SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
Schedule 14D-1
Tender Offer Statement
(Amendment No. 25)
Pursuant to
Section 14(d(1) of the Securities Exchange Act of 1934
and
Amendment No. 35
to
Schedule 13D+
and
Amendment No. 12
to
Schedule 13D++
----------------------
Conrail Inc.
(Name of Subject Company)
CSX Corporation
Norfolk Southern 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 James C. Bishop, Jr.
CSX Corporation Norfolk Southern Corporation
One James Center Three Commercial Place
901 East Cary Street Norfolk, Virginia 23510
Richmond, Virginia 23219-4031 Telephone: (757) 629-2750
Telephone: (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 Randall H. Doud
Wachtell, Lipton, Rosen & Katz Skadden, Arps, Slate, Meagher & Flom LLP
51 West 52nd Street 919 Third Avenue
New York, New York 10019 New York, New York 10022
Telephone: (212) 403-1000 Telephone: (212) 735-3000
- ----------------------
+ of CSX Corporation and Green Acquisition Corp.
++ of Norfolk Southern Corporation
SCHEDULE 14D-1
CUSIP No. 208368 10 0
- -------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
CSX CORPORATION
- -------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)[X]
(b)[ ]
- -------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------
4 SOURCE OF FUNDS
BK, WC, OO
- -------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(e) or 2(f) [ ]
- -------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
VIRGINIA
- -------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
17,775,124 Common Shares.*
- -------------------------------------------------------------------------
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
CERTAIN SHARES [X]
- -------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
Approximately 19.9% of outstanding Shares.*
- -------------------------------------------------------------------------
10 REPORTING PERSON
HC and CO
- -------------------------------------------------------------------------
- -------------
* Excludes 8,200,100 Common Shares beneficially owned by Norfolk
Southern Corporation which CSX Corporation may be deemed to
beneficially own by reason of the CSX/NSC Letter Agreement
referred to herein. Also excludes 15,955,477 Common Shares
purchasable upon exercise of the Company Stock Option. See Section
13 of the Offer to Purchase, dated December 6, 1996, and all
amendments thereto.
SCHEDULE 14D-1
CUSIP No. 208368 10 0
- -----------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
GREEN ACQUISITION CORPORATION
- -----------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [ ]
- -----------------------------------------------------------------------------
3 SEC USE ONLY
- -----------------------------------------------------------------------------
4 SOURCE OF FUNDS
AF
- -----------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(e) or 2(f) [ ]
- -----------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
PENNSYLVANIA
- -----------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
17,775,124 Common Shares.*
- -----------------------------------------------------------------------------
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
CERTAIN SHARES [X]
- -----------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
Approximately 19.9% of outstanding Shares.*
- -----------------------------------------------------------------------------
10 REPORTING PERSON
CO
- -----------------------------------------------------------------------------
- -------------
* Excludes 8,200,100 Common Shares beneficially owned by Norfolk
Southern Corporation which CSX Corporation may be deemed to
beneficially own by reason of the CSX/NSC Letter Agreement
referred to herein. Also excludes 15,955,477 Common Shares
purchasable upon exercise of the Company Stock Option. See Section
13 of the Offer to Purchase, dated December 6, 1996, and all
amendments thereto.
This Statement amends and supplements the Tender Offer Statement
on Schedule 14D-1 filed with the Securities and Exchange Commission (the
"SEC") on December 6, 1996, as previously amended and supplemented (the
"Schedule 14D-1"), by Green Acquisition Corp. ("Purchaser"), a
Pennsylvania corporation, CSX Corporation, a Virginia corporation
("Parent" or "CSX"), and Norfolk Southern Corporation, a Virginia
corporation ("NSC"), to purchase all 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 associated
common stock purchase rights, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated December 6, 1996,
the Supplement thereto, dated December 19, 1996 (the "First
Supplement"), the Second Supplement thereto, dated March 7, 1997 (the
"Second Supplement"), and the Third Supplement thereto, dated April 10,
1997 (the "Third Supplement"), and the related Letters of Transmittal
(which, together with any amendments or supplements thereto, constitute
the "Second Offer") at a purchase price of $115 per Share, net to the
tendering shareholder in cash. Capitalized terms used and not defined
herein shall have the meanings assigned such terms in the Offer to
Purchase, the First Supplement, the Second Supplement, the Third
Supplement and the Schedule 14D-1.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Item 4 is hereby amended and supplemented by the following:
(b) J.P. Morgan Securities Inc. and Merrill Lynch & Co.
(collectively, the "Arrangers"), Merrill Lynch Capital Corporation
("MLCC") and Morgan Guaranty Trust Company of New York ("Morgan") have
entered into a commitment letter with NSC, dated April 22, 1997 (the
"NSC Bank Commitment Letter"), pursuant to which MLCC and Morgan have
each committed to provide up to $500,000,000 of a total $7 billion in
required borrowings pursuant to a new senior credit facility (the "New
NSC Credit Facility") to finance NSC's requirements under the Second
Offer and the Merger, to pay its portion of related fees and expenses,
to refinance NSC's existing debt (including under the NSC Credit
Agreement) and for general corporate purposes, including to support
commercial paper issuances. It is anticipated that the Arrangers will
arrange and/or syndicate the New NSC Credit Facility with a group of
commercial banks (the "Lenders").
Morgan's and MLCC's obligations to make loans to NSC to fund the
purchase price of Shares purchased in the Second Offer and the Merger
are (and the Lenders' obligations will be) subject to the following
conditions, among others: (i) approval of the CSX/NSC Voting Trust by
all required governmental and regulatory bodies, (ii) the absence of a
material adverse change in the consolidated financial condition,
operations, assets, business or prospects of NSC and its subsidiaries or
Conrail and its subsidiaries or with respect to financial, bank
syndication or capital market conditions and (iii) the absence of any
amendments or modifications to the Second Offer and the Merger Agreement
which could, in the reasonable opinion of the Arrangers, impede or delay
the Merger or otherwise materially adversely affect the Second Offer,
the parties to the Second Offer or the Lenders.
The New NSC Credit Facility will consist of two facilities, a
$3.5 billion unsecured 364-day revolving credit facility (the "364 Day
Facility") and a $3.5 billion unsecured five-year revolving credit
facility (the "5 Year Facility"). Loans under the 364 Day Facility will
bear interest at a rate per annum equal to, at the option of NSC, any of
(i) the Eurodollar rate plus a margin depending upon NSC's senior
unsecured long-term debt ratings of between .50% and .155%, (ii) an
adjusted CD rate plus a margin depending upon NSC's senior unsecured
long-term debt ratings of between .625% and .28%, (iii) the higher of
(A) Morgan's prime rate or (B) the federal funds rate plus .50% (the
"Base Rate") or (iv) a money market rate, and will mature 364 days from
the closing under the New NSC Credit Facility (the "Closing Date"). The
5 Year Facility will mature five years after the Closing Date and loans
thereunder will bear interest at a rate per annum equal to, at the
option of NSC, any of (i) the Eurodollar rate plus a margin depending on
NSC's senior unsecured long-term debt ratings of between .45% and .135%,
(ii) an adjustable CD rate plus a margin depending on NSC's senior
unsecured long-term debt ratings of between .575% and .26%, (iii) the
Base Rate or (iv) a money market rate. The New NSC Credit Facility will
also provide for a facility fee accruing on the total amount available
or outstanding under the 364 Day Facility at a rate which will be,
depending upon NSC's senior unsecured long-term debt ratings, between
.15% and .045% per annum and a facility fee accruing on the total amount
available or outstanding under the 5 Year Facility at a rate which will
be, depending upon NSC's senior unsecured long-term debt ratings,
between .20% and .065%.
The New NSC Credit Facility will contain certain financial
covenants as well as certain restrictions on, among other things, (i)
indebtedness of subsidiaries, (ii) liens, (iii) mergers, consolidations
and sales of assets, and (iv) transactions with affiliates. The
financial covenants will require NSC to maintain a specified minimum
consolidated net worth and maximum leverage ratios.
The New NSC Credit Facility will contain certain representations
and warranties regarding, among other things, corporate existence, power
and authority, enforceability of the loan documents related to the New
NSC Credit Facility, no conflicts, financial information, absence of
material adverse change, absence of material litigation, compliance with
certain laws and regulations, certain environmental matters, taxes,
matters related to the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and absence of material misstatements. In
addition, the New NSC Credit Facility will contain certain covenants
regarding, among other things, maintenance of corporate existence,
maintenance of the business, maintenance of insurance, payment of taxes,
delivery of financial statements and reports, compliance with laws, use
of proceeds and continued ownership by NSC of certain specified
subsidiaries.
Events of default under the New NSC Credit Facility will
include, subject (in certain instances) to customary notice and cure
periods, material breaches of representations or warranties, failure to
pay principal or interest, breach of covenants, cross default to certain
other debt, material judgments, bankruptcy, failures to make payments
required to be made under ERISA, and a Change of Control (to be defined
in the agreement evidencing the New NSC Credit Facility).
In connection with the New NSC Credit Agreement, NSC has agreed
to pay the Arrangers and the Lenders certain fees, to reimburse the
Arrangers and the Lenders for certain expenses and to provide certain
indemnities, as is customary for commitments of the type described
herein.
It is anticipated that the indebtedness incurred by NSC under
the New NSC Credit Facility will be repaid from funds generated
internally by NSC and its subsidiaries, through additional borrowings,
or through a combination of such sources. No final decisions have been
made concerning the method NSC will employ to repay such indebtedness.
Such decisions when made will be based on NSC'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.
The NSC Credit Agreement will be terminated in its entirety
prior to, or concurrently with, the execution of the New NSC Credit
Facility, and all outstanding loans under the NSC Credit Agreement, if
any, will be then repaid.
The foregoing description of the NSC Bank Commitment Letter is
qualified in its entirety by reference to the full text of the
Commitment Letter, a copy of which has been included as an exhibit
hereto and is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
Item 11 is hereby amended and supplemented by the following:
(b)(3) Commitment Letter, dated April 22, 1997, among Morgan
Guaranty Trust Company of New York, J.P. Morgan
Securities Inc., Merrill Lynch Capital Corporation,
Merrill Lynch & Co. and Norfolk Southern Corporation.
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: April 25, 1997
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.
NORFOLK SOUTHERN CORPORATION
By: /s/ JAMES C. BISHOP, JR.
Name: James C. Bishop, Jr.
Title: Executive Vice President-Law
Dated: April 25, 1997
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.
ATLANTIC ACQUISITION CORPORATION
By: /s/ JAMES C. BISHOP, JR.
Name: James C. Bishop, Jr.
Title: Vice President and
General Counsel
Dated: April 25, 1997
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: April 25, 1997
EXHIBIT INDEX
Exhibit
No.
*(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.
*(a)(11) Text of Press Release issued by Parent and the Company on
December 10, 1996.
*(a)(12) Text of Advertisement published by Parent and the Company on
December 10, 1996.
*(a)(13) Text of Press Release issued by Parent on December 11, 1996.
*(a)(14) Text of Advertisement published by Parent and the Company on
December 12, 1996.
*(a)(15) Supplement to Offer to Purchase, dated December 19, 1996.
*(a)(16) Revised Letter of Transmittal.
*(a)(17) Revised Notice of Guaranteed Delivery.
*(a)(18) Text of Press Release issued by Parent and the Company on
December 19, 1996.
*(a)(19) Letter from Parent to shareholders of the Company, dated
December 19, 1996.
*(a)(20) Text of Press Release issued by Parent on December 20, 1996.
*(a)(21) Text of Press Release issued by Parent and the Company on
January 9, 1997.
*(a)(22) Text of Press Release issued by Parent and the Company on
January 13, 1997.
*(a)(23) Text of Press Release issued by Parent and the Company on
January 15, 1997.
*(a)(24) Text of Press Release issued by Parent on January 17, 1997.
(a)(25) Deleted.
*(a)(26) Text of Letter issued by Parent and the Company dated January
22, 1997.
*(a)(27) Text of Advertisement published by Parent and the Company on
January 29, 1997.
*(a)(28) Text of Press Release issued by Parent and the Company on
January 31, 1997.
*(a)(29) Text of Press Release issued by Parent on February 14, 1997.
*(a)(30) Text of Press Release issued by Parent on March 3, 1997.
*(a)(31) Second Supplement to Offer to Purchase, dated March 7, 1997.
*(a)(32) Revised Letter of Transmittal.
*(a)(33) Revised Notice of Guaranteed Delivery.
*(a)(34) Text of Press Release issued by Parent on March 7, 1997.
*(a)(35) Form of Summary Advertisement, dated March 10, 1997.
*(a)(36) Letter from Parent to employees of the Company, published on
March 12, 1997.
*(a)(37) Text of Press Release issued by CSX and NSC on April 8, 1997.
*(a)(38) Third Supplement to Offer to Purchase, dated April 10, 1997.
*(a)(39) Revised Letter of Transmittal circulated with the Third
Supplement.
*(a)(40) Revised Notice of Guaranteed Delivery circulated with the
Third Supplement.
*(b)(1) Credit Agreement, dated November 15, 1996 (incorporated by
reference to Exhibit (b)(2) to Parent and Purchaser's Tender
Offer Statement on Schedule 14D-1, as amended, dated October
16, 1996).
*(b)(2) Credit Agreement, dated as of February 10, 1997, by and among
NSC, Morgan Guaranty Trust Company of New York, as
administrative agent, Merrill Lynch Capital Corporation, as
documentation agent, and the banks from time to time parties
thereto (incorporated by reference to NSC's and Atlantic
Acquisition Corporation's Tender Offer Statement on Schedule
14D-1, dated February 12, 1997).
(b)(3) Commitment Letter, dated April 22, 1997, among Morgan Guaranty
Trust Company of New York, J.P. Morgan Securities Inc.,
Merrill Lynch Capital Corporation, Merrill Lynch & Co. and
Norfolk Southern Corporation.
*(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).
*(c)(6) Second Amendment to Agreement and Plan of Merger, dated as of
December 18, 1996, by and among Parent, Purchaser and the
Company.
*(c)(7) Form of Amended and Restated Voting Trust Agreement.
(c)(8) Deleted.
*(c)(9) Text of STB Decision No. 5 of STB Finance Docket No. 33220,
dated January 8, 1997.
(c)(10) Deleted.
*(c)(11) Text of opinion of Judge Donald VanArtsdalen of the United
States District Court for the Eastern District of Pennsylvania
as delivered from the bench on January 9, 1997.
*(c)(12) Third Amendment to Agreement and Plan of Merger, dated as of
March 7, 1997, by and among Parent, Purchaser and the Company.
*(c)(13) Form of Amended and Restated Voting Trust Agreement.
*(c)(14) Letter Agreement between CSX and NSC, dated April 8, 1997.
*(c)(15) Fourth Amendment to Agreement and Plan of Merger, dated as of
April 8, 1997, by and among CSX, Purchaser and the Company.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
- -----------
* Previously filed.
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
60 Wall Street
New York, NY 10260
J.P. MORGAN SECURITIES INC.
60 Wall Street
New York, NY 10260
MERRILL LYNCH CAPITAL CORPORATION
World Financial Center
North Tower
New York, NY 10281
MERRILL LYNCH & Co.
World Financial Center
North Tower
New York, NY 10281
April 22, 1997
COMMITMENT LETTER
Mr. William J. Romig
Vice President
Norfolk Southern Corporation
Norfolk, VA 23510-2191
Dear Bill:
You have advised us that Norfolk Southern Corporation ("NSC")
intends to participate in the acquisition of Conrail, Inc. (the
"Acquisition") by means of a joint cash tender offer in conjunction with
CSX Corporation ("CSX") (the "Tender Offer") and subsequent merger (the
"Merger"). We understand that you will require up to $7,000,000,000 of
senior bank debt facilities (the "Credit Facilities") to finance the
Acquisition, to refinance your existing bank facilities, to backstop
NSC's commercial paper program, to pay related fees and expenses, and
for general corporate purposes. You have requested us to arrange the
Credit Facilities.
J.P. Morgan Securities Inc. ("JPMSI") and Merrill Lynch & Co.
("ML&Co."; together with JPMSI, the "Arrangers") are pleased to advise
you that we are willing to use our best efforts to arrange a syndicate
of financial institutions (the "Lenders") to provide the Credit
Facilities. In addition, Morgan Guaranty Trust Company of New York
("Morgan") and Merrill Lynch Capital Corporation ("Merrill") hereby
severally commit that each will, or will cause an affiliate to, provide
up to $500,000,000 of the Credit Facilities.
Attached as Exhibit A to this letter is a Summary of Terms and
Conditions (the "Term Sheet") setting forth the principal terms and
conditions on and subject to which Morgan and Merrill are willing to
make their respective portions of the Credit Facilities available.
It is agreed that Morgan and Merrill will act as the sole agents
for, and that JPMSI and ML&Co. will act as sole arrangers of, the Credit
Facilities and that no additional agents, co-agents or arrangers will be
appointed without the prior written consent of Morgan, JPMSI, Merrill
and ML&Co. All aspects of the syndication, including decisions as to the
selection of institutions to be approached and when they will be
approached when their commitments will be accepted, which institutions
will participate, the tiering and allocations of the commitments among
the Lenders and the amount, timing and distribution of fees among the
Lenders shall, in each case, be subject to mutual agreement of the
Arrangers and NSC.
You agree to assist JPMSI and ML&Co. in forming any such
syndicate and to provide Morgan, JPMSI, Merrill, ML&Co. and the other
Lenders, promptly upon request, all information deemed reasonably
necessary by them to complete successfully the syndication, including,
but not limited to, (a) an information package for delivery to potential
syndicate members and participants and (b) all information and
projections prepared by you or your advisers relating to the
transactions described. You agree that any other financings during the
syndication process will be subject to approval by Morgan, JPMSI,
Merrill and ML&Co. You further agree to make your officers and
representatives available to participate in information meetings for
potential syndicate members at such time and places as Morgan, JPMSI,
Merrill and ML&Co. may reasonably request.
You represent and warrant and covenant that no written
information and no information (written or otherwise) given at
information meetings for potential syndicate members (collectively, the
"Information") which has been or is hereafter furnished by or on behalf
of NSC to Morgan, JPMSI, Merrill and/or ML&Co. in connection with the
transactions contemplated hereby contained (or, in the case of
Information furnished after the date hereof, will contain) as of the
time it was furnished (or is furnished) any material misstatement of
fact or omitted (or will omit) as of such time to state any material
fact necessary to make the statements therein, in the light of the
circumstances under which they were (or will be) made, not misleading;
provided, that the foregoing representation and warranty is made only to
the best of your knowledge in the case of Information relating to
Conrail, Inc. and its subsidiaries, which knowledge is principally based
upon public disclosure by Conrail, Inc.; and provided, further, that,
with respect to Information consisting of statements, estimates and
projections regarding the future performance of NSC and Conrail, Inc.
and their respective subsidiaries (collectively, the "Projections"), no
representation or warranty is made other than that the Projections have
been (or will be) prepared in good faith utilizing due and careful
consideration and the best information available to NSC at the time of
preparation thereof. You agree to supplement the Information and the
Projections from time to time until the Closing Date (as defined in the
Term Sheet) as appropriate, so that the representations and warranties
in the preceding sentence remain correct. In arranging and syndicating
the Credit Facilities, Morgan, JPMSI, Merrill and ML&Co. will use and
rely on the Information and the Projections without independent
verification thereof.
Morgan's and Merrill's commitments hereunder are subject to the
conditions that (a) after the date hereof there shall not have occurred
(i) any material adverse change in the consolidated financial position,
operations, assets, business or prospects of NSC and its subsidiaries or
Conrail and its subsidiaries or (ii) any material change in or material
disruption of financial bank syndication or capital market conditions
that in the opinion of Morgan, JPMSI, Merrill or ML&Co. could materially
and adversely affect the syndication of the Credit Facilities; (b) the
offer to purchase for the Tender Offer (the "Offer to Purchase") and the
merger agreement for the Merger shall be in the form previously
delivered to Morgan and Merrill, except for any amendments or
modifications thereto that could not, in the reasonable opinion of
Morgan and Merrill, impede or delay the Merger or otherwise materially
adversely affect the Acquisition, or the parties to the Acquisition or
the Lenders (it being understood that any amendment or modification
which (1) increases the purchase price per share, (2) decreases the
minimum condition, or (3) removes the requirement that the poison pill
or similar arrangements or any Pennsylvania statutory provision
restricting the ability to consummate the Tender Offer or the Merger be
inapplicable shall not constitute such an amendment or modification);
(c) the voting trust referred to in the Offer to Purchase (the "Voting
Trust") shall have been approved by all of the required governmental and
regulatory bodies, including, but not limited to, the Surface
Transportation Board; (d) the Voting Trust shall be reasonably
acceptable in form and substance to Morgan and Merrill and shall contain
no provisions which, in the reasonable opinion of Morgan or Merrill,
could affect NSC's ability to perform its obligations with regard to the
Credit Facilities. In addition, Morgan's and Merrill's commitment is
subject to the negotiation, execution and delivery prior to June 1, 1997
of definitive documentation with respect to the Credit Facilities
satisfactory in form and substance to Morgan, Merrill and their counsel.
Such documentation shall contain the terms and conditions set forth in
the Term Sheet and such other indemnities, covenants, representations
and warranties, events of default, conditions precedent, and other terms
and conditions (which in each case shall not be inconsistent with the
Term Sheet) as shall be satisfactory in all respects to Morgan, Merrill
and you. Matters which are not covered by the provisions of this letter
and the Term Sheet are subject to the approval of Morgan, Merrill and
you.
You agree to pay all reasonable out-of-pocket expenses of the
Agents and the Arrangers associated with the syndication of the Credit
Facilities and the preparation, execution and delivery of this letter
and the definitive financing agreements (including the reasonable fees
and disbursements and other charges of counsel). You agree to indemnify
and hold harmless of each of Morgan, JPMSI, Merrill, ML&Co. and each
director, officer, employee, affiliate and agent thereof (each, and
"Indemnified Person") against, and to reimburse each Indemnified Person,
upon its demand, for, any losses, claims, damages, liabilities or other
expenses ("Losses") to which such Indemnified Person may become subject
insofar as such Losses arise out of or in any way relate to or result
from the Acquisition, this letter or the financing contemplated hereby,
including, without imitation, Losses consisting of legal or other
expenses incurred in connection with investigating, defending or
participating in any legal proceeding relating to any of the foregoing
(whether or not such Indemnified Person is a party thereto); provided
that the foregoing will not apply to any Losses to the extent they are
found by a final decision of a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct or such
Indemnified Person. Your obligations under this paragraph shall remain
effective whether or not definitive financing documentation is executed
and notwithstanding any termination of this letter. Neither Morgan,
JPMSI, Merrill, ML&Co. nor any other Indemnified Person shall be
responsible or liable to any other person for consequential damages
which may be alleged as a result of this letter or the financing
contemplated hereby.
This letter may not be changed except pursuant to a written
agreement signed by each of the parties hereto. This letter shall be
governed by, and construed in accordance with, the laws of the State of
New York.
This letter is delivered to you on the understanding that
neither this letter nor any of its terms or substance shall be
disclosed, directly or indirectly, to any other person except (a) to
your employees, directors, agents and advisers who are directly involved
in the consideration of this matter, (b) to Conrail, Inc. and CSX and
their respective employees, directors, agents and advisers or (c) as
disclosure may be compelled in a judicial or administrative proceeding
or as otherwise required by law. All descriptions of and references to
the Credit Facilities in any filing with a governmental authority or in
any press release, advertisement or other public disclosure shall be
subject to the prior review of each of Morgan and Merrill.
If you are in agreement with the foregoing, please sign and
return to Morgan the enclosed copies of this letter no later than
11:59p.m. New York time on April 23, 1997. This offer shall terminate
at such time unless prior thereto we shall have received signed copies
of such letters.
We look forward to working with you on this transaction.
MORGAN GUARANTY TRUST COMPANY MERRILL LYNCH CAPITAL
OF NEW YORK CORPORATION
By: /S/ PATRICIA LUNKA By: /S/ CHRISTOPHER J. BIROSAK
Title: Vice President Title: Vice President
J.P. MORGAN SECURITIES INC. MERRILL LYNCH & CO.
By: /S/ DAVID A. NASS, JR. By: /S/ CHRISTOPHER J. BIROSAK
Title: Vice President Title: Managing Director
Accepted and agreed to as of the dated first above written:
NORFOLK SOUTHERN CORPORATION
By: /S/ WILLIAM J. ROMIG
Title: Vice President and Treasurer
SUMMARY OF TERMS AND CONDITIONS
FOR NORFOLK SOUTHERN CORPORATION
Borrower: Norfolk Southern Corporation ("NSC")
Amount: $7.0 billion
Purpose: To finance the purchase by NSC of a
portion of the assets of Conrail,
Inc. and its Subsidiaries, to pay
related fees and expenses, to
refinance a portion of the existing
bank debt of NSC (including under
the existing credit agreement), and
for general corporate purposes,
including a backstop for commercial
paper issuance.
Arrangers: J.P. Morgan Securities Inc. and
Merrill Lynch & Co. (collectively,
in such capacities, the
"Arrangers").
Administrative Agent: Morgan Guaranty Trust Company of New
York ("Morgan").
Documentation Agent Merrill Lynch Capital Corporation
("Merrill").
Lenders: Lenders, financial institutions and other
entities acceptable to the Arrangers and
the Borrower (the "Lenders").
Facility Description: Unsecured revolving credit facility;
$3.5 billion 364-day;
$3.5 billion five-year.
Borrowing Options: Eurodollar, Adjusted CD, Base Rate, and
Money Market.
CD will be automatically adjusted
for reserves and other regulatory
requirements. Eurodollar
adjustments for Regulation D will
be charged by Lenders individually.
Base Rate means the higher of
Morgan's prime rate or the federal
funds rate + 0.50%.
Money Market Option
Description: The Borrower may request the
Administrative Agent to solicit
competitive bids from the Lenders
at a margin over Eurodollar or at
an absolute rate. Each Lender will
bid at its own discretion for
amounts up to the total amount of
commitments and the Borrower will
be under no obligation to accept
any of the bids. Any Money Market
advances made by a Lender shall be
deemed usage of the facility for
the purpose of fees and
availability. However, each
Lender's advance shall not reduce
such Lender's obligation to lend
its pro rata share of the remaining
undrawn commitment.
Bid Selection Mechanism: The
Borrower will determine the
aggregate amount of bids, if any,
it will accept. Bids will be
accepted in order of the lowest to
the highest rates ("Bid Rates"). If
two or more Lenders bid at the same
Bid Rate and the amount of such
bids accepted is less than the
aggregate amount of such bids, then
the amount to be borrowed at such
Bid Rate will be allocated among
such Lenders in proportion to the
amount for which each Lender bid at
such Bid Rate. If the bids are
either unacceptably high to the
Borrower or are insufficient in
amount, the Borrower may cancel the
auction.
Fees and Interest Rates:
Facility Fee: A per annum fee, payable on each
Lender's commitment irrespective of
usage, calculated on a 360 day
basis and payable quarterly in
arrears and upon termination of the
facility. The Facility Fee rate
will vary according to the Pricing
Level that corresponds to the
Borrower's credit quality (see
attached Pricing Grid).
Margins: Margins for committed Eurodollar
and CD Loans are set forth in the
attached Pricing Grid.
Reference Lenders: Three institutions representative of the
Lenders.
Interest Payments: At the end of each applicable
Interest Period or quarterly, if
earlier.
Interest Periods: Syndicated Borrowings:
Eurodollar Loans - 1, 2, 3, or 6 months.
Adjusted CD Loans - 30, 60, 90, or 180
days.
Non-Syndicated Borrowings:
Money Market Eurodollar Loans -
minimum 1 month.
Money Market Absolute Rate Loans - min.
14 days.
Drawdowns: Minimum amounts of $25 million with
additional increments of $1
million. Drawdowns are at the
Borrower's option with same day
notice for Base Rate Loans, one
business day's for Money Market
Absolute Rate Loans, two business
days for Adjusted CD Loans, three
business days for Eurodollar Loans,
and five business days for Money
Market Eurodollar Loans.
Prepayments: Base Rate Loans may be prepaid at
any time on one business day's
notice. Eurodollar and Adjusted CD
Loans aggregating $25 million may
be prepaid on three business days'
notice, subject to the payment of
breakage costs, if any. Money
Market Loans may not be prepaid
before the end of an Interest
Period.
Termination or Reduction of
Commitments: The Borrower will have the right,
upon at least three business days'
notice, to terminate or cancel, in
whole or in part, the portion of
the facility in excess of aggregate
outstanding borrowings, provided
that each partial reduction shall
be in a minimum amount of at least
$25 million or any whole multiple
of $1,000,000 in excess thereof.
Representations and
Warranties: Customary for credit agreements of
this nature, with respect to the
Borrower and its Substantial
Subsidiaries, including but not
limited to:
1. Corporate existence.
2. Corporate and governmental
authorization; no contravention;
binding effect.
3. Financial information,
including unaudited proforma
statements.
4. No material adverse change
since December 31, 1996.
5. Environmental matters.
6. Compliance with laws,
including ERISA and contractual
obligations.
7. No material litigation.
8. Existence, incorporation,
etc. of Substantial Subsidiaries.
9. Payment of taxes.
10. Full disclosure.
11. Regulatory restrictions on
borrowing.
12. Not an investment company.
Conditions to Initial Borrowing: Customary for credit agreements of
this nature, with respect to the
Borrower and its Substantial
Subsidiaries, including but not
limited to:
1. Absence of default.
2. Accuracy of representations
and warranties.
3. Negotiation and execution of
satisfactory closing documentation,
including favorable legal opinions
from counsel for Agents and
Borrower.
4. Deal-specific requirements if
any; regulatory approvals
(excluding Surface
Transportation Board ("STB")
approval), licenses.
5. Termination of commitments and
repayment of all amounts
borrowed under the Credit
Agreement dated February 10,
1997.
6. The agreement dated as of
April 8, 1997 between CSX
Corporation ("CSX")and the
Borrower (the "Agreement")
shall be substantially in full
force and effect in the form
provided to the lenders, and
all obligations to be
performed by each party
thereto on or prior to the
date of the initial borrowing
shall have been performed in
full.
7. If the long term debt
securities of the Borrower are
rated below BBB-by Standard &
Poor's Corporation ("S&P") or
below Baa3 by Moody's Investor
Service, Inc. ("Moody's") at
any time prior to the
execution of definitive loan
documentation, the Borrower
and the Lenders will negotiate
in good faith to amend the
provisions of this Term Sheet
(including without limitation
by increasing the facility fee
or the margins applicable to
the loans, by determining new
compliance levels for the
financial covenants and by
including additional financial
or other covenants, or events
of default) in a manner
satisfactory to the Borrower
and the Lenders.
Conditions to All Borrowings: 1. Accuracy of representations
and warranties,
2. Absence of default.
Affirmative Covenants: Customary for credit agreements of
this nature, with respect to the
Borrower and its Substantial
Subsidiaries, including but not
limited to:
1. Information.
2. Payment of taxes and other
obligations.
3. Maintenance of property; insurance.
4. Conduct of business and maintenance
of existence.
5. Compliance with laws including
ERISA, environmental
regulations, and material
contractual obligations.
6. Inspection of property, books
and records.
7. Use of proceeds.
Negative Covenants: Customary for credit agreements of this
nature, with respect to the Borrower and
its Substantial Subsidiaries, including
but not limited to:
1. Mergers, consolidations, and
sales of assets.
2. Negative pledge.
3. Subsidiary debt limitation,
with appropriate baskets to be
determined.
4. Transactions with affiliates.
5. Borrower will at all times
own, directly or indirectly,
Norfolk and Western Railway
Company and Norfolk Southern
Railway Company.
6. No material modification to
the terms of the Agreement and
to the arrangements with
respect to the ownership and
use of the assets of Conrail,
Inc. by CSX and the Borrower.
Financial Covenants: 1. Net Worth Test. Consolidated
Book Net Worth (with
appropriate adjustments for
acquisition-related charges)
must at all times exceed [ ]
billion plus [25%] of Annual
Net Income (if positive).
2. Leverage Test. On any date,
Consolidated Total Debt of the
Borrower and its consolidated
Subsidiaries shall not exceed
[ ]% of Total Capital. Total
Capital shall be the sum of
Consolidated Total Debt and
Stockholders' Equity.
Events of Default: Customary for credit agreements of
this nature, with respect to the
Borrower and its Substantial
Subsidiaries, including but not
limited to:
1. Failure to pay any principal
under the Credit Agreement
when due or interest or fees
within 5 days.
2. Failure to comply with
covenants (with notice and
cure periods, where
appropriate).
3. Representations or warranties
materially incorrect.
4. Failure of the Borrower or its
Subsidiaries to pay when due
any other debt with an
aggregate principal amount of
$50 million or more. Cross
default to other debt of the
Borrower and its Subsidiaries
with an aggregate principal
amount of $50 million or more.
5. Change of ownership or
control.
6. Other usual defaults with
respect to the Borrower and
Substantial Subsidiaries,
including but not limited to
insolvency, bankruptcy, ERISA,
and judgment defaults.
Increased Costs/Change of
Circumstances: The credit agreement will contain
customary provisions protecting the
Lenders in the event of
unavailability of funding,
illegality, increased costs and
funding losses.
Indemnification: The Borrower will indemnify the
Lenders against all losses,
liabilities, claims, damages, or
expenses relating to their loans,
the Borrower's use of loan proceeds
or the commitments, including but
not limited to reasonable
attorneys' fees and settlement
costs (except such as result from
the indemnitee's gross negligence
or willful misconduct).
Transfers and Participations: Lenders will have the right to
transfer or sell participations in
their loans or commitments with the
transferability of voting rights in
the case of participations limited
to changes in principal, rate, fees
and term. Assignments, which must
be in amounts of at least $10
million, will be allowed with the
consent of the Borrower, and/or,
assignment will be allowed within
the Lender Group and to Lenders'
affiliates.
Administrative Fee: As agreed upon by the Borrower and
Morgan.
Auction Fee: As agreed upon by the Borrower and
Morgan.
Required Lenders: Under each Credit Facility, Lenders
holding 51% of the aggregate amount
of the commitments under such
Credit Facility.
Rate and Fee Basis: All per annum rates shall be
calculated on the basis of a year
of 360 days (or 365/366 days, in
the case of Base Rate Loans the
interest rate payable on which is
then based on the Prime Rate) for
actual days elapsed.
Expenses: Borrower will pay all legal and
other out-of-pocket expenses of
the Arrangers and the Agents
related to this transaction and any
subsequent amendments or waivers,
including the fees and expenses of
Davis Polk & Wardwell, special
counsel to the Agents.
Governing Law: State of New York.
PRICING GRID FOR NORFOLK SOUTHERN COPRORATION
364-Day Facility
(basis points per annum)
<TABLE>
<CAPTION>
=================================================================================================================================
LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V LEVEL VI
- ---------------------------------------------------------------------------------------------------------------------------------
Basis for If the Borrower's If the Borrower's If the Borrower's If the Borrower's If the Borrower's If Levels
Pricing senior unsecured senior unsecured senior unsecured long senior unsecured senior unsecured long I-V do
long term debt is long term debt is term debt is rated at long term debt is term debt is rated at do not
rated at least A by rated at least A- least BBB+ by Stan- rated at least BBB least BBB- by apply
Standard & Poor's by Standard & dard & Poor's or Baa1 by Standard & Standard & Poor's or
or A2 by Moody's. Poor's or A3 by by Moody's. Poor's or Baa2 by Baa3 by Moody's.
Moody's. Moody's.
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Facility Fee 4.5 5.5 6.0 7.0 9.0 15.0
- ---------------------------------------------------------------------------------------------------------------------------------
"Unused" Cost 4.5 5.5 6.0 7.0 9.0 15.0
- ---------------------------------------------------------------------------------------------------------------------------------
LIBOR + 15.5 17.0 21.5 25.5 31.0 50.0
- ---------------------------------------------------------------------------------------------------------------------------------
CD + 28.0 29.5 34.0 38.0 43.5 62.5
- ---------------------------------------------------------------------------------------------------------------------------------
Base Rate + 0 0 0 0 0 0
- ---------------------------------------------------------------------------------------------------------------------------------
"Used" Cost L + 20.0 L + 22.5 L + 27.5 L + 32.5 L + 40.0 L + 65.0
=================================================================================================================================
</TABLE>
PRICING GRID FOR NORFOLK SOUTHERN CORPORATION
5 Year Facility
(basis points per annum)
<TABLE>
<CAPTION>
================================================================================================================================
LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V LEVEL VI
- --------------------------------------------------------------------------------------------------------------------------------
Basis for If the Borrower's If the Borrower's If the Borrower's If the Borrower's If the Borrower's If Levels
Pricing senior unsecured senior unsecured senior unsecured long senior unsecured senior unsecured long I-V do not
long term debt is long term debt is term debt is rated at long term debt is term debt is rated at apply.
rated at least A by rated at least A- least BBB+ by Stan- rated at least BBB least BBB- by
Standard & Poor's by Standard & dard & Poor's or Baa1 by Standard & Standard & Poor's or
or A2 by Moody's. Poor's or A3 by by Moody's. Poor's or Baa2 by Baa3 by Moody's.
Moody's. Moody's.
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Facility Fee 6.5 7.5 9.0 11.0 13.5 20.0
- --------------------------------------------------------------------------------------------------------------------------------
"Unused" Cost 6.5 7.5 9.0 11.0 13.5 20.0
- --------------------------------------------------------------------------------------------------------------------------------
LIBOR + 13.5 15.0 18.5 21.5 26.5 45.0
- --------------------------------------------------------------------------------------------------------------------------------
CD + 26.0 27.5 31.0 34.0 39.0 57.5
- --------------------------------------------------------------------------------------------------------------------------------
Base Rate + 0 0 0 0 0 0
- --------------------------------------------------------------------------------------------------------------------------------
"Used" Cost L + 20.0 L + 22.5 L + 27.5 L + 32.5 L + 40.0 L + 65.0
================================================================================================================================
</TABLE>
