SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended
September 30, 1994
------------------
or
( ) Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to
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Commission file number 1-12184
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CONRAIL INC.
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-2728514
- --------------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2001 Market Street, Philadelphia, Pennsylvania 19101
- -----------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(215) 209-4000
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(Registrant's telephone number, including area code)
- -----------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Number of shares of Conrail Inc. common stock outstanding (as of
October 31, 1994) 78,901,320
1
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CONRAIL INC.
INDEX
Page Number
PART I. FINANCIAL INFORMATION -----------
Item 1. Financial Statements:
Condensed Consolidated Statements
of Income - Quarters and nine
months ended September 30, 1994 and
1993 3
Condensed Consolidated Balance
Sheets - September 30, 1994 and
December 31, 1993 4
Condensed Consolidated Statements
of Cash Flows - Nine months ended
September 30, 1994 and 1993 5
Notes to Condensed Consolidated
Financial Statements 6
Reports of Independent Accountants 8
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
2
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PART I. FINANCIAL INFORMATION
CONRAIL INC.
Item 1. Financial Statements.
---------------------
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
($ In Millions Except Per Share Data)
Quarters Ended Nine Months Ended
September 30, September 30,
-------------- -----------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $949 $854 $2,747 $2,543
---- ---- ------ ------
Operating expenses
Way and structures 121 116 386 374
Equipment 204 172 623 526
Transportation 346 316 1,038 958
General and administrative 84 94 265 286
Early retirement program 84
--- --- ----- -----
Total operating expenses 755 698 2,396 2,144
--- --- ----- -----
Income from operations 194 156 351 399
Interest expense (48) (48) (143) (138)
Loss on disposition of subsidiary (80) (80)
Other income, net 28 30 79 87
--- --- ----- -----
Income before income taxes and the
cumulative effect of changes in
accounting principles 174 58 287 268
Income taxes 68 61 112 140
--- --- ----- -----
Income before the cumulative effect
of changes in accounting principles 106 (3) 175 128
Cumulative effect of changes in
accounting principles (74)
---- ----- ------ ------
Net income (loss) $106 $ (3) $ 175 $ 54
==== ===== ====== ======
Income (loss) per common share
Before the cumulative effect of
changes in accounting principles
Primary $1.29 $(.07) $ 2.07 $1.47
Fully diluted 1.17 (.07) 1.91 1.36
Cumulative effect of changes in
accounting principles
Primary (.92)
Fully diluted (.81)
Net income (loss) per common share
Primary $1.29 $(.07) $ 2.07 $ .55
Fully diluted 1.17 (.07) 1.91 .55
Dividends per common share $.375 $.325 $1.025 $.875
Weighted average number of shares
used in computing earnings per share
(thousands)
Primary 79,461 80,406 79,839 80,704
Fully diluted 89,324 80,406 89,747 90,777
Ratio of earnings to fixed charges 4.04x 2.02x 2.63x 2.64x
See accompanying notes.
</TABLE>
3
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<TABLE>
CONRAIL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
($ In Millions) September 30, December 31,
1994 1993
------------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 45 $ 38
Accounts receivable 679 644
Deferred tax assets 238 227
Material and supplies 129 132
Other current assets 23 21
------ ------
Total current assets 1,114 1,062
Property and equipment, net 6,467 6,313
Other assets 715 573
------ ------
Total assets $8,296 $7,948
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings 186 79
Current maturities of long-term debt 114 146
Accounts payable 107 62
Wages and employee benefits 177 185
Casualty reserves 106 93
Accrued and other current liabilities 539 510
----- -----
Total current liabilities 1,229 1,075
Long-term debt 1,996 1,959
Casualty reserves 211 132
Deferred income taxes 1,168 1,081
Special income tax obligation 528 575
Other liabilities 333 342
----- -----
Total liabilities 5,465 5,164
----- -----
Stockholders' equity
Series A ESOP convertible junior
preferredstock 286 286
Unearned ESOP compensation (245) (253)
Common stock 80 80
Additional paid-in capital 1,838 1,819
Retained earnings 941 857
------ ------
2,900 2,789
Treasury stock (69) (5)
------ ------
Total stockholders' equity 2,831 2,784
------ ------
Total liabilities and
stockholders' equity $8,296 $7,948
====== ======
See accompanying notes.
</TABLE>
4
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<TABLE>
CONRAIL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
($ In Millions)
Nine Months Ended
September 30,
-----------------
1994 1993
----- -----
<S> <C> <C>
Cash flows from operating activities $ 468 $ 334
----- -----
Cash flows from investing activities
Property and equipment acquisitions (371) (328)
Other (44) (22)
----- -----
Net cash used in investing activities (415) (350)
----- -----
Cash flows from financing activities
Repurchase of common stock (64) (50)
Proceeds from short-term borrowings, net 107 (107)
Proceeds from long-term debt, net 59 305
Payment of capital lease and equipment obligations (65) (76)
Dividends paid on common stock (81) (70)
Dividends paid on preferred stock (16) (16)
Other 14 11
---- -----
Net cash used in financing activities (46) (3)
---- -----
Increase (decrease) in cash and cash equivalents 7 (19)
Cash and cash equivalents
Beginning of period 38 40
----- -----
End of period $ 45 $ 21
===== =====
See accompanying notes.
</TABLE>
5
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CONRAIL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The unaudited financial statements contained herein present Conrail
Inc.'s (the "Company") consolidated financial position as of
September 30, 1994 and December 31, 1993, the consolidated results of
operations for the three and nine-month periods ended September 30,
1994 and 1993 and the consolidated cash flows for the nine-month
periods ended September 30, 1994 and 1993. In the opinion of
management, these financial statements include all adjustments,
consisting of normal recurring adjustments, and the cumulative effects
of changes in accounting principles mentioned in Note 3, necessary to
present fairly the results for the interim periods included.
The rules and regulations of the Securities and Exchange Commission
permit certain information and footnote disclosures, ordinarily
required by generally accepted accounting principles, to be condensed
or omitted from interim financial reports. Accordingly, the financial
statements included herein should be read in conjunction with the
audited financial statements and notes for the year ended December 31,
1993, presented in the Company's Annual Report on Form 10-K.
2. During the first quarter of 1994, the Company recorded a charge of
$51 million (after tax benefits of $33 million) for a non-union
employee voluntary early retirement program and related costs. The
majority of the cost of the early retirement program will be paid from
the Company's overfunded pension plan.
3. Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" and Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109).
As a result, the Company recorded cumulative after tax charges
totalling $74 million in the first quarter of 1993.
6
<PAGE>
4. As a result of the increase in the federal corporate income tax rate
from 34% to 35%, enacted August 10, 1993 and effective January 1, 1993,
income tax expense for the quarter and nine months ended September 30,
1993, includes $36 million of a retroactive nature, primarily for the
effects of adjusting deferred income taxes and the special income tax
obligation for the rate increase as required under SFAS 109.
5. During the third quarter of 1993, the Company recorded an estimated
loss for the disposition of its investment in its subsidiary, Concord
Resources Group, Inc. of $80 million less estimated tax benefits of $30
million.
6. In July 1993, the Board of Directors authorized a $100 million
common stock repurchase program. During the first nine months of 1994,
the Company acquired 1,100,071 shares for approximately $64 million
under this program, and at September 30, 1994 approximately $22 million
remained available from the authorization. On July 20, 1994, the
Company's Board of Directors authorized an additional $100 million
common stock repurchase program.
7. In July 1994, Consolidated Rail Corporation ("CRC"), a wholly-owned
subsidiary of the Company, issued approximately $49 million of 1994
Equipment Trust Certificates, Series A, with interest rates ranging
from 5.5% to 7.6%, maturing annually from 1995 to 2009. The
certificates were used to finance approximately 85% of the total
purchase price of 36 locomotives.
8. Information regarding contingent liabilities and litigation was
included in Note 12 to Consolidated Financial Statements and Part I,
Item 3 - Legal Proceedings in the Company's Annual Report on Form 10-K
for the year ended December 31, 1993. Material developments with
respect to these and other matters are discussed in Part II, Item 1 -
Legal Proceedings in this Form 10-Q.
7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Stockholders and Board of Directors of
Conrail Inc.
We have reviewed the accompanying condensed consolidated balance
sheet of Conrail Inc. and its subsidiaries (the "Company") as of
September 30, 1994 and the related condensed consolidated statements
of income for the three and nine months ended September 30, 1994 and
the condensed consolidated statement of cash flows for the nine
months ended September 30, 1994. The condensed consolidated
statements of income for the three and nine months ended
September 30, 1993 and the condensed consolidated statement of cash
flows for the nine months ended September 30, 1993 were reviewed by
other independent accountants, whose report dated October 21, 1993,
disclosed that no material modifications should have been made to the
interim financial information for it to be in conformity with
generally accepted accounting principles. This financial information
is the responsibility of the Company's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data and making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying interim financial information
for it to be in conformity with generally accepted accounting
principles.
The Company's consolidated balance sheet as of December 31, 1993 and
the related consolidated statements of income, stockholders' equity
and cash flows for the year then ended (not presented herein) were
audited by other independent accountants, whose report dated
January 24, 1994 expressed an unqualified opinion on those statements
and included an explanatory paragraph describing the Company's change
in methods for accounting for income taxes and postretirement
benefits other than pensions in 1993.
PRICE WATERHOUSE LLP
Thirty South Seventeenth Street
Philadelphia, PA 19103
October 19, 1994
8
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REPORT OF INDEPENDENT ACCOUNTANTS
The Stockholders and Board of Directors of
Conrail Inc.
We have made a review of the condensed consolidated balance sheet of
Conrail Inc. and subsidiaries as of September 30, 1993, and the
related condensed consolidated statements of income for the three
and nine-month periods ended September 30, 1993, and the condensed
consolidated statement of cash flows for the nine-month period ended
September 30, 1993, in accordance with standards established by the
American Institute of Certified Public Accountants.
A review of interim financial information consists principally of
obtaining an understanding of the system for the preparation of
interim financial information, applying analytical procedures to
financial data, and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope
than an audit in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the condensed consolidated financial
statements referred to above for them to be in conformity with
generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet as of
December 31, 1993, and the related consolidated statements of
income, stockholders' equity and cash flows for the year then ended
(not presented herein); and in our report, dated January 24, 1994,
we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December 31,
1993, is fairly presented, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.
COOPERS & LYBRAND
2400 Eleven Penn Center
Philadelphia, Pennsylvania
January 24, 1994
9
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CONRAIL INC.
Item 2. Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations
-----------------------------------
Results of Operations
---------------------
Overview
--------
Net income for Conrail Inc. ("Conrail" or "the Company") was
$106 million for the third quarter of 1994 compared with a net
loss of $3 million for the third quarter of 1993. The third
quarter 1993 loss includes recognition of the effects of the
increase in the federal corporate income tax rate, $36 million,
and the recording of an estimated net loss on the disposition of
Concord Resources Group, Inc.("Concord"), $50 million (see Notes
4 and 5 to the Condensed Consolidated Financial Statements).
Without these two charges, Conrail's net income for the third
quarter of 1993 would have been $83 million.
Net income for the first nine months of 1994 was $175 million
compared with $54 million for the first nine months of 1993.
Results for the first nine months of 1994 include a one-time
charge of $51 million (net of tax benefits of $33 million)
relating to a non-union early retirement program and related
costs that the Company recorded in the first quarter of 1994
(see Note 2 to the Condensed Consolidated Financial Statements).
Excluding that charge, net income for the first nine months of
1994 would have been $226 million. Results for the first nine
months of 1993 include the estimated net loss on the disposition
of Concord, $50 million, the recognition of the balance sheet
effects of the federal corporate income tax increase, $34
million, and the one-time charges in the first quarter of 1993
of $74 million (net of taxes of $14 million) for the adoption of
required changes in accounting for income taxes and
postretirement benefits other than pensions (see Note 3 to the
Condensed Consolidated Financial Statements). Absent these
charges, Conrail's net income would have been $212 million for
the first nine months of 1993.
Net income per common share for the third quarter of 1994 was
$1.29 on a primary basis and $1.17 on a fully diluted basis,
compared with a net loss per common share for the third quarter
10
<PAGE>
of 1993 of $.07 on both a primary and fully diluted basis.
Without the charges for the effects of the increase in the
federal corporate income tax rate and the estimated net loss on
the disposition of Concord, net income per common share for the
third quarter of 1993 would have been $1.00 on a primary basis
and $.91 on a fully diluted basis.
Net income per common share for the first nine months of 1994
was $2.07 on a primary basis and $1.91 on a fully diluted basis
compared with $.55 per share on both a primary and fully diluted
basis for the same period of 1993. Excluding the aforementioned
one-time charges in both nine-month periods, net income per
common share would have been $2.71 on a primary basis and $2.48
on a fully diluted basis for the first nine months of 1994
compared with $2.50 and $2.29 on the respective bases for the
first nine months of 1993.
Traffic volume increased in each of the four Service Groups,
Intermodal, Automotive, Unit Train and Core, for both the third
quarter and nine months ended September 30, 1994, compared with
the same periods in 1993. The Company believes that the economy
will continue to grow during the fourth quarter, although at a
slower pace than earlier in the year.
The Service Groups' analyses to evaluate assets required to
effectively and economicaly support their operations will not
be completed by year end, as previously disclosed, but will continue
into 1995.
Third Quarter 1994 compared with Third Quarter 1993
---------------------------------------------------
Net income for the third quarter of 1994 was $106 million
compared with a net loss for the third quarter of 1993 of
$3 million after recognizing the effects of the increase in the
federal corporate income tax rate and the estimated loss on the
disposition of Concord (see Notes 4 and 5 to the Condensed
Consolidated Financial Statements).
Operating revenues (primarily freight line-haul revenues, but
also including switching, demurrage and incidental revenues)
increased $95 million, or 11.1%, from $854 million in the third
quarter of 1993 to $949 million in the third quarter of 1994. A
10.6% increase in traffic volume in units (freight cars and
intermodal trailers and containers) was primarily responsible
for an $87 million increase in line-haul revenues which was
11
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partially offset by a slight decrease in average revenue per
unit which reduced revenues by $1 million. The decline in
average revenue per unit resulted from an unfavorable traffic
mix which lowered revenues by $12 million, that was mostly
offset by an increase in average rates which increased revenues
by $11 million. Other revenues increased by $9 million
primarily attributable to the Company's subsidiaries (other than
Consolidated Rail Corporation) also experiencing volume
increases during the quarter.
Operating expenses for the quarter increased $57 million, or
8.2%, from $698 million in 1993 to $755 million in 1994. The
following table sets forth the operating expenses for the two
periods:
Third Quarter
-------------
Increase
($ In Millions) 1994 1993 (Decrease)
---- ---- --------
Compensation and benefits $305 $297 $ 8
Fuel 46 41 5
Material and supplies 49 42 7
Equipment rents 96 78 18
Depreciation and amortization 69 70 (1)
Casualties and insurance 59 32 27
Other 131 138 (7)
---- ---- ---
$755 $698 $57
==== ==== ===
Compensation and benefits as a percent of revenues were 32.2% in
the third quarter of 1994 and 34.7% in the third quarter of
1993.
The increase of $18 million, or 23.1%, in equipment rents
primarily reflects increased traffic volume and congestion in
the yards. The effects of new operating leases also increased
equipment rents in 1994 versus 1993.
Casualties and insurance costs increased $27 million, or 84.4%,
due to an increase in the estimates to settle personal injury
claims. While the number of injuries in the third quarter of
1994 was slightly less than the corresponding quarter in 1993,
the cost per claim to settle injuries has continued to escalate.
Expenses recorded in the third quarter 1994 include increases
in per incident cost estimates for personal injuries which
12
<PAGE>
have occurred in 1994. The Company also expects an increase
of approximately $10 million per quarter for personal injury costs
over prior corresponding quarters if the current trend of claims
incurred continues.
Other operating expenses decreased $7 million, or 5.1%,
primarily due to favorable adjustments made as a result of a
reassessment of several accounting estimates, including the
accrual for costs associated with the crew consist labor
agreement ratified in 1992. These favorable adjustments were
partially offset by increases in lease rentals and trailer
loading and unloading expenses.
The Company's operating ratio (operating expenses as a percent
of revenues) was 79.6% for the third quarter of 1994, compared
with 81.7% for the third quarter of 1993.
First Nine Months of 1994 compared with First Nine Months of
------------------------------------------------------------
1993
----
Net income for the first nine months of 1994 was $175 million,
an increase of $121 million, from $54 million for the first nine
months of 1993. Net income for the first nine months of 1994
includes the effects of a one-time charge of $51 million (net of
tax benefits of $33 million) relating to a non-union voluntary
early retirement program and related costs which the Company
recorded during the first quarter of 1994 (see Note 2 to the
Condensed Consolidated Financial Statements). Net income for
the first nine months of 1993 includes the effects of one-time
charges in the first quarter of $74 million (net of tax benefits
of $14 million) for adoption of required changes in accounting
for income taxes and postretirement benefits other than pensions
(see Note 3 to the Condensed Consolidated Financial Statements);
and the third quarter charges for the recognition of the effects
on deferred taxes of the increase in the federal corporate
income tax rate, $34 million, and the estimated loss on the
disposition of Concord, $50 million, net of taxes of $30
million, (see Notes 4 and 5 to the Condensed Consolidated
Financial Statements).
Operating revenues for the first nine months of 1994 increased
$204 million, or 8.0%, to $2,747 million from $2,543 million for
the same nine months of 1993. A 9.6% increase in traffic volume
resulted in a $232 million increase in revenues that was
13
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partially offset by a 1.3% decrease in average revenue per unit
which reduced revenues by $35 million. The decline in average
revenue per unit was caused by an unfavorable traffic mix.
Other revenues increased $7 million.
Operating expenses increased $252 million (including $84 million
related to the non-union voluntary early retirement program and
related costs), or 11.8%, to $2,396 million for the first nine
months of 1994 from $2,144 million for the same period of 1993.
The following table shows the operating expenses for the
periods:
First Nine Months
-----------------
Increase
($ In Millions) 1994 1993 (Decrease)
------ ------ ----------
Compensation and benefits $ 957 $ 929 $ 28
Fuel 140 128 12
Material and supplies 162 149 13
Equipment rents 289 228 61
Depreciation and amortization 208 211 (3)
Casualties and insurance 143 97 46
Other 413 402 11
Early retirement program 84 - 84
------ ------ ----
$2,396 $2,144 $252
====== ====== ====
Compensation and benefits as a percent of revenues were 34.8% in
the first nine months of 1994 and 36.5% in the first nine months
of 1993. The compensation and benefits increase of $28 million,
or 3.0%, was attributable primarily to increased overtime caused
by the adverse weather conditions and service disruptions
experienced in the first quarter of 1994.
The increase of $61 million, or 26.8%, in equipment rents is
primarily attributable to increased traffic volume and new
operating leases, as well as the effects of crowded serving
yards and train delays primarily caused by adverse weather
conditions experienced in the first quarter of 1994.
Casualties and insurance costs increased $46 million, or 47.4%,
primarily due to an increase in personal injury claims expense
recorded in the third quarter based on higher expected costs to
settle claims.
14
<PAGE>
In the first quarter of 1994, the Company incurred a one-time
pre-tax charge of $84 million for the non-union voluntary early
retirement program and related costs (see Note 2 to the
Condensed Consolidated Financial Statements).
Conrail's operating ratio was 87.2% for the first nine months of
1994, compared with 84.3% for the first nine months of 1993.
Without the $84 million one-time charge for the early retirement
program, the operating ratio for the first nine months of 1994
would have been 84.1%. While the Company's financial goal of
achieving an 81.5% operating ratio (excluding non-recurring
charges) for the full year has not changed, superior fourth
quarter results will be required to achieve the goal.
Liquidity and Capital Resources
-------------------------------
The Company's cash and cash equivalents increased $7 million in
the first nine months of 1994, from $38 million at December 31,
1993 to $45 million at September 30, 1994. Cash generated from
operations, primarily from its wholly-owned subsidiary,
Consolidated Rail Corporation, and borrowings are the Company's
principal sources of liquidity and are used primarily for
capital expenditures, debt service, common stock repurchases and
dividends. In the first nine months of 1994, operating
activities provided cash of $468 million and net proceeds from
short-term borrowings and long-term debt provided $166 million.
The principal uses of cash were for property and equipment
acquisitions, $371 million; common stock repurchases, $64
million; payment of capital lease and equipment obligations, $65
million; and cash dividends on common and preferred stock, $97
million.
A working capital (current assets less current liabilities)
deficiency of $115 million existed at September 30, 1994 as
compared with a deficiency of $13 million at December 31, 1993.
Management believes that the Company's financial position allows
it sufficient access to credit sources on investment grade
terms, and, if necessary, additional intermediate or long-term
debt could be obtained for working capital requirements.
15
<PAGE>
During the first nine months of 1994, Consolidated Rail
Corporation issued $198 million of commercial paper and repaid
$91 million. At September 30, 1994, $286 million of commercial
paper remained outstanding, of which $100 million is classified
as long-term debt since it is expected to be refinanced through
subsequent issuances of commercial paper and is supported by a
long-term credit facility.
In July 1993, the Company announced a third common stock
repurchase program of up to $100 million. During the first nine
months of 1994, 1,100,071 shares were acquired for $64 million,
bringing the total acquired under this program through
September 30, 1994 to 1,337,926 shares at a cost of
approximately $78 million. At September 30, 1994, approximately
$22 million remained from this program. On July 20, 1994, the
Board of Directors authorized an additional $100 million common
stock repurchase program.
16
<PAGE>
PART II. OTHER INFORMATION
CONRAIL INC.
Item 1. Legal Proceedings
-----------------
The Penn Central Corporation v. United States, Consolidated Rail
----------------------------------------------------------------
Corporation, et al.
-------------------
In March 1992, The Penn Central Corporation ("Penn Central")
filed suit in the Special Court, a federal court with
jurisdiction over certain matters relating to Penn Central's
conveyance of rail properties pursuant to the Regional Rail
Reorganization Act, seeking a finding that the federal
government was barred from pursuing CERCLA claims against it for
environmental contamination of properties conveyed as part of
its reorganization process. CRC and other recipients of former
Penn Central property filed in opposition to Penn Central.
On August 23, 1994, the Special Court held that the
reorganization did not prevent the government from pursuing its
CERCLA claims against Penn Central. The Court also granted
CRC's Motion for Summary Judgment against Penn Central, finding
that CRC's liability for contamination to former Penn Central
property was limited to the post-conveyance period only --
beginning in 1976. Notwithstanding this finding, the Special
Court declined to preclude federal courts from applying
principles of joint and several liability and holding CRC liable
for pre-conveyance contamination in instances where
contamination of the property was not divisible.
This matter was previously reported in the Company's report on
Form 10-K for the year ended December 31, 1993, in connection
with "United States v. Southeastern Pennsylvania Transportation
Authority, National Railroad Passenger Corporation, and
Consolidated Rail Corporation (Paoli Railyard)" and "United
States v. Conrail (Elkhart Yard, Indiana)."
17
<PAGE>
Item 2. Changes in Securities
---------------------
On October 19, 1994, the Company amended its Rights Agreement to
increase the Purchase Price (as defined in the Rights Agreement)
for a share of its common stock from $52.50 to $105. In
addition, the Rights Agreement was amended to enable the
Company's Board of Directors to require the exchange of some or
all of the Rights for one share of its common stock for each
Right at any time after there is an Acquiring Person (as defined
in the Rights Agreement; generally, an owner of 10% or more of
the Company's common stock).
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
4.1 Amended Rights Agreement
11 Statement of earnings per share
computations.
12 Computations of the ratio of earnings to
fixed charges.
15.a Letter re unaudited interim financial
information from Price Waterhouse LLP.
15.b Letter re unaudited interim financial
information from Coopers & Lybrand L.L.P.
27 Financial data schedule
(b) Reports on Form 8-K
None
18
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CONRAIL INC.
Registrant
/s/ Bruce B. Wilson
--------------------------------
Bruce B. Wilson
Senior Vice President - Law
/s/ H. W. Brown
--------------------------------
H. W. Brown
Senior Vice President -
Finance and Administration
(Principal Financial Officer)
Date: November 10, 1994
19
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EXHIBIT INDEX
-------------
Exhibit Page Number in
No. SEC Sequential
Numbering System
------- ----------------
4.1 Amended Rights Agreement
11 Statement of earnings per share
computations.
12 Computations of the ratio of
earnings to fixed charges.
15.a Letter re unaudited interim
financial information from Price
Waterhouse LLP.
15.b Letter re unaudited interim
financial information from
Coopers & Lybrand L.L.P.
27 Financial data schedule
20
<PAGE>
Exhibit 4.1
AMENDMENT TO RIGHTS AGREEMENT -----------
-----------------------------
AMENDMENT, dated as of October 19, 1994, to the Rights
Agreement, dated as of July 19, 1989, as amended March 21, 1990
(the "Rights Agreement"), between Consolidated Rail Corporation,
a Pennsylvania corporation, and First Chicago Trust Company of
New York, as Rights Agent (the "Rights Agent"), which Rights
Agreement was assigned by Consolidated Rail Corporation, as of
July 1, 1993, to Conrail Inc., a Pennsylvania corporation (the
"Company").
The Company and the Rights Agent have heretofore executed
and entered into the Rights Agreement. Pursuant to Section 27 of
the Rights Agreement, the Company and the Rights Agent may from
time to time supplement or amend the Rights Agreement in
accordance with the provisions of Section 27 thereof. All acts
and things necessary to make this Amendment a valid agreement,
enforceable according to its terms, have been done and performed,
and the execution and delivery of this Amendment by the Company
and the Rights Agent have been in all respects duly authorized by
the Company and the Rights Agent.
In consideration of the foregoing and the mutual
agreements set forth herein, the parties have hereto agreed as
follows:
1. Section 7(b) of the Rights Agreement is hereby amended
to read in its entirety as follows:
The Purchase Price for each Common Share pursuant
to the exercise of a Right shall be $105, shall
be subject to adjustment from time to time after
October 19, 1994 as provided in Sections 11 and
13 hereof and shall be payable in lawful money
of the United States of America in accordance
with paragraph (c) below.
2. Section 24(a) of the Rights Agreement is hereby
modified and amended by deleting the second sentence thereof.
<PAGE>
3. This Amendment to the Rights Agreement shall be
governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania applicable to contracts to be made
and performed entirely within such Commonwealth.
4. This Amendment to the Rights Agreement may be executed
in any number of counterparts, each of which shall be an
original, but such counterparts shall together constitute one and
the same instrument. Terms not defined herein shall, unless the
context otherwise requires, have the meanings assigned to such
terms in the Rights Agreement.
5. In all respects not inconsistent with the terms and
provisions of this Amendment to the Rights Agreement, the Rights
Agreement is hereby ratified, adopted, approved and confirmed.
In executing and delivering this Amendment, the Rights Agent
shall be entitled to all the privileges and immunities afforded
to the Rights Agent under the terms and conditions of the Rights
Agreement.
6. If any term, provision, covenant or restriction of this
Amendment to the Rights Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants
and restrictions of this Amendment to the Rights Agreement, and
of the Rights Agreement, shall remain in full force and effect
and shall in no way be affected, impaired or invalidated.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and attested, all as of the date
and year first above written.
Attest: CONRAIL INC.
By:____________________ By:_________________________________
Attest: FIRST CHICAGO TRUST COMPANY
OF NEW YORK
By:____________________ By:_________________________________
<PAGE>
AMENDMENT ASSIGNMENT AND ASSUMPTION AGREEMENT
- ----------------------------------------------
This Amendment, Assignment and Assumption Agreement is made
as of the 17th day of February, 1993 by and among Consolidated
Rail Corporation, a Pennsylvania corporation ("Assignor"),
Conrail Inc., a Pennsylvania corporation ("Assignee"), and First
Chicago Trust Company of New York (the "Rights Agent").
WHEREAS, Assignor and the Rights Agent are parties to that
certain Rights Agreement dated as of July 19, 1989, as amended as
of March 1, 1990 (the "Rights Agreement"), providing for the
issuance of common stock purchase rights to the holders of shares
of common stock of Assignor, par value $1.00 per share (the
"Assignor Common Stock"); and
WHEREAS, Assignor has formed Assignee as a wholly-owned
subsidiary of Assignor and Assignee has formed Conrail Subsidiary
Corporation, a Pennsylvania corporation ("Merger Sub"), as
a wholly-owned subsidiary of Assignee; and
WHEREAS, pursuant to an Agreement and Plan of Merger dated
as of February 17, 1993 (the "Merger Agreement"), Merger Sub
will be merged with and into Assignor (the "Merger"; and,
pursuant to the Merger, each holder of Assignor Common Stock will
receive one share of common stock, par value $1.00, of Assignee
(the "Assignee Common Stock"), for each share of Assignor Common
Stock held by such holder immediately prior to the Merger, and,
after the Merger, all outstanding Assignor Common Stock will be
owned by Assignee, with the result that Assignor will become a
wholly-owned subsidiary of Assignee;
WHEREAS, pursuant to the Merger Agreement, Assignor has
agreed to assign, and Assignee has agreed to assume, all of the
rights and obligations of Assignor under the Rights Agreement;
and
<PAGE>
WHEREAS, the board of directors of Assignor believes that,
in connection with effecting the Merger, it is in the best
interests of the shareholders of Assignor to amend the Rights
Agreement before the assignment thereof by Assignor to Assignee;
NOW, THEREFORE, intending to be legally bound, the
parties hereto agree as follows:
1. Amendment to Plan. The Rights Agreement is hereby
------------------
amended by adding the following language immediately after the
word "Person" in clause (a) of Section 13 thereof and immediately
after the word "Person" the first time it appears in clause (b)
of Section 13 thereof:
(other than one or more of the Company's wholly-owned
Subsidiaries)
2. Assignment and Assumption. Assignor hereby assigns,
--------------------------
transfers and conveys to Assignee all of the right, title and
interest of Assignor in and to the Rights Agreement and Assignee
hereby assumes and agrees to perform all liabilities and
obligations of Assignor under the Rights Agreement such that all
references in the Rights Agreement to the term "Company" shall be
deemed to refer to the Assignee and not the Assignor.
3. Governing Law. This Agreement shall be governed by and
--------------
construed in accordance with the laws of the Commonwealth of
Pennsylvania.
4. Binding Agreement. This Agreement shall be binding
------------------
upon, and shall inure to the benefit of, the successors and
assigns of the parties hereto.
5. Condition to Effectiveness. Except for Paragraph 1
---------------------------
hereof which shall be effective as of the date first written
above, this Agreement shall take effect at the Effective Time
specified in the Merger Agreement; provided, however, that this
Agreement, except for Paragraph 1 hereof, shall be null and void
and of no effect if the Merger does not become effective at the
Effective Time (as it may be changed pursuant to the Merger
Agreement) in accordance with the applicable provisions of the
laws of the Commonwealth of Pennsylvania.
<PAGE>
6. Counterparts. This Agreement may be executed in any
-------------
number of counterparts, each of which when taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.
CONSOLIDATED RAIL CORPORATION
By:______________________________________
Bruce B. Wilson
Senior Vice President-Law
CONRAIL INC.
By:______________________________________
H. William Brown
Senior Vice President - Finance
FIRST CHICAGO TRUST COMPANY
OF NEW YORK
By:______________________________________
Title:____________________________________
<PAGE>
AMENDMENT TO RIGHTS AGREEMENT
-----------------------------
AMENDMENT, dated as of March 21, 1990, to the Rights
Agreement, dated as of July 19, 1989 (the "Rights Agreement"),
between Consolidated Rail Corporation, a Pennsylvania corporation
(the "Company"), and First Chicago Trust Company of New York, as
Rights Agent (the "Rights Agent"). The Company and the Rights
Agent have heretofore executed and entered into the Rights
Agreement. Pursuant to Section 27 of the Rights Agreement, the
Company and the Rights Agent may from time to time supplement or
amend the Rights Agreement in accordance with the provisions of
Section 27 thereof. All acts and things necessary to make this
Amendment a valid agreement, enforceable according to its terms,
have been done and performed, and the execution and delivery of
this Amendment by the Company and the Rights Agent have been in
all respects duly authorized by the Company and the Rights Agent.
In consideration of the foregoing and the mutual agreements set
forth herein, the parties hereto agree as follows:
1. Section 1(a) of the Rights Agreement is hereby modified
and amended by adding the following sentence to the end thereof:
Notwithstanding the foregoing, if the Board of
Directors of the Company determines in good faith
that a Person who would otherwise be an Acquiring
Person, as defined pursuant to the foregoing
provisions of this paragraph (a), has become such
inadvertently, and such Person divests as promptly
as practicable a sufficient number of Common Shares
so that such Person would no longer be an Acquiring
Person, as defined pursuant to the foregoing
provisions of this paragraph (a), then such Person
shall not be deemed to be an "Acquiring Person" for
any purposes of this Agreement.
<PAGE>
2. Section 1 of the Rights Agreement is hereby modified
and amended by deleting paragraph (m) thereof in its entirety.
3. Section 11(a) of the Rights Agreement is hereby
modified and amended by deleting subparagraph (iii) thereof in
its entirety, renumbering subparagraph (iv) thereof as
subparagraph (iii), and amending and modifying subparagraph (ii)
thereof to read in its entirety as follows:
(ii) Subject to Section 24 of this Agreement, in the event
any Person becomes an Acquiring Person, each holder of a Right
shall thereafter have a right to receive, upon exercise thereof
at a price equal to the then current Purchase Price multiplied by
the number of Common Shares for which a Right is then
exercisable, in accordance with the terms of this Agreement, such
number of Common Shares of the Company as shall equal the result
obtained by (x) multiplying the then current Purchase Price by
the number of Common Shares for which a Right is then exercisable
and dividing that product by (y) 50% of the then current per
share market price of the Company's Common Shares (determined
pursuant to Section 11(d) hereof) on the date of the occurrence
of such event. In the event that any Person shall become an
Acquiring Person and the Rights shall then be outstanding, the
Company shall not take any action which would eliminate or
diminish the benefits intended to be afforded by the Rights.
From and after the occurrence of such event, any Rights that are
or were acquired or beneficially owned by any Acquiring Person
(or any Associate or Affiliate of such Acquiring Person) shall be
void and any holder of such Rights shall thereafter have no right
to exercise such Rights under any provision of this Agreement.
<PAGE>
No Right Certificate shall be issued pursuant to Section 3 that
represents Rights beneficially owned by an Acquiring Person whose
Rights would be void pursuant to the preceding sentence or any
Associate or Affiliate thereof; no Right Certificate shall be
issued at any time upon the transfer of any Rights to an
Acquiring Person whose Rights would be void pursuant to the
preceding sentence or any Associate or Affiliate thereof or to
any nominee of such Acquiring Person, Associate or Affiliate; and
any Right Certificate delivered to the Rights Agent for transfer
to an Acquiring Person whose Rights would be void pursuant to the
preceding sentence shall be cancelled.
4. Section 24(a) of the Rights Agreement is hereby
modified and amended by deleting the phrase "at any time after
the occurrence of a Trigger Event" from the first sentence
thereof and substituting therefor the phrase "at any time after
any Person becomes an Acquiring Person".
5. This Amendment to the Rights Agreement shall be
governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania and for all purposes shall be
governed by and construed in accordance with the laws of such
Commonwealth applicable to contracts to be made and performed
entirely within such Commonwealth.
6. This Amendment to the Rights Agreement may be executed
in any number of counterparts, each of which shall be an
original, but such counterparts shall together constitute one and
the same instrument. Terms not defined herein shall, unless the
context otherwise requires, have the meanings assigned to such
terms in the Rights Agreement.
7. In all respects not inconsistent with the terms and
provisions of this Amendment to the Rights Agreement, the Rights
Agreement is hereby ratified, adopted, approved and confirmed.
In executing and delivering this Amendment, the Rights Agent
shall be entitled to all the privileges and immunities afforded
to the Rights Agent under the terms and conditions of the Rights
Agreement.
<PAGE>
8. If any term, provision, covenant or restriction of this
Amendment to the Rights Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants
and restrictions of this Amendment to the Rights Agreement, and
of the Rights Agreement, shall remain in full force and effect
and shall in no way be affected, impaired or invalidated.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and attested, all as of the date
and year first above written.
Attest: CONSOLIDATED RAIL CORPORATION
By:________________________ By:_________________________________
Attest: FIRST CHICAGO TRUST COMPANY OF
NEW YORK
By:_________________________ By:_________________________________
<PAGE>
CONSOLIDATED RAIL CORPORATION
AND
FIRST CHICAGO TRUST COMPANY OF NEW YORK
Rights Agent
Rights Agreement
Dated as of July 19, 1989
<PAGE>
TABLE OF CONTENTS
-----------------
Page
Section 1. Certain Definitions 1
Section 2. Appointment of Rights Agent 5
Section 3. Issue of Right Certificates 5
Section 4. Form of Right Certificates 8
Section 5. Countersignature and Registration 9
Section 6. Transfer, Split Up, Combination and Exchange
of Right Certificates; Mutilated, Destroyed, Lost or
Stolen Right Certificates . 10
Section 7. Exercise of Rights; Purchase Price; Expiration
Date of Rights 11
Section 8. Cancellation and Destruction of
Right Certificates 13
Section 9. Availability of Common Shares 13
Section 10. Common Shares Record Date 14
Section 11. Adjustment of Purchase Price, Number of
Shares or Number of Rights 15
Section 12. Certificate of Adjusted Purchase Price or
Number of Shares 25
Section 13. Consolidation, Merger or Sale or Transfer
of Assets or Earning Power 25
Section 14. Fractional Rights and Fractional Shares 27
Section 15. Rights of Action 28
Section 16. Agreement of Right Holders 29
i
<PAGE>
Page
----
Section 17. Right Certificate Holder Not Deemed
a Stockholder 30
Section 18. Concerning the Rights Agent 30
Section 19. Merger or Consolidation or Change of
Name of Rights Agent 31
Section 20. Duties of Rights Agent 32
Section 21. Change of Rights Agent 35
Section 22. Issuance of New Right Certificates 37
Section 23. Redemption 37
Section 24. Exchange 38
Section 25. Notice of Certain Events 40
Section 26. Notices 41
Section 27. Supplements and Amendments 42
Section 28. Successors 42
Section 29. Benefits of this Agreement 43
Section 30. Severability 43
Section 31. Governing Law 43
Section 32. Counterparts 43
Section 33. Descriptive Headings 44
ii
<PAGE>
RIGHTS AGREEMENT
----------------
Agreement, dated as of July 19, 1989, between Consolidated
Rail Corporation, a Pennsylvania corporation (the "Company"), and
First Chicago Trust Company of New York (the "Rights Agent").
The Board of Directors of the Company has authorized and
declared a dividend of one common share purchase right ("Right")
for each Common Share (as hereinafter defined) of the Company
outstanding on July 31, 1989 (the "Record Date"), each Right
representing the right to purchase one Common Share, upon the
terms and subject to the conditions herein set forth, and has
further authorized and directed the issuance of one Right with
respect to each Common Share that shall become outstanding
between the Record Date and the earliest of the Distribution
Date, the Redemption Date and the Final Expiration Date (as such
terms are hereinafter defined).
Accordingly, in consideration of the premises and the mutual
agreements herein set forth, and intending to be legally bound,
the parties hereby agree as follows:
Section 1. Certain Definitions
-------------------
For purposes of this Agreement, the following terms have the
meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term
is hereinafter defined) who or which, together with all
Affiliates and Associates (as such terms are hereinafter defined)
of such Person, shall be the Beneficial Owner (as such term is
hereinafter defined) of 10% or more of the Common Shares of the
Company then outstanding, but shall not include the Company, any
Subsidiary (as such term is hereinafter defined) of the Company,
any employee benefit plan of the Company or any Subsidiary of the
Company, or any entity holding Common Shares for or pursuant to
the terms of any such plan. Notwithstanding the foregoing, no
1
<PAGE>
Person shall become an "Acquiring Person" as the result of an
acquisition of Common Shares by the Company which, by reducing
the number of shares outstanding, increases the proportionate
number of shares beneficially owned by such Person to 10% or more
of the Common Shares of the Company then outstanding; provided,
--------
however, that if a Person shall become the Beneficial Owner of
- -------
10% or more of the Common Shares of the Company then outstanding
by reason of share purchases by the Company and shall, after such
share purchases by the Company, become the Beneficial Owner of
any additional Common Shares of the Company, then such Person
shall be deemed to be an "Acquiring Person".
(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), as in effect on the date of this
Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of and
shall be deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's
Affiliates or Associates beneficially owns, directly or
indirectly;
(ii) which such Person or any of such Person's
Affiliates or Associates has (A) the right to acquire (whether
such right is exercisable immediately or only after the passage
of time) pursuant to any agreement, arrangement or understanding
(other than customary agreements with and between underwriters
and selling group members with respect to a bona fide public
offering of securities), or upon the exercise of conversion
rights, exchange rights, rights (other than these Rights),
warrants or options, or otherwise; provided, however, that a
-------- -------
Person shall not be deemed the Beneficial Owner of, or to
beneficially own, securities tendered pursuant to a tender or
2
<PAGE>
exchange offer made by or on behalf of such Person or any of such
Person's Affiliates or Associates until such tendered securities
are accepted for purchase or exchange; or (B) the right to vote
pursuant to any agreement, arrangement or understanding;
provided, however, that a Person shall not be deemed the
- -------- -------
Beneficial Owner of, or to beneficially own, any security if the
agreement, arrangement or understanding to vote such security (1)
arises solely from a revocable proxy or consent given to such
Person in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable rules and
regulations promulgated under the Exchange Act and (2) is not
also then reportable on Schedule 13D under the Exchange Act (or
any comparable or successor report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person with which such Person or any of
such Person's Affiliates or Associates has any agreement,
arrangement or understanding (other than customary agreements
with and between underwriters and selling group members with
respect to a bona fide public offering of securities) for the
purpose of acquiring, holding, voting (except to the extent
contemplated by the proviso to Section 1(c)(ii)(B)) or disposing
of any securities of the Company. Notwithstanding anything in
this definition of Beneficial Ownership to the contrary, the
phrase "then outstanding," when used with reference to a Person's
Beneficial Ownership of securities of the Company, shall mean the
number of such securities then issued and outstanding together
with the number of such securities not then actually issued and
outstanding which such Person would be deemed to own beneficially
hereunder.
(d) "Business Day" shall mean any day other than a
Saturday, a Sunday, or a day on which banking institutions in New
York are authorized or obligated by law or executive order to
close.
3
<PAGE>
(e) "Close of business" on any given date shall mean 5:00
P.M., New York time, on such date; provided, however, that if
-------- -------
such date is not a Business Day it shall mean 5:00 P.M., New York
time, on the next succeeding Business Day.
(f) "Common Shares" when used with reference to the Company
shall mean the shares of common stock, par value $1.00 per share,
of the Company. "Common Shares" when used with reference to any
Person other than the Company shall mean the capital stock (or
equity interest) with the greatest voting power of such other
Person or, if such other Person is a Subsidiary of another
Person, the Person or Persons which ultimately control such
first-mentioned Person.
(g) "Distribution Date" shall have the meaning set forth in
Section 3 hereof.
(h) "Final Expiration Date" shall have the meaning set
forth in Section 7 hereof.
(i) "Person" shall mean any individual, firm, corporation
or other entity, and shall include any successor (by merger or
otherwise) of such entity.
(j) "Redemption Date" shall have the meaning set forth in
Section 7 hereof.
(k) "Shares Acquisition Date" shall mean the first date of
public announcement by the Company or an Acquiring Person that an
Acquiring Person has become such.
(l) "Subsidiary" of any Person shall mean any corporation
or other entity of which a majority of the voting power of the
voting equity securities or equity interest is owned, directly or
indirectly, by such Person.
4
<PAGE>
(m) A "Trigger Event" shall be deemed to have occurred upon
any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or any
Subsidiary of the Company, or any entity holding Common Shares
for or pursuant to the terms of any such plan), together with all
Affiliates and Associates of such Person, becoming the Beneficial
Owner of 10% or more of the Common Shares of the Company then
outstanding. Notwithstanding the foregoing, no Trigger Event
shall be deemed to have occurred as the result of an acquisition
of Common Shares by the Company which, by reducing the number of
shares outstanding, increases the proportionate number of shares
beneficially owned by such Person to 10% or more of the Common
Shares of the Company then outstanding; provided, however, that
-------- -------
in the event that a Person shall become the Beneficial Owner of
10% or more of the Common Shares of the Company then outstanding
by reason of share purchases by the Company, a Trigger Event
shall be deemed to have occurred upon such Person, after such
share purchases by the Company, becoming the Beneficial Owner of
any additional Common Shares of the Company.
Section 2. Appointment of Rights Agent
---------------------------
The Company hereby appoints the Rights Agent to act as agent
for the Company and the holders of the Rights (who, in accordance
with Section 3 hereof, shall prior to the Distribution Date also
be the holders of the Common Shares) in accordance with the terms
and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such
co-Rights Agents as it may deem necessary or desirable.
Section 3. Issue of Right Certificates
---------------------------
(a) Until the earlier of (i) the tenth day after the Shares
Acquisition Date or (ii) the tenth business day (or such later
date as may be determined by action of the Board of Directors
prior to such time as any Person becomes an Acquiring Person)
5
<PAGE>
after the date of the commencement by any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan
of the Company or of any Subsidiary of the Company or any entity
holding Common Shares for or pursuant to the terms of any such
plan) of, or of the first public announcement of the intention of
any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any
Subsidiary of the Company or any entity holding Common Shares for
or pursuant to the terms of any such plan) to commence, a tender
or exchange offer the consummation of which would result in any
Person becoming the Beneficial Owner of Common Shares aggregating
10% or more of the then outstanding Common Shares (including any
such date which is after the date of this Agreement and prior to
the issuance of the Rights; the earlier of such dates being
herein referred to as the "Distribution Date"), (x) the Rights
will be evidenced (subject to the provisions of Section 3(b)
hereof) by the certificates for Common Shares registered in the
names of the holders thereof (which certificates shall also be
deemed to be Right Certificates) and not by separate Right
Certificates, and (y) the right to receive Right Certificates
will be transferable only in connection with the transfer of
Common Shares. As soon as practicable after the Distribution
Date, the Company will prepare and execute, the Rights Agent will
countersign, and the Company will send or cause to be sent (and
the Rights Agent will, if requested, send) by first-class,
insured, postage-prepaid mail, to each record holder of Common
Shares as of the close of business on the Distribution Date, at
the address of such holder shown on the records of the Company, a
Right Certificate, in substantially the form of Exhibit A hereto
(a "Right Certificate"), evidencing one Right for each Common
Share so held. As of the Distribution Date, the Rights will be
evidenced solely by such Right Certificates.
6
<PAGE>
(b) On the Record Date, or as soon as practicable
thereafter, the Company will send a copy of a Summary of Rights
to Purchase Common Shares, in substantially the form of Exhibit B
hereto (the "Summary of Rights"), by first-class, postage-prepaid
mail, to each record holder of Common Shares as of the close of
business on the Record Date, at the address of such holder shown
on the records of the Company. With respect to certificates for
Common Shares outstanding as of the Record Date, until the
Distribution Date, the Rights will be evidenced by such
certificates registered in the names of the holders thereof
together with a copy of the Summary of Rights attached thereto.
Until the Distribution Date (or the earlier of the Redemption
Date or the Final Expiration Date), the surrender for transfer of
any certificate for Common Shares outstanding on the Record Date,
with or without a copy of the Summary of Rights attached thereto,
shall also constitute the transfer of the Rights associated with
the Common Shares represented thereby.
(c) Certificates for Common Shares which become outstanding
(including, without limitation, reacquired Common Shares referred
to in the last sentence of this paragraph (c)) after the Record
Date but prior to the earliest of the Distribution Date, the
Redemption Date or the Final Expiration Date shall have impressed
on, printed on, written on or otherwise affixed to them the
following legend:
This certificate also evidences and
entitles the holder hereof to certain rights
as set forth in a Rights Agreement between
Consolidated Rail Corporation and First
Chicago Trust Company of New York, dated as
of July 19, 1989 (the "Rights Agreement"),
the terms of which are hereby incorporated
herein by reference and a copy of which is on
file at the principal executive offices of
7
<PAGE>
Consolidated Rail Corporation. Under certain
circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by
separate certificates and will no longer be
evidenced by this certificate. Consolidated
Rail Corporation will mail to the holder of
this certificate a copy of the Rights
Agreement without charge after receipt of a
written request therefor. As described in
the Rights Agreement, Rights issued to any
Person who becomes an Acquiring Person (as
defined in the Rights Agreement) may under
certain circumstances become null and void.
With respect to such certificates containing the foregoing
legend, until the Distribution Date, the Rights associated with
the Common Shares represented by such certificates shall be
evidenced by such certificates alone, and the surrender for
transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares
represented thereby. In the event that the Company purchases or
acquires any Common Shares after the Record Date but prior to the
Distribution Date, any Rights associated with such Common Shares
shall be deemed cancelled and retired so that the Company shall
not be entitled to exercise any Rights associated with the Common
Shares which are no longer outstanding.
Section 4. Form of Right Certificates
--------------------------
The Right Certificates (and the forms of election to
purchase Common Shares and of assignment to be printed on the
reverse thereof) shall be substantially the same as Exhibit A
hereto and may have such marks of identification or designation
and such legends, summaries or endorsements printed thereon as
the Company may deem appropriate and as are not inconsistent with
8
<PAGE>
the provisions of this Agreement, or as may be required to comply
with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock
exchange on which the Rights may from time to time be listed, or
to conform to usage. Subject to the provisions of Section 22
hereof, the Right Certificates shall entitle the holders thereof
to purchase such number of Common Shares as shall be set forth
therein at the price per Common Share set forth therein (the
"Purchase Price"), but the number of such Common Shares and the
Purchase Price shall be subject to adjustment as provided herein.
Section 5. Countersignature and Registration
---------------------------------
The Right Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its Chief Executive Offi
cer, its President, any of its Vice Presidents, or its Treasurer,
either manually or by facsimile signature, shall have affixed
thereto the Company's seal or a facsimile thereof, and shall be
attested by the Secretary or an Assistant Secretary of the
Company, either manually or by facsimile signature. The Right
Certificates shall be manually countersigned by the Rights Agent
and shall not be valid for any purpose unless countersigned. In
case any officer of the Company who shall have signed any of the
Right Certificates shall cease to be such officer of the Company
before countersignature by the Rights Agent and issuance and
delivery by the Company, such Right Certificates, nevertheless,
may be countersigned by the Rights Agent and issued and delivered
by the Company with the same force and effect as though the
person who signed such Right Certificates had not ceased to be
such officer of the Company; and any Right Certificate may be
signed on behalf of the Company by any person who, at the actual
date of the execution of such Right Certificate, shall be a
proper officer of the Company to sign such Right Certificate,
9
<PAGE>
although at the date of the execution of this Rights Agreement
any such person was not such an officer.
Following the Distribution Date, the Rights Agent will keep
or cause to be kept, at its principal office, books for
registration and transfer of the Right Certificates issued
hereunder. Such books shall show the names and addresses of the
respective holders of the Right Certificates, the number of
Rights evidenced on its face by each of the Right Certificates
and the date of each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of
----------------------------------------------
Right Certificates; Mutilated, Destroyed, Lost or Stolen Right
- --------------------------------------------------------------
Certificates
- ------------
Subject to the provisions of Section 14 hereof, at any time
after the close of business on the Distribution Date, and at or
prior to the close of business on the earlier of the Redemption
Date or the Final Expiration Date, any Right Certificate or Right
Certificates (other than Right Certificates representing Rights
that have become void pursuant to Section 11(a)(ii) hereof or
that have been exchanged pursuant to Section 24 hereof) may be
transferred, split up, combined or exchanged for another Right
Certificate or Right Certificates, entitling the registered
holder to purchase a like number of Common Shares as the Right
Certificate or Right Certificates surrendered then entitled such
holder to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Right Certificate or Right
Certificates shall make such request in writing delivered to the
Rights Agent, and shall surrender the Right Certificate or Right
Certificates to be transferred, split up, combined or exchanged
at the principal office of the Rights Agent. Thereupon the
Rights Agent shall countersign and deliver to the person entitled
thereto a Right Certificate or Right Certificates, as the case
may be, as so requested. The Company may require payment of a
10
<PAGE>
sum sufficient to cover any tax or governmental charge that may
be imposed in connection with any transfer, split up, combination
or exchange of Right Certificates.
Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction
or mutilation of a Right Certificate, and, in case of loss, theft
or destruction, of indemnity or security reasonably satisfactory
to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all
reasonable expenses incidental thereto, and upon surrender to the
Rights Agent and cancellation of the Right Certificate if
mutilated, the Company will make and deliver a new Right
Certificate of like tenor to the Rights Agent for delivery to the
registered holder in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration
----------------------------------------------
Date of Rights
- --------------
(a) The registered holder of any Right Certificate may
exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the
Distribution Date upon surrender of the Right Certificate, with
the form of election to purchase on the reverse side thereof duly
executed, to the Rights Agent at the principal office of the
Rights Agent, together with payment of the Purchase Price for
each Common Share as to which the Rights are exercised, at or
prior to the earliest of (i) the close of business on July 19,
1999 (the "Final Expiration Date"), (ii) the time at which the
Rights are redeemed as provided in Section 23 hereof (the
"Redemption Date"), or (iii) the time at which such Rights are
exchanged as provided in Section 24 hereof.
(b) The Purchase Price for each Common Share pursuant to
the exercise of a Right shall initially be $105, shall be subject
11
<PAGE>
to adjustment from time to time as provided in Sections 11 and 13
hereof and shall be payable in lawful money of the United States
of America in accordance with Paragraph (c) below.
(c) Upon receipt of a Right Certificate representing
exercisable Rights, with the form of election to purchase duly
executed, accompanied by payment of the Purchase Price for the
shares to be purchased and an amount equal to any applicable
transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof by certified
check, cashier's check or money order payable to the order of the
Company, the Rights Agent shall thereupon promptly (i)
requisition from any transfer agent of the Common Shares
certificates for the number of Common Shares to be purchased and
the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, (ii) when appropriate, requisition
from the Company the amount of cash to be paid in lieu of
issuance of fractional shares in accordance with Section 14
hereof, (iii) after receipt of such certificates, cause the same
to be delivered to or upon the order of the registered holder of
such Right Certificate, registered in such name or names as may
be designated by such holder and (iv) when appropriate, after
receipt, deliver such cash to or upon the order of the registered
holder of such Right Certificate.
(d) In case the registered holder of any Right Certificate
shall exercise less than all the Rights evidenced thereby, a new
Right Certificate evidencing Rights equivalent to the Rights
remaining unexercised shall be issued by the Rights Agent to the
registered holder of such Right Certificate or to his duly
authorized assigns, subject to the provisions of Section 14
hereof.
12
<PAGE>
(e) The Company covenants and agrees that it will cause to
be reserved and kept available out of its authorized and unissued
Common Shares or any Common Shares held in its treasury, the
number of Common Shares that will be sufficient to permit the
exercise in full of all outstanding Rights in accordance with
this Section 7.
Section 8. Cancellation and Destruction of Right
-------------------------------------
Certificates
- ------------
All Right Certificates surrendered for the purpose of
exercise, transfer, split up, combination or exchange shall, if
surrendered to the Company or to any of its agents, be delivered
to the Rights Agent for cancellation or in cancelled form, or, if
surrendered to the Rights Agent, shall be cancelled by it, and no
Right Certificates shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Rights
Agreement. The Company shall deliver to the Rights Agent for
cancellation and retirement, and the Rights Agent shall so cancel
and retire, any other Right Certificate purchased or acquired by
the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Right Certificates to the
Company, or shall, at the written request of the Company, destroy
such cancelled Right Certificates, and in such case shall deliver
a certificate of destruction thereof to the Company.
Section 9. Availability of Common Shares
-----------------------------
The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all Common Shares
delivered upon exercise of Rights shall, at the time of delivery
of the certificates for such Common Shares (subject to payment of
the Purchase Price), be duly and validly authorized and issued
and fully paid and nonassessable shares; provided, however, that
-------- -------
the Company shall be under no obligation to deliver any Common
13
<PAGE>
Shares or other securities upon exercise of the Rights until such
Common Shares or other securities shall be registered under the
Securities Act of 1933, as amended, and applicable state
securities laws. The Company further covenants and agrees that
it will take all such action as may be necessary to ensure that
all Common Shares deliverable upon exercise of Rights shall, as
promptly as practicable after the Rights become exercisable for
such Common Shares, be registered under the Securities Act of
1933, as amended, and applicable state securities laws.
The Company further covenants and agrees that it will pay
when due and payable any and all federal and state transfer taxes
and charges which may be payable in respect of the issuance or
delivery of the Right Certificates or of any Common Shares upon
the exercise of Rights. The Company shall not, however, be
required to pay any transfer tax which may be payable in respect
of any transfer or delivery of Right Certificates to a person
other than, or the issuance or delivery of certificates for the
Common Shares in a name other than that of, the registered holder
of the Right Certificate evidencing Rights surrendered for
exercise or to issue or to deliver any certificates for Common
Shares upon the exercise of any Rights until any such tax shall
have been paid (any such tax being payable by the holder of such
Right Certificate at the time of surrender) or until it has been
established to the Company's reasonable satisfaction that no such
tax is due.
Section 10. Common Shares Record Date
-------------------------
Each person in whose name any certificate for Common Shares
is issued upon the exercise of Rights shall for all purposes be
deemed to have become the holder of record of the Common Shares
represented thereby on, and such certificate shall be dated, the
date upon which the Right Certificate evidencing such Rights was
duly surrendered and payment of the Purchase Price (and any
applicable transfer taxes) was made; provided, however, that if
-------- -------
14
<PAGE>
the date of such surrender and payment is a date upon which the
Common Shares transfer books of the Company are closed, such
person shall be deemed to have become the record holder of such
shares on, and such certificate shall be dated, the next
succeeding Business Day on which the Common Shares transfer books
of the Company are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Right Certificate shall not be
entitled to any rights of a holder of Common Shares for which the
Rights shall be exercisable, including, without limitation, the
right to vote, to receive dividends or other distributions or to
exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as
provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares
----------------------------------------------
or Number of Rights
- -------------------
The Purchase Price, the number of Common Shares covered by
each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Common
Shares payable in Common Shares, (B) subdivide the outstanding
Common Shares, (C) combine the outstanding Common Shares into a
smaller number of Common Shares or (D) issue any shares of its
capital stock in a reclassification of the Common Shares
(including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or
surviving corporation), except as otherwise provided in this
Section 11(a), the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the number and
kind of shares of capital stock issuable on such date, shall be
15
<PAGE>
proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive, upon
payment of the Purchase Price then in effect, the aggregate
number and kind of shares of capital stock which, if such Right
had been exercised immediately prior to such date and at a time
when the Common Shares transfer books of the Company were open,
he would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification; provided, however, that in no event shall the
-------- -------
consideration to be paid upon the exercise of one Right be less
than the aggregate par value of the shares of capital stock of
the Company issuable upon exercise of one Right.
(ii) Subject to Section 24 of this Agreement, in the
event (A) a Trigger Event shall have occurred (other than through
an acquisition described in subparagraph (iii) of this paragraph
(a)) or (B) during such time as there is an Acquiring Person,
there shall be any reclassification of securities (including any
reverse stock split), or recapitalization or reorganization of
the Company or other transaction or series of transactions
involving the Company which has the effect, directly or
indirectly, or increasing by more than 1% the proportionate share
of the outstanding shares of any class of equity securities of
the Company or any of its Subsidiaries beneficially owned by any
Acquiring Person or any Affiliate or Associate thereof, each
holder of a Right shall thereafter have a right to receive, upon
exercise thereof at a price equal to the then current Purchase
Price multiplied by the number of Common Shares for which a Right
is then exercisable, in accordance with the terms of this
Agreement, such number of Common Shares of the Company as shall
equal the result obtained by (x) multiplying the then current
Purchase Price by the number of Common Shares for which a Right
is then exercisable and dividing that product by (y) 50% of the
then current per share market price of the Company's Common
16
<PAGE>
Shares (determined pursuant to Section 11(d) hereof) on the date
of the occurrence of the earlier of the events described in
clauses (A) and (B) above. In the event that any Person shall
become an Acquiring Person and the Rights shall then be
outstanding, the Company shall not take any action which would
eliminate or diminish the benefits intended to be afforded by the
Rights.
From and after the occurrence of the earlier of the events
described in clauses (A) and (B) above, any Rights that are or
were acquired or beneficially owned by any Acquiring Person (or
any Associate or Affiliate of such Acquiring Person) shall be
void and any holder of such Rights shall thereafter have no right
to exercise such Rights under any provision of this Agreement.
No Right Certificate shall be issued pursuant to Section 3 that
represents Rights beneficially owned by an Acquiring Person whose
Rights would be void pursuant to the preceding sentence or any
Associate or Affiliate thereof; no Right Certificate shall be
issued at any time upon the transfer of any Rights to an
Acquiring Person whose Rights would be void pursuant to the
preceding sentence or any Associate or Affiliate thereof or to
any nominee of such Acquiring Person, Associate or Affiliate; and
any Right Certificate delivered to the Rights Agent for transfer
to an Acquiring Person whose Rights would be void pursuant to the
preceding sentence shall be cancelled.
(iii) The right to buy Common Shares of the Company
pursuant to clause (A) of subparagraph (ii) of this paragraph (a)
shall not arise as a result of any Person becoming an Acquiring
Person through a purchase of Common Shares pursuant to a tender
offer made in the manner prescribed by Section 14(d) of the
Exchange Act and the rules and regulations promulgated
thereunder; provided, however, that (A) such tender offer shall
-------- -------
provide for the acquisition of all of the outstanding Common
Shares held by any Person other than such Person and its
17
<PAGE>
Affiliates for cash and (B) such purchase shall cause such
Person, together with all Affiliates and Associates of such
Person, to be the Beneficial Owner of 80% or more of the Common
Shares then outstanding.
(iv) In the event that there shall not be sufficient
Common Shares issued but not outstanding or authorized but
unissued to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii), the Company
shall take all such action as may be necessary to authorize
additional Common Shares for issuance upon exercise of the
Rights.
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Common
Shares entitling them (for a period expiring within 45 calendar
days after such record date) to subscribe for or purchase Common
Shares or securities convertible into Common Shares at a price
per Common Share (or having a conversion price per share, if a
security convertible into Common Shares) less than the then
current per share market price of the Common Shares (as defined
in Section 11(d)) on such record date, the Purchase Price to be
in effect after such record date shall be determined by multi-
plying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the
number of Common Shares outstanding on such record date plus the
number of Common Shares which the aggregate offering price of the
total number of Common Shares so to be offered (and/or the
aggregate initial conversion price of the convertible securities
so to be offered) would purchase at such current market price and
the denominator of which shall be the number of Common Shares
outstanding on such record date plus the number of additional
Common Shares to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially
convertible); provided, however, that in no event shall the
-------- -------
18
<PAGE>
consideration to be paid upon the exercise of one Right be less
than the aggregate par value of the shares of capital stock of
the Company issuable upon exercise of one Right. In case such
subscription price may be paid in a consideration part or all of
which shall be in a form other than cash, the value of such
consideration shall be as determined in good faith by the Board
of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent. Common
Shares owned by or held for the account of the Company shall not
be deemed outstanding for the purpose of any such computation.
Such adjustment shall be made successively whenever such a record
date is fixed; and in the event that such rights, options or war-
rants are not so issued, the Purchase Price shall be adjusted to
be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) In case the Company shall fix a record date for the
making of a distribution to all holders of the Common Shares
(including any such distribution made in connection with a
consolidation or merger in which the Company is the continuing or
surviving corporation) of evidences of indebtedness or assets
(other than a regular quarterly cash dividend or a dividend
payable in Common Shares) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the
Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the
numerator of which shall be the then current per share market
price of the Common Shares on such record date, less the fair
market value (as determined in good faith by the Board of
Directors of the Company, whose determination shall be described
in a statement filed with the Rights Agent) of the portion of the
assets or evidences of indebtedness so to be distributed or of
such subscription rights or warrants applicable to one Common
Share and the denominator of which shall be such current per
19
<PAGE>
share market price of the Common Shares; provided, however, that
-------- -------
in no event shall the consideration to be paid upon the exercise
of one Right be less than the aggregate par value of the shares
of capital stock of the Company to be issued upon exercise of one
Right. Such adjustments shall be made successively whenever such
a record date is fixed; and in the event that such distribution
is not so made, the Purchase Price shall again be adjusted to be
the Purchase Price which would then be in effect if such record
date had not been fixed.
(d) For the purpose of any computation hereunder, the
"current per share market price" of the Common Shares on any date
shall be deemed to be the average of the daily closing prices per
share of such Common Shares for the 30 consecutive Trading Days
(as such term is hereinafter defined) immediately prior to such
date; provided, however, that in the event that the current per
-------- -------
share market price of the Common Shares is determined during a
period following the announcement by the issuer of such Common
Shares of (A) a dividend or distribution on such Common Shares
payable in shares of such Common Shares or securities convertible
into such shares, or (B) any subdivision, combination or reclassi-
fication of such Common Shares and prior to the expiration of
30 Trading Days after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the
current per share market price shall be appropriately adjusted to
reflect the current market price per Common Share. The closing
price for each day shall be the last sale price, regular way, or,
in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading
on the New York Stock Exchange or, if the Common Shares are not
20
<PAGE>
listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal
national securities exchange on which the Common Shares are
listed or admitted to trading or, if the Common Shares are not
listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average
of the high bid and low asked prices in the over-the-counter
market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotations System ("NASDAQ") or such
other system then in use, or, if on any such date the Common
Shares are not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional
market maker making a market in the Common Shares selected by the
Board of Directors of the Company. The term "Trading Day" shall
mean a day on which the principal national securities exchange on
which the Common Shares are listed or admitted to trading is open
for the transaction of business or, if the Common Shares are not
listed or admitted to trading on any national securities
exchange, a Business Day. If the Common Shares are not publicly
held or so listed or traded, "current per share market price"
shall mean the fair value per share as determined in good faith
by the Board of Directors of the Company, whose determination
shall be described in a statement filed with the Rights Agent.
(e) No adjustment in the Purchase Price shall be required
unless such adjustment would require an increase or decrease of
at least 1% in the Purchase Price; provided, however, that any
-------- -------
adjustments which by reason of this Section 11(e) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under
this Section 11 shall be made to the nearest cent or to the
21
<PAGE>
nearest one ten-thousandth of a share as the case may be.
Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no later
than the earlier of (i) three years from the date of the
transaction which requires such adjustment or (ii) the date of
the expiration of the right to exercise any Rights.
(f) If as a result of an adjustment made pursuant to
Section 11(a) hereof, the holder of any Right thereafter
exercised shall become entitled to receive any shares of capital
stock of the Company other than Common Shares, thereafter the
number of such other shares so receivable upon exercise of any
Right shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Shares contained in Section
11(a) through (c), inclusive, and the provisions of Sections 7,
9, 10 and 13 with respect to the Common Shares shall apply on
like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent
to any adjustment made to the Purchase Price hereunder shall
evidence the right to purchase, at the adjusted Purchase Price,
the number of Common Shares purchasable from time to time
hereunder upon exercise of the Rights, all subject to further
adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase
Price as a result of the calculations made in Sections 11(b) and
(c), each Right outstanding immediately prior to the making of
such adjustment shall thereafter evidence the right to purchase,
at the adjusted Purchase Price, that number of Common Shares
(calculated to the nearest one ten-thousandth of a share)
obtained by (i) multiplying (x) the number of shares covered by a
Right immediately prior to this adjustment by (y) the Purchase
Price in effect immediately prior to such adjustment of the
22
<PAGE>
Purchase Price and (ii) dividing the product so obtained by the
Purchase Price in effect immediately after such adjustment of the
Purchase Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights,
in substitution for any adjustment in the number of Common Shares
purchasable upon the exercise of a Right. Each of the Rights
outstanding after such adjustment of the number of Rights shall
be exercisable for the number of Common Shares for which a Right
was exercisable immediately prior to such adjustment. Each Right
held of record prior to such adjustment of the number of Rights
shall become that number of Rights (calculated to the nearest one
ten-thousandth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the
Purchase Price. The Company shall make a public announcement of
its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. This record date may be the
date on which the Purchase Price is adjusted or any day
thereafter, but, if the Right Certificates have been issued,
shall be at least 10 days later than the date of the public
announcement. If Right Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section
11(i), the Company shall, as promptly as practicable, cause to be
distributed to holders of record of Right Certificates on such
record date Right Certificates evidencing, subject to Section 14
hereof, the additional Rights to which such holders shall be
entitled as a result of such adjustment, or, at the option of the
Company, shall cause to be distributed to such holders of record
in substitution and replacement for the Right Certificates held
by such holders prior to the date of adjustment, and upon
23
<PAGE>
surrender thereof, if required by the Company, new Right
Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Right Certificates so
to be distributed shall be issued, executed and countersigned in
the manner provided for herein and shall be registered in the
names of the holders of record of Right Certificates on the
record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the
Purchase Price or the number of Common Shares issuable upon the
exercise of the Rights, the Right Certificates theretofore and
thereafter issued may continue to express the Purchase Price and
the number of Common Shares which were expressed in the initial
Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then par value, if any, of
the Common Shares issuable upon exercise of the Rights, the
Company shall take any corporate action which may, in the opinion
of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable Common
Shares at such adjusted Purchase Price.
(1) In any case in which this Section 11 shall require that
an adjustment in the Purchase Price be made effective as of a
record date for a specified event, the Company may elect to defer
until the occurrence of such event the issuing to the holder of
any Right exercised after such record date of the Common Shares
and other capital stock or securities of the Company, if any,
issuable upon such exercise over and above the Common Shares and
other capital stock or securities of the Company, if any,
issuable upon such exercise on the basis of the Purchase Price in
effect prior to such adjustment; provided, however, that the
-------- -------
Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive
24
<PAGE>
such additional shares upon the occurrence of the event requiring
such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such
reductions in the Purchase Price, in addition to those ad-
justments expressly required by this Section 11, as and to the
extent that it in its sole discretion shall determine to be
advisable in order that any consolidation or subdivision of the
Common Shares, issuance wholly for cash of any Common Shares at
less than the current market price, issuance wholly for cash of
Common Shares or securities which by their terms are convertible
into or exchangeable for Common Shares, dividends on Common
Shares payable in Common Shares or issuance of rights, options or
warrants referred to hereinabove in Section 11(b), hereafter made
by the Company to holders of its Common Shares shall not be
taxable to such stockholders.
Section 12. Certificate of Adjusted Purchase Price or
-----------------------------------------
Number of Shares
- ----------------
Whenever an adjustment is made as provided in Section 11 or
13 hereof, the Company shall promptly (a) prepare a certificate
setting forth such adjustment, and a brief statement of the facts
accounting for such adjustment, (b) file with the Rights Agent
and with each transfer agent for the Common Shares a copy of such
certificate and (c) mail a brief summary thereof to each holder
of a Right Certificate in accordance with Section 25 hereof .
Section 13. Consolidation, Merger or Sale or Transfer of
--------------------------------------------
Assets or Earning Power
- -----------------------
In the event, directly or indirectly, (a) the Company shall
consolidate with, or merge with and into, any other Person, (b)
any Person shall consolidate with the Company, or merge with and
into the Company and the Company shall be the continuing or
surviving corporation of such merger and, in connection with such
merger, all or part of the Common Shares shall be changed into or
25
<PAGE>
exchanged for stock or other securities of any other Person (or
the Company) or cash or any other property, or (c) the Company
shall sell or otherwise transfer (or one or more of its
Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of
the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person other than the Company or
one or more of its wholly-owned Subsidiaries, then, and in each
such case, proper provision shall be made so that (i) each holder
of a Right (except as otherwise provided herein) shall thereafter
have the right to receive, upon the exercise thereof at a price
equal to the then current Purchase Price multiplied by the number
of Common Shares for which a Right is then exercisable, in
accordance with the terms of this Agreement, such number of
Common Shares of such other Person (including the Company as
successor thereto or as the surviving corporation) as shall equal
the result obtained by (A) multiplying the then current Purchase
Price by the number of Common Shares for which a Right is then
exercisable and dividing that product by (B) 50% of the then
current per share market price of the Common Shares of such other
Person (determined pursuant to Section 11(d) hereof) on the date
of consummation of such consolidation, merger, sale or transfer;
(ii) the issuer of such Common Shares shall thereafter be liable
for, and shall assume, by virtue of such consolidation, merger,
sale or transfer, all the obligations and duties of the Company
pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such issuer; and (iv) such
issuer shall take such steps (including, but not limited to, the
reservation of a sufficient number of its Common Shares in
accordance with Section 9 hereof) in connection with such
consummation as may be necessary to assure that the provisions
hereof shall thereafter be applicable, as nearly as reasonably
may be, in relation to the Common Shares thereafter deliverable
26
<PAGE>
upon the exercise of the Rights. The Company shall not
consummate any such consolidation, merger, sale or transfer
unless prior thereto the Company and such issuer shall have
executed and delivered to the Rights Agent a supplemental
agreement so providing. The Company shall not enter into any
transaction of the kind referred to in this Section 13 if at the
time of such transaction there are any rights, warrants,
instruments or securities outstanding or any agreements or
arrangements which, as a result of the consummation of such
transaction, would eliminate or substantially diminish the
benefits intended to be afforded by the Rights. The provisions
of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers.
Section 14. Fractional Rights and Fractional Shares
---------------------------------------
(a) The Company shall not be required to issue fractions of
Rights or to distribute Right Certificates which evidence
fractional Rights. In lieu of such fractional Rights, there
shall be paid to the registered holders of the Right Certificates
with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the
current market value of a whole Right. For the purposes of this
Section 14(a), the current market value of a whole Right shall be
the closing price of the Rights for the Trading Day immediately
prior to the date on which such fractional Rights would have been
otherwise issuable. The closing price for any day shall be the
last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock
Exchange or, if the Rights are not listed or admitted to trading
on the New York Stock Exchange, as reported in the principal
27
<PAGE>
consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading or, if the
Rights are not listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the
over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not
quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker
making a market in the Rights selected by the Board of Directors
of the Company. If on any such date no such market maker is
making a market in the Rights, the fair value of the Rights on
such date as determined in good faith by the Board of Directors
of the Company shall be used.
(b) The Company shall not be required to issue fractions of
Common Shares upon exercise of the Rights or to distribute
certificates which evidence fractional Common Shares. In lieu of
fractional Common Shares, the Company shall pay to the registered
holders of Right Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one Common Share. For
the purposes of this Section 14(b), the current market value of a
Common Share shall be the closing price of a Common Share (as
determined pursuant to the second sentence of Section 11(d)(i)
hereof) for the Trading Day immediately prior to the date of such
exercise.
(c) The holder of a Right by the acceptance of the Right
expressly waives his right to receive any fractional Rights or
any fractional shares upon exercise of a Right (except as
provided above).
28
<PAGE>
Section 15. Rights of Action
----------------
All rights of action in respect of this Agreement, excepting
the rights of action given to the Rights Agent under Section 18
hereof, are vested in the respective registered holders of the
Right Certificates (and, prior to the Distribution Date, the
registered holders of the Common Shares); and any registered
holder of any Right Certificate (or, prior to the Distribution
Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior
to the Distribution Date, of the Common Shares), may, in his own
behalf and for his own benefit, enforce, and may institute and
maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, his right to exercise
the Rights evidenced by such Right Certificate in the manner
provided in such Right Certificate and in this Agreement.
Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the
holders of Rights would not have an adequate remedy at law for
any breach of this Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief
against actual or threatened violations of the obligations of any
Person subject to, this Agreement.
Section 16. Agreement of Right Holders
--------------------------
Every holder of a Right, by accepting the same, consents and
agrees with the Company and the Rights Agent and with every other
holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common
Shares;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if
29
<PAGE>
surrendered at the principal office of the Rights Agent, duly
endorsed or accompanied by a proper instrument of transfer: and
(c) the Company and the Rights Agent may deem and treat the
person in whose name the Right Certificate (or, prior to the
Distribution Date, the associated Common Shares certificate) is
registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or
writing on the Right Certificates or the associated Common Shares
certificate made by anyone other than the Company or the Rights
Agent) for all purposes whatsoever, and neither the Company nor
the Rights Agent shall be affected by any notice to the contrary.
Section 17. Right Certificate Holder Not Deemed a Stockholder
-------------------------------------------------
No holder, as such, of any Right Certificate shall be
entitled to vote, receive dividends or be deemed for any purpose
the holder of the Common Shares or any other securities of the
Company which may at any time be issuable on the exercise of the
Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the
holder of any Right Certificate, as such, any of the rights of a
stockholder of the Company or any right to vote for the election
of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate
action, or to receive notice of meetings or other actions
affecting stockholders (except as provided in Section 25 hereof),
or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by such Right Certificate
shall have been exercised in accordance with the provisions
hereof.
Section 18. Concerning the Rights Agent
---------------------------
The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from
time to time, on demand of the Rights Agent, its reasonable
30
<PAGE>
expenses and counsel fees and other disbursements incurred in the
administration and execution of this Agreement and the exercise
and performance of its duties hereunder. The Company also agrees
to indemnify the Rights Agent for, and to hold it harmless
against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the
Rights Agent, for anything done or omitted by the Rights Agent in
connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against
any claim of liability in the premises. The Rights Agent shall
be protected and shall incur no liability for, or in respect of
any action taken, suffered or omitted by it in connection with,
its administration of this Agreement in reliance upon any Right
Certificate or certificate for the Common Shares or for other
securities of the Company, instrument of assignment or transfer,
power of attorney, endorsement, affidavit, letter, notice,
direction, consent, certificate, statement, or other paper or
document believed by it to be genuine and to be signed, executed
and, where necessary, verified or acknowledged, by the proper
person or persons, or otherwise upon the advice of counsel as set
forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of
--------------------------------------------
Rights Agent
- ------------
Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated,
or any corporation resulting from any merger or consolidation to
which the Rights Agent or any successor Rights Agent shall be a
party, or any corporation succeeding to the stock transfer or
corporate trust business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under
this Agreement without the execution or filing of any paper or
any further act on the part of any of the parties hereto;
provided, that such corporation would be eligible for appointment
- --------
31
<PAGE>
as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall
succeed to the agency created by this Agreement, any of the Right
Certificates shall have been countersigned but not delivered, any
such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Right Certificates so
countersigned; and in case at that time any of the Right Certifi
cates shall not have been countersigned, any successor Rights
Agent may countersign such Right Certificates either in the name
of the predecessor Rights Agent or in the name of the successor
Rights Agent; and in all such cases such Right Certificates shall
have the full force provided in the Right Certificates and In
this Agreement. In case at any time the name of the Rights Agent
shall be changed and at such time any of the Right Certificates
shall have been countersigned but not delivered, the Rights Agent
may adopt the countersignature under its prior name and deliver
Right Certificates so countersigned; and in case at that time any
of the Right Certificates shall not have been countersigned, the
Rights Agent may countersign such Right Certificates either in
its prior name or in its changed name; and in all such cases such
Right Certificates shall have the full force provided in the
Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent
----------------------
The Rights Agent undertakes the duties and obligations
imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right
Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who
may be legal counsel for the Company), and the opinion of such
counsel shall be full and complete authorization and protection
32
<PAGE>
to the Rights Agent as to any action taken or omitted by it in
good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable
that any fact or matter be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved
and established by a certificate signed by any one of the
Chairman of the Board, the Chief Executive Officer, the
President, any Vice President, the Treasurer or the Secretary of
the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for
any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the
Company and any other Person only for its own negligence, bad
faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason
of any of the statements of fact or recitals contained in this
Agreement or in the Right Certificates (except its
countersignature thereof) or be required to verify the same, but
all such statements and recitals are and shall be deemed to have
been made by the Company only.
(e) The Rights Agent shall not be under any responsibility
in respect of the validity of this Agreement or the execution and
delivery hereof (except the due execution hereof by the Rights
Agent) or in respect of the validity or execution of any Right
Certificate (except its countersignature thereof); nor shall it
be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right
Certificate; nor shall it be responsible for any change in the
exercisability of the Rights (including the Rights becoming void
pursuant to Section 11(a)(ii) hereof) or any adjustment in the
terms of the Rights (including the manner, method or amount
33
<PAGE>
thereof) provided for in Section 3, 11, 13, 23 or 24, or the
ascertaining of the existence of facts that would require any
such change or adjustment (except with respect to the exercise of
Rights evidenced by Right Certificates after actual notice that
such change or adjustment is required); nor shall it by any act
hereunder be deemed to make any representation or warranty as to
the authorization or reservation of any Common Shares to be
issued pursuant to this Agreement or any Right Certificate or as
to whether any Common Shares will, when issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed,
acknowledged and delivered all such further and other acts,
instruments and assurances as may reasonably be required by the
Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties
hereunder from any one of the Chairman of the Board, the Chief
Executive Officer, the President, any Vice President, the
Secretary or the Treasurer of the Company, and to apply to such
officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or
suffered by it in good faith in accordance with instructions of
any such officer or for any delay in acting while waiting for
those instructions.
(h) The Rights Agent and any stockholder, director, officer
or employee of the Rights Agent may buy, sell or deal in any of
the Rights or other securities of the Company or become
pecuniarily interested in any transaction in which the Company
34
<PAGE>
may be interested, or contract with or lend money to the Company
or otherwise act as fully and freely as though it were not Rights
Agent under this Agreement. Nothing herein shall preclude the
Rights Agent from acting in any other capacity for the Company or
for any other legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty
hereunder either itself or by or through its attorneys or agents,
and the Rights Agent shall not be answerable or accountable for
any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct, provided reasonable care was
exercised in the selection and continued employment thereof.
Section 21. Change of Rights Agent
----------------------
The Rights Agent or any successor Rights Agent may resign
and be discharged from its duties under this Agreement upon 30
days' notice in writing mailed to the Company and to each
transfer agent of the Common Shares by registered or certified
mail, and to the holders of the Right Certificates by first-class
mail. The Company may remove the Rights Agent or any successor
Rights Agent upon 30 days' notice in writing, mailed to the
Rights Agent or successor Rights Agent, as the case may be, and
to each transfer agent of the Common Shares by registered or
certified mail, and to the holders of the Right Certificates by
first-class mail. If the Rights Agent shall resign or be removed
or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. If the Company shall
fail to make such appointment within a period of 30 days after
giving notice of such removal or after it has been notified in
writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right
35
<PAGE>
Certificate (who shall, with such notice, submit his Right
Certificate for inspection by the Company), then the registered
holder of any Right Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent.
Any successor Rights Agent, whether appointed by the Company or
by such a court, shall be a corporation organized and doing
business under the laws of the United States or of the State of
New York (or of any other state of the United States so long as
such corporation is authorized to do business as a banking
institution in the State of New York), in good standing, having
an office in the State of New York, which is authorized under
such laws to exercise corporate trust or stock transfer powers
and is subject to supervision or examination by federal or state
authority and which has at the time of its appointment as Rights
Agent a combined capital and surplus of at least $50 million.
After appointment, the successor Rights Agent shall be vested
with the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further act
or deed; but the predecessor Rights Agent shall deliver and
transfer to the successor Rights Agent any property at the time
held by it hereunder, and execute and deliver any further
assurance, conveyance, act or deed necessary for the purpose.
Not later than the effective date of any such appointment the
Company shall file notice thereof in writing with the predecessor
Rights Agent and each transfer agent of the Common Shares, and
mail a notice thereof in writing to the registered holders of the
Right Certificates. Failure to give any notice provided for in
this Section 21, however, or any defect therein, shall not affect
the legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent, as
the case may be.
36
<PAGE>
Section 22. Issuance of New Right Certificates
----------------------------------
Notwithstanding any of the provisions of this Agreement or
of the Rights to the contrary, the Company may, at its option,
issue new Right Certificates evidencing Rights in such form as
may be approved by its Board of Directors to reflect any
adjustment or change in the Purchase Price and the number or kind
or class of shares or other securities or property purchasable
under the Right Certificates made in accordance with the
provisions of this Agreement.
Section 23. Redemption
----------
(a) The Board of Directors of the Company may, at its
option, at any time prior to such time as any Person becomes an
Acquiring Person, redeem all but not less than all the then
outstanding Rights at a redemption price of $.01 per Right,
appropriately adjusted to reflect any stock split, stock dividend
or similar transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the "Redemption
Price"). The redemption of the Rights by the Board of Directors
may be made effective at such time on such basis and with such
conditions as the Board of Directors in its sole discretion may
establish.
(b) Immediately upon the action of the Board of Directors
of the Company ordering the redemption of the Rights pursuant to
paragraph (a) of this Section 23, and without any further action
and without any notice, the right to exercise the Rights will
terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price. The Company shall
promptly give public notice of any such redemption; provided,
--------
however, that the failure to give, or any defect in, any such
- -------
notice shall not affect the validity of such redemption. Within
10 days after such action of the Board of Directors ordering the
redemption of the Rights, the Company shall mail a notice of
redemption to all the holders of the then outstanding Rights at
37
<PAGE>
their last addresses as they appear upon the registry books of
the Rights Agent or, prior to the Distribution Date, on the
registry books of the transfer agent for the Common Shares. Any
notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice.
Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made. Neither the
Company nor any of its Affiliates or Associates may redeem,
acquire or purchase for value any Rights at any time in any
manner other than that specifically set forth in this Section 23
or in Section 24 hereof, and other than in connection with the
purchase of Common Shares prior to the Distribution Date.
Section 24. Exchange
--------
(a) The Board of Directors of the Company may, at its
option, at any time after the occurrence of a Trigger Event,
exchange all or part of the then outstanding and exercisable
Rights (which shall not include Rights that have become void
pursuant to the provisions of Section 11(a)(ii) hereof) for
Common Shares at an exchange ratio of one Common Share per Right,
appropriately adjusted to reflect any stock split, stock dividend
or similar transaction occurring after the date hereof (such ex
change ratio being hereinafter referred to as the "Exchange
Ratio"). Notwithstanding the foregoing, the Board of Directors
shall not be empowered to effect such exchange at any time after
any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or any such
Subsidiary, or any entity holding Common Shares for or pursuant
to the terms of any such plan), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of 50% or
more of the Common Shares then outstanding.
38
<PAGE>
(b) Immediately upon the action of the Board of Directors
of the Company ordering the exchange of any Rights pursuant to
paragraph (a) of this Section 24 and without any further action
and without any notice, the right to exercise such Rights shall
terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of Common Shares equal to
the number of such Rights held by such holder multiplied by the
Exchange Ratio. The Company shall promptly give public notice of
any such exchange; provided, however, that the failure to give,
-------- -------
or any defect in, such notice shall not affect the validity of
such exchange. The Company promptly shall mail a notice of any
such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights
Agent. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by
which the exchange of the Common Shares for Rights will be
effected and, in the event of any partial exchange, the number of
Rights which will be exchanged. Any partial exchange shall be
effected pro rata based on the number of Rights (other than
Rights which have become void pursuant to the provisions of
Section 11(a)(ii) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient Common
Shares issued but not outstanding or authorized but unissued to
permit any exchange of Rights as contemplated in accordance with
this Section 24, the Company shall take all such action as may be
necessary to authorize additional Common Shares for issuance upon
exchange of the Rights.
(d) The Company shall not be required to issue fractions of
Common Shares or to distribute certificates which evidence
fractional Common Shares. In lieu of such fractional Common
Shares, the Company shall pay to the registered holders of the
39
<PAGE>
Right Certificates with regard to which such fractional Common
Shares would otherwise be issuable an amount in cash equal to the
same fraction of the current market value of a whole Common
Share. For the purposes of this paragraph (d), the current
market value of a whole Common Share shall be the closing price
of a Common Share (as determined pursuant to the second sentence
of Section 11(d) hereof) for the Trading Day immediately prior to
the date of exchange pursuant to this Section 24.
Section 25. Notice of Certain Events
------------------------
(a) In case the Company shall propose (i) to pay any
dividend payable in stock of any class to the holders of its
Common Shares or to make any other distribution to the holders of
its Common Shares (other than a regular quarterly cash dividend),
(ii) to offer to the holders of its Common Shares rights or
warrants to subscribe for or to purchase any additional Common
Shares or shares of stock of any class or any other securities,
rights or options, (iii) to effect any reclassification of its
Common Shares (other than a reclassification involving only the
subdivision of outstanding Common Shares), (iv) to effect any
consolidation or merger into or with, or to effect any sale or
other transfer (or to permit one or more of its Subsidiaries to
effect any sale or other transfer), in one or more transactions,
of 50% or more of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to, any other Person, (v) to
effect the liquidation, dissolution or winding up of the Company,
then, in each such case, the Company shall give to each holder of
a Right Certificate, in accordance with Section 26 hereof, a
notice of such proposed action, which shall specify the record
date for the purposes of such stock dividend, or distribution of
rights or warrants, or the date on which such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution,
or winding up is to take place and the date of participation
40
<PAGE>
therein by the holders of the Common Shares, if any such date is
to be fixed, and such notice shall be so given in the case of any
action covered by clause (i) or (ii) above at least 10 days prior
to the record date for determining holders of the Common Shares
for purposes of such action, and in the case of any such other
action, at least 10 days prior to the date of the taking of such
proposed action or the date of participation therein by the
holders of the Common Shares whichever shall be the earlier.
(b) In case any of the events set forth in Section
11(a)(ii) hereof shall occur, then the Company shall as soon as
practicable thereafter give to each holder of a Right
Certificate, in accordance with Section 26 hereof, a notice of
the occurrence of such event, which notice shall describe such
event and the consequences of such event to holders of Rights
under Section 11(a)(ii) hereof.
Section 26. Notices
-------
Notices or demands authorized by this Agreement to be given
or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently given-or
made if sent by first-class mail, postage prepaid, addressed
(until another address is filed in writing with the Rights Agent)
as follows:
Consolidated Rail Corporation
1842 Six Penn Center Plaza
Philadelphia, Pennsylvania 19103
Attention: Bruce B. Wilson
Senior Vice President - Law
Subject to the provisions of Section 21 hereof, any notice
or demand authorized by this Agreement to be given or made by the
Company or by the holder of any Right Certificate to or on the
Rights Agent shall be sufficiently given or made if sent by
41
<PAGE>
first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
First Chicago Trust Company of New York
30 West Broadway
New York, New York 10007
Attention: Tenders and Exchanges Administration
Notices or demands authorized by this Agreement to be given or
made by the Company or the Rights Agent to the holder of any
Right Certificate shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at
the address of such holder as shown on the registry books of the
Company.
Section 27. Supplements and Amendments
--------------------------
The Company may from time to time supplement or amend this
Agreement without the approval of any holders of Right Certifi-
cates in order to cure any ambiguity, to correct or supplement
any provision contained herein which may be defective or
inconsistent with any other provisions herein, or to make any
other provisions with respect to the Rights which the Company may
deem necessary or desirable, any such supplement or amendment to
be evidenced by a writing signed by the Company and the Rights
Agent; provided, however, that from and after such time as any
-------- -------
Person becomes an Acquiring Person, this Agreement shall not be
amended in any manner which would adversely affect the interests
of the holders of Rights (other than an Acquiring Person).
Section 28. Successors
----------
All the covenants and provisions of this Agreement by or for
the benefit of the Company or the Rights Agent shall bind and
inure to the benefit of their respective successors and assigns
hereunder.
42
<PAGE>
Section 29. Benefits of this Agreement
--------------------------
Nothing in this Agreement shall be construed to give to any
Person other than the Company, the Rights Agent and the
registered holders of the Right Certificates (and, prior to the
Distribution Date, the Common Shares) any legal or equitable
right, remedy or claim under this Agreement; but this Agreement
shall be for the sole and exclusive benefit of the Company, the
Rights Agent and the registered holders of the Right Certificates
(and, prior to the Distribution Date, the Common Shares).
Section 30. Severability
------------
If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no
way be affected, impaired or invalidated.
Section 31. Governing Law
-------------
This Agreement and each Right Certificate issued hereunder
shall be deemed to be a contract made under the laws of the
Commonwealth of Pennsylvania and for all purposes shall be
governed by and construed in accordance with the laws of such
Commonwealth applicable to contracts to be made and performed
entirely within such Commonwealth, except for Sections 18, 19, 20
and 21, which for all purposes shall be governed by and construed
in accordance with the laws of the State of New York.
Section 32. Counterparts
------------
This Agreement may be executed in any number of counterparts
and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together
constitute but one and the same instrument.
43
<PAGE>
Section 33. Descriptive Headings
--------------------
Descriptive headings of the several Sections of this
Agreement are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions
hereof.
44
<PAGE>
<TABLE>
Exhibit 11
----------
CONRAIL INC.
------------
EARNINGS PER SHARE COMPUTATIONS
-------------------------------
<CAPTION>
($ In Millions Except Per Share)
Quarters Ended Nine Months Ended
September 30, September 30,
-------------- -----------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary
- -------
Income (loss) before the cumulative
effect of changes in accounting
principles(1) $106 $(3) $175 $128
Dividends declared on Series A
ESOP convertible junior preferred
stock (ESOP Stock), net of
tax benefits (4) (3) (10) (10)
---- ---- ---- ----
102 (6) 165 118
Charges relative to the cumulative
effect of changes in accounting
principles (1) (74)
---- ---- ---- ----
Adjusted net income (loss) $102 $(6) $165 $ 44
==== ==== ==== ====
Fully Diluted
- -------------
Income (loss) before the cumulative
effect of changes in accounting
principles (1) 106 (3) 175 128
Dividends declared on ESOP Stock,
net of tax benefits (3)
Nondiscretionary adjustment (2) (1) (5) (4)
---- ---- ---- ----
105 (6) 170 124
Charges relative to the cumulative
effect of changes in accounting
principles (1) (74)
---- ---- ---- ----
Adjusted net income (loss) $105 $(6) $170 $ 50
==== ==== ==== ====
Page 1 of 3
</TABLE>
<PAGE>
Exhibit 11
<TABLE> ----------
CONRAIL INC.
------------
EARNINGS PER SHARE COMPUTATIONS
-------------------------------
<CAPTION>
($ In Millions Except Per Share)
Quarters Ended Nine Months Ended
September 30, September 30,
------------------- ----------------------
1994 1993 1994 1993
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Weighted average number of shares
Primary
Weighted average number of
common shares outstanding 78,943,971 79,507,361 79,184,111 79,701,862
Effect of shares issuable
under stock option plans 516,629 898,615 655,369 1,001,996
---------- ---------- ---------- ----------
79,460,600 80,405,976 79,839,480 80,703,858
========== ========== ========== ==========
Fully diluted
Weighted average number of
common shares outstanding 78,943,971 79,507,361 79,184,111 79,701,862
ESOP Stock 9,863,383 9,907,107 9,956,575
Effect of shares issuable
under stock option plans 516,629 898,615 655,369 1,118,840
---------- ---------- ---------- ----------
89,323,983 80,405,976 89,746,587 90,777,277
========== ========== ========== ==========
Income (loss) per common share
Before the cumulative effect of
changes in accounting principles
Primary $1.29 $(.07) $2.07 $1.47
Fully diluted 1.17 (.07) 1.91 1.36
Cumulative effect of changes in
accounting principles
Primary (.92)
Fully diluted (.81)
Net income (loss) per common share
Primary $1.29 $(.07) $2.07 $ .55
Fully diluted 1.17 (.07) 1.91 .55
Page 2 of 3
</TABLE>
<PAGE>
Exhibit 11
----------
CONRAIL INC.
------------
EARNINGS PER SHARE COMPUTATIONS
-------------------------------
[CAPTION]
($ In Millions Except Per Share)
Notes: 1. Conrail adopted Statement of Financial Accounting
Standards No. 106 ("Employers'Accounting for
Postretirement Benefits Other Than Pensions") and
Statement of Financial Accounting Standards No. 109
("Accounting for Income Taxes") effective January 1,
1993. As a result, Conrail recorded cumulative
after tax charges of $22 million and $52 million,
respectively.
2. Represents the increase, net of income tax benefits,
in ESOP-related expenses assuming conversion of all
ESOP stock to common stock.
Page 3 of 3
<TABLE>
Exhibit 12
----------
CONRAIL INC.
------------
COMPUTATIONS OF THE RATIO OF EARNINGS TO FIXED CHARGES
------------------------------------------------------
<CAPTION>
($ In Millions)
Quarters Ended Nine Months Ended
September 30, September 30,
-------------- -----------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Earnings
- --------
Pre-tax income $174 $ 58 $287 $268
Add:
Interest expense 48 48 143 138
Rental expense interest factor 7 5 25 17
Less equity in undistributed (earnings)
loss of 20-50% owned companies (3) (4) (10) (11)
---- ---- ---- ----
Earnings available for fixed charges $226 $107 $445 $412
==== ==== ==== ====
Fixed charges
- -------------
Interest expense 48 48 143 138
Rental expense interest factor 7 5 25 17
Capitalized interest 1 1 1
---- ---- ---- ----
Fixed charges $ 56 $ 53 $169 $156
==== ==== ==== ====
Ratio of earnings to fixed charges 4.04x 2.02x 2.63x 2.64x
<FN>
For purposes of computing the ratio of earnings to fixed charges, earnings
represent income before income taxes plus fixed charges, less equity in
undistributed (earnings) loss of 20% to 50% owned companies. Fixed charges
represent interest expense together with any interest capitalized and a
portion of rent under long-term operating leases representative of an interest
factor.
</FN>
</TABLE>
Exhibit 15.a
------------
November 10, 1994
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Dear Sirs:
We are aware that Conrail Inc. has incorporated by
reference our report dated October 19, 1994 (issued pursuant
to the provisions of Statement of Auditing Standards
No. 71) in the following registration statements:
* Registration Statement on Form S-8 No. 33-19155
* Registration Statement on Form S-8 No. 33-44140
* Registration Statement on Form S-3 No. 33-64670.
We are also aware of our responsibilities under the
Securities Act of 1933 and that pursuant to Rule 436(c)
our report dated October 19, 1994 shall not be considered
part of a registration statement prepared or certified by
us or a report prepared or certified by us within the
meaning of Sections 7 and 11 of the Securities Act of
1933.
Very truly yours,
PRICE WATERHOUSE LLP
Thirty South Seventeenth Street
Philadelphia, PA 19103
Exhibit 15.b
------------
November 10, 1994
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Re: Conrail Inc.
Registration on Form S-8 (Registration Form No. 33-19155 and
Registration Form No. 33-44140)
Registration on Form S-3 (Registration Form No. 33-64670)
We are aware that our report dated January 24, 1994 on our
review of interim financial information of Conrail Inc.
and subsidiaries for the three and nine-month periods
ended September 30, 1993 and included in the Company's
quarterly report on Form 10-Q for the quarter ended
September 30, 1994 will be incorporated by reference in
the registration statements. Pursuant to Rule 436(c)
under the Securities Act of 1933, this report should not
be considered a part of the registration statements
prepared or certified by us within the meaning of
Sections 7 and 11 of that Act.
COOPERS & LYBRAND L.L.P.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27
----------
CONRAIL INC.
------------
FINANCIAL DATA SCHEDULE
-----------------------
($ In Millions Except Per Share)
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM
FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FORM 10-Q.
<MULTIPLIER> 1,000,000
<S> <C>
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-START> Jan-01-1994
<PERIOD-END> Sep-30-1994
<PERIOD-TYPE> 9-MOS
<CASH> 45
<SECURITIES> 0
<RECEIVABLES> 679
<ALLOWANCES> 0
<INVENTORY> 129
<CURRENT-ASSETS> 1,114
<PP&E> 6,467
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,296
<CURRENT-LIABILITIES> 1,229
<BONDS> 1,996
0
286
<COMMON> 80
<OTHER-SE> 2,465
<TOTAL-LIABILITY-AND-EQUITY> 8,296
<SALES> 0
<TOTAL-REVENUES> 2,747
<CGS> 0
<TOTAL-COSTS> 2,396
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 143
<INCOME-PRETAX> 287
<INCOME-TAX> 112
<INCOME-CONTINUING> 175
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 175
<EPS-PRIMARY> 2.07
<EPS-DILUTED> 1.91
</TABLE>
