding the procedural hurdles imposed by the CSX Limited Special Meeting Proposal as described in paragraphs 83-89.

102. The false and misleading statements in the CSX Proxy make it plainly obvious that CSX is favoring its restrictive proposal in opposition to the two unconditional shareholder proposals that compete directly with the CSX Limited Special Meeting Proposal, in violation of Rule 14a-4(a)(3) which mandates that proxy statements “identify clearly and impartially each separate matter intended to be acted upon.” 17 C.F.R. § 240.14a-4(a)(3).

103. The false and misleading statements contained in the CSX Proxy were made knowingly by the CSX Defendants for the sole purpose of obtaining personal advantage by seeking to implement corporate governance procedures designed to entrench the current Board members and to insulate them from removal by CSX shareholders.

The CSX Smear Campaign

104. As part of the CSX Defendants’ smear campaign to block TCI’s slate of directors and Bylaw proposals from being considered at the 2008 Shareholders Meeting, the CSX Defendants have made a series of irresponsible and reckless statements about TCI’s position on capital expenditures and the nomination of a minority slate for election to the Board. In Fall 2007, proposed legislation in the House of Representatives that would have had the effect of reducing rail profits. TCI recommended in public statements, including in an October 16, 2007

52 letter to the Board, that CSX take temporary steps to freeze growth investment until the regulatory landscape was less uncertain. TCI has always made clear that it believes that CSX should continue to make capital expenditures needed for safety and maintenance. Nonetheless, CSX and Mr. Ward have repeatedly and intentionally failed to distinguish between two types of capital expenditures: those related to growth and those related to safety and maintenance. CSX also has omitted in every public statement the full context of TCI’s concern, which is how railroads should respond to proposed federal legislation that would reduce rail profits and thus limit overall revenue.

105. CSX’s scare tactics date back to November 16, 2007, when CSX filed its 8-K and made the following statements:

(a) “CSX will not compromise safety, service and efficiency by arbitrarily restricting investment as TCI suggests”; and

(b) “CSX will not ‘threaten’ to arbitrarily restrict capital spending on critical national infrastructure assets in a misguided and counterproductive effort to pressure legislative and regulatory authorities, as TCI has urged.”

106. CSX deliberately mischaracterized TCI’s comments with regard to investments, in an attempt to scare shareholders to rally around the existing Board for the 2008 Shareholders Meeting.

107. The actual statement made by TCI with regard to capital expenditures appears in its October 16, 2007 public letter to the Board, which states:

Over the past year, the [Surface Transportation Board] has issued several decisions against the railroads, including those related to smaller shipper rate cases, fuel surcharges and the cost of capital. The STB’s slashing of the cost of capital coupled with a refusal to simultaneously consider replacement cost has significantly increased regulatory risk. We do not believe CSX management fully appreciates the regulatory and legislative risks facing the industry. In fact, CSX management is fanning the anti-rail flames and thus only increasing these risks by massively overstating

CSX’s true returns. We therefore ask the Board and management take the following actions . . . . Freeze growth investment until the fate of the re-regulation bill is known. It is irresponsible to make long-term investments without knowing the long-term returns, and the long-term returns are unknowable while the re-regulation risk persists at this heightened level. This is a sad outcome, and ironic as Washington acknowledges the railroads’ need to make long-term investments, and yet it is the uncertainty emanating from Washington that ensures such investments cannot be justifiably made.

(emphasis added)

108. Knowing that TCI had leveled significant criticism at CSX for its lack of robust corporate governance standards and its lack of attention to important developing events on Capitol Hill, CSX chose to avoid addressing a sophisticated concern about its conduct by shamelessly taking the language entirely out of context, twisting it to suit the Board, and creating a media-friendly sound bite for its campaign to entrench the Board.

109. On March 5, 2008, Mr. Ward and Snehal Amin of TCI testified during a Congressional hearing about investment in the railroad industry. Mr. Ward sat next to Mr. Amin, who testified concerning the intentions and goals of TCI. During the Congressional hearing, Mr. Amin repeatedly made clear that TCI was interested in making a long term investment in CSX, was in favor of CSX’s continuing to make capital expenditures for safety and maintenance, and advocated only freezing growth capital expenditures as a response to regulatory uncertainty. Indeed, Mr. Amin specifically said, “On investment, I want to make one thing very clear. We have never, nor would we ever suggest that railroads cut any spending in maintenance or safety.”

110. Nevertheless, six days later, on March 11, 2008, the Washington Times published an editorial entitled “Rewards for Railroads,” written by Mr. Ward (the “Ward Editorial”). The Ward Editorial criticized the goals of “activist hedge funds” while trumpeting the recent accomplishments of CSX.

111. In an attempt to mischaracterize the statements and actions undertaken by TCI, Mr. Ward made several false and misleading statements, such as, “One hedge fund . . . actually demanded that CSX freeze investment in its rail system.” The impact of this statement was further heightened by Mr. Ward’s false and misleading comment that, “[b]y their very nature, railroads require constant investment to ensure high levels of safety and customer service,” falsely implying that the “freeze” purportedly demanded by TCI jeopardized CSX’s commitment to safety.

112. Mr. Ward further denounced activist investors, such as TCI, as “short-sighted investors .. . . merely putting [their] narrow agenda ahead of the long-term interests of the company, their fellow shareholders, and the customers who sustain the business.” Mr. Ward’s false and misleading statement that TCI is a “short-sighted investor” is yet another attempt to mischaracterize TCI’s long-term interest in CSX.

113. Edward J. Kelly III, presiding director of CSX’s Board, also joined in CSX’s parade of false statements made to stifle its critics, by stating in a press release issued on the date this lawsuit was commenced that “the [CSX] Board concluded that TCI is not simply interested in having a representative voice on the Board, but is instead seeking to achieve effective control of the CSX Board of Directors and dictate Company strategy.”

114. The false and misleading statements by CSX, Mr. Ward and Mr. Kelly are undermined by the fact that they know that TCI and 3G are nominating directors for only five of the 12 Board seats and that only one of the five director nominees is affiliated with TCI. Despite having full knowledge that TCI and 3G are nominating a minority slate of nominees, in its February 14, 2008 letter to Chris Hohn of TCI, CSX falsely accused TCI of trying to achieve “effective control of the company notwithstanding its ownership of only 4% of the shares.”

55 115. The existing public record and statements publicly issued by TCI contradict the false and misleading statements, in the Ward Editorial, the press release quoting Mr. Kelly’s and CSX’s filings with the SEC.

116. Although CSX failed to timely file the Ward Editorial as part of its solicitation material, the Ward Editorial was filed with the SEC as a Supplemental Schedule 14A on March 17, 2008, the day CSX commenced this lawsuit. Rule 14a-9 applies to solicitation material “made by means of any proxy statement, form of proxy, notice of meeting or other communication, written or oral.” This includes “[m]aterial which directly or indirectly impugns character, integrity or personal reputation, or directly or indirectly makes charges concerning improper, illegal or immoral conduct or associations, without factual foundation.” 17 C.F.R. § 240.14a-9.

117. In the Ward Editorial, Mr. Ward, speaking on behalf of CSX, makes the false statements described at paragraphs 110-112. The statements are false because they misstate and omit material facts regarding TCI’s investment in, and statements about, CSX.

FIRST COUNTERCLAIM

(Violations of Section 14(a) of the Exchange Act)

118. TCI repeats the allegations of preceding paragraphs 1-117 as if fully set forth herein.

119. As set forth herein, the CSX Defendants violated Section 14(a) and the rules and regulations promulgated thereunder by filing incomplete, false and misleading proxy solicitations, including the CSX Proxy, the Ward Editorial, the February 14, 2008 Board letter to TCI, and the March 17, 2008 press release announcing the lawsuit.

56 120. The CSX Proxy is materially false and misleading because it fails to disclose that CSX set its LTIP performance grants while in possession of material nonpublic information.

121. The CSX Proxy is materially false and misleading because it fails to disclose that the Omnibus Plan, adopted by the shareholders, did not include any provision that would allow the Board to set grants while in possession of material nonpublic information.

122. The CSX Proxy is materially false and misleading because it fails to disclose that the setting of performance grants under the LTIP violated the company’s Corporate Governance Guidelines, including its Insider Trading Policy.

123. The CSX Proxy is materially false and misleading because it fails to disclose how the awards pursuant to the LTIP were determined.

124. The CSX Proxy is materially false and misleading because it fails to disclose that the amount of the annual stock grant under the Stock Plan was determined while the Board was in possession of material nonpublic information.

125. The CSX Proxy is materially false and misleading because it fails to disclose that the discretionary grant was awarded during the Blackout Period.

126. The CSX Proxy is materially false and misleading because it fails to disclose when the shares were awarded to the Board under the Stock Plan.

127. The CSX Proxy is materially false and misleading because it fails to disclose how the awards pursuant to the Stock Plan are determined.

128. The CSX Proxy is materially false and misleading because it fails to disclose that the directors’ shares were awarded in violation of CSX’s Insider Trading Policy, Corporate Governance Guidelines and Code of Ethics.

57 129. The CSX Proxy is materially false and misleading because it is a disingenuous effort to appear responsive to the CSX shareholders’ previously expressed wishes underlying the 2007 Proposal.

130. The CSX Proxy is materially false and misleading because it omits clear disclosure that only shareholders of record may make a request for a special meeting.

131. The CSX Proxy is materially false and misleading because it omits a description of the “safeguards” identifying the practical barriers any shareholder seeking to perfect this right would face.

132. The CSX Proxy is materially false and misleading because it omits the requirement that shares must be held through the meeting date, which is an extraordinary requirement that differs from the requirements of the annual meeting.

133. The CSX Proxy is materially false and misleading because it omits any description of the annual meeting procedures that would allow shareholders to evaluate CSX’s accuracy in asserting that the procedural “safeguards” for special meetings are “similar” to the procedural requirements for presenting shareholder matters at annual meetings.

134. The CSX Proxy is materially false and misleading because it omits disclosures describing the Article VIII powers to amend the Limited Special Meeting Proposal without obtaining shareholder approval.

135. The CSX Proxy is materially false and misleading because it contains material misstatements describing the TCI Proposal.

136. The CSX Proxy is materially false and misleading because it omits material facts regarding the procedural hurdles imposed by the CSX Limited Special Meeting Proposal.

58 137. The CSX Proxy is false and misleading because CSX favors its restrictive proposal in opposition to the two unconditional shareholder proposals that compete directly with the CSX Limited Special Meeting Proposal, in violation of Rule 14a-4(a)(3).

138. Mr. Ward’s statements as CSX’s CEO in the Ward Editorial are materially false and misleading because they misstate and omit material facts regarding TCI’s investment in, and statements about, CSX.

139. The February 14, 2008 proxy materials are materially false and misleading because they deliberately mischaracterize a 4% beneficial ownership position and a minority board slate as “control.”

140. The March 17, 2008 proxy materials are materially false and misleading because they omit material information with regard to the real reasons CSX commenced this lawsuit against TCI and 3G.

141. The omissions and misrepresentations in the CSX Proxy, the Ward Editorial, and CSX’s other regulatory filings regarding this contested solicitation concern information material to CSX shareholders and the investing public.

142. CSX’s shareholders and the investing public will be irreparably harmed in the absence of the declaratory and equitable relief as prayed for herein.

SECOND COUNTERCLAIM

(Violations of Section 20(a) of the Exchange Act)

143. TCI repeats the allegations of preceding paragraphs 1-142 as if fully set forth herein.

144. Counterclaim Defendant Michael Ward maintained discretionary authority to control or influence the conduct of CSX, including CSX’s actions and omissions in violation of Section 14(a) of the Exchange Act complained of herein.

59 145. Counterclaim Defendant Ward is a controlling person of CSX within the meaning of Section 20(a) of the Exchange Act and is liable for the violations of Section 14(a) of the Exchange Act as pleaded herein.

THIRD COUNTERCLAIM

(Violation of Virginia Code § 13.1-624)

146. TCI repeats the allegations of preceding paragraphs 1-145 as if fully set forth herein.

147. Virginia Code § 13.1-680 protects the rights of shareholders by mandating that “[t]he shareholders may remove one or more directors with or without cause, unless the Articles of Incorporation provide that directors may be removed only with cause.”

148. CSX’s articles of incorporation do not limit the circumstances under which directors may be removed; therefore, CSX directors may be removed with or without cause.

149. Virginia Code § 13.1-624 states that “[t]he bylaws of a corporation may contain any provision for managing the business and regulating the affairs of the corporation that is not inconsistent with law or the articles of incorporation.”

150. Because it operates to bar a special shareholder meeting from being called for the purpose of removing existing directors and electing shareholder-nominated directors, the February Amendment infringes upon shareholders’ rights guaranteed by Virginia Code § 13.1-680 and thus violates Virginia Code § 13.1-624.

151. Pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201, TCI is entitled to a declaration of this court that the February Amendment violates applicable Virginia law and is therefore void.

PRAYER FOR RELIEF

WHEREFORE, TCI prays for relief in the form of an Order:

(a) Declaring that CSX failed to file timely, complete and accurate disclosures in violation of Section 14(a) of the Act;

(b) Directing that CSX file truthful and accurate Schedule 14A disclosures, in compliance with the applicable rules and regulations, forthwith;

(c) Declaring that CSX’s Board of Directors was in violation of the CSX’s Insider Trading Policy, Corporate Governance Guidelines, CSX’s Code of Ethics and Bylaws;

(d) Directing that the February Amendment is void under Virginia Code §§ 13.1-680 and 13.1-624;

(e) Enjoining CSX from proposing the CSX Limited Special Meeting Proposal from being considered at the June 25, 2008 Shareholders Meeting or, if rescheduled, any annual shareholders meeting scheduled for 2008;

(f) Enjoining CSX from voting proxies received prior to such time as the Court ascertains that CSX has filed an accurate and compliant proxy statement;

(g) Enjoining CSX from committing any violations of Rule 14a-9 in connection with any further solicitation relating to the June 25, 2008 Shareholder Meeting.

(h) Directing the CSX Board of Directors to pay for the preparation and filing of CSX’s amended proxy statement;

(i) Granting costs, including attorneys’ fees; and

(j) Granting such other and further relief as the Court may deem just and proper.

61

Dated April 4, 2008

SCHULTE ROTH & ZABEL LLP


By:	/s/ Howard O. Godnick
	Howard O. Godnick
	Yocheved Cohen
	919 Third Avenue
	New York, New York 10022
	(212) 756-2000
		howard.godnick@srz.com
		yocheved.cohen@srz.com

Attorneys for The Children’s Investment Fund
Management (UK) LLP, The Children’s
Investment Fund Management (Cayman) LTD.,
The Children’s Investment Master Fund,
Christopher Hohn, and Snehal Amin

62

EX-99.7 3 a08-8514_2ex99d7.htm EX-99.7

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

CSX CORPORATION,

Plaintiff,

v.

THE CHILDREN’S INVESTMENT FUND
MANAGEMENT (UK) LLP, THE
CHILDREN’S INVESTMENT FUND
MANAGEMENT (CAYMAN) LTD., THE
CHILDREN’S INVESTMENT MASTER
FUND, 3G CAPITAL PARTNERS LTD., 3G		ECF Case
CAPITAL PARTNERS, L.P., 3G FUND, L.P.,
CHRISTOPHER HOHN, SNEHAL AMIN
AND ALEXANDRE BEHRING, A/K/A		08 Civ. 02764 (LAK) (KNF)
ALEXANDRE BEHRING COSTA,
		ANSWER, AFFIRMATIVE DEFENSES,
Defendants		COUNTERCLAIMS AND THIRD
		PARTY CLAIMS OF 3G CAPITAL
		PARTNERS, LTD., 3G CAPITAL
3G CAPITAL PARTNERS LTD., 3G		PARTNERS, L.P. AND 3G FUND, L.P.
CAPITAL PARTNERS, L.P., AND 3G FUND,
L.P.,

Counterclaimants,

v.

CSX CORPORATION AND MICHAEL
WARD

Counterclaim Defendants.

Answer, affirmative defenses and counterclaims of defendants 3g capital partners ltd., 3g capital partners, l.p., 3 g fund, l.p. and alexandre behring

Defendants 3G Capital Partners, Ltd., 3G Capital Partners, L.P., 3G Fund, L.P. and Alexandre Behring (collectively “3G”) hereby set forth their Answer to the Complaint of Plaintiff CSX Corporation (“CSX”):(1)

(1) To the extent that any headings in the Complaint are deemed to be allegations that require a response, 3G denies any allegations contained therein.

This case illustrates the extraordinary lengths to which entrenched management will go to protect its own narrow interests at the expense of the owners and other stakeholders of a publicly-owned company. By postponing its shareholder meeting and filing this aggressive and unnecessary lawsuit, CSX seeks to block 3G and the members of its investor group — who together own a significant percentage of the company — from nominating any directors to the CSX board. 3G and its investor group seek to nominate five highly qualified and experienced professionals who would be independent of management. As a minority of the twelve member board, these directors would only seek to contribute their ideas and experience toward improving CSX’s performance and unlocking value for all shareholders. Rather than welcome this valuable contribution, CSX management has taken any challenge to the status quo as a threat to its own self interests. This lawsuit — the latest in a series of obstructive tactics designed to thwart positive change at the company — stretches the federal securities laws beyond recognition in an effort to disenfranchise the company’s shareholders and prevent them from having any voice on the board.

As and for its answer to the specific allegations of the Complaint, 3G states and alleges as follows:

RESPONSE TO SPECIFIC ALLEGATIONS

1. 3G admits that CSX purports to bring an action against defendants for injunctive and declaratory relief. 3G admits that it filed preliminary proxy solicitation materials which

disclose its intention to nominate a minority slate of directors for election to the CSX’s board of directors at the 2008 annual meeting of CSX shareholders, and to propose an amendment to CSX’s Amended and Restated Bylaws. 3G denies the remaining allegations in Paragraph 1 and denies that CSX is entitled to any of the relief sought.

2. Paragraph 2 states legal conclusions to which no response is required.

3. 3G denies the allegations in Paragraph 3.

4. 3G admits that it filed a Schedule 13D together with other of the defendants on December 19, 2007. 3G denies the remaining allegations in Paragraph 4 as to 3G’s own actions. 3G is without knowledge sufficient to form a belief as to the truth of the remaining allegations in Paragraph 4.

5. 3G denies the allegations in Paragraph 5.

6. 3G denies the allegations in Paragraph 6.

7. 3G denies the allegations in Paragraph 7.

8. 3G denies the allegations in Paragraph 8.

9. 3G denies the allegations in Paragraph 9.

10. Paragraph 10 states legal conclusions to which no response is required.

11. Paragraph 11 states legal conclusions to which no response is required.

12. Paragraph 12 states legal conclusions to which no response is required.

13. Paragraph 13 states legal conclusions to which no response is required.

14. 3G admits the allegations in Paragraph 14.

15. 3G is without knowledge sufficient to form a belief as to the truth of the allegations in Paragraph 15.

16. 3G is without knowledge sufficient to form a belief as to the truth of the allegations in Paragraph 16.

17. 3G is without knowledge sufficient to form a belief as to the truth of the allegations in Paragraph 17.

18. 3G is without knowledge sufficient to form a belief as to the truth of the allegations in Paragraph 18.

19. 3G is without knowledge sufficient to form a belief as to the truth of the allegations in Paragraph 19.

20. 3G admits the allegations in Paragraph 20.

21. 3G admits the allegations in Paragraph 21.

22. 3G admits that 3G Capital Partners Ltd. is a Cayman Islands exempt company.

23. 3G admits that Alexandre Behring is a citizen of Brazil and a managing director of 3G. The remainder of Paragraph 23 states a legal conclusion to which no response is required.

24. 3G is without knowledge sufficient to form a belief as to the truth of the allegations in Paragraph 24.

25. 3G is without knowledge sufficient to form a belief as to the truth of the allegations in Paragraph 25.

26. 3G is without knowledge sufficient to form a belief as to the truth of the allegations in Paragraph 26.

27. 3G is without knowledge sufficient to form a belief as to the truth of the allegations in Paragraph 27.

28. 3G admits that TCI made an HSR filing on March 2, 2007. 3G is without knowledge sufficient to form a belief as to the truth of the other allegations in the first sentence

of Paragraph 28. The remaining allegations in Paragraph 28 state legal conclusions to which no response is required.

29. 3G is without knowledge sufficient to form a belief as to the truth of the allegations in Paragraph 29.

30. 3G is without knowledge sufficient to form a belief as to the truth of the allegations in Paragraph 30.

31. 3G is without knowledge sufficient to form a belief as to the truth of the allegations in Paragraph 31.

32. 3G is without knowledge sufficient to form a belief as to the truth of the allegations in Paragraph 32.

33. 3G is without knowledge sufficient to form a belief as to the truth of the allegations in Paragraph 33.

34. 3G is without knowledge sufficient to form a belief as to the truth of the allegations in Paragraph 34.

35. 3G admits that on or about October 16, 2007, TCI sent a letter to the board of directors of CSX. TCI’s October 16, 2007 letter speaks for itself and 3G denies any allegations in Paragraph 35 that is inconsistent with that letter.

36. 3G is without knowledge sufficient to form a belief as to the truth of the allegations in Paragraph 36.

37. 3G admits that, on or about May 9, 2007, 3G called CSX to inquire about the outcome of a special shareholder vote.

38. 3G is without knowledge sufficient to form a belief as to the truth of the allegations in Paragraph 38.

39. 3G admits that on or about June 13, 2007, representatives of CSX met with Behring and others from 3G at 3G’s New York office. 3G admits that it told CSX that 3G would be making an HSR filing. 3G denies the remaining allegations in Paragraph 39.

40. 3G admits that it made an HSR filing on or about June 14, 2007. 3G admits the allegations in the second sentence of Paragraph 40. 3G states that the third sentence states legal conclusions to which no response is required, and denies the remaining allegations of Paragraph 40.

41. 3G admits that it attended the CSX Analyst/Investor conference in New York, as did approximately 200 other individuals. 3G denies that it attended that conference “together” with TCI. 3G further denies that it approached CSX’s Chief Financial Officer “along with” defendant Hohn. 3G is without knowledge sufficient to form a belief as to the truth of the remaining allegations in Paragraph 41.

42. 3G admits that Mr. Lamphere purchased CSX stock on or about November 6 and 13, 2007 in connection with his becoming a nominee to the CSX board in that he bought the shares in connection with the possibility of becoming a nominee to the CSX board, and states that as of those dates, 3G had not entered in to any agreements or understandings with Mr. Lamphere. 3G admits that it entered into a nominee agreement with Mr. Lamphere on December 10, 2007 pursuant to which neither party was obligated to conduct any proxy solicitation. 3G admits the remaining allegations in Paragraph 42.

43. 3G is without knowledge sufficient to form a belief as to the truth of the allegations in Paragraph 43.

44. 3G is without knowledge sufficient to form a belief as to the truth of the allegations in Paragraph 44.

45. 3G is without knowledge sufficient to form a belief as to the truth of the allegations in Paragraph 45.

46. 3G is without knowledge sufficient to form a belief as to the truth of the allegations in Paragraph 46.

47. 3G is without knowledge sufficient to form a belief as to the truth of the allegations in Paragraph 47.

48. 3G is without knowledge sufficient to form a belief as to the truth of the allegations in Paragraph 48.

49. 3G is without knowledge sufficient to form a belief as to the truth of the allegations in Paragraph 49.

50. 3G denies the allegations in Paragraph 50.

51. 3G admits the allegations in Paragraph 51.

52. 3G admits the allegations in Paragraph 52.

53. Paragraph 53 states a legal conclusion to which no response is required.

54. Paragraph 54 states a legal conclusion to which no response is required.

55. Paragraph 55 states legal conclusions to which no response is required.

56. Paragraph 56 states legal conclusions to which no response is required.

57. Paragraph 57 states legal conclusions to which no response is required.

58. Paragraph 58 states legal conclusions to which no response is required.

59. Defendant’s Schedule 13D and Schedule 14A speak for themselves and 3G denies any allegation inconsistent with those Schedules. 3G denies the allegations in the third sentence of Paragraph 59.

60. 3G denies the allegations in Paragraph 60.

61. 3G denies the allegations in Paragraph 61 and repeats and incorporates its answers to paragraphs 25, 28, 29, 31, 33, 34, and 35 of the Complaint.

62. 3G denies the allegations in Paragraph 62 and repeats and incorporates its answers to paragraphs 26, 29 and 30 of the Complaint.

63. 3G denies the allegations in Paragraph 63 insofar as they relate to 3G. 3G is without knowledge sufficient to form a belief as to the truth of the remaining allegations in Paragraph 63.

64. 3G denies the allegations in Paragraph 64.

65. 3G is without knowledge sufficient to form a belief as to the truth of the allegations in Paragraph 65.

66. Paragraph 66 states legal conclusions to which no response is required.

67. 3G denies the allegations in Paragraph 67.

68. 3G denies the allegations in Paragraph 68.

69. Defendants’ Schedule 13D speaks for itself and 3G denies any allegation in Paragraph 69 that is inconsistent with that Schedule.

70. 3G denies the allegations in Paragraph 70.

71. 3G denies the allegations in Paragraph 71 and repeats and incorporates its answers to paragraphs 28, 36, 37, 39, 40 and 41 of the Complaint.

72. 3G denies the allegations in Paragraph 72.

73. 3G denies the allegations in Paragraph 73.

74. 3G denies the allegations in Paragraph 74.

75. 3G denies the allegations in Paragraph 75.

76. 3G denies the allegations in Paragraph 76.

77. 3G denies the factual allegations in Paragraph 77 and states that Rule 13d-5(b)(1) speaks for itself.

78. 3G denies the allegations in Paragraph 78.

79. 3G denies the allegations in Paragraph 79.

80. 3G denies the allegations in Paragraph 80 insofar as they relate to 3G. 3G is without knowledge sufficient to form a belief as to the truth of the remaining allegations in Paragraph 80.

81. 3G admits that it did not file the written agreements relating to the swap arrangements as exhibits to the Schedule 13D. 3G denies the remaining allegations in Paragraph 81.

82. 3G denies the allegations in Paragraph 82 and states that the schedule disclosing the information referenced in paragraph 82 was filed in the last amendment to Defendants’ Schedule 13D in accordance with a representation made to the Securities Exchange Commission on February 20, 2008 to disclose this information. The remainder of the allegations in Paragraph 82 state legal conclusions to which no response is required.

83. 3G admits that it did not file the nominee agreements as exhibits to the Schedule 13D. 3G denies the remaining allegations in Paragraph 83.

84. Paragraph 84 states legal conclusions to which no response is required.

85. 3G admits that defendants filed their preliminary proxy statement on March 10, 2008. 3G denies the remaining allegations in Paragraph 85.

86. 3G denies the allegations in Paragraph 86.

87. 3G denies the allegations in Paragraph 87.

88. 3G denies the allegations in Paragraph 88.

89. 3G denies the allegations in Paragraph 89.

90. 3G denies the allegations in Paragraph 90.

91. 3G denies the allegations in Paragraph 91.

92. 3G denies the allegations in Paragraph 92.

93. 3G denies the allegations in Paragraph 93.

94. CSX’s Amended and Restated Bylaws speak for themselves and 3G denies any allegation in Paragraph 94 that is inconsistent with those Bylaws.

95. 3G admits the allegations in the first sentence of Paragraph 95. 3G denies the remaining allegations in Paragraph 95.

96. 3G admits the allegations in Paragraph 96.

97. 3G admits the allegations in Paragraph 97.

98. 3G denies the allegations in Paragraph 98.

COUNT I

99. 3G repeats and incorporates its responses to paragraphs 1-98 as if fully set forth herein.

100. 3G denies the allegations in Paragraph 100.

101. 3G denies the allegations in Paragraph 101.

102. 3G denies the allegations in Paragraph 102.

103. 3G denies the allegations in Paragraph 103.

104. 3G denies the allegations in Paragraph 104.

105. 3G denies the allegations in Paragraph 105.

106. 3G denies the allegations in Paragraph 106.

COUNT II

107. 3G repeats and incorporates its responses to paragraphs 1-106 as if fully set forth herein.

108. 3G denies the allegations in Paragraph 108.

109. 3G denies the allegations in Paragraph 109.

110. 3G denies the allegations in Paragraph 110.

111. 3G denies the allegations in Paragraph 111.

112. 3G denies the allegations in Paragraph 112.

113. 3G denies the allegations in Paragraph 113.

114. 3G denies the allegations in Paragraph 114.

115. 3G denies the allegations in Paragraph 115.

116. 3G denies the allegations in Paragraph 116.

117. 3G admits that it did not file the nominee agreements or swap agreements as exhibits to the Schedule 13D. 3G denies the remaining allegations in Paragraph 117.

118. 3G denies the allegations in Paragraph 118 insofar as they relate to 3G. 3G is without knowledge or information sufficient to form a belief as to the truth of the allegations in Paragraph 118 insofar as they relate to TCI.

119. 3G denies the allegations in Paragraph 119.

120. 3G denies the allegations in Paragraph 120.

COUNT III

121. 3G repeats and incorporates its responses to paragraphs 1-120 as if fully set forth herein.

122. 3G admits that Defendant Behring has some discretionary authority to control or influence the conduct of 3G. 3G denies the remaining allegations in Paragraph 122.

123. 3G is without knowledge sufficient to form a belief as to the truth of the allegations in Paragraph 123.

124. 3G is without knowledge sufficient to form a belief as to the truth of the allegations in Paragraph 124.

125. Paragraph 125 states legal conclusions to which no response is required.

COUNT IV

126. 3G repeats and incorporates its responses to paragraphs 1-125 as if fully set forth herein.

127. Paragraph 127 states legal conclusions to which no response is required.

128. Paragraph 128 states legal conclusions to which no response is required.

129. CSX’s Amended and Restated Bylaws speak for themselves and 3G denies any allegation in Paragraph 129 that is inconsistent with those Bylaws.

130. 3G denies the allegations in Paragraph 130 except admits that on January 8, 21, and 25, 2008, Defendants supplied to CSX Notices of their intent to nominate five persons for election to the CSX board of directors at the 2008 annual meeting of shareholders and to propose amendments to the CSX Amended and Restated Bylaws.

131. 3G denies the allegations in Paragraph 131.

132. 3G denies the allegations in Paragraph 132.

PRAYER FOR RELIEF

3G denies that CSX is entitled to the relief sought.

Affirmative defenses

3G does not assume the burden of proof on any affirmative defense where the substantive law provides otherwise.

1. Plaintiff’s complaint fails to state a claim upon which relief can be granted.

2. The alleged misrepresentations and omissions in the Complaint are not material.

3. CSX and CSX shareholders have not suffered any injuries as a result of the alleged acts in the Complaint.

4. Plaintiff’s claims for relief are barred by the doctrine of unclean hands.

5. Plaintiff’s claims for relief are barred by the doctrines of waiver, acquiescence and/or estoppel.

6. Plaintiff’s claims for relief are barred by the doctrine of laches.

7. Plaintiff’s claims are barred by the doctrine of in pari delicto.

counterclaims of 3G capital partners ltd,
3g capital partners l.p. and 3g fund l.p.

Overview

1. CSX Chief Executive Officer Michael Ward and his board are spending shareholder money to employ bare-knuckle tactics to protect the interests of management and its board instead of serving shareholders. Ward and CSX have postponed the 2008 stockholder meeting and changed the record date for determining who may vote at that meeting. In combination with this stalling tactic, Ward and CSX have made a series of false statements about 3G and TCI. These CSX misrepresentations were intended to mislead investors and to falsely disparage 3G and TCI. At the same time, CSX management have cynically adjusted financial projections and policies to further influence the shareholder vote in June. This coordinated scheme by Ward and CSX is all part of an agenda to deprive shareholders of the right to consider any board nominees proposed by either 3G or TCI. CSX and Ward are waging their proxy campaign in a manner that is unlawful, risky to its business, and damaging to all its stakeholders.

2. Ward and CSX have made materially false and misleading statements and omissions in proxy filings and in other public statement concerning:

(a) CSX’s purpose in delaying the 2008 annual meeting and in filing this lawsuit against 3G;

(b) 3G and TCI’s purposes in seeking to nominate their slate of director-nominees;

(c) 3G and TCI’s proposals for improving the performance of CSX;

(d) proposed by-law amendments relating to special shareholder meetings that have been submitted for approval at the next shareholder meeting; and

(e) CSX’s use of material non-public information in connection with its award of compensation to management and to its incumbent board of directors.

3. Through this conduct, CSX and Ward have violated the Securities Exchange Act of 1934, 15 U.S.C. § 78a et seq. (the “Exchange Act”) and Virginia Code § 13.1-624.

PARTIES

4. Counterclaim Plaintiff 3G Capital Partners Ltd is a Cayman Islands exempt company.

5. Counterclaim Plaintiff 3G Fund L.P. is a Cayman Islands limited partnership.

6. Counterclaim Plaintiff 3G Capital Partners L.P. is a Cayman Islands limited partnership.

7. Counterclaim Defendant CSX Corporation (“CSX”) is a Virginia Corporation with its principal place of business in Jacksonville, Florida.

8. Counterclaim Defendant Michael Ward is the Chairman and CEO of CSX Corporation. At all relevant times, Mr. Ward maintained discretionary authority to control or influence the conduct of CSX Corporation and is a controlling person within the meaning of Section 20(a) of the ‘34 Act. Mr. Ward directed false statements relating to the 2008 proxy solicitation toward New York, where CSX’s stock is traded and where many investors are located. Upon information and belief, Mr. Ward has traveled to New York for business in his capacity as CEO of CSX.

JURISDICTION AND VENUE

9. This Court has jurisdiction over the subject matter of this action based upon 28 U.S.C. §§ 1331, 1332, 1367 and Section 27 of the ‘34 Act, 15 U.S.C. § 78aa.

10. Venue in this district is proper pursuant to Section 27 of the ‘34 Act, 15 U.S.C. § 78aa, and 28 U.S.C. § 1391(d).

FACTUAL BACKGROUND

3G’s Attempt to Engage In A Productive Dialogue with CSX Management

11. In January 2007 3G acquired a stake in CSX after concluding that CSX was undervalued and represented an attractive investment opportunity.

12. Throughout the first half of 2007, 3G continued to study CSX, and to develop ideas for operational and business improvements that 3G believed could dramatically increase shareholder value.

13. Initially, 3G hoped and expected that CSX’s current management would improve CSX’s performance by addressing the some of the operational issues that 3G had identified.

14. As a shareholder of CSX, 3G tried on several occasions to arrange a meeting with CSX’s top management. CSX management initially did not want to meet and expressed doubt that 3G was a shareholder of CSX. In or about May of 2007, 3G faxed to CSX a brokerage account statement to establish that, in fact, 3G was a holder of CSX stock. Only then did CSX agree to meet and two representatives visited 3G in New York.

15. On June 14, 2007, 3G filed a disclosure with the Federal Trade Commission under the Hart-Scott-Rodino Act relating to 3G’s investment in CSX. 3G provided CSX with advance notice of this filing.

16. Shortly thereafter in June 2007, 3G representatives, including Mr. Behring, traveled to Jacksonville, Florida to meet with CSX management. 3G had also hoped to tour some operational facilities but CSX refused that request.

17. These 3G representatives were met by CSX CEO Michael Ward and others from CSX. 3G asked questions and shared suggestions for improvement. During the course of the meeting Ward asked, in sum and substance, whether 3G was with the vocal activist hedge funds

or with CSX’s existing management and board. 3G made it clear that it had not chosen sides but was simply seeking a better understanding of CSX.

18. After months of monitoring CSX’s performance, 3G became skeptical that CSX leadership had the willingness and ability to make the operational improvements that 3G believed it should.

19. Faced with a board and management committed to the same underperforming status quo, 3G began to explore a variety of options with respect to its investment in CSX, including the possibility of proposing one or more nominees who could bring sound operational knowledge and experience to CSX’s board, and who could both challenge and assist management in improving the operation and performance of the business.

20. Mr. Behring’s previous great success in the railroad industry made him a natural choice to serve as a nominee for the CSX board.

21. In November 2007, 3G also approached Gil Lamphere, a former executive and director at successful railroads. 3G had identified Mr. Lamphere as someone with valuable experience in the railroad industry. 3G sought to consult with Mr. Lamphere as it considered its options and next steps. 3G inquired whether, if asked, Mr. Lamphere would consider serving as a nominee and running to serve as a director on the CSX board

22. Those and other preliminary inquiries eventually led 3G, on December 12, 2007, to agree to coordinate its actions with respect to CSX as a shareholder group with TCI, and to file its Schedule 13D and preliminary proxy statement. Those filings fully disclosed, among other things, 3G’s use of swap agreements and any arrangements or understandings it had with TCI and other shareholders.

CSX Fails to Raise Any Concerns About 3G’s Disclosures Despite Its Prior Knowledge of 3G’s Investment in CSX

23. On January 8, 2008, after having filed its Schedule 13D and preliminary proxy statement, TCI submitted to CSX a notification of the TCI/3G slate of nominees for the CSX Board (the “Notice”).

24. On January 15, 2008, TCI received a letter from Ellen M. Fitzsimmons, General Counsel of CSX, acknowledging receipt of the Notice (the “Response Letter”).

25. The Response Letter claimed just one supposed deficiency in the Notice — CSX’s claim that TCI could not reserve its rights to nominate alternate nominees — and made no claims of any purportedly false or misleading statements in 3G and TCI’s proxy statement or Schedule 13D.

26. Indeed, 3G was initially encouraged by CSX’s response to its filings. During this time, CSX engaged in discussions with 3G and TCI about potential board representation.

27. After those discussions broke down, CSX engaged in a scorched-earth campaign to prevent 3G and TCI from nominating its slate of directors, several of whom CSX itself had just offered to nominate. That campaign included making a series of false and misleading statements to CSX’s shareholders.

CSX’s and Ward’s False and Misleading Proxy Statements Concerning 3G and TCI

28. On March 5, 2008, Mr. Ward and TCI’s Snehal Amin testified before a congressional hearing regarding re-regulation of the railroad industry. During that hearing, Mr. Amin testified at length about the long-term intentions and goals of TCI with respect to CSX.

29. On March 11, 2008, Mr. Ward authored an editorial that appeared in the Washington Times (the “Ward Editorial”). The Ward Editorial is a proxy solicitation and contains a number of false and misleading statements about 3G and TCI.

30. For example, Mr. Ward claimed that “[o]ne hedge fund . . . actually demanded that CSX freeze investment in its rail system” and suggested that the recommended freeze would have jeopardized CSX’s commitment to safety. That statement was false because, as Mr. Ward knows — and as Mr. Amin made clear during his congressional testimony — TCI never demanded that CSX freeze capital expenditures related to safety and always made clear its belief that CSX should continue to make safety and maintenance related capital investments in its rail system. Rather, as TCI has repeatedly made clear, TCI has advocated that CSX take temporary steps to freeze growth investment until the regulatory landscape was more certain.

31. Mr. Ward also took aim at so-called activist investors such as 3G and TCI. Mr. Ward falsely labeled them “short-sighted investors” who put their “narrow agenda ahead of the long-term interests of the company, their fellow shareholders, and the customers who sustain the business.”

32. That statement was false because the existing public record, including statements publicly issued by TCI, flatly contradicted Mr. Ward’s claims.

33. Mr. Ward’s false statement about TCI and 3G violated Section 14(a) and Rule 14a-9, which provides that “[n]o solicitation subject to this regulation shall be made by means of any proxy statement form of proxy, notice of meeting or other communication, written or oral, containing any statement which . . . is false or misleading with respect to any material fact or which omits to state any material fact necessary in order to make the statements therein not false or misleading.” 17 C.F.R. § 240.14a-9.

CSX’s False Statements Concerning This Lawsuit

34. On March 17, 2008, after knowing about TCI’s investment in CSX for a year, and nearly two months after the January 15, 2008 letter failing to identify any deficiencies in 3G’s or TCI’s Notice, CSX filed this lawsuit which, for the first time, alleged deficiencies in 3G and

TCI’s Notice, Schedule 14A and Schedule 13D. At that time, CSX also announced that it was rescheduling its annual meeting from May 7, 2008 to June 25, 2008.

35. CSX intentionally waited in silence until March 17, 2008 to raise any issue about 3G’s disclosures, because, as CSX knew, CSX’s bylaws required that any corrective disclosures pertinent to the 2008 shareholder meeting be made prior to February 1, 2008.

36. In its press release announcing the lawsuit, CSX made false statements about 3G and TCI that were designed to convince shareholders that CSX, as Mr. Ward claimed, was interested in “protecting the interests of all CSX shareholders.” In reality, CSX acted for the purpose of entrenching itself and stifling the voices of any dissenters.

37. Most troublingly, the release claims that CSX “filed this suit against 3G and TCI to ensure that all of our shareholders receive complete and accurate information about the group’s holdings, agreements, plans and motivations to which they are entitled under federal securities laws.”

38. That statement was materially false. If CSX’s true purpose was to ensure that shareholders receive complete and accurate information, CSX would have raised those issues at least two months before, on January 15, 2008, when 3G would have had the opportunity — if appropriate — to address CSX’s concerns in time for the shareholder meeting then set for May 2008.

39. In addition, in a press release announcing and describing the lawsuit, CSX made false and misleading statements about 3G and TCI’s motives in connection with the proxy solicitation.

40. In that press release, CSX quoted Edward J. Kelly III, presiding director of CSX’s board of directors, as stating that “the [CSX] Board concluded that TCI is not simply interested

in having a representative voice on the Board, but is instead seeking to achieve effective control of the CSX Board of Directors and dictate Company strategy.”

41. That statement was materially false. The board could not have concluded, in good faith, that TCI (and, by implication, 3G) were seeking to “achieve effective control of the CSX Board of Directors and dictate Company strategy” because the board knew that 3G and TCI were nominating directors for only 5 out of 12 board seats. Moreover, three of the five director nominees are independent of both 3G and TCI, and all five nominees are independent of CSX management. Each has committed in writing that if elected he would act in the interests of all stockholders, rather than in self interest or in the interest of any particular stockholder.

42. CSX’s false statements about this lawsuit violated Section 14(a) and Rule 14a-9, which provides that “[n]o solicitation subject to this regulation shall be made by means of any proxy statement form of proxy, notice of meeting or other communication, written or oral, containing any statement which . . . is false or misleading with respect to any material fact or which omits to state any material fact necessary in order to make the statements therein not false or misleading.” 17 C.F.R. § 240.14a-9.

CSX’s False Statements Concerning the Bylaw Amendment

43. At CSX’s 2007 annual shareholders meeting on May 2, 2007, CSX’s shareholders considered a non-binding proposal to amend to CSX’s bylaws that would give shareholders holding between 10% and 25% of CSX’s outstanding stock the ability to call special shareholder meetings (the “Shareholder Bylaw Amendment”). The proposal’s clear purpose was to enhance shareholders’ ability to influence director elections. Despite management’s opposition to the proposal, shareholder’s overwhelmingly approved it by a margin of more than two-to-one.

44. On February 4, 2008, nine months after the Shareholder Bylaw Amendment had been approved by the stockholders, CSX’s board approved an amendment to the bylaws

providing that a special meeting of shareholders will be called by the board if it receives a written request to do so from the record holders of shares representing at least 15% of the outstanding voting power of the corporation (the “Board Bylaw Amendment”).

45. The Board Bylaw Amendment, however, was far different from the Shareholder Bylaw Amendment that the shareholders had overwhelmingly approved at the 2007 stockholders meeting.

46. Most notably, although the Shareholder Bylaw Amendment would have permitted shareholders to call a special meeting to discuss any corporate matters, the Board Bylaw Amendment prohibits shareholders from considering, at such a special meeting, any matter considered at a shareholder meeting within the previous 12 months or that will be considered at a shareholder meeting taking place within 90 days of the special meeting.

47. Since CSX board members are elected annually, that limitation effectively strips shareholders of the right to call special meetings to remove or elect board members.

48. Moreover, because under Virginia law, management of a corporation is centralized with the board of directors, there is little for shareholders to vote on other than the election or removal of directors.

49. Thus, the Board Bylaw Amendment grants nothing more than an illusory right to the shareholders.

50. CSX has placed the Board Bylaw Amendment on the ballot in opposition to shareholder proposals similar to the Shareholder Bylaw Amendment that would provide shareholders with a meaningful right to call special meetings, including for the purpose of removing existing directors and voting on shareholder-nominated directors.

51. CSX has made false statements about its bylaw amendment in hopes of concealing the true effects of the amendment.

52. In CSX’s preliminary proxy statement, filed on February 22, 2008 (“the CSX Proxy”), CSX stated that “[t]he Board believes that the Amendments address the views of shareholders reflected in the vote at the 2007 annual meeting to permit shareholders to cause special shareholder meetings to be held.”

53. That statement was false because, as noted above, the Board Bylaw Amendment was substantially and materially different from the Shareholder Bylaw Amendment approved by the shareholders during the 2007 annual meeting and thus does not address the views of shareholders reflected in their vote at that meeting.

54. CSX’s false statement about the Board Bylaw Amendment violated Section 14(a) and Rule 14a-9, which provides that “[n]o solicitation subject to this regulation shall be made by means of any proxy statement form of proxy, notice of meeting or other communication, written or oral, containing any statement which . . . is false or misleading with respect to any material fact or which omits to state any material fact necessary in order to make the statements therein not false or misleading.” 17 C.F.R. § 240.14a-9.

The Board Bylaw Amendment Also Violates Virginia Law

55. In addition, the Board Bylaw Amendment violates Virginia law, which requires that “[t]he shareholders may remove one or more directors with or without cause, unless the Articles of Incorporation provide that directors may be removed only with cause.” Virginia Code § 13.1-680. CSX’s Articles of Incorporation do not provide that directors may be removed only with cause, and do not otherwise restrict the circumstances in which directors may be removed.

56. The Board Bylaw Amendment prevents shareholders from calling a special meeting for the purpose of removing existing directors, and thereby impinge on shareholder’s rights under § 13.1-680 to “remove one or more directors with or without cause.” Therefore, the Board Bylaw Amendment violates Virginia law, which provides that “[t]he by-laws of the corporation may contain any provision for managing the business and regulating the affairs of the corporation that is not inconsistent with the law or the Articles of Incorporation.” Virginia Code § 13.1-624.

CSX’s False Statements Concerning Management and Director Compensation

57. Under CSX’s shareholder-approved Omnibus Incentive Plan, the Board may award CSX executives and employees with a variety of equity-based performance compensation. The board’s compensation committee currently issues equity grants to executive officers and other employees under a Long Term Incentive Plan (“LTIP”). Under the plan, a performance grant is established and then, based on the stock price on the date of the grant, is translated into a target stock award.

58. Similarly, the CSX Corporation Stock Plan for Directors (the “Director Stock Plan”) requires that at least 50% of the Directors’ total compensation must be in the form of CSX stock. As with the LTIP, the number of shares granted to directors depends on CSX’s stock price on the date of the grant.

59. In May 2007, CSX set its stock grants for management and other employees while in possession of material, non-public information that was publicly released on the heels of the stock grants, and had the effect of significantly increasing the value of those grants. CSX’s possession and use of material non-public information in setting its grants was not disclosed in its proxy materials.

60. Specifically, on May 1, 2007, CSX set its LTIP stock grants for more than 600 employees before the disclosure of material information. One week later, on May 8, 2007, CSX made a series of significant public announcements that increased the value of its stock by more than 7%. Those announcements included:

(a) $1 billion increase in the CSX stock repurchase program;

(b) an increase in its quarterly dividend by 25%;

(c) a commitment to making significant core capital investments; and

(d) a financial projection that by 2010 earnings per share would increase by 15% to 17% on a compound annual growth basis, which was materially higher than CSX’s February 15, 2007 projection of 12% to 15% for such earnings growth.

61. Following the May 8, 2007 disclosures, the volume of CSX shares traded on the market nearly doubled from the previous day’s trading and the value of CSX shares closed 7.3% higher than the closing price on May 1.

62. CSX knew that its May 8, 2007 disclosures would have a dramatic positive effect on the CSX stock price at the time that it made the stock grants on May 1.

63. By contrast, the year before, CSX set its LTIP stock grants in 2006 immediately following a May 3, 2006 material dividend announcement.

64. The LTIP grants are based on the value of the incentive compensation grant, which is translated into a number of shares of stock depending on CSX’s share price. Thus, had the performance share grants under the LTIP been set after the May 8, 2007 disclosures, CSX would have granted fewer shares of common stock under the LTIP.

65. Thus, by setting its LTIP grants before the release of material non-public information, CSX effectively increased the amount of its LTIP grants by 7.3%.

66. For example, for Mr. Ward — the highest paid executive in the rail industry — the board set a performance grant of $4,000,010 under the LTIP on May 1, 2007. That translated into 92,347 shares of CSX stock based on the stock price on that date. Because the grant was made before the release of material non-public information, however, Mr. Ward’s performance grant was substantially higher than it would have been had the grant been made shortly after the release of the material non-public information.

67. The Board similarly awarded itself CSX stock right before the release of material nonpublic information, knowing that the announcement of that information would boost the value of the stock.

68. On May 1, 2007, the Board met to review and renew directors’ compensation. Under Sections 14 and 15 of the Stock Plan, the Board has unfettered control over the terms and conditions of the plan, including the time the shares will be granted to the Directors. The plan also gives the Board the power to unilaterally amend any term in the Stock Plan at any time.

69. During that meeting, no changes were made to the directors’ compensation package even though the board knew that (1) the company was in possession of material non-public information that was certain to substantially increase CSX’s share price and (2) if the board did nothing, the shares would automatically be granted to the board on May 2, 2007 — before the release of that non-public information.

70. The annual shareholders meeting took place on May 2, 2007. On that day, the directors were each awarded $37,500 worth of shares based on the value of CSX’s stock as of May 1, 2007. As noted above, CSX made a series of significant public announcements on May 8, 2007.

71. The directors knew that the shares they were awarded on the day of the annual shareholders meeting would increase in value as a result of the upcoming announcements.

72. In addition, there is reason to believe that the improprieties in CSX’s executive compensation practices go beyond the use of material non-public information in stock grants described herein. Indeed, a former employee has recently filed suit and alleging that CSX’s top executives have obtained substantial amounts in undisclosed non-cash compensation in the form of perquisites at the Greenbrier Hotel, a resort owned by CSX. The allegations in that complaint are of substantial concern to 3G as a CSX shareholder.

73. CSX’s conduct violated Section 14(a) of the Exchange Act and the rules promulgated thereunder. Rule 14a-9 provides that “[n]o solicitation subject to this regulation shall be made by means of any proxy statement form of proxy, notice of meeting or other communication, written or oral, containing any statement which . . . is false or misleading with respect to any material fact or which omits to state any material fact necessary in order to make the statements therein not false or misleading.”
17 C.F.R. § 240.14a-9.

74. In the CSX Proxy, CSX violated Rule 14a-9 by failing to disclose, with respect to director and management compensation, that the company set its performance grants while in possession of material nonpublic information, effectively causing the grants to be higher than they would have been had they been set after the release of such information and thereby concealing that the award resulted in increased compensation expense to CSX.

75. The CSX Proxy also omitted material disclosures required by Schedule 14A, Item 8, which incorporates by reference Item 402 of Regulation S-K. Item 402 requires disclosure of all material facts about executive compensation, including, for example, “how the determination

is made as to when awards are granted, including awards of equity-based compensation such as stock options.”

76. CSX also violated Rule 14a-9 by effectively concealing director compensation. The CSX Proxy states that “[d]uring 2007, each non-employee director received an annual retainer of $75,000, at least 50% of which was payable by CSX stock pursuant to the CSX Corporation Stock Plan for Directors.” This statement violates Rule 14a-9 because it is both misleading and omits material facts. As discussed above, because the stock grants were set on May 2, 2007 — before the release of material non-public information — the actual value of each director’s annual retainer was substantially higher than CSX claimed.

FIRST CLAIM FOR RELIEF
(Violation of Section 14(a) of the ‘34 Act)

77. 3G repeats and realleges the allegations of paragraphs 1-76 as if fully set forth herein.

78. As described above CSX has violated Section 14(a) and the rules and regulations promulgated thereunder by filing materially incomplete, false and misleading proxy solicitation materials, including CSX’s Proxy, the Ward Editorial and numerous other press releases and public materials.

79. The CSX Proxy is false and misleading because:

(a) it falsely describes the Board Bylaw Amendment;

(b) it fails to disclose that the Board had set its 2007 LTIP and director stock grants while in possession of material non-public information; and

(c) by setting the LTIP and director stock grants while in possession of material non-public information, CSX falsely reported executive and director compensation that was lower than that which the directors and employees actually received.

80. The Ward Editorial is a false and misleading proxy solicitation because it:

(a) falsely suggests that TCI had demanded that CSX freeze its safety-related capital expenditures, as opposed to its growth investment capital expenditures; and

(b) falsely impugns the credibility of 3G and TCI by ascribing to them motives that are flatly contradicted by all of the relevant public information.

81. CSX’s March 17, 2008 press release describing the reasons it brought this lawsuit and moved the annual meeting date is a false and misleading proxy solicitation because it:

(a) falsely states that 3G and TCI were seeking to achieve “effective control” of the company when, in reality, 3G and TCI seek to nominate only 5 of 12 directors, three of whom are independent of both 3G and TCI;

(b) falsely claims that CSX filed the lawsuit to ensure that its shareholders receive “complete and accurate information” in the proxy fight, which could not have been true given the timing of CSX’s complaint.

82. Each of the misstatements and omissions alleged above are material to CSX shareholders and the investing public.

83. CSX’s shareholders and the investing public will be irreparably harmed in the absence of the declaratory and equitable relief prayed for.

SECOND COUNTERCLAIM
(Violations of Section 20(a) of the ‘34 Act)

84. 3G repeats and realleges the allegations of paragraphs 1-83 as if fully set forth herein.

85. Counterclaim Defendant Michael Ward maintained discretionary authority to control or influence the conduct of CSX, including CSX’s actions and omissions in violation of Section 14(a) of the Exchange Act complained of herein.

86. Mr. Ward is a controlling person of CSX within the meaning of Section 20(a) of the Exchange Act and is liable for the violations of Section 14(a) of the Exchange Act as pleaded herein.

THIRD COUNTERCLAIM

(Declaratory Judgment)

87. 3G repeats the allegations of paragraphs 1-87 as if fully set forth herein.

88. Virginia Code § 13.1-680 protects the rights of shareholders by mandating that “[t]he shareholders may remove one or more directors with or without cause, unless the Articles of Incorporation provide that directors may be removed only with cause.”

89. CSX’s Articles of Incorporation do not provide that directors may be removed only with cause.

90. Virginia Code § 13.1-624 states that “[t]he by-laws of the corporation may contain any provision for managing the business and regulating the affairs of the corporation that is not inconsistent with law or the Articles of Incorporation.”

91. The Board Bylaw Amendment prevents shareholders from calling a special meeting for the purpose of removing existing directors and therefore infringes shareholder rights under Virginia Code § 13.1-680 and thus violates Virginia Code
§ 13.1-624

PRAYER FOR RELIEF

WHEREFORE, 3G prays for relief in the form of an Order:

(a) Declaring that CSX violated Section 14(a) of the ‘34 Act;

(b) Directing that CSX amend its proxy statement to correct the false and misleading statements therein, in compliance with the applicable rules and regulations;

(c) Declaring that the Board Bylaw Amendment violates Virginia law and is void, and directing that CSX amend the CSX Proxy and ballot to remove the Board Bylaw Amendment from consideration;

(d) Requiring CSX to cause its incumbent directors personally to bear the cost of preparing and filing the corrective amended proxy statement, so that said cost shall not be borne by CSX’s shareholders;

(e) Enjoining CSX from further violations of Rule 14a-9 in connection with the proxy solicitation for the next shareholder meeting;

(f) Enjoining CSX from voting any proxies received prior to such time as the Court ascertains that CSX has filed an accurate and compliant proxy statement;

(g) Ordering CSX to pay 3G’s attorneys’ fees and all costs in connection with this action; and

(h) Granting such other and further relief as the Court may deem just and proper.

Date:	April 4, 2008	Respectfully submitted,
	New York, New York

		/s/ Peter Duffy Doyle

		Peter Duffy Doyle Andrew M. Genser Matthew F. Dexter KIRKLAND & ELLIS LLP Citigroup Center 153 East 53rd Street New York, NY 10022 (212) 446-4800 pdoyle@kirkland.com agenser@kirkland.com mdexter@kirkland.com

		Attorneys for Defendants 3G Capital Partners Ltd., 3G Capital Partners, L.P., 3G Fund, L.P. and Alexandre Behring

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