Two hedge fund shareholders of CSX -- The Children's Investment Fund (TCI) and 3G Capital Partners -- proposed a slate of five nominees to the Jacksonville, Florida-based company's board as part of a lengthy and bitter proxy battle.

The hedge funds said they had proposed the dissident slate because CSX has been underperforming.

For instance, while CSX has indicated its profits should double within the next five years, the hedge funds argue that earnings could quadruple in that time with improved network performance and cost savings.

The hedge funds also claim they could achieve $2.2 billion in annual productivity gains within five years, compared with $400 million the company has targeted by 2010.

The proxy fight culminated in a vote at the company's shareholder meeting in June. CSX delayed announcing the results at the time, saying that the outcome was too close to call.

Last week the company said preliminary results showed four of the five dissident nominees -- Gilbert Lamphere, Alexandre Behring, Christopher Hohn and Timothy O'Toole -- had scored enough votes to make it onto the board.

CSX said on Friday that Lamphere and Behring could join the board immediately, while the other two contested seats were the subject of an appeal pending before the 2nd U.S. Circuit Court of Appeals on an expedited hearing schedule.

The appeal relates to a federal judge's ruling in June that while TCI and 3G had violated securities law by evading disclosure obligations, they were allowed to vote all their shares.

In morning New York Stock Exchange trade, CSX shares were down 31 cents at $63.29.

(Reporting by Nick Carey; Editing by Lisa Von Ahn)