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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
CONRAIL INC.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing.
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(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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LOGO
October 31, 1996
Dear Shareholder:
On behalf of the Board of Directors and Officers of Conrail Inc., we would
like to invite you to attend a Special Meeting of Shareholders to be held on
Thursday, November 14, 1996, at 5:00 p.m., Eastern Standard Time at The Academy
of Music Hall, 1420 Locust Street, Philadelphia, Pennsylvania, for the purpose
described in the attached Notice of Special Meeting. Conrail is not soliciting
proxies at this time for the Special Meeting but expects to deliver definitive
proxy materials to shareholders shortly.
As previously announced, Conrail and CSX Corporation have entered into a
Merger Agreement providing for a merger of equals of the companies. In the
transaction, 40% of the shares of Conrail common stock and ESOP preferred stock
would be acquired for cash at $92.50 per share, and the remaining 60% would be
acquired for CSX stock at an exchange ratio of 1.85619 CSX shares for each
Conrail share. As part of the transaction, CSX has commenced a cash tender offer
at $92.50 per share for an aggregate of approximately 19.9% of the outstanding
Conrail shares. The CSX transaction is more fully described in an offer to
purchase and related materials you should have already received.
On October 23, 1996, Norfolk Southern Corporation announced a tender offer
for all outstanding Conrail shares at $100 per share. The Norfolk offer is
described in an offer to purchase and related materials that you have received
or will receive shortly. Conrail has not yet responded to the Norfolk offer,
which it will do no later than the date required by law, which is November 6,
1996. Conrail believes that Norfolk will be delivering to shareholders in the
near future definitive proxy materials soliciting proxies against the proposal
to be considered at the Special Meeting.
If you have any questions regarding the Special Meeting please contact D.F.
King & Co., Inc. toll free at 1-800-549-6746. Thank you for your continued
support.
Sincerely,
LOGO
David M. LeVan
Chairman, President and
Chief Executive Officer
<PAGE> 3
CONRAIL INC.
2001 MARKET STREET
TWO COMMERCE SQUARE
PHILADELPHIA, PENNSYLVANIA 19101-1417
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 14, 1996
To Our Shareholders:
Notice is hereby given that a Special Meeting (the "Special Meeting") of
Shareholders of Conrail Inc. ("Conrail") will be held at The Academy of Music
Hall, 1420 Locust Street, Philadelphia, Pennsylvania, on Thursday, November 14,
1996, at 5:00 p.m., Eastern Standard Time, for the following purposes:
1. To approve an amendment to Conrail's Articles of Incorporation which
would cause the provisions of Subchapter E of Chapter 25 of the
Pennsylvania Business Corporation Law of 1988, as amended, to no longer
be applicable to Conrail, and to authorize the Board of Directors, in
its discretion, to direct certain executive officers of Conrail to file
or not file such Articles of Amendment if the Board determines such
action to be in the best interests of Conrail; and
2. To adjourn the Special Meeting, if necessary, to permit further
solicitation of proxies in the event that there are not sufficient votes
at the time of the Special Meeting to approve the foregoing proposal.
Only those shareholders of record as of the close of business on October
25, 1996, will be entitled to vote at the Special Meeting. A majority of the
outstanding shares of Conrail Common Stock and Series A ESOP Convertible Junior
Preferred Stock entitled to vote, considered as a single class, is required for
a quorum. For purposes of any meeting of shareholders that has been previously
adjourned for one or more periods aggregating at least fifteen days because of
an absence of a quorum, the shareholders entitled to vote who attend such an
adjourned meeting, although less than a quorum, shall nevertheless constitute a
quorum for the purposes of acting on any matter set forth in this Notice.
October 31, 1996 By Order of the Board of Directors
/s/ James D. McGeehan
James D. McGeehan
Corporate Secretary
<PAGE> 4
LOGO
November , 1996
Dear Shareholder:
On behalf of the Board of Directors and Officers of Conrail Inc., we would
like to invite you to attend a Special Meeting of Shareholders to be held on
Thursday, November 14, 1996, at 5:00 p.m., Eastern Standard Time at The Academy
of Music Hall, 1420 Locust Street, Philadelphia, Pennsylvania. The attached
proxy statement contains important information which you should read carefully.
As previously announced, Conrail and CSX Corporation have entered into a
Merger Agreement providing for a merger of equals of the companies. We believe
the merger will create one of the world's leading freight transportation and
logistics companies. In the transaction 40% of the shares of Conrail common
stock and ESOP preferred stock would be acquired for cash at $92.50 per share,
and the remaining 60% would be acquired for CSX stock at an exchange ratio of
1.85619 CSX shares for each Conrail share. Your Board of Directors has
unanimously approved the CSX Merger Agreement.
As part of the transaction, CSX has commenced a cash tender offer at $92.50
per share for an aggregate of approximately 19.9% of the outstanding Conrail
shares. As described in the enclosed proxy statement, a Pennsylvania statute
effectively precludes CSX from acquiring 20% or more of Conrail's shares in the
tender offer or otherwise and then completing the transactions contemplated by
the CSX Merger Agreement, unless the Conrail shareholders vote to amend the
Conrail Articles of Incorporation to opt out of such statute.
At the Special Meeting, shareholders will be asked to approve an amendment
to Conrail's Articles of Incorporation to opt out of the Pennsylvania statute so
that CSX can acquire for cash 40% of the shares of Conrail common and ESOP
preferred stock as provided in the CSX Merger Agreement. If the amendment is
approved, CSX would be able either to increase the number of shares subject to
its current tender offer, or to commence a second tender offer, in each case so
as to purchase an aggregate of 40% of the shares for cash. In addition, Conrail
has the right, and currently intends, to require CSX to make the second tender
offer if the amendment is approved and CSX does not elect to increase the number
of shares subject to its current tender offer.
On October 23, 1996, Norfolk Southern Corporation announced an unsolicited
tender offer for all outstanding Conrail shares at $100 per share. The enclosed
proxy statement contains a summary description of the Norfolk offer. Certain
conditions to the Norfolk offer (including redemption of Conrail's common stock
purchase rights) can only be satisfied if Conrail's Board of Directors takes
action. Under the CSX Merger Agreement, Conrail's Board of Directors is
prohibited, until April 13, 1997 (or, if earlier, the date on which the CSX
Merger Agreement is terminated for any other reason, which, absent action by CSX
or its shareholders, can only be effected by Conrail following the failure by
Conrail's shareholders to approve the merger with CSX at a meeting duly called
to vote thereon), from (i) withdrawing or modifying, or publicly proposing to
withdraw or modify, its approval or recommendation of CSX's offer and merger, in
a manner adverse to CSX, (ii) approving or recommending, or publicly proposing
to approve or recommend, any competing proposal (such as the Norfolk offer) or
(iii) causing Conrail to enter into any agreement related to any such competing
proposal. The CSX Merger Agreement does not require that any meeting of
shareholders to consider the merger be held before April 13, 1997, and there can
be no assurance that Conrail's Board of Directors would be permitted under the
CSX Merger Agreement, or would otherwise seek, to take any such actions before
that date. In addition, on and after April 13, 1997, the CSX Merger Agreement
provides that certain conditions must be satisfied in order for Conrail's Board
of Directors to take any of the foregoing actions and, in any event, Conrail's
Board of Directors is not required under Pennsylvania law to agree to or
recommend any competing proposal (such as the Norfolk offer) or to take any
action to facilitate any such competing proposal.
On November , 1996, Conrail filed a Solicitation/Recommendation Statement
on Schedule 14D-9 with respect to the Norfolk offer, which stated [DISCLOSURE
FROM SCHEDULE 14D-9 TO BE PROVIDED].
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION SO THAT SHAREHOLDERS, IF THEY SO
CHOOSE, WILL BE ABLE TO TENDER AND RECEIVE CASH FOR 40% (RATHER THAN 19.9%) OF
THE SHARES PURSUANT TO CSX'S CURRENT TENDER OFFER (OR THE SECOND TENDER OFFER).
FOR THOSE SHAREHOLDERS WHO HAVE TENDERED THEIR SHARES PURSUANT TO A TENDER
OFFER, IT IS IMPORTANT THAT SUCH SHAREHOLDERS SIGN, DATE AND MAIL THE WHITE
PROXY ENCLOSED HEREWITH TO DIRECT THE VOTE OF SUCH SHARES. TENDERING YOUR SHARES
PURSUANT TO A TENDER OFFER DOES NOT CONSTITITE VOTING OF YOUR SHARES IN
CONNECTION WITH THE PROPOSAL DESCRIBED IN THE ATTACHED PROXY STATEMENT.
As soon as possible, please complete the top part of the enclosed WHITE
proxy, detach the completed portion and return it in the enclosed postage paid
return envelope, to ensure that your shares will be voted at the meeting. Voting
your shares by proxy does not prevent you from voting your shares in person
should you decide to attend the meeting. If you have any questions regarding the
Special Meeting or need assistance in voting, please contact our proxy
solicitor, D.F. King & Co., Inc., toll free at 1-800-549-6746. Thank you for
your continued support.
Sincerely,
LOGO
David M. LeVan
Chairman, President and
Chief Executive Officer
<PAGE> 5
CONRAIL INC.
2001 MARKET STREET
TWO COMMERCE SQUARE
PHILADELPHIA, PENNSYLVANIA 19101-1417
PROXY STATEMENT FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 14, 1996
This proxy statement ("Proxy Statement") is furnished in connection with
the solicitation by the Board of Directors (the "Board") of Conrail Inc., a
Pennsylvania corporation with its principal executive offices located at the
address set forth above ("Conrail"), of proxies for use at a Special Meeting
(the "Special Meeting") of Shareholders to be held at The Academy of Music Hall,
1420 Locust Street, Philadelphia, Pennsylvania, on Thursday, November 14, 1996,
at 5:00 p.m., Eastern Standard Time, and at any adjournments thereof. A single
form of proxy for both holders of the Common Stock of Conrail, par value $1.00
per share (the "Common Stock"), and holders of the Series A ESOP Convertible
Junior Preferred Stock, without par value (the "ESOP Stock" and, together with
the Common Stock and associated common stock purchase rights, the "Shares"), is
being furnished for use at the Special Meeting. The holders of the Common Stock
vote together as a class with the holders of the ESOP Stock. This Proxy
Statement and the form of proxy are first being mailed on November , 1996, or
as soon as practicable thereafter, to all shareholders entitled to vote at the
Special Meeting. Participants in the Consolidated Rail Corporation Matched
Savings Plan (the "ESOP") desiring that Fidelity Management Trust Company, as
trustee under the ESOP (the "Trustee"), vote the shares of ESOP Stock allocated
to such participants' accounts should so instruct the Trustee by completing the
voting instruction card that will be provided to participants for that purpose.
Participants cannot vote their shares of ESOP Stock or instruct the Trustee as
to how to vote their shares of ESOP Stock by completing the enclosed proxy card.
Pursuant to this Proxy Statement, Conrail is soliciting proxies in favor of
the proposal (the "Proposal"), described below under "THE PROPOSAL", to approve
an amendment (the "Amendment") to Conrail's Articles of Incorporation (the
"Conrail Articles") to permit Conrail to opt out of Subchapter E of Chapter 25
(the "Pennsylvania Statute") of the Pennsylvania Business Corporation Law of
1988, as amended (the "PBCL"). The Board of Directors recommends a vote FOR the
Proposal so that shareholders, if they choose to do so, will be able to tender
and receive cash for 40% of the fully diluted Shares (rather than 19.9% of
outstanding Shares) pursuant to the tender offer which was commenced by CSX
Corporation, a Virginia corporation ("CSX"), on October 16, 1996 (or in a second
tender offer that CSX may, and at the request of Conrail will, commence
following approval of the Proposal). The Board of Directors thus recommends that
you should not send in or complete a proxy you may receive from Norfolk Southern
Corporation, a Virginia corporation ("Norfolk"), who is soliciting proxies
against the Proposal. See "NORFOLK'S ACTIONS" below. If you have already done
so, you may revoke that proxy and vote FOR the Proposal by signing and dating
the enclosed WHITE proxy and mailing it in the enclosed postage paid return
envelope.
PLEASE SIGN AND DATE THE ENCLOSED WHITE PROXY TODAY.
THE CSX TRANSACTIONS
On October 14, 1996, Conrail entered into an Agreement and Plan of Merger
(the "Merger Agreement") by and among Conrail, Green Acquisition Corp., a
Pennsylvania corporation ("Purchaser"), and CSX, providing for the merger (the
"Merger") of Conrail with and into Purchaser. The Merger Agreement, which was
unanimously approved by the Board of Directors and the disinterested members of
the Board of Directors, provides for a business combination in which 40% of the
Shares, on a fully diluted basis, would be acquired for cash at $92.50 per
Share, and the remaining 60% would be acquired for stock at an exchange ratio
(the "Exchange Ratio") of 1.85619 CSX shares for each Share. Pursuant to the
Merger Agreement, CSX commenced a tender offer (the "CSX Tender Offer") on
October 16, 1996, to purchase 19.9% of the outstanding Shares for cash at $92.50
per Share. The terms and conditions of the CSX Tender Offer are set forth in an
Offer to Purchase (the "CSX Offer to Purchase") which has been filed by CSX as
an exhibit to a
<PAGE> 6
Tender Offer Statement on Schedule 14D-1 filed with the Securities and Exchange
Commission (the "SEC"). Further, Conrail has filed a Solicitation/Recommendation
Statement on Schedule 14D-9 (the "CSX Schedule 14D-9") with the SEC, in which
Conrail sets forth its reasons for entering into the Merger Agreement. Copies of
the CSX Offer to Purchase and the CSX Schedule 14D-9 have been mailed to Conrail
shareholders and should be read carefully. Shareholders who want additional
copies of the CSX Offer to Purchase and/or the CSX Schedule 14D-9 or who have
questions concerning the CSX Tender Offer should contact MacKenzie Partners,
Inc., the information agent for the CSX Tender Offer, at 800-322-2885 or
Wasserstein Perella & Co., Inc., the dealer manager for the CSX Tender Offer, at
212-969-2700 (call collect).
The CSX Tender Offer is for 19.9%, rather than 40%, of the Shares because,
as described below under "THE PROPOSAL", unless and until the Pennsylvania
Statute is made inapplicable to Conrail, if CSX were to acquire 20% or more of
the outstanding Shares, CSX would be unable to complete the transactions
contemplated by the Merger Agreement. If the Proposal is approved and the
Amendment is effective, CSX will be entitled to (i) increase the number of
Shares to which the CSX Tender Offer applies to 40% of the fully diluted Shares
or (ii) commence a second tender offer for an additional number of Shares (the
"Second CSX Tender Offer") for at least the same $92.50 price and otherwise on
terms and conditions no less favorable to shareholders than the CSX Tender
Offer, such that the Shares acquired in such Second CSX Tender Offer, together
with the Shares acquired in the CSX Tender Offer, will equal 40% of the fully
diluted Shares. If the Proposal is approved and the Amendment is effective,
Conrail can require CSX to either (i) if the CSX Tender Offer remains open,
increase the number of Shares subject to the CSX Tender Offer or, (ii) if the
CSX Tender Offer has expired, commence the Second CSX Tender Offer. In either
case, pursuant to the Merger Agreement, Conrail may not require CSX to take such
action during a period in which the CSX Tender Offer has less than 10 business
days until its scheduled expiration date.
As described in the CSX Offer to Purchase, if CSX acquires 40% of the fully
diluted Shares pursuant to the CSX Tender Offer, the Second CSX Tender Offer, if
applicable, or otherwise, the approval of the Merger by the Conrail shareholders
will be virtually certain because (i) the approval of the Merger at a meeting of
Conrail shareholders requires that a simple majority of votes cast at such
meeting are cast in favor of the Merger, (ii) abstentions, broker non-votes and
other Shares not voted are not counted in the tabulation of votes cast, and
(iii) all Shares acquired by CSX are required pursuant to the Merger Agreement
to be immediately deposited into a voting trust and to be voted in favor of the
Merger (and against any competing transaction). Because it can be expected that
some percentage of the Shares entitled to vote at a meeting of shareholders will
not in fact vote, 40% of the fully diluted Shares, together with only a very
small number of additional Shares, would be likely to represent a majority of
votes cast at a special meeting to vote on the Merger and, thus, be sufficient
to approve the Merger. In addition, CSX may exercise an option (the "Option"),
more fully described below, to purchase 15,955,477 shares of Common Stock, among
other circumstances, if CSX consummates the CSX Tender Offer. If CSX acquires
40% of the fully diluted Shares and the Option is exercised, the approval of the
Merger by the Conrail shareholders would be certain. Therefore, if the Proposal
is adopted, CSX would be in a position to acquire up to 40% of the fully diluted
Shares, and to exercise the Option, which would bring its interest up to
approximately 50%, and CSX could itself cause the Merger to be approved without
the vote of any other Conrail shareholders. Moreover, if CSX consummates only
the CSX Tender Offer by acquiring 19.9% of the Shares and then exercises the
Option, CSX will then own approximately 30% of the fully diluted Shares, and
will have a large portion of the voting power of the Shares entitled to vote in
favor of the Merger.
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NORFOLK'S ACTIONS
THE NORFOLK OFFER. On October 23, 1996, Norfolk announced an unsolicited
tender offer for all outstanding Shares for $100 per Share, net to the seller in
cash (the "Norfolk Offer"). The terms and conditions of the Norfolk Offer are
set forth in an Offer to Purchase (the "Norfolk Offer to Purchase") which was
filed by Norfolk as an exhibit to a Tender Offer Statement on Schedule 14D-1
filed with the SEC on October 24, 1996. Copies of the Norfolk Offer to Purchase
have been mailed to Conrail shareholders and should be read carefully.
Shareholders who want additional copies of the Norfolk Offer to Purchase should
contact D.F. King & Co., Inc., Conrail's proxy solicitor, who mailed the Norfolk
Offer to Purchase at the request of Norfolk, toll free at 1-800-549-6746. Banks,
brokers and other nominees should call the materials distribution department at
(212) 425-1395 or transmit requests by facsimile to (212) 809-8838.
Certain conditions to the Norfolk Offer (including redemption of Conrail's
common stock purchase rights and approval of the Norfolk Offer under Subchapter
F of Chapter 25 of the PBCL) can only be satisfied if Conrail's Board of
Directors takes action. Under the Merger Agreement, Conrail's Board of Directors
is prohibited, until April 13, 1997 (or, if earlier, the date on which the
Merger Agreement is terminated for any other reason, which, absent action by CSX
or its shareholders, can only be effected by Conrail following the failure by
Conrail's shareholders to approve the Merger at a meeting duly called to vote
thereon), from (i) withdrawing or modifying, or publicly proposing to withdraw
or modify, its approval or recommendation of the CSX Tender Offer and the Merger
in a manner adverse to CSX, (ii) approving or recommending, or publicly
proposing to approve or recommend, any competing proposal (such as the Norfolk
Offer) or (iii) causing Conrail to enter into any agreement related to any such
competing proposal. The Merger Agreement does not require that any meeting of
shareholders to consider the Merger be held before April 13, 1997, and there can
be no assurance that Conrail's Board of Directors would be permitted under the
Merger Agreement, or would otherwise seek, to take any such actions before that
date. In addition, on and after April 13, 1997, the Merger Agreement provides
that certain conditions must be satisfied in order for Conrail's Board of
Directors to take any of the forgoing actions and, in any event, Conrail's Board
of Directors is not required under Pennsylvania law to agree to or recommend any
competing proposal (such as the Norfolk Offer) or to take any action to
facilitate any such competing proposal.
On November , 1996, Conrail filed a Solicitation/Recommendation Statement
on Schedule 14D-9 with respect to the Norfolk Offer (the "Norfolk Schedule
14D-9"), which stated as follows: [DISCLOSURE FROM NORFOLK SCHEDULE 14D-9 TO BE
PROVIDED].
NORFOLK LITIGATION. On October 23, 1996, Norfolk filed a Complaint for
Declaratory and Injunctive Relief in the United States District Court for the
Eastern District of Pennsylvania against Conrail, CSX and certain of the
directors of Conrail. Norfolk's complaint alleges, among other things,
violations of fiduciary duty, of Conrail's Articles of Incorporation and
By-Laws, of the PBCL and of the federal securities laws and requests preliminary
and permanent injunctive and declaratory relief including, without limitation,
(i) an injunction from commencing or continuing a tender offer (such as the CSX
Tender Offer) for the Shares, seeking the shareholder approval of the Amendment
or taking steps to make effective the Amendment, taking any action to redeem the
common stock purchase rights issued pursuant to the July 19, 1989 Conrail Rights
Agreement or to render such common stock purchase rights inapplicable to the CSX
Tender Offer and the Merger without, at the same time, rendering them
inapplicable with respect to the Norfolk Offer, taking any action to enforce
certain provisions of the Merger Agreement, failing to take action to exempt
Norfolk's proposal to acquire Conrail from certain provisions of the PBCL, and
holding the Special Meeting, and (ii) a declaration that certain "continuing
director" provisions in the September 20, 1995 amendment to the July 19, 1989
Conrail Rights Agreement are void. The Norfolk complaint specifically alleges
certain misrepresentations and omissions of material fact by Conrail and CSX, as
set forth below under "DISCLOSURE CLAIMS BY NORFOLK".
Conrail believes that the claims set forth in Norfolk's complaint are
entirely without merit, and on October 28, 1996, Conrail filed a motion to
dismiss Norfolk's complaint in its entirety. A hearing on the preliminary
injunction being sought by Norfolk has been scheduled for November 12, 1996.
3
<PAGE> 8
On October 30, 1996 Norfolk filed its First Amemded Complaint for
Declaratory and Injunctive Relief, which amends its original complaint
principally by asserting additional state law claims. [INSERT DESCRIPTION OF
ADDITIONAL DEVELOPMENTS RELATING TO THE LITIGATION.]
NORFOLK PROXY SOLICITATION AGAINST THE PROPOSAL. On October 24, 1996,
Norfolk filed preliminary proxy materials with the SEC, in which Norfolk
indicated it intends to solicit proxies against the Proposal at the Special
Meeting. The Board of Directors recommends that you should not send in or
complete a proxy you may receive from Norfolk, who is soliciting proxies against
the Proposal. If you have already done so, you may revoke that proxy and vote
FOR the Proposal by signing and dating the enclosed WHITE proxy and mailing it
in the enclosed postage paid return envelope.
THE PROPOSAL
Conrail's Board of Directors believes that shareholders, if they choose to
do so, should be able to tender and receive cash for 40% of the fully diluted
Shares (rather than 19.9% of the outstanding Shares) pursuant to the CSX Tender
Offer and the Second CSX Tender Offer, if applicable, and that the consummation
of such offer(s) will facilitate the strategic business combination represented
by the Merger. As a result, the Board of Directors has approved the following
resolutions and directed that they be submitted to a vote of the shareholders at
the Special Meeting:
An amendment of the Articles of Incorporation of Conrail is hereby
approved and adopted, by which, upon the effectiveness of such
amendment, Article Ten thereof will be amended and restated in its
entirety as follows: "Subchapter E, Subchapter G and Subchapter H of
Chapter 25 of the Pennsylvania Business Corporation Law of 1988, as
amended, shall not be applicable to the Corporation."; and further,
that the Board of Directors of Conrail, in its discretion, shall be
authorized to direct certain executive officers of Conrail to file or
not file the Articles of Amendment of Conrail's Articles of
Incorporation reflecting such amendment or to terminate the Articles
of Amendment prior to their effective date, if the Board determines
such action to be in the best interests of Conrail.
The Conrail Articles currently provide that Subchapter G and Subchapter H
of Chapter 25 of the PBCL referred to in the above resolutions do not apply to
Conrail. Approval of the Amendment will result in Subchapter E, in addition to
Subchapters G and H, being inapplicable to Conrail.
APPROVAL OF THE PROPOSAL REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF
THE VOTES CAST BY ALL SHAREHOLDERS ENTITLED TO VOTE THEREON.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE FOR THE PROPOSAL.
The Pennsylvania Statute generally provides that any holder of voting
shares of a Pennsylvania registered corporation that becomes the subject of a
control transaction (as described below) is entitled to receive cash for each of
such person's voting shares in an amount equal to the "fair value" of each
voting share as of the date on which such control transaction occurred. Although
the Pennsylvania Statute provides for a judicial appraisal procedure, "fair
value" is defined to be not less than the highest price per share paid by the
acquiror in a control transaction at any time during the 90-day period ending on
and including the date of the control transaction, plus, to the extent not
reflected in such price paid, an increment representing any value, including,
without limitation, any proportion of any value payable for control of such
corporation. A control transaction is the acquisition by a person (or group of
persons acting in concert) of voting power over voting shares of a registered
corporation which would entitle the holders of such shares to cast 20% or more
of the votes that all shareholders would be entitled to cast in an election of
directors of such corporation.
Because of the Pennsylvania Statute, CSX could not purchase 20% or more of
the Shares in a tender offer or other transaction (other than the Merger)
without all holders of Shares having the right to put the Shares to CSX for at
least $92.50 in cash. As a result, unless the Conrail shareholders approve the
Proposal, the cash payable for 19.9%, rather than 40%, of the Shares would be
paid in the CSX Tender Offer in the near term, and the cash payable for the
additional 20.1% of the Shares would be paid in the subsequent Merger if
4
<PAGE> 9
the Merger is consummated. As described in the CSX Offer to Purchase, the Merger
will not be consummated unless and until, among other things, Conrail and CSX
receive the approval of the Merger from the Surface Transportation Board (the
"STB"). Conrail and CSX plan to file an application (the "STB Application") with
the STB on or before March 1, 1997, seeking the approval of the STB for the
Merger and transactions related to the Merger. The STB will then hold a public
hearing on such application, unless it determines that a public hearing is, in
the public interest, not necessary. Under existing law, the STB is required to
enter a final order with respect to the STB Application within approximately 15
months after such application is accepted. However, the STB can process cases
more quickly and Conrail and CSX have submitted a request to the STB to adopt an
expedited schedule. Any appeals from the STB final order may not be resolved for
a substantial period of time after the entry of such order by the STB. As a
result of such factors, it is expected that the Merger will not be consummated
prior to the fourth quarter of 1997.
Pursuant to the Merger Agreement and in order to facilitate the
transactions contemplated thereby, if the Proposal is approved, Conrail will be
required to file the Amendment with the Pennsylvania Department of State so as
to accommodate the acquisition by CSX of in excess of 20% of the Shares, such
filing to be made and effective immediately prior to such acquisition. If CSX is
not in a position to make such acquisition (because, for example, Shares have
not been tendered to CSX), Conrail is not required to make such filing (although
approval of the Proposal will authorize Conrail to do so) and Conrail does not
currently intend to make such filing unless it is required under the Merger
Agreement to permit CSX to acquire in excess of 20% of the Shares. Moreover,
pursuant to the Merger Agreement, Conrail is not permitted to file the Amendment
except for the purpose of facilitating the acquisition by CSX of more than 19.9%
of the Shares pursuant to the CSX Tender Offer, the Second CSX Tender Offer, if
applicable, the Merger or otherwise.
The discretion vested by the Proposal in the Conrail Board of Directors to
determine whether or not to have Conrail officers file the Amendment is
intended, under circumstances where the Merger Agreement is no longer in effect
or otherwise with the consent of CSX, to enable the Board of Directors to
determine whether causing the Amendment to become effective would at such time
be in the best interests of Conrail, considering, to the extent the Board of
Directors deems appropriate under the circumstances at such time, Conrail's
various constituencies, the short-term and long-term interests of Conrail, the
resources, intent and conduct of any person seeking control of Conrail and all
other pertinent factors. There will not be any limit as to the time period
during which the Board of Directors may exercise its discretion to file or not
file the Amendment if it determines such action to be in the best interests of
Conrail.
If the Proposal is approved and the Amendment is effective, CSX will be
entitled to (i) increase the number of Shares to which the CSX Tender Offer
applies to 40% of the fully diluted Shares or (ii) commence the Second CSX
Tender Offer for at least the same $92.50 price and otherwise on terms and
conditions no less favorable to shareholders than the CSX Tender Offer, such
that the Shares acquired in such Second CSX Tender Offer, together with the
Shares acquired in the CSX Tender Offer, will equal 40% of the fully diluted
Shares. If the Proposal is approved and the Amendment is effective, Conrail can
require CSX to either (i) if the CSX Tender Offer remains open, increase the
number of Shares subject to the CSX Tender Offer or (ii) if the CSX Tender Offer
has expired, commence the Second CSX Tender Offer. In either case, pursuant to
the Merger Agreement, Conrail may not require CSX to take such action during a
period in which the CSX Tender Offer has less than 10 business days until its
scheduled expiration date. Under the Merger Agreement, CSX has the right to
unilaterally increase the price offered in the CSX Tender Offer or the Second
CSX Tender Offer, if applicable, or the percentage of Shares covered thereby
(without making any change in the consideration per Share payable in the
Merger), subject to the obligation to cause such offer to remain open for 10
business days following the date any such change is publicly announced. Under
the Merger Agreement, CSX cannot change the consideration payable in the Merger
without the consent of Conrail.
If the Proposal is approved and the Amendment is filed and becomes
effective, the Pennsylvania Statute will no longer apply to Conrail, whether or
not any or all of the CSX Tender Offer, the Second CSX Tender Offer (as defined
below) or the Merger are consummated. Even if the Proposal is approved and the
Amendment does become effective, CSX could consummate the CSX Tender Offer, the
Second CSX Tender Offer, if applicable, and/or exercise the Option without the
Merger being consummated (if regulatory or CSX shareholder approvals were not
obtained). In addition, if sufficient shares are tendered in the CSX Tender
5
<PAGE> 10
Offer, CSX could purchase Shares regardless of whether the Proposal is approved
and the Amendment becomes effective. CSX would then have the right to start the
Second CSX Tender Offer and could do so at a higher price than the price paid in
the CSX Tender Offer.
All Shares acquired by CSX or its affiliates upon consummation of the CSX
Tender Offer and the Second CSX Tender Offer, if applicable, upon exercise of
the Option or otherwise will be deposited into a voting trust (the "Voting
Trust"). The Voting Trust will be required to vote any such Shares at any
meeting of the holders of Shares in favor of the Merger (and against any
competing transaction), and in favor of any proposal or action necessary or
desirable to effect, or consistent with the effectuation of, the transactions
contemplated by the Merger Agreement. If CSX is able to acquire 40% of the fully
diluted Shares through the CSX Tender Offer and the Second CSX Tender Offer, if
applicable, the approval of the Merger by a majority of votes cast at a special
meeting of the holders of Shares will, for the reasons set forth above under the
caption "THE CSX TRANSACTIONS", be virtually certain. Because typically some
percentage of the shares entitled to vote at a meeting of shareholders do not in
fact vote, 40% of the fully diluted Shares, together with only a very small
number of additional Shares, would most likely represent a majority of votes
cast at a special meeting to vote on the Merger, and thus be sufficient to
approve the Merger.
The Merger Agreement provides that CSX may exercise the Option to purchase
15,955,477 shares of Common Stock pursuant to the Conrail Stock Option
Agreement, dated as of October 14, 1996, between CSX and Conrail if CSX
consummates the CSX Tender Offer or if the Merger Agreement is terminated and
CSX is entitled to receive the break-up fees provided for in the Merger
Agreement. If CSX acquires 40% of the Shares through the CSX Tender Offer and
the Second CSX Tender Offer, if applicable, and exercises the Option, the Voting
Trust will then hold approximately 50% of the Shares and will cast its votes to
approve the Merger, which number of votes will be sufficient to approve the
Merger regardless of the votes of other shareholders. Therefore, approval of the
Proposal would assure that the Merger will be approved by Conrail's shareholders
if sufficient Shares are tendered in the CSX Tender Offer and the Second CSX
Tender Offer, if applicable, and the Option is exercised. Moreover, if CSX
consummates only the CSX Tender Offer by acquiring 19.9% of the Shares and then
exercises the Option, CSX will then own approximately 30% of the fully diluted
Shares, and will have a large portion of the voting power of the Shares to vote
in favor of the Merger.
Shareholders should be aware that if the Proposal is approved so that, as a
result, CSX would be allowed to consummate the CSX Tender Offer and the Second
CSX Tender Offer, if applicable, for an aggregate of 40% of the fully diluted
Shares, shareholders may decide to tender their Shares to CSX (even if they
believe that the Norfolk Offer, if it could be effected, has a higher value)
because shareholders may conclude that sufficient Shares will be tendered by
other shareholders and that failure to tender will result in the non-tendering
shareholders receiving only CSX shares which, based on current market prices,
have a per Share value that is less than the $92.50 per Share being offered in
the CSX Tender Offer. Therefore, if the Proposal is approved, such CSX Tender
Offer and the Second CSX Tender Offer, if applicable, may succeed regardless of
the perceived relative values of such offer(s) and the Norfolk Offer. As of the
close of business on November , 1996, the trading price for CSX shares on the
New York Stock Exchange Composite Tape was $ .
Under the Merger Agreement, if the Proposal is not approved at the Special
Meeting, Conrail may, and at the request of CSX will, call one or more
additional special meeting(s) to again seek approval of the Proposal. If CSX
acquires 19.9% of the Shares pursuant to the CSX Tender Offer and thereafter a
record date is established for any such additional special meeting, then the
Shares so acquired by CSX will be voted in favor of the Proposal. In such case,
a significant portion of the votes will be committed to vote in favor of the
Proposal. If any such additional special meeting is held, holders of Shares will
receive notice of, and proxy materials relating to, such additional special
meeting prior to the date thereof in accordance with applicable law.
Shareholders should also be aware that if the Proposal is not approved and,
as a result, CSX is not in a position to acquire 40% of the fully diluted Shares
and is not thereafter in a position to approve the Merger without the vote of
other Conrail shareholders, there can be no assurance that the Merger would be
6
<PAGE> 11
consummated. As set forth above, under the Merger Agreement, Conrail's Board of
Directors is prohibited, until April 13, 1997 (with certain limited exceptions
described above), from (i) withdrawing or modifying, or publicly proposing to
withdraw or modify, its approval or recommendation of the CSX Tender Offer and
the Merger in a manner adverse to CSX, (ii) approving or recommending, or
publicly proposing to approve or recommend, any competing proposal (such as the
Norfolk Offer) or (iii) causing Conrail to enter into any agreement related to
any such competing proposal. In addition, on and after April 13, 1997, the
Merger Agreement provides that certain conditions must be satisfied in order for
Conrail's Board of Directors to take any of the foregoing actions, and, in any
event, Conrail's Board of Directors is not required under Pennsylvania law to
agree to or recommend any competing proposal (such as the Norfolk Offer) or to
take any action to facilitate any such competing proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL.
PLEASE SIGN AND DATE THE ENCLOSED WHITE PROXY TODAY.
THE ADJOURNMENT PROPOSAL
In the event that there are not sufficient votes to approve the Proposal at
the time of the Special Meeting, the Proposal could not be approved at the
Special Meeting unless it were adjourned in order to permit further solicitation
of proxies. In order to allow proxies that have been received by Conrail at the
time of the Special Meeting to be voted for such adjournment, if necessary,
Conrail has submitted the question of adjournment (the "Adjournment Proposal")
under such circumstances, and only under such circumstances, to holders of
Shares as a separate matter for their consideration. A majority of the Shares
represented and voting at the Special Meeting is required in order to approve
any such adjournment. The Board of Directors recommends that holders of Shares
vote their proxies in favor of the Adjournment Proposal so that their proxies
may be used for such purposes in the event it should become necessary. Properly
executed proxies will be voted in favor of any such adjournment unless otherwise
indicated thereon. If it is necessary to adjourn the Special Meeting, no notice
of the time and place of the adjourned meeting is required to be given to
holders of Shares other than an announcement of such time and place at the
Special Meeting. This Adjournment Proposal relates only to an adjournment
occurring for the purpose of soliciting additional proxies for the Proposal
relating to the Amendment to the Articles of Incorporation in the event that
there are insufficient votes to approve such proposal at the Special Meeting.
Any other adjournment would be voted upon pursuant to the discretionary
authority granted by the proxy.
VOTING INFORMATION AND SOLICITATION OF PROXIES
VOTING AND REVOCATION OF PROXIES. Execution of the accompanying WHITE
proxy will not affect a shareholder's right to attend the Special Meeting and
vote in person. Any shareholder who has executed a proxy and wishes to vote in
person at the Special Meeting must deliver a written notice revoking that proxy
to the Corporate Secretary of Conrail before the proxy is voted. A shareholder
may also revoke a proxy by duly executing a proxy bearing a later date. If no
direction is given, proxies for shares of Common Stock will be voted in
accordance with the recommendations of the Board as set forth in this Proxy
Statement. Abstentions will be treated as Shares that are present and entitled
to vote for the purpose of determining the presence of a quorum, but will not be
counted for the purpose of determining approval of the Proposal. Shares
represented by broker non-votes will not be considered as present for the
purpose of determining the presence of a quorum or as entitled to vote on the
Proposal. As a result, broker non-votes will have an impact on the presence of a
quorum, but will have no impact on the approval of the Proposal if a quorum is
present. Proxies for Shares that have been allocated to individual
shareholder-participants pursuant to the ESOP will be voted in accordance with
that shareholder-participant's direction as set forth on the voting instruction
card which will be provided to shareholder-participants.
Shareholder-participants cannot vote their shares of ESOP Stock or instruct the
Trustee as to how to vote their shares of ESOP Stock by completing the enclosed
proxy card. All shares of ESOP Stock that have not been allocated to an
individual shareholder-participant, and all shares of ESOP
7
<PAGE> 12
Stock that have been so allocated but as to which no voting instructions have
been received by the Trustee shall, in accordance with the Trust Agreement
between Consolidated Rail Corporation and the Trustee, be voted in the same
manner and proportion as are the shares of ESOP Stock for which valid
instructions are received. In addition, shares held under Conrail's Employee
Benefits Trust will be voted by the trustee thereof in the same manner and
proportion as the shares of ESOP Stock for which valid instructions are received
are instructed to be voted.
The Board of Directors recommends that you should not send in or complete a
proxy you may receive from Norfolk, who is soliciting proxies against the
Proposal. If you have already done so, you may revoke that proxy and vote FOR
the Proposal by signing and dating the enclosed WHITE proxy and mailing it in
the enclosed postage paid return envelope.
The Board knows of no matters likely to be brought before the Special
Meeting other than the Proposal (as defined below) described in this Proxy
Statement. If any other matters, not now known or determined, properly come
before the Special Meeting or any adjournment thereof, the persons named in the
enclosed form of proxy will vote such proxy in accordance with their best
judgment in such matters pursuant to the discretionary authority granted in the
proxy.
VOTE REQUIRED. Each Share entitles the holder thereof to one vote on all
matters that may properly come before the Special Meeting. The presence, in
person or by proxy, of the holders of a majority of the outstanding shares of
Common Stock and ESOP Stock, considered as a single class, is necessary to
constitute a quorum at the Special Meeting. In order for the Proposal to be
approved, assuming the presence of a quorum at the Special Meeting, a majority
of the votes cast at the Special Meeting must be voted FOR the Proposal.
RECORD DATE AND OUTSTANDING SHARES. Pursuant to Conrail's By-laws, the
Board has fixed the close of business on October 25, 1996, as the time for
determining shareholders of record entitled to notice of, and to vote at, the
Special Meeting. As of the close of business on October 10, 1996, there were
issued and outstanding 80,178,281 shares of Common Stock and 9,571,086 shares of
ESOP Stock.
SOLICITATION OF PROXIES. In addition to solicitation by mail, solicitation
of proxies may be made by personal interview, special letter, telephone or
telegraph by the officers, directors and employees of Conrail. Brokerage firms
will be requested to forward proxy materials to beneficial owners of Shares
registered in their names and will be reimbursed for their expenses. In
addition, Conrail has retained D.F. King & Co., Inc. to assist in the
solicitation of proxies, either in person or by mail, telephone or telegram, at
an estimated cost of $200,000 plus expenses. The cost of solicitation will be
paid by Conrail.
If you have any questions about voting your Shares, please call:
D.F. KING & CO., INC.
CALL TOLL FREE: 1-800-549-6746
8
<PAGE> 13
DISCLOSURE CLAIMS BY NORFOLK
Norfolk's complaint alleges that Conrail and CSX misrepresented and omitted
material facts and Conrail believes that it did not misrepresent or omit any
material facts, as alleged in Norfolk's complaint. The pertinent allegations
from Norfolk's complaint are set forth below (capitalized terms used in the
following quoted paragraphs and not defined herein shall have the meanings set
forth in Norfolk's complaint):
"48. Conrail's Preliminary Proxy Statement contains the following
misrepresentations of fact:
(a) Conrail states that "certain provisions of Pennsylvania law effectively
preclude . . . CSX from purchasing 20% or more" of Conrail's shares in the CSX
Offer "or in any other manner (except the [CSX] Merger." This statement is
false. The provisions of Pennsylvania law to which Conrail is referring are
those of Subchapter 25E of the Pennsylvania Business Corporation law. This law
does not "effectively preclude" CSX from purchasing 20% or more of Conrail's
stock other than through the CSX Merger. Rather, it simply requires a purchaser
of 20% or more of Conrail's voting stock to pay a fair price in cash, on demand,
to the holders of the remaining 80% of the shares. The real reason that CSX will
not purchase 20% or more of Conrail's voting stock absent the Charter Amendment
is that, unlike NS, CSX is unable or unwilling to pay a fair price in cash for
100% of Conrail's stock.
(b) Conrail states that its "Board of Directors believes that Conrail
shareholders should have the opportunity to receive cash in the near term for
40% of [Conrail's] shares," and that "[t]he Board of Directors believes it is in
the best interests of shareholders that they have the opportunity to receive
cash for 40% of their shares in the near term." These statements are false.
First of all, the Conrail Board believes that Conrail shareholders should have
the opportunity to receive cash in the near-term for 40% of Conrail's shares
only if such transaction will swiftly deliver effective control of Conrail to
CSX. Second, the Conrail Board of Directors does not believe that such swift
transfer of control to CSX is in the best interests of Conrail shareholders;
rather, the Conrail Board of Directors believes that swift transfer of effective
control over Conrail to CSX through the CSX Offer will lock-up the CSX
Transaction and preclude Conrail shareholders from any opportunity to receive
the highest reasonably available price in a sale of control of Conrail.
49. CSX's Schedule 14D-1 contains the following misrepresentations of fact:
(a) CSX states that the "purpose of the [CSX] Offer is for [CSX] . . . to
acquire a significant equity interest in [Conrail] as the first step in a
business combination of [CSX] and [Conrail]." This statement is false. The
purpose of the CSX Offer is to swiftly transfer effective control over Conrail
to CSX in order to lock up the CSX Transaction and foreclose the acquisition of
Conrail by any competing higher bidder.
(b) CSX states that "the Pennsylvania Control Transaction Law effectively
precludes [CSX, through its acquisition subsidiary] from purchasing 20% or more
of Conrail's shares pursuant to the [CSX] Offer." This statement is false. The
provisions of Pennsylvania law to which Conrail is referring are those of
Subchapter 25E of the Pennsylvania Business Corporation law. This law does not
"effectively preclude" CSX from purchasing 20% or more of Conrail's stock other
than through the CSX Merger. Rather, it simply requires a purchaser of 20% or
more of Conrail's voting stock to pay a fair price in cash, on demand, to the
holders of the remaining 80% of the shares. The real reason that CSX will not
purchase 20% or more of Conrail's voting stock absent the Charter Amendment is
that, unlike NS, CSX is unable or unwilling to pay a fair price in cash for 100%
of Conrail's stock.
50. Conrail's Schedule 14D-9 states that "the [CSX Transaction] . . . is
being structured as a true merger-of-equals transaction." This statement is
false. The CSX Transaction is being structured as a rapid, locked-up sale of
control of Conrail to CSX involving a significant, albeit inadequate, control
premium.
51. Each of the Conrail Preliminary Proxy Statement, the CSX Schedule
14D-1, and the Conrail Schedule 14D-9 omit to disclose the following material
facts, the disclosure of which are necessary to make the statements made in such
documents not misleading:
(a) That both Conrail (and its senior management) and CSX (and its senior
management) knew (i) that NS was keenly interested in acquiring Conrail, (ii)
that NS has the financial capacity and resources
9
<PAGE> 14
to pay a higher price for Conrail than CSX could, and (iii) that a financially
superior competing bid for Conrail by NS was inevitable.
(b) That Conrail management led NS to believe that if and when the Conrail
Board determined to sell Conrail, it would do so through a process in which NS
would be given the opportunity to bid, and that in the several weeks prior to
the announcement of the CSX Transaction, defendant LeVan on two occasions
prevented Mr. Goode from presenting an acquisition proposal to Conrail by
stating to him that making such a proposal would be unnecessary and that Mr.
LeVan would contact Mr. Goode concerning NS's interest in acquiring Conrail
following (i) the Conrail Board's strategic planning meeting scheduled for
September 1996 and (ii) a meeting of the Conrail Board purportedly scheduled for
October 16, 1996.
(c) That in September of 1994, NS had proposed a stock-for-stock
acquisition of Conrail at an exchange ratio of 1.1 shares of NS stock for each
share of Conrail stock, which ratio, if applied to the price of NS stock on the
day before announcement of the CSX Transaction, October 14, 1996, implied a bid
by NS worth over $101 per Conrail share.
(d) That the CSX Transaction was structured to swiftly transfer effective,
if not absolute voting control over Conrail to CSX, and to prevent any other
bidders from acquiring Conrail for a higher price.
(e) That although Conrail obtained opinions from Morgan Stanley and Lazard
Freres that the consideration to be received by Conrail stockholders in the CSX
Transaction was "fair" to such shareholders from a financial point of view,
Conrail's Board did not ask its investment bankers whether the CSX Transaction
consideration was adequate, from a financial point of view, in the context of a
sale of control of Conrail such as the CSX Transaction.
(f) That although in arriving at their "fairness" opinions, both Morgan
Stanley and Lazard Freres purport to have considered the level of consideration
paid in comparable transactions, both investment bankers failed to consider the
most closely comparable transaction -- NS's September 1994 merger proposal,
which as noted above, would imply a price per Conrail share in excess of $101.
(g) That, if asked to do so, Conrail's investment bankers would be unable
to opine in good faith that the consideration offered in the CSX Transaction is
adequate to Conrail's shareholders from a financial point of view.
(h) That Conrail's Board failed to seek a fairness opinion from its
investment bankers concerning the $300 million break-up fee included in the CSX
Transaction.
(i) That Conrail's Board failed to seek a fairness opinion from its
investment bankers concerning the Stock Option Agreement granted by Conrail to
CSX in connection with the CSX Transaction.
(j) That the Stock Option Agreement is structured so as to impose
increasingly severe dilution costs on a competing bidder for control of Conrail
for progressively higher acquisition bids.
(k) That the Conrail Board intends to withhold the filing of the Charter
Amendment following its approval by Conrail's stockholders if the effectiveness
of such amendment would facilitate any bid for Conrail other than the CSX
Transaction.
(l) That the Charter Amendment and/or its submission to a vote of the
Conrail shareholders is illegal and ultra vires under Pennsylvania law.
(m) That the Conrail Board's discriminatory (i) use of the Charter
Amendment, (ii) amendment of the Conrail Poison Pill and (iii) action exempting
the CSX Transaction from Pennsylvania's Business Combination Statute, all to
facilitate the CSX Transaction and to preclude competing financially superior
offers for control of Conrail, constitute a breach of the defendant directors'
fiduciary duty of loyalty.
(n) That Conrail's Board failed to conduct a reasonable, good faith
investigation of all reasonably available material information prior to
approving the CSX transaction and related agreements, including the lock-up
Stock Option Agreement.
10
<PAGE> 15
(o) That in recommending that Conrail's shareholders tender their shares to
CSX in the CSX Offer, Conrail's Board did not conclude that doing so would be in
the best interests of Conrail's shareholders.
(p) That in recommending that Conrail's shareholders approve the Charter
Amendment, the Conrail Board did not conclude that doing so would be in the best
interests of Conrail's shareholders.
(q) That in recommending that Conrail shareholders tender their shares to
CSX in the CSX Offer, primary weight was given by the Conrail Board to interests
of persons and/or groups other than Conrail's shareholders.
(r) That in recommending that Conrail shareholders tender their shares to
CSX in the CSX Offer, primary weight was given to the personal interests of
defendant LeVan in increasing his compensation and succeeding Mr. Snow as
Chairman and Chief Executive Officer of the combined CSX/Conrail company.
(s) That the Continuing Director Requirement in Conrail's Poison Pill
(described below in paragraphs 54 through 60), adopted by Conrail's board in
September 1995 and publicly disclosed at that time, is illegal and ultra vires
under Pennsylvania law and therefore is void and unenforceable."
[FOREGOING DISCLOSURE CLAIMS TO BE UPDATED TO REFLECT NORFOLK'S AMENDED
COMPLAINT].
11
<PAGE> 16
INFORMATION CONCERNING CERTAIN SHAREHOLDERS
AND CONRAIL OFFICERS AND DIRECTORS
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF. To Conrail's knowledge,
the only persons (or "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), who, as of
October 10, 1996, owned beneficially more than 5% of any class of Conrail's
voting securities are listed in the following table:
<TABLE>
<CAPTION>
TITLE OF NAME AND ADDRESS OF ACCOUNT AND NATURE OF PERCENT
CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- ------------- ---------------------------------- ------------------------------- --------
<S> <C> <C> <C>
Common Stock FMR Corp. 6,493,904(1) 8.1%
82 Devonshire Street
Boston, MA 02109
Common Stock The Capital Group Companies, Inc. 5,570,710(2) 6.9%
333 S. Hope Street
Los Angeles, CA 90071
Common Stock Mellon Bank, N.A. 4,382,935 shares, solely in its 5.5%
Suite 3346 capacity as trustee of the
Pittsburgh, PA 15258-0001 Conrail, Inc. Employee Benefits
Trust(3)
ESOP Stock Fidelity Management Trust Company 7,375,912 shares, solely in its 77.1%
82 Devonshire Street capacity as Trustee of the
Boston, MA 02109 ESOP(4)
</TABLE>
- ---------------
(1) Based on information set forth on the Schedule 13G filed by FMR, Corp. with
the SEC on February 13, 1996. These shares represent 7.2% of Conrail's total
voting securities.
(2) Based on information set forth on the Schedule 13G filed by The Capital
Group Companies, Inc. with the SEC on February 13, 1996. These shares
represent 6.2% of Conrail's total voting securities.
(3) These shares represent 4.9% of Conrail's total voting securities.
(4) Shares of ESOP Stock are convertible into shares of Common Stock at any time
on a share-for-share basis, subject to certain antidilution adjustments. As
a result, ownership of shares of ESOP Stock is deemed to be ownership of an
equal number of shares of Common Stock. These shares of ESOP Stock represent
8.2% of Conrail's total voting securities.
OWNERSHIP BY MANAGEMENT OF VOTING SECURITIES. The following table sets
forth the beneficial ownership, as of October 10, 1996, of Common Stock and ESOP
Stock of each director, each of the six most highly compensated executive
officers of Conrail, and all directors and executive officers as a group. Unless
otherwise indicated, each such person has sole voting and investment power with
respect to such shares of Common Stock and sole voting power with respect to
such shares of ESOP Stock. The Trustee holds sole investment power with respect
to all shares of ESOP Stock. As of October 10, 1996, all Conrail directors and
executive officers as a group owned less than one percent (1%) of the aggregate
outstanding Shares. To the best of Conrail's knowledge, its directors and
executive officers currently intend to tender their Shares pursuant to the CSX
Tender Offer and to vote for the Merger.
<TABLE>
<CAPTION>
NAME OF AMOUNT PERCENT
INDIVIDUAL OR GROUP BENEFICIALLY OWNED OF CLASS
- ----------------------------------------------------------- ------------------ ---------
<S> <C> <C>
David M. LeVan 81,549(1) *
Chairman of the Board of Directors,
President and Chief Executive Officer
H. Furlong Baldwin 2,000 *
Director
</TABLE>
<TABLE>
<S> <C> <C>
Claude S. Brinegar 1,000 *
Director
</TABLE>
12
<PAGE> 17
<TABLE>
<CAPTION>
NAME OF AMOUNT PERCENT
INDIVIDUAL OR GROUP BENEFICIALLY OWNED OF CLASS
- ----------------------------------------------------------- ------------------ ---------
<S> <C> <C>
Daniel B. Burke 2,000 *
Director
Kathleen Foley Feldstein 700 *
Director
Roger S. Hilles 2,362 *
Director
E. Bradley Jones 1,000 *
Director
David B. Lewis 1,200 *
Director
John C. Marous 800 *
Director
Gail McGovern 0 *
Director
Raymond T. Schuler 7,882 *
Director
David H. Swanson 449 *
Director
Bruce B. Wilson 55,569(1) *
Senior Vice President--Law
Ronald J. Conway 17,127(1) *
Senior Vice President--Operations
Timothy P. Dwyer 18,964(1) *
Senior Vice President--Unit Trains Service Group
John P. Sammon 7,365(1) *
Senior Vice President--CORE Service Group
George P. Turner 26,543(1) *
Senior Vice President--Automotive Service Group
Executive Officers and Directors as a Group 424,985(2) *
</TABLE>
- ---------------
* Less than one percent.
(1) For Messrs. LeVan, Wilson, Conway, Dwyer, Sammon and Turner, respectively,
includes options exercisable within 60 days to acquire 33,691, 42,905,
9,250, 12,375, 0 and 16,107 shares of Common Stock and 2,523, 2,494, 2,440,
2,135, 2,145 and 2,179 shares of ESOP Stock allocated to the accounts of
each of the named officers under the ESOP. Shares of ESOP Stock are
convertible into shares of Common Stock at any time on a share-for-share
basis, subject to certain antidilution adjustments. As a result, ownership
of shares of ESOP Stock is deemed to be ownership of an equal number of
shares of Common Stock.
(2) Includes (x) options exercisable within 60 days to acquire 216,502 shares of
Common Stock and (y) 43,423 shares of ESOP Stock allocated to the accounts
of individual officers under the ESOP. This number also includes shares held
by all officers of Consolidated Rail Corporation.
INTERESTS OF CERTAIN PERSONS IN THE MATTER TO BE ACTED UPON. The Merger
Agreement provides that, until their respective resignation or removal or until
their respective successors are duly elected and qualified, and subject to the
terms of the Merger Agreement, from and after that time when the Merger becomes
effective (the "Effective Time") the current Chairmen of the Boards of each of
CSX and Conrail will serve as members of the Board of Directors of the combined
company ("Parent"). The Board of Directors of Parent will additionally consist
of an even number of outside directors to be agreed upon. Each of Conrail and
CSX are permitted under the Merger Agreement to designate half of such outside
directors. Pursuant to the Merger Agreement, Conrail and CSX have also agreed to
establish certain committees of the Board of Directors of Parent from and after
the Effective Time, and each of Conrail and CSX shall have the right to appoint
50% of the members of each committee.
13
<PAGE> 18
The Merger Agreement further provides that, unless altered by a vote of 75%
of the directors of Parent after the Effective Time, during the two-year period
after the Effective Time the current Chairman and Chief Executive Officer of CSX
(the "CSX Chairman") will be the Chairman and Chief Executive Officer of Parent
and the current Chairman and Chief Executive Officer of Conrail (the "Conrail
Chairman") will be the President and Chief Operating Officer of Parent and
President and Chief Executive Officer of each of Parent's railroad subsidiaries.
Following the two-year period, (i) the CSX Chairman will continue as Chairman of
Parent for an additional two-year period and Chairman Emeritus for a one-year
period thereafter and (ii) the Conrail Chairman will be elected to the office of
Chief Executive Officer of Parent. The Conrail Chairman will then succeed the
CSX Chairman as Chairman of Parent at the end of the additional two-year period.
Prior to the execution of the Merger Agreement, Conrail and CSX and each of
their respective executive officers were parties to change in control/severance
agreements which provide for, among other things, the payment of severance
amounts and benefits upon certain terminations of employment in connection with
a change in control of Conrail and CSX. David M. LeVan, Chairman of the Board,
President and Chief Executive Officer of Conrail has entered into a new
employment agreement with CSX which will also become effective at the Effective
Time. In addition, Mr. LeVan has entered into a new change in control agreement
with CSX, which will also become effective as of the Effective Time, in
replacement of his existing change in control agreement with Conrail. If the
Merger Agreement is terminated prior to the Effective Time, neither the new
employment agreements nor the new change in control agreement will take effect,
and the existing change in control/severance agreement between Mr. LeVan and
Conrail will continue in effect. The foregoing summary description is qualified
in its entirety by reference to the further information regarding Mr. LeVan's
employment agreement or change in control/severance agreement contained in the
Schedule 14D-9 previously provided to shareholders, and otherwise available as
described above under "THE CSX TRANSACTIONS".
14
<PAGE> 19
SUBMISSION OF SHAREHOLDER PROPOSALS
The Board of Directors of Conrail has not yet scheduled the next Annual
Meeting of Shareholders and, under Conrail's By-laws and Pennsylvania law, the
date of the next Annual Meeting of Shareholders may be set by the Board of
Directors for any date during the calendar year 1997. There can be no assurance
that the next Annual Meeting will be scheduled before the end of 1997.
Shareholder proposals may, under the rules of the SEC, be submitted for
inclusion in Conrail's proxy statement and form of proxy for the next Annual
Meeting of Shareholders. If the Annual Meeting were to be held on May 21, 1997,
shareholder proposals would have to be received by Conrail not later than
December 3, 1996. If the next Annual Meeting of Shareholders is scheduled for a
later date, the deadline for submitting shareholder proposals will be similarly
extended. Proposals must be in writing and should be sent via registered,
certified or express mail to: Secretary of the Corporation, Conrail Inc., 2001
Market Street, Two Commerce Square, Philadelphia, Pennsylvania 19101-1417.
Shareholder proposals must also meet the applicable criteria set forth in
Conrail's Amended and Restated By-laws in order to be considered at Conrail's
1997 Annual Meeting. A shareholder may request a copy of Conrail's Amended and
Restated By-laws by writing to the Secretary of the Corporation at the address
provided above.
November , 1996 By Order of the Board of Directors
/s/ James D. McGeehan
James D. McGeehan
Corporate Secretary
15
<PAGE> 20
LETTER TO PARTICIPANTS
IN
THE CONSOLIDATED RAIL CORPORATION
MATCHED SAVINGS PLAN
NOVEMBER , 1996
Dear Plan Participants:
At a Special Meeting of the Shareholders to be held on Thursday, November
14, 1996, the shareholders of Conrail Inc. (the "Company") will vote upon a
proposed amendment to the Company's Articles of Incorporation, as more fully
described in the Company's Proxy Statement, a copy of which is enclosed. You are
encouraged to read this information carefully.
As a participant in the Consolidated Rail Corporation Matched Savings Plan
(the "Plan"), you are entitled to instruct the Trustee, Fidelity Management
Trust Company ("Fidelity"), as to the manner in which the shares of ESOP
Preferred Conrail Inc. Series A ESOP Convertible Junior Preferred Stock
("Shares") credited to your Plan account as of October 21, 1996, are to be
voted.
The Trust Agreement provides that Fidelity is to vote ESOP Preferred Shares
credited to participant accounts in accordance with participant instructions.
The Trust Agreement requires Fidelity to vote ESOP Preferred Shares credited to
participant accounts for which Fidelity does not receive instructions and shares
in the Plan not credited to participant accounts in proportion to the
instructions received from participants. Fidelity must follow the terms of the
Trust Agreement unless otherwise required by applicable law.
PLEASE USE THE ENCLOSED, STRIPED TRUSTEE INSTRUCTION CARD TO INSTRUCT
FIDELITY HOW TO VOTE ESOP PREFERRED SHARES CREDITED TO YOUR ACCOUNT. The
enclosed Trustee Instruction Card sets out the number of ESOP Preferred Shares
credited to your account as of October 21, 1996, and Fidelity will apply your
instructions to that number of ESOP Preferred Shares. Once your have completed
and signed the enclosed Trustee Instruction Card, please return it in the
enclosed, postage paid return envelope to Fidelity's tabulation agent, Corporate
Election Services at 400 Fairway Drive, Suite 110, Moon Township, Pennsylvania
15108.
It is important for you to return the Trustee Instruction Card to
Fidelity's agent. If you fail to do so, your ESOP Preferred Shares will be voted
by the Trustee in proportion to the instructions received by Fidelity from other
Plan participants who have timely returned their instruction cards unless
otherwise required by law.
If you hold shares of the Company's common stock ("Common Shares") outside
the Plan, a white Proxy Card is also enclosed. DO NOT USE THE WHITE PROXY CARD
TO GIVE FIDELITY INSTRUCTIONS WITH RESPECT TO ESOP PREFERRED SHARES. The white
Proxy Card is to be used ONLY with respect to Common Shares that you hold. If
you wish to vote your Common Shares AND instruct the Trustee as to how to vote
the ESOP Preferred Shares credited to your Plan account, it is necessary to
return BOTH signed, completed cards in a timely manner to Corporate Election
Services.
IN ORDER FOR YOUR INSTRUCTIONS TO BE EFFECTIVE, FIDELITY'S TABULATION AGENT
MUST RECEIVE THE TRUSTEE INSTRUCTION CARD AT THE ADDRESS LISTED ON THE ENCLOSED
POSTAGE PAID RETURN ENVELOPE BY MIDNIGHT, NOVEMBER 12, 1996, UNLESS THE SPECIAL
MEETING DATE IS POSTPONED. Please be sure to properly complete, sign and date
the Trustee Instruction Card. Fidelity will disregard any incomplete or unsigned
Trustee Instruction Card, and will vote ESOP Preferred Shares reflected on such
card as if it had not received instructions with respect to such Shares.
Fidelity will not honor any instructions on a white Proxy Card with respect to
ESOP Preferred Shares.
Your voting instructions to Fidelity are confidential. Neither Fidelity nor
the tabulation agent will reveal to the Company, or any prospective purchaser of
the Company or their affiliates, how you instruct Fidelity to vote ESOP
Preferred Shares credited to your account.
In materials filed with the Securities and Exchange Commission, Norfolk
Southern Corporation and its affiliate, Atlantic Acquisition Corporation, have
announced their intention to solicit proxies in connection with
<PAGE> 21
the vote to be taken at this Special Meeting. It is possible that you will
receive additional solicitation materials pertaining to this Special Meeting
from Norfolk Southern Corporation or its affiliate ("Norfolk Southern"). You
will be able to use either the enclosed striped, white Trustee Instruction Card,
or any specific trustee instruction card enclosed with Norfolk Southern proxy
solicitation materials, to direct Fidelity how to vote the ESOP Preferred Shares
credited to your Plan account. FIDELITY MAKES NO RECOMMENDATION TO PLAN
PARTICIPANT'S AS TO HOW TO VOTE THEIR ESOP PREFERRED SHARES.
After you have instructed Fidelity, you may revoke your voting instructions
by filing with Corporate Election Services at 400 Fairway Drive, Suite 110, Moon
Township, Pennsylvania 15108, a written notice to that effect, or by filing with
Corporate Election Services a new Trustee Instruction Card that is duly executed
and that bears a date later than the date of the original instructions. In order
for such revocation to be effective, Corporate Election Services must receive
such revocation by MIDNIGHT on NOVEMBER 12, 1996.
If you lose your instruction card, or require additional information
concerning the procedure to instruct Fidelity as to how to vote your ESOP
Preferred Shares, please contact Fidelity's Participant Services Group at
1-800-354-9727.
FIDELITY MANAGEMENT TRUST COMPANY,
as Trustee of the Consolidated Rail
Corporation Matched Savings Plan
<PAGE> 22
EXHIBIT (a)(3)
CONTACTS: CSX Corporation Conrail Inc.
Thomas E. Hoppin Craig R. MacQueen
(804) 782-1450 (215) 209-4594
FOR IMMEDIATE RELEASE
CSX AND CONRAIL TO COMBINE
IN PRO-COMPETITIVE, STRATEGIC MERGER
RICHMOND AND PHILADELPHIA -- Oct. 15, 1996 -- CSX Corporation (CSX)
(NYSE: CSX) and Conrail Inc. (Conrail) (NYSE: CRR), leading transportation
companies with complementary eastern rail routes, announced today they have
agreed to a strategic merger. The merger agreement calls for Conrail
shareholders to receive a combination of cash and CSX shares valued at
approximately $8.4 billion, or $92.50 per Conrail share, based on the recent
trading prices for CSX's common stock. The parties will propose a schedule that
contemplates completion of the transaction in late 1997.
The merger will create the leading freight transportation and logistics
company in the world with annual revenues of more than $14 billion, offering
domestic and international customers rail, container-shipping, barge,
intermodal and contract logistics services. The newly created transportation
system will offer much more extensive single-line rail service opportunities to
shippers and receivers in 22 states and will have a 29,645 mile system,
covering a territory from Chicago, Boston and New York to Miami and New
Orleans.
John W. Snow, chairman, president and chief executive officer of CSX,
said, "This merger of equals represents a strategic combination that will
provide excellent value for our customers and our shareholders, and is
consistent with sound public policy. This is the right merger at the right time
between the right companies.
"This dynamic combination is a 'win-win' transaction for the
shareholders of both companies, our customers and the communities we both
serve. We will have the financial strength to make substantial infrastructure
investments and service improvements. The transaction will have an immediate,
positive effect on cash flow and will be accretive to earnings per share in the
second year. Together, the companies will have stronger revenue, cash flow and
earnings growth than they would have had on their own. The merged company will
be the premier freight transportation company in North America and, as such, we
should command a premium price/earnings multiple -- thus creating greater value
for our shareholders," Snow said.
<PAGE> 23
"Our new company will provide new single-line rail service to major
markets east of the Mississippi and will greatly benefit shippers, the
communities served and the nation as a whole. The merger will extend our
customers' market reach, speeding service and enhancing their competitive
positions at home and abroad. It makes the most efficient use of existing
transportation infrastructure, thereby lowering the total cost of transporting
American products," Snow said.
"Moreover," Snow said, "this transaction offers an opportunity to
improve passenger safety and service and to begin to address the need to
separate freight and passenger service in high-density commuter and Amtrak
corridors, including Philadelphia, Baltimore and Washington, D.C. We hope to
consolidate much of our freight service on the CSX line between Philadelphia
and Washington, thereby reducing freight operations on Amtrak's northeast
corridor south of Philadelphia. Additionally, the contemplated ability to
reroute some freight trains from other routes should free up capacity on other
CSX lines, such as the Harper's Ferry-Washington line used by Maryland commuter
trains. Such improvements can be addressed only through this transaction."
"We are delighted to be merging with our ideal partner," said David M.
LeVan, Conrail's chairman, president, and chief executive officer. "Conrail
today is a strong railroad, but recent changes in industry structure and in
U.S. patterns of distribution require a broader market reach. The new company
we are creating will be more competitive with trucks and other modes of
transportation. Where new, single-line services are possible, we will provide
our customers one point of contact, and eliminate the costs and delays now
layered over every step in the service process.
"Our customers will enjoy significantly improved, more competitive
freight transportation service that will result in greater service innovation
and competitive pricing. The merger will allow us to build on the coal,
merchandise, intermodal and logistics strengths of both companies. Importantly,
our companies share an uncompromising commitment to safety, operating
excellence and superior service and have compatible cultures that will expedite
realization of the benefits of the merger," LeVan said.
Under the terms of the transaction, 40 percent of the fully diluted
shares of Conrail's common stock and ESOP preferred stock will be acquired for
cash at $92.50 per share, and the remaining 60 percent will be acquired for
stock at an exchange ratio of 1.85619 CSX shares for each Conrail share.
CSX will promptly commence a cash tender offer at $92.50 per Conrail
share for an aggregate of about 17.9 million shares of Conrail common stock and
ESOP preferred stock, or approximately 19.9 percent of the Conrail outstanding
voting stock. The offer will be subject to the usual conditions, including
Surface Transportation Board (STB) informal approval of a customary voting
trust and obtaining the necessary financing.
2
<PAGE> 24
A Pennsylvania statute effectively precludes CSX from acquiring 20
percent or more of Conrail's voting shares in the tender offer, unless the
Conrail shareholders vote to opt-out of the statute by a majority of the Conrail
shares voting at a meeting. A meeting to vote on the opt-out is expected to be
held prior to the expiration of the tender offer. Following approval, the Merger
Agreement effectively provides that an aggregate of 40 percent of the fully
diluted shares will be purchased for cash in this tender offer or in another
offer that may be made. If approval is not obtained, the cash not paid in the
offer would be paid in the subsequent merger.
The companies also have granted each other an option to purchase 19.9
percent of the other's common shares under certain conditions. The 19.9 percent
option held by CSX also would be exercisable if it purchases shares in the
offer.
Following STB approval of the merger, and after other conditions have
been met, the companies will complete their merger through an expected tax-free
exchange of stock at an exchange ratio of 1.85619 CSX shares for each remaining
Conrail share. The application for STB approval of the transaction is expected
to be filed in early 1997, and the parties will propose a schedule that
contemplates a decision toward that year's end. Pending STB review, the shares
purchased will be placed in the voting trust.
Total benefits from the merger will be about $550 million annually,
based on the realization of cost savings from operating efficiencies, facility
consolidations, overhead rationalization, and other activities, and new traffic
volumes earned by enhanced service. The combined company will make investments
to support revenue growth, and will create a streamlined organization that
incorporates the best of both companies while combining facilities and
realizing economies of scale. The companies stated they expect there will be
some job losses as a result of consolidations and the elimination of
redundancies, but these will be offset over time by new employment
opportunities resulting from growth of the business.
The merger will yield new, competitive services that neither railroad
can now offer on its own. The new system will have faster schedules, more
frequent and reliable service, with shorter routes and improved equipment
supply and utilization. The new system will create major, new single-line
service routes between north-south markets. Moreover, the creation of a
single-line route along the Atlantic corridor will provide a much needed,
cost-effective and environmentally superior intermodal alternative to truck
traffic now being hauled over I-95 and other north-south interstate highways.
Many shippers will be attracted from the heavily congested highways and urban
centers by the quality of service offered by the combined company.
"The ability to compete more effectively for truck traffic is an
exciting growth opportunity that offers significant public benefits including
the reduction of highway traffic, improved environmental conditions and greater
safety," LeVan said.
3
<PAGE> 25
In rail corridors where CSX and Conrail both have routes, there will be
significant operating benefits and, in many cases, major reductions in length
of haul. Where their routes are end to end, there will be extensive new
single-line service for shippers. Integrating the entire network, moreover,
will produce significant additional benefits in traffic handling and marketing,
and in facility and equipment utilization.
As a result of these many service and efficiency benefits, competition
will be enhanced. Where CSX and Conrail are now the only rail competitors, the
merger partners are willing to agree to grant competitive access. There,
shippers will continue to enjoy two-railroad competition, and will receive the
competitive benefits of a more efficient CSX/Conrail system and single-line
routes to many new destinations.
Snow will become chairman and chief executive officer of the new holding
company. LeVan will become the new holding company's president and chief
operating officer. The board of directors will be composed of an equal number of
members from the boards of CSX and Conrail. Upon consummation of the
transaction, LeVan will be president and chief executive officer of the two
railroads. LeVan will succeed Snow as chief executive officer of the new company
two years after consummation of the merger, and Snow will serve as chairman of
the corporation for the two years thereafter.
The new holding company will be headquartered in Philadelphia, with a
significant presence in Richmond. Operating headquarters for the two railroads
will remain in Philadelphia and Jacksonville for the foreseeable future. A new
name for the combined company will be announced at a later time.
The transaction has been unanimously approved by the boards of
directors of both companies. It is subject to the approval of shareholders of
both companies and STB approval. Under the terms of the agreement, CSX or
Conrail is each entitled, under certain circumstances, to receive a termination
fee of $300 million from the other in the event the merger is not completed
because of a competing offer for the other company.
CSX is being advised on the transaction by Wasserstein Perella & Co.,
which has also provided a fairness opinion. Salomon Brothers Inc. has also been
retained to advise CSX on post-transaction financing matters. Conrail is being
advised by and has received fairness opinions from Lazard Freres & Co. LLC and
Morgan Stanley Incorporated.
CSX Corporation, headquartered in Richmond, VA, is an International
transportation company offering a variety of rail, container-shipping,
intermodal, trucking, barge, and contract logistics services.
4
<PAGE> 26
Conrail, with corporate headquarters in Philadelphia, PA, operates an
11,000-mile rail freight network in 12 northeastern and midwestern states, the
District of Columbia, and the Province of Quebec.
Additional information regarding this announcement can be found on the
companies' Web sites on the Internet. CSX's home page can be reached at
http://www.CSX.com. Conrail's home page can be reached at
http://www.CONRAIL.com.
NOTE TO BROADCAST EDITORS:
A live satellite feed of B-roll from both CSX and Conrail will be available:
Tuesday, October 15 from 10:00 a.m. to 10:30 a.m. (EDT) -- coordinates are
C-Band Telstar 401, Transponder 5
Tuesday, October 15 from 1:30 p.m. to 2:00 p.m. (EDT) -- coordinates are C-Band
Telstar 402, Transponder 18
# # #
5
<PAGE> 27
PROXY
CONRAIL INC.
PROXY SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF CONRAIL, INC. FOR THE
SPECIAL MEETING OF SHAREHOLDERS, NOVEMBER 14, 1996
The undersigned hereby constitutes and appoints Kathleen F. Feldstein, David B.
Lewis and John C. Marous, and each or any of them, as true and lawful agents
and proxies with full power of substitution in each to represent the
undersigned at the Special Meeting of Shareholders of Conrail to be held
on Thursday, November 14, 1996, at 9:30 a.m., Eastern Standard Time,
at , and at any adjournments thereof, on all matters coming before said
meeting.
You are encouraged to specify your choice by marking the appropriate box on the
reverse side of this card. If you sign and return this card but do not mark
any boxes, your shares of Common Stock will be voted in accordance with the
Board of Directors' recommendations. The persons listed above cannot vote your
shares of Common Stock unless you sign and return this card.
SEE REVERSE SIDE
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
<PAGE> 28
Please mark your vote as in this example: {X}
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE
This Proxy when properly executed will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made with respect to the
voting of Common Stock, this Proxy will be voted FOR the proposal described
below.
The Board of Directors recommends a vote FOR:
The Proposal to approve an amendment to Conrail's Articles of
Incorporation which would cause the provisions of Subchapter E
of Chapter 25 of the Pennsylvania Business Corporation Law of
1988, as amended, to no longer be applicable to Conrail, and
to authorize the Board of Directors, in its discretion, to
direct certain executive officers of Conrail to file or not
file such Articles of Amendment if the Board determines such
action to be in the best interests of Conrail.
FOR { } AGAINST { } ABSTAIN { }
Note: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
-----------------------------
-----------------------------
SIGNATURE(S) DATE
-----------------------------
TITLE
<PAGE> 29
FORM OF INSTRUCTION
CONRAIL INC.
CONSOLIDATED RAIL CORPORATION MATCHED SAVINGS PLAN
VOTING INSTRUCTIONS
TO: FIDELITY MANAGEMENT TRUST COMPANY
The undersigned hereby instructs the Trustee to vote (or cause to be voted) all
shares of ESOP Stock and Common Stock of Conrail Inc. under the Plan at the
Special Meeting of Shareholders to be held on Thursday, November 14, 1996, at
9:30 a.m., Eastern Standard Time, on the Proposal relating to, among other
things, the amendment of the Articles of Incorporation of Conrail Inc., and on
all other matters coming before said meeting.
You are encouraged to specify your choice by marking the appropriate box on the
reverse side of this card. If the Trustee does not receive this Form of
Instruction, marked to show your instructions to the Trustee, by TUESDAY,
NOVEMBER 12, 1996, the shares of ESOP Stock and Common Stock allocated to your
Plan account, together with a percentage of shares of ESOP Stock and Common
Stock not allocated to any participant's account under the Plan, will be voted
by the Trustee in the same proportion as those for which the Trustee received
instructions from participants.
SEE REVERSE SIDE
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
<PAGE> 30
Please mark your instructions as in this example: {X}
PLEASE MARK, SIGN, DATE AND RETURN THE
FORM OF INSTRUCTION
PROMPTLY USING THE ENCLOSED ENVELOPE
This Form of Instruction when properly executed will result in the Trustee
voting your shares of ESOP Stock and Common Stock (or causing such shares to be
voted) in the manner directed herein by the undersigned participant in the
Plan. If no direction is made, the shares of ESOP Stock and Common Stock
allocated to your Plan account, together with a percentage of shares of ESOP
Stock and Common Stock not allocated to an account under the Plan, will be
voted by the Trustee in the same proportion as those for which the Trustee
received instructions from participants.
The Board of Directors recommends a vote FOR:
The Proposal to approve an amendment to Conrail's Articles of
Incorporation which would cause the provisions of Subchapter E
of Chapter 25 of the Pennsylvania Business Corporation Law of
1988, as amended, to no longer be applicable to Conrail, and
to authorize the Board of Directors, in its discretion, to
direct certain executive officers of Conrail to file or not
file such Articles of Amendment if the Board determines such
action to be in the best interests of Conrail.
FOR { } AGAINST { } ABSTAIN { }
Note: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
-----------------------------
-----------------------------
SIGNATURE(S) DATE
-----------------------------
TITLE
<PAGE> 31
TRUSTEE INSTRUCTION CARD
CONRAIL INC.
INSTRUCTION CARD SOLICITED BY
FIDELITY MANAGEMENT TRUST COMPANY
FOR THE
SPECIAL MEETING OF SHAREHOLDERS, NOVEMBER 14, 1996
As a participant in the Consolidated Rail Corporation Matched Savings Plan (the
"Plan") whose Plan account has been credited with shares of Conrail Inc. Series
A ESOP Convertible Junior Preferred Stock ("ESOP Preferred Shares") as of
October 21, 1996, the undersigned hereby directs Fidelity Management Trust
Company, as trustee of the Plan (the "Trustee"), to vote all such ESOP Preferred
Shares at the Special Meeting of Shareholders of Conrail Inc. to be held on
Thursday, November 14, 1996, at 5:00 p.m., Eastern Standard Time, at The Academy
of Music Hall, 1420 Locust Street, Philadelphia, Pennsylvania and at any
adjournments thereof, as designated on the reverse side of this Instruction
Card. The Trustee will vote the number of ESOP Preferred Shares credited to your
Plan account as you instruct if your executed Instruction Card is RECEIVED by
Midnight, November 12, 1996, at the address on the enclosed postage paid return
envelope. THE TRUSTEE MAKES NO RECOMMENDATION TO PLAN PARTICIPANTS AS TO HOW
ESOP PREFERRED SHARES CREDITED TO THEIR PLAN ACCOUNTS SHOULD BE VOTED. The
voting instructions of each Plan participant are confidential and will not be
revealed to the Company, or any proposed purchaser or their affiliates.
IF YOU DO NOT SIGN AND RETURN THIS INSTRUCTION CARD, OR IF YOU SIGN AND RETURN
THIS INSTRUCTION CARD BUT DO NOT MARK THE BOXES, ESOP PREFERRED SHARES CREDITED
TO YOUR PLAN ACCOUNT WILL BE VOTED BY THE TRUSTEE, TOGETHER WITH UNALLOCATED
ESOP PREFERRED SHARES, IN THE SAME MANNER AND PROPORTION AS THE SHARES OF ESOP
PREFERRED SHARES CREDITED TO PARTICIPANTS' ACCOUNTS FOR WHICH VALID VOTING
INSTRUCTIONS ARE RECEIVED, SUBJECT TO APPLICABLE LAW.
----------------
SEE REVERSE SIDE
----------------
<PAGE> 32
PLEASE MARK YOUR
/X/ INSTRUCTION AS IN
THIS EXAMPLE.
The Proposal to approve an amendment to Conrail Inc.'s Articles of
Incorporation which would cause the provisions of Subchapter E of Chapter 25 of
the Pennsylvania Business Corporation Law of 1988, as amended, to no longer be
applicable to Conrail Inc., and to authorize the Board of Directors, in its
discretion, to direct certain executive officers of Conrail Inc. to file or not
file such Articles of Amendment if the Board determines such action to be in
the best interests of Conrail Inc.
FOR AGAINST ABSTAIN
/ / / / / /
The Adjournment Proposal to adjourn the Special Meeting, if necessary, to
permit further solicitation of proxies in the event that there are not
sufficient votes at the time of the Special Meeting to approve the foregoing
Proposal.
FOR AGAINST ABSTAIN
/ / / / / /
THIS INSTRUCTION CARD WHEN PROPERLY EXECUTED WILL BE USED BY THE TRUSTEE TO
DETERMINE HOW TO VOTE ESOP PREFERRED SHARES CREDITED IN THE ACCOUNT OF THE
UNDERSIGNED PLAN PARTICIPANT AS DIRECTED HEREIN.
PLEASE MARK, SIGN, DATE AND RETURN THIS INSTRUCTION CARD PROMPTLY USING THE
ENCLOSED POSTAGE PAID RETURN ENVELOPE.
SIGNATURE(S)___________________________________________________________________
TITLE____________________________________________ DATE_________________________
Note: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
<PAGE> 33
CONRAIL INC.
P PROXY SOLICITED ON BEHALF OF THE
R BOARD OF DIRECTORS OF CONRAIL INC. FOR THE
O SPECIAL MEETING OF SHAREHOLDERS, NOVEMBER 14, 1996
X
Y The undersigned hereby constitutes and appoints Timothy T. O'Toole
and Bruce B. Wilson, and each or either of them, as true and lawful
agents and proxies with full power of substitution in each to represent
the undersigned at the Special Meeting of Shareholders of Conrail Inc.
to be held on Thursday, November 14, 1996, at 5:00 p.m., Eastern
Standard Time, at The Academy of Music Hall, 1420 Locust Street,
Philadelphia, Pennsylvania, and at any adjournments thereof, on all
matters coming before said meeting. A participant in the Consolidated
Rail Corporation Matched Savings Plan (the "ESOP") desiring that
Fidelity Management Trust Company, as trustee under the ESOP (the
"Trustee"), vote shares of Conrail Inc. Series A ESOP Convertible
Junior Preferred Stock ("ESOP Stock") allocated to such participant's
account should so instruct the Trustee by completing the voting
instruction card that has been provided to ESOP participants for such
purpose. ESOP participants cannot vote their shares of ESOP Stock or
instruct the Trustee as to how to vote their shares of ESOP Stock by
completing this proxy card.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICE BY MARKING THE APPROPRIATE
BOX ON THE REVERSE SIDE OF THIS PROXY CARD. IF YOU SIGN AND RETURN
THIS PROXY CARD BUT DO NOT MARK ANY BOXES, YOUR SHARES WILL BE VOTED
IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PERSONS
LISTED ABOVE CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS
PROXY CARD.
-----------
SEE REVERSE
SIDE
-----------
<PAGE> 34
/x/ Please mark your
vote as in this
example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR:
The Proposal to approve an amendment to Conrail Inc.'s Articles of
incorporation which would cause the provisions of Subchapter E of Chapter 25 of
the Pennsylvania Business Corporation Law of 1968, as amended, to no longer be
applicable to Conrail Inc., and to authorize the Board of Directors, in its
discretion, to direct certain executive officers of Conrail Inc. to file or not
file such Articles of Amendment if the Board determines such action to be in
the best interests of Conrail Inc.
FOR AGAINST ABSTAIN
/ / / / / /
The Adjournment Proposal to adjourn the Special Meeting, if necessary, to
permit further solicitation of proxies in the event that there are not
sufficient votes at the time of the Special Meeting to approve the foregoing
Proposal.
FOR AGAINST ABSTAIN
/ / / / / /
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE WITH RESPECT TO THE
VOTING OF SHARES, THIS PROXY WILL BE VOTED FOR THE PROPOSAL DESCRIBED ABOVE.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
POSTAGE PAID RETURN ENVELOPE.
Signature(s) _____________________________________________________________
Title __________________________________________ Date _________________
Note: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing at attorney, executor, administrator, trustee or guardian,
please give full title as such.
