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SCHEDULE 14A
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
CONRAIL INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NORFOLK SOUTHERN CORPORATION
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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PRELIMINARY COPY
SPECIAL MEETING OF SHAREHOLDERS
OF
CONRAIL INC.
TO BE HELD ON NOVEMBER 14, 1996
-----------------------
PROXY STATEMENT
OF
NORFOLK SOUTHERN CORPORATION
-----------------------
SOLICITATION OF PROXIES
IN OPPOSITION TO THE PROPOSED AMENDMENT TO THE
ARTICLES OF INCORPORATION OF CONRAIL INC.
This Proxy Statement and the enclosed [GOLD] proxy card are furnished by
Norfolk Southern Corporation, a Virginia corporation ("Norfolk Southern"), in
connection with its solicitation of proxies to be used at a special meeting
of shareholders of Conrail Inc., a Pennsylvania corporation ("Conrail" or the
"Company"), and at any adjournments, postponements or reschedulings thereof
(the "Special Meeting"). Pursuant to this Proxy Statement, Norfolk Southern
is soliciting proxies from holders of shares (the "Shareholders") of the
common stock of Conrail, par value $1.00 per share (the "Common Shares"), and
the Series A ESOP Convertible Junior Preferred Stock, without par value
("ESOP Preferred Shares" and, together with the Common Shares, the "Shares"),
to vote AGAINST Conrail's proposal (the "Amendment Proposal") to amend the
Articles of Incorporation of Conrail to opt out of Subchapter E of Chapter 25
of the Pennsylvania Business Corporation Law of 1988, as amended (the "Fair
Value Statute"). According to the preliminary Conrail Proxy Statement filed
with the Securities and Exchange Commission (the "SEC") on October 16, 1996
(the "Conrail Proxy Statement"), Conrail has fixed November 14, 1996 as the
date of the Special Meeting and October 25, 1996 as the record date for
determining those Shareholders who will be entitled to vote at the Special
Meeting (the "Record Date"). This Proxy Statement and the enclosed proxy are
first being sent or given to Shareholders on or about October , 1996. The
principal executive offices of Conrail are located at 2001 Market Street, Two
Commerce Square, Philadelphia, Pennsylvania, 19101-1417.
On October 24, 1996, Atlantic Acquisition Corporation ("AAC"), a
wholly-owned subsidiary of Norfolk Southern, commenced a tender offer (the
"Norfolk Southern Cash Offer") for all outstanding Common Shares and ESOP
Preferred Shares, including, in each case, the associated Common Stock
Purchase Rights issued pursuant to the Rights Agreement, dated as of July 19,
1989, as amended, between Conrail and First Chicago Trust Company of New
York, as Rights Agent (the "Rights Agreement"), at a price of $100 per Share,
net to the seller in cash, without interest thereon. The terms and conditions
of the Norfolk Southern Cash Offer are set forth in an Offer to Purchase (the
"Norfolk Southern Offer to Purchase") which has been included as an exhibit
to a Schedule 14D-1 filed by Norfolk Southern with the SEC on October 24,
1996. The Norfolk Southern Cash Offer of $100 per Share represents a premium
of $11.49 (13%) over the blended per Share value of CSX's 40% cash and 60%
stock proposal, based upon the closing sale price per share of CSX's common
stock as reported on the New York Stock Exchange Inc. Composite Tape (the
"Composite Tape") on October 22, 1996, the last trading day prior to the
public announcement of the Norfolk Southern Cash Offer. Shareholders are
referred to the Norfolk Southern Offer to Purchase for a more detailed
description of the terms and conditions of the Norfolk Southern Cash Offer.
The purpose of the Norfolk Southern Cash Offer is to acquire control of,
and ultimately the entire equity interest in, the Company. Norfolk Southern
is seeking to negotiate with the Company a definitive merger agreement
pursuant to which the Company would, as soon as practicable following
consummation of the Norfolk Southern Cash Offer, consummate a merger or
similar business combination with Norfolk Southern or a direct or indirect
subsidiary of Norfolk Southern (the "Proposed Norfolk Southern/Conrail
Merger"). In the Proposed Norfolk Southern/Conrail Merger, each Common Share
and ESOP Preferred
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Share then outstanding (other than Shares held by the Company or any
subsidiary of the Company, Shares owned by Norfolk Southern, AAC or any
direct or indirect subsidiary of Norfolk Southern) would be converted into
the right to receive an amount in cash equal to the price per Share paid
pursuant to the Norfolk Southern Cash Offer.
According to the Conrail Proxy Statement, on October 14, 1996, Conrail
entered into an Agreement and Plan of Merger (the "CSX/Conrail Merger
Agreement") by and among Conrail, CSX Corporation, a Virginia corporation
("CSX") and Green Acquisition Corp., a Pennsylvania corporation and
wholly-owned subsidiary of CSX (the "CSX Acquisition Sub"), providing for the
merger of Conrail with and into CSX Acquisition Sub (the "CSX/Conrail
Proposed Merger"). According to the Conrail Proxy Statement, the CSX/Conrail
Merger Agreement provides that a maximum of 40% of the Shares, on a fully
diluted basis, would be acquired by CSX for cash at $92.50 per Share, and the
remaining 60% of the Shares would be acquired by CSX for stock at an exchange
ratio of 1.85619 CSX shares for each Share (the "CSX Exchange Ratio").
Pursuant to the CSX/Conrail Merger Agreement, CSX commenced a tender offer
(the "CSX Tender Offer" and, together with the CSX/Conrail Proposed Merger
and related transactions, the "CSX Acquisition Proposal") on October 16,
1996, to purchase 19.9% of the outstanding Shares. The terms and conditions
of the CSX Tender Offer are set forth in an Offer to Purchase (the "CSX Offer
to Purchase") which has been filed with the SEC. In the CSX Offer to
Purchase, CSX states that certain provisions of Pennsylvania law "effectively
preclude" CSX from purchasing 20% or more of the Shares in the CSX Tender
Offer.
As described in more detail in this Proxy Statement, Norfolk Southern does
not believe that the Amendment Proposal is in the Shareholders' best
interests at this time. IF APPROVED AND IMPLEMENTED, THE AMENDMENT PROPOSAL
COULD RESULT IN CSX GAINING CONTROL OF CONRAIL AND COULD PREVENT SHAREHOLDERS
FROM RECEIVING THE SUPERIOR VALUE REPRESENTED BY THE NORFOLK SOUTHERN CASH
OFFER.
Norfolk Southern stands ready to enter into immediate negotiations with
Conrail concerning a superior alternative to the CSX/Conrail Proposed Merger.
The Norfolk Southern Cash Offer also constitutes an invitation to the Board
of Directors of Conrail to enter into merger negotiations with Norfolk
Southern.
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IMPORTANT
REJECTION OF THE AMENDMENT PROPOSAL WILL BE AN IMPORTANT STEP IN SECURING
THE SUCCESS OF THE NORFOLK SOUTHERN CASH OFFER. HOWEVER, YOU MUST TENDER YOUR
SHARES PURSUANT TO THE NORFOLK SOUTHERN CASH OFFER IF YOU WISH TO PARTICIPATE
IN THE NORFOLK SOUTHERN CASH OFFER. YOUR VOTE AGAINST THE AMENDMENT PROPOSAL
DOES NOT OBLIGATE YOU TO TENDER YOUR SHARES PURSUANT TO THE NORFOLK SOUTHERN
CASH OFFER, AND YOUR FAILURE TO VOTE AGAINST THE AMENDMENT PROPOSAL DOES NOT
PREVENT YOU FROM TENDERING YOUR SHARES PURSUANT TO THE NORFOLK SOUTHERN CASH
OFFER.
REJECTION OF THE AMENDMENT PROPOSAL WILL ALSO SEND AN IMPORTANT MESSAGE TO
YOUR BOARD THAT YOU WANT THEM TO NEGOTIATE WITH NORFOLK SOUTHERN IN AN EFFORT
TO MAXIMIZE THE VALUE OF YOUR SHARES.
EVEN IF YOU HAVE ALREADY SENT A PROXY TO THE BOARD OF DIRECTORS OF CONRAIL,
YOU HAVE EVERY RIGHT TO CHANGE YOUR VOTE. YOU MAY REVOKE THAT PROXY AND VOTE
AGAINST THE AMENDMENT PROPOSAL BY SIGNING, DATING AND MAILING THE ENCLOSED
[GOLD] PROXY IN THE ENCLOSED ADDRESSED ENVELOPE. NO POSTAGE IS NECESSARY IF
YOUR PROXY IS MAILED IN THE UNITED STATES.
PLEASE SIGN, DATE AND MAIL THE [GOLD] PROXY TODAY.
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY OR HOW FEW SHARES YOU OWN.
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THIS PROXY STATEMENT IS NOT AN OFFER TO BUY ANY SHARES. SUCH AN OFFER IS
MADE ONLY THROUGH THE NORFOLK SOUTHERN OFFER TO PURCHASE.
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REASONS TO VOTE AGAINST
THE AMENDMENT PROPOSAL
The Conrail Board of Directors has scheduled the Special Meeting and
intends to solicit votes to approve the Amendment Proposal. Norfolk Southern
believes that there is no reason for the Conrail Board to require
Shareholders to vote on the Amendment Proposal now, nor is there any reason
for Shareholders to opt out of the Fair Value Statute which protects their
ability as Shareholders to receive the best value for their Shares. Since the
Conrail Board is insisting on proceeding with a Shareholder vote on November
14, 1996, Norfolk Southern believes that Shareholders can best protect their
interests and maximize the value of their investment by voting AGAINST the
Amendment Proposal.
Set forth below are several reasons to vote AGAINST the Amendment
Proposal.
THE NORFOLK SOUTHERN CASH OFFER REPRESENTS A SUPERIOR VALUE FOR SHAREHOLDERS.
Norfolk Southern believes that the consummation of the Norfolk Southern
Cash Offer would be more beneficial to Shareholders and to the Company than
if the Company is acquired by CSX. Advantages of the Norfolk Southern Cash
Offer, as compared to the CSX Tender Offer, include:
o Superior Price. The price per Share offered to Shareholders in the
Norfolk Southern Cash Offer ($100) is higher than the price per
Share being offered in the CSX Tender Offer ($92.50). In fact, the
Norfolk Southern Cash Offer of $100 per Share represents a premium
of $11.49 (13%) over the blended per Share value of CSX's 40% cash
and 60% stock proposal, based upon the closing sale price per share
of CSX's common stock as reported on the Composite Tape on October
22, 1996, the last trading day prior to the public announcement of
the Norfolk Southern Cash Offer.
o More in the Near Term. Under the CSX Acquisition Proposal, a
maximum of 40% of the outstanding Shares would be exchanged for
cash in the near term and the remaining 60% of the Shares would not
be exchanged or converted until the back-end CSX/Conrail Proposed
Merger is consummated, which could take a year or longer. Under the
Norfolk Southern Cash Offer, up to 100% of the Shares could be
tendered and exchanged for cash upon the closing of the Norfolk
Southern Cash Offer.
o Greater Amount of Cash. The Norfolk Southern Cash Offer pays cash
for 100% of the outstanding Shares. Under the CSX Acquisition
Proposal, only 40% of the outstanding Shares could be exchanged for
cash in the CSX Tender Offer and CSX/Conrail Proposed Merger. The
remaining 60% would be exchanged for CSX shares only upon the
completion of the second step of the CSX/Conrail Proposed Merger.
o Greater Certainty of Payment. Norfolk Southern is prepared to
establish a voting trust under which it would acquire for cash 100%
of the Shares pursuant to the Norfolk Southern Cash Offer and the
Proposed Norfolk Southern/Conrail Merger without waiting for
approval by the Surface Transportation Board (the "STB") of Norfolk
Southern's acquisition of control, which could take a year or
longer. In contrast, CSX is only prepared to acquire for cash 40%
of the Shares pursuant to the CSX Tender Offer without the approval
of the STB and has conditioned its obligation to exchange CSX
shares for the remaining 60% of the Shares upon receipt of such
approval.
o Continued Equity Risk. More than half (60%) of the consideration
offered under the CSX Acquisition Proposal consists of stock. The
value you would receive for your Shares in the back-end CSX/Conrail
Proposed Merger would fluctuate with the value of the CSX shares.
Completing the back-end CSX/Conrail Proposed Merger could take a
year or longer. Accordingly, the value of the consideration you
would receive under the CSX Acquisition Proposal would be subject
to market fluctuations and could diminish. Further, because the CSX
Exchange Ratio lacks a collar or other value protective device,
there is no limit to how far the value of the stock component of
the consideration could decrease.
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YOU HAVE NOTHING TO GAIN FROM APPROVING THE AMENDMENT PROPOSAL.
o The Fair Value Statute Protects Shareholders. We believe that
Conrail deliberately has not opted out of the Fair Value Statute
previously because of the protection it provides to Shareholders.
If you opt out of the Fair Value Statute now, you will give up an
important layer of Shareholder protection. You would give up a
valuable choice. As described in more detail below, the Fair Value
Statute provides that upon a person acquiring 20% or more of a
registered Pennsylvania corporation such as Conrail, a shareholder
may make a written demand on the acquiring person for the payment
of cash in an amount equal to the "fair value" of each voting share
as of the date on which the control transaction occurs. The Fair
Value Statute provides for a judicial appraisal procedure and, as
further described below, defines "fair value" to be not less than
the highest price per share paid by the acquiror during the 90-day
period ending on and including the date on which the acquiror
acquired 20% of the voting shares plus any possible control
premium. The practical effect is that the Fair Value Statute places
a floor upon the consideration that Shareholders can receive in a
control transaction or in an acquisition of the Company by an
acquiring person. Norfolk Southern believes that it would be unwise
for Shareholders to opt out of a protective statute that could
result in Shareholders receiving a higher price for their Shares.
A VOTE AGAINST THE AMENDMENT PROPOSAL WILL HELP PRESERVE YOUR OPTIONS AND
YOUR ABILITY TO MAXIMIZE THE VALUE OF YOUR SHARES.
o By voting against the Amendment Proposal, Shareholders can preserve
their flexibility to pursue alternatives to maximize the value of
their Shares. In particular, a vote against the Amendment Proposal
would help preserve the existence of the Norfolk Southern Cash
Offer. The Conrail Proxy Statement states that the purpose of the
Amendment Proposal is to permit Conrail to opt out of these
provisions of Pennsylvania law so that CSX can purchase a maximum
of 40% of the fully diluted Shares for $92.50. Further, because
Conrail has granted CSX a lockup option to purchase 15,955,477
Common Shares under certain circumstances, including if CSX
purchases the Shares under the CSX Tender Offer, CSX would be in a
position to bring its interest in Conrail to a majority voting
interest. Consequently, CSX could itself cause the CSX/Conrail
Proposed Merger to be approved without the vote of any other
Shareholder, thereby acquiring Conrail by purchasing from
Shareholders only 40% of the Shares for cash. The Norfolk Southern
Cash Offer provides cash for up to 100% of the Shares.
YOU CAN TAKE TWO IMMEDIATE STEPS TO HELP OBTAIN THE MAXIMUM VALUE FOR YOUR
SHARES:
o Return your [GOLD] proxy card and vote AGAINST the Amendment
Proposal; and
o Make your views known to Conrail's Board of Directors.
By taking these steps, you will preserve the Shareholder protections which
you currently enjoy and will send a clear message to Conrail's Board of
Directors that they should take actions to maximize the value of your
investment by removing any obstacles to the Norfolk Southern Cash Offer.
THE AMENDMENT PROPOSAL
According to the Conrail Proxy Statement, at the Special Meeting,
Shareholders will be asked to vote on the following proposal:
An amendment (the "Amendment") of the Articles of Incorporation of
Conrail is hereby approved and adopted, by which, upon the effectiveness
of such amendment, Article Ten thereof will be amended and restated in its
entirety as follows: "Subchapter E, Subchapter G and Subchapter H of
Chapter 25 of the Pennsylvania Business Corporation Law of 1988, as
amended, shall not be applicable to the Corporation"; and further, that
the Board of Directors of Conrail, in its discretion, shall be authorized
to direct certain executive officers of Conrail to file or not file the
Articles of Amendment of Conrail's Articles of Incorporation reflecting
such Amendment or to terminate the Articles of Amendment prior to their
effective date, if the Board determines such action to be in the best
interests of Conrail.
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Subchapter E of Chapter 25 of the Pennsylvania Business Corporation Law of
1988, as amended, provides that any holder of voting shares of a Pennsylvania
registered corporation that becomes the subject of a "control transaction"
(as described below) is entitled to receive cash for each of such person's
voting shares in an amount equal to the "fair value" of each voting share as
of the date on which such control transaction occurred. The Fair Value
Statute defines "fair value" to be not less than the highest price per share
paid by the acquiror in a control transaction at any time during the 90-day
period ending on and including the date of the control transaction, plus, to
the extent not reflected in such price paid, an increment representing any
value, including, without limitation, any proportion of any value payable for
control of such corporation. A "control transaction" is defined as the
acquisition by a person (or group of persons acting in concert) of voting
power over voting shares of a registered corporation which would entitle the
holders of such shares to cast 20% or more of the votes that all shareholders
would be entitled to cast in an election of directors of such corporation.
The Fair Value Statute provides for a judicial appraisal process when
requested by a shareholder in situations where the shareholder and the
controlling person or group are unable to agree on the fair value of the
shares or on a binding procedure to determine the fair value of the shares.
Following a control transaction, the Fair Value Statute provides that
shareholders are entitled to demand that they be paid the fair value of their
shares.
SUMMARY OF THE CSX ACQUISITION PROPOSAL
The following description of the CSX Acquisition Proposal is based upon
the Conrail Proxy Statement and is qualified in its entirety by reference to
the full text thereof.
The CSX/Conrail Merger Agreement provides for the merger of Conrail with
and into CSX Acquisition Sub. Under the terms of the CSX/Conrail Merger
Agreement, a maximum of 40% of the Shares would be acquired for cash at
$92.50 per Share, and the remaining 60% of the Shares would be acquired for
CSX stock at the CSX Exchange Ratio. As part of the CSX Acquisition Proposal,
CSX has commenced the CSX Tender Offer at $92.50 per Share for an aggregate
of approximately 19.9% of the outstanding Shares. Conrail states in the
Conrail Proxy Statement that the CSX Tender Offer is for 19.9% of the Shares,
rather than 40%, because, certain provisions of Pennsylvania law effectively
preclude CSX from purchasing 20% or more of the Shares in the CSX Tender
Offer or in any other manner (except in the CSX/Conrail Proposed Merger). The
Conrail Proxy Statement further states that the purpose of the Amendment
Proposal is to permit Conrail to opt out of such provisions of Pennsylvania
law so that CSX can purchase a maximum of 40% of the fully diluted Shares for
$92.50 per Share in cash. As described in the CSX Tender Offer, if CSX
acquires 40% of the Shares, such Shares will be required to be voted for the
CSX/Conrail Proposed Merger and, therefore, the approval of the CSX/Conrail
Proposed Merger by the Shareholders will be virtually certain. In addition,
Conrail and CSX have entered into an option agreement (the "CSX Lockup Option
Agreement") pursuant to which Conrail has granted to CSX an option (the "CSX
Lockup Option"), to purchase 15,955,477 Common Shares, exercisable under
certain circumstances, including its purchase of Shares under the CSX Tender
Offer. If CSX acquires 40% of the Shares and the CSX Lockup Option is
exercised, the approval of the CSX/Conrail Proposed Merger by the
Shareholders would be certain. Therefore, if the Amendment Proposal is
adopted, CSX would be in a position to acquire up to 40% of the fully diluted
Shares, and to exercise the CSX Lockup Option that would bring its interest
up to a majority interest, and CSX could itself cause the CSX/Conrail Proposed
Merger to be approved without the vote of any other Shareholders.
The obligations of CSX and Conrail to effect the CSX/Conrail Proposed
Merger are subject to various conditions, including the approval of the
Shareholders of the CSX/Conrail Proposed Merger, the approval of the
shareholders of CSX with respect to, among other things, the issuance of
shares of CSX common stock in the CSX/Conrail Proposed Merger, and the STB
having issued a final decision approving, exempting or otherwise authorizing
consummation of the CSX/Conrail Proposed Merger and all other material
transactions contemplated by the CSX/Conrail Merger Agreement as may require
such authorizations and which, among other things, does not impose on CSX,
Conrail or any of their respective subsidiaries terms or conditions that
materially and adversely affect the long-term benefits expected to be
received by CSX from the transactions contemplated by the CSX/Conrail Merger
Agreement.
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CERTAIN LITIGATION
On October 23, 1996, Norfolk Southern, AAC and Kathryn B. McQuade filed a
Complaint for Declaratory and Injunctive Relief against Conrail, its
directors and CSX in the United States District Court for the Eastern
District of Pennsylvania. The Complaint alleges, among other things, that the
defendants have breached their fiduciary duties with respect to the Amendment
Proposal; that the defendants have breached their fiduciary duties with
respect to the Rights Agreement; that the defendants have breached their
fiduciary duties with respect to the Pennsylvania Business Combination
Statute; that the defendants have breached their fiduciary duties with
respect to certain lock-up provisions contained in the CSX/Conrail Merger
Agreement; that the "Continuing Director" requirement of the Rights Agreement
is void under Pennsylvania law and under Conrail's Articles of Incorporation
and By-laws and constitutes a breach of the director defendants' duty of
loyalty; that the defendants have violated Sections 14 (a), (d) and (e) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
rules and regulations promulgated thereunder; and that Conrail and its
directors are estopped from effectuating a sale of Conrail without giving
Norfolk Southern an adequate opportunity to present its competing tender
offer.
The plaintiffs seek declaratory relief and an order preliminarily and
permanently enjoining the defendants, their directors, officers, partners,
employees, agents, subsidiaries and affiliates, and all other persons acting
in concert with or on behalf of the defendants directly or indirectly, from:
(a) commencing or continuing a tender offer for the Shares or other Conrail
securities; (b) seeking Shareholder approval of the Amendment Proposal, or,
in the event it has been approved by the Shareholders, from taking any steps
to make the Amendment Proposal effective; (c) taking any action to redeem
rights issued pursuant to the Rights Agreement or render the Rights Agreement
inapplicable as to any offer by CSX without, at the same time, taking such
action as to the Norfolk Southern Cash Offer; (d) taking any action to
enforce the "Continuing Director" requirement of the Rights Agreement;
(e) taking any action to enforce the termination fee granted to CSX by
Conrail under the CSX/Conrail Merger Agreement or the CSX Lockup Option
Agreement; (f) failing to take such action as is necessary to exempt Norfolk
Southern's proposed acquisition of Conrail from the provisions of the
Pennsylvania Business Combination Statute; and (g) holding the Special
Meeting until all necessary corrective disclosures have been made and
adequately disseminated to the Shareholders.
In addition, the defendants seek compensatory damages, the costs and
disbursements of the action and such other and further relief as the court
deems just and proper.
The defendants also moved on October 23, 1996, for an order granting
expedited discovery and scheduling concerning their request for preliminary
injunctive relief.
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VOTING INFORMATION
According to the Conrail Proxy Statement, the Special Meeting is scheduled
to be held at [PLACE], at 9:30 a.m., Eastern Standard Time.
According to the Conrail Proxy Statement, approval of the Amendment
Proposal requires the affirmative vote of a majority of the votes cast by all
Shareholders entitled to vote thereon. The presence, in person or by proxy,
of the holders of a majority of the outstanding Common Shares and ESOP
Preferred Shares, considered as a single class, is necessary to constitute a
quorum at the Special Meeting. The holders of Common Shares vote together as
a class with the holders of the ESOP Preferred Shares. All outstanding Shares
as of the close of business on the Record Date will be entitled to vote at
the Special Meeting. Each Share entitles the holder thereof to one vote on
all matters that may properly come before the Special Meeting. Broker
non-votes and abstentions will not be counted as votes "cast" at the Special
Meeting. Proxies for Shares that have been allocated to individual
shareholder-participants pursuant to the Consolidated Rail Corporation
Matched Savings Plan (the "ESOP") will be voted in accordance with that
shareholder-participant's directions. All ESOP Preferred Shares that have not
been allocated to an individual shareholder-participant, and all ESOP
Preferred Shares that have been so allocated but as to which no voting
instructions have been received by Fidelity Management Trust Company, as
trustee (the "Trustee") of the ESOP Preferred Shares, shall, in accordance
with the Trust Agreement between Consolidated Rail Corporation and the
Trustee, be voted in the same manner and proportion as are the ESOP Preferred
Shares for which valid instructions are received. In addition, shares held
under Conrail's Employee Benefits Trust will be voted by the trustee thereof
in the same manner and proportion as are the ESOP Preferred Shares for which
valid instructions are received.
According to the CSX/Conrail Merger Agreement, as of October 10, 1996,
there were issued and outstanding 80,178,281 Common Shares and 9,571,086 ESOP
Preferred Shares. Also according to the CSX/Conrail Merger Agreement,
15,955,477 Common Shares have been reserved for issuance pursuant to the CSX
Lockup Option Agreement.
The accompanying [GOLD] proxy will be voted in accordance with the
shareholder's instructions on such [GOLD] proxy. Shareholders may vote
against the Amendment Proposal by marking the proper box on the [GOLD] proxy.
If no instructions are given, the [GOLD] proxy will be voted AGAINST the
Amendment Proposal.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, WE URGE YOU TO VOTE
AGAINST THE AMENDMENT PROPOSAL ON THE ENCLOSED [GOLD] PROXY AND IMMEDIATELY
MAIL IT IN THE ENCLOSED ENVELOPE. YOU MAY DO THIS EVEN IF YOU HAVE ALREADY
SENT IN A DIFFERENT PROXY SOLICITED BY CONRAIL'S BOARD OF DIRECTORS. IT IS
THE LATEST DATED PROXY THAT COUNTS. EXECUTION AND DELIVERY OF A PROXY BY A
RECORD HOLDER OF SHARES WILL BE PRESUMED TO BE A PROXY WITH RESPECT TO ALL
SHARES HELD BY SUCH RECORD HOLDER UNLESS THE PROXY SPECIFIES OTHERWISE.
YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO ITS EXERCISE BY ATTENDING
THE SPECIAL MEETING AND VOTING IN PERSON, BY SUBMITTING A DULY EXECUTED LATER
DATED PROXY OR BY SUBMITTING A WRITTEN NOTICE OF REVOCATION. UNLESS REVOKED
IN THE MANNER SET FORTH ABOVE, DULY EXECUTED PROXIES IN THE FORM ENCLOSED
WILL BE VOTED AT THE SPECIAL MEETING ON THE AMENDMENT PROPOSAL IN ACCORDANCE
WITH YOUR INSTRUCTIONS. IN THE ABSENCE OF SUCH INSTRUCTIONS, SUCH PROXIES
WILL BE VOTED AGAINST THE AMENDMENT PROPOSAL.
NORFOLK SOUTHERN STRONGLY RECOMMENDS A VOTE AGAINST THE AMENDMENT PROPOSAL.
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YOUR VOTE IS IMPORTANT. PLEASE SIGN, DATE AND RETURN THE [GOLD] PROXY
TODAY.
IF YOU HAVE ALREADY SENT A PROXY TO THE BOARD OF DIRECTORS OF CONRAIL, YOU
MAY REVOKE THAT PROXY AND VOTE AGAINST THE AMENDMENT PROPOSAL BY SIGNING,
DATING AND MAILING THE ENCLOSED [GOLD] PROXY.
If you have any questions about the voting of Shares, please call:
GEORGESON
& COMPANY INC.
CALL TOLL FREE: 800-223-2064
Banks and Brokers call: 212-440-9800
SOLICITATION OF PROXIES
Proxies will be solicited by mail, telephone, telefax and in person.
Norfolk Southern has retained Georgeson & Company Inc. ("Georgeson") for
solicitation and advisory services in connection with solicitations relating
to the Special Meeting, for which Georgeson is to receive an initial proxy
advisory retainer fee of $ and an additional fee of $ in connection
with the solicitation of proxies for the Special Meeting. Norfolk Southern
has also agreed to reimburse Georgeson for its reasonable out-of-pocket
expenses and to indemnify Georgeson against certain liabilities and expenses,
including reasonable legal fees and related charges. Georgeson will solicit
proxies for the Special Meeting from individuals, brokers, banks, bank
nominees and other institutional holders. Directors, officers and certain
employees of Norfolk Southern may assist in the solicitation of proxies
without any additional remuneration. The entire expense of soliciting proxies
for the Special Meeting by or on behalf of Norfolk Southern is being borne by
Norfolk Southern.
The following Directors and Officers of Norfolk Southern may solicit
proxies: David R. Goode, D. Henry Watts, Gerald L. Baliles, Carroll A.
Campbell, Jr., Gene R. Carter, L.E. Coleman, T. Marshall Hahn, Jr., Landon
Hilliard, E.B. Leisenring, Jr., Arnold B. McKinnon, Robert E. McNair, Jane
Margaret O'Brien, Harold W. Pote, James C. Bishop, Jr., R. Alan Brogan, L. I.
Prillaman, Stephen C. Tobias, Henry C. Wolf, William B. Bales, Paul N.
Austin, John F. Corcoran, David A. Cox, Thomas L. Finkbiner, John W. Fox,
Jr., Thomas J. Golian, James L. Granum, James A. Hixon, Jon L. Manetta,
Harold C. Mauney, Jr., Donald W. Mayberry, James W. McClellan, Kathryn B.
McQuade, Charles W. Moorman, Phillip R. Ogden, Magda A. Ratajski, John P.
Rathbone, William J. Romig, Donald W. Seale, Robert S. Spenski, William C.
Wooldridge and Dezora M. Martin. None of the foregoing participants
beneficially owns more than 1% of the outstanding Shares. The foregoing
participants in the aggregate beneficially own less than 1% of the
outstanding Shares. Norfolk Southern is the beneficial holder of 100 Common
Shares purchased by a subsidiary of Norfolk Southern on October 18, 1996 for
$86.00 per Common Share.
CERTAIN INFORMATION ABOUT NORFOLK SOUTHERN
Norfolk Southern is a Virginia-based holding company that owns all the
common stock of and controls a major freight railroad, Norfolk Southern
Railway Company; a motor carrier, North American Van Lines, Inc. ("North
American"); and a natural resources company, Pocahontas Land Corporation
("Pocahontas Land"). The railroad system's lines extend over more than 14,400
miles of road in 20 states, primarily in the Southeast and Midwest, and the
Province of Ontario, Canada. North American provides household moving and
specialized freight handling services in the United States and Canada, and
offers certain motor carrier services world-wide. Pocahontas Land manages
approximately 900,000 acres of coal, natural gas and timber resources in
Alabama, Illinois, Kentucky, Tennessee, Virginia and West Virginia.
The principal executive offices of Norfolk Southern are located at Three
Commercial Place, Norfolk, Virginia, 23510-2191.
9
<PAGE>
OTHER INFORMATION
The information concerning Conrail and the CSX Acquisition Proposal
contained herein has been taken from, or based upon, publicly available
documents on file with the SEC and other publicly available information.
Norfolk Southern does not take any responsibility for the accuracy or
completeness of such information or for any failure by Conrail to disclose
events that may have occurred and may affect the significance or accuracy of
any such information.
The information contained in this Proxy Statement concerning the Norfolk
Southern Cash Offer is taken from, and qualified in its entirety by reference
to, the full text of the Norfolk Southern Offer to Purchase.
Norfolk Southern is not aware of any other matter to be considered at the
Special Meeting. However, if any other matter properly comes before the
Special Meeting, Norfolk Southern will vote all proxies held by it as Norfolk
Southern, in its sole discretion, may determine.
According to the Conrail Proxy Statement, Shareholder proposals may, under
the rules of the SEC, be submitted for inclusion in the Conrail proxy
statement and form of proxy for the Annual Meeting of Shareholders currently
scheduled for May 21, 1997, but must be received by Conrail not later than
December 3, 1996.
* * *
NORFOLK SOUTHERN CORPORATION
Dated: October , 1996
10
<PAGE>
SCHEDULE I
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT OF THE COMPANY
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF. According to the Conrail
Proxy Statement, the only persons (or "group" as that term is used in Section
13(d)(3) of the Exchange Act, who, as of October , 1996, owned beneficially
more than 5% of any class of Conrail's voting securities are listed in the
following table:
<TABLE>
<CAPTION>
TITLE OF NAME AND ADDRESS OF PERCENT OF
CLASS BENEFICIAL OWNER ACCOUNT AND NATURE OF BENEFICIAL OWNERSHIP CLASS
- --------------------- ------------------------- ----------------------------------------------- ------------
<S> <C> <C> <C>
Common Shares ........ FMR Corp. 82 Devonshire St. (1) %
Boston, MA 02109
Common Shares ........ The Capital Group Companies, (2) %
Inc. 333 S. Hope Street Los
Angeles, CA 90071
Common Shares ........ Mellon Bank, N.A. 4,382,935 shares, solely in its capacity %
as trustee of the Conrail Inc. Employee
Benefits Trust (3)
ESOP %
Preferred Shares ... Fidelity Management Trust 9,571,086 shares, solely in its capacity %
Company 82 Devonshire St. as Trustee of the ESOP(4)
Boston, MA 02109
</TABLE>
- ------------
(1) Based on information provided to Conrail from First Chicago Trust
Company of New York, the transfer agent for Conrail. These shares
represent % of Conrail's total voting securities.
(2) Based on information provided to Conrail from First Chicago Trust
Company of New York, the transfer agent for Conrail. These shares
represent % of Conrail's total voting securities.
(3) These shares represent % of Conrail's total voting securities.
(4) ESOP Preferred Shares are convertible into shares of Common Stock at
any time on a share-for-share basis, subject to certain antidilution
adjustments. As a result, ownership of ESOP Preferred Shares is deemed
to be ownership of an equal number of Common Shares. These ESOP
Preferred Shares represent % of Conrail's total voting securities.
OWNERSHIP BY MANAGEMENT OF VOTING SECURITIES. The following table from the
Conrail Proxy Statement sets forth the beneficial ownership, as of October
, 1996, of Common Shares and ESOP Preferred Shares of each director, each
of the six most highly compensated executive officers of Conrail, and all
directors and executive officers as a group. Unless otherwise indicated, each
such person has sole voting and investment power with respect to such Common
Shares and sole voting power with respect to such ESOP Preferred Shares. The
Trustee holds sole investment power with respect to all ESOP Preferred
Shares. As of October , 1996, all Conrail directors and officers as a group
owned less than one percent (1%) of the aggregate outstanding Shares.
11
<PAGE>
<TABLE>
<CAPTION>
NAME OF AMOUNT PERCENT OF
INDIVIDUAL OR GROUP BENEFICIALLY OWNED CLASS
- -------------------------------------- ------------------ ----------
<S> <C> <C>
David M. Levan
Chairman of the Board of Directors,
President and Chief Executive Officer 81,502(1) *
H. Furlong Baldwin
Director ............................. 2,000 *
Claude S. Brinegar
Director ............................. 1,000 *
Daniel B. Burke
Director ............................. 2,000 *
Kathleen Foley Feldstein
Director ............................. 700 *
Roger S. Hilles
Director ............................. 2,362 *
E. Bradley Jones
Director ............................. 1,000 *
David B. Lewis
Director ............................. 1,200 *
John C. Marous
Director ............................. 800 *
Gail McGovern
Director ............................. 0 *
Raymond T. Schuler
Director ............................. 7,833 *
David H. Swanson
Director ............................. 449 *
Bruce B. Wilson
Senior Vice President--Law ........... 55,490(1) *
Ronald J. Conway
Senior Vice President--Operations ... 17,057(1) *
Timothy P. Dwyer
Senior Vice President--Unit Trains
Service Group ........................ 18,826(1) *
John P. Sammon
Senior Vice President--CORE Service
Group ................................ 7,250(1) *
George P. Turner
Senior Vice President--Automotive
Service Group ........................ 26,405(1) *
Executive Officers and Directors as a
Group ................................ 433,252(2) *
</TABLE>
- ------------
* Less than one percent.
(1) For Messrs. LeVan, Wilson, Conway, Dwyer, Sammon and Turner,
respectively, includes options exercisable within 60 days to acquire
33,691; 42,905; 9,250; 12,375; 0 and 16,107 Common Shares and 2,476;
2,416; 2,370; 1,998; 2,031 and 2,040 ESOP Preferred Shares allocated to
the accounts of each of the named officers under the ESOP. ESOP
Preferred Shares are convertible into Common Shares at any time on a
share-for-share basis, subject to certain antidilution adjustments. As
a result, ownership of ESOP Preferred Shares is deemed to be ownership
of an equal number of Common Shares.
(2) Includes (x) options exercisable within 60 days to acquire 235,116
Common Shares and (y) 45,566 ESOP Preferred Shares allocated to the
accounts of individual officers under the ESOP. This number also
includes Shares held by all officers of Consolidated Rail Corporation,
a subsidiary of Conrail.
12
<PAGE>
ADDITIONAL INFORMATION
If your Shares are held in the name of a bank or broker, only your bank or
broker can vote your Shares and only upon receipt of your specific
instructions. Please instruct your bank or broker to vote AGAINST the
Amendment Proposal by executing the [GOLD] proxy card today. If you have any
questions or require any assistance in voting your Shares, please call:
GEORGESON
& COMPANY INC.
Wall Street Plaza
New York, New York 10005
Call Toll Free: 800-223-2064
Banks and Brokers call: 212-440-9800
13
<PAGE>
PRELIMINARY COPY
FORM OF PROXY
PROXY SOLICITED ON BEHALF OF
NORFOLK SOUTHERN CORPORATION FOR THE
SPECIAL MEETING OF SHAREHOLDERS OF CONRAIL INC.
TO BE HELD NOVEMBER 14, 1996
The undersigned hereby constitutes and appoints and
, and each or any of them, as true and lawful agents and proxies
with full power of substitution in each to represent the undersigned, and to
vote all shares of common stock, par value $1.00 per share ("Common Shares"),
of Conrail Inc. ("Conrail") which the undersigned would be entitled to vote
if personally present, at the Special Meeting of Shareholders of Conrail
scheduled to be held on Thursday, November 14, 1996, at 9:30 a.m., Eastern
Standard Time, at , and at any adjournments thereof, on all
matters coming before the Special Meeting.
You are encouraged to specify your choice by marking the appropriate box
on the reverse side of this card. This Proxy when properly executed will be
voted in the manner directed herein by the undersigned shareholder. IF NO
DIRECTION IS MADE WITH RESPECT TO THE VOTING OF COMMON SHARES, THIS PROXY
WILL BE VOTED AGAINST THE PROPOSAL DESCRIBED BELOW. The persons listed above
cannot vote your Common Shares unless you sign and return this card.
(Continued on the reverse side)
<PAGE>
(Continued from the reverse side)
Please mark your vote as in this example: [X]
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE
NORFOLK SOUTHERN CORPORATION STRONGLY RECOMMENDS A VOTE AGAINST:
The Proposal of the Conrail Board of Directors to approve an amendment to
Conrail's Articles of Incorporation which would cause the provisions of
Subchapter E of Chapter 25 of the Pennsylvania Business Corporation Law of
1988, as amended, to no longer be applicable to Conrail, and to authorize the
Board of Directors of Conrail, in its discretion, to direct certain executive
officers of Conrail to file or not file such Articles of Amendment if the
Board determines such action to be in the best interests of Conrail.
AGAINST [ ] FOR [ ] ABSTAIN [ ]
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
Note: Please sign exactly as name appears hereon.
Joint owners should each sign. When signing as
attorney, executor, administrator, trustee or
guardian, please give full title as such.
------------------------------------------------
------------------------------------------------
Signature(s) Date
Title: -----------------------------------------
<PAGE>
PRELIMINARY COPY
FORM OF INSTRUCTION
PROXY SOLICITED ON BEHALF OF
NORFOLK SOUTHERN CORPORATION
FOR THE SPECIAL MEETING OF SHAREHOLDERS OF CONRAIL INC.,
TO BE HELD NOVEMBER 14, 1996
CONSOLIDATED RAIL CORPORATION
MATCHED SAVINGS PLAN (THE "PLAN")
VOTING INSTRUCTIONS
TO: FIDELITY MANAGEMENT TRUST COMPANY
The undersigned hereby instructs the Fidelity Management Trust Company to
vote (or cause to be voted) all shares of Series A ESOP Junior Convertible
Preferred Stock (the "ESOP Preferred Shares") and common stock, par value
$1.00 per share (the "Common Shares") of Conrail Inc. ("Conrail") under the
Plan at the Special Meeting of Shareholders scheduled to be held on Thursday,
November 14, 1996, at 9:30 a.m., Eastern Standard Time, at , and
at any adjournments thereof, on the Proposal relating to, among other things,
the amendment of the Articles of Incorporation of Conrail, and on all other
matters coming before the Special Meeting.
You are encouraged to specify your choice by marking the appropriate box
on the reverse side of this card. IF FIDELITY MANAGEMENT TRUST COMPANY DOES
NOT RECEIVE THIS FORM OF INSTRUCTION, MARKED TO SHOW YOUR INSTRUCTIONS TO
FIDELITY MANAGEMENT TRUST COMPANY, BY TUESDAY, NOVEMBER 12, 1996, THE ESOP
PREFERRED SHARES AND COMMON SHARES ALLOCATED TO YOUR PLAN ACCOUNT, TOGETHER
WITH A PERCENTAGE OF ESOP PREFERRED SHARES AND COMMON SHARES NOT ALLOCATED TO
ANY PARTICIPANT'S ACCOUNT UNDER THE PLAN, WILL BE VOTED BY FIDELITY
MANAGEMENT TRUST COMPANY IN THE SAME PROPORTION AS THOSE FOR WHICH FIDELITY
MANAGEMENT TRUST COMPANY RECEIVED INSTRUCTIONS FROM PARTICIPANTS.
In its or their discretion, the proxy or proxies are authorized to vote
upon such other matters as may properly come before the meeting.
(Continued on the reverse side)
1
<PAGE>
(Continued from reverse side)
Please mark your instructions as in this example: [X]
PLEASE MARK, SIGN, DATE AND RETURN THE
FORM OF INSTRUCTION
PROMPTLY USING THE ENCLOSED ENVELOPE
This Form of Instruction when properly executed will result in Fidelity
Management Trust Company voting your ESOP Preferred Shares and Common Shares
(or causing such shares to be voted) in the manner directed herein by the
undersigned participant in the Plan.
NORFOLK SOUTHERN CORPORATION STRONGLY RECOMMENDS A VOTE AGAINST:
The Proposal to approve an amendment to Conrail's Articles of
Incorporation which would cause the provisions of Subchapter E of Chapter 25
of the Pennsylvania Business Corporation Law of 1988, as amended, to no
longer be applicable to Conrail, and to authorize the Board of Directors of
Conrail, in its discretion, to direct certain executive officers of Conrail
to file or not file such Articles of Amendment if the Board determines such
action to be in the best interests of Conrail.
AGAINST [ ] FOR [ ] ABSTAIN [ ]
Note: Please sign exactly as name appears hereon.
Joint owners should each sign. When signing as
attorney, executor, administrator, trustee or
guardian, please give full title as such.
------------------------------------------------
------------------------------------------------
Signature(s) Date
Title: -----------------------------------------
