SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
SCHEDULE 14D-1
Tender Offer Statement
Pursuant to
Section 14(d)(1) of the Securities Exchange Act of 1934
and
Schedule 13D
(Amendment No. 8)
_______________
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
Telephone: (804) 782-1400
(Names, Addresses and Telephone Numbers of Persons 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
<PAGE>
This Statement amends and supplements the Tender Of-
fer Statement on Schedule 14D-1 filed with the Securities and
Exchange Commission (the "Commission") on October 16, 1996, as
previously amended and supplemented (the "Schedule 14D-1"), by
Green Acquisition Corp. ("Purchaser"), a Pennsylvania corpo-
ration and a wholly owned subsidiary of CSX Corporation, a Vir-
ginia corporation ("Parent"), to purchase an aggregate of
17,860,124 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 (together with the
Common Shares, the "Shares"), of Conrail Inc., a Pennsylvania
corporation (the "Company"), including, in each case, the as-
sociated Common Stock Purchase Rights, upon the terms and sub-
ject to the conditions set forth in the Offer to Purchase,
dated October 16, 1996 (the "Offer to Purchase"), as supple-
mented by the Supplement thereto, dated November 6, 1996 (the
"Supplement"), and in the related Letters of Transmittal
(which, together with any amendments or supplements thereto,
constitute the "Offer") at a purchase price of $110.00 per
Share, net to the tendering shareholder in cash. Capitalized
terms used and not defined herein shall have the meanings as-
signed such terms in the Offer to Purchase, the Supplement and
the Schedule 14D-1.
Item 6. Interest in Securities of the Subject Company
(a)-(b) The Offer expired in accordance with its terms at
12:00 midnight on November 20, 1996. In connection therewith,
on November 21, 1996, Parent issued a press release announcing,
among other things, that, as of the Expiration Date, (1) based
upon a preliminary count from the Depositary, a total of
76,629,202 Shares had been tendered under the Offer, of which
approximately 50,497,768 had been tendered by notice of
guaranteed delivery, (2) Purchaser accepted for payment
17,860,124 Shares at a price of $110 per share, representing
approximately 19.9% of the outstanding voting Shares, (3) the
preliminary proration factor is 23% for all Shares tendered and
(4) payment for Shares accepted for payment is expected to
commence promptly after the final proration factor is
announced, which is expected to occur on or about November 27,
1996. A copy of the press release is attached as Exhibit
(a)(23), and the foregoing summary description is qualified in
its entirety by reference to such exhibit.
Item 10. Additional Information
(b) On November 20, 1996, the Voting Trust Agreement was
executed and delivered, and Deposit Guaranty National Bank was<PAGE>
appointed as the Trustee thereunder. A copy of the Voting
Trust Agreement is attached as Exhibit (c)(9), and the
foregoing summary description is qualified in its entirety by
reference to such exhibit.
(e) (i) On November 19, 1996, Judge Donald W.
VanArtsdalen of the United States District Court for the
Eastern District of Pennsylvania ruled from the bench that
NSC's motion for a preliminary injunction relating to the Offer
was denied. Such ruling is attached hereto as Exhibit (c)(8),
and the foregoing summary description is qualified in its
entirety by reference to such exhibit.
(ii) On November 20, 1996, Parent and the Company
issued a joint press release stating that the United States
Court of Appeals for the Third Circuit rejected NSC's
application for an injunction relating to the Offer pending an
appeal by NSC of the November 19, 1996 decision by the United
States District Court for the Eastern District of Pennsylvania.
A copy of the press release is attached as Exhibit (a)(21), and
the foregoing summary description is qualified in its entirety
by reference to such exhibit.
(f) On November 20, 1996, Parent and the Company issued a
joint press release confirming that the two companies are
meeting with the AFL-CIO to discuss the proposed Merger. A
copy of the press release is attached as Exhibit (a)(22), and
the foregoing summary description is qualified in its entirety
by reference to such exhibit.
-2-<PAGE>
Item 11. Material to be Filed as Exhibits.
(a)(1) -- Offer to Purchase, dated October 16, 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 Nom-
inees.*
(a)(6) -- Guidelines for Certification of Taxpayer Identi-
fication Number on Substitute Form W-9.*
(a)(7) -- Text of Press Release issued by Parent on Octo-
ber 15, 1996.*
(a)(8) -- Form of Summary Advertisement, dated October 16,
1996.*
(a)(9) -- Text of Press Release issued by Parent on Octo-
ber 22, 1996.*
(a)(10) -- Text of Press Release issued by Parent on Octo-
ber 23, 1996.*
(a)(11) -- Text of Press Release issued by Parent on Octo-
ber 30, 1996.*
(a)(12) -- Text of Press Release issued by Parent on Novem-
ber 3, 1996.*
(a)(13) -- Supplement to Offer to Purchase, dated November
6, 1996.*
(a)(14) -- Revised Letter of Transmittal.*
(a)(15) -- Revised Notice of Guaranteed Delivery.*
(a)(16) -- Revised Letter to Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.*
_____________________
* Previously filed.
-3-<PAGE>
(a)(17) -- Revised Letter to Clients for use by Brokers,
Dealers, Commercial Banks, Trust Companies and
Other Nominees.*
(a)(18) -- Text of Press Release issued by Parent and the
Company on November 6, 1996.*
(a)(19) -- Text of Press Release issued by Parent and the
Company on November 13, 1996.*
(a)(20) -- Text of Press Release issued by Parent and the
Company on November 19, 1996.*
(a)(21) -- Text of Press Release issued by Parent and the
Company on November 20, 1996.
(a)(22) -- Text of Press Release issued by Parent and the
Company on November 20, 1996.
(a)(23) -- Text of Press Release issued by Parent on Novem-
ber 21, 1996.
(b)(1) -- Commitment Letter, dated October 21, 1996.*
(b)(2) -- Credit Agreement, dated November 15, 1996.*
(c)(1) -- Agreement and Plan of Merger, dated as of Octo-
ber 14, 1996, by and among Parent, Purchaser and
the Company.*
(c)(2) -- Company Stock Option Agreement, dated as of Oc-
tober 14, 1996, between Parent and the Company.*
(c)(3) -- Parent Stock Option Agreement, dated as of Octo-
ber 14, 1996, between Parent and the Company.*
(c)(4) -- Form of Voting Trust Agreement.*
(c)(5) -- Complaint in Norfolk Southern Corporation, et
al. v. Conrail Inc., et al., No. 96-CV-7167,
filed on October 23, 1996.*
(c)(6) -- First Amended Complaint in Norfolk Southern Cor-
poration, et al. v. Conrail Inc., et al., No.
96-CV-7167, filed on October 30, 1996.*
-4-<PAGE>
(c)(7) -- First Amendment to Agreement and Plan of Merger,
dated as of November 5, 1996, by and among Par-
ent, Purchaser and the Company.*
(c)(8) -- Text of ruling of Judge Donald W. VanArtsdalen
of the United States District Court for the
Eastern District of Pennsylvania on November 19,
1996.
(c)(9) -- Voting Trust Agreement, dated as of October 15,
1996, by and among Parent, Purchaser and Deposit
Guaranty National Trust.
-5-<PAGE>
SIGNATURE
After due inquiry and to the best of my 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: November 21, 1996<PAGE>
SIGNATURE
After due inquiry and to the best of my 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: November 21, 1996<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
(a)(1) -- Offer to Purchase, dated October 16, 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 Nom-
inees.*
(a)(6) -- Guidelines for Certification of Taxpayer Identi-
fication Number on Substitute Form W-9.*
(a)(7) -- Text of Press Release issued by Parent on Octo-
ber 15, 1996.*
(a)(8) -- Form of Summary Advertisement, dated October 16,
1996.*
(a)(9) -- Text of Press Release issued by Parent on Octo-
ber 22, 1996.*
(a)(10) -- Text of Press Release issued by Parent on Octo-
ber 23, 1996.*
(a)(11) -- Text of Press Release issued by Parent on Octo-
ber 30, 1996.*
(a)(12) -- Text of Press Release issued by Parent on Novem-
ber 3, 1996.*
(a)(13) -- Supplement to Offer to Purchase, dated November
6, 1996.*
(a)(14) -- Revised Letter of Transmittal.*
(a)(15) -- Revised Notice of Guaranteed Delivery.*
(a)(16) -- Revised Letter to Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.*
_____________________
* Previously filed.<PAGE>
(a)(17) -- Revised Letter to Clients for use by Brokers,
Dealers, Commercial Banks, Trust Companies and
Other Nominees.*
(a)(18) -- Text of Press Release issued by Parent and the
Company on November 6, 1996.*
(a)(19) -- Text of Press Release issued by Parent and the
Company on November 13, 1996.*
(a)(20) -- Text of Press Release issued by Parent and the
Company on November 19, 1996.*
(a)(21) -- Text of Press Release issued by Parent and the
Company on November 20, 1996.
(a)(22) -- Text of Press Release issued by Parent and the
Company on November 20, 1996.
(a)(23) -- Text of Press Release issued by Parent on Novem-
ber 21, 1996.
(b)(1) -- Commitment Letter, dated October 21, 1996.*
(b)(2) -- Credit Agreement, dated November 15, 1996.*
(c)(1) -- Agreement and Plan of Merger, dated as of Octo-
ber 14, 1996, by and among Parent, Purchaser and
the Company.*
(c)(2) -- Company Stock Option Agreement, dated as of Oc-
tober 14, 1996, between Parent and the Company.*
(c)(3) -- Parent Stock Option Agreement, dated as of Octo-
ber 14, 1996, between Parent and the Company.*
(c)(4) -- Form of Voting Trust Agreement.*
(c)(5) -- Complaint in Norfolk Southern Corporation, et
al. v. Conrail Inc., et al., No. 96-CV-7167,
filed on October 23, 1996.*
(c)(6) -- First Amended Complaint in Norfolk Southern Cor-
poration, et al. v. Conrail Inc., et al., No.
96-CV-7167, filed on October 30, 1996.*
(c)(7) -- First Amendment to Agreement and Plan of Merger,
dated as of November 5, 1996, by and among Par-
ent, Purchaser and the Company.*
-2-<PAGE>
(c)(8) -- Text of ruling of Judge Donald W. VanArtsdalen
of the United States District Court for the
Eastern District of Pennsylvania on November 19,
1996.
(c)(9) -- Voting Trust Agreement, dated as of October 15,
1996, by and among Parent, Purchaser and Deposit
Guaranty National Trust.
-3-
CONTACT: CSX Conrail
Thomas E. Hoppin Craig R. MacQueen
(804) 782-1450 (215) 209-4594
Kekst and Company Abernathy MacGregor Group
Richard Wolff Joele Frank/Dan Katcher
(212) 593-2655 (212) 371-5999
FOR IMMEDIATE RELEASE
APPEALS COURT REFUSES TO ENJOIN CSX TENDER OFFER
RICHMOND, VA and PHILADELPHIA, PA, Nov. 20, 1996 -- CSX Corpo-
ration (CSX) (NYSE: CSX) and Conrail Inc. (Conrail) (NYSE: CRR)
said today that they are pleased with the decision by the United
States Court of Appeals for the Third Circuit rejecting Norfolk
Southern's application for an injunction pending an appeal by
Norfolk Southern of yesterday's decision by the United States
District Court for the Eastern District of Pennsylvania. The
District Court decision, announced last night, denied Norfolk
Southern's motion for a preliminary injunction to block the
purchase of Conrail shares by CSX in its $110 cash tender offer for
19.9% of Conrail shares outstanding.
CSX and Conrail issued the following statement:
"We are pleased that the U.S. Court of Appeals has let stand
yesterday's District Court ruling. Despite Norfolk Southern's con-
tinuing attempts to derail the merger of Conrail and CSX, we are
committed to each other and to the great future of our combined
companies."
CSX Corporation, headquartered in Richmond, Va., is an inter-
national transportation company offering a variety of rail,
container-shipping, intermodal, trucking, barge and contract logis-
tics 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.
# # #
CONTACTS:
CSX CORPORATION CONRAIL INC.
Thomas E. Hoppin Rudy Husband
(804) 782-1450 (215) 209-4594
FOR IMMEDIATE RELEASE
CONRAIL AND CSX BEGIN DISCUSSIONS WITH AFL-CIO ON PROPOSED
MERGER
RICHMOND, VA, AND PHILADELPHIA, PA, NOV. 20, 1996 -- Conrail
and CSX confirmed that meetings have begun with the Transporta-
tion Trades Department of the AFL-CIO to discuss the proposed
merger between Conrail and CSX. Yesterday's meeting was a get-
acquainted session to establish channels of communication.
Further discussions are expected to be held as the merger pro-
ceeds. The AFL-CIO previously announced that it had formed a
coalition of rail unions to analyze the merger and to develop a
formal position.
CSX, headquartered in Richmond, Va., is an international trans-
portation 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 Co-
lumbia, 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.
# # #
CONTACT: CSX Kekst and Company
Thomas E. Hoppin Richard Wolff
(804) 782-1450 (212) 593-2655
FOR IMMEDIATE RELEASE
CSX CORPORATION SUCCESSFUL IN TENDER OFFER
FOR CONRAIL SHARES
RICHMOND, VIRGINIA, NOVEMBER 21, 1996 -- CSX Corporation (CSX)
(NYSE: CSX) today announced that its cash tender offer by its
subsidiary for shares of Conrail Inc. (NYSE: CRR) at a price of
$110 per share was oversubscribed. The offer expired at
midnight Eastern time on Wednesday, November 20, 1996.
Based on a preliminary count from the depositary for the offer,
approximately 76,629,202 shares have been tendered, of which
approximately 50,497,768 have been tendered by notice of guar-
anteed delivery. CSX's subsidiary, Green Acquisition Corp.,
accepted for payment 17,860,124 Conrail shares sought in the
offer, which represents approximately 19.9% of the outstanding
voting shares of Conrail. The preliminary proration factor
under the offer is 23% for all Conrail shares tendered. The
final proration factor is expected to be announced on or about
November 27, 1996, and it is expected that payment for the
shares that have been accepted will commence promptly thereaf-
ter.
John W. Snow, CSX Corporation's chairman, president and chief
executive officer, said, "With the successful completion of
this tender offer, we move another step closer to completing
the strategic merger of Conrail and CSX and realizing the sub-
stantial benefits that this combination will bring."
CSX Corporation, headquartered in Richmond, Va., is an interna-
tional transportation company offering a variety of rail,
container-shipping, intermodal, trucking, barge, and contract
logistics management services.
Conrail, with corporate headquarters in Philadelphia, Pa., op-
erates an 11,000-mile rail freight network in 12 northeastern
and midwestern states, the District of Columbia, and the Prov-
ince of Quebec.
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.
# # #
THE COURT: First I want to thank all counsel very
much for the very excellent briefs that have been submitted,
the pleadings that have been submitted in this matter, the very
fine presentations that have been made on behalf of their
respective clients. I'm sorry that we are pressed for time and
have been throughout this whole proceeding. That's the way
preliminary injunction applications always seem to have to
operate.
This is an important matter. As I said, I think that
even though I won't be citing a lot of cases or anything of
that sort, I think that it's more important that I make the
decision now so that the parties will have whatever appellate
rights they may have and have them promptly.
I say it is an important matter. Wasn't it Everett
Dirksen who used to say "a billion dollars here and a billion
dollars there and pretty soon you're talking about real money"?
Well, that's what this case seems to be.
First it's here in Federal Court because of claimed
Williams Act violations. The purpose of the Williams Act as to
tender offer, as I understand it at least, is to assure that
there is adequate and fair and full information provided to
shareholders so that they will be able to have an informed
basis upon which to decide whether to tender their shares, hold
their shares or perhaps sell them on the open market.<PAGE>
Plaintiffs have presented evidence and arguments that
certain of the information constituted either misstatements of
fact or omitted information that it was necessary to make in
order that the information that was provided was not mislead-
ing.
Most of those contentions, quite frankly, appear to
me to be what is generally called nitpicking or insignificant
matters. Even if there were questions about the original ten-
der offer, I am convinced that the amendments that were pro-
vided were clearly adequate to correct any deficiencies. Cer-
tainly all of the shareholders have been literally deluged in
the last few weeks with information about the proposed CSX Con-
rail merger agreement and the CSX and competing Norfolk South-
ern tender offers.
In addition there has been significant coverage in
the financial and news sections of many of the newspapers.
Obviously I would concede of course that even though other
information was provided in the papers and news media that the
Williams Act does require that the tender offeror and the
responding target corporation provide full and adequate infor-
mation. And therefore if there were incorrect statements made
in the tender offer or in the responding information by the
target corporation, it would not necessarily be corrected
because there was other public information to the contrary or
that would have corrected those statements.
-2-<PAGE>
However it is hard for me to conceive of any inter-
ested shareholder being misled in any way by the information
provided by either CSX or Conrail in their respective public
disclosures or lack of information.
Although I agree that the persistent and repeated
reference by both CSX and Conrail that the proposed merger will
be a merger of equals is somewhat indefinite in its meaning,
certainly any reasonable shareholder would recognize this ter-
minology as being a statement of opinion and that the assertion
could be made in good faith notwithstanding the rather obvious
fact that if this merger proposal as contemplated in the merger
agreement goes through, Conrail shareholders will have in
aggregate less than a controlling interest and it apparently
would be approximately one-third stake in the newly-merged
corporation.
Some of the information that plaintiffs contend must
be included would indeed make the information so voluminous
that shareholders would be inundated, and that has also been
held to be improper. The tender offers that have been provided
to the shareholders with the accompanying documents already
take several hours of careful study to read, and that's without
any of the attached exhibits.
The only relief that ordinarily would be granted or
could be granted would be to enjoin the tender offer going for-
ward until and unless proper amendments were provided to the
-3-<PAGE>
shareholders, and to extend the period of time that the tender
offer should remain open.
Of course that is one of the primary things and that
is what the plaintiffs seek by way of this preliminary injunc-
tion. To do that, it seems to me, that such preliminary
injunction would have to spell out in detail exactly what defi-
ciencies would need to be corrected. And as I understand it,
at least the primary contentions now are that it did not suf-
ficiently spell out how Lazard & Freres and the other financial
institution that provided an opinion as to a fair valuation or
fair pricing reached their conclusions and that it did not con-
tain sufficient information as to all of the factors that were
taken into consideration and how they arrived at what the syn-
ergies, what savings will be brought about by the synergies.
I don't think that those details, since they do state
in the information given what those total savings will be or
what they are projected to be, it seems to me that going into
further detail as to that would be certainly not required under
the Williams Act.
I am not convinced that the plaintiffs have estab-
lished that they are likely to succeed on any of their Williams
Act claims, particularly in light of all of the disclosures
that have been made to the shareholders.
-4-<PAGE>
Therefore, the motions for preliminary injunction for
violations of the Williams Act against the CSX tender offer
going forward will be denied.
I might add, of course, that most of the complaints
about the information that has been given is the information
that was provided by Conrail in its -- as a target in its
responses, whereas the tender offer is actually being made by
CSX. I'm not suggesting that that makes any particular differ-
ence, but I think that it may have some significance as to
whether or not the information provided by CSX complies with
the Williams Act.
There is also a question of irreparable harm. Now,
it is my understanding that in Williams Act cases where there
is a Williams Act violation that it is appropriate under cer-
tain conditions to enjoin the tender offer going forward. So I
don't think there need be shown any further irreparable harm
ordinarily in an injunction based on Williams Act violations
other than the violation itself. As I say, however, it is my
conclusion that on the basis of all of the evidence that's been
presented that there is no Williams Act violation and certainly
it's not so clear that a preliminary injunction should be
entered.
Plaintiffs also seek to jettison the merger agreement
proceeding because they claim that the board of directors of
Conrail have violated their fiduciary duties to Conrail share-
holders. Defendants counter by contending that all actions
-5-<PAGE>
they have taken and intend to take are strictly in accordance
with the law. These claims of course are all based on state
law and because Conrail's incorporated in and has its principal
place of business in Pennsylvania, it seems clear and I believe
everyone agrees that Pennsylvania corporate law applies as to
the duties of corporate directors and the rights of the share-
holders in this particular case.
In substance, as I understand it, plaintiff's primary
arguments are founded on the contention that the so-called two-
tiered back-ended merger is illegal under Pennsylvania law
because it unfairly coerces the shareholders to tender their
shares to CSX -- or rather I believe it's actually Green Acqui-
sition Corporation, but I'm using those two corporations inter-
changeably. It coerces them to do so in fear that if they fail
to tender their shares they will receive less consideration in
the later exchange of CSX stock for Conrail stock. That is,
that the back end portion or the 60 percent stock that would be
exchanged -- of Conrail stock that would be exchanged in the
back end of the deal would not be worth the amount that is
presently offered for the front end which is $110 a share.
Until the merger actually goes through, if it does,
the actual amount or valuation of the back end cannot be accu-
rately determined. CSX stock has apparently -- may advance or
it may decline in the open market prior to the time that the
exchange actually takes place. And we really have no way of
knowing what that is. There are ways of valuing it as of
-6-<PAGE>
today's market value, and it would seem clear that if you apply
today's market value and using the formulas that economists
like to use of the value of money and so on, reducing it and so
on, it would appear that the back end would not be worth the
$110.
That, however, as I see it does not make the matter
inherently unfair, unlawful or coercive as that term is being
used. By statute under the so-called Pennsylvania business
corporation law that was enacted, most recently enacted or
amended in 1990, the general duties of directors is set forth
in Section 1712 which imposes a fiduciary obligation on direc-
tors to perform their duties in a good-faith manner as direc-
tors believed to be in the best interests of the corporation.
I note that this duty is to the corporation; not necessarily to
the shareholders. These duties must be performed with such
care including reasonable inquiry, skill and diligence as a
person of ordinary prudence under similar circumstances would
exercise.
In doing this, directors by statute may rely on
information from officers and employees of the corporation
which the directors reasonably believe to be competent and
reliable, including also attorneys, CPAs and corporate commit-
tees.
The express fiduciary duties are further spelled out
in subchapter B. Section 1715 expressly and perhaps uniquely
provides that directors may consider all groups that may be
-7-<PAGE>
affected by their actions, including shareholders, employees,
customers, communities in which the corporate offices and
facilities are located and may consider both the short-term and
the long-term interests of the corporation. I note in this
regard that under the merger agreement and/or probably the
Norfolk Southern which I'll refer to as NS tender offer Conrail
will probably no longer exist as an independent stand-alone
corporate enterprise.
In addition, directors may consider the resources,
intent and conduct, both past and potential, of any party seek-
ing to acquire control. Section 1715(b) expressly provides
that in considering the best interests of the corporation or
the effects of any action, the directors are not required to
consider the interests of any group, obviously including share-
holders, as a dominant or controlling factor, nor does it spec-
ify how those interests shall be quantified or weighed by the
corporate directors.
Section 1715(c) further qualifies directors' obliga-
tions by expressly providing that the director's fiduciary
duties shall not be deemed to require directors to, one, redeem
any rights under or to modify or render inapplicable any share-
holders' rights plans. I understand that as meaning that the
directors cannot be compelled under the rubric of performing
their fiduciary duties to redeem the so-called poison pill plan
that will become applicable in this case if NS acquires more
than 10 percent of Conrail stock.
-8-<PAGE>
This section to me says that the Court may not
through a mandatory injunction compel a redemption of the
poison pill as to Norfolk Southern. Notwithstanding that under
the merger agreement the poison pill will not become applicable
to CSX acquisition when it acquires more than 10 percent of the
Conrail stock.
Section 1715(c)2 provides that the directors' fidu-
ciary duties shall not be deemed to require them to render
inapplicable or make determinations under subchapter E relating
to control transactions. In this case, the proposed opt-out of
subchapter E insofar as applicable to the CSX-Conrail merger.
In other words, the directors shall not be deemed to require
them to render inapplicable the proposed opt-out of subchapter
E insofar as applicable to this merger, and that would, I
believe, include also the proposed tender offer by -- or the
tender offer rather by NS.
Subchapter F relating to business combinations
between an acquiring party and the corporation acquired; again,
one of the things that the plaintiffs want to have the Court
enjoin. And also it does not require that subchapter F not be
applicable to NS because the merger agreement will make inap-
plicable subchapter F as to CSX. In other words, a I read the
statute, they could make it applicable to their merger partner
-- or they could make it inapplicable rather to their merger
partner and not applicable to any other potential acquirer.
-9-<PAGE>
Section 1715(c)3 further provides that fiduciary
duties do not require directors to act solely because of the
effect such action might have on an acquisition or potential
acquisition of control, or the consideration that might be
offered or paid to shareholders in such an acquisition.
And finally, Section 1715(d) states that absent
breach of fiduciary duty, lack of good faith or self-dealing,
any act by the board of directors shall be presumed to be in
the best interests of the corporation. In determining whether
the general standard of care of Section 1712 has been satis-
fied, there shall be no greater obligation to justify or a
higher burden of proof by a board of directors or individual
directors relating to or affecting an acquisition or attempted
acquisition of control than is applied to any other act by the
board of directors.
The statute goes on to say notwithstanding anything
above, any act relating to an acquisition to which a majority
of the disinterested directors shall have assented shall be
presumed to satisfy the general standards of fiduciary care set
forth in Section 1712, unless it is proven by clear and con-
vincing evidence that the disinterested directors did not
assent to such act in good faith after reasonable investiga-
tion.
I note that in this case the board of directors con-
sists of 12 persons and all except one, Mr. LeVan, are under
-10-<PAGE>
and by statutory definition disinterested directors, and obvi-
ously therefore that section of the statute is applicable in
this case.
Section 1716 reiterates that in considering the
effects of any action, directors may consider the effects on
stockholders, employees, suppliers, customers and the communi-
ties in which the officers and/or facilities are located and
all pertinent factors, and that no factor need be predominant.
In this case there has not been shown any type of
lack of good faith after a reasonable investigation by any
director so far as I have been able to determine from the evi-
dence that has been presented, including any of the exhibits
that have been presented, and clearly if there is any evidence
at all of such of which I say I find absolutely none on the
present record, it has not been proven by clear and convincing
evidence. Although there may be some argument that the direc-
tors should have made some further inquiry, they have the right
to rely on recommendations of corporate officers and those who
negotiate on their behalf and by their committees by statute.
For this reason alone, the grant of preliminary
injunction as I see it may not be granted. Basically it seems
to me that the plaintiffs are contending that the sole or at
least the primary consideration by a board of directors in con-
sidering a competing offer by potential acquirers of the
control of a corporation should be which competitor offers the
best short-range price or profit for shareholders. Clearly
-11-<PAGE>
Pennsylvania statutory law is expressly against such a
contention.
There have been allegations suggesting that the whole
CSX-Conrail merger is being motivated by Mr. LeVan or because
it would assure him by contract of certain higher personal
income. I see nothing wrong with the merger agreement provid-
ing who will be the main executive officers for the first few
years after the completion of the merger, and I think the wit-
nesses who testified explained very clearly why it was really
important that they have this assurance in order that the
merger should succeed.
I can see why the directors of Conrail might very
well want to be sure that their existing top executive officer
would continue in top management in the merged corporation, and
that the first board of directors at least will consist equally
of former CSX and former Conrail board members.
It seems clear that the Pennsylvania statutes to
which I have referred were enacted with the decisions of the
Delaware State Courts and particularly Unicol Corporation v.
Mesa Petroleum Corporation, and Revlon, Incorporated v.
MacAndrews and Forbes Holdings, Incorporated, that they had
that clearly in mind and in order to exclude those in similar
decisions that seem to mandate or suggest that the primary or
perhaps only consideration in a situation where there is an
attempted takeover or a rival competition for a takeover or a
merger between corporations is what is the best financial deal
-12-<PAGE>
for the stockholders in the short term. And most of the evi-
dence that has been presented in this case is based on the con-
tention that somehow the offer that has been made by NS is a
superior offer financially.
Although those decisions may be fine for the share-
holders whose only interest is that of a short-term financial
investment to maximize their profits, it completely ignores the
economic utility and value of corporations as a form of busi-
ness enterprise that produces goods and services for the public
and the national economy, in this case railroad services.
Directors have the right to consider these matters,
and by statute in Pennsylvania they have the right to consider
all matters including not only the rights of shareholders and
the financial interests of shareholders, but these other so-
called constituencies.
It also has not been established certainly by clear
and convincing evidence that the financial deal for the Conrail
shareholders under the merger agreement will inevitably or in
the long run prove less valuable than the offer by NS, assuming
that the NS offer could go through.
There are practical problems with the Unicol and
Revlon line of cases as I see it, aside from their myopic view
that because stockholders are at least in theory the owners of
the corporation that only their interests should be considered
-13-<PAGE>
or at a minimum must be given the highest priority and impor-
tance. The primary practical problem is that it replaces the
discretion of a corporate board of directors who hopefully are
sophisticated practical business managers, and eventually under
Unicol and those decisions place it in the hands of judges
whose business judgment, however altruistic, is certainly apt
to be less reliable than that of business managers.
Other provisions of the Pennsylvania business corpo-
rate law further confirm that the board of directors have wide
discretion in how to react to so-called takeover bids, such as
that of NS. Section 1502(a)18 provides that directors may
accept, reject, respond to or take no action in respect of an
actual or proposed acquisition, tender offer, takeover or other
fundamental change or otherwise.
The committee notes to this section say in part that
this section is intended to make clear in conjunction with
Section 1721(a) that in the first instance the decision to
accept or reject the merger or other similar proposal rests
with the directors. It is not intended that there by a manda-
tory obligation to respond to a takeover proposal. It is
intended to include among other things whether to adopt a poi-
son pill plan and if a plan is or has been adopted, whether to
redeem rights subject only to the general applicable business
judgment rule.
Section 2513 also provides that securities issued,
such as stock, may limit the rights of shareholders who own or
-14-<PAGE>
offer to acquire a specified number or percentage of shares.
The comment to Section 2513 states that the section intends to
expressly validate the adoption of poison pills including flip-
in and flip-over plans such as are apparent in the poison pill
plan applicable to Conrail. I also note in this case that the
so-called poison pill plan was adopted in 1989, long before the
present situation came into being.
Also the CSX-Conrail merger agreement was entered
into before there was any NS proposal outstanding except that
there had been some informal discussions, and it was known that
NS might be interested.
There is also a contention that somehow the CSX-
Conrail merger unlawfully and unfairly coerces Conrail share-
holders to tender their shares to Green Acquisition and to not
offer the shares to Norfolk Southern's tender offer. So far as
I can find, there is no case law, at least involving Pennsyl-
vania state law, to support the so-called coercion theory of
the type of merger proposed here.
Stockholders of Conrail do have multiple options, and
that is clear from the evidence. They may of course tender
their shares and support the CSX-Conrail merger. If all tender
their shares and the deal goes through as contemplated, share-
holders would receive $110 in cash for 40 percent of their
stock, and 1.85617 shares of CSX stock for each remaining share
of Conrail stock. They could also tender their shares and sell
19.9 percent of their stock, if all tendered, at $110 per share
-15-<PAGE>
and then all or a majority of the shareholders could vote
against the proposed opt-out of subchapter E. In the event I
don't know what NS would do with the shares of stock which
everyone agrees would be at a premium price based on the pre-
mium of acquiring control.
The evidence is clear that no one can really predict
what will be the outcome of the proposed vote on opting out of
subchapter E. It has been suggested somehow that it is illegal
or unlawful or unfair, I'm not sure what, that the new
acquirer, CSX, be allowed to vote on that opting out of chapter
E. It seems to me that all shareholders, if they are share-
holders of record on the record date have the right under the
law to vote on that matter and therefore I can see nothing
wrong with them being allowed to do so if they at that time
have acquired shares of stock in Conrail.
Shareholders have other options. They can do noth-
ing, as the board of directors and some of the witnesses who
testified do not intend to do, and could retain their shares.
If all did so, then the initial acquisition would fail utterly.
Of course it is generally believed, although there is no evi-
dence to establish this, but I would assume that it is probably
a correct prognostication that there will be enough shares ten-
dered to make the 19.9 percent.
Conrail shareholders may also tender their shares to
NS and hope that NS would be able to get their contingencies
finally met by reason perhaps of insufficient tenders to the
-16-<PAGE>
CSX offer. And if so, they might eventually receive $110 for
all of their shares.
Shareholders can also, of course, sell their shares
on the open market and let others decide what is to the best
financial advantage. With all of these options, some of which
may be more profitable to them than others in the short term
while others may, as some of the board of directors of both CSX
and Conrail apparently hope and predict and anticipate may be
more profitable in the long run.
I do not see any coercion, but only several options,
any of which will undoubtedly end up being a net return to most
shareholders far in excess of whatever their original invest-
ment may have been.
Under our laws, ordinarily corporations are operated
by a board of directors. And the board of directors have
rights to enter into certain contracts subject to limitations
in their charter and in the charter of the corporation, to the
extent that they are within their corporate powers and pursuant
to the corporate business. There is nothing that has been
called to my attention that is alleged to be beyond the board
of directors' rights in entering into the CSX-Conrail merger
agreement, despite arguments to the contrary.
Under doctrines of ordinary contract law where a law-
ful contract is entered into there is a duty of fair dealing
between the parties to carry out the terms of the agreement.
-17-<PAGE>
Although a breach of contract is not in itself unlawful in the
sense of constituting a civil tort, a breach does make that
breaching party subject to damages. In this case a break-up
fee has been stipulated to, which may be analogous to an agree-
ment for liquidated damages; that may or may not be too high,
but that is certainly at this point purely a hypothetical situ-
ation as I see it until someone attempts to assert the right to
claim a break-up fee, and then it conceivably could be liti-
gated as to whether that was excessive or so unreasonable as to
not be a proper term in the agreement.
Although a breach of contract is not a tort, there is
a tort of interference with contract. I am troubled that
everyone seems to assume that Conrail would have the right, in
fact it is contended that it has a duty to breach the essential
terms of the contract of merger, which as I see it was properly
entered into and contains no terms that are prohibited by Penn-
sylvania law, and that somehow they have the further right to
sabotage the contract, that is that somehow the board of direc-
tors have not only a right, but a duty to somehow sabotage the
contract by supporting the NS proposal. As I see it, they
would have this right and perhaps duty only if the terms of the
agreement are illegal or contrary to public policy. And, as I
pointed out, each of the alleged illegalities appear to be
authorized or at least not prohibited under Pennsylvania statu-
tory law.
-18-<PAGE>
I can find no principle difference between this and
any other contract. I won't go into any examples that might be
given, but it has been suggested that perhaps some different
law should be applied to a merger situation because sharehold-
ers are affected. Obviously any contract that is entered into
by a corporation that extends into the future may affect the
corporation's net profits or losses and also, thereby, have
effects; sometimes very disastrous effects, sometimes very fine
effects for the shareholders' financial well being.
Basically the law of Pennsylvania leaves decisions
such as what is best for the corporation to be that of the duly
elected board of directors rather than by second guessing by
the courts. In this case I am sure that the board of directors
of Conrail are in fact in a far better position than the courts
to decide what is the best interest of the corporation, which
is the test in Pennsylvania. The shareholders themselves are
in the best position to decide which of the several options are
best for them.
Finally, it has been suggested that the Pennsylvania
statutes that provide board of directors with broad discretion
in deciding mergers and how to react to takeover bids were
enacted to prevent two-tier, back-end mergers and takeovers of
the type that are here contemplated. That argument of course
is a possible argument, but I think that I am bound to follow
what are the clear wording of the statutes. I think that it is
clear from the Pennsylvania statutes, which are not ambiguous
-19-<PAGE>
and have not been argued to be ambiguous, that it is up to the
board of directors and they alone, so long as they act in good
faith after reasonable investigation, as to what is in the best
interest of the corporation. And that the directors have every
right to favor one competing bid over another and particularly
have the right to resist hostile takeovers by such methods as
poison pills, shareholders' rights, making recommendations to
shareholders, favoring one proposed corporate party over the
other, and using stock options in favor of one corporation over
another, and include extensive so-called break-up fees. And
certainly it seems to me that it can agree not to stop their
proposal after signing a merger agreement, which is essentially
what as I see it is the arguments made that somehow this merger
should be enjoined at this stage of the proceeding.
Again, let me repeat I am unable to find that the
plaintiffs are likely to succeed on any of the claims for which
they seek preliminary injunctive relief. I do not find that
the grant of a preliminary injunction would be in the best
interest of the public. A preliminary injunction would not
maintain the status quo, which is one of the things it is sup-
posed to do, but would radically alter the position of the par-
ties. I do not find that there has been irreparable harm; as I
pointed out before, that probably would not be required if
there was a Williams Act violation, but I do not find that they
have shown the probability of success on any of the Williams
Act claims.
-20-<PAGE>
One other feature, of course, of this action, so far
as the state law claims are filed, it is said that they are
filed as representative actions on behalf of the corporation.
I think it's very questionable whether injunctive relief would
be appropriate in any event, because it seems to me that in the
normal situation where there is a claim that the directors have
violated their fiduciary duties it's a claim for monetary dam-
ages and not for equitable relief. That has not been argued in
this case and I don't want to go into that at this time, but it
is certainly a matter that would make it seem to me that it
would be questionable whether equitable relief should be given.
Therefore, for the reasons that I have stated, all
requests and all present motions for preliminary injunctive
relief will be and are denied.
-21-
VOTING TRUST AGREEMENT
THIS VOTING TRUST AGREEMENT, dated as of October 15,
1996, by and among CSX Corporation, a Virginia corporation
("Parent"), Green Acquisition Corp., a Pennsylvania corporation
and a wholly-owned subsidiary of Parent ("Acquiror"), and De-
posit Guaranty National Bank, a national banking association
(the "Trustee"),
W I T N E S S E T H:
WHEREAS, Parent, Acquiror and Conrail Inc., a Penn-
sylvania corporation (the "Company"), have entered into an
Agreement and Plan of Merger, dated as of October 14, 1996 (as
it may be amended from time to time, the "Merger Agreement";
capitalized terms used but not defined herein shall have the
meanings set forth therein), pursuant to which (i) Acquiror
shall commence the Offer (and in certain circumstances a Second
Offer) (collectively, the "Tender Offer") for shares of Common
Stock of the Company (all such shares accepted for payment pur-
suant to the Tender Offer or otherwise received, acquired or
purchased by or on behalf of Parent or Acquiror, including pur-
suant to the Option Agreement, the "Acquired Shares"), and (ii)
the Company will merge with Acquiror pursuant to the Merger;
WHEREAS, Parent, Acquiror and the Company have en-
tered into a Stock Option Agreement, dated as of October 14,
1996 (as it may be amended from time to time, the "Option<PAGE>
-2-
Agreement") providing Parent and Acquiror the option to pur-
chase 15,955,477 shares of common stock of the Company;
WHEREAS, Parent and Acquiror wish (and are obligated
pursuant to the Merger Agreement and the Option Agreement),
simultaneously with the acceptance for payment of such Acquired
Shares pursuant to the Tender Offer, the Option Agreement or
otherwise to deposit such Shares of Common Stock in an indepen-
dent, irrevocable voting trust, pursuant to the rules of the
Surface Transportation Board (the "STB"), in order to avoid any
allegation or assertion that the Parent or the Acquiror is con-
trolling or has the power to control the Company prior to the
receipt of any required STB approval or exemption;
WHEREAS, neither the Trustee nor any of its affili-
ates has any officers or board members in common or any direct
or indirect business arrangements or dealings (as described in
Paragraph 9 hereof) with the Parent or the Acquiror or any of
their affiliates; and
WHEREAS, the Trustee is willing to act as voting
trustee pursuant to the terms of this Trust Agreement and the
rules of the STB,
NOW THEREFORE, the parties hereto agree as follows:
1. Creation of Trust -- The Parent and the Acquiror
hereby appoint Deposit Guaranty National Bank as Trustee here-
under, and Deposit Guaranty National Bank hereby accepts said<PAGE>
-3-
appointment and agrees to act as Trustee under this Trust
Agreement as provided herein.
2. Trust is Irrevocable -- This Trust Agreement and
the nomination of the Trustee during the term of the trust
shall be irrevocable by the Parent and the Acquiror and their
affiliates and shall terminate only in accordance with, and to
the extent of, the provisions of Paragraphs 8 and 14 hereof.
3. Deposit of Trust Stock -- The Parent and the Ac-
quiror agree that, prior to acceptance of Acquired Shares pur-
chased pursuant to the Tender Offer, the Acquiror will direct
the depositary for the Tender Offer to transfer to the Trustee
any such Acquired Shares purchased pursuant to the Tender
Offer. The Parent and the Acquiror also agree that simulta-
neously with receipt, acquisition or purchase of any additional
shares of Common Stock by either of them, directly or indi-
rectly, or by any of their affiliates, including, without limi-
tation, upon any exercise of the option provided for in the
Option Agreement, they will transfer to the Trustee the cer-
tificate or certificates for such shares. All such certifi-
cates shall be duly endorsed or accompanied by proper instru-
ments duly executed for transfer thereof to the Trustee or
otherwise validly and properly transferred, and shall be ex-
changed for one or more Voting Trust Certificates substantially
in the form attached hereto as Exhibit A (the "Trust Certifi-
cates"), with the blanks therein appropriately filled in. All<PAGE>
-4-
shares of Common Stock at any time delivered to the Trustee
hereunder are called the "Trust Stock." The Trustee shall pre-
sent to the Company all certificates representing Trust Stock
for surrender and cancellation and for the issuance and deliv-
ery to the Trustee of new certificates registered in the name
of the Trustee or its nominee.
4. Powers of Trustee -- The Trustee shall be pres-
ent, in person or represented by proxy, at all annual and spe-
cial meetings of shareholders of the Company so that all Trust
Stock may be counted for the purposes of determining the pres-
ence of a quorum at such meetings. Parent and Acquiror agree,
and the Trustee acknowledges, that the Trustee shall not par-
ticipate in or interfere with the management of the Company and
shall take no other actions with respect to the Company except
in accordance with the terms hereof. The Trustee shall exer-
cise all voting rights in respect of the Trust Stock to approve
and effect the Merger, and in favor of any proposal or action
necessary or desirable to effect, or consistent with the effec-
tuation of, the Parent and Acquiror's acquisition of the Com-
pany, pursuant to the Merger Agreement, and without limiting
the generality of the foregoing, 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 Securities and Exchange
Commission, in which one slate of nominees shall support the
effectuation of the Merger and another slate oppose it, then
the Trustee shall vote in favor of the slate supporting the<PAGE>
-5-
effectuation of the Merger. In addition, for so long as the
Merger Agreement is in effect, the Trustee shall exercise all
voting rights in respect of the Trust Stock, to cause any other
proposed merger, business combination or similar transaction
(including, without limitation, any consolidation, sale or pur-
chase of assets, reorganization, recapitalization, liquidation
or winding up of or by the Company) involving the Company, but
not involving the Parent or one of its subsidiaries or affili-
ates (otherwise than in connection with a disposition pursuant
to Paragraph 8), not to be effected. In addition, the Trustee
shall exercise all voting rights in respect of the Trust Stock
in favor of any proposal or action necessary or desirable to
dispose of Trust Stock in accordance with Paragraph 8 hereof.
Except as provided in the three immediately preceding sen-
tences, the Trustee shall vote all shares of Trust Stock with
respect to all matters, including without limitation the elec-
tion or removal of directors, voted on by the shareholders of
the Company (whether at a regular or special meeting or pursu-
ant to a unanimous written consent) in the same proportion as
all shares of Common Stock (other than Trust Stock) are voted
with respect to such matters. In exercising its voting rights
in accordance with this Paragraph 4, the Trustee shall take
such actions at all annual, special or other meetings of stock-
holders of the Company or in connection with any and all con-
sents of shareholders in lieu of a meeting. <PAGE>
-6-
5. Further Provisions Concerning Voting of Trust
Stock -- The Trustee shall be entitled and it shall be its duty
to exercise any and all voting rights in respect of the Trust
Stock either in person or by proxy, as herein provided (includ-
ing without limitation Paragraphs 4 and 8(b) hereof), unless
otherwise directed by the STB or a court of competent jurisdic-
tion. Subject to Paragraph 4, the Trustee shall not exercise
the voting powers of the Trust Stock in any way so as to create
any dependence or intercorporate relationship between (i) any
or all of the Parent, the Acquiror and their affiliates, on the
one hand, and (ii) the Company or its affiliates, on the other
hand. The term "affiliate" or "affiliates" wherever used in
this Trust Agreement shall have the meaning specified in
Section 11323(c) of Title 49 of the United States Code, as
amended. The Trustee shall not, without the prior approval of
the STB, vote the Trust Stock to elect any officer, director,
nominee or representative of the Parent, the Acquiror or their
affiliates as an officer or director of the Company or of any
affiliate of the Company. The Trustee shall be kept informed
respecting the business operations of the Company by means of
the financial statements and other public disclosure documents
periodically filed by the Company and affiliates of the Company
with the Securities and Exchange Commission (the "SEC") and the
STB, and by means of information respecting the Company
contained in such statements and other documents filed by the
Parent with the SEC and the STB, copies of which shall be<PAGE>
-7-
promptly furnished to the Trustee by the Company or the Parent,
as the case may be, and the Trustee shall be fully protected in
relying upon such information. Notwithstanding the foregoing
provisions of this Paragraph 5 or any other provision of this
Agreement, however, the registered holder of any Trust
Certificate may at any time with the prior written approval of
the Company -- but only with the prior written approval of the
STB -- instruct the Trustee in writing to vote the Trust Stock
represented by such Trust Certificate in any manner, in which
case the Trustee shall vote such shares in accordance with such
instructions.
6. Transfer of Trust Certificates -- The Trust Cer-
tificates shall be transferable only with the prior written
consent of the Company. They may be transferred on the books
of the Trustee by the registered holder upon the surrender
thereof properly assigned, in accordance with rules from time
to time established for that purpose by the Trustee. Until so
transferred, the Trustee may treat the registered holder as
owner for all purposes. Each transferee of a Trust Certificate
issued hereunder shall, by his acceptance thereof, assent to
and become a party to this Trust Agreement, and shall assume
all attendant rights and obligations. Any such transfer in
violation of this Paragraph 6 shall be null and void.
7. Dividends and Distributions -- Pending the termi-
nation of this Trust as hereinafter provided, the Trustee<PAGE>
-8-
shall, immediately following the receipt of each cash dividend
or cash distribution as may be declared and paid upon the Trust
Stock, pay the same over to or as directed by the Acquiror or
to or as directed by the holder of Trust Certificates hereunder
as then appearing on the books of the Trustee. The Trustee
shall receive and hold dividends and distributions other than
cash upon the same terms and conditions as the Trust Stock and
shall issue Trust Certificates representing any new or addi-
tional securities that may be paid as dividends or otherwise
distributed upon the Trust Stock to the registered holders of
Trust Certificates in proportion to their respective interests.
8. Disposition of Trust Stock; Termination of Trust
-- (a) This Trust is accepted by the Trustee subject to the
right hereby reserved in the Parent at any time to direct the
sale or other disposition of the whole or any part of the Trust
Stock, but only as permitted by subparagraph (e) below, whether
or not an event described in subparagraph (b) below has oc-
curred. The Trustee shall take all actions reasonably re-
quested by the Parent (including, without limitation, exercis-
ing all voting rights in respect of Trust Stock) in favor of
any proposal or action necessary or desirable to effect, or
consistent with the effectuation of or with respect to any pro-
posed sale or other disposition of the whole or any part of the<PAGE>
-9-
Trust Stock by the Acquiror or Parent that is otherwise permit-
ted pursuant to this Paragraph 8, including, without limita-
tion, in connection with the exercise by Parent of its regis-
tration rights under the Merger Agreement. The Trustee shall
be entitled to rely on a certification from the Parent, signed
by its President or one of its Vice Presidents and under its
corporate seal that a disposition of the whole or any part of
the Trust Stock is being made in accordance with the require-
ments of subparagraph (e) below. In the event of a permitted
sale of Trust Stock by the Acquiror, the Trustee shall, to the
extent the consideration therefor is payable to or controllable
by the Trustee, promptly pay, or cause to be paid, upon the
order of the Acquiror the net proceeds of such sale to the reg-
istered holders of the Trust Certificates in proportion to
their respective interests. It is the intention of this Para-
graph that no violation of 49 U.S.C. Section 11323 will result
from a termination of this Trust.
(b) In each case under this subparagraph (b), with
the prior written consent of the Company, in the event the STB
by final order shall (i) approve or exempt the acquisition of
control of the Company by the Acquiror, the Parent or any of
their affiliates or (ii) approve or exempt a merger between the
Company and the Acquiror, the Parent or any of their affili-
ates, then immediately upon the direction of the Parent and the
delivery of a certified copy of such order of the STB or other
governmental authority with respect thereof, or, in the event<PAGE>
-10-
that Subtitle IV of Title 49 of the United States Code, or
other controlling law, is amended to allow the Acquiror, the
Parent or their affiliates to acquire control of the Company
without obtaining STB or other governmental approval, upon
delivery of an opinion of independent counsel selected by the
Trustee that no order of the STB or other governmental author-
ity is required, the Trustee shall either (x) transfer to or
upon the order of the Acquiror, the Parent or the holder or
holders of Trust Certificates hereunder as then appearing on
the records of the Trustee, its right, title and interest in
and to all of the Trust Stock then held by it (or such portion
as is represented by the Trust Certificates in the case of such
an order by such holders) in accordance with the terms, condi-
tions and agreements of this Trust Agreement and not thereto-
fore transferred by it as provided in subparagraph (a) hereof,
or (y) if shareholder approval has not previously been ob-
tained, vote the Trust Stock with respect to any such merger
between the Company and the Acquiror, the Parent or any affili-
ate of either as directed by the holder or holders of a major-
ity in interest of the Trust Certificates, and upon any such
merger this Trust shall cease and come to an end.
(c) (i) Upon consummation of the Merger, the Trust
Stock shall be canceled and retired and shall cease to exist in
accordance with Section 2.1(c) of the Merger Agreement, and
thereafter this Trust shall cease and come to an end. <PAGE>
-11-
(ii) In the event that the Merger Agreement termi-
nates in accordance with its terms, Parent shall use its best
efforts to sell the Trust Stock during a period of two years
after such termination or such extension of that period as the
STB shall approve and the Company shall reasonably approve.
Any such disposition shall be subject to the requirements of
subparagraph (e) below, and to any jurisdiction of the STB to
oversee Parent's divestiture of Trust Stock. At all times, the
Trustee shall continue to perform its duties under this Trust
Agreement and, should Parent be unsuccessful in its efforts to
sell or distribute the Trust Stock during the period referred
to, the Trustee shall then as soon as practicable, and subject
to the requirements of subparagraph (e) below, sell the Trust
Stock for cash to eligible purchasers in such manner and for
such price as the Trustee in its discretion shall deem reason-
able after consultation with Parent. (An "eligible purchaser"
hereunder 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.) Parent agrees to cooper-
ate with the Trustee in effecting such disposition and the
Trustee agrees 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 this Trust
Agreement, including subparagraph (e) below, and with the re-
quirements of the terms of any STB or court order. The pro-
ceeds of the sale shall be distributed to or upon the order of<PAGE>
-12-
Parent or, on a pro rata basis, to the holder or holders of the
Trust Certificates hereunder as then known to the Trustee. The
Trustee may, in its reasonable discretion, require the sur-
render to it of the Trust Certificates hereunder before paying
to the holder his share of the proceeds. Upon disposition of
all the Trust Stock pursuant to this paragraph 8(c)(ii), this
Trust shall cease and come to an end.
(d) Unless sooner terminated pursuant to any other
provision herein contained, this Trust Agreement shall termi-
nate on December 31, 2016, and may be extended by the parties
hereto, so long as no violation of 49 U.S.C. Section 11323 will
result from such termination or extension. All Trust Stock and
any other property held by the Trustee hereunder upon such ter-
mination shall be distributed to or upon the order of the Ac-
quiror. The Trustee may, in its reasonable discretion, require
the surrender to it of the Trust Certificates hereunder before
the release or transfer of the stock interests evidenced
thereby.
(e) No disposition of Trust Stock under this para-
graph 8 or otherwise hereunder shall be made except pursuant to
one or more broadly distributed public offerings and subject to
all necessary regulatory approvals, if any. Notwithstanding
the foregoing, Trust Stock may be distributed as otherwise di-
rected by Parent, with the prior written consent of the Com-
pany, in which case the Trustee shall be entitled to rely on a<PAGE>
-13-
certificate of Parent (acknowledged by the Company) that such
person or entity to whom the Trust Stock is disposed is not an
affiliate of the Parent and has all necessary regulatory au-
thority, if any is necessary, to purchase such Trust Stock.
The Trustee shall promptly inform the STB of any transfer or
disposition of Trust Stock pursuant to this Paragraph 8.
(f) Except as expressly provided in this Paragraph
8, the Trustee shall not dispose of, or in any way encumber,
the Trust Stock, and any transfer, sale or encumbrance in vio-
lation of the foregoing shall be null and void.
9. Independence of the Trustee -- Neither the
Trustee nor any affiliate of the Trustee may have (i) any of-
ficers, or members of their respective boards of directors, in
common with the Acquiror, the Parent, or any affiliate of ei-
ther, or (ii) any direct or indirect business arrangements or
dealings, financial or otherwise, with the Acquiror, the Parent
or any affiliate of either, other than dealings pertaining to
the establishment and carrying out of this voting trust. Mere
investment in the stock or securities of the Acquiror or the
Parent or any affiliate of either by the Trustee, short of ob-
taining a controlling interest, will not be considered a pro-
scribed business arrangement or dealing, but in no event shall
any such investment by the Trustee in voting securities of the
Acquiror, the Parent or their affiliates exceed five percent of
their outstanding voting securities and in no event shall the<PAGE>
-14-
Trustee hold a proportion of such voting securities so substan-
tial as to permit the Trustee in any way to control or direct
the affairs of the Acquiror, the Parent or their affiliates.
Neither the Acquiror, the Parent nor their affiliates shall
purchase the stock or securities of the Trustee or any affili-
ate of the Trustee.
10. Compensation of the Trustee -- The Trustee shall
be entitled to receive reasonable and customary compensation
for all services rendered by it as Trustee under the terms
hereof and said compensation to the Trustee, together with all
counsel fees, taxes, or other expenses reasonably incurred
hereunder, shall be promptly paid by the Acquiror or the Par-
ent.
11. Trustee May Act Through Agents -- The Trustee
may at any time or from time to time appoint an agent or agents
and may delegate to such agent or agents the performance of any
administrative duty of the Trustee.
12. Concerning the Responsibilities and Indemnifica-
tion of the Trustee -- The Trustee shall not be liable for any
mistakes of fact or law or any error of judgment, or for any
act or omission, except as a result of the Trustee's willful
misconduct or gross negligence. The Trustee shall not be an-
swerable for the default or misconduct of any agent or attorney
appointed by it in pursuance hereof if such agent or attorney<PAGE>
-15-
has been selected with reasonable care. The duties and respon-
sibilities of the Trustee shall be limited to those expressly
set forth in this Trust Agreement. The Trustee shall not be
responsible for the sufficiency or the accuracy of the form,
execution, validity or genuineness of the Trust Stock, or of
any documents relating thereto, or for any lack of endorsement
thereon, or for any description therein, nor shall the Trustee
be responsible or liable in any respect on account of the iden-
tity, authority or rights of the persons executing or deliver-
ing or purporting to execute or deliver any such Trust Stock or
document or endorsement or this Trust Agreement, except for the
execution and delivery of this Trust Agreement by this Trustee.
The Acquiror and the Parent agree that they will at all times
protect, indemnify and save harmless the Trustee, its direc-
tors, officers, employees and agents from any loss, cost or
expense of any kind or character whatsoever in connection with
this Trust except those, if any, growing out of the gross neg-
ligence or willful misconduct of the Trustee, and will at all
times themselves undertake, assume full responsibility for, and
pay all costs and expense of any suit or litigation of any
character, including any proceedings before the STB, with re-
spect to the Trust Stock of this Trust Agreement, and if the
Trustee shall be made a party thereto, the Acquiror or the Par-
ent will pay all costs and expenses, including reasonable coun-
sel fees, to which the Trustee may be subject by reason
thereof; provided, however, that the Acquiror and the Parent<PAGE>
-16-
shall not be responsible for the cost and expense of any suit
that the Trustee shall settle without first obtaining the
Parent's written consent. The Trustee may consult with counsel
and the opinion of such counsel shall be full and complete au-
thorization and protection in respect of any action taken or
omitted or suffered by the Trustee hereunder in good faith and
in accordance with such opinion.
13. Trustee to Give Account to Holders -- To the
extent requested to do so by the Acquiror or any registered
holder of a Trust Certificate, the Trustee shall furnish to the
party making such request full information with respect to (i)
all property theretofore delivered to it as Trustee, (ii) all
property then held by it as Trustee, and (iii) all actions
theretofore taken by it as Trustee.
14. Resignation, Succession, Disqualifications of
Trustee -- The Trustee, or any trustee hereafter appointed, may
at any time resign by giving forty-five days' written notice of
resignation to the Parent and the STB. The Parent shall at
least fifteen days prior to the effective date of such notice
appoint a successor trustee which shall (i) satisfy the re-
quirements of Paragraph 9 hereof and (ii) be a corporation or-
ganized and doing business under the laws of the United States<PAGE>
-17-
or of any State thereof and authorized under such laws to exer-
cise corporate trust powers, having a combined capital and sur-
plus of at last $50,000,000 and subject to supervision or ex-
amination by federal or state authority. If no successor
trustee shall have been appointed and shall have accepted ap-
pointment at least fifteen days prior to the effective date of
such notice of resignation, the resigning Trustee may petition
any competent authority or court of competent jurisdiction for
the appointment of a successor trustee. Upon written assump-
tion by the successor trustee of the Trustee's powers and
duties hereunder, a copy of the instrument of assumption shall
be delivered by the Trustee to the Parent and the STB and all
registered holders of Trust Certificates shall be notified of
its assumption, whereupon the Trustee shall be discharged of
the powers and duties of the Trustee hereunder and the succes-
sor trustee shall become vested with such powers and duties.
In the event of any material violation by the Trustee of the
terms and conditions of this Trust Agreement, the Trustee shall
become disqualified from acting as trustee hereunder as soon as
a successor trustee shall have been selected in the manner pro-
vided by this paragraph.
15. Amendment -- Subject to the requirements of Sec-
tion 1.9 of the Merger Agreement, this Trust Agreement may from
time to time be modified or amended by agreement executed by
the Trustee, the Acquiror (if executed prior to the Merger),
the Parent and all registered holders of the Trust Certificates<PAGE>
-18-
(i) pursuant to an order of the STB, (ii) with the prior ap-
proval of the STB, (iii) in order to comply with any order of
the STB or (iv) upon receipt of an opinion of counsel satisfac-
tory to the Trustee and the holders of Trust Certificates that
an order of the STB approving such modification or amendment is
not required and that the amendment is consistent with the
STB's regulations regarding voting trusts.
16. Governing Law; Powers of the STB -- The provi-
sions of this Trust Agreement and of the rights and obligations
of the parties hereunder shall be governed by the laws of the
State of Pennsylvania, except that to the extent any provision
hereof may be found inconsistent with subtitle IV, title 49,
United States Code or regulations promulgated thereunder, such
statute and regulations shall control and such provision hereof
shall be given effect only to the extent permitted by such
statute and regulations. In the event that the STB shall, at
any time hereafter by final order, find that compliance with
law requires any other or different action by the Trustee than
is provided herein, the Trustee shall act in accordance with
such final order instead of the provisions of this Trust Agree-
ment.
17. Counterparts -- This Trust Agreement is executed
in four counterparts, each of which shall constitute an origi-
nal, and one of which shall be held by each of the Parent and
the Acquiror and the other two shall be held by the Trustee,<PAGE>
-19-
one of which shall be subject to inspection by holders of Trust
Certificates on reasonable notice during business hours.
18. Filing With the STB -- A copy of this Agreement
and any amendments or modifications thereto shall be filed with
the STB by the Acquiror.
19. Successors and Assigns -- This Trust Agreement
shall be binding upon the successors and assigns to the parties
hereto, including without limitation successors to the Acquiror
and the Parent by merger, consolidation or otherwise. The par-
ties agree that the Company shall be an express third party
beneficiary of this Trust Agreement. Except as otherwise ex-
pressly set forth herein, any consent required from the Company
hereunder shall be granted or withheld in the Company's sole
discretion.
20. Succession of Functions -- The term "STB" in-
cludes any successor agency or governmental department that is
authorized to carry out the responsibilities now carried out by
the STB with respect to the consideration of the consistency
with the public interest of rail mergers and combinations, the
regulation of voting trusts in respect of the acquisition of
securities of rail carriers or companies controlling them, and
the exemption of approved rail mergers and combinations from
the antitrust laws. <PAGE>
-20-
21. Notices -- Any notice which any party hereto may
give to the other hereunder shall be in writing and shall be
given by hand delivery, or by first class registered mail, or
by overnight courier service, or by facsimile transmission con-
fined by one of the aforesaid methods, sent,
If to Purchaser or Acquiror, to:
CSX Corporation
One James Center
901 East Cary Street
Richmond, Virginia 23219
Attention: General Counsel
If to the Trustee, to:
Deposit Guaranty National
One Deposit Guaranty Plaza,
8th Floor
Jackson, Mississippi 39201
Attention: Corporate Trust Department
With a required copy to:
Deposit Guaranty National Bank
c/o Commercial National Bank in Shreveport
333 Texas Street
Shreveport, LA 71101
Attention: Corporate Trust Department
And if to the holders of Trust Certificates, to them at their
addresses as shown on the records maintained by the Trustee.
22. Remedies -- Each of the parties hereto acknowl-
edges and agrees that in the event of any breach of this Agree-
ment, each non-breaching party would be irreparably and immedi-
ately harmed and could not be made whole by monetary damages.
It is accordingly agreed that the parties hereto (a) will<PAGE>
-21-
waive, in any action for specific performance, the defense of
adequacy of a remedy at law and (b) shall be entitled, in addi-
tion to any other remedy to which they may be entitled at law
or in equity, to an order compelling specific performance of
this Agreement in any action instituted in any state or federal
court sitting in Philadelphia, Pennsylvania. Each party hereto
consents to personal jurisdiction in any such action brought in
any state or federal court sitting in Philadelphia, Pennsylva-
nia.
IN WITNESS WHEREOF, CSX Corporation and Green Acqui-
sition Corp. have caused this Trust Agreement to be executed by
their authorized officers and their corporate seals to be af-
fixed, attested by their Secretaries or Assistant Secretaries,
and Deposit Guaranty National Bank has caused this Trust Agree-
ment to be executed by its authorized officer or agent and its
corporate seat to be affixed, attested to by its Secretary or
one of its Assistant Secretaries or other authorized agent, all
as of the day and year first above written.
Attest: CSX CORPORATION
/s/ Rachel E. Geiersbach By/s/ William H. Sparrow
Asst. Secretary Vice President - Financial
Planning<PAGE>
-22-
Attest: GREEN ACQUISITION CORP.
/s/ Alan A. Rudnick By/s/ Paul R. Goodwin
Asst. Secretary CFO and Treasurer
Attest: COMMERCIAL NATIONAL BANK,
AGENT FOR DEPOSIT GUARANTY
NATIONAL BANK
/s/ Malcolm F. Stadtlander By/s/ Linda H. Trichel
Trust Officer Linda H. Trichel
Trust Officer<PAGE>
No.________________ EXHIBIT A
_______ Shares
VOTING TRUST CERTIFICATE
FOR
COMMON STOCK
OF
CONRAIL NC.
INCORPORATED UNDER THE LAWS OF
THE STATE OF PENNSYLVANIA
THIS IS TO CERTIFY that __________ will be entitled,
on the surrender of this Certificate, to receive on the termi-
nation of the Voting Trust Agreement hereinafter referred to,
or otherwise as provided in Paragraph 8 of said Voting Trust
Agreement, a certificate or certificates for __________ shares
of the Common Stock, $1.00 par value, of Conrail Inc., a Penn-
sylvania corporation (the "Company"). This Certificate is is-
sued pursuant to, and the rights of the holder hereof are sub-
ject to and limited by, the terms of a Voting Trust Agreement,
dated as of October 15, 1996, executed by CSX Corporation, a
Virginia corporation, Green Acquisition Corp., a Pennsylvania
corporation, and Deposit Guaranty National Bank, as Trustee (as
it may be amended from time to time, the "Voting Trust Agree-
ment"), a copy of which Voting Trust Agreement is on file in
the office of said Trustee at One Deposit Guaranty Plaza, 8th
Floor, Jackson, Mississippi 39201 and open to inspection of any
stockholder of the Company and the holder hereof. The Voting
Trust Agreement, unless earlier terminated (or extended) pursu-
ant to the terms thereof, will terminate on December 31, 2016,
so long as no violation of 49 U.S.C. Section 11323 will result
from such termination.<PAGE>
-2-
The holder of this Certificate shall be entitled to
the benefits of said Voting Trust Agreement, including the
right to receive payment equal to the cash dividends, if any,
paid by the Company with respect to the number of shares repre-
sented by this Certificate.
This Certificate shall be transferable only on the
books of the undersigned Trustee or any successor, to be kept
by it, on surrender hereof by the registered holder in person
or by attorney duly authorized in accordance with the provi-
sions of said Voting Trust Agreement, and until so transferred,
the Trustee may treat the registered holder as the owner of
this Voting Trust Certificate for all purposes whatsoever, un-
affected by any notice to the contrary.
By accepting this Certificate, the holder hereof
assents to all the provisions of, and becomes a party to, said
Voting Trust Agreement.
IN WITNESS WHEREOF, the Trustee has caused this Cer-
tificate to be signed by its officer duly authorized.
Dated:
DEPOSIT GUARANTY
NATIONAL BANK
By_________________________
Authorized Officer<PAGE>
-3-
[FORM OF BACK OF VOTING TRUST CERTIFICATE]
FOR VALUE RECEIVED ___________________ hereby sells,
assigns, and transfers unto __________ the within Voting Trust
Certificate and all rights and interests represented thereby,
and does hereby irrevocably constitute and appoint ____________
Attorney to transfer said Voting Trust Certificate on the books
of the within mentioned Trustee, with full power of substitu-
tion in the premises.
___________________________
Dated:
In the Presence of:
___________________________
