UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Delaware Otsego Corporation
----------------------------------------
(Name of Issuer)
Common Stock, Par Value $.125 Per Share
----------------------------------------
(Title of Class of Securities)
246244 10 7
(CUSIP Number)
James C. Bishop, Jr.
Three Commercial Place
Norfolk, Virginia 23510-9240
Telephone (757) 629-2600
--------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
August 8, 1997
--------------------
(Date of Event which Requires
Filing of this Statement)
If the filing person has previously filed a statement on Schedule
13G to report the acquisition which is the subject of this
Schedule 13D, and is filing this schedule because of Rule 13d-
1(b)(3) or (4), check the following box: ( )
Schedule 13D
CUSIP No. 246244 10 7
- -----------------------------------------------------------------------------
(1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Norfolk Southern Corporation 52-1188014
- -----------------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP:
(a) ( )
(b) (X)
- -----------------------------------------------------------------------------
(3) SEC USE ONLY
- -----------------------------------------------------------------------------
(4) SOURCE OF FUNDS
00
- -----------------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or ( )
2(e)
- -----------------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Commonwealth of Virginia
- -----------------------------------------------------------------------------
(7) SOLE VOTING POWER
0
-------------------------------------------------
(8) SHARED VOTING POWER
NUMBER OF SHARES 0
BENEFICIALLY OWNED -------------------------------------------------
BY EACH (9) SOLE DISPOSITIVE POWER
REPORTING PERSON WITH
0
-------------------------------------------------
(10) SHARED DISPOSITIVE POWER
0
- -----------------------------------------------------------------------------
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
384,181.6(1)
- -----------------------------------------------------------------------------
(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES ( )
- -----------------------------------------------------------------------------
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
20.9%
- -----------------------------------------------------------------------------
(14) TYPE OF REPORTING PERSON
CO
- -----------------------------------------------------------------------------
(1) Only to the extent that Norfolk Southern Corporation might or could, by
reason of the Letter of Offer attached as Exhibit 1 hereto, be deemed to
be part of a group under Rule 13d-5(b)(1) of the rules promulgated under
the Securities and Exchange Act of 1934, as amended, and thereby for the
purposes of Section 13(d) of such Act be deemed beneficially to own the
110,250 shares of Delaware Otsego Corporation beneficially owned by CSX
Transportation, Inc. and the 273,931.6 shares of Delaware Otsego
Corporation beneficially owned by Walter G. Rich.
Item 1. SECURITY AND ISSUER
This statement relates to the Common Stock, par value 12 1/2 cents per
share ("Common Stock"), of Delaware Otsego Corporation, a New York
corporation (the "Issuer"), which has its principal executive offices at 1
Railroad Avenue, Cooperstown, New York 13326.
Item 2. IDENTITY AND BACKGROUND
This statement is filed on behalf of Norfolk Southern Corporation, a
Virginia corporation ("Norfolk Southern"), which has its principal
executive offices at Three Commercial Place, Norfolk, Virginia 23510-2191.
Norfolk Southern is a transportation holding company which has various
subsidiaries, most of which engage in railroad operations.
Set forth below are the name, current residence or business address
and present principal occupation or employment of each director and
executive officer of Norfolk Southern. Unless otherwise indicated each
person identified below is employed by Norfolk Southern. The principal
address of Norfolk Southern and, unless otherwise indicated below, the
current business address for each individual listed below, is Norfolk
Southern Corporation, Three Commercial Place, Norfolk, Virginia 23510-2191.
Each such person is a citizen of the United States. Directors are
identified by an asterisk.
NAME AND PRINCIPAL
ADDRESS PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
David R. Goode* Chairman, President and Chief Executive
Officer.
James C. Bishop, Jr. Executive Vice President-Law.
R. Alan Brogan Executive Vice President-Transportation
P.O. Box 988 Logistics and President, North American Van
Fort Wayne, IN 46801-0988 Lines, Inc.
L. I. Prillaman Executive Vice President-Marketing.
Stephen C. Tobias Executive Vice President-Operations.
Henry C. Wolf Executive Vice President-Finance.
John F. Corcoran Senior Vice President-Public Affairs.
1500 K Street, N.W.,
Suite 375
Washington, DC 20005
Paul N. Austin Vice President-Personnel.
David A. Cox Vice President-Properties.
Thomas L. Finkbiner Vice President-Intermodal.
Nancy S. Fleischman Vice President.
Robert C. Fort Vice President-Public Relations.
John W. Fox, Jr. Vice President-Coal Marketing.
110 Franklin Rd., S.E.
Roanoke, VA 24042
Thomas J. Golian Vice President.
James L. Granum Vice President-Public Affairs.
1500 K Street, N.W.
Suite 375
Washington, DC 20005
James A. Hixon Vice President-Taxation.
Jon L. Manetta Vice President-Transportation & Mechanical.
Harold C. Mauney, Jr. Vice President-Public Affairs.
Donald W. Mayberry Vice President-Research and Tests.
110 Franklin Rd., S.E.
Roanoke, VA 24042
James W. McClellan Vice President-Strategic Planning.
Kathryn B. McQuade Vice President-Internal Audit.
110 Franklin Rd., S.E.
Roanoke, VA 24042
Charles W. Moorman, IV Vice President-Information Technology.
Phillip R. Ogden Vice President-Engineering.
99 Spring Street, SW
Atlanta, GA 30303
John P. Rathbone Vice President and Controller.
William J. Romig Vice President and Treasurer.
Donald W. Seale Vice President-Merchandise Marketing.
Robert S. Spenski Vice President-Labor Relations.
Rashe W. Stephens, Jr. Vice President-Quality Management.
William C. Wooldridge Vice President-Law.
Dezora M. Martin Corporate Secretary.
Gerald L. Baliles* Partner, Hunton & Williams.
Hunton & Williams
951 E. Byrd St.
Riverfront Plaza, East
Tower
Richmond, VA 23219-4074
Carroll A. Campbell, Jr.* President and Chief Executive Officer,
American Council American Council of Life Insurance.
of Life Insurance
1001 Pennsylvania Ave.,
N.W.
Washington, D.C. 20004
Gene R. Carter* Executive Director, Association for
Association for Super-
vision Supervision and
Curriculum Development.
and Curriculum Develop-
ment
1250 N. Pitt Street
Alexandria, VA 22314-1403
L. E. Coleman* Director.
7 Trillium Lane
Eastman Grantham, NH 03753
T. Marshall Hahn, Jr.* Honorary Chairman of the Board,
Georgia-Pacific Corporation Georgia-Pacific Corporation.
P. O. Box 105605
Atlanta, GA 30348-5605
Landon Hilliard* Partner, Brown Brothers Harriman & Co.
Brown Brothers Harriman
& Co.
59 Wall Street
New York, NY 10005
E. B. Leisenring, Jr.* Chairman of The Philadelphia
The Philadelphia Contributionship.
Contributionship
One Tower Bridge, Suite 501
West Conshohockew, PA 19428
Arnold B. McKinnon* Director.
Jane Margaret O'Brien* President, St. Mary's College of Maryland.
St. Mary's College
of Maryland
St. Mary's City, MD 20686
Harold W. Pote* Partner, The Beacon Group.
The Beacon Group
399 Park Ave., 17th Floor
New York, NY 10022
During the past five years, neither Norfolk Southern nor any of its
executive officers and directors has been convicted in a criminal
proceeding or been a party to a civil proceeding of a type described in
part (d) or (e) of Item 2.
Item 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Norfolk Southern does not own any shares of the Issuer and includes
the shares owned by CSX Transportation, Inc. ("CSXT"), a wholly owned
subsidiary of CSX Corporation ("CSX"), and Walter G. Rich, the Chairman and
Chief Executive Officer of the Issuer ("Rich"), in this Statement only to
the extent that Norfolk Southern might or could, by reason of the matters
set forth in Item 4. herein, be deemed to be part of a group under Rule
13d-5(b)(1) of the rules promulgated under the Securities and Exchange Act
of 1934, as amended (the "Act"), and thereby for the purposes of Section
13(d) of the Act be deemed beneficially to own the shares of Common Stock
beneficially owned by CSXT and Rich.
As disclosed in Item 4. herein, Norfolk Southern, CSX (or their
designated affiliates) and Rich have proposed forming a new company "Newco")
to offer to purchase all the outstanding shares of Common Stock of the
Issuer. The funds to be used in making such proposed purchase will, if
such transaction proceeds, be contributed to Newco by Norfolk Southern and
CSX, directly or through their designated affiliates, in such amounts that
Norfolk Southern's and CSX's respective contributions to Newco (after
taking account of CSX's contribution to Newco of CSXT's Common Stock) are
equal. Norfolk Southern intends to obtain its portion of such funds from
working capital.
Item 4. PURPOSE OF TRANSACTION
Norfolk Southern, CSX (or their designated affiliates) and Rich have
proposed forming Newco to acquire all the outstanding shares of Common
Stock for cash (other than the shares of Common Stock held by CSXT and
certain of the shares of Common Stock held by Rich, which will be
cancelled). A letter of offer and draft term sheet (collectively, the
"Letter of Offer") were provided to the Issuer on Friday, August 8, 1997
containing an offer to such effect. Norfolk Southern has, through
representatives, engaged, and expects to continue to engage, in discussions
with the Issuer concerning the proposed transaction. The proposed
transaction and its principal terms and features are described in the
Letter of Offer, which is attached hereto as Exhibit 1, is incorporated
herein by reference and by which any summary thereof in this Statement on
Schedule 13D is qualified in its entirety.
Item 5. INTEREST IN SECURITIES OF THE ISSUER
(a) Norfolk Southern does not own any shares of the Issuer and
includes the shares owned by CSXT and Rich in this Statement only to the
extent that Norfolk Southern might or could, by reason of the Letter of
Offer, be deemed to be part of a group under Rule 13d-5(b)(1) of the rules
promulgated under the Act, and thereby for the purposes of Section 13(d) of
the Act be deemed beneficially to own the 110,250 shares of Common Stock
beneficially owned by CSXT and the 273,931.6 shares of Common Stock
beneficially owned by Rich, which represent in aggregate 20.9% of the
outstanding shares of Common Stock. In respect of the other persons who by
reason of the Letter of Offer may, together with Norfolk Southern, comprise
a group within the meaning of Section 13(d)(3) of the Act, it is Norfolk
Southern's understanding that (x) CSXT is the beneficial owner of 110,250
shares of Common Stock, which represent approximately 6.0% of the
outstanding shares of Common Stock, and (y) Walter G. Rich is the
beneficial owner of 273,931.6 shares of Common Stock, which represent
approximately 14.9% of the outstanding shares of Common Stock.
(b) Norfolk Southern has no power, sole or shared, to vote or direct
the vote, or to dispose or direct the disposition, of any shares of Common
Stock. It is Norfolk Southern's understanding that Rich has the sole power
to vote and dispose of the 273,931.6 shares of Common Stock beneficially owned
by him. It is Norfolk Southern's understanding that CSX and CSXT have shared
power to vote and dispose of the 110,250 shares of Common Stock
beneficially owned by CSXT.
(c) None.
(d) None.
(e) N/A
Item 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER
In the Letter of Offer, Newco has proposed to enter into an agreement
with the Issuer pursuant to which Newco would acquire all of the
outstanding shares of Common Stock for cash (other than the shares of
Common Stock beneficially owned by CSXT and certain of the shares of Common
Stock beneficially owned by Rich, which will be cancelled).
The proposed transaction is described in more detail in the Letter of
Offer, which is attached hereto as Exhibit 1, is incorporated herein by
reference and by which any summary thereof in this Statement on Schedule
13D is qualified in its entirety.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 1 - Letter of Offer on behalf of Newco dated August 8,
1997.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: August 11, 1997
NORFOLK SOUTHERN CORPORATION
By: Dezora M. Martin
Name: Dezora M. Martin
Title: Corporate Secretary
EXHIBIT INDEX
Exhibit 1 - Letter of Offer on behalf of Newco dated August 8, 1997.
Exhibit 1
PRIVILEGED AND CONFIDENTIAL
August 8, 1997
The Board of Directors of
Delaware Otsego Corporation
One Railroad Avenue
Cooperstown, New York
Gentlemen:
On behalf of a new company ("Newco") to be organized by CSX
Corporation ("CSX"), Norfolk Southern Corporation ("NSC") and Walter Rich
("Mr. Rich"), we are pleased to provide you with an offer (the "Offer") for
the acquisition (the "Transaction") of all of the outstanding capital stock
of Delaware Otsego Corporation (the Company ). The principal features of
the Transaction are described in a draft term sheet (the Term Sheet ), a
copy of which is attached to this letter.
The principal terms of the Offer are as follows:
1. Form of Transaction. (a) Newco, a corporation to be formed and
capitalized with cash to be provided by CSX and NSC, will acquire all
outstanding shares of the Company's capital stock from the Company's
shareholders in a merger transaction (the "Merger"). Mr. Rich will
contribute to Newco a portion of the shares and options to purchase shares
of the Company s common stock ( Common Stock ) owned by him.
(b) The capitalization of Newco will be comprised of (i) a
class of Cumulative Preferred Stock having two series (differing only with
respect to redemption, as described in the Term Sheet) that will be non-
participating and owned in amounts of liquidation preference reflecting the
contributions to Newco of CSX, NSC and Mr. Rich, (ii) a class of Junior
Preferred Stock with an aggregate liquidation preference of $100 million
that will be non-participating and will be owned in equal proportions by
CSX and NSC and (iii) common stock, which will be owned 80% by Mr. Rich,
10% by CSX and 10% by NSC. The terms of the capital structure of Newco are
more fully described in the Term Sheet.
(c) The Board of Directors of Newco will consist of Mr. Rich and
his designees, who will represent a majority, and representatives of CSX
and NSC. Certain designated matters to be agreed upon will require the
approval of a supermajority of Newco s Board of Directors.
2. Consideration. Subject to the terms and conditions delineated
below, Newco will purchase, or exchange into new securities, all capital
stock of the Company and will enter into an employment agreement with Mr.
Rich. Total cash paid in the Transaction will be as described below.
(a) Cash Consideration for the Stock. The cash consideration
for the purchase of the capital stock of the Company will be $19 per share
(the "Per Share Price") of the Company's Common Stock.
(b) Stock Options. All outstanding Company employee stock
options ("Options"), other than those which may be contributed to Newco by
Mr. Rich, will be cashed out at the difference between the Per Share Price
and the respective exercise price therefor, multiplied by the number of
shares of Common Stock subject to the Option.
(c) Stock Contribution. Prior to the Merger, CSX will
contribute to Newco the 110,250 shares of Common Stock owned by it and Mr.
Rich will contribute to Newco a portion of the Common Stock and Options
owned by him. All such shares and Options to purchase shares so held by
Newco will be canceled in the Transaction. The shares and Options
contributed by CSX and Mr. Rich will not be converted in the Transaction
into cash but instead will be converted into shares and options to purchase
shares of Cumulative Preferred Stock of Newco with a liquidation preference
equal to the value (at the Per Share Price) of CSX s and Mr. Rich s
respective contributions.
(d) Employment Agreement. Newco will enter into an agreement
(the "Employment Agreement") with Mr. Rich, the principal terms of which
are described in the Term Sheet.
(e) Financing. The Transaction will not be subject to obtaining
financing. Sources and uses in the Transaction (other than with respect to
working capital following the Transaction) are as follows:
Source Value
Mr. Rich Contribution $2,602,350
CSX Stock Contribution 2,094,750
CSX Cash Contribution 23,440,473
NSC Cash Contribution 25,535,223
Total $53,672,796
----- -----------
Use Amount
Purchase of Common Stock $35,726,555
Option and Warrant Cash-Out 4,698,225
Repayment of Bank Debt 6,748,016
Transaction Costs 6,500,000
Total $53,672,796
----- -----------
3. Conditions.
(a) Definitive Documents. The Offer is made subject to the
negotiation and execution of definitive documentation ("Definitive
Documents") satisfactory to us and containing representations and
warranties, covenants and other terms and conditions that are customary for
an acquisition of this kind (including that the Company will not take any
action, regulatory or otherwise, inconsistent with facilitating
consummation of the Transaction), approval of the Company's Board of
Directors and, if required, shareholders under applicable law and the
satisfaction of any and all applicable regulatory requirements. As stated
above, the Offer is not subject to a financing condition.
(b) Participation of Mr. Rich. The Offer is conditioned upon
mutually satisfactory arrangements between Newco and Mr. Rich concerning
the Employment Agreement and his ongoing involvement in the affairs of the
Company.
(c) Exclusivity. The Offer is conditioned upon the agreement of
the Company and Mr. Rich that, pending the execution and delivery of the
Definitive Documents, neither the Company nor its management, nor any of
their employees, affiliates, advisors or representatives, will solicit,
encourage, entertain, facilitate or enter into discussions or negotiations
with respect to any proposal (other than the Offer) to acquire the stock or
assets of the Company. Unless extended by mutual agreement, the foregoing
exclusivity provision will expire on the earlier of (i) the execution of
Definitive Documents (which documents shall contain provisions that
supersede this paragraph) and (ii) 5:00 p.m. (New York City time) on August
19, 1997.
4. Legal Fees. CSX and NSC have agreed to pay the reasonable fees
and expenses of one firm of legal counsel advising Mr. Rich, up to $50,000
plus 50% of any such fees in excess of $50,000, for the benefit of Mr. Rich
in connection with the Transaction ("Legal Fees"). If following execution
of this letter by the Company (a) the Company does not comply with
Paragraph 3(c) of this letter or, following execution of the Definitive
Documents, the Company breaches any agreements contained therein or (b)
Definitive Documents are not entered into or, following execution of
Definitive Documents, the Merger is not consummated and, in the case of
this clause (b), within one year following the date that the Company
advises Newco that it has determined not to pursue the Transaction, the
Company enters into an alternative transaction providing for the sale of
its capital stock or a material portion of its assets, then the Company
shall be responsible for the payment or reimbursement of the Legal Fees.
Mr. Rich shall be responsible for the payment of his legal fees if he does
not comply with Paragraph 3(c) of this letter.
5. Consummation of the Transaction. We are prepared to proceed in
the most expeditious manner so that, subject to the terms and conditions of
the Offer and the Definitive Documents, the Transaction can be completed as
soon as practicable. In recognition of this, unless this letter is
executed by the Company by 5:00 p.m. on Sunday, August 10, 1997, this
proposal should not be considered outstanding thereafter. Of course,
except in respect of Paragraphs 3(c) and (4) of this letter, this letter
does not create binding obligations on any party in respect of the
Transaction.
6. Counterparts. This letter may be executed in one or more
counterparts.
We hope that the terms of this Offer address the objectives of the
Company. We look forward to proceeding with you to the completion of the
Transaction. We and our counsel are prepared to move forward immediately
to reach definitive terms. This letter shall not constitute a binding
agreement between the parties hereto, except that the provisions of
Paragraphs 3(c) and 4 of this letter shall be binding on the parties hereto
upon execution below by the Company.
Very truly yours,
CSX CORPORATION
By:_________________________
NORFOLK SOUTHERN CORPORATION
By:_________________________
Accepted and Agreed to as
____________________________
to Paragraphs 3(c) and 4 Walter Rich
as of August __, 1997:
DELAWARE OTSEGO CORPORATION
By: ________________________
PROJECT BASEBALL
TERM SHEET
Transaction Structure: Baseball Acquisition Corp.
( Acquisition ), a company to
be formed on behalf of CSX (or
its designated affiliate), NSC
(or its designated affiliate)
and WR, shall acquire all
outstanding capital stock of
Delaware Otsego Corporation
( Baseball ) at a cash price of
$19 per share. In arriving at
the cash purchase price it has
been assumed that there exist
transaction costs incurred by
Baseball of up to $6.5 million
(consisting of advisory fees,
change-of-control payments,
repayment of existing bank debt
and the purchase price for
certain real property) that will
be paid by Acquisition in
addition to the cash price and
that all convertible debt,
warrants and options of Baseball
(other than those held by WR)
will be converted into Baseball
Shares at or prior to the merger
that would occur between
Acquisition and Baseball.
Financing Structure: The acquisition shall be
financed by CSX, NSC and WR as
follows:
WR shall contribute his Baseball
Shares and options to purchase
Baseball Shares, having an
aggregate value of $2,602,350 at
$19 per Baseball Share, in
exchange for Common Shares and
Cumulative Preferred Shares or
options to purchase Cumulative
Preferred Shares of Acquisition.
WR shall receive Cumulative
Preferred Shares(or, to the
extent options are contributed,
options to purchase Cumulative
Preferred Shares) with a
liquidation preference equal to
the value contributed.
CSX and NSC shall contribute
cash as may be required to
purchase Baseball Shares in the
acquisition and to pay the
transaction costs described
above. CSX shall also
contribute its 110,250 Baseball
Shares. Each of CSX and NSC
shall receive Cumulative
Preferred Shares with a
liquidation preference equal to
the value of its cash and stock
contributions as well as equal
amounts of Junior Preferred
Shares (which shall carry an
aggregate liquidation preference
of $100 million).
Common Shares shall be owned 80%
by WR, 10% by CSX and 10% by
NSC; and WR shall have voting
control through such ownership
of Common Shares.
Economics of Cumulative There shall be established two
Preferred Shares: series of a single class of
Cumulative Preferred Shares
which shall differ only as to
redemption, as follows:
Payment Preference. Cumulative
Preferred Shares shall have
dividend and liquidation
preference over all Junior
Preferred Shares and all Common
Shares. Dividends on Cumulative
Preferred Shares shall cumulate
at the rate of 10% compounded
annually until the Board
determines that sufficient cash
is available to pay dividends in
cash. No dividend or
liquidation payments shall be
made on Common Shares or Junior
Preferred Shares until all
Cumulative Preferred Shares,
with cumulative dividends, are
redeemed by Acquisition. The
series of Cumulative Preferred
Shares held by CSX and NSC (but
not the series held by WR) shall
have a redemption preference
over all Junior Preferred
Shares.
Redemption. If redeemable,
Cumulative Preferred Shares
shall be redeemed at liquidation
preference plus accrued and
unpaid dividends. The series of
Cumulative Preferred Shares held
by CSX and NSC shall be
mandatorily redeemable upon
achieving certain cash levels
from cash flow from operations
and from dispositions of assets.
The series of Cumulative
Preferred Shares held by WR
shall be redeemable at WR's
option at any time at which
there is to be a cash redemption
of the series of Cumulative
Preferred Shares held by CSX and
NSC or of Junior Preferred
Shares. Cumulative Preferred
Shares shall be redeemed ratably
when redeemed for cash. Subject
to the supermajority approval of
Acquisition s Board, CSX or NSC
may use Cumulative Preferred
Shares in connection with a
purchase of any Acquisition
assets by such party.
Economics of Junior Preferred Payment Preference. Junior
Shares: Preferred Shares shall have a
dividend, liquidation and
redemption preference over all
Common Shares, but shall be
subordinate, with respect to
dividend and liquidation
payments, to all Cumulative
Preferred Shares (and, with
respect to all redemption
payments, to the series of
Cumulative Preferred Shares held
by CSX and NSC (but not the
series held by WR)). Dividends
on Junior Preferred Shares shall
cumulate at the rate of 4%
compounded annually until the
Board determines that sufficient
cash is available to pay
dividends in cash; and dividends
on Junior Preferred Shares shall
not be paid until all accrued
and unpaid dividends on
Cumulative Preferred Shares have
been paid.
Redemption. Junior Preferred
shall be mandatorily redeemable,
following redemption of the
series of Cumulative Preferred
Shares held by CSX and NSC, at
liquidation preference plus
accrued and unpaid dividends
upon achieving certain cash
levels from cash flow from
operations and from dispositions
of assets. Junior Preferred
Shares (and, if applicable,
Cumulative Preferred Shares held
by WR) shall be redeemed ratably
when redeemed for cash.
Management: WR shall enter into a three-year
employment agreement to be
Chairman and CEO. After the
three-year term, employment
shall be renewed automatically
for one-year renewal terms
unless Acquisition delivers
written notice to WR in the
period from 120 to 90 days prior
to expiration. WR s salary and
benefits (including, in lieu of
receiving such benefits in
connection with the acquisition,
severance benefits) shall remain
at current levels. It shall be
a condition of employment that
WR retain his shares (subject to
the other provisions hereof) and
that WR live on the Edgewater
property for the convenience and
security of Acquisition and to
ensure WR s availability in the
event of an emergency. WR shall
enter into a customary non-
compete and exclusive service
agreement, subject to standard
permissible activities.
Employment and put and call
decisions of Acquisition
respecting WR shall be made by
disinterested directors.
Acquisition shall create a
Management Incentive Bonus
Program, to be approved by a
supermajority of Acquisition s
Board, which shall provide cash
bonuses to operating management
upon achievement of certain
financial targets following the
acquisition, determined without
giving effect to the financing
and transaction costs of the
acquisition.
Certain Dispositions: General. WR and the
other on-going Baseball
management shall receive a
commission on asset dispositions
as described below: Other than
with respect to the circum-
stances covered by clause
(y) under West of Passaic
Junction -- Non-freight set
forth below, commissions shall
be payable only with respect to
any transaction (x) consummated
during WR s employment as CEO or
(y) arising from an opportunity
identified to the disinterested
directors on Acquisition s Board
and significantly pursued by WR
(except in the event of a
termination of WR s employment
by Acquisition prior to the
third anniversary of the
acquisition without cause, in
which case a lesser standard
shall apply), the negotiation of
which was approved by the
disinterested directors on
Acquisition s Board during such
employment, and consummated
within two years of the
termination of such employment,
in the case of non-passenger
transactions, and four years of
the termination of such
employment, in the case of
passenger transactions.
Commissions shall be paid in
cash at the rate of 7% of the
gross consideration received by
Acquisition (or, in the case of
a non-cash transaction, the fair
market value of the asset
disposed) in such transaction
and shall be allocated among
such Baseball management (and in
such amounts) as is determined
by WR.
Passaic Junction and East.
Freight. No commission shall be
payable with respect to any
freight transaction. Non-
freight. A commission shall be
payable with respect to any non-
freight transaction that does
not, in the reasonable judgment
of both CSX and NSC, interfere
with freight rights and
operations if such non-freight
transaction is approved by a
supermajority of Acquisition s
Board and consummated.
West of Passaic Junction.
Freight. A commission shall be
payable with respect to a
freight transaction. Non-
freight. A commission shall be
payable with respect to (x) a
non-freight transaction or (y) a
reasonable, bona fide and firm
offer with respect to a non-
freight transaction which is
rejected by Acquisition s Board.
West of Passaic Junction.
Freight. A commission shall be
payable with respect to a
freight transaction. Non-
freight. A commission shall be
payable with respect to (x) a
non-freight transaction or (y) a
reasonable, bona fide and firm
offer with respect to a non-
freight transaction which is
rejected by Acquisition s Board.
Right of First Refusal. Either
CSX or NSC shall have a right of
first refusal with respect to
any transaction with respect to
Baseball properties and assets
west of Passaic Junction.
Put and Call Rights: Subject to all necessary
governmental approvals,
Acquisition may call in whole
but, except as provided below,
not in part, and WR may put to
Acquisition in whole or, except
as provided below, in part, WR s
Cumulative Preferred Shares,
options to purchase Cumulative
Preferred Shares and Common
Shares for a price equal to the
sum of (x) in respect of
Cumulative Preferred Shares or
options to purchase Cumulative
Preferred Shares, the
liquidation preference of the
Cumulative Preferred Shares put
or called (or underlying the
options put or called) plus
accrued and unpaid dividends on
such shares plus (y) in respect
of Common Shares, the par value
of the Common Shares put or
called. Such put and call
rights may be exercised at any
time after the earlier of (i)
the termination of WR s
employment as CEO by Acquisition
or by reason of WR s death or
disability and (ii) the third
anniversary of the acquisition.
Acquisition may assign its call
right or put obligation to CSX
and NSC (or to a voting trust
established by them) in equal
proportions, and, in the event
that Acquisition has
insufficient cash, WR exercising
his put right may put to CSX and
NSC (or to a voting trust
established by them) in equal
proportions. CSX and NSC may,
upon exercising the call rights
or responding to an exercise of
WR s put rights, provide that
the subject securities be
conveyed to a third party. In
the event of any assignment of
the put obligation by CSX or
NSC, the payment of the put
price shall be guaranteed by CSX
and NSC in equal proportions.
Notwithstanding the foregoing,
in the event of a termination of
WR s employment as CEO by
Acquisition for cause, until the
third anniversary of the
acquisition, WR s put right
shall be limited to his Common
Shares and shall not extend to
his Cumulative Preferred Shares
and Acquisition shall have the
right to call WR s Common Shares
without WR s Cumulative
Preferred Shares.
Corporate Governance: Acquisition s Board shall be
comprised of seven persons: the
CEO of Acquisition, four persons
designated by the CEO of
Acquisition and one person
designated by each of NSC and
CSX.
Major decisions outside the
ordinary course of business
(including material asset
dispositions and the business
plan and budget described below)
shall be subject to
supermajority approval of the
Board (including by both CSX and
NSC), consistent with STB/ICC
precedent.
Except with respect to day-to-
day railroad operations,
Acquisition shall follow a
mutually agreed business plan
and budget which shall be
designed prior to Closing (and
updated by Acquisition s Board
annually thereafter) with the
goals of (a) ensuring repayment
of contributions and (b) of
maximizing Acquisition s value,
which may include the
disposition of assets. The
definitive documentation shall
include appropriate financial
covenants customary for such
transactions.
The parties shall enter into a
Shareholders Agreement
respecting corporate governance,
put and call rights and
transferability restrictions.
Expenses: Except as set forth under
Transaction Structure above,
each party shall bear its own
expenses; except that the
provisions contained in
paragraph 4 of the proposal
letter shall apply with respect
to Legal Fees (as defined
therein).
Conditions: Conditions to closing shall be
those customary for transactions
of this type, including, without
limitation, (a) completion of
satisfactory transaction and
employment documents; (b) the
absence of any governmental
investigation or challenge or
third-party challenge with
respect to the transaction, (c)
satisfaction of all necessary
regulatory approvals and (d)
obtaining standard opinions.
Financing shall not be a
condition.
Definitive Documentation: The definitive documentation
shall contain provisions
providing that the exercise of
rights shall be subject to all
required regulatory approvals.
