SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
[Amendment No. . . . . . . . . .]
Filed by the Registrant [X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
[X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or
240.14a-12
CONRAIL INC.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Name of Registrant as Specified in Its Charter)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which
transaction applies:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2) Aggregate number of securities to which
transaction applies:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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.):
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4) Proposed maximum aggregate value of transaction:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5) Total Fee Paid
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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.
1) Amount Previously Paid : ________________________________________
2) Form Schedule or Registration Statement No:______________________
3) Filing Party: ___________________________________________________
4) Date Filed: _____________________________________________________
<PAGE>
CONRAIL INC.
April 3, 1996
Dear Shareholder:
On behalf of the Board of Directors and Officers of Conrail
Inc., we would like to invite you to attend the Annual
Meeting of Shareholders to be held on Wednesday, May 15,
1996 at 9:30 a.m. Eastern Daylight Time in The Academy of
Music Hall, 1420 Locust Street, Philadelphia, Pennsylvania.
We look forward to seeing those of you who are able to
attend the meeting.
At the meeting, shareholders will be asked to elect four
directors for terms expiring in 1999, to approve amendments
to Conrail's 1991 Long Term Incentive Plan and to ratify the
appointment of independent accountants, Price Waterhouse
LLP. As has been the case at each of our prior meetings of
shareholders, a report on the activities and performance of
Conrail will also be made.
As soon as possible, please complete the top part of the
enclosed proxy card, detach the completed portion and return
it in the enclosed postpaid return envelope, to ensure that
your shares will be voted at the meeting. Voting your
shares by proxy does not prevent you from casting your
shares in person should you decide to attend the meeting.
If you intend to come to the meeting, please so indicate in
the Special Action section of the proxy card which you
return and retain the bottom portion of the card as this
serves as your admission card. You will also note that this
bottom portion of the proxy card outlines the agenda for the
meeting.
Conrail's performance for 1995 was encouraging, particularly
in light of the lower than expected traffic levels during
the year. Our management team was able to keep costs in
line with business levels by adjusting our operating plan.
The economic uncertainty of 1996, coupled with the impact of
the severe winter weather earlier this year, pose additional
challenges for us in 1996. However, we believe we have
identified marketing and service opportunities that offer
promise for revenue growth. The success of these initiatives
and our ability to control costs will be critical as we work
toward meeting customer and shareholder expectations in
1996.
Sincerely,
/s/ James A. Hagen /s/ David M. LeVan
James A. Hagen David M. LeVan
Chairman of the Board of Directors President & Chief Executive Officer
<PAGE>
CONRAIL INC.
Two Commerce Square
2001 Market Street
Philadelphia, Pennsylvania 19101
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 15, 1996
To Our Shareholders:
NOTICE is hereby given that the ANNUAL MEETING OF SHAREHOLDERS
OF CONRAIL INC. will be held in The Academy of Music Hall, 1420
Locust Street, Philadelphia, Pennsylvania, on the 15th day of May,
1996 at 9:30 a.m., Eastern Daylight Time, for the following
purposes:
1. To elect four directors in Class III to serve until the
Annual Meeting of Shareholders in 1999 and until their
successors are elected and take office;
2. To approve amendments to the Conrail 1991 Long-Term
Incentive Plan;
3. To ratify the appointment of Price Waterhouse LLP as the
independent accountants for the year 1996; and
4. To consider such other business as may properly come
before the meeting.
Only those shareholders of record as of the close of business
on March 1, 1996 will be entitled to vote at the meeting. For
purposes of any meeting of shareholders that has been previously
adjourned for one or more periods aggregating at least fifteen (15)
days because of an absence of a quorum, the shareholders 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.
April 3, 1996 By Order of the Board of Directors
/s/ Allan Schimmel
Allan Schimmel
Corporate Secretary
IMPORTANT NOTICE
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE COMPLETE,
DATE, SIGN AND PROMPTLY MAIL THE ACCOMPANYING PROXY IN THE RETURN
ENVELOPE WHICH HAS BEEN PROVlDED. NO POSTAGE IS NECESSARY IF MAILED
IN THE UNITED STATES. ANY PERSON GIVING A PROXY HAS THE POWER TO
REVOKE IT PRIOR TO ITS EXERCISE, AND SHAREHOLDERS WHO ARE PRESENT AT
THE MEETING MAY THEN REVOKE THEIR PROXY AND VOTE IN PERSON.
<PAGE>
CONRAIL INC.
Two Commerce Square
2001 Market Street
Philadelphia, Pennsylvania 19101
(215) 209-4000
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 15, 1996
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors (the "Board") of Conrail Inc.
("Conrail") of proxies for use at the Annual Meeting to be held in
The Academy of Music Hall, 1420 Locust Street, Philadelphia,
Pennsylvania, on the 15th day of May, 1996 at 9:30 a.m., Eastern
Daylight Time, and at any adjournments thereof. A form of proxy for
holders of Conrail's common stock (the "Conrail Common Stock") and
Series A ESOP Convertible Junior Preferred Stock (the "Conrail
Preferred Stock") is being furnished for use at the Annual Meeting.
This Proxy Statement and the form of proxy are being mailed on April
3, 1996, or thereafter as practicable, to all shareholders entitled
to vote at the Annual Meeting.
On July 1, 1993, Conrail Inc. became the publicly held holding
company of Consolidated Rail Corporation, which remains the
principal subsidiary of Conrail Inc. Except as otherwise noted,
references to Conrail in this Proxy Statement are to Consolidated
Rail Corporation prior to July 1, 1993 and to Conrail Inc.
thereafter. For purposes of the disclosure set forth herein,
executive officers of Consolidated Rail Corporation are treated as
executive officers of Conrail Inc.
VOTING AND REVOCATION OF PROXIES. Execution of the accompanying
proxy will not affect a shareholder's right to attend the Annual
Meeting and vote in person. Any shareholder who has executed a proxy
and wishes to vote in person at the Annual 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. Proxies for
shares of Conrail Common Stock and for shares of Conrail Preferred
Stock that have been allocated to individual employees will be voted
in accordance with the shareholder's direction. If no direction is
given, proxies for shares of Conrail Common Stock will be voted in
accordance with the recommendations of the Board as set forth in
this Proxy Statement. All shares of Conrail Preferred Stock that
have not been allocated to an individual employee, and all shares of
Conrail Preferred Stock that have been so allocated but as to which
no voting instructions have been received by the Trustee of
Conrail's Employee Stock Ownership Plan (the "ESOP"), shall, in
accordance with the Trust Agreement between Conrail and the ESOP
Trustee, be voted in the same manner and proportion as are the
shares of Conrail Preferred Stock for which valid instructions are
received.
The Board knows of no matters likely to be brought before the
Annual Meeting other than those described in this Proxy Statement.
If any other matters, not now known or determined, properly come
before the Annual 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
discretionary authority granted in the proxy.
VOTE REQUIRED. Each share of Conrail Common Stock and each
share of Conrail Preferred Stock will entitle the holder thereof to
one vote on all matters that may properly come before the Annual
Meeting. The presence, in person or by proxy, of a majority of the
outstanding shares of Conrail Common Stock and Conrail Preferred
Stock, considered as one class, is necessary to constitute a quorum
at the Annual Meeting. The votes required for the election of
directors and the approval of the amendment of the Conrail 1991 Long-
Term Incentive Plan ("Long-Term Incentive Plan Amendment"), as set
forth below, assume the presence of a quorum at the Annual Meeting.
2
<PAGE>
The four candidates receiving the four highest numbers of votes
cast at the Annual Meeting by the holders of Conrail Common Stock
and Conrail Preferred Stock, voting as one class, in the election of
Class III directors will be elected Class III directors. Approval of
the Long-Term Incentive Plan Amendment requires the affirmative vote
of a majority of the votes cast at the Annual Meeting by the holders
of Conrail Common Stock and Conrail Preferred Stock, voting as one
class.
The election inspector appointed for the Annual Meeting will
determine whether or not a quorum is present and will tabulate the
votes cast, whether in person or by proxy, at the Annual Meeting.
The election inspector will treat abstentions with respect to a
matter to be submitted to the shareholders as shares that are
present and entitled to vote on such matter for purposes of
determining the presence of a quorum with respect to such matter,
but as unvoted for purposes of determining the approval of such
matter. Abstentions will have no impact on the election of
directors or any other matter submitted to the shareholders for a
vote, except as specifically set forth below. Shares represented by
broker non-votes with respect to a matter to be submitted to the
shareholders will not be considered as present for purposes of
determining the presence of a quorum with respect to such matter, or
as entitled to vote on such matter. As a result, broker non-votes
will have an impact on the presence of a quorum with respect to such
matter, but will have no impact on either the election of directors
or any other matter submitted to the shareholders for a vote if a
quorum with respect to such matter is present. For purposes of
adopting the Long-Term Incentive Plan Amendment, abstentions will be
treated as no votes, and broker non-votes will not be counted.
RECORD DATE AND OUTSTANDING SHARES. Pursuant to Conrail's By-
laws, the Board has fixed the close of business on March 1, 1996
as the time for determining shareholders of record entitled to
notice of, and to vote at, the Annual Meeting. As of the close of
business on March 1, 1996, there were issued and outstanding
81,983,135 shares of Conrail Common Stock and 9,754,859 shares of
Conrail Preferred Stock. 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 March 1, 1996, owned beneficially more than 5% of any
class of Conrail's voting securities are listed in the following
table:
<TABLE>
<S> <C> <C> <C>
Name and Address Amount and Nature of Percent
Title of Class of Beneficial Owner Beneficial Ownership of Class
- -------------- ------------------- -------------------- --------
Conrail FMR Corp. 6,493,904 (of which: 7.9%
Common 82 Devonshire St. sole voting power -
Stock Boston, MA 02109 29,338; shared voting
power - 0; sole
dispositive power -
6,493,904; shared
dispositive power -
100) (1)
Conrail The Capital Group 5,570,710 (of which: 6.8%
Common Companies, Inc. sole voting power -
Stock 333 S. Hope Street 1,174,010; shared
Los Angeles, CA 90071 voting power - 0; sole
dispositive power -
5,570,710; shared
dispositive power - 0)
(2)
Conrail Mellon Bank, N.A. 4,645,430 shares, not 5.7%
Common One Mellon Bank Center individually, but
Stock Suite 3346 solely in its capacity
Pittsburgh, PA 15258-0001 as trustee of the
Conrail Employee
Benefits Trust (3)
Conrail Fidelity Management 7,767,015 shares, not 79.6%
Preferred Trust Co. individually, but
Stock 82 Devonshire Street solely in its capacity
Boston, MA 02109 as Trustee of
the ESOP (4)
3
<PAGE>
<FN>
- -----
1. Based on Schedule 13G filed by FMR Corp. with the Securities
and Exchange Commission on February 14, 1996. These shares
represent 7.1% of Conrail's total voting securities (Common
Stock and Preferred Stock voting as one class).
2. Based on Schedule 13G filed by The Capital Group Companies,
Inc. with the Securities and Exchange Commission on February
9, 1996. These shares represent 6.1% of Conrail's total
voting securities.
3. These shares represent 5.1% of Conrail's total voting
securities.
4. Shares of Conrail Preferred Stock are convertible into shares
of Conrail Common Stock at any time on a share-for-share basis,
subject to certain antidilution adjustments. As a result,
ownership of shares of Conrail Preferred Stock is deemed to be
ownership of an equal number of shares of Conrail Common Stock.
These 7,767,015 shares of Conrail Preferred Stock represent
8.5% of Conrail's total voting securities.
</FN>
</TABLE>
OWNERSHIP BY MANAGEMENT OF EQUITY SECURITIES. The following
table sets forth the beneficial ownership, as of March 1, 1996, of
Conrail Common Stock and Conrail Preferred Stock of each director
and nominee, each of the executive officers named in the Summary
Compensation Table 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 Conrail Common
Stock and sole voting power with respect to such shares of Conrail
Preferred Stock. The ESOP Trustee holds sole investment power with
respect to all shares of Conrail Preferred Stock. As of March 1,
1996, all Conrail directors and officers as a group owned less than
one percent (1%) of the aggregate outstanding Conrail Common Stock
and Conrail Preferred Stock.
Amount and Nature
Name and Title of Beneficial
Title of Class of Beneficial Owner Ownership
- --------------------- ------------------------ ------------------
Conrail Common Stock James A. Hagen 63,753(1)
Chairman of the Board of
Directors
H. Furlong Baldwin 2,000
Director
Claude S. Brinegar 1,000
Director and Nominee
Daniel B. Burke 2,000
Director and Nominee
Kathleen Foley Feldstein 700
Director
Roger S. Hillas 2,362
Director and Nominee
E. Bradley Jones 1,000
Director and Nominee
David B. Lewis 1,200
Director
John C. Marous 800
Director
Raymond T. Schuler 7,788
Director
David H. Swanson 441
Director
4
<PAGE>
Amount and Nature
Name and Title of Beneficial
Title of Class of Beneficial Owner Ownership
- --------------------- ------------------------ ------------------
David M. LeVan 86,107(1)
Director, President and
Chief Executive Officer
H. William Brown 87,137(1)
Senior Vice President -
Finance and Administration
Bruce B. Wilson 55,118(1)
Senior Vice President - Law
Ronald J. Conway 16,689(1)
Senior Vice President-
Operations
George P. Turner 26,101(1)
Senior Vice President-
Automotive Service Group
All Directors and Executive 658,828(2)
Officers as a group(3)
- ---------
(1) For Messrs. Hagen, LeVan, Brown, Wilson, Conway, and
Turner, respectively, includes options exercisable within 60 days to
acquire 0, 33,691, 55,639, 42,905, 9,250 and 16,107 shares of
Conrail Common Stock and 2,004, 2,080, 2,061, 2,052, 2,002 and 1,737
shares of Conrail Preferred Stock allocated to the accounts of the
named officers pursuant to the ESOP. Shares of Conrail Preferred
Stock are convertible into shares of Conrail Common Stock at any
time on a share-for-share basis, subject to certain antidilution
adjustments. As a result, ownership of shares of Conrail Preferred
Stock is deemed to be ownership of an equal number of shares of
Conrail Common Stock.
(2) Includes options exercisable within 60 days to acquire
341,897 shares of Conrail Common Stock and 45,621 shares of Conrail
Preferred Stock allocated to the accounts of individual officers
pursuant to the ESOP. This number also includes shares held by all
officers of Consolidated Rail Corporation.
(3) Section 16(a) of the Exchange Act and the rules and
regulations promulgated thereunder require that certain officers,
directors and 10% beneficial owners of Conrail Common Stock file
with the Securities and Exchange Commission, within specified time
periods, reports concerning transactions in Conrail securities.
Based on its review of the filed forms or written representations
that, in certain instances, no filing is required, Conrail believes
that all Section 16(a) filing requirements during 1995 were complied
with, except that one timely report by each of L. M. Passa and G. P.
Turner failed to include certain shares acquired through dividend
reinvestment, and one report reflecting the sale of shares by each
of G. H. Kuhn and G. M. Williams after their respective status as
Conrail officers ceased was not timely filed.
PROXY SOLICITATION. Conrail will bear the expense of the
Board's proxy solicitation. In addition to the use of the mails,
proxies may be solicited by personal interview, telephone and
telegram by the directors, officers and employees of Conrail (none
of whom will receive additional compensation therefor). Conrail has
engaged D. F. King & Company, Inc., 77 Water Street, New York, N.Y.,
to assist in the solicitation of proxies for a fee not to exceed
$15,000, plus reimbursement of out-of-pocket expenses. Upon request,
Conrail will reimburse banks, brokerage houses and other
institutions, nominees and fiduciaries for their reasonable expenses
in forwarding proxy materials to beneficial owners.
5
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Four directors (Class III) will be elected at the Annual
Meeting to serve until the Annual Meeting of Shareholders in 1999.
Four directors (Class I) are serving three-year terms expiring in
1997. Four directors (Class II) are serving three-year terms
expiring in 1998. Except directors elected to fill unexpired terms,
all directors of each class are elected to serve three-year terms
and until their successors are elected and take office. James A.
Hagen, Chairman of the Board, has announced his intention to retire
from the Board after the 1996 Annual Meeting, at which point he will
be succeeded by David M. LeVan. Fewer nominees are named than the
number of directors fixed by Conrail's articles of incorporation and
By-laws, which provide for five Class I directors, four Class II
directors and four Class III directors. The Nominating Committee of
the Board has chosen not to nominate candidates for either the
vacant Class I Director position or the Class I Director position
that will become vacant upon Mr. Hagen's retirement. Proxies cannot
be voted for a greater number of persons than the number of nominees
named.
All persons named herein as nominees for director have
consented to serve, and it is not contemplated that any nominee will
be unable to serve as a director. If such event occurs, however,
discretionary authority is reserved to cast votes for the election
of a substitute or substitutes selected by the Board, and all
proxies eligible to be voted will be voted for such other person or
persons.
Set forth below are the names and ages of the nominees for
election to the Board and the directors continuing in office, each
such person's prior service as a director of Conrail and a brief
description of each such person's business experience over the past
five years, including any other directorships in certain companies.
PROPOSAL NO. 1
NOMINEES FOR ELECTION AS CLASS III DIRECTORS - TERM EXPIRING 1999:
Prior Service
Name, Business Experience As Conrail
and Other Directorships Director
- ------------------------------------------- ---------------
Claude S. Brinegar Since 1990
Vice Chairman of Unocal Corp., a high
technology earth resources company, from
August 1989 to June 1995. Retired from
Unocal Corp. in May 1992, where he held
the position of Executive Vice President
- Administration and Planning, since
1989. Director, Maxicare Health Plans,
Inc., and a visiting scholar at Stanford
University. Age 69.
Daniel B. Burke 1981 to 1986
Chairman and Owner, Portland, Maine and since 1987
Baseball Inc., 1994 to present. Retired
in February 1994 from Capital
Cities/ABC, Inc. where he held the
positions of President and Chief
Executive Officer since June 1990.
Director, Capital Cities/ABC, Inc., Rohm
and Haas Co., Avon Products, Inc.,
Morgan Stanley Group Incorporated and
Darden Restaurants. Age 67.
Roger S. Hillas Since 1981
Retired in January 1993 from Meritor
Savings Bank where he held the positions
of Chairman and Chief Executive Officer
between July 1988 and December 1992.
Director, P.H. Glatfelter Company, Toll
Bros., Inc., The Bon-Ton Stores, Inc.
and VF Corporation. Age 68.
6
<PAGE>
Prior Service
Name, Business Experience As Conrail
and Other Directorships Director
- ------------------------------------------- ---------------
E. Bradley Jones Since 1987
Retired in December 1984 from LTV Steel
Company where he held the positions of
Chairman and Chief Executive Officer and
Group Vice President of LTV Corporation.
Director, TRW, Inc., NAACO Materials
Handling Group, Cleveland-Cliffs, Inc.,
Birmingham Steel Corporation and RPM,
Inc.; Trustee, First Union Real Estate
Equity and Mortgage Investments and
Trustee, Fidelity Group of Funds. Age
68.
DIRECTORS CONTINUING IN OFFICE
CLASS I DIRECTORS - TERM EXPIRING 1997:
H. Furlong Baldwin Since 1988
Chairman and Chief Executive Officer of
Mercantile Bankshares Corporation since
prior to January 1991. Director,
Mercantile Bankshares Corporation,
Baltimore Gas & Electric Company, GRC
International, Inc. and USF&G
Corporation. Age 64.
James A. Hagen Since 1989
Chairman of the Board of Directors of
Conrail since May 1989. Retired March
1995 as Chief Executive Officer of
Conrail, a position he held since May
1989. Chairman, President and Chief
Executive Officer between May 1989 and
September 1994. Director, Philadelphia
Electric Company and Penn Mutual Life
Insurance Company. Age 64.
David M. LeVan Since 1994
President and Chief Executive Officer of
Conrail since March 1995. President and
Chief Operating Officer of Conrail
between September 1994 and March 1995.
Executive Vice President between
November 1993 and September 1994.
Senior Vice President-Operations
between July 1992 and November 1993.
Senior Vice President-Operating
Systems and Strategy between November
1991 and June 1992. Senior Vice
President - Corporate Systems between
November 1990 and November 1991. Age
50.
David H. Swanson Since 1989
President and Chief Executive Officer of
Countrymark Cooperative, Inc., a farm
supply and marketing cooperative, since
December 1995. Chairman and Chief
Executive Officer of Explorer
Nutritional Group, an animal nutrition
company, and Chairman of Premiere Agri-
Technologies, Inc., an international
agricultural business, between January
1995 and December 1995. Chief Executive
Officer of Premiere Agri-Technologies,
Inc. between January 1994 and January
1995. Chairman, President and Chief
Executive Officer of Central Soya
Company, Inc. between 1986 and January
1994. Director, Fiduciary Trust
International. Age 53.
7
<PAGE>
CLASS II DIRECTORS - TERM EXPIRING 1998:
Prior Service
Name, Business Experience As Conrail
and Other Directorships Director
- ------------------------------------------- ---------------
Kathleen Foley Feldstein Since 1993
President of Economics Studies, Inc., a
private consulting firm, since prior to
January 1, 1991. Director, Bank America
Corporation, Digital Equipment
Corporation and John Hancock Mutual Life
Insurance Company. Age 55.
David B. Lewis Since 1989
Chairman of Lewis, White & Clay, P.C., a
law firm, since prior to January 1991.
Director, LG&E Energy Corp., Comerica
Bank, and TRW, Inc. Lewis, White & Clay
provided legal services to Conrail in
1995. Age 51.
John C. Marous Since 1991
Retired in July 1990 from Westinghouse
Electric Corporation where he held the
position of Chairman and Chief Executive
Officer between January 1988 and July
1990. Director, Bell Atlantic
Corporation, Connecticut Mutual Life
Insurance Company and Mellon Bank, N.A.
Age 70.
Raymond T. Schuler Since 1981
Retired in September 1990 from the
Business Council of New York State,
Inc., where he held the positions of
Vice Chairman, President and Chief
Executive Officer. Director, Oneida,
Ltd. Age 66.
BOARD COMMITTEES AND MEETlNGS
During 1995, the Board held fourteen meetings, and each
director attended more than 75 percent of the aggregate of the total
number of meetings held by the Board and the total number of
meetings held by committees of the Board on which such director
served.
The Board has a number of committees, including an Audit
Committee, a Compensation Committee and a Nominating Committee. The
Audit Committee, consisting of Messrs. Lewis (Chairman), Brinegar,
Schuler and Swanson, met four times during 1995. The Audit Committee
reviews Conrail's accounting processes, financial control and
reporting systems, as well as the selection of Conrail's independent
accountants and the scope of the audits to be conducted. The
Compensation Committee, consisting of Messrs. Hillas (Chairman),
Baldwin and Marous, met six times during 1995. The Compensation
Committee reviews Conrail's compensation programs and structure.
The Nominating Committee, consisting of Messrs. Jones (Chairman),
Brinegar, Burke, Schuler and Swanson, met two times during 1995.
The Nominating Committee has the responsibility for recommending
individuals for election as members of the Board. The Nominating
Committee will consider written recommendations from shareholders
for nominees for election to the Board, provided that such
recommendations, together with (i) such information regarding each
nominee as would be required to be included in a proxy statement
filed pursuant to the Exchange Act, (ii) a description of all
arrangements or understandings among the recommending shareholder
and each nominee and any other person with respect to such
nomination (and naming such person or persons), and (iii) the
8
<PAGE>
consent of each nominee to serve as a director of Conrail if so
elected, are received by the Corporate Secretary of Conrail by, in
the case of an annual meeting of shareholders, not later than the
date specified in Conrail's most recent proxy statement as the date
by which shareholder proposals for inclusion in Conrail's proxy
materials for consideration at the next annual meeting must be
received and, in the case of a special meeting of shareholders, not
later than the tenth day after the giving of notice of such meeting.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS' COMPENSATION. Directors who are not officers of
Conrail receive an annual fee of $25,000 and a fee of $1,000 for
each Board and Board committee meeting they attend. Each such
director who is a chairman of a Board Committee receives an
additional annual fee of $2,000, except the chairman of the Audit
Committee who receives an additional annual fee of $2,500. Directors
who are officers of Conrail are not paid any fees for service on the
Board or on any Board Committees.
Conrail maintains a Retirement Plan for Non-Employee Directors
that provides each director who is not an employee or former
employee of Conrail with a retirement benefit equal to the product
of (1) one-twelfth of his or her annual retainer fee from Conrail in
effect at the time the director ceases to serve as a member of the
Board and (2) the number of full months, up to 120, he or she served
on the Board, including service on the Board of Consolidated Rail
Corporation prior to July 1, 1993.
Benefits are payable in cash, from Conrail's general assets, in
equal monthly installments over the ten-year period beginning with
the month following the later of (1) the month in which the director
ceases to serve on the Board or (2) the month in which the director
attains age 65. Notwithstanding the foregoing, (1) the benefits of
directors who cease to serve on the Board on account of disability
commence with the month following the month in which the director
ceases to serve on the Board, and (2) after a director's death, his
or her benefits shall be paid to the director's designated
beneficiary, or in the absence of a written designation, to the
director's estate, in a lump sum, as soon as practicable following
the director's death.
Benefits are forfeited in the event the director, before he or
she attains age 65, is removed from the Board for cause or
voluntarily resigns from the Board, unless the resignation is
approved by the Board on account of a conflict between the interests
of the director and the interests of Conrail.
Conrail also maintains a Board of Directors Charitable
Contributions Program pursuant to which Conrail has purchased life
insurance policies of $1 million on the life of each director. Upon
the death of an individual director, Conrail will donate $1 million
in five annual installments of $200,000 each to one or more
qualifying educational or charitable organizations designated by the
director, and will be reimbursed by the life insurance proceeds.
Individual directors derive no financial benefit from the program;
all charitable deductions accrue solely to Conrail. In 1995, a
donation of $200,000 was made under the program on behalf of the
late Ann F. Friedlaender.
COMPENSATION OF EXECUTIVE OFFICERS. The following table
provides certain summary information concerning compensation awarded
to, earned by or paid in 1995 to Conrail's Chairman and former Chief
Executive Officer, James A. Hagen, Conrail's current President and
Chief Executive Officer, David M. LeVan, and each of the four other
most highly compensated executive officers of Conrail (determined as
of the end of the last fiscal year (December 31, 1995) and hereafter
referred to as the "named executive officers") for all services
rendered in all capacities to Conrail and its subsidiaries during
the fiscal years ended December 31, 1993, 1994 and 1995.
9
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation
Long-Term Compensation Awards
----------------------------- ------------------------------
(a) (b) (c) (d) (f) (g) (i)
<S> <C> <C> <C> <C> <C> <C>
Securities
Name and Restricted Underlying All Other
Principal Salary Bonus Stock Award(s) Options/SARS Compensation
Position Year ($) ($) ($) (#) ($) (1)
- ------------ ---- -------- -------- -------------- ------------ ------------
J. A. Hagen .......... 1995 $202,044 $173,798 $ 0(2) 33,000 $9,000
Chairman & Former CEO 1994 647,985 85,000 630,000(3) 10,697
1993 646,899 19,500 615,576(4) 15,434
D. M. LeVan .......... 1995 514,519 24,759 509,976(2) 30,746 9,000
President & CEO
H. W. Brown .......... 1995 290,761 13,946 203,294(2) 9,000 9,000
Sr. Vice President - 1994 280,150 14,000 189,000(3) 9,000
Finance & Admin. 1993 264,995 7,990 189,163(4) 8,994
B. B. Wilson ......... 1995 253,026 114,792 27,425(2) 9,000 9,000
Sr. Vice President -Law 1994 245,040 122,500 0(3) 9,000
1993 243,075 77,028 55,742(4) 8,994
R. J. Conway ......... 1995 223,889 101,367 27,425(2) 9,000 9,000
Sr. Vice President - 1994 166,940 88,023 0(3) 9,000
Operations 1993 146,715 4,467 76,458(4) 8,994
G. P. Turner ......... 1995 198,881 9,578 148,214(2) 9,000 9,000
Sr. Vice President - 1994 150,460 65,178 0(3) 9,000
Automotive Sv. Grp. 1993 122,613 3,735 73,756(4) 8,994
- ------
<FN>
(1) These amounts represent Conrail's matching contribution in the
form of Conrail Preferred Stock of amounts deferred by the
named executive officers through a 401(k) plan during 1995,
1994 and 1993. The shares are allocated based on the per share
price set at the time the shares were purchased by the plan.
With respect to Mr. Hagen, an additional $1,697 was contributed
in 1994 and $6,440 in 1993 for his annual supplemental term
life insurance premium.
(2) This figure represents the following: (i) the full market
value as of the January 31, 1996 grant date of restricted
shares of Conrail Common Stock awarded to the named executive
officer as a result of a 1995 bonus deferral, and is composed
of the amount of the 1995 bonus that such officer elected to
defer ($277,546, $117,246 and $80,526, for Messrs. LeVan, Brown
and Turner respectively) plus a matching contribution by
Conrail in the amount of 50% for Messrs. LeVan, Brown and
Turner (each determined by the length of the deferral period
elected by such named executive officer); and (ii) the value
of shares of Conrail Common Stock awarded on January 22, 1996
in settlement of performance shares granted on January 1, 1995
based on Conrail's having met certain predetermined financial
performance goals (computed at a fair market value of
$68.5625). The number of shares of restricted stock was
determined by the fair market value of Conrail Common Stock on
January 31, 1996 ($70.3125). Dividends are paid on all
restricted shares.
As of December 31, 1995, Messrs. LeVan, Brown, Wilson, Conway,
and Turner held, respectively, 9,352, 9,958, 2,134, 2,061, and
1,706 restricted shares of Conrail Common Stock worth $351,024,
$444,823, $102,928, $85,456 and $70,250, respectively, net of
the payments which such officers would have been entitled to
receive absent their elections to take restricted shares
instead of cash bonuses. Valuation is based on the closing
price of Conrail Common Stock on December 31, 1995 ($70.00).
These numbers exclude shares received in January 1996 pursuant
to such officers' 1995 bonus deferrals, if any, and shares
previously acquired through bonus deferrals as to which
restrictions lapsed prior to December 31, 1995.
10
<PAGE>
(3) This figure represents the full market value as of the January
31, 1995 grant date of restricted shares of Conrail Common
Stock awarded to the named executive officer as a result of a
1994 bonus deferral, and is composed of the amount of the 1994
bonus which such officer elected to defer ($420,000 and
$126,000 for Messrs. Hagen and Brown, respectively) plus a
matching contribution by Conrail in the amount of 50%. The
number of shares of restricted stock was determined by the fair
market value of Conrail Common Stock on January 31, 1995
($52.875).
(4) This figure represents the full market value as of the
February 7, 1994 grant date of restricted shares of Conrail
Common Stock awarded to the named executive officer as a result
of a 1993 bonus deferral, and is composed of the amount of the
1993 bonus which such officer elected to defer ($410,800,
$126,237, $46,452, $58,814 and $49,171 for Messrs. Hagen,
Brown, Wilson, Conway and Turner, respectively) plus a matching
contribution by Conrail in the amount of 50% for Messrs. Hagen
and Brown, and a matching contribution by Conrail in the amount
of 20% and 30%, respectively, for Messrs. Wilson and Conway
(each as determined by the length of the deferral period
elected by such named executive officer). The number of shares
of restricted stock was determined by the fair market value of
Conrail Common Stock on February 7, 1994 ($61.6875).
</FN>
</TABLE>
904 shares of restricted stock held by Mr. Wilson vested on
February 7, 1996, two years from the date of the award, and
1,239 shares of restricted stock held by Mr. Conway will vest
on February 7, 1997, three years from the date of the award.
The following table contains information concerning the grant of
stock options made to the named executive officers during the fiscal
year ended December 31, 1995.
<TABLE>
Option/SAR Grants in Last Fiscal Year
<CAPTION>
Grant Date
Individual Grant Value
- -------------------------------------------------------------------------------------- -------------
(a) (b) (c) (d) (e) (f)
<S> <C> <C> <C> <C> <C>
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or Grant Date
Options/SARs Employees in Base Price Present Value
Name Granted(#) Fiscal Year ($/sh) Expiration Date ($)(4)
- ------------- ------------- ------------ ----------- --------------- -------------
J. A. Hagen ...... 33,000 6.4% $50.6875 (1) $458,370
D. M. LeVan ...... 6,500(2) 1.3% $50.6875 January 1, 2005 90,285
13,000(3) 2.5% $50.6875 January 1, 2005 180,570
3,749(2) 0.7% $54.1250 January 1, 2005 50,124
7,497(3) 1.5% $54.1250 January 1, 2005 100,235
H. W. Brown ...... 3,000(2) 0.6% $50.6875 January 1, 2005 41,670
6,000(3) 1.2% $50.6875 January 1, 2005 83,340
B. B. Wilson ..... 3,000(2) 0.6% $50.6875 January 1, 2005 41,670
6,000(3) 1.2% $50.6875 January 1, 2005 83,340
R. J. Conway ..... 3,000(2) 0.6% $50.6875 January 1, 2005 41,670
6,000(3) 1.2% $50.6875 January 1, 2005 83,340
G. P. Turner ..... 3,000(2) 0.6% $50.6875 January 1, 2005 41,670
6,000(3) 1.2% $50.6875 January 1, 2005 83,340
- -------
<FN>
(1) These options were forfeited on Mr. Hagen's retirement in March 1995.
(2) Exerciseable as of January 22, 1996, based on Conrail's
achievement of a pre-established 1995 cash flow goal.
11
<PAGE>
(3) Exerciseable in two increments based on Conrail's achievement
of pre-established cash flow goals for 1997 and 1998, or
proportionately in 1998, based on Conrail's achievement of a pre-
established three-year, cumulative cash flow goal. If none
of the foregoing goals is met, the options become exerciseable
in total on January 1, 2000, and expire June 30, 2000.
(4) Based on modified Black-Scholes option pricing model assuming a
five-year term and that dividends are compounded quarterly and
risk-free rates are compounded continuously over the expected
option term. Dividend yield for the $50.6875 and $54.125
options are 3.35% and 3.14%, respectively, and risk free rates
of return are 7.82% and 5.85%, respectively, using daily
volatility rates of 26.45% and 26.69%, respectively.
</FN>
</TABLE>
The following table provides information concerning the
exercise of stock options during the fiscal year ended December 31,
1995, by each of the named executive officers and the value of
unexercised stock options held by each such officer as of December
31, 1995.
<TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
<CAPTION>
(a) (b) (c) (d) (e)
<S> <C> <C> <C> <C>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End (#) at FY-End ($)
------------- ----------------
Shares Acquired Exercisable/ Exercisable/
Name On Exercise (#) Value Realized ($) Unexercisable Unexercisable(1)
- ----------------- --------------- ------------------ ------------- -----------------
J. A. Hagen...... 40,000 $1,483,750 E 31,250 E $ 851,563
U 0 U 0
D. M. LeVan...... 0 0 E 33,691 E 822,532
U 32,205 U 591,767
H. W. Brown...... 0 0 E 55,639 E 2,292,200
U 13,811 U 327,975
B. B. Wilson.... 0 0 E 42,905 E 1,586,782
U 13,811 U 327,975
R. J. Conway.... 0 0 E 9,250 E 227,875
U 9,125 U 200,281
G. P. Turner.... 0 0 E 16,107 E 515,622
U 9,125 U 200,281
- ----------
<FN>
(1) This valuation is based on the fair market value of Conrail
Common Stock on December 31, 1995 ($69.8765).
</FN>
</TABLE>
12
<PAGE>
<TABLE>
Long-Term Incentive Plans - Awards in Last Fiscal Year
<CAPTION>
Estimated Future Payouts
under Non-Stock Price-Based Plans
----------------------------------
(a) (b) (c) (d) (e) (f)
<S> <C> <C> <C> <C> <C>
Number of
Shares, Performance
Units or or Other
Other Period Until
Number of Maturation
Name Rights(#)(1) or Payout Threshold(#) Target(#) Maximum(#)
------------------- -------------- --------------- ------------ --------- ----------
J. A. Hagen(2)..... 2,948 Jan. 1997 -1998 0 0 0
D. M. LeVan........ 2,746 Jan. 1997 -1998 2,471 2,746 2,746
H. W. Brown........ 800 Jan. 1997 -1998 720 800 800
B. B. Wilson....... 800 Jan. 1997 -1998 720 800 800
R. J. Conway....... 800 Jan. 1997 -1998 720 800 800
G. P. Turner....... 800 Jan. 1997 -1998 720 800 800
- ---------
<FN>
(1) Represents two-thirds of the performance shares granted to
the named executive officers in 1995. The performance
shares potentially vest in two successive increments,
based on Conrail's performance as measured against annual
cash flow goals in each of 1996 and 1997. At the end of
1997, unvested performance shares will have an opportunity
to vest proportionately if Conrail has met 90% or more of
a three-year, cumulative cash flow goal. Performance
shares not vested under one of the foregoing scenarios
will be forfeited. The first third, which vested based on
Conrail's performance during 1995, was paid to recipients
on January 22, 1996, and the value of that award is
included in column (f) of the Summary Compensation Table.
(2) Upon his retirement in March 1995, Mr. Hagen forfeited
2,948 performance shares granted on January 1, 1995, that
would have qualified as Long-Term Incentive Compensation.
The value of performance shares vesting and paid to Mr.
Hagen in January 1996 is included in column (f) of the
Summary Compensation Table.
</FN>
</TABLE>
Pension Plan Table and Related Disclosure
The following table shows estimated annual retirement benefits
payable under the Supplemental Pension Plan of Consolidated Rail
Corporation.
Years of Service
------------------------------------------
Remuneration 15 YRS 20 YRS 25 YRS 30 YRS 35 YRS
- ------------ ------ ------- ------- ------- -------
$ 125,000 20,928 27,905 34,881 41,857 48,833
150,000 26,178 34,905 43,631 52,357 61,083
175,000 31,428 41,905 52,381 62,857 73,333
200,000 36,678 48,905 61,131 73,357 85,583
225,000 41,928 55,905 69,881 83,857 97,833
250,000 47,178 62,905 78,631 94,357 110,083
300,000 57,678 76,905 96,131 115,357 134,583
400,000 78,678 104,905 131,631 157,357 183,583
450,000 89,178 118,905 148,631 178,357 208,083
500,000 99,678 132,905 166,131 199,357 232,583
600,000 120,678 160,905 201,131 241,357 281,583
700,000 141,678 188,905 236,131 283,357 330,583
750,000 152,178 202,905 253,631 304,357 355,083
1,250,000 257,178 342,905 428,631 514,357 600,083
1,500,000 309,678 412,905 516,131 619,357 722,583
1,750,000 362,178 482,905 603,631 724,357 845,083
2,000,000 414,678 552,905 691,131 829,357 967,583
13
<PAGE>
Messrs. Hagen, LeVan, Brown, Wilson, Conway and Turner have 15,
18, 17, 16, 26 and 35 years of credited service, respectively.
Compensation covered by the Pension Plan consists of an employee's
wages for federal income tax purposes (see column (c) to the Summary
Compensation Table plus any bonus paid in 1995; column (d) reflects
bonuses earned in the stated year, but not paid in such year),
excluding reimbursements, fringe benefits, gains from the exercise
of employee stock options, and contributions to deferred
compensation plans other than employee deferrals under Conrail's
Matched Savings Plan. In 1995, the covered compensation of Messrs.
Hagen, LeVan, Brown, Wilson, Conway and Turner was $1,612,709,
$596,388, $455,443, $289,714, $282,349 and $322,246, respectively.
The table above shows estimated annual retirement benefits, after
application of the Pension Plan's railroad retirement offset,
payable to participants as a straight life annuity under the Pension
Plan upon normal retirement at age 65 based upon final average
compensation and years of Conrail service. The table does not
reflect statutory limits on benefits under tax-qualified plans.
Employment Agreements and Termination of Employment and
Change in Control Arrangements
Conrail entered into an employment agreement with Mr. Hagen in
connection with his employment as Conrail's Chairman and Chief
Executive Officer. Mr. Hagen also serves as a member of the Board,
subject to shareholder approval. The employment agreement terminated
upon Mr. Hagen's retirement, effective March 31, 1995. Under the
agreement, Mr. Hagen receives supplemental retirement benefits equal
to any difference between (a) the estimated retirement benefits to
which he would have been entitled from CSX Distribution Services,
Inc. ("CSX") if he had continued his employment with CSX throughout
the time employed by Conrail, and (b) his actual retirement benefits
from Conrail and CSX. Mr. Hagen's annual supplemental retirement
benefits under the referenced provisions are approximately $300,000.
These supplemental retirement benefits are paid from Conrail's
general assets in the form of an annuity for the life of Mr. Hagen,
and do not reflect the pre- and post-retirement survivor protections
elected by Mr. Hagen.
To ensure that Conrail will have the continued dedicated
service of certain executives notwithstanding the possibility,
threat or occurrence of changes in control, Conrail has entered into
severance agreements with the officers named in the Summary
Compensation Table, other than Mr. Hagen. The agreements generally
provide that if the executive is Terminated other than for Cause
within three years after a Change in Control, or within two years of
regulatory approval of such Change in Control, each as defined in
the agreement, such executive is entitled to receive severance
benefits. Such benefits would be equal to a lump sum payment equal
to all previously accrued cash compensation, three times the sum of
the then-current base salary and highest annual bonus earned within
the previous three calendar years, together with certain other
payments and benefits, including continuation of employee welfare
benefits and an additional payment to compensate the executive for
certain excise taxes imposed upon payments under such agreements.
In addition, such Termination would result in the acceleration of
vesting or lapse of restricted periods on previously granted stock-
based incentive awards.
Board Compensation Committee Report
Conrail's Compensation Committee of the Board of Directors is
composed entirely of outside directors. The Compensation
Committee's executive officer compensation policies for 1995 were as
follows:
1. The Committee continued to emphasize at-risk compensation
based on corporate performance and adopted new performance criteria
for non-cash incentive compensation.
14
<PAGE>
2. The Committee believes an appropriate cash compensation
structure for Conrail executive officers is an annual base salary
slightly below the average for officers with similar positions at
comparable companies, together with a significant component of
performance-related at-risk compensation in the form of an annual
incentive opportunity, resulting in a total cash compensation
opportunity that is slightly above the average for the executive
officers' counterparts at comparable companies. The Committee
believes that setting total cash compensation opportunities slightly
above the total cash compensation opportunities at comparable
companies is an effective method to attract, retain and motivate
qualified executive officers.
In determining 1995 cash compensation levels, the Committee
considered executive officer compensation at companies of a size
comparable to Conrail, i.e., companies with revenues in the $3 - $4
billion range.
3. The Committee, in setting 1995 base salaries for
individual executive officers and, in particular, the changes in
those base salaries between 1994 and 1995, also considered each
executive officer's expertise, scope of responsibility and
achievement, all of which were given equal weight relative to one
another. Achievement is measured against a management style that
promotes customer focus, teamwork and process improvement.
Consistent with the cash compensation structure outlined above, the
average base salaries of the named executives in 1995 were slightly
below the average for officers with similar positions at the
comparable companies.
4. In 1995, performance-related at-risk cash compensation for
all executive officers, other than James A. Hagen and David M.
LeVan, was provided under an incentive plan pursuant to which all
non-union employees were eligible to receive incentive payments.
The size of the incentive awards were intended generally to provide,
when added to the base salaries of the executive officers, total
cash compensation opportunities slightly above the average for the
executive officer's counterparts at comparable companies. In
December 1994, the Committee set two measurements of corporate
performance relevant to the 1995 incentive plan: operating income
and operating ratio (operating expenses as a percent of revenues).
No payment would have been made under the plan unless a specified
level of operating income for 1995 had been attained. The amount of
the payments under the plan was correlated to the 1995 operating
ratio, adjusted to exclude the effect of a one-time charge to
earnings associated with an asset disposition program. Although the
resulting operating ratio did not meet the target, it was sufficient
to entitle participants to an incentive award, although at a
proportionately lower level than would have been earned had the
target been achieved.
5. Executive officers were permitted to defer receipt of
their 1995 incentive awards for up to five years by electing to
receive all or a portion of those awards in restricted shares of
Conrail common stock. As an incentive to so elect, a further award
of restricted stock (bonus shares) was offered to each participant,
the amount of which was determined by the period of restriction
elected by such participant for those bonus shares. The percentage
of the bonus shares in relation to the deferred incentive award was
equal to 10%, 20%, 30%, 40% or 50% for an election of a one, two,
three, four, or five-year restriction, respectively, on the bonus
shares. The same level of benefits was made available to all non-
union employees who elected to defer. As a consequence, the size of
the restricted stock award is a function of Conrail's performance
under the 1995 incentive plan and the individual elections of
participants in the plan to receive their incentive payments in the
form of restricted stock awards. The Committee continues to believe
that such incentives are an appropriate method to more closely align
the personal financial interests of executive officers and employees
with the financial interests of shareholders.
6. For 1995, the Committee approved a new three-year,
performance-based non-cash incentive award program, pursuant to
which all executive officers were granted stock options and
performance shares on January 1, 1995. The size of the awards
granted to executive officers were based on their respective levels.
Mr. Hagen, then Chairman and Chief Executive Officer, was
15
<PAGE>
granted 33,000 stock options and 4,400 performance shares. Mr. LeVan,
in his capacity as President and Chief Operating Officer, was awarded
19,500 stock options and 2,600 performance shares. Other executive
officers, including those named executive officers, received between
3,750 and 9,000 stock options and 500 and 1,200 performance shares,
depending on their level. Coincident with his promotion to
President and Chief Executive Officer upon Mr. Hagen's retirement in
March 1995, Mr. LeVan received an additional award of 11,246 stock
options and 1,499 performance shares, bringing him, on a pro rata
basis, to the level of awards previously established for the Chief
Executive Officer position. In addition, four officers who are not
named in the executive compensation table also received subsequent
awards of stock options and performance shares in recognition of
their promotions during 1995. All of the options referred to herein
have exercise prices equal to the fair market value of Conrail's
Common Stock on the date of the award, and potentially vest annually
in one-third increments based on Conrail's performance as measured
against an annual cash flow goal. The performance share awards are
similarly structured, potentially vesting in one-third increments
contingent upon Conrail's achievement of this same annual cash flow
goal. Options and performance shares that remain unvested after
three years may vest in proportion to Conrail's achievement of 90%
or more of its cumulative three year cash flow goal. Failure to
meet these vesting requirements will result in forfeiture of the
unvested performance shares. The performance-based vesting
described above is a feature of all options and performance shares
granted in 1995 and is intended to encourage corporate performance
that will achieve Conrail's business plan and translate into
increased shareholder value through the market price of Conrail's
Common Stock.
7. The Committee made no changes to the base salary of Mr.
Hagen during his tenure as Chairman and Chief Executive Officer
during 1995, except for a 4 percent competitive salary adjustment
that was applied to the base-salaries of all non-union employees
effective January 1, 1995. This adjustment was designed to address
a shortfall between Conrail non-union salaries and those of its
transportation competitors and other large industrial employers in
the areas where Conrail operates. In addition, Mr. Hagen was
awarded a $75,000 selective cash award in March 1995, as part of a
program under which all non-union employees were eligible to receive
similar awards. The amount of Mr. Hagen's award reflects the value
placed by the Committee on Mr. Hagen's commitment to insure a smooth
transition in leadership. Upon Mr. Hagen's retirement, Mr. LeVan
was promoted to President and Chief Executive Officer, and his
salary was increased from $425,000 to $540,000 to reflect this
increase in responsibility. In setting Mr. LeVan's compensation as
President and Chief Executive Officer, the Committee considered the
base salaries and tenure of Chief Executive Officers of the
comparable companies referred to in paragraph 2 above.
8. The amounts of Messrs. Hagen's and LeVan's annual cash
incentive awards in 1995 were determined based upon the same pre-
established performance criteria as set for all other executive
officers and non-union employees, namely the operating income and
operating ratio goals described above. These awards were made
pursuant to the Conrail Senior Executive Performance Plan, which was
approved by shareholders in 1995 in order that such payments could
qualify as "performance-based compensation" within the meaning of
Section 162(m) of the Internal Revenue Code, and therefore preserve,
to the extent possible, federal income tax deductions available for
executive compensation. However, the Committee reserves the right
to pay compensation that would not qualify as "performance-based"
under Section 162(m) to the extent it determines that it is in the
best interests of Conrail to do so.
Roger S. Hillas, Chairman John C. Marous H. Furlong Baldwin
16
<PAGE>
PERFORMANCE GRAPH
The following line graph depicts a comparison of Conrail's
five-year cumulative total shareholder return, assuming reinvestment
of dividends, with the S&P 500 Stock Index and a railroad peer group
index.
GRAPHICAL MATERIAL OMITTED FOR ELECTRONIC FILING. SEE FOLLOWING PARAGRAPH
AND TABLE FOR NARRATIVE EXPLANATION.
Assumes $100 invested on December 31, 1990 in Conrail Common
Stock, S&P 500 Stock Index and the rail peer group composite (the
returns of which have been weighted according to their respective
market capitalization as of each December 31, the beginning of the periods
for which returns are indicated).
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
Conrail $100 $216 $248 $357 $277 $393
S&P 500 $100 $130 $140 $154 $156 $215
Rail Composite $100 $155 $176 $208 $172 $248
17
<PAGE>
PROPOSAL NO. 2
TO APPROVE THE AMENDMENT OF THE CONRAIL 1991 LONG-TERM INCENTIVE PLAN
On February 21, 1996, acting upon the recommendation of the
Compensation Committee (the "Committee"), the Board of Directors
approved and recommended for submission to the shareholders for
approval the amendment of the 1991 Long-Term Incentive Plan (the
"Plan"). The approval by an affirmative vote of the holders of a
majority of the shares present, in person or by proxy, and entitled
to vote at the 1996 Annual Meeting is required for approval of
amendment of the Plan.
The Board of Directors believes that the Plan has been
effective in allowing Conrail and its subsidiaries to provide
incentives for enhanced individual and corporate performance, to
attract and retain outstanding individuals as officers and key
employees and to align its employees' interests with those of its
shareholders through opportunities to acquire Conrail Common Stock
and payments based on the value of such stock or the achievement of
financial performance goals.
As originally approved by shareholders in 1991, the Plan
authorized up to 3.2 million shares of Common Stock to be issued
with respect to awards thereunder (as adjusted to reflect a 1992 2-
for-1 stock split effected as a dividend). Currently, approximately
600,000 shares remain available for issuance pursuant to the Plan.
The Board believes that amendment of the Plan is now advisable,
including amendments that will permit the Company to continue to
take advantage of certain tax deductions for compensation to the
most highly compensated executive officers, in the event any such
individual earns in excess of $1 million during any tax year.
The principal features of the proposed amendment of the Plan
are summarized below. The following summary does not purport to be
complete and is qualified in its entirety by reference to the text
of the Plan, as amended and restated, which is attached hereto as
Appendix A.
INCREASE IN AUTHORIZED SHARES: Of the 3.2 million shares
originally authorized for grant under the Plan, approximately 2.6
million either have been issued or have been reserved for issuance
under authorized grants. Therefore, there are currently available
approximately 600,000 shares for future awards. The proposed
amendment would increase the number of authorized shares under the
Plan by approximately 3.4 million, such that there would be
available for future issuance a total of 4 million shares under the
amended Plan. The closing price of a share of Conrail Common Stock,
based on the New York Stock Exchange Composite Tape on March 1,
1996, was $71.875.
Upon the expiration, termination or cancellation (in whole or
in part) of unexercised non-qualified or incentive stock options or
the forfeiture of phantom stock or performance shares on which no
dividend equivalents have been paid, the shares of Common Stock
subject thereto would again be available for grant under the Plan.
Shares of Common Stock covered by an option which is surrendered
upon exercise of a stock appreciation right and phantom stock or
performance shares on which dividend equivalents have been paid
shall thereafter be unavailable for grant under the Plan.
ELIGIBILITY: The Plan currently provides for participation by
executives and key employees, as determined by the Committee. The
proposed amendment would provide for participation by employees of
Conrail and its subsidiaries, as determined by the Committee. As of
December 31, 1995, there were approximately 23,500 employees of
Conrail and its subsidiaries, 22,600 of whom are employees of
Consolidated Rail Corporation. Directors who are not full-time
employees are not eligible.
AMENDMENT TO TERMS OF AWARDS: The Plan currently authorizes
the award of non-qualified and incentive stock options, stock
appreciation rights ("SAR") granted in tandem with stock options,
restricted stock and performance shares. The proposed amendment
would authorize the award of phantom stock, in addition to the
foregoing awards. Phantom stock would be issued by Conrail and,
after satisfaction of any requirements as established by the
Committee, would be settled in either Conrail Common Stock or cash,
also at the discretion of the Committee. Conrail may elect to pay the
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equivalent of dividends on shares of phantom stock during the
restricted period, if any, or may permit such payments to accrue in
the form of additional shares of phantom stock. Shares of phantom
stock will not have voting rights.
The proposed amendment reaffirms the Committee's discretion to
provide for the treatment of awards in cases of death, disability,
retirement or other termination of employment and to amend awards,
including to provide for acceleration thereof, upon the occurrence
of a Change of Control, as defined in the amended Plan. The
Committee may not otherwise alter or impair an outstanding award,
without the consent of the affected participants.
With respect to awards based on Conrail's financial and other
performance, the amendment provides that one or more of the
following performance criteria shall be used in determining the
terms of such awards: net income; earnings per share; debt
reduction; safety; on-time performance; return on investment;
operating ratio; cash flow; return on assets; shareholder return;
revenue; customer satisfaction; return on equity; and operating
income. To the extent awards are performance-based, it is intended
that such awards under the Plan qualify as performance-based
compensation within the meaning of Section 162(m) of the Internal
Revenue Code (the "Code"). As required by Section 162(m), the
amended Plan specifies that the maximum number of shares of Common
Stock that may be granted to any individual pursuant to awards in
any Plan year would be 150,000.
With respect to the award of stock options, the Plan provides
that the exercise price of any incentive stock options or non-
qualified stock options may not be less than the fair market value
of Conrail Common Stock on the date the option is granted, and that
the exercise period of any option, as determined by the Committee,
shall begin no less than six months from the date of grant. The
proposed amendment would clarify that no option may be exercised
more than 10 years from the date of grant.
TERMINATION PROVISIONS: If not earlier terminated by Conrail,
the Plan will terminate on May 15, 2001. In order to continue to
make Plan benefits available to Conrail and its subsidiaries beyond
that time, the proposed amendment would extend the termination date
of the Plan to May 15, 2006. In addition, awards granted under the
Plan are exerciseable only by a participant during his or her
lifetime and are non-assignable and non-transferable, except by will
or the laws of decent and distribution. The proposed amendment
would allow awards to be exercised by a designated beneficiary of
the participant or by the executor of the participant's estate.
AMENDMENT OF THE PLAN: The Plan currently provides that the
Board of Directors may alter, suspend or terminate the Plan,
including amendments that may be required to comply with rules
promulgated by the Securities and Exchange Commission. The Board
may not, however, materially increase the maximum number of shares
which may be issued under the Plan (except in the case of
adjustments in the event of capital changes by Conrail, as described
therein), materially increase the benefits accruing to participants
under the Plan or materially modify the Plan eligibility
requirements, without shareholder approval. In addition, the Board
may not alter or impair any award previously granted under the Plan.
FEDERAL INCOME TAX CONSEQUENCES: The principal federal income
tax consequences of the Plan, as amended, under the Code as
currently in effect, to employees and Conrail are set forth below.
The grant of stock options other than incentive stock options
("non-qualified stock options"), SAR's, phantom stock and
performance shares does not result in any taxable income to the
employee or in any tax deduction to Conrail. The grant of
restricted stock does not result in any taxable income to the
employee or in any tax deduction to Conrail, so long as the
employee's interest in such shares is subject to a "substantial risk
of forfeiture" within the meaning of Section 83 of the Internal
Revenue Code. Upon the exercise of a non-qualified stock option,
the excess of the fair market value of the
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shares acquired over their cost to the option holder is taxable to the
option holder as ordinary income and is deductible by Conrail, subject
to the usual rules relating to the reasonableness of compensation. The
option holder's tax basis for the shares is their fair market value at the
time of exercise. Upon the exercise of SAR's, the vesting of
restricted stock, the settlement of phantom stock or the payment of
performance shares, the cash or fair market value of the stock
received is taxable to the recipient as ordinary income and is
deductible by Conrail, subject to the usual rules relating to the
reasonableness of compensation and the potential restrictions on
deductions of compensation under 162(m) of the Code. The employee's
tax basis for any shares received is the fair market value thereof
at the time of such exercise, vesting, settlement or payment.
Income realized on the exercise of non-qualified stock options or
SAR's, the vesting of restricted stock, the settlement of phantom
stock or the payment of performance shares is subject to federal and
(where applicable) state withholding taxes.
If a non-qualified stock option is exercised and the option
price is paid by exchanging other appreciated shares of Common Stock
for the shares subject to the option, the following tax consequences
are applicable: (a) regarding the stock evenly exchanged, no
taxable gain or loss will be recognized by the option holder and the
tax basis and holding period of the old stock carries over to the
new stock; and (b) regarding the additional shares received, the
fair market value of the additional shares will be taxable to the
option holder as ordinary income.
In the event an option holder sells or exchanges stock received
upon exercise of non-qualified stock options, the vesting of
restricted stock, the settlement of phantom stock or the payment of
performance shares, he or she will realize a long-term or short-term
capital gain or loss depending upon the holding period for the
shares and the amount realized in the transaction.
Dividends on restricted stock payable to the employee prior to
the lapse of restrictions will be taxed as dividend income to the
employee, and Conrail will receive no tax deduction for the
dividends paid. Dividend equivalent payments, if any, on phantom
stock, including those in the form of additional shares of phantom
stock, will be taxed as additional compensation and subject to all
applicable withholding, and Conrail will receive a corresponding tax
deduction for the amounts paid.
In general, an employee who is granted an incentive stock
option will not be subject to federal income tax upon the grant or
exercise of the option if (i) the option is exercised within three
months after the termination of employment (with other special rules
for death or disability) and (ii) no disposition of the shares
received upon exercise is made within two years from the date of
grant nor within one year after the date of exercise (collectively,
the "holding periods"). However, the employee could be subject to
the minimum tax on tax preferences upon the exercise of an incentive
stock option, depending upon his or her individual tax situation.
In the event of a sale of the shares received upon exercise of an
incentive stock option after the holding periods, any appreciation
of the shares received above the exercise price should qualify as
capital gain. Conrail is not entitled to a tax deduction with
respect to the grant or exercise of an incentive stock option nor
with respect to any disposition of such shares after the holding
periods. However, if shares acquired pursuant to the exercise of an
incentive stock option are sold by the employee before the end of
the holding periods, any gain on the sale at the time of exercise
will be taxable as ordinary income for the taxable year in which the
sale occurs. Income will be realized only to the extent the amount
received upon sale exceeds the employee's basis for the stock.
Conrail will be entitled to a tax deduction in the amount of the
ordinary income realized by the employee.
GRANTS UNDER THE PLAN, AS AMENDED: The number and types of
awards that may be granted in the future under the Plan as amended,
as well as the number of eligible employees who may be granted such
awards, are not determinable at this time. Currently, there are
approximately 320 active employees who are participants in the Plan.
The proposed amendment would not have affected the
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grant of options, restricted stock or performance shares awarded
under the Plan during 1995. Information with respect to grants made
under the Plan in 1995 is set forth below.
Restricted Performance
Name and Position Options Stock Shares
- ------------------ -------- ---------- -----------
J. A. Hagen...... 33,000 0 4,400(3)
D. M. LeVan...... 30,746 5,921(2) 4,099(3)
H. W. Brown...... 9,000 2,501(2) 1,200(3)
B. B. Wilson..... 9,000 0 1,200(3)
R. J. Conway..... 9,000 0 1,200(3)
G. P. Turner..... 9,000 1,718(2) 1,200(3)
Executive Group.. 187,992 20,301(2) 25,066(3)
Non-Executive
Director Group... 0 0 0
Non-Executive
Officer Group.... 328,765 0 43,830(3)
(1) Mr. Hagen forfeited these options on his retirement in March
1995. Valuation of the options awarded to the named executive
officers appears in the table titled "Option/SAR Grant in Last
Fiscal Year." The theoretical value of options awarded in 1995 to
the Executive Group and to the Non-Executive Officer Group is,
respectively, $2,598,864 and $4,553,400, based on the methodology
described at note (4) to the referenced option grant table.
(2) Awarded on January 31, 1996 as the result of an election to
defer all or part of their 1995 bonuses. The value of these awards
as of their 1996 grant date is discussed at note (2) to the Summary
Compensation Table.
(3) Awarded on January 1, 1995. One third of these awards was
settled in Conrail Common Stock in January 1996 based on Conrail's
financial performance during 1995. The valuation of the settled
awards is discussed at note (2) to the Summary Compensation Table.
The Board of Directors recommends a vote for approval of Proposal No. 2.
PROPOSAL NO. 3
TO RATIFY THE APPOINTMENT OF PRICE WATERHOUSE LLP
AS THE INDEPENDENT ACCOUNTANTS FOR THE YEAR 1996
The Board has selected the firm of Price Waterhouse LLP ("Price
Waterhouse") as independent accountants to audit the books, records
and accounts of Conrail for the current fiscal year, subject to
ratification by vote of Conrail's shareholders. If the shareholders
do not ratify the selection of Price Waterhouse, the selection of
independent accountants will be reconsidered and made by the Board.
It is understood that even if the selection is ratified, the Board,
in its discretion, may direct the appointment of a new independent
accounting firm at any time during the year if it determines that
such a change would be in the best interests of Conrail and its
shareholders. Price Waterhouse has served as Conrail's independent
accountant since 1994.
Representatives of Price Waterhouse are expected to be present
at the Annual Meeting and will have the opportunity to make a
statement if they desire to do so and are expected to be available
to respond to appropriate questions.
The Board of Directors recommends a vote for approval of Proposal No. 3.
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SHAREHOLDER PROPOSALS
Shareholder proposals may, under the rules of the Securities
and Exchange Commission, be submitted for inclusion in Conrail's
proxy statement and form of proxy for the Annual Meeting of
Shareholders currently scheduled for May 21, 1997, but must be
received by Conrail not later than December 3, 1996. Proposals must
be in writing and should be sent via registered, certified or
express mail to: Secretary of the Corporation, Conrail Inc., Two
Commerce Square, 2001 Market Street, Philadelphia, Pennsylvania
19101-1422. 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.
By Order of the Board of Directors
/s/ Allan Schimmel
Allan Schimmel
April 3, 1996 Corporate Secretary
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Appendix A
CONRAIL INC.
1991 LONG-TERM INCENTIVE PLAN
AMENDED AND RESTATED AS OF MAY 15, 1996
Section 1: GENERAL PROVISIONS
1.1 Purposes
The purposes of the 1991 Long-Term Incentive Plan, as
amended and restated, (the "Plan") of Conrail Inc. (the
"Company") are to promote the interests of the Company and
its stockholders by (i) motivating employees, salaried
executives and other key employees of the Company and its
Subsidiaries, by means of performance-related incentives, to
achieve long-range performance goals; (ii) attracting and
retaining salaried executives and other key employees of
outstanding ability; (iii) strengthening the Company's
capability to develop, maintain and direct a competent manage-
ment team; (iv) providing incentive compensation opportu-
nities which are competitive with those of other major cor-
porations; (v) aligning the interests of employees with the
interests of the Company's stockholders; and (vi) enabling
such employees to participate in the long-term growth and
financial success of the Company.
1.2 Definitions
"Award" - means a Stock Option grant, a Right, a
Restricted Stock grant, a Phantom Stock award and/or a
Performance Share award under the Plan.
"Board of Directors" - means the board of directors of
the Company.
"Change of Control" - means any of the following
events or occurrences:
(i) The stockholders of the Company approve a
transaction or transactions (however denominated or
effectuated) with another corporation or other Person
("Combination"), and immediately after such transaction(s)
less than eighty percent (80%) of the combined voting power
of the then-outstanding securities of such corporation or
Person will be held in the aggregate by the holders of
securities entitled, immediately prior to such Combination,
to vote generally in the election of directors of the
Company ("Voting Stock");
(ii) A report is filed on Schedule 13D or Schedule 14D-1
(or any successor schedule, form or report), pursuant to
the Exchange Act, disclosing that any Person has become the
beneficial owner of 20 or more percent of the voting power
of Voting Stock;
(iii) The stockholders of the Company approve the
sale of all or substantially all of its assets to any other
corporation or other Person, and less than eighty percent
(80%) of the combined voting power of the then-outstanding
securities of such corporation or Person immediately after
such transaction will be held in the aggregate by the
holders of Voting Stock immediately prior to such sale;
(iv) At any time, Continuing Directors (as herein
defined) shall not constitute a majority of the members of
the Board ("Continuing Director" means (i) each individual
who has been a director of the Company for at least twenty-
four (24) consecutive months before such time and (ii) each
individual who was nominated or elected to be a director of
the Company by at least two-thirds of the Continuing
Directors at the time of such nomination or election);
(v) The stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company; or
(vi) The Committee determines by a majority vote that
the occurrence, or the threat or imminence of the
occurrence, of another event or situation will have import
or effects similar to the foregoing such that such event or
situation should be considered a Change of Control hereunder.
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Notwithstanding the provisions of the foregoing
subparagraphs (i)-(vi), a Change of Control for purposes of
this Plan shall not be deemed to have occurred solely
because (a) the Company, (b) an entity of which the Company
is the direct or indirect Beneficial Owner (as herein
defined) of 50 or more percent of the voting securities or
(c) any Company-sponsored employee stock ownership plan or
any other employee benefit plan of the Company either files
or becomes obligated to file a report or a proxy statement
under or in response to Schedule 13D, Schedule 14D-1, Form 8-
K or Schedule 14A (or any successor schedule, form or report
or item therein) under the Exchange Act, disclosing
beneficial ownership by it of shares of Voting Stock,
whether in excess of 20 percent or otherwise, or because the
Company reports that a change in control of the Company has
or may have occurred or will or may occur in the future by
reason of such beneficial ownership.
"Code" - means the Internal Revenue Code of 1986, as
amended.
"Committee" - means the Compensation Committee of the
Board of Directors.
"Common Stock" - means the $1.00 par value Common
Stock of the Company.
"Corporation" - means the Company and/or its Subsidiaries.
"Disinterested Person" - has the meaning set forth in
Rule 16b-3(d)(3) promulgated by the Securities and Exchange
Commission under the Exchange Act, as in effect on May 15,
1996.
"Employee" - means any salaried employee of the Corporation.
"Exchange Act" - means the Securities Exchange Act of
1934, as amended.
"Fair Market Value" - means the average of the high
and low prices of the Common Stock on the date on which it
is to be valued hereunder, as reported for New York Stock
Exchange Composite Transactions.
"Incentive Stock Options" - mean Stock Options which
constitute "incentive stock options" under Section 422 (or
any successor section) of the Code.
"Non-Qualified Stock Options" - mean Stock Options
which do not constitute Incentive Stock Options.
"Participant" - means an Employee who is selected by
the Committee to receive an Award under the Plan.
"Performance Cycle" or "Cycle" - means the period of
years selected by the Committee during which the performance
of the Company, the Corporation, or the Participant is mea-
sured for the purpose of determining the extent to which an
Award subject to Performance Goals has been earned.
"Performance Goals" - means the objectives for the
Company, the Corporation, or the Participant that may be
established by the Committee for a Performance Cycle, with
respect to Performance-based awards contingently awarded
under the Plan. The Performance Goals for a Performance
Cycle shall be based on one or more of the following
criteria, as determined by the Committee with respect to a
Performance Cycle:
1. net income 8. cash flow
2. earnings per share 9. return on assets
3. debt reduction 10. shareholder return
4. safety 11. revenue
5. on-time performance 12. customer satisfaction
6. return on investment 13. return on equity
7. operating ratio 14. operating income
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"Performance Share" - means a phantom share equivalent
to one share of Common Stock contingently awarded under
Section 5 of the Plan and subject to one or more Performance
Criteria.
"Phantom Stock" - means an award pursuant to Section 6
of the Plan of a contingent right to receive a share of
Common Stock at a time subsequent to such award.
"Restricted Period" - means the period of years
selected by the Committee during which a grant of Restricted
Stock or Phantom Stock, as the case maybe, is forfeitable to
the Company.
"Restricted Stock" - means shares of Common Stock con-
tingently granted to a Participant under Section 4 of the
Plan.
"Right" - means a stock appreciation right granted to
a Participant under Section 3 of the Plan.
"Stock Option" or "Option" - means an Incentive Stock
Option and/or a Non-Qualified Stock Option granted under
Section 2 of the Plan.
"Subsidiary" - means any corporation in which the
Company possesses directly or indirectly more than fifty
percent (50%) of the total combined voting power of all
classes of its stock.
1.3 Administration
The Plan shall be administered by the Committee, which
shall at all times consist of three or more members, each of
whom is a Disinterested Person. The Committee shall have
sole and complete authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the
operation of the Plan as it shall from time to time deem
advisable, and to interpret the terms and provisions of the
Plan. The Committee's decisions are binding upon all
parties. No member of the Committee shall be liable for any
action or determination made in good faith with respect to
the Plan.
1.4 Eligibility
(a) All Employees of the Company and its Subsidiaries,
as determined at the discretion of the Committee, are
eligible to be Participants in the Plan.
(b) Each Award, and the terms and conditions of such
Award, shall be confirmed in writing by the Company. The
Committee may require Participants to execute agreements
with respect to such Awards.
1.5 Shares Reserved
(a) As of the Effective Date, there shall be reserved
for issuance pursuant to the Plan a total of 4,000,000
shares of Common Stock. In the event that (i) a Stock
Option expires, is cancelled, or is terminated unexercised
as to any shares covered thereby, or (ii) shares or
equivalents on which no dividends or dividend equivalents
have been paid (other than shares of Restricted Stock) are
forfeited for any reason under the Plan, such shares shall
thereafter be available for issuance pursuant to the Plan
and shall be considered as part of the 4,000,000 shares of
Common Stock authorized for issuance pursuant to the Plan.
Shares of Common Stock covered by a Stock Option which is
surrendered upon exercise of a Stock Appreciation Right,
shares of Phantom Stock or Performance Shares on which
dividends, or the equivalent thereof, have been paid, shall
thereafter be unavailable for issuance pursuant to the Plan.
In the event that an Award is purchased pursuant to Section
1.10(c)(ii) hereof, the shares covered by the Award shall
not thereafter be available for issuance pursuant to the
Plan.
(b) In the event of any change in the outstanding
shares of Common Stock by reason of any stock dividend or
split, recapitalization, merger, consolidation, spin-off,
combination or exchange of shares or
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other corporate change, or any distributions to holders of
Common Stock other than normal cash dividends, the Committee
shall make such substitution or adjustment, if any, as it deems
to be equitable, as to the number of shares of Common Stock or
other securities issued or reserved for issuance pursuant to the
Plan, the number of outstanding Stock Options and the option price
thereof, the number of Rights, and the number of outstanding
Performance Shares, the number of outstanding shares of
Phantom Stock and shares of Restricted Stock. Also, in
instances where another corporation or other business entity
is being acquired by the Company, and the Company has
assumed outstanding employee option grants and/or the obli-
gation to make future or potential grants under a prior
existing plan of the acquired entity, similar adjustments
are permitted at the discretion of the Committee.
1.6 Tax Withholding
The Corporation shall have the right to deduct from all
amounts paid in cash (whether under this Plan or otherwise)
any taxes required by law to be withheld therefrom. In the
case of payments of Awards in the form of Common Stock, at
the Committee's discretion the Participant may be required
to pay to the Corporation the amount of any taxes required
to be withheld with respect to such Common Stock, or, in
lieu thereof, the Corporation shall have the right to retain
the number of shares of Common Stock whose Fair Market Value
equals the amount required to be withheld.
1.7 Nontransferability
No right or interest of any Participant in any Award
shall be subject to any lien, obligation or liability of the
Participant, and no Award shall be assignable or transfer-
able, except by will, the laws of descent and distribution.
Notwithstanding the foregoing, a Participant may designate a
beneficiary with respect to the Awards granted to such
Participant. An Award shall be exercisable during the
Participant's life only by such Participant or the guardian
or legal representative of such Participant. After the
Participant's death, an Award shall be exercisable by the
beneficiary designated by the Participant, the executor or
executrix of the Participant's estate or the person or
persons to whom rights under the Award shall pass by will or
the laws of descent and distribution in accordance with the
provisions of the Award and Plan.
1.8 No Right to Employment
No person shall have any claim or right to be granted
an Award, and the grant of an Award shall not be construed
as giving a Participant the right to be retained in the
employ of the Corporation. Further, the Corporation
expressly reserves the right at any time to dismiss a Par-
ticipant free from any liability, or any claim under the
Plan, except as provided herein or in the terms of a Stock
Option, Restricted Stock, Phantom Stock or Performance
Share, which the Committee in its discretion may decide to
provide to Participants.
1.9 Construction of the Plan
The validity, construction, interpretation, administra-
tion and effect of the Plan and of its rules and regula-
tions, and rights relating to the Plan, shall be determined
in accordance with the laws of Pennsylvania. It is intended
that the Plan comply with Rule 16b-3 under the Exchange Act,
as in effect on May 15, 1996, as may be amended from time to
time, and so far as possible, the Plan shall be construed,
interpreted, and administered in a manner consistent with
this intent.
1.10 Amendment
(a) Subject to the Exchange Act and the rules and
regulations thereunder as in effect on May 15, 1996, as may
be amended from time to time, the Board of Directors may
amend, suspend or terminate the Plan or any portion thereof
at any time, provided that no amendment, suspension or
termination shall alter or impair any right theretofore
awarded or granted to any Participant, without the consent
of such Participant.
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(b) With the consent of the Participant affected
thereby, the Committee may amend, cancel, or modify any out
standing Award, including without limitation, to change the
date or dates as of which (i) a Stock Option or right
becomes exercisable or is forfeited if not exercised, (ii)
the restrictions on shares of Restricted Stock are removed,
(iii) a share of Phantom Stock is settled in cash or Common
Stock or (iv) a Performance Share is deemed earned.
(c) Notwithstanding the foregoing, the Committee may
amend or modify any outstanding Award in connection with a
Change of Control to (i) provide for the acceleration of any
time periods relating to the exercise or realization of such
Awards so that such Awards may be exercised or realized in
full on or before a date fixed by the Board of Directors,
(ii) provide for the purchase of such Awards, upon the
Participant's request, for an amount of cash equal to the
amount which could have been attained upon the exercise or
realization of such Awards had such Awards been currently
exercisable or payable, (iii) make such adjustment to the
Awards then outstanding as the Board of Directors deems
appropriate to reflect such transaction or change, or (iv)
cause the Awards then outstanding to be assumed, or new
rights substituted therefor, by the surviving corporation in
such change.
1.11 Effective Date
The amended and restated Plan shall be effective on May
15, 1996 ("Effective Date") if approved by shareholders at
the meeting of shareholders of the Company on such date, and
will terminate on May 15, 2006. No Award may be granted
after the termination of the Plan, but all Awards granted
prior to termination may be exercised in accordance with
their terms.
1.12 General Provisions
(a) Absence on leave approved pursuant to the duly
adopted policies of the Corporation shall not be considered
an interruption or termination of employment or service of
any Employee for purposes of the Plan.
(b) The obligation of the Company to issue, transfer
or deliver Common Stock under the Plan shall be subject to
(i) the effectiveness of a registration statement under the
Securities Act of 1933, as amended, with respect to such
issue, transfer or delivery, if deemed necessary or appro-
priate by counsel for the Company, (ii) the condition that
the shares of Common Stock reserved for issuance, if any,
shall have been listed (or authorized for listing upon
official notice of issuance) upon each stock exchange on
which outstanding shares of the same class may then be
listed and (iii) all other applicable laws, regulations,
rules and orders which shall then be in effect.
(c) The Plan, insofar as it provides for cash pay
ments, shall be unfunded, and the Corporation shall not be
required to segregate any assets which may at any time be
awarded under the Plan. Any liability of the Corporation to
any person which respect to any Award under the Plan shall
be based solely upon any contractual obligations which may
be created by or pursuant to the Plan. No such obligation
of the Corporation shall be deemed to be secured by any
pledge of, or other encumbrance on, any property of the
Corporation.
1.13 Maximum Award
The maximum number of shares to a Participant pursuant
to Awards under this Plan during any calendar year will be
150,000.
1.14 Performance-Based Awards
The Committee may make any Award a Performance-Based
Award through the application of the Performance Goals and
the Performance Cycle.
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Section 2: STOCK OPTIONS
2.1 Authority of Committee
Subject to the provisions of the Plan, the Committee
shall have sole and complete authority to determine the
Employees to whom Stock Options shall be granted, the number
of shares to be covered by each Stock Option and the condi-
tions and limitations, if any, in addition to those set
forth in Section 2.3 hereof, applicable to the exercise of
the Stock Option. The Committee shall have the authority to
make a grant of Stock Options contingent upon the occurrence
of an event, including the exercise of a Stock Option by a
Participant by tender of shares of Common Stock pursuant to
Section 2.3(d) hereof, in which event the Committee may
grant a new Stock Option to such Participant to purchase
that number of shares of Common Stock which equal the number
of shares of Common Stock tendered by such Participant. The
Committee shall have the authority to grant Incentive Stock
Options, or to grant Non-Qualified Stock Options, or to
grant both types of Stock Options, except that Incentive
Stock Options can only be granted to Employees.
In the case of Incentive Stock Options, the maximum
aggregate Fair Market Value (at the date of grant) of the
shares which any Participant may first exercise during any
calendar year, under this Plan or any other plan of the
Company or a corporation which (at the date of grant) is a
parent of the Company or a Subsidiary, shall not exceed
$100,000 or such larger employee grant maximum as shall be
in effect under Section 422 of the Code at the time of
grant, plus such unused limit carryover as is permitted
under Section 422 of the Code.
2.2 Option Price
The Committee shall establish the option price at the
time each Stock Option is granted, which price shall not be
less than one hundred percent (100%) of the Fair Market
Value of the Common Stock on the date of grant. The option
price shall be subject to adjustment in accordance with the
provisions of Section 1.5(b) hereof.
2.3 Exercise of Options
(a) Except as otherwise provided pursuant to Section
2.3(c) hereof, each Stock Option by its terms shall require
the Participant to remain in the continuous employ of the
Corporation for at least six months from the date of grant
of the Stock Option before any part of the Stock Option
shall be exercisable. Stock Options may not be exercisable
later than ten years after their date of grant.
(b) The Committee may determine the terms and
conditions pursuant to which any Stock Option shall become
exercisable and shall expire.
(c) The option price of each share as to which an
Option is exercised shall be paid in full at the time of
such exercise. The Committee may determine whether such
payment shall be made in cash, by tender of shares of Common
Stock owned by the Participant valued at Fair Market Value
as of the date of exercise, or by a combination of cash and
shares of Common Stock.
Section 3: STOCK APPRECIATION RIGHTS
3.1 Terms and Conditions
The Committee may, in its discretion, grant Rights to
the holders of Options under this Plan, but only if such
holders are subject to Section 16(b) of the Exchange Act.
Rights shall be subject to the following terms and condi-
tions:
(a) Each Right shall relate to a specific Stock Option
granted under this Plan (the "related Option") and may be
granted at the same time the related Option is granted or at
any time thereafter prior to the last day on which the
related Option may be exercised. Such Rights shall be sub-
ject to such additional terms and conditions as the
Committee may specify.
A-6
<PAGE>
(b) A Right shall entitle the Participant, upon sur-
render of an exercisable related Option, or an exercisable
portion thereof, to receive from the Company an amount equal
to the Fair Market Value on the surrender date of the shares
that the Participant would have been entitled to purchase on
that date pursuant to the related Option or portion thereof
surrendered, less the amount that the Participant would have
been required to pay to purchase such shares under the
related Option. The amount shall be paid at the sole dis-
cretion of the Committee to the Participant in cash, Common
Stock, or a combination of cash and Common Stock. No frac-
tional shares shall be issued as a result of exercising a
Right. A Participant wishing to exercise a Right shall give
written notice of such exercise to the Company, and the date
the Company receives such notice shall be the day on which
the related Option or portion thereof shall be deemed
surrendered.
Section 4: RESTRICTED STOCK GRANTS
4.1 Authority of the Committee
(a) Subject to the provisions of the Plan, the
Committee shall have sole and complete authority to
determine the Employees to whom shares of Restricted Stock
shall be granted, the number of shares of Restricted Stock
to be granted to each Participant, the duration of the
Restricted Period during which, and the conditions under
which, the Restricted Stock may be forfeited to the Company,
and the terms and conditions of the Award in addition to
those contained in Section 4.2.
(b) Anything in Section 4.1(a) to the contrary
notwithstanding, in the event a Participant elects, in
accordance with the terms of a profit incentive plan
maintained by the Corporation, to receive Common Stock in
lieu of all or a portion of the cash to which such
Participant would otherwise be entitled pursuant to such
profit incentive plan, the Committee shall grant, in one or
more Awards, to such Participant such number of shares of
Restricted Stock at such times and with such durations of
Restricted Periods as shall be set forth in the profit
incentive plan pursuant to which such Participant has made
such election.
4.2 Terms and Conditions
(a) Shares of Restricted Stock may not be sold,
assigned, transferred, pledged or otherwise encumbered,
except as herein provided, during the Restricted Period.
The Participant shall receive his or her award in shares of
Restricted Stock, which shall be registered in the name of
the Participant, together with a stock power endorsed in
blank, by the Company. At the expiration of the Restricted
Period, all restrictions shall lapse and the Participant or
his or her legal representative shall have full and complete
discretion with respect to such shares, except that the
Committee shall have authority to retain up to fifty percent
(50%) of the shares of Restricted Stock as to which
restrictions have lapsed and, in lieu thereof, to pay the
Participant the Fair Market Value of the retained shares in
cash.
(b) Except as provided in subsection (a) hereof, the
Participant shall have all the rights of a holder of Common
Stock, including but not limited to the rights to receive
dividends and to vote during the Restricted Period.
Section 5: PERFORMANCE SHARES
5.1 Authority of Committee
The Committee shall have sole and complete authority to
determine the Employees who shall receive Performance Shares
and the number of such shares for each such Employee for
each Performance Cycle, and to determine the duration of
each Performance Cycle. There may be more than one
Performance Cycle in existence at any one time, and the
duration of Performance Cycles may differ from each other.
At the discretion of the Committee, each award of
Performance Shares may be confirmed by a Performance Share
agreement executed by the Company and the Participant.
A-7
<PAGE>
5.2 Performance Goals
The Committee shall establish Performance Goals for
each Cycle on the basis of such criteria and to accomplish
such objectives as the Committee may from time to time
select. During any Cycle, the Committee may adjust the
Performance Goals for such Cycle as it deems equitable in
recognition of unusual or non-recurring events affecting the
Corporation or Participant or changes in applicable tax laws
or accounting principles.
5.3 Payment of Performance Shares
The Committee shall determine the number of Performance
Shares, up to one hundred and fifty percent (150%) of the
number contingently awarded to each Participant for the
Cycle, which have been earned on the basis of the Corpora-
tion's or the Participant's performance in relation to the
established Performance Goals, with payment in cash (at Fair
Market Value) and shares of Common Stock, in such propor-
tions as the Committee shall determine. Participants may
defer receipt of payment for earned Performance Shares under
terms established by the Committee, if provision is made for
such deferrals by the Committee.
Section 6: PHANTOM STOCK
6.1 Authority of the Committee
(a) Subject to the provisions of the Plan, the
Committee shall have sole and complete authority to
determine the Employees who shall receive awards of Phantom
Stock, the number of shares to be awarded to each
Participant, the duration of any deferral periods or other
conditions that may pertain to any Phantom Stock award and
the conditions under which the Phantom Stock award may be
forfeited.
(b) Anything in Section 6.1(a) to the contrary
notwithstanding, in the event a Participant elects, in
accordance with the terms of a profit incentive plan
maintained by the Corporation, to receive Common Stock in
lieu of all or a portion of the cash to which such
Participant would otherwise be entitled pursuant to such
profit incentive plan, the Committee shall grant, in one or
more Awards, to such Participant such number of shares of
Phantom Stock at such times and subject to such Restricted
Periods as shall be set forth in the profit incentive plan
pursuant to which such Participant has made such election.
6.2 Terms and Conditions
(a) Shares of Phantom Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered. The
Participant shall receive his or her award in shares of
Phantom Stock, for which a book entry shall be made in the
name of the Participant during the Restricted Period. At
the conclusion of the Restricted Period, Common Stock or
cash, or a combination of both shall be issued to the
Participant.
(b) The Company may elect to pay the equivalent of
dividends on the shares of a Participant's Phantom Stock
during the Restricted Period, if any, or may permit such
payments to accrue in the form of additional shares of
Phantom Stock.
(c) Shares of Phantom Stock will not have voting
rights.
A-8
<PAGE>
CONRAIL INC.
Proxy Solicited on behalf of the Board of Directors of
The Company for the Annual Meeting of Shareholders, May 15, 1996
P The undersigned hereby constitutes and appoints Kathleen Foley Feldstein,
R David B. Lewis and John C. Marous, and each of them, as true and lawful
O agents and proxies with full power of substitution in each to represent the
X undersigned at the Annual Meeting of Shareholders of CONRAIL INC. to be held
Y on Wednesday, May 15, 1996 at 9:30 a.m. in The Academy of Music Hall, 1420
Locust Street, Philadelphia, Pennsylvania, and at any adjournments thereof,
on all matters coming before said meeting. If the undersigned participates
in the Consolidated Rail Corporation Employee Stock Ownership Plan (ESOP),
pursuant to which the ESOP account of the undersigned has been allocated
shares of Conrail Inc. Series A ESOP Convertible Junior Preferred Stock
(ESOP Stock), the undersigned hereby directs Fidelity Management Trust
Company, as Trustee to the ESOP, to vote all such shares at the aforesaid
Annual Meeting and any adjournments thereof as designated on the reverse
side of this proxy and in its discretion on such other matters as may
properly come before the meeting.
Election of Directors. Nominees:
Class III-Term Expiring 1999
1. Claude S. Brinegar
2. Daniel B. Burke
3. Roger S. Hillas
4. E. Bradley Jones
You are encouraged to specify your choices by marking the appropriate boxes.
SEE REVERSE SIDE. 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 Proxy Committee cannot vote your shares of
Common Stock unless you sign and return this card. If you do not sign and
return this card, or if you sign and return the card but do not mark the boxes,
your shares of ESOP Stock, if any, will be voted by the ESOP Trustee, together
with unallocated ESOP Stock, in the same manner and proportion as the shares of
ESOP Stock for which valid voting instructions have been received.
Comments:
------------------------------------------------------- SEE REVERSE
------------------------------------------------------- SIDE
<PAGE>
2570
Please mark your
X vote as in this
example.
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 Proposals 1, 2 and 3. With
respect to the effect of the undersigned shareholder's failure to direct the
voting of ESOP Stock, SEE REVERSE SIDE.
The Board of Directors recommends a vote FOR:
1. Election of 2. Approval of 3. Ratification of
Directors Amendments Auditors.
Class III-Term to Conrail
Expiring 1999 1991 Long-
(see reverse). Term
Incentive Plan.
FOR WITHHELD FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
___ ___ ___ ___ ___ ___ ___ ___
For, except vote withheld
from the following nominee(s):
_____________________________
_____________________________
________________________________________________________________________________
Special Action
Will Attend Comments
Annual Meeting _____ on _____
Reverse
Side
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
<PAGE>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Detach Proxy Card Here
Annual
Meeting of
Shareholders
May 15, 1996, 9:30 a.m.
The Academy of Music Hall
1420 Locust Street
Philadelphia, PA
The Academy of Music Hall is located in Center City Philadelphia and is in
close proximity to SEPTA's major mass transit lines. Shareholders attending
the Conrail meeting may use, at their own expense, any of the commercial
parking lots in and around The Academy of Music Hall.
ANNOUNCING CONRAIL'S DirectSERVICE
SHAREHOLDER INVESTMENT PROGRAM
Conrail, in conjunction with First Chicago Trust Company of New York,
will soon implement a DirectSERVICE Shareholder Investment
Program. Features of this low cost shareholder-paid program, include:
* Shareholders of record are automatically enrolled in the program;
* New shareholders can open an account with as little as $250.
Additional shares can be purchased weekly with as little as $50;
* Shares are purchased through First Chicago as an alternative to
the traditional brokerage method;
* Investment amounts can be automatically deducted from the
shareholder's bank account;
* Book entry accounts are established and credited with the
appropriate number of full and fractional shares;
* All or part of regular dividends can be reinvested (dividend
reinvestment automatically continues for current participants);
* Stock certificates can be deposited into the program for
safekeeping. Certificates can be obtained by the shareholder any
time at no cost; and
* Sales of shares can be easily accommodated by calling a toll free
telephone number.
WATCH FOR MORE DETAILS IN THE MAIL ABOUT
THE BENEFITS OF CONRAIL'S DirectSERVICE
SHAREHOLDER INVESTMENT PROGRAM
<PAGE>
Admission Ticket
CONRAIL INC.
Annual Meeting
of
Shareholders
Wednesday, May 15, 1996
9:30 a.m.
The Academy of Music Hall
1420 Locust Street
Philadelphia, PA
Meeting Agenda
--------------
* Welcome by James A. Hagen, Chairman of the Board of Directors
* Presentation of Affidavit of Notice of Meeting
* Report on Quorum
* Report on Appointment of Judge of Election
* Election of Directors to serve until Annual Meeting of Shareholders in 1999
* Approval of Amendments to Conrail 1991 Long-Term Incentive Plan
* Ratification of Price Waterhouse as Independent Auditors
* Remarks by David M. LeVan, President & Chief Executive Officer
* Discussion Period
* Report on Results of Balloting
* Adjournment
It is important that your shares are represented at this meeting, whether or
not you attend the meeting in person. To make sure your shares are
represented, we urge you to complete, detach and mail the proxy card above.
If you plan to attend the Annual Meeting, please mark the appropriate box in
- ----------------------------------------------------------------------------
the Special Action Section of the proxy card above. Display this ticket to the
- ------------------------------------------------------------------------------
Conrail representative at the entrance to The Academy of Music Hall.
- --------------------------------------------------------------------
<PAGE>
