<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-1
TENDER OFFER STATEMENT
PURSUANT TO
SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
AND
AMENDMENT NO. 10
TO
SCHEDULE 13D
------------------------
CONRAIL INC.
(NAME OF SUBJECT COMPANY)
CSX CORPORATION
GREEN ACQUISITION CORP.
(BIDDERS)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(TITLE OF CLASS OF SECURITIES)
208368 10 0
(CUSIP NUMBER OF CLASS OF SECURITIES)
SERIES A ESOP CONVERTIBLE JUNIOR PREFERRED STOCK, WITHOUT PAR VALUE
(TITLE OF CLASS OF SECURITIES)
NOT AVAILABLE
(CUSIP NUMBER OF CLASS OF SECURITIES)
MARK G. ARON
CSX CORPORATION
ONE JAMES CENTER
901 EAST CARY STREET
RICHMOND, VIRGINIA 23219-4031
(804) 782-1400
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDER)
WITH A COPY TO:
PAMELA S. SEYMON
WACHTELL, LIPTON, ROSEN & KATZ
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019
TELEPHONE: (212) 403-1000
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CALCULATION OF FILING FEE
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<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE**
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<S> <C>
$2,017,932,950.00 $403,586.59
</TABLE>
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* For purposes of calculating the filing fee only. This calculation assumes the
purchase of an aggregate of 18,344,845 Shares of Common Stock, par value
$1.00 per share, and Series A ESOP Convertible Junior Preferred Stock,
without par value, of Conrail Inc. at $110 net per Share in cash.
** The amount of the filing fee, calculated in accordance with Rule 0-11(d) of
the Securities Exchange Act of 1934, as amended, equals 1/50th of one percent
of the aggregate value of cash offered by Green Acquisition Corp. for such
number of Shares.
------------------------
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
<TABLE>
<S> <C>
Amount Previously Paid: Not applicable
Form or Registration No.: Not applicable
Filing Party: Not applicable
Date Filed: Not applicable
</TABLE>
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<PAGE> 2
CUSIP NO. 208368 10 0
Page 1 of 2 pages
14D-1
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<S> <C> <C>
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1. NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
CSX CORPORATION
62-1051971
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [ ]
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3. SEC USE ONLY
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4. SOURCE OF FUNDS
BK, WC
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED [ ]
PURSUANT TO ITEMS 2(e) or 2(f)
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
VIRGINIA
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7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
See "Introduction" of the Offer to Purchase, dated December 6, 1996, filed as Exhibit
(a)(1) hereto.
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8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES [ ]
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9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
See "Introduction" of the Offer to Purchase, dated December 6, 1996, filed as
Exhibit (a)(1) hereto.
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10. TYPE OF REPORTING PERSON
HC, CO
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</TABLE>
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page 2 of 2 pages
CUSIP NO. 208368 10 0
14D-1
<TABLE>
<S> <C> <C>
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1. NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
GREEN ACQUISITION CORP.
54-1826002
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [ ]
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3. SEC USE ONLY
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4. SOURCE OF FUNDS
AF
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(e) or 2(f) [ ]
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6. CITIZENSHIP OR PLACE OF ORGANIZATION
PENNSYLVANIA
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7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
See "Introduction" of the Offer to Purchase, dated December 6, 1996, filed as Exhibit
(a)(1) hereto.
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8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES [ ]
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9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
See "Introduction" of the Offer to Purchase, dated December 6, 1996, filed as Exhibit
(a)(1) hereto.
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10. REPORTING PERSON
CO
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</TABLE>
<PAGE> 4
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Conrail Inc., a Pennsylvania
corporation (the "Company"). The address of the Company's principal executive
offices is 2001 Market Street, Two Commerce Square, Philadelphia, Pennsylvania
19101-1417.
(b) This Statement on Schedule 14D-1 relates to the offer by Green
Acquisition Corp. ("Purchaser"), a Pennsylvania corporation and a wholly owned
subsidiary of CSX Corporation, a Virginia corporation ("Parent"), to purchase up
to an aggregate of 18,344,845 shares of (i) Common Stock, par value $1.00 per
share (the "Common Shares"), and (ii) Series A ESOP Convertible Junior Preferred
Stock, without par value (the "ESOP Preferred Shares" and, together with the
Common Shares, the "Shares"), of the Company, including, in each case, the
associated Common Stock Purchase Rights, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated December 6, 1996, and in
the related Letter of Transmittal (which, together with any amendments or
supplements thereto, constitute the "Second Offer"), at a purchase price of $110
per Share, net to the tendering shareholder in cash. The Company has advised
Purchaser that at November 27, 1996, 82,248,741 Common Shares and 7,303,920 ESOP
Preferred Shares were outstanding. The information set forth under
"Introduction" in the Offer to Purchase annexed hereto as Exhibit (a)(1) is
incorporated herein by reference.
(c) The information set forth under "Price Range of Shares; Dividends" in
the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d); (g) This Statement is being filed by Purchaser and Parent. The
information set forth under "Introduction" and "Certain Information Concerning
Purchaser and Parent" in the Offer to Purchase and Schedule I thereto is
incorporated herein by reference.
(e)-(f) During the last five years, neither Purchaser, Parent nor any
persons controlling Purchaser, nor, to the best knowledge of Purchaser or
Parent, any of the persons listed on Schedule I to the Offer to Purchase (i) has
been convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (ii) was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which any such
person was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting activities subject to, federal or state securities
laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth under "Introduction," "Background of the
Second Offer; Contacts with the Company," "Purpose of the Second Offer and the
Merger; Plans for the Company," "Merger Agreement; Other Agreements," "Certain
Information Concerning the Company" and "Certain Information Concerning
Purchaser and Parent" in the Offer to Purchase is incorporated herein by
reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth under "Introduction" and "Source and
Amount of Funds" in the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth under "Introduction," "Background of the
Second Offer; Contacts with the Company," "Purpose of the Second Offer and the
Merger; Plans for the Company" and "Merger Agreement; Other Agreements" in the
Offer to Purchase is incorporated herein by reference.
(f)-(g) The information set forth under "Introduction" and "Effect of the
Second Offer on the Market for the Common Shares; Exchange Listing and Exchange
Act Registration; Margin Regulations" in the Offer to Purchase is incorporated
herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth under "Introduction," "Certain
Information Concerning Purchaser and Parent" and "Merger Agreement; Other
Agreements" in the Offer to Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
The information set forth under "Introduction," "Background of the Second
Offer; Contacts with the Company," "Purpose of the Second Offer and the Merger;
Plans for the Company," "Certain Information Concerning Purchaser and Parent,"
and "Merger Agreement; Other Agreements" in the Offer to Purchase is
incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth under "Fees and Expenses" in the Offer to
Purchase is incorporated herein by reference.
<PAGE> 5
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth under "Certain Information Concerning Purchaser
and Parent" in the Offer to Purchase is incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) Not applicable.
(b)-(c) The information set forth under "Introduction" and "Certain Legal
Matters; Regulatory Approvals" in the Offer to Purchase is incorporated herein
by reference.
(d) The information set forth under "Effect of the Second Offer on the
Market for the Common Shares; Exchange Listing and Exchange Act Registration;
Margin Regulations" in the Offer to Purchase is incorporated herein by
reference.
(e) The information set forth under "Certain Legal Matters; Regulatory
Approvals" in the Offer to Purchase is incorporated herein by reference.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively, is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
(a)(1) Offer to Purchase, dated December 6, 1996.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form
W-9.
(a)(7) Tender Offer Instructions for Participants of Conrail Inc. Dividend Reinvestment
Plan.
(a)(8) Text of Press Release issued by Parent and the Company on December 6, 1996.
(a)(9) Form of Summary Advertisement, dated December 6, 1996.
(a)(10) Text of Press Release issued by Parent on December 5, 1996.
(b) Not applicable.
(c)(1) Agreement and Plan of Merger, dated as of October 14, 1996, by and among Parent,
Purchaser and the Company (incorporated by reference to Exhibit (c)(1) to Parent
and Purchaser's Tender Offer Statement on Schedule 14D-1, as amended, dated
October 16, 1996).
(c)(2) Company Stock Option Agreement, dated as of October 14, 1996, between Parent and
the Company (incorporated by reference to Exhibit (c)(2) to Parent and
Purchaser's Tender Offer Statement on Schedule 14D-1, as amended, dated October
16, 1996).
(c)(3) Parent Stock Option Agreement, dated as of October 14, 1996, between Parent and
the Company (incorporated by reference to Exhibit (c)(3) to Parent and
Purchaser's Tender Offer Statement on Schedule 14D-1, as amended, dated October
16, 1996).
(c)(4) Voting Trust Agreement, dated as of October 15, 1996, by and among Parent,
Purchaser and Deposit Guaranty National Bank (incorporated by reference to
Exhibit (c)(4) to Parent and Purchaser's Tender Offer Statement on Schedule
14D-1, as amended, dated October 16, 1996).
(c)(5) First Amendment to Agreement and Plan of Merger, dated as of November 5, 1996, by
and among Parent, Purchaser and the Company (incorporated by reference to Exhibit
(c)(7) to Parent and Purchaser's Tender Offer Statement on Schedule 14D-1, as
amended, dated October 16, 1996).
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
</TABLE>
2
<PAGE> 6
SIGNATURE
After due inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
CSX CORPORATION
By: /s/ MARK G. ARON
Name: Mark G. Aron
Title: Executive Vice President -- Law
and Public Affairs
Dated: December 6, 1996
<PAGE> 7
SIGNATURE
After due inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
GREEN ACQUISITION CORP.
By: /s/ MARK G. ARON
Name: Mark G. Aron
Title: General Counsel and Secretary
Dated: December 6, 1996
<PAGE> 8
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO.
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<S> <C>
(a)(1) Offer to Purchase, dated December 6, 1996.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
(a)(7) Tender Offer Instructions for Participants of Conrail Inc. Dividend Reinvestment Plan.
(a)(8) Text of Press Release issued by Parent and the Company on December 6, 1996.
(a)(9) Form of Summary Advertisement, dated December 6, 1996.
(a)(10) Text of Press Release issued by Parent on December 5, 1996.
(b) Not applicable.
(c)(1) Agreement and Plan of Merger, dated as of October 14, 1996, by and among Parent, Purchaser
and the Company (incorporated by reference to Exhibit (c)(1) to Parent and Purchaser's Tender
Offer Statement on Schedule 14D-1, as amended, dated October 16, 1996).
(c)(2) Company Stock Option Agreement, dated as of October 14, 1996, between Parent and the Company
(incorporated by reference to Exhibit (c)(2) to Parent and Purchaser's Tender Offer Statement
on Schedule 14D-1, as amended, dated October 16, 1996).
(c)(3) Parent Stock Option Agreement, dated as of October 14, 1996, between Parent and the Company
(incorporated by reference to Exhibit (c)(3) to Parent and Purchaser's Tender Offer Statement
on Schedule 14D-1, as amended, dated October 16, 1996).
(c)(4) Voting Trust Agreement, dated as of October 15, 1996, by and among Parent, Purchaser and
Deposit Guaranty National Bank (incorporated by reference to Exhibit (c)(4) to Parent and
Purchaser's Tender Offer Statement on Schedule 14D-1, as amended, dated October 16, 1996).
(c)(5) First Amendment to Agreement and Plan of Merger, dated as of November 5, 1996, by and among
Parent, Purchaser and the Company (incorporated by reference to Exhibit (c)(7) to Parent and
Purchaser's Tender Offer Statement on Schedule 14D-1, as amended, dated October 16, 1996).
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
</TABLE>
<PAGE> 1
OFFER TO PURCHASE FOR CASH
UP TO AN AGGREGATE OF 18,344,845 SHARES
OF
COMMON STOCK AND SERIES A ESOP CONVERTIBLE JUNIOR PREFERRED STOCK
(including, in each case, the associated Common Stock Purchase Rights)
OF
CONRAIL INC.
AT
$110 NET PER SHARE
BY
GREEN ACQUISITION CORP.
a wholly owned subsidiary of
CSX CORPORATION
THE SECOND OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 6, 1997, UNLESS THE SECOND
OFFER IS EXTENDED.
------------------------
THE SECOND OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THE PENNSYLVANIA
CONTROL TRANSACTION LAW BEING INAPPLICABLE TO CONRAIL INC. (THE "COMPANY"),
WHICH WILL REQUIRE COMPANY SHAREHOLDER APPROVAL OF AN AMENDMENT TO THE COMPANY
ARTICLES. SEE INTRODUCTION AND SECTION 15.
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THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE SECOND
OFFER AND THE MERGER, DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY (INCLUDING THE SECOND OFFER AND THE MERGER) ARE IN THE BEST
INTERESTS OF THE COMPANY AND RECOMMENDS THAT SHAREHOLDERS OF THE COMPANY WHO
DESIRE TO RECEIVE CASH FOR A PORTION OF THEIR SHARES ACCEPT THE SECOND OFFER AND
TENDER THEIR SHARES PURSUANT TO THE SECOND OFFER.
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IMPORTANT
Any shareholder desiring to tender all or any portion of such shareholder's
Common Shares (as defined herein) or ESOP Preferred Shares (as defined herein)
should either (i) complete and sign the Letter of Transmittal (or a facsimile
thereof) in accordance with the instructions set forth therein, have such
shareholder's signature thereon guaranteed if required by Instruction 1 thereto,
mail or deliver the Letter of Transmittal (or such facsimile thereof) and any
other required documents to the Depositary and either deliver the certificates
for such Shares (as defined herein) to the Depositary (as defined herein) along
with the Letter of Transmittal (or a facsimile thereof) or deliver such Shares
pursuant to the procedure for book-entry transfer set forth in Section 3 prior
to the expiration of the Second Offer or (ii) request such shareholder's broker,
dealer, commercial bank, trust company or other nominee to effect the
transaction for such shareholder. A shareholder having Shares registered in the
name of a broker, dealer, commercial bank, trust company or other nominee must
contact such broker, dealer, commercial bank, trust company or other nominee if
such shareholder desires to tender such Shares.
Any shareholder who desires to tender Shares and whose certificates for such
Shares are not immediately available, or who cannot comply with the procedures
for book-entry transfer described in this Offer to Purchase on a timely basis,
may tender such Shares by following the procedures for guaranteed delivery set
forth in Section 3.
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal or other tender offer materials may be
directed to the Information Agent (as defined herein) or the Dealer Manager (as
defined herein) at their respective addresses and telephone numbers set forth on
the back cover of this Offer to Purchase.
The Dealer Manager for the Second Offer is:
WASSERSTEIN PERELLA & CO., INC.
December 6, 1996
<PAGE> 2
TABLE OF CONTENTS
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PAGE
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INTRODUCTION........................................................................... 1
1. Terms of the Second Offer; Proration; Expiration Date............................. 4
2. Acceptance for Payment and Payment for Shares..................................... 6
3. Procedures for Tendering Shares................................................... 7
4. Withdrawal Rights................................................................. 10
5. Certain Federal Income Tax Consequences........................................... 11
6. Price Range of Shares; Dividends.................................................. 14
7. Effect of the Second Offer on the Market for the Common Shares; Exchange Listing
and Exchange Act Registration..................................................... 15
8. Certain Information Concerning the Company........................................ 15
9. Certain Information Concerning Purchaser and Parent............................... 19
10. Source and Amount of Funds........................................................ 21
11. Background of the Second Offer; Contacts with the Company......................... 23
12. Purpose of the Second Offer and the Merger; Plans for the Company................. 29
13. Merger Agreement; Other Agreements................................................ 30
14. Dividends and Distributions....................................................... 49
15. Conditions of the Second Offer.................................................... 49
16. Certain Legal Matters; Regulatory Approvals....................................... 51
17. Fees and Expenses................................................................. 58
18. Miscellaneous..................................................................... 59
Schedule I -- Information Concerning Directors and Executive Officers of Parent and I-1
Purchaser............................................................................
</TABLE>
i
<PAGE> 3
TO THE HOLDERS OF COMMON STOCK AND SERIES A ESOP CONVERTIBLE
JUNIOR PREFERRED STOCK OF CONRAIL INC.:
INTRODUCTION
Green Acquisition Corp. ("Purchaser"), a Pennsylvania corporation and a
wholly owned subsidiary of CSX Corporation, a Virginia corporation ("Parent"),
hereby offers to purchase up to an aggregate of 18,344,845 shares of (i) common
stock, par value $1.00 per share (the "Common Shares"), and (ii) Series A ESOP
Convertible Junior Preferred Stock, without par value (the "ESOP Preferred
Shares" and, together with the Common Shares, the "Shares"), of the Company,
including, in each case, the associated common stock purchase rights (the
"Rights") issued pursuant to the Rights Agreement, dated as of July 19, 1989,
between the Company and First Chicago Trust Company of New York, as Rights Agent
(as amended, the "Rights Agreement"), at a price of $110 per Share, net to the
seller in cash, without interest thereon (the "Second Offer Price"), upon the
terms and subject to the conditions set forth in this Offer to Purchase and in
the related Letter of Transmittal (which, as amended from time to time, together
constitute the "Second Offer"). Unless the context otherwise requires, all
references to Common Shares, ESOP Preferred Shares or Shares shall include the
associated Rights, and all references to the Rights shall include the benefits
that may enure to holders of the Rights pursuant to the Rights Agreement,
including the right to receive any payment due upon redemption of the Rights.
Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares by Purchaser
pursuant to the Second Offer. Purchaser will pay all charges and expenses of
Wasserstein Perella & Co., Inc., as Dealer Manager (in such capacity, the
"Dealer Manager"), Citibank, N.A., as Depositary (the "Depositary"), and
MacKenzie Partners, Inc., as Information Agent (the "Information Agent"),
incurred in connection with the Second Offer. See Section 17.
Participants in the Company's Matched Savings Plan (the "ESOP") desiring
that Fidelity Management Trust Company, as trustee under the ESOP (the "ESOP
Trustee"), tender the ESOP Preferred Shares allocated to their accounts, which
will be converted into Common Shares upon consummation of the Second Offer,
should so instruct the ESOP Trustee by completing the form that will be provided
to participants for that purpose. ESOP participants cannot tender Shares
allocated to their ESOP accounts by executing the Letter of Transmittal.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD" OR "BOARD OF DIRECTORS")
HAS UNANIMOUSLY APPROVED THE SECOND OFFER AND THE MERGER (AS DEFINED HEREIN),
DETERMINED THAT THE MERGER AGREEMENT (AS DEFINED HEREIN) AND THE TRANSACTIONS
CONTEMPLATED THEREBY (INCLUDING THE SECOND OFFER AND THE MERGER) ARE IN THE BEST
INTERESTS OF THE COMPANY AND RECOMMENDS THAT SHAREHOLDERS OF THE COMPANY WHO
DESIRE TO RECEIVE CASH FOR A PORTION OF THEIR SHARES ACCEPT THE SECOND OFFER AND
TENDER THEIR SHARES PURSUANT TO THE SECOND OFFER.
THE SECOND OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THE PENNSYLVANIA
CONTROL TRANSACTION LAW (AS DEFINED HEREIN) BEING INAPPLICABLE TO THE COMPANY
(THE "OPT OUT CONDITION"), WHICH WILL REQUIRE COMPANY SHAREHOLDER APPROVAL OF AN
AMENDMENT TO THE COMPANY ARTICLES (AS DEFINED HEREIN). SEE SECTION 15.
------------------------
The Company has advised Purchaser that each of Lazard Freres & Co. LLC
("Lazard Freres") and Morgan Stanley & Co. Incorporated ("Morgan Stanley") has
delivered to the Board its written opinion that, as of the date of the Merger
Agreement, the consideration to be received by the holders of Shares (other than
Parent, Purchaser or any other subsidiary of Parent) pursuant to the First
Offer, the Second Offer and the Merger, taken together, is fair from a financial
point of view to such holders. A copy of each such opinion is contained in the
Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9"), which is being mailed to shareholders of the Company herewith, and such
shareholders are urged to
1
<PAGE> 4
read each opinion in its entirety for a description of the assumptions made,
factors considered, procedures followed by, and certain information concerning,
Lazard Freres and Morgan Stanley.
The purpose of the Second Offer is for Parent, through Purchaser, to
increase its equity interest in the Company as the second step in a business
combination of Parent and the Company. Pursuant to a cash tender offer commenced
by Purchaser on October 16, 1996 (the "First Offer" and, together with the
Second Offer, the "Offers") which expired at 12:00 midnight, New York City time,
on November 20, 1996 (the "First Offer Expiration Date"), Purchaser acquired an
aggregate of 17,860,124 Shares. The Second Offer is being made pursuant to an
Agreement and Plan of Merger, dated as of October 14, 1996 (as amended, the
"Merger Agreement"), by and among the Company, Parent and Purchaser. The Merger
Agreement provides that, following the completion of the Second Offer and the
satisfaction or waiver of certain conditions, the Company will be merged with
and into Purchaser (the "Merger"), with Purchaser as the surviving corporation
(the "Surviving Corporation"), in accordance with the Pennsylvania Business
Corporation Law of 1988, as amended (the "Pennsylvania Law"). As more fully
described in Section 13, in the Merger, each outstanding Share (other than
Shares held in the treasury of the Company or owned by Parent, Purchaser or any
other wholly owned subsidiary of Parent or the Company) will be converted, at
the election of the holder of Shares and subject to certain limitations, into
the right to receive (i) $110 in cash, without interest (unless, prior to the
Effective Time, at least 40% of the outstanding Shares on a fully diluted basis
have been purchased by Purchaser (other than upon exercise of the Company Stock
Option, as defined herein)), (ii) 1.85619 shares of common stock, par value
$1.00 per share, of Parent (the "Parent Common Stock") or (iii) a combination of
such cash and shares of Parent Common Stock. However, the Merger Agreement
contains provisions which will ensure that, regardless of the number of Shares
for which holders have elected to receive cash or Parent Common Stock, as the
case may be, the aggregate number of Shares to be converted into Parent Common
Stock pursuant to the Merger shall be equal as nearly as practicable to 60% of
all Shares outstanding immediately prior to the Merger on a fully diluted basis
(except for Shares issuable or outstanding pursuant to the Company Stock
Option), and the aggregate number of Shares to be converted into the right to
receive cash pursuant to the Merger, together with the Shares theretofore
purchased by Purchaser (other than upon exercise of the Company Stock Option),
shall be equal as nearly as practicable to 40% of all such Shares outstanding
immediately prior to the Merger on a fully diluted basis. Accordingly, in the
case of any particular shareholder, depending on the aggregate number of Shares
for which the holders have elected to receive cash or Parent Common Stock, as
the case may be, such shareholder may not receive in respect of his or her
Shares the amount of cash, Parent Common Stock or combination thereof that such
shareholder requested in his or her election. See Section 13. The Surviving
Corporation will be a wholly owned subsidiary of Parent. The time at which the
Merger is consummated in accordance with the Merger Agreement is hereinafter
referred to as the "Effective Time." The Offers and the Merger are sometimes
collectively referred to herein as the "Transactions."
THE SECOND OFFER DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY PARENT COMMON STOCK. SUCH AN OFFER MAY BE MADE ONLY PURSUANT
TO A PROSPECTUS.
In connection with the execution of the Merger Agreement, the Company and
Parent entered into an option agreement (the "Company Stock Option Agreement")
pursuant to which the Company granted to Parent an option (the "Company Stock
Option"), which is currently exercisable, to purchase 15,955,477 Common Shares
at an exercise price of $92.50 per Common Share, subject to adjustment as set
forth therein. Concurrently, Parent and the Company entered into an option
agreement (the "Parent Stock Option Agreement" and, together with the Company
Stock Option Agreement, the "Option Agreements") pursuant to which Parent
granted to the Company an option, exercisable only in certain events, to
purchase 43,090,773 shares of Parent Common Stock at an exercise price of $64.82
per share, subject to adjustment as set forth therein. See Section 13.
Simultaneously with the purchase of Shares pursuant to the Second Offer,
the Shares purchased will be deposited in an independent, irrevocable voting
trust (the "Voting Trust") in accordance with the terms of the Voting Trust
Agreement, dated as of October 15, 1996 (the "Voting Trust Agreement"), entered
into by
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<PAGE> 5
Parent, Purchaser and Deposit Guaranty National Bank (the "Voting Trustee"). The
Shares acquired by Purchaser in the First Offer were deposited into the Voting
Trust upon purchase. See Sections 13 and 16.
Under Subchapter E of Chapter 25 of the Pennsylvania Law (the "Pennsylvania
Control Transaction Law"), unless a corporation's articles of incorporation or
by-laws adopted by the shareholders otherwise provide, after the occurrence of a
"control transaction," any holder of voting shares of a "registered corporation"
(such as the Company) may make written demand on the "controlling person" for
payment of cash in an amount equal to the "fair value" of each voting share as
of the date on which the control transaction occurs. A "control transaction" is
the acquisition by a "controlling person," that is, a person or group of persons
acting in concert who have voting power over voting shares of the registered
corporation that would entitle the holders thereof to cast at least 20% of the
votes that all shareholders would be entitled to cast in an election of
directors. See Section 16.
The Company's Articles of Incorporation (the "Company Articles") currently
do not contain a provision by which the Company opts out of the Pennsylvania
Control Transaction Law. Accordingly, unless and until such time as the Company
Articles are amended to include such an opt out provision, the Pennsylvania
Control Transaction Law effectively precludes Purchaser from purchasing Shares
pursuant to the Second Offer and consummating the Merger in accordance with the
Merger Agreement. Therefore, the Second Offer has been made subject to the Opt
Out Condition. The Company has mailed to its shareholders a definitive proxy
statement for a special meeting of the Company's shareholders (the "Pennsylvania
Special Meeting") currently scheduled to be held on December 23, 1996 for the
purpose of voting on an amendment to the Company Articles (the "Articles
Amendment") to opt out of the Pennsylvania Control Transaction Law. The record
date for the Pennsylvania Special Meeting has been fixed by the Company at
December 5, 1996. Under the Company Articles and the Pennsylvania Law, the
Articles Amendment must be approved by a majority of the votes cast by the
holders of outstanding Shares, voting as a single class (the "Pennsylvania
Shareholder Approval"). As of the date hereof, Parent and Purchaser beneficially
own 17,860,124 Shares, representing approximately 19.9% of the Shares
outstanding as of November 27, 1996, all of which were acquired pursuant to the
First Offer. Under the terms of the Voting Trust Agreement, all such Shares will
be voted in favor of the Articles Amendment. THE SECOND OFFER DOES NOT
CONSTITUTE A SOLICITATION OF PROXIES FOR THE PENNSYLVANIA SPECIAL MEETING. ANY
SUCH SOLICITATION WILL BE MADE ONLY BY THE COMPANY AND PURSUANT TO PROXY
MATERIALS COMPLYING WITH THE REQUIREMENTS OF SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"), AND THE RULES AND
REGULATIONS THEREUNDER.
Under the Merger Agreement, the Company has agreed not to convene, adjourn
or postpone the Pennsylvania Special Meeting without the prior consent of
Parent, which consent will not be unreasonably withheld. As a result, it is
expected that the Pennsylvania Special Meeting will not be convened if the
Company has not prior thereto received sufficient proxies to assure approval of
the Articles Amendment. Pursuant to the Merger Agreement, either Parent or the
Company can require that additional special meetings be held for the purpose of
considering the Articles Amendment, and a new record date could be set for any
such special meeting (and a new record date would be required if such a special
meeting is held after February 3, 1997). See Section 13.
If the Pennsylvania Shareholder Approval is obtained (whether or not such
approval is obtained prior to the expiration of the Second Offer), Purchaser
may, in its discretion and depending upon the circumstances (but subject to the
terms and conditions of the Second Offer and the Merger Agreement), accept for
payment Shares in the Second Offer and, thereafter, purchase additional Shares
through a subsequent tender offer, in open market purchases, pursuant to the
Company Stock Option Agreement or otherwise. Such additional Share purchases may
be on terms different from the terms of the Second Offer. See Sections 1 and 13.
Certain other conditions to the consummation of the Second Offer are
described in Section 15. Subject to the terms of the Merger Agreement, Purchaser
reserves the right to waive any one or more of the conditions to the Second
Offer.
If the Articles Amendment is not approved, if the Pennsylvania Special
Meeting is not convened, or if the Second Offer is not consummated, Parent and
the Company are each permitted under the Merger Agreement to seek shareholder
approval of the Merger at a special meeting called for such purpose. If the
Merger is so approved (and the other conditions to closing of the Merger, such
as regulatory approval, have been satisfied),
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<PAGE> 6
and Parent shall not have then acquired 40% of the fully diluted Shares (other
than upon exercise of the Company Stock Option), the Merger would then have a
cash election component such that shareholders, upon consummation of the Merger,
would have received (including pursuant to the Offers) $110 in cash per Share
for an aggregate of 40% of such fully diluted Shares, and 1.85619 shares of
Parent Common Stock for each of the remaining 60% of such fully diluted Shares.
Thus, approval of the Articles Amendment is not a condition to consummation of
the Merger; however, such approval would permit consummation of the Second
Offer, giving shareholders the opportunity to receive more cash in the near term
for a portion of their Shares, rather than waiting until the Merger is
consummated (which, based on the current schedule proposed by the Surface
Transportation Board (the "STB"), is not expected to occur before the first
quarter of 1998). See Section 16.
The obligations of Parent and Purchaser to consummate the Merger are
conditioned upon, among other things, the STB having issued a final decision
approving, exempting or otherwise authorizing consummation of the Merger and all
other material transactions contemplated by the Merger Agreement as may require
such authorization and which, among other things, does not impose on Parent, the
Company or any of their respective subsidiaries terms or conditions that
materially and adversely affect the long-term benefits expected to be received
by Parent from the transactions contemplated by the Merger Agreement. See
Section 13.
The Merger is also conditioned upon, among other things, the approval and
adoption of the Merger Agreement by the requisite vote of the shareholders of
the Company and the approval of Parent shareholders to an amendment of Parent's
Articles of Incorporation to increase the authorized number of Parent Common
Shares in order to effect the Merger, and to approve the issuance of Parent
Common Stock in the Merger for purposes of the rules of the New York Stock
Exchange, Inc. ("NYSE"), by the requisite vote of the shareholders of Parent.
Under the Company Articles and the Pennsylvania Law, the affirmative vote of the
holders of a majority of the votes cast by the outstanding Shares, voting as a
single class, is required to approve and adopt the Merger Agreement and the
Merger. Under Parent's Articles of Incorporation, the affirmative vote of the
holders of a majority of the outstanding shares of Parent Common Stock is
required to approve the amendment of Parent's Articles of Incorporation.
Based on information supplied by the Company, as of November 27, 1996, (i)
82,248,741 Common Shares were issued and outstanding and 8,263,682 Common Shares
were reserved for issuance pursuant to outstanding employee stock options or
upon conversion of the ESOP Preferred Shares and (ii) 7,303,920 ESOP Preferred
Shares were issued and outstanding. Pursuant to the Company Articles, each ESOP
Preferred Share purchased pursuant to the Second Offer will automatically be
converted into one Common Share upon consummation of the Second Offer, and each
remaining ESOP Preferred Share will be automatically converted into one Common
Share immediately prior to the Effective Time.
As of the date hereof, Parent beneficially owns 17,860,124 Common Shares,
representing approximately 19.9% of the Shares outstanding as of November 27,
1996. Assuming the purchase of 18,344,845 Shares pursuant to the Second Offer,
Parent will beneficially own approximately 40% of the Shares outstanding as of
November 27, 1996 on a fully diluted basis. In accordance with the Voting Trust,
all such Shares will be voted in favor of the Merger.
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE SECOND OFFER.
1. TERMS OF THE SECOND OFFER; PRORATION; EXPIRATION DATE. Upon the terms
and subject to the conditions of the Second Offer (including, if the Second
Offer is extended or amended, the terms and conditions of any extension or
amendment), Purchaser will accept for payment and pay for up to an aggregate of
18,344,845 Shares which are validly tendered prior to the Expiration Date (as
defined herein) and not properly withdrawn in accordance with Section 4. The
term "Expiration Date" means 12:00 midnight, New York City time, on Monday,
January 6, 1997, unless and until Purchaser, in its sole discretion (but subject
to the terms of the Merger Agreement), shall have extended the period of time
during which the Second Offer is open, in which event the term "Expiration Date"
shall refer to the latest time and date at which the Second Offer, as so
extended by Purchaser, shall expire.
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<PAGE> 7
If more than 18,344,845 Shares are validly tendered prior to the Expiration
Date and not properly withdrawn, Purchaser will, upon the terms and subject to
the conditions of the Second Offer, accept for payment and pay for only
18,344,845 Shares, on a pro rata basis, with adjustments to avoid purchases of
fractional Shares, based upon the number of Shares validly tendered prior to the
Expiration Date and not properly withdrawn. The same proration factor will be
applied in the Second Offer to both the Common Shares and the ESOP Preferred
Shares. See Introduction and Section 13. Because of the difficulty of
determining precisely the number of Shares validly tendered and not withdrawn,
if proration is required, Purchaser would not expect to be able to announce the
final results of proration or pay for Shares until at least five NYSE trading
days after the Expiration Date. Preliminary results of proration will be
announced by press release as promptly as practicable after the Expiration Date.
Holders of Shares may obtain such preliminary information from the Information
Agent and may also be able to obtain such preliminary information from their
brokers.
If any or all of the events set forth in Section 15 shall have occurred
prior to the Expiration Date, Purchaser reserves the right (but shall not be
obligated) to (i) decline to purchase any of the Shares tendered in the Second
Offer and terminate the Second Offer, and return all tendered Shares to the
tendering shareholders, (ii) waive or amend any or all conditions to the Second
Offer to the extent permitted by applicable law and the provisions of the Merger
Agreement, and, subject to complying with applicable rules and regulations of
the Securities and Exchange Commission (the "SEC"), purchase all Shares validly
tendered, or (iii) extend the Second Offer and, subject to the right of
shareholders to withdraw Shares until the Expiration Date, retain the Shares
which have been tendered during the period or periods for which the Second Offer
is extended.
Purchaser expressly reserves the right, in its sole discretion, at any time
and from time to time, to extend for any reason the period of time during which
the Second Offer is open, including the occurrence of any of the events
specified in Section 15, by giving oral or written notice of such extension to
the Depositary. During any such extension, all Shares previously tendered and
not properly withdrawn will remain subject to the Second Offer, subject to the
rights of a tendering shareholder to withdraw its Shares in accordance with the
procedures set forth in Section 4.
Subject to the applicable regulations of the SEC, Purchaser also expressly
reserves the right, in its sole discretion (but subject to the terms of the
Merger Agreement), at any time and from time to time, (i) to delay acceptance
for payment of, or, regardless of whether such Shares were theretofore accepted
for payment, payment for, any Shares in order to comply in whole or in part with
any applicable law and (ii) to waive any condition or otherwise amend the Second
Offer in any respect by giving oral or written notice of such delay, waiver or
amendment to the Depositary and by making a public announcement thereof.
The Merger Agreement provides that, without the consent of the Company,
Purchaser will not, among other things, decrease the Second Offer Price, change
the form of consideration to be paid pursuant to the Second Offer, modify any of
the conditions to the Second Offer, impose conditions to the Second Offer in
addition to those set forth in the Merger Agreement or amend any term or
condition of the Second Offer in any manner adverse to the holders of Shares, it
having been agreed in the Merger Agreement that a waiver by Purchaser of any
condition in its discretion shall not be deemed to be adverse to the holders of
Shares. In addition, the Merger Agreement provides that, without the consent of
the Company, the Second Offer Price may be increased and the Second Offer may be
extended to the extent required by law in connection with such an increase.
Purchaser acknowledges that (i) Rule 14e-1(c) under the Exchange Act
requires Purchaser to pay the consideration offered or return the Shares
tendered promptly after the termination or withdrawal of the Second Offer, and
(ii) Purchaser may not delay acceptance for payment of, or payment for (except
as provided in clause (i) of the first sentence of the second preceding
paragraph), any Shares upon the occurrence of any of the conditions specified in
Section 15 without extending the period of time during which the Second Offer is
open.
Any such extension, delay, termination, waiver or amendment will be
followed as promptly as practicable by public announcement thereof, with such
announcement in the case of an extension to be made no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date.
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<PAGE> 8
Subject to applicable law (including Rules 14d-4(c), 14d-6(d) and 14e-1 under
the Exchange Act, which require that material changes be promptly disseminated
to shareholders in a manner reasonably designed to inform them of such changes)
and without limiting the manner in which Purchaser may choose to make any public
announcement, Purchaser shall have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by issuing a press
release to the Dow Jones News Service.
If Purchaser makes a material change in the terms of the Second Offer or
the information concerning the Second Offer, or if it waives a material
condition of the Second Offer, Purchaser will disseminate additional tender
offer materials and extend the Second Offer to the extent required by Rules
14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period during
which the Second Offer must remain open following material changes in the terms
of the Second Offer or information concerning the Second Offer, other than a
change in price or a change in percentage of securities sought, will depend upon
the facts and circumstances, including the relative materiality of the changed
terms or information. In the SEC's view, an offer should generally remain open
for a minimum of five business days from the date a material change is first
published, sent or given to shareholders. With respect to a change in price or a
change in percentage of securities sought (other than an increase in the number
of Shares sought not in excess of 2% of the outstanding Shares), a minimum
ten-business-day period is required to allow for adequate dissemination to
shareholders and investor response. As used in this Offer to Purchase, "business
day" has the meaning set forth in Rule 14d-1 under the Exchange Act.
Accordingly, if, prior to the Expiration Date, Purchaser increases or decreases
the number of Shares being sought, or increases or decreases the consideration
offered pursuant to the Second Offer, and if the Second Offer is scheduled to
expire at any time earlier than the period ending on the tenth business day from
the date that notice of such increase or decrease is first published, sent or
given to holders of Shares, except in respect of an increase in the number of
Shares sought not in excess of 2% of the outstanding Shares, the Second Offer
will be extended at least until the expiration of such ten-business-day period.
As of the date of this Offer to Purchase, the Rights are evidenced by the
certificates representing Shares and do not trade separately. Accordingly, by
tendering a certificate representing Shares, a shareholder is automatically
tendering a similar number of associated Rights. If, however, pursuant to the
Rights Agreement or for any other reason, the Rights detach and separate
certificates representing rights ("Rights Certificates") are issued,
shareholders will be required to tender one Right for each Share tendered in
order to effect a valid tender of such Share.
The Company has provided Purchaser with the Company's shareholder list and
security position listings for the purpose of disseminating the Second Offer to
holders of Shares. This Offer to Purchase, the related Letter of Transmittal,
and other relevant materials will be mailed to record holders of Shares whose
names appear on the Company's shareholder list and will be furnished, for
subsequent transmittal to beneficial owners of Shares, to brokers, dealers,
commercial banks, trust companies and similar persons whose names, or the names
of whose nominees, appear on the shareholder list or, if applicable, who are
listed as participants in a clearing agency's security position listing.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and
subject to the conditions of the Second Offer (including, if the Second Offer is
extended or amended, the terms and conditions of any such extension or
amendment), Purchaser will purchase, by accepting for payment, and will pay for,
up to an aggregate of 18,344,845 Shares which are validly tendered prior to the
Expiration Date (and not properly withdrawn in accordance with Section 4)
promptly after the later to occur of (i) the Expiration Date and (ii) the
satisfaction or waiver of the conditions set forth in Section 15. Purchaser
expressly reserves the right, in its discretion, to delay acceptance for payment
of, or, subject to applicable rules of the SEC, payment for, Shares in order to
comply in whole or in part with any applicable law.
In all cases, payment for Shares purchased pursuant to the Second Offer
will be made only after timely receipt by the Depositary of (i) the certificates
evidencing such Shares (the "Share Certificates") or timely confirmation of a
book-entry transfer (a "Book-Entry Confirmation") of such Shares, if such
procedure is available, into the Depositary's account at The Depository Trust
Company or the Philadelphia Depository Trust Company (each a "Book-Entry
Transfer Facility" and, collectively, the "Book-Entry Transfer Facilities")
pursuant to the procedures set forth in Section 3, (ii) the Letter of
Transmittal (or facsimile
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<PAGE> 9
thereof), properly completed and duly executed, or, in the case of a book-entry
transfer, an Agent's Message (as defined herein) and (iii) any other documents
required by the Letter of Transmittal.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares, that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that Purchaser
may enforce such agreement against the participant.
For purposes of the Second Offer, Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares validly tendered and not properly
withdrawn if, as and when Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance of such Shares for payment. Payment for
Shares accepted pursuant to the Second Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as agent for
tendering shareholders for the purpose of receiving payments from Purchaser and
transmitting payments to such tendering shareholders. Under no circumstances
will interest on the purchase price for Shares be paid by Purchaser, regardless
of any delay in making such payment. Upon the deposit of funds with the
Depositary for the purpose of making payments to tendering shareholders,
Purchaser's obligation to make such payment shall be satisfied and tendering
shareholders must thereafter look solely to the Depositary for payment of
amounts owed to them by reason of the acceptance for payment of Shares pursuant
to the Second Offer. Purchaser will pay any stock transfer taxes incident to the
transfer to it of validly tendered Shares, except as otherwise provided in
Instruction 6 of the Letter of Transmittal, as well as any charges and expenses
of the Depositary and the Information Agent.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Second Offer (including proration due to
tenders of more than 18,344,845 Shares), or if Share Certificates are submitted
evidencing more Shares than are tendered, Share Certificates evidencing
unpurchased Shares will be returned, without expense to the tendering
shareholder (or, in the case of Shares tendered by book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility pursuant to the procedure
set forth in Section 3, such Shares will be credited to an account maintained at
such Book-Entry Transfer Facility), as promptly as practicable following the
expiration or termination of the Second Offer.
If, prior to the Expiration Date, Purchaser increases the consideration to
be paid per Share pursuant to the Second Offer, Purchaser will pay such
increased consideration for all such Shares purchased pursuant to the Second
Offer, whether or not such Shares were tendered prior to such increase in
consideration.
Purchaser reserves the right to transfer or assign, in whole at any time,
or in part from time to time, to Parent or one or more direct or indirect wholly
owned subsidiaries of Parent, the right to purchase all or any portion of the
Shares tendered pursuant to the Second Offer, provided that any such transfer or
assignment will not relieve Purchaser of its obligations under the Second Offer
and will in no way prejudice the rights of tendering shareholders to receive
payment for Shares validly tendered and accepted for payment pursuant to the
Second Offer.
3. PROCEDURES FOR TENDERING SHARES.
Valid Tender of Shares. In order for Shares to be validly tendered
pursuant to the Second Offer, the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees, or
an Agent's Message (in the case of any book-entry transfer) and any other
required documents, must be received by the Depositary at one of its addresses
set forth on the back cover of this Offer to Purchase prior to the Expiration
Date and either (i) the Share Certificates evidencing tendered Shares must be
received by the Depositary at one of such addresses or Shares must be tendered
pursuant to the procedure for book-entry transfer described below and a
Book-Entry Confirmation must be received by the Depositary, in each case, prior
to the Expiration Date, or (ii) the tendering shareholder must comply with the
guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY
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<PAGE> 10
WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY
IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at each Book-Entry Transfer Facility for purposes of the Second
Offer within two business days after the date of this Offer to Purchase, and any
financial institution that is a participant in either of the Book-Entry Transfer
Facilities' systems may make book-entry delivery of Shares by causing a
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at a Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for transfer. However, although delivery of
Shares may be effected through book-entry transfer at a Book-Entry Transfer
Facility, the Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees, or an Agent's Message
in connection with a book-entry delivery of Shares, and any other required
documents must, in any case, be transmitted to and received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase prior
to the Expiration Date or the tendering shareholder must comply with the
guaranteed delivery procedures described below. DELIVERY OF DOCUMENTS TO A
BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER
FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Signature Guarantee. Signatures on all Letters of Transmittal must be
guaranteed by a firm which is a bank, broker, dealer, credit union, savings
association or other entity that is a member in good standing of the Securities
Transfer Agents Medallion Program (each, an "Eligible Institution"), unless the
Shares tendered thereby are tendered (i) by a registered holder of Shares who
has not completed either the box entitled "Special Delivery Instructions" or the
box entitled "Special Payment Instructions" on the Letter of Transmittal or (ii)
for the account of an Eligible Institution. See Instruction 1 of the Letter of
Transmittal.
If a Share Certificate is registered in the name of a person other than the
signer of the Letter of Transmittal, or if payment is to be made, or a Share
Certificate not accepted for payment or not tendered is to be returned, to a
person other than the registered holder(s), then the Share Certificate must be
endorsed or accompanied by appropriate stock powers, in either case, signed
exactly as the name(s) of the registered holder(s) appear on the Share
Certificate, with the signature(s) on such Share Certificate or stock powers
guaranteed as described above. See Instructions 1 and 5 of the Letter of
Transmittal.
Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to
the Second Offer and such shareholder's Share Certificates are not immediately
available or time will not permit all required documents to reach the Depositary
prior to the Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis, such Shares may nevertheless be tendered if all the
following conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser
herewith, is received by the Depositary as provided below prior
to the Expiration Date; and
(iii) in the case of a guarantee of Shares, the Share Certificates for
all tendered Shares, in proper form for transfer, or a
Book-Entry Confirmation, together with a properly completed and
duly executed Letter of Transmittal (or manually signed
facsimile thereof) with any required signature guarantee (or, in
the case of a book-entry transfer, an Agent's Message) and any
other documents required by such Letter of Transmittal, are
received by the Depositary within three NYSE trading days after
the date of execution of the Notice of Guaranteed Delivery.
Any Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
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<PAGE> 11
Notwithstanding any other provision hereof, payment for Shares purchased
pursuant to the Second Offer will, in all cases, be made only after timely
receipt by the Depositary of (i) the Share Certificates evidencing such Shares,
or a Book-Entry Confirmation of the delivery of such Shares, if available, (ii)
a properly completed and duly executed Letter of Transmittal (or manually signed
facsimile thereof) or, in the case of a book-entry transfer, an Agent's Message
and (iii) any other documents required by the Letter of Transmittal.
Distribution of Rights. Holders of Shares will be required to tender one
Right for each Share tendered to effect a valid tender of such Share. Unless and
until the Distribution Date (as defined herein) occurs, the Rights will be
represented by and transferred with the Shares. Accordingly, if the Distribution
Date does not occur prior to the Expiration Date, a tender of Shares will
constitute a tender of the associated Rights. If a Distribution Date has
occurred, Rights Certificates representing a number of Rights equal to the
number of Shares being tendered must be delivered to the Depositary in order for
such Shares to be validly tendered. If a Distribution Date has occurred, a
tender of Shares without Rights constitutes an agreement by the tendering
shareholder to deliver Rights Certificates representing a number of Rights equal
to the number of Shares tendered pursuant to the Second Offer to the Depositary
within three NYSE trading days after the date such certificates are distributed.
Purchaser reserves the right to require that it receive such Rights Certificates
prior to accepting Shares for payment. Payment for Shares tendered and purchased
pursuant to the Second Offer will be made only after timely receipt by the
Depositary of, among other things, such Rights Certificates, if such Rights
Certificates have been distributed to holders of Shares. Purchaser will not pay
any additional consideration for the Rights tendered pursuant to the Second
Offer.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tendered Shares pursuant to any of the procedures described above will be
determined by Purchaser in its sole discretion, whose determination will be
final and binding on all parties. Purchaser reserves the absolute right to
reject any or all tenders of any Shares determined by it not to be in proper
form or if the acceptance for payment of, or payment for, such Shares may, in
the opinion of Purchaser's counsel, be unlawful. Purchaser also reserves the
absolute right, in its sole discretion, to waive any of the conditions of the
Second Offer or any defect or irregularity in any tender with respect to Shares
of any particular shareholder, whether or not similar defects or irregularities
are waived in the case of other shareholders. No tender of Shares will be deemed
to have been validly made until all defects and irregularities have been cured
or waived.
Purchaser's interpretation of the terms and conditions of the Second Offer
(including the Letter of Transmittal and the instructions thereto) will be final
and binding. None of Parent, Purchaser, the Company, the Depositary, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or will incur any
liability for failure to give any such notification.
Appointment as Proxy. By executing a Letter of Transmittal as set forth
above, a tendering shareholder irrevocably appoints designees of Purchaser as
such shareholder's proxies, each with full power of substitution, to the full
extent of such shareholder's rights with respect to the Shares tendered by such
shareholder and accepted for payment by Purchaser (and any and all noncash
dividends, distributions, rights, other Shares, or other securities issued or
issuable in respect of such Shares on or after December 6, 1996). All such
proxies shall be considered coupled with an interest in the tendered Shares.
This appointment will be effective if, when, and only to the extent that,
Purchaser accepts such Shares for payment pursuant to the Second Offer. Upon
such acceptance for payment, all prior proxies given by such shareholder with
respect to such Shares and other securities will, without further action, be
revoked, and no subsequent proxies may be given. The designees of Purchaser
will, with respect to the Shares and other securities for which the appointment
is effective, be empowered (subject to the Voting Trust Agreement so long as it
shall be in effect with respect to the Shares) to exercise all voting and other
rights of such shareholder as they, in their sole discretion, may deem proper at
any annual, special, adjourned or postponed meeting of the Company's
shareholders, by written consent or otherwise, and Purchaser reserves the right
to require that, in order for Shares or other securities to be deemed validly
tendered, immediately upon Purchaser's acceptance for payment of such Shares,
Purchaser (including through the Voting Trust) must be able to exercise full
voting rights with respect to such Shares.
9
<PAGE> 12
ESOP Preferred Shares. According to documents filed by the Company with
the SEC, all outstanding ESOP Preferred Shares are owned of record by the ESOP
Trustee and, accordingly, only the ESOP Trustee can effect a valid tender of
such shares. The ESOP Trustee is required to request instructions from each
participant in the ESOP as to whether ESOP Preferred Shares allocated to such
participant's account should be tendered pursuant to the Second Offer, and to
tender such shares in accordance with such instructions. Pursuant to the
organizational documents of the ESOP (but subject to applicable law), the ESOP
Trustee may not tender allocated ESOP Preferred Shares as to which no
instructions are received. Unallocated shares are required to be tendered or not
tendered in the same proportion as allocated shares for which instructions from
participants are received. Purchaser has been advised that, with respect to the
First Offer, the ESOP Trustee determined that applicable law required it to
tender allocated shares for which no instruction was received by the applicable
deadline and with respect to all unallocated shares and, accordingly, all such
shares were so tendered.
The Company has informed Parent and Purchaser that both the Conrail Inc.
Employee Benefits Trust (the "Company Employee Benefits Trust") and the ESOP
tendered substantially all of their Shares pursuant to the First Offer and have
received cash for the Shares accepted for payment. Pursuant to the terms of the
Company Employee Benefits Trust, the cash proceeds from those Shares purchased
in the First Offer were used by the Company Employee Benefits Trust to purchase
additional Shares in the market. As a result, the Company Employee Benefits
Trust was the record owner of such additional Shares as of the record date for
the Pennsylvania Special Meeting. Pursuant to the terms of the ESOP, the ESOP
Trustee has the authority and fiduciary responsibility to determine what action
to take with the proceeds resulting from the tender of unallocated Shares
pursuant to the First Offer, which may or may not include purchasing additional
Shares.
Purchaser's acceptance for payment of Shares tendered pursuant to the
Second Offer will constitute a binding agreement between the tendering
shareholder and Purchaser upon the terms and subject to the conditions of the
Second Offer.
4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Second Offer
are irrevocable except that such Shares may be withdrawn at any time prior to
the Expiration Date and, unless theretofore accepted for payment by Purchaser
pursuant to the Second Offer, may also be withdrawn at any time after February
4, 1997.
If Purchaser extends the Second Offer, is delayed in its acceptance for
payment of Shares or is unable to accept Shares for payment pursuant to the
Second Offer for any reason, then, without prejudice to Purchaser's rights under
the Second Offer, the Depositary may, nevertheless, on behalf of Purchaser,
retain tendered Shares, and such Shares may not be withdrawn except to the
extent that tendering shareholders are entitled to withdrawal rights as
described in this Section 4. Any such delay will be by an extension of the
Second Offer to the extent required by law.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder, if different from that of the person who tendered such
Shares. If Share Certificates evidencing Shares to be withdrawn have been
delivered or otherwise identified to the Depositary, then, prior to the physical
release of such Share Certificates, the serial numbers shown on such Share
Certificates must be submitted to the Depositary and the signature(s) on the
notice of withdrawal must be guaranteed by an Eligible Institution, unless such
Shares have been tendered for the account of an Eligible Institution. If Shares
have been tendered pursuant to the procedure for book-entry transfer as set
forth in Section 3, any notice of withdrawal must also specify the name and
number of the account at the Book-Entry Transfer Facility to be credited with
the withdrawn Shares.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser, in its sole discretion,
whose determination will be final and binding. None of Parent, Purchaser, the
Company, the Depositary, the Information Agent or any other person will be under
any duty to give notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification.
10
<PAGE> 13
Any Shares properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the Second Offer. However, withdrawn Shares may
be retendered at any time prior to the Expiration Date by following the
procedures described in Section 3.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following discussion is a
summary of the material federal income tax consequences of the Offers and the
Merger to holders of Shares who hold the Shares as capital assets. The
discussion set forth below is for general information only and may not apply to
certain categories of holders of Shares subject to special treatment under the
Internal Revenue Code of 1986, as amended (the "Code"), such as foreign holders
and holders who acquired such Shares pursuant to the exercise of employee stock
options or otherwise as compensation. This summary is based upon laws,
regulations, rulings and decisions currently in effect, all of which are subject
to change, retroactively or prospectively, and to possibly differing
interpretations.
Tax Consequences of the Offers and the Merger Generally. It is unclear
whether the Offers and the Merger should be treated as a single integrated
transaction for federal income tax purposes. If the Offers and the Merger are so
treated and the Merger is in the form of a merger of the Company into Purchaser,
the Offers and the Merger should, in the aggregate, qualify as a reorganization
pursuant to Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code. In such event,
generally (i) no gain or loss will be recognized by Parent, Purchaser or the
Company pursuant to the Offers and the Merger, (ii) gain or loss will be
recognized by a shareholder of the Company who receives solely cash in exchange
for Shares pursuant to either Offer and/or the Merger, (iii) no gain or loss
will be recognized by a shareholder of the Company who does not exchange any
Shares pursuant to the Offers and who receives solely Parent Common Stock in
exchange for Shares pursuant to the Merger, and (iv) a shareholder of the
Company who receives a combination of cash and Parent Common Stock in exchange
for such shareholder's Shares, pursuant to either Offer and/or the Merger, will
not recognize loss but will recognize gain, if any, to the extent of the lesser
of (i) the cash received and (ii) the excess of the sum of the fair market value
of the Parent Common Stock and the amount of cash received over a shareholder's
tax basis in the Shares exchanged. If so integrated, the federal income tax
consequences to a shareholder may be, depending on such shareholder's particular
circumstances, less favorable than the federal income tax consequences to such
shareholder if the Offers and the Merger are not treated as integrated. Although
it is currently anticipated that counsel to the Company and Parent will each
render an opinion that the Merger constitutes a reorganization within the
meaning of Section 368 of the Code, in the event that counsel to the Company or
Parent is unable to render such opinion either because (1) the amount of cash
received in the Offers, as a percentage of the total consideration received by
holders of Shares, will be an amount that does not satisfy certain "continuity
of shareholder interests" requirements or (2) for any other reason, then,
pursuant to the Merger Agreement the form of the Merger will be changed to a
merger of Purchaser into the Company (the "Reverse Merger"). In such case the
Offers and the Merger will not constitute a reorganization, and will be taxable
to shareholders of the Company who will recognize gain or loss equal to the
difference between the fair market value of the Parent Common Stock and cash
received and the shareholder's tax basis in the Shares exchanged.
If the Offers and the Merger were not treated as a single integrated
transaction for federal income tax purposes, the receipt of cash pursuant to
either Offer would be a sale or exchange, while the Merger should still qualify
as a reorganization pursuant to Sections 368(a)(1)(A) and 368(a)(2)(D) of the
Code, if the Merger is in the form of a merger of the Company into Purchaser.
TAX CONSEQUENCES IF THE OFFERS AND THE MERGER ARE TREATED AS A SINGLE INTEGRATED
TRANSACTION AND AS A REORGANIZATION
Exchange of Shares Solely for Cash. In general, a shareholder of the
Company who, pursuant to either Offer and/or the Merger, exchanges all of the
Shares actually and constructively owned by such shareholder solely for cash
will recognize capital gain or loss equal to the difference between the amount
of cash received and such shareholder's adjusted tax basis in the Shares
surrendered. The gain or loss will be long-term capital gain or loss if, as of
the date of the exchange, the holder thereof has held such Shares for more than
one year. Gain or loss will be calculated separately for each identifiable block
of Shares surrendered pursuant to either Offer and/or the Merger.
11
<PAGE> 14
Exchange of Shares Solely for Parent Common Stock. A shareholder of the
Company who, pursuant to the Merger, exchanges all of the Shares actually owned
by such shareholder solely for shares of Parent Common Stock (and who did not
exchange any Shares for cash in either Offer) will not recognize any gain or
loss upon such exchange. Such shareholder may recognize gain or loss, however,
to the extent cash is received in lieu of a fractional share of Parent Common
Stock, as discussed below. The aggregate adjusted tax basis of the shares of
Parent Common Stock received in such exchange will be equal to the aggregate
adjusted tax basis of the Shares surrendered therefor, and the holding period of
Parent Common Stock will include the period during which the Shares surrendered
in exchange therefor were held.
Exchange of Shares for Parent Common Stock and Cash. A shareholder of the
Company who, pursuant to either Offer and/or the Merger, exchanges all of the
Shares actually owned by such shareholder for a combination of shares of Parent
Common Stock and cash will not recognize any loss on such exchange. Such
shareholder will realize gain equal to the excess, if any, of the cash and the
aggregate fair market value of Parent Common Stock received pursuant to either
Offer and/or the Merger over such shareholder's adjusted tax basis in the Shares
exchanged therefor, but will recognize any realized gain only to the extent of
the cash received.
Any gain recognized by a shareholder of the Company who receives a
combination of Parent Common Stock and cash pursuant to either Offer and/or the
Merger will be treated as capital gain unless the receipt of the cash has the
effect of the distribution of a dividend for federal income tax purposes, in
which case such recognized gain will be treated as ordinary dividend income to
the extent of such shareholder's ratable share of the Company's accumulated
earnings and profits.
For purposes of determining whether the cash received pursuant to either
Offer and/or the Merger will be treated as a dividend for federal income tax
purposes, a shareholder of the Company will be treated as if such shareholder
first exchanged all of such shareholder's Shares solely for Parent Common Stock
and then Parent immediately redeemed a portion of such Parent Common Stock in
exchange for the cash such shareholder actually received.
In general, the determination as to whether the cash received will be
treated as received pursuant to a sale or exchange (generating capital gain) or
a dividend distribution (generating ordinary income) depends upon whether and to
what extent there is a reduction in the shareholder's deemed percentage stock
ownership of Parent. A shareholder of the Company who exchanges such
shareholder's Shares for a combination of Parent Common Stock and cash will
recognize capital gain rather than dividend income if the deemed redemption by
Parent (described in the preceding paragraph) is "not essentially equivalent to
a dividend" or is "substantially disproportionate" with respect to such
shareholder.
Whether the deemed exchange and subsequent redemption transaction are "not
essentially equivalent to a dividend" with respect to a Company shareholder will
depend upon such shareholder's particular circumstances. In order to reach such
conclusion, it must be determined that the transaction results in a "meaningful
reduction" in such Company shareholder's deemed percentage stock ownership of
Parent. In determining whether a reduction in a Company shareholder's deemed
percentage stock ownership has occurred, (i) the percentage of the outstanding
stock of Parent that such Company shareholder is deemed actually and
constructively to have owned immediately before the deemed redemption by Parent
should be compared to (ii) the percentage of the outstanding stock of Parent
actually and constructively owned by such shareholder immediately after the
deemed redemption by Parent as a result of either Offer, Merger or otherwise.
The relevant constructive ownership rules treat shareholders as owning stock
held indirectly (through partnerships, estates, trusts and corporations) and,
under certain circumstances, treat persons as owning stock owned by their
partners, beneficiaries and shareholders. Shareholders will also be treated as
owning stock that could be acquired by virtue of the exercise of any option to
acquire stock, and individual shareholders are treated as owning any stock owned
by their family.
A Company shareholder will comply with the "substantially disproportionate"
rule if the percentage described in (ii) above is less than 80% of the
percentage described in (i) above. Even if a Company shareholder does not
qualify under such test, the Internal Revenue Service has ruled that a minority
shareholder in a publicly held corporation whose relative stock interest is
minimal and who exercises no control with respect to corporate affairs is
considered to have a "meaningful reduction" if such shareholder has
12
<PAGE> 15
a reduction in such shareholder's percentage stock ownership. In most
circumstances, therefore, gain recognized by a shareholder of the Company who
exchanges such shareholder's Shares for a combination of Parent Common Stock and
cash will be capital gain, which will constitute long-term capital gain if the
holding period for such Shares was greater than one year as of the date of the
exchange.
The aggregate tax basis of Parent Common Stock received by a Company
shareholder who, pursuant to either Offer and/or the Merger, exchanges such
shareholder's Shares for a combination of Parent Common Stock and cash will be
the same as the aggregate tax basis of the Shares surrendered therefor,
decreased by the cash received and increased by the amount of gain recognized,
if any (including any portion of such gain that is treated as a dividend). The
holding period of Parent Common Stock will include the holding period of the
Shares surrendered therefor.
Cash Received in Lieu of a Fractional Interest of Parent Common
Stock. Cash received in lieu of a fractional share of Parent Common Stock will
generally (subject to the discussion above) be treated as received in redemption
of such fractional interest and gain or loss will be recognized, measured by the
difference between the amount of cash received and the portion of the basis of
the Shares allocable to such fractional interest. Such gain or loss will
constitute capital gain or loss, and will generally be long-term capital gain or
loss if the holding period for such Shares was greater than one year as of the
date of the exchange.
TAX CONSEQUENCES IF THE OFFERS AND THE MERGER ARE TREATED AS SEPARATE
TRANSACTIONS AND THE MERGER IS TREATED AS A REORGANIZATION
If the Offers and the Merger were treated as separate transactions for
federal income tax purposes, the receipt of cash pursuant to either Offer would
be a taxable transaction, while the Merger should still qualify as a
reorganization pursuant to Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code,
if the Merger is a merger of the Company into Purchaser. Accordingly, a
shareholder of the Company who receives cash pursuant to either Offer would
recognize gain or loss equal to the difference between the amount of cash
received and the shareholder's adjusted tax basis in the Shares surrendered. The
gain or loss would be long-term capital gain or loss if, as of the date of the
exchange, such shareholder had held such stock for more than one year.
A shareholder of the Company who receives Parent Common Stock and/or cash
pursuant to the Merger would be subject to the federal income tax rules
concerning reorganizations discussed above under "Tax Consequences if the Offers
and the Merger are Treated as a Single Integrated Transaction and as a
Reorganization" (but without regard to the cash received, and Shares exchanged,
in either Offer).
TAX CONSEQUENCES IF FORM OF MERGER IS A MERGER OF PURCHASER INTO THE COMPANY
If counsel to Parent or the Company are unable to render opinions that such
transaction would constitute a reorganization within the meaning of Section 368
of the Code because the "continuity of shareholder interests" requirements would
not be met or for any reason, the Merger will be changed in form to a merger of
Purchaser into the Company. In such a case, the transaction would not constitute
a reorganization within the meaning of Section 368 of the Code. This result
would occur if the value of the Parent Common Stock at the time of the Merger
had declined significantly in value from its value as of the date hereof.
In the event of a Reverse Merger, a shareholder would recognize gain or
loss equal to the fair market value of the Parent Common Stock and cash received
over the shareholder's tax basis in the Shares exchanged, calculated separately
as to each block of Shares exchanged. The character of such gain or loss would
be determined as described above.
WITHHOLDING
Unless a shareholder complies with certain reporting and/or certification
procedures or is an exempt recipient under applicable provisions of the Code and
Treasury Regulations promulgated thereunder, such shareholder may be subject to
withholding tax of 31% with respect to any cash payments received pursuant to
either Offer and/or the Merger. Shareholders should consult their brokers or the
Depositary to ensure compliance with such procedures. Foreign shareholders
should consult with their own tax advisors regarding withholding taxes in
general.
13
<PAGE> 16
TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT TO
CERTAIN SHAREHOLDERS OF THE PURCHASE PRICE FOR SHARES PURCHASED PURSUANT TO THE
SECOND OFFER, EACH SUCH SHAREHOLDER MUST PROVIDE THE DEPOSITARY WITH SUCH
SHAREHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH
SHAREHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY
COMPLETING THE SUBSTITUTE FORM W-9 IN THE LETTER OF TRANSMITTAL. IF BACKUP
WITHHOLDING APPLIES WITH RESPECT TO A SHAREHOLDER, THE DEPOSITARY IS REQUIRED TO
WITHHOLD 31% OF ANY PAYMENTS MADE TO SUCH SHAREHOLDER. SEE INSTRUCTION 9 OF THE
LETTER OF TRANSMITTAL.
THE ABOVE DISCUSSION MAY NOT APPLY TO CERTAIN CATEGORIES OF SHAREHOLDERS
SUBJECT TO SPECIAL TREATMENT UNDER THE CODE, SUCH AS FOREIGN SHAREHOLDERS AND
SHAREHOLDERS WHOSE SHARES WERE ACQUIRED PURSUANT TO THE EXERCISE OF AN EMPLOYEE
STOCK OPTION OR OTHERWISE AS COMPENSATION. SHAREHOLDERS ARE URGED TO CONSULT
THEIR OWN TAX ADVISORS TO DETERMINE THE SPECIFIC TAX CONSEQUENCES OF THE OFFERS
AND THE MERGER, INCLUDING ANY FEDERAL, STATE, LOCAL OR OTHER TAX CONSEQUENCES
(INCLUDING ANY TAX RETURN FILING OR OTHER TAX REPORTING REQUIREMENTS) OF THE
OFFERS AND THE MERGER.
6. PRICE RANGE OF SHARES; DIVIDENDS. According to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995 (the "Company Form
10-K"), the Common Shares are listed and principally traded on the NYSE, and are
also listed and traded on the Philadelphia Stock Exchange, Inc. and quoted under
the symbol "CRR." The following table sets forth, for the quarters indicated,
the high and low sales prices per Common Share on the NYSE and the amount of
cash dividends declared per Common Share, as reported in the Company Form 10-K
for periods in 1994 and 1995, and as reported by published financial sources
with respect to periods in 1996:
<TABLE>
<CAPTION>
CASH
HIGH LOW DIVIDENDS
---- --- ---------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994:
First Quarter......................................... $69 1/4 $56 1/2 $.325
Second Quarter........................................ 59 1/8 50 3/8 .325
Third Quarter......................................... 58 1/8 48 3/8 .375
Fourth Quarter........................................ 55 1/4 48 1/8 .375
YEAR ENDED DECEMBER 31, 1995:
First Quarter......................................... 57 5/8 50 1/2 .375
Second Quarter........................................ 56 1/4 51 1/8 .375
Third Quarter......................................... 70 1/4 55 1/8 .425
Fourth Quarter........................................ 74 3/8 65 1/2 .425
YEAR ENDED DECEMBER 31, 1996:
First Quarter......................................... 77 1/4 67 5/8 .425
Second Quarter........................................ 73 66 1/4 .425
Third Quarter......................................... 74 5/8 63 3/4 .475
Fourth Quarter (through December 5, 1996)............. 98 1/4 68 1/2 .475
</TABLE>
On October 14, 1996, the last trading day prior to the date of the public
announcement of the execution of the Merger Agreement, the reported closing
sales price of the Common Shares on the NYSE Composite Tape was $71 per Share.
On December 5, 1996, the last full trading day prior to the date of this Offer
to Purchase, the reported closing sales price of the Common Shares on the NYSE
Composite Tape was $96 3/4 per Common Share. SHAREHOLDERS ARE URGED TO OBTAIN A
CURRENT MARKET QUOTATION FOR THE COMMON SHARES.
All of the outstanding ESOP Preferred Shares are held of record by the ESOP
Trustee. There is no trading market for the ESOP Preferred Shares. Since
issuance of the ESOP Preferred Shares, the Company has declared quarterly cash
dividends on the ESOP Preferred Shares of $.54125 per share. Each ESOP Preferred
Share is convertible under certain circumstances into one Common Share.
14
<PAGE> 17
7. EFFECT OF THE SECOND OFFER ON THE MARKET FOR THE COMMON SHARES; EXCHANGE
LISTING AND EXCHANGE ACT REGISTRATION. The purchase of Common Shares pursuant to
the Second Offer will reduce the number of Common Shares that might otherwise
trade publicly and could reduce the number of holders of Common Shares, which
could adversely affect the liquidity and market value of the remaining Common
Shares held by the public. Following the Second Offer, a large percentage of the
outstanding Common Shares will be owned by Purchaser.
According to the NYSE's published guidelines, the NYSE would consider
delisting the Common Shares if, among other things, the number of record holders
of at least 100 Common Shares should fall below 1,200, the number of publicly
held Common Shares (exclusive of holdings of officers, directors and their
families and other concentrated holdings of 10% or more ("NYSE Excluded
Holdings")) should fall below 600,000 or the aggregate market value of publicly
held Common Shares (exclusive of NYSE Excluded Holdings) should fall below
$5,000,000. If, as a result of the purchase of Common Shares pursuant to the
Second Offer or otherwise, the Common Shares no longer meet the requirements of
the NYSE for continued listing and the listing of the Common Shares is
discontinued, the market for the Common Shares could be adversely affected.
If the NYSE were to delist the Common Shares, it is possible that the
Common Shares would continue to trade on another securities exchange or in the
over-the-counter market and that price or other quotations would be reported by
such exchange or through the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") or other sources. The extent of the public
market therefor and the availability of such quotations would depend, however,
upon such factors as the number of shareholders and/or the aggregate market
value of such securities remaining at such time, the interest in maintaining a
market in the Shares on the part of securities firms, the possible termination
of registration under the Exchange Act as described below and other factors.
Purchaser cannot predict whether the reduction in the number of Common Shares
that might otherwise trade publicly would have an adverse or beneficial effect
on the market price for or marketability of the Common Shares or whether it
would cause future market prices to be greater or less than the Second Offer
Price.
The Common Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application by the Company to the SEC if the
Common Shares are not listed on a national securities exchange and there are
fewer than 300 record holders of the Common Shares. The termination of
registration of the Common Shares under the Exchange Act would substantially
reduce the information required to be furnished by the Company to holders of
Common Shares and to the SEC and would make certain provisions of the Exchange
Act, such as the short-swing profit recovery provisions of Section 16(b), the
requirement of furnishing a proxy statement in connection with shareholders'
meetings pursuant to Section 14(a), and the requirements of Rule 13e-3 under the
Exchange Act with respect to "going private" transactions, no longer applicable
to the Common Shares. In addition, "affiliates" of the Company and persons
holding "restricted securities" of the Company may be deprived of the ability to
dispose of such securities pursuant to Rule 144 promulgated under the Securities
Act of 1933, as amended (the "Securities Act").
If registration of the Common Shares under the Exchange Act were
terminated, the Common Shares would no longer be eligible for NASDAQ reporting.
8. CERTAIN INFORMATION CONCERNING THE COMPANY. Except as otherwise noted
below, the information concerning the Company contained in this Offer to
Purchase, including financial information, has been taken from or based upon the
Company Form 10-K and other publicly available documents and records on file
with the SEC and other public sources. Neither Parent nor Purchaser assumes any
responsibility for the accuracy or completeness of the information concerning
the Company contained in such documents and records or for any failure by the
Company to disclose events which may have occurred or may affect the
significance or accuracy of any such information but which are unknown to Parent
or Purchaser.
The Company is a Pennsylvania corporation whose principal executive offices
are located at 2001 Market Street, Two Commerce Square, Philadelphia,
Pennsylvania 19101. Through its wholly owned subsidiary, Consolidated Rail
Corporation, a Pennsylvania corporation ("CRC"), the Company provides freight
transportation services within the northeast and midwest United States. The
Company interchanges freight with other United States and Canadian railroads for
transport to destinations within and outside the Company's service
15
<PAGE> 18
region. As of December 31, 1995, CRC (excluding its subsidiaries) maintained
17,715 miles of track on its 10,701 mile route system. Of total route miles,
8,860 are owned, 100 are leased or operated under contract and 1,741 are
operated under trackage rights, including approximately 300 miles operated
pursuant to an easement over Amtrak's Northeast Corridor. Also as of December
31, 1995, the Company owned or held subject to capital lease 2,023 locomotives
and 51,404 freight cars (including 21,948 subject to operating leases),
excluding locomotives and freight cars held by subsidiaries other than CRC,
which have an immaterial number of locomotives and freight cars. The Company
operates no significant line of business other than the freight railroad
business and does not provide common carrier passenger or commuter train
service.
The Company serves a heavily industrial region that is marked by dense
population centers which constitute a substantial market for consumer durable
and non-durable goods, and a market for raw materials used in manufacturing and
by electric utilities.
Financial Information. Set forth below is certain selected consolidated
financial information relating to the Company and its subsidiaries which has
been excerpted or derived from the financial statements contained in (i) the
Company Form 10-K, (ii) the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1996 (the "Company Form 10-Q") and (iii) the
Company's Annual Report on Form 10-K for the year ended December 31, 1994. More
comprehensive financial information is included in the Company Form 10-K and the
Company Form 10-Q and other documents filed by the Company with the SEC. The
financial information that follows is qualified in its entirety by reference to
the Company Form 10-K and the Company Form 10-Q and other documents, including
the financial statements and related notes contained therein. The Company Form
10-K and the Company Form 10-Q and other documents may be examined and copies
may be obtained from the offices of the SEC in the manner set forth below.
CONRAIL INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER
30, YEAR ENDED DECEMBER 31,
---------------- --------------------------
1996 1995 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues............................................ $2,771 $2,735 $3,686 $3,733 $3,453
Operating expenses.................................. 2,413 2,233 3,230 3,127 2,862
Operating income.................................... 358 502 456 606 591
Net income to common shareholders................... 195 294 264 324 160
INCOME PER COMMON SHARE INFORMATION:
Net earnings per Common Share before the cumulative
effect of changes in accounting principles
Primary........................................ $ 2.39 $ 3.61 $ 3.19 $ 3.90 $ 2.74
Fully diluted.................................. 2.21 3.28 2.94 3.56 2.51
Net per Common Share cumulative effect of changes in
accounting principles(1)
Primary........................................ -- -- -- -- (.92)
Fully diluted.................................. -- -- -- -- (.81)
Net earnings per Common Share
Primary........................................ 2.39 3.61 3.19 3.90 1.82
Fully diluted.................................. 2.21 3.28 2.94 3.56 1.70
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
---------------- --------------------------
1996 1995 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets...................................... $1,199 $1,187 $1,206 $1,125 $1,062
Property and equipment (net)........................ 6,495 6,680 6,408 6,498 6,313
Total assets........................................ 8,387 8,683 8,424 8,322 7,948
Current liabilities................................. 1,250 1,238 1,170 1,201 1,075
Long-term debt, excluding current portion........... 1,891 2,037 1,911 1,940 1,959
Total shareholders' equity.......................... 2,938 3,080 2,977 2,925 2,784
</TABLE>
- ---------------
(1) Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions" and SFAS 109, "Accounting for
Income Taxes."
The Company is subject to the information and reporting requirements of the
Exchange Act and is required to file reports and other information with the SEC
relating to its business, financial condition and other matters. Information, as
of particular dates, concerning the Company's directors and officers, their
remuneration, stock options granted to them, the principal holders of the
Company's securities, any material interests of such persons in transactions
with the Company and other matters is required to be disclosed in proxy
statements distributed to the Company's shareholders and filed with the SEC.
These reports, proxy statements and other information should be available for
inspection at the public reference facilities of the SEC located in Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and also should be
available for inspection and copying at prescribed rates at the following
regional offices of the SEC: Seven World Trade Center, New York, New York 10048;
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of this
material may also be obtained by mail, upon payment of the SEC's customary fees,
from the SEC's principal office at 450 Fifth Street, N.W., Washington, D.C.
20549. The SEC also maintains an Internet web site at http://www.sec.gov that
contains reports, proxy statements and other information. Reports, proxy
statements and other information concerning the Company should also be available
for inspection at the offices of the NYSE, 20 Broad Street, New York, New York
10005.
Certain Projected Financial Information. In the course of its discussions
with Parent described in Section 11, the Company provided Parent and its
financial advisors with certain business and financial information which Parent
believes was not publicly available. Such information included, among other
things, certain financial projections for 1996 through 1999 (the "Company
Projections") prepared by management of the Company as a long-range plan. The
Company Projections do not take into account any of the potential effects of the
transactions contemplated by the Offers and/or the Merger. The Company does not
as a matter of course publicly disclose internal projections as to future
revenues, earnings or financial condition.
The Company Projections indicated the following income statement and cash
flow data: (i) projected net revenues for each of the years ended December 31,
1996 through December 31, 1999 were $3,762 million, $3,874 million, $3,988
million and $4,149 million, respectively; (ii) projected operating expenses for
each of such years were $2,987 million, $3,026 million, $3,043 million and
$3,112 million, respectively; (iii) projected operating income for each of such
years was $775 million, $848 million, $945 million and $1,037 million,
respectively; (iv) projected net income for each of such years was $438 million,
$485 million, $542 million and $599 million, respectively; (v) projected net
cash provided by operating activities for each of such years was $855 million,
$822 million, $890 million and $975 million, respectively; (vi) projected
capital expenditures for each of such years was $492 million, $510 million, $550
million and $550 million, respectively; (vii) projected net internally generated
funds (defined as net cash provided by operating activities less capital
expenditures) for each of such years were $363 million, $312 million, $340
million and $425 million, respectively; (viii) projected debt issuance net of
debt retirement for each of such years was $(49) million, $7 million, $(11)
million and $(85) million, respectively; and (ix) projected net change in cash
for each of such years was $43 million, $0, $0 and $0, respectively.
In connection with the Company Projections, the Company also furnished
Parent with projected balance sheets of the Company for the years 1996 through
1999. Such balance sheets projected total assets of the Company increasing from
$8,660 million in 1996 to $9,656 million in 1999, total long-term debt
(excluding
17
<PAGE> 20
current portion) decreasing from $1,862 million in 1996 to $1,773 million in
1999 and total shareholders' equity increasing from $3,057 million in 1996 to
$3,725 million in 1999.
THE COMPANY PROJECTIONS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE
OR COMPLIANCE WITH PUBLISHED GUIDELINES OF THE SEC OR THE GUIDELINES ESTABLISHED
BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS. THE PROJECTIONS ARE
INCLUDED IN THIS OFFER TO PURCHASE ONLY BECAUSE SUCH INFORMATION WAS PROVIDED TO
PARENT. NONE OF PARENT, PURCHASER OR ANY PARTY TO WHOM THE PROJECTIONS WERE
PROVIDED ASSUMES ANY RESPONSIBILITY FOR THE ACCURACY OF SUCH INFORMATION. WHILE
PRESENTED WITH NUMERICAL SPECIFICITY, THESE PROJECTIONS ARE BASED UPON A VARIETY
OF ASSUMPTIONS RELATING TO THE BUSINESSES OF THE COMPANY WHICH, THOUGH PARENT
HAS BEEN ADVISED WERE CONSIDERED REASONABLE BY THE COMPANY AT THE TIME THEY WERE
FURNISHED TO PARENT, MAY NOT BE REALIZED AND ARE SUBJECT TO SIGNIFICANT
UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND THE CONTROL OF THE
COMPANY. THERE CAN BE NO ASSURANCE THAT THE PROJECTIONS WILL BE REALIZED, AND
ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE SHOWN. THE PROJECTIONS HAVE NOT
BEEN EXAMINED OR COMPILED BY THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS. FOR
THESE REASONS, AS WELL AS THE BASES ON WHICH SUCH PROJECTIONS WERE COMPILED,
THERE CAN BE NO ASSURANCE THAT SUCH PROJECTIONS WILL BE REALIZED, OR THAT ACTUAL
RESULTS WILL NOT BE HIGHER OR LOWER THAN THOSE ESTIMATED. THE INCLUSION OF SUCH
PROJECTIONS HEREIN SHOULD NOT BE REGARDED AS AN INDICATION THAT PARENT,
PURCHASER OR ANY OTHER PARTY WHO RECEIVED SUCH INFORMATION CONSIDERS IT AN
ACCURATE PREDICTION OF FUTURE EVENTS.
Certain Operating Relationships. Various subsidiaries of each of Parent,
on the one hand, and the Company, on the other hand, have operating
relationships with each other. Approximately 6%, 6%, and 7% of the Company's
total loads in 1993, 1994 and 1995, respectively, were interchanged with Parent.
Major interchange locations between Parent and the Company include Cincinnati,
Ohio; Alexandria, Virginia; Philadelphia, Pennsylvania; and Toledo, Ohio.
In connection with interchanges, either or both railroads of Parent and the
Company may be the party billing the shipper of such interchange freight, and,
in cases where one of the parties bills for the entire shipment, such party will
periodically remit to the other party the net amount of the proceeds due to such
other carrier in accordance with standard industry practice. In addition, Parent
and the Company often, together with other railroads, cooperate in terminal
switching operations at certain major locations including Chicago, Illinois and
East St. Louis, Illinois. Parent and the Company also have proprietary interests
in various terminal companies in their service territories, including the Belt
Railway of Chicago and The Lakefront Dock, Railroad Terminal Company.
In addition to the foregoing, Parent and the Company are parties to various
trackage rights agreements pursuant to which each carrier operates over the
other carrier's track.
The Rights. On July 19, 1989, the Board of Directors of CRC, which is the
Company's current operating subsidiary and which prior to the Company's adoption
of a holding company structure on February 17, 1993 operated on a stand alone
basis, declared a dividend distribution of one common stock purchase right for
each common share of CRC and executed the Rights Agreement. Upon adoption by the
Company of a holding company structure on February 17, 1993, CRC assigned all of
CRC's title and interest under the Rights Agreement to the Company (the
"Assignment"). In 1995, one Right was distributed with respect to each
outstanding ESOP Preferred Share. Under the Rights Agreement, each Right
entitles the holder to purchase one Common Share at an exercise price of
$205.00, subject to adjustment. The Rights are not exercisable until the
Distribution Date. The Rights will expire at the close of business on September
20, 2005 (the "Final Expiration Date"), unless the Final Expiration Date is
extended or unless earlier redeemed by the Company in accordance with the Rights
Agreement. The Rights Agreement and all amendments,
18
<PAGE> 21
supplements and resolutions relating thereto, and descriptions thereof, have
been filed by the Company with the SEC. Copies of such documents may be obtained
in the manner set forth above.
In conjunction with the execution of the Merger Agreement, the Board of
Directors of the Company amended the Rights Agreement to (i) render the Rights
Agreement inapplicable to the Merger and the other transactions contemplated by
the Merger Agreement and the Company Stock Option Agreement and (ii) ensure that
(a) neither Parent nor any of its wholly owned subsidiaries is an Acquiring
Person pursuant to the Rights Agreement and (b) a Shares Acquisition Date,
Distribution Date or Trigger Event (in each case, as defined in the Rights
Agreement) does not occur by reason of the approval, execution or delivery of
the Merger Agreement and the Company Stock Option Agreement, the consummation of
the Merger, or the other transactions contemplated by the Merger Agreement or
the Company Stock Option Agreement and the Rights Agreement may not be further
amended by the Company without the prior consent of Parent in its sole
discretion. The Company has also agreed to take any further action necessary to
render the Rights Agreement inapplicable to the Transactions.
On November 4, 1996, the Board of Directors of the Company adopted a
resolution extending the Distribution Date (as defined in the Rights Agreement)
so that it will occur only after the acquisition by an Acquiring Person (as
defined in the Rights Agreement) of beneficial ownership of at least 10% of the
outstanding Common Shares.
Shareholders are required to tender one associated Right for each Share
tendered in order to effect a valid tender of such Share. If the Distribution
Date does not occur prior to the Expiration Date, a tender of Shares will
automatically constitute a tender of the associated Rights. See Section 3.
9. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT.
Purchaser. Purchaser is a Pennsylvania corporation organized in October
1996 and has not carried on any significant activities other than activities
undertaken in connection with the Offers and the Merger. The principal offices
of Purchaser are located at One James Center, 901 East Cary Street, Richmond,
Virginia 23219. Purchaser is a wholly owned subsidiary of Parent. Other than the
Shares acquired in the First Offer and to be acquired in the Second Offer, all
of which will be held through the Voting Trust, until the Merger is consummated,
it is not expected that Purchaser will have any significant assets or
liabilities or engage in activities other than those incident to the
transactions contemplated by the Offers and the Merger. Upon consummation of the
First Offer, Purchaser acquired 17,860,124 Shares which were deposited into the
Voting Trust upon purchase.
Parent. Parent is a Virginia corporation with its principal executive
offices located at One James Center, 901 East Cary Street, Richmond, Virginia
23219.
Parent provides rail, intermodal, ocean container-shipping, barging,
trucking, and contract logistics services worldwide. Through its subsidiary CSX
Transportation ("CSXT"), Parent provides rail freight transportation and
distribution services over approximately 18,500 route miles in 20 states in the
United States east, midwest and south, and in Ontario, Canada. CSXT interchanges
freight with western railroads at key gateways in Chicago, East St. Louis,
Memphis and New Orleans. CSXT's service territory includes 26 port cities for
international transport. In 1995, the principal commodities hauled by CSXT were
coal, chemicals, automotive parts, finished vehicles, agricultural products,
forest products (including paper, paper products, and lumber products),
minerals, fertilizers, and metals.
Parent also transports freight through subsidiaries conducting
container-shipping, intermodal, and barge operations. Its subsidiary, Sea-Land
Service Inc. ("Sea-Land"), is the largest container-shipping line in the United
States and one of the three largest container-shipping companies in the world.
Sea-Land operates more than 100 container ships and nearly 200,000 containers
throughout the world. Parent's subsidiary, American Commercial Lines Inc., is
the largest and most diversified barge transportation firm in both North and
South America. CSX Intermodal provides shippers with nationwide intermodal
service for moving domestic and international freight in trailers, domestic
containers and international steamship containers, often in close alignment with
CSXT and Sea-Land.
19
<PAGE> 22
Parent is subject to the information and reporting requirements of the
Exchange Act and is required to file reports and other information with the SEC
relating to its business, financial condition and other matters. Information, as
of particular dates, concerning Parent's directors and officers, their
remuneration, stock options granted to them, the principal holders of Parent's
securities, any material interests of such persons in transactions with Parent
and other matters is required to be disclosed in proxy statements distributed to
Parent's shareholders and filed with the SEC. These reports, proxy statements
and other information should be available for inspection and copies may be
obtained in the same manner as set forth for the Company in Section 8. The
shares of Parent Common Stock are listed on the NYSE, and reports, proxy
statements and other information concerning Parent should also be available for
inspection at the offices of the NYSE, 20 Broad Street, New York, New York
10005.
The name, citizenship, business address, principal occupation or employment
and five-year employment history for each of the directors and executive
officers of Parent and Purchaser are set forth in Schedule I hereto.
Except as set forth in this Offer to Purchase, neither Parent nor
Purchaser, nor, to the best knowledge of Parent or Purchaser, any of the persons
listed in Schedule I hereto, or any associate or majority-owned subsidiary of
such persons, beneficially owns any equity security of the Company, and neither
Parent nor Purchaser, nor, to the best knowledge of Parent or Purchaser, any of
the other persons referred to above, or any of the respective directors,
executive officers or subsidiaries of any of the foregoing, has effected any
transaction in any equity security of the Company during the past 60 days. Mr.
John Hall, a director of Parent, owns 50 Common Shares through an asset
management fund, and Mr. Mark Aron, an executive officer of Parent and Purchaser
and a director of Purchaser, owns not more than 800 Common Shares.
Except as set forth in this Offer to Purchase, neither Parent nor
Purchaser, nor, to the best knowledge of Parent or Purchaser, any of the persons
listed in Schedule I hereto has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Company, including, without limitation, any contract, arrangement, understanding
or relationship concerning the transfer or the voting of any securities of the
Company, joint ventures, loan or option arrangements, puts or calls, guaranties
of loans, guaranties against loss or the giving or withholding of proxies.
Except as set forth in this Offer to Purchase, neither Parent nor Purchaser,
nor, to the best knowledge of Parent or Purchaser, any of the persons listed in
Schedule I hereto has had any transactions with the Company, or any of its
executive officers, directors or affiliates that would require reporting under
the rules of the SEC.
Except as set forth in this Offer to Purchase, there have been no contacts,
negotiations or transactions between Parent or Purchaser, or their respective
subsidiaries, or, to the best knowledge of Parent or Purchaser, any of the
persons listed in Schedule I hereto, on the one hand, and the Company or its
executive officers, directors or affiliates, on the other hand, concerning a
merger, consolidation or acquisition, tender offer or other acquisition of
securities, election of directors, or a sale or other transfer of a material
amount of assets.
Financial Information. Set forth below is certain selected consolidated
financial information relating to Parent and its subsidiaries which has been
excerpted or derived from the financial statements contained in Parent's Annual
Reports on Form 10-K for the fiscal years ended December 29, 1995 and December
30, 1994 (the "Parent Form 10-Ks") and in Parent's Quarterly Report on Form 10-Q
for the fiscal quarter ended September 27, 1996 (the "Parent Form 10-Q"). More
comprehensive financial information is included in the Parent Form 10-Ks and the
Parent Form 10-Q and other documents filed by Parent with the SEC. The financial
information that follows is qualified in its entirety by reference to the Parent
Form 10-Ks and the Parent Form 10-Q and other documents including the financial
statements and related notes contained therein. The Parent Form 10-Ks and the
Parent Form 10-Q and other documents may be examined and copies may be obtained
from the offices of the SEC in the manner set forth above.
20
<PAGE> 23
CSX CORPORATION
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED(2) YEAR ENDED
------------------------------ --------------------------------------------
SEPTEMBER 27, SEPTEMBER 29, DECEMBER 29, DECEMBER 30, DECEMBER 31,
1996 1995 1995 1994 1993
------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenue............... $ 7,833 $ 7,594 $ 10,504 $ 9,608 $ 8,940
Operating expense............... 6,737 6,865 9,332 8,376 8,027
Operating income................ 1,096 729 1,172 1,232 913
Net earnings.................... 602 342 618 652 359
PER SHARE INFORMATION:
Earnings per share(1)........... $ 2.83 $ 1.62 $ 2.94 $ 3.12 $ 1.73
</TABLE>
<TABLE>
<CAPTION>
AT AT
------------------------------ --------------------------------------------
SEPTEMBER 27, SEPTEMBER 29, DECEMBER 29, DECEMBER 30, DECEMBER 31,
1996 1995 1995 1994 1993
------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets.................. $ 1,919 $ 1,810 $ 1,935 $ 1,665 $ 1,571
Properties -- net............... 11,720 11,188 11,297 11,044 10,788
Total assets.................... 14,641 14,028 14,282 13,724 13,420
Long-term debt, current
portion....................... 201 387 486 312 146
Total current liabilities....... 2,699 2,664 2,991 2,505 2,275
Long-term debt, excluding
current portion............... 2,288 2,564 2,222 2,618 3,133
Total shareholders' equity...... 4,815 3,989 4,242 3,731 3,180
</TABLE>
- ---------------
(1) All per share data has been adjusted for two-for-one stock split distributed
December 21, 1995.
(2) For the nine-month periods ended September 27, 1996 and September 29, 1995,
Parent changed its financial presentation to exclude non-transportation
activities from operating revenue, operating expense, and operating income.
10. SOURCE AND AMOUNT OF FUNDS. Purchaser estimates that the total amount
of funds required to purchase Shares pursuant to the Offers, to pay the cash
portion of the consideration in the Merger and to pay all related costs and
expenses will be approximately $4.1 billion (of which approximately $2.0 billion
was paid in connection with the First Offer). See "Fees and Expenses" in Section
17.
Purchaser plans to obtain the necessary funds through capital contributions
or advances made by Parent. Parent plans to obtain the funds for such capital
contributions or advances from its available cash and working capital, and
either through the issuance of long- or short-term debt securities (including,
without limitation, commercial paper notes) or under the Facility, as defined
and described below.
Parent's commercial paper program involves the private placement of
unsecured, commercial paper notes with varying maturities of up to 270 days. The
commercial paper issuances generally have an effective interest rate
approximating the then market rate of interest for commercial paper of similar
rating. Currently the weighted average interest rate for commercial paper
outstanding is approximately 5.65%. Parent may refinance any commercial paper
borrowings used to finance the purchase of Shares pursuant to the Second Offer
through private placements of additional commercial paper, borrowings under the
Facility or, depending on market or business conditions, through such other
financing as Parent may deem appropriate.
To finance payment of the First Offer, Parent issued and sold commercial
paper, supported by the Credit Agreement described below. Funds obtained through
such issuance and sale were then contributed by Parent to Purchaser.
Credit Agreement. In connection with the Offers and the Merger, Parent has
entered into a Revolving Credit and Competitive Advance Facility, dated as of
November 15, 1996 (the "Credit Agreement"), with Bank of America National Trust
and Savings Association and NationsBank, N.A., as Co-Syndication Agents,
21
<PAGE> 24
The Bank of Nova Scotia, as Documentation Agent, The Chase Manhattan Bank, as
Administrative Agent (the "Administrative Agent"), and the other lenders party
thereto (collectively, the "Lenders"). Under the terms of the Credit Agreement,
the Lenders have agreed to provide a revolving credit and competitive advance
facility in an aggregate principal amount of $4,800,000,000 (the "Facility").
$800,000,000 of the Facility became available to Parent on November 15, 1996
(the "Effectiveness Date") and the remainder became available upon the
satisfaction of the Initial Tender Offer Condition (as defined in the Credit
Agreement). The Facility includes a $50,000,000 letter of credit subfacility.
Proceeds of the Facility will be used to finance the purchase of Shares pursuant
to one or more all-cash tender offers, exercise of the Company Stock Option or
otherwise and the Merger, to replace previously existing credit facilities used
for commercial paper backup and, following the Merger, to provide working
capital and for other general corporate purposes.
Under the Facility, two borrowing options are available: (i) a competitive
advance option (the "CAF"), which is provided on an uncommitted competitive
advance basis through a competitive bid auction mechanism, and (ii) a revolving
credit option (the "Revolving Credit"), which is provided on a committed basis.
Under each option, amounts borrowed and repaid may be reborrowed subject to
availability under the Facility. Up to the full amount of the remaining
commitments may be borrowed under either of the two borrowing options, so long
as the Aggregate Outstanding Extensions of Credit (as defined in the Credit
Agreement) do not exceed the amount of the Facility at any time. Each borrowing
will be conditioned upon the delivery of a borrowing notice, the accuracy of
representations and warranties and the absence of defaults and, from and after
the satisfaction of the Initial Tender Offer Condition, the absence of pending
litigation or administrative proceedings or other legal or regulatory
developments related to the Acquisition (as defined in the Credit Agreement)
that, in the reasonable judgment of at least three of the Agents (as defined in
the Credit Agreement), would be reasonably likely to prohibit the Acquisition
(as defined in the Credit Agreement) or to result in a material adverse effect,
excluding litigation, administrative proceedings of regulatory developments
related to STB approval of the Acquisition.
In addition to the borrowing options described above, Parent may request
the issuance of letters of credit under the Facility up to an aggregate face
amount of $50,000,000, provided that Aggregate Outstanding Extensions of Credit
do not exceed the amount of the Facility at any time. If a drawing is made under
a letter of credit, Parent shall reimburse the Administrative Agent, provided
that, subject to the satisfaction of the borrowing conditions described above,
Parent may finance such reimbursement with a borrowing under the Facility.
Under the Facility, interest rates for outstanding loans are determined as
follows: (i) interest rates for the CAF are obtained from bids selected by
Parent and (ii) interest rates for the Revolving Credit will be based upon
either LIBOR or an alternate base rate ("ABR") that will be the higher of The
Chase Manhattan Bank's prime rate and the federal funds effective rate plus 1/2
of 1%, as selected by Parent. No spread will be charged on ABR loans. The
interest rate applicable to each LIBOR loan will be equal to LIBOR for the
interest period applicable to such loan plus a margin, ranging from 14.0 to 35.0
basis points per annum, determined based upon Parent's credit rating at the
time.
Under the Facility, interest periods for outstanding loans are determined
as follows: (i) interest periods for the CAF will be determined per market
availability, with fixed-rate auction advances being for periods ranging from
seven to 360 days and the interest period on LIBOR loans will be either one,
two, three or six months, at Parent's option; and (ii) under the Revolving
Credit, the interest period on LIBOR loans will be either one, two, three or six
months, at Parent's option. Interest will be payable at the end of the relevant
interest period, but not less often than quarterly. Interest will be calculated
on the basis of the actual number of days elapsed over a 365/366-day year for
ABR loans based upon the prime rate and over a 360-day year for all other loans.
Under the Facility, prepayments of ABR loans will be permitted at any time
without penalty. LIBOR Revolving Credit loans may be prepaid in whole or in part
at any time, subject to compensation in respect of any redeployment costs if
prepayment occurs other than at the end of an interest period. CAF loans may not
be prepaid without the applicable Lender's consent.
In the event Parent decides to abandon the Acquisition or any governmental
approval necessary for the Acquisition is denied after exhaustion of all
appeals, the Lenders' commitments will be reduced from
22
<PAGE> 25
$4,800,000,000 to the sum, at such time, of the Aggregate Outstanding Extensions
of Credit plus the aggregate face amount of outstanding commercial paper of
Parent supported by the Facility plus $1,500,000,000. Additionally, upon any
sale or disposition of Shares (other than Shares constituting Unrestricted
Margin Stock (as defined in the Credit Agreement)), the commitments will
automatically reduce in an amount equal to 100% of the net cash proceeds of such
sale or disposition. Parent may opt to reduce the commitments under the Facility
by giving notice thereof, provided that the aggregate Facility commitments at
any time may in no event be less than the aggregate amount of the Aggregate
Outstanding Extensions of Credit at such time.
The Credit Agreement contains certain representations and warranties
regarding, among other things, organization and powers, authority and
enforceability, no conflicts, financial information, absence of material adverse
change, absence of material litigation, compliance with laws and regulations and
agreements, inapplicability of certain laws, taxes, ERISA and absence of
material misstatements. In addition, the Credit Agreement contains certain
covenants regarding, among other things, maintenance of corporate existence,
maintenance of ownership of railroad subsidiaries, maintenance of insurance,
payment of taxes, delivery of financial statements and reports, compliance with
laws, use of proceeds, and certain limitations on debt, including limitations on
indebtedness in excess of $4,000,000,000 for the purchase of Shares, limitations
on additional indebtedness at subsidiaries and a limitation on total debt (other
than indebtedness incurred to finance the exercise of the Company Stock Option)
as a percentage of total capitalization to a maximum of 65% prior to the Merger
and 55% at or after the Merger. The Credit Agreement also includes certain
covenants regarding limitations on mergers or sales of all or substantially all
assets and limitations on liens and sale/leaseback transactions. In addition,
sales of Shares constituting Unrestricted Margin Stock must be in exchange for
cash or cash equivalents and Parent must maintain such proceeds as cash, cash
equivalents or short-term investments except to the extent Parent reduces the
commitments under the Facility by an amount equal to such proceeds.
Events of Default (as defined in the Credit Agreement) include material
breaches of representations or warranties, failure to pay principal or interest,
breach of covenants, cross acceleration, material judgments and bankruptcy,
subject to customary notice and cure periods. Upon the occurrence of an Event of
Default, the Majority Lenders (as defined in the Credit Agreement) can cause the
Administrative Agent to terminate the commitments and declare all outstanding
loans immediately due and payable. If a bankruptcy Event of Default occurs, the
commitments will terminate automatically and the loans will become due and
payable immediately without any action by the Administrative Agent or the
Lenders.
In connection with the Facility, Parent has agreed to pay the Agents
certain fees, to reimburse the Agents for certain expenses and to provide
certain indemnities as is customary for a credit facility of this type. A
facility fee will be payable to each Lender based upon the aggregate amount of
such Lender's commitment, at a rate ranging from 6.0 to 15.0 basis points per
annum, depending upon Parent's credit ratings.
It is anticipated that the indebtedness incurred by Parent in connection
with the transactions contemplated by the Merger Agreement will be repaid from
funds generated internally by Parent and its subsidiaries (including, after the
Merger, if consummated, dividends paid by the Surviving Corporation and its
subsidiaries), through additional borrowings, through application of proceeds of
dispositions or through a combination of two or more such sources. No final
decisions have been made concerning the method Parent will employ to repay such
indebtedness. Such decisions, when made, will be based on Parent's review from
time to time of the advisability of particular actions, as well as on prevailing
interest rates and financial and other economic conditions.
11. BACKGROUND OF THE SECOND OFFER; CONTACTS WITH THE COMPANY. In the
ordinary course of Parent's long-term strategic review process, Parent and its
subsidiaries routinely analyze potential combinations with various railroad
companies. In recent years, Parent has placed particular emphasis on studies of
the Company, considering it to be an ideal candidate for such a combination.
From time to time since August 1994, Parent has conveyed to senior managers
of the Company Parent's continuing interest in discussing a business combination
and Parent's views as to the desirability of such a transaction. These contacts
by Parent led to a discussion in July 1996 between David M. LeVan, Chairman,
23
<PAGE> 26
President and Chief Executive Officer of the Company, and John W. Snow,
Chairman, President and Chief Executive Officer of Parent, generally regarding
the consolidation in the railroad industry and the regulatory environment with
respect to such consolidation. Following such discussion, each of the parties
independently analyzed its strategic opportunities, including potential business
combination transactions. Shortly following preliminary discussions between Mr.
Snow and Mr. LeVan, on October 6, 1996, Mr. Snow and Mr. LeVan met to discuss
the possibility for and the terms of a business combination between Parent and
the Company. Following that meeting, senior management of both companies,
together with their financial and legal advisors, independently undertook to
examine a possible transaction and to conduct detailed business reviews. On
October 8, 1996, Parent and the Company entered into a confidentiality agreement
in connection with their discussions. Such discussions led to the negotiation of
the Merger Agreement and the Option Agreements, which were executed on October
14, 1996.
On October 16, 1996, Parent, through Purchaser, commenced the First Offer
at a price of $92.50 per Share in cash.
On October 23, 1996, Norfolk Southern Corporation ("NSC") announced its
intention to commence, and on October 24, 1996 NSC commenced, a tender offer for
the Company (the "Hostile Offer"). The Hostile Offer was subject to numerous
conditions, including the termination of the Merger Agreement and the
redemption, invalidity or other inapplicability of the Rights. NSC also has
commenced litigation relating to the transactions contemplated by the Merger
Agreement and the Hostile Offer.
On October 23, 1996, Parent issued the following press release in response
to the announcement of the Hostile Offer:
NEWS
CSX Dismisses Norfolk Southern's Announcement as a 'Confusing Non-Bid'
RICHMOND, Va., Oct. 23 /PRNewswire/ -- In response to the Norfolk
Southern (NYSE: NSC) (NSC) announcement of its hostile tender offer
for Conrail, CSX (NYSE: CSX) issued the following statement:
"Norfolk Southern's hostile offer comes as no surprise. It simply
does not provide the same long-term value as the strategic CSX-Conrail
partnership, which offers Conrail shareholders tax-free equity and the
substantial upside potential that only comes from the benefits derived
from the merger of CSX and Conrail.
"Furthermore, Norfolk Southern's highly conditional non-bid would
inevitably face serious delay and could not in any event be
consummated without the approval of the Conrail board. Specifically,
the provisions of the CSX-Conrail merger agreement effectively
preclude the Conrail board of directors' approval of any competing
offers prior to mid-April 1997. In contrast, the CSX cash tender offer
would close in November 1996. The certain delays involved in the
Norfolk Southern non-bid severely and negatively impact the present
value of its proposal. Using a customary discount rate of 2 percent
per month, the Norfolk Southern non-bid is worth less than $90 per
Conrail share, far less than Norfolk Southern would have Conrail
shareholders believe.
"The fact is that the merger of CSX and Conrail will result in
service, efficiency and competitive benefits that cannot be achieved
by any combination of the Norfolk Southern and Conrail systems.
"By every measure, the CSX-Conrail merger is superior in
economic, operational and public policy terms to the Norfolk Southern
non-bid."
Thereafter, during the weekend of November 2 through November 3, 1996,
representatives of Parent and NSC met to discuss matters related to the possible
sale of certain of the Company's assets.
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On November 3, 1996, Parent issued the following press release:
FOR IMMEDIATE RELEASE:
CSX Confirms Talks with Norfolk Southern
Richmond, Va. -- Nov. 3, 1996 -- CSX Corporation (CSX) (NYSE:
CSX) today released the following statement:
"CSX Corporation today announced that, at the initiation of
Norfolk Southern Corp. (Norfolk Southern), it is having conversations
with Norfolk Southern about a possible sale by the post-merger
CSX/Conrail of certain material assets. CSX has advised Conrail Inc.
of such conversations. No agreements have been reached and there can
be no assurance that any agreements will be reached. Under the terms
of the CSX/Conrail merger agreement, mutual agreement between CSX and
Conrail would be required for an agreement of the type discussed."
No agreements were reached as a result of the conversations held between
Parent and NSC during the November 2 weekend.
Following the announcement by NSC of the Hostile Offer and from time to
time thereafter until the execution of the first amendment to the Merger
Agreement (the "First Amendment") on November 5, 1996, Parent and the Company
held discussions and engaged in negotiations relative to the Merger Agreement
(as originally executed on October 14, 1996 (the "Original Merger Agreement"))
and the First Amendment.
On November 5, 1996, Parent and the Company entered into the First
Amendment pursuant to which, among other things, the price per Share offered in
the First Offer (the "First Offer Price") was increased to $110 per Share.
On November 6, 1996, Parent and the Company issued the following joint
press release announcing execution of the First Amendment:
FOR IMMEDIATE RELEASE
CSX AND CONRAIL AMEND MERGER AGREEMENT
CSX Raises Cash Portion of its Agreement with Conrail to $110 per Conrail
Share
Conrail Board Unanimously Approves CSX Amended Offer
Conrail Board Unanimously Rejects Norfolk Southern's Offer
Richmond, Va. and Philadelphia, Pa. -- Nov. 6, 1996 -- CSX
Corporation [NYSE: CSX] and Conrail Inc. [NYSE: CRR] today announced
that they have amended the terms of their merger agreement. Under the
revised terms, CSX has raised the cash portion of its offer to $110
per Conrail share.
Conrail also announced that its board of directors carefully
considered the relative merits of a merger with Norfolk Southern
rather than with CSX, and unanimously reaffirmed that a merger with
CSX is in Conrail's best interest and is the superior strategic
combination for Conrail. The Conrail board determined that a
transaction with Norfolk Southern is not in the best interest of
Conrail and its constituencies.
David M. LeVan, chairman, president and chief executive officer
of Conrail, said, "Our two companies have now agreed to significantly
increase the value to be received by the Conrail shareholders, and
Conrail's other constituencies will continue to get tremendous
benefits resulting from the CSX merger.
"On Oct. 14, 1996, the Conrail board unanimously approved a
merger of equals with CSX to create one of the world's leading
transportation and logistics companies," Mr. LeVan continued.
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"That transaction provided value to our shareholders at the high-end of
what has been paid in other railroad mergers, and it clearly was and is in
the best interests of Conrail and its constituencies. Before approving that
merger, we carefully considered the relative merits of a merger with
Norfolk Southern rather than with CSX, and we unanimously determined that a
merger with CSX was in Conrail's best interest and was the superior
strategic combination for Conrail. In making that decision we were fully
aware that Norfolk Southern had expressed an interest in acquiring Conrail.
We have now reaffirmed that decision."
John W. Snow, CSX chairman, president and chief executive
officer, said, "Our decision to increase the cash portion of the offer
not only reflects CSX's commitment to completing the transaction, but
also accounts for the increased value we have determined will be
realized through the merger. Further analysis by our management team,
working with its counterpart at Conrail, has identified at least $730
million in synergies and cost savings, $180 million more than
originally anticipated.
"Following the combination of our two companies, we expect
immediate net traffic benefits of about $165 million and cost savings
totaling approximately $565 million," continued Mr. Snow.
"Importantly, we will realize these benefits rapidly by working
closely together. This is especially significant since Conrail
shareholders who receive CSX shares as consideration for their shares,
will benefit from what we expect will be a substantial increase in the
value of those shares.
"Furthermore, it is apparent that the merger between CSX and
Conrail will produce significant public policy benefits. The service
and pricing advantages we will offer shippers will reduce truck
traffic along the now congested interstate corridors throughout the
region. We also will be able to provide a safer, more reliable
operating environment for passenger services. Only the CSX/Conrail
combination offers so many significant benefits to customers and the
greater public," Mr. Snow added.
"The hostile Norfolk Southern bid is burdened with a series of
significant conditions. Given all the obstacles in the path of Norfolk
Southern's bid, Conrail shareholders would have to wait a prolonged
amount of time to receive payment for their shares. Meanwhile, the
CSX/Conrail combination offers an immediate opportunity to move
forward together creating real, substantive value for both Conrail and
CSX shareholders.
"The merger of CSX and Conrail is driven by a compelling logic.
Together, CSX and Conrail will create the leading global freight
transportation and logistics management company and provide
dramatically improved rail service to our customers east of the
Mississippi. Shippers and receivers throughout the region will benefit
from significantly enhanced competition, much better service and more
competitive pricing. Our combined railroad will grow significantly and
operate with maximum efficiency," Mr. Snow said.
"Clearly, the combination of CSX and Conrail provides the best
overall package of benefits to our constituencies, including
customers, the communities we serve, and the public-at-large. We
welcome the strong support of the Conrail board of directors and look
forward to a bright future as our new company moves full speed into
the 21st Century," concluded Mr. Snow.
The significant amendments to the CSX/Conrail merger agreement
include:
- The increase of the cash portion of the transaction to $110 per
Conrail share. The structure of the proposed merger will remain the
same: 40 percent of the fully diluted shares of Conrail's common stock
and ESOP preferred stock will be acquired at the new price and the
remaining 60 percent will be exchanged for CSX stock at the originally
agreed-upon exchange ratio of 1.85619 CSX shares for each Conrail
share;
- An extension by three months of the period of time during which
the Conrail board of directors cannot withdraw its support of the
merger agreement or agree to any competing transaction. As now
extended, such provisions will run until July 12, 1997; and
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- Neither party will engage in discussions or enter into any
agreement with other railroad companies (including Norfolk Southern)
relating to trackage rights or other concessions without the
participation and agreement of the other party.
Additionally, the Conrail Shareholders Meeting scheduled for Nov.
14 has been canceled. The record date for a new shareholders meeting
has been set at Dec. 5, 1996, and the shareholder meeting is expected
to be held in mid-December.
CSX's tender offer of $110 per Conrail share is for an aggregate
of about 17.9 million shares of Conrail common stock and ESOP
preferred stock, or approximately 19.9 percent of the Conrail
outstanding voting stock. The offer is subject to certain customary
conditions.
Under the terms of the CSX offer, as amended, the tender offer's
expiration date and withdrawal and proration rights are extended until
Midnight EST, Nov. 20, 1996. As of the close of business on Nov. 5,
1996, 56,634 Conrail shares had been tendered pursuant to the CSX
offer.
CSX Corporation, headquartered in Richmond, Va., is an
international transportation company offering a variety of rail,
container-shipping, intermodal, trucking, barge and contract logistics
management services.
Conrail, with corporate headquarters in Philadelphia, Pa.,
operates an 11,000-mile rail freight network in 12 northeastern and
midwestern states, the District of Columbia, and the Province of
Quebec.
Attached is a fact sheet on the CSX/Conrail merger of equals, and
additional information regarding this announcement can be found on the
companies' Web sites on the Internet. CSX's home page can be reached
at http://www.CSX.com. Conrail's home page can be reached at
http://www.CONRAIL.com.
FAST FACTS REGARDING THE CSX/CONRAIL MERGER
- The proposed CSX/CRR merger of equals will create a powerful
strategic alliance, the leading transportation company in the world
with more than $14 billion in revenue and operations serving more than
80 countries around the globe.
- In addition to the railroad, the new company will include the
nation's largest container-shipping (Sea-Land Services) and barging
(American Commercial Barge Line) companies, its only full-service,
coast-to-coast intermodal company (CSX Intermodal) and one of the
foremost contract logistics management companies (Customized
Transportation Services) in the world.
- For employees and the communities within which they work and
live, the CSX/CRR merger of equals offers the combination of companies
with complementary business mixes, common corporation strategies and
compatible corporate cultures.
- CSX/CRR has agreed to locating the corporate headquarters of
the new company in Philadelphia; to leaving the operating headquarters
of the CSXT and Conrail rail companies in Jacksonville and
Philadelphia for the foreseeable future; to a board comprised of an
equal number of directors from each company; and to a defined
succession plan that insures the management and employees,
shareholders, customers and communities served by both companies will
have powerful roles and strong voices in the future of the company.
- For shareholders, the CSX/CRR merger of equals offers ownership
of an international transportation company with the scale and
efficiency at home and abroad to compete effectively and generate
attractive returns well into the 21st Century.
- For customers, the CSX/CRR combination provides a 29,000 route
mile rail system that would span 22 states and offer vastly improved
service to virtually all major markets east of the Mississippi. Such a
system will provide the highest quality service to customers as a
result of faster,
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<PAGE> 30
more reliable service, shorter routes, an improved cost structure, better
equipment supply and utilization and more single-line service.
- The proposed CSX/CRR merger of equals allows realization of
public policy benefits that cannot be accomplished through any other
combination.
- More passenger trains will use the combined CSX/CRR rail system
than any other in the United States. These include not only Amtrak's,
but also those operated by commuter services in Boston, New York,
Philadelphia, Baltimore and Washington. Freight and passenger trains
currently share the same tracks in these areas. Improved coordination,
scheduling and operation of freight and passenger services will reduce
delays and improve safety and service for passengers. Similar options
may exist in other parts of the combined system in the future as
hard-pressed urban planners increasingly turn to rail transportation
to relieve highway congestion, save scarce public resources and
improve air quality.
- The proposed CSX/CRR merger of equals offers improved rail
competition to Northeast and Midwest markets and an opportunity to
improve the social and economic benefits of the entire transportation
infrastructure of the region through increased, more effective
competition with the trucking industry and through additional
intermodal cooperation.
On November 8, 1996, NSC publicly announced an increase in the price
offered in the Hostile Offer.
On November 13, 1996, Parent and the Company issued the following joint
press release stating that CSX has had, and continues to have, discussions with
the Company relating to an increase in the value of the consideration payable
upon consummation of the Merger:
FOR IMMEDIATE RELEASE
CONRAIL BOARD ADVISES SHAREHOLDERS NOT TO TENDER
TO REVISED NORFOLK SOUTHERN TENDER OFFER;
CSX AND CONRAIL REAFFIRM COMMITMENT TO THEIR MERGER
Richmond, Va. and Philadelphia, Pa., Nov. 13, 1996 -- Conrail
Inc. (NYSE: CRR) announced today that its board of directors
recommends that shareholders not tender their shares pursuant to the
revised Norfolk Southern tender offer. Shares tendered to the Norfolk
Southern offer, which expires on Nov. 22, cannot be accepted for
payment under the terms of that offer. Conrail's board said that
shareholders who desire to receive cash now for a portion of their
shares should tender to the offer of CSX Corporation (CSX) (NYSE:
CSX), which expires Nov. 20.
Conrail again reaffirmed that a merger with CSX is in Conrail's
best interest and is the superior strategic combination for Conrail.
Both CSX and Conrail stated that they continue to be fully committed
to their merger.
CSX and Conrail stated that they have been having, and continue
to have, discussions relating to an increase in the value of the
consideration payable upon consummation of the CSX-Conrail merger.
There can be no assurance as to when or if any such modifications will
be made.
CSX, headquartered in Richmond, Va., is an international
transportation company offering a variety of rail, container-shipping,
intermodal, trucking, barge and contract logistics management
services.
Conrail, with corporate headquarters in Philadelphia, Pa.,
operates an 11,000-mile rail freight network in 12 northeastern and
midwestern states, the District of Columbia, and the Province of
Quebec.
CSX's home page can be reached at http://www.CSX.com. Conrail's
home page can be reached at http://www.CONRAIL.com.
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On November 19, 1996, following a two-day hearing, the United States
District Court for the Eastern District of Pennsylvania denied NSC's motion for
a preliminary injunction relating to the First Offer. On November 20, 1996, the
United States Court of Appeals for the Third Circuit rejected NSC's application
for an injunction relating to the First Offer pending an appeal by NSC of the
November 19, 1996 decision.
At 12:00 midnight on November 20, 1996, the First Offer expired in
accordance with its terms. In connection therewith, Purchaser accepted for
payment 17,860,124 Shares at a price of $110 per Share, representing
approximately 19.9% of the voting Shares outstanding as of October 10, 1996 and
a proration factor of approximately 23.45% for all Shares tendered pursuant to
the First Offer.
12. PURPOSE OF THE SECOND OFFER AND THE MERGER; PLANS FOR THE COMPANY. The
purpose of the Second Offer is for Parent, through Purchaser, to increase its
equity interest in the Company as the second step in consummating a business
combination between Parent and the Company. The purpose of the Merger is for
Parent to acquire all Shares not purchased pursuant to the Offers and thereby
accomplish a business combination transaction.
Parent has held discussions and, together with the Company, may initiate
future discussions with other Class 1 railroads (including NSC) to address
regulatory requirements and other competition issues arising from the Merger.
Such discussions may lead to various concessions, such as the grant of trackage
rights or other dispositions of assets, by the post-merger combined company.
Under the Merger Agreement, Parent and the Company have agreed that all such
discussions will be conducted jointly. See Section 13.
Upon consummation of the Merger, Parent intends to continue to review the
combined company and its assets, businesses, operations, properties, policies,
corporate structure, capitalization and management and consider if any changes
would be desirable in light of the circumstances then existing. Upon
consummation of the Merger, Parent also intends to continue to identify
synergies and cost savings, including its freight traffic arrangements with the
Company.
Based upon discussions with the Company, Parent believes that total
quantifiable benefits from the Merger will be approximately $730 million
annually, based on the realization of cost savings (totaling approximately $565
million) from operating efficiencies, facility consolidations, overhead
rationalization and other activities, and new traffic volumes (totaling
approximately $165 million) earned by enhanced service. Parent intends that the
combined company will make investments to support revenue growth, and will
create a streamlined organization that incorporates the best of Parent's and the
Company's organizations, while combining facilities and realizing economies of
scale. Parent expects that there will be some job losses as a result of
consolidations and the elimination of redundancies, but that these will be
offset substantially over time by new employment opportunities resulting from
growth of the business. Parent has not yet developed specific plans to implement
the foregoing. THE FOREGOING ESTIMATES OF COST SAVINGS AND SYNERGIES ARE
INHERENTLY SUBJECT TO SIGNIFICANT UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH
ARE BEYOND THE CONTROL OF PARENT. THERE CAN BE NO ASSURANCE THAT THEY WILL BE
ACHIEVED AND ACTUAL SAVINGS AND SYNERGIES MAY VARY MATERIALLY FROM THOSE
ESTIMATED. THE INCLUSION OF SUCH ESTIMATES HEREIN SHOULD NOT BE REGARDED AS AN
INDICATION THAT PARENT, PURCHASER OR ANY OTHER PARTY CONSIDERS SUCH ESTIMATES AN
ACCURATE PREDICTION OF FUTURE EVENTS.
The Merger Agreement provides that, following the consummation of the
Merger, Parent and the Company shall cause the corporate headquarters of Parent
to be located in Philadelphia, Pennsylvania. Except as noted in this Offer to
Purchase, neither Parent nor Purchaser has any present plans or proposals that
relate to or would result in (a) an extraordinary corporate transaction, such as
a merger, reorganization, liquidation, or sale or transfer of a material amount
of assets, involving the Company or any of its subsidiaries, (b) any changes in
the Company's present board of directors or management, (c) any material change
in the Company's present capitalization, corporate structure or business, (d)
causing a class of the Company's securities to be delisted from a national
securities exchange or to cease to be authorized to be quoted in an inter-dealer
quotation system of a registered national securities association, or (e) a class
of the Company's securities becoming eligible for termination of registration
pursuant to Section 12(g)(4) of the Exchange Act.
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13. MERGER AGREEMENT; OTHER AGREEMENTS.
MERGER AGREEMENT
THE FOLLOWING IS A SUMMARY OF CERTAIN PROVISIONS OF THE MERGER AGREEMENT.
THE SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT
WHICH IS INCORPORATED HEREIN BY REFERENCE. TERMS NOT OTHERWISE DEFINED HEREIN OR
IN THE FOLLOWING SUMMARY SHALL HAVE THE MEANINGS SET FORTH IN THE MERGER
AGREEMENT.
The First Offer. The First Offer was commenced by Purchaser pursuant to
the Merger Agreement that provides that, on the terms and subject to the prior
satisfaction or waiver of the conditions to the First Offer, Purchaser will
purchase all Shares validly tendered pursuant to the First Offer as soon as
practicable after the later of the satisfaction of the conditions of the First
Offer and the expiration of the First Offer, except that Purchaser will not
purchase the Shares until after calculation of proration. The Merger Agreement
provides that, without the written consent of the Company, Purchaser will not
decrease the First Offer Price, decrease the number of Shares sought in the
First Offer, change the form of consideration to be paid pursuant to the First
Offer, impose additional conditions to the First Offer or amend any other term
or any condition of the First Offer in any manner adverse to the holders of
Shares, except that, if on the initially scheduled expiration date of the First
Offer (as it may be extended in accordance with the terms of the Merger
Agreement), all conditions to the First Offer are not satisfied or waived, the
First Offer may be extended from time to time without the consent of the Company
for a time reasonably expected to be necessary to satisfy the unsatisfied
conditions. The Company, Parent and Purchaser have agreed that no waiver by
Purchaser of any of the conditions to the First Offer will be deemed adverse to
the holders of Shares, except that Purchaser may not waive the minimum number of
Shares condition (the "Minimum Condition") without the Company's consent. If all
conditions to the First Offer are satisfied as of the expiration date for the
First Offer except for the Minimum Condition, Purchaser will extend the First
Offer from time to time until 270 days after the date of the Merger Agreement
or, if earlier, such time as the Minimum Condition is satisfied or validly
waived under the Merger Agreement. In addition, the Merger Agreement provides
that, without the Company's consent, the First Offer Price may be increased and
the First Offer may be extended to the extent required by law in connection with
the increase.
Upon expiration of the First Offer and the consummation thereof, Purchaser
purchased 17,860,124 Shares, which were deposited into the Voting Trust upon
purchase.
The Second Offer. The Merger Agreement provides that, at any time
following seven business days after consummation of the First Offer, if Parent
and its subsidiaries do not already own at such time 40% or more of the Shares
outstanding as of the date of the Original Merger Agreement on a fully diluted
basis (excluding Shares that would be outstanding upon exercise of the Company
Stock Option), Parent may, and at the written request of the Company is required
to, commence the Second Offer to purchase up to that number of Shares which,
when added to the aggregate number of Shares then beneficially owned by Parent
(other than pursuant to the Company Option Agreement) equals 40% of such
outstanding Shares, at a price of not less than $110 and on other terms no less
favorable to shareholders of the Company than the First Offer, provided that
Parent will not be required to consummate the Second Offer until after the
Pennsylvania Control Transaction Law is inapplicable to the Company.
The Second Offer was commenced on December 6, 1996.
The Merger. The Merger Agreement provides that, subject to the terms and
conditions thereof and in accordance with the Pennsylvania Law, at the Effective
Time, the Company will be merged with and into Purchaser, the separate corporate
existence of the Company will cease, and Purchaser will be the Surviving
Corporation in the Merger and will continue to be governed by the laws of the
State of Pennsylvania. Pursuant to the Merger, the Articles of Incorporation of
Purchaser will be the Articles of Incorporation of the Surviving Corporation
until thereafter amended (except that the Articles of Incorporation of the
Surviving Corporation will provide that the Surviving Corporation will be named
"Conrail Inc."), and the By-laws of Purchaser will be the By-laws of the
Surviving Corporation until thereafter amended. The Merger will have the effects
set forth in the Pennsylvania Law.
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Conversion of Shares. The Merger Agreement provides that as of the
Effective Time, each issued and outstanding Share (other than Shares owned by
the Company as treasury stock and Shares owned by Parent, the Company or any of
their respective subsidiaries, which will be cancelled and retired) will be
converted into the right to receive either (i) $110 (the "Per Share Cash
Consideration") without interest, (ii) shares of Parent Common Stock or (iii) a
combination of the foregoing. Pursuant to the Merger Agreement, each of the
issued and outstanding shares of common stock, par value $1.00 per share, of
Purchaser will be converted at the Effective Time into a fully paid and
non-assessable share of common stock of the Surviving Corporation.
Unless, prior to the Effective Time, at least 40% of the outstanding Shares
on a fully diluted basis have been purchased by Purchaser (other than upon
exercise of the Company Stock Option), in which case each Share will be
converted into 1.85619 shares of Parent Common Stock as provided in the second
succeeding paragraph, each holder of Shares, as more fully set forth in the
Merger Agreement (other than holders of Shares to be cancelled) will have the
right to submit a request (an "Election") specifying the number of Shares that
the holder desires to have converted into 1.85619 shares of Parent Common Stock
per Share in the Merger (a "Stock Election") and the number of Shares that the
holder desires to have converted into the right to receive the Per Share Cash
Consideration in the Merger (a "Cash Election").
The aggregate number of Shares to be converted into Parent Common Stock
will be equal as nearly as practicable to 60% of all outstanding Shares on a
fully diluted basis; and the number of Shares to be converted into the right to
receive the Per Share Cash Consideration, together with the Shares acquired by
Purchaser pursuant to the Offers or otherwise (other than upon exercise of the
Company Stock Option) (the "Tendered Shares"), will be equal as nearly as
practicable to 40% of all such outstanding Shares.
If Stock Elections are received for a number of Shares that is 60% or less
of such outstanding Shares, each Share covered by a Stock Election will be
converted in the Merger into 1.85619 shares of Parent Common Stock (the
"Conversion Ratio"). If, between the date of the Merger Agreement and the
Effective Time, the issued and outstanding shares of Parent Common Stock have
been changed into a different number of shares or a different class of shares
due to a stock split, reverse stock split, stock dividend, spin-off,
extraordinary dividend, recapitalization, reclassification or other similar
transaction with a record date within such period, the Conversion Ratio will be
appropriately adjusted.
If Stock Elections are received for more than 60% of the outstanding Shares
on a fully diluted basis, each Share as to which an Election is not in effect
(or deemed not to be in effect pursuant to the Merger Agreement) on the last day
on which an Election may be made under the Merger Agreement (other than Tendered
Shares) (a "Non-Electing Share"), and each Share for which a Cash Election has
been received, will be converted into the right to receive the Per Share Cash
Consideration in the Merger, and Shares for which Stock Elections have been
received will be converted into Parent Common Stock and the right to receive the
Per Share Cash Consideration in the following manner:
(1) There will be distributed with respect to such Shares a number of
shares of Parent Common Stock equal to the Conversion Ratio with respect to
a fraction of such Shares, the numerator of which fraction will be 60% of
such number of outstanding Shares and the denominator of which will be the
aggregate number of Shares covered by Stock Elections; and
(2) Such Shares not fully converted into the right to receive Parent
Common Stock as set forth in clause (1) above will be converted in the
Merger into the right to receive the Per Share Cash Consideration for each
Share so converted.
If the number of Tendered Shares and Shares for which Cash Elections are
received in the aggregate is 40% or less of the outstanding Shares on a fully
diluted basis, each Share covered by a Cash Election will be converted in the
Merger into the right to receive the Per Share Cash Consideration.
If the number of Tendered Shares and Shares for which Cash Elections are
received in the aggregate is more than 40% of the outstanding Shares on a fully
diluted basis, each Non-Electing Share and each Share for which a Stock Election
has been received will be converted in the Merger into a number of shares of
Parent Common Stock equal to the Conversion Ratio, and the Shares for which Cash
Elections have been received
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will be converted into the right to receive the Per Share Cash Consideration and
Parent Common Stock in the following manner:
(1) There will be distributed with respect to such Shares the Per
Share Cash Consideration with respect to a fraction of such Shares, the
numerator of which fraction will be 40% of such number of outstanding
Shares minus the number of Tendered Shares and the denominator of which
will be the aggregate number of Shares covered by Cash Elections; and
(2) Such Shares not fully converted into the right to receive the Cash
Consideration as set forth in clause (1) above will be converted in the
Merger into the right to receive a number of shares of Parent Common Stock
equal to the Conversion Ratio for each Share so converted.
The Merger Agreement provides that if Stock Elections are not received for
more than 60% of the outstanding Shares on a fully diluted basis, or if the
number of Tendered Shares and Shares for which Cash Elections are received
together is not more than 40% of such outstanding Shares, there will be
distributed with respect to each Non-Electing Share the Per Share Cash
Consideration with respect to a fraction of such Non-Electing Share, where such
fraction is calculated in a manner that will result in the sum of (i) the number
of Shares converted into cash pursuant to this paragraph, (ii) the number of
Shares for which Cash Elections have been received and (iii) the number of
Shares purchased pursuant to the Offers being as close as practicable to 40% of
the outstanding Shares. Each Non-Electing Share not converted into the right to
receive the Per Share Cash Consideration as set forth in the preceding sentence
will be converted in the Merger into the right to receive a number of Shares of
Parent Common Stock equal to the Conversion Ratio for each Non-Electing Share so
converted.
In lieu of any fractional share of Parent Common Stock, Parent will pay to
each former shareholder of the Company who otherwise would be entitled to
receive such a fractional share an amount in cash equal to (i) the average
closing sales price of a share of Parent Common Stock as reported on the NYSE
Composite Tape, calculated in the manner set forth in the Merger Agreement, on
the date on which the Effective Time occurs times (ii) the fractional interest
in a share of Parent Common Stock to which such holder would otherwise be
entitled.
For purposes of this section, "outstanding" Shares means all Shares
outstanding immediately prior to the Effective Time on a fully diluted basis
(including Common Shares issuable upon conversion of ESOP Preferred Shares),
except for Common Shares outstanding or issuable upon exercise of the Company
Stock Option.
Board of Directors; Officers. The Merger Agreement provides that, until
their respective resignation or removal or until their respective successors are
duly elected and qualified and subject to the terms of the Merger Agreement,
from and after the Effective Time the current Chairmen of the Boards of the
Company and Parent will serve as members of the Board of Directors of Parent.
The Board of Directors of Parent will additionally consist of an even number of
outside directors to be agreed upon. Each of the Company and Parent are
permitted under the Merger Agreement to designate half of such outside
directors. Pursuant to the Merger Agreement, the Company and Parent have also
agreed to establish certain committees of the Board of Directors of Parent from
and after the Effective Time, and each of the Company and Parent shall have the
right to appoint 50% of each committee.
The Merger Agreement provides that, unless altered by a vote of 75% of the
directors of Parent after the Effective Time, during the two-year period after
the Effective Time the current Chairman and Chief Executive Officer of Parent
will be Chairman and Chief Executive Officer of Parent and the current Chairman
and Chief Executive Officer of the Company will be President and Chief Operating
Officer of Parent and President and Chief Executive Officer of each of Parent's
railroad subsidiaries. Following the two-year period, the current Chairman and
Chief Executive Officer of Parent will continue as Chairman of Parent for an
additional two-year period and Chairman Emeritus for a one-year period
thereafter and the current Chairman and Chief Executive Officer of the Company
will be elected to the additional office of Chief Executive Officer of Parent on
the second anniversary of the Effective Time, and will succeed as Chairman of
Parent at the end of such additional two-year period.
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Shareholders' Meetings. Pursuant to the Merger Agreement, the Company and
Parent will prepare and file with the SEC a registration statement on Form S-4
relating to the shares of Parent Common Stock to be issued in the Merger in
which a joint proxy statement/prospectus (the "Proxy Statement") will be
included as a prospectus, and will use all reasonable efforts to have such
registration statement declared effective under the Securities Act as promptly
as possible and to have the Proxy Statement mailed as promptly as possible to
their respective shareholders. Further, the Company has mailed to its
shareholders a definitive proxy statement and has called the Pennsylvania
Special Meeting for the purpose of obtaining the Pennsylvania Shareholder
Approval to amend the Company Articles to make inapplicable the Pennsylvania
Control Transaction Law to the Company, and after any such approval will take
all necessary or advisable action to cause such amendment to become effective.
As soon as practicable following the date of the Merger Agreement, the Company
will call and hold a meeting of its shareholders (the "Company Merger Meeting"
and, together with the Pennsylvania Special Meeting, the "Company Shareholders
Meetings") for the purpose of obtaining the approval of the shareholders of the
Company (the "Company Merger Approval") with respect to the Merger. Subject to
the terms of the Merger Agreement described under "-- No Solicitation," the
Merger Agreement provides that the Company's obligations pursuant to the
foregoing sentence are not affected by the commencement, public proposal, public
disclosure or communication to the Company of any Takeover Proposal (as defined
herein) in respect of the Company. The Company has agreed, through its Board of
Directors, to recommend to its shareholders the approval and adoption of the
Second Offer and the matters to be considered at the Company Shareholders
Meetings, except to the extent that the Board of Directors of the Company shall
have withdrawn or modified its approval or recommendation of the Second Offer or
such matters and terminated the Merger Agreement in accordance with the
provisions of the Merger Agreement described under "-- No Solicitation."
Pursuant to the Merger Agreement and subject to the Voting Trust Agreement,
Parent will cause all Shares acquired by it or its wholly owned subsidiaries
pursuant to the Offers or otherwise to be voted in favor of the matters to be
considered at the Company Shareholders Meetings.
The Merger Agreement requires Parent, as soon as practicable following the
date of the Merger Agreement, to duly call and hold a meeting of its
shareholders (the "Parent Shareholders Meeting") to obtain the approval of the
shareholders of Parent (the "Parent Shareholder Approval") with respect to an
amendment of the Parent Articles of Incorporation as described in the Merger
Agreement (and after any such approval to take all necessary or advisable action
to cause the amendment to become effective) and with respect to the issuance of
Parent Common Stock in the Merger for purposes of the rules of the NYSE. As more
fully described in the Merger Agreement, the amendment to the Parent Articles of
Incorporation to be voted upon at the Parent Shareholders Meeting is intended to
increase the number of shares of Purchaser Common Stock authorized under the
Parent Articles of Incorporation, to change the name of Parent to a new, neutral
name and to effect certain other changes. Subject to the provisions of the
Merger Agreement described under "-- No Solicitation," Parent has agreed that
its obligations pursuant to the foregoing sentence are not affected by the
commencement, public proposal, public disclosure or communication to Parent of
any Takeover Proposal in respect of Parent. Parent has agreed, through its Board
of Directors, to recommend to its shareholders the approval and adoption of the
matters to be considered at the Parent Shareholders Meeting, except to the
extent that the Board of Directors of Parent shall have withdrawn or modified
its recommendation of such matters and terminated this Agreement in accordance
with the provisions of the Merger Agreement described under "-- No
Solicitation."
In the Merger Agreement, Parent and the Company have agreed to use
reasonable efforts to hold the Company Merger Meeting and the Parent
Shareholders Meeting on the same date as soon as practicable after the date of
the Merger Agreement.
The Merger Agreement provides that the Company will not convene, adjourn or
postpone the Pennsylvania Special Meeting without Parent's prior consent, and
such consent will not be unreasonably withheld. In the event that the matters to
be considered at the Company Merger Meeting or the Parent Shareholders Meeting
are not approved at a meeting called for such purpose, from time to time the
Company or Parent, as applicable, may, and will at the request of Parent or the
Company, as applicable, duly call one or more meetings of shareholders for such
purposes. Subject to the foregoing, the Merger Agreement further
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provides that the Company shall convene any such shareholder meetings as soon as
practicable after receipt of any request to do so by Parent (and, in the case of
the Pennsylvania Special Meeting, as soon as practicable after December 5,
1996).
Voting Trust. The parties to the Merger Agreement have agreed that,
simultaneously with the purchase of Shares pursuant to the Offers, the Company
Stock Option Agreement or otherwise, such Shares will be deposited in the Voting
Trust. The Voting Trust may not be modified or amended without the prior written
approval of the Company as to voting rights with respect to, or transfer
restrictions on, such Shares, or otherwise unless such modification or amendment
is not inconsistent with the Merger Agreement and is not adverse to the Company
or its shareholders. See "-- Voting Trust Agreement" and Section 16.
Interim Operations of the Company and Parent. Except as otherwise set
forth in the Merger Agreement, Parent and the Company have agreed that, from the
date of the Merger Agreement to the Effective Time, each of them will, and will
cause their respective subsidiaries to, carry on their respective businesses in
the ordinary course consistent with past practice and in compliance in all
material respects with all applicable laws and regulations and, to the extent
consistent therewith, will use all reasonable efforts to preserve intact their
current business organizations, use reasonable efforts to keep available the
services of their current officers and other key employees as a group and
preserve their relationships with those persons having business dealings with
them to the end that their goodwill and ongoing businesses will be unimpaired at
the Effective Time. Except as contemplated by or as otherwise set forth in the
Merger Agreement, without limiting the generality of the foregoing, from the
date of the Merger Agreement to the Effective Time, and without the consent of
the other except in certain circumstances specified therein, neither the Company
nor Parent will, or will permit any of its respective subsidiaries to:
(a) other than dividends and distributions (including liquidating
distributions) by a direct or indirect wholly owned subsidiary of the
Company or Parent, as applicable, to its parent, or by a subsidiary
that is partially owned by the Company or Parent, as applicable, or any
of their respective subsidiaries, provided that the Company or Parent,
as applicable, or any such subsidiary receives or is to receive its
proportionate share thereof, and other than the regular quarterly
dividends of $.475 per share with respect to Common Shares, regular
quarterly dividends of $.54125 per share with respect to ESOP Preferred
Shares in accordance with their terms and regular quarterly dividends
of $.26 per share with respect to Parent Common Stock (plus increases
of no more than 20% per year), (x) declare, set aside or pay any
dividends on, or make any other distributions in respect of, any of its
capital stock, (y) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital
stock, or (z) except in connection with the funding of employee benefit
plans, purchase, redeem, retire or otherwise acquire any shares of its
capital stock or of any of its subsidiaries that would constitute a
"significant subsidiary" within the meaning of Rule 1-02 of Regulation
S-X of the SEC or any other securities thereof or any rights, warrants
or options to acquire any such shares or other securities;
(b) issue, deliver, sell, pledge or otherwise encumber any shares of its
capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any
such shares, voting securities or convertible securities (other than
(v) in accordance with the Rights Agreement, or the Rights Agreement,
dated as of June 8, 1988 (as amended, the "Parent Rights Agreement"),
relating to rights ("Parent Rights") to purchase shares of Junior
Participating Preferred Stock Series B, without par value, of Parent,
(w) the issuance of Shares or Parent Common Stock upon (1) the exercise
of the Company Employee Stock Options (as defined herein) or Parent
Employee Stock Options (as defined herein), respectively, listed in the
disclosure schedules to the Merger Agreement and outstanding on the
date of the Merger Agreement, in accordance with their present terms or
(2) pursuant to a grant existing as of the date of the Merger Agreement
or otherwise permitted by the provisions of the Merger Agreement
described in this section under any Employee Benefit Plan, (x) the
grant or award of Company Employee Stock Options or Parent Employee
Stock Options (or the issuance of Shares or Parent Common Stock upon
exercise thereof) consistent with past practice in amounts not to
exceed, in any 12-month period, 110% of the amount issued in the prior
12-month period, and, in the case of Parent, target
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<PAGE> 37
bonus awards under Parent's long-term incentive plans consistent with
past practice in amounts not to exceed, in any 12-month period, 110% of
the amounts of the aggregate target bonus awards issued in the prior
12-month period, (y) the issuance of Shares upon conversion of ESOP
Preferred Shares in accordance with their terms and (z) the issuance of
Shares or Parent Common Stock pursuant to the Option Agreements);
(c) in the case of the Company or Parent, adopt, propose or agree to any
amendment to its articles of incorporation, by-laws or other comparable
organizational documents, except for such amendments as are
contemplated hereby, and, in the case of any subsidiary, adopt, propose
or agree to any amendment to its certificate of incorporation, by-laws
or other comparable organizational documents other than in the ordinary
course in a manner which does not have a material adverse effect on the
Company or Parent, as applicable;
(d) sell, lease, license, mortgage or otherwise encumber or subject to any
lien or otherwise dispose of any of its properties or assets, other
than (x) transactions in the ordinary course of business consistent
with past practice and (y) transactions involving assets which do not
individually or in the aggregate exceed $50,000,000 in any 12-month
period;
(e) make or agree to make any acquisition (other than of inventory) or
capital expenditure;
(f) except in the ordinary course consistent with past practice, make any
tax election that could reasonably be expected to have a material
adverse effect on the Company or Parent, as applicable or settle or
compromise any material income tax liability;
(g) pay, discharge, settle or satisfy any material claims, liabilities or
obligations (whether absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement
or satisfaction, in the ordinary course of business consistent with
past practice or in accordance with their terms, of liabilities (x)
reflected or reserved against in, or contemplated by, the most recent
consolidated financial statements (or the notes thereto) of the Company
or of Parent included in any report, schedule, form, statement or other
document (including any exhibits, schedules and documents incorporated
by reference) required to be filed with the SEC since January 1, 1995
by the Company or Purchaser, as applicable, (y) incurred since the date
of such financial statements in the ordinary course of business
consistent with past practice or (z) which do not in the aggregate have
a material adverse effect on the Company or Parent, as applicable;
(h) except in the ordinary course of business or except as would not
reasonably be expected to have a material adverse effect on the Company
or Parent, as applicable, modify, amend or terminate any material
contract or agreement to which the Company or Parent, as applicable, or
any of their respective subsidiaries, is a party or waive, release or
assign any material rights or claims thereunder;
(i) make any material change to its accounting methods, principles or
practices, except as may be required by generally accepted accounting
principles;
(j) except as required by law or contemplated by the Merger Agreement and
except for rail labor agreements negotiated in the ordinary course,
enter into, adopt or amend in any material respect or terminate any
collective bargaining agreement or any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, medical or other plan,
arrangement or understanding providing benefits to any current or
former employee, officer or director of the Company or Purchaser, as
the case may be, or of any of their respective wholly owned
subsidiaries ("Employee Benefit Plans"), or any other agreement, plan
or policy involving the Company or Parent, as applicable, or any of
their respective subsidiaries, and one or more of their directors,
officers or employees, or materially change any actuarial or other
assumption used to calculate funding obligations with respect to any
pension plans, or change the manner in which contributions to any
pension plan are made or the basis on which such contributions are
determined;
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(k) except for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not materially
increase benefits or compensation expenses of the Company or Parent, as
applicable, or their respective subsidiaries, or as contemplated hereby
or by the terms of any contract the existence of which does not
constitute a violation of the Merger Agreement, increase the
compensation of any director, executive officer or other key employee
or pay any benefit or amount not required by a plan or arrangement as
in effect on the date of the Merger Agreement to any such person;
(l) enter into any agreement containing any provision or covenant (x)
limiting in any material respect its ability to compete with any person
which would bind the other party to the Merger Agreement or its
operations after the Effective Time or (y) granting concessions to any
railroad (whether through divestiture of lines or the grant of trackage
rights) other than in the ordinary course of business; or
(m) authorize, or commit or agree to take, any of the foregoing actions.
The Merger Agreement provides that Parent and the Company will coordinate
with one another regarding the declaration and payment of dividends in respect
of Parent Common Stock and Shares and the record dates and payment dates
relating thereto such that any holder of Shares will not receive two dividends,
or fail to receive one dividend, for any single calendar quarter with respect to
its Shares and/or any shares of Parent Common Stock any such holder receives in
exchange therefor pursuant to the Merger.
Pursuant to the Merger Agreement, except as required by law, the Company
and Parent have agreed that they will not, and will not permit any of their
respective subsidiaries to, voluntarily take any action that would, or that
could reasonably be expected to, result in (1) any of the representations and
warranties of such party set forth in the Merger Agreement or the Option
Agreements that are qualified as to materiality becoming untrue, (2) any of such
representations and warranties that are not so qualified becoming untrue in any
material respect, (3) any of the conditions to the consummation of the
transactions contemplated by the Merger Agreement not being satisfied or (4) any
material impairment or delay of STB approval.
Third Party Discussions. The Merger Agreement provides that, during the
term of the Merger Agreement, neither the Company nor Parent will, nor will it
permit any of its subsidiaries to, nor shall it authorize or permit any of its
officers, directors or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it or any of its
subsidiaries to, directly or indirectly through another person, participate in
any conversations, discussions or negotiations, or enter into any agreement,
arrangement or understanding, with any other company engaged in the operation of
railroads (including NSC) with respect to the acquisition by any such other
company (including NSC) of any securities or assets of the Company and its
subsidiaries or Parent and its subsidiaries, or any trackage rights or other
concessions relating to the assets or operations of the Company and its
subsidiaries or Parent and its subsidiaries, other than with respect to sales,
leases, licenses, mortgages or other disposals of assets or properties that are
permitted as described in (d) under "-- Interim Operations of the Company and
Parent". Notwithstanding the foregoing, however, Parent and the Company will be
permitted to engage in conversations, discussions and negotiations with other
companies engaged in the operation of railroads (including NSC) to the extent
reasonably necessary or reasonably advisable in connection with obtaining
regulatory approval of the transactions contemplated by the Merger Agreement in
accordance with the terms set forth in the Merger Agreement, and, in each case,
so long as (i) a representative of each of the Company and Parent is present at
any such conversation, discussion or negotiation, (ii) the general subject
matter of any such conversation, discussion or negotiation has been agreed to in
advance by the Company and Parent and (iii) the Company, Parent and such other
company have previously agreed to appropriate confidentiality arrangements, on
terms reasonably acceptable to the Company and Parent (which terms shall in any
event permit disclosure to the extent required by law), relating to the
existence and subject matter of any such conversation, discussion or
negotiation. The provisions of the Merger Agreement described in this paragraph
will terminate and be of no further force and effect immediately upon any
exercise by Parent or the Company of its rights under the proviso to the first
sentence described under "-- No Solicitation," provided that such party
exercising such rights has given the other party prior notice with respect
thereto.
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No Solicitation. Under the terms of the Merger Agreement, neither the
Company nor Parent may, nor may it permit any of its subsidiaries, officers,
directors, employees or representatives to, directly or indirectly through
another person, (i) solicit, initiate or encourage (including by way of
furnishing information), or take any other action designed to facilitate,
directly or indirectly, any inquiries or the making of any proposal which
constitutes any Takeover Proposal or (ii) participate in any discussions or
negotiations regarding any Takeover Proposal; provided, however, that if, at any
time prior to the earlier of (x) the consummation of the First Offer and (y) the
obtaining of the Company Merger Approval, in the case of the Company, or the
Parent Shareholder Approval, in the case of Parent, or after 270 days from the
date of the Merger Agreement and prior to the Approval Date (as defined herein),
the Board of Directors of the Company or Parent, as applicable, determines in
good faith, based on the advice of outside counsel, that it is necessary to do
so to avoid a breach of its fiduciary duties under applicable law, the Company
or Parent, as applicable, may, in response to a Takeover Proposal which was not
solicited by it or which did not otherwise result from a breach of the terms of
the Merger Agreement described in this paragraph, and subject to compliance with
certain notice provisions of the Merger Agreement, (x) furnish information with
respect to it and its subsidiaries to any person pursuant to a customary
confidentiality agreement (as determined by the party receiving such Takeover
Proposal after consultation with its outside counsel) the benefits of the terms
of which, if more favorable to the other party to such confidentiality agreement
than those in place with the other party to the Merger Agreement, shall be
extended to the other party to the Merger Agreement, and (y) participate in
negotiations regarding such Takeover Proposal. For purposes of the Merger
Agreement, "Takeover Proposal" in respect of the Company or Parent, as
applicable, means any proposal or offer from any person for the acquisition or
purchase of more than 50% of the assets of such party and its subsidiaries or
more than 50% of the equity securities of such party entitled to vote generally
in the election of directors, any tender offer or exchange offer that if
consummated would result in any person beneficially owning more than 50% of the
equity securities of such party entitled to vote generally in the election of
directors, or any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving such party, other than
the transactions contemplated by the Merger Agreement or the Option Agreements.
Except as permitted by the Merger Agreement, the Company and Parent have
agreed that neither the Board of Directors of the Company or Parent, as
applicable, nor any committee thereof will (i) withdraw or modify (or propose
publicly to do so), in a manner adverse to the other party, its approval or
recommendation of the Second Offer or its adoption and approval of the matters
to be considered at the respective shareholders meetings of the Company or
Parent, (ii) approve or recommend (or propose publicly to do so), any Takeover
Proposal, or (iii) cause the Company or Parent, as applicable, to enter into any
agreement (an "Acquisition Agreement") related to a Takeover Proposal. However,
the Merger Agreement provides that if at any time following 270 days after the
date of the Merger Agreement and prior to the earlier of (a) the time that at
least 40% of the outstanding Shares on a fully diluted basis have been deposited
in the Voting Trust and (b) the obtaining of Company Merger Approval (in the
case of the Company) or Parent Shareholder Approval (in the case of Parent)
(such earlier date referred to in clause (a) or (b) being the "Approval Date")
there exists a Superior Proposal (as defined herein), and such Board of
Directors determines that (x) in the case of the Board of Directors of the
Company, there is no substantial probability that Parent will succeed in
acquiring 40% of the Shares in the Offers or otherwise (or, if the Pennsylvania
Shareholder Approval has not yet been obtained, that there is no substantial
probability that the Company Merger Approval will be obtained), in either case
due to the existence of such Superior Proposal with respect to the Company or
(y) in the case of the Board of Directors of Parent, there is no substantial
probability that the Parent Shareholder Approval will be obtained due to the
existence of such Superior Proposal with respect to Parent, the Board of
Directors of the Company or Parent, as applicable, may (subject to this and the
following sentences) withdraw or modify its approval or recommendation of either
Offer, the Merger or the adoption and approval of the matters to be considered
at their respective shareholder meetings and approve or recommend such Superior
Proposal or terminate the Merger Agreement (and concurrently, if it so chooses,
cause the Company or Parent, as applicable, to enter into an Acquisition
Agreement with respect to such Superior Proposal), but only after giving notice
to the other party as required by the Merger Agreement and described in the
following paragraph. As used in the Merger Agreement, a "Superior Proposal"
means any proposal made by a third party to acquire, directly or indirectly, for
consideration consisting of cash and/or securities, more than 50% of
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the voting equity securities of the Company or Parent, as the case may be, or
all or substantially all the assets of the Company or Parent, as the case may
be, and otherwise on terms which the Board of Directors of such party determines
in its good faith judgment (x) (based on the written opinion of a nationally
recognized financial advisor) to be more favorable from a financial point of
view to its shareholders than the Transactions and for which any required
financing is then committed and (y) to be more favorable to such party than the
Transactions after taking into account all constituencies (including
shareholders) and pertinent factors permitted under the Pennsylvania Law or
applicable Virginia law.
In addition to the obligations of the parties set forth in the two
immediately preceding paragraphs, the Merger Agreement provides that any party
that has received a Takeover Proposal must immediately advise the other orally
and in writing of any request for information or of any Takeover Proposal, the
material terms and conditions of such request or Takeover Proposal and the
identity of the person making such request or Takeover Proposal. Any party that
has received a Takeover Proposal is required to keep the other reasonably
informed of the status and details (including amendments or proposed amendments)
of any such request or Takeover Proposal.
The Merger Agreement provides that nothing contained in the provisions
described in this subsection prohibits Parent or the Company from taking and
disclosing to its shareholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or from making any disclosure to its
shareholders if, in the good faith judgment of its Board of Directors, based on
the advice of outside counsel, failure so to disclose would result in a
violation of applicable law. However, neither Parent nor the Company nor their
respective Board of Directors nor any committee thereof may, except as permitted
by the provisions of the Merger Agreement described in the second preceding
paragraph, withdraw or modify, or propose publicly to withdraw or modify, its
position with respect to either Offer or the matters to be considered at either
Company Shareholders Meeting or the Parent Shareholders Meeting, as applicable,
or approve or recommend, or propose publicly to approve or recommend, a Takeover
Proposal.
Reasonable Efforts; Regulatory Approval. Each of the parties to the Merger
Agreement has agreed to use all reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
Merger and the other transactions contemplated by the Merger Agreement and the
Option Agreements, including (i) the obtaining of all necessary actions or
nonactions, waivers, consents and approvals from third parties and Governmental
Entities (as defined in the Merger Agreement) and the making of all necessary
registrations and filings and the taking of all reasonable steps as may be
necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity, (ii) the defending of any lawsuits or
any other legal proceedings challenging the Merger Agreement or the Option
Agreements or the consummation of the transactions contemplated thereby, and
(iii) the execution and delivery of any additional instruments necessary to
consummate the transactions contemplated by, and to fully carry out the purposes
of, the Merger Agreement and the Option Agreements.
Pursuant to the Merger Agreement, each of the parties will make and cause
its respective subsidiaries to make all necessary filings, as soon as
practicable, including those required with the STB and applicable transportation
regulations and laws in order to facilitate prompt consummation of the Offers,
the Merger and the other transactions contemplated by the Merger Agreement and
by the Option Agreements; will use reasonable efforts to provide such
information and communications to Governmental Entities as may be reasonably
requested; and will provide to the other party copies of all applications made
pursuant to the foregoing, subject to the terms set forth in the Merger
Agreement.
The Company and Parent have agreed, and each has agreed to cause each of
its subsidiaries, to take all such actions as are necessary to (i) cooperate
with one another to prepare and present to the STB as soon as practicable all
filings and other presentations in connection with seeking any STB approval,
exemption or other authorization necessary to consummate the transactions
contemplated by the Merger Agreement and the Option Agreements, (ii) prosecute
such filings and other presentations with diligence, (iii) diligently oppose any
objections to, appeals from or petitions to reconsider or reopen any such STB
approval by persons not
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party to the Merger Agreement, and (iv) take all such further action as
reasonably may be necessary to obtain a final order or orders of the STB
approving such transactions consistent with the Merger Agreement and the Option
Agreements.
Anti-Takeover Laws. The Merger Agreement provides that the Company and
Parent will take all action necessary to ensure that no state anti-takeover
statute or similar statute or regulation is or becomes operative with respect to
either Offer, the Merger, the Merger Agreement, the Option Agreements or any of
the other transactions contemplated by the Merger Agreement or the Option
Agreements, and if any state anti-takeover statute or similar statute or
regulation becomes so operative, take all action necessary to ensure that each
Offer, the Merger and the other transactions contemplated by the Merger
Agreement and the Option Agreements may be consummated as promptly as
practicable.
Directors' and Officers' Insurance and Indemnification. Under the Merger
Agreement, Parent has agreed that all rights to indemnification and exculpation
from liabilities for acts or omissions occurring at or prior to the Effective
Time existing as of the date of the Merger Agreement in favor of the current or
former directors or officers of the Company and its subsidiaries, the existence
of which does not constitute a breach of the Merger Agreement, will be assumed
by the Surviving Corporation in the Merger as of the Effective Time and will
survive the Merger and continue in full force and effect in accordance with
their terms. The Merger Agreement also provides that, from and after the
Effective Time, directors and officers of the Company who become directors or
officers of Parent will be entitled to the same indemnity rights and protections
as are afforded to other directors and officers of Parent.
Pursuant to the Merger Agreement, in the event that Parent or any of its
successors or assigns consolidates with or merges into any other person and is
not the continuing or surviving corporation or entity of such consolidation or
merger or transfers or conveys all or substantially all of its properties and
assets to any person, then proper provision will be made so that the successors
and assigns of Parent assume the obligations under the Merger Agreement
described in this section.
The Company and Parent have agreed that, for three years after the
Effective Time, Parent is to provide, if available on commercially reasonable
terms, officers' and directors' liability insurance in respect of acts or
omissions occurring prior to the Effective Time, including the transactions
contemplated by the Merger Agreement, covering each person covered by the
Company's officers' and directors' liability insurance policy as of the date of
the Merger Agreement, or who becomes so covered before the Effective Time, on
terms with respect to coverage and amount no less favorable than those of such
policy in effect on the date of the Merger Agreement, provided that in
satisfying the foregoing obligation Parent is not required to pay premiums in
excess of 150% of the amount per annum the Company paid in its last full fiscal
year ending prior to the date of the Merger Agreement, and provided further that
Parent is nevertheless obligated to provide such coverage as may be obtained for
such amount.
Compensation and Benefits; Stock Options. The Merger Agreement provides
that, following the Effective Time, Parent will cause the Surviving Corporation
to honor all obligations under employment agreements, employee benefit plans,
programs, policies and arrangements of the Company or Parent the existence of
which does not constitute a violation of the Merger Agreement in accordance with
the terms thereof, and Parent will provide employees of the Company with
benefits no less favorable in the aggregate than those provided to similarly
situated Parent employees. For two years after the Effective Time, Parent or the
Surviving Corporation will provide severance and termination benefits to all
non-union employees of the Company and Parent terminated as a result of or in
connection with the Merger, which benefits shall be determined consistent with
industry standards and taking into account those benefits provided in recent
similar transactions in the industry.
The Merger Agreement also provides that, as soon as practicable following
the date thereof, the Board of Directors of the Company (or, if appropriate, any
administering committee) will take such action as may be required to (a) adjust
the terms of all outstanding employee stock options or other rights ("Company
Employee Stock Options") to purchase or receive Shares granted under the Company
employee stock plans set forth in the disclosure schedules to the Merger
Agreement (the "Company Stock Plans"), whether vested or unvested, as necessary
to provide that, at the Effective Time, each Company Employee Stock Option
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outstanding immediately prior to such time will be deemed to constitute an
option to acquire, on the same terms and conditions as were applicable under the
Company Employee Stock Option, the same number of shares of Parent Common Stock
as the holder of the Company Employee Stock Option would have been entitled to
receive pursuant to the Merger had that holder exercised the Company Employee
Stock Option in full immediately prior to the Effective Time, at a price per
share of Parent Common Stock equal to (A) the aggregate exercise price for the
Shares otherwise purchasable pursuant to the Company Employee Stock Option
divided by (B) the aggregate number of shares of Parent Common Stock deemed
purchasable pursuant to the Company Employee Stock Option (each, as so adjusted,
an "Adjusted Option"); except that in the case of any qualified stock option (as
defined in the Merger Agreement), the option price, the number of shares
purchasable pursuant to such option and the terms and conditions of exercise of
such option will be determined in order to comply with Section 424 of the Code;
and (b) make such other changes to the Company Stock Plans as the Company and
Parent may agree are appropriate to give effect to the Merger.
Pursuant to the Merger Agreement, Parent will deliver to the holders of
Company Employee Stock Options as soon as practicable after the Effective Time
appropriate notices setting forth the holders' rights under the respective
Company Stock Plans and the agreements evidencing the grants of the Company
Employee Stock Options. The notices will also state that the Company Employee
Stock Options and agreements will be assumed by Parent and will continue in
effect on the same terms and conditions (subject to the adjustments described in
the immediately preceding paragraph). Parent will comply with the terms of the
Company Stock Plans and ensure, to the extent required by, and subject to the
provisions of, such Company Stock Plans, that the Company Employee Stock Options
which qualified as qualified stock options prior to the Effective Time continue
to qualify as qualified stock options after the Effective Time.
Under the Merger Agreement, Parent has agreed to take such actions as are
reasonably necessary for the assumption of the Company Stock Plans described in
the first paragraph of this section, including the reservation, issuance and
listing of Parent Common Stock as is necessary to effectuate the transactions
contemplated therein. As soon as reasonably practicable after the Effective
Time, Parent will prepare and file with the SEC one or more registration
statements on Form S-8 or other appropriate form with respect to shares of
Parent Common Stock subject to Company Employee Stock Options issued under the
Company Stock Plans and will use all reasonable efforts to maintain the
effectiveness of a registration statement or registration statements covering
the Company Employee Stock Options (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as the Company
Employee Stock Options remain outstanding. With respect to those individuals, if
any, who subsequent to the Effective Time will be subject to the reporting
requirements under Section 16(a) of the Exchange Act, where applicable, Parent
has agreed to use all reasonable efforts to administer the Company Stock Plans
assumed pursuant to the Merger Agreement in a manner that complies with Rule
16b-3 promulgated under the Exchange Act to the extent the applicable Company
Stock Plan complied with such rule prior to the Merger.
Pursuant to the Merger Agreement, a holder of an Adjusted Option may
exercise that Adjusted Option in whole or in part in accordance with its terms
by delivering a properly executed notice of exercise to Parent, together with
the consideration therefor and the federal withholding tax information, if any,
required in accordance with the related Company Stock Plan.
Except as otherwise contemplated by the provisions of the Merger Agreement
described in this section or required by the terms of the Company Employee Stock
Options, all restrictions or limitations on transfer and vesting with respect to
Company Employee Stock Options awarded under the Company Stock Plans or any
other plan, program or arrangement of the Company or any of its subsidiaries, to
the extent that such restrictions or limitations shall not have already lapsed,
will remain in full force and effect with respect to those options after giving
effect to the Merger and the assumption by Parent as described above.
Tax-Free Reorganization. The Merger Agreement provides that neither the
Company nor Parent nor any affiliate thereof will take any action that would
cause the Merger not to qualify as a tax-free reorganization under Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code.
Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to Parent and Purchaser with
respect to, among other things, its organization,
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subsidiaries, qualification, authorization, capital structure, public filings,
employee benefit plans, defaults, information in the Proxy Statement and other
documents filed with the SEC in connection with the Transactions, compliance
with laws, consents and approvals, brokers' fees, undisclosed liabilities,
shareholder voting requirements and the absence of certain events. In the Merger
Agreement, Parent and Purchaser have made customary representations and
warranties to the Company with respect to, among other things, organization,
subsidiaries, authorization, capital structure, public filings, employee benefit
plans, information in the Proxy Statement, compliance with laws, consents and
approvals, brokers' fees, undisclosed liabilities, shareholder voting
requirements and the absence of certain events.
Conditions to the Merger. The respective obligations of the Company, on
the one hand, and Parent and Purchaser, on the other, to effect the Merger are
subject to the satisfaction or waiver on or prior to the Closing Date (as
defined in the Merger Agreement) of the following conditions: (a) each of the
Company Merger Approval and the Parent Shareholder Approval shall have been
obtained; (b) any applicable waiting period (and any extension thereof) under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act") shall have been terminated or shall have expired; (c) no judgment, order,
decree, statute, law, ordinance, rule, regulation, temporary restraining order,
preliminary or permanent injunction or other order enacted, entered,
promulgated, enforced or issued by any court of competent jurisdiction or other
Governmental Entity or other legal restraint or prohibition (collectively,
"Restraints") preventing the consummation of the Merger may be in effect,
provided the party asserting this condition shall have used reasonable efforts
to prevent the entry of any such Restraints and to appeal as promptly as
possible any such Restraints that may be entered, and there shall not be any
Restraint enacted, entered, enforced or promulgated that is reasonably likely to
result in a material adverse effect on the Company and Parent on a combined
basis; and (d) the shares of Parent Common Stock issuable to the Company's
shareholders pursuant to the Merger Agreement and under the Company Stock Plans
shall have been approved for listing on the NYSE, subject to official notice of
issuance.
The obligation of Parent to effect the Merger is further subject to
satisfaction or waiver of the following conditions: (a) the Company shall not
have breached or failed to observe or perform in any material respect any of its
covenants or agreements under the Merger Agreement to be performed by it at or
prior to the Closing Date (as defined in the Merger Agreement), and the
representations and warranties of the Company in the Merger Agreement shall be
true and accurate both when made and at and as of the Closing Date, as if made
at and as of such time (except to the extent expressly made as of an earlier
date, in which case as of such date), except where the failure of such
representations and warranties to be so true and correct (without giving effect
to any limitation as to "materiality" or "material adverse effect" set forth
therein), does not have, and is not likely to have, individually or in the
aggregate, a material adverse effect on the Company; (b) at any time after the
date of the Merger Agreement there will not have occurred any material adverse
change relating to the Company; (c) Purchaser shall have purchased the Shares in
the First Offer or, if not, Parent and Purchaser shall have obtained sufficient
financing, on terms reasonably acceptable to Parent, to enable consummation of
the Merger; (d) the STB will have issued a decision (which decision will not
have been stayed or enjoined) that (A) constitutes a final order approving,
exempting or otherwise authorizing consummation of the Merger and all other
material transactions contemplated by the Merger Agreement (or subsequently
presented to the STB by agreement of the Company and Parent) as may require such
authorization and (B) does not (1) change or disapprove of the consideration to
be given in the Merger or other material provisions of Article II of the Merger
Agreement or (2) impose on Parent, the Company or any of their respective
subsidiaries any other terms or conditions (including, without limitation, labor
protective provisions but excluding conditions heretofore imposed by the
Interstate Commerce Commission in New York Dock Railway -- Control -- Brooklyn
Eastern District, 360 I.C.C. 60 (1979)) that materially and adversely affect the
long-term benefits expected to be received by Parent from the transactions
contemplated by the Merger Agreement; and (e) all actions by or in respect of or
filings with any Governmental Entity required to permit the consummation of the
Merger (other than approval of the STB, which is addressed in clause (d) above)
will have been obtained, excluding any consent, approval, clearance or
confirmation the failure to obtain which would not have a material adverse
effect on Parent, the Company or, after the Effective Time, the Surviving
Corporation.
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The obligation of the Company to effect the Merger is further subject to
satisfaction or waiver of the following conditions: (a) Parent shall not have
breached or failed to observe or perform in any material respect any of its
covenants or agreements under the Merger Agreement to be performed by it at or
prior to the Closing Date, and the representations and warranties of Parent in
the Merger Agreement shall be true and accurate both when made and at and as of
the Closing Date, as if made at and as of such time (except to the extent
expressly made as of an earlier date, in which case as of such date), except
where the failure of such representations and warranties to be so true and
correct (without giving effect to any limitation as to "materiality" or
"material adverse effect" set forth therein), does not have, and is not likely
to have, individually or in the aggregate, a material adverse effect on Parent;
(b) at any time after the date of the Merger Agreement there will not have
occurred any material adverse change relating to Parent; (c) the STB will have
issued a decision (which decision will not have been stayed or enjoined) that
(i) constitutes a final order approving, exempting or otherwise authorizing
consummation of the Merger and all other material transactions contemplated
thereby or subsequently presented to the STB by agreement of Parent and the
Company as may require such authorization and (ii) does not change or disapprove
of the consideration to be given in the Merger or other material provisions of
Article II of the Merger Agreement.
Neither Parent nor the Company is permitted under the Merger Agreement to
rely on the failure of any condition described in the three immediately
preceding paragraphs, as the case may be, to be satisfied if such failure was
caused by such party's failure to use reasonable efforts to consummate the
Merger and the other transactions contemplated by the Merger Agreement, as
required by and subject to the provisions of the Merger Agreement described
under "-- Reasonable Efforts; Regulatory Approval."
Termination. The Merger Agreement may be terminated at any time prior to
the Effective Time, whether before or after the Pennsylvania Shareholder
Approval, the Company Merger Approval or the Parent Shareholder Approval, only
as provided below:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company: (i) if the Merger has not been
consummated by December 31, 1998; except that the right to terminate the
Merger Agreement pursuant to this provision will not be available to any
party whose failure to perform any of its obligations under the Merger
Agreement results in the failure of the Merger to be consummated by such
time; (ii) if, at a Company Merger Meeting duly convened therefor or at any
adjournment or postponement thereof, the Company Merger Approval is not
obtained, if such shareholders meeting is held after the earlier of (a) 270
days after the
date of the Original Merger Agreement or (b) the purchase of an aggregate
of 40% of the fully diluted Shares under the Offers; (iii) if, at a Parent
Shareholders Meeting duly convened therefor or at any adjournment or
postponement thereof, the Parent Shareholder Approval is not obtained, if
such shareholders meeting is held after the earlier of (a) 270 days after
the date of the Original Merger Agreement or (b) the purchase of an
aggregate of 40% of the fully diluted Shares under the Offers; or (iv) if
any Governmental Entity has issued a Restraint or taken any other action
permanently enjoining, restraining or otherwise prohibiting the
consummation of the Merger or any of the other transactions contemplated by
the Merger Agreement and such Restraint or other action has become final
and nonappealable; except that the party seeking to terminate the Merger
Agreement pursuant to this clause (iv) must have used all reasonable
efforts to prevent the entry of and to remove such Restraint or other
action;
(c) by Parent, if the Company has breached or failed to perform in any
material respect any of its representations, warranties, covenants or other
agreements contained in the Merger Agreement, which breach or failure to
perform (A) would constitute the failure of the condition to the Merger
described in clause (a) of the second paragraph under "-- Conditions to the
Merger," and (B) cannot be or has not been cured within 30 days after the
giving of written notice to the Company of such breach (as long as Parent
is not then in material breach of any representation, warranty, covenant or
other agreement contained in the Merger Agreement and provided that, if
such breach is curable through the exercise of the Company's best efforts,
the Merger Agreement may not be terminated for so long as the Company is
using its best efforts to cure such breach);
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(d) by Parent in accordance with the terms of the Merger Agreement
described under "-- No Solicitation," as long as Parent has complied with
all such terms, including the notice provisions therein, and as long as
Parent complies with applicable requirements of the terms of the Merger
Agreement described under "-- Certain Fees and Expenses;"
(e) by Parent, if (i) the Board of Directors of the Company or, if
applicable, any committee thereof, has withdrawn or modified in a manner
adverse to Parent its approval or recommendation of either Offer or the
Merger or the matters to be considered at the Company Shareholders Meetings
or failed to reconfirm its recommendation within 15 business days after a
written request to do so, or approved or recommended any Takeover Proposal
in respect of the Company or (ii) the Board of Directors of the Company or
any committee thereof has resolved to take any of the foregoing actions;
(f) by Parent, if the Company or any of its officers, directors,
employees, representatives or agents take any of the actions that would be
proscribed by the terms of the Merger Agreement described under "-- No
Solicitation" but for the exceptions therein allowing certain actions to be
taken pursuant to the proviso in the first sentence of such section or the
second sentence of the second paragraph of such section;
(g) by the Company, if Parent has breached or failed to perform in any
material respect any of its representations, warranties, covenants or other
agreements contained in the Merger Agreement, which breach or failure to
perform (A) would constitute the failure of a condition to the Merger, as
described under "-- Conditions to the Merger," and (B) cannot be or has not
been cured within 30 days after the giving of written notice to Parent of
such breach (as long as the Company is not then in material breach of any
representation, warranty, covenant or other agreement contained in the
Merger Agreement and provided that, if such breach is curable through the
exercise of Parent's best efforts, the Merger Agreement may not be
terminated pursuant to this provision of the Merger Agreement for so long
as Parent is so using its best efforts to cure such breach);
(h) by the Company in accordance with the provisions of the Merger
Agreement described in the second paragraph under "-- No Solicitation," as
long as the Company has complied with all such provisions, including the
notice provisions therein, and complies with applicable requirements of the
provisions of the Merger Agreement described under "-- Certain Fees and
Expenses";
(i) by the Company, if (i) the Board of Directors of Parent or, if
applicable, any committee thereof has withdrawn or modified in a manner
adverse to the Company its approval or recommendation of the matters to be
considered at the Parent Shareholders Meeting, or failed to reconfirm its
recommendation within 15 business days after a written request to do so, or
approved or recommended any Takeover Proposal in respect of Parent or (ii)
the Board of Directors of Parent or any committee thereof has resolved to
take any of the foregoing actions; or
(j) by the Company, if Parent or any of its officers, directors,
employees, representatives or agents takes any of the actions that would be
proscribed by the terms of the Merger Agreement described under "-- No
Solicitation" but for the exceptions therein allowing certain actions to be
taken pursuant to the proviso in the first sentence of such section or the
second sentence of the second paragraph of such section.
Certain Fees and Expenses. The Merger Agreement provides that, in the
event that (i) a Takeover Proposal in respect of the Company shall have been
made known to the Company or any of its subsidiaries or has been made directly
to its shareholders generally or any person shall have publicly announced an
intention (whether or not conditional) to make such a Takeover Proposal and
thereafter the Merger Agreement is terminated by either Parent or the Company
pursuant to clauses (i) or (ii) of paragraph (b) under "-- Termination," or (ii)
the Merger Agreement is terminated (x) by the Company pursuant toparagraph (h)
under "-- Termination," or (y) by Parent pursuant to paragraph (e) under "--
Termination," then the Company is required to promptly, but in no event later
than two days after the date of the termination, pay Parent a fee equal to $300
million (the "Termination Fee") (except that no Termination Fee will be payable
pursuant to clause (i) of this sentence unless and until within 24 months of
such termination
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the Company or any of its subsidiaries enters into an Acquisition Agreement or
consummates a Takeover Proposal). The Company has agreed that, if it fails
promptly to pay the amount due pursuant to the foregoing provision, and, in
order to obtain such payment, Parent commences a suit which results in a
judgment against the Company for such fee, the Company will pay to Parent its
costs and expenses (including attorneys' fees and expenses) in connection with
such suit, together with interest on the amount of the fee.
The Merger Agreement also provides that, in the event that (i) a Takeover
Proposal in respect of Parent shall have been made known to Parent or any of its
subsidiaries or has been made directly to its shareholders generally or any
person shall have publicly announced an intention (whether or not conditional)
to make such a Takeover Proposal and thereafter the Merger Agreement is
terminated by either Parent or the Company pursuant to clause (i) or (iii) of
paragraph (b) under "-- Termination," or (ii) the Merger Agreement is terminated
(x) by Parent pursuant to paragraph (d) under "-- Termination" or (y) by the
Company pursuant to paragraph (i) under "-- Termination," Parent is required to
promptly, but in no event later than two days after the date of the termination,
pay the Company the Termination Fee (except that no Termination Fee shall be
payable pursuant to clause (i) of this sentence unless and until within 24
months of such termination Parent or any of its subsidiaries enters into an
Acquisition Agreement or consummates a Takeover Proposal). If Parent fails
promptly to pay the amount due pursuant to the foregoing provision, and, in
order to obtain such payment, the Company commences a suit which results in a
judgment against Parent for the fee set forth in the foregoing provision, Parent
is required to pay to the Company its costs and expenses (including attorneys'
fees and expenses) in connection with such suit, together with interest on the
amount of the fee.
Parent or Purchaser will pay any sales, transfer or similar tax arising as
a result of the consummation of the Transactions and imposed on shareholders of
the Company.
Amendment. The Merger Agreement may be amended by the parties, by an
instrument in writing signed on behalf of each party, at any time before or
after the Pennsylvania Shareholder Approval, the Company Merger Approval or the
Parent Shareholder Approval. However, after any such approval, the Merger
Agreement does not permit the parties to make any amendment that by law requires
further approval by the shareholders of the Company or Parent without the
further approval of such shareholders.
Registration Rights. Under the terms of the Merger Agreement, the Company
or Parent, as applicable (the "issuing party") will, if requested by the other
party to the Merger Agreement (the "requesting party") within three years after
the termination of the Merger Agreement, as expeditiously as possible prepare
and file up to three registration statements under the Securities Act if
necessary to permit the sale or other disposition of any or all securities
deposited in the Voting Trust, in the case of Parent, or acquired through
exercise of the Parent Stock Option Agreement, in the case of the Company, in
accordance with the intended method of sale or other disposition stated by the
requesting party. The issuing party will also use its best efforts to qualify
such securities under applicable state securities laws and will take certain
steps to cause any sale or other disposition pursuant to such registration
statement to be effected on a widely distributed basis. The issuing party will
use reasonable efforts to cause each such registration statement to become
effective, to obtain any or all required consents or waivers, and to keep such
registration statement effective for such period not in excess of 180 calendar
days as is reasonably necessary to effect such sale or other disposition. The
foregoing obligations of the issuing party may be suspended for certain limited
periods if the Board of Directors of the issuing party determines that carrying
out such obligations during such periods would require disclosure of nonpublic
information that would materially and adversely affect the issuing party. The
Merger Agreement provides that if the issuing party effects a registration under
the Securities Act of the issuing party's securities for its own account or for
any of its shareholders, then with certain exceptions the other party to the
Merger Agreement will have the right to participate in such registration without
affecting the obligation of the issuing party to effect demand registrations for
the requesting party as described above, subject to certain reductions if the
managing underwriters of such registration advise the issuing party that the
number of securities requested to be included in such offering exceed the number
that can be sold.
Listing. Parent has agreed to use reasonable efforts to cause the shares
of Parent Common Stock to be issued in the Merger, under the Company Stock Plans
and pursuant to the Parent Stock Option Agreement,
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and the Company has agreed to use reasonable efforts to cause Shares to be
issued pursuant to the Company Stock Option Agreement, to be approved for
listing on the NYSE prior to the Closing Date.
Rights Agreements. The Merger Agreement provides that the Board of
Directors of the Company will take all further action, if any, reasonably
requested in writing by Parent (including redeeming the Rights immediately prior
to the Effective Time or amending the Rights Agreement) in order to render the
Rights inapplicable to the transactions contemplated by the Merger Agreement and
the Company Stock Option Agreement. Except for the foregoing, the Board of
Directors of the Company will not amend or take any action with respect to the
Rights Agreement, including a redemption of the Rights or any action to
facilitate a Takeover Proposal in respect of the Company.
The Merger Agreement provides that the Board of Directors of Parent will
take all further action, if any, reasonably requested in writing by the Company
in order to render the Parent Rights inapplicable to the Parent Stock Option
Agreement. The Board of Directors of Parent will not otherwise amend or take any
action with respect to the Parent Rights Agreement to facilitate a Takeover
Proposal in respect of Parent.
DISSENTERS' RIGHTS
Shareholders who sell shares in the Second Offer will not be entitled to
exercise any dissenters' rights with respect to such Shares but, rather, will
receive the Second Offer Price.
Dissenters' rights cannot be exercised at this time. Shareholders who will
be entitled to dissenters' rights, if any, in connection with the Merger (or
similar business combination) will receive additional information concerning any
available dissenters' rights and the procedures to be followed in connection
therewith before such shareholders have to take any action relating thereto.
In accordance with the United States Supreme Court decision, Schwabacher v.
United States, 334 U.S. 182 (1948), shareholders of the Company will not have
any dissenters' rights in connection with the Merger under state law, unless the
STB or a court of competent jurisdiction determines that state-law dissenters'
rights are available to holders of Shares. Parent considers it unlikely that the
STB or a court will determine that state-law dissenters' rights are available to
holders of Shares. As part of the approval of the Merger, Parent and the Company
intend to seek a determination of the STB that the terms of the Merger are just
and reasonable. It is Parent's and the Company's understanding that upon the
issuance of such a determination, dissenters' rights under state law will be
preempted. Shareholders of the Company will have an opportunity to participate
in this STB proceeding.
If dissenters' rights are available to holders of Shares, such rights will
be provided in accordance with Section 1571 et seq. of the Pennsylvania Law.
Under such Section, holders of Common Shares will not be entitled to dissenters'
rights in connection with the Merger.
OPTION AGREEMENTS
Concurrently with the Merger Agreement, the parties have entered into the
Option Agreements, granting each other the right to purchase certain shares of
their common stock under certain circumstances.
Pursuant to the Company Stock Option Agreement, the Company granted Parent
an option to purchase 15,955,477 Common Shares at a price of $92.50 per share,
subject to adjustment for changes in the Company's capitalization as described
in the Company Stock Option Agreement (the "Purchase Price"), payable in cash.
Such option becomes exercisable, in whole but not in part, after the first to
occur of (i) any event which entitles Parent to receive the Termination Fee and
(ii) the consummation of the First Offer (the first such occurrence being a
"Purchase Event"); thus, such option has become exercisable. The option
terminates upon the first to occur of (i) the Effective Date, (ii) 18 months
after the first occurrence of a Purchase Event, and (iii) the termination of the
Merger Agreement (unless Parent is entitled to the Termination Fee, in which
case the option shall not terminate until the later of (a) six months following
the time the Termination Fee becomes payable and (b) the expiration of the
period in which Parent has the right to receive the Termination Fee). Any Common
Shares purchased under the Company Stock Option Agreement will be deposited into
the Voting Trust.
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If, during the time that the option under the Company Stock Option
Agreement is exercisable, the Company enters into an agreement pursuant to which
all outstanding Common Shares are to be purchased for or converted into, in
whole or in part, cash (other than in respect of fractional shares), then such
agreement will make proper provision so that, upon consummation of the
transaction (which will be the date of acceptance for payment in the case of a
transaction involving a tender offer), in exchange for cancellation of the
option, Parent shall receive an amount in cash equal to the difference (if
positive) between the closing market price per Common Share on the day
immediately prior to the consummation of such transaction and the Purchase
Price. In the event (i) the Company enters into an agreement to consolidate
with, merge into, or sell substantially all of the Company's assets to any
person, other than Parent, Purchaser or a direct or indirect subsidiary thereof,
and the Company is not the surviving corporation, or (ii) the Company allows any
person, other than Parent, Purchaser or a direct or indirect subsidiary thereof,
to merge into or consolidate with the Company in a series of transactions in
which the Common Shares or other securities of the Company represent less than
50% of the outstanding voting securities of the merged corporation, then such
agreement will make proper provision so that the option will be adjusted,
exchanged, or converted into an option with identical terms as those described
in the Company Stock Option Agreement, appropriately adjusted for such
transaction. Parent may require the Company to register Common Shares purchased
under the option pursuant to the Securities Act of 1933 on the terms set forth
in the Merger Agreement. The Common Shares purchased under the option may not be
transferred or otherwise disposed of except as provided in the Voting Trust
Agreement.
Pursuant to the Parent Stock Option Agreement, Parent granted the Company
an option to purchase 43,090,773 shares of Parent Common Stock, at a price of
$64.82 per share, subject to adjustments substantially the same as those in the
Company Stock Option Agreement. Such option becomes exercisable, in whole but
not in part, after any event which entitles the Company to receive the
Termination Fee (a "Purchase Event"). The option terminates upon the earlier of
(i) the Merger, (ii) 18 months after the first occurrence of a Purchase Event,
and (iii) the termination of the Merger Agreement (unless the Company is
entitled to a Termination Fee, in which case the option shall not terminate
until the later of (a) six months following the time such Termination Fee
becomes payable and (b) the expiration of the period in which the Company has
the right to receive a Termination Fee). Any purchase of shares of Parent Common
Stock under the Parent Stock Option Agreement is subject to the conditions set
forth therein, and any Parent Common Stock so purchased will be delivered
immediately to the trustee of the applicable voting trust. The Parent Stock
Option Agreement also provides for adjustments for certain business combinations
on substantially the same terms as those of the Company Stock Option Agreement.
The foregoing description of the Merger Agreement and the Option Agreements
is qualified in its entirety by reference to the texts of such Agreements,
copies of which have been filed by Parent as exhibits to the Schedule 14D-1
filed by Parent with the SEC.
VOTING TRUST AGREEMENT
Pursuant to the Voting Trust Agreement, the Voting Trustee will agree to
act as trustee in respect of the Voting Trust. In such capacity, the Voting
Trustee will vote all Shares (the "Trust Stock") acquired by Purchaser in the
Offers, pursuant to the Company Stock Option Agreement or otherwise to approve
the Merger, in favor of any proposal necessary to effectuate Parent's
acquisition of the Company pursuant to the Merger Agreement, and, so long as the
Merger Agreement is in effect (subject to certain exceptions), against any other
proposed merger, business combination or similar transaction involving the
Company. On other matters (including the election or removal of directors), the
Voting Trustee will vote the Trust Stock in the same proportion as all other
Shares are voted with respect to such matters.
Pending the termination of the Voting Trust, the Voting Trustee will pay
over to Purchaser all cash dividends and cash distributions paid on the Trust
Stock.
The Voting Trust Agreement provides that Parent at any time may not sell or
make any other disposition of the whole or any part of the Trust Stock, whether
or not the Merger or a similar transaction has been approved by the STB or is
otherwise permitted, unless and until the Merger Agreement has been terminated
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or as otherwise consented to by the Company. The Voting Trustee shall take all
actions reasonably requested by the Parent with respect to any proposed sale or
other disposition of the whole or any part of the Trust Stock by Purchaser or
Parent, including in connection with the exercise by Parent of any rights under
the Merger Agreement, provided that such disposition of the Trust Stock must be
made pursuant to one or more broadly distributed public offerings and subject to
all necessary regulatory approvals, if any, or as otherwise directed by Parent
with the prior written consent of the Company.
The Voting Trust Agreement also provides that, in the event the STB
approves or exempts the Merger or a similar transaction, or in the event that
the law is amended to allow Purchaser, Parent or their affiliates to acquire
control of the Company without obtaining STB or other governmental approval (and
upon delivery of an opinion of independent counsel that no order of the STB or
other governmental authority is required), the Voting Trustee, with the prior
written consent of the Company, will either transfer the Trust Stock to the
Purchaser, or if shareholder approval has not previously been obtained, vote the
Trust Stock in favor of the Merger.
The Voting Trust Agreement provides that, in the event that the Merger
Agreement terminates in accordance with its terms, Parent will use its best
efforts to sell the Trust Stock in the manner described above during the
succeeding two-year period. Any such disposition shall be subject to any
jurisdiction of the STB to oversee Parent's divestiture of Trust Stock. In
connection with such an event, the Voting Trustee would continue to perform its
duties under the Voting Trust Agreement and, if Parent fails to so sell or
distribute the Trust Stock, the Voting Trustee will as soon as practicable sell
the Trust Stock for cash to one or more eligible purchasers in the manner
described above for such price as the Voting Trustee in its discretion shall
deem reasonable after consultation with Parent. An "eligible purchaser" is a
person or entity not affiliated with Parent and that has all necessary
regulatory authority, if any, to purchase the Trust Stock. Pursuant to the
Voting Trust Agreement, Parent will agree to cooperate with the Voting Trustee
in so disposing of the Trust Stock and the Voting Trustee has agreed to act in
accordance with any direction made by Parent as to any specific terms or method
of disposition, to the extent not inconsistent with any of the terms of the
Voting Trust Agreement and with the requirements of the terms of any STB or
court order. The proceeds of the sale would be distributed to Parent.
The Voting Trust Agreement provides that the Voting Trustee shall receive
reasonable and customary compensation and indemnification from Parent and
Purchaser.
Pursuant to the Merger Agreement, the Voting Trust may not be modified or
amended without the prior written approval of the Company, which is an express
third party beneficiary of the Voting Trust Agreement, unless such modification
or amendment is not inconsistent with the Merger Agreement or the Option
Agreements and is not adverse to the Company or its shareholders (and Parent and
the Company have agreed in the Merger Agreement that any change to the terms of
the Voting Trust Agreement relating to voting rights or rights and restrictions
relating to the transfer of Trust Stock shall in any event require the prior
approval of the Company), and no power of Parent or Purchaser provided for in
the Voting Trust Agreement may be exercised so as to violate the Merger
Agreement.
Parent has requested the staff of the STB to render an informal written
opinion that the use of the Voting Trust is consistent with the policies of the
STB; and the staff of the STB has done so. See Section 16.
EMPLOYMENT AGREEMENTS
Snow Employment Agreement. Parent and John W. Snow have entered into an
employment agreement, dated as of October 14, 1996 (the "Snow Employment
Agreement"), which will be effective for a five-year period beginning at the
Effective Time (the "Employment Period"). The Snow Employment Agreement provides
that Mr. Snow will serve as Chairman of the Board and Chief Executive Officer of
Parent for two years following the Merger (the "First Employment Segment"); as
Chairman of the Board during the subsequent two years (the "Second Employment
Segment"); and as Chairman Emeritus during the following year (the "Third
Employment Segment"). The Employment Agreement further provides that during the
First Employment Segment Mr. Snow will receive base compensation at least equal
to the base compensation he received in the year prior to the Merger, and that
during the Second and Third Employment Segments Mr.
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Snow will receive base compensation in an amount no less than that received by
the Chief Executive Officer of Parent during the Second Employment Segment.
If, during the Employment Period, Parent terminates Mr. Snow's employment
for a reason other than Cause or Disability (each as defined in the Snow
Employment Agreement), or Mr. Snow terminates employment for Good Reason (as
defined in the Snow Employment Agreement), Mr. Snow will be entitled to the
following:
(1) a lump-sum payment aggregating (a) accrued obligations to Mr. Snow,
such as unpaid or deferred compensation, (b) the greater of (i) the
amount Mr. Snow would receive in compensation (including bonus) during
the remainder of the Employment Period and (ii) the amount equal to
three times Mr. Snow's most recent annual compensation (including
bonus), and (c) an amount equal to the excess of (i) the actuarial
equivalent of the benefit under Parent's retirement plans which Mr.
Snow would receive assuming he continued employment with Parent for the
longer of three years and the time remaining in the Employment Period
over (ii) the actuarial equivalent of Mr. Snow's actual benefit under
Parent's retirement plans;
(2) a payment in an amount such that after the payment of all income and
excise taxes, Mr. Snow will be in the same after-tax position as if no
excise tax under Section 4999 of the Code had been imposed;
(3) continued employee welfare benefits for the longer of three years and
the number of years remaining in the Employment Period; and
(4) the immediate vesting of outstanding stock-based awards.
The Snow Employment Agreement provides that the Merger will not constitute
a Change of Control for the purpose of the Severance Agreement between Mr. Snow
and Parent, dated as of February 1, 1995.
LeVan Employment Agreement. Parent, the Company, and David M. LeVan have
entered into an employment agreement, dated as of October 14, 1996 (the "LeVan
Employment Agreement"), which will be effective for a period equal to the
Employment Period. The LeVan Employment Agreement provides that Mr. LeVan will
serve as Chief Operating Officer and President of Parent, and as Chief Executive
Officer and President of the railroad businesses of the Company and Parent, from
the Effective Time until the second anniversary of such date or, if earlier, the
termination of Mr. Snow's employment or of his status as Chief Executive Officer
of Parent (the "First Employment Segment"). Additionally, Mr. LeVan will serve
as Chief Executive Officer of Parent during the period beginning immediately
after the First Employment Segment and ending on the fourth anniversary of the
Effective Time or, if earlier, upon the termination of Mr. Snow's employment or
of his status as Chairman of the Board (the "Second Employment Segment"). During
the period commencing immediately after the Second Employment Segment, or, if
earlier, upon the termination of Mr. Snow's status as Chairman of the Board (the
"Third Employment Segment"), Mr. LeVan will additionally serve as Chairman of
the Board of Parent. The LeVan Employment Agreement further provides that during
the First Employment Segment Mr. LeVan shall receive annual base compensation at
least equal to 90% of the amount received by the Chief Executive Officer of
Parent, but not less than $810,000, and bonus and other incentive compensation
at least equal to 90% of the amount received by the Chief Executive Officer of
Parent, and that during the Second and Third Employment Segments Mr. LeVan will
receive compensation in an amount no less than that received by the Chief
Executive Officer during the First Employment Segment, but not less than
$900,000.
If, during the Employment Period, Parent terminates Mr. LeVan's employment
for a reason other than Cause or Disability (each as defined in the LeVan
Employment Agreement), or Mr. LeVan terminates employment for Good Reason (as
defined in the LeVan Employment Agreement), Mr. LeVan will be entitled to the
following:
(1) a lump-sum payment aggregating (a) accrued obligations to Mr. LeVan,
such as unpaid or deferred compensation, (b) the greater of (i) the
amount Mr. LeVan would have received in compensation (including bonus)
during the remainder of the Employment Period, assuming an annual base
salary
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and bonus during the Second Employment Segment and Third Employment
Segment equal to the greater of Mr. LeVan's base salary and bonus and
that of Mr. Snow during the First Employment Segment and (ii) the
amount equal to three times Mr. LeVan's most recent annual compensation
(including bonus), and (c) an amount equal to the excess of (i) the
actuarial equivalent of the benefit under Parent's retirement plans
which Mr. LeVan would receive assuming he continued employment with
Parent for the longer of three years and the time remaining in the
Employment Period over (ii) the actuarial equivalent of Mr. LeVan's
actual benefit under Parent's retirement plans;
(2) a payment in an amount such that after the payment of all income and
excise taxes, Mr. LeVan will be in the same after-tax position as if no
excise tax under Section 4999 of the Code had been imposed;
(3) continued employee welfare benefits for the longer of three years and
the number of years remaining in the Employment Period; and
(4) the immediate vesting of outstanding stock-based awards.
The Employment Agreement provides that it supersedes, at the Effective
Time, the severance agreement between Mr. LeVan and the Company, dated as of
August 1, 1995.
14. DIVIDENDS AND DISTRIBUTIONS. If, on or after December 6, 1996, the
Company should (i) split, combine or otherwise change the Shares or its
capitalization, (ii) issue or sell any additional securities of the Company or
otherwise cause an increase in the number of outstanding securities of the
Company or (iii) acquire currently outstanding Shares or otherwise cause a
reduction in the number of outstanding Shares, then, without prejudice to
Purchaser's rights under Sections 1 and 15, Purchaser, in its sole discretion,
may make such adjustments as it deems appropriate in the purchase price and
other terms of the Second Offer and the Merger, including, without limitation,
the amount and type of securities offered to be purchased.
If, on or after December 6, 1996, the Company should declare or pay any
dividend on the Shares, other than regular quarterly dividends, or make any
distribution (including, without limitation, the issuance of additional Shares
pursuant to a stock dividend or stock split, the issuance of other securities or
the issuance of rights for the purchase of any securities) with respect to the
Shares that is payable or distributable to shareholders of record on a date
prior to the transfer to the name of Purchaser or its nominee or transferee on
the Company's stock transfer records of the Shares purchased pursuant to the
Second Offer, then, without prejudice to Purchaser's rights under Sections 1 and
15, (i) the purchase price per Share payable by Purchaser pursuant to the Second
Offer will be reduced by the amount of any such cash dividend or cash
distribution and (ii) any such non-cash dividend, distribution or right to be
received by the tendering shareholders will be received and held by such
tendering shareholders for the account of Purchaser and will be required to be
promptly remitted and transferred by each such tendering shareholder to the
Depositary for the account of Purchaser, accompanied by appropriate
documentation of transfer. Pending such remittance and subject to applicable
law, Purchaser will be entitled to all rights and privileges as owner of any
such non-cash dividend, distribution or right and may withhold the entire
purchase price or deduct from the purchase price the amount of value thereof, as
determined by Purchaser in its sole discretion.
The Company has agreed in the Merger Agreement that it will not pay any
dividends, other than regular quarterly dividends, on its capital stock,
including the Shares, prior to the Effective Time without the consent of Parent.
The Company has also agreed that, without the consent of Parent, it will not (a)
take certain actions that would change the number of shares of its capital stock
outstanding or result in the reclassification of any of its capital stock, or
(b) purchase, retire or otherwise acquire any shares of its capital stock, or
(c) issue, pledge or otherwise encumber its capital stock or any securities
convertible into or representing the right to acquire its capital stock, with
certain exceptions set forth in the Merger Agreement. See "Merger Agreement;
Other Agreements -- Merger Agreement -- Interim Operations of the Company and
Parent."
15. CONDITIONS OF THE SECOND OFFER. Notwithstanding any other provisions
of the Second Offer, and in addition to (and not in limitation of) Purchaser's
rights to extend and amend the Second Offer at
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any time, in its sole discretion (subject to the provisions of the Merger
Agreement), Purchaser shall not be required to accept for payment or, subject to
any applicable rules and regulations of the SEC, including Rule 14e-1(c) under
the Exchange Act (relating to Purchaser's obligation to pay for or return
tendered Shares promptly after termination or withdrawal of the Second Offer),
pay for, and may delay the acceptance for payment of or, subject to the
restriction referred to above, the payment for, any tendered Shares, and may
terminate the Second Offer as to any Shares not then paid for, if, prior to the
expiration of the Second Offer, (1) Purchaser is not satisfied, in its
reasonable judgment, that the Pennsylvania Control Transaction Law is
inapplicable to the Company or (2) at any time on or after December 6, 1996 and
prior to the acceptance for payment of Shares, any of the following events shall
occur (defined terms used below shall have the meanings ascribed in the Merger
Agreement):
(a) there shall be instituted or pending any action or proceeding by any
government or governmental authority or agency, domestic or foreign,
(i) challenging or seeking to make illegal, to delay materially or
otherwise directly or indirectly to restrain or prohibit the making of
the Second Offer, the acceptance for payment of or payment for some of
or all the Shares by Parent or Purchaser or the consummation by Parent
or Purchaser of the Merger, seeking to obtain material damages relating
to the Merger Agreement, the Option Agreements or any of the
transactions contemplated thereby or otherwise seeking to prohibit
directly or indirectly the transactions contemplated by the Second
Offer or the Merger Agreement, or challenging or seeking to make
illegal the transactions contemplated by the Option Agreements or
otherwise directly or indirectly to restrain, prohibit or delay the
transactions contemplated by the Option Agreements, (ii) except for the
Voting Trust, seeking to restrain, prohibit or delay Parent's,
Purchaser's or any of their subsidiaries' ownership or operation of all
or any material portion of the business or assets of the Company and
its subsidiaries, taken as a whole, or to compel Parent or any of its
subsidiaries to dispose of or hold separate all or any material portion
of the business or assets of the Company and its subsidiaries, taken as
a whole, (iii) except for the Voting Trust, seeking to impose or
confirm material limitations on the ability of Parent, Purchaser or any
of their subsidiaries or affiliates effectively to exercise full rights
of ownership of the Common Shares, including, without limitation, the
right to vote any Common Shares acquired or owned by Parent, Purchaser
or any of their subsidiaries on all matters properly presented to the
Company's shareholders, or (iv) seeking to require divestiture by
Parent or Purchaser or any of their subsidiaries of any Common Shares,
in the case of any of (i) through (iv) above, which actions or
proceedings are reasonably likely to have a material adverse effect on
Parent; or
(b) there shall be any action taken, or any statute, rule, regulation,
injunction, order or decree enacted, enforced, promulgated, issued or
deemed applicable to the transactions contemplated by the Second Offer
or the Merger Agreement, by or before any court, government or
governmental authority or agency, domestic or foreign, that, directly
or indirectly, results in any of the consequences referred to in
paragraph (a) above; or
(c) the Board of Directors of the Company shall have withdrawn, modified or
changed in a manner adverse to Parent or Purchaser its approval or
recommendation of the Second Offer or the matters to be considered at
the Company Shareholders Meetings or shall have recommended a Takeover
Proposal or other business combination, or the Company shall have
entered into an agreement in principle (or similar agreement) or
definitive agreement providing for a Takeover Proposal or other
business combination, with a person or entity other than Parent or
Purchaser (or the Board of Directors of the Company resolves to do any
of the foregoing); or
(d) the Company shall have breached or failed to observe or perform in any
material respect any of its covenants or agreements under the Merger
Agreement, or any of the representations and warranties of the Company
set forth in the Merger Agreement shall not be true and accurate both
when made and as of the date of consummation of the Second Offer, as if
made at and as of such time (except to the extent expressly made as of
an earlier date, in which case as of such date), except where the
breach or failure to observe or perform such covenants or agreements,
or the failure of such representations and warranties to be so true and
correct (without giving effect to any limitation as to
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"materiality" or "material adverse effect" set forth therein), does not
have, and is not likely to have, individually or in the aggregate, a
material adverse effect on the Company; or
(e) the Merger Agreement shall have been terminated in accordance with its
terms;
which, in the reasonable judgment of Parent or Purchaser in any such case, and
regardless of the circumstances (including any action or omission by Parent or
Purchaser not inconsistent with the terms of the Merger Agreement) giving rise
to any such condition, makes it inadvisable to proceed with such acceptance for
payment or payment.
The foregoing conditions are for the sole benefit of Parent and Purchaser
and may be asserted by Parent or Purchaser regardless of the circumstances
giving rise to any such condition (including any action or omission by Parent or
Purchaser not inconsistent with the terms of the Merger Agreement) or may be
waived by Parent or Purchaser in whole or in part at any time and from time to
time in their reasonable discretion. The failure by Parent or Purchaser at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right; the waiver of any such right with respect to particular facts and
other circumstances shall not be deemed a waiver with respect to any other facts
and circumstances; and each such right shall be deemed an ongoing right that may
be asserted at any time and from time to time.
16. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS.
General. Except as otherwise disclosed herein, based on representations
and warranties made by the Company in the Merger Agreement and a review of
publicly available information by the Company with the SEC, neither Purchaser
nor Parent is aware of (i) any license or regulatory permit that appears to be
material to the business of the Company and its subsidiaries, taken as a whole,
that might be adversely affected by the acquisition of Shares by Parent or
Purchaser pursuant to the Second Offer or the Merger, respectively, or (ii) any
approval or other action by any governmental, administrative or regulatory
agency or authority, domestic or foreign, that would be required for the
acquisition or ownership of Shares by Parent or Purchaser as contemplated
herein. Should any such approval or other action be required, Parent and
Purchaser currently contemplate that such approval or action would be sought.
While Purchaser does not currently intend to delay the acceptance for payment of
Shares tendered pursuant to the Second Offer pending the outcome of any such
matter, there can be no assurance that any such approval or action, if needed,
would be obtained or would be obtained without substantial conditions or that
adverse consequences might not result to the business of the Company, Purchaser
or Parent or that certain parts of the businesses of the Company, Purchaser or
Parent might not have to be disposed of in the event that such approvals were
not obtained or any other actions were not taken. Purchaser's obligation under
the Second Offer to accept for payment and pay for Shares is subject to certain
conditions. See Section 15.
Antitrust. Under the HSR Act and the rules promulgated thereunder by the
Federal Trade Commission (the "FTC"), certain acquisition transactions may not
be consummated unless certain information has been furnished to the Antitrust
Division of the U.S. Department of Justice (the "Antitrust Division") and the
FTC and certain waiting period requirements have been satisfied. Parent has
sought confirmation from the FTC that the acquisition of Shares by Parent
(including acquisitions pursuant to the Offers, the Company Stock Option
Agreement and the Merger) is exempt from the notice and waiting period
requirements of the HSR Act provided that information and documentary material
filed with the STB in connection with the seeking of STB approval of the
proposed acquisition are contemporaneously filed with the Antitrust Division and
the FTC, where, prior to the purchase by Purchaser of Shares and the placement
of those Shares in the Voting Trust, the STB staff has reviewed the Voting Trust
and provided an informal favorable written opinion with respect to it, and the
parties have filed with the STB a Notice of Intent to File Railroad Control
Application. On November 8, 1996, counsel for Parent received oral confirmation
from the FTC staff that, subject to such conditions, the acquisition of control
of the Company by Parent is exempt from the notice and waiting period
requirement of the HSR Act. Parent and the Company have complied and intend to
continue to comply with the requirements set forth above and, therefore, believe
that the acquisition by Parent of Shares pursuant to the Offers, the Merger, and
the Company Stock Option Agreement are exempt from the notice and waiting period
requirements of the HSR Act. If the STB approves the Merger and related
transactions, its approval will exempt the Merger from federal and state
antitrust laws.
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STB Matters; The Voting Trust. Certain activities of subsidiaries of the
Company are regulated by the STB. Provisions of subtitle IV, title 49 of the
United States Code ("Subtitle IV") require approval of, or the granting of an
exemption from approval by, the STB for the acquisition of control of two or
more carriers subject to the jurisdiction of the STB ("Carriers") by a person
that is not a Carrier and for the acquisition or control of a Carrier by a
person that is not a Carrier but that controls any number of Carriers. STB
approval or exemption is required for, among other things, Purchaser's
acquisition of control of the Company. Parent and Purchaser do not believe that
the grant of the Company Stock Option by the Company to the Purchaser, whether
or not Purchaser acquires Shares pursuant to the Second Offer, would give Parent
and its affiliates control of the Company. Parent and Purchaser do not believe
that either the STB or its predecessor has ruled on whether the grant of an
option can in any circumstance confer control of the issuer. There can be no
assurance, however, that the STB would not find that the grant of the Company
Stock Option would give Parent and its affiliates control of the Company. Parent
and Purchaser do not believe that ownership by Purchaser of the Shares to be
purchased pursuant to the Second Offer or the Company Stock Option Agreement
would give Parent and its affiliates control of the Company and its affiliates.
Nonetheless, Purchaser intends, simultaneous with the purchase of the Shares
pursuant to the Second Offer and the Company Stock Option Agreement, to deposit
the Shares so purchased in the Voting Trust in order to ensure that Parent and
its affiliates do not acquire and directly or indirectly exercise control over
the Company and its affiliates prior to obtaining necessary STB approvals or
exemptions. STB approval of the Merger is not a condition to the Second Offer.
On November 1, 1996, counsel for Parent received an informal written opinion
from the staff of the STB that the Voting Trust would effectively insulate
Parent and its affiliates from a violation of the governing statute and STB
policy that would result from an unauthorized acquisition by Parent of a
sufficient interest in the Company to result in control of the Company.
It is possible that the U.S. Department of Justice or railroad competitors
of Parent and the Company, or others, may argue that Parent and Purchaser should
not be permitted to use the voting trust mechanism to acquire Shares prior to
final STB approval of the acquisition of control of the Company. Parent and
Purchaser believe it is unlikely that such arguments would prevail, but there
can be no assurance in this regard, nor can there be any assurance that if such
arguments are made, it will not cause the STB staff to rescind their opinion
regarding the Voting Trust Agreement.
The Voting Trustee is required under the terms of the Voting Trust
Agreement to vote all Shares deposited in the Voting Trust (the "Trust Stock")
in favor of the Merger, in favor of any proposal necessary or desirable to
effectuate Parent's combination with the Company pursuant to the Merger
Agreement, and, if there shall be with respect to the Board of Directors of the
Company an "Election Contest" as defined in the proxy rules of the SEC in which
one slate of nominees shall support the effectuation of the Merger and another
slate oppose it, to vote in favor of the slate supporting the effectuation of
the Merger. In addition, for so long as the Merger Agreement is in effect,
subject to certain exceptions, the Voting Trustee shall vote against any other
proposed merger, business combination or similar transaction involving the
Company, but not Parent or one of its affiliates. On certain other matters, the
Voting Trustee is to vote the Trust Stock in the same proportion as all other
Shares are voted with respect to such matters.
Pending the termination of the Voting Trust, the Voting Trustee will pay
over to Purchaser all cash dividends and cash distributions paid on the Trust
Stock.
The Voting Trustee has agreed to take all actions reasonably requested by
Parent with respect to any proposed sale or disposition of the Trust Stock by
Parent or Purchaser, including, without limitation, in connection with the
exercise of registration rights under the Merger Agreement. Upon (i) approval or
exemption by the STB of the Merger or the acquisition of control of the Company
by Parent or its affiliates or (ii) if the law is amended, delivery to the
Voting Trustee of an opinion of independent legal counsel that no STB or other
governmental approval is required, the Voting Trustee shall either transfer the
Trust Stock to Parent or Purchaser or, if stockholder approval of the Merger has
not previously been obtained, vote the Trust Stock in favor of the Merger.
In the event the Merger Agreement is terminated in accordance with its
terms, Parent has agreed to use its best efforts to sell or distribute the Trust
Stock in one or more broadly distributed public offerings subject to
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all necessary regulatory approvals or as otherwise directed by Parent with the
prior written consent of the Company within two years or such extension of that
period as the STB shall approve and the Company shall reasonably approve. Such
disposition shall be subject to any jurisdiction of the STB to oversee Parent's
divestiture of the Trust Stock. The Voting Trustee shall continue to perform its
duties under the Voting Trust Agreement and, should Parent be unsuccessful in
its efforts to sell or distribute the Trust Stock during the two-year period,
the Voting Trustee shall as soon as practicable sell the Trust Stock for cash to
eligible purchasers in such manner and for such price as the Voting Trustee in
its discretion shall deem reasonable after consultation with Parent. (An
"eligible purchaser" thereunder shall be a person or entity that is not
affiliated with Parent and which has all necessary regulatory authority, if any,
to purchase the Trust Stock.) The Voting Trust Agreement further provides that
Parent will cooperate with the Voting Trustee in effecting such disposition and
that the Voting Trustee will act in accordance with any direction made by Parent
as to any specific terms or method of disposition, to the extent not
inconsistent with the terms of the Voting Trust Agreement and the requirements
of the terms of any STB or court order. The proceeds of any such sale will be
distributed to Parent.
The Voting Trust Agreement provides that the Voting Trustee shall receive
reasonable and customary compensation and indemnification from Parent and
Purchaser.
Pursuant to the Merger Agreement, the Voting Trust may not be modified or
amended without the prior written approval of the Company, which is an express
third-party beneficiary of the Voting Trust Agreement, unless such modification
or amendment is not inconsistent with the Merger Agreement and is not adverse to
the Company or its shareholders. In its November 1, 1996 informal written
opinion to Parent's counsel, the staff of the STB stated that it assumes that
according to its terms the Voting Trust Agreement may be amended pursuant to an
order of the STB, notwithstanding the Merger Agreement which purports to accord
the Company a veto power over any such modifications or amendments, if the STB
finds that compliance with law requires such amendment.
STB Matters; Acquisition of Control. Set forth below is information
relating to approval by the STB of the acquisition of control over the Company
by Parent and Purchaser. On October 18, 1996, Parent and the Company filed with
the STB a Notice of Intent to File Railroad Control Application. This Notice
indicated that the parties intend to file with the STB on or before March 1,
1997, an application ("STB Application") seeking STB approval of the acquisition
of control by Parent and its affiliates of the Company and its affiliates
incident to the Merger, and related transactions. The STB is required by statute
to enter a final order with respect to the STB Application within approximately
16 months after it is filed. The parties requested that the STB decide the case
on an expedited basis. On November 15, 1996, the STB issued a tentative order
proposing a schedule that requires its final decision to be served within 300
days from the filing of the STB Application. The proposed scheduling order is
subject to public comment and reply by the applicants in a process that will
close on December 16, 1996, and thereafter the STB is expected to issue a final
scheduling order which may or may not vary from the proposed order. Regardless
of the provisions of the final scheduling order, there can be no assurance that
the STB will issue a final decision any sooner than the approximately 16-month
period permitted by law, or that the decision, when issued, will be favorable to
the Merger.
Under Subtitle IV, the STB is required to approve the Merger if it finds
that the Merger is consistent with the public interest. In making that
determination, the STB must consider at least the following factors: (1) the
effect of the proposed transaction on the adequacy of transportation to the
public; (2) the effect on the public interest of including, or failing to
include, other rail carriers in the area involved in the proposed transaction;
(3) the total fixed charges that result from the proposed transaction; (4) the
interest of carrier employees affected by the proposed transaction; and (5)
whether the proposed transaction would have an adverse effect on competition
among rail carriers in the affected region or in the national rail system.
Because the STB's approval of the Merger would be a "major Federal action"
within the meaning of the National Environmental Policy Act, the STB must also
consider the environmental effects of the proposed Merger. An STB approval order
exempts the parties from federal, state and local law, including the antitrust
laws and laws enforcing contract rights, as necessary to permit them to carry
out the transaction.
In analyzing the factors described in the preceding paragraph, the STB
weighs the potential benefits to the public against any potential harm to the
public resulting from the proposed transaction. Parent and the
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Company believe they will present a strong case to the STB that the Merger
satisfies the public interest balancing test. Parent and the Company believe
that they will demonstrate that a combination of Parent and the Company,
conditioned as they propose (see " -- Conditions" below), will have significant
public benefits and otherwise will satisfy the standards for STB approval. While
the applicants will seek to present a highly persuasive case, there can be no
assurance that the STB Application will not be denied, or will not be granted
subject to conditions that are so onerous that the Merger would not be
consummated.
Interested parties, including other railroads, shippers, state and federal
agencies and legislators, and shareholders of Parent or the Company, may seek to
participate in the STB proceeding on the Merger, consistent with applicable
laws, regulations, decisions and orders, and may support, oppose, or seek to
have conditions imposed on the transaction or, in the case of other railroads,
to be included in the Merger, such as through the divestiture to such railroads
of certain rail lines of Parent and/or the Company.
Norfolk Southern; Possible Inconsistent Application. In a letter dated
October 25, 1996, NSC notified the STB of its intent to participate as an active
party in the STB proceedings regarding Parent's and the Company's application
for control. In addition, on November 6, 1996, NSC filed a Notice of Intent to
File Railroad Control Application indicating that NSC will file with the STB a
control application with respect to the Company on or before May 1, 1997. STB
approval of a control application is only permissive and does not require the
parties to consummate the transaction authorized by the STB. The STB may approve
both the Parent/Company application and the NSC application, only one, or
neither. On November 27, 1996, the STB issued a tentative order proposing a
schedule that requires its final decision to be issued within 300 days from the
filing of the NSC application. The proposed scheduling order is subject to
public comment and reply by NSC in a process that will close on December 23,
1996. The final schedule may differ from the proposed schedule.
Conditions. The STB has the authority to impose conditions on its approval
of a control transaction to alleviate competitive or other concerns. If such
conditions are imposed, the applicants can elect to consummate the control
transaction subject to the conditions or not to consummate the transaction. In
light of the policies of the STB expressed in recent decisions relating to other
railroad combinations, Parent and the Company are willing, in connection with
the Merger and upon its consummation, to provide competitive access to another
railroad in those situations where Parent and the Company are now the only rail
competitors and to make other reasonable accommodations. Such access may take
the form of a grant of trackage rights over rail properties or other forms, any
of which could diminish the value to Parent or the Company of its rail
properties. The identity of the railroad or railroads that will be provided such
competitive access, the forms it will take and the terms and conditions that
would apply thereto have not been determined and remain subject to negotiations.
The STB may impose and enforce, including through ongoing STB oversight
following consummation of the Merger, any such arrangements as conditions to its
approval of the Merger and may require the modification of such arrangements or
require other arrangements regarding rail competition or other aspects of the
public interest, which could be more burdensome, as conditions to its approval
of the Merger. See Section 12.
Under the terms of the Merger Agreement, the obligations of Parent to
consummate the Merger are conditioned upon, among other things, the issuance by
the STB of a decision (which decision shall not have been stayed or enjoined)
that (A) constitutes a final order approving, exempting or otherwise authorizing
consummation of the Merger and all other material transactions contemplated by
the Merger Agreement requiring such authorization and (B) does not (1) change or
disapprove of the consideration to be given in the Merger or other material
provisions of Article II of the Merger Agreement or (2) impose on Parent, the
Company or any of their respective subsidiaries any other terms or conditions
(including, without limitation, labor protective provisions but excluding
conditions heretofore imposed by the Interstate Commerce Commission in New York
Dock Railway -- Control -- Brooklyn Eastern District, 360 I.C.C. 60 (1979)) that
materially and adversely affect the long-term benefits expected to be received
by Parent from the transactions contemplated by the Merger Agreement. Conditions
proposed by the applicants themselves would not be considered so to adversely
affect the expected long-term benefits.
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There is no assurance that STB approval will be obtained or obtained on
terms that would be acceptable to Parent. Should Parent elect under the terms of
the Merger Agreement not to consummate the Merger, a subsequent disposition of
the Shares owned by Parent could result in a significant loss to Parent.
Judicial Review -- Stay. Judicial review of an STB approval order may be
sought by certain interests aggrieved by it and the effectiveness of the order
could be stayed by the STB or by an appellate court while such judicial
proceedings are pending. STB approval is not automatically stayed if a party
seeks judicial review of the decision; however, it is possible that the approval
could be stayed by the STB or a reviewing court. The applicants would expect to
oppose any stay of the effectiveness of the STB's order if the order is
favorable. If approval is stayed, consummation of the Merger, which would occur
after stockholder approval, receipt of required regulatory approvals and
satisfaction or waiver of all of the other conditions set forth in the Merger
Agreement, may not occur for a substantial period of time after the entry of the
final written decision of the STB. There can be no assurance that an STB order
approving the Merger will not be overturned on appeal.
Pending receipt of STB approval, it is expected that the businesses and
operations of Parent and the Company will be conducted in the usual and ordinary
course of business, the Shares acquired by Parent and/or Purchaser will be held
in the Voting Trust and Parent will not exercise control over the Company and
its subsidiaries.
Norfolk Southern Litigation. On October 23, 1996, NSC filed a Complaint
for Declaratory and Injunctive Relief in the United States District Court for
the Eastern District of Pennsylvania, naming the Company, Parent and directors
of the Company as defendants, alleging, among other things, violations of
fiduciary duty, of the Company Articles and the Company's By-laws, of the
Pennsylvania Law and of disclosure provisions of the federal securities laws
relating to tender offers and proxy solicitations, and requesting preliminary
and permanent injunctive and declaratory relief including, without limitation,
an injunction from commencing or continuing a tender offer (such as the Second
Offer) for Company securities, seeking approval of the Articles Amendment or
taking steps to make the Articles Amendment effective, taking any action to
redeem the Rights or render the Rights inapplicable to any offer with respect to
the Company by Parent without, at the same time, rendering the Rights
inapplicable with respect to NSC's proposed tender offer with respect to the
Company, taking any action to enforce certain provisions of the Merger
Agreement, failing to take action to exempt NSC's proposal to acquire the
Company from certain provisions of the Pennsylvania Law and holding the
Pennsylvania Special Meeting. On October 30, 1996, NSC amended its complaint to,
among other things, challenge certain additional features in the Merger
Agreement and the Rights Agreement. As amended, the NSC complaint alleges, among
other things, that entering into the Company Stock Option Agreement and the
Termination Fee provisions of the Merger Agreement are violations of the
fiduciary duties of the defendants, that the provisions of the Rights Agreement
(which are alleged to result in the Company being prohibited from engaging in
any merger or sale transaction with any entity other than Parent until 2005 in
the event that a Distribution Date occurs) violate defendants' fiduciary duties;
that the structure of the Offers is coercive and unfair to stockholders of the
Company; that a provision in the Merger Agreement barring the Company from
changing its recommendation of the transaction or agreeing to a competing
transaction for a 180-day period from the execution of the Merger Agreement is
ultra vires and a breach of the defendants' duties; and that certain features of
the Rights Agreement which vest exclusive authority to redeem or amend the
Rights in Continuing Directors (as defined in the Rights Agreement) are
unlawful. On October 24, 1996, a hearing was scheduled on the preliminary
injunction being sought by NSC to enjoin, among other things, the Pennsylvania
Special Meeting (and the effectiveness of the Articles Amendment) and to enjoin
consummation of the First Offer. Substantially similar allegations were made in
a complaint filed against the Company, Parent and directors of the Company in
the same court by certain shareholders of the Company purportedly on behalf of a
class of shareholders. On November 19, 1996, following a two-day hearing, the
Court denied NSC's and the shareholder plaintiff's motions for a preliminary
injunction in all respects. The Court ruled, among other things, that the
plaintiffs had failed to make the requisite showing, in connection with their
motion for a preliminary injunction; that the federal securities law claims were
meritorious; that the challenged provisions of the Merger Agreement and the
Offers were unlawful; that the directors of the Company had breached their
fiduciary duties in connection with the Merger Agreement; that there had been a
lack of good faith after reasonable investigation by the
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directors of the Company; that, contrary to the assertion of NSC and the
shareholder plaintiffs, it was inappropriate for the Merger Agreement to deal
with the subject of management succession; that under the Pennsylvania Law
directors do not have wide discretion in how to react to takeover bids such as
the Hostile Offer; that the Merger Agreement was not properly entered into and
contains terms that are prohibited by the Pennsylvania Law; that the First Offer
was "coercive"; and that the directors do not have the right to favor one
competitive bid over another and in particular do not have the right to resist
hostile takeovers by the use of a rights plan and other provisions that favor
one corporation over another. NSC and the shareholder plaintiffs appealed that
ruling to the United States Court of Appeals for the Third Circuit and sought an
injunction pending appeal against consummation of the Offer. On November 20,
1996, the Court of Appeals denied that motion, whereupon NSC withdrew its motion
to expedite its appeal. On December 3, 1996, the Court of Appeals denied the
shareholder plaintiffs' motions to expedite their appeal, and scheduled briefing
upon the appeals of NSC and the shareholder plaintiffs to be completed by early
February 1997.
On December 5, 1996, Parent and the Company filed answers to NSC's second
amended complaint in the action, denying the material allegations of the
complaint. In addition, Parent and the Company filed counterclaims against NSC
in the action (the "Counterclaims"). The Counterclaims allege, among other
things, that NSC has tortiously interfered, and is tortiously interfering, with
the legitimate contractual rights and expectations of Parent and the Company
arising out of the Merger Agreement. In particular, the Counterclaims allege
that by making the Hostile Offer, and by making false and misleading statements
concerning the viability of the Hostile Offer, as well as by filing meritless
litigation, in federal court, NSC is attempting to frustrate the Merger and/or
to obtain leverage to pressure Parent and the Company to agree to sell certain
Company assets to NSC. As relief, the Counterclaims seek compensatory damages
from NSC in an amount to be proved at trial, and, in addition, punitive damages.
State Takeover Statutes. A number of states throughout the United States
have enacted takeover statutes that purport, in varying degrees, to be
applicable to attempts to acquire securities of corporations that are
incorporated or have assets, shareholders, executive offices or places of
business in such states. In Edgar v. Mite Corp., the Supreme Court of the United
States held that the Illinois Business Takeover Act, which involved state
securities laws that made the takeover of certain corporations more difficult,
imposed a substantial burden on interstate commerce and therefore was
unconstitutional. In CTS Corp. v. Dynamics Corp. of America, however, the
Supreme Court of the United States held that a state may, as a matter of
corporate law and, in particular, those laws concerning corporate governance,
constitutionally disqualify a potential acquiror from voting on the affairs of a
target corporation without prior approval of the remaining shareholders,
provided that such laws were applicable only under certain conditions.
The Company, directly or through subsidiaries, conducts business in a
number of states throughout the United States, some of which have enacted
takeover laws. Purchaser does not know whether any of these laws will, by their
terms, apply to the Second Offer and has not complied with any such laws. Should
any person seek to apply any state takeover law, Purchaser will take such action
as then appears desirable, which may include challenging the validity or
applicability of any such statute in appropriate court proceedings. In the event
it is asserted that one or more state takeover laws are applicable to the
Transactions, and an appropriate court does not determine that such law is, or
such laws are inapplicable or invalid as applied to the Second Offer, Purchaser
might be required to file certain information with, or receive approvals from,
the relevant state authorities. In addition, if enjoined, Purchaser might be
unable to accept for payment any Shares tendered pursuant to the Second Offer,
or be delayed in continuing or consummating the Second Offer. In such case,
Purchaser may not be obligated to accept for payment any Shares tendered. See
Section 15.
The Pennsylvania Takeover Disclosure Law ("PTDL") purports to regulate
certain attempts to acquire a corporation which (1) is organized under the laws
of Pennsylvania or (2) has its principal place of business and substantial
assets located in Pennsylvania. The PTDL requires, among other things, that the
offeror, 20 days prior to any takeover offer, file a registration statement for
the takeover offer with the Pennsylvania Securities Commission (the "PSC") and
publicly disclose the offering price of the disclosed offer. However, in Crane
Co. v. Lam, 509 F. Supp. 782 (E.D. Pa. 1981), the United States District Court
for the Eastern District of Pennsylvania preliminarily enjoined, on grounds
arising under the United States Constitution, enforcement of at least the
portion of the PTDL involving the pre-offer waiting period thereunder. Section
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8(a) of the PTDL provides an exemption for any offer to purchase securities as
to which the board of directors of the target company recommends acceptance to
its shareholders, if at the time such recommendation is first communicated to
shareholders the offeror files with the PSC a copy of the Schedule 14D-1 and
certain other information and materials, including an undertaking to notify
security holders of the target company that a notice has been filed with the PSC
which contains substantial additional information about the offer and which is
available for inspection at the PSC's principal office during business hours.
While reserving and not waiving its right to challenge the constitutionality or
validity of the PTDL, its applicability to the Second Offer or the jurisdiction
of the PSC, Purchaser is making such a filing with the PSC in order to qualify
for such exemption from the PTDL. Additional information about the Second Offer
has been filed with the PSC pursuant to the PTDL and is available for inspection
at the office at Eastgate Office Building, Second Floor, 1010 North 7th Street,
Harrisburg, PA 17102-1410, during business hours.
Chapter 25 of the Pennsylvania Law contains other provisions relating
generally to takeovers and acquisitions of certain publicly owned Pennsylvania
corporations such as the Company that have a class or series of shares entitled
to vote generally in the election of directors registered under the Exchange Act
(a "registered corporation"). The following discussion is a general and highly
abbreviated summary of certain features of such chapter, is not intended to be
complete or to completely address potentially applicable exceptions or
exemptions, and is qualified in its entirety by reference to the full text of
Chapter 25 of the Pennsylvania Law.
In addition to other provisions not applicable to the Second Offer or the
Merger, Subchapter 25D of the Pennsylvania Law includes provisions requiring
approval of a merger of a registered corporation with an "interested
shareholder" in which the "interested shareholder" is treated differently from
other shareholders, by the affirmative vote of the shareholders entitled to cast
at least a majority of the votes that all shareholders other than the interested
shareholder are entitled to cast with respect to the transaction without
counting the votes of the interested shareholders. This disinterested
shareholder approval requirement is not applicable to a transaction (i) approved
by a vote of the board of directors, without counting the votes of directors who
are directors or officers of, or who have a material equity interest in, the
interested shareholder, (ii) in which the consideration to be received by
shareholders is not less than the highest amount paid by the interested
shareholder in acquiring his shares, or (iii) effected without submitting the
Merger to a vote of shareholders as permitted in Section 1924(b)(1)(ii) of the
Pennsylvania Law. Purchaser believes that the disinterested shareholder approval
requirement of Subchapter 25D of the Pennsylvania Law will not be applicable to
the contemplated Merger because of prior disinterested Company Board approval.
Subchapter 25E of the Pennsylvania Law, which addresses "control
transactions," requires under certain circumstances any person who acquires at
least 20% of the voting power of a registered corporation, upon written demand
from any shareholder, to purchase for cash up to the balance of the voting
shares of the corporation at the price determined under the statute, which may
not be less than the highest price per share paid by the controlling person or
group at any time during the 90-day period ending on and including the date of
the control transaction, plus, to the extent not reflected in such price, an
increment representing a proportion of any value payable for acquisition of
control of the corporation. A "control transaction" would occur if, without the
Pennsylvania Shareholder Approval and the effectuation of the Articles
Amendment, Purchaser were to acquire voting power over 20% or more of the Shares
pursuant to the Second Offer, the Company Stock Option Agreement or otherwise
(except in the Merger). Because Purchaser does not intend to acquire 20% or more
of the voting power of the Company until such time as the Pennsylvania
Shareholder Approval is obtained, Subchapter 25E of the Pennsylvania Law would
not be applicable. See Section 13.
Subchapter 25F of the Pennsylvania Law prohibits under certain
circumstances certain "business combinations," including mergers and sales or
pledges of significant assets, of a registered corporation with an "interested
shareholder" for a period of five years. Subchapter 25F of the Pennsylvania Law
exempts, among other things, business combinations approved by the board of
directors prior to a shareholder becoming an interested shareholder. Since the
Board of Directors of the Company approved the Merger prior to such time as
Parent and Purchaser may be deemed to have become an interested shareholder,
Purchaser believes that Subchapter 25F of the Pennsylvania Law is not applicable
to the contemplated Merger.
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Subchapter 25G of the Pennsylvania Law, relating to "control-share
acquisitions," prevents under certain circumstances the owner of a control-share
block of shares of a registered corporation from voting such shares unless a
majority of the "disinterested" shares approve such voting rights. Failure to
obtain such approval may result in a forced sale by the control-share owner of
the control-share block to the corporation at a possible loss. The Company
Articles specifically provide that Subchapter 25G of the Pennsylvania Law does
not apply to the Company.
Subchapter 25H of the Pennsylvania Law, relating to disgorgement by certain
controlling shareholders of a registered corporation, provides that under
certain circumstances any profit realized by a controlling person from the
disposition of shares of the corporation to any person (including to the
corporation under Subchapter 25G of the Pennsylvania Law or otherwise) will be
recoverable by the corporation. The Company Articles specifically provide that
Subchapter 25H of the Pennsylvania Law does not apply to the Company.
Subchapter 25I of the Pennsylvania Law entitles "eligible employees" of a
registered corporation to a lump sum payment of severance compensation under
certain circumstances if the employee is terminated, other than for willful
misconduct, within two years after voting rights lost as a result of a
control-share acquisition are restored by a vote of disinterested shareholders
("Control-share Approval") or, in the event the termination was accomplished
pursuant to an agreement, arrangement or understanding with the acquiring
person, within 90 days prior to Control-share Approval. Subchapter 25J of
Pennsylvania Law provides protection against termination or impairment under
certain circumstances of "covered labor contracts" of a registered corporation
as a result of a "business combination" transaction if the business operation to
which the covered labor contract relates was owned by the registered corporation
at the time voting rights are restored by shareholder vote after a control-share
acquisition. Subchapters I and J apply only in the event of a "control-share
acquisition" specified in Subchapter G of the Pennsylvania Law. The Company
Articles specifically provide that Subchapter G of the Pennsylvania Law does not
apply to the Company.
Section 2504 of the Pennsylvania Law provides that the applicability of
Chapter 25 of the Pennsylvania Law to a registered corporation having a class or
series of shares entitled to vote generally in the election of directors
registered under the Exchange Act or otherwise satisfying the definition of a
registered corporation under Section 2502(1) of the Pennsylvania Law shall
terminate immediately upon the termination of the status of the corporation as a
registered corporation. Purchaser intends to seek to cause the Company to
terminate the registration of the Shares under the Exchange Act as soon after
consummation of the Merger as the requirements for termination of the
registration of the Common Shares are met.
Except for the filing pursuant to Section 8(a) of the PTDL described above,
neither Purchaser nor Parent has currently complied with any state takeover
statute or regulation. Purchaser reserves the right to challenge the
applicability or validity of any state law purportedly applicable to the Second
Offer or the Merger and nothing in this Offer to Purchase or any action taken in
connection with the Second Offer or the Merger is intended as a waiver of such
right. If it is asserted that any state takeover statute is applicable to the
Second Offer or the Merger and an appropriate court does not determine that it
is inapplicable or invalid as applied to the Second Offer or the Merger,
Purchaser might be required to file certain information with, or to receive
approvals from, the relevant state authorities, and Purchaser might be unable to
accept for payment or pay for Shares tendered pursuant to the Second Offer, or
be delayed in consummating the Second Offer or the Merger. In such case,
Purchaser may not be obliged to accept for payment or pay for any Shares
tendered pursuant to the Second Offer.
17. FEES AND EXPENSES. Wasserstein Perella & Co., Inc. ("Wasserstein
Perella") is acting as the Dealer Manager in connection with the Second Offer
and is acting as financial advisor to Parent in connection with its combination
with the Company. Parent has agreed to pay Wasserstein Perella for its services
in conjunction with the Second Offer and other transactions contemplated by the
Merger Agreement an aggregate fee (the "Transaction Fee") of $19 million. The
first $2.85 million of the Transaction Fee was payable upon the public
announcement that the Company and Parent had entered into the Merger Agreement.
An additional $2.85 million of the Transaction Fee was payable upon consummation
of the First Offer, and an additional $5.7 million of the Transaction Fee is
payable upon completion of certain events with respect to the Transactions. The
remaining unpaid balance of the Transaction Fee will become payable upon the
closing of the Merger. If the Merger Agreement is terminated or abandoned prior
to the consummation of
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an acquisition transaction, and Parent or Purchaser receives a termination fee
in connection with such termination or abandonment, then, immediately following
Parent's receipt of such termination fee, Wasserstein Perella will receive an
additional fee of $5 million; provided that such additional fee shall have
credited against it certain prior payments. Parent has agreed to reimburse
Wasserstein Perella for its out-of-pocket expenses, including the fees and
expenses of its legal counsel, incurred in connection with its engagement, and
to indemnify Wasserstein Perella and certain related persons against certain
liabilities and expenses in connection with its engagement, including certain
liabilities under the federal securities laws.
Wasserstein Perella has rendered various investment banking and other
advisory services to Parent and its affiliates in the past and is expected to
continue to render such services, for which it has received and will continue to
receive customary compensation from Parent and its affiliates. In the ordinary
course of business, Wasserstein Perella and its affiliates may actively trade
the debt and equity securities of Parent and its affiliates and the Company for
their own account and for the accounts of customers and, accordingly, may at any
time hold a long or short position in such securities.
Purchaser has retained MacKenzie Partners, Inc. to act as the Information
Agent in connection with the Second Offer. The Information Agent may contact
holders of Shares by mail, telephone, facsimile, telegraph and personal
interviews and may request brokers, dealers and other nominee shareholders to
forward materials relating to the Second Offer to beneficial owners of Shares.
The Information Agent will receive reasonable and customary compensation for its
services, will be reimbursed for certain reasonable out-of-pocket expenses and
will be indemnified against certain liabilities and expenses in connection
therewith, including certain liabilities under the federal securities laws.
In addition, Citibank, N.A. has been retained as the Depositary. The
Depositary has not been retained to make solicitations or recommendations in its
role as Depositary. The Depositary will receive reasonable and customary
compensation for its services, will be reimbursed for certain reasonable
out-of-pocket expenses and will be indemnified against certain liabilities and
expenses in connection therewith, including certain liabilities under the
federal securities laws.
Except as set forth above, Purchaser will not pay any fees or commissions
to any broker or dealer or any other person for soliciting tenders of Shares
pursuant to the Second Offer. Brokers, dealers, commercial banks and trust
companies will, upon request only, be reimbursed by Purchaser for customary
mailing and handling expenses incurred by them in forwarding material to their
customers.
18. MISCELLANEOUS. Purchaser is not aware of any jurisdiction where the
making of the Second Offer is prohibited by any administrative or judicial
action pursuant to any valid state statute. If Purchaser becomes aware of any
valid state statute prohibiting the making of the Second Offer or the acceptance
of the Shares pursuant thereto, Purchaser will make a good faith effort to
comply with such state statute. If, after such good faith effort, Purchaser
cannot comply with any such state statute, the Second Offer will not be made to
(nor will tenders be accepted from or on behalf of) the holders of Shares in
such state. In any jurisdiction where the securities, blue sky or other laws
require the Second Offer to be made by a licensed broker or dealer, the Second
Offer shall be deemed to be made on behalf of Purchaser by one or more
registered brokers or dealers which are licensed under the laws of such
jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PARENT OR PURCHASER NOT CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
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Parent and Purchaser have filed with the SEC the Schedule 14D-1, together
with exhibits, pursuant to Rule 14d-3 of the General Rules and Regulations under
the Exchange Act, furnishing certain additional information with respect to the
Second Offer. The Schedule 14D-1, and any amendments thereto, may be inspected
at, and copies may be obtained from, the same places and in the same manner as
set forth in Section 8 (except that they will not be available at the regional
offices of the SEC).
GREEN ACQUISITION CORP.
December 6, 1996
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SCHEDULE I
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE
OFFICERS OF PARENT AND PURCHASER
1. Directors and Executive Officers of Parent. The following table sets
forth the name, business address, present principal occupation, and employment
and material occupations, positions, offices, or employments for the past five
years of each director and executive officer of Parent. The principal business
address of each executive officer of Parent is One James Center, 901 East Cary
Street, Richmond, VA 23219. Unless otherwise indicated, each occupation set
forth opposite an individual's name refers to employment with Parent. Where no
date is given for the commencement of the indicated office or position, such
office or position was assumed prior to December 6, 1991. Directors are
indicated by an asterisk. Each director and executive officer listed below is a
citizen of the United States.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR
NAME AND CURRENT EMPLOYMENT; MATERIAL POSITIONS
BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
- ------------------------------ ------------------------------------------------------------
<S> <C>
John Q. Anderson.............. Executive Vice President, Sales and Marketing, CSX
Transportation, Inc. ("CSXT") since May 1996. Prior thereto,
Senior Vice President -- Coal, Metals and Minerals Business
of Burlington Northern Santa Fe Corporation and Executive
Vice President of Burlington Northern Railroad.
Mark G. Aron.................. Executive Vice President -- Law and Public Affairs since
April 1995. Prior thereto, Senior Vice President -- Law and
Public Affairs.
Elizabeth E. Bailey*.......... John C. Hower Professor of Public Policy and Management, The
3620 Spruce Street Wharton School of the University of Pennsylvania. Director
Philadelphia, PA 19104 of Honeywell, Inc. and Philip Morris Companies, Inc.
Director of Parent since November 1989.
Robert L. Burrus, Jr.*........ Partner in and Chairman of McGuire, Woods, Battle & Boothe,
One James Center a law firm. Director of Concepts Direct, Inc.; Heilig-Meyers
901 East Cary Street Company; O'Sullivan Corporation; S&K Famous Brands, Inc. and
Richmond, VA 23219 Smithfield Foods, Inc.; Director of Parent since April 1993.
Alvin R. Carpenter............ President and Chief Executive Officer, CSXT since January
1992. Prior thereto, President of CSX Distribution Services,
Inc.
John P. Clancey............... President and Chief Executive Officer, Sea-Land Service Inc.
("Sea-Land").
Donald D. Davis............... Senior Vice President -- Employee Relations, CSXT since
April 1992. Prior thereto, Senior Vice President -- Human
Resources.
James Ermer................... Executive Vice President -- Corporate Planning and
Development since April 1995. Prior thereto, Senior Vice
President -- Finance.
Andrew B. Fogarty............. Senior Vice President -- Finance & Planning, Sea-Land since
June 1996. Vice President -- Audit and Advisory Services
from February 1995 to June 1996. Prior thereto, Vice
President -- Executive Department.
Paul R. Goodwin............... Executive Vice President -- Finance and Chief Financial
Officer since April 1995. From February 1995 to April 1995,
Executive Vice President -- Finance and Administration,
CSXT. Prior thereto, Senior Vice President -- Finance, CSXT.
</TABLE>
I-1
<PAGE> 64
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR
NAME AND CURRENT EMPLOYMENT; MATERIAL POSITIONS
BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
- ------------------------------ ------------------------------------------------------------
<S> <C>
Bruce C. Gottwald*............ Chairman and Chief Executive Officer of Ethyl Corporation, a
330 South Fourth Street worldwide producer of petroleum additives. Director of
P.O. Box 2189 Albemarle Corporation; First Colony Corporation; First
Richmond, VA 23219 Colony Life Insurance Co.; James River Corporation and
Tredegar Industries, Inc. Director of Parent since April
1988.
Robert J. Grassi.............. Senior Vice President -- Atlantic, AME Services of Sea-Land
since June 1996. Prior thereto, Senior Vice
President -- Finance and Planning.
Michael C. Hagan.............. President and Chief Executive Officer, American Commercial
Lines, Inc. since May 1992. Prior thereto, President and
Chief Operating Officer of American Commercial Lines.
John R. Hall*................. Chairman of Ashland Inc. Director of Banc One Corporation;
100 Ashland Dr. The Canada Life Assurance Company; Humana Inc.; Reynolds
Russell, KY 41169 Metals Company and UCAR International Inc. Director of
Parent since May 1994.
Richard H. Klem............... Vice President -- Corporate Strategy since May 1992. Prior
thereto, Vice President -- Economic Analysis and Corporate
Strategy.
Robert D. Kunisch*............ Chairman, President and Chief Executive Officer of PHH
11333 McCormick Rd. Corporation, provider of value added business services,
Hunt Valley, MD 21031 including vehicle management services, real estate services,
and mortgage banking services. Director of Mercantile
Bankshares Corporation and GenCorp. Director of Parent since
October 1990.
Hugh L. McColl Jr.*........... Chairman and Chief Executive Officer of NationsBank
NationsBank Corporate Center Corporation, a bank holding company. Prior thereto, Chairman
Charlotte, NC 28255 and Chief Executive Officer of NCNB Corporation, a
predecessor of NationsBank Corporation. Director of
Jefferson-Pilot Corporation; Jefferson-Pilot Life Insurance
Company; Ruddick Corporation and Sonoco Products Co.
Director of Parent since February 1992.
James W. McGlothlin*.......... Chairman and Chief Executive Officer of The United Company,
P.O. Box 1280 a diversified energy company. Director of Basset Furniture
Bristol, VA 24203 Industries, Inc. Director of Parent since November 1989.
Southwood J. Morcott*......... Chairman and Chief Executive Officer of Dana Corporation, a
4500 Dorr Street manufacturer of automotive and truck parts and provider of
Toledo, OH 43615 commercial credit. Previously, Chairman, President and Chief
Executive Officer of Dana Corporation. Director of Johnson
Controls, Inc. and Phelps Dodge Corporation. Director of
Parent since July 1990.
Jesse R. Mohorovic............ Vice President -- Executive Department since February 1995.
From April 1994 to February 1995, Vice
President -- Corporate Communications of CSXT. Prior
thereto, Vice President -- Corporate Communications of
Sea-Land.
Richard E. Murphy............. Senior Vice President -- Corporate Marketing of Sea-Land
since 1996. From 1995 to 1996, Senior Vice
President -- Atlantic AME; Vice President -- Pacific
Services, from 1993-1995; prior thereto, Vice
President -- Pacific Services, Sea-Land.
Gerald L. Nichols............. Executive Vice President and Chief Operating Officer, CSXT
since February 1995. Prior thereto, Senior Vice
President -- Administration of CSXT.
</TABLE>
I-2
<PAGE> 65
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR
NAME AND CURRENT EMPLOYMENT; MATERIAL POSITIONS
BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
- ------------------------------ ------------------------------------------------------------
<S> <C>
McNeil Porter................. Chairman, CSX Intermodal, Inc. since January 1996. Prior
thereto, President and CEO of CSX Intermodal, Inc.
Charles G. Raymond............ Senior Vice President -- Operations, Sea-Land.
Charles E. Rice*.............. Chairman and Chief Executive Officer of Barnett Banks, Inc.,
50 North Laura Street a bank holding company. Director of Sprin Corporation.
Jacksonville, FL 32202 Director of Parent since April 1990.
William C. Richardson*........ President and Chief Executive Officer of the W.K. Kellogg
1 Michigan Avenue Foundation, a major philanthropic institution, since 1995.
Battle Creek, MI 49017....... Prior thereto, President of The Johns Hopkins University.
Director of Mercantile Bankshares Corporation and Mercantile
Safe Deposit & Trust Company. Director of Parent since
December 1992.
James L. Ross................. Vice President and Controller, since October 1995. Prior
thereto, Audit Partner, Ernst Young, LLP.
Frank S. Royal*............... Physician. Director of Columbia/HCA Healthcare Corporation;
1122 North 25th Street Crestar Financial Corporation; Chesapeake Corporation and
Richmond, VA 23223........... Dominion Resources, Inc. Director of Parent since January
1994.
John W. Snow*................. Chairman of the Board, President and Chief Executive Officer
of Parent. Director of Circuit City Stores, Inc.;
NationsBank Corporation; Bassett Furniture Industries, Inc.;
Textron, Inc. and USX Corporation. Director of Parent since
April 1988.
Ronald T. Sorrow.............. President and Chief Executive Officer of CSX Intermodal,
Inc. since January 1996. Prior thereto, Vice
President -- Sales and Marketing of CSX Intermodal, Inc.
William H. Sparrow............ Vice President -- Financial Planning since February 1996.
From May 1994 to February 1996, Vice President -- Capital
Budgeting. Prior thereto, Vice President & Treasurer.
Michael J. Ward............... Executive Vice President, CSXT from May 1996. Senior Vice
President -- Finance, CSXT from April 1995 to May 1996.
Prior thereto, General Manager -- C&O Business Unit, from
1994 to April 1995, and Vice President -- Coal of CSXT.
Gregory W. Weber.............. Vice President and Treasurer.
</TABLE>
I-3
<PAGE> 66
2. Directors and Executive Officers of Purchaser. Set forth below are the
name and position with Purchaser of each director and executive officer of
Purchaser. The principal address of Purchaser and the current business address
of each individual listed below is One James Center, 901 East Cary Street,
Richmond, VA 23219. Each such person is a citizen of the United States. The
present principal occupation or employment (in addition to the position with
Purchaser indicated below), and material occupations, positions, offices or
employments for the past five years of each person is set forth in Part 1 above
(except for Alan A. Rudnick whose principal occupation since May 1991 is Vice
President -- General Counsel and Corporate Secretary). Directors are indicated
by an asterisk.
<TABLE>
<CAPTION>
PRESENT POSITION
NAME WITH THE PURCHASER
--------------------------------- --------------------------------------
<S> <C>
Mark G. Aron*.................... General Counsel and Secretary
Paul R. Goodwin*................. Chief Financial Officer and Treasurer
Alan A. Rudnick.................. Assistant Secretary
John W. Snow*.................... Chief Executive Officer and President
Gregory W. Weber................. Assistant Treasurer
</TABLE>
I-4
<PAGE> 67
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for the Shares
and any other required documents should be sent by each shareholder of the
Company or his broker, dealer, commercial bank, trust company or other nominee
to the Depositary at one of its addresses set forth below:
The Depositary for the Second Offer is:
CITIBANK, N.A.
<TABLE>
<CAPTION>
By Hand: By Mail: By Overnight Carrier:
<S> <C> <C>
Citibank, N.A. Citibank, N.A. Citibank, N.A.
Corporate Trust Window c/o Citicorp Data Distribution, Inc. c/o Citicorp Data Distribution, Inc.
111 Wall Street, 5th P.O. Box 7072 404 Sette Drive
Floor Paramus, New Jersey 07653 Paramus, New Jersey 07652
New York, New York 10043
Facsimile for Eligible Institutions: (201) 262-3240
To confirm fax only: (800) 422-2077
</TABLE>
------------------------
Any questions or requests for assistance or additional copies of the Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Information Agent or the Dealer Manager at their respective
telephone numbers and locations listed below. You may also contact your broker,
dealer, commercial bank or trust company or other nominee for assistance
concerning the Second Offer.
The Information Agent for the Second Offer is:
mackenzie logo
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
CALL TOLL FREE (800) 322-2885
The Dealer Manager for the Second Offer is:
WASSERSTEIN PERELLA & CO., INC.
31 West 52nd Street
New York, New York 10019
Call Collect:
(212) 969-2700
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF
COMMON STOCK AND SERIES A ESOP
CONVERTIBLE JUNIOR PREFERRED STOCK
(including, in each case, the associated Common Stock Purchase Rights)
OF
CONRAIL INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED DECEMBER 6, 1996
BY
GREEN ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
CSX CORPORATION
THE SECOND OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 6, 1997, UNLESS THE SECOND
OFFER IS EXTENDED.
The Depositary for the Second Offer is:
CITIBANK, N.A.
<TABLE>
<S> <C> <C>
By Hand: By Mail: By Overnight Carrier:
Citibank, N.A. Citibank, N.A. Citibank, N.A.
Corporate Trust Window c/o Citicorp Data Distribution, c/o Citicorp Data Distribution,
111 Wall Street, 5th Floor Inc. Inc.
New York, New York 10043 P.O. Box 7072 404 Sette Drive
Paramus, New Jersey 07653 Paramus, New Jersey 07652
</TABLE>
Facsimile for Eligible Institutions: (201) 262-3240
To confirm fax only: (800) 422-2077
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OR TELEX TRANSMISSION
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST
SIGN THIS LETTER OF TRANSMITTAL WHERE INDICATED BELOW AND COMPLETE THE
SUBSTITUTE FORM W-9 PROVIDED BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by shareholders of Conrail
Inc. either if certificates ("Share Certificates") evidencing shares of common
stock, par value $1.00 per share (the "Common Shares"), or shares of Series A
ESOP Convertible Junior Preferred Stock, without par value (the "ESOP Preferred
Shares" and, together with the Common Shares, the "Shares"), are to be forwarded
herewith or if delivery of Shares is to be made by book-entry transfer to the
Depositary's account at The Depository Trust Company or the Philadelphia
Depository Trust Company (each, a "Book-Entry Transfer Facility" and
collectively, the "Book-Entry Transfer Facilities") pursuant to the book-entry
transfer procedure described in "Procedures for Tendering Shares" of the Offer
to Purchase (as defined below). Delivery of documents to a Book-Entry Transfer
Facility in accordance with such Book-Entry Transfer Facility's procedures does
not constitute delivery to the Depositary.
<PAGE> 2
Holders of Shares will be required to tender one Right (as defined below)
for each Share tendered to effect a valid tender of such Share. Until the
Distribution Date (as defined in the Offer to Purchase) occurs, the Rights are
represented by and transferred with the Shares. Accordingly, if the Distribution
Date does not occur prior to the Expiration Date (as defined in the Offer to
Purchase), a tender of Shares will constitute a tender of the associated Rights.
If a Distribution Date has occurred, certificates representing a number of
Rights equal to the number of Shares being tendered must be delivered to the
Depositary in order for such Shares to be validly tendered. If a Distribution
Date has occurred, a tender of Shares without Rights constitutes an agreement by
the tendering shareholder to deliver certificates representing a number of
Rights equal to the number of Shares tendered pursuant to the Second Offer (as
defined below) to the Depositary within three New York Stock Exchange, Inc.
trading days after the date such certificates are distributed. Purchaser (as
defined below) reserves the right to require that it receive such certificates
prior to accepting Shares for payment. Payment for Shares tendered and purchased
pursuant to the Second Offer will be made only after timely receipt by the
Depositary of, among other things, such certificates, if such certificates have
been distributed to holders of Shares. Purchaser will not pay any additional
consideration for the Rights tendered pursuant to the Second Offer.
Shareholders whose Share Certificates are not immediately available or who
cannot deliver their Share Certificates and all other documents required hereby
to the Depositary prior to the Expiration Date (as defined in "Terms of the
Second Offer; Proration; Expiration Date" of the Offer to Purchase) or who
cannot complete the procedure for delivery by book-entry transfer on a timely
basis and who wish to tender their Shares must do so pursuant to the guaranteed
delivery procedure described in "Procedures for Tendering Shares" of the Offer
to Purchase. See Instruction 2.
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution:
Check Box of Applicable Book-Entry Transfer Facility:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Account Number ____________ Transaction Code Number
[ ] CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s):
Window Ticket No. (if any):
Date of Execution of Notice of Guaranteed Delivery:
Name of Institution which Guaranteed Delivery:
If Delivered by Book-Entry Transfer, Check Box of Book-Entry Transfer
Facility:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Account Number ____________ Transaction Code Number
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
DESCRIPTION OF SHARES TENDERED
<CAPTION>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
SHARE CERTIFICATE(S) TENDERED
(ATTACH ADDITIONAL LIST IF NECESSARY)
<CAPTION>
TOTAL NUMBER OF SHARES NUMBER OF SHARES
CERTIFICATE NUMBER(S)* REPRESENTED BY CERTIFICATE(S) TENDERED**
<S> <C> <C>
TOTAL SHARES
* Need not be completed by shareholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares being delivered to the
Depositary are being tendered. See Instruction 4.
</TABLE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE INSTRUCTIONS SET FORTH IN THIS
LETTER OF TRANSMITTAL CAREFULLY.
<PAGE> 4
Ladies and Gentlemen:
The undersigned hereby tenders to Green Acquisition Corp., a Pennsylvania
corporation ("Purchaser") and a wholly owned subsidiary of CSX Corporation, a
Virginia corporation, the above-described shares of common stock, par value
$1.00 per share (the "Common Shares"), or shares of Series A ESOP Convertible
Junior Preferred Stock, without par value (the "ESOP Preferred Shares" and,
together with the Common Shares, the "Shares"), of Conrail Inc., a Pennsylvania
corporation (the "Company"), including, in each case, the associated common
stock purchase rights (the "Rights") issued pursuant to the Rights Agreement,
dated as of July 19, 1989, between the Company and First Chicago Trust Company
of New York, as Rights Agent (as amended, the "Rights Agreement"), pursuant to
Purchaser's offer to purchase up to an aggregate of 18,344,845 Shares,
including, in each case, the associated Rights, at a price of $110 per Share,
net to the seller in cash, upon the terms and subject to the conditions set
forth in the Offer to Purchase, dated December 6, 1996 (the "Offer to
Purchase"), receipt of which is hereby acknowledged, and in this Letter of
Transmittal (which, as amended from time to time, together constitute the
"Second Offer"). All references herein to Common Shares, ESOP Preferred Shares
or Shares includes the associated Rights.
The undersigned understands that Purchaser reserves the right to transfer
or assign, in whole at any time, or in part from time to time, to one or more of
its affiliates, the right to purchase all or any portion of the Shares tendered
pursuant to the Second Offer, but any such transfer or assignment will not
relieve Purchaser of its obligations under the Second Offer and will in no way
prejudice the rights of tendering shareholders to receive payment for Shares
validly tendered and accepted for payment pursuant to the Second Offer.
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, in accordance with the terms of the Second Offer (including,
if the Second Offer is extended or amended, the terms and conditions of any such
extension or amendment), the undersigned hereby sells, assigns and transfers to,
or upon the order of, Purchaser all right, title and interest in and to all the
Shares that are being tendered hereby (and any and all non-cash dividends,
distributions, rights, other Shares or other securities issued or issuable in
respect of such Shares or declared, paid or distributed in respect of such
Shares on or after December 6, 1996 (collectively, "Distributions")), and
irrevocably appoints the Depositary the true and lawful agent and
attorney-in-fact of the undersigned with respect to such Shares and all
Distributions, with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (i) deliver
certificates for such Shares (individually, a "Share Certificate") and all
Distributions, or transfer ownership of such Shares and all Distributions on the
account books maintained by a Book-Entry Transfer Facility, together, in either
case, with all accompanying evidence of transfer and authenticity to, or upon
the order of Purchaser, (ii) present such Shares and all Distributions for
transfer on the books of the Company and (iii) receive all benefits and
otherwise exercise all rights of beneficial ownership of such Shares and all
Distributions, all in accordance with the terms of the Second Offer.
If, on or after December 6, 1996, the Company should declare or pay any
cash or stock dividend, other than regular quarterly cash dividends, or make any
distribution with respect to the Shares that is payable or distributable to
stockholders of record on a date prior to the transfer to the name of Purchaser
or its nominee or transferee on the Company's stock transfer records of the
Shares accepted for payment pursuant to the Second Offer, then, subject to the
provisions of Section 14 of the Offer to Purchase, (i) the purchase price per
Share payable by Purchaser pursuant to the Second Offer will be reduced by the
amount of any such cash dividend or cash distribution and (ii) any such non-cash
dividend, distribution or right to be received by the tendering shareholder will
be received and held by such tendering shareholder for the account of Purchaser
and will be required to be promptly remitted and transferred by each such
tendering shareholder to the Depositary for the account of Purchaser,
accompanied by appropriate documentation of transfer. Pending such remittance,
Purchaser will be entitled to all rights and privileges as owner of any such
non-cash dividend, distribution or right and may withhold the entire purchase
price or deduct from the purchase price the amount of value thereof, as
determined by Purchaser in its sole discretion.
By executing this Letter of Transmittal, the undersigned irrevocably
appoints John W. Snow, Mark G. Aron and Alan A. Rudnick as proxies of the
undersigned, each with full power of substitution, to the full extent of the
undersigned's rights with respect to the Shares tendered by the undersigned and
accepted for payment by Purchaser (and any and all Distributions). All such
proxies shall be considered coupled with an interest in the tendered Shares.
This appointment will be effective if, when, and only to the extent that,
Purchaser accepts such Shares for payment pursuant to the Second Offer. Upon
such acceptance for payment, all prior proxies given by the undersigned with
respect to such Shares, Distributions and other securities will, without further
action, be revoked, and no subsequent proxies may be given. The individuals
named above as proxies will, with respect to the Shares, Distributions and other
securities for which the appointment is effective, be empowered (subject to the
terms of the Voting Trust Agreement (as defined in the Offer to Purchase) so
long as it shall be in effect with respect to the Shares) to exercise all voting
and other rights of the undersigned as they in their sole discretion may deem
proper at any annual, special, adjourned or postponed meeting of the Company's
shareholders, by written consent or otherwise, and Purchaser reserves the right
to require that, in order for Shares, Distributions or other securities to be
deemed validly tendered, immediately upon Purchaser's acceptance for payment of
such Shares Purchaser must be able to exercise full voting rights with respect
to such Shares.
<PAGE> 5
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and all Distributions, that the undersigned own(s) the Shares
tendered hereby within the meaning of Rule 14e-4 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), that such
tender of Shares complies with Rule 14e-4 under the Exchange Act, and that when
such Shares are accepted for payment by Purchaser, Purchaser will acquire good,
marketable and unencumbered title thereto and to all Distributions, free and
clear of all liens, restrictions, charges and encumbrances, and that none of
such Shares and Distributions will be subject to any adverse claim. The
undersigned, upon request, shall execute and deliver all additional documents
deemed by the Depositary or Purchaser to be necessary or desirable to complete
the sale, assignment and transfer of the Shares tendered hereby and all
Distributions. In addition, the undersigned shall remit and transfer promptly to
the Depositary for the account of Purchaser all Distributions in respect of the
Shares tendered hereby, accompanied by appropriate documentation of transfer,
and, pending such remittance and transfer or appropriate assurance thereof,
Purchaser shall be entitled to all rights and privileges as owner of each such
Distribution and may withhold the entire purchase price of the Shares tendered
hereby or deduct from such purchase price, the amount or value of such
Distribution as determined by Purchaser in its sole discretion.
No authority herein conferred or agreed to be conferred shall be affected
by, and all such authority shall survive, the death or incapacity of the
undersigned. All obligations of the undersigned hereunder shall be binding upon
the heirs, personal representatives, successors and assigns of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in "Procedures for Tendering Shares" of the Offer to
Purchase and in the Instructions hereto will constitute the undersigned's
acceptance of the terms and conditions of the Second Offer. Purchaser's
acceptance for payment of Shares tendered pursuant to the Second Offer will
constitute a binding agreement between the undersigned and Purchaser upon the
terms and subject to the conditions of the Second Offer. The undersigned
recognizes that under certain circumstances set forth in the Offer to Purchase,
Purchaser may not be required to accept for payment any of the Shares tendered
hereby.
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions," please issue the check for the purchase price of all Shares
purchased, and return all Share Certificates evidencing Shares not purchased or
not tendered, in the name(s) of the registered holder(s) appearing above under
"Description of Shares Tendered." Similarly, unless otherwise indicated in the
box entitled "Special Delivery Instructions," please mail the check for the
purchase price of all Shares purchased and all Share Certificates evidencing
Shares not tendered or not purchased (and accompanying documents, as
appropriate) to the address(es) of the registered holder(s) appearing above
under "Description of Shares Tendered." In the event that the boxes entitled
"Special Payment Instructions" and "Special Delivery Instructions" are both
completed, please issue the check for the purchase price of all Shares purchased
and return all Share Certificates evidencing Shares not purchased or not
tendered in the name(s) of, and mail such check and Share Certificates to, the
person(s) so indicated. Unless otherwise indicated herein in the box entitled
"Special Payment Instructions," please credit any Shares tendered hereby and
delivered by book-entry transfer, but which are not purchased, by crediting the
account at the Book-Entry Transfer Facility designated above. The undersigned
recognizes that Purchaser has no obligation, pursuant to the Special Payment
Instructions, to transfer any Shares from the name of the registered holder(s)
thereof if Purchaser does not accept for payment any of the Shares tendered
hereby.
<PAGE> 6
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7 OF
THIS LETTER OF TRANSMITTAL)
To be completed ONLY if certificates for Shares not tendered or not
purchased and/or the check for the purchase price of Shares purchased are to be
issued in the name of someone other than the undersigned, or if Shares delivered
by book-entry transfer which are not purchased are to be returned by credit to
an account maintained at a Book-Entry Transfer Facility other than that
designated above.
Issue check and/or certificates to:
Name
(PLEASE PRINT)
Address
- ------------------------------------------------------
(ZIP CODE)
- ------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
[ ] Credit unpurchased Shares delivered by book-entry transfer to the Book-Entry
Transfer Facility account set forth below:
Check appropriate box:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
- ------------------------------------------------------
(ACCOUNT NUMBER)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7
OF THIS LETTER OF TRANSMITTAL)
To be completed ONLY if certificates for Shares not tendered or not
purchased and/or the check for the purchase price of Shares purchased are to be
sent to someone other than the undersigned, or to the undersigned at an address
other than that shown above.
Mail check and/or certificates to:
Name
(PLEASE PRINT)
Address
- ------------------------------------------------------
(ZIP CODE)
<PAGE> 7
SIGN HERE
(COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
X
- --------------------------------------------------------------------------------
X
- --------------------------------------------------------------------------------
(SIGNATURE(S) OF HOLDER(S))
Date , 199
- --.
(Must be signed by registered holder(s) exactly as name(s) appear(s) on common
or preferred stock certificate(s) or on a security position listing or by
person(s) authorized to become registered holder(s) by certificates and
documents transmitted herewith. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, please provide the following
information. See Instruction 5 of this Letter of Transmittal.)
Name(s)
(PLEASE PRINT)
Capacity (Full Title)
Address
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
Tax Identification or Social Security No.
(COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5 OF THIS LETTER OF TRANSMITTAL)
Authorized Signature
Name
(PLEASE PRINT)
Title
Name of Firm
Address
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
Date , 199
- --.
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a firm which is a
bank, broker, dealer, credit union, savings association, or other entity that is
a member in good standing of the Securities Transfer Agent's Medallion Program
(each, an "Eligible Institution"). No signature guarantee is required on this
Letter of Transmittal (a) if this Letter of Transmittal is signed by the
registered holder(s) (which term, for purposes of this document, shall include
any participant in a Book-Entry Transfer Facility whose name appears on a
security position listing as the owner of Shares) of Shares tendered herewith,
unless such holder(s) has completed either the box entitled "Special Delivery
Instructions" or the box entitled "Special Payment Instructions" on the reverse
hereof, or (b) if such Shares are tendered for the account of an Eligible
Institution. See Instruction 5. If a Share Certificate is registered in the name
of a person other than the signer of this Letter of Transmittal, or if payment
is to be made, or a Share Certificate not accepted for payment or not tendered
is to be returned, to a person other than the registered holder(s), then the
Share Certificate must be endorsed or accompanied by appropriate stock powers,
in either case signed exactly as the name(s) of the registered holder(s)
appear(s) on the Share Certificate, with the signature(s) on such Share
Certificate or stock powers guaranteed as described above. See Instruction 5.
2. Delivery of Letter of Transmittal and Share Certificates. This Letter of
Transmittal is to be used either if Share Certificates are to be forwarded
herewith or if Shares are to be delivered by book-entry transfer pursuant to the
procedure set forth in "Procedures for Tendering Shares" of the Offer to
Purchase. Share Certificates evidencing all tendered Shares, or confirmation of
a book-entry transfer of such Shares, if such procedure is available, into the
Depositary's account at one of the Book-Entry Transfer Facilities pursuant to
the procedures set forth in "Procedures for Tendering Shares" of the Offer to
Purchase, together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) with any required signature guarantees (or,
in the case of a book-entry transfer, an Agent's Message, as defined below) and
any other documents required by this Letter of Transmittal, must be received by
the Depositary at one of its addresses set forth on the reverse hereof prior to
the Expiration Date (as defined in "Terms of the Second Offer; Proration;
Expiration Date" of the Offer to Purchase). If Share Certificates are forwarded
to the Depositary in multiple deliveries, a properly completed and duly executed
Letter of Transmittal must accompany each such delivery. Stockholders whose
Share Certificates are not immediately available, who cannot deliver their Share
Certificates and all other required documents to the Depositary prior to the
Expiration Date or who cannot complete the procedure for delivery by book-entry
transfer on a timely basis may tender their Shares pursuant to the guaranteed
delivery procedure described in "Procedures for Tendering Shares" of the Offer
to Purchase. Pursuant to such procedure: (i) such tender must be made by or
through an Eligible Institution; (ii) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form provided by Purchaser
herewith, must be received by the Depositary prior to the Expiration Date; and
(iii) in the case of a guarantee of Shares, the Share Certificates, in proper
form for transfer, or a confirmation of a book-entry transfer of such Shares, if
such procedure is available, into the Depositary's account at one of the
Book-Entry Transfer Facilities, together with a properly completed and duly
executed Letter of Transmittal (or manually signed facsimile thereof) with any
required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message), and any other documents required by this Letter of
Transmittal, must be received by the Depositary within three New York Stock
Exchange, Inc. trading days after the date of execution of the Notice of
Guaranteed Delivery, all as described in "Procedures for Tendering Shares" of
the Offer to Purchase. The term "Agent's Message" means a message, transmitted
by a Book-Entry Transfer Facility to, and received by the Depositary and forming
a part of a Book-Entry Confirmation, which states that such Book-Entry Transfer
Facility has received an express acknowledgment from the participant in such
Book-Entry Transfer Facility tendering the Shares, that such participant has
received and agrees to be bound by the terms of this Letter of Transmittal and
that the Purchaser may enforce such agreement against the participant.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND
THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY.
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. By execution of this Letter of Transmittal
(or a facsimile hereof), all tendering stockholders waive any right to receive
any notice of the acceptance of their Shares for payment.
3. Inadequate Space. If the space provided herein under "Description of
Shares Tendered" is inadequate, the Share Certificate numbers, the number of
Shares evidenced by such Share Certificates and the number of Shares tendered
should be listed on a separate schedule and attached hereto.
4. Partial Tenders. (Not applicable to stockholders who tender by
book-entry transfer.) If fewer than all the Shares evidenced by any Share
Certificate delivered to the Depositary herewith are to be tendered hereby, fill
in the number of Shares which are to be tendered in the box entitled "Number of
Shares Tendered." In such cases, new Share Certificate(s) evidencing the
remainder of the Shares that were evidenced by the Share Certificates delivered
to the Depositary herewith will be sent to the person(s) signing this Letter of
Transmittal, unless otherwise provided in the box entitled "Special Delivery
Instructions," as soon as practicable after the expiration or termination of the
Second Offer. All Shares evidenced by Share Certificates delivered to the
Depositary will be deemed to have been tendered unless otherwise indicated.
<PAGE> 9
5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the Share Certificates evidencing such Shares without alteration,
enlargement or any other change whatsoever.
If any Share tendered hereby is owned of record by two or more persons, all
such persons must sign this Letter of Transmittal. If any of the Shares tendered
hereby are registered in the names of different holders, it will be necessary to
complete, sign and submit as many separate Letters of Transmittal as there are
different registrations of such certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Share Certificates or separate stock
powers are required, unless payment is to be made to, or Share Certificates
evidencing Shares not tendered or not purchased are to be issued in the name of,
a person other than the registered holder(s), in which case, the Share
Certificate(s) evidencing the Shares tendered hereby must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) on such Share Certificate(s).
Signatures on such Share Certificate(s) and stock powers must be guaranteed by
an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signatures on such
Share Certificate(s) and stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Share Certificate(s) or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to Purchaser of such person's authority so to act must be
submitted.
6. Stock Transfer Taxes. Except as otherwise provided in this Instruction
6, Purchaser will pay all stock transfer taxes with respect to the sale and
transfer of any Shares to it or its order pursuant to the Second Offer. If,
however, payment of the purchase price of any Shares purchased is to be made to,
or Share Certificate(s) evidencing Shares not tendered or not purchased are to
be issued in the name of, a person other than the registered holder(s), the
amount of any stock transfer taxes (whether imposed on the registered holder(s),
such other person or otherwise) payable on account of the transfer to such other
person will be deducted from the purchase price of such Shares purchased, unless
evidence satisfactory to Purchaser of the payment of such taxes, or exemption
therefrom, is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE SHARE CERTIFICATE(S) EVIDENCING THE
SHARES TENDERED HEREBY.
7. Special Payment and Delivery Instructions. If a check for the purchase
price of any Shares tendered hereby is to be issued, or Share Certificate(s)
evidencing Shares not tendered or not purchased are to be issued, in the name of
a person other than the person(s) signing this Letter of Transmittal or if such
check or any such Share Certificate is to be sent to someone other than the
person(s) signing this Letter of Transmittal or to the person(s) signing this
Letter of Transmittal, but at an address other than that shown in the box
entitled "Description of Shares Tendered," the appropriate boxes on this Letter
of Transmittal must be completed. Shares tendered hereby by book-entry transfer
may request that Shares not purchased be credited to such account maintained at
a Book-Entry Transfer Facility as such stockholder may designate in the box
entitled "Special Payment Instructions" on the reverse hereof. If no such
instructions are given, all such Shares not purchased will be returned by
crediting the account at the Book-Entry Transfer Facility designated on the
reverse hereof as the account from which such Shares were delivered.
8. Requests for Assistance or Additional Copies. Requests for assistance
may be directed to the Information Agent or Dealer Manager at their respective
addresses or telephone numbers set forth below. Additional copies of the Offer
to Purchase, this Letter of Transmittal, the Notice of Guaranteed Delivery and
the Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 may be obtained from the Information Agent or the Dealer Manager or
from brokers, dealers, commercial banks or trust companies.
9. Substitute Form W-9. Each tendering shareholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN") on the
Substitute Form W-9 which is provided under "Important Tax Information" below,
and to certify, under penalties of perjury, that such number is correct and that
such shareholder is not subject to backup withholding of federal income tax. If
a tendering shareholder has been notified by the Internal Revenue Service that
such shareholder is subject to backup withholding, such shareholder must cross
out item (2) of the Certification box of the Substitute Form W-9, unless such
shareholder has since been notified by the Internal Revenue Service that such
shareholder is no longer subject to backup withholding. Failure to provide the
information on the Substitute Form W-9 may subject the tendering shareholder to
31% federal income tax withholding on the payment of the purchase price of all
Shares purchased from such shareholder. If the tendering shareholder has not
been issued a TIN and has applied for one or intends to apply for one in the
near future, such shareholder should write "Applied For" in the space provided
for the TIN in Part I of the Substitute Form W-9, and sign and date the
Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is
not provided with a TIN within 60 days, the Depositary will withhold 31% on all
payments of the purchase price to such stockholder until a TIN is provided to
the Depositary.
10. Lost, Destroyed or Stolen Certificates. If any certificate(s)
representing Shares has been lost, destroyed or stolen, the shareholder should
promptly notify the Depositary. The shareholder will then be instructed as to
the steps that must be taken in order to replace the certificate(s). This Letter
of Transmittal and related documents cannot be processed until the procedures
for replacing lost or destroyed certificates have been followed.
<PAGE> 10
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), PROPERLY
COMPLETED AND DULY EXECUTED, WITH ANY REQUIRED SIGNATURE GUARANTEES, OR AN
AGENT'S MESSAGE (TOGETHER WITH SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY
TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A PROPERLY COMPLETED AND DULY
EXECUTED NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR
TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE).
IMPORTANT TAX INFORMATION
Under the federal income tax law, a shareholder whose tendered Shares are
accepted for payment is required by law to provide the Depositary (as payer)
with such shareholder's correct TIN on Substitute Form W-9 below. If such
shareholder is an individual, the TIN is such shareholder's social security
number. If the Depositary is not provided with the correct TIN, the shareholder
may be subject to a $50 penalty imposed by the Internal Revenue Service. In
addition, payments that are made to such shareholder with respect to Shares and
Rights purchased pursuant to the Second Offer may be subject to backup
withholding of 31%.
Certain shareholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such individual must submit a statement, signed under penalties of
perjury, attesting to such individual's exempt status. Forms of such statements
can be obtained from the Depositary. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies with respect to a shareholder, the Depositary
is required to withhold 31% of any payments made to such shareholder. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to backup withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund may be obtained from
the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a shareholder
with respect to Shares purchased pursuant to the Second Offer, the shareholder
is required to notify the Depositary of such shareholder's correct TIN by
completing the form below certifying (a) that the TIN provided on Substitute
Form W-9 is correct (or that such shareholder is awaiting a TIN), and (b) that
(i) such shareholder has not been notified by the Internal Revenue Service that
such shareholder is subject to backup withholding as a result of a failure to
report all interest or dividends or (ii) the Internal Revenue Service has
notified such shareholder that such shareholder is no longer subject to backup
withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The shareholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Shares
tendered hereby. If the Shares are in more than one name or are not in the name
of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional guidance on
which number to report. If the tendering shareholder has not been issued a TIN
and has applied for a number or intends to apply for a number in the near
future, the shareholder should write "Applied For" in the space provided for the
TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For" is
written in Part I and the Depositary is not provided with a TIN within 60 days,
the Depositary will withhold 31% of all payments of the purchase price to such
stockholder until a TIN is provided to the Depositary.
<PAGE> 11
- --------------------------------------------------------------------------------
PAYER'S NAME: CITIBANK, N.A., AS DEPOSITARY
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
PART I -- PLEASE PROVIDE YOUR TIN IN THE Social Security Number OR
BOX AT RIGHT AND CERTIFY BY SIGNING AND / /
DATING BELOW.
Employer Identification Number
(If awaiting TIN write "Applied For")
--------------------------------------------------------------------------------------------
PART II -- For Payees Exempt From Backup Withholding, see the enclosed Guidelines and complete
as instructed therein. CERTIFICATION -- Under penalties of perjury, I certify that:
SUBSTITUTE (1) The number shown on this form is my correct Taxpayer Identification Number (or a Taxpayer
FORM W-9 Identification Number has not been issued to me and either (a) I have mailed or delivered
DEPARTMENT OF an application to receive a Taxpayer Identification Number to the appropriate Internal
THE TREASURY Revenue Service ("IRS") or Social Security Administration office or (b) I intend to mail or
INTERNAL deliver an application in the near future. I understand that if I do not provide a Taxpayer
REVENUE SERVICE Identification Number within sixty (60) days, 31% of all reportable payments made to me
PAYER'S REQUEST thereafter will be withheld until I provide a number), and
FOR TAXPAYER (2) I am not subject to backup withholding either because I have not been notified by the IRS
IDENTIFICATION that I am subject to backup withholding as a result of failure to report all interest or
NUMBER (TIN) dividends, or the IRS has notified me that I am no longer subject to backup withholding.
--------------------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the
IRS that you are subject to backup withholding because of underreporting interest or dividends
on your tax return. However, if after being notified by the IRS that you were subject to backup
withholding you received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out item (2).
(Also see instructions in the enclosed Guidelines.)
-------------------------------------------- DATE ________________, 199__
SIGNATURE
</TABLE>
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE SECOND OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
Questions and requests for assistance or additional copies
of the Offer to Purchase, Letter of Transmittal and
other tender offer materials may be directed to the
Information Agent or the Dealer Manager as set forth below:
The Information Agent for the Second Offer is:
mackenzie logo
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
CALL TOLL FREE (800) 322-2885
The Dealer Manager for the Second Offer is:
WASSERSTEIN PERELLA & CO., INC.
31 West 52nd Street
New York, New York 10019
Call Collect:
(212) 969-2700
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF SHARES OF
COMMON STOCK AND SERIES A ESOP CONVERTIBLE JUNIOR PREFERRED STOCK
(including, in each case, the associated Common Stock Purchase Rights)
OF
CONRAIL INC.
TO
GREEN ACQUISITION CORP.
a wholly owned subsidiary of
CSX CORPORATION
(Not to be Used for Signature Guarantees)
This Notice of Guaranteed Delivery, or one substantially in the form
hereof, must be used to accept the Second Offer (as defined below) if (i)
certificates ("Share Certificates") evidencing shares of common stock, par value
$1.00 per share (the "Common Shares"), or shares of Series A ESOP Convertible
Junior Preferred Stock, without par value (the "ESOP Preferred Shares" and,
together with the Common Shares, the "Shares"), of Conrail Inc., a Pennsylvania
corporation (the "Company"), including the associated common stock purchase
rights (the "Rights") issued pursuant to the Rights Agreement, dated July 19,
1989, between the Company and First Chicago Trust Company of New York, as Rights
Agent, are not immediately available, (ii) time will not permit all required
documents to reach Citibank, N.A., as Depositary (the "Depositary"), prior to
the Expiration Date (as defined in "Terms of the Second Offer; Proration;
Expiration Date" of the Offer to Purchase (as defined below)) or (iii) the
procedure for book-entry transfer cannot be completed on a timely basis. All
references herein to the Common Shares, ESOP Preferred Shares or Shares include
the associated Rights. This Notice of Guaranteed Delivery may be delivered by
hand or transmitted by telegram, facsimile transmission or mail to the
Depositary. See "Procedures for Tendering Shares" of the Offer to Purchase.
The Depositary for the Second Offer is:
CITIBANK, N.A.
<TABLE>
<CAPTION>
By Hand: By Mail: By Overnight Carrier:
<S> <C> <C>
Citibank, N.A. Citibank, N.A. Citibank, N.A.
Corporate Trust Window c/o Citicorp Data Distribution, c/o Citicorp Data Distribution,
111 Wall Street, 5th Floor Inc. Inc.
New York, New York 10043 P.O. Box 7072 404 Sette Drive
Paramus, New Jersey 07653 Paramus, New Jersey 07652
Facsimile for Eligible Institutions: (201) 262-3240
To confirm fax only: (800) 422-2077
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A
LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION"
UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE
APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to Green Acquisition Corp., a Pennsylvania
corporation and a wholly owned subsidiary of CSX Corporation, a Virginia
corporation, upon the terms and subject to the conditions set forth in the Offer
to Purchase, dated December 6, 1996 (the "Offer to Purchase"), and the related
Letter of Transmittal (which, as amended from time to time, together constitute
the "Second Offer"), receipt of each of which is hereby acknowledged, the number
of Shares specified below pursuant to the guaranteed delivery procedures
described in "Procedures for Tendering Shares" of the Offer to Purchase.
<TABLE>
<S> <C>
Number of Shares: Name(s) of Record Holder(s):
- ------------------------------------------------ ------------------------------------------------
Certificate Nos. (if available):
- ------------------------------------------------ ------------------------------------------------
PLEASE PRINT
Check ONE box if Shares will be tendered by
book-entry transfer: Address(es):
[ ] The Depository Trust Company
------------------------------------------------
[ ] Philadelphia Depository Trust Company ZIP CODE
Area Code and Tel. No.:
Account Number:
------------------------------------------------
Dated: , 199_
</TABLE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
The undersigned, a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or correspondent in the United
States, hereby (a) represents that the tender of Shares effected hereby complies
with Rule 14e-4 of the Securities Exchange Act of 1934, as amended, and (b)
guarantees delivery to the Depositary, at one of its addresses set forth above,
of certificates evidencing the Shares tendered hereby in proper form for
transfer, or confirmation of book-entry transfer of such Shares into the
Depositary's accounts at The Depository Trust Company or the Philadelphia
Depository Trust Company, in each case with delivery of a properly completed and
duly executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantees, or an Agent's Message (as defined in "Acceptance for
Payment and Payment for Shares" of the Offer to Purchase), and any other
documents required by the Letter of Transmittal, (a) in the case of Shares,
within three New York Stock Exchange, Inc. trading days after the date of
execution of this Notice of Guaranteed Delivery, or (b) in the case of Rights, a
period ending the latter of (i) three New York Stock Exchange, Inc. trading days
after the date of execution of this Notice of Guaranteed Delivery or (ii) three
business days after the date Right Certificates are distributed to stockholders.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in financial loss to such Eligible Institution.
<TABLE>
<S> <C>
- ------------------------------------------------ ------------------------------------------------
NAME OF FIRM AUTHORIZED SIGNATURE
- ------------------------------------------------ ------------------------------------------------
ADDRESS TITLE
Name:
- ------------------------------------------------
ZIP CODE PLEASE PRINT
Area Code and Tel. No.: Date: , 199 --
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE.
SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE> 1
<TABLE>
<S> <C>
wasserstein logo Wasserstein, Perella & Co., Inc.
31 West 52nd Street
New York, New York 10019
Tel: (212) 969-2700
</TABLE>
OFFER TO PURCHASE FOR CASH
UP TO AN AGGREGATE OF 18,344,845 SHARES
OF
COMMON STOCK AND SERIES A ESOP CONVERTIBLE JUNIOR PREFERRED STOCK
(including, in each case, the associated Common Stock Purchase Rights)
OF
CONRAIL INC.
AT
$110 NET PER SHARE
BY
GREEN ACQUISITION CORP.
a wholly owned subsidiary of
CSX CORPORATION
THE SECOND OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 6, 1997, UNLESS THE SECOND
OFFER IS EXTENDED.
December 6, 1996
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Green Acquisition Corp., a Pennsylvania
corporation ("Purchaser") and a wholly owned subsidiary of CSX Corporation, a
Virginia corporation, to act as Dealer Manager in connection with the
Purchaser's offer to purchase up to an aggregate of 18,344,845 shares of (i)
common stock, par value $1.00 per share (the "Common Shares"), and (ii) Series A
ESOP Convertible Junior Preferred Stock, without par value (the "ESOP Preferred
Shares" and, together with the Common Shares, the "Shares"), of Conrail Inc., a
Pennsylvania corporation (the "Company"), including in each case, the associated
common stock purchase rights (the "Rights") issued pursuant to the Rights
Agreement, dated July 19, 1989, by and between the Company and First Chicago
Trust Company of New York, as Rights Agent at a price of $110 per Share, net to
the seller in cash, upon the terms and subject to the conditions set forth in
the Offer to Purchase, dated December 6, 1996 (the "Offer to Purchase"), and the
related Letter of Transmittal (which, as amended from time to time, together
constitute the "Second Offer") enclosed herewith. All references herein to
Common Shares, ESOP Preferred Shares or Shares shall include the associated
Rights.
THE SECOND OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THE PENNSYLVANIA
CONTROL TRANSACTION LAW (AS DEFINED IN THE OFFER TO PURCHASE) BEING INAPPLICABLE
TO THE COMPANY, WHICH WILL REQUIRE COMPANY SHAREHOLDER APPROVAL OF AN AMENDMENT
TO THE COMPANY'S ARTICLES OF INCORPORATION.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, or who hold
Shares registered in their own names, we are enclosing the following documents:
1. Offer to Purchase, dated December 6, 1996;
2. Letter of Transmittal to be used by holders of Shares in accepting the
Second Offer and tendering Shares;
3. Notice of Guaranteed Delivery to be used to accept the Second Offer if
the certificates evidencing such Shares (the "Share Certificates") are not
immediately available or time will not permit all required documents to reach
Citibank, N.A. (the "Depositary") prior to the Expiration Date (as defined in
the Offer to Purchase) or the procedure for book-entry transfer cannot be
completed on a timely basis;
4. A letter to shareholders of the Company from David M. LeVan, Chairman,
President and Chief Executive Officer, together with a
Solicitation/Recommendation Statement on Schedule 14D-9 filed with the
Securities and Exchange Commission by the Company;
5. A letter which may be sent to your clients for whose accounts you hold
Shares registered in your name or in the name of your nominees, with space
provided for obtaining such clients' instructions with regard to the Second
Offer;
<PAGE> 2
6. Guidelines of the Internal Revenue Service for Certification of Taxpayer
Identification Number on Substitute Form W-9; and
7. Return envelope addressed to the Depositary.
Upon the terms and subject to the conditions of the Second Offer
(including, if the Second Offer is extended or amended, the terms and conditions
of any such extension or amendment), Purchaser will purchase, by accepting for
payment, and will pay for, up to an aggregate of 18,344,845 Shares validly
tendered prior to the Expiration Date promptly after the later to occur of (i)
the Expiration Date and (ii) the satisfaction or waiver of the conditions set
forth in "Conditions of the Second Offer" of the Offer to Purchase. For purposes
of the Second Offer, Purchaser will be deemed to have accepted for payment, and
thereby purchased, tendered Shares if, as and when Purchaser gives oral or
written notice to the Depositary of Purchaser's acceptance of such Shares for
payment. In all cases, payment for Shares purchased pursuant to the Second Offer
will be made only after timely receipt by the Depositary of (i) the Share
Certificates or timely confirmation of a book-entry transfer of such Shares, if
such procedure is available, into the Depositary's account at The Depository
Trust Company or the Philadelphia Depository Trust Company pursuant to the
procedures set forth in "Procedures for Tendering Shares" of the Offer to
Purchase, (ii) the Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, or an Agent's Message (as defined in "Acceptance
for Payment and Payment for Shares" of the Offer to Purchase) and (iii) any
other documents required by the Letter of Transmittal.
Purchaser will not pay any fees or commissions to any broker or dealer or
any other person (other than the Dealer Manager and the Information Agent as
described in "Fees and Expenses" of the Offer to Purchase) in connection with
the solicitation of tenders of Shares pursuant to the Second Offer. Purchaser
will, however, upon request, reimburse you for customary mailing and handling
expenses incurred by you in forwarding the enclosed materials to your clients.
Purchaser will pay any stock transfer taxes incident to the transfer to it
of validly tendered Shares, except as otherwise provided in Instruction 6 of the
Letter of Transmittal.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. THE SECOND OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS
WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 6, 1997,
UNLESS THE SECOND OFFER IS EXTENDED.
In order to take advantage of the Second Offer, a duly executed and
properly completed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees and any other required documents, should be sent
to the Depositary, and certificates evidencing the tendered Shares should be
delivered or such Shares should be tendered by book-entry transfer, all in
accordance with the Instructions set forth in the Letter of Transmittal and the
Offer to Purchase.
If holders of Shares wish to tender Shares, but it is impracticable for
them to forward their certificates or other required documents prior to the
Expiration Date, a tender may be effected by following the guaranteed delivery
procedures specified under "Procedures for Tendering Shares" of the Offer to
Purchase.
Any inquiries you may have with respect to the Second Offer should be
addressed to the Dealer Manager or the Information Agent at their respective
addresses and telephone numbers set forth on the back cover page of the Offer to
Purchase.
Additional copies of the enclosed materials may be obtained from the
undersigned at Wasserstein Perella & Co., Inc., telephone (212) 969-2700
(Collect) or by calling the Information Agent, MacKenzie Partners, Inc.,
telephone 1-800-322-2885 (Toll Free), or from brokers, dealers, commercial banks
or trust companies.
Very truly yours,
Wasserstein Perella & Co., Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON AS AN AGENT OF PARENT, PURCHASER, THE DEPOSITARY, THE
INFORMATION AGENT OR THE DEALER MANAGER, OR ANY AFFILIATE OF ANY OF THE
FOREGOING, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY
STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE SECOND OFFER OTHER
THAN THE DOCUMENTS ENCLOSED AND THE STATEMENTS CONTAINED THEREIN.
<PAGE> 1
OFFER TO PURCHASE FOR CASH
UP TO AN AGGREGATE OF 18,344,845 SHARES
OF
COMMON STOCK AND SERIES A ESOP CONVERTIBLE JUNIOR PREFERRED STOCK
(including, in each case, the associated Common Stock Purchase Rights)
OF
CONRAIL INC.
AT
$110 NET PER SHARE
BY
GREEN ACQUISITION CORP.
a wholly owned subsidiary of
CSX CORPORATION
THE SECOND OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 6, 1997, UNLESS THE SECOND
OFFER IS EXTENDED.
December 6, 1996
To Our Clients:
Enclosed for your consideration is an Offer to Purchase, dated December 6,
1996 (the "Offer to Purchase"), and the related Letter of Transmittal (which, as
amended from time to time, together constitute the "Second Offer") in connection
with the offer by Green Acquisition Corp., a Pennsylvania corporation
("Purchaser") and a wholly owned subsidiary of CSX Corporation, a Virginia
corporation, to purchase up to an aggregate of 18,344,845 shares of (i) common
stock, par value $1.00 per share (the "Common Shares"), and (ii) Series A ESOP
Convertible Junior Preferred Stock, without par value (the "ESOP Preferred
Shares" and, together with the Common Shares, the "Shares"), of Conrail Inc., a
Pennsylvania corporation (the "Company"), including, in each case, the
associated common stock purchase rights (the "Rights") issued pursuant to the
Rights Agreement, dated as of July 19, 1989, between the Company and First
Chicago Trust Company of New York, as Rights Agent at a price of $110 per Share,
net to the seller in cash, upon the terms and subject to the conditions set
forth in the Second Offer. All references herein to Common Shares, ESOP
Preferred Shares, or Shares shall include the associated Rights.
Shareholders whose certificates evidencing Shares ("Share Certificates")
are not immediately available or who cannot deliver their Share Certificates and
all other documents required by the Letter of Transmittal to the Depositary
prior to the Expiration Date (as defined in "Terms of the Second Offer;
Proration; Expiration Date" of the Offer to Purchase) or who cannot complete the
procedure for delivery by book-entry transfer to the Depositary's account at a
Book-Entry Transfer Facility (as defined in "Acceptance for Payment and Payment
for Shares" of the Offer to Purchase) on a timely basis and who wish to tender
their Shares must do so pursuant to the guaranteed delivery procedure described
in "Procedures for Tendering Shares" of the Offer to Purchase. See Instruction 2
of the Letter of Transmittal. Delivery of documents to a Book-Entry Transfer
Facility in accordance with the Book-Entry Transfer Facility's procedures does
not constitute delivery to the Depositary.
THE MATERIAL IS BEING SENT TO YOU AS THE BENEFICIAL OWNER OF SHARES HELD BY
US FOR YOUR ACCOUNT BUT NOT REGISTERED IN YOUR NAME. WE ARE THE HOLDER OF RECORD
OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY
BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF
TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY
YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to have us tender on your
behalf any or all of the Shares held by us for your account, upon the terms and
subject to the conditions set forth in the Second Offer.
Your attention is invited to the following:
1. The tender price is $110 per Share, net to the seller in cash.
2. The Second Offer, proration period and withdrawal rights will
expire at 12:00 midnight, New York City time, on Monday, January 6, 1997,
unless the Second Offer is extended.
<PAGE> 2
3. The Second Offer is being made for up to an aggregate of 18,344,845
Shares.
4. The Board of Directors of the Company has unanimously approved the
Second Offer and the Merger (as defined in the Offer to Purchase),
determined that the Merger Agreement and the transactions contemplated
thereby (including the Second Offer and the Merger) are in the best
interests of the Company and recommends that shareholders of the Company
who desire to receive cash for a portion of their Shares accept the Second
Offer and tender their Shares pursuant to the Second Offer.
5. The Second Offer is conditioned upon, among other things, the
Pennsylvania Control Transaction Law (as defined in the Offer to Purchase)
being inapplicable to the Company, which will require Company shareholder
approval of an amendment to the Company's Articles of Incorporation.
6. Tendering shareholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares by Purchaser
pursuant to the Second Offer.
The Second Offer is made solely by the Offer to Purchase and the related
Letter of Transmittal and is being made to all holders of Shares. Purchaser is
not aware of any state where the making of the Second Offer is prohibited by
administrative or judicial action pursuant to any valid state statute. If
Purchaser becomes aware of any valid state statute prohibiting the making of the
Second Offer or the acceptance of Shares pursuant thereto, Purchaser will make a
good faith effort to comply with such state statute. If, after such good faith
effort, Purchaser cannot comply with such state statute, the Second Offer will
not be made to (nor will tenders be accepted from or on behalf of) the holders
of Shares in such state. In any jurisdiction where the securities, blue sky or
other laws require the Second Offer to be made by a licensed broker or dealer,
the Second Offer shall be deemed to be made on behalf of Purchaser by the Dealer
Manager or one or more registered brokers or dealers licensed under the laws of
such jurisdiction.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the instruction form contained
in this letter. An envelope in which to return your instructions to us is
enclosed. If you authorize the tender of your Shares, all such Shares will be
tendered unless otherwise specified on the instruction form set forth in this
letter. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US
TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE SECOND OFFER.
<PAGE> 3
INSTRUCTIONS
WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH
UP TO AN AGGREGATE OF 18,344,845 SHARES OF
COMMON STOCK AND SERIES A ESOP CONVERTIBLE JUNIOR PREFERRED STOCK
OF CONRAIL INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated December 6, 1996, and the related Letter of Transmittal
(which, as amended from time to time, together constitute the "Second Offer"),
in connection with the offer by Green Acquisition Corp., a Pennsylvania
corporation ("Purchaser") and a wholly owned subsidiary of CSX Corporation, a
Virginia corporation, to purchase up to an aggregate of 18,344,845 shares of (i)
common stock, par value $1.00 per share (the "Common Shares"), and (ii) Series A
ESOP Convertible Junior Preferred Stock, without par value (the "ESOP Preferred
Shares" and, together with the Common Shares, the "Shares"), of Conrail Inc., a
Pennsylvania corporation (the "Company") including, in each case, the associated
common stock purchase rights (the "Rights") issued pursuant to the Rights
Agreement, dated July 19, 1989, between the Company and First Chicago Trust
Company of New York, as Rights Agent. All references herein to the Common
Shares, ESOP Preferred Shares or Shares shall include the associated Rights.
This will instruct you to tender to Purchaser the number of Shares
indicated below (or, if no number is indicated in either appropriate space
below, all Shares) held by you for the account of the undersigned, upon the
terms and subject to the conditions set forth in the Second Offer.
<TABLE>
<S> <C>
Number of Shares to be Tendered*: SIGN HERE
Shares
Account Number: SIGNATURE(S)
Dated: , 199_ PLEASE TYPE OR PRINT NAME(S) HERE
PLEASE TYPE OR PRINT ADDRESS(ES) HERE
AREA CODE AND TELEPHONE NUMBER
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY
NUMBER(S)
</TABLE>
- ---------------
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. -- Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e. 00-0000000. The table below will help determine the number
to give the payer.
<TABLE>
<CAPTION>
------------------------------------------------------------
GIVE THE TAXPAYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF -
------------------------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, any
one of the
individuals(1)
3. Husband and wife (joint account) The actual owner of
the account or, if
joint funds, either
person(1)
4. Custodian account of a minor (Uniform The minor(2)
Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if the
minor is the only
contributor, the
minor(1)
6. Account in the name of guardian or The ward, minor, or
committee for a designated ward, incompetent person(3)
minor, or incompetent person
7. a. The usual revocable savings trust The grantor-
account (grantor is also trustee) trustee(1)
b. So-called trust account that is not The actual owner(1)
a legal or valid trust under State
law
8. Sole proprietorship account The owner(4)
<CAPTION>
------------------------------------------------------------
GIVE THE TAXPAYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF -
------------------------------------------------------------
<S> <C>
9. A valid trust, estate or pension trust The Legal entity (Do
not furnish the
identifying number of
the personal
representative or
trustee unless the
legal entity itself
is not designated in
the account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or educational The organization
organization account
12. Partnership account held in the name The partnership
of the business
13. Association, club, or other tax-exempt The organization
organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a public
entity (such as a State or local
government, school district, or
prison) that receives agricultural
program payments
</TABLE>
- ------------------------------------------------------------
- ------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you do not know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file a tax return. Payers must generally withhold 31%
of taxable interest, dividend, and certain other payments to a payee who does
not furnish a taxpayer identification number to a payer. Certain penalties may
also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. -- If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 20% on any portion of an
underpayment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- if you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE
<PAGE> 1
EXHIBIT (A)(7)
RE: TENDER OFFER INSTRUCTIONS FOR
PARTICIPANTS OF CONRAIL INC. DIVIDEND REINVESTMENT PLAN
Dear Dividend Reinvestment Plan Participant:
As a participant in the Plan, we are requesting instructions on the shares of
Conrail Inc. allocated to your account. In order for you to direct the tender of
these shares you must give your tender instructions to Citibank, N.A., which is
acting as Depositary for the Offer to Purchase of Conrail Inc. Common and ESOP
Preferred Stock by Green Acquisition Corp. ("Purchaser"), a wholly owned
subsidiary of CSX Corporation.
Conrail Inc. and CSX Corporation have entered into a Merger Agreement. Under the
terms of the agreement, Purchaser is offering to purchase for cash 18,344,845
shares of Conrail Inc. Common Stock and ESOP Preferred Stock at $110 per share.
The remaining 60% would be acquired at the time of the merger for CSX stock at
an exchange ratio of 1.85619 CSX shares for each Conrail share.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE TENDER OFFER AND MERGER AND
RECOMMENDS THAT CONRAIL SHAREHOLDERS WHO DESIRE TO RECEIVE CASH FOR A PORTION OF
THEIR SHARES ACCEPT THE TENDER OFFER AND TENDER THEIR SHARES.
If you also own shares held in registered form, you would have previously
received the Second Offer to Purchase and related documents in a separate
mailing. Your registered shares may be tendered by executing a properly
completed Letter of Transmittal that was included in that package.
To tender shares held in the Plan, please complete the enclosed Instruction Card
and mail it in the return envelope provided or fax it to Citibank, N.A. at (201)
262-3240.
If you have any questions, or require additional assistance, please call
MacKenzie Partners, Inc., the Information Agent, at (800) 322-2885 or (212)
929-5500.
PLEASE NOTE: THE OFFER EXPIRES ON MONDAY, JANUARY 6, 1997 AT 12:00 MIDNIGHT.
<PAGE> 2
INSTRUCTION CARD
RE: CONRAIL INC.
DIVIDEND REINVESTMENT PLAN
To Citibank, N.A. as Depositary for the Offer to Purchase an Aggregate of
18,344,845 Shares of Conrail Inc. Common Stock and Series A ESOP Convertible
Junior Preferred Stock:
I am a participant in the above-stated Plan and, as such, I received a copy
of the Offer to Purchase, dated December 6, 1996, made by Green Acquisition
Corp., a wholly owned subsidiary of CSX Corporation, and the related Letter of
Transmittal (which together constitute the "Second Offer"), under which
18,344,845 shares of Common and Series A ESOP Convertible Junior Preferred Stock
of Conrail Inc. are to be purchased at $110 net per share for cash.
I wish to direct you to instruct First Chicago Trust Company, the Dividend
Reinvestment Agent for Conrail Inc., to tender all common shares held by the
Dividend Reinvestment Agent for my account.
...........................................
(Signature of Participant)
...........................................
(Signature of Participant)
...........................................
(Date)
If shares are held in joint names,
each co-owner must sign.
PLEASE COMPLETE THE SUBSTITUTE W-9 BELOW
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
PAYER'S NAME: CITIBANK, N.A., AS DEPOSITARY
- ----------------------------------------------------------------------------------------------------------
SUBSTITUTE PART I -- PLEASE PROVIDE YOUR TIN IN Social Security Number OR
FORM W-9 THE BOX AT RIGHT AND CERTIFY BY / /
SIGNING AND DATING BELOW. ---------------------------------
Employer Identification Number
(If awaiting TIN write "Applied For")
------------------------------------------------------------------------------
PART II -- For Payees Exempt from Backup Withholding, see the enclosed
Guidelines and complete as instructed therein.
CERTIFICATION -- Under penalties of perjury, I certify that:
DEPARTMENT OF (1) The number shown on this form is my correct Taxpayer Identification
THE TREASURY Number (or a Taxpayer Identification Number has not been issued to me and
INTERNAL either (a) I have mailed or delivered an application to receive a
REVENUE SERVICE Taxpayer Identification Number to the appropriate Internal Revenue
PAYER'S REQUEST Service ("IRS") or Social Security Administration office or (b) I intend
FOR TAXPAYER to mail or deliver an application in the near future. I understand that
IDENTIFICATION if I do not provide a Taxpayer Identification Number within sixty (60)
NUMBER (TIN) days, 31% of all reportable payments made to me thereafter will be
withheld until I provide a number), and
(2) I am not subject to backup withholding either because I have not been
notified by the IRS that I am subject to backup withholding as a result of
failure to report all interest or dividends, or the IRS has notified me
that I am no longer subject to backup withholding.
------------------------------------------------------------------------------
CERTIFICATE INSTRUCTIONS -- You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding because
of underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out item (2). (Also see instructions in the
enclosed Guidelines.)
___________________________________________________ DATE __________________,
199_
SIGNATURE
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT (a)(8)
CONTACT: CSX Kekst and Company
Thomas E. Hoppin Richard Wolff
(804) 782-1450 (212) 593-2655
FOR IMMEDIATE RELEASE
CSX CORPORATION COMMENCES SECOND TENDER OFFER FOR CONRAIL
SHARES AT A PRICE OF $110 PER SHARE
RICHMOND, VIRGINIA, DECEMBER 6, 1996 -- CSX Corporation (CSX) (NYSE: CSX) today
commenced a tender offer for up to an aggregate of 18,344,845 shares of common
stock and Series A ESOP Convertible Junior Preferred Stock of Conrail Inc.
(NYSE: CRR) at a price of $110 cash per share. As previously announced, on
November 21, CSX successfully completed its first tender offer for
approximately 19.9% of the outstanding shares of Conrail. As a result, upon
completion of the second tender offer, CSX will own approximately 40% of the
fully diluted shares of Conrail.
The second tender offer, which is being made under the previously announced
merger agreement between CSX and Conrail, will expire at midnight Eastern time
on Monday, January 6, 1997, unless otherwise extended.
The second tender offer is conditioned upon, among other things, Subchapter 25E
of the Pennsylvania Business Corporation Law being inapplicable to Conrail,
which will require an amendment to Conrail's Articles of Incorporation causing
Conrail to opt out of Subchapter 25E. The Articles amendment must be approved
by a majority of the votes cast by the Conrail shareholders. All shares
purchased by CSX in the first tender offer will be voted in favor of the
Articles amendment. A special meeting of Conrail shareholders, at which the
amendment will be voted on, is currently scheduled for 5 p.m. (EST) on
December 23, 1996. A December 5, 1996 record date for the special meeting has
been set.
John W. Snow, CSX Corporation's chairman, president and chief executive officer,
said, "With the commencement of this second tender offer, we move another step
closer to the completion of the strategic merger of Conrail and CSX and to the
realization of the substantial benefits that this combination will bring to all
of our constituencies."
CSX Corporation, headquartered in Richmond, VA, is an international
transportation company offering a variety of rail, container-shipping,
intermodal, trucking, barge, and contract logistics management services. CSX's
home page can be reached at http//www.CSX.com.
# # #
<PAGE> 1
Exhibit a(9)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. This announcement does not constitute a solicitation of
proxies for the Pennsylvania Special Meeting (as defined in the Offer
to Purchase). The Second Offer is made solely by the Offer to
purchase, dated December 6, 1996, and the related Letter of
transmittal and is being made to all holders of Shares.
the Second Offer is not being made to (nor will tenders
be accepted from or on behalf of) holders of Shares in
any jurisdiction in which the making of the Second
offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction.
in those jurisdictions where securities, blue
sky or other laws require the Second Offer to
be made by a licensed broker or dealer, the
second Offer shall be deemed to be made on
behalf of Green Acquisition Corp. by
Wasserstein Perella & Co., Inc. or
one or more registered brokers or
dealers licensed under the laws
of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
UP TO AN AGGREGATE OF 18,344,845 SHARES OF
COMMON STOCK
AND
SERIES A ESOP CONVERTIBLE JUNIOR PREFERRED STOCK
(INCLUDING, IN EACH CASE, THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
OF
CONRAIL INC.
AT
$110 NET PER SHARE
BY
GREEN ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
CSX CORPORATION
Green Acquisition Corp. ("Purchaser"), a Pennsylvania corporation and a
wholly owned subsidiary of CSX Corporation, a Virginia corporation ("Parent"),
hereby offers to purchase up to an aggregate of 18,344,845 shares of (i) common
stock, par value $1.00 per share (the "Common Shares"), and (ii) Series A ESOP
Convertible Junior Preferred Stock, without par value (the "ESOP Preferred
Shares" and, together with the Common Shares, the "Shares"), of Conrail Inc., a
Pennsylvania corporation (the "Company"), including, in each case, the
associated Common Stock Purchase Rights (the "Rights") issued pursuant to the
Rights Agreement, dated as of July 19, 1989, between the Company and First
Chicago Trust Company of New York, as Rights Agent (as amended, the "Rights
Agreement"), at a price of $110 per Share, net to the seller in cash, without
interest thereon (the "Offer Price"), upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated December 6, 1996 (the
"Offer to Purchase"), and in the related Letter of Transmittal (which, as
amended from time to time, together constitute the "Second Offer"). Unless the
context otherwise requires, all references to Common Shares, ESOP Preferred
Shares or Shares shall include the associated Rights, and all references to the
Rights shall include the benefits that may enure to holders of the Rights
pursuant to the Rights Agreement, including the right to receive any payment due
upon redemption of the Rights.
THE SECOND OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 6, 1997, UNLESS THE SECOND
OFFER IS EXTENDED.
The Second Offer is conditioned upon, among other things, the
Pennsylvania Control Transaction Law (as defined in the Offer to Purchase) being
inapplicable to the Company, which will require Company shareholder approval of
the Articles Amendment (as defined in the Offer to Purchase). The Articles
Amendment must be approved by a majority of the votes cast by the holders of
outstanding Shares, voting as a single class. Parent beneficially owns
17,860,124 Shares, representing approximately 19.9% of the Shares outstanding as
of November 27, 1996, all of which will be voted in favor of the Articles
Amendment. A special meeting of shareholders of the Company at which such
shareholder approval will be sought is currently scheduled to be held on
December 23, 1996. Other conditions to the Second Offer are set forth in Section
15 of the Offer to Purchase.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE
SECOND OFFER AND THE MERGER, DETERMINED THAT THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY (INCLUDING THE SECOND OFFER AND THE MERGER)
ARE IN THE BEST INTERESTS OF THE COMPANY AND RECOMMENDS THAT SHAREHOLDERS OF THE
COMPANY WHO DESIRE TO RECEIVE CASH FOR A PORTION OF THEIR SHARES ACCEPT THE
SECOND OFFER AND TENDER THEIR SHARES PURSUANT TO THE SECOND OFFER.
The Second Offer is being made pursuant to an Agreement and Plan of
Merger, dated as of October 14, 1996 (as amended, the "Merger Agreement"), by
and among the Company, Parent and Purchaser. The Merger Agreement provides,
among other things, that subject to the satisfaction or waiver of certain
conditions set forth in the Merger Agreement (including approval of the Merger
by the Surface Transportation Board), the Company will merge (the "Merger") with
and into Purchaser, with Purchaser continuing as the surviving corporation. In
the Merger, each outstanding Share (other than Shares held in the treasury of
the Company or owned by Parent, Purchaser or any other wholly owned subsidiary
of Parent or the Company) will be converted, at the election of the holder of
Shares, subject to certain terms and conditions, into the right to receive $110
in cash, 1.85619 shares of common stock, par value $1.00 per share ("Parent
Common Stock"), of Parent, or a combination of such cash and shares of Parent
Common Stock. The Merger Agreement provides that the aggregate number of Shares
to be converted into Parent Common Stock pursuant to the Merger shall be equal
as nearly as practicable to 60% of all outstanding Shares (excluding Shares
outstanding pursuant to the Company Stock Option Agreement (as defined in the
Offer to Purchase)), on a fully diluted basis, and that the aggregate number of
Shares to be converted into the right to receive $110 in cash per Share pursuant
to the Merger, together with the Shares acquired by Purchaser (other than
pursuant to the Company Stock Option Agreement), shall be equal as nearly as
practicable to 40% of such outstanding Shares, on a fully diluted basis.
Simultaneously with the execution of the Merger Agreement, Parent and the
Company also entered into the Parent Stock Option Agreement (as defined in the
Offer to Purchase) and the Company Stock Option Agreement, each of which is
described in Section 13 of the Offer to Purchase.
Purchaser expressly reserves the right, in its sole judgment and
subject to the terms of the Merger Agreement, at any time and from time to time
and regardless of whether any of the events set forth in Section 15 of the Offer
to Purchase shall have occurred or shall have been determined by Purchaser to
have occurred, (i) to extend the period of time during which the Second Offer is
open and thereby delay acceptance for payment of, and the payment for, any
Shares, by giving oral or written notice of such extension to the Depositary (as
defined in the Offer to Purchase) and (ii) to amend the Second Offer in any
respect by giving oral or written notice of such amendment to the Depositary.
Any such extension or amendment will be followed as promptly as practicable by a
public announcement thereof, such announcement in the case of an extension, to
be issued not later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date (as defined in the Offer to
Purchase). During any such extension, all Shares previously tendered and not
withdrawn will remain subject to the Second Offer, subject to the right of a
tendering shareholder to withdraw such shareholder's Shares.
Purchaser will, upon the terms and subject to the conditions of the
Second Offer, purchase up to an aggregate of 18,344,845 Shares on a pro rata
basis (with adjustments to avoid purchase of fractional Shares) based upon the
number of Shares properly tendered on or prior to the Expiration Date and not
withdrawn. Due to the difficulty of determining the precise number of Shares
properly tendered and not withdrawn, if proration is required, Purchaser does
not expect to announce the final results of proration or pay for Shares until at
least five New York Stock Exchange trading days after the Expiration Date.
Preliminary results of proration will be announced by press release as promptly
as practicable after the Expiration Date. Holders of Shares may obtain such
preliminary information when it becomes available from the Information Agent (as
defined in the Offer to Purchase) and may be able to obtain such information
from their brokers.
For purposes of the Second Offer, Purchaser will be deemed to have
accepted for payment, and thereby purchased, Shares validly tendered and not
properly withdrawn if, as and when Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance of such Shares for payment pursuant to the
Second Offer. In all cases, upon the terms and subject to the conditions of the
Second Offer, payment for Shares purchased pursuant to the Second Offer will be
made by deposit of the purchase price therefor with the Depositary, which will
act as agent for tendering shareholders for the purpose of receiving payment
from Purchaser and transmitting payment to validly tendering shareholders. Under
no circumstances will interest on the purchase price for Shares be paid by
Purchaser by reason of any delay in making such payment. In all cases, payment
for Shares purchased pursuant to the Second Offer will be made only after timely
receipt by the Depositary of (a) certificates for such Shares ("Certificates")
or a book-entry confirmation of the book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company or the Philadelphia
Depository Trust Company (collectively, the "Book-Entry Transfer Facilities"),
pursuant to the procedures set forth in Section 3 of the Offer to Purchase, (b)
the Letter of Transmittal (or facsimile thereof) properly completed and duly
executed, with any required signature guarantees, or an Agent's Message (as
defined in the Offer to Purchase) in connection with a book-entry transfer, and
(c) any other documents required by the Letter of Transmittal.
If, for any reason whatsoever, acceptance for payment of any Shares
tendered pursuant to the Second Offer is delayed, or if Purchaser is unable to
accept for payment or pay for Shares tendered pursuant to the Second Offer,
then, without prejudice to Purchaser's rights set forth in the Offer to
Purchase, the Depositary may, nevertheless, on behalf of Purchaser, retain
tendered Shares and such Shares may not be withdrawn except to the extent that
the tendering shareholder is entitled to and duly exercises withdrawal rights as
described in Section 4 of the Offer to Purchase. Any such delay will be followed
by an extension of the Second Offer to the extent required by law.
If any tendered Shares are not accepted for payment for any reason
pursuant to the terms and conditions of the Second Offer (including proration
due to tenders of more than 18,344,845 Shares), or if Share Certificates are
submitted evidencing more Shares than are tendered, Share Certificates
evidencing unpurchased Shares will be returned, without expense to the tendering
shareholder (or, in the case of Shares tendered by book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility pursuant to the procedure
set forth in Section 3 of the Offer to Purchase, such Shares will be credited to
an account maintained at such Book-Entry Transfer Facility), as promptly as
practicable following the expiration or termination of the Second Offer.
Except as otherwise provided in Section 4 of the Offer to Purchase,
tenders of Shares made pursuant to the Second Offer are irrevocable. Shares
tendered pursuant to the Second Offer may be withdrawn at any time prior to
12:00 Midnight, New York City time, on Monday, January 6, 1997 (or if Purchaser
shall have extended the period of time for which the Second Offer is open, at
the latest time and date at which the Second Offer, as so extended by Purchaser,
shall expire) and unless theretofore accepted for payment and paid for by
Purchaser pursuant to the Second Offer, may also be withdrawn at any time after
February 4, 1997. In order for a withdrawal to be effective, a written,
telegraphic or facsimile transmission notice of withdrawal must be timely
received by the Depositary at one of its addresses set forth on the back cover
of the Offer to Purchase. Any notice of withdrawal must specify the name of the
person who tendered the Shares to be withdrawn, the number of Shares to be
withdrawn, and, if Certificates for Shares have been tendered, the name of the
registered holder of the Shares as set forth in the tendered Certificate, if
different from that of the person who tendered such Shares. If Certificates for
Shares to be withdrawn have been delivered or otherwise identified to the
Depositary, then prior to the physical release of such Certificates, the serial
numbers shown on such Certificates evidencing the Shares to be withdrawn must be
submitted to the Depositary and the signature on the notice of withdrawal must
be guaranteed by a firm which is a bank, broker, dealer, credit union, savings
association or other entity that is a member in good standing of the Securities
Transfer Agent's Medallion Program (an "Eligible Institution"), unless such
Shares have been tendered for the account of an Eligible Institution. If Shares
have been tendered pursuant to the procedures for book-entry transfer set forth
in Section 3 of the Offer to Purchase, any notice of withdrawal must also
specify the name and number of the account at the appropriate Book-Entry
Transfer Facility to be credited with the withdrawn Shares and otherwise comply
with such Book-Entry Transfer Facility's procedures. Withdrawal of tenders of
Shares may not be rescinded, and any Shares properly withdrawn will be deemed
not to be validly tendered for purposes of the Second Offer. Withdrawn Shares
may, however, be retendered by repeating one of the procedures set forth in
Section 3 of the Offer to Purchase at any time before the Expiration Date.
Purchaser, in its sole judgment, will determine all questions as to the form and
validity (including time of receipt) of notices of withdrawal, and such
determination will be final and binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of
the General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Company has provided Purchaser with the Company's shareholder list
and security position listings for the purpose of disseminating the Second Offer
to holders of Shares. The Offer to Purchase, the related Letter of Transmittal
and other relevant materials will be mailed to record holders of Shares and will
be furnished to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the shareholder
list, or, if applicable, who are listed as participants in a clearing agency's
security position listing for subsequent transmittal to beneficial owners of
Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE SECOND OFFER.
Questions and requests for assistance or for additional copies of the
Offer to Purchase, the Letter of Transmittal or other tender offer materials may
be directed to the Information Agent or the Dealer Manager at their respective
addresses and telephone numbers as set forth below, and copies will be furnished
promptly at Purchaser's expense. No fees or commissions will be paid to brokers,
dealers or other persons (other than the Information Agent and the Dealer
Manager) for soliciting tenders of Shares pursuant to the Second Offer.
The Information Agent for the Second Offer is:
[LOGO] MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
CALL TOLL-FREE (800) 322-2885
The Dealer Manager for the Second Offer is:
WASSERSTEIN PERELLA & CO., INC.
31 West 52nd Street
New York, New York 10019
(212) 969-2700 (Call Collect)
December 6, 1996
<PAGE> 1
FOR IMMEDIATE RELEASE EXHIBIT (a)(10)
CONTACTS:
CSX Corporation Conrail Inc.
Thomas E. Hoppin Craig R. MacQueen
(804)782-1450 (215)209-4594
Kekst and Company Abernathy MacGregor Group
Richard Wolff Dan Katcher/Matthew Sherman
(212)593-2655 (212)371-5999
CSX AND CONRAIL SUE NORFOLK SOUTHERN FOR TORTIOUS INTERFERENCE
RICHMOND, VA AND PHILADELPHIA, PA, (DECEMBER 5, 1996) -- CSX
Corporation [NYSE: CSX] and Conrail Inc. [NYSE: CRR] announced today that they
have filed counterclaims, in the United States District Court for the Eastern
District of Pennsylvania, seeking damages and alleging, among other things,
that Norfolk Southern has tortiously interfered with the CSX/Conrail Merger
Agreement. It is further alleged that Norfolk Southern is acting not with the
intention or expectation of acquiring Conrail shares at $110 per share but in
order to disrupt and cripple a strategic alliance between CSX and Conrail.
Because Norfolk Southern's wrongdoing is and has been malicious and
intentional, CSX and Conrail are seeking punitive damages. A jury trial has
been demanded.
CSX and Conrail stated, "Despite Norfolk Southern's ongoing campaign to
destroy the CSX/Conrail strategic merger, we are confident that the merger will
be successfully completed. The purpose of these counterclaims is to make
Norfolk Southern pay for its improper and unlawful conduct. We look forward to
presenting these claims to a jury in Pennsylvania.
"Norfolk Southern is frustrated by the sound business judgment of the
Conrail Board that a strategic merger of equals between CSX and Conrail is in
the best interests of Conrail and its constituencies. Norfolk Southern has
flooded the marketplace with false and misleading information concerning both
the CSX/Conrail merger and its conditional hostile tender offer. Norfolk should
be held accountable for its actions."
CSX Corporation, headquartered in Richmond, VA, is an international
transportation company offering a variety of rail, container-shipping,
intermodal, trucking, barge and contract logistics management services. CSX's
home page can be reached at http://www.CSX.com.
Conrail, with corporate headquarters in Philadelphia, PA, operates an
11,000-mile rail freight network in 12 northeastern and midwestern states, the
District of Columbia, and the Province of Quebec. Conrail's home page can be
reached at http://www.CONRAIL.com.
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