SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
SCHEDULE 13D
Under the
Securities Exchange Act of 1934
Conrail Inc.
------------
(Name of Issuer)
Common Stock, Par Value $1 Per Share
------------------------------------
(Title of Class of Securities)
20836810
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(CUSIP Number)
Carol Condie Cheryl Cook, Esq.
Mellon Bank, N.A. Conrail Inc.
One Mellon Bank Center 2001 Market Street
Suite 3346 Two Commerce Square
Pittsburgh, PA 15258-0001 Philadelphia, PA 10101
(412) 234-8820 (215) 209-4000
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(Name, address and telephone number of persons authorized
to receive notices and communications)
June 15, 1995
_____________________________________________________________
(Date of Event which requires Filing of this Statement)
If the filing person had previously filed a statement on
Schedule 13G to report the acquisition which is the subject
of this Schedule 13D, and is filing this schedule because of
Rule 13d-1(b)(3) or (4), check the following box: [ ]
Check the following box if a fee is being paid with this
statement: [X]
<PAGE>
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CUSIP NO. 20836810 Page 2 of 9 pages
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___________________________________________________________
1. Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Mellon Bank, N.A., as Trustee of the Conrail Inc.
Employee Benefits Trust
____________________________________________________________
2. Check the Appropriate Box if a Member of a Group
(a) [ ]
(b) [ ]
Not Applicable
____________________________________________________________
3. SEC Use only
____________________________________________________________
4. Source of Funds
SC, OO
- ------------------------------------------------------------
5. Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(d) or 2(e) [ ]
____________________________________________________________
6. Citizenship or Place of Organization
Pennsylvania
____________________________________________________________
Number of Shares 7. Sole Voting Power
Beneficially 0
Owned by Each 8. Shared Voting Power
Reporting Person 4,728,132
With 9. Sole Dispositive Power
0
10. Shared Dispositive Power
4,728,132
____________________________________________________________
11. Aggregate Amount Beneficially Owned by Each Reporting
Person
4,728,132 shares
____________________________________________________________
12. Check if the Aggregate Amount in Row (11) Excludes
Certain Shares [ ]
____________________________________________________________
13. Percent of Class Represented by Amount in Row (11)
6.0%
____________________________________________________________
14. Type of Reporting Person
BK, OO
____________________________________________________________
<PAGE>
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CUSIP NO. 20836810 Page 3 of 9 pages
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Item 1. Security and Issuer
-------------------
The class of equity securities to which this
Schedule relates is the Common Stock, par value $1 per share
("Common Stock"), of Conrail Inc., a Pennsylvania
corporation (the "Issuer"). The principal executive offices
of the Issuer are located at 2001 Market Street, Two
Commerce Square, Philadelphia, PA 10101.
Item 2. Identity and Background
-----------------------
This Schedule is being filed by the Conrail
Inc. Employee Benefits Trust (the "Trust"). The address
of the Trust is c/o Mellon Bank, N.A., One Mellon Bank
Center, Suite 3346, Pittsburgh, PA 15258-0001. The address
of the trustee of the Trust (the "Trustee") is Mellon Bank,
N.A., One Mellon Bank Center, Suite 3346, Pittsburgh, PA
15258-0001. The Trust is a trust organized under the laws
of the Commonwealth of Pennsylvania and is not engaged in
the conduct of any business. The Trustee is a national
banking association organized under the laws of the United
States.
Except as described herein, during the past five years,
neither the Trust nor the Trustee has been (i) convicted in
a criminal proceeding (excluding traffic violations or
similar misdemeanors) or (ii) a party to a civil proceeding
of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is
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CUSIP NO. 20836810 Page 4 of 9 pages
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subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to,
Federal or state securities laws or finding any violation with respect
to such laws.
In January 1992, the office of the Comptroller of the
Currency accepted an Offer of Settlement from Mellon Bank, N.A.,
in an administrative proceeding, under which Mellon Bank agreed
not to violate section 15C of the Securities Act of 1934, in connection
with its participation in the primary distribution of certain debt
securities issued by various government enterprises.
Item 3. Source and Amount of Funds or Other Consideration
-------------------------------------------------
On June 15, 1995, the Issuer and the Trustee
entered into a trust agreement creating the Trust (the
"Trust Agreement"). A copy of the Trust Agreement is
annexed hereto as Exhibit 1. Pursuant to the terms of the
Trust Agreement, the Issuer sold 4,728,132 shares of Common
Stock to the Trust at a price equal to $52.875 per share
(the last reported sales price on the New York Stock
Exchange Composite Tape on June 15, 1995), or an aggregate
purchase price of $249,999,979.50. The purchase price is
evidenced by a promissory note (the "Note") delivered by the
Trustee to the Issuer. The form of such Note is set forth
as Exhibit B to the Trust Agreement. The Note bears
interest at the rate of 6.90% per annum and is payable in
installments as provided therein.
<PAGE>
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CUSIP NO. 20836810 Page 5 of 9 pages
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The Issuer may from time to time contribute cash
to the Trust, which, together with earnings of the Trust
(primarily dividends on the shares of Common Stock), will be
applied to payment of principal and interest on the Note.
If the contributions to, and earnings of, the Trust are
insufficient to satisfy any installment of principal and
interest on the due date thereof, the Issuer may, in its
discretion, forgive such installment to the extent of the
insufficiency. The Note may be prepaid in a similar manner.
Item 4. Purpose of Transaction
----------------------
The Issuer has advised the Trustee that the Trust
was created to provide for the satisfaction of certain
obligations of the Issuer and its affiliates under various
employee benefit plans of the Issuer, including those
providing for the acquisition by employees of shares of
Common Stock. In addition, the Issuer has advised the
Trustee that the Trust was formed for the purpose of
enhancing the Issuer's financial flexibility. Although the
Issuer has also advised the Trustee that the purchase of
shares of Common Stock by the Trust is not intended to be an
antitakeover device, such purchase may be considered to have
certain antitakeover effects. The Trust holds approximately
6.0% of the outstanding shares of Common Stock. The Trust
Agreement provides that shares held by the Trustee shall be
voted in the same proportion and manner as any shares of
voting stock of the Issuer held in accounts of participants
<PAGE>
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CUSIP NO. 20836810 Page 6 of 9 pages
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in the Issuer's Matched Savings Plan (the "MSP"), and also
provides for a similar procedure in the case of a tender or
exchange offer for shares of Common Stock. Such
participants direct the voting or tender of shares held in
their MSP accounts. See Item 5 below. Under the
Pennsylvania Business Corporation Law, various transactions
including adoption of a plan of merger or share exchange
would require the approval of a majority of the outstanding
shares of Common Stock. The transfer of shares of Common
Stock to the Trust may, in the absence of employee support,
make more difficult or discourage such transactions or a
tender offer or proxy contest, whether or not other
shareholders regard the particular transactions or proposals
as favorable to the Issuer.
Item 5. Interest in Securities of the Issuer
------------------------------------
The Trust holds 4,728,132 shares of Common Stock,
as to which it may be deemed to have shared power to vote or
to direct the vote or to dispose or direct the disposition,
as hereinafter stated. The filing of this Schedule 13D by
the Trust does not constitute, and should not be construed
as, an admission that the Trustee beneficially owns any
securities covered by this Schedule or is required to file
this Schedule. The Trustee disclaims beneficial ownership
of the securities covered by this Schedule.
Shares of Common Stock acquired pursuant to the
Trust Agreement are held in the Trust and will be released
<PAGE>
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CUSIP NO. 20836810 Page 7 of 9 pages
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as the principal of the Note is paid or forgiven and will be
transferred to or for the benefit of certain employee
benefit plans of the Issuer (the "Plans") in the manner set
forth in the Trust Agreement. As of the date hereof, no
shares of Common Stock have been released from the Trust
pursuant to the terms of the Trust Agreement. The Issuer
has advised the Trustee that contributions, if any, by the
Issuer to the Plans will be decreased by the value of the
released shares transferred to the Plans from the Trust.
The Trustee has no discretion in the manner in
which the Common Stock will be voted. Under the Trust
Agreement, participants in the MSP will, in effect,
determine the proportion and manner in which shares of
Common Stock held in the Trust are voted or are tendered in
response to any tender or exchange offer for shares of
Common Stock. Participants in the MSP direct the voting and
tendering of shares of voting stock of the Issuer held in
their accounts. All voting and other actions taken by
individual MSP participants will be held in confidence and
not disclosed to any person, including officers and
employees of the Issuer.
<PAGE>
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CUSIP NO. 20836810 Page 8 of 9 pages
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Item 6. Contracts, Arrangements, Understandings or
------------------------------------------
Relationships with Respect to Securities of the
-----------------------------------------------
Issuer
------
The Issuer and the Trustee, as trustee for the
Trust, have entered into the Trust Agreement, and the
Trustee, as trustee for the Trust, has issued the Note to
the Issuer in payment for the 4,728,132 shares of Common
Stock issued to the Trust. See also Items 3 and 5 of this
Schedule.
Item 7. Material to be Filed as Exhibits
--------------------------------
1 -- The Conrail Inc. Employee Benefits
Trust Agreement dated June 15, 1995, between
Conrail Inc. and Mellon Bank, N.A., as
Trustee.
2 -- Form of Promissory Note dated June
15, 1995, delivered to Conrail Inc. by Mellon
Bank, N.A., as Trustee.
<PAGE>
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CUSIP NO. 20836810 Page 9 of 9 pages
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SIGNATURE
After reasonable inquiry and to the best of
my knowledge and belief, I certify that the information
set forth in this statement is true, complete and
correct.
MELLON BANK, N.A., as Trustee of
the Conrail Inc. Employee Benefits Trust
By /s/
-------------------------
Name: Allan M. Seaman
Title: Associate Counsel
Dated: June 26, 1995
CONRAIL INC.
EMPLOYEE BENEFITS TRUST AGREEMENT
TRUST AGREEMENT, dated June 15, 1995, by
and between CONRAIL INC., a Pennsylvania
corporation (the "Company"), and MELLON BANK,
N.A., as trustee of the Trust created hereby
(the "Trustee").
The Company is or may become obligated in respect
of existing and future incentive, compensation and benefit
plans and arrangements to make payments to or for the
benefit of past, present or future employees and directors,
or their respective beneficiaries. For the purpose of
providing for the satisfaction, in whole or in part, of
certain of such obligations, as the Board of Directors of
the Company may from time to time determine, the Company
desires to establish a trust (the "Trust"), which shall be a
grantor trust within the meaning of Section 671 of the
Internal Revenue Code of 1986, as amended (the "Code"), the
assets of which shall be subject to the claims of the
Company's existing or future general creditors.
NOW, THEREFORE, in consideration of the mutual
agreements contained herein and for other good and valuable
consideration, the parties hereto agree as follows:
<PAGE>
2
ARTICLE I
Establishment
-------------
SECTION 1.1. Trust Fund. The assets held at any
-----------
time and from time to time under the Trust collectively are
herein referred to as the "Trust Fund" and shall consist of
contributions received by the Trustee, proceeds of any
loans, investments and reinvestments thereof and the
earnings and income thereon, less disbursements thereof. At
no time shall the assets of the Trust Fund consist of direct
interests in real property or leaseholds. Except as herein
otherwise provided, title to the assets of the Trust Fund
shall at all times be vested in the Trustee and securities
that are part of the Trust Fund shall be held in such manner
that the Trustee's name and the fiduciary capacity in which
the securities are held are fully disclosed, subject to the
right of the Trustee to hold title in the name of a nominee.
This Trust shall be known as the Conrail Inc. Employee
Benefits Trust. The Company and the Trustee intend the
Trust to be an independent legal entity.
SECTION 1.2. Trustee Acceptance. The Trustee
-------------------
hereby accepts this Trust and all the Company's right, title
and interest in the property transferred to the Trust and
all other property coming into the possession of the Trustee
pursuant to the terms of this Agreement, and the Trustee
agrees to hold, administer and distribute the Trust property
and the income therefrom according to the terms and
conditions hereof.
<PAGE>
3
SECTION 1.3. Grantor Trust. The Trust shall be a
--------------
grantor trust within the meaning of Section 671 of the Code
and shall be construed accordingly. The Trust shall not be
subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and the assets
of the Trust shall not be treated as the assets of any
employee benefit plan subject to ERISA. The Trust Fund
shall at all times remain subject to the claims of the
Company's general creditors.
SECTION 1.4. Separate Entity. The principal of
----------------
the Trust Fund, any earnings thereon and the proceeds of any
dispositions thereof shall be held separate and apart from
funds of the Company and shall be used exclusively for the
uses and purposes set forth in this Agreement. No employee
benefit plan of the Company or any of its subsidiaries
(including the Plans (as defined in Article II)), or any
participant in any such plan or any employee of the Company
or any of its subsidiaries, shall have any rights to, claims
against, or beneficial interest in, any assets of the Trust.
The Company (acting through the SECT Committee) may
make all decisions required or permitted to be made by it
pursuant to this Agreement in its sole and absolute discretion,
and shall have no express or implied duty to act as a fiduciary
<PAGE>
4
of, or in the best interest of, the participants of the
Plans or the employees of the Company.
SECTION 1.5. Irrevocability. The Trust shall not
---------------
be revocable by the Company.
ARTICLE II
Definitions
-----------
The following definitions shall apply to the
Trust:
"Additional Note" means any Promissory Note of the
---------------
Trust to the Company, representing indebtedness of the Trust
incurred to purchase Company Stock, other than the
Promissory Note dated as of June 15, 1995.
"Board" means the Board of Directors of the
-----
Company.
"Business Day" means any day that is not a
------------
Saturday, Sunday or legal holiday in the Commonwealth of
Pennsylvania or the State of New York, on which the New York
Stock Exchange is open for trading in New York City.
"Company Stock" means shares of Common Stock, par
-------------
value $1.00 per share, of the Company.
"ESOP Preferred Stock" means shares of Series A
--------------------
Convertible Junior Preferred Stock, no par value, of the
Company.
"Fair Market Value" means, with respect to Company
-----------------
Stock, the last sales price per share of Company Stock as
<PAGE>
5
reported on the New York Stock Exchange Composite Tape as of
any particular date.
"Matched Savings Plan" means the Consolidated Rail
--------------------
Corporation Matched Savings Plan.
"Matched Savings Plan Trustee" means the bank,
----------------------------
trust company or other financial institution at the time
serving as trustee under the Matched Savings Plan.
"Note" means the Promissory Note of the Trust to
----
the Company dated June 15, 1995, representing indebtedness
of the Trust incurred to purchase Company Stock, and any
Additional Note.
"Plan" or "Plans" means any employee or director
---- -----
incentive, compensation or benefit plan or arrangement
listed on Exhibit A annexed hereto. The SECT Committee may
add to or delete from Exhibit A such employee or director
incentive, compensation or benefit plans or arrangements of
the Company or its subsidiaries as the SECT Committee, in
its sole discretion, shall determine. The Trustee is not a
party to any such plan and shall not be charged with
knowledge of the terms of any such plan.
"SECT Committee" means the committee appointed by
--------------
the Board to administer certain matters related to the
Trust.
<PAGE>
6
"Trust Year" means the calendar year, except the
----------
first Trust Year which shall begin on the date first written
above and end on December 31, 1995.
ARTICLE III
Funding the Trust
-----------------
SECTION 3.1. Delivery of Company Stock.
--------------------------
Concurrently with the execution of this Agreement, the
Company is conveying to the Trust 4,728,132 shares of
Company Stock, to be administered and disposed of by the
Trustee as provided in Article IV. Concurrently with the
execution of this Agreement, the Trustee, on behalf of the
Trust, is delivering to the Company a Note in payment of
the purchase price for the Company Stock so conveyed, in a
principal amount equal to 4,728,132 multiplied by the last
sales price as reported on the New York Stock Exchange
Composite Tape on June 15, 1995, such Note to be
substantially in the form set forth as Exhibit B annexed
hereto.
From time to time on and after the date hereof,
the Company may convey to the Trust additional shares of
Company Stock, to be administered and disposed of by the
Trustee as provided in Article IV. Concurrently with any
such conveyance, the Trustee, on behalf of the Trust, will
deliver to the Company an Additional Note in payment of
the purchase price of Company Stock so conveyed, in a
<PAGE>
7
principal amount equal to the number of shares of Company
Stock so conveyed multiplied by the last sales price as
reported on the New York Stock Exchange Composite Tape on
the date of such conveyance, such Additional Note to be
substantially in the form set forth as Exhibit B annexed
hereto.
SECTION 3.2. Distributions. Distributions paid
-------------
in cash on assets held by the Trust shall be used to pay
interest on the Note as it becomes due. Any excess
remaining after such payment may, in accordance with the
directions of the SECT Committee, be applied to the
payment of principal thereon or distributed to or for the benefit
of Plans. Non-cash distributions paid on assets held by
the Trust shall, in accordance with the directions of the
SECT Committee, be either held in the Trust or reduced to
cash as soon as practicable and used in the same manner as
cash distributions. In all cases, unless otherwise
instructed by the SECT Committee, the Trustee shall
temporarily invest cash in accordance with Article VI to
the extent it is not, at the time, distributed to or for
the benefit of Plans.
SECTION 3.3. Contributions. In each Trust Year
--------------
the Company may, in its sole discretion, contribute cash
to the Trust in amounts and at times that, when added to
the earnings of the Trust, will be sufficient to enable
the Trust to make interest and principal payments on the
Note as they come due. In the event contributions to, and
<PAGE>
8
earnings of, the Trust are insufficient to satisfy any
installment of principal and interest on the due date
thereof, the Company (acting through the SECT Committee)
may, in its discretion, forgive such installment to the
extent of the insufficiency. The Trust shall have no
remedy for any failure by the Company to make any
contribution to the Trust. All contributions to the Trust
shall be used to make principal and interest payments on
the Note. Unless otherwise instructed by the SECT
Committee, the Trustee shall temporarily invest cash in
accordance with Article VI to the extent any cash is not,
at the time, used to make principal and interest payments
on the Note. The Trustee shall be under no duty or
obligation to require the Company to make any cash or
other contributions to the Trust.
SECTION 3.4. Prepayments. The Company may,
------------
from time to time, contribute cash to the Trust in amounts
sufficient to enable the Trust to prepay, in whole or in
part, principal (and accrued interest thereon to the date
of prepayment) of the Note at any time without premium or
penalty or, in lieu of such prepayment, the SECT Committee
may, from time to time, direct that all or any part of
such principal (and interest accrued thereon) shall be
forgiven and the amount so directed shall be forgiven.
Each such prepayment of principal shall be applied to
reduce installments of principal thereafter due on the
Note.
<PAGE>
9
ARTICLE IV
Release of Company Stock and Allocations
----------------------------------------
SECTION 4.1. Release of Company Stock from Trust.
------------------------------------
As soon as practicable after each payment,
forgiveness or prepayment, if any, of principal (and
accrued interest thereon) of the Note is made, a number of
shares of Company Stock shall be made available for
transfer from the Trust ("Released Shares") in the manner
set forth in Section 4.2. The total number of such shares
shall equal the number of shares of Company Stock held in
the Trust which are not Released Shares immediately prior
to the payment, forgiveness or prepayment multiplied by a
fraction, the numerator of which shall be the amount of
principal paid or prepaid by the Trust on the Note or
forgiven upon such payment or prepayment date or date of
forgiveness and the denominator of which shall be the sum
of the numerator plus the remaining principal amount of
the Note. No fractional shares shall be released. If at
any time fractional shares would otherwise be released,
the number of Released Shares shall be rounded down to the
next whole number. The number of Released Shares,
determined as aforesaid, shall be certified to the Trustee
by the SECT Committee.
SECTION 4.2. Disposition of Released Shares.
-------------------------------
Released Shares shall be transferred to or for the benefit
of such Plans (or their participants and beneficiaries) as
<PAGE>
10
the SECT Committee, in its sole discretion, shall
determine; provided that the SECT Committee may direct the
--------
Trustee to sell Released Shares and transfer the proceeds
thereof to or for the benefit of Plans (or their
participants and beneficiaries) to the extent that
contributions to such Plans are required to be in the form
of cash. The SECT Committee may direct the Trustee as to
the timing and manner of the sale of Released Shares in
order to comply with applicable law and to avoid, if
possible, adverse effects on the publicly traded market
price of Company Stock; provided that all Released Shares
must be sold or transferred within twelve months of their
becoming Released Shares. In the event that the SECT
Committee directs the Trustee to sell Released Shares, the
Company may purchase such Released Shares from the Trust
at the Fair Market Value of Company Stock on the Business
Day of such sale.
SECTION 4.3. Transfer of Other Assets. Any
-------------------------
assets other than Company Stock held in the Trust may, at
the direction of the SECT Committee, either be used to pay
interest and principal on the Note or be transferred by
the Trustee in such amounts and at such times to or for
the benefit of such Plans (or their participants and
beneficiaries) as the SECT Committee shall, in its sole
discretion, determine.
<PAGE>
11
SECTION 4.4. Rights Regarding Common Stock.
------------------------------
(a) Voting Rights. The Trustee shall follow the
--------------
directions of the Matched Savings Plan participants with
respect to the manner of voting of Company Stock held by
the Trust on each matter pending before an annual or
special meeting of shareholders of the Company. In
connection with any such meeting of shareholders, the SECT
Committee shall cause the Matched Savings Plan Trustee to
provide the Trustee with certification of the directions
received from the Matched Savings Plan participants directing
the Matched Savings Plan Trustee whether and how to vote or
abstain with respect to any ESOP Preferred Stock or Company Stock
held by the Matched Savings Plan. Upon receipt by the Trustee
of such certification, the Trustee shall, on each such
matter, vote or abstain with respect to the shares of
Company Stock held by the Trust in the same proportion and
manner as the Matched Savings Plan participants directed
the Matched Savings Plan Trustee to vote or abstain with
respect to any ESOP Preferred Stock or Company Stock held
by the Matched Savings Plan.
(b) Tender or Exchange Offer. If a tender or
-------------------------
exchange offer is commenced for Company Stock by a person
other than the Company (or a subsidiary of the Company),
the SECT Committee shall cause the Matched Savings Plan
Trustee to provide the Trustee with certification of the
<PAGE>
12
directions received from the Matched Savings Plan
participants direct ing the Matched Savings Plan Trustee
whether to tender or exchange any ESOP Preferred Stock or
Company Stock held by the Matched Savings Plan and upon
receipt by the Trustee of such certification, the Company
Stock held by the Trust shall be tendered or exchanged, or
not tendered or exchanged, by the Trustee in the same
proportion and manner as the Matched Savings Plan
participants directed the Matched Savings Plan Trustee
with respect to any ESOP Preferred Stock or Company Stock
held by the Matched Savings Plan. If a tender or exchange
offer is commenced for Company Stock by the Company (or a
subsidiary of the Company), the Trustee shall not tender
or exchange the Company Stock held by the Trust.
(c) Confidentiality. All voting and other
----------------
actions taken by individual participants in the Matched
Savings Plan shall be held confidential by the Trustee and
shall not be divulged or released to any person, including
officers and employees of the Company and its affiliates.
(d) Trustee Action. Except as provided in
---------------
Sections 4.4(a) and (b) above, the Trustee shall not make
any recommendations regarding the manner of exercising any
rights under this Section 4.4, including whether or not
any rights should be exercised.
<PAGE>
13
SECTION 4.5. Withholding. The Trustee shall
------------
withhold any taxes from any payment to the extent required
by applicable law and in such amounts as shall be directed
by the SECT Committee.
SECTION 4.6. Registration. (a) Promptly
-------------
following the execution of this Agreement, the Company
shall prepare and file with the Securities and Exchange
Commission (the "SEC") a "shelf" registration statement on
Form S-3 or on any other appropriate form (such
registration statement, as it may be amended or
supplemented from time to time, being hereinafter referred
to as the "Registration Statement") in accordance with
Rule 415 under the Securities Act of 1933, as amended (the
"Securities Act"), providing for the registration of the
Company Stock held by the Trust. The Company shall use its
reasonable efforts to cause such Registration Statement
and all required filings under state securities laws to
become effective and to keep such Registration Statement
and required filings, or any sub sequently filed
Registration Statement and required filings, continuously
effective until the termination of the Trust. The Company
will notify the Trustee of the effectiveness of the
Registration Statement and shall furnish to the Trustee
such number of copies as the Trustee may reasonably
request of the Registration Statement (including any
amendments, supplements and exhibits), the prospectus
<PAGE>
14
contained therein (including each preliminary prospectus
and any summary prospectus), any documents incorporated by
reference in the Registration Statement and such other
documents as the Trustee may reasonably request in order to
facilitate its sale of Released Shares of Company Stock held
in the Trust in the manner described in the Registration
Statement. The Trustee shall not sell, exchange or
transfer any Company Stock except as directed by the SECT
Committee, except as provided in Section 4.4(b).
ARTICLE V
Bankruptcy or Insolvency
------------------------
SECTION 5.1. Deliveries to Creditors of the Company.
---------------------------------------
The Trust Fund is and shall remain at all times
subject to the claims of the general creditors of the
Company. Moreover, neither the Trustee nor the Company
shall create any security interest in the Trust Fund in
favor of any Plan or any creditor. If the Trustee
receives the notice provided for in Section 5.2, or if the
Trustee otherwise receives actual notice that the Company
is insolvent or bankrupt as defined in Section 5.2, the
Trustee shall make no further distributions from the Trust
Fund but shall deliver the entire amount of the Trust Fund
as a court of competent jurisdiction, or duly appointed
receiver or other person authorized to act by such a
court, may direct. The Trustee shall resume distribution
of the Trust Fund as directed by the Company under the
<PAGE>
15
terms hereof, upon not less than 30 days' advance notice
to the Company, if it determines that the Company was not,
or is no longer, bankrupt or insolvent. Such
determination shall be made in a timely fashion, and shall
be based upon a decision of a court of competent
jurisdiction or a certification by the Chief Executive
Officer of the Company of such a determination of its
Board of Directors. The Trustee shall have no duty to
inquire as to whether the Company is bankrupt or insolvent.
SECTION 5.2. Notification of Bankruptcy or
-----------------------------
Insolvency. The Company shall advise the Trustee promptly
- -----------
in writing of the Company's bankruptcy or insolvency. The
Company shall be considered bankrupt or insolvent upon the
occurrence of any of the following:
(i) the Company shall make an assignment for the
benefit of creditors, file a petition in bankruptcy,
petition or apply to any tribunal for the appointment
of a custodian, receiver, liquidator, sequestrator or
trustee for it or a substantial part of its assets,
or shall commence any case under any bankruptcy,
insolvency, reorganization, arrangement, readjustment
of debt, dissolution, liquidation or similar law or
statute of any jurisdiction (Federal or state),
whether now or hereafter in effect; or there shall
<PAGE>
16
have been filed any such petition or application, or
any such case shall have been commenced against it,
in which an order for relief is entered or which
remains undismissed for a period of 120 days; or the
Company by any act or omission shall indicate its
consent to, approval of or acquiescence in (a) any
such petition, application or case or order for
relief or (b) the appointment of any custodian,
receiver or trustee for it or any substantial part of
its property, or shall suffer any such custodianship,
receivership or trusteeship to continue undischarged
for a period of 120 days; or
(ii) the Company shall generally not pay its
debts as such debts become due or shall cease to pay
its debts generally in the ordinary course of
business.
ARTICLE VI
Investments
-----------
SECTION 6.1. Investments. The Trustee shall
------------
invest and reinvest the cash held in Trust Fund
exclusively in Company Stock; provided, however, that the
-------- -------
Trustee may invest any portion of cash held in the Trust
Fund temporarily in (i) United States Government
obligations with maturities of less than one year, (ii)
commercial paper, maturing not more than 90 days after the
date of such investment, issued by a corporation organized
<PAGE>
17
and existing under the laws of the United States of
America or any jurisdiction thereof, with a rating, at the
date of such investment, of "P-1" (or higher) according to
Moody's Investor Services Inc. or "A-1" (or higher)
according to Standard & Poor's Corporation, (iii) interest-
bearing accounts (including at a banking institution of
the Trustee or an affiliate) including, but not limited
to, certificates of deposit, time deposits, savings
accounts and money market accounts, with maturities of
less than one year, or (iv) a common, collective or pooled
trust fund maintained by the Trustee or an affiliate of
the Trustee, which trust fund's investments are
substantially limited to those described in clauses (i),
(ii) and (iii) of this Section 6.1, in which event such
part of the Trust Fund so invested shall be subject to all
the terms and provisions of the common, collective or
pooled trust fund that contemplate the commingling for
investment purposes of such trust assets with trust assets
of other trusts. The Company acknowledges that any
collective fund utilized may provide for the lending of
its securities and the trustee of any such collective fund
may receive income from the lending of such securities
that is separate and apart from the income such trustee
might receive as a collective fund trustee or as the
Trustee.
<PAGE>
18
SECTION 6.2. Trustee's Duties. The Trustee
-----------------
shall have no duty to determine or review the merit or
suitability of investing the Trust Fund in Company Stock
for the objectives of the Trust, and the Trustee shall
have no liability for actions taken by it in conformity
with Section 6.1.
ARTICLE VII
Accounting by Trustee
---------------------
<PAGE>
The Trustee shall keep accurate and detailed
records of all investments, receipts, disbursements and
other transactions. All such records shall be open to
inspection and audit at all reasonable times by the
Company. Within sixty days following the close of each
Trust Year and within sixty days after the removal or
resignation of a Trustee, the Trustee shall deliver to the
Company a written account of its administration of the
Trust during such year or during the period from the close
of the last preceding Trust Year to the date of such
removal or resignation, setting forth all investments,
receipts, disbursements and other transactions effected by
it, including a description of all securities and
investments purchased and sold with the cost and net
proceeds of such purchases or sales, and showing all cash,
securities and other property held in the Trust at the end
of such year or as of the date of such removal or
resignation, as the case may be. All tax returns and
<PAGE>
19
other regulatory filings required by the Trust shall be
prepared by the Company. The Trustee shall make such
filings as shall be directed by the Company and shall be
entitled to rely on the accuracy of all returns and
filings so prepared by the Company.
ARTICLE VIII
Responsibility and Powers of Trustee
------------------------------------
SECTION 8.1. Duty of Trustee. The Trustee
----------------
shall not be liable in connection with the performance of its
duties hereunder except for its negligence or bad faith;
provided, however, that the Trustee shall incur no
- -------- -------
liability for any action taken by the Trustee pursuant to
a direction, request, or approval given by the Company,
the Board or the SECT Committee in accordance with the
terms of this Agreement; and provided further that the
-------- -------
Trustee shall invest the Trust Fund only as provided in
Article VI and the Trustee shall incur no liability by
reason of lack of diversification of the Trust Fund.
SECTION 8.2. Indemnification of Trustee. The
---------------------------
Company shall indemnify and hold the Trustee harmless from
any liabilities, claims or expenses that it may incur in
the exercise and performance of its powers and duties
hereunder, including reasonable attorneys' fees and
expenses, and that are not due to its negligence or bad
faith, including any liability alleged to have resulted
from a violation of law, including, without limitation,
<PAGE>
20
the Securities Act or the rules and regulations of any
authority having jurisdiction over the Company or any of
its affairs.
SECTION 8.3. Management and Control of Trust Fund.
-------------------------------------
Subject to the terms of this Agreement, the Trustee
shall have exclusive authority, discretion and
responsibility to manage and control the assets of the
Trust Fund.
SECTION 8.4. Powers of the Trustee. Without in
----------------------
any way limiting the powers and discretion conferred upon
it by the other provisions of this Agreement or by law,
but subject to Article IV, Article VI and any other
provisions of this Agreement, the Trustee is expressly
authorized and empowered:
(i) to sell, exchange, convey, transfer or
otherwise dispose of any property held by it by private contract or
at public auction, and no person dealing with the Trustee
shall be bound to see to the application of the purchase
money or to inquire into the validity, expediency or
propriety of any such sale or other disposition;
(ii) to enter into contracts or to make commitments
either alone or in concert with others to sell at any
future date any property held in the Trust Fund or to
purchase any property which it may be authorized to acquire
hereunder;
<PAGE>
21
(iii) to vote any stocks, bonds or other
securities; to give general or special proxies or powers of
attorney with or without power of substitution; to exercise
any conversion privileges, subscription rights or other
options and to make any payments incidental thereto; to
consent to or otherwise participate in corporate
reorganizations or other changes affecting corporate
securities and to delegate discretionary powers and to pay
any assessments or charges in connection therewith; and
generally to exercise any of the powers of an owner with
respect to stocks, bonds, securities or other property held
in the Trust Fund;
(iv) to make, execute, acknowledge and deliver
any and all documents of transfer and conveyance and any
and all other instruments that may be necessary or
appropriate to carry out the powers herein granted;
(v) to register any investment held in the Trust
Fund in its own name or in the name of a nominee and to
hold any investment in bearer form, or to combine certif-
icates representing such investments with certificates of
the same issue held by the Trustee in other fiduciary
capacities, or to deposit or to arrange for the deposit of
such securities in a qualified central depositary
even though, when so deposited, such securities may be
merged and held in bulk in the name of the nominee of such
<PAGE>
22
depositary with other securities deposited therein by any
other person, or to deposit or to arrange for the deposit
of any securities issued by the United States Government,
or any agency or instrumentality thereof, with a Federal
Reserve Bank, but the books and records of the Trustee
shall at all times show that all such investments are part
of the Trust Fund;
(vi) to deposit all or any part of the Trust Fund in
interest-bearing accounts maintained by, or savings
certificates issued by, the Trustee, in its separate
corporate capacity, or in any other banking institution
affiliated with the Trustee;
(vii) to maintain cash balances with itself or an
affiliate to meet anticipated distributions from, or
administrative expenses of, the Trust Fund without
incurring any obligation to pay interest thereon; and
(viii) to do all things that the Trustee reasonably
deems necessary to carry out the purposes of this Trust.
ARTICLE IX
Compensation of Trustee
-----------------------
The Trustee shall be entitled to receive such
reasonable compensation for its services as shall be agreed
upon in writing by the Company and the Trustee. To the extent
the compensation and expenses of the Trustee are not paid
<PAGE>
23
directly by the Company, they shall be paid by the Trust, but
in all events shall remain an obligation of the Company.
ARTICLE X
Action by the SECT Committee
----------------------------
Any action with respect to the Trust by the SECT
Committee shall be taken by vote or consent of at least a
majority of its members or by any member authorized by the
SECT Committee to take action with respect thereto and shall
be communicated to the Trustee by the chairman or any other
member designated by the SECT Committee.
ARTICLE XI
Replacement of Trustee
----------------------
The Trustee may, with 30 days' advance written
notice, be removed at any time by the Company or may resign,
in which case a new trustee shall appointed by the Company.
Any successor trustee appointed by the Company shall be an
independent, institutional trustee.
ARTICLE XII
Amendment or Termination; Notices
---------------------------------
SECTION 12.1. Amendment. This Agreement may be
----------
amended at any time and to any extent by a written instrument
executed by the Trustee and the Company, except to make the
Trust revocable or to change the provisions of, or to make any
provision inconsistent with, Sections 4.4(a) and (b), Section
<PAGE>
24
12.1, Section 12.2 or Section 12.3. Notwithstanding the
foregoing, in the event the employee stock ownership plan that
comprises part of the Matched Saving Plan or the employee bene-
fit plan or plans contained in any amendment of
Sections 4.4(a) and (b) pursuant to paragraph (i) below no
longer exists or no longer holds voting stock of the Company,
Sections 4.4(a) and (b) may be amended as follows:
(i) if voting stock of the Company is held in another
employee benefit plan or plans in which a broad cross-
section of nonunion employees of the Company can
confidentially direct the voting, then the Company may
amend Sections 4.4(a) and (b) to provide that the Trustee
shall follow the directions of the participants in one or
more of such plans with respect to the manner of voting
the Company Stock held by the Trust and, in the event of a
tender or exchange offer for Company Stock, whether to
tender or exchange the Company Stock held by the Trust;
(ii) if (i) is not applicable, the Company may amend
Sections 4.4(a) and (b) to provide mechanics to allow the
Company Stock held by the Trust to be voted and, in the
event of a tender or exchange offer, to be tendered or
exchanged as directed confidentially by a broad cross
section of nonunion employees of the Company other than
executive officers (as such term is defined in Rule 3b-7
<PAGE>
25
promulgated pursuant to the Securities Exchange Act of
1934, as amended).
SECTION 12.2. Termination. The Trust shall
------------
terminate upon the earlier of (i) June 14, 2010, or (ii) the
date on which the Trust no longer holds any assets.
SECTION 12.3. Effect of Termination. Upon
----------------------
termination of the Trust, the Trustee shall sell sufficient
remaining assets of the Trust so that the proceeds of such
sale, together with any other available cash, can be applied to
pay in full the remaining principal of the Note and any accrued
but unpaid interest thereon. The SECT Committee may direct the
Trustee as to the timing and manner of the sale, if any, of
Company Stock in order to comply with applicable law and to
avoid, if possible, adverse effects on the publicly traded
market price of Company Stock. The proceeds of sale shall
first be paid to the Company, up to the amount of any unpaid
principal and interest on the Note except to the extent
forgiven by the Company. In the event the proceeds of the sale
shall be insufficient to discharge the Note in its entirety,
the Company shall be deemed to have forgiven all amounts that
shall remain due and owing thereon. Any assets or Company
Stock remaining in the Trust, or the proceeds of the sale
thereof, shall be distributed to or for the benefit
of any employee benefit plan (including one or more of the
Plans) in which a broad cross-section of nonunion employees of
<PAGE>
26
the Company or its subsidiaries participate, as the SECT
Committee shall, in its sole discretion, determine.
SECTION 12.4. Notices. Any notice, report, demand
--------
or waiver required or permitted hereunder shall be
in writing and shall be given personally, delivered by
overnight delivery service or sent by telecopier, addresses
as follows:
If to the Company:
Conrail Inc.
2001 Market Street
Two Commerce Square
Philadelphia, PA 10101 Telephone No.: (215)
209-4000 Telecopier No.: (215) 209-4819
Attention: Timothy O'Toole
If to the Trustee:
Mellon Bank, N.A.
One Mellon Bank Center
Suite 3346
Pittsburgh, PA 15258-0001
Telephone No.: (412) 234-8820
Telecopier No.: (412) 234-7937
Attention: Carol Condie, Trust Officer
Notices shall be effective only upon receipt.
The Company and the Trustee may change the address
to which notices, requests and other communications are to be
sent to it by giving written notice of such address change to
the other parties in conformity with this Section 12.4.
<PAGE>
27
ARTICLE XIII
Severability
------------
Any provision of this Agreement prohibited by law
shall be ineffective to the extent to any such prohibition
without invalidating the remaining provisions hereof.
ARTICLE XIV
Governing Law
-------------
This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of
Pennsylvania.
IN WITNESS WHEREOF, the Company and the Trustee
have executed this Agreement as of the date set forth above.
CONRAIL INC.,
by /s/
-----------------------------------
Name: Timothy T. O'Toole
Title: Vice President - Treasurer
MELLON BANK, N.A.,
Trustee,
by /s/
-----------------------------------
Name: Kerry Nelson
Title: Vice President
<PAGE>
Exhibit A
---------
Designated Plans
----------------
1. Annual Performance Achievement Reward Plan
2. Annual Performance Achievement Reward PLUS Plan
3. Worker Safety Awards Plan
4. Non-Agreement Employee Life, Dismemberment and
Disability Benefits Plan
5. Long Term Disability Payment Plan
6. Employee Claim Settlement Plan
7. Non-Agreement Employee Medical and Dental Plan
8. Consolidated Rail Corporation Non-Agreement Retirees
Medical Plan
<PAGE>
Exhibit B
---------
PROMISSORY NOTE
Philadelphia, Pennsylvania June 15, 1995
FOR VALUE RECEIVED, the undersigned, Mellon Bank,
N.A., solely in its capacity as Trustee (the "Trustee") of
the Conrail Inc. Employee Benefits Trust (the "Trust"),
hereby promises on behalf of the Trust to pay to the order
of Conrail Inc. ("Conrail") the sum of $249,999,979.50,
together with interest thereon as hereinafter set forth.
Interest shall be paid (computed on the basis of a
360-day year of twelve 30-day months) on the unpaid
principal balance, at an interest rate (the "Interest Rate")
of 6.90% per annum. Interest shall accrue from the date
hereof on the unpaid balance, and shall be paid on each
March 16, June 16, September 16 and December 16, commencing
September 16, 1995. All principal and accrued and unpaid
interest thereon shall be payable on June 14, 2010. In the
event contributions to, and earnings of, the Trust are
insufficient to satisfy any installment of principal and
interest on the due date thereof, the Company (acting
through the SECT Committee) may, in its discretion, forgive
such installment to the extent of the insufficiency.
Principal (and accrued unpaid interest thereon) of this Note
may be prepaid in whole or in part at any time and from time
to time without penalty and may, in the manner set forth in
the Trust Agreement, dated as of June 15, 1995, between the
Trustee and Conrail, be forgiven. Each prepayment (or
forgiveness) of principal shall be applied to reduce
installments of principal thereafter due on the Note in the
order of their scheduled maturities. Whenever any
prepayment falls due on a Saturday, Sunday or public
holiday, such payment shall be made on the next succeeding
business day. Upon termination of the Trust, the entire
unpaid balance of principal and interest shall be
immediately payable.
The Company shall, and is hereby authorized to,
record on the schedule attached hereto as Schedule I, or to
otherwise record in accordance with its usual practice, the
date and amount of each principal payment or forgiveness of
such payment; provided, however, that failure to do so shall
-----------------
not affect the Trust's obligation to pay amounts due
hereunder.
All payments received hereunder shall be applied
in the following order: first, to the payment of any costs
(including attorneys' fees) incurred by the holder hereof in
<PAGE>
2
collecting any amounts hereunder; second, to the payment of
accrued but unpaid interest; and third, to the payment of
the principal amount outstanding.
This Note shall be governed by and construed under
the laws of the Commonwealth of Pennsylvania.
The Trust hereby waives presentment, demand,
protest and notice of dishonor.
This Note is issued by the Trust pursuant to the
Trust Agreement and is entitled to the benefits thereof. The
Trustee is executing this Note solely in its capacity as
trustee of the Trust. The Trustee shall have no liability
or obligation of any kind in its individual capacity to the
Company or its successors as a result of the execution or
issuance of this Note.
All payments of principal and interest in respect
of this Note shall be made in transferable United States
dollars in immediately available funds to the order of the
holder hereof by wire transfer to such account at such
financial institution as may be specified from time to time
by the holder hereof to the Trustee in writing.
Any failure of the holder to exercise any right,
remedy or recourse shall not be deemed a waiver or release
of same, such waiver or release or any other modification of
any such right, remedy or recourse to be effective only if
set forth in a written document executed by the holder and
then only to the extent specifically recited therein. A
waiver or release with reference to one event shall not be
construed as continuing, as a bar to or as a waiver or
release of any subsequent event. The acceptance by the
holder of payment hereunder that is less than payment in
full of all amounts due and payable at the time of such
payment shall not constitute a waiver of the right to
exercise any right, remedy or recourse at that time or at
any subsequent time, or nullify any prior exercise of any
such right, remedy or recourse without the express written
consent of the holder.
The Company's rights under this Note are
nonassignable and nontransferable, and any purported
assignment or transfer of this Note or the Company's rights
hereunder shall be null and void.
Subject to the provisions hereof, and to the
extent not inconsistent with applicable law, in the event of
default hereunder, the Trust agrees to pay all reasonable
<PAGE>
3
costs of collection hereof when billed therefor, including
reasonable attorneys' fees, whether or not action shall be
instituted to enforce this Note.
MELLON BANK, N.A., as Trustee,
by /s/
-----------------------
Name: Kerry Nelson
Title: Vice President
<PAGE>
SCHEDULE I
Principal Payment/Forgiveness Record
------------------------------------
Outstanding
Date Payment/Forgiveness Principal Amount
-------- ------------------- -----------------
$ $
<PAGE>
