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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 4
to
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
Pursuant to Section 14(d)(4)
of the Securities Exchange Act of 1934
CONRAIL INC.
(Name of Subject Company)
CONRAIL INC.
(Name of Person(s) Filing Statement)
Common Stock, par value $1.00 per share
(including the associated Common Stock Purchase Rights)
(Title of Class of Securities)
208368 10 0
(CUSIP Number of Class of Securities)
Series A ESOP Convertible Junior Preferred Stock, without par value
(including the associated Common Stock Purchase Rights)
(Title of Class of Securities)
N/A
(CUSIP Number of Class of Securities)
James D. McGeehan
Corporate Secretary
Conrail Inc.
2001 Market Street
Two Commerce Square
Philadelphia, Pennsylvania 19101
(215) 209-4000
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person(s) Filing Statement)
With a copy to:
Robert A. Kindler, Esq.
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
(212) 474-1000
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<PAGE>
INTRODUCTION
Conrail Inc. ("Conrail") hereby amends and supplements its
Solicitation/Recommendation Statement on Schedule 14D-9, originally filed
on November 6, 1996, and amended on November 7, 1996, November 8, 1996 and
November 13, 1996 (as amended, the "Norfolk Schedule 14D-9"), with respect
to an offer by Atlantic Acquisition Corporation, a Pennsylvania corporation
("Atlantic") and a wholly owned subsidiary of Norfolk Southern Corporation,
a Virginia corporation ("Norfolk"), to purchase all the issued and
outstanding Shares of Conrail. Capitalized terms not defined herein have
the meanings assigned thereto in the Norfolk Schedule 14D-9.
Item 8. Additional Information to be Furnished.
Item 8 of the Norfolk Schedule 14D-9 is hereby amended and
supplemented by adding the following text at the end thereof:
On November 15, 1996, Norfolk filed its Second Amended
Complaint for Declaratory and Injunctive Relief in the United States
District Court of the Eastern District of Pennsylvania against
Conrail, CSX and the directors of Conrail. Norfolk's second amended
complaint amends its original complaint, as amended, filed as Exhibit
(c)(4) hereto, principally by asserting additional allegations of
misrepresentations and omissions of material fact. Conrail believes
that the allegations set forth in Norfolk's second amended complaint
are entirely without merit. The Norfolk second amended complaint
specifically alleges the following misrepresentations and omissions of
material fact by Conrail and CSX (capitalized terms used in the
following quoted paragraphs not defined herein shall have the meanings
set forth in the Norfolk second amended complaint):
"95. On October 15, 1996, Conrail and CSX issued press releases
announcing the CSX transaction, and Conrail published and filed preliminary
proxy materials with the SEC. On October 16, 1996, CSX filed and published
its Schedule 14D-1 Tender Offer Statement and Conrail filed its
Schedule 14D-9 Solicitation/Recommendation Statement. These communications
to Conrail's shareholders reflect a scheme by defendants to coerce, mislead
and fraudulently manipulate such shareholders to swiftly deliver control of
Conrail to CSX and effectively frustrate any competing higher bid.
<PAGE>
96. Conrail's Preliminary Proxy Statement contains the following
misrepresentations of fact:
(a) Conrail states that "certain provisions of
Pennsylvania law effectively preclude . . . CSX from
purchasing 20% or more" of Conrail's shares in the
CSX Offer "or in any other manner (except the [CSX]
Merger". This statement is false. The provisions of
Pennsylvania law to which Conrail is referring are
those of Subchapter 25E of the Pennsylvania Business
Corporation law. This law does not "effectively
preclude" CSX from purchasing 20% or more of Conrail's
stock other than through the CSX Merger. Rather, it
simply requires a purchaser of 20% or more of
Conrail's voting stock to pay a fair price in cash, on demand,
to the holders of the remaining 80% of the shares.
The real reason that CSX will not purchase 20% or more of
Conrail's voting stock absent the Charter Amendment is
that, unlike NS, CSX is unable or unwilling to pay a
fair price in cash for 100% of Conrail's stock.
(b) Conrail states that its "Board of Directors
believes that Conrail shareholders should have the
opportunity to receive cash in the near term for 40%
of [Conrail's] shares", and that "[t]he Board of
Directors believes it is in the best interests of
shareholders that they have the opportunity to receive
cash for 40% of their shares in the near term". These
statements are false. First of all, the Conrail Board
believes that Conrail shareholders should have the
opportunity to receive cash in the near-term for 40%
of Conrail's shares only if such transaction will
swiftly deliver effective control of Conrail to CSX.
Second, the Conrail Board of Directors does not
believe that such swift transfer of control to CSX is
in the best interests of Conrail shareholders; rather,
the Conrail Board of Directors believes that swift
transfer of effective control over Conrail to CSX
through the CSX Offer will lock-up the CSX Transaction
and preclude Conrail shareholders from any opportunity
to receive the highest reasonably available price in a
sale of control of Conrail.
<PAGE>
97. CSX's Schedule 14D-1 contains the following misrepresentations of
fact:
(a) CSX states that:
At any time prior to the announcement by
[Conrail] or an Acquiring Person that an
Acquiring Person has become such, [Conrail] may redeem the
[Conrail Poison Pill Plan] rights. . . .
This statement is false. In fact, the Conrail Poison
Pill rights are redeemable any time prior to the
Distribution Date. After the Distribution Date, they
cannot be redeemed. CSX further states that:
The terms of the [Conrail Poison Pill]
rights may be amended by the [Conrail Board] without
the consent of the holders of the Rights . . . to
make any other provision with respect to the
Rights which [Conrail] may deem desirable;
provided that from and after such time as
Acquiring Person becomes such, the Rights may not
be amended in any manner which would adversely
affect the interests of holders of Rights.
This statement is also false. The Conrail Board's
power to freely amend the poison pill rights
terminates on the Distribution Date, not the date when someone
becomes an Acquiring Person. These misrepresentations
operate to conceal the fact that the Conrail Board
will lose its power to control the drastic effects of the
poison pill ten days following commencement of a
competing tender offer.
(b) CSX states that the "purpose of the [CSX]
Offer is for [CSX] . . . to acquire a significant
equity interest in [Conrail] as the first step in a
business combination of [CSX] and [Conrail]". This
statement is false. The purpose of the CSX Offer is
to swiftly transfer effective control over Conrail to
CSX in order to lock up the CSX Transaction and foreclose
the acquisition of Conrail by any competing higher
bidder.
(c) CSX states that "the Pennsylvania Control
Transaction Law effectively precludes [CSX, through
its acquisition subsidiary] from purchasing 20% or more
of Conrail's shares pursuant to the [CSX] Offer". This
<PAGE>
statement is false. The provisions of Pennsylvania
law to which Conrail is referring are those of
Subchapter 25E of the Pennsylvania Business Corporation law.
This law does not "effectively preclude" CSX from
purchasing 20% or more of Conrail's stock other than
through the CSX Merger. Rather, it simply requires a
purchaser of 20% or more of Conrail's voting stock to
pay a fair price in cash, on demand, to the holders of
the remaining 80% of the shares. The real reason that
CSX will not purchase 20% or more of Conrail's voting
stock absent the Charter Amendment is that, unlike NS,
CSX is unable or unwilling to pay a fair price in cash
for 100% of Conrail's stock.
98. Conrail's Schedule 14D-9 states that "the [CSX Transaction] . . .
is being structured as a true merger-of-equals transaction". This statement
is false. The CSX Transaction is being structured as a rapid, locked-up
sale of control of Conrail to CSX involving a significant, albeit
inadequate, control premium.
99. Each of the Conrail Preliminary Proxy Statement, the CSX
Schedule 14D-1, and the Conrail Schedule 14D-9 omit to disclose the
following material facts, the disclosure of which are necessary to make the
statements made in such documents not misleading:
(a) That the Conrail Board will lose its power
to redeem or freely amend the Conrail Poison Pill Plan
rights on the "Distribution Date", which will occur 10
business days from the date when a competing tender
offer for Conrail is commenced.
(b) That both Conrail (and its senior
management) and CSX (and its senior management) knew (i) that NS
was keenly interested in acquiring Conrail, (ii) that
NS has the financial capacity and resources to pay a
higher price for Conrail than CSX could, and
(iii) that a financially superior competing bid for Conrail by
NS was inevitable.
(c) That Conrail management led NS to believe
that if and when the Conrail Board determined to sell
Conrail, it would do so through a process in which NS
would be given the opportunity to bid, and that in the
several weeks prior to the announcement of the CSX
Transaction, defendant LeVan on two occasions
prevented Mr. Goode from presenting an acquisition proposal to
<PAGE>
Conrail by stating to him that making such a proposal
would be unnecessary and that Mr. LeVan would contact
Mr. Goode concerning NS's interest in acquiring
Conrail following (i) the Conrail Board's strategic planning
meeting scheduled for September 1996 and (ii) a
meeting of the Conrail Board purportedly scheduled for
October 16, 1996.
(d) That in September of 1994, NS had proposed a
stock-for-stock acquisition of Conrail at an exchange
ratio of 1.1 shares of NS stock for each share of
Conrail stock, which ratio, if applied to the price of
NS stock on the day before announcement of the CSX
Transaction, October 14, 1996, implied a bid by NS
worth over $101 per Conrail share.
(e) That the CSX Transaction was structured to
swiftly transfer effective, if not absolute voting
control over Conrail to CSX, and to prevent any other
bidders from acquiring Conrail for a higher price.
(f) That although Conrail obtained opinions from
Morgan Stanley and Lazard Freres that the
consideration to be received by Conrail stockholders in the CSX
Transaction was "fair" to such shareholders from a
financial point of view, Conrail's Board did not ask
its investment bankers whether the CSX Transaction
consideration was adequate, from a financial point of
view, in the context of a sale of control of Conrail
such as the CSX Transaction.
(g) That although in arriving at their
"fairness" opinions, both Morgan Stanley and Lazard Freres
purport to have considered the level of consideration
paid in comparable transactions, both investment
bankers failed to consider the most closely comparable
transaction-- NS's September 1994 merger proposal,
which as noted above, would imply a price per Conrail
share in excess of $101.
(h) That, if asked to do so, Conrail's
investment bankers would be unable to opine in good faith that
the consideration offered in the CSX Transaction is
adequate to Conrail's shareholders from a financial
point of view.
(i) That Conrail's Board failed to seek a
fairness opinion from its investment bankers concerning
<PAGE>
the $300 million break-up fee included in the CSX
Transaction.
(j) That Conrail's Board failed to seek a
fairness opinion from its investment bankers
concerning the Stock Option Agreement granted by Conrail to CSX
in connection with the CSX Transaction.
(k) That the Stock Option Agreement is
structured so as to impose increasingly severe dilution costs on
a competing bidder for control of Conrail for
progressively higher acquisition bids.
(l) That the Conrail Board intends to withhold
the filing of the Charter Amendment following its
approval by Conrail's stockholders if the
effectiveness of such amendment would facilitate any bid for
Conrail other than the CSX Transaction.
(m) That the Charter Amendment and/or its
submission to a vote of the Conrail shareholders is
illegal and ultra vires under Pennsylvania law.
(n) That the Conrail Board's discriminatory
(i) use of the Charter Amendment, (ii) amendment of the
Conrail Poison Pill and (iii) action exempting the CSX
Transaction from Pennsylvania's Business Combination
Statute, all to facilitate the CSX Transaction and to
preclude competing financially superior offers for
control of Conrail, constitute a breach of the
defendant directors' fiduciary duty of loyalty.
(o) That Conrail's Board failed to conduct a
reasonable, good faith investigation of all reasonably
available material information prior to approving the
CSX transaction and related agreements, including the
lock-up Stock Option Agreement.
(p) That in recommending that Conrail's
shareholders tender their shares to CSX in the CSX
Offer, Conrail's Board did not conclude that doing so
would be in the best interests of Conrail's
shareholders.
(q) That in recommending that Conrail's
shareholders approve the Charter Amendment, the
Conrail Board did not conclude that doing so would be in the
best interests of Conrail's shareholders.
<PAGE>
(r) That in recommending that Conrail
shareholders tender their shares to CSX in the CSX
Offer, primary weight was given by the Conrail Board
to interests of persons and/or groups other than
Conrail's shareholders.
(s) That in recommending that Conrail
shareholders tender their shares to CSX in the CSX
Offer, primary weight was given to the personal
interests of defendant LeVan in increasing his
compensation and succeeding Mr. Snow as Chairman and
Chief Executive Officer of the combined CSX/Conrail
company.
(t) That the Continuing Director Requirement in
Conrail's Poison Pill (described below in
paragraphs 80 through 88, adopted by Conrail's board in September
1995 and publicly disclosed at that time, is illegal
and ultra vires under Pennsylvania law and therefore
is void and unenforceable.
(u) That, in deciding to pursue a transaction
with CSX, the Conrail Board relied on an internal
management analysis that was based on public
information as opposed to analysis by Conrail's
financial advisers.
100. In connection with the defendants' announcement of the Revised
CSX Transaction on November 6, 1996 and the Conrail Board's Schedule 14D-9
recommendation against the NS Offer, defendants issued several false and
misleading statements:
(a) In their joint press release dated November
6, 1996, defendants:
(i) stated that the Conrail Board carefully
considered the relative merits of the CSX
Transaction and the NS Proposal, when in fact
they specifically directed their financial advisors
not to do so in rendering their fairness
opinions;
(ii) claim that they have discovered
additional synergies of $180 million that "will
be realized" in connection with the CSX
Transaction, yet omitted disclosure in the press
release or in any disclosure materials of any
support or explanation of how and why these
claimed additional synergies
<PAGE>
were suddenly discovered at or about the time of announcement
of the increase in the cash component of the CSX
Transaction.
(b) In CSX's Schedule 14D-1, Amendment No. 4, defendant CSX, with
Conrail's knowing and active participation:
(i) states that the NS Proposal is a
"nonbid," when in fact it is a bona fide superior
offer that is available to Conrail shareholders
if the Conrail board were to properly observe its
fiduciary duties and recognize that the purported
contractual prohibitions against doing so
contained in the CSX Merger Agreement are illegal
and unenforceable;
(ii) states falsely that Norfolk Southern
initiated discussions with CSX during the weekend
of November 2 and 3, when in fact CSX initiated
those talks;
(iii) states that the November 2 and 3 talks
concerned sales of Conrail assets to NS after an
acquisition of Conrail by CSX, while in fact such
discussions also included scenarios in which NS
would acquire Conrail and then sell certain
Conrail assets to CSX;
(iv) state that the Conrail board "carefully
considered" the relative merits of a merger with
Norfolk Southern rather than with CSX, while in
fact Conrail's financial advisors were instructed
not to do so in rendering their fairness opinions;
(v) fails to disclose the basis for and
analysis, if any, underlying the "discovery" of
an additional $180 million in CSX/Conrail merger
synergies.
(c) In Conrail's Schedule 14D-9 with respect to
the NS Offer, defendant Conrail, with CSX's knowing and
active participation:
(i) stated that Conrail's board of directors
"unanimously recommends" that Conrail
shareholders not tender their shares into the NS Offer while
failing to disclose that the directors were bound
<PAGE>
by contract, under the CSX Merger Agreement, to
make such recommendation, that such contractual
obligation is void under Pennsylvania law, and
what effect the unenforceability of such
contractual obligation, if considered by the Conrail
board, would have upon their recommendation;
(ii) stated that Conrail's board of directors
"unanimously recommends" that Conrail
shareholders who desire to receive cash for their shares
tender their shares in the CSX Offer, while
failing to disclose that the CSX Merger Agreement
bound the directors contractually to make such
recommendation, that such contractual obligation
is void under Pennsylvania law, and what effect
the unenforceability of such contractual
obligation, if considered by the Conrail board,
would have upon their recommendation;
(iii) failed to disclose that in negotiating
the revised terms of the CSX Transaction, Conrail
could have demanded, in consideration for
agreeing to the revised terms, that its board of
directors be released from the poison pill lock-in and 180-
day lock-out provisions, that Conrail management
and Conrail's advisors failed to so inform the
Conrail board, and that instead, management
unilaterally determined to negotiate an increase
in the lock-out provision from 180 days to 270
days;
(iv) failed to disclose the basis for and
analysis underlying the defendants "discovery" of
$180 million in new CSX/Conrail merger synergies.
(v) failed to disclose the basis for the
opinions of Conrail's investment bankers that the
CSX Transaction was "fair" to shareholders from a
financial perspective.
(vi) stated that, in rendering their fairness
opinions to the Conrail Board, Conrail's
financial advisers did not address the relative merits of
the CSX and Norfolk Southern transactions, while
failing to disclose that in fact Conrail's
financial advisers provided Conrail with advice
<PAGE>
concerning the relative merits of the CSX and
Norfolk Southern tender offers.
(vii) failed to disclose the substance of its
financial advisers' advice concerning the
relative merits of the CSX and Norfolk Southern
transactions.
(d) In Conrail's Schedule 14D-9, Amendment No. 4, with respect to the
CSX Offer, defendant Conrail, with CSX's knowing and active participation:
(i) stated that Conrail's board of directors
"unanimously recommends" that Conrail
shareholders not tender their shares into the NS Offer while
failing to disclose that the directors were bound
by contract, under the CSX Merger Agreement, to
make such recommendation, that such contractual
obligation is void under Pennsylvania law, and
what effect the unenforceability of such con-
tractual obligation, if considered by the Conrail
board, would have upon their recommendation;
(ii) stated that Conrail's board of directors
"unanimously recommends" that Conrail
shareholders who desire to receive cash for their shares
tender their shares in the CSX Offer, while
failing to disclose that the CSX Merger Agreement
bound the directors contractually to make such
recommendation, that such contractual obligation
is void under Pennsylvania law, and what effect
the unenforceability of such contractual
obligation, if considered by the Conrail board,
would have upon their recommendation;
(iii) failed to disclose that in negotiating
the revised terms of the CSX Transaction, Conrail
could have demanded, in consideration for
agreeing to the revised terms, that its board of
directors be released from the poison pill lock-in and 180-
day lock-out provisions, that Conrail management
and Conrail's advisors failed to so inform the
Conrail board, and that instead, management
unilaterally determined to negotiate an increase
in the lock-out provision from 180 days to 270
days;
<PAGE>
(iv) failed to disclose the basis for and
analysis, if any, underlying the defendants
"discovery" of $180 million in new CSX/Conrail
merger synergies.
(v) failed to disclose the basis for the
opinions of Conrail's investment bankers that the
CSX Transaction was "fair" to shareholders from a
financial perspective.
(vi) stated that, in rendering their fairness
opinions to the Conrail Board, conrail's
financial advisers did not address the relative merits of
the CSX and Norfolk Southern transactions, while
failing to disclose that in fact Conrail's
financial advisers provided Conrail with advice
concerning the relative merits of the CSX and
Norfolk Southern tender offers.
(vii) failed to disclose the substance of its
financial advisers' advice concerning the
relative merits of the CSX and Norfolk Southern
transactions."
A copy of Norfolk's second amended complaint is attached hereto as
Exhibit (c)(5) and is incorporated herein by reference, and the foregoing
summary description is qualified in its entirety by reference to such
exhibit.
Item 9. Materials to be filed as Exhibits.
Item 9 of the Norfolk Schedule 14D-9 is hereby amended and
supplemented by adding the following text thereto:
(c)(5) Second Amended Complaint in Norfolk Southern et. al. v.
Conrail Inc., et al., No. 96-CV-7167, filed on November 15,
1996 in the United States District Court for the Eastern
District of Pennsylvania (incorporated by reference to
Exhibit (c)(12) to the CSX 14D-9).
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete
and correct.
CONRAIL INC.
By /s/ Timothy T. O'Toole
------------------------------------
Name: Timothy T. O'Toole
Title: Senior Vice President--Finance
Dated as of November 18, 1996
<PAGE>
EXHIBIT INDEX
Exhibit Description Page No.
*(a)(1) Text of press release issued by Conrail
dated October 23, 1996 (incorporated by
reference to Exhibit (a)(9) to the
Solicitation/Recommendation Statement on
Schedule 14D-9 of Conrail Inc. dated
October 16, 1996, as amended (the "CSX 14D-9"))...
*(a)(2) Text of press release issued by Norfolk,
dated October 23, 1996 (incorporated by
reference to Exhibit (a)(8) to the CSX
14D-9)............................................
*(a)(3) Text of press release issued by Conrail and
CSX dated November 6, 1996........................
*(a)(4) Letter to shareholders of Conrail dated
November 6, 1996..................................
*(a)(5) Text of press release issued by Conrail,
dated November 7, 1996 (incorporated by
reference to Exhibit (a)(16) to the CSX
14D-9)............................................
*(a)(6) Text of press release issued by Conrail,
dated November 7, 1996 (incorporated by
reference to Exhibit (a)(17) to the CSX
14D-9)............................................
*(a)(7) Text of press release issued by Conrail,
dated November 8, 1996 (incorporated by
reference to Exhibit (a)(18) to the CSX
14D-9)............................................
*(a)(8) Text of press release issued by Conrail and
CSX, dated November 13, 1996 (incorporated
by reference to Exhibit (a)(19) to the CSX
14D-9)............................................
(b) Not applicable....................................
*(c)(1) Pages 4-5 and 9-14 of Conrail's Proxy
Statement dated April 3, 1996 (incorporated
by reference to Exhibit (c)(7) to the CSX
14D-9)............................................
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* Previously filed
<PAGE>
*(c)(2) Employment Agreement of Mr. David M. LeVan
dated as of October 14, 1996 (incorporated
by reference to Exhibit (c)(5) to the CSX
14D-9)............................................
*(c)(3) Change of Control Agreement of Mr. David M.
LeVan dated as of October 14, 1996
(incorporated by reference to Exhibit
(c)(6) to the CSX 14D-9)..........................
*(c)(4) First Amended Complaint in Norfolk Southern
et al. v. Conrail Inc., et al., No. 96-CV-
7167, filed on October 28, 1996 in the
United States District Court for the
Eastern District of Pennsylvania (incorporated by
reference to Exhibit (c)(9) to the
CSX 14D-9).......................................
(c)(5) Second Amended Complaint in Norfolk
Southern et. al. v. Conrail Inc., et al.,
No. 96-CV-7167, filed on November 15, 1996 in
the United States District Court for the
Eastern District of Pennsylvania
(incorporated by reference to
Exhibit (c)(12) to the CSX 14D-9)................
- ---------------------
* Previously filed
