-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T8X/Ggw8f/J1ZKyaHOGTbVbVOSxORvRCpSGhdWhydMBtgEarpf7pcoLIydOwTQRW OwwA7du8j3Bj6fBshe8G4A== 0000950123-96-005719.txt : 19961017 0000950123-96-005719.hdr.sgml : 19961017 ACCESSION NUMBER: 0000950123-96-005719 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 19961016 SROS: NYSE GROUP MEMBERS: CSX CORP GROUP MEMBERS: GREEN ACQUISITION CORP. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CONRAIL INC CENTRAL INDEX KEY: 0000897732 STANDARD INDUSTRIAL CLASSIFICATION: RAILROADS, LINE-HAUL OPERATING [4011] IRS NUMBER: 232728514 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-42777 FILM NUMBER: 96644399 BUSINESS ADDRESS: STREET 1: TWO COMMERCE SQ STREET 2: P O BOX 41417 CITY: PHILADELPHIA STATE: PA ZIP: 19101-1417 BUSINESS PHONE: 2152094434 MAIL ADDRESS: STREET 1: P.O. BOX 41429 STREET 2: 2001 MARKET STREET CITY: PHILADELPHIA STATE: PA ZIP: 19101-1429 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CONRAIL INC CENTRAL INDEX KEY: 0000897732 STANDARD INDUSTRIAL CLASSIFICATION: RAILROADS, LINE-HAUL OPERATING [4011] IRS NUMBER: 232728514 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: 1934 Act SEC FILE NUMBER: 005-42777 FILM NUMBER: 96644400 BUSINESS ADDRESS: STREET 1: TWO COMMERCE SQ STREET 2: P O BOX 41417 CITY: PHILADELPHIA STATE: PA ZIP: 19101-1417 BUSINESS PHONE: 2152094434 MAIL ADDRESS: STREET 1: P.O. BOX 41429 STREET 2: 2001 MARKET STREET CITY: PHILADELPHIA STATE: PA ZIP: 19101-1429 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CSX CORP CENTRAL INDEX KEY: 0000277948 STANDARD INDUSTRIAL CLASSIFICATION: RAILROADS, LINE-HAUL OPERATING [4011] IRS NUMBER: 621051971 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: ONE JAMES CNTR STREET 2: 901 E CARY ST CITY: RICHMOND STATE: VA ZIP: 23219 BUSINESS PHONE: 8047821400 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CSX CORP CENTRAL INDEX KEY: 0000277948 STANDARD INDUSTRIAL CLASSIFICATION: RAILROADS, LINE-HAUL OPERATING [4011] IRS NUMBER: 621051971 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: ONE JAMES CNTR STREET 2: 901 E CARY ST CITY: RICHMOND STATE: VA ZIP: 23219 BUSINESS PHONE: 8047821400 SC 14D1 1 SCHEDULE 14D-1 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 14D-1 TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 AND SCHEDULE 13D ------------------------ CONRAIL INC. (NAME OF SUBJECT COMPANY) CSX CORPORATION GREEN ACQUISITION CORP. (BIDDERS) COMMON STOCK, PAR VALUE $1.00 PER SHARE (TITLE OF CLASS OF SECURITIES) 208368 10 0 (CUSIP NUMBER OF CLASS OF SECURITIES) SERIES A ESOP CONVERTIBLE JUNIOR PREFERRED STOCK, WITHOUT PAR VALUE (TITLE OF CLASS OF SECURITIES) NOT AVAILABLE (CUSIP NUMBER OF CLASS OF SECURITIES) MARK G. ARON CSX CORPORATION ONE JAMES CENTER 901 EAST CARY STREET RICHMOND, VIRGINIA 23219-4031 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDER) WITH A COPY TO: PAMELA S. SEYMON WACHTELL, LIPTON, ROSEN & KATZ 51 WEST 52ND STREET NEW YORK, NEW YORK 10019 TELEPHONE: (212) 403-1000 ------------------------ CALCULATION OF FILING FEE - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
TRANSACTION VALUATION* AMOUNT OF FILING FEE** - --------------------------------- --------------------------------- $1,652,061,470 $330,413
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- * For purposes of calculating the filing fee only. This calculation assumes the purchase of an aggregate of 17,860,124 Shares of Common Stock, par value $1.00 per share, or Series A ESOP Convertible Junior Preferred Stock, without par value, of Conrail Inc. at $92.50 net per share in cash. ** The amount of the filing fee, calculated in accordance with Rule 0-11(d) of the Securities Exchange Act of 1934, as amended, equals 1/50th of one percent of the aggregate value of cash offered by Green Acquisition Corp. for such number of Shares. ------------------------ / / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. Amount Previously Paid: Not applicable Form or Registration No.: Not applicable Filing Party: Not applicable Date Filed: Not applicable
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 CUSIP NO. 208368 10 0 Page 1 of 2 pages 14D-1 - ---------------------------------------------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON CSX CORPORATION - ---------------------------------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) /X/ - ---------------------------------------------------------------------------------------------------------- 3. SEC USE ONLY - ---------------------------------------------------------------------------------------------------------- 4. SOURCE OF FUNDS BK, WC - ---------------------------------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(e) or 2(f) / / - ---------------------------------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION VIRGINIA - ---------------------------------------------------------------------------------------------------------- 7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 0 See Section 13 of the Offer to Purchase, dated October 16, 1996 filed as Exhibit (a)(1) hereto - ---------------------------------------------------------------------------------------------------------- 8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES / / - ---------------------------------------------------------------------------------------------------------- 9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) 0% - ---------------------------------------------------------------------------------------------------------- 10. TYPE OF REPORTING PERSON HC and CO - ----------------------------------------------------------------------------------------------------------
3 page 2 of 2 pages CUSIP NO. 208368 10 0 14D-1 - ---------------------------------------------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON GREEN ACQUISITION CORP. - ---------------------------------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) /X/ - ---------------------------------------------------------------------------------------------------------- 3. SEC USE ONLY - ---------------------------------------------------------------------------------------------------------- 4. SOURCE OF FUNDS AF - ---------------------------------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(e) or 2(f) / / - ---------------------------------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION PENNSYLVANIA - ---------------------------------------------------------------------------------------------------------- 7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 0 - ---------------------------------------------------------------------------------------------------------- 8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES / / - ---------------------------------------------------------------------------------------------------------- 9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) 0% - ---------------------------------------------------------------------------------------------------------- 10. REPORTING PERSON CO - ----------------------------------------------------------------------------------------------------------
4 ITEM 1. SECURITY AND SUBJECT COMPANY. (a) The name of the subject company is Conrail Inc., a Pennsylvania corporation (the "Company"). The address of the Company's principal executive offices is 2001 Market Street, Two Commerce Square, Philadelphia, Pennsylvania 19101-1417. (b) This Statement on Schedule 14D-1 relates to the offer by Green Acquisition Corp. ("Purchaser"), a Pennsylvania corporation and a wholly owned subsidiary of CSX Corporation, a Virginia corporation ("Parent"), to purchase an aggregate of 17,860,124 shares of (i) Common Stock, par value $1.00 per share (the "Common Shares"), and (ii) Series A ESOP Convertible Junior Preferred Stock, without par value (the "ESOP Preferred Shares" and, together with the Common Shares, the "Shares"), of the Company, including, in each case, the associated Common Stock Purchase Rights, upon the terms and subject to the conditions set forth in the Offer to Purchase dated October 16, 1996 and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, constitute the "Offer") at a purchase price of $92.50 per Share, net to the tendering shareholder in cash. At October 10, 1996, 80,178,281 Common Shares and 9,571,086 ESOP Preferred Shares were outstanding. The information set forth under "Introduction" in the Offer to Purchase annexed hereto as Exhibit (a)(1) is incorporated herein by reference. (c) The information set forth under "Price Range of Shares; Dividends" in the Offer to Purchase is incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND. (a)-(d); (g) This Statement is being filed by Purchaser and Parent. The information set forth under "Introduction" and "Certain Information Concerning Purchaser and Parent" in the Offer to Purchase and Schedule I thereto is incorporated herein by reference. (e)-(f) During the last five years, neither Purchaser, Parent nor any persons controlling Purchaser, nor, to the best knowledge of Purchaser or Parent, any of the persons listed on Schedule I to the Offer to Purchase (i) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which any such person was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. (a)-(b) The information set forth under "Introduction," "Background of the Offer; Contacts with the Company," "Purpose of the Offer and the Merger; Plans for the Company," "Merger Agreement; Other Agreements," "Certain Information Concerning the Company" and "Certain Information Concerning Purchaser and Parent" in the Offer to Purchase is incorporated herein by reference. ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a)-(b) The information set forth under "Introduction" and "Source and Amount of Funds" in the Offer to Purchase is incorporated herein by reference. (c) Not applicable. ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER. (a)-(e) The information set forth under "Introduction," "Background of the Offer; Contacts with the Company," "Purpose of the Offer and the Merger; Plans for the Company" and "Merger Agreement; Other Agreements" in the Offer to Purchase is incorporated herein by reference. (f)-(g) The information set forth under "Introduction" and "Effect of the Offer on the Market for the Common Shares; Exchange Listing and Exchange Act Registration; Margin Regulations" in the Offer to Purchase is incorporated herein by reference. ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a)-(b) The information set forth under "Introduction," "Certain Information Concerning Purchaser and Parent" and "Merger Agreement; Other Agreements" in the Offer to Purchase is incorporated herein by reference. 5 ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES. The information set forth under "Introduction," "Background of the Offer; Contacts with the Company," "Purpose of the Offer and the Merger; Plans for the Company," "Certain Information Concerning Purchaser and Parent," and "Merger Agreement; Other Agreements" in the Offer to Purchase is incorporated herein by reference. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth under "Fees and Expenses" in the Offer to Purchase is incorporated herein by reference. ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS. The information set forth under "Certain Information Concerning Purchaser and Parent" in the Offer to Purchase is incorporated herein by reference. ITEM 10. ADDITIONAL INFORMATION. (a) Not applicable. (b)-(c) The information set forth under "Introduction" and "Certain Legal Matters; Regulatory Approvals" in the Offer to Purchase is incorporated herein by reference. (d) The information set forth under "Effect of the Offer on the Market for the Common Shares; Exchange Listing and Exchange Act Registration; Margin Regulations" in the Offer to Purchase is incorporated herein by reference. (e) The information set forth under "Certain Legal Matters; Regulatory Approvals" in the Offer to Purchase is incorporated herein by reference. (f) The information set forth in the Offer to Purchase and the Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively, is incorporated herein by reference. ITEM 11. MATERIAL TO BE FILED AS EXHIBITS. (a)(1) Offer to Purchase dated October 16, 1996. (a)(2) Letter of Transmittal. (a)(3) Notice of Guaranteed Delivery. (a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Text of Press Release issued by Parent on October 15, 1996. (a)(8) Form of Summary Advertisement dated October 16, 1996. (b) Not applicable. (c)(1) Agreement and Plan of Merger, dated as of October 14, 1996, by and among Parent, Purchaser and the Company. (c)(2) Company Stock Option Agreement, dated as of October 14, 1996, between Parent and the Company. (c)(3) Parent Stock Option Agreement, dated as of October 14, 1996, between Parent and the Company. (c)(4) Form of Voting Trust Agreement. (d) Not applicable. (e) Not applicable. (f) Not applicable.
2 6 SIGNATURE After due inquiry and to the best of its knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. CSX CORPORATION By: /s/ MARK G. ARON ---------------------------------------- Name: Mark G. Aron Title: Senior Vice President -- Law and Public Affairs Dated: October 16, 1996 7 SIGNATURE After due inquiry and to the best of its knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. GREEN ACQUISITION CORP. By: /s/ MARK G. ARON ---------------------------------------- Name: Mark G. Aron Title: General Counsel and Secretary Dated: October 16 , 1996 8 EXHIBIT INDEX
EXHIBIT NO. - -------- (a)(1) Offer to Purchase dated October 16, 1996. (a)(2) Letter of Transmittal. (a)(3) Notice of Guaranteed Delivery. (a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Text of Press Release issued by Parent on October 15, 1996. (a)(8) Form of Summary Advertisement dated October 16, 1996. (b) Not applicable. (c)(1) Agreement and Plan of Merger, dated as of October 14, 1996, by and among Parent, Purchaser and the Company. (c)(2) Company Stock Option Agreement, dated as of October 14, 1996, between Parent and the Company. (c)(3) Parent Stock Option Agreement, dated as of October 14, 1996, between Parent and the Company. (c)(4) Form of Voting Trust Agreement. (d) Not applicable. (e) Not applicable. (f) Not applicable.
EX-99.A1 2 OFFER TO PURCHASE 1 OFFER TO PURCHASE FOR CASH AN AGGREGATE OF 17,860,124 SHARES OF COMMON STOCK AND SERIES A ESOP CONVERTIBLE JUNIOR PREFERRED STOCK (INCLUDING, IN EACH CASE, THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS) OF CONRAIL INC. AT $92.50 NET PER SHARE BY GREEN ACQUISITION CORP. A WHOLLY OWNED SUBSIDIARY OF CSX CORPORATION THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, NOVEMBER 15, 1996, UNLESS THE OFFER IS EXTENDED. ------------------------ THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THE RECEIPT BY GREEN ACQUISITION CORP. ("PURCHASER"), PRIOR TO THE EXPIRATION OF THE OFFER, OF AN INFORMAL WRITTEN OPINION IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO PURCHASER FROM THE STAFF OF THE SURFACE TRANSPORTATION BOARD (THE "STB"), WITHOUT THE IMPOSITION OF ANY CONDITIONS UNACCEPTABLE TO PURCHASER, THAT THE USE OF A VOTING TRUST IN SUBSTANTIALLY THE FORM CONTEMPLATED BY THE MERGER AGREEMENT (THE "VOTING TRUST") IS CONSISTENT WITH THE POLICIES OF THE STB AGAINST UNAUTHORIZED ACQUISITIONS OF CONTROL OF A REGULATED CARRIER, (2) THE RECEIPT BY PURCHASER, PRIOR TO THE EXPIRATION OF THE OFFER, OF AN INFORMAL STATEMENT FROM THE PREMERGER NOTIFICATION OFFICE OF THE FEDERAL TRADE COMMISSION THAT THE TRANSACTIONS CONTEMPLATED BY THE OFFER, THE MERGER AGREEMENT AND THE COMPANY STOCK OPTION AGREEMENT (AS SUCH TERMS ARE DEFINED HEREIN) ARE NOT SUBJECT TO, OR ARE EXEMPT FROM, THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR ACT"), OR IN THE ABSENCE OF THE RECEIPT OF SUCH INFORMAL STATEMENT, ANY APPLICABLE WAITING PERIOD UNDER THE HSR ACT SHALL HAVE EXPIRED OR BEEN TERMINATED PRIOR TO THE EXPIRATION OF THE OFFER, (3) PARENT AND PURCHASER OBTAINING, PRIOR TO THE EXPIRATION OF THE OFFER, SUFFICIENT FINANCING, ON TERMS REASONABLY ACCEPTABLE TO PARENT, TO ENABLE CONSUMMATION OF THE OFFER AND MERGER AND (4) THERE BEING AT LEAST 17,860,124 SHARES (AS DEFINED HEREIN) VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER. SEE SECTION 15. ------------------------ THE BOARD OF DIRECTORS OF CONRAIL INC. (THE "COMPANY") HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER, DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY (INCLUDING THE OFFER AND THE MERGER) ARE IN THE BEST INTERESTS OF THE COMPANY AND RECOMMENDS THAT SHAREHOLDERS OF THE COMPANY WHO DESIRE TO RECEIVE CASH FOR THEIR SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. ------------------------ IMPORTANT Any shareholder desiring to tender all or any portion of such shareholder's Common Shares (as defined herein) or ESOP Preferred Shares (as defined herein, and together with the Common Shares, the "Shares") should either (i) complete and sign the Letter of Transmittal (or a facsimile thereof) in accordance with the instructions in the Letter of Transmittal, have such shareholder's signature thereon guaranteed if required by Instruction 1 to the Letter of Transmittal, mail or deliver the Letter of Transmittal (or such facsimile thereof) and any other required documents to the Depositary and either deliver the certificates for such Shares to the Depositary along with the Letter of Transmittal (or a facsimile thereof) or deliver such Shares pursuant to the procedure for book-entry transfer set forth in Section 3 prior to the expiration of the Offer or (ii) request such shareholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for such shareholder. A shareholder having Shares registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such broker, dealer, commercial bank, trust company or other nominee if such shareholder desires to tender such Shares. Any shareholder who desires to tender Shares and whose certificates for such Shares are not immediately available, or who cannot comply with the procedures for book-entry transfer described in this Offer to Purchase on a timely basis, may tender such Shares by following the procedures for guaranteed delivery set forth in Section 3. Questions and requests for assistance or for additional copies of this Offer to Purchase, the Letter of Transmittal or other tender offer materials, may be directed to the Information Agent (as defined herein) or the Dealer Manager (as defined herein) at their respective addresses and telephone numbers set forth on the back cover of this Offer to Purchase. The Dealer Manager for the Offer is: WASSERSTEIN PERELLA & CO., INC. October 16, 1996 2 TABLE OF CONTENTS
PAGE ---- INTRODUCTION........................................................................... 1 1. Terms of the Offer; Proration; Expiration Date.................................... 4 2. Acceptance for Payment and Payment for Shares..................................... 6 3. Procedures for Tendering Shares................................................... 7 4. Withdrawal Rights................................................................. 10 5. Certain Federal Income Tax Consequences........................................... 11 6. Price Range of Shares; Dividends.................................................. 14 7. Effect of the Offer on the Market for the Common Shares; Exchange Listing and Exchange Act Registration; Margin Regulations..................................... 15 8. Certain Information Concerning the Company........................................ 15 9. Certain Information Concerning Purchaser and Parent............................... 20 10. Source and Amount of Funds........................................................ 22 11. Background of the Offer; Contacts with the Company................................ 22 12. Purpose of the Offer and the Merger; Plans for the Company........................ 23 13. Merger Agreement; Other Agreements................................................ 23 14. Dividends and Distributions....................................................... 42 15. Conditions of the Offer........................................................... 43 16. Certain Legal Matters; Regulatory Approvals....................................... 44 17. Fees and Expenses................................................................. 50 18. Miscellaneous..................................................................... 51 Schedule I -- Information Concerning the Directors and Executive Officers of Parent and I-1 Purchaser............................................................................
i 3 TO THE HOLDERS OF COMMON STOCK AND SERIES A ESOP CONVERTIBLE JUNIOR PREFERRED STOCK OF CONRAIL INC.: INTRODUCTION Green Acquisition Corp. ("Purchaser"), a Pennsylvania corporation and a wholly owned subsidiary of CSX Corporation, a Virginia corporation ("Parent"), hereby offers to purchase an aggregate of 17,860,124 shares of (i) common stock, par value $1.00 per share (the "Common Shares"), and (ii) Series A ESOP Convertible Junior Preferred Stock, without par value (the "ESOP Preferred Shares" and, together with the Common Shares, the "Shares"), of Conrail Inc., a Pennsylvania corporation (the "Company"), including, in each case, the associated Common Stock Purchase Rights (the "Rights") issued pursuant to the Rights Agreement, dated as of July 19, 1989, between the Company and First Chicago Trust Company of New York, as Rights Agent (as amended, the "Rights Agreement"), at a price of $92.50 per Share, net to the seller in cash, without interest thereon (the "Offer Price"), upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, as amended from time to time, together constitute the "Offer"). Unless the context otherwise requires, all references to Common Shares, ESOP Preferred Shares or Shares shall include the associated Rights, and all references to the Rights shall include the benefits that may enure to holders of the Rights pursuant to the Rights Agreement, including the right to receive any payment due upon redemption of the Rights. Tendering shareholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares by Purchaser pursuant to the Offer. Purchaser will pay all charges and expenses of Wasserstein Perella & Co., Inc., as Dealer Manager (in such capacity, the "Dealer Manager"), IBJ Schroder Bank & Trust Company, as Depositary (the "Depositary"), and MacKenzie Partners, Inc., as Information Agent (the "Information Agent"), incurred in connection with the Offer. See Section 17. Participants in the Company's Matched Savings Plan (the "ESOP") desiring that Fidelity Management Trust Company, as trustee under the ESOP (the "ESOP Trustee"), tender the ESOP Preferred Shares allocated to their accounts, which will be converted into Common Shares upon consummation of the Offer, should so instruct the ESOP Trustee by completing the form that will be provided to participants for that purpose. ESOP participants cannot tender shares allocated to their ESOP accounts by executing the Letter of Transmittal. THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD" OR "BOARD OF DIRECTORS") HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER (AS DEFINED BELOW), DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY (INCLUDING THE OFFER AND THE MERGER) ARE IN THE BEST INTERESTS OF THE COMPANY AND RECOMMENDS THAT SHAREHOLDERS OF THE COMPANY WHO DESIRE TO RECEIVE CASH FOR THEIR SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THE RECEIPT BY PURCHASER, PRIOR TO THE EXPIRATION OF THE OFFER, OF AN INFORMAL WRITTEN OPINION IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO PURCHASER FROM THE STAFF OF THE SURFACE TRANSPORTATION BOARD (THE "STB"), WITHOUT THE IMPOSITION OF ANY CONDITIONS UNACCEPTABLE TO PURCHASER, THAT THE USE OF A VOTING TRUST IN SUBSTANTIALLY THE FORM CONTEMPLATED BY THE MERGER AGREEMENT (THE "VOTING TRUST") IS CONSISTENT WITH THE POLICIES OF THE STB AGAINST UNAUTHORIZED ACQUISITIONS OF CONTROL OF A REGULATED CARRIER (SUCH CONDITION, THE "VOTING TRUST CONDITION"), (2) THE RECEIPT BY PURCHASER, PRIOR TO THE EXPIRATION OF THE OFFER, OF AN INFORMAL STATEMENT FROM THE PREMERGER NOTIFICATION OFFICE OF THE FEDERAL TRADE COMMISSION (THE "FTC") THAT THE TRANSACTIONS CONTEMPLATED BY THE OFFER, THE MERGER AGREEMENT AND THE COMPANY STOCK OPTION AGREEMENT (AS SUCH TERMS ARE DEFINED HEREIN) ARE NOT SUBJECT TO, OR ARE EXEMPT FROM, THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR ACT"), OR, IN THE ABSENCE OF THE RECEIPT OF SUCH INFORMAL STATEMENT, ANY APPLICABLE WAITING PERIOD UNDER THE HSR ACT SHALL HAVE EXPIRED OR BEEN TERMINATED PRIOR TO THE EXPIRATION OF THE OFFER (SUCH CONDITION, THE "HSR CONDITION"), (3) PARENT AND PURCHASER OBTAINING, PRIOR TO THE EXPIRATION OF THE OFFER, SUFFICIENT FINANCING, ON TERMS REASONABLY ACCEPTABLE TO PARENT, TO ENABLE CONSUMMATION OF THE OFFER AND 1 4 MERGER AND (4) THERE BEING AT LEAST 17,860,124 SHARES (THE "MINIMUM NUMBER OF SHARES") VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER (THE "MINIMUM CONDITION"). SEE SECTION 15. The Company has advised Purchaser that each of Lazard Freres & Co. LLC ("Lazard Freres") and Morgan Stanley & Co. Incorporated ("Morgan Stanley") has delivered to the Board its written opinion that as of the date of the Merger Agreement (as defined below) the consideration to be received by the holders of Shares pursuant to the Offer and the Merger, taken together, is fair from a financial point of view to such holders. A copy of each such opinion is contained in the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"), which is being mailed to shareholders of the Company herewith, and such shareholders are urged to read the opinion in its entirety for a description of the assumptions made, factors considered, procedures followed by, and certain information concerning, Lazard Freres and Morgan Stanley. The purpose of the Offer is for Parent, through Purchaser, to acquire a significant equity interest in the Company as the first step in a business combination of Parent and the Company. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of October 14, 1996 (the "Merger Agreement"), by and among the Company, Parent and Purchaser. The Merger Agreement provides that, following the completion of the Offer and the satisfaction or waiver of certain conditions, the Company will be merged with and into Purchaser (the "Merger"), with Purchaser as the surviving corporation (the "Surviving Corporation"), in accordance with the Pennsylvania Business Corporation Law of 1988, as amended (the "Pennsylvania Law"). As more fully described in Section 13, in the Merger, each outstanding Share (other than Shares held in the treasury of the Company or owned by Parent, Purchaser or any other wholly owned subsidiary of Parent or the Company) will be converted, at the election of the holder of Shares and subject to certain limitations, into the right to receive (i) $92.50 in cash, without interest, (ii) 1.85619 shares of common stock, par value $1.00 per share, of Parent (the "Parent Common Stock") or (iii) a combination of such cash and shares of Parent Common Stock. However, the Merger Agreement contains provisions which will ensure that, regardless of the number of Shares for which holders have elected to receive cash or Parent Common Stock, as the case may be, the aggregate number of Shares to be converted into Parent Common Stock pursuant to the Merger shall be equal as nearly as practicable to 60% of all Shares outstanding immediately prior to the Merger on a fully diluted basis (except for Shares issuable or outstanding pursuant to the Company Stock Option, as hereinafter defined), and the aggregate number of Shares to be converted into the right to receive cash pursuant to the Merger, together with the Shares theretofore purchased by Purchaser (other than upon exercise of the Company Stock Option), shall be equal as nearly as practicable to 40% of all such Shares outstanding immediately prior to the Merger. Accordingly, in the case of any particular shareholder, depending on the aggregate number of Shares for which the holders have elected to receive cash or Parent Common Stock, as the case may be, such shareholder may not receive in respect of his or her Shares the amount of cash, Parent Common Stock or combination thereof that such shareholder requested in his or her election. See Section 13. The Surviving Corporation will be a wholly owned subsidiary of Parent. The time at which the Merger is consummated in accordance with the Merger Agreement is hereinafter referred to as the "Effective Time." The Offer and the Merger are sometimes collectively referred to herein as the "Transactions." THE OFFER DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY PARENT COMMON STOCK. SUCH AN OFFER MAY BE MADE ONLY PURSUANT TO A PROSPECTUS. In connection with the execution of the Merger Agreement, the Company and Parent entered into an option agreement (the "Company Stock Option Agreement") pursuant to which the Company granted to Parent an option (the "Company Stock Option"), exercisable only in certain events, to purchase 15,955,477 Common Shares at an exercise price of $92.50 per Common Share, subject to adjustment as set forth therein. Concurrently, Parent and the Company entered into an option agreement (the "Parent Stock Option Agreement" and, together with the Company Stock Option Agreement, the "Option Agreements") pursuant to which Parent granted to the Company an option, exercisable only in certain events, to purchase 43,090,773 shares of Parent Common Stock at an exercise price of $64.82 per share, subject to adjustment as set forth therein. See Section 13. 2 5 Simultaneously with the purchase of Shares pursuant to the Offer, the Shares purchased will be deposited in an independent, irrevocable Voting Trust in accordance with the terms of the proposed Voting Trust Agreement. See Sections 13 and 16. The Offer is conditioned upon satisfaction of the Voting Trust Condition. Certain other conditions to the consummation of the Offer are described in Section 15. Subject to the terms of the Merger Agreement, Purchaser reserves the right to waive any one or more of the conditions to the Offer. Under Subchapter E of Chapter 25 of the Pennsylvania Law (the "Pennsylvania Control Transaction Law"), unless a corporation's articles of incorporation or by-laws adopted by the shareholders otherwise provide, after the occurrence of a "control transaction", any holder of voting shares of a "registered corporation" (such as the Company) may make written demand on the "controlling person" for payment of cash in an amount equal to the "fair value" of each voting share as of the date on which the control transaction occurs. A "control transaction" is the acquisition by a "controlling person" -- that is, a person or group of persons acting in concert who have voting power over voting shares of the registered corporation that would entitle the holders thereof to cast at least 20% of the votes that all shareholders would be entitled to cast in an election of directors. See Section 16. The Company's Articles of Incorporation (the "Company Articles") currently do not contain a provision by which the Company "opts out" of the Pennsylvania Control Transaction Law. Accordingly, unless and until such time as the Company Articles are amended to include such an "opt out" provision, the Pennsylvania Control Transaction Law effectively precludes Purchaser from purchasing more than the Minimum Number of Shares pursuant to the Offer. The Company has filed preliminary proxy materials with the Securities and Exchange Commission (the "SEC") for a special meeting of the Company's shareholders (the "Pennsylvania Special Meeting") expected to be held on November 14, 1996 for the purpose of voting on an amendment to the Company Articles (the "Articles Amendment") to opt out of the Pennsylvania Control Transaction Law. Under the Company Articles and the Pennsylvania Law, the Articles Amendment must be approved by a majority of the votes cast by the holders of outstanding Shares, voting as a single class (the "Pennsylvania Shareholder Approval"). THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR THE PENNSYLVANIA SPECIAL MEETING. ANY SUCH SOLICITATION WILL BE MADE ONLY BY THE COMPANY AND PURSUANT TO PROXY MATERIALS COMPLYING WITH THE REQUIREMENTS OF SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"), AND THE RULES AND REGULATIONS THEREUNDER. If the Articles Amendment is approved by the requisite vote of the Company's shareholders at the Pennsylvania Special Meeting prior to the expiration of the Offer, Purchaser may (but is not obligated to) increase the Minimum Number of Shares to an amount equal to 40% of the outstanding Shares on a fully diluted basis (excluding Common Shares issuable upon exercise of the Company Stock Option) and, if Purchaser in its discretion determines to so increase the Minimum Number of Shares and if required under the rules of the SEC, Purchaser shall extend the Offer. See Section 1. Alternatively, if the Pennsylvania Shareholder Approval is obtained (whether or not such approval is obtained prior to the expiration of the Offer), Purchaser may, in its discretion and depending upon the circumstances (but subject to the terms and conditions of the Offer and the Merger Agreement), accept for payment Shares in the Offer and thereafter purchase additional Shares in a later tender offer (the "Second Offer"), pursuant to the Company Stock Option Agreement or otherwise. Such additional Share purchases may be on terms different from the terms of the Offer, provided that in the Merger Agreement Parent and Purchaser have agreed that additional purchases pursuant to the Second Offer shall be at a price not less than $92.50 and shall be on terms no less favorable to the Company's shareholders than the Offer. In addition, under the terms of the Merger Agreement, at any time following obtaining the Pennsylvania Shareholder Approval, if Parent and its subsidiaries do not already own 40% or more of the outstanding Shares (as determined above), the Company may require Parent to commence the Second Offer. See Sections 1 and 13. The obligations of Parent and Purchaser to consummate the Merger are conditioned upon, among other things, the STB having issued a final decision approving, exempting or otherwise authorizing consummation of the Merger and all other material transactions contemplated by the Merger Agreement as may require such authorization and which, among other things, does not impose on Parent, the Company or any of their 3 6 respective subsidiaries, terms or conditions that materially and adversely affect the long-term benefits expected to be received by Parent from the transactions contemplated by the Merger Agreement. See Section 13. The Merger is also conditioned upon, among other things, the approval and adoption of the Merger Agreement by the requisite vote of the shareholders of the Company. Under the Company Articles and the Pennsylvania Law, the affirmative vote of the holders of a majority of the votes cast by the outstanding Shares, voting as a single class, is required to approve and adopt the Merger Agreement and the Merger. Based on information supplied by the Company, as of October 10, 1996, (i) 80,178,281 Common Shares were issued and outstanding and 15,522,547 Common Shares were reserved for issuance pursuant to outstanding employee stock options or upon conversion of the ESOP Preferred Shares and (ii) 9,571,086 ESOP Preferred Shares were issued and outstanding. Pursuant to the Company Articles, each ESOP Preferred Share purchased pursuant to the Offer will automatically be converted into one Common Share upon consummation of the Offer, and each remaining ESOP Preferred Share will be automatically converted into one Common Share immediately prior to the Effective Time. THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 1. TERMS OF THE OFFER; PRORATION; EXPIRATION DATE. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any extension or amendment), Purchaser will accept for payment and pay for an aggregate of 17,860,124 Shares which are validly tendered prior to the Expiration Date (as hereinafter defined) and not properly withdrawn in accordance with Section 4. The term "Expiration Date" means 12:00 Midnight, New York City time, on Friday, November 15, 1996, unless and until Purchaser, in its sole discretion (but subject to the terms of the Merger Agreement), shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall refer to the latest time and date at which the Offer, as so extended by Purchaser, shall expire. The Merger Agreement provides that, in the event all conditions to Purchaser's obligation to purchase Shares under the Offer at any scheduled expiration thereof are satisfied other than the Minimum Condition, Purchaser shall, from time to time, extend the Offer until the earlier of (i) 180 days following the date of the Merger Agreement or (ii) such time as the Minimum Condition is satisfied or waived in accordance with the Merger Agreement. The Merger Agreement provides that, without the consent of the Company, Purchaser will not waive the Minimum Condition. Subject to Purchaser's right to increase the Minimum Number of Shares (as described below), if more than 17,860,124 Shares are validly tendered prior to the Expiration Date and not properly withdrawn, Purchaser will, upon the terms and subject to the conditions of the Offer, accept for payment and pay for only 17,860,124 Shares, on a pro rata basis, with adjustments to avoid purchases of fractional Shares, based upon the number of Shares validly tendered prior to the Expiration Date and not properly withdrawn. If the Articles Amendment is approved by the requisite vote of the Company's shareholders at the Pennsylvania Special Meeting prior to the Expiration Date, Purchaser may (but is not obligated to) increase the Minimum Number of Shares to an amount equal to 40% of the outstanding Shares on a fully diluted basis (excluding Shares issuable upon exercise of the Company Stock Option) and, if Purchaser in its discretion determines to so increase the Minimum Number of Shares and if such action is required under the rules of the SEC, Purchaser will extend the Offer. Alternatively, if the Pennsylvania Shareholder Approval is obtained (whether or not such approval is obtained prior to the Expiration Date), Purchaser may, in its discretion and depending upon the circumstances (but subject to the terms and conditions of the Offer and the Merger Agreement), accept for payment Shares in the Offer and thereafter purchase additional Shares. See Introduction and Section 13. In any event, the same proration factor will be applied in the Offer to the Common Shares and the ESOP Preferred Shares. Because of the difficulty of determining precisely the number of Shares validly tendered and not withdrawn, if proration is required, Purchaser would not expect to be able to announce the final results of proration or pay for Shares until at least five New York Stock Exchange, Inc. ("NYSE") trading days after 4 7 the Expiration Date. Preliminary results of proration will be announced by press release as promptly as practicable after the Expiration Date. Holders of Shares may obtain such preliminary information from the Information Agent and may also be able to obtain such preliminary information from their brokers. The Merger Agreement provides that, at any time following the Pennsylvania Shareholder Approval, if Parent and its subsidiaries do not, in the aggregate, own 40% of the Shares outstanding, on a fully diluted basis as of the date of the Merger Agreement (excluding Shares that would be outstanding upon exercise of the Company Stock Option), Parent may, and at the written request of the Company is required to, commence the Second Offer to purchase up to that number of Shares which, when added to the aggregate number of Shares then beneficially owned by Parent (other than pursuant to exercise of the Company Stock Option) equals 40% of such outstanding Shares, at a price not less than $92.50. The Company has agreed that it shall not make such written request at any time that the Offer is outstanding and the Expiration Date is within 10 business days thereof. The Second Offer, if it occurs, will be on terms no less favorable to the shareholders of the Company than the Offer. The Offer is conditioned upon, among other things, satisfaction of the Voting Trust Condition. If the Voting Trust Condition is not satisfied or any or all of the other events set forth in Section 15 shall have occurred prior to the Expiration Date, Purchaser reserves the right (but shall not be obligated) to (i) decline to purchase any of the Shares tendered in the Offer and terminate the Offer, and return all tendered Shares to the tendering shareholders, (ii) waive or amend any or all conditions to the Offer to the extent permitted by applicable law and the provisions of the Merger Agreement, and, subject to complying with applicable rules and regulations of the SEC, purchase all Shares validly tendered, or (iii) extend the Offer and, subject to the right of shareholders to withdraw Shares until the Expiration Date, retain the Shares which have been tendered during the period or periods for which the Offer is extended. Purchaser expressly reserves the right, in its sole discretion (but subject to the terms of the Merger Agreement), at any time and from time to time, to extend for any reason the period of time during which the Offer is open, including the occurrence of any of the events specified in Section 15, by giving oral or written notice of such extension to the Depositary. During any such extension, all Shares previously tendered and not properly withdrawn will remain subject to the Offer, subject to the rights of a tendering shareholder to withdraw its Shares in accordance with the procedures set forth in Section 4. Subject to the applicable regulations of the SEC, Purchaser also expressly reserves the right, in its sole discretion (but subject to the terms of the Merger Agreement), at any time and from time to time, (i) to delay acceptance for payment of, or, regardless of whether such Shares were theretofore accepted for payment, payment for, any Shares in order to comply in whole or in part with any applicable law and (ii) to waive any condition or otherwise amend the Offer in any respect by giving oral or written notice of such delay, waiver or amendment to the Depositary and by making a public announcement thereof. The Merger Agreement provides that, without the consent of the Company, Purchaser will not, among other things, decrease the Offer Price, decrease the Minimum Number of Shares, change the form of consideration to be paid pursuant to the Offer, modify any of the conditions to the Offer, impose conditions to the Offer in addition to those set forth in the Merger Agreement, except as set forth in the proviso below, extend the Offer, or amend any term or condition of the Offer in any manner adverse to the holders of Shares, it having been agreed in the Merger Agreement that a waiver by Purchaser of any condition in its discretion shall not be deemed to be adverse to the holders of Shares; provided, however, that the Purchaser shall not waive the Minimum Condition without the consent of the Company; and provided further that, if on any scheduled Expiration Date (as it may be extended in accordance with the terms of the Merger Agreement), all conditions to the Offer shall not have been satisfied or waived, the Offer may be extended from time to time without the consent of the Company for such period of time as is reasonably expected to be necessary to satisfy the unsatisfied conditions. In the Merger Agreement Parent and Purchaser also have agreed that, in the event all conditions to their obligation to purchase Shares under the Offer at any scheduled Expiration Date are satisfied other than the Minimum Condition, Purchaser shall, from time to time, extend the Offer until the earlier of (i) 180 days following the date of the Merger Agreement or (ii) such time as such condition is satisfied or waived in accordance with the terms of the Merger Agreement. In addition, the Merger 5 8 Agreement provides that, without the consent of the Company, the Offer Price and the Minimum Number of Shares may be increased, and the Offer may be extended to the extent required by law in connection with such an increase. Purchaser acknowledges that (i) Rule 14e-1(c) under the Exchange Act requires Purchaser to pay the consideration offered or return the Shares tendered promptly after the termination or withdrawal of the Offer, and (ii) Purchaser may not delay acceptance for payment of, or payment for (except as provided in clause (i) of the first sentence of the second preceding paragraph), any Shares upon the occurrence of any of the conditions specified in Section 15 without extending the period of time during which the Offer is open. Any such extension, delay, termination, waiver or amendment will be followed as promptly as practicable by public announcement thereof, with such announcement in the case of an extension to be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Subject to applicable law (including Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act, which require that material changes be promptly disseminated to shareholders in a manner reasonably designed to inform them of such changes) and without limiting the manner in which Purchaser may choose to make any public announcement, Purchaser shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a press release to the Dow Jones News Service. If Purchaser makes a material change in the terms of the Offer or the information concerning the Offer, or if it waives a material condition of the Offer, Purchaser will disseminate additional tender offer materials and extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period during which the Offer must remain open following material changes in the terms of the Offer or information concerning the Offer, other than a change in price or a change in percentage of securities sought, will depend upon the facts and circumstances, including the relative materiality of the changed terms or information. In the SEC's view, an offer should generally remain open for a minimum of five business days from the date a material change is first published, sent or given to shareholders. With respect to a change in price or a change in percentage of securities sought (other than an increase in the number of Shares sought not in excess of 2% of the outstanding Shares), a minimum ten business day period is required to allow for adequate dissemination to shareholders and investor response. As used in this Offer to Purchase, "business day" has the meaning set forth in Rule 14d-1 under the Exchange Act. Accordingly, if, prior to the Expiration Date, Purchaser increases or decreases the number of Shares being sought, or increases or decreases the consideration offered pursuant to the Offer, and if the Offer is scheduled to expire at any time earlier than the period ending on the tenth business day from the date that notice of such increase or decrease is first published, sent or given to holders of Shares, except in respect of an increase in the Minimum Number of Shares not in excess of 2% of the outstanding Shares, the Offer will be extended at least until the expiration of such 10 business day period. As of the date of this Offer to Purchase, the Rights are evidenced by the certificates representing Shares and do not trade separately. Accordingly, by tendering a certificate representing Shares, a shareholder is automatically tendering a similar number of associated Rights. If, however, pursuant to the Rights Agreement or for any other reason, the Rights detach and separate certificates representing rights ("Rights Certificates") are issued, shareholders will be required to tender one Right for each Share tendered in order to effect a valid tender of such Share. The Company has provided Purchaser with the Company's shareholder list and security position listings for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase, the related Letter of Transmittal, and other relevant materials will be mailed to record holders of Shares whose names appear on the Company's shareholder list and will be furnished, for subsequent transmittal to beneficial owners of Shares, to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the shareholder list or, if applicable, who are listed as participants in a clearing agency's security position listing. 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Purchaser will purchase, by accepting for payment, and will pay for, an 6 9 aggregate of 17,860,124 Shares which are validly tendered prior to the Expiration Date (and not properly withdrawn in accordance with Section 4) promptly after the later to occur of (i) the Expiration Date and (ii) the satisfaction or waiver of the conditions set forth in Section 15. Purchaser expressly reserves the right, in its discretion, to delay acceptance for payment of, or, subject to applicable rules of the SEC, payment for, Shares in order to comply in whole or in part with any applicable law. In all cases, payment for Shares purchased pursuant to the Offer will be made only after timely receipt by the Depositary of (i) the certificates evidencing such Shares (the "Share Certificates") or timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Shares, if such procedure is available, into the Depositary's account at The Depository Trust Company or the Philadelphia Depository Trust Company (each a "Book-Entry Transfer Facility" and, collectively, the "Book-Entry Transfer Facilities") pursuant to the procedures set forth in Section 3, (ii) the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, or, in the case of a book-entry transfer, an Agent's Message (as defined below) and (iii) any other documents required by the Letter of Transmittal. The term "Agent's Message" means a message, transmitted by a Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Transfer Facility tendering the Shares, that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that Purchaser may enforce such agreement against the participant. For purposes of the Offer, Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not properly withdrawn if, as and when Purchaser gives oral or written notice to the Depositary of Purchaser's acceptance of such Shares for payment. Payment for Shares accepted pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering shareholders for the purpose of receiving payments from Purchaser and transmitting payments to such tendering shareholders. Under no circumstances will interest on the purchase price for Shares be paid by Purchaser, regardless of any delay in making such payment. Upon the deposit of funds with the Depositary for the purpose of making payments to tendering shareholders, Purchaser's obligation to make such payment shall be satisfied and tendering shareholders must thereafter look solely to the Depositary for payment of amounts owed to them by reason of the acceptance for payment of Shares pursuant to the Offer. Purchaser will pay any stock transfer taxes incident to the transfer to it of validly tendered Shares, except as otherwise provided in Instruction 6 of the Letter of Transmittal, as well as any charges and expenses of the Depositary and the Information Agent. If any tendered Shares are not accepted for payment for any reason pursuant to the terms and conditions of the Offer (including proration due to tenders of more than 17,860,124 Shares), or if Share Certificates are submitted evidencing more Shares than are tendered, Share Certificates evidencing unpurchased Shares will be returned, without expense to the tendering shareholder (or, in the case of Shares tendered by book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility pursuant to the procedure set forth in Section 3, such Shares will be credited to an account maintained at such Book-Entry Transfer Facility), as promptly as practicable following the expiration or termination of the Offer. If, prior to the Expiration Date, Purchaser increases the consideration to be paid per Share pursuant to the Offer, Purchaser will pay such increased consideration for all such Shares purchased pursuant to the Offer, whether or not such Shares were tendered prior to such increase in consideration. Purchaser reserves the right to transfer or assign, in whole at any time, or in part from time to time, to Parent or one or more direct or indirect wholly owned subsidiaries of Parent, the right to purchase all or any portion of the Shares tendered pursuant to the Offer, provided that any such transfer or assignment will not relieve Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering shareholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 3. PROCEDURES FOR TENDERING SHARES. Valid Tender of Shares. In order for Shares to be validly tendered pursuant to the Offer, the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message (in the case of any book-entry transfer) and any other required documents, 7 10 must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date and either (i) the Share Certificates evidencing tendered Shares must be received by the Depositary at one of such addresses or Shares must be tendered pursuant to the procedure for book-entry transfer described below and a Book-Entry Confirmation must be received by the Depositary, in each case prior to the Expiration Date, or (ii) the tendering shareholder must comply with the guaranteed delivery procedures described below. THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. Book-Entry Transfer. The Depositary will establish an account with respect to the Shares at each Book-Entry Transfer Facility for purposes of the Offer within two business days after the date of this Offer to Purchase, and any financial institution that is a participant in either of the Book-Entry Transfer Facilities' systems may make book-entry delivery of Shares by causing a Book-Entry Transfer Facility to transfer such Shares into the Depositary's account at a Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures for transfer. However, although delivery of Shares may be effected through book-entry transfer at a Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message in connection with a book-entry delivery of Shares, and any other required documents must, in any case, be transmitted to and received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date or the tendering shareholder must comply with the guaranteed delivery procedures described below. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. Signature Guarantee. Signatures on all Letters of Transmittal must be guaranteed by a firm which is a bank, broker, dealer, credit union, savings association or other entity that is a member in good standing of the Securities Transfer Agents Medallion Program (each, an "Eligible Institution"), unless the Shares tendered thereby are tendered (i) by a registered holder of Shares who has not completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. See Instruction 1 of the Letter of Transmittal. If a Share Certificate is registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made, or a Share Certificate not accepted for payment or not tendered is to be returned, to a person other than the registered holder(s), then the Share Certificate must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear on the Share Certificate, with the signature(s) on such Share Certificate or stock powers guaranteed as described above. See Instructions 1 and 5 of the Letter of Transmittal. Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to the Offer and such shareholder's Share Certificates are not immediately available or time will not permit all required documents to reach the Depositary prior to the Expiration Date or the procedure for book-entry transfer cannot be completed on a timely basis, such Shares may nevertheless be tendered if all the following conditions are satisfied: (i) the tender is made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by Purchaser herewith, is received by the Depositary as provided below prior to the Expiration Date; and 8 11 (iii) in the case of a guarantee of Shares, the Share Certificates for all tendered Shares, in proper form for transfer, or a Book-Entry Confirmation, together with a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) with any required signature guarantee (or, in the case of a book-entry transfer, an Agent's Message) and any other documents required by such Letter of Transmittal, are received by the Depositary within three NYSE trading days after the date of execution of the Notice of Guaranteed Delivery. Any Notice of Guaranteed Delivery may be delivered by hand or transmitted by telegram, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in the Notice of Guaranteed Delivery. Notwithstanding any other provision hereof, payment for Shares purchased pursuant to the Offer will, in all cases, be made only after timely receipt by the Depositary of (i) the Share Certificates evidencing such Shares, or a Book-Entry Confirmation of the delivery of such Shares, if available, (ii) a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) (or in the case of a book-entry transfer, an Agent's Message) and (iii) any other documents required by the Letter of Transmittal. Distribution of Rights. Holders of Shares will be required to tender one Right for each Share tendered to effect a valid tender of such Share. Unless and until the Distribution Date (as defined in Section 8 below) occurs, the Rights are represented by and transferred with the Shares. Accordingly, if the Distribution Date does not occur prior to the Expiration Date of the Offer, a tender of Shares will constitute a tender of the associated Rights. If a Distribution Date has occurred, certificates representing a number of Rights equal to the number of Shares being tendered must be delivered to the Depositary in order for such Shares to be validly tendered. If a Distribution Date has occurred, a tender of Shares without Rights constitutes an agreement by the tendering shareholder to deliver certificates representing a number of Rights equal to the number of Shares tendered pursuant to the Offer to the Depositary within three NYSE trading days after the date such certificates are distributed. Purchaser reserves the right to require that it receive such certificates prior to accepting Shares for payment. Payment for Shares tendered and purchased pursuant to the Offer will be made only after timely receipt by the Depositary of, among other things, such certificates, if such certificates have been distributed to holders of Shares. Purchaser will not pay any additional consideration for the Rights tendered pursuant to the Offer. Determination of Validity. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tendered Shares pursuant to any of the procedures described above will be determined by Purchaser in its sole discretion, whose determination will be final and binding on all parties. Purchaser reserves the absolute right to reject any or all tenders of any Shares determined by it not to be in proper form or if the acceptance for payment of, or payment for, such Shares may, in the opinion of Purchaser's counsel, be unlawful. Purchaser also reserves the absolute right, in its sole discretion, to waive any of the conditions of the Offer (subject to the terms of the Merger Agreement) or any defect or irregularity in any tender with respect to Shares of any particular shareholder, whether or not similar defects or irregularities are waived in the case of other shareholders. No tender of Shares will be deemed to have been validly made until all defects and irregularities have been cured or waived. Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. None of Parent, Purchaser, the Company, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or will incur any liability for failure to give any such notification. Appointment as Proxy. By executing a Letter of Transmittal as set forth above, a tendering shareholder irrevocably appoints designees of Purchaser as such shareholder's proxies, each with full power of substitution, to the full extent of such shareholder's rights with respect to the Shares tendered by such shareholder and accepted for payment by Purchaser (and any and all noncash dividends, distributions, rights, other Shares, or other securities issued or issuable in respect of such Shares on or after the date of the Merger Agreement). All such proxies shall be considered coupled with an interest in the tendered Shares. This appointment will be effective if, when, and only to the extent that, Purchaser accepts such Shares for payment pursuant to the Offer. Upon such acceptance for payment, all prior proxies given by such shareholder with respect to such 9 12 Shares and other securities will, without further action, be revoked, and no subsequent proxies may be given. The designees of Purchaser will, with respect to the Shares and other securities for which the appointment is effective, be empowered (subject to the Voting Trust so long as it shall be in effect with respect to the Shares) to exercise all voting and other rights of such shareholder as they in their sole discretion may deem proper at any annual, special, adjourned or postponed meeting of the Company's shareholders, by written consent or otherwise, and Purchaser reserves the right to require that, in order for Shares or other securities to be deemed validly tendered, immediately upon Purchaser's acceptance for payment of such Shares, Purchaser (including through the Voting Trust) must be able to exercise full voting rights with respect to such Shares. TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT TO CERTAIN SHAREHOLDERS OF THE PURCHASE PRICE FOR SHARES PURCHASED PURSUANT TO THE OFFER, EACH SUCH SHAREHOLDER MUST PROVIDE THE DEPOSITARY WITH SUCH SHAREHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH SHAREHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9 IN THE LETTER OF TRANSMITTAL. IF BACKUP WITHHOLDING APPLIES WITH RESPECT TO A SHAREHOLDER, THE DEPOSITARY IS REQUIRED TO WITHHOLD 31% OF ANY PAYMENTS MADE TO SUCH SHAREHOLDER. SEE INSTRUCTION 9 OF THE LETTER OF TRANSMITTAL. ESOP Preferred Shares. According to documents filed by the Company with the SEC, all outstanding ESOP Preferred Shares are owned of record by the ESOP Trustee and, accordingly, only the ESOP Trustee can effect a valid tender of such shares. The ESOP Trustee is required to request instructions from each participant in the ESOP as to whether ESOP Preferred Shares allocated to such participant's account should be tendered pursuant to the Offer, and to tender such shares in accordance with such instructions. Pursuant to the organizational documents of the ESOP, the ESOP Trustee may not tender allocated ESOP Preferred Shares as to which no instructions are received. Unallocated shares are required to be tendered or not tendered in the same proportion as allocated shares for which instructions from participants are received. Purchaser's acceptance for payment of Shares tendered pursuant to the Offer will constitute a binding agreement between the tendering shareholder and Purchaser upon the terms and subject to the conditions of the Offer. 4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer are irrevocable except that such Shares may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment by Purchaser pursuant to the Offer, may also be withdrawn at any time after December 14, 1996. If Purchaser extends the Offer, is delayed in its acceptance for payment of Shares or is unable to accept Shares for payment pursuant to the Offer for any reason, then, without prejudice to Purchaser's rights under the Offer, the Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent that tendering shareholders are entitled to withdrawal rights as described in this Section 4. Any such delay will be by an extension of the Offer to the extent required by law. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder, if different from that of the person who tendered such Shares. If Share Certificates evidencing Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such Share Certificates, the serial numbers shown on such Share Certificates must be submitted to the Depositary and the signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution, unless such Shares have been tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer as set forth in Section 3, any notice of withdrawal must also specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares. 10 13 All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by Purchaser, in its sole discretion, whose determination will be final and binding. None of Parent, Purchaser, the Company, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Any Shares properly withdrawn will thereafter be deemed not to have been validly tendered for purposes of the Offer. However, withdrawn Shares may be retendered at any time prior to the Expiration Date by following the procedures described in Section 3. 5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following discussion is a summary of the material federal income tax consequences of the Offer and Merger to holders of Shares who hold the Shares as capital assets. The discussion set forth below is for general information only and may not apply to certain categories of holders of Shares subject to special treatment under the Internal Revenue Code of 1986, as amended (the "Code"), such as foreign holders and holders who acquired such Shares pursuant to the exercise of employee stock options or otherwise as compensation. This summary is based upon laws, regulations, rulings and decisions currently in effect, all of which are subject to change, retroactively or prospectively, and to possibly differing interpretations. Tax Consequences of the Offer and the Merger Generally. It is unclear whether the Offer and the Merger should be treated as a single integrated transaction for federal income tax purposes. If the Offer and the Merger are so treated and the Merger is in the form of a merger of the Company into Purchaser, the Offer and the Merger should, in the aggregate, qualify as a reorganization pursuant to Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code. In such event, generally (i) no gain or loss will be recognized by Parent, Purchaser or the Company pursuant to the Offer and the Merger, (ii) gain or loss will be recognized by a shareholder of the Company who receives solely cash in exchange for Shares pursuant to the Offer and/or the Merger, (iii) no gain or loss will be recognized by a shareholder of the Company who does not exchange any Shares pursuant to the Offer and who receives solely Parent Common Stock in exchange for Shares pursuant to the Merger, and (iv) a shareholder of the Company who receives a combination of cash and Parent Common Stock in exchange for such shareholder's Shares, pursuant to the Offer and/or the Merger, will not recognize loss but will recognize gain, if any, to the extent of the lesser of (i) the cash received and (ii) the excess of the sum of the fair market value of the Parent Common Stock and the amount of cash received over a shareholder's tax basis in the Shares exchanged. If so integrated, the federal income tax consequences to a shareholder may be, depending on such shareholder's particular circumstances, less favorable than the federal income tax consequences to such shareholder if the Offer and the Merger are not treated as integrated. Although it is currently anticipated that counsel to the Company and Parent will each render an opinion that the Merger constitutes a reorganization within the meaning of Section 368 of the Code, in the event that counsel to the Company or Parent is unable to render such opinion either because (1) the amount of cash received in the Offer, as a percentage of the total consideration received by holders of Common Shares and ESOP Preferred Shares, will be an amount that does not satisfy certain "continuity of shareholder interests" requirements or (2) for any other reason, then, pursuant to the Merger Agreement the form of the Merger will be changed to a merger of Purchaser into the Company. In such case the Offer and the Merger will not constitute a reorganization, and will be taxable to shareholders of the Company who will recognize gain or loss equal to the difference between the fair market value of the Parent Common Stock and cash received and the shareholder's tax basis in the Shares exchanged. If the Offer and the Merger were not treated as a single integrated transaction for federal income tax purposes, the receipt of cash pursuant to the Offer would be a sale or exchange, while the Merger should still qualify as a reorganization pursuant to Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code, if the Merger is in the form of the Company into Purchaser. 11 14 TAX CONSEQUENCES IF THE OFFER AND THE MERGER ARE TREATED AS A SINGLE INTEGRATED TRANSACTION AND AS A REORGANIZATION Exchange of Shares Solely for Cash. In general, a shareholder of the Company who, pursuant to the Offer and/or the Merger, exchanges all of the Shares actually and constructively owned by such shareholder solely for cash will recognize capital gain or loss equal to the difference between the amount of cash received and such shareholder's adjusted tax basis in the Shares surrendered. The gain or loss will be long-term capital gain or loss if, as of the date of the exchange, the holder thereof has held such Shares for more than one year. Gain or loss will be calculated separately for each identifiable block of Shares surrendered pursuant to the Offer and/ or the Merger. Exchange of Shares Solely for Parent Common Stock. A shareholder of the Company who, pursuant to the Merger, exchanges all of the Shares actually owned by such shareholder solely for shares of Parent Common Stock (and who did not exchange any Shares for cash in the Offer) will not recognize any gain or loss upon such exchange. Such shareholder may recognize gain or loss, however, to the extent cash is received in lieu of a fractional share of Parent Common Stock, as discussed below. The aggregate adjusted tax basis of the shares of Parent Common Stock received in such exchange will be equal to the aggregate adjusted tax basis of the Shares surrendered therefor, and the holding period of Parent Common Stock will include the period during which the Shares surrendered in exchange therefor were held. Exchange of Shares for Parent Common Stock and Cash. A shareholder of the Company who, pursuant to the Offer and/or the Merger, exchanges all of the Shares actually owned by such shareholder for a combination of shares of Parent Common Stock and cash will not recognize any loss on such exchange. Such shareholder will realize gain equal to the excess, if any, of the cash and the aggregate fair market value of Parent Common Stock received pursuant to the Offer and/or the Merger over such shareholder's adjusted tax basis in the Shares exchanged therefor, but will recognize any realized gain only to the extent of the cash received. Any gain recognized by a shareholder of the Company who receives a combination of Parent Common Stock and cash pursuant to the Offer and/or the Merger will be treated as capital gain unless the receipt of the cash has the effect of the distribution of a dividend for federal income tax purposes, in which case such recognized gain will be treated as ordinary dividend income to the extent of such shareholder's ratable share of the Company's accumulated earnings and profits. For purposes of determining whether the cash received pursuant to the Offer and/or the Merger will be treated as a dividend for federal income tax purposes, a shareholder of the Company will be treated as if such shareholder first exchanged all of such shareholder's Shares solely for Parent Common Stock and then Parent immediately redeemed a portion of such Parent Common Stock in exchange for the cash such shareholder actually received. In general, the determination as to whether the cash received will be treated as received pursuant to a sale or exchange (generating capital gain) or a dividend distribution (generating ordinary income) depends upon whether and to what extent there is a reduction in the shareholder's deemed percentage stock ownership of Parent. A shareholder of the Company who exchanges such shareholder's Shares for a combination of Parent Common Stock and cash will recognize capital gain rather than dividend income if the deemed redemption by Parent (described in the preceding paragraph) is "not essentially equivalent to a dividend" or is "substantially disproportionate" with respect to such shareholder. Whether the deemed exchange and subsequent redemption transaction are "not essentially equivalent to a dividend" with respect to a Company shareholder will depend upon such shareholder's particular circumstances. In order to reach such conclusion, it must be determined that the transaction results in a "meaningful reduction" in such Company shareholder's deemed percentage stock ownership of Parent. In determining whether a reduction in a Company shareholder's deemed percentage stock ownership has occurred, (i) the percentage of the outstanding stock of Parent that such Company shareholder is deemed actually and constructively to have owned immediately before the deemed redemption by Parent should be compared to (ii) the percentage of the outstanding stock of Parent actually and constructively owned by such 12 15 shareholder immediately after the deemed redemption by Parent as a result of the Offer, Merger or otherwise. The relevant constructive ownership rules treat shareholders as owning stock held indirectly (through partnerships, estates, trusts and corporations) and, under certain circumstances, treat persons as owning stock owned by their partners, beneficiaries and shareholders. Shareholders will also be treated as owning stock that could be acquired by virtue of the exercise of any option to acquire stock, and individual shareholders are treated as owning any stock owned by their family. A Company shareholder will comply with the "substantially disproportionate" rule if the percentage described in (ii) above is less than 80 percent of the percentage described in (i) above. Even if a Company shareholder does not qualify under such test, the Internal Revenue Service has ruled that a minority shareholder in a publicly held corporation whose relative stock interest is minimal and who exercises no control with respect to corporate affairs is considered to have a "meaningful reduction" if such shareholder has a reduction in such shareholder's percentage stock ownership. In most circumstances, therefore, gain recognized by a shareholder of the Company who exchanges such shareholder's Shares for a combination of Parent Common Stock and cash will be capital gain, which will constitute long-term capital gain if the holding period for such Shares was greater than one year as of the date of the exchange. The aggregate tax basis of Parent Common Stock received by a Company shareholder who, pursuant to the Offer and/or the Merger, exchanges such shareholder's Shares for a combination of Parent Common Stock and cash will be the same as the aggregate tax basis of the Shares surrendered therefor, decreased by the cash received and increased by the amount of gain recognized, if any (including any portion of such gain that is treated as a dividend). The holding period of Parent Common Stock will include the holding period of the Shares surrendered therefor. Cash Received in Lieu of a Fractional Interest of Parent Common Stock. Cash received in lieu of a fractional share of Parent Common Stock will generally (subject to the discussion above) be treated as received in redemption of such fractional interest and gain or loss will be recognized, measured by the difference between the amount of cash received and the portion of the basis of the Shares allocable to such fractional interest. Such gain or loss will constitute capital gain or loss, and will generally be long-term capital gain or loss if the holding period for such Shares was greater than one year as of the date of the exchange. TAX CONSEQUENCES IF THE OFFER AND THE MERGER ARE TREATED AS SEPARATE TRANSACTIONS AND THE MERGER IS TREATED AS A REORGANIZATION If the Offer and the Merger were treated as separate transactions for federal income tax purposes, the receipt of cash pursuant to the Offer would be a taxable transaction, while the Merger should still qualify as a reorganization pursuant to Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code, if the Merger is a merger of the Company into Purchaser. Accordingly, a shareholder of the Company who receives cash pursuant to the Offer would recognize gain or loss equal to the difference between the amount of cash received and the shareholder's adjusted tax basis in the Shares surrendered. The gain or loss would be long-term capital gain or loss if, as of the date of the exchange, such shareholder had held such stock for more than one year. A shareholder of the Company who receives Parent Common Stock and/or cash pursuant to the Merger would be subject to the federal income tax rules concerning reorganizations discussed above under "Tax Consequences if the Offer and the Merger are Treated as a Single Integrated Transaction" (but without regard to the cash received, and Shares exchanged, in the Offer). TAX CONSEQUENCES IF FORM OF MERGER IS A MERGER OF PURCHASER INTO THE COMPANY If counsel to Parent or the Company are unable to render opinions that such transaction would constitute a reorganization within the meaning of Section 368 of the Code because the "continuity of shareholder interests" requirements would not be met or for any such reason, the Merger will be changed in form to a merger of Purchaser into the Company (the "Reverse Merger"). In such a case, the transaction would not constitute a reorganization within the meaning of Section 368 of the Code. This result would occur if the value of the Parent Common Stock at the time of the Merger had declined significantly in value from its value as of the date hereof. 13 16 In the event of a Reverse Merger, a shareholder would recognize gain or loss equal to the fair market value of the Parent Common Stock and cash received over the shareholder's tax basis in the Shares exchanged, calculated separately as to each block of Shares exchanged. The character of such gain or loss would be determined as described above. WITHHOLDING Unless a shareholder complies with certain reporting and/or certification procedures or is an exempt recipient under applicable provisions of the Code and Treasury Regulations promulgated thereunder, such shareholder may be subject to withholding tax of 31% with respect to any cash payments received pursuant to the Offer and Merger. Shareholders should consult their brokers or the Depositary to ensure compliance with such procedures. Foreign shareholders should consult with their own tax advisors regarding withholding taxes in general. THE ABOVE DISCUSSION MAY NOT APPLY TO CERTAIN CATEGORIES OF SHAREHOLDERS SUBJECT TO SPECIAL TREATMENT UNDER THE CODE, SUCH AS FOREIGN SHAREHOLDERS AND SHAREHOLDERS WHOSE SHARES WERE ACQUIRED PURSUANT TO THE EXERCISE OF AN EMPLOYEE STOCK OPTION OR OTHERWISE AS COMPENSATION. SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE SPECIFIC TAX CONSEQUENCES OF THE OFFER AND THE MERGER, INCLUDING ANY FEDERAL, STATE, LOCAL OR OTHER TAX CONSEQUENCES (INCLUDING ANY TAX RETURN FILING OR OTHER TAX REPORTING REQUIREMENTS) OF THE OFFER AND THE MERGER. 6. PRICE RANGE OF SHARES; DIVIDENDS. According to the Company's Annual Report on Form 10-K for the year ended December 31, 1995 (the "Company Form 10-K"), the Common Shares are listed and principally traded on the NYSE, and are also listed and traded on the Philadelphia Stock Exchange, and quoted under the symbol "CRR". The following table sets forth, for the quarters indicated, the high and low sales prices per Common Share on the NYSE and the amount of cash dividends paid per Common Share, as reported in the Company Form 10-K for periods in 1994 and 1995, and as reported by published financial sources with respect to periods in 1996:
CASH HIGH LOW DIVIDENDS ---- --- --------- YEAR ENDED DECEMBER 31, 1994: First Quarter........................................... $69 1/4 $56 1/2 $.325 Second Quarter.......................................... 59 1/8 50 3/8 .325 Third Quarter........................................... 58 1/8 48 3/8 .375 Fourth Quarter.......................................... 55 1/4 48 1/8 .375 YEAR ENDED DECEMBER 31, 1995: First Quarter........................................... 57 5/8 50 1/2 .375 Second Quarter.......................................... 56 1/4 51 1/8 .375 Third Quarter........................................... 70 1/4 55 1/8 .425 Fourth Quarter.......................................... 74 3/8 65 1/2 .425 YEAR ENDED DECEMBER 31, 1996: First Quarter........................................... 77 1/4 67 5/8 .425 Second Quarter.......................................... 73 66 1/4 .425 Third Quarter........................................... 74 5/8 63 3/4 .475 Fourth Quarter (through October 15, 1996)............... 88 68 1/2 N.A.
On October 14, 1996, the last trading day prior to the date of the public announcement of the execution of the Merger Agreement, the reported closing sales price of the Common Shares on the NYSE Composite Tape was $71 per Share. On October 15, 1996, the last full trading day prior to the date of this Offer to Purchase, the reported closing sales price of the Common Shares on the NYSE Composite Tape was $85 1/8 per Common Share. SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE COMMON SHARES. 14 17 All of the outstanding ESOP Preferred Shares are held of record by the ESOP Trustee. There is no trading market for the ESOP Preferred Shares. Since issuance of the ESOP Preferred Shares, the Company has paid quarterly cash dividends on the ESOP Preferred Shares of $.54125 per share. Each ESOP Preferred Share is convertible under certain circumstances into one Common Share. 7. EFFECT OF THE OFFER ON THE MARKET FOR THE COMMON SHARES; EXCHANGE LISTING AND EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS. The purchase of Common Shares pursuant to the Offer will reduce the number of Common Shares that might otherwise trade publicly and could reduce the number of holders of Common Shares, which could adversely affect the liquidity and market value of the remaining Common Shares held by the public. Following the Offer, a large percentage of the outstanding Common Shares will be owned by Purchaser. According to the NYSE's published guidelines, the NYSE would consider delisting the Common Shares if, among other things, the number of record holders of at least 100 Common Shares should fall below 1,200, the number of publicly held Common Shares (exclusive of holdings of officers, directors and their families and other concentrated holdings of 10% or more ("NYSE Excluded Holdings")) should fall below 600,000 or the aggregate market value of publicly held Common Shares (exclusive of NYSE Excluded Holdings) should fall below $5,000,000. If, as a result of the purchase of Common Shares pursuant to the Offer or otherwise, the Common Shares no longer meet the requirements of the NYSE for continued listing and the listing of the Common Shares is discontinued, the market for the Common Shares could be adversely affected. If the NYSE were to delist the Common Shares, it is possible that the Common Shares would continue to trade on another securities exchange or in the over-the-counter market and that price or other quotations would be reported by such exchange or through the National Association of Securities Dealers Automated Quotation System ("NASDAQ") or other sources. The extent of the public market therefor and the availability of such quotations would depend, however, upon such factors as the number of shareholders and/ or the aggregate market value of such securities remaining at such time, the interest in maintaining a market in the Shares on the part of securities firms, the possible termination of registration under the Exchange Act as described below and other factors. Purchaser cannot predict whether the reduction in the number of Common Shares that might otherwise trade publicly would have an adverse or beneficial effect on the market price for or marketability of the Common Shares or whether it would cause future market prices to be greater or less than the Offer Price. The Common Shares are currently registered under the Exchange Act. Such registration may be terminated upon application by the Company to the SEC if the Common Shares are not listed on a national securities exchange and there are fewer than 300 record holders of the Common Shares. The termination of registration of the Common Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to holders of Common Shares and to the SEC and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b), the requirement of furnishing a proxy statement in connection with shareholders' meetings pursuant to Section 14(a), and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions, no longer applicable to the Common Shares. In addition, "affiliates" of the Company and persons holding "restricted securities" of the Company may be deprived of the ability to dispose of such securities pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended (the "Securities Act"). If registration of the Common Shares under the Exchange Act were terminated, the Common Shares would no longer be eligible for NASDAQ reporting. 8. CERTAIN INFORMATION CONCERNING THE COMPANY. Except as otherwise noted below, the information concerning the Company contained in this Offer to Purchase, including financial information, has been taken from or based upon the Company Form 10-K and other publicly available documents and records on file with the SEC and other public sources. Neither Parent nor Purchaser assumes any responsibility for the accuracy or completeness of the information concerning the Company contained in such documents and records or for any failure by the Company to disclose events which may have occurred or may affect the significance or accuracy of any such information but which are unknown to Parent or Purchaser. 15 18 The Company is a Pennsylvania corporation whose principal executive offices are located at 2001 Market Street, Two Commerce Square, Philadelphia, Pennsylvania 19101. Through its wholly-owned subsidiary, Consolidated Rail Corporation ("CRC"), a Pennsylvania corporation, the Company provides freight transportation services within the northeast and midwest United States. The Company interchanges freight with other United States and Canadian railroads for transport to destinations within and outside the Company's service region. As of December 31, 1995, CRC (excluding its subsidiaries) maintained 17,715 miles of track on its 10,701 mile route system. Of total route miles, 8,860 are owned, 100 are leased or operated under contract and 1,741 are operated under trackage rights, including approximately 300 miles operated pursuant to an easement over Amtrak's Northeast Corridor. Also as of December 31, 1995, the Company had (owned or subject to capital lease) 2,023 locomotives and 51,404 freight cars (including 21,948 subject to operating leases), excluding locomotives and freight cars held by subsidiaries other than CRC, which have an immaterial number of locomotives and freight cars. The Company operates no significant line of business other than the freight railroad business and does not provide common carrier passenger or commuter train service. The Company serves a heavily industrial region that is marked by dense population centers which constitute a substantial market for consumer durable and non-durable goods, and a market for raw materials used in manufacturing and by electric utilities. Financial Information. Set forth below is certain selected consolidated financial information relating to the Company and its subsidiaries which has been excerpted or derived from the financial statements contained in (i) the Company Form 10-K, (ii) the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1996 (the "Company Form 10-Q") and (iii) the Company's Annual Report on Form 10-K for the year ended December 31, 1994. More comprehensive financial information is included in the Company Form 10-K and the Company Form 10-Q and other documents filed by the Company with the SEC. The financial information that follows is qualified in its entirety by reference to the Company Form 10-K and the Company Form 10-Q and other documents, including the financial statements and related notes contained therein. The Company Form 10-K and the Company Form 10-Q and other documents may be examined and copies may be obtained from the offices of the SEC in the manner set forth below. CONRAIL INC. SELECTED CONSOLIDATED FINANCIAL INFORMATION (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, ---------------- -------------------------- 1996 1995 1995 1994 1993 ------ ------ ------ ------ ------ INCOME STATEMENT DATA: Revenues............................................ $1,838 $1,812 $3,686 $3,733 $3,453 Operating expenses.................................. 1,715 1,518 3,230 3,127 2,862 Operating income.................................... 123 294 456 606 591 Net income to common shareholders................... 57 178 264 324 160 INCOME PER COMMON SHARE INFORMATION: Net earnings per Common Share before the cumulative effect of changes in accounting principles Primary........................................ $ 0.66 $ 2.17 $ 3.19 $ 3.90 $ 2.74 Fully diluted.................................. 0.64 1.98 2.94 3.56 2.51 Net per Common Share cumulative effect of changes in accounting principles(1) Primary........................................ -- -- -- -- (.92) Fully diluted.................................. -- -- -- -- (.81) Net earnings per Common Share Primary........................................ 0.66 2.17 3.19 3.90 1.82 Fully diluted.................................. 0.64 1.98 2.94 3.56 1.70
16 19
AT JUNE 30, AT DECEMBER 31, ---------------- -------------------------- 1996 1995 1995 1994 1993 ------ ------ ------ ------ ------ BALANCE SHEET DATA: Current assets...................................... $1,223 $1,124 $1,206 $1,125 $1,062 Property and equipment (net)........................ 6,446 6,660 6,408 6,498 6,313 Total assets........................................ 8,341 8,609 8,424 8,322 7,948 Current liabilities................................. 1,213 1,250 1,170 1,201 1,075 Long-term debt, excluding current portion........... 1,887 2,068 1,911 1,940 1,959 Total shareholders' equity.......................... 2,899 3,007 2,977 2,925 2,784
- --------------- (1) Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 106, "Employers' Accounting for Postretirement Benefits Other than Pensions" and SFAS 109, "Accounting for Income Taxes." The Company is subject to the information and reporting requirements of the Exchange Act and is required to file reports and other information with the SEC relating to its business, financial condition and other matters. Information, as of particular dates, concerning the Company's directors and officers, their remuneration, stock options granted to them, the principal holders of the Company's securities, any material interests of such persons in transactions with the Company and other matters is required to be disclosed in proxy statements distributed to the Company's shareholders and filed with the SEC. These reports, proxy statements and other information should be available for inspection at the public reference facilities of the SEC located in Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and also should be available for inspection and copying at prescribed rates at the following regional offices of the SEC: Seven World Trade Center, New York, New York 10048; and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of this material may also be obtained by mail, upon payment of the SEC's customary fees, from the SEC's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The SEC also maintains an Internet web site at http://www.sec.gov that contains reports, proxy statements and other information. Reports, proxy statements and other information concerning the Company should also be available for inspection at the offices of the NYSE, 20 Broad Street, New York, New York 10005. Certain Projected Financial Information. In the course of its discussions with Parent described in Section 11, the Company provided Parent and its financial advisors with certain business and financial information which Parent believes was not publicly available. Such information included, among other things, certain financial projections for 1996 through 1999 (the "Company Projections") prepared by management of the Company as a long-range plan. The Company Projections do not take into account any of the potential effects of the transactions contemplated by the Offer and the Merger. The Company does not as a matter of course publicly disclose internal projections as to future revenues, earnings or financial condition. The Company Projections indicated the following income statement and cash flow data: (i) projected net cash provided by operating activities for each of the years ended December 31, 1996 through December 31, 1999 were $3,762 million, $3,874 million, $3,988 million and $4,149 million, respectively; (ii) projected operating expenses for each of such years were $2,987 million, $3,026 million, $3,043 million and $3,112 million, respectively; (iii) projected operating income for each of such years was $775 million, $848 million, $945 million and $1,037 million, respectively; (iv) projected net income for each of such years was $438 million, $485 million, $542 million and $599 million, respectively; (v) projected net cash provided by operating activities for each of such years was $855 million, $822 million, $890 million and $975 million, respectively; (vi) projected capital expenditures for each of such years was $492 million, $510 million, $550 million and $550 million, respectively; (vii) projected net internally generated funds (defined as net cash provided by operating activities less capital expenditures) for each of such years were $363 million, $312 million, $340 million and $425 million, respectively; (viii) projected debt issuance net of debt retirement for each of such years was $(49) million, $7 million, $(11) million and $(85) million, respectively; and (ix) projected net change in cash for each of such years was $43 million, $0, $0 and $0, respectively. In connection with the Company Projections, the Company also furnished Parent with projected balance sheets of the Company for the years 1996 through 1999. Such balance sheets projected total assets of the Company increasing from $8,660 million in 1996 to $9,656 million in 1999, total long-term debt (excluding 17 20 current portion) decreasing from $1,862 million in 1996 to $1,773 million in 1999 and total shareholders' equity increasing from $3,057 million in 1996 to $3,725 million in 1999. THE COMPANY PROJECTIONS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE WITH PUBLISHED GUIDELINES OF THE SEC OR THE GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS. THE PROJECTIONS ARE INCLUDED IN THIS OFFER TO PURCHASE ONLY BECAUSE SUCH INFORMATION WAS PROVIDED TO PARENT. NONE OF PARENT, PURCHASER OR ANY PARTY TO WHOM THE PROJECTIONS WERE PROVIDED ASSUMES ANY RESPONSIBILITY FOR THE ACCURACY OF SUCH INFORMATION. WHILE PRESENTED WITH NUMERICAL SPECIFICITY, THESE PROJECTIONS ARE BASED UPON A VARIETY OF ASSUMPTIONS RELATING TO THE BUSINESSES OF THE COMPANY WHICH, THOUGH PARENT HAS BEEN ADVISED WERE CONSIDERED REASONABLE BY THE COMPANY AT THE TIME THEY WERE FURNISHED TO PARENT, MAY NOT BE REALIZED AND ARE SUBJECT TO SIGNIFICANT UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND THE CONTROL OF THE COMPANY. THERE CAN BE NO ASSURANCE THAT THE PROJECTIONS WILL BE REALIZED, AND ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE SHOWN. THE PROJECTIONS HAVE NOT BEEN EXAMINED OR COMPILED BY THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS. FOR THESE REASONS, AS WELL AS THE BASES ON WHICH SUCH PROJECTIONS WERE COMPILED, THERE CAN BE NO ASSURANCE THAT SUCH PROJECTIONS WILL BE REALIZED, OR THAT ACTUAL RESULTS WILL NOT BE HIGHER OR LOWER THAN THOSE ESTIMATED. THE INCLUSION OF SUCH PROJECTIONS HEREIN SHOULD NOT BE REGARDED AS AN INDICATION THAT PARENT, PURCHASER OR ANY OTHER PARTY WHO RECEIVED SUCH INFORMATION CONSIDERS IT AN ACCURATE PREDICTION OF FUTURE EVENTS. Certain Operating Relationships. Various subsidiaries of each of Parent, on the one hand, and the Company, on the other hand, have operating relationships with each other. Approximately 6%, 6%, and 7% of the Company's total loads in 1993, 1994 and 1995, respectively, were interchanged with Parent. Major interchange locations between Parent and the Company include Cincinnati, Ohio; Alexandria, Virginia; Philadelphia, Pennsylvania; and Toledo, Ohio. In connection with interchanges, either or both railroads of Parent and the Company may be the party billing the shipper of such interchange freight, and in cases where one of the parties bills for the entire shipment, such party will periodically remit to the other party the net amount of the proceeds due to such other carrier in accordance with standard industry practice. In addition, Parent and the Company often, together with other railroads, cooperate in terminal switching operations at certain major locations including Chicago, Illinois and East St. Louis, Illinois. Parent and the Company also have proprietary interests in various terminal companies in their service territories, including the Belt Railway of Chicago and The Lakefront Dock, Railroad Terminal Company. In addition to the foregoing, Parent and the Company are parties to various trackage rights agreements pursuant to which each carrier operates over the other carrier's track. The Rights. The following is based upon the Form 8-K dated July 31, 1989 filed by CRC, which is the Company's current operating subsidiary and which prior to the Company's adoption of the holding company structure on February 17, 1993 operated on a stand alone basis (the "July 1989 Form 8-K"), the Company's Form 8-B dated as of September 25, 1995 and other amendments to the Rights Agreement filed with the SEC. On July 19, 1989, the Board of Directors of CRC declared a dividend distribution of one Common Stock Purchase Right (a "Right") for each share of common stock of CRC and executed the Rights Agreement. Upon adoption by the Company of a holding company structure on February 17, 1993, CRC assigned all of CRC's title and interest under the Rights Agreement, as amended, to the Company (the "Assignment"). On October 2, 1995, one Right was distributed with respect to each outstanding ESOP Preferred Share. Under 18 21 the Rights Agreement, as amended, each Right entitles the holder to purchase one Common Share at an exercise price of $205.00, subject to adjustment. Under the Rights Agreement, as amended, until the close of business on the Distribution Date (which is defined as the earlier of (i) 10 days following a public announcement that a person or group of affiliated or associated persons (the "Acquiring Person") has acquired, or obtained the right to acquire, beneficial ownership of 10% or more of the outstanding Shares and (ii) 10 business days (or such later date as the Board of Directors of the Company shall determine) following the commencement of a tender offer or exchange offer which would result in a person or group beneficially owning 10% or more of the outstanding Shares), the Rights will be evidenced by the Share Certificates and will be transferred with and only with such share certificates. As soon as practicable after the Distribution Date, Rights Certificates will be mailed to holders of record of the Shares as of the close of business on the Distribution Date, and thereafter the separate Rights Certificates alone will evidence the Rights. The Rights are not exercisable until the Distribution Date. The Rights will expire at the close of business on July 19, 1999 unless earlier redeemed by the Company as described below. In the event that the Company is acquired in a merger or consolidation in which the Company is not the surviving corporation or 50% or more of the Company's consolidated assets or earning power is sold or transferred, each holder of a Right will thereafter have the right to receive, upon the exercise thereof at then current exercise price of the Right, that number of shares of common stock of the acquiring company which at the time of such transaction will have a value equal to two times the exercise price of the Right. In the event that an Acquiring Person becomes the beneficial owner of 10% or more of the outstanding Shares, each holder of a Right will thereafter have the right to receive, upon exercise, Common Shares (or, in certain circumstances, cash, property or other securities of the Company), having a value equal to two times the exercise price of the Right. At any time prior to the announcement by the Company or an Acquiring Person that an Acquiring Person has become such, the Company may redeem the Rights in whole, but not in part, at a price of $.01 per Right (the "Redemption Price"). Immediately upon the action of the Board of Directors of the Company ordering redemption of the Rights, the Rights will terminate, and the only right to which the holders of Rights will be entitled will be the right to receive the Redemption Price. Until a Right is exercised, the holder thereof, as such, will have no rights as a shareholder of the Company, including without limitation, the right to vote or to receive dividends. The terms of the Rights may be amended by the Board of Directors of the Company without the consent of the holders of the Rights in order to cure any ambiguity, to correct or supplement any provision which is defective or inconsistent with other provisions, or to make any other provision with respect to the Rights which the Company may deem desirable; provided that from and after such time an Acquiring Person becomes such, the Rights may not be amended in any manner which would adversely affect the interests of holders of Rights. The foregoing summary of the Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the July 1989 Form 8-K, the text of the Rights Agreement as an exhibit thereto filed with the SEC, the Assignment, and subsequent amendments to the Rights Agreement as filed with the SEC. Copies of these documents may be obtained in the manner set forth above. In conjunction with the execution of the Merger Agreement, the Board of Directors of the Company amended the Rights Agreement to (i) render the Rights Agreement inapplicable to the Merger and the other transactions contemplated by the Merger Agreement and the Company Stock Option Agreement and (ii) ensure that (a) neither Parent nor any of its wholly owned subsidiaries is an Acquiring Person pursuant to the Rights Agreement and (b) a Shares Acquisition Date, Distribution Date or Trigger Event (in each case as defined in the Rights Agreement) does not occur by reason of the approval, execution or delivery of the Merger Agreement and the Company Stock Option Agreement, the consummation of the Merger, or the other transactions contemplated by the Merger Agreement or the Company Stock Option Agreement and the Rights Agreement may not be further amended by the Company without the prior consent of Parent in its sole 19 22 discretion. The Company has also agreed to take any further action necessary to render the Rights Agreement inapplicable to the Transactions. Shareholders are required to tender one associated Right for each Share tendered in order to effect a valid tender of such Share. If the Distribution Date does not occur prior to the Expiration Date, a tender of Shares will automatically constitute a tender of the associated Rights. See Section 3. 9. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT. Purchaser. Purchaser is a Pennsylvania corporation organized in October 1996 and has not carried on any significant activities other than activities undertaken in connection with the Offer and the Merger. The principal offices of Purchaser are located at One James Center, 901 East Cary Street, Richmond, Virginia 23219. Purchaser is a wholly owned subsidiary of Parent. Until immediately prior to the time that Purchaser will purchase Shares pursuant to the Offer, it is not expected that Purchaser will have any significant assets or liabilities or engage in activities other than those incident to the transactions contemplated by the Offer and the Merger. Parent. Parent is a Virginia corporation with its principal executive offices located at One James Center, 901 East Cary Street, Richmond, Virginia 23219. Parent provides rail, intermodal, ocean container-shipping, barging, trucking, and contract logistics services worldwide. Through its subsidiary CSX Transportation ("CSXT"), Parent provides rail freight transportation and distribution services over approximately 18,500 route miles in 20 states in the United States east, midwest and south; and in Ontario, Canada. CSXT interchanges freight with western railroads at key gateways in Chicago, East St. Louis, Memphis and New Orleans. CSXT's service territory includes 26 port cities for international transport. In 1995, the principal commodities hauled by CSXT were coal, chemicals, automotive parts, finished vehicles, agricultural products, forest products (including paper, paper products, and lumber products), minerals, fertilizers, and metals. Parent also transports freight through subsidiaries conducting container-shipping, intermodal, and barge operations. Its subsidiary, Sea-Land Service Inc. ("Sea-Land"), is the largest container-shipping line in the United States and one of the three largest container-shipping companies in the world. Sea-Land operates more than 100 container ships and nearly 200,000 containers throughout the world. Parent's subsidiary, American Commercial Lines Inc., is the largest and most diversified barge transportation firm in both North and South America. CSX Intermodal provides shippers with nationwide intermodal service for moving domestic and international freight in trailers, domestic containers and international steamship containers, often in close alignment with CSXT and Sea-Land. Parent is subject to the information and reporting requirements of the Exchange Act and is required to file reports and other information with the SEC relating to its business, financial condition and other matters. Information, as of particular dates, concerning Parent's directors and officers, their remuneration, stock options granted to them, the principal holders of Parent's securities, any material interests of such persons in transactions with Parent and other matters is required to be disclosed in proxy statements distributed to Parent's shareholders and filed with the SEC. These reports, proxy statements and other information should be available for inspection and copies may be obtained in the same manner as set forth for the Company in Section 8. The shares of Parent common stock are listed on the NYSE, and reports, proxy statements and other information concerning Parent should also be available for inspection at the offices of the NYSE, 20 Broad Street, New York, New York 10005. The name, citizenship, business address, principal occupation or employment and five-year employment history for each of the directors and executive officers of Parent and Purchaser are set forth in Schedule I hereto. Except as set forth in this Offer to Purchase, neither Parent nor Purchaser, nor, to the best knowledge of Parent or Purchaser, any of the persons listed in Schedule I hereto, or any associate or majority-owned subsidiary of such persons, beneficially owns any equity security of the Company, and neither Parent nor Purchaser, nor, to the best knowledge of Parent or Purchaser, any of the other persons referred to above, or 20 23 any of the respective directors, executive officers or subsidiaries of any of the foregoing, has effected any transaction in any equity security of the Company during the past 60 days. Mr. John Hall, a director of Parent, owns 50 Common Shares through an asset management fund, and Mr. Mark Aron, an executive officer of Parent and Purchaser and a director of Purchaser, owns not more than 800 Common Shares. In addition, Mr. Robert Burrus, a director of Parent, in his capacity as a trustee of a trust, sold 650 Common Shares on September 5, 1996 at a price of $70 per share. Except as set forth in this Offer to Purchase, neither Parent nor Purchaser, nor, to the best knowledge of Parent or Purchaser, any of the persons listed in Schedule I hereto has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, without limitation, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any securities of the Company, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss or the giving or withholding of proxies. Except as set forth in this Offer to Purchase, neither Parent nor Purchaser, nor, to the best knowledge of Parent or Purchaser, any of the persons listed in Schedule I hereto has had any transactions with the Company, or any of its executive officers, directors or affiliates that would require reporting under the rules of the SEC. Except as set forth in this Offer to Purchase, there have been no contacts, negotiations or transactions between Parent or Purchaser, or their respective subsidiaries, or, to the best knowledge of Parent or Purchaser, any of the persons listed in Schedule I hereto, on the one hand, and the Company or its executive officers, directors or affiliates, on the other hand, concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, election of directors, or a sale or other transfer of a material amount of assets. Financial Information. Set forth below is certain selected consolidated financial information relating to Parent and its subsidiaries which has been excerpted or derived from the financial statements contained in Parent's Annual Reports on Form 10-K for the fiscal years ended December 29, 1995 and December 30, 1994 (the "Parent Form 10-Ks") and in Parent's Quarterly Report on Form 10-Q for the fiscal quarter ended June 28, 1996 (the "Parent Form 10-Q"). More comprehensive financial information is included in the Parent Form 10-K and the Parent Form 10-Q and other documents filed by Parent with the SEC. The financial information that follows is qualified in its entirety by reference to the Parent Form 10-K and the Parent Form 10-Q and other documents including the financial statements and related notes contained therein. The Parent Form 10-Ks and the Parent Form 10-Q and other documents may be examined and copies may be obtained from the offices of the SEC in the manner set forth above. CSX CORPORATION SELECTED CONSOLIDATED FINANCIAL INFORMATION (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
SIX MONTHS ENDED(2) YEAR ENDED -------------------- -------------------------------------------- JUNE 28, JUNE 30, DECEMBER 29, DECEMBER 30, DECEMBER 31, 1996 1995 1995 1994 1993 -------- -------- ------------ ------------ ------------ INCOME STATEMENT DATA: Operating revenue...................... $ 5,186 $ 4,993 $ 10,504 $ 9,608 $ 8,940 Operating expense...................... 4,482 4,633 9,332 8,376 8,027 Operating income....................... 704 360 1,172 1,232 913 Net earnings........................... 380 140 618 652 359 PER SHARE INFORMATION: Earnings per share(1).................. $ 1.80 $ 0.67 $ 2.94 $ 3.12 $ 1.73
21 24
AT AT -------------------- -------------------------------------------- JUNE 28, JUNE 30, DECEMBER 29, DECEMBER 30, DECEMBER 31, 1996 1995 1995 1994 1993 -------- -------- ------------ ------------ ------------ BALANCE SHEET DATA: Current assets......................... $ 1,979 $ 1,752 $ 1,935 $ 1,665 $ 1,571 Properties -- net...................... 11,568 11,119 11,297 11,044 10,788 Total assets........................... 14,531 13,894 14,282 13,724 13,420 Long-term debt, current portion........ 395 397 486 312 146 Total current liabilities.............. 2,834 2,699 2,991 2,505 2,275 Long-term debt, excluding current portion.............................. 2,271 2,577 2,222 2,618 3,133 Total shareholders' equity ............ 4,567 3,821 4,242 3,731 3,180
- --------------- (1) Adjusted for two-for-one stock split distributed December 21, 1995. (2) For the six month periods ended June 28, 1996 and June 30, 1995, Parent changed its financial presentation to exclude non-transportation activities from operating revenue, operating expense, and operating income. 10. SOURCE AND AMOUNT OF FUNDS. Purchaser estimates that the total amount of funds required to purchase Shares pursuant to the Offer, to pay the cash portion of the consideration in the Merger and to pay all related costs and expenses will be approximately $3.5 billion. See "Fees and Expenses." Purchaser plans to obtain the necessary funds through capital contributions or advances made by Parent. Parent plans to obtain the funds for such capital contributions or advances from its available cash and working capital, and either through the issuance of long- or short-term debt securities (including, without limitation, commercial paper notes) or pursuant to a credit facility that Parent will seek to obtain from one or more commercial banks. Parent's commercial paper program involves the private placement of unsecured, commercial paper notes with maturities of up to 270 days. The commercial paper generally has an effective interest rate approximating the then market rate of interest for commercial paper of similar rating, currently approximately 5.45%. Parent may refinance any commercial paper borrowings used to finance the purchase of Shares pursuant to the Offer through private placements of additional commercial paper, borrowings under the credit facility referred to above or, depending on market or business conditions, through such other financing as Parent may deem appropriate. It is anticipated that the indebtedness incurred by Parent in connection with the transactions contemplated by the Merger Agreement will be repaid from funds generated internally by Parent and its subsidiaries (including, after the Merger, if consummated, dividends paid by the Surviving Corporation and its subsidiaries), through additional borrowings, through application of proceeds of dispositions or through a combination of two or more such sources. No final decisions have been made concerning the method Parent will employ to repay such indebtedness. Such decisions, when made, will be based on Parent's review from time to time of the advisability of particular actions, as well as on prevailing interest rates and financial and other economic conditions. 11. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY. In the ordinary course of Parent's long-term strategic review process, Parent and its subsidiaries routinely analyze potential combinations with various railroad companies. In recent years, Parent has placed particular emphasis on studies of the Company, considering it to be an ideal candidate for such a combination. From time to time since August 1994, Parent has conveyed to senior managers of the Company Parent's continuing interest in discussing a business combination and Parent's views as to the desirability of such a transaction. These contacts by Parent led to a discussion in July 1996 between David M. LeVan, Chairman, President and Chief Executive Officer of the Company, and John W. Snow, Chairman, President and Chief Executive Officer of Parent, generally regarding the consolidation in the railroad industry and the regulatory environment with respect to such consolidation. Following such discussion, each of the parties independently analyzed its strategic opportunities, including potential business combination transactions. Shortly following preliminary discussions between Mr. Snow and Mr. LeVan, on October 6, 1996, Mr. Snow and Mr. LeVan met to discuss the possibility for and the terms of a business combination between Parent and the Company. 22 25 Following that meeting, senior management of both companies, together with their financial and legal advisors, independently undertook to examine a possible transaction and to conduct detailed business reviews. On October 8, 1996, Parent and the Company entered into a confidentiality agreement in connection with their discussions. Such discussions led to the negotiation of the Merger Agreement and the Option Agreements, which were executed on October 14, 1996. On October 16, 1996, Parent and Purchaser commenced the Offer. 12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY. The purpose of the Offer is for Parent, through Purchaser, to acquire a significant equity interest in the Company as a first step in consummating a business combination between Parent and the Company. The purpose of the Merger is for Parent to acquire all Shares not purchased pursuant to the Offer and thereby accomplish the business combination transaction. Upon consummation of the Merger, Parent intends to continue to review the combined company and its assets, businesses, operations, properties, policies, corporate structure, capitalization and management and consider if any changes would be desirable in light of the circumstances then existing. Upon consummation of the Merger, Parent also intends to continue to identify synergies and cost savings, including its freight traffic arrangements with the Company. Based upon discussions with the Company, Parent believes that total quantifiable benefits from the Merger will be approximately $550 million annually, based on the realization of cost savings from operating efficiencies, facility consolidations, overhead rationalization and other activities, and new traffic volumes earned by enhanced service. Parent intends that the combined company will make investments to support revenue growth, and will create a streamlined organization that incorporates the best of Parent's and the Company's organizations, while combining facilities and realizing economies of scale. Parent expects that there will be some job losses as a result of consolidations and the elimination of redundancies, but that these will be offset substantially over time by new employment opportunities resulting from growth of the business. Parent has not yet developed specific plans to implement the foregoing. THE FOREGOING ESTIMATES OF COST SAVINGS AND SYNERGIES ARE INHERENTLY SUBJECT TO SIGNIFICANT UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND THE CONTROL OF PARENT. THERE CAN BE NO ASSURANCE THAT THEY WILL BE ACHIEVED AND ACTUAL SAVINGS AND SYNERGIES MAY VARY MATERIALLY FROM THOSE ESTIMATED. THE INCLUSION OF SUCH ESTIMATES HEREIN SHOULD NOT BE REGARDED AS AN INDICATION THAT PARENT, PURCHASER OR ANY OTHER PARTY CONSIDERS SUCH ESTIMATES AN ACCURATE PREDICTION OF FUTURE EVENTS. The Merger Agreement provides that, following the consummation of the Merger, Parent and the Company shall cause the corporate headquarters of Parent to be located in Philadelphia, Pennsylvania. Except as noted in this Offer to Purchase, neither Parent nor Purchaser has any present plans or proposals that would result in an extraordinary corporate transaction, such as a reorganization, liquidation, relocation of operations, or sale or transfer of assets, involving the Company or any of its subsidiaries, or any material changes in the Company's corporate structure, business or composition of its board of directors, management or personnel. 13. MERGER AGREEMENT; OTHER AGREEMENTS. MERGER AGREEMENT THE FOLLOWING IS A SUMMARY OF CERTAIN PROVISIONS OF THE MERGER AGREEMENT. THE SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT WHICH IS INCORPORATED HEREIN BY REFERENCE. TERMS NOT OTHERWISE DEFINED HEREIN OR IN THE FOLLOWING SUMMARY SHALL HAVE THE MEANINGS SET FORTH IN THE MERGER AGREEMENT. The Offer. The Merger Agreement provides that Purchaser will commence the Offer and that, on the terms and subject to the prior satisfaction or waiver of the conditions to the Offer, Purchaser will purchase all Shares validly tendered pursuant to the Offer as soon as practicable after the later of the satisfaction of the 23 26 conditions of the Offer and the expiration of the Offer, except that Purchaser will not purchase the Shares until after calculation of proration. The Merger Agreement provides that, without the written consent of the Company, Purchaser will not decrease the Offer Price, decrease the number of Shares sought in the Offer, change the form of consideration to be paid pursuant to the Offer, impose additional conditions to the Offer or amend any other term or any condition of the Offer in any manner adverse to the holders of Shares, except that if on the initially scheduled expiration date of the Offer (as it may be extended in accordance with the terms of the Merger Agreement), all conditions to the Offer are not satisfied or waived, the Offer may be extended from time to time without the consent of the Company for a time reasonably expected to be necessary to satisfy the unsatisfied conditions. The Company, Parent and Purchaser have agreed that no waiver by Purchaser of any of the conditions to the Offer will be deemed adverse to the holders of Shares, except that Purchaser may not waive the Minimum Condition without the Company's consent. If all conditions to the Offer are satisfied as of the Expiration Date except for the Minimum Condition, Purchaser will extend the Offer from time to time until 180 days after the date of the Merger Agreement or, if earlier, such time as the Minimum Condition is satisfied or validly waived under the Merger Agreement. In addition, the Merger Agreement provides that, without the Company's consent, the Offer Price may be increased and the Offer may be extended to the extent required by law in connection with the increase. The Merger Agreement provides that, at any time following Pennsylvania Shareholder Approval, if Parent and its subsidiaries do not own at such time 40% of the Shares outstanding as of the date of the Merger Agreement (excluding Shares that would be outstanding upon exercise of the Company Stock Option), Parent may, and at the written request of the Company (which request may not be made within the 10-day period before the then-scheduled Expiration Date) is required to, commence the Second Offer to purchase up to that number of Shares which, when added to the aggregate number of Shares then beneficially owned by Parent (other than pursuant to the Company Option Agreement) equals 40% of such outstanding Shares, at a price not less than $92.50. The Second Offer, if it occurs, will be on terms no less favorable to the shareholders of the Company than the Offer. The Merger. The Merger Agreement provides that, subject to the terms and conditions thereof and in accordance with the Pennsylvania Law, at the Effective Time, the Company will be merged with and into Purchaser, the separate corporate existence of the Company will cease, and Purchaser will be the surviving corporation in the Merger and will continue to be governed by the laws of the State of Pennsylvania. Pursuant to the Merger, the Articles of Incorporation of Purchaser will be the Articles of Incorporation of the Surviving Corporation until thereafter amended (except that the Articles of Incorporation of the Surviving Corporation will provide that the Surviving Corporation will be named Conrail Inc.), and the By-laws of Purchaser will be the By-laws of the Surviving Corporation until thereafter amended. The Merger will have the effects set forth in the Pennsylvania Law. Conversion of Shares. The Merger Agreement provides that as of the Effective Time, each issued and outstanding Share (other than Shares owned by the Company as treasury stock and Shares owned by Parent, the Company or any of their respective subsidiaries, which will be cancelled and retired) will be converted into the right to receive either (i) $92.50 (the "Per Share Cash Consideration") without interest, (ii) shares of Parent Common Stock or (iii) a combination of the foregoing. Pursuant to the Merger Agreement, each of the issued and outstanding shares of common stock, par value $1.00 per share, of Purchaser will be converted at the Effective Time into a fully paid and non-assessable share of common stock of the Surviving Corporation. Unless, prior to the Effective Time, at least 40% of the outstanding Shares have been purchased by Purchaser (other than upon exercise of the Company Stock Option), in which case each Share will be converted into 1.85619 shares of Parent Common Stock as provided in the second succeeding paragraph, each holder of Shares, as more fully set forth in the Merger Agreement (other than holders of Shares to be cancelled) will have the right to submit a request (an "Election") specifying the number of Shares that the holder desires to have converted into 1.85619 shares of Parent Common Stock per Share in the Merger (a "Stock Election") and the number of Shares that the holder desires to have converted into the right to receive the Per Share Cash Consideration in the Merger (a "Cash Election"). 24 27 The aggregate number of Shares to be converted into Parent Common Stock will be equal as nearly as practicable to 60% of all outstanding Shares; and the number of Shares to be converted into the right to receive the Per Share Cash Consideration, together with the Shares acquired by Purchaser pursuant to the Offer or otherwise (other than upon exercise of the Company Stock Option) (the "Tendered Shares"), will be equal as nearly as practicable to 40% of all outstanding Shares. If Stock Elections are received for a number of Shares that is 60% or less of the outstanding Shares, each Share covered by a Stock Election will be converted in the Merger into 1.85619 shares of Parent Common Stock (the "Conversion Ratio"). If, between the date of the Merger Agreement and the Effective Time, the issued and outstanding shares of Parent Common Stock have been changed into a different number of shares or a different class of shares due to a stock split, reverse stock split, stock dividend, spin-off, extraordinary dividend, recapitalization, reclassification or other similar transaction with a record date within such period, the Conversion Ratio will be appropriately adjusted. If Stock Elections are received for more than 60% of the outstanding Shares, each Share as to which an Election is not in effect (or deemed not to be in effect pursuant to the Merger Agreement) on the last day on which an Election may be made under the Merger Agreement (other than Tendered Shares) (a "Non- Electing Share"), and each Share for which a Cash Election has been received, will be converted into the right to receive the Per Share Cash Consideration in the Merger, and Shares for which Stock Elections have been received will be converted into Parent Common Stock and the right to receive the Per Share Cash Consideration in the following manner: (1) There will be distributed with respect to such Shares a number of shares of Parent Common Stock equal to the Conversion Ratio with respect to a fraction of such Shares, the numerator of which fraction will be 60% of the number of outstanding Shares and the denominator of which will be the aggregate number of Shares covered by Stock Elections; and (2) Such Shares not fully converted into the right to receive Parent Common Stock as set forth in clause (1) above will be converted in the Merger into the right to receive the Per Share Cash Consideration for each Share so converted. If the number of Tendered Shares and Shares for which Cash Elections are received in the aggregate is 40% or less of the outstanding Shares, each Share covered by a Cash Election will be converted in the Merger into the right to receive the Per Share Cash Consideration. If the number of Tendered Shares and Shares for which Cash Elections are received in the aggregate is more than 40% of the outstanding Shares, each Non-Electing Share and each Share for which a Stock Election has been received will be converted in the Merger into a number of shares of Parent Common Stock equal to the Conversion Ratio, and the Shares for which Cash Elections have been received will be converted into the right to receive the Per Share Cash Consideration and Parent Common Stock in the following manner: (1) There will be distributed with respect to such Shares the Per Share Cash Consideration with respect to a fraction of such Shares, the numerator of which fraction will be 40% of the number of outstanding Shares minus the number of Tendered Shares and the denominator of which will be the aggregate number of Shares covered by Cash Elections; and (2) Such Shares not fully converted into the right to receive the Cash Consideration as set forth in clause (1) above will be converted in the Merger into the right to receive a number of shares of Parent Common Stock equal to the Conversion Ratio for each Share so converted. The Merger Agreement provides that if Stock Elections are not received for more than 60% of the outstanding Shares, or if the number of Tendered Shares and Shares for which Cash Elections are received together is not more than 40% of the outstanding Shares, there will be distributed with respect to each Non- Electing Share the Per Share Cash Consideration with respect to a fraction of such Non-Electing Share, where such fraction is calculated in a manner that will result in the sum of (i) the number of Shares converted into cash pursuant to this paragraph, (ii) the number of Shares for which Cash Elections have been received 25 28 and (iii) the number of Shares purchased pursuant to the Offer being as close as practicable to 40% of the outstanding Shares. Each Non-Electing Share not converted into the right to receive the Per Share Cash Consideration as set forth in the preceding sentence will be converted in the Merger into the right to receive a number of Shares of Parent Common Stock equal to the Conversion Ratio for each Non-Electing Share so converted. In lieu of any fractional share of Parent Common Stock, Parent will pay to each former shareholder of the Company who otherwise would be entitled to receive such a fractional share an amount in cash equal to (i) the average closing sales price of a share of Parent Common Stock as reported on the NYSE Composite Tape, calculated in the manner set forth in the Merger Agreement, on the date on which the Effective Time occurs times (ii) the fractional interest in a share of Parent Common Stock to which such holder would otherwise be entitled. For purposes of this section, "outstanding" shares means all Common Shares outstanding immediately prior to the Effective Time on a fully diluted basis (including Common Shares issuable upon conversion of ESOP Preferred Shares), except for Common Shares outstanding or issuable upon exercise of the Company Stock Option. Board of Directors; Officers. The Merger Agreement provides that, until their respective resignation or removal or until their respective successors are duly elected and qualified and subject to the terms of the Merger Agreement, from and after the Effective Time the current Chairmen of the Boards of the Company and Parent will serve as members of the Board of Directors of Parent. The Board of Directors of Parent will additionally consist of an even number of outside directors to be agreed upon. Each of the Company and Parent are permitted under the Merger Agreement to designate half of such outside directors. Pursuant to the Merger Agreement, the Company and Parent have also agreed to establish certain committees of the Board of Directors of Parent from and after the Effective Time, and each of the Company and Parent shall have the right to appoint 50% of each committee. The Merger Agreement provides that, unless altered by a vote of 75% of the directors of Parent after the Effective Time, during the two-year period after the Effective Time the current Chairman and Chief Executive Officer of Parent will be Chairman and Chief Executive Officer of Parent and the current Chairman and Chief Executive Officer of the Company will be President and Chief Operating Officer of Parent and President and Chief Executive Officer of each of Parent's railroad subsidiaries. Following the two-year period, the current Chairman and Chief Executive Officer of Parent will continue as Chairman of Parent for an additional two-year period and Chairman Emeritus for a one-year period thereafter and the current Chairman and Chief Executive Officer of the Company will be elected to the additional office of Chief Executive Officer of Parent on the second anniversary of the Effective Time, and will succeed as Chairman of Parent at the end of such additional two-year period. Shareholders' Meetings. Pursuant to the Merger Agreement, the Company and Parent will prepare and file with the SEC a registration statement on Form S-4 relating to the shares of Parent Common Stock to be issued in the Merger in which the joint proxy statement/prospectus (the "Proxy Statement") will be included as a prospectus, and will use all reasonable efforts to have such registration statement declared effective under the Securities Act as promptly as possible and to have the Proxy Statement mailed as promptly as possible to their respective shareholders. Further, the Company has filed with the SEC preliminary proxy materials and has agreed to use reasonable efforts to clear such materials and thereafter call and hold the Pennsylvania Special Meeting for the purpose of obtaining the Pennsylvania Shareholder Approval to amend the Company Articles to make inapplicable Subchapter E (Control Transactions) of Chapter 25 of the Pennsylvania Law to the Company, and after any such approval will take all necessary or advisable action to cause such amendment to become effective (but not until immediately prior to a transaction that would cause Parent to own 20% or more of the outstanding voting power of the Company). As soon as practicable following the date of the Merger Agreement, the Company will call and hold a meeting of its shareholders (the "Company Merger Meeting" and, together with the Pennsylvania Special Meeting, the "Company Shareholders Meetings") for the purpose of obtaining the approval of the shareholders of the Company (the "Company Merger Approval") with respect to the Merger. Subject to the terms of the Merger Agreement described under "-- No 26 29 Solicitation," the Merger Agreement provides that the Company's obligations pursuant to the foregoing sentence are not affected by the commencement, public proposal, public disclosure or communication to the Company of any Takeover Proposal (as defined) in respect of the Company. The Company has agreed, through its Board of Directors, to recommend to its shareholders the approval and adoption of the Offer and the matters to be considered at the Company Shareholders Meetings, except to the extent that the Board of Directors of the Company shall have withdrawn or modified its approval or recommendation of the Offer or such matters and terminated the Merger Agreement in accordance with the provisions of the Merger Agreement described under "-- No Solicitation." Pursuant to the Merger Agreement and subject to the Voting Trust Agreement, Parent will cause all Shares acquired by it or its wholly owned subsidiaries pursuant to the Offer or otherwise to be voted in favor of the matters to be considered at the Company Merger Meeting. The Merger Agreement requires Parent, as soon as practicable following the date of the Merger Agreement, to duly call and hold a meeting of its shareholders (the "Parent Shareholders Meeting") to obtain the approval of the shareholders of Parent (the "Parent Shareholder Approval") with respect to an amendment of the Articles of Incorporation of Parent as described in the Merger Agreement (and after any such approval to take all necessary or advisable action to cause the amendment to become effective) and with respect to the issuance of Parent Common Stock in the merger for purposes of the rules of the NYSE. As more fully described in the Merger Agreement, the amendment to the Parent Articles of Incorporation to be voted upon at the Parent Shareholders Meeting is intended to increase the number of shares of Purchaser Common Stock authorized under the Parent Articles of Incorporation and to authorize the issuance of Parent Common Stock in the Merger, to change the name of Parent to a new, neutral name and to effect certain other changes. Subject to the provisions of the Merger Agreement described under "-- No Solicitation," Parent has agreed that its obligations pursuant to the foregoing sentence are not affected by the commencement, public proposal, public disclosure or communication to Parent of any Takeover Proposal in respect of Parent. Parent has agreed, through its Board of Directors, to recommend to its shareholders the approval and adoption of the matters to be considered at the Parent Shareholders Meeting, except to the extent that the Board of Directors of Parent shall have withdrawn or modified its recommendation of such matters and terminated this Agreement in accordance with the provisions of the Merger Agreement described under "-- No Solicitation." Parent and the Company have agreed to use reasonable efforts to hold the Company Merger Meeting and the Parent Shareholders Meeting on the same date as soon as practicable after the date of the Merger Agreement. Voting Trust. The parties to the Merger Agreement have agreed that simultaneously with the purchase of Shares pursuant to the Offer, the Company Stock Option Agreement or otherwise, such Shares will be deposited in the Voting Trust. The Voting Trust may not be modified or amended without the prior written approval of the Company as to voting rights with respect to, or transfer restrictions on, such Shares, or otherwise unless such modification or amendment is not inconsistent with the Merger Agreement and is not adverse to the Company or its shareholders. See "-- Voting Trust Agreement" and Section 16. Interim Operations of the Company and Parent. Except as otherwise set forth in the Merger Agreement, Parent and the Company have agreed that, from the date of the Merger Agreement to the Effective Time, each of them will, and will cause their respective subsidiaries to, carry on their respective businesses in the ordinary course consistent with past practice and in compliance in all material respects with all applicable laws and regulations and, to the extent consistent therewith, will use all reasonable efforts to preserve intact their current business organizations, use reasonable efforts to keep available the services of their current officers and other key employees as a group and preserve their relationships with those persons having business dealings with them to the end that their goodwill and ongoing businesses will be unimpaired at the Effective Time. Except as contemplated by or as otherwise set forth in the Merger Agreement, without limiting the generality of the foregoing, from the date of the Merger Agreement to the Effective Time, and 27 30 without the consent of the other except in certain circumstances specified therein, neither the Company nor Parent will, or permit any of its respective subsidiaries to: (a) other than dividends and distributions (including liquidating distributions) by a direct or indirect wholly owned subsidiary of the Company or Parent, as applicable, to its parent, or by a subsidiary that is partially owned by the Company or Parent, as applicable, or any of their respective subsidiaries, provided that the Company or Parent, as applicable, or any such subsidiary receives or is to receive its proportionate share thereof, and other than the regular quarterly dividends of $.475 per share with respect to Common Shares, regular quarterly dividends of $.54125 per share with respect to ESOP Preferred Shares in accordance with their terms and regular quarterly dividends of $.26 per share with respect to Parent Common Stock (plus increases of no more than 20% per year), (x) declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock, (y) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, or (z) except in connection with the funding of employee benefit plans, purchase, redeem, retire or otherwise acquire any shares of its capital stock or of any of its subsidiaries that would constitute a "significant subsidiary" within the meaning of Rule 1-02 of Regulation S-X of the SEC or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities; (b) issue, deliver, sell, pledge or otherwise encumber any shares of its capital stock, any other voting securities or any securities convertible into, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities (other than (v) in accordance with the Rights Agreement, or the Rights Agreement, dated as of June 8, 1988, as amended (the "Parent Rights Agreement"), relating to rights ("Parent Rights") to purchase shares of Junior Participating Preferred Stock Series B, without par value, of Parent, (w) the issuance of Shares or Parent Common Stock upon (1) the exercise of the Company Employee Stock Options or Parent Employee Stock Options, respectively, listed in the disclosure schedules to the Merger Agreement and outstanding on the date of the Merger Agreement, in accordance with their present terms or (2) pursuant to a grant existing as of the date of the Merger Agreement or otherwise permitted by the provisions of the Merger Agreement described in this section under any Employee Benefit Plan (x) the grant or award of Company Employee Stock Options or Parent Employee Stock Options (or the issuance of Shares or Parent Common Stock upon exercise thereof) consistent with past practice in amounts not to exceed, in any 12-month period, 110% of the amount issued in the prior 12-month period, and, in the case of Parent, target bonus awards under Parent's long-term incentive plans consistent with past practice in amounts not to exceed, in any 12-month period, 110% of the amounts of the aggregate target bonus awards issued in the prior 12-month period, (y) the issuance of Shares upon conversion of ESOP Preferred Shares in accordance with their terms and (z) the issuance of Shares or Parent Common Stock pursuant to the Option Agreements); (c) in the case of the Company or Parent, adopt, propose or agree to any amendment to its articles of incorporation, by-laws or other comparable organizational documents, except for such amendments as are contemplated hereby, and, in the case of any subsidiary, adopt, propose or agree to any amendment to its certificate of incorporation, by-laws or other comparable organizational documents other than in the ordinary course in a manner which does not have a material adverse effect; (d) sell, lease, license, mortgage or otherwise encumber or subject to any lien or otherwise dispose of any of its properties or assets, other than (x) transactions in the ordinary course of business consistent with past practice and (y) transactions involving assets which do not individually or in the aggregate exceed $50,000,000 in any 12-month period; (e) make or agree to make any acquisition (other than of inventory) or capital expenditure; (f) except in the ordinary course consistent with past practice, make any tax election that could reasonably be expected to have a material adverse effect on the Company or Parent, as applicable or settle or compromise any material income tax liability; 28 31 (g) pay, discharge, settle or satisfy any material claims, liabilities or obligations (whether absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge, settlement or satisfaction, in the ordinary course of business consistent with past practice or in accordance with their terms, of liabilities (x) reflected or reserved against in, or contemplated by, the most recent consolidated financial statements (or the notes thereto) of the Company or of Parent included in any report, schedule, form, statement or other document (including any exhibits, schedules and documents incorporated by reference) required to be filed with the SEC since January 1, 1995 by the Company or Purchaser, as applicable, (y) incurred since the date of such financial statements in the ordinary course of business consistent with past practice or (z) which do not in the aggregate have a material adverse effect on the Company or Parent, as applicable; (h) except in the ordinary course of business or except as would not reasonably be expected to have a material adverse effect on the Company or Parent, as applicable, modify, amend or terminate any material contract or agreement to which the Company or Parent, as applicable, or any of their respective subsidiaries, is a party or waive, release or assign any material rights or claims thereunder; (i) make any material change to its accounting methods, principles or practices, except as may be required by generally accepted accounting principles; (j) except as required by law or contemplated hereby, (and except for rail labor agreements negotiated in the ordinary course) enter into, adopt or amend in any material respect or terminate any collective bargaining agreement or any bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, medical or other plan, arrangement or understanding providing benefits to any current or former employee, officer or director of the Company or Purchaser, as the case may be, or of any of their respective wholly owned subsidiaries ("Employee Benefit Plans"), or any other agreement, plan or policy involving the Company or Parent, as applicable, or any of their respective subsidiaries, and one or more of their directors, officers or employees, or materially change any actuarial or other assumption used to calculate funding obligations with respect to any pension plans, or change the manner in which contributions to any pension plan are made or the basis on which such contributions are determined; (k) except for normal increases in the ordinary course of business consistent with past practice that, in the aggregate, do not materially increase benefits or compensation expenses of the Company or Parent, as applicable, or their respective subsidiaries, or as contemplated hereby or by the terms of any contract the existence of which does not constitute a violation of the Merger Agreement, increase the compensation of any director, executive officer or other key employee or pay any benefit or amount not required by a plan or arrangement as in effect on the date of this Agreement to any such person; (l) enter into any agreement containing any provision or covenant (x) limiting in any material respect its ability to compete with any person which would bind the other party to the Merger Agreement or its operations after the Effective Time or (y) granting concessions to any railroad (whether through divestiture of lines or the grant of trackage rights) other than in the ordinary course of business; or (m) authorize, or commit or agree to take, any of the foregoing actions. The Merger Agreement provides that Parent and the Company will coordinate with one another regarding the declaration and payment of dividends in respect of Parent Common Stock and Shares and the record dates and payment dates relating thereto such that any holder of Shares will not receive two dividends, or fail to receive one dividend, for any single calendar quarter with respect to its Shares and/or any shares of Parent Common Stock any such holder receives in exchange therefor pursuant to the Merger. Pursuant to the Merger Agreement, except as required by law, the Company and Parent have agreed that they will not, and will not permit any of their respective subsidiaries to, voluntarily take any action that would, or that could reasonably be expected to, result in (1) any of the representations and warranties of such party 29 32 set forth in the Merger Agreement or the Option Agreements that are qualified as to materiality becoming untrue, (2) any of such representations and warranties that are not so qualified becoming untrue in any material respect, (3) any of the conditions to the consummation of the transactions contemplated hereby not being satisfied or (4) any material impairment or delay of STB approval. No Solicitation. Under the terms of the Merger Agreement, neither the Company nor Parent may, nor may it permit any of its subsidiaries, officers, directors, employees or representatives to, directly or indirectly through another person, (i) solicit, initiate or encourage (including by way of furnishing information), or take any other action designed to facilitate, directly or indirectly, any inquiries or the making of any proposal which constitutes any Takeover Proposal or (ii) participate in any discussions or negotiations regarding any Takeover Proposal; provided, however, that if, at any time prior to the earlier of (x) the consummation of the Offer and (y) the obtaining of the Company Merger Approval, in the case of the Company, or the Parent Shareholder Approval, in the case of Parent, or after 180 days from the date of the Merger Agreement and prior to the Approval Date (as defined in the next paragraph), the Board of Directors of the Company or Parent, as applicable, determines in good faith, based on the advice of outside counsel, that it is necessary to do so to avoid a breach of its fiduciary duties to the Company under applicable law, the Company or Parent, as applicable, may, in response to a Takeover Proposal which was not solicited by it or which did not otherwise result from a breach of the terms of the Merger Agreement described in this paragraph, and subject to compliance with certain notice provisions of the Merger Agreement, (x) furnish information with respect to it and its subsidiaries to any person pursuant to a customary confidentiality agreement (as determined by the party receiving such Takeover Proposal after consultation with its outside counsel) the benefits of the terms of which, if more favorable to the other party to such confidentiality agreement than those in place with the other party to the Merger Agreement, shall be extended to the other party to the Merger Agreement, and (y) participate in negotiations regarding such Takeover Proposal. For purposes of the Merger Agreement, "Takeover Proposal" in respect of the Company or Parent, as applicable, means any proposal or offer from any person for the acquisition or purchase of more than 50% of the assets of such party and its subsidiaries or more than 50% of the equity securities of such party entitled to vote generally in the election of directors, any tender offer or exchange offer that if consummated would result in any person beneficially owning more than 50% of the equity securities of such party entitled to vote generally in the election of directors, or any merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving such party, other than the transactions contemplated by the Merger Agreement or the Option Agreements. Except as permitted by the Merger Agreement, the Company and Parent have agreed that neither the Board of Directors of the Company or Parent, as applicable, nor any committee thereof will (i) withdraw or modify (or propose publicly to do so), in a manner adverse to the other party, its approval or recommendation of the Offer or its adoption and approval of the matters to be considered at the respective shareholders meetings of the Company or Parent, (ii) approve or recommend (or propose publicly to do so), any Takeover Proposal, or (iii) cause the Company or Parent, as applicable, to enter into any agreement (an "Acquisition Agreement") related to a Takeover Proposal. However, the Merger Agreement provides that if at any time following 180 days after the date of the Merger Agreement and prior to the earlier of (a) the time that at least 40% of the outstanding Shares on a fully diluted basis have been deposited in the Voting Trust and (b) the obtaining of Company Merger Approval (in the case of the Company) or Parent Shareholder Approval (in the case of Parent) (such earlier date referred to in clause (x) or (y) being the "Approval Date") there exists a Superior Proposal, and such Board of Directors determines that (x) in the case of the Board of Directors of the Company, there is no substantial probability that Parent will succeed in acquiring 40% of the Shares in the Offer and/or the Second Offer or otherwise (or if the Pennsylvania Shareholder Approval has not been obtained, there is no substantial probability that the Company Merger Approval will be obtained), in either case due to the existence of such Superior Proposal with respect to the Company or (y) in the case of the Board of Directors of Parent, there is no substantial probability that the Parent Shareholder Approval will be obtained due to the existence of such Superior Proposal with respect to Parent, the Board of Directors of the Company or Parent, as applicable, may (subject to this and the following sentences) withdraw or modify its approval or recommendation of the Offer, the Merger or the adoption and approval of the matters to be considered at their respective shareholder meetings and approve or recommend such Superior Proposal or terminate the Merger Agreement (and concurrently, if it so chooses, cause the Company or Parent, as 30 33 applicable, to enter into an Acquisition Agreement with respect to such Superior Proposal), but only after giving the notice required by the Merger Agreement. As used in the Merger Agreement, a "Superior Proposal" means any proposal made by a third party to acquire, directly or indirectly, for consideration consisting of cash and/or securities, more than 50% of the voting equity securities of the Company or Parent, as the case may be, or all or substantially all the assets of the Company or Parent, as the case may be, and otherwise on terms which the Board of Directors of such party determines in its good faith judgment (x) (based on the written opinion of a nationally recognized financial advisor) to be more favorable from a financial point of view to its shareholders than the Transactions and for which any required financing is then committed and (y) to be more favorable to such party than the Transactions after taking into account all constituencies (including shareholders) and pertinent factors permitted under the Pennsylvania Law or applicable Virginia law. In addition to the obligations of the parties set forth in the two immediately preceding paragraphs, the Merger Agreement provides that any party that has received a Takeover Proposal must immediately advise the other orally and in writing of any request for information or of any Takeover Proposal, the material terms and conditions of such request or Takeover Proposal and the identity of the person making such request or Takeover Proposal. Any party that has received a Takeover Proposal is required to keep the other reasonably informed of the status and details (including amendments or proposed amendments) of any such request or Takeover Proposal. The Merger Agreement provides that nothing contained in the provisions described in this subsection prohibits Parent or the Company from taking and disclosing to its shareholders a position contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure to its shareholders if, in the good faith judgment of its Board of Directors, based on the advice of outside counsel, failure so to disclose would result in a violation of applicable law; however, neither Parent nor the Company nor their respective Board of Directors nor any committee thereof may, except as permitted by the provisions of the Merger Agreement described in the second preceding paragraph, withdraw or modify, or propose publicly to withdraw or modify, its position with respect to the Offer or the matters to be considered at the Company Shareholders Meetings or the Parent Shareholders Meeting, as applicable, or approve or recommend, or propose publicly to approve or recommend, a Takeover Proposal. Reasonable Efforts; Regulatory Approval. Each of the parties to the Merger Agreement has agreed to use all reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Merger and the other transactions contemplated by the Merger Agreement and the Option Agreements, including (i) the obtaining of all necessary actions or nonactions, waivers, consents and approvals from third parties and Governmental Entities (as defined in the Merger Agreement) and the making of all necessary registrations and filings and the taking of all reasonable steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Entity, (ii) the defending of any lawsuits or any other legal proceedings challenging the Merger Agreement or the Option Agreements or the consummation of the transactions contemplated thereby, and (iii) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, the Merger Agreement and the Option Agreements. Pursuant to the Merger Agreement, each of the parties will make and cause its respective subsidiaries to make all necessary filings, as soon as practicable, including those required with the STB and applicable transportation regulations and laws in order to facilitate prompt consummation of the Offer, the Merger and the transactions contemplated by the Merger Agreement and by the Option Agreements; will use reasonable efforts to provide such information and communications to Governmental Entities as may be reasonably requested; and will provide to the other party copies of all applications made pursuant to the foregoing, subject to the terms set forth in the Merger Agreement. The Company and Parent have agreed, and each has agreed to cause each of its subsidiaries, to take all such actions as are necessary to (i) cooperate with one another to prepare and present to the STB as soon as 31 34 practicable all filings and other presentations in connection with seeking any STB approval, exemption or other authorization necessary to consummate the transactions contemplated by the Merger Agreement and the Option Agreements, (ii) prosecute such filings and other presentations with diligence, (iii) diligently oppose any objections to, appeals from or petitions to reconsider or reopen any such STB approval by persons not party to the Merger Agreement, and (iv) take all such further action as reasonably may be necessary to obtain a final order or orders of the STB approving such transactions consistent with the Merger Agreement and the Option Agreements. Anti-Takeover Laws. The Merger Agreement provides that the Company and Parent will take all action necessary to ensure that no state anti-takeover statute or similar statute or regulation is or becomes operative with respect to the Offer, the Merger, the Merger Agreement, the Option Agreements or any of the other transactions contemplated by the Merger Agreement or the Option Agreements, and if any state anti-takeover statute or similar statute or regulation becomes so operative, take all action necessary to ensure that the Offer, the Merger and the other transactions contemplated by the Merger Agreement and the Option Agreements may be consummated as promptly as practicable. Directors' and Officers' Insurance and Indemnification. Under the Merger Agreement, Parent has agreed that all rights to indemnification and exculpation from liabilities for acts or omissions occurring at or prior to the Effective Time existing as of the date of the Merger Agreement in favor of the current or former directors or officers of the Company and its subsidiaries, the existence of which does not constitute a breach of the Merger Agreement, will be assumed by the Surviving Corporation in the Merger as of the Effective Time and will survive the Merger and continue in full force and effect in accordance with their terms. The Merger Agreement also provides that, from and after the Effective Time, directors and officers of the Company who become directors or officers of Parent will be entitled to the same indemnity rights and protections as are afforded to other directors and officers of Parent. Pursuant to the Merger Agreement, in the event that Parent or any of its successors or assigns consolidates with or merges into any other person and is not the continuing or surviving corporation or entity of such consolidation or merger or transfers or conveys all or substantially all of its properties and assets to any person, then proper provision will be made so that the successors and assigns of Parent assume the obligations under the Merger Agreement described in this section. The Company and Parent have agreed that, for three years after the Effective Time, Parent is to provide, if available on commercially reasonable terms, officers' and directors' liability insurance in respect of acts or omissions occurring prior to the Effective Time, including the transactions contemplated by the Merger Agreement, covering each person covered by the Company's officers' and directors' liability insurance policy as of the date of the Merger Agreement, or who becomes so covered before the Effective Time, on terms with respect to coverage and amount no less favorable than those of such policy in effect on the date of the Merger Agreement, provided that in satisfying the foregoing obligation Parent is not required to pay premiums in excess of 150% of the amount per annum the Company paid in its last full fiscal year ending prior to the date of the Merger Agreement, and provided further that Parent is nevertheless obligated to provide such coverage as may be obtained for such amount. Compensation and Benefits; Stock Options. The Merger Agreement provides that, following the Effective Time, Parent will cause the Surviving Corporation to honor all obligations under employment agreements, employee benefit plans, programs, policies and arrangements of the Company or Parent the existence of which does not constitute a violation of the Merger Agreement in accordance with the terms thereof, and Parent will provide employees of the Company with benefits no less favorable in the aggregate than those provided to similarly situated Parent employees. For two years after the Effective Time, Parent or the Surviving Corporation will provide severance and termination benefits to all non-union employees of the Company and Parent terminated as a result of or in connection with the Merger, which benefits shall be determined consistent with industry standards and taking into account those benefits provided in recent similar transactions in the industry. The Merger Agreement also provides that, as soon as practicable following the date of such Agreement, the Board of Directors of the Company (or, if appropriate, any administering committee) will take such action 32 35 as may be required to (a) adjust the terms of all outstanding employee stock options or other rights ("Company Employee Stock Options") to purchase or receive Shares granted under the Company employee stock plans set forth in the disclosure schedules to the Merger Agreement (the "Company Stock Plans"), whether vested or unvested, as necessary to provide that, at the Effective Time, each Company Employee Stock Option outstanding immediately prior to such time will be deemed to constitute an option to acquire, on the same terms and conditions as were applicable under the Company Employee Stock Option, the same number of shares of Parent Common Stock as the holder of the Company Employee Stock Option would have been entitled to receive pursuant to the Merger had that holder exercised the Company Employee Stock Option in full immediately prior to the Effective Time, at a price per share of Parent Common Stock equal to (A) the aggregate exercise price for the Shares otherwise purchasable pursuant to the Company Employee Stock Option divided by (B) the aggregate number of shares of Parent Common Stock deemed purchasable pursuant to the Company Employee Stock Option (each, as so adjusted, an "Adjusted Option"); except that in the case of any qualified stock option (as defined in the Merger Agreement), the option price, the number of shares purchasable pursuant to such option and the terms and conditions of exercise of such option will be determined in order to comply with Section 424 of the Code; and (b) make such other changes to the Company Stock Plans as the Company and Parent may agree are appropriate to give effect to the Merger. Pursuant to the Merger Agreement, Parent will deliver to the holders of Company Employee Stock Options as soon as practicable after the Effective Time appropriate notices setting forth the holders' rights under the respective Company Stock Plans and the agreements evidencing the grants of the Company Employee Stock Options. The notices will also state that the Company Employee Stock Options and agreements will be assumed by Parent and will continue in effect on the same terms and conditions (subject to the adjustments described in the immediately preceding paragraph). Parent will comply with the terms of the Company Stock Plans and ensure, to the extent required by, and subject to the provisions of, such Company Stock Plans, that the Company Employee Stock Options which qualified as qualified stock options prior to the Effective Time continue to qualify as qualified stock options after the Effective Time. Under the Merger Agreement, Parent has agreed to take such actions as are reasonably necessary for the assumption of the Company Stock Plans described in the first paragraph of this section, including the reservation, issuance and listing of Parent Common Stock as is necessary to effectuate the transactions contemplated therein. As soon as reasonably practicable after the Effective Time, Parent will prepare and file with the SEC one or more registration statements on Form S-8 or other appropriate form with respect to shares of Parent Common Stock subject to Company Employee Stock Options issued under the Company Stock Plans and will use all reasonable efforts to maintain the effectiveness of a registration statement or registration statements covering the Company Employee Stock Options (and maintain the current status of the prospectus or prospectuses contained therein) for so long as the Company Employee Stock Options remain outstanding. With respect to those individuals, if any, who subsequent to the Effective Time will be subject to the reporting requirements under Section 16(a) of the Exchange Act, where applicable, Parent has agreed to use all reasonable efforts to administer the Company Stock Plans assumed pursuant to the Merger Agreement in a manner that complies with Rule 16b-3 promulgated under the Exchange Act to the extent the applicable Company Stock Plan complied with such rule prior to the Merger. Pursuant to the Merger Agreement, a holder of an Adjusted Option may exercise that Adjusted Option in whole or in part in accordance with its terms by delivering a properly executed notice of exercise to Parent, together with the consideration therefor and the federal withholding tax information, if any, required in accordance with the related Company Stock Plan. Except as otherwise contemplated by the provisions of the Merger Agreement described in this section or required by the terms of the Company Employee Stock Options, all restrictions or limitations on transfer and vesting with respect to Company Employee Stock Options awarded under the Company Stock Plans or any other plan, program or arrangement of the Company or any of its subsidiaries, to the extent that such restrictions or limitations shall not have already lapsed, will remain in full force and effect with respect to those options after giving effect to the Merger and the assumption by Parent as described above. 33 36 Tax-Free Reorganization. The Merger Agreement provides that neither the Company or Parent or any affiliate thereof will take any action that would cause the Merger not to qualify as a tax-free reorganization under Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code. Representations and Warranties. In the Merger Agreement, the Company has made customary representations and warranties to Parent and Purchaser with respect to, among other things, its organization, subsidiaries, qualification, authorization, capital structure, public filings, employee benefit plans, defaults, information in the Proxy Statement and other documents filed with the SEC in connection with the Transactions, compliance with laws, consents and approvals, brokers' fees, undisclosed liabilities, shareholder voting requirements and the absence of certain events. In the Merger Agreement, Parent and Purchaser have made customary representations and warranties to the Company with respect to, among other things, organization, subsidiaries, authorization, capital structure, public filings, employee benefit plans, information in the Proxy Statement, compliance with laws, consents and approvals, brokers' fees, undisclosed liabilities, shareholder voting requirements and the absence of certain events. Conditions to the Merger. The respective obligations of the Company, on the one hand, and Parent and Purchaser, on the other, to effect the Merger is subject to the satisfaction or waiver on or prior to the Closing Date (as defined in the Merger Agreement) of the following conditions: (a) each of the Company Merger Approval and the Parent Shareholder Approval shall have been obtained; (b) any applicable waiting period (and any extension thereof) under the HSR Act shall have been terminated or shall have expired; (c) no judgment, order, decree, statute, law, ordinance, rule, regulation, temporary restraining order, preliminary or permanent injunction or other order enacted, entered, promulgated, enforced or issued by any court of competent jurisdiction or other Governmental Entity or other legal restraint or prohibition (collectively, "Restraints") preventing the consummation of the Merger may be in effect, provided the party asserting this condition shall have used reasonable efforts to prevent the entry of any such Restraints and to appeal as promptly as possible any such Restraints that may be entered, and there shall not be any Restraint enacted, entered, enforced or promulgated that is reasonably likely to result in a material adverse effect on the Company and Parent on a combined basis; and (d) the shares of Parent Common Stock issuable to the Company's shareholders pursuant to the Merger Agreement and under the Company Stock Plans shall have been approved for listing on the NYSE, subject to official notice of issuance. The obligation of Parent to effect the Merger is further subject to satisfaction or waiver of the following conditions: (a) the Company shall not have breached or failed to observe or perform in any material respect any of its covenants or agreements under the Merger Agreement to be performed by it at or prior to the Closing Date (as defined in the Merger Agreement), and the representations and warranties of the Company in the Merger Agreement shall be true and accurate both when made and at and as of the Closing Date, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date), except where the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to "materiality" or "material adverse effect" set forth therein), does not have, and is not likely to have, individually or in the aggregate, a material adverse effect on the Company; (b) at any time after the date of the Merger Agreement there will not have occurred any material adverse change relating to the Company; (c) Purchaser shall have purchased the Shares in the Offer or, if not, Parent and Purchaser shall have obtained sufficient financing, on terms reasonably acceptable to Parent, to enable consummation of the Merger; (d) the STB will have issued a decision (which decision will not have been stayed or enjoined) that (A) constitutes a final order approving, exempting or otherwise authorizing consummation of the Merger and all other material transactions contemplated by the Merger Agreement (or subsequently presented to the STB by agreement of the Company and Parent) as may require such authorization and (B) does not (1) change or disapprove of the consideration to be given in the Merger or other material provisions of Article II of the Merger Agreement or (2) impose on Parent, the Company or any of their respective subsidiaries any other terms or conditions (including, without limitation, labor protective provisions but excluding conditions heretofore imposed by the Interstate Commerce Commission in New York Dock Railway -- Control -- Brooklyn Eastern District, 360 I.C.C. 60 (1979)) that materially and adversely affect the long-term benefits expected to be received by Parent from the transactions contemplated by the Merger Agreement; and (e) all actions by or in respect of or filings with any Governmental Entity required to permit the consummation of the 34 37 Merger (other than approval of the STB, which is addressed in clause (d) above) will have been obtained, excluding any consent, approval, clearance or confirmation the failure to obtain which would not have a material adverse effect on Parent, the Company or, after the Effective Time, the Surviving Corporation. The obligation of the Company to effect the Merger is further subject to satisfaction or waiver of the following conditions: (a) Parent shall not have breached or failed to observe or perform in any material respect any of its covenants or agreements under the Merger Agreement to be performed by it at or prior to the Closing Date, and the representations and warranties of Parent in the Merger Agreement shall be true and accurate both when made and at and as of the Closing Date, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date), except where the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to "materiality" or "material adverse effect" set forth therein), does not have, and is not likely to have, individually or in the aggregate, a material adverse effect on Parent; (b) at any time after the date of the Merger Agreement there will not have occurred any material adverse change relating to Parent; (c) the STB will have issued a decision (which decision will not have been stayed or enjoined) that (i) constitutes a final order approving, exempting or otherwise authorizing consummation of the Merger and all other material transactions contemplated thereby or subsequently presented to the STB by agreement of Parent and the Company as may require such authorization and (ii) does not change or disapprove of the consideration to be given in the Merger or other material provisions of Article II of the Merger Agreement. Neither Parent nor the Company are permitted under the Merger Agreement to rely on the failure of any condition described in the three immediately preceding paragraphs, as the case may be, to be satisfied if such failure was caused by such party's failure to use reasonable efforts to consummate the Merger and the other transactions contemplated by the Merger Agreement, as required by and subject to the provisions of the Merger Agreement described under "-- Reasonable Efforts." Termination. The Merger Agreement may be terminated at any time prior to the Effective Time, whether before or after the Pennsylvania Shareholder Approval, the Company Merger Approval or the Parent Shareholder Approval, only as provided below: (a) by mutual written consent of Parent and the Company; (b) by either Parent or the Company: (i) if the Merger has not been consummated by December 31, 1998; except that the right to terminate the Merger Agreement pursuant to this provision will not be available to any party whose failure to perform any of its obligations under the Merger Agreement results in the failure of the Merger to be consummated by such time; (ii) if, at a Company Merger Meeting duly convened therefor or at any adjournment or postponement thereof, the Company Merger Approval is not obtained; (iii) if, at a Parent Shareholders Meeting duly convened therefor or at any adjournment or postponement thereof, the Parent Shareholder Approval is not obtained; or (iv) if any Governmental Entity has issued a Restraint or taken any other action permanently enjoining, restraining or otherwise prohibiting the consummation of the Merger or any of the other transactions contemplated by the Merger Agreement and such Restraint or other action has become final and nonappealable; except that the party seeking to terminate the Merger Agreement pursuant to this clause (iv) must have used all reasonable efforts to prevent the entry of and to remove such Restraint or other action; (c) by Parent, if the Company has breached or failed to perform in any material respect any of its representations, warranties, covenants or other agreements contained in the Merger Agreement, which breach or failure to perform (A) would constitute the failure of the condition to the Merger described in clause (a) of the second paragraph under "-- Conditions to the Merger," and (B) cannot be or has not been cured within 30 days after the giving of written notice to the Company of such breach (as long as Parent is not then in material breach of any representation, warranty, covenant or other agreement contained in the Merger Agreement and provided that, if such breach is curable through the exercise of the Company's best efforts, the Merger Agreement may not be terminated for so long as the Company is using its best efforts to cure such breach); 35 38 (d) by Parent in accordance with the terms of the Merger Agreement described under "-- No Solicitation," as long as Parent has complied with all such terms, including the notice provisions therein, and as long as Parent complies with applicable requirements of the terms of the Merger Agreement described under "-- Certain Fees and Expenses"; (e) by Parent if (i) the Board of Directors of the Company or, if applicable, any committee thereof, has withdrawn or modified in a manner adverse to Parent its approval or recommendation of the Offer or the Merger or the matters to be considered at the Company Shareholders Meetings or failed to reconfirm its recommendation within 15 business days after a written request to do so, or approved or recommended any Takeover Proposal in respect of the Company or (ii) the Board of Directors of the Company or any committee thereof has resolved to take any of the foregoing actions; (f) by Parent, if the Company or any of its officers, directors, employees, representatives or agents take any of the actions that would be proscribed by the terms of the Merger Agreement described under "-- No Solicitation" but for the exceptions therein allowing certain actions to be taken pursuant to the proviso in the first sentence of such section or the second sentence of the second paragraph of such section; (g) by the Company, if Parent has breached or failed to perform in any material respect any of its representations, warranties, covenants or other agreements contained in the Merger Agreement, which breach or failure to perform (A) would constitute the failure of a condition to the Merger, as described under "-- Conditions to the Merger," and (B) cannot be or has not been cured within 30 days after the giving of written notice to Parent of such breach (as long as the Company is not then in material breach of any representation, warranty, covenant or other agreement contained in the Merger Agreement and provided that, if such breach is curable through the exercise of Parent's best efforts, the Merger Agreement may not be terminated pursuant to this provision of the Merger Agreement for so long as Parent is so using its best efforts to cure such breach); (h) by the Company in accordance with the provisions of the Merger Agreement described in the second paragraph under "-- No Solicitation," as long as Parent has complied with all such provisions, including the notice provisions therein, and complies with applicable requirements of the provisions of the Merger Agreement described under "-- Certain Fees and Expenses"; (i) by the Company if (i) the Board of Directors of Parent or, if applicable, any committee thereof has withdrawn or modified in a manner adverse to the Company its approval or recommendation of the matters to be considered at the Parent Shareholders Meeting, or failed to reconfirm its recommendation within 15 business days after a written request to do so, or approved or recommended any Takeover Proposal in respect of Parent or (ii) the Board of Directors of Parent or any committee thereof has resolved to take any of the foregoing actions; or (j) by the Company, if Parent or any of its officers, directors, employees, representatives or agents takes any of the actions that would be proscribed by the terms of the Merger Agreement described under "-- No Solicitation" but for the exceptions therein allowing certain actions to be taken pursuant to the proviso in the first sentence of such section or the second sentence of the second paragraph of such section. Certain Fees and Expenses. The Merger Agreement provides that, in the event that (i) a Takeover Proposal in respect of the Company shall have been made known to the Company or any of its subsidiaries or has been made directly to its shareholders generally or any person shall have publicly announced an intention (whether or not conditional) to make such a Takeover Proposal and thereafter the Merger Agreement is terminated by either Parent or the Company pursuant to clauses (i) or (ii) of paragraph (b) under "-- Termination," or (ii) the Merger Agreement is terminated (x) by the Company pursuant to paragraph (h) under "-- Termination," or (y) by Parent pursuant to paragraph (e) under "-- Termination," then the Company will (A) promptly, but in no event later than two days after the date of the termination, pay Parent a fee equal to $300 million (the "Termination Fee") (except that no Termination Fee will be payable pursuant to clause (i) of this sentence unless and until within 24 months of such termination the Company or 36 39 any of its subsidiaries enters into an Acquisition Agreement or consummates a Takeover Proposal). The Company has agreed that, if it fails promptly to pay the amount due pursuant to the foregoing provision, and, in order to obtain such payment, Parent commences a suit which results in a judgment against the Company for such fee, the Company will pay to Parent its costs and expenses (including attorneys' fees and expenses) in connection with such suit, together with interest on the amount of the fee. The Merger Agreement also provides that, in the event that (i) a Takeover Proposal in respect of Parent shall have been made known to Parent or any of its subsidiaries or has been made directly to its shareholders generally or any person shall have publicly announced an intention (whether or not conditional) to make such a Takeover Proposal and thereafter the Merger Agreement is terminated by either Parent or the Company pursuant to clause (i) or (iii) of paragraph (b) under "-- Termination," or (ii) the Merger Agreement is terminated (x) by Parent pursuant to paragraph (d) under "-- Termination" or (y) by the Company pursuant to paragraph (i) under "-- Termination," Parent is required to (A) promptly, but in no event later than two days after the date of the termination, pay the Company the Termination Fee (except that no Termination Fee shall be payable pursuant to clause (i) of this sentence unless and until within 24 months of such termination Parent or any of its subsidiaries enters into an Acquisition Agreement or consummates a Takeover Proposal). If Parent fails promptly to pay the amount due pursuant to the foregoing provision, and, in order to obtain such payment, the Company commences a suit which results in a judgment against Parent for the fee set forth in the foregoing provision, Parent is required pay to the Company its costs and expenses (including attorneys' fees and expenses) in connection with such suit, together with interest on the amount of the fee. Parent or Purchaser will pay any sales, transfer or similar tax arising as a result of the consummation of the Transactions and imposed on shareholders of the Company. Amendment. The Merger Agreement may be amended by the parties, by an instrument in writing signed on behalf of each party, at any time before or after the Pennsylvania Shareholder Approval, the Company Merger Approval or the Parent Shareholder Approval. However, after any such approval, the Merger Agreement does not permit the parties to make any amendment that by law requires further approval by the shareholders of the Company or Parent without the further approval of such shareholders. Registration Rights. Under the terms of the Merger Agreement, the Company or Parent, as applicable (the "issuing party") will, if requested by the other party to the Merger Agreement (the "requesting party") within three years after the termination of the Merger Agreement, as expeditiously as possible prepare and file up to three registration statements under the Securities Act if necessary to permit the sale or other disposition of any or all securities deposited in the Voting Trust, in the case of Parent, or acquired through exercise of the Parent Stock Option Agreement, in the case of the Company, in accordance with the intended method of sale or other disposition stated by the requesting party. The issuing party will also use its best efforts to qualify such securities under applicable state securities laws and will take certain steps to cause any sale or other disposition pursuant to such registration statement to be effected on a widely distributed basis. The issuing party will use reasonable efforts to cause each such registration statement to become effective, to obtain any or all required consents or waivers, and to keep such registration statement effective for such period not in excess of 180 calendar days as is reasonably necessary to effect such sale or other disposition. The foregoing obligations of the issuing party may be suspended for certain limited periods if the Board of Directors of the issuing party determines that carrying out such obligations during such periods would require disclosure of nonpublic information that would materially and adversely affect the issuing party. The Merger Agreement provides that if the issuing party effects a registration under the Securities Act of the issuing party's securities for its own account or for any of its shareholders, then with certain exceptions the other party to the Merger Agreement will have the right to participate in such registration without affecting the obligation of the issuing party to effect demand registration statements for the requesting party as described above, subject to certain reductions if the managing underwriters of such registration advise the issuing party that the number of securities requested to be included in such offering exceed the number that can be sold. Listing. Parent has agreed to use reasonable efforts to cause the shares of Parent Common Stock to be issued in the Merger, under the Company Stock Plans and pursuant to the Parent Stock Option Agreement, 37 40 and the Company has agreed to use reasonable efforts to cause Shares to be issued pursuant to the Company Stock Option Agreement to be approved for listing on the NYSE prior to the Closing Date. Rights Agreements. The Board of Directors of the Company will take all further action, if any, reasonably requested in writing by Parent (including redeeming the Rights immediately prior to the Effective Time or amending the Rights Agreement) in order to render the Rights inapplicable to the transactions contemplated by the Merger Agreement and the Company Stock Option Agreement. Except for the foregoing, the Board of Directors of the Company will not amend or take any action with respect to the Rights Agreement, including a redemption of the Rights or any action to facilitate a Takeover Proposal in respect of the Company. The Board of Directors of Parent will take all further action, if any, reasonably requested in writing by the Company in order to render the Parent Rights inapplicable to the Parent Stock Option Agreement. The Board of Directors of Parent will not otherwise amend or take any action with respect to the Parent Rights Agreement to facilitate a Takeover Proposal in respect of Parent. DISSENTERS' RIGHTS In accordance with the United States Supreme Court decision, Schwabacher v. United States, 334 U.S. 182 (1948), shareholders of the Company will not have any dissenters' rights under state law, unless the STB or a court of competent jurisdiction determines that state-law dissenters' rights are available to holders of Shares. Parent considers it unlikely that the STB or a court will determine that state-law dissenters' rights are available to holders of Shares. As part of the approval of the Merger, Parent and the Company intend to seek a determination of the STB that the terms of the Merger are just and reasonable. It is Parent's and the Company's understanding that upon the issuance of such a determination, dissenters' rights under state law will be preempted. Shareholders of the Company will have an opportunity to participate in this STB proceeding. If dissenters' rights are available to holders of Shares, such rights will be provided in accordance with Section 1571 et seq. of the Pennsylvania Law. In such event, any issued and outstanding Shares held by persons who object to the Merger and comply with all the provisions of the Pennsylvania Law concerning the right of holders of Shares to dissent from the Merger and require valuation of their Shares (a "Dissenting Shareholder") will not be converted into the right to receive the Offer Price, without interest, pursuant to the Merger Agreement but will become the right to receive payment of the "fair value" of their Shares at the Effective Time (exclusive of any element of appreciation or depreciation in anticipation of the Merger); provided, however, that the Shares outstanding immediately prior to the Effective Time and held by a Dissenting Shareholder who will, after the Effective Time, withdraw his demand for payment or lose his right to dissent, in either case pursuant to the Pennsylvania Law, will be deemed to be converted as of the Effective Time into the right to receive the Offer Price, payable to the holder thereof, without interest. Dissenters' rights cannot be exercised at this time. Shareholders who will be entitled to dissenters' rights, if any, in connection with the Merger (or similar business combination) will receive additional information concerning any available dissenters' rights and the procedures to be followed in connection therewith before such shareholders have to take any action relating thereto. Shareholders who sell shares in the Offer will not be entitled to exercise any dissenters' rights with respect to Shares purchased but, rather, will receive the Offer Price. OPTION AGREEMENTS Concurrently with the Merger Agreement, the parties have entered into the Option Agreements, granting each other the right to purchase certain shares of their common stock under certain circumstances. Pursuant to the Company Stock Option Agreement, the Company granted Parent an option to purchase 15,955,477 Common Shares at a price of $92.50 per share, subject to adjustment for changes in the Company's capitalization as described in the Company Stock Option Agreement (the "Purchase Price"), payable in cash. Such option becomes exercisable, in whole but not in part, after the first to occur of (i) any 38 41 event which entitles Parent to receive the Termination Fee and (ii) the consummation of the Offer (the first such occurrence being a "Purchase Event"). The option terminates upon the first to occur of (i) the Effective Date, (ii) 18 months after the first occurrence of a Purchase Event, and (iii) the termination of the Merger Agreement (unless Parent is entitled to the Termination Fee, in which case the option shall not terminate until the later of (a) six months following the time the Termination Fee becomes payable and (b) the expiration of the period in which Parent has the right to receive the Termination Fee). Any purchase of Common Shares under the Company Stock Option Agreement is subject to the Voting Trust Condition, and any Common Shares so purchased will be delivered immediately to the trustee thereunder. If, during the time that the option under the Company Stock Option Agreement is exercisable, the Company enters into an agreement pursuant to which all outstanding Common Shares are to be purchased for or converted into, in whole or in part, cash (other than in respect of fractional shares), then such agreement will make proper provision so that, upon consummation of the transaction (which will be the date of acceptance for payment in the case of a transaction involving a tender offer), in exchange for cancellation of the option, Parent shall receive an amount in cash equal to the difference (if positive) between the closing market price per Common Share on the day immediately prior to the consummation of such transaction and the Purchase Price. In the event (i) the Company enters into an agreement to consolidate with, merge into, or sell substantially all of the Company's assets to any person, other than Parent, Purchaser or a direct or indirect subsidiary thereof, and the Company is not the surviving corporation, or (ii) the Company allows any person, other than Parent, Purchaser or a direct or indirect subsidiary thereof, to merge into or consolidate with the Company in a series of transactions in which the Common Shares or other securities of the Company represent less than 50% of the outstanding voting securities of the merged corporation, then such agreement will make proper provision so that the option will be adjusted, exchanged, or converted into an option with identical terms as those described in the Company Stock Option Agreement, appropriately adjusted for such transaction. Parent may require the Company to register Common Shares purchased under the option pursuant to the Securities Act of 1933 on the terms set forth in the Merger Agreement. The Common Shares purchased under the option may not be transferred or otherwise disposed of except as provided in the Voting Trust Agreement. Pursuant to the Parent Stock Option Agreement, Parent granted the Company an option to purchase 43,090,773 million shares of Parent Common Stock, at a price of $64.82 per share, subject to adjustments substantially the same as those in the Company Stock Option Agreement. Such option becomes exercisable, in whole but not in part, after any event which entitles the Company to receive the Termination Fee (a "Purchase Event"). The option terminates upon the earlier of (i) the Merger, (ii) 18 months after the first occurrence of a Purchase Event, and (iii) the termination of the Merger Agreement (unless the Company is entitled to a Termination Fee, in which case the option shall not terminate until the later of (a) six months following the time such Termination Fee becomes payable and (b) the expiration of the period in which the Company has the right to receive a Termination Fee). Any purchase of shares of Parent Common Stock under the Parent Stock Option Agreement is subject to the conditions set forth therein, and any Parent Common Stock so purchased will be delivered immediately to the trustee of the applicable voting trust. The Parent Stock Option Agreement also provides for adjustments for certain business combinations on substantially the same terms as those of the Company Stock Option Agreement. The foregoing description of the Merger Agreement and the Option Agreements is qualified in its entirety by reference to the texts of such Agreements, copies of which have been filed by Parent as exhibits to the Schedule 14D-1 filed by Parent with the SEC. VOTING TRUST AGREEMENT Pursuant to a proposed Voting Trust Agreement (the "Voting Trust Agreement") to be entered into by and among Parent, Purchaser and a voting trustee that is expected to be a banking corporation (the "Trustee"), the Trustee will agree to act as trustee in respect of the Voting Trust. In such capacity, the Trustee will vote all Shares (the "Trust Stock") acquired by Purchaser in the Offer, the Second Offer or pursuant to the Company Stock Option Agreement or otherwise to approve the Merger, in favor of any proposal necessary to effectuate Parent's acquisition of the Company pursuant to the Merger Agreement, and, 39 42 so long as the Merger Agreement is in effect (subject to certain exceptions), against any other proposed merger, business combination or similar transaction involving the Company. On other matters (including the election or removal of directors), the Trustee will vote the Trust Stock in the same proportion as all other Shares are voted with respect to such matters. Pending the termination of the Voting Trust, the Trustee will pay over to Purchaser all cash dividends and cash distributions paid on the Trust Stock. The Voting Trust Agreement will provide that Parent at any time may not sell or make any other disposition of the whole or any part of the Trust Stock, whether or not the Merger or a similar transaction has been approved by the STB or is otherwise permitted, unless and until the Merger Agreement has been terminated or as otherwise consented to by the Company. The Trustee shall take all actions reasonably requested by the Parent with respect to any proposed sale or other disposition of the whole or any part of the Trust Stock by Purchaser or Parent, including in connection with the exercise by Parent of any rights under the Merger Agreement, provided that such disposition of the Trust Stock must be made pursuant to one or more broadly distributed public offerings and subject to all necessary regulatory approvals, if any, or as otherwise directed by Parent with the prior written consent of the Company. The Voting Trust Agreement also will provide that, in the event the STB approves or exempts the Merger or a similar transaction, or in the event that the law is amended to allow Purchaser, Parent or their affiliates to acquire control of the Company without obtaining STB or other governmental approval (and upon delivery of an opinion of independent counsel that no order of the STB or other governmental authority is required), the Trustee, with the prior written consent of the Company, will either transfer the Trust Stock to the Purchaser, or if shareholder approval has not previously been obtained, vote the Trust Stock in favor of the Merger. It is anticipated that the Voting Trust Agreement will provide that, in the event that the Merger Agreement terminates in accordance with its terms, Parent will use its best efforts to sell the Trust Stock in the manner described above during the succeeding two-year period. Any such disposition shall be subject to any jurisdiction of the STB to oversee Parent's divestiture of Trust Stock. In connection with such an event, the Trustee would continue to perform its duties under the Voting Trust Agreement and, if Parent fails to so sell or distribute the Trust Stock, the Trustee will as soon as practicable sell the Trust Stock for cash to one or more eligible purchasers in the manner described above for such price as the Trustee in its discretion shall deem reasonable after consultation with Parent. An "eligible purchaser" is a person or entity not affiliated with Parent and that has all necessary regulatory authority, if any, to purchase the Trust Stock. Pursuant to the Voting Trust Agreement, Parent will agree to cooperate with the Trustee in so disposing of the Trust Stock and the Trustee has agreed to act in accordance with any direction made by Parent as to any specific terms or method of disposition, to the extent not inconsistent with any of the terms of the Voting Trust Agreement and with the requirements of the terms of any STB or court order. The proceeds of the sale would be distributed to Parent. The Voting Trust Agreement provides that the Trustee shall receive reasonable and customary compensation and indemnification from Parent and Purchaser. Pursuant to the Merger Agreement, the Voting Trust may not be modified or amended without the prior written approval of the Company, which is an express third party beneficiary of the Voting Trust Agreement, unless such modification or amendment is not inconsistent with the Merger Agreement or the Option Agreements and is not adverse to the Company or its shareholders (and Parent and the Company have agreed in the Merger Agreement that any change to the terms of the Voting Trust Agreement relating to voting rights or rights and restrictions relating to the transfer of Trust Stock shall in any event require the prior approval of the Company), and no power of Parent or Purchaser provided for in the Voting Trust Agreement may be exercised so as to violate the Merger Agreement. Upon execution of the Voting Trust Agreement, Parent will request the staff of the STB to render an informal written opinion that the use of the Voting Trust is consistent with the policies of the STB. See Section 16. 40 43 EMPLOYMENT AGREEMENTS Snow Employment Agreement. Parent and John W. Snow have entered into an employment agreement dated as of October 14, 1996 (the "Snow Employment Agreement"), which will be effective for a five-year period beginning at the Effective Time (the "Employment Period"). The Snow Employment Agreement provides that Mr. Snow will serve as Chairman of the Board and Chief Executive Officer of Parent for two years following the Merger (the "First Employment Segment"); as Chairman of the Board during the subsequent two years (the "Second Employment Segment"); and as Chairman Emeritus during the following year (the "Third Employment Segment"). The Employment Agreement further provides that during the First Employment Segment Mr. Snow will receive base compensation at least equal to the base compensation he received in the year prior to the Merger, and that during the Second and Third Employment Segments Mr. Snow will receive base compensation in an amount no less than that received by the Chief Executive Officer of Parent during the Second Employment Segment. If, during the Employment Period, Parent terminates Mr. Snow's employment for a reason other than Cause or Disability (as defined in the Snow Employment Agreement), or Mr. Snow terminates employment for Good Reason (as defined in the Employment Agreement), Mr. Snow will be entitled to the following: (1) a lump-sum payment aggregating (a) accrued obligations to Mr. Snow, such as unpaid or deferred compensation, (b) the greater of (i) the amount Mr. Snow would receive in compensation (including bonus) during the remainder of the Employment Period and (ii) the amount equal to three times Mr. Snow's most recent annual compensation (including bonus), and (c) an amount equal to the excess of (i) the actuarial equivalent of the benefit under Parent's retirement plans which Mr. Snow would receive assuming he continued employment with Parent for the longer of three years and the time remaining in the Employment Period over (ii) the actuarial equivalent of Mr. Snow's actual benefit under Parent's retirement plans; (2) a payment in an amount such that after the payment of all income and excise taxes, Mr. Snow will be in the same after-tax position as if no excise tax under Section 4999 of the Code had been imposed; (3) continued employee welfare benefits for the longer of three years and the number of years remaining in the Employment Period; and (4) the immediate vesting of outstanding stock-based awards. The Snow Employment Agreement provides that the Merger will not constitute a Change of Control for the purpose of the Severance Agreement between Mr. Snow and Parent dated as of February 1, 1995. LeVan Employment Agreement. Parent, the Company, and David M. LeVan have entered into an employment agreement dated as of October 14, 1996 (the "LeVan Employment Agreement"), which will be effective for a period equal to the Employment Period. The LeVan Employment Agreement provides that Mr. LeVan will serve as Chief Operating Officer and President of Parent, and as Chief Executive Officer and President of the railroad businesses of the Company and Parent, from the Effective Time until the second anniversary of such date or, if earlier, the termination of Mr. Snow's employment or of his status as Chief Executive Officer of Parent (the "First Employment Segment"). Additionally, Mr. LeVan will serve as Chief Executive Officer of Parent during the period beginning immediately after the First Employment Segment and ending on the fourth anniversary of the Effective Time or, if earlier, upon the termination of Mr. Snow's employment or of his status as Chairman of the Board (the "Second Employment Segment"). During the period commencing immediately after the Second Employment Segment, or, if earlier, upon the termination of Mr. Snow's status as Chairman of the Board (the "Third Employment Segment"), Mr. LeVan will additionally serve as Chairman of the Board of Parent. The LeVan Employment Agreement further provides that during the First Employment Segment Mr. LeVan shall receive annual base compensation at least equal to 90% of the amount received by the Chief Executive Officer of Parent, but not less than $810,000, and bonus and other incentive compensation at least equal to 90% of the amount received by the Chief Executive Officer of Parent, and that during the Second and Third Employment Segments Mr. LeVan will receive compensation 41 44 in an amount no less than that received by the Chief Executive Officer during the First Employment Segment, but not less than $900,000. If, during the Employment Period, Parent terminates Mr. LeVan's employment for a reason other than Cause or Disability (as defined in the LeVan Employment Agreement), or Mr. LeVan terminates employment for Good Reason (as defined in the LeVan Employment Agreement), Mr. LeVan will be entitled to the following: (1) a lump-sum payment aggregating (a) accrued obligations to Mr. LeVan, such as unpaid or deferred compensation, (b) the greater of (i) the amount Mr. LeVan would have received in compensation (including bonus) during the remainder of the Employment Period, assuming an annual base salary and bonus during the Second and Third Segments equal to the greater of Mr. LeVan's base salary and bonus and that of Mr. Snow during the First Employment Segment and (ii) the amount equal to three times Mr. LeVan's most recent annual compensation (including bonus), and (c) an amount equal to the excess of (i) the actuarial equivalent of the benefit under Parent's retirement plans which Mr. LeVan would receive assuming he continued employment with Parent for the longer of three years and the time remaining in the Employment Period over (ii) the actuarial equivalent of Mr. LeVan's actual benefit under Parent's retirement plans; (2) a payment in an amount such that after the payment of all income and excise taxes, Mr. LeVan will be in the same after-tax position as if no excise tax under Section 4999 of the Code had been imposed; (3) continued employee welfare benefits for the longer of three years and the number of years remaining in the Employment Period; and (4) the immediate vesting of outstanding stock-based awards. The Employment Agreement provides that it supersedes, at the Effective Time, the severance agreement between Mr. LeVan and the Company dated as of August 1, 1995. 14. DIVIDENDS AND DISTRIBUTIONS. If, on or after the date of the Merger Agreement, the Company should (i) split, combine or otherwise change the Shares or its capitalization, (ii) issue or sell any additional securities of the Company or otherwise cause an increase in the number of outstanding securities of the Company or (iii) acquire currently outstanding Shares or otherwise cause a reduction in the number of outstanding Shares, then, without prejudice to Purchaser's rights under Sections 1 and 15, Purchaser, in its sole discretion, may make such adjustments as it deems appropriate in the purchase price and other terms of the Offer and the Merger, including, without limitation, the amount and type of securities offered to be purchased. If, on or after the date of the Merger Agreement, the Company should declare or pay any dividend on the Shares, other than regular quarterly dividends, or make any distribution (including, without limitation, the issuance of additional Shares pursuant to a stock dividend or stock split, the issuance of other securities or the issuance of rights for the purchase of any securities) with respect to the Shares that is payable or distributable to shareholders of record on a date prior to the transfer to the name of Purchaser or its nominee or transferee on the Company's stock transfer records of the Shares purchased pursuant to the Offer, then, without prejudice to Purchaser's rights under Sections 1 and 15, (i) the purchase price per Share payable by Purchaser pursuant to the Offer will be reduced by the amount of any such cash dividend or cash distribution and (ii) any such non-cash dividend, distribution or right to be received by the tendering shareholders will be received and held by such tendering shareholders for the account of Purchaser and will be required to be promptly remitted and transferred by each such tendering shareholder to the Depositary for the account of Purchaser, accompanied by appropriate documentation of transfer. Pending such remittance and subject to applicable law, Purchaser will be entitled to all rights and privileges as owner of any such non-cash dividend, distribution or right and may withhold the entire purchase price or deduct from the purchase price the amount of value thereof, as determined by Purchaser in its sole discretion. 42 45 The Company has agreed in the Merger Agreement that it will not pay any dividends, other than regular quarterly dividends, on its capital stock, including the Shares, prior to the Effective Time without the consent of Parent. The Company has also agreed that, without the consent of Parent, it will not (a) take certain actions that would change the number of shares of its capital stock outstanding or result in the reclassification of any of its capital stock, or (b) purchase, retire or otherwise acquire any shares of its capital stock, or (c) issue, pledge or otherwise encumber its capital stock or any securities convertible into or representing the right to acquire its capital stock, with certain exceptions set forth in the Merger Agreement. See "Merger Agreement; Other Agreements -- Merger Agreement -- Interim Operations of the Company and Parent." 15. CONDITIONS OF THE OFFER. Notwithstanding any other provisions of the Offer, and in addition to (and not in limitation of) Purchaser's rights to extend and amend the Offer at any time in its sole discretion (subject to the provisions of the Merger Agreement), Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating to Purchaser's obligation to pay for or return tendered Shares promptly after termination or withdrawal of the Offer), pay for, and may delay the acceptance for payment of or, subject to the restriction referred to above, the payment for, any tendered Shares, and may terminate the Offer as to any Shares not then paid for, if (1) (i) Purchaser does not receive prior to the expiration of the Offer an informal written opinion in form and substance reasonably satisfactory to Purchaser from the staff of the STB, without the imposition of any conditions unacceptable to Purchaser, that the use of the Voting Trust is consistent with the policies of the STB against unauthorized acquisitions of control of a regulated carrier, or (ii) Purchaser does not receive prior to the expiration of the Offer an informal statement from the Premerger Notification Office of the FTC that the transactions contemplated by the Offer, the Merger Agreement and the Company Stock Option Agreement are not subject to, or are exempt from, the HSR Act, or in the absence of the receipt of such informal statement, any applicable waiting period under the HSR Act shall have expired or been terminated prior to the expiration of the Offer (see Section 16), or (2) at any time on or after October 14, 1996 and prior to the acceptance for payment of Shares, any of the following events shall occur (defined terms used below shall have the meanings ascribed in the Merger Agreement): (a) there shall be instituted or pending any action or proceeding by any government or governmental authority or agency, domestic or foreign, (i) challenging or seeking to make illegal, to delay materially or otherwise directly or indirectly to restrain or prohibit the making of the Offer, the acceptance for payment of or payment for some of or all the Shares by Parent or Purchaser or the consummation by Parent or Purchaser of the Merger, seeking to obtain material damages relating to the Merger Agreement, the Option Agreements or any of the transactions contemplated thereby or otherwise seeking to prohibit directly or indirectly the transactions contemplated by the Offer or the Merger Agreement, or challenging or seeking to make illegal the transactions contemplated by the Option Agreements or otherwise directly or indirectly to restrain, prohibit or delay the transactions contemplated by the Option Agreements, (ii) except for the Voting Trust, seeking to restrain, prohibit or delay Parent's, Purchaser's or any of their subsidiaries' ownership or operation of all or any material portion of the business or assets of the Company and its subsidiaries, taken as a whole, or to compel Parent or any of its subsidiaries to dispose of or hold separate all or any material portion of the business or assets of the Company and its subsidiaries, taken as a whole, (iii) except for the Voting Trust, seeking to impose or confirm material limitations on the ability of Parent, Purchaser or any of their subsidiaries or affiliates effectively to exercise full rights of ownership of the Common Shares, including, without limitation, the right to vote any Common Shares acquired or owned by Parent, Purchaser or any of their subsidiaries on all matters properly presented to the Company's shareholders, or (iv) seeking to require divestiture by Parent or Purchaser or any of their subsidiaries of any Common Shares, in the case of any of (i) through (iv) above, which actions or proceedings are reasonably likely to have a material adverse effect on Parent; or (b) there shall be any action taken, or any statute, rule, regulation, injunction, order or decree enacted, enforced, promulgated, issued or deemed applicable to the transactions contemplated by the Offer or the Merger Agreement, by or before any court, government or governmental authority or agency, domestic or foreign, that, directly or indirectly, results in any of the consequences referred to in paragraph (a) above; or 43 46 (c) prior to the expiration of the Offer there shall not have been validly tendered and not withdrawn an aggregate of at least 17,860,124 Shares; or (d) the Board of Directors of the Company shall have withdrawn, modified or changed in a manner adverse to Parent or Purchaser its approval or recommendation of the Offer or the matters to be considered at the Company Shareholders Meetings or shall have recommended a Takeover Proposal (as defined in the Merger Agreement) or other business combination, or the Company shall have entered into an agreement in principle (or similar agreement) or definitive agreement providing for a Takeover Proposal or other business combination with a person or entity other than Parent or Purchaser (or the Board of Directors of the Company resolves to do any of the foregoing); or (e) the Company shall have breached or failed to observe or perform in any material respect any of its covenants or agreements under the Merger Agreement, or any of the representations and warranties of the Company set forth in the Merger Agreement shall not be true and accurate both when made and as of the date of consummation of the Offer, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date), except where the breach or failure to observe or perform such covenants or agreements, or the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to "materiality" or " material adverse effect" set forth therein), does not have, and is not likely to have, individually or in the aggregate, a material adverse effect on the Company; or (f) the Merger Agreement shall have been terminated in accordance with its terms; or (g) Parent or Purchaser shall not have obtained sufficient financing, on terms reasonably acceptable to Parent, to enable consummation of the Offer and the Merger; which, in the reasonable judgment of Parent or Purchaser in any such case, and regardless of the circumstances (including any action or omission by Parent or Purchaser not inconsistent with the terms of the Merger Agreement) giving rise to any such condition, makes it inadvisable to proceed with such acceptance for payment or payment. The foregoing conditions are for the sole benefit of Parent and Purchaser and may be asserted by Parent or Purchaser regardless of the circumstances giving rise to any such condition (including any action or omission by Parent or Purchaser not inconsistent with the terms of the Merger Agreement) or may be waived by Parent or Purchaser in whole or in part at any time and from time to time in their reasonable discretion (subject to Section 1.1(a) of the Merger Agreement -- see Section 1). The failure by Parent or Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right; the waiver of any such right with respect to particular facts and other circumstances shall not be deemed a waiver with respect to any other facts and circumstances; and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. 16. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS. General. Except as otherwise disclosed herein, based on representations and warranties made by the Company in the Merger Agreement and a review of publicly available information by the Company with the SEC, neither Purchaser nor Parent is aware of (i) any license or regulatory permit that appears to be material to the business of the Company and its subsidiaries, taken as a whole, that might be adversely affected by the acquisition of Shares by Parent or Purchaser pursuant to the Offer or the Merger, respectively, or (ii) any approval or other action by any governmental, administrative or regulatory agency or authority, domestic or foreign, that would be required for the acquisition or ownership of Shares by Parent or Purchaser as contemplated herein. Should any such approval or other action be required, Parent and Purchaser currently contemplate that such approval or action would be sought. While Purchaser does not currently intend to delay the acceptance for payment of Shares tendered pursuant to the Offer pending the outcome of any such matter, there can be no assurance that any such approval or action, if needed, would be obtained or would be obtained without substantial conditions or that adverse consequences might not result to the business of the Company, Purchaser or Parent or that certain parts of the businesses of the Company, Purchaser or Parent might not have to be disposed of in the event that such approvals were not obtained or any other actions were not taken. 44 47 Purchaser's obligation under the Offer to accept for payment and pay for Shares is subject to certain conditions. See Section 15. Antitrust. Under the HSR Act and the rules that have been promulgated thereunder by the FTC, certain acquisition transactions may not be consummated unless certain information has been furnished to the Antitrust Division of the Department of Justice (the "Antitrust Division") and the FTC and certain waiting period requirements have been satisfied. The notice and waiting period requirements of the HSR Act do not apply to the Merger, provided that information and documentary material filed with the STB in connection with the seeking of STB approval of the Merger are contemporaneously filed with the Antitrust Division and the FTC. Parent intends to comply with these contemporaneous filing requirements and therefore believes that the notice and waiting period requirements do not apply to the Merger. Parent and Purchaser believe that the Offer, the Merger and the Company Option Agreement are not subject to, or are exempt from, the HSR Act. Parent and Purchaser will request the Premerger Notification Office of the FTC to confirm this understanding. See Section 15. STB Matters; The Voting Trust. Certain activities of subsidiaries of the Company are regulated by the STB. Provisions of subtitle IV, title 49 of the United States Code require approval of, or the granting of an exemption from approval by, the STB for the acquisition of control of two or more carriers subject to the jurisdiction of the STB ("Carriers") by a person that is not a Carrier and for the acquisition or control of a Carrier by a person that is not a Carrier but that controls any number of Carriers. STB approval or exemption is required for, among other things, Purchaser's acquisition of control of the Company. Parent and Purchaser do not believe that the grant of the Company Option by the Company to the Purchaser, whether or not Purchaser acquires Shares pursuant to the Offer, would give Parent and its affiliates control of the Company. Parent and Purchaser do not believe that either the STB or its predecessor has ruled on whether the grant of an option can in any circumstance confer control of the issuer. There can be no assurance, however, that the STB would not find that the grant of the Company Option would give Parent and its affiliates control of the Company. Parent and Purchaser do not believe that ownership by Purchaser of the Shares to be purchased pursuant to the Offer or the Company Option Agreement would give Parent and its affiliates control of the Company and its affiliates. Nonetheless, Purchaser intends, simultaneous with the acquisition of the Shares pursuant to the Offer and the Company Option Agreement, to deposit the Shares purchased pursuant to the Offer and the Option Agreement in the Voting Trust in order to ensure that Parent and its affiliates do not acquire and directly or indirectly exercise control over the Company and its affiliates prior to obtaining necessary STB approvals or exemptions. STB approval of the proposed Merger is not a condition to the Offer. The Offer is conditioned upon the issuance by the staff of the STB of an informal, nonbinding opinion, without the imposition of any conditions unacceptable to Purchaser, that the use of the Voting Trust is consistent with the policies of the STB against unauthorized acquisitions of control of a regulated carrier. Parent will request the staff of the STB to issue such an opinion. Under STB regulations that have been in effect since 1979, the STB staff has the power to issue such opinions. The proposed Voting Trust Agreement is modeled closely upon voting trust agreements that have been approved by the STB. However, there can be no assurance that the STB will not seek changes in, or request public comment regarding, the Voting Trust Agreement. See "The Merger Agreement; Other Agreements -- Voting Trust Agreement." It is possible that the Department of Justice or railroad competitors of Parent and the Company, or others, may argue that Purchaser should not be permitted to use the voting trust mechanism to acquire Shares prior to final STB approval of the acquisition of control of the Company. Purchaser believes it is unlikely that such arguments would prevail, but there can be no assurance in this regard, nor can there be any assurance that if such arguments are made, it will not cause delay in obtaining a favorable STB staff opinion regarding the Voting Trust Agreement. Pursuant to the terms of the Voting Trust Agreement, it is expected that the Trustee would hold such Shares until (i) the receipt of STB approval or (ii) the Shares are disposed of. The Voting Trust Agreement that has been submitted to the staff of the STB for approval provides that Trustee will have sole power to vote the Shares in the Trust, will vote those Shares in favor of the Merger and, so long as the Merger Agreement is in effect, against any other acquisition transaction, will vote the Shares in favor of any permitted disposition of the Shares and, on all other matters, will vote the Shares in proportion to the vote of all other shareholders of 45 48 the Company. The Voting Trust Agreement contains certain other terms and conditions designed to ensure that neither Purchaser nor Parent will control the Company during the pendency of the STB proceedings. In addition, the Voting Trust Agreement provides that Purchaser or its successor in interest will be entitled to receive any such dividend paid by the Company. STB Matters; Acquisition of Control. Set forth below is information relating to approval by the STB of the acquisition of control over the Company by Parent and Purchaser. On or before March 1, 1997 (but not before January 15, 1997), Parent, the Company and various of their affiliates plan to file an application (the "STB Application") seeking approval of the STB for the acquisition of control over the Company and its affiliates by Parent and its affiliates, the Merger, and related transactions. Under applicable law and regulations, the STB will hold a public hearing on such application, unless it determines that a public hearing is not necessary in the public interest. In ruling on the STB Application, it is expected that the STB will consider at least the following: (a) the effect of the proposed control transaction on the adequacy of transportation to the public; (b) the effect on the public interest of including, or failing to include, other rail carriers in the area involved in the proposed transaction; (c) the total fixed charges that result from the proposed transaction; (d) the interest of rail carrier employees affected by the proposed transaction; and (e) whether the proposed transaction would have an adverse effect on competition among rail carriers in the affected region or in the national rail system. The STB has the authority to impose conditions on its approval of a control transaction to alleviate competitive or other concerns. If such conditions are imposed, the applicants can elect to consummate the control transaction subject to the conditions or can elect not to consummate the transaction. Parent has indicated a willingness to agree to conditions to preserve rail competition where Parent and the Company are the only rail competitors. The obligations of Parent and Purchaser to consummate the Merger are conditioned upon, among other things, the issuance by the STB of a decision (which decision shall not have been stayed or enjoined) that (A) constitutes a final order approving, exempting or otherwise authorizing consummation of the Merger and all other transactions contemplated by the Merger Agreement and the Option Agreements (or subsequently presented to the STB by agreement of Parent and the Company) as may require such authorization and (B) does not (1) change or disapprove of the consideration to be given in the Merger or other material provisions of Article II of the Merger Agreement or (2) impose on Parent, the Company or any of their respective Subsidiaries (as defined in the Merger Agreement) any other terms or conditions (including, without limitation, labor protective provisions but excluding conditions heretofore imposed by the Interstate Commerce Commission in New York Dock Railway -- Control -- Brooklyn Eastern District, 360 I.C.C. 60 (1979)) that materially and adversely affect the long-term benefits expected to be received by Parent from the transactions contemplated by the Merger Agreement or the Company Option Agreement. There is no assurance that STB approval will be obtained or obtained on terms that would be acceptable to Parent. See "-- Merger Agreement -- Conditions to the Merger" in Section 13. Three of the five factors listed above are, in Parent's view, unlikely to affect whether the STB Application is approved by the STB. As to factor (b) - -- inclusion of other carriers -- the STB disfavors this remedy, it has rarely been requested, and Parent believes it is unlikely to be requested by any railroad in a Parent/Company proceeding. As to factor (c) -- effect on fixed charges -- the capital structure of the resulting company will be sufficiently strong that this factor is unlikely, in Parent's view, to be given weight by the STB in deciding whether to approve a combination of the Company and Parent. As to factor (d) -- the interest of affected carrier employees -- the STB has adopted a standard set of labor protective conditions -- the New York Dock conditions referred to above -- which it imposes in rail merger and control transactions, and Parent expects that those conditions would be imposed upon a merger of Purchaser and the Company and that this would not affect approval of the transaction. The remaining two factors -- factor (a) -- effect on the adequacy of transportation -- and factor (e) -- effect on rail competition -- are reflected in the public interest balancing test that the STB applies in reviewing railroad mergers like the proposed combination of Parent and the Company. On the one hand, the STB considers the public benefits of the transaction in terms of better service to shippers, efficiencies, cost savings and the like. On the other hand, the STB considers any public harms from the transaction. The principal harm of concern to the STB, and the principal issue that is likely to be raised by parties opposing 46 49 approval of a merger of Purchaser and the Company or seeking the imposition of conditions thereto, is reduction in competition. In applying the public interest balancing test, the STB is guided by Congress' intent to encourage mergers, consolidations, and joint use of facilities that tend to rationalize and improve the Nation's rail system. In light of the policies of the STB expressed in its recent decision relating to the combination of the Union Pacific and Southern Pacific Railroads, in connection with the Merger and upon its consummation, Parent and the Company are willing to provide competitive access to another railroad in those situations where Parent and the Company now are the only rail competitors. Such access may take the form of grant of trackage rights over rail properties, or other forms, any of which could diminish the value to Parent or the Surviving Corporation of its rail properties. The identity of the railroad or railroads that will be provided such competitive access, the forms it will take, and the terms and conditions that would apply thereto have not been determined and will be subject to negotiations. The STB may impose and enforce those arrangements, when reached, as conditions to its approval of the Merger and may require the modification of such arrangements or require other arrangements regarding rail competition or other aspects of the public interest, which could be more burdensome, as conditions to its approval of the Merger. Parent and the Company intend to present to the STB their case that the acquisition of control of the Company by Parent satisfies the public interest balancing test. First, Parent and the Company will seek to show that a combination of the Company and Parent has significant public benefits. Second, Parent and the Company will seek to show that a combination of the Company and Parent, especially with competition-preserving conditions that Parent is prepared to agree to, will have no significant adverse effect on rail competition, and indeed will strengthen such competition. While Parent and the Company will seek to present a highly persuasive case, there can be no assurance that the STB Application will not be denied, or will not be granted subject to conditions that are so onerous that the Merger is not consummated. Under existing law, the STB is required to enter a final order with respect to the STB Application within approximately 15 months after such application is accepted. However, the STB can process such cases more quickly. Parent, the Company and various of their affiliates plan to ask the STB to adopt a more expedited schedule. Under existing law, other railroads and other interested parties may seek to intervene to oppose the STB Application or to seek protective conditions in the event approval by the STB is granted. In addition, any appeals from the STB final order might not be resolved for a substantial period of time after the entry of such order by the STB. Pending receipt of the STB approval, it is expected that the business and operations of the Company will be conducted in the usual and ordinary course of business, and the Company's employees and management will continue in their present positions. State Takeover Statutes. A number of states throughout the United States have enacted takeover statutes that purport, in varying degrees, to be applicable to attempts to acquire securities of corporations that are incorporated or have assets, shareholders, executive offices or places of business in such states. In Edgar v. Mite Corp., the Supreme Court of the United States held that the Illinois Business Takeover Act, which involved state securities laws that made the takeover of certain corporations more difficult, imposed a substantial burden on interstate commerce and therefore was unconstitutional. In CTS Corp. v. Dynamics Corp. of America, however, the Supreme Court of the United States held that a state may, as a matter of corporate law and, in particular, those laws concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without prior approval of the remaining shareholders, provided that such laws were applicable only under certain conditions. The Pennsylvania Takeover Disclosure Law ("PTDL") purports to regulate certain attempts to acquire a corporation which (1) is organized under the laws of Pennsylvania or (2) has its principal place of business and substantial assets located in Pennsylvania. The PTDL requires, among other things, that the offeror, 20 days prior to any takeover offer, file a registration statement for the takeover offer with the Pennsylvania Securities Commission (the "PSC") and publicly disclose the offering price of the disclosed offer. However, in Crane Co. v. Lam, 509 F. Supp. 782 (E.D. Pa. 1981), the United States District Court for the Eastern District of Pennsylvania preliminarily enjoined, on grounds arising under the United States Constitution, 47 50 enforcement of at least the portion of the PTDL involving the pre-offer waiting period thereunder. Section 8(a) of the PTDL provides an exemption for any offer to purchase securities as to which the board of directors of the target company recommends acceptance to its shareholders, if at the time such recommendation is first communicated to shareholders the offeror files with the PSC a copy of the Schedule 14D-1 and certain other information and materials, including an undertaking to notify security holders of the target company that a notice has been filed with the PSC which contains substantial additional information about the offer and which is available for inspection at the PSC's principal office during business hours. While reserving and not waiving its right to challenge the constitutionality or validity of the PTDL, its applicability to the Offer or the jurisdiction of the PSC, Purchaser is making such a filing with the PSC in order to qualify for such exemption from the PTDL. Additional information about the Offer has been filed with the Pennsylvania Securities Commission pursuant to the PTDL and is available for inspection at the Pennsylvania Securities Commission's office at Eastgate Office Building, Second Floor, 1010 North 7th Street, Harrisburg, PA 17102-1410, during business hours. Chapter 25 of the Pennsylvania Law contains other provisions relating generally to takeovers and acquisitions of certain publicly owned Pennsylvania corporations such as the Company that have a class or series of shares entitled to vote generally in the election of directors registered under the Exchange Act (a "registered corporation"). The following discussion is a general and highly abbreviated summary of certain features of such chapter, is not intended to be complete or to completely address potentially applicable exceptions or exemptions, and is qualified in its entirety by reference to the full text of Chapter 25 of the Pennsylvania Law. In addition to other provisions not applicable to the Offer or the Merger, Subchapter 25D of the Pennsylvania Law includes provisions requiring approval of a merger of a registered corporation with an "interested shareholder" in which the "interested shareholder" is treated differently from other shareholders, by the affirmative vote of the shareholders entitled to cast at least a majority of the votes that all shareholders other than the interested shareholder are entitled to cast with respect to the transaction without counting the votes of the interested shareholders. This disinterested shareholder approval requirement is not applicable to a transaction (i) approved by a vote of the board of directors, without counting the votes of directors who are directors or officers of, or who have a material equity interest in, the interested shareholder, (ii) in which the consideration to be received by shareholders is not less than the highest amount paid by the interested shareholder in acquiring his shares, or (iii) effected without submitting the Merger to a vote of shareholders as permitted in Section 1924(b)(1)(ii) of the Pennsylvania Law. Purchaser believes that the disinterested shareholder approval requirement of Subchapter 25D will not be applicable to the contemplated Merger because of prior disinterested Company Board approval. Subchapter 25E of the Pennsylvania Law, which addresses "control transactions," requires under certain circumstances any person who acquires at least 20% of the voting power of a registered corporation, upon written demand from any shareholder, to purchase for cash up to the balance of the voting shares of the corporation at the price determined under the statute, which may not be less than the highest price per share paid by the controlling person or group at any time during the 90-day period ending on and including the date of the control transaction, plus, to the extent not reflected in such price, an increment representing a proportion of any value payable for acquisition of control of the corporation. A "control transaction" would occur if, without the Pennsylvania Shareholder Approval, Purchaser were to acquire voting power over 20% or more of the Shares pursuant to the Offer, the Company Stock Option Agreement or otherwise (except in the Merger). Because Purchaser intends to acquire less than 20% of the voting power of the Company until such time as the Pennsylvania Shareholder Approval is obtained, Subchapter 25E would not be applicable. See Section 13. Subchapter 25F of the Pennsylvania Law prohibits under certain circumstances certain "business combinations," including mergers and sales or pledges of significant assets, of a registered corporation with an "interested shareholder" for a period of five years. Subchapter 25F exempts, among other things, business combinations approved by the board or directors prior to a shareholder becoming an interested shareholder. Since the Board of Directors of the Company approved the Merger prior to such time as Parent and Purchaser 48 51 may be deemed to have become an interested shareholder, Purchaser believes that Subchapter 25F is not applicable to the contemplated Merger. Subchapter 25G of the Pennsylvania Law, relating to "control-share acquisitions," prevents under certain circumstances the owner of a control-share block of shares of a registered corporation from voting such shares unless a majority of the "disinterested" shares approve such voting rights. Failure to obtain such approval may result in a forced sale by the control-share owner of the control-share block to the corporation at a possible loss. The Company Articles specifically provide that Subchapter 25G does not apply to the Company. Subchapter 25H of the Pennsylvania Law, relating to disgorgement by certain controlling shareholders of a registered corporation, provides that under certain circumstances any profit realized by a controlling person from the disposition of shares of the corporation to any person (including to the corporation under Subchapter 25G or otherwise) will be recoverable by the corporation. The Company Articles specifically provide that Subchapter 25H does not apply to the Company. Subchapter 25I of the Pennsylvania Law entitles "eligible employees" of a registered corporation to a lump sum payment of severance compensation under certain circumstances if the employee is terminated, other than for willful misconduct, within two years after voting rights lost as a result of a control-share acquisition are restored by a vote of disinterested shareholders ("Control-share Approval") or, in the event the termination was accomplished pursuant to an agreement, arrangement or understanding with the acquiring person, within 90 days prior to Control-share Approval. Subchapter 25J of Pennsylvania Law provides protection against termination or impairment under certain circumstances of "covered labor contracts" of a registered corporation as a result of a "business combination" transaction if the business operation to which the covered labor contract relates was owned by the registered corporation at the time voting rights are restored by shareholder vote after a control-share acquisition. Subchapters I and J apply only in the event of a "control-share acquisition" specified in Subchapter G. The Company Articles specifically provide that Subchapter G does not apply to the Company. Section 2504 of the Pennsylvania Law provides that the applicability of Chapter 25 of the Pennsylvania Law to a registered corporation having a class or series of shares entitled to vote generally in the election of directors registered under the Exchange Act or otherwise satisfying the definition of a registered corporation under Section 2502(1) of the Pennsylvania Law shall terminate immediately upon the termination of the status of the corporation as a registered corporation. Purchaser intends to seek to cause the Company to terminate the registration of the Shares under the Exchange Act as soon after consummation of the Merger as the requirements for termination of the registration of the Common Shares are met. Except for the filing pursuant to Section 8(a) of the PTDL described above, neither Purchaser nor Parent has currently complied with any state takeover statute or regulation. Purchaser reserves the right to challenge the applicability or validity of any state law purportedly applicable to the Offer or the Merger and nothing in this Offer to Purchaser or any action taken in connection with the Offer or the Merger is intended as a waiver of such right. If it is asserted that any state takeover statute is applicable to the Offer or the Merger and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer or the Merger, Purchaser might be required to file certain information with, or to receive approvals from, the relevant state authorities, and Purchaser might be unable to accept for payment or pay for Shares tendered pursuant to the Offer, or be delayed in consummating the Offer or the Merger. In such case, Purchaser may not be obliged to accept for payment or pay for any Shares tendered pursuant to the Offer. A number of other states have adopted laws and regulations applicable to attempts to acquire securities of corporations which are incorporated, or have substantial assets, shareholders, principal executive offices or principal places of business, or whose business operations otherwise have substantial economic effects, in such states. In 1982, in Edgar v. MITE Corp., the Supreme Court of the United States invalidated on constitutional grounds the Illinois Business Takeover Statute, which, as a matter of state securities law, made takeovers of corporations meeting certain requirements more difficult. However, in 1987 in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the State of Indiana may, as a matter of corporate law, and, in particular, with respect to those aspects of corporate law concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without the prior approval of 49 52 the remaining shareholders. The state law before the Supreme Court was by its terms applicable only to corporations that had a substantial number of shareholders in the state and were incorporated there. The Company, directly or through subsidiaries, conducts business in a number of states throughout the United States, some of which have enacted takeover laws. Purchaser does not know whether any of these laws will, by their terms, apply to the Offer and has not complied with any such laws. Should any person seek to apply any state takeover law, Purchaser will take such action as then appears desirable, which may include challenging the validity or applicability of any such statute in appropriate court proceedings. In the event it is asserted that one or more state takeover laws are applicable to the Transaction, and an appropriate court does not determine that such law is, or such laws are inapplicable or invalid as applied to the Offer, Purchaser might be required to file certain information with, or receive approvals from, the relevant state authorities. In addition, if enjoined, Purchaser might be unable to accept for payment any Shares tendered pursuant to the Offer, or be delayed in continuing or consummating the Offer. In such case, Purchaser may not be obligated to accept for payment any Shares tendered. See Section 15. 17. FEES AND EXPENSES. Wasserstein Perella & Co., Inc. ("Wasserstein Perella") is acting as the Dealer Manager in connection with the Offer and is acting as financial advisor to Parent in connection with its acquisition of the Company. Parent has agreed to pay Wasserstein Perella for its services in conjunction with the Offer and other transactions contemplated by the Merger Agreement an aggregate fee (the "Transaction Fee") of $19 million. The first $2.85 million of the Transaction Fee was payable upon the public announcement that the Company and Parent had entered into the Merger Agreement. An additional $2.85 million of the Transaction Fee and an additional $5.7 million of the Transaction Fee are payable upon completion of certain events with respect to the Transactions. The remaining unpaid balance of the Transaction Fee is payable upon the closing of the Merger. If the Merger Agreement is terminated or abandoned prior to the consummation of an acquisition transaction, and Parent or Purchaser receives a termination fee in connection with such termination or abandonment, then, immediately following Parent's receipt of such termination fee, Wasserstein Perella will receive an additional fee of $5 million; provided that such additional fee shall have credited against it certain prior payments. Parent has agreed to reimburse Wasserstein Perella for its out-of-pocket expenses, including the fees and expenses of its legal counsel, incurred in connection with its engagement, and to indemnify Wasserstein Perella and certain related persons against certain liabilities and expenses in connection with its engagement, including certain liabilities under the federal securities laws. Wasserstein Perella has rendered various investment banking and other advisory services to Parent and its affiliates in the past and is expected to continue to render such services, for which it has received and will continue to receive customary compensation from Parent and its affiliates. In the ordinary course of business, Wasserstein Perella and its affiliates may actively trade the debt and equity securities of Parent and its affiliates and the Company for their own account and for the accounts of customers and, accordingly, may at any time hold a long or short position in such securities. Purchaser has retained MacKenzie Partners, Inc. to act as the Information Agent in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, facsimile, telegraph and personal interviews and may request brokers, dealers and other nominee shareholders to forward materials relating to the Offer to beneficial owners of Shares. The Information Agent will receive reasonable and customary compensation for its services, will be reimbursed for certain reasonable out-of-pocket expenses and will be indemnified against certain liabilities and expenses in connection therewith, including certain liabilities under the federal securities laws. In addition, IBJ Schroder Bank & Trust Company has been retained as the Depositary. The Depositary has not been retained to make solicitations or recommendations in its role as Depositary. The Depositary will receive reasonable and customary compensation for its services, will be reimbursed for certain reasonable out-of-pocket expenses and will be indemnified against certain liabilities and expenses in connection therewith, including certain liabilities under the federal securities laws. Except as set forth above, Purchaser will not pay any fees or commissions to any broker or dealer or any other person for soliciting tenders of Shares pursuant to the Offer. Brokers, dealers, commercial banks and 50 53 trust companies will, upon request only, be reimbursed by Purchaser for customary mailing and handling expenses incurred by them in forwarding material to their customers. 18. MISCELLANEOUS. Purchaser is not aware of any jurisdiction where the making of the Offer is prohibited by any administrative or judicial action pursuant to any valid state statute. If Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of the Shares pursuant thereto, Purchaser will make a good faith effort to comply with such state statute. If, after such good faith effort, Purchaser cannot comply with any such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Purchaser by one or more registered brokers or dealers which are licensed under the laws of such jurisdiction. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF PARENT OR PURCHASER NOT CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. Parent and Purchaser have filed with the SEC the Schedule 14D-1, together with exhibits, pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange Act, furnishing certain additional information with respect to the Offer. The Schedule 14D-1, and any amendments thereto, may be inspected at, and copies may be obtained from, the same places and in the same manner as set forth in Section 8 (except that they will not be available at the regional offices of the SEC). GREEN ACQUISITION CORP. October 16, 1996 51 54 SCHEDULE I INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND PURCHASER 1. Directors and Executive Officers of Parent. The following table sets forth the name, business address, present principal occupation, and employment and material occupations, positions, offices, or employments for the past five years of each director and executive officer of Parent. The principal business address of each executive officer of Parent is One James Center, 901 East Cary Street, Richmond, VA 23219. Unless otherwise indicated, each occupation set forth opposite an individual's name refers to employment with Parent. Where no date is given for the commencement of the indicated office or position, such office or position was assumed prior to October 16, 1991. Directors are indicated by an asterisk. Each director and executive officer listed below is a citizen of the United States.
PRINCIPAL OCCUPATION OR NAME AND CURRENT EMPLOYMENT; MATERIAL POSITIONS BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS - ------------------------------ ------------------------------------------------------------ John Q. Anderson.............. Executive Vice President, Sales and Marketing, CSX Transportation, Inc. ("CSXT") since May 1996. Prior thereto, Senior Vice President -- Coal, Metals and Minerals Business of Burlington Northern Santa Fe Corporation. Mark G. Aron.................. Executive Vice President -- Law and Public Affairs since April 1995. Prior thereto, Senior Vice President -- Law and Public Affairs. Elizabeth E. Bailey*.......... John C. Hower Professor of Public Policy and Management, The 3620 Spruce Street Wharton School of the University of Pennsylvania. Director Philadelphia, PA 19104 of Honeywell, Inc. and Philip Morris Companies, Inc. Director of Parent since November 1989. Robert L. Burrus, Jr.*........ Partner in and Chairman of McGuire, Woods, Battle & Boothe, One James Center a law firm. Director of Concepts Direct, Inc.; Heilig-Meyers 901 East Cary Street Company; O'Sullivan Corporation; S&K Famous Brands, Inc. and Richmond, VA 23219 Smithfield Foods, Inc.; Director of Parent since April 1993. Alvin R. Carpenter............ President, CSXT since January 1992. Prior thereto, President of CSX Distribution Services, Inc. John P. Clancey............... President and Chief Executive Officer, Sea-Land Service Inc. ("Sea-Land"). Donald D. Davis............... Senior Vice President -- Employee Relations, CSXT since April 1992. Prior thereto, Senior Vice President -- Human Resources. James Ermer................... Executive Vice President -- Corporate Planning and Development since April 1995. Prior thereto, Senior Vice President -- Finance. Andrew B. Fogarty............. Senior Vice President -- Finance & Planning, Sea-Land since June 1996. Vice President -- Audit and Advisory Services from February 1995 to June 1996. Vice President -- Executive Department. Paul R. Goodwin............... Executive Vice President -- Finance and Chief Financial Officer since April 1995. From February 1995 to April 1995, Executive Vice President -- Finance and Administration, CSXT. Prior thereto, Senior Vice President -- Finance, CSXT. Bruce C. Gottwald*............ Chairman and Chief Executive Officer of Ethyl Corporation, a 330 South Forth Street worldwide producer of petroleum additives. Director of P.O. Box 2189 Albemarle Corporation; First Colony Corporation; First Richmond, VA 23219 Colony Life Insurance Co.; James River Corporation and Tredegar Industries, Inc. Director of Parent since April 1988.
I-1 55
PRINCIPAL OCCUPATION OR NAME AND CURRENT EMPLOYMENT; MATERIAL POSITIONS BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS - ------------------------------ ------------------------------------------------------------ Robert J. Gross............... Senior Vice President -- Atlantic-AME since June 1996. Prior thereto, Senior Vice President -- Finance and Planning. Michael C. Hagan.............. President and Chief Executive Officer, American Commercial Lines, Inc. since May 1992. Prior thereto, President and Chief Operating Officer of American Commercial Lines. John R. Hall*................. Chairman and Chief Executive Officer of Ashland Inc. 100 Ashland Dr. Director of Banc One Corporation; The Canada Life Assurance Russell, KY 41169 Company; Humana Inc.; Reynolds Metals Company and UCAR International Inc. Director of Parent since May 1994. Richard H. Klem............... Vice President -- Corporate Strategy since May 1992. Prior thereto, Vice President -- Economic Analysis and Corporate Strategy. Robert D. Kunisch*............ Chairman, President and Chief Executive Officer of PHH 11333 McCormick Rd. Corporation, provider of value added business services, Hunt Valley, MD 21031 including vehicle management services, real estate services, and mortgage banking services. Director of Mercantile Bankshares Corporation and GenCorp. Director of Parent since October 1990. Hugh L. McColl Jr.*........... Chairman and Chief Executive Officer of NationsBank NationsBank Corporate Center Corporation, a bank holding company. Prior thereto, Chairman Charlotte, NC 28255 and Chief Executive Officer of NCNB Corporation, a predecessor of NationsBank Corporation. Director of Jefferson-Pilot Corporation; Jefferson-Pilot Life Insurance Company; Ruddick Corporation and Sonoco Products Co. Director of Parent since February 1992. James W. McGlothlin*.......... Chairman and Chief Executive Officer of The United Company, P.O. Box 1280 a diversified energy company. Director of Basset Furniture Bristol, VA 24203 Industries, Inc. Director of Parent since November 1989. Southwood J. Morcott*......... Chairman and Chief Executive Officer of Dana Corporation, a 4500 Dorr Street manufacturer of automotive and truck parts and provider of Toledo, OH 43615 commercial credit. Previously, Chairman, President and Chief Executive Officer of Dana Corporation. Director of Johnson Controls, Inc. and Phelps Dodge Corporation. Director of Parent since July 1990. Jesse R. Mohorovic............ Vice President -- Executive Department since February 1995. From April 1994 to February 1995, Vice President -- Corporate Communications of CTX. Prior thereto, Vice President -- Corporate Communications of Sea-Land. Richard E. Murphy............. Senior Vice President -- Corporate Marketing since 1996. From 1995 to 1996, Senior Vice President -- Atlantic AME; Vice President -- Pacific Services, from 1993-1995; prior thereto, Vice President -- Pacific Services, Sea-Land. Gerald L. Nichols............. Executive Vice President and Chief Operating Officer, CSXT since February 1995. Prior thereto, Senior Vice President -- Administration of CSXT M. McNeil Porter.............. Chairman, CSX Intermodal, Inc. since January 1996. Prior thereto, President and CEO of CSX Intermodal, Inc. Charles G. Raymond............ Senior Vice President -- Operations, Sea-Land. Charles E. Rice*.............. Chairman and Chief Executive Officer of Barnett Banks, Inc., 50 North Laura Street a bank holding company. Director of Spring Corporation. Jacksonville, FL 32202 Director of Parent since April 1990.
I-2 56
PRINCIPAL OCCUPATION OR NAME AND CURRENT EMPLOYMENT; MATERIAL POSITIONS BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS - ------------------------------ ------------------------------------------------------------ William C. Richardson*........ President and Chief Executive Officer of the W.K. Kellogg 1 Michigan Avenue Foundation, a major philanthropic institution, since 1995. Battle Creek, MI 49017 Prior thereto, President of The Johns Hopkins University. Director of Mercantile Bankshares Corporation and Mercantile Safe Deposit & Trust Company. Director of Parent since December 1992. James L. Ross................. Vice President and Controller, since October 1995. Prior thereto, Audit Partner, Ernst Young, LLP. Frank S. Royal*............... Physician. Director of Columbia/HCA Healthcare Corporation; 1122 North 25th Street Crestar Financial Corporation; Chesapeake Corporation and Richmond, VA 23223 Dominion Resources, Inc. Director of Parent since January 1994. John W. Snow*................. Chairman of the Board, President and Chief Executive Officer of Parent. Director of Circuit City Stores, Inc.; NationsBank Corporation; Bassett Furniture Industries, Inc.; Textron, Inc. and USX Corporation. Director of Parent since April 1988. Ronald T. Sorrow.............. President and Chief Executive Officer of CSX Intermodal, Inc. since January 1996. Prior thereto, Vice President -- Sales and Marketing of CSX Intermodal, Inc. William H. Sparrow............ Vice President -- Financial Planning since February 1996. From May 1994 to February 1996, Vice President -- Capital Budgeting. Prior thereto, Vice President & Treasurer. Michael J. Ward............... Executive Vice President, CSXT from May 1996. Senior Vice President -- Finance, CSXT from April 1995 to May 1996. Prior thereto, General Manager -- C&O Business Unit, from 1994 to April 1995, and Vice President -- Coal of CSXT. Gregory W. Weber.............. Vice President and Treasurer
2. Directors and Executive Officers of Purchaser. Set forth below are the name and position with Purchaser of each director and executive officer of Purchaser. The principal address of Purchaser and the current business address of each individual listed below is One James Center, 901 East Cary Street, Richmond, VA 23219. Each such person is a citizen of the United States. The present principal occupation or employment (in addition to the position with Purchaser indicated below), and material occupations, positions, offices or employments for the past five years of each person is set forth in Part 1 above (except for Alan A. Rudnick whose principal occupation since May, 1991 is Vice President -- General Counsel and Corporate Secretary). Directors are indicated by an asterisk.
PRESENT POSITION NAME WITH THE PURCHASER --------------------------------- -------------------------------------- Mark G. Aron*.................... General Counsel and Secretary Paul R. Goodwin*................. Chief Financial Officer and Treasurer Alan A. Rudnick.................. Assistant Secretary John W. Snow*.................... Chief Executive Officer
I-3 57 Facsimile copies of the Letter of Transmittal, properly completed and duly signed, will be accepted. The Letter of Transmittal, certificates for the Shares and any other required documents should be sent by each shareholder of the Company or his broker, dealer, commercial bank, trust company or other nominee to the Depositary at one of its addresses set forth below: The Depositary for the Offer is: IBJ SCHRODER BANK & TRUST COMPANY
By Hand or By Mail: By Facsimile Transmission: Overnight Delivery: P.O. Box 84 (212) 858-2611 One State Street Bowling Green Station Attn: Reorganization New York, New York 10004 New York, New York 10274-0084 Operations Department Attn: Securities Attn: Reorganization Processing Window, Operations Department Subcellar One Confirm Facsimile by Telephone: (212) 858-2103
------------------------ Any questions or requests for assistance or additional copies of the Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Information Agent or the Dealer Manager at their respective telephone numbers and locations listed below. You may also contact your broker, dealer, commercial bank or trust company or other nominee for assistance concerning the Offer. The Information Agent for the Offer is: MACKENZIE PARTNERS, INC. 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (call collect) or CALL TOLL FREE (800) 322-2885 The Dealer Manager for the Offer is: WASSERSTEIN PERELLA & CO., INC. 31 West 52nd Street New York, New York 10019 Call Collect: (212) 969-2700 EX-99.A2 3 LETTER OF TRANSMITTAL 1 LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK AND SERIES A ESOP CONVERTIBLE JUNIOR PREFERRED STOCK (INCLUDING, IN EACH CASE, THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS) OF CONRAIL INC. PURSUANT TO THE OFFER TO PURCHASE DATED OCTOBER 16, 1996 BY GREEN ACQUISITION CORP. A WHOLLY OWNED SUBSIDIARY OF CSX CORPORATION THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, NOVEMBER 15, 1996, UNLESS THE OFFER IS EXTENDED. The Depositary for the Offer is: IBJ SCHRODER BANK & TRUST COMPANY By Mail: By Hand or Overnight Delivery: P.O. Box 84 One State Street Bowling Green Station New York, New York 10004 New York, New York 10274-0084 Attn: Securities Processing Attn: Reorganization Operations Window, Department Subcellar One
By Facsimile Transmission: (212) 858-2611 Attn: Reorganization Operations Department Confirm Facsimile by telephone: (212) 858-2103 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OR TELEX TRANSMISSION OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL WHERE INDICATED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9 PROVIDED BELOW. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be completed by shareholders of Conrail Inc. either if certificates ("Share Certificates") evidencing shares of common stock, par value $1.00 per share (the "Common Shares") or shares of Series A ESOP Convertible Junior Preferred Stock, without par value (the "ESOP Preferred Shares" and, together with the Common Shares, the "Shares") are to be forwarded herewith or if delivery of Shares is to be made by book-entry transfer to the Depositary's account at The Depository Trust Company or the Philadelphia Depository Trust Company (each, a "Book-Entry Transfer Facility" and collectively, the "Book-Entry Transfer Facilities") pursuant to the book-entry transfer procedure described in "Procedures for Tendering Shares" of the Offer to Purchase (as defined below). Delivery of documents to a Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures does not constitute delivery to the Depositary. 2 Holders of Shares will be required to tender one Right for each Share tendered to effect a valid tender of such Share. Until the Distribution Date (as defined in the Offer to Purchase) occurs, the Rights are represented by and transferred with the Shares. Accordingly, if the Distribution Date does not occur prior to the Expiration Date (as defined in the Offer to Purchase), a tender of Shares will constitute a tender of the associated Rights. If a Distribution Date has occurred, certificates representing a number of Rights equal to the number of Shares being tendered must be delivered to the Depositary in order for such Shares to be validly tendered. If a Distribution Date has occurred, a tender of Shares without Rights constitutes an agreement by the tendering shareholder to deliver certificates representing a number of Rights equal to the number of Shares tendered pursuant to the Offer to the Depositary within three New York Stock Exchange, Inc. trading days after the date such certificates are distributed. Purchaser (as defined in the Offer to Purchase) reserves the right to require that it receive such certificates prior to accepting Shares for payment. Payment for Shares tendered and purchased pursuant to the Offer will be made only after timely receipt by the Depositary of, among other things, such certificates, if such certificates have been distributed to holders of Shares. Purchaser will not pay any additional consideration for the Rights tendered pursuant to the Offer. Shareholders whose Share Certificates are not immediately available or who cannot deliver their Share Certificates and all other documents required hereby to the Depositary prior to the Expiration Date (as defined in "Terms of the Offer; Proration; Expiration Date" of the Offer to Purchase) or who cannot complete the procedure for delivery by book-entry transfer on a timely basis and who wish to tender their Shares must do so pursuant to the guaranteed delivery procedure described in "Procedures for Tendering Shares" of the Offer to Purchase. See Instruction 2. / / CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE FOLLOWING: Name of Tendering Institution: Check Box of Applicable Book-Entry Transfer Facility: / / The Depository Trust Company / / Philadelphia Depository Trust Company Account Number ____________ Transaction Code Number / / CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s): Window Ticket No. (if any): Date of Execution of Notice of Guaranteed Delivery: Name of Institution which Guaranteed Delivery: If Delivered by Book-Entry Transfer, Check Box of Book-Entry Transfer Facility: / / The Depository Trust Company / / Philadelphia Depository Trust Company Account Number ____________ Transaction Code Number 3
DESCRIPTION OF SHARES TENDERED NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK)
SHARE CERTIFICATE(S) TENDERED (ATTACH ADDITIONAL LIST IF NECESSARY) TOTAL NUMBER OF SHARES NUMBER OF SHARES CERTIFICATE NUMBER(S)* REPRESENTED BY CERTIFICATE(S) TENDERED** TOTAL SHARES * Need not be completed by shareholders tendering by book-entry transfer. ** Unless otherwise indicated, it will be assumed that all Shares being delivered to the Depositary are being tendered. See Instruction 4.
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL CAREFULLY. 4 Ladies and Gentlemen: The undersigned hereby tenders to Green Acquisition Corp., a Pennsylvania corporation ("Purchaser") and a wholly owned subsidiary of CSX Corporation, a Virginia corporation, the above-described shares of common stock, par value $1.00 per share (the "Common Shares") or shares of Series A ESOP Convertible Junior Preferred Stock, without par value (the "ESOP Preferred Shares" and, together with the Common Shares, the "Shares"), of Conrail Inc., a Pennsylvania corporation (the "Company"), including, in each case, the associated Common Stock Purchase Rights (the "Rights") issued pursuant to the Rights Agreement dated as of July 19, 1989, between the Company and First Chicago Trust Company of New York, as Rights Agent (as amended, the "Rights Agreement"), pursuant to Purchaser's offer to purchase an aggregate of 17,860,124 Shares, including, in each case, the associated Rights, at a price of $92.50 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated October 16, 1996 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which, as amended from time to time, together constitute the "Offer"). All references herein to the Common Shares, ESOP Preferred Shares or Shares includes the associated Rights. The undersigned understands that Purchaser reserves the right to transfer or assign, in whole at any time, or in part from time to time, to one or more of its affiliates, the right to purchase all or any portion of the Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering shareholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. Subject to, and effective upon, acceptance for payment of the Shares tendered herewith, in accordance with the terms of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the undersigned hereby sells, assigns and transfers to, or upon the order of, Purchaser all right, title and interest in and to all the Shares that are being tendered hereby (and any and all non-cash dividends, distributions, rights, other Shares or other securities issued or issuable in respect of such Shares or declared, paid or distributed in respect of such Shares on or after October 14, 1996 (collectively, "Distributions")), and irrevocably appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares and all Distributions, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (i) deliver certificates for such Shares (individually, a "Share Certificate") and all Distributions, or transfer ownership of such Shares and all Distributions on the account books maintained by a Book-Entry Transfer Facility, together, in either case, with all accompanying evidence of transfer and authenticity to, or upon the order of Purchaser, (ii) present such Shares and all Distributions for transfer on the books of the Company and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares and all Distributions, all in accordance with the terms of the Offer. If, on or after October 14, 1996, the Company should declare or pay any cash or stock dividend, other than regular quarterly cash dividends, or make any distribution with respect to the Shares that is payable or distributable to stockholders of record on a date prior to the transfer to the name of Purchaser or its nominee or transferee on the Company's stock transfer records of the Shares accepted for payment pursuant to the Offer, then, subject to the provisions of Section 14 of the Offer to Purchase, (i) the purchase price per Share payable by Purchaser pursuant to the Offer will be reduced by the amount of any such cash dividend or cash distribution and (ii) any such non-cash dividend, distribution or right to be received by the tendering shareholder will be received and held by such tendering shareholder for the account of Purchaser and will be required to be promptly remitted and transferred by each such tendering shareholder to the Depositary for the account of Purchaser, accompanied by appropriate documentation of transfer. Pending such remittance, Purchaser will be entitled to all rights and privileges as owner of any such non-cash dividend, distribution or right and may withhold the entire purchase price or deduct from the purchase price the amount of value thereof, as determined by Purchaser in its sole discretion. By executing this Letter of Transmittal, the undersigned irrevocably appoints John W. Snow, Mark G. Aron and Alan A. Rudnick as proxies of the undersigned, each with full power of substitution, to the full extent of the undersigned's rights with respect to the Shares tendered by the undersigned and accepted for payment by Purchaser (and any and all Distributions). All such proxies shall be considered coupled with an interest in the tendered Shares. This appointment will be effective if, when, and only to the extent that, Purchaser accepts such Shares for payment pursuant to the Offer. Upon such acceptance for payment, all prior proxies given by the undersigned with respect to such Shares, Distributions and other securities will, without further action, be revoked, and no subsequent proxies may be given. The individuals named above as proxies will, with respect to the Shares, Distributions and other securities for which the appointment is effective, be empowered (subject to the terms of the Voting Trust Agreement (as defined in the Offer to Purchase) so long as it shall be in effect with respect to the Shares) to exercise all voting and other rights of the undersigned as they in their sole discretion may deem proper at any annual, special, adjourned or postponed meeting of the Company's shareholders, by written consent or otherwise, and Purchaser reserves the right to require that, in order for Shares, Distributions or other securities to be deemed validly tendered, immediately upon Purchaser's acceptance for payment of such Shares Purchaser must be able to exercise full voting rights with respect to such Shares. 5 The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby and all Distributions, that the undersigned own(s) the Shares tendered hereby within the meaning of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that such tender of Shares complies with Rule 14e-4 under the Exchange Act, and that when such Shares are accepted for payment by Purchaser, Purchaser will acquire good, marketable and unencumbered title thereto and to all Distributions, free and clear of all liens, restrictions, charges and encumbrances, and that none of such Shares and Distributions will be subject to any adverse claim. The undersigned, upon request, shall execute and deliver all additional documents deemed by the Depositary or Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby and all Distributions. In addition, the undersigned shall remit and transfer promptly to the Depositary for the account of Purchaser all Distributions in respect of the Shares tendered hereby, accompanied by appropriate documentation of transfer, and, pending such remittance and transfer or appropriate assurance thereof, Purchaser shall be entitled to all rights and privileges as owner of each such Distribution and may withhold the entire purchase price of the Shares tendered hereby or deduct from such purchase price, the amount or value of such Distribution as determined by Purchaser in its sole discretion. No authority herein conferred or agreed to be conferred shall be affected by, and all such authority shall survive, the death or incapacity of the undersigned. All obligations of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. The undersigned understands that tenders of Shares pursuant to any one of the procedures described in "Procedures for Tendering Shares" of the Offer to Purchase and in the Instructions hereto will constitute the undersigned's acceptance of the terms and conditions of the Offer. Purchaser's acceptance for payment of Shares tendered pursuant to the Offer will constitute a binding agreement between the undersigned and Purchaser upon the terms and subject to the conditions of the Offer. The undersigned recognizes that under certain circumstances set forth in the Offer to Purchase, Purchaser may not be required to accept for payment any of the Shares tendered hereby. Unless otherwise indicated herein in the box entitled "Special Payment Instructions," please issue the check for the purchase price of all Shares purchased, and return all Share Certificates evidencing Shares not purchased or not tendered, in the name(s) of the registered holder(s) appearing above under "Description of Shares Tendered." Similarly, unless otherwise indicated in the box entitled "Special Delivery Instructions," please mail the check for the purchase price of all Shares purchased and all Share Certificates evidencing Shares not tendered or not purchased (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing above under "Description of Shares Tendered." In the event that the boxes entitled "Special Payment Instructions" and "Special Delivery Instructions" are both completed, please issue the check for the purchase price of all Shares purchased and return all Share Certificates evidencing Shares not purchased or not tendered in the name(s) of, and mail such check and Share Certificates to, the person(s) so indicated. Unless otherwise indicated herein in the box entitled "Special Payment Instructions," please credit any Shares tendered hereby and delivered by book-entry transfer, but which are not purchased, by crediting the account at the Book-Entry Transfer Facility designated above. The undersigned recognizes that Purchaser has no obligation, pursuant to the Special Payment Instructions, to transfer any Shares from the name of the registered holder(s) thereof if Purchaser does not accept for payment any of the Shares tendered hereby. 6 SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7 OF THIS LETTER OF TRANSMITTAL) To be completed ONLY if certificates for Shares not tendered or not purchased and/or the check for the purchase price of Shares purchased are to be issued in the name of someone other than the undersigned, or if Shares delivered by book-entry transfer which are not purchased are to be returned by credit to an account maintained at a Book-Entry Transfer Facility other than that designated above. Issue check and/or certificates to: Name (PLEASE PRINT) Address - ------------------------------------------------------ (ZIP CODE) - ------------------------------------------------------ (TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER) (ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW) / / Credit unpurchased Shares delivered by book-entry transfer to the Book-Entry Transfer Facility account set forth below: Check appropriate box: / / The Depository Trust Company / / Philadelphia Depository Trust Company - ------------------------------------------------------ (ACCOUNT NUMBER) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7 OF THIS LETTER OF TRANSMITTAL) To be completed ONLY if certificates for Shares not tendered or not purchased and/or the check for the purchase price of Shares purchased are to be sent to someone other than the undersigned, or to the undersigned at an address other than that shown above. Mail check and/or certificates to: Name (PLEASE PRINT) Address - ------------------------------------------------------ (ZIP CODE) 7 SIGN HERE (COMPLETE SUBSTITUTE FORM W-9 ON REVERSE) X - -------------------------------------------------------------------------------- X - -------------------------------------------------------------------------------- (SIGNATURE(S) OF HOLDER(S)) Date , 1996 (Must be signed by registered holder(s) exactly as name(s) appear(s) on common or preferred stock certificate(s) or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, please provide the following information. See Instruction 5 of this Letter of Transmittal.) Name(s) (PLEASE PRINT) Capacity (Full Title) Address - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number Tax Identification or Social Security No. (COMPLETE SUBSTITUTE FORM W-9 ON REVERSE) GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 5 OF THIS LETTER OF TRANSMITTAL) Authorized Signature Name (PLEASE PRINT) Title Name of Firm Address - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number Date , 1996 8 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. Guarantee of Signatures. Except as otherwise provided below, all signatures on this Letter of Transmittal must be guaranteed by a firm which is a bank, broker, dealer, credit union, savings association, or other entity that is a member in good standing of the Securities Transfer Agent's Medallion Program (each, an "Eligible Institution"). No signature guarantee is required on this Letter of Transmittal (a) if this Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this document, shall include any participant in a Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) of Shares tendered herewith, unless such holder(s) has completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the reverse hereof, or (b) if such Shares are tendered for the account of an Eligible Institution. See Instruction 5. If a Share Certificate is registered in the name of a person other than the signer of this Letter of Transmittal, or if payment is to be made, or a Share Certificate not accepted for payment or not tendered is to be returned, to a person other than the registered holder(s), then the Share Certificate must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on the Share Certificate, with the signature(s) on such Share Certificate or stock powers guaranteed as described above. See Instruction 5. 2. Delivery of Letter of Transmittal and Share Certificates. This Letter of Transmittal is to be used either if Share Certificates are to be forwarded herewith or if Shares are to be delivered by book-entry transfer pursuant to the procedure set forth in "Procedures for Tendering Shares" of the Offer to Purchase. Share Certificates evidencing all tendered Shares, or confirmation of a book-entry transfer of such Shares, if such procedure is available, into the Depositary's account at one of the Book-Entry Transfer Facilities pursuant to the procedures set forth in "Procedures for Tendering Shares" of the Offer to Purchase, together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message, as defined below) and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the reverse hereof prior to the Expiration Date (as defined in "Terms of the Offer Proration; Expiration Date" of the Offer to Purchase). If Share Certificates are forwarded to the Depositary in multiple deliveries, a properly completed and duly executed Letter of Transmittal must accompany each such delivery. Stockholders whose Share Certificates are not immediately available, who cannot deliver their Share Certificates and all other required documents to the Depositary prior to the Expiration Date or who cannot complete the procedure for delivery by book-entry transfer on a timely basis may tender their Shares pursuant to the guaranteed delivery procedure described in "Procedures for Tendering Shares" of the Offer to Purchase. Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by Purchaser herewith, must be received by the Depositary prior to the Expiration Date; and (iii) in the case of a guarantee of Shares, the Share Certificates, in proper form for transfer, or a confirmation of a book-entry transfer of such Shares, if such procedure is available, into the Depositary's account at one of the Book-Entry Transfer Facilities, together with a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message), and any other documents required by this Letter of Transmittal, must be received by the Depositary within three New York Stock Exchange, Inc. trading days after the date of execution of the Notice of Guaranteed Delivery, all as described in "Procedures for Tendering Shares" of the Offer to Purchase. The term "Agent's Message" means a message, transmitted by a Book-Entry Transfer Facility to, and received by the Depositary and forming a part of a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Transfer Facility tendering the Shares, that such participant has received and agrees to be bound by the terms of this Letter of Transmittal and that the Purchaser may enforce such agreement against the participant. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. By execution of this Letter of Transmittal (or a facsimile hereof), all tendering stockholders waive any right to receive any notice of the acceptance of their Shares for payment. 3. Inadequate Space. If the space provided herein under "Description of Shares Tendered" is inadequate, the Share Certificate numbers, the number of Shares evidenced by such Share Certificates and the number of Shares tendered should be listed on a separate schedule and attached hereto. 4. Partial Tenders. (Not applicable to stockholders who tender by book-entry transfer.) If fewer than all the Shares evidenced by any Share Certificate delivered to the Depositary herewith are to be tendered hereby, fill in the number of Shares which are to be tendered in the box entitled "Number of Shares Tendered." In such cases, new Share Certificate(s) evidencing the remainder of the Shares that were evidenced by the Share Certificates delivered to the Depositary herewith will be sent to the person(s) signing this Letter of Transmittal, unless otherwise provided in the box entitled "Special Delivery Instructions," as soon as practicable after the expiration or termination of the Offer. All Shares evidenced by Share Certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 9 5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the Share Certificates evidencing such Shares without alteration, enlargement or any other change whatsoever. If any Share tendered hereby is owned of record by two or more persons, all such persons must sign this Letter of Transmittal. If any of the Shares tendered hereby are registered in the names of different holders, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of such certificates. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, no endorsements of Share Certificates or separate stock powers are required, unless payment is to be made to, or Share Certificates evidencing Shares not tendered or not purchased are to be issued in the name of, a person other than the registered holder(s), in which case, the Share Certificate(s) evidencing the Shares tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on such Share Certificate(s). Signatures on such Share Certificate(s) and stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Shares tendered hereby, the Share Certificate(s) evidencing the Shares tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on such Share Certificate(s). Signatures on such Share Certificate(s) and stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal or any Share Certificate(s) or stock power is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to Purchaser of such person's authority so to act must be submitted. 6. Stock Transfer Taxes. Except as otherwise provided in this Instruction 6, Purchaser will pay all stock transfer taxes with respect to the sale and transfer of any Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price of any Shares purchased is to be made to, or Share Certificate(s) evidencing Shares not tendered or not purchased are to be issued in the name of, a person other than the registered holder(s), the amount of any stock transfer taxes (whether imposed on the registered holder(s), such other person or otherwise) payable on account of the transfer to such other person will be deducted from the purchase price of such Shares purchased, unless evidence satisfactory to Purchaser of the payment of such taxes, or exemption therefrom, is submitted. EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE SHARE CERTIFICATE(S) EVIDENCING THE SHARES TENDERED HEREBY. 7. Special Payment and Delivery Instructions. If a check for the purchase price of any Shares tendered hereby is to be issued, or Share Certificate(s) evidencing Shares not tendered or not purchased are to be issued, in the name of a person other than the person(s) signing this Letter of Transmittal or if such check or any such Share Certificate is to be sent to someone other than the person(s) signing this Letter of Transmittal or to the person(s) signing this Letter of Transmittal but at an address other than that shown in the box entitled "Description of Shares Tendered," the appropriate boxes on this Letter of Transmittal must be completed. Shares tendered hereby by book-entry transfer may request that Shares not purchased be credited to such account maintained at a Book-Entry Transfer Facility as such stockholder may designate in the box entitled "Special Payment Instructions" on the reverse hereof. If no such instructions are given, all such Shares not purchased will be returned by crediting the account at the Book-Entry Transfer Facility designated on the reverse hereof as the account from which such Shares were delivered. 8. Requests for Assistance or Additional Copies. Requests for assistance may be directed to the Information Agent or Dealer Manager at their respective addresses or telephone numbers set forth below. Additional copies of the Offer to Purchase, this Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 may be obtained from the Information Agent or the Dealer Manager or from brokers, dealers, commercial banks or trust companies. 9. Substitute Form W-9. Each tendering shareholder is required to provide the Depositary with a correct Taxpayer Identification Number ("TIN") on the Substitute Form W-9 which is provided under "Important Tax Information" below, and to certify, under penalties of perjury, that such number is correct and that such shareholder is not subject to backup withholding of federal income tax. If a tendering shareholder has been notified by the Internal Revenue Service that such shareholder is subject to backup withholding, such shareholder must cross out item (2) of the Certification box of the Substitute Form W-9, unless such shareholder has since been notified by the Internal Revenue Service that such shareholder is no longer subject to backup withholding. Failure to provide the information on the Substitute Form W-9 may subject the tendering shareholder to 31% federal income tax withholding on the payment of the purchase price of all Shares purchased from such shareholder. If the tendering shareholder has not been issued a TIN and has applied for one or intends to apply for one in the near future, such shareholder should write "Applied For" in the space provided for the TIN in Part I of the Substitute Form W-9, and sign and date the Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is not provided with a TIN within 60 days, the Depositary will withhold 31% on all payments of the purchase price to such stockholder until a TIN is provided to the Depositary. 10. Lost, Destroyed or Stolen Certificates. If any certificate(s) representing Shares has been lost, destroyed or stolen, the shareholder should promptly notify the Depositary. The shareholder will then be instructed as to the steps that must be taken in order to replace the certificate(s). This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost or destroyed certificates have been followed. 10 IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), PROPERLY COMPLETED AND DULY EXECUTED, WITH ANY REQUIRED SIGNATURE GUARANTEES, OR AN AGENT'S MESSAGE (TOGETHER WITH SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE). IMPORTANT TAX INFORMATION Under the federal income tax law, a shareholder whose tendered Shares are accepted for payment is required by law to provide the Depositary (as payer) with such shareholder's correct TIN on Substitute Form W-9 below. If such shareholder is an individual, the TIN is such shareholder's social security number. If the Depositary is not provided with the correct TIN, the shareholder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments that are made to such shareholder with respect to Shares and Rights purchased pursuant to the Offer may be subject to backup withholding of 31%. Certain shareholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, such individual must submit a statement, signed under penalties of perjury, attesting to such individual's exempt status. Forms of such statements can be obtained from the Depositary. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. If backup withholding applies with respect to a shareholder, the Depositary is required to withhold 31% of any payments made to such shareholder. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup withholding on payments that are made to a shareholder with respect to Shares purchased pursuant to the Offer, the shareholder is required to notify the Depositary of such shareholder's correct TIN by completing the form below certifying (a) that the TIN provided on Substitute Form W-9 is correct (or that such shareholder is awaiting a TIN), and (b) that (i) such shareholder has not been notified by the Internal Revenue Service that such shareholder is subject to backup withholding as a result of a failure to report all interest or dividends or (ii) the Internal Revenue Service has notified such shareholder that such shareholder is no longer subject to backup withholding. WHAT NUMBER TO GIVE THE DEPOSITARY The shareholder is required to give the Depositary the social security number or employer identification number of the record holder of the Shares tendered hereby. If the Shares are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance on which number to report. If the tendering shareholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, the shareholder should write "Applied For" in the space provided for the TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is not provided with a TIN within 60 days, the Depositary will withhold 31% of all payments of the purchase price to such stockholder until a TIN is provided to the Depositary. 11 - -------------------------------------------------------------------------------- PAYER'S NAME: IBJ SCHRODER BANK & TRUST COMPANY, AS DEPOSITARY - -------------------------------------------------------------------------------- PART I -- PLEASE PROVIDE YOUR TIN IN THE Social Security Number OR BOX AT RIGHT AND CERTIFY BY SIGNING AND / / DATING BELOW. Employer Identification Number (If awaiting TIN write "Applied For") -------------------------------------------------------------------------------------------- PART II -- For Payees Exempt From Backup Withholding, see the enclosed Guidelines and complete as instructed therein. CERTIFICATION -- Under penalties of perjury, I certify that: (1) The number shown on this form is my correct Taxpayer Identification Number (or a Taxpayer Identification Number has not been issued to me and either (a) I have mailed or delivered an application to receive a Taxpayer Identification Number to the appropriate Internal Revenue Service ("IRS") or Social Security Administration office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a Taxpayer Identification Number within sixty (60) days, 31% of all reportable payments made to me thereafter will be withheld until I provide a number), and (2) I am not subject to backup withholding either because I have not been notified by the IRS that I am subject to backup withholding as a result of failure to report all interest or dividends, or the IRS has notified me that I am no longer subject to backup withholding. -------------------------------------------------------------------------------------------- CERTIFICATE INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out item (2). (Also see instructions in the enclosed Guidelines.) ----------------------------- DATE ________________, 1996 SIGNATURE
- -------------------------------------------------------------------------------- NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. Questions and requests for assistance or additional copies of the Offer to Purchase, Letter of Transmittal and other tender offer materials may be directed to the Information Agent or the Dealer Manager as set forth below: The Information Agent for the Offer is: MACKENZIE PARTNERS, INC. 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (call collect) or CALL TOLL FREE (800) 322-2885 The Dealer Manager for the Offer is: WASSERSTEIN PERELLA & CO., INC. 31 West 52nd Street New York, New York 10019 Call Collect: (212) 969-2700 SUBSTITUTE FORM W-9 DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER (TIN) EX-99.A3 4 NOTICE OF GUARANTEED DELIVERY 1 NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK AND SERIES A ESOP CONVERTIBLE JUNIOR PREFERRED STOCK (INCLUDING, IN EACH CASE, THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS) OF CONRAIL INC. TO GREEN ACQUISITION CORP. A WHOLLY OWNED SUBSIDIARY OF CSX CORPORATION (NOT TO BE USED FOR SIGNATURE GUARANTEES) This Notice of Guaranteed Delivery, or one substantially in the form hereof, must be used to accept the Offer (as defined below) if (i) certificates ("Share Certificates") evidencing shares of common stock, par value $1.00 per share (the "Common Shares") or shares of Series A ESOP Convertible Junior Preferred Stock, without par value (the "ESOP Preferred Shares" and, together with the Common Shares, the "Shares"), of Conrail Inc., a Pennsylvania corporation (the "Company"), including the associated Common Stock Purchase Rights (the "Rights") issued pursuant to the Rights Agreement, dated July 19, 1989, between the Company and First Chicago Trust Company of New York, as Rights Agent (as amended, the "Rights Agreement"), are not immediately available, (ii) time will not permit all required documents to reach IBJ Schroder Bank and Trust Company, as Depositary (the "Depositary"), prior to the Expiration Date (as defined in "Terms of the Offer; Proration; Expiration Date" of the Offer to Purchase (as defined below)) or (iii) the procedure for book-entry transfer cannot be completed on a timely basis. All references herein to the Common Shares, ESOP Preferred Shares or Shares include the associated Rights. This Notice of Guaranteed Delivery may be delivered by hand or transmitted by telegram, facsimile transmission or mail to the Depositary. See "Procedures for Tendering Shares" of the Offer to Purchase. The Depositary for the Offer is: IBJ SCHRODER BANK & TRUST COMPANY
By Hand or By Mail: By Facsimile Transmission: Overnight Delivery: Bowling Green Station (212) 858-2611 One State Street P.O. Box 84 Attn: Reorganization New York, New York 10004 New York, New York 10274-0084 Operations Department Attn: Securities Processing Attn: Reorganization Window, Operations Department Subcellar One Confirm Facsimile by Telephone: (212) 858-2103
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL. 2 Ladies and Gentlemen: The undersigned hereby tenders to Green Acquisition Corp., a Pennsylvania corporation and a wholly owned subsidiary of CSX Corporation, a Virginia corporation, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated October 16, 1996 (the "Offer to Purchase"), and the related Letter of Transmittal (which, as amended from time to time, together constitute the "Offer"), receipt of each of which is hereby acknowledged, the number of Shares specified below pursuant to the guaranteed delivery procedures described in "Procedures for Tendering Shares" of the Offer to Purchase. Number of Shares: Name(s) of Record Holder(s): - ------------------------------------------------ ------------------------------------------------ Certificate Nos. (if available): - ------------------------------------------------ ------------------------------------------------ PLEASE PRINT Check ONE box if Shares will be tendered by book-entry transfer: Address(es): / / The Depository Trust Company ------------------------------------------------ / / Philadelphia Depository Trust Company ZIP CODE Area Code and Tel. No.: Account Number: ------------------------------------------------ Dated: , 1996
GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEES) The undersigned, a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or correspondent in the United States, hereby (a) represents that the tender of Shares effected hereby complies with Rule 14e-4 of the Securities Exchange Act of 1934, as amended, and (b) guarantees delivery to the Depositary, at one of its addresses set forth above, of certificates evidencing the Shares tendered hereby in proper form for transfer, or confirmation of book-entry transfer of such Shares into the Depositary's accounts at The Depository Trust Company or the Philadelphia Depository Trust Company, in each case with delivery of a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees, or an Agent's Message (as defined in "Acceptance for Payment and Payment for Shares" of the Offer to Purchase), and any other documents required by the Letter of Transmittal, (a) in the case of Shares, within three New York Stock Exchange, Inc. trading days after the date of execution of this Notice of Guaranteed Delivery, or (b) in the case of Rights, a period ending the latter of (i) three New York Stock Exchange, Inc. trading days after the date of execution of this Notice of Guaranteed Delivery or (ii) three business days after the date Right Certificates are distributed to stockholders. The Eligible Institution that completes this form must communicate the guarantee to the Depositary and must deliver the Letter of Transmittal and certificates for Shares to the Depositary within the time period shown herein. Failure to do so could result in financial loss to such Eligible Institution. - ------------------------------------------------ ------------------------------------------------ NAME OF FIRM AUTHORIZED SIGNATURE - ------------------------------------------------ ------------------------------------------------ ADDRESS TITLE Name: - ------------------------------------------------ ZIP CODE PLEASE PRINT Area Code and Tel. No.: Date: , 1996
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. EX-99.A4 5 LETTER TO BROKERS, DEALERS 1 wasserstein logo Wasserstein, Perella & Co., Inc. 31 West 52nd Street New York, New York 10019 Tel: (212) 969-2700
OFFER TO PURCHASE FOR CASH AN AGGREGATE OF 17,860,124 SHARES OF COMMON STOCK AND SERIES A ESOP CONVERTIBLE JUNIOR PREFERRED STOCK (INCLUDING, IN EACH CASE, THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS) OF CONRAIL INC. AT $92.50 NET PER SHARE BY GREEN ACQUISITION CORP. A WHOLLY OWNED SUBSIDIARY OF CSX CORPORATION THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, NOVEMBER 15, 1996, UNLESS THE OFFER IS EXTENDED. October 16, 1996 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been appointed by Green Acquisition Corp., a Pennsylvania corporation ("Purchaser") and a wholly owned subsidiary of CSX Corporation, a Virginia corporation ("Parent"), to act as Dealer Manager in connection with the Purchaser's offer to purchase an aggregate of 17,860,124 shares of (i) common stock, par value $1.00 per share (the "Common Shares"), and (ii) Series A ESOP Convertible Junior Preferred Stock, without par value (the "ESOP Preferred Shares" and, together with the Common Shares, the "Shares"), of Conrail Inc., a Pennsylvania corporation (the "Company"), including in each case, the associated Common Stock Purchase Rights (the "Rights") issued pursuant to the Rights Agreement, dated July 19, 1989, by and between the Company and First Chicago Trust Company of New York, as Rights Agent (as amended, the "Rights Agreement") at a price of $92.50 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated October 16, 1996 (the "Offer to Purchase"), and the related Letter of Transmittal (which, as amended from time to time, together constitute the "Offer") enclosed herewith. All references herein to the Common Shares, ESOP Preferred Shares or Shares shall include the associated Rights. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THE RECEIPT BY PURCHASER, PRIOR TO THE EXPIRATION OF THE OFFER, OF AN INFORMAL WRITTEN OPINION IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO PURCHASER FROM THE STAFF OF THE SURFACE TRANSPORTATION BOARD (THE "STB"), WITHOUT THE IMPOSITION OF ANY CONDITIONS UNACCEPTABLE TO PURCHASER, THAT THE USE OF A VOTING TRUST (THE "VOTING TRUST") IN SUBSTANTIALLY THE FORM CONTEMPLATED BY THE MERGER AGREEMENT IS CONSISTENT WITH THE POLICIES OF THE STB AGAINST UNAUTHORIZED ACQUISITIONS OF CONTROL OF A REGULATED CARRIER (SUCH CONDITION, THE "VOTING TRUST CONDITION"), (2) THE RECEIPT BY PURCHASER, PRIOR TO THE EXPIRATION OF THE OFFER, OF AN INFORMAL STATEMENT FROM THE PREMERGER NOTIFICATION OFFICE OF THE FEDERAL TRADE COMMISSION THAT THE TRANSACTIONS CONTEMPLATED BY THE OFFER, THE MERGER AGREEMENT AND THE COMPANY STOCK OPTION AGREEMENT (AS DEFINED IN THE OFFER TO PURCHASE) ARE NOT SUBJECT TO, OR ARE EXEMPT FROM, THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR ACT"), OR IN THE ABSENCE OF THE RECEIPT OF SUCH INFORMAL STATEMENT, ANY APPLICABLE WAITING PERIOD UNDER THE HSR ACT SHALL HAVE EXPIRED OR BEEN TERMINATED, (3) PARENT AND PURCHASER OBTAINING, PRIOR TO THE EXPIRATION OF THE OFFER, SUFFICIENT FINANCING, ON TERMS REASONABLY ACCEPTABLE TO PARENT, TO ENABLE CONSUMMATION OF THE OFFER AND THE MERGER AND (4) THERE BEING AT LEAST 17,860,124 SHARES VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER. 2 For your information and for forwarding to your clients for whom you hold Shares registered in your name or in the name of your nominee, or who hold Shares registered in their own names, we are enclosing the following documents: 1. Offer to Purchase, dated October 16, 1996; 2. Letter of Transmittal to be used by holders of Shares in accepting the Offer and tendering Shares; 3. Notice of Guaranteed Delivery to be used to accept the Offer if the certificates evidencing such Shares (the "Share Certificates") are not immediately available or time will not permit all required documents to reach IBJ Schroder Bank & Trust Company (the "Depositary") prior to the Expiration Date (as defined in the Offer to Purchase) or the procedure for book-entry transfer cannot be completed on a timely basis; 4. A letter to shareholders of the Company from David M. LeVan, Chairman, President and Chief Executive Officer, together with a Solicitation/Recommendation Statement on Schedule 14D-9 filed with the Securities and Exchange Commission by the Company; 5. A letter which may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominees, with space provided for obtaining such clients' instructions with regard to the Offer; 6. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9; and 7. Return envelope addressed to the Depositary. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Purchaser will purchase, by accepting for payment, and will pay for, an aggregate of 17,860,124 Shares validly tendered prior to the Expiration Date promptly after the later to occur of (i) the Expiration Date and (ii) the satisfaction or waiver of the conditions set forth in "Conditions of the Offer" of the Offer to Purchase. For purposes of the Offer, Purchaser will be deemed to have accepted for payment, and thereby purchased, tendered Shares if, as and when Purchaser gives oral or written notice to the Depositary of Purchaser's acceptance of such Shares for payment. In all cases, payment for Shares purchased pursuant to the Offer will be made only after timely receipt by the Depositary of (i) the Share Certificates or timely confirmation of a book-entry transfer of such Shares, if such procedure is available, into the Depositary's account at The Depository Trust Company or the Philadelphia Depository Trust Company pursuant to the procedures set forth in "Procedures for Tendering Shares" of the Offer to Purchase, (ii) the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, or an Agent's Message (as defined in "Acceptance for Payment and Payment for Shares" of the Offer to Purchase) and (iii) any other documents required by the Letter of Transmittal. Purchaser will not pay any fees or commissions to any broker or dealer or any other person (other than the Dealer Manager and the Information Agent as described in "Fees and Expenses" of the Offer to Purchase) in connection with the solicitation of tenders of Shares pursuant to the Offer. Purchaser will, however, upon request, reimburse you for customary mailing and handling expenses incurred by you in forwarding the enclosed materials to your clients. Purchaser will pay any stock transfer taxes incident to the transfer to it of validly tendered Shares, except as otherwise provided in Instruction 6 of the Letter of Transmittal. YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, NOVEMBER 15, 1996, UNLESS THE OFFER IS EXTENDED. In order to take advantage of the Offer, a duly executed and properly completed Letter of Transmittal (or facsimile thereof), with any required signature guarantees and any other required documents, should be sent to the Depositary, and certificates evidencing the tendered Shares should be delivered or such Shares should be tendered by book-entry transfer, all in accordance with the Instructions set forth in the Letter of Transmittal and the Offer to Purchase. If holders of Shares wish to tender Shares, but it is impracticable for them to forward their certificates or other required documents prior to the Expiration Date, a tender may be effected by following the guaranteed delivery procedures specified under "Procedures for Tendering Shares" of the Offer to Purchase. Any inquiries you may have with respect to the Offer should be addressed to the Dealer Manager or the Information Agent at their respective addresses and telephone numbers set forth on the back cover page of the Offer to Purchase. Additional copies of the enclosed materials may be obtained from the undersigned, at Wasserstein Perella & Co., Inc., telephone (212) 969-2700 (Collect) or by calling the Information Agent, MacKenzie Partners, Inc., telephone 1-800-322-2885 (Toll Free), or from brokers, dealers, commercial banks or trust companies. Very truly yours, Wasserstein Perella & Co., Inc. 3 NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON AS AN AGENT OF PARENT, PURCHASER, THE DEPOSITARY, THE INFORMATION AGENT OR THE DEALER MANAGER, OR ANY AFFILIATE OF ANY OF THE FOREGOING, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED AND THE STATEMENTS CONTAINED THEREIN. EX-99.A5 6 LETTER TO CLIENTS 1 OFFER TO PURCHASE FOR CASH AN AGGREGATE OF 17,860,124 SHARES OF COMMON STOCK AND SERIES A ESOP CONVERTIBLE JUNIOR PREFERRED STOCK (INCLUDING, IN EACH CASE, THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS) OF CONRAIL INC. AT $92.50 NET PER SHARE BY GREEN ACQUISITION CORP. A WHOLLY OWNED SUBSIDIARY OF CSX CORPORATION THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, NOVEMBER 15, 1996 UNLESS THE OFFER IS EXTENDED. October 16, 1996 To Our Clients: Enclosed for your consideration is an Offer to Purchase, dated October 16, 1996 (the "Offer to Purchase"), and the related Letter of Transmittal (which, as amended from time to time, together constitute the "Offer") in connection with the Offer by Green Acquisition Corp., a Pennsylvania corporation ("Purchaser") and a wholly owned subsidiary of CSX Corporation, a Virginia corporation ("Parent"), to purchase an aggregate of 17,860,124 shares of (i) common stock, par value $1.00 per share (the "Common Shares"), and (ii) Series A ESOP Convertible Junior Preferred Stock, no par value (the "ESOP Preferred Shares" and, together with the Common Shares, the "Shares"), of Conrail Inc., a Pennsylvania corporation (the "Company"), including, in each case, the associated Common Stock Purchase Rights (the "Rights") issued pursuant to the Rights Agreement, dated as of July 19, 1989, between the Company and First Chicago Trust Company of New York, as Rights Agent (as amended, the "Rights Agreement") at a price of $92.50 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer. All references herein to the Common Shares, ESOP Preferred Shares, or Shares shall include the associated Rights. Shareholders whose certificates evidencing Shares ("Share Certificates") are not immediately available or who cannot deliver their Share Certificates and all other documents required by the Letter of Transmittal to the Depositary prior to the Expiration Date (as defined in "Terms of the Offer; Proration; Expiration Date" of the Offer to Purchase) or who cannot complete the procedure for delivery by book-entry transfer to the Depositary's account at a Book-Entry Transfer Facility (as defined in "Acceptance for Payment and Payment for Common Shares" of the Offer to Purchase) on a timely basis and who wish to tender their Shares must do so pursuant to the guaranteed delivery procedure described in "Procedures for Tendering Shares" of the Offer to Purchase. See Instruction 2 of the Letter of Transmittal. Delivery of documents to a Book-Entry Transfer Facility in accordance with the Book-Entry Transfer Facility's procedures does not constitute delivery to the Depositary. THE MATERIAL IS BEING SENT TO YOU AS THE BENEFICIAL OWNER OF SHARES HELD BY US FOR YOUR ACCOUNT BUT NOT REGISTERED IN YOUR NAME. WE ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT. We request instructions as to whether you wish to have us tender on your behalf any or all of the Shares held by us for your account, upon the terms and subject to the conditions set forth in the Offer. Your attention is invited to the following: 1. The tender price is $92.50 per Share, net to the seller in cash. 2. The Offer, proration period and withdrawal rights will expire at 12:00 Midnight, New York City time, on Friday, November 15, 1996, unless the Offer is extended. 3. The Offer is being made for an aggregate of 17,860,124 Shares. 2 4. The Board of Directors of the Company has unanimously approved the Offer and the Merger (as defined in the Offer to Purchase), has determined that the Merger Agreement and the transactions contemplated thereby (including the Offer and the Merger) are in the best interests of the Company and recommends that shareholders of the Company who desire to receive cash for their Shares accept the Offer and tender their Shares pursuant to the Offer. 5. The Offer is conditioned upon, among other things, (a) the receipt by Purchaser, prior to the expiration of the Offer, of an informal written opinion in form and substance reasonably satisfactory to Purchaser from the staff of the Surface Transportation Board (the "STB"), without the imposition of any conditions unacceptable to Purchaser, that the use of a voting trust in substantially the form contemplated by the Merger Agreement is consistent with the policies of the STB against unauthorized acquisitions of control of a regulated carrier, (b) the receipt by Purchaser, prior to the expiration of the Offer, of an informal statement from the Premerger Notification Office of the Federal Trade Commission that the transactions contemplated by the Offer, the Merger Agreement and the Company Stock Option Agreement (as such terms are defined in the Offer to Purchase) are not subject to, or are exempt from, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), or, in the absence of the receipt of such informal statement, any applicable waiting period under the HSR Act shall have expired or been terminated, (c) Parent and Purchaser obtaining, prior to the expiration of the Offer, sufficient financing, on terms reasonably acceptable to Parent, to enable consummation of the Offer and the Merger and (d) there being at least 17,860,124 Shares validly tendered and not properly withdrawn prior to the expiration of the Offer. 6. Tendering shareholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares by Purchaser pursuant to the Offer. The Offer is made solely by the Offer to Purchase and the related Letter of Transmittal and is being made to all holders of Shares. Purchaser is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. If Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, Purchaser will make a good faith effort to comply with such state statute. If, after such good faith effort, Purchaser cannot comply with such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Purchaser by the Dealer Manager or one or more registered brokers or dealers licensed under the laws of such jurisdiction. If you wish to have us tender any or all of your Shares, please so instruct us by completing, executing and returning to us the instruction form contained in this letter. An envelope in which to return your instructions to us is enclosed. If you authorize the tender of your Shares, all such Shares will be tendered unless otherwise specified on the instruction form set forth in this letter. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER. 3 INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH AN AGGREGATE OF 17,860,124 SHARES OF COMMON STOCK AND SERIES A ESOP CONVERTIBLE JUNIOR PREFERRED STOCK OF CONRAIL INC. The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase, dated October 16, 1996, and the related Letter of Transmittal (which, as amended from time to time, together constitute the "Offer"), in connection with the offer by Green Acquisition Corp., a Pennsylvania corporation ("Purchaser") and a wholly owned subsidiary of CSX Corporation, a Virginia corporation ("Parent"), to purchase an aggregate of 17,860,124 shares of (i) common stock, par value $1.00 per share (the "Common Shares") and (ii) Series A ESOP Convertible Junior Preferred Stock, no par value (the "ESOP Preferred Shares" and, together with the Common Shares, the "Shares"), of Conrail Inc., a Pennsylvania corporation (the "Company") including, in each case, the associated Common Stock Purchase Rights (the "Rights") issued pursuant to the Rights Agreement, dated July 19, 1989, between the Company and First Chicago Trust Company of New York, as Rights Agent (as the "Rights Agreement"). All references herein to the Common Shares, ESOP Preferred Shares or Shares shall include the associated Rights. This will instruct you to tender to Purchaser the number of Shares indicated below (or, if no number is indicated in either appropriate space below, all Shares) held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer. Number of Shares to be Tendered*: SIGN HERE Shares Account Number: SIGNATURE(S) Dated: , 1996 PLEASE TYPE OR PRINT NAME(S) HERE PLEASE TYPE OR PRINT ADDRESS(ES) HERE AREA CODE AND TELEPHONE NUMBER TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER(S)
- --------------- * Unless otherwise indicated, it will be assumed that all Shares held by us for your account are to be tendered. EX-99.A6 7 TAX GUIDELINES - FORM W-9 1 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER. -- Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer.
------------------------------------------------------------ GIVE THE TAXPAYER IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF -- ------------------------------------------------------------ 1. An individual's account The individual 2. Two or more individuals (joint The actual owner of account) the account or, if combined funds, any one of the individuals(1) 3. Husband and wife (joint account) The actual owner of the account or, if joint funds, either person(1) 4. Custodian account of a minor (Uniform The minor(2) Gift to Minors Act) 5. Adult and minor (joint account) The adult or, if the minor is the only contributor, the minor(1) 6. Account in the name of guardian or The ward, minor, or committee for a designated ward, incompetent person(3) minor, or incompetent person 7. a. The usual revocable savings trust The grantor- account (grantor is also trustee) trustee(1) b. So-called trust account that is not The actual owner(1) a legal or valid trust under State law 8. Sole proprietorship account The owner(4) ------------------------------------------------------------ GIVE THE TAXPAYER IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF -- ------------------------------------------------------------ 9. A valid trust, estate or pension trust The Legal entity (Do not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(5) 10. Corporate account The corporation 11. Religious, charitable, or educational The organization organization account 12. Partnership account held in the name The partnership of the business 13. Association, club, or other tax-exempt The organization organization 14. A broker or registered nominee The broker or nominee 15. Account with the Department of The public entity Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments
- ------------------------------------------------------------ - ------------------------------------------------------------ (1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) Show the name of the owner. (5) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. 2 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you do not have a taxpayer identification number or you do not know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments include the following: - A corporation. - A financial institution. - An organization exempt from tax under section 501(a), or an individual retirement plan. - The United States or any agency or instrumentality thereof. - A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. - A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. - An international organization or any agency, or instrumentality thereof. - A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. - A real estate investment trust. - A common trust fund operated by a bank under section 584(a). - An exempt charitable remainder trust, or a non-exempt trust described in section 4947(a)(1). - An entity registered at all times under the Investment Company Act of 1940. - A foreign central bank of issue. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - Payments to nonresident aliens subject to withholding under section 1441. - Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. - Payments of patronage dividends where the amount received is not paid in money. - Payments made by certain foreign organizations. - Payments made to a nominee. Payments of interest generally subject to backup withholding include the following: - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt-interest dividends under section 852). - Payments described in section 6049(b)(5) to nonresident aliens. - Payments on tax-free covenant bonds under section 1451. - Payments made by certain foreign organizations. - Payments made to a nominee. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Certain payments other than interest, dividends, and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041A(a), 6045, and 6050A. PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to the IRS. The IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file a tax return. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. -- If you fail to include any portion of an includible payment for interest, dividends, or patronage dividends in gross income, such failure will be treated as being due to negligence and will be subject to a penalty of 20% on any portion of an underpayment attributable to that failure unless there is clear and convincing evidence to the contrary. (3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- if you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE EX-99.A7 8 TEXT OF PRESS RELEASE ISSUED BY PARENT 1 EXHIBIT (a)(7) CONTACTS: CSX Corporation Conrail Inc. Thomas E. Hoppin Craig R. MacQueen (804) 782-1450 (215) 209-4594 FOR IMMEDIATE RELEASE CSX AND CONRAIL TO COMBINE IN PRO-COMPETITIVE, STRATEGIC MERGER RICHMOND AND PHILADELPHIA -- Oct. 15, 1996 -- CSX Corporation (CSX) (NYSE: CSX) and Conrail Inc. (Conrail) (NYSE: CRR), leading transportation companies with complementary eastern rail routes, announced today they have agreed to a strategic merger. The merger agreement calls for Conrail shareholders to receive a combination of cash and CSX shares valued at approximately $8.4 billion, or $92.50 per Conrail share, based on the recent trading prices for CSX's common stock. The parties will propose a schedule that contemplates completion of the transaction in late 1997. The merger will create the leading freight transportation and logistics company in the world with annual revenues of more than $14 billion, offering domestic and international customers rail, container-shipping, barge, intermodal and contract logistics services. The newly created transportation system will offer much more extensive single-line rail service opportunities to shippers and receivers in 22 states and will have a 29,645 mile system, covering a territory from Chicago, Boston and New York to Miami and New Orleans. John W. Snow, chairman, president and chief executive officer of CSX, said, "This merger of equals represents a strategic combination that will provide excellent value for our customers and our shareholders, and is consistent with sound public policy. This is the right merger at the right time between the right companies. "This dynamic combination is a 'win-win' transaction for the shareholders of both companies, our customers and the communities we both serve. We will have the financial strength to make substantial infrastructure investments and service improvements. The transaction will have an immediate, positive effect on cash flow and will be accretive to earnings per share in the second year. Together, the companies will have stronger revenue, cash flow and earnings growth than they would have had on their own. The merged company will be the premier freight transportation company in North America and, as such, we should command a premium price/earnings multiple -- thus creating greater value for our shareholders," Snow said. 2 "Our new company will provide new single-line rail service to major markets east of the Mississippi and will greatly benefit shippers, the communities served and the nation as a whole. The merger will extend our customers' market reach, speeding service and enhancing their competitive positions at home and abroad. It makes the most efficient use of existing transportation infrastructure, thereby lowering the total cost of transporting American products," Snow said. "Moreover," Snow said, "this transaction offers an opportunity to improve passenger safety and service and to begin to address the need to separate freight and passenger service in high-density commuter and Amtrak corridors, including Philadelphia, Baltimore and Washington, D.C. We hope to consolidate much of our freight service on the CSX line between Philadelphia and Washington, thereby reducing freight operations on Amtrak's northeast corridor south of Philadelphia. Additionally, the contemplated ability to reroute some freight trains from other routes should free up capacity on other CSX lines, such as the Harper's Ferry-Washington line used by Maryland commuter trains. Such improvements can be addressed only through this transaction." "We are delighted to be merging with our ideal partner," said David M. LeVan, Conrail's chairman, president, and chief executive officer. "Conrail today is a strong railroad, but recent changes in industry structure and in U.S. patterns of distribution require a broader market reach. The new company we are creating will be more competitive with trucks and other modes of transportation. Where new, single-line services are possible, we will provide our customers one point of contact, and eliminate the costs and delays now layered over every step in the service process. "Our customers will enjoy significantly improved, more competitive freight transportation service that will result in greater service innovation and competitive pricing. The merger will allow us to build on the coal, merchandise, intermodal and logistics strengths of both companies. Importantly, our companies share an uncompromising commitment to safety, operating excellence and superior service and have compatible cultures that will expedite realization of the benefits of the merger," LeVan said. Under the terms of the transaction, 40 percent of the fully diluted shares of Conrail's common stock and ESOP preferred stock will be acquired for cash at $92.50 per share, and the remaining 60 percent will be acquired for stock at an exchange ratio of 1.85619 CSX shares for each Conrail share. CSX will promptly commence a cash tender offer at $92.50 per Conrail share for an aggregate of about 17.9 million shares of Conrail common stock and ESOP preferred stock, or approximately 19.9 percent of the Conrail outstanding voting stock. The offer will be subject to the usual conditions, including Surface Transportation Board (STB) informal approval of a customary voting trust and obtaining the necessary financing. 2 3 A Pennsylvania statute effectively precludes CSX from acquiring 20 percent or more of Conrail's voting shares in the tender offer, unless the Conrail shareholders vote to opt-out of the statute by a majority of the Conrail shares voting at a meeting. A meeting to vote on the opt-out is expected to be held prior to the expiration of the tender offer. Following approval, the Merger Agreement effectively provides that an aggregate of 40 percent of the fully diluted shares will be purchased for cash in this tender offer or in another offer that may be made. If approval is not obtained, the cash not paid in the offer would be paid in the subsequent merger. The companies also have granted each other an option to purchase 19.9 percent of the other's common shares under certain conditions. The 19.9 percent option held by CSX also would be exercisable if it purchases shares in the offer. Following STB approval of the merger, and after other conditions have been met, the companies will complete their merger through an expected tax-free exchange of stock at an exchange ratio of 1.85619 CSX shares for each remaining Conrail share. The application for STB approval of the transaction is expected to be filed in early 1997, and the parties will propose a schedule that contemplates a decision toward that year's end. Pending STB review, the shares purchased will be placed in the voting trust. Total benefits from the merger will be about $550 million annually, based on the realization of cost savings from operating efficiencies, facility consolidations, overhead rationalization, and other activities, and new traffic volumes earned by enhanced service. The combined company will make investments to support revenue growth, and will create a streamlined organization that incorporates the best of both companies while combining facilities and realizing economies of scale. The companies stated they expect there will be some job losses as a result of consolidations and the elimination of redundancies, but these will be offset over time by new employment opportunities resulting from growth of the business. The merger will yield new, competitive services that neither railroad can now offer on its own. The new system will have faster schedules, more frequent and reliable service, with shorter routes and improved equipment supply and utilization. The new system will create major, new single-line service routes between north-south markets. Moreover, the creation of a single-line route along the Atlantic corridor will provide a much needed, cost-effective and environmentally superior intermodal alternative to truck traffic now being hauled over I-95 and other north-south interstate highways. Many shippers will be attracted from the heavily congested highways and urban centers by the quality of service offered by the combined company. "The ability to compete more effectively for truck traffic is an exciting growth opportunity that offers significant public benefits including the reduction of highway traffic, improved environmental conditions and greater safety," LeVan said. 3 4 In rail corridors where CSX and Conrail both have routes, there will be significant operating benefits and, in many cases, major reductions in length of haul. Where their routes are end to end, there will be extensive new single-line service for shippers. Integrating the entire network, moreover, will produce significant additional benefits in traffic handling and marketing, and in facility and equipment utilization. As a result of these many service and efficiency benefits, competition will be enhanced. Where CSX and Conrail are now the only rail competitors, the merger partners are willing to agree to grant competitive access. There, shippers will continue to enjoy two-railroad competition, and will receive the competitive benefits of a more efficient CSX/Conrail system and single-line routes to many new destinations. Snow will become chairman and chief executive officer of the new holding company. LeVan will become the new holding company's president and chief operating officer. The board of directors will be composed of an equal number of members from the boards of CSX and Conrail. Upon consummation of the transaction, LeVan will be president and chief executive officer of the two railroads. LeVan will succeed Snow as chief executive officer of the new company two years after consummation of the merger, and Snow will serve as chairman of the corporation for the two years thereafter. The new holding company will be headquartered in Philadelphia, with a significant presence in Richmond. Operating headquarters for the two railroads will remain in Philadelphia and Jacksonville for the foreseeable future. A new name for the combined company will be announced at a later time. The transaction has been unanimously approved by the boards of directors of both companies. It is subject to the approval of shareholders of both companies and STB approval. Under the terms of the agreement, CSX or Conrail is each entitled, under certain circumstances, to receive a termination fee of $300 million from the other in the event the merger is not completed because of a competing offer for the other company. CSX is being advised on the transaction by Wasserstein Perella & Co., which has also provided a fairness opinion. Salomon Brothers Inc. has also been retained to advise CSX on post-transaction financing matters. Conrail is being advised by and has received fairness opinions from Lazard Freres & Co. LLC and Morgan Stanley Incorporated. CSX Corporation, headquartered in Richmond, VA, is an International transportation company offering a variety of rail, container-shipping, intermodal, trucking, barge, and contract logistics services. 4 5 Conrail, with corporate headquarters in Philadelphia, PA, operates an 11,000-mile rail freight network in 12 northeastern and midwestern states, the District of Columbia, and the Province of Quebec. Additional information regarding this announcement can be found on the companies' Web sites on the Internet. CSX's home page can be reached at http://www.CSX.com. Conrail's home page can be reached at http://www.CONRAIL.com. NOTE TO BROADCAST EDITORS: A live satellite feed of B-roll from both CSX and Conrail will be available: Tuesday, October 15 from 10:00 a.m. to 10:30 a.m. (EDT) -- coordinates are C-Band Telstar 401, Transponder 5 Tuesday, October 15 from 1:30 p.m. to 2:00 p.m. (EDT) -- coordinates are C-Band Telstar 402, Transponder 18 # # # 5 EX-99.A8 9 FORM OF SUMMARY ADVERTISEMENT 1 EXHIBIT (a)(8) This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares. The Offer is made solely by the Offer to Purchase dated October 16, 1996 and the related Letter of Transmittal and is being made to all holders of Shares. The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. In those jurisdictions where securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Green Acquisition Corp. by Wasserstein Perella & Co., Inc. or one or more registered brokers or dealers licensed under the laws of of such jurisdiction. Notice of Offer to Purchase for Cash An Aggregate of 17,860,124 Shares of Common Stock and Series A ESOP Convertible Junior Preferred Stock (including, in each case, the associated Common Stock Purchase Rights) of Conrail Inc. at $92.50 Net Per Share by Green Acquisition Corp., a wholly owned subsidiary of CSX Corporation Green Acquisition Corp. ("Purchaser"), a Pennsylvania corporation and a wholly owned subsidiary of CSX Corporation, a Virginia corporation ("Parent"), hereby offers to purchase an aggregate of 17,860,124 shares of (i) common stock, par value $1.00 per share (the "Common Shares"), and (ii) Series A ESOP Convertible Junior Preferred Stock, without par value (the "ESOP Preferred Shares" and, together with the Common Shares, the "Shares"), of Conrail Inc., a Pennsylvania corporation (the "Company"), including, in each case, the associated Common Stock Purchase Rights (the "Rights") issued pursuant to the Rights Agreement, dated as of July 19, 1989, between the Company and First Chicago Trust Company of New York, as Rights Agent (as amended, the "Rights Agreement"), at a price of $92.50 per Share, net to the seller in cash, without interest thereon (the "Offer Price"), upon the terms and subject to the conditions set forth in the Offer to Purchase dated October 16, 1996 (the "Offer to Purchase") and in the related Letter of Transmittal (which, as amended from time to time, together constitute the "Offer"). Unless the context otherwise requires, all references to Common Shares, ESOP Preferred Shares or Shares shall include the associated Rights, and all references to the Rights shall include the benefits that may enure to holders of the Rights pursuant to the Rights Agreement, including the right to receive any payment due upon redemption of the rights. If, prior to the expiration of the Offer, the shareholders of the Company approve an - 1 - 2 amendment to the Company's Articles of Incorporation to opt out of the provisions of Chapter 25, Subchapter E of the Pennsylvania Business Corporation Law (related to "control transactions"), Purchaser may, depending on the circumstances, increase the number of Shares that will be accepted in the Offer to 40% of the outstanding Shares on a fully diluted basis as of October 14, 1996 (excluding Shares issuable pursuant to the Company Stock Option Agreement (as defined in the Offer to Purchase)). The Company has agreed in the Merger Agreement (as defined below) to seek such approval as soon as practicable after execution of the Merger Agreement. THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, NOVEMBER 15, 1996, UNLESS THE OFFER IS EXTENDED. The Offer is conditioned upon, among other things, prior to the expiration of the Offer, (1) the receipt by Purchaser of an informal written opinion in form and substance reasonably satisfactory to Purchaser from the staff of the Surface Transportation Board (the "STB"), without the imposition of any conditions unacceptable to Purchaser, that the use of a Voting Trust in substantially the form contemplated by the Merger Agreement is consistent with the policies of the STB against unauthorized acquisitions of control of a regulated carrier, (2) the receipt by Purchaser of an informal statement from the Premerger Notification Office of the Federal Trade Commission that the transactions contemplated by the Offer, the Merger Agreement and the Company Stock Option Agreement are not subject to, or are exempt from, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), or, in the absence of the receipt of such informal statement, any applicable waiting period under the HSR Act shall have expired or been terminated, (3) Parent and Purchaser having obtained, on terms reasonably acceptable to Parent, sufficient financing to enable consummation of the Offer and the Merger and (4) there being at least 17,860,124 Shares validly tendered and not withdrawn. The Board of Directors of the Company has unanimously approved the Offer and the Merger, determined that the Merger Agreement and the transactions contemplated thereby (including the Offer and the Merger) are in the best interests of the Company and recommends that shareholders of the Company who desire to receive cash for their Shares accept the Offer and tender their Shares pursuant to the Offer. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of October 14, 1996 (the "Merger Agreement"), by and among the Company, Parent and Purchaser. The Merger Agreement provides, among other things, that subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement (including approval of the Merger by the STB), the Company will merge (the "Merger") with and into Purchaser, with Purchaser continuing as the surviving corporation. In the Merger, each outstanding Share (other than Shares held in the treasury of the Company or owned by Parent, Purchaser or any other wholly owned subsidiary of Parent or the Company) will be converted, at the election of the holder of Shares, - 2 - 3 subject to certain terms and conditions, into the right to receive $92.50 in cash, 1.85619 shares of common stock, par value $1.00 per share ("Parent Common Stock"), of Parent, or a combination of such cash and shares of Parent Common Stock. The Merger Agreement provides that the aggregate number of Shares to be converted into Parent Common Stock pursuant to the Merger shall be equal as nearly as practicable to 60% of all outstanding Shares (excluding Shares outstanding pursuant to the Company Stock Option Agreement), and that the aggregate number of Shares to be converted into the right to receive $92.50 in cash per Share pursuant to the Merger, together with the Shares acquired by Purchaser (other than pursuant to the Company Stock Option Agreement), shall be equal as nearly as practicable to 40% of such outstanding Shares. Simultaneously with the execution of the Merger Agreement, Parent and the Company also entered into the Parent Stock Option Agreement (as defined in the Offer to Purchase) and the Company Stock Option Agreement, each of which is described in Section 13 of the Offer to Purchase. Purchaser expressly reserves the right, in its sole judgment and subject to the terms of the Merger Agreement, at any time and from time to time and regardless of whether any of the events set forth in Section 15 of the Offer to Purchase shall have occurred or shall have been determined by Purchaser to have occurred, (i) to extend the period of time during which the Offer is open and thereby delay acceptance for payment of, and the payment for, any Shares, by giving oral or written notice of such extension to the Depositary (as defined in the Offer to Purchase) and (ii) to amend the Offer in any respect by giving oral or written notice of such amendment to the Depositary. Any such extension or amendment will be followed as promptly as practicable by a public announcement thereof, such announcement in the case of an extension, to be issued not later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date (as defined in the Offer to Purchase). During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer, subject to the right of a tendering shareholder to withdraw such shareholder's Shares. Purchaser will, upon the terms and subject to the conditions of the Offer, purchase an aggregate of 17,860,124 Shares on a pro rata basis (with adjustments to avoid purchase of fractional Shares) based upon the number of Shares properly tendered on or prior to the Expiration Date and not withdrawn. Due to the difficulty of determining the precise number of Shares properly tendered and not withdrawn, if proration is required, Purchaser does not expect to announce the final results of proration or pay for Shares until at least five New York Stock Exchange trading days after the Expiration Date. Preliminary results of proration will be announced by press release as promptly as practicable after the Expiration Date. Holders of Shares may obtain such preliminary information when it becomes available from the Information Agent and may be able to obtain such information from their brokers. For purposes of the Offer, Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not properly withdrawn as, if and when Purchaser gives oral or written notice to the Depositary of Purchaser's - 3 - 4 acceptance of such Shares for payment pursuant to the Offer. In all cases, upon the terms and subject to the conditions of the Offer, payment for Shares purchased pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering shareholders for the purpose of receiving payment from Purchaser and transmitting payment to validly tendering shareholders. Under no circumstances will interest on the purchase price for Shares be paid by Purchaser by reason of any delay in making such payment. In all cases, payment for Shares purchased pursuant to the Offer will be made only after timely receipt by the Depositary of (a) certificates for such Shares ("Certificates") or a book-entry confirmation of the book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company or the Philadelphia Depository Trust Company (collectively, the "Book-Entry Transfer Facilities"), pursuant to the procedures set forth in Section 3 of the Offer to Purchase, (b) the Letter of Transmittal (or facsimile thereof) properly completed and duly executed, with any required signature guarantees, or an Agent's Message (as defined in the Offer to Purchase) in connection with a book-entry transfer, and (c) any other documents required by the Letter of Transmittal. If, for any reason whatsoever, acceptance for payment of any Shares tendered pursuant to the Offer is delayed, or if Purchaser is unable to accept for payment or pay for Shares tendered pursuant to the Offer, then, without prejudice to Purchaser's rights set forth in the Offer to Purchase, the Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares and such Shares may not be withdrawn except to the extent that the tendering shareholder is entitled to and duly exercises withdrawal rights as described in Section 4 of the Offer to Purchase. Any such delay will be followed by an extension of the Offer to the extent required by law. If any tendered Shares are not accepted for payment for any reason pursuant to the terms and conditions of the Offer (including proration due to tenders of more than 17,860,124 Shares), or if Share Certificates are submitted evidencing more Shares than are tendered, Share Certificates evidencing unpurchased Shares will be returned, without expense to the tendering shareholder (or, in the case of Shares tendered by book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility pursuant to the procedure set forth in Section 3, such Shares will be credited to an account maintained at such Book-Entry Transfer Facility), as promptly as practicable following the expiration or termination of the Offer. Except as otherwise provided in Section 4 of the Offer to Purchase, tenders of Shares made pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any time prior to 12:00 Midnight, New York City time, on Friday, November 15, 1996 (or if Purchaser shall have extended the period of time for which the Offer is open, at the latest time and date at which the Offer, as so extended by Purchaser, shall expire) and unless theretofore accepted for payment and paid for by Purchaser pursuant to the Offer, may also be withdrawn at any time after December 14, 1996. In order for a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the - 4 - 5 Depositary at one of its addresses set forth on the back cover of the Offer to Purchase. Any notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn, and, if Certificates for Shares have been tendered, the name of the registered holder of the Shares as set forth in the tendered Certificate, if different from that of the person who tendered such Shares. If Certificates for Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then prior to the physical release of such Certificates, the serial numbers shown on such Certificates evidencing the Shares to be withdrawn must be submitted to the Depositary and the signature on the notice of withdrawal must be guaranteed by a firm which is a bank, broker, dealer, credit union, savings association or other entity that is a member in good standing of the Securities Transfer Agent's Medallion Program (an "Eligible Institution"), unless such Shares have been tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedures for book-entry transfer set forth in Section 3 of the Offer to Purchase, any notice of withdrawal must also specify the name and number of the account at the appropriate Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's procedures. Withdrawal of tenders of Shares may not be rescinded, and any Shares properly withdrawn will be deemed not to be validly tendered for purposes of the Offer. Withdrawn Shares may, however, be retendered by repeating one of the procedures set forth in Section 3 of the Offer to Purchase at any time before the Expiration Date. Purchaser, in its sole judgment, will determine all questions as to the form and validity (including time of receipt) of notices of withdrawal, and such determination will be final and binding. The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. The Company has provided Purchaser with the Company's shareholder list and security position listings for the purpose of disseminating the Offer to holders of Shares. The Offer to Purchase, the related Letter of Transmittal and other relevant materials will be mailed to record holders of Shares and will be furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the shareholder list, or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares. The Offer to Purchase and the related Letter of Transmittal contain important information which should be read carefully before any decision is made with respect to the Offer. Questions and requests for assistance or for additional copies of the Offer to Purchase, the Letter of Transmittal or other tender offer materials may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers as set forth below, and copies will be furnished promptly at Purchaser's expense. No fees or commissions will be paid to brokers, dealers or other - 5 - 6 persons (other than the Information Agent and the Dealer Manager) for soliciting tenders of Shares pursuant to the Offer. The Information Agent for the Offer is: MACKENZIE PARTNERS, INC. 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (Call Collect) or CALL TOLL-FREE (800) 322-2885 The Dealer Manager for the Offer is: WASSERSTEIN PERELLA & CO., INC. 31 West 52nd Street New York, New York 10019 (212) 969-2700 (Call Collect) October 16, 1996 - 6 - EX-99.C1 10 AGREEMENT AND PLAN OF MERGER 1 EXHIBIT (c)(1) EXECUTION COPY AGREEMENT AND PLAN OF MERGER by and among CONRAIL INC., a Pennsylvania corporation, GREEN ACQUISITION CORP., a Pennsylvania corporation, and CSX CORPORATION, a Virginia corporation, Dated as of October 14, 1996. 2 TABLE OF CONTENTS
Page ---- ARTICLE I THE OFFER AND THE MERGER . . . . . . . . . . .. . . . . . . . . . . . . . . . 2 SECTION 1.1. The Offer . . . . . . . . . . . . . . . . . . . . . . . 2 SECTION 1.2. Green Actions . . . . . . . . . . . . . . . . . . . . . 4 SECTION 1.3. The Merger . . . . . . . . . . . . . . . . . . . . . . . 6 section 1.4. Closing . . . . . . . . . . . . . . . . . . . . . . . . 6 SECTION 1.5. Effective Time . . . . . . . . . . . . . . . . . . . . . 6 SECTION 1.6. Effects of the Merger . . . . . . . . . . . . . . . . . 7 SECTION 1.7. Articles of Incorporation and By-laws; Directors and Officers . . . . . . . . . . . . . . . . 7 SECTION 1.8. Boards, Committees and Officers. . . . . . . . . . . . . 7 SECTION 1.9. Voting Trust . . . . . . . . . . . . . . . . . . . . . . 8 ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES . . . . . . . . . . . .. . . 8 SECTION 2.1. Conversion of Shares . . . . . . . . . . . . . . . . . . 8 SECTION 2.2. Election Procedures . . . . . . . . . . . . . . . . . . . 9 SECTION 2.3. Issuance of White Common Stock and Payment of Cash; Proration . . . . . . . . . . . . 11 SECTION 2.4. Issuance of White Common Stock . . . . . . . . . . . . . 14 SECTION 2.5. Payment of Cash Consideration . . . . . . . . . . . . . . 14 SECTION 2.6. Stock Transfer Books . . . . . . . . . . . . . . . . . . 15 SECTION 2.7. No Dissenter's Rights . . . . . . . . . . . . . . . . . . 15 SECTION 2.8. No Further Ownership Rights . . . . . . . . . . . . . . . 15 SECTION 2.9. Termination of Exchange Trust . . . . . . . . . . . . . . 15 SECTION 2.10. No Liability . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 2.11. Lost Certificates . . . . . . . . . . . . . . . . . . . . 16 SECTION 2.12. Withholding Rights . . . . . . . . . . . . . . . . . . . 16 ARTICLE III REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . 17 SECTION 3.1. Representations and Warranties of Green. . . . . . . . . . 17 SECTION 3.2. Representations and Warranties of White and Tender Sub . . . . . . . . . . . . . . . . . . . . . 27
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Page ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . . 36 SECTION 4.1. Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . 36 SECTION 4.2. No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . 40 ARTICLE V ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 SECTION 5.1. Preparation of the Form S-4 and the Joint Proxy Statement; Shareholders Meetings. . . . . . . . . . . . . 43 SECTION 5.2. Letters of Accountants . . . . . . . . . . . . . . . . . . . . . 45 SECTION 5.3. Tax-Free Reorganization . . . . . . . . . . . . . . . . . . . . . 46 SECTION 5.4. Access to Information; Confidentiality . . . . . . . . . . . . . 46 SECTION 5.5. Reasonable Efforts . . . . . . . . . . . . . . . . . . . . . . . 47 SECTION 5.6. Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . 48 SECTION 5.7. Certain Employee Matters . . . . . . . . . . . . . . . . . . . . 50 SECTION 5.8. Indemnification, Exculpation and Insurance . . . . . . . . . . . 51 SECTION 5.9. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . 52 SECTION 5.10. Public Announcements . . . . . . . . . . . . . . . . . . . . . . 53 SECTION 5.11. Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 SECTION 5.12. NYSE Listing . . . . . . . . . . . . . . . . . . . . . . . . . . 54 SECTION 5.13. Shareholder Litigation . . . . . . . . . . . . . . . . . . . . . 54 SECTION 5.14. Green Rights Agreement . . . . . . . . . . . . . . . . . . . . . 54 SECTION 5.15. White Rights Agreement . . . . . . . . . . . . . . . . . . . . . 55 SECTION 5.16. Corporate Headquarters . . . . . . . . . . . . . . . . . . . . . 55 SECTION 5.17. Registration Rights . . . . . . . . . . . . . . . . . . . . . . 55 SECTION 5.18. Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 ARTICLE VI CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 SECTION 6.1. Conditions to Each Party's Obligation To Effect the Merger . . . . . . . . . . . . . . . . . . . . . 56 SECTION 6.2. Conditions to Obligations of White . . . . . . . . . . . . . . . 57 SECTION 6.3. Conditions to Obligation of Green . . . . . . . . . . . . . . . . 58 SECTION 6.4. Frustration of Closing Conditions . . . . . . . . . . . . . . . . 59 ARTICLE VII TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . 59 SECTION 7.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 SECTION 7.2. Effect of Termination. . . . . . . . . . . . . . . . . . . . . . 61
-ii- 4
Page ---- SECTION 7.3. Amendment. . . . . . . . . . . . . . . . . . . . . . . . 62 SECTION 7.4. Extension; Waiver. . . . . . . . . . . . . . . . . . . . 62 SECTION 7.5. Procedure for Termination, Amendment, Extension or Waiver. . . . . . . . . . . . . . . . . . 62 ARTICLE VIII GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 SECTION 8.1. Nonsurvival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 62 SECTION 8.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . 62 SECTION 8.3. Definitions . . . . . . . . . . . . . . . . . . . . . . 63 SECTION 8.4. Interpretation . . . . . . . . . . . . . . . . . . . . . 64 SECTION 8.5. Counterparts . . . . . . . . . . . . . . . . . . . . . . 65 SECTION 8.6. Entire Agreement; No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . 65 SECTION 8.7. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . 65 SECTION 8.8. Assignment . . . . . . . . . . . . . . . . . . . . . . . 65 SECTION 8.9. ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . 66 SECTION 8.10. Headings . . . . . . . . . . . . . . . . . . . . . . . . 66 SECTION 8.11. Severability . . . . . . . . . . . . . . . . . . . . . . 66 EXHIBIT A Corporate Governance . . . . . . . . . . . . . . . . A-1 EXHIBIT B Form of Affiliate Letter . . . . . . . . . . . . . . B-1 EXHIBIT C Form of Amended and Restated Articles of Incorporation . . . . . . . . . . . . . . C-1 EXHIBIT D Conditions to the Offer . . . . . . . . . . . . . . . D-1 EXHIBIT E Form of Voting Trust Agreement . . . . . . . . . . . E-1 EXHIBIT F Form of Conrail Tax Letter . . . . . . . . . . . . . F-1 EXHIBIT G Form of CSX Tax Letter . . . . . . . . . . . . . . . G-1
-iii- 5 DEFINED TERMS
Page Section ---- ------- Acquisition Agreement 41 Section 4.2 Adjusted Option 49 Section 5.6 affiliate 63 Section 8.3 Agreement 1 Preamble Amended Green Articles 45 Section 5.1 Amended White Articles 45 Section 5.1 Approval Date 41 Section 4.2 Articles of Merger 6 Section 1.5 Average White Share Price 14 Section 2.3 Cash Election 9 Section 2.2 Cash Portion G-2 Exhibit G Certificates 9 Section 2.1 Closing 6 Section 1.4 Closing Date 6 Section 1.4 Code 1 Recitals Company F-1 Exhibit F Company Capital Stock F-1 Exhibit F Company Common Stock F-1 Exhibit F Confidentiality Agreement 47 Section 5.4 Conversion Ratio 11 Section 2.3 disposition F-3 Exhibit F Effective Time 6 Section 1.5 Election 9 Section 2.2 Election Deadline 10 Section 2.2 Employee Benefit Plans Environmental Laws 22 Section 3.1 ESOP Preferred Stock F-1 Exhibit F Exchange Act 2 Section 1.1 Exchange Agent 10 Section 2.2 Exchange Trust 14 Section 2.4 Form S-4 22 Section 3.1 Form of Election 9 Section 2.2 Governmental Entity 20 Section 3.1 Green 1 Preamble Green Advisors 6 Section 1.2 Green Articles 45 Section 5.1 Green Benefit Plans 24 Section 3.1 Green Common Stock 1 Recitals Green Disclosure Schedule 17 Section 3.1
-iv- 6 Green Employee Stock Options 18 Section 3.1 Green ESOP Preferred Stock 1 Recitals Green Filed SEC Documents 23 Section 3.1 Green Fairness Opinions 6 Section 1.2 Green Filed SEC Documents 23 Section 3.1 Green Material Breach 60 Section 7.1 Green Merger Shareholder Approval 25 Section 3.1 Green Merger Shareholders Meeting 44 Section 5.1 Green Option 1 Recitals Green Pennsylvania Proxy Statement 20 Section 3.1 Green Pennsylvania Shareholder Approval 25 Section 3.1 Green Pennsylvania Shareholders Meeting 43 Section 5.1 Green Permits 24 Section 3.1 Green Preferred Stock 18 Section 3.1 Green Rights 19 Section 3.1 Green Rights Agreement 19 Section 3.1 Green Rights Plan Amendment 26 Section 3.1 Green SEC Documents 21 Section 3.1 Green Shareholder Approvals 25 Section 3.1 Green Shareholders Meetings 44 Section 5.1 Green Stock Option Agreement 1 Recitals Green Stock Plans 18 Section 3.1 GSOP Stock F-2 Exhibit F HSR Act 20 Section 3.1 issuing party 55 Section 5.17 Joint Proxy Statement 20 Section 3.1 key employee 24 Section 3.1 knowledge 64 Section 8.3 Liens 18 Section 3.1 material 64 Section 8.3 material adverse change 63 Section 8.3 material adverse effect 63 Section 8.3 materially 64 Section 8.3 Merger 6 Section 1.3 Merger Agreement F-1 Exhibit F Non-Electing Shares 13 Section 2.3 NYSE 21 Section 3.1 Offer 2 Section 1.1
-v- 7 Offer Price 2 Section 1.1 Offer to Purchase 2 Section 1.1 Offer Documents 3 Section 1.1 Option Agreements 2 Recitals Parent G-1 Exhibit G Parent Common Stock F-2 Exhibit F Pennsylvania Law 6 Section 1.3 Per Share Cash Consideration 9 Section 2.2 Per Share Merger Consideration 9 Section 2.1 person 64 Section 8.3 Proxy Statements 21 Section 3.1 qualified stock options 49 Section 5.6 Railroad CEO A-1 Exhibit A requesting party 55 Section 5.17 Restraints 56 Section 6.1 Rule 145 B-1 Exhibit B Schedule 14D-1 3 Section 1.1 Schedule 14D-9 5 Section 1.2 SEC 3 Section 1.1 Second Offer 4 Section 1.1 Securities B-4 Annex I to Exh. B Securities Act 21 Section 3.1 Significant Subsidiary 17 Section 3.1 significant subsidiary 17 Section 3.1 STB 15 Section 2.7 Stock Election 9 Section 2.2 Sub F-1 Exhibit F subsidiary 64 Section 8.3 Superior Proposal 42 Section 4.2 Surviving Corporation 6 Section 1.3 Takeover Proposal 41 Section 4.2 Tax Opinions 46 Section 5.3 Tendered Shares 11 Section 2.3 Tender Sub 1 Preamble Termination Fee 52 Section 5.9 Transfer Taxes 53 Section 5.9 Voting Trust 8 Section 1.9 White 1 Preamble White Articles 45 Section 5.1
-vi- 8 White Benefit Plans 34 Section 3.2 White Common Stock 2 Recitals White Disclosure Schedule 27 Section 3.2 White Employee Stock Options 28 Section 3.2 White Filed SEC Documents 32 Section 3.2 White Material Breach 60 Section 7.1 White Option 2 Recitals White Permits 33 Section 3.2 White Preferred Stock 27 Section 3.2 White Rights 29 Section 3.2 White Rights Agreement 29 Section 3.2 White Rights Plan Amendment 35 Section 3.2 White SEC Documents 31 Section 3.2 White Securities B-1 Exhibit B White Shareholder Approval 35 Section 3.2 White Shareholders Meeting 44 Section 5.1 White Stock Option Agreement 2 Recitals White Stock Plans 28 Section 3.2
-vii- 9 AGREEMENT AND PLAN OF MERGER, dated as of October 14, 1996 (this "Agreement"), by and among CONRAIL INC., a Pennsylvania corporation ("Green"), GREEN ACQUISITION CORP., a Pennsylvania corporation and a wholly owned subsidiary of White ("Tender Sub"), and CSX CORPORATION, a Virginia corporation ("White"). WITNESSETH: WHEREAS, the Board of Directors of Green has approved, and deems it advisable and in the best interests of Green to consummate, the business combination contemplated hereby upon the terms and subject to the conditions set forth herein; WHEREAS, the respective Boards of Directors of Tender Sub and White have approved, and deem it advisable and in the best interests of their respective shareholders to consummate, the business combination contemplated hereby upon the terms and subject to the conditions set forth herein; WHEREAS, it is intended that the business combination contemplated hereby be accomplished by Tender Sub commencing a cash tender offer for shares of common stock, par value $1.00 per share, of Green (including the associated Green Rights, "Green Common Stock"), and for shares of Series A ESOP Convertible Junior Preferred Stock, without par value, of Green (including the associated Green Rights, "Green ESOP Preferred Stock"), to be followed by a merger of Green with and into Tender Sub, with Tender Sub being the surviving corporation, upon the terms and subject to the conditions set forth herein; WHEREAS, Green, Tender Sub and White desire to make certain representations, warranties, covenants and agreements in connection with the transactions contemplated hereby and also to prescribe various conditions to the transactions contemplated hereby; WHEREAS, for United States federal income tax purposes, it is intended that the Merger provided for herein shall qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and the rules and regulations 10 promulgated thereunder, and this Agreement is intended to be and is adopted as a plan of reorganization within the meaning of Section 368 of the Code; WHEREAS, concurrently with the execution and delivery of this Agreement, Green and White are entering into a stock option agreement (the "Green Stock Option Agreement"), pursuant to which White shall be granted the option (the "Green Option") to purchase shares of Green Common Stock, upon the terms and subject to the conditions set forth therein; and WHEREAS, concurrently with the execution and delivery of this Agreement, White and Green are entering into a stock option agreement (the "White Stock Option Agreement", and, together with the Green Stock Option Agreement, the "Option Agreements"), pursuant to which Green shall be granted the option (the "White Option") to purchase shares of common stock, par value $1.00 per share, of White ("White Common Stock"), upon the terms and subject to the conditions set forth therein. NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, the parties, intending to be legally bound, agree as follows: ARTICLE I THE OFFER AND THE MERGER SECTION 1.1. The Offer. (a) As promptly as practicable (but in no event later than five business days after the public announcement of the execution hereof), Tender Sub shall commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") an offer (the "Offer") to purchase for cash an aggregate of 17,860,124 shares of Green Common Stock and Green ESOP Preferred Stock at a price of $92.50 per share, net to the seller in cash (such price, or such higher price per share as may be paid in the Offer, being referred to herein as the "Offer Price"), subject to the conditions set forth in Exhibit D hereto. Tender Sub shall, on the terms and subject to the prior satisfaction or waiver of the conditions of the Offer, accept for payment and pay for shares of Green Common Stock and Green ESOP Preferred Stock tendered as soon as practicable after the later of the satisfaction of the -1- 11 conditions to the Offer and the expiration of the Offer; provided, however, that no such payment shall be made until after calculation of proration; provided further that immediately upon the acceptance for payment of and payment for shares of Green ESOP Preferred Stock pursuant to the Offer, such shares shall be automatically converted on a one-for-one basis into shares of Green Common Stock in accordance with the terms of the Green Articles. The obligations of Tender Sub to commence the Offer and to accept for payment and to pay for any shares of Green Common Stock or Green ESOP Preferred Stock validly tendered shall be subject only to the conditions set forth in Exhibit D hereto. The Offer shall be made by means of an offer to purchase (the "Offer to Purchase") containing the terms set forth in this Agreement and the conditions set forth in Exhibit D hereto. Without the written consent of Green, Tender Sub shall not decrease the Offer Price, decrease the aggregate number of shares of Green Common Stock and Green ESOP Preferred Stock sought, change the form of consideration to be paid pursuant to the Offer, modify any of the conditions to the Offer set forth in Exhibit D hereto, impose conditions to the Offer in addition to those set forth in Exhibit D hereto, except as provided in the proviso below, extend the Offer, or amend any other term or condition of the Offer in any manner which is adverse to the holders of shares of Green Common Stock, it being agreed that a waiver by Tender Sub of any condition in its discretion shall not be deemed to be adverse to the holders of Green Common Stock; provided, however, that Tender Sub shall not waive the condition set forth in paragraph (c) of Exhibit D without the consent of Green; and provided further that, if on any scheduled expiration date of the Offer (as it may be extended in accordance with the terms hereof), all conditions to the Offer shall not have been satisfied or waived, the Offer may be extended from time to time without the consent of Green for such period of time as is reasonably expected to be necessary to satisfy the unsatisfied conditions. White and Tender Sub agree that, in the event all conditions to their obligation to purchase shares under the Offer at any scheduled expiration date thereof are satisfied other than the condition set forth in paragraph (c) of Exhibit D, Tender Sub shall, from time to time, extend the Offer until the earlier of (i) 180 days following the date hereof or (ii) such time as such condition is satisfied or waived in accordance herewith. In addition, the Offer Price and the number of shares of Green Common Stock or Green ESOP Preferred Stock sought may be increased and the Offer may be extended to the extent required by law in connection with such increase, in each case without the consent of Green. It is agreed that the conditions to the Offer are for the benefit of White and Tender Sub and may be asserted by White or Tender Sub regardless of the circumstances giving rise to any such condition (including any action or inaction by White or Tender Sub not inconsistent with the terms hereof) or may be waived by White or Tender Sub, in whole or in part at any time and from time to time, in its sole discretion. (b) White and Tender Sub shall file with the United States Securities and Exchange Commission (the "SEC") as soon as practicable on the date the Offer is commenced, a Tender Offer Statement on Schedule 14D-1 with respect to the Offer (together with all amendments and supplements thereto and in -2- 12 cluding the exhibits thereto, the "Schedule 14D-1") which shall include, as exhibits, the Offer to Purchase and a form of letter of transmittal and summary advertisement (the Schedule 14D-1 and such documents, collectively, together with any amendments and supplements thereto, the "Offer Documents"). Each of White and Tender Sub agrees to take all steps necessary to cause the Offer Documents to be filed with the SEC and to be disseminated to Green's shareholders, in each case as and to the extent required by applicable federal securities laws. Each of White and Tender Sub, on the one hand, and Green, on the other hand, agrees promptly to correct any information provided by it for use in the Offer Documents if and to the extent that it shall have become false and misleading in any material respect, and White and Tender Sub further agree to take all steps necessary to cause the Offer Documents as so corrected to be filed with the SEC and to be disseminated to Green's shareholders, in each case as and to the extent required by applicable federal securities laws. Green and its counsel shall be given the opportunity to review the Offer Documents before they are filed with the SEC. In addition, White and Tender Sub agree to provide Green and its counsel in writing with any comments White, Tender Sub or their counsel may receive from time to time from the SEC or its staff with respect to the Offer Documents promptly after the receipt of such comments. White and Tender Sub shall cooperate with Green in responding to any comments received from the SEC with respect to the Offer and amending the Offer in response to any such comments. (c) Subject to the terms and conditions of the Offer, White shall provide or cause to be provided to Tender Sub on a timely basis the funds necessary to accept for payment, and pay for, shares of Green Common Stock and Green ESOP Preferred Stock that Tender Sub becomes obligated to accept for payment, and pay for, pursuant to the Offer. (d) At any time following the obtaining of the Green Pennsylvania Shareholder Approval, if White and its subsidiaries do not already own 40% or more of the outstanding shares of Green Common Stock on a fully diluted basis as of the date hereof (excluding for purposes of this Section 1.1(d) shares that would be outstanding upon exercise of the Green Stock Option Agreement), White may, and at the written request of Green shall, commence an offer (the "Second Offer") to -3- 13 purchase up to that number of shares of Green Common Stock and Green ESOP Preferred Stock which, when added to the aggregate number of shares of Green Common Stock and Green ESOP Preferred Stock then beneficially owned by White (other than pursuant to the Green Stock Option Agreement) equals 40% of such outstanding shares of Green Common Stock, at a price not less than $92.50. Green agrees that it shall not make such written request at any time that the Offer is outstanding and has a scheduled expiration date within 10 business days of such time. White and Green agree that if the Second Offer is commenced they will file such documents and make such recommendations and take such other action as is required by this Agreement in respect of the Offer, and the Second Offer shall be on terms no less favorable to the shareholders of Green than the Offer. SECTION 1.2. Green Actions. (a) Green hereby approves of and consents to the Offer and represents that its Board of Directors, at a meeting duly called and held, has unanimously by the vote of all directors present (i) determined that this Agreement and the transactions contemplated hereby (including the Offer and the Merger), the Option Agreements and the transactions contemplated thereby, are in the best interests of Green, (ii) approved this Agreement and the transactions contemplated hereby (including the Offer and the Merger), and approved the Option Agreements and the transactions contemplated thereby, such determination and approval constituting approval thereof by the Board of Directors for all purposes of the Pennsylvania Law, and (iii) resolved to recommend that the shareholders of Green who desire to receive cash for their shares of Green Common Stock or Green ESOP Preferred Stock accept the Offer and tender their shares of Green Common Stock or Green ESOP Preferred Stock thereunder to Tender Sub and that all shareholders of Green approve and adopt this Agreement and the transactions contemplated hereby; provided, however, that prior to the purchase by Tender Sub of shares of Green Common Stock and Green ESOP Preferred Stock pursuant to the Offer, Green may modify, withdraw or change such recommendation, but only to the extent that Green complies with Section 4.2 hereof. Green hereby consents to the inclusion in the Offer Documents of the recommendations of Green's Board of Directors described in this Section. -4- 14 (b) Concurrently with the commencement of the Offer, Green shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (together with all amendments and supplements thereto and including the exhibits thereto, the "Schedule 14D-9") which shall contain the recommendation referred to in clauses (i), (ii) and (iii) of Section 1.2(a) hereof; provided, however, that Green may modify, withdraw or change such recommendation, but only to the extent that Green complies with Section 4.2 hereof. Green agrees to take all steps necessary to cause the Schedule 14D-9 to be filed with the SEC and to be disseminated to Green's shareholders, in each case as and to the extent required by applicable federal securities laws. Each of Green, on the one hand, and White and Tender Sub, on the other hand, agrees promptly to correct any information provided by it for use in the Schedule 14D-9 if and to the extent that it shall have become false and misleading in any material respect, and Green further agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated to Green's shareholders, in each case as and to the extent required by applicable federal securities laws. White and its counsel shall be given the opportunity to review the Schedule 14D-9 before it is filed with the SEC. In addition, Green agrees to provide White, Tender Sub and their counsel in writing with any comments Green or its counsel may receive from time to time from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt of such comments. Green shall cooperate with White and Tender Sub in responding to any comments received from the SEC with respect to the Schedule 14D-9 and amending the Schedule 14D-9 in response to any such comments. (c) In connection with the Offer, if requested by Tender Sub, Green shall promptly furnish or cause to be furnished to Tender Sub mailing labels, security position listings and any available listing or computer file containing the names and addresses of the record holders of the shares of Green Common Stock as of a recent date, and shall furnish Tender Sub with such information and assistance (including updated information) as Tender Sub or its agents may reasonably request in communicating the Offer to the shareholders of Green. -5- 15 (d) Green has received the written opinions of Lazard Freres & Co. and Morgan Stanley & Co. Incorporated (the "Green Advisors"), each dated as of the date of this Agreement, to the effect that, as of such date, the consideration to be received by Green shareholders (other than Tender Sub and its affiliates) pursuant to the Offer and Merger, taken together, is fair from a financial point of view to such holders (the "Green Fairness Opinions"). Green has delivered to Tender Sub a copy of the Green Fairness Opinions. SECTION 1.3. The Merger. (a) Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the Pennsylvania Business Corporation Law of 1988, as amended (the "Pennsylvania Law"), Green shall be merged with and into Tender Sub at the Effective Time (the "Merger"). Tender Sub shall be the surviving corporation (the "Surviving Corporation") of the Merger and shall succeed to and assume all rights and obligations of Green in accordance with the Pennsylvania Law. (b) If for any reason the parties hereto are unable to obtain either of the Tax Opinions referred to in Section 5.3(a) on or as of the Closing Date, then the Merger shall be effected such that Tender Sub shall be merged with and into Green, with Green being the "Surviving Corporation" for all purposes hereunder, and such transaction shall be the "Merger" for all purposes hereunder. In such event, the parties agree to execute an appropriate amendment to this Agreement in order to reflect the foregoing. SECTION 1.4. Closing. The closing of the Merger (the "Closing") shall take place at 10:00 a.m. on a date to be specified by the parties (the "Closing Date"), which (subject to satisfaction or waiver of the conditions set forth in Article VI) shall be no later than the second business day after satisfaction or waiver of the conditions set forth in Section 6.1, unless another time or date is agreed to by the parties hereto. The Closing shall be held at such location in the City of New York as is agreed to by the parties hereto. SECTION 1.5. Effective Time. Subject to the provisions of this Agreement, as soon as practicable on or after the Closing Date, the parties shall file articles of merger or other appropriate documents (such documents, collectively, the "Articles of Merger") executed in accordance with the relevant provisions of the Pennsylvania Law and shall make all other filings or recordings as may be required under the Pennsylvania Law. The Merger shall become effective at such time as the Articles of Merger are duly filed with the Pennsylvania Department of State, or at such subsequent date or time as White, Tender Sub and Green shall agree and shall be specified in the Articles of Merger (the time the Merger becomes effective being hereinafter referred to as the "Effective Time"). -6- 16 SECTION 1.6. Effects of the Merger. The Merger shall have the effects set forth in Chapter 19 of the Pennsylvania Law. SECTION 1.7. Articles of Incorporation and By-laws; Directors and Officers. (a) The articles of incorporation and by-laws of Tender Sub, as in effect immediately prior to the Effective Time, shall be the articles of incorporation and by-laws, respectively, of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law, provided that the articles of incorporation of the Surviving Corporation shall provide that the Surviving Corporation shall be named "Conrail Inc." (b) Subject to Section 1.8, the directors of Tender Sub and the officers of Green at the Effective Time shall, from and after the Effective Time, be the initial directors and officers, respectively, of the Surviving Corporation, until their successors shall have been duly elected or appointed or qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation's articles of incorporation and by-laws. SECTION 1.8. Boards, Committees and Officers. The Board of Directors, committees of the Board of Directors, composition of such committees (including chairmen thereof) and officers of White and/or the Surviving Corporation (as indicated on Exhibit A hereto) shall be as set forth on Exhibit A hereto until the earlier of the resignation or removal of any individual listed on or designated in accordance with Exhibit A or until their respective successors are duly elected and qualified, as the case may be, it being agreed that if any director shall be unable to serve as a director (including as a member or chairman of any committee) at the Effective Time the party which designated such individual as indicated in Exhibit A shall designate another individual to serve in such individual's place. If any officer listed on or appointed in accordance with Exhibit A ceases to be a full-time employee of Green, Tender Sub or White prior to the Effective Time, the parties shall agree upon another person to serve in such person's stead. The committees of the Board of Directors of White shall have such authority as may, subject to applicable law, be delegated to them by the Board of Directors of White. SECTION 1.9. Voting Trust. The parties agree that, simultaneously with the purchase by White, Tender Sub or their affiliates of shares of Green Common Stock and Green ESOP Preferred Stock pursuant to the Offer, the Green Stock Option Agreement or otherwise, such shares of Green Common Stock (including pursuant to the automatic conversion of Green ESOP Preferred Stock) shall be deposited in a voting trust (the "Voting Trust") in accordance with the terms and conditions of a voting -7- 17 trust agreement substantially in the form attached hereto as Exhibit E. The Voting Trust may not be modified or amended without the prior written approval of Green unless such modification or amendment is not inconsistent with this Agreement or the Option Agreements and is not adverse to Green or its shareholders (it being understood that any change to the terms of the Voting Trust relating to voting rights or rights and restrictions relating to the transfer of such shares of Green Common Stock shall in any event require the prior approval of Green). No power of White or Tender Sub provided for in the Voting Trust Agreement may be exercised in a manner which violates this Agreement. ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES SECTION 2.1. Conversion of Shares. (a) Each share of Common Stock, par value $1.00 per share, of Tender Sub issued and outstanding immediately prior to the Effective Time shall, at the Effective Time, by virtue of the Merger and without any action on the part of any person, become one duly authorized, validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation. (b) Each share of Green Common Stock issued and outstanding immediately prior to the Effective Time (other than shares of Green Common Stock to be canceled pursuant to Section 2.1(c) hereof) shall, at the Effective Time, by virtue of the Merger and without any action on the part of the holder thereof, be converted into the right to receive such number of duly authorized, validly issued, fully paid and nonassessable shares of White Common Stock or cash, without any interest thereon, as specified in Section 2.3 hereof. (c) All shares of Green Common Stock that are owned by Green as treasury stock and any shares of Green Common Stock owned by White, Green or any of their respective subsidiaries shall, at the Effective Time, be canceled and retired and shall cease to exist, and no shares of White Common Stock or other consideration shall be delivered or owing in exchange therefor. (d) On and after the Effective Time, holders of certificates which immediately prior to the Effective Time represented issued and outstanding shares of Green Common Stock, including those issuable upon conversion of the shares of Green ESOP Preferred Stock (which conversion shall occur automatically pursuant to the terms of the Green Articles prior to the Effective Time so that, immediately prior to the Effective Time, no shares of Green ESOP Preferred Stock shall be issued and outstanding), ("Certificates") shall cease to have any rights as shareholders of Green, except the right to receive the consideration set -8- 18 forth in this Article II (the "Per Share Merger Consideration") with respect to each share held by them. SECTION 2.2 Election Procedures. Unless, prior to the Effective Time, Tendered Shares constitute at least 40% of all outstanding shares of Green Common Stock and Green ESOP Preferred Stock (in which case each share of Green Common Stock (including shares of Green Common Stock into which the shares of Green ESOP Preferred Stock shall have been converted) shall be converted in the Merger into White Common Stock as provided in Section 2.3(b) hereof), each holder of shares of Green Common Stock (other than holders of shares of Green Common Stock to be canceled as set forth in Section 2.1(c)) and Green ESOP Preferred Stock shall have the right to submit a request specifying the number of shares that such holder desires to have converted into shares of White Common Stock in the Merger, and the number of shares that such holder desires to have converted into the right to receive $92.50, per share, without interest (the "Per Share Cash Consideration"), in the Merger in accordance with the following procedures: (a) Each holder of shares of Green Common Stock and Green ESOP Preferred Stock may specify in a request made in accordance with the provisions of this Section 2.2 (herein called an "Election") (i) the number of shares owned by such holder that such holder desires to have converted into shares of White Common Stock in the Merger (a "Stock Election") and (ii) the number of shares owned by such holder that such holder desires to have converted into the right to receive the Per Share Cash Consideration in the Merger (a "Cash Election"). (b) White shall prepare a form reasonably acceptable to Green (the "Form of Election") which shall be mailed to Green's shareholders in accordance with this Section 2.2 so as to permit Green's shareholders to exercise their right to make an Election prior to the Election Deadline. (c) White shall use reasonable efforts to make the Form of Election available to all shareholders of Green at least ten business days prior to the Election Deadline. (d) Any Election shall have been made properly only if the person authorized to receive Elections and to act as exchange agent under this Agreement (the "Exchange Agent") shall have received, by 5:00 p.m. local time in the city in which the principal office of such Exchange Agent is located, on the date of the Election Deadline, a Form of Election properly completed and signed and accompanied by Certificates to which such Form of Election relates (or by an appropriate guarantee of delivery of such Certificates, as set forth in such Form of Election, from a member of any registered national securities exchange or of the National Association of Securities Dealers, Inc. or a commercial bank or trust company in the United States provided such Certificates are in fact delivered to the Exchange Agent -9- 19 by the time required in such guarantee of delivery). Failure to deliver shares covered by such a guarantee of delivery within the time set forth on such guarantee shall be deemed to invalidate any otherwise properly made Election. As used herein, "Election Deadline" means the date announced by White, in a news release delivered to the Dow Jones News Service, as the last day on which Forms of Election will be accepted; provided that such date shall be a business day no earlier than twenty business days prior to the Effective Time and no later than the date on which the Effective Time occurs and shall be at least five business days following the date of such news release; provided further that White shall have the right to set a later date as the Election Deadline so long as such later date is no later than the date on which the Effective Time occurs. (e) Any Green shareholder may at any time prior to the Election Deadline change his or her Election by written notice received by the Exchange Agent prior to the Election Deadline accompanied by a properly completed and signed, revised Form of Election. (f) Any Green shareholder may, at any time prior to the Election Deadline, revoke his or her Election by written notice received by the Exchange Agent prior to the Election Deadline or by withdrawal prior to the Election Deadline of his or her Certificates, or of the guarantee of delivery of such Certificates, previously deposited with the Exchange Agent. All Elections shall be revoked automatically if the Exchange Agent is notified in writing by White or Green that this Agreement has been terminated. Any Green shareholder who shall have deposited Certificates with the Exchange Agent shall have the right to withdraw such Certificates by written notice received by the Exchange Agent and thereby revoke his Election as of the Election Deadline if the Merger shall not have been consummated prior thereto. (g) White shall have the right to make rules, not inconsistent with the terms of this Agreement, governing the validity of the Forms of Election, the manner and extent to which Elections are to be taken into account in making the determinations prescribed by Section 2.3, the issuance and delivery of certificates for shares of White Common Stock into which shares of Green Common Stock are converted in the Merger and the payment of cash for shares of Green Common Stock converted into the right to receive Per Share Cash Consideration in the Merger. SECTION 2.3. Issuance of White Common Stock and Payment of Cash; Proration. The manner in which each share of Green Common Stock (other than shares of Green Common Stock to be canceled as set forth in Section 2.1(c)) shall be converted into shares of White Common Stock or the right -10- 20 to receive cash on the Effective Date shall be as set forth in this Section 2.3. All references to "outstanding" shares of Green Common Stock in Section 2.2 and this Section 2.3 shall mean all shares of Green Common Stock issued and outstanding immediately prior to the Effective Time on a fully diluted basis, including all shares of Green Common Stock issuable upon conversion of the shares of Green ESOP Preferred Stock, held by the Green Employee Benefits Trust and issuable upon exercise of outstanding Green Employee Stock Options and all shares of Green Common Stock acquired by Tender Sub pursuant to the Offer or otherwise, except for shares of Green Common Stock acquired by White pursuant to the Green Stock Option Agreement (the "Tendered Shares"). (a) As is more fully set forth below, the aggregate number of shares of Green Common Stock to be converted into shares of White Common Stock pursuant to the Merger shall be equal as nearly as practicable to 60% of all outstanding shares of Green Common Stock; and the number of shares of Green Common Stock to be converted into the right to receive the cash in the Merger pursuant to this Agreement, together with the Tendered Shares, shall be equal as nearly as practicable to 40% of all outstanding shares of Green Common Stock. (b) If Stock Elections are received for a number of shares of Green Common Stock that is 60% or less of the outstanding shares of Green Common Stock, each share of Green Common Stock covered by a Stock Election shall be converted in the Merger into 1.85619 shares of White Common Stock (the "Conversion Ratio"). In the event that between the date of this Agreement and the Effective Time, the issued and outstanding shares of White Common Stock shall have been affected or changed into a different number of shares or a different class of shares as a result of a stock split, reverse stock split, stock dividend, spin-off, extraordinary dividend, recapitalization, reclassification or other similar transaction with a record date within such period, in each case which is prohibited pursuant to Section 4.1 without the consent of Green, the Conversion Ratio shall be appropriately adjusted. (c) If Stock Elections are received for more than 60% of the outstanding shares of Green Common Stock, each Non-Electing Share (as defined in Section 2.3(g)) and each share of Green Common Stock for which a Cash Election has been received shall be converted into the right to receive cash in the Merger, and the shares of Green Common Stock for which Stock Elections have been received shall be converted into shares of White Common Stock and the right to receive cash in the following manner: (1) The Exchange Agent shall distribute with respect to shares of Green Common Stock as to which a stock election has been made a number of shares of White Common Stock equal to the conversion ratio per share of Green Common Stock with respect to a fraction of such shares of Green Common Stock, the numerator of which fraction shall be 60% of the number of outstanding shares of Green Common Stock -11- 21 and the denominator of which shall be the aggregate number of shares of green common stock covered by stock elections. (2) Shares of Green Common Stock covered by a Stock Election and not fully converted into the right to receive shares of White Common Stock as set forth in clause (1) above shall be converted in the Merger into the right to receive the Per Share Cash Consideration for each share of Green Common Stock so converted. d. If the number of Tendered Shares and shares of Green Common Stock for which Cash Elections are received in the aggregate is 40% or less of the outstanding shares of Green Common Stock, each share of Green Common Stock covered by a Cash Election shall be converted in the Merger into the right to receive the Per Share Cash Consideration. e. If the number of Tendered Shares and shares of Green Common Stock for which Cash Elections are received in the aggregate is more than 40% of the outstanding shares of Green Common Stock, each Non-Electing Share and each share of Green Common Stock for which a Stock Election has been received shall be converted in the Merger into a number of shares of White Common Stock equal to the Conversion Ratio, and, the shares of Green Common Stock for which Cash Elections have been received shall be converted into the right to receive the Per Share Cash Consideration and shares of White Common Stock in the following manner: (1) The Exchange Agent shall distribute with respect to shares of Green Common Stock as to which a cash election has been made the per share cash consideration per share of Green Common Stock with respect to a fraction of such shares of Green Common Stock, the numerator of which fraction shall be 40% of the difference of the number of outstanding shares of Green Common Stock minus the number of tendered shares and the denominator of which shall be the aggregate number of shares of Green Common Stock covered by cash elections. (2) Shares of Green Common Stock covered by a cash election and not fully converted into the right to receive the per share cash consideration as set forth in clause (1) above shall be converted in the merger into the right to receive a number of shares of White Common Stock equal to the conversion -12- 22 Ratio for Each Share of Green Common Stock so Converted. (f) If Non-Electing Shares are not converted under either Section 2.3(c) or Section 2.3(e), the Exchange Agent shall distribute with respect to each such Non-Electing Share, the Per Share Cash Consideration with respect to a fraction of such Non-Electing Share, where such fraction is calculated in a manner that will result in the sum of (i) the number of shares of Green Common Stock converted into cash pursuant to this Section 2.3(f), (ii) the number of shares of Green Common Stock for which Cash Elections have been received and (iii) the number of Tendered Shares purchased pursuant to the Offer being as close as practicable to 40% of the outstanding shares of Green Common Stock. Each Non-Electing Share not converted into the right to receive cash as set forth in the preceding sentence shall be converted in the Merger into the right to receive a number of shares of White Common Stock equal to the Conversion Ratio for each Non-Electing Share so converted. (g) For the purposes of this Section 2.3, outstanding shares of Green Common Stock as to which an Election is not in effect at the Election Deadline (other than Tendered Shares) shall be called "Non-Electing Shares". If White and Green shall determine that any Election is not properly made with respect to any shares of Green Common Stock, such Election shall be deemed to be not in effect, and the shares of Green Common Stock covered by such Election shall, for purposes hereof, be deemed to be Non-Electing Shares. (h) No certificates or scrip representing fractional shares of White Common Stock shall be issued upon the surrender for exchange of Certificates, no dividend or distribution with respect to shares shall be payable on or with respect to any fractional share and such fractional share interests shall not entitle the owner thereof to vote or to any other rights of a shareholder of White. In lieu of any such fractional share of White Common Stock, White shall pay to each former shareholder of Green who otherwise would be entitled to receive a fractional share of White Common Stock an amount in cash determined by multiplying (i) the Average White Share Price on the date on which the Effective Time occurs by (ii) the fractional interest in a share of White Common Stock to which such holder would otherwise be entitled. For purposes hereof, the "Average White Share Price" shall mean the average closing sales price, rounded to four decimal points, of the White Common Stock as reported on the New York Stock Exchange Composite Tape, for the twenty (20) consecutive trading days ending on the trading day which is five (5) trading days prior to the Effective Time. SECTION 2.4. Issuance of White Common Stock. Immediately following the Effective Time, White shall deliver, in trust (the "Exchange Trust"), to the Exchange Agent, for the benefit of Green shareholders, certificates representing an aggregate number of shares of White Common Stock as nearly as practicable equal to the product of the Conversion Ratio and the number of shares of Green Common Stock to be converted into shares of White Common Stock as determined in Section 2.3. -13- 23 As soon as practicable after the Effective Time, each holder of shares of Green Common Stock converted into shares of White Common Stock pursuant to Section 2.1(a), upon surrender to the Exchange Agent (to the extent not previously surrendered with a Form of Election) of one or more Certificates for cancellation, shall be entitled to receive certificates representing the number of whole shares of White Common Stock into which such shares of Green Common Stock shall have been converted in the Merger. No dividends or distributions that have been declared and having a record date after the Effective Time shall be paid to persons entitled to receive certificates for shares of White Common Stock until such persons surrender their Certificates, at which time all such dividends shall be paid. In no event shall the persons entitled to receive such dividends be entitled to receive interest on such dividends. If any certificate for such White Common Stock is to be issued in a name other than that in which the Certificate surrendered in exchange therefor is registered, it shall be a condition of such exchange that the person requesting such exchange shall pay to the Exchange Agent any transfer or other taxes required by reason of issuance of certificates for such White Common Stock in a name other than the registered holder of the Certificate surrendered, or shall establish to the satisfaction of the Exchange Agent that such tax has been paid or is not applicable. SECTION 2.5. Payment of Cash Consideration. At the Closing, White shall deposit into the Exchange Trust, for the benefit of Green shareholders, an amount in cash equal to the Per Share Cash Consideration multiplied by the number of shares of Green Common Stock, if any, to be converted into the right to receive the Per Share Cash Consideration as determined in Section 2.3. As soon as practicable after the Effective Time, the Exchange Agent shall distribute to holders of shares of Green Common Stock converted into the right to receive the Per Share Cash Consideration pursuant to Section 2.1(a), upon surrender to the Exchange Agent (to the extent not previously surrendered with a Form of Election) of one or more Certificates for cancellation, a bank check for an amount equal to $92.50 times the number of shares of Green Common Stock so converted. In no event shall the holder of any such surrendered Certificates be entitled to receive interest on any cash to be received in the Merger. If such check is to be issued in the name of a person other than the person in whose name the Certificates surrendered for exchange therefor are registered, it shall be a condition of the exchange that the person requesting such exchange shall pay to the Exchange Agent any transfer or other taxes required by reason of issuance of such check to a person other than the registered holder of the Certificates surrendered, or shall establish to the satisfaction of the Exchange Agent that such tax has been paid or is not applicable. SECTION 2.6. Stock Transfer Books. At the Effective Time, the stock transfer books of Green shall be closed and there shall be no further registration of transfers of stock on the records of Green. If, after the Effective Time, certificates representing shares of Green capital stock are presented to the Surviving Corporation, they shall be canceled and exchanged for cash and/or certificates representing White Common Stock pursuant to this Article II. -14- 24 SECTION 2.7. No Dissenter's Rights. In accordance with Schwabacher v. United States, 334 U.S. 182 (1948), shareholders of Green shall not have any dissenter's or like rights; provided, however, that if the Surface Transportation Board (the "STB") or a court of competent jurisdiction determines that dissenter's rights are available to holders of shares of Green capital stock, then such holders shall be provided with dissenter's rights in accordance with the Pennsylvania Law. SECTION 2.8. No Further Ownership Rights. All shares of White Common Stock issued upon the surrender for exchange of Certificates in accordance with the terms of this Article II (including any cash paid pursuant to this Article II) shall be deemed to have been issued (and paid) in full satisfaction of all rights pertaining to the shares theretofore represented by such Certificates, subject, however, to the Surviving Corporation's obligation to pay any dividends or make any other distributions with a record date prior to the Effective Time which may have been declared or made by Green on such shares of Green Common Stock or Green ESOP Preferred Stock which remain unpaid at the Effective Time. SECTION 2.9. Termination of Exchange Trust. Any portion of the Exchange Trust which remains undistributed to the holders of Certificates for six months after the Effective Time shall be delivered to White, upon demand, and any holders of Certificates who have not theretofore complied with this Article II shall thereafter look only to White for payment of their claim for the Per Share Cash Consideration or shares of White Common Stock, any cash, dividends or distributions with respect to White Common Stock. SECTION 2.10. No Liability. None of White, Green or the Exchange Agent shall be liable to any person in respect of any shares of White Common Stock (or dividends or distributions with respect thereto) or cash delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. If any Certificate shall not have been surrendered prior to seven years after the Effective Time (or immediately prior to such earlier date on which any cash, shares of White Common Stock or any cash dividends or distributions payable to the holder of such Certificate would otherwise escheat to or become the property of any Governmental Entity), any such Per Share Cash Consideration or shares of White Common Stock or cash, dividends or distributions in respect of such Certificate shall, to the extent permitted by applicable law, become the property of the Surviving Corporation, free and clear of all claims or interest of any person previously entitled thereto. SECTION 2.11. Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by White or the Surviving Corporation, the posting by such person of a bond in such reasonable amount as White or the Surviving Corpo ration may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent shall issue in exchange for such lost, stolen or destroyed Certificate the -15- 25 cash or shares of White Common Stock and, if applicable, any cash, dividends and distributions on shares of White Common Stock deliverable in respect thereof pursuant to this Agreement. SECTION 2.12 Withholding Rights. White, Tender Sub or the Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of Green Common Stock such amounts as White, Tender Sub or the Exchange Agent is required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign tax law. To the extent that amounts are so withheld and paid over to the appropriate taxing authority by White, Tender Sub or the Exchange Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Green Common Stock in respect of which such deduction and withholding was made by White, Tender Sub or the Exchange Agent. ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.1 Representations and Warranties of Green. Except as disclosed in the Green Filed SEC Documents or as set forth on the Disclosure Schedule delivered by Green to White prior to the execution of this Agreement (the "Green Disclosure Schedule"), Green represents and warrants to White and Tender Sub as follows: (a) Organization, Standing and Corporate Power. Each of Green and its Significant Subsidiaries is a corporation or other legal entity duly organized, validly existing and in good standing or validly subsisting (with respect to jurisdictions which recognize such concept) under the laws of the jurisdiction in which it is organized and has the requisite corporate or other power, as the case may be, and authority to carry on its business as now being conducted, except where the failure to be so organized, existing and in good standing or validly subsisting or to have such power and authority would not have a material adverse effect with respect to Green. Each of Green and its Significant Subsidiaries is duly qualified or licensed to do business and is in good standing or validly subsisting (with respect to jurisdictions which recognize such concept) in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed or to be in good standing or validly subsisting individually or in the aggregate would not have a material adverse effect on Green. Green has delivered to White prior to the execution of this Agreement complete and correct copies of its certificate of incorporation and by-laws and the certificates of incorporation and by-laws (or compa- -16- 26 rable organizational documents) of its Significant Subsidiaries, in each case as amended to date. As used in this Agreement, a "Significant Subsidiary" means any subsidiary of Green or White, as the case may be, that would constitute a "significant subsidiary" of such party within the meaning of Rule 1-02 of Regulation S-X of the SEC. (b) Subsidiaries. Exhibit 21 to the Annual Report of Green on Form 10-K for the fiscal year ended December 31, 1995 includes all subsidiaries of Green which as of the date of this Agreement are Significant Subsidiaries. All the outstanding shares of capital stock of, or other equity interests in, each such Significant Subsidiary have been validly issued and are fully paid and nonassessable and are owned directly or indirectly by Green, free and clear of all pledges, claims, liens, charges, encumbrances and security interests of any kind or nature whatsoever (collectively, "Liens"). (c) Capital Structure. The authorized capital stock of Green consists of 250,000,000 shares of Green Common Stock and 25,000,000 shares of preferred stock, without par value, of Green ("Green Preferred Stock"), of which 10,000,000 shares have been designated as Green ESOP Preferred Stock. At the close of business on October 10, 1996, (i) 80,178,281 shares of Green Common Stock were issued and outstanding, (ii) 5,433,970 shares of Green Common Stock were held by Green (or its subsidiary) in its treasury, (iii) 5,951,461 shares of Green Common Stock were reserved for issuance pursuant to the Green 1987 Long-Term Incentive Plan and the Green 1991 Long-Term Incentive Plan, as amended (such plans, collectively, the "Green Stock Plans"), (iv) 9,571,086 shares of Green Common Stock were reserved for issuance upon conversion of the Green ESOP Preferred Stock, (v) 9,571,086 shares of Green ESOP Preferred Stock were issued and outstanding, which shares will be automatically converted into 9,571,086 shares of Green Common Stock prior to the Effective Time pursuant to the Green Articles, (vi) no shares of Green ESOP Preferred Stock were held by Green (or its subsidiary) in its treasury, and (vii) other than the Green ESOP Preferred Stock, no other shares of Green Preferred Stock have been designated or issued. Except as set forth above and except for 15,955,477 shares of Green Common Stock reserved for issuance upon the exercise of the Green Option, at the close of business on October 10, 1996, no shares of capital stock or other securities of Green were issued, reserved for issuance or outstanding. At the close of business on October 10, 1996, there were no outstanding stock appreciation rights or rights (other than employee stock options or other rights ("Green Employee Stock Options") to purchase or receive Green Common Stock granted under the Green Stock Plans) to receive shares of Green Common Stock on a deferred basis granted under the Green Stock Plans or otherwise. The Green Disclosure Schedule sets forth a complete and correct list, as of October 10, 1996, of the number of shares of Green Common Stock subject to Green Employee Stock Options and the exercise prices thereof. All outstanding shares of capital stock of Green are, and all shares -17- 27 which may be issued will be, when issued, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. As of the close of business on October 10, 1996, there were no bonds, debentures, notes or other indebtedness of Green having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which shareholders of Green may vote. Except as set forth above or as contemplated by the Option Agreements, as of the close of business on October 10, 1996, there were no outstanding securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind to which Green or any of its subsidiaries is a party or by which any of them is bound obligating Green or any of its subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other securities of Green or of any of its Significant Subsidiaries or obligating Green or any of its Significant Subsidiaries to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, arrangement or undertaking. Except for agreements entered into with respect to the Green Stock Plans, as of the close of business on October 10, 1996, there were no outstanding contractual obligations of Green or any of its Significant Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock of Green or any of its Significant Subsidiaries. As of the close of business on October 10, 1996, there were no outstanding contractual obligations of Green to vote or to dispose of any shares of the capital stock of any of its Significant Subsidiaries. Green has delivered to White a complete and correct copy of the Rights Agreement, dated as of July 19, 1989, as amended and supplemented to the date hereof (the "Green Rights Agreement"), relating to rights ("Green Rights") to purchase Green Common Stock. (d) Authority; Noncontravention. Green has all requisite corporate power and authority to enter into this Agreement and, subject to the Green Merger Shareholder Approval, in the case of the Merger, to consummate the transactions contemplated by this Agreement. Green has all requisite corporate power and authority to enter into the Option Agreements and to consummate the transactions contemplated thereby. The execution and delivery of this Agreement and the Option Agreements by Green and the consummation by Green of the transactions contemplated by this Agreement and the Option Agreements have been duly authorized by all necessary corporate action on the part of Green, subject, in the case of the Merger, to the Green Merger Shareholder Approval and subject to the Green Pennsylvania Shareholder Approval, in the case of the Second Offer. This Agreement and the Option Agreements have been duly executed and delivered by Green and constitute legal, valid and binding obligations of Green, enforceable against Green in accordance with their terms. The execution and delivery of this Agreement and the Option Agreements do not, and the consummation of the transactions contemplated by this Agreement and the Option Agreements and compliance with the provisions of this Agreement and the Option Agreements will not, conflict with, or result in any violation of, -18- 28 or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancelation or acceleration of any obligation or loss of a material benefit under, or result in the creation of any Lien upon any of the properties or assets of Green or any of its Significant Subsidiaries under, (i) the certificate of incorporation or by-laws of Green or the comparable organizational documents of any of its Significant Subsidiaries, (ii) subject to giving such notices and obtaining such consents as may be listed in Section 3.1(d) of the Green Disclosure Schedule, any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise or license applicable to Green or any of its Significant Subsidiaries or their respective properties or assets, or (iii) subject to the governmental filings and other matters referred to in the following sentence, any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Green or any of its Significant Subsidiaries or their respective properties or assets, other than, in the case of clauses (ii) and (iii), any such conflicts, violations, defaults, rights, losses or Liens that individually or in the aggregate would not (x) have a material adverse effect on Green, (y) impair the ability of Green to perform its obligations under this Agreement (including obligations respecting the Offer and the Merger) or the Option Agreements, or (z) prevent or materially delay the consummation of any of the transactions contemplated by this Agreement (including the Offer and the Merger) or the Option Agreements. No consent, approval, order or authorization of, or registration, declaration or filing with, any federal, state, local or foreign government or any court, administrative or regulatory agency or commission or other governmental authority or agency (a "Governmental Entity") is required by or with respect to Green or any of its Significant Subsidiaries in connection with the execution and delivery of this Agreement or the Option Agreements by Green or the consummation by Green of the transactions contemplated by this Agreement or the Option Agreements, except for: (1) compliance with any applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"); (2) compliance with any applicable requirements relating to approval of the Merger by the STB; (3) the filing with the SEC of (A) a proxy statement relating to the Green Pennsylvania Shareholders Meeting, as contemplated by Section 5.1(b) hereof (such proxy statement, as amended or supplemented from time to time, the "Green Pennsylvania Proxy Statement"), (B) a proxy statement relating to the Green Merger Shareholders Meeting (such proxy statement, together with the proxy statement relating to the White Shareholders Meeting, in each case as amended or supplemented from time to time, the "Joint Proxy Statement" which, together with the Green Pennsylvania Proxy Statement, are referred to herein as the "Proxy Statements"), (C) the Schedule 14D-9 and (D) such reports under Section 13(a), 13(d), 15(d) or 16(a) of the Exchange Act, as may be required in connection with this Agreement, the Option Agreements and the transactions contemplated by this Agreement and the Option Agreements; (4) the filing of the Articles of Merger as provided in Section 1.3, the Amended Green Articles as -19- 29 provided in Section 5.1(f) and appropriate documents with the relevant authorities of other states in which Green is qualified to do business and such filings with Governmental Entities to satisfy the applicable requirements of state securities or "blue sky" laws; (5) such filings with and approvals of the New York Stock Exchange, Inc. (the "NYSE") to permit the shares of Green Common Stock that are to be issued pursuant to the Green Stock Option Agreement to be listed on the NYSE; (6) such other filings and consents as may be required under any environmental, health or safety law or regulation pertaining to any notification, disclosure or required approval necessitated by the Offer, the Merger or the transactions contemplated by this Agreement and the Option Agreements, the failure of which to be made or obtained would not reasonably be expected to have a material adverse effect on Green; and (7) such consents, approvals, orders or authorizations the failure of which to be made or obtained would not reasonably be expected to have a material adverse effect on Green. (e) SEC Documents; Undisclosed Liabilities. Green has filed all required reports, schedules, forms, statements and other documents with the SEC since January 1, 1995 (including exhibits, schedules and documents incorporated by reference, the "Green SEC Documents"). As of their respective dates, the Green SEC Documents complied in all material respects with the requirements of the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to such Green SEC Documents, and none of the Green SEC Documents when filed contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Except to the extent that information contained in any Green SEC Document has been revised or superseded by a later Green Filed SEC Document, none of the Green SEC Documents contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of Green included in the Green SEC Documents comply as to form, as of their respective dates of filing with the SEC, in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles (except, in the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present in all material respects the consolidated financial position of Green and its consolidated subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal recurring year-end audit adjustments). Except (i) as reflected in such financial statements or in the notes thereto, (ii) as con- -20- 30 templated hereunder or under the Option Agreements, (iii) for liabilities incurred in connection with this Agreement or the transactions contemplated hereby and (iv) for liabilities and obligations incurred since July 1, 1996 in the ordinary course of business consistent with past practice, neither Green nor any of its subsidiaries has any material liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise), including liabilities arising under any laws relating to the protection of health, safety or the environment ("Environmental Laws"), required by generally accepted accounting principles to be reflected in a consolidated balance sheet of Green and its consolidated subsidiaries (including the notes thereto) and which, individually or in the aggregate, could reasonably be expected to have a material adverse effect on Green. (f) Information Supplied. None of the information supplied or to be supplied by Green for inclusion or incorporation by reference in the registration statement on Form S-4 to be filed with the SEC by White in connection with the issuance of White Common Stock in the Merger (the "Form S-4") will, at the time the Form S-4 is filed with the SEC or at the time it becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. None of the Schedule 14D-9 or the Green Pennsylvania Proxy Statement nor any of the information supplied or to be supplied by Green for inclusion or incorporation by reference in the Offer Documents or the Joint Proxy Statement will, at the date such documents are first published, sent or delivered to shareholders and, in the case of the Green Pennsylvania Proxy Statement, at the time of the Green Pennsylvania Shareholders Meeting, and, in the case of the Joint Proxy Statement, at the time of the Green Merger Shareholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Schedule 14D-9, the Green Pennsylvania Proxy Statement and the Joint Proxy Statement will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder. Notwithstanding the foregoing, no representation or warranty is made by Green with respect to statements made or incorporated by reference therein based on information supplied by White for inclusion or incorporation by reference in any of the foregoing documents. (g) Absence of Certain Changes or Events. Except (i) as disclosed in the Green SEC Documents filed and publicly available prior to the date of this Agreement (as amended to the date of this Agreement, the "Green Filed SEC Documents"), (ii) for the transactions provided for or permitted by this Agreement or in the Option Agreements, and (iii) for liabilities incurred in connection with or as a result of this Agreement or the Option Agreements, since the date of the most recent audited financial -21- 31 statements included in the Green Filed SEC Documents, Green has conducted its business only in the ordinary course, and there has not been (1) any material adverse change in Green, (2) any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to any of Green's capital stock, other than regular quarterly cash dividends of $.475 per share on the Green Common Stock and $.54125 per share on the Green ESOP Preferred Stock in accordance with the terms thereof, (3) any split, combination or reclassification of any of Green's capital stock or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of Green's capital stock, except for issuances of Green Common Stock upon conversion of Green ESOP Preferred Stock or upon the exercise of Green Employee Stock Options in accordance with the terms thereof, (4) except as would have been permitted under Section 4.1, (A) any granting by Green or any of its Significant Subsidiaries to any current or former employee, officer or director of Green of any increase in compensation, except for normal increases in the ordinary course of business consistent with past practice or as required under employment agreements in effect as of the date of the most recent financial statements included in the Green Filed SEC Documents, (B) any granting by Green or any of its Significant Subsidiaries to any current or former employee, officer or director of any increase in severance or termination pay, except as required under any employment, severance or termination agreements in effect as of the date of the most recent financial statements included in the Green Filed SEC Documents, or (C) any entry by Green or any of its subsidiaries into any employment, consulting, severance, termination or indemnification agreements, arrangements, or understandings with any such current or former employee, officer or director, or (5) except insofar as may have been disclosed in the Green Filed SEC Documents or required by a change in generally accepted accounting principles, any change in accounting methods, principles or practices by Green materially affecting its assets, liabilities or business. For purposes of this Agreement, "key employee" means any employee whose current salary and targeted bonus exceeds $100,000 per annum. (h) Compliance with Applicable Laws. Green and its subsidiaries hold all permits, licenses, variances, exemptions, orders and approvals of all Governmental Entities which are material to the operation of the businesses of Green and its subsidiaries, taken as a whole (the "Green Permits"). Green and its subsidiaries are in compliance with the terms of the Green Permits and all applicable statutes, laws, ordinances, rules and regulations, including Environmental Laws, except where the failure so to comply, individually or in the aggregate, could not reasonably be expected to have a material adverse effect on Green. The businesses of Green and its subsidiaries are not being conducted in violation of any law, ordinance or regulation of any Governmental Entity, including Environmental Laws, except for possible violations which could not reasonably be expected to have a material adverse effect on Green. As of the date of this Agreement, no action, demand, requirement or -22- 32 investigation by any Governmental Entity with respect to Green or any of its subsidiaries is pending or, to the knowledge of Green, threatened, other than, in each case, those the outcome of which, individually or in the aggregate, could not reasonably be expected to have a material adverse effect on Green. (i) Absence of Changes in Benefit Plans. Section 3.1(i) of the Green Disclosure Schedule sets forth a true and complete list of all material Green Benefit Plans as of the date hereof. Except for rail labor agreements negotiated in the ordinary course, since the date of the most recent financial statements included in the Green Filed SEC Documents, there has not been any adoption or amendment in any material respect by Green or any of its subsidiaries of any collective bargaining agreement or any bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, medical or other plan, arrangement or understanding providing benefits to any current or former employee, officer or director of Green or any of its wholly owned subsidiaries (collectively, the "Green Benefit Plans"). (j) ERISA Compliance. (i) With respect to the Green Benefit Plans, individually and in the aggregate, no event has occurred and, to the knowledge of Green, there exists no condition or set of circumstances, in connection with which Green or any of its subsidiaries could be subject to any liability that is reasonably likely to have a material adverse effect on Green (except liability for benefits claims and funding obligations payable in the ordinary course) under ERISA, the Code or any other applicable law. (ii) Each Green Benefit Plan has been administered in accordance with its terms except for any failures so to administer any Green Benefit Plan as would not individually or in the aggregate have a material adverse effect on Green. Green, its subsidiaries and all the Green Benefit Plans are in compliance with the applicable provisions of ERISA, the Code and all other applicable laws and the terms of all applicable collective bargaining agreements, except for any failures to be in such compliance as would not individually or in the aggregate have a material adverse effect on Green. (iii) Except for all equity-based and other awards, the vesting and exercisability of which will, by their -23- 33 terms, be accelerated as a result of the transactions contemplated hereunder, no employee of Green will be entitled to any additional benefits or any acceleration of the time of payment or vesting of any benefits under any Green Benefit Plan as a result of the transactions contemplated by this Agreement or the Option Agreements. (k) Voting Requirements. The affirmative vote of the holders of a majority of the votes cast by all outstanding shares of Green Common Stock and Green ESOP Preferred Stock, voting as a single class, (A) at the Green Pennsylvania Shareholders Meeting (the "Green Pennsylvania Shareholder Approval") to adopt and approve an amendment to the Green Articles, providing that Subchapter E (Control Transactions) of Chapter 25 of the Pennsylvania Law shall not be applicable to Green and (B) at the Green Merger Shareholders Meeting (the "Green Merger Shareholder Approval" and, together with the Green Pennsylvania Shareholder Approval, the "Green Shareholder Approvals") to adopt and approve this Agreement and the transactions contemplated hereby, are the only votes of the holders of any class or series of Green capital stock or indebtedness necessary to approve and adopt this Agreement, the Option Agreements and the transactions contemplated by this Agreement (including the Offer and the Merger) and the Option Agreements. (l) State Takeover Statutes. Subject to receipt of the Green Pennsylvania Shareholder Approval, in the case of Subchapter E (Control Transactions) of Chapter 25 of the Pennsylvania Law, and assuming that White, together with its affiliates, does not have voting power with respect to 20% or more of the votes that all Green shareholders would be entitled to cast in an election of directors prior to the date of filing of the Amended Green Articles, the Board of Directors of Green has taken all action necessary or advisable so as to render inoperative with respect to the transactions contemplated hereby (including the Offer and the Merger) or by the Option Agreements all applicable state anti-takeover statutes. (m) Brokers. No broker, investment banker, financial advisor or other person, other than the Green Advisors, the fees and expenses of which shall be paid by Green, is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement and the Option Agreements based upon arrangements made by or on behalf of Green. Green has furnished to White true and complete copies of all agreements under which any such fees or expenses are payable and all indemnification and other agreements related to the engagement of the persons to whom such fees are payable. (n) Green Rights Agreement and By-laws. (A) The Green Rights Agreement has been amended (the "Green Rights Plan Amendment") to (i) render the Green Rights Agreement inapplicable to -24- 34 the Offer, the Merger and the other transactions contemplated by this Agreement and the Option Agreements and (ii) ensure that (y) neither White nor any of its wholly owned subsidiaries is an Acquiring Person (as defined in the Green Rights Agreement) pursuant to the Green Rights Agreement and (z) a Shares Acquisition Date, Distribution Date or Trigger Event (in each case as defined in the Green Rights Agreement) does not occur by reason of the approval, execution or delivery of this Agreement, and the Green Stock Option Agreement, the consummation of the Offer, the Merger or the consummation of the other transactions contemplated by this Agreement and the Green Stock Option Agreement, and the Green Rights Agreement may not be further amended by Green without the prior consent of White in its sole discretion. (B) The Green by-laws have been amended to reduce the notice period required in connection with a meeting of shareholders to the minimum period permitted by the Pennsylvania Law with respect to the transactions contemplated hereby. (o) Tax Status. Neither Green nor any of its subsidiaries has taken any action or, as of the date hereof, is aware of any fact that would jeopardize the qualification of the Merger as a reorganization under Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code. SECTION 3.2. Representations and Warranties of White and Tender Sub. Except as disclosed in the White Filed SEC Documents or as set forth on the Disclosure Schedule delivered by White to Green prior to the execution of this Agreement (the "White Disclosure Schedule"), White and Tender Sub represent and warrant to Green as follows: (a) Organization, Standing and Corporate Power. Each of Tender Sub and White and its Significant Subsidiaries is a corporation or other legal entity duly organized, validly existing and in good standing or validly subsisting (with respect to jurisdictions which recognize such concept) under the laws of the jurisdiction in which it is organized and has the requisite corporate or other power, as the case may be, and authority to carry on its business as now being conducted, except where the failure to be so organized, existing and in good standing or validly subsisting or to have such power and authority would not have a material adverse effect with respect to White. Each of Tender Sub and White and its Significant Subsidiaries is duly qualified or licensed to do business and is in good standing or validly subsisting (with respect to jurisdictions which recognize such concept) in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed or to be in good standing or validly subsisting individually or in the aggregate would not have a -25- 35 material adverse effect on White. White has delivered to Green prior to the execution of this Agreement complete and correct copies of its certificate of incorporation and by-laws and the certificates of incorporation and by-laws (or comparable organizational documents) of its Significant Subsidiaries and of Tender Sub, in each case as amended to date. (b) Subsidiaries. Exhibit 21 to the Annual Report of White on Form 10-K for the fiscal year ended December 31, 1995 includes all the subsidiaries of White which as of the date of this Agreement are Significant Subsidiaries. All the outstanding shares of capital stock of, or other equity interests in, each such Significant Subsidiary have been validly issued and are fully paid and nonassessable and are owned directly or indirectly by White, free and clear of all Liens. (c) Capital Structure. The authorized capital stock of White consists of 300,000,000 shares of White Common Stock and 25,000,000 shares of preferred stock, without par value, of White ("White Preferred Stock"). At the close of business on October 11, 1996, (i) 216,536,551 shares of White Common Stock were issued and outstanding, (ii) 28,020,494 shares of White Common Stock were reserved for issuance pursuant to the White 1987 Long-Term Performance Plan, White 1990 Stock Award Plan, White Shareholders Dividend Reinvestment Plan, White Employees Stock Purchase and Dividend Reinvestment Plan, White Stock Plan for Directors and the White Stock Purchase and Loan Plan (such plans, collectively, the "White Stock Plans"), and (iii) no shares of White Preferred Stock have been designated (other than 250,000 shares designated as the $7.00 Cumulative Convertible Preferred Stock, Series A and 3,000,000 shares designated as the Junior Participating Preferred Stock, Series B) or issued. Except as set forth above and except for 43,090,773 shares of White Common Stock reserved for issuance upon the exercise of the White Option, at the close of business on October 11, 1996, no shares of capital stock or other voting securities of White were issued, reserved for issuance or outstanding. At the close of business on October 11, 1996, there were no outstanding stock appreciation rights or rights (other than employee stock options or other rights ("White Employee Stock Options") to purchase or receive White Common Stock granted under the White Stock Plans) to receive shares of White Common Stock on a deferred basis granted under the White Stock Plans or otherwise. The White Disclosure Schedule sets forth a complete and correct list, as of October 11, 1996, of the number of shares of White Common Stock subject to White Employee Stock Options and the exercise prices thereof. All outstanding shares of capital stock of White are, and all shares which may be issued will be, when issued, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. As of the close of business on October 11, 1996, there were no bonds, debentures, notes or other indebtedness of White having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which shareholders of White may vote. Except as set -26- 36 forth above or as contemplated by the Option Agreements, as of the close of business on October 11, 1996, there were no outstanding securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind to which White or any of its subsidiaries is a party or by which any of them is bound obligating White or any of its subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other securities of White or of any of its Significant Subsidiaries or obligating White or any of its Significant Subsidiaries to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, arrangement or undertaking. Except for agreements entered into with respect to the White Stock Plans, as of the close of business on October 11, 1996, there were no outstanding contractual obligations of White or any of its subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock of White or any of its Significant Subsidiaries. As of the close of business on October 11, 1996, there were no outstanding contractual obligations of White to vote or to dispose of any shares of the capital stock of any of its Significant Subsidiaries. White has delivered to Green a complete and correct copy of the Rights Agreement dated as of June 8, 1988, as amended and supplemented to the date hereof (the "White Rights Agreement"), relating to rights ("White Rights") to purchase shares of Junior Participating Preferred Stock, Series B, without par value. As of the date of this Agreement, the authorized capital stock of Tender Sub consists of 100 shares of common stock, par value $1.00 per share, all of which have been validly issued, are fully paid and nonassessable and are owned by White free and clear of any Lien. (d) Authority; Noncontravention. White and Tender Sub have all requisite corporate power and authority to enter into this Agreement and, subject to the White Shareholder Approval, in the case of the Merger, to consummate the transactions contemplated by this Agreement. White has all requisite corporate power and authority to enter into the Option Agreements and to consummate the transactions contemplated thereby. The execution and delivery of this Agreement by White and Tender Sub and the Option Agreements by White and the consummation of the transactions contemplated by this Agreement by White and Tender Sub, and the consummation of the transactions contemplated by the Option Agreements by White, have been duly authorized by all necessary corporate action on the part of White and Tender Sub, subject, in the case of the issuance of White Common Stock in connection with the Merger, to the White Shareholder Approval. This Agreement has been duly executed and delivered by White and Tender Sub and constitutes a legal, valid and binding obligation of White and Tender Sub, enforceable against White and Tender Sub in accordance with its terms. The Option Agreements have been duly executed and delivered by White and constitute legal, valid and binding obligations of White, enforceable against White in accordance with their terms. The execution and delivery of this Agreement and the Option Agreements do not, and the consummation of the transactions contemplated by this -27- 37 Agreement and the Option Agreements and compliance with the provisions of this Agreement and the Option Agreements will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancelation or acceleration of any obligation or loss of a material benefit under, or result in the creation of any Lien upon any of the properties or assets of Tender Sub or White or any of its Significant Subsidiaries under, (i) the certificate of incorporation or by-laws of Tender Sub or White or the comparable organizational documents of any of its Significant Subsidiaries, (ii) subject to giving such notices and obtaining such consents as may be listed in Section 3.2(d) of the White Disclosure Schedule, any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise or license applicable to Tender Sub or White or any of its Significant Subsidiaries or their respective properties or assets, or (iii) subject to the governmental filings and other matters referred to in the following sentence, any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Tender Sub or White or any of its Significant Subsidiaries or their respective properties or assets, other than, in the case of clauses (ii) and (iii), any such conflicts, violations, defaults, rights, losses or Liens that individually or in the aggregate would not (x) have a material adverse effect on White, (y) impair the ability of White or Tender Sub to perform their obligations under this Agreement or the Option Agreements (including obligations respecting the Offer and the Merger), or (z) prevent or materially delay the consummation of any of the transactions contemplated by this Agreement (including the Offer and the Merger) or the Option Agreements. No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required by or with respect to Tender Sub or White or any of its Significant Subsidiaries in connection with the execution and delivery of this Agreement or the Option Agreements or the consummation of the transactions contemplated by this Agreement or the Option Agreements, except for (1) compliance with any applicable requirements of the HSR Act; (2) compliance with any applicable requirements relating to approval of the Merger by the STB; (3) the filing with the SEC of (A) the Schedule 14D-1, (B) the Joint Proxy Statement relating to the White Shareholders Meeting, (C) the Form S-4 and (D) such reports under Section 13(a), 13(d), 15(d) or 16(a) of the Exchange Act as may be required in connection with this Agreement, the Option Agreements and the transactions contemplated by this Agreement and the Option Agreements; (4) the filing of the Articles of Merger as provided in Section 1.3, the Amended White Articles as provided in Section 5.1(e) and appropriate documents with the relevant authorities of other states in which White is qualified to do business and such filings with Governmental Entities to satisfy the applicable requirements of state securities or "blue sky" laws; (5) such filings with and approvals of the NYSE to permit the shares of White Common Stock that are to be issued in the Merger, under the Green Stock Plans and pursuant to the White Stock Option Agreement to be listed on the NYSE; (6) such other filings and consents as may be -28- 38 required under any environmental, health or safety law or regulation pertaining to any notification, disclosure or required approval necessitated by the Offer, the Merger or the transactions contemplated by this Agreement and the Option Agreements, the failure of which to be made or obtained would not reasonably be expected to have a material adverse effect on White; and (7) such consents, approvals, orders or authorizations the failure of which to be made or obtained would not reasonably be expected to have a material adverse effect on White. (e) SEC Documents; Undisclosed Liabilities. White has filed all required reports, schedules, forms, statements and other documents with the SEC since January 1, 1995 (including exhibits, schedules and documents incorporated by reference, the "White SEC Documents"). As of their respective dates, the White SEC Documents complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to such White SEC Documents, and none of the White SEC Documents when filed contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Except to the extent that information contained in any White SEC Document has been revised or superseded by a later White Filed SEC Document, none of the White SEC Documents contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of White included in the White SEC Documents comply as to form, as of their respective dates of filing with the SEC, in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles (except, in the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present in all material respects the consolidated financial position of White and its consolidated subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal recurring year-end audit adjustments). Except (i) as reflected in such financial statements or in the notes thereto, (ii) as contemplated hereunder or under the Option Agreements, (iii) for liabilities incurred in connection with this Agreement or the transactions contemplated hereby and (iv) for liabilities and obligations incurred since June 29, 1996 in the ordinary course of business consistent with past practice, neither White nor any of its subsidiaries has any material liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise), including liabilities arising under any Environmental Laws, required by generally accepted accounting principles to be reflected in a -29- 39 consolidated balance sheet of White and its consolidated subsidiaries (including the notes thereto) and which, individually or in the aggregate, could reasonably be expected to have a material adverse effect on White. (f) Information Supplied. None of the information supplied or to be supplied by White for inclusion or incorporation by reference in the Form S-4 will, at the time the Form S-4 is filed with the SEC or at the time it becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. None of the Offer Documents nor any of the information supplied or to be supplied by White for inclusion or incorporation by reference in Green Pennsylvania Proxy Statement or the Joint Proxy Statement will, at the date such documents are first published, sent or delivered to shareholders and, in the case of the Green Pennsylvania Proxy Statement, at the time of the Green Pennsylvania Shareholders Meeting, and, in the case of the Joint Proxy Statement, at the time of the White Shareholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Schedule 14D-1 and the Joint Proxy Statement will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder. Notwithstanding the foregoing, no representation or warranty is made by White with respect to statements made or incorporated by reference therein based on information supplied by Green for inclusion or incorporation by reference in any of the foregoing documents. (g) Absence of Certain Changes or Events. Except (i) as disclosed in the White SEC Documents filed and publicly available prior to the date of this Agreement (as amended to the date of this Agreement, the "White Filed SEC Documents"), (ii) for the transactions provided for or permitted by this Agreement or in the Option Agreements, and (iii) for liabilities incurred in connection with or as a result of this Agreement or the Option Agreements, since the date of the most recent audited financial statements included in the White Filed SEC Documents, White has conducted its business only in the ordinary course, and there has not been (1) any material adverse change in White, (2) any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to any of White's capital stock, other than regularly quarterly cash dividends of $.26 per share on the White Common Stock, (3) any split, combination or reclassification of any of White's capital stock or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of White's capital stock, except for issuances of White Common Stock upon the exercise of White Employee Stock Options in accordance with the terms thereof, (4) except as would have been permitted under Section 4.1 (A) any granting by White or any of its Significant Subsidiaries -30- 40 to any current or former employee, officer or director of White of any increase in compensation, except for normal increases in the ordinary course of business consistent with past practice or as required under employment agreements in effect as of the date of the most recent financial statements included in the White Filed SEC Documents, (B) any granting by White or any of its Significant Subsidiaries to any such officer or director of any increase in severance or termination pay, except as required under any employment, severance or termination agreements in effect as of the date of the most recent financial statements included in the White Filed SEC Documents, or (C) any entry by White or any of its subsidiaries into any employment, consulting, severance, termination or indemnification agreements, arrangements or understandings with any current or former employee, officer or director or (5) except insofar as may have been disclosed in the White Filed SEC Documents or required by a change in generally accepted accounting principles, any change in accounting methods, principles or practices by White materially affecting its assets, liabilities or business. (h) Compliance with Applicable Laws. White and its subsidiaries hold all permits, licenses, variances, exemptions, orders and approvals of all Governmental Entities which are material to the operation of the businesses of White and its subsidiaries, taken as a whole (the "White Permits"). White and its subsidiaries are in compliance with the terms of the White Permits and all applicable statutes, laws, ordinances, rules and regulations, including Environmental Laws, except where the failure so to comply, individually or in the aggregate, could not reasonably be expected to have a material adverse effect on White. The businesses of White and its subsidiaries are not being conducted in violation of any law, ordinance or regulation of any Governmental Entity, including Environmental Laws, except for possible violations which could not reasonably be expected to have a material adverse effect on White. As of the date of this Agreement, no action, demand, requirement or investigation by any Governmental Entity with respect to White or any of its subsidiaries is pending or, to the knowledge of White, threatened, other than, in each case, those the outcome of which, individually or in the aggregate could not reasonably be expected to have a material adverse effect on White. (i) Absence of Changes in Benefit Plans. Section 3.2(i) of the White Disclosure Schedule sets forth a true and complete list of all material White Benefit Plans as of the date hereof. Except for rail labor agreements negotiated in the ordinary course, since the date of the most recent financial statements included in the White Filed SEC Documents, there has not been any adoption or amendment in any material respect by White or any of its subsidiaries of any collective bargaining agreement or any bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, medical or other plan, arrangement or understanding providing benefits to any current or former employee, officer or -31- 41 director of White or any of its wholly owned subsidiaries (collectively, the "White Benefit Plans" and, together with the Green Benefit Plans, the "Employee Benefit Plans"). (j) ERISA Compliance. (i) With respect to the White Benefit Plans, individually and in the aggregate, no event has occurred and, to the knowledge of White, there exists no condition or set of circumstances, in connection with which White or any of its subsidiaries could be subject to any liability that is reasonably likely to have a material adverse effect on White (except liability for benefits claims and funding obligations payable in the ordinary course) under ERISA, the Code or any other applicable law. (ii) Each White Benefit Plan has been administered in accordance with its terms, except for any failures so to administer any White Benefit Plans as would not individually or in the aggregate have a material adverse effect on White. White, its subsidiaries and all the White Benefit Plans are in compliance with the applicable provisions of ERISA, the Code and all other applicable laws and the terms of all applicable collective bargaining agreements, except for any failures to be in such compliance as would not individually or in the aggregate have a material adverse effect on White. (iii) Except for all equity-based and other awards, the vesting and exercisability of which will, by their terms, be accelerated as a result of the transactions contemplated hereunder, no employee of White will be entitled to any additional benefits or any acceleration of the time of payment or vesting of any benefits under any White Benefit Plan as a result of the transactions contemplated by this Agreement or the Option Agreements. (k) Voting Requirements. The affirmative vote of the holders of a majority of all outstanding shares of White Common Stock, voting as a single class, at the White Shareholders Meeting (the "White Shareholder Approval") to adopt and approve the Amended White Articles (as contemplated by Section 5.1(e) hereof), which approval shall also constitute approval of the issuance of the White Common Stock in the Merger in accordance with the rules of the NYSE, is the only vote of the holders of any class or series of White capital stock or indebtedness necessary to approve and adopt this -32- 42 Agreement, the Option Agreements and the transactions contemplated by this Agreement and the Option Agreements. (l) State Takeover Statutes. The Board of Directors of White has taken all action necessary or advisable so as to render inoperative with respect to the transactions contemplated hereby or by the Option Agreements all applicable state anti-takeover statutes. (m) Brokers. No broker, investment banker, financial advisor or other person, other than Wasserstein Perella & Co., Inc. and Salomon Brothers Inc, the fees and expenses of which shall be paid by White, is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement and the Option Agreements based upon arrangements made by or on behalf of White. White has furnished to Green true and complete copies of all agreements under which any such fees or expenses are payable and all indemnification and other agreements related to the engagement of the persons to whom such fees are payable. (n) White Rights Agreement. The White Rights Agreement has been amended (the "White Rights Plan Amendment") to (i) render the White Rights Agreement inapplicable to the transactions contemplated by the White Stock Option Agreement and (ii) ensure that (y) neither Green nor any of its wholly owned subsidiaries is an Acquiring Person (as defined in the White Rights Agreement) pursuant to the White Rights Agreement by virtue of the approval, execution or delivery of the White Stock Option Agreement or the consummation of the transactions contemplated thereby and (z) a Shares Acquisition Date or Distribution Date (in each case as defined in the White Rights Agreement) does not occur by reason of the approval, execution or delivery of the White Stock Option Agreement, the consummation of the Merger, or the consummation of the other transactions contemplated by this Agreement and the White Stock Option Agreement and such amendment may not be further amended by White without the prior consent of Green in its sole discretion. (o) Tax Status. None of White, Tender Sub, or any subsidiary of White or Tender Sub has taken any action or, as of the date hereof, is aware of any fact that would jeopardize the qualification of the Merger as a reorganization under Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code. ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS -33- 43 SECTION 4.1. Conduct of Business. (a) Conduct of Business. Except as contemplated by this Agreement or as set forth in Section 4.1 of the Green Disclosure Schedule or the White Disclosure Schedule, as applicable, during the period from the date of this Agreement to the Effective Time, Green and White shall, and shall cause their respective subsidiaries to, carry on their respective businesses in the ordinary course consistent with past practice and in compliance in all material respects with all applicable laws and regulations and, to the extent consistent therewith, shall use all reasonable efforts to preserve intact their current business organizations, use reasonable efforts to keep available the services of their current officers and other key employees as a group and preserve their relationships with those persons having business dealings with them to the end that their goodwill and ongoing businesses shall be unimpaired at the Effective Time. Except as contemplated by this Agreement or as set forth in Section 4.1 of the Green Disclosure Schedule or the White Disclosure Schedule, as applicable, without limiting the generality of the foregoing, during the period from the date of this Agreement to the Effective Time, neither Green nor White shall, nor shall such parties permit any of their respective subsidiaries to (without the consent of the other party hereto, provided that such consent shall not be required in respect of subsections (iv) or (v) below if, based on the advice of outside counsel to either party, the discussion of such matters or related disclosures of information by the parties hereto would be inappropriate): (i) other than dividends and distributions (including liquidating distributions) by a direct or indirect wholly owned subsidiary of Green or White, as applicable, to its parent, or by a subsidiary that is partially owned by Green or White, as applicable, or any of their respective subsidiaries, provided that Green or White, as applicable, or any such subsidiary receives or is to receive its proportionate share thereof, and other than the regular quarterly dividends of $.475 per share with respect to Green Common Stock, regular quarterly dividends of $.54125 per share with respect to Green ESOP Preferred Stock in accordance with its terms and regular quarterly dividends of $.26 per share with respect to White Common Stock (plus such increases as may be properly authorized not to exceed 20% per annum), (x) declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock, (y) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, or (z) except in connection with the funding of employee benefit plans, purchase, redeem, retire or otherwise ac- -34- 44 quire any shares of its capital stock or the capital stock of any of its Significant Subsidiaries or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities; (ii) issue, deliver, sell, pledge or otherwise encumber any shares of its capital stock, any other voting securities or any securities convertible into, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities (other than (u) in accordance with the terms of the Green Rights Agreement or the White Rights Agreement, (w) the issuance of Green Common Stock or White Common Stock (A) upon the exercise of Green Employee Stock Options or White Employee Stock Options, respectively, and listed in the Green Disclosure Schedule and the White Disclosure Schedule outstanding on the date of this Agreement and in accordance with their present terms or (B) pursuant to a grant existing as of the date hereof or otherwise permitted under this Section under any Employee Benefit Plan, (x) the grant or award of (A) Green Employee Stock Options or White Employee Stock Options (or the issuance of Green Common Stock or White Common Stock upon exercise thereof) consistent with past practice in amounts not to exceed, in any 12-month period, 110% of the amount issued in the prior 12-month period, and (B) in the case of White, target bonus awards under White's long-term incentive plans consistent with past practice in amounts not to exceed, in any 12-month period, 110% of the amounts of the aggregate target bonus awards issued in the prior 12-month period, (y) the issuance of Green Common Stock upon conversion of Green ESOP Preferred Stock in accordance with its terms and (z) the issuance of Green Common Stock or White Common Stock pursuant to the Option Agreements); (iii) in the case of Green or White, adopt, propose or agree to any amendment to its articles of incorporation, by-laws or other comparable organizational documents, except for such amendments as are contemplated hereby, and, in the case of any subsidiary, adopt, propose or agree to any amendment to its certificate of incorporation, by-laws or other comparable organizational documents other than in the ordinary course in a manner -35- 45 which does not have a material adverse effect on Green or White, as applicable; (iv) sell, lease, license, mortgage or otherwise encumber or subject to any Lien or otherwise dispose of any of its properties or assets, other than (x) transactions in the ordinary course of business consistent with past practice and (y) transactions involving assets which do not individually or in the aggregate exceed $50,000,000 in any 12-month period; (v) make or agree to make any acquisition (other than of inventory) or capital expenditure; (vi) except in the ordinary course consistent with past practice, make any tax election that could reasonably be expected to have a material adverse effect on Green or White, as applicable, or settle or compromise any material income tax liability; (vii) pay, discharge, settle or satisfy any material claims, liabilities or obligations (whether absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge, settlement or satisfaction (A) in the ordinary course of business consistent with past practice or in accordance with their terms, (B) of liabilities reflected or reserved against in, or contemplated by, the most recent consolidated financial statements (or the notes thereto) of Green included in the Green Filed SEC Documents or of White included in the White Filed SEC Documents, as applicable, (C) incurred since the date of such financial statements in the ordinary course of business consistent with past practice or (D) which do not in the aggregate have a material adverse effect on Green or White, as applicable; (viii) except in the ordinary course of business or except as would not reasonably be expected to have a material adverse effect on Green or White, as applicable, modify, amend or terminate any material contract or agreement to which Green or White, as applicable, or any of their respective subsidiaries, is a party or waive, release or assign any material rights or claims thereunder; -36- 46 (ix) make any material change to its accounting methods, principles or practices, except as may be required by generally accepted accounting principles; (x) except as required by law or contemplated hereby and except for rail labor agreements negotiated in the ordinary course, enter into, adopt or amend in any material respect or terminate any Green Benefit Plan or White Benefit Plan, as applicable, or any other agreement, plan or policy involving Green or White, as applicable, or any of their respective subsidiaries, and one or more of their directors, officers or employees, or materially change any actuarial or other assumption used to calculate funding obligations with respect to any pension plan, or change the manner in which contributions to any pension plan are made or the basis on which such contributions are determined; (xi) except for normal increases in the ordinary course of business consistent with past practice that, in the aggregate, do not materially increase benefits or compensation expenses of Green or White, as applicable, or their respective subsidiaries, or as contemplated hereby or by the terms of any contract the existence of which does not constitute a violation of this Agreement, increase the compensation of any director, executive officer or other key employee or pay any benefit or amount not required by a plan or arrangement as in effect on the date of this Agreement to any such person; (xii) enter into any agreement containing any provision or covenant (x) limiting in any material respect the ability to compete with any person which would bind the other party hereto (or its operations) after the Effective Time or (y) other than in the ordinary course of business, granting concessions to any railroad (whether through divestiture of lines or the grant of trackage rights); or (xiii) authorize, or commit or agree to take, any of the foregoing actions. (b) Coordination of Dividends. White and Green shall coordinate with one another regarding the declaration and payment of dividends in respect of White Common Stock and Green Common Stock and the -37- 47 record dates and payment dates relating thereto, it being the intention of White and Green that any holder of Green Common Stock shall not receive two dividends, or fail to receive one dividend, for any single calendar quarter with respect to its shares of Green Common Stock and/or any shares of White Common Stock any such holder receives in exchange therefor pursuant to the Merger. (c) Other Actions. Except as required by law, Green and White shall not, and shall not permit any of their respective subsidiaries to, voluntarily take any action that would, or that could reasonably be expected to, result in (i) any of the representations and warranties of such party set forth in this Agreement or the Option Agreements that are qualified as to materiality becoming untrue, (ii) any of such representations and warranties that are not so qualified becoming untrue in any material respect or (iii) any of the conditions to the consummation of the transactions contemplated hereby not being satisfied. Without limiting the foregoing, Green and White shall not, and shall not permit any of their respective subsidiaries to, take any action that could reasonably be expected to impair, or delay in any material respect, obtaining the STB approval contemplated by Sections 6.2(d) and 6.3(c) or complying with or satisfying the terms thereof. (d) Advice of Changes. Green and White shall promptly advise the other party orally and in writing of (i) any representation or warranty made by it contained in this Agreement or the Option Agreements that is qualified as to materiality becoming untrue or inaccurate in any respect or any such representation or warranty that is not so qualified becoming untrue or inaccurate in any material respect, (ii) the failure by it to comply in any material respect with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement or the Option Agreements and (iii) any change or event having, or which, insofar as can reasonably be foreseen, could reasonably be expected to have, a material adverse effect on such party or on the truth of their respective representations and warranties or the ability of the conditions to the consummation of the transactions contemplated hereby to be satisfied; provided, however, that no such notification shall affect the representations, warranties, covenants or agreements of the parties (or remedies with respect thereto) or the conditions to the obligations of the parties under this Agreement or the Option Agreements. SECTION 4.2. No Solicitation. (a) Neither Green nor White shall, nor shall it permit any of its subsidiaries to, nor shall it authorize or permit any of its officers, directors or employees or any investment banker, financial advisor, attorney, accountant or other representative retained by it or any of its subsidiaries to, directly or indirectly through another person, (i) solicit, initiate or encourage (including by way of furnishing information), or take any other action designed to facilitate, directly or indirectly, any inquiries or the making of any proposal which constitutes any Takeover Proposal or (ii) participate in any discussions or negotiations regarding any Takeover Proposal; provided, however, that if, at any time prior to the earlier of -38- 48 (x) the consummation of the Offer and (y) the obtaining of the Green Merger Shareholder Approval, in the case of Green, or the White Shareholder Approval, in the case of White, or after 180 days from the date hereof and prior to the Approval Date, the Board of Directors of Green or White, as applicable, determines in good faith, based on the advice of outside counsel, that it is necessary to do so to avoid a breach of its fiduciary duties to Green under applicable law, Green or White, as applicable, may, in response to a Takeover Proposal which was not solicited by it or which did not otherwise result from a breach of this Section 4.2(a), and subject to such party's compliance with Section 4.2(c), (A) furnish information with respect to it and its subsidiaries to any person pursuant to a customary confidentiality agreement (as determined by the party receiving such Takeover Proposal after consultation with its outside counsel), the benefits of the terms of which, if more favorable to the other party to such confidentiality agreement than those in place with the other party hereto, shall be extended to the other party hereto, and (B) participate in negotiations regarding such Takeover Proposal. For purposes of this Agreement, "Takeover Proposal" in respect of Green or White, as applicable, means any proposal or offer from any person for the acquisition or purchase of more than 50% of the assets of such party and its subsidiaries or more than 50% of the equity securities of such party entitled to vote generally in the election of directors, any tender offer or exchange offer that if consummated would result in any person beneficially owning more than 50% of the equity securities of such party entitled to vote generally in the election of directors, or any merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving such party, other than the transactions contemplated by this Agreement or the Option Agreements. (b) Except as expressly permitted by this Section 4.2, neither the Board of Directors of Green or White, as applicable, nor any committee thereof shall (i) withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to the other party hereto, the approval or recommendation by such Board of Directors or such committee of the Offer or the adoption and approval of the matters to be considered at the Green Shareholders Meetings, in the case of Green, and the White Shareholders Meeting, in the case of White, (ii) approve or recommend, or propose publicly to approve or recommend, any Takeover Proposal, or (iii) cause Green or White, as applicable, to enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement (each, an "Acquisition Agreement") related to any Takeover Proposal. Notwithstanding the foregoing, in the event that, at any time following 180 days after the date hereof and prior to the earlier of (x) the time that Tendered Shares constituting at least 40% of the outstanding shares of Green Common Stock and Green ESOP Preferred Stock on a fully diluted basis have been deposited in the Voting Trust and (y) the obtaining of the Green Merger Shareholder Approval, in the case of Green, or the White Shareholder Approval, in the case of White (such earlier date referred to in (x) or (y), the "Approval Date"), there exists a Superior Proposal and such Board of Directors determines that (x) in the case of the Board of Directors of Green, there is not a substantial probability that White will be successful in acquiring 40% of the shares of Green Common Stock and Green ESOP Preferred Stock in the Offer and/or the Second -39- 49 Offer or otherwise (or, if the Green Pennsylvania Stockholder Approval has not then been obtained, there is not a substantial probability that the Green Merger Shareholder Approval will be obtained), in either case due to the existence of such Superior Proposal with respect to Green or (y) in the case of the Board of Directors of White, there is not a substantial probability that the White Shareholder Approval will be obtained due to the existence of such Superior Proposal with respect to White, the Board of Directors of Green or White, as applicable, may (subject to this and the following sentences) withdraw or modify its approval or recommendation of the Offer, the Merger or the adoption and approval of the matters to be considered at the Green Shareholders Meetings, in the case of Green, and the White Shareholders Meeting, in the case of White, the Board of Directors of Green or White, as applicable, may (subject to this and the following sentences) approve or recommend such Superior Proposal or terminate this Agreement (and concurrently with such termination, if it so chooses, cause Green or White, as applicable, to enter into any Acquisition Agreement with respect to such Superior Proposal), but only at a time that is after the fifth business day following the other party's receipt of written notice advising such other party that the Board of Directors of Green or White, as applicable, has received a Superior Proposal, specifying the material terms and conditions of such Superior Proposal and identifying the person making such Superior Proposal. For purposes of this Agreement, a "Superior Proposal" means in respect of Green or White, as applicable, any proposal made by a third party to acquire, directly or indirectly, for consideration consisting of cash and/or securities, more than 50% of the equity securities of Green or White, as the case may be, entitled to vote generally in the election of directors or all or substantially all the assets of Green or White, as the case may be, and otherwise on terms which the Board of Directors of such party determines in its good faith judgment (x) (based on the written opinion of a financial advisor of nationally recognized reputation (which opinion shall be provided to the other party hereto)) to be more favorable from a financial point of view to its shareholders than the Offer, the Merger and the transactions contemplated hereby and for which financing, to the extent required, is then committed and (y) also to be more favorable to such party than the Offer, the Merger and the transactions contemplated hereby after taking into account all constituencies (including shareholders) and pertinent factors permitted under the Pennsylvania Law or applicable Virginia law. (c) In addition to the obligations of the parties set forth in paragraphs (a) and (b) of this Section 4.2, any party that has received a Takeover Proposal shall immediately advise the other party hereto orally and in writing of any request for information or of any Takeover Proposal, the material terms and conditions of such request or Takeover Proposal and the identity of the person making such request or Takeover Proposal. Any party that has received a Takeover Proposal will keep the other party hereto reasonably informed of the status and details (including amendments or proposed amendments) of any such request or Takeover Proposal. (d) Nothing contained in this Section 4.2 shall prohibit either party hereto from taking and disclosing to its shareholders a -40- 50 position contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure to its shareholders if, in the good faith judgment of its Board of Directors, based on the advice of outside counsel, failure so to disclose would result in a violation of applicable law; provided, however, that neither party nor its Board of Directors nor any committee thereof shall, except as permitted by Section 4.2(b), withdraw or modify, or propose publicly to withdraw or modify, its position with respect to the Offer or the matters to be considered at the Green Shareholders Meetings or the White Shareholders Meeting, as applicable, or approve or recommend, or propose publicly to approve or recommend, a Takeover Proposal. ARTICLE V ADDITIONAL AGREEMENTS SECTION 5.1. Preparation of the Form S-4 and the Joint Proxy Statement; Shareholders Meetings. (a) As soon as practicable following the date of this Agreement, Green and White shall prepare and file with the SEC the Joint Proxy Statement and White shall prepare and file with the SEC the Form S-4, in which the Joint Proxy Statement will be included as a prospectus. Each of Green and White shall use all reasonable efforts to have the Form S-4 declared effective under the Securities Act as promptly as practicable after such filing. Green will use all reasonable efforts to cause the Joint Proxy Statement to be mailed to Green's shareholders, and White will use all reasonable efforts to cause the Joint Proxy Statement to be mailed to White's shareholders, in each case as promptly as practicable after the Form S-4 is declared effective under the Securities Act. White shall also take any action (other than qualifying to do business in any jurisdiction in which it is not now so qualified or to file a general consent to service of process) required to be taken under any applicable state securities laws in connection with the issuance of White Common Stock in the Merger and under the Green Stock Plans and White Stock Plans, and Green shall furnish all information concerning Green and the holders of Green Common Stock as may be reasonably requested in connection with any such action. (b) Green shall, as soon as practicable following the date of this Agreement, file with the SEC preliminary proxy materials and use reasonable efforts to clear such materials and thereafter duly call, give notice of, convene and hold on a date mutually agreed to by White and Green a meeting of its shareholders (the "Green Pennsylvania Shareholders Meeting") for the purpose of amending the Green Articles to explicitly provide that Subchapter E (Control Transactions) of Chapter 25 of the Pennsylvania Law shall not apply to Green; and shall, as soon as practicable following the date of this Agreement, duly call, give notice of, convene and hold a meeting of its shareholders (the "Green Merger Shareholders Meeting" and, together with the Green Pennsylvania Shareholders Meeting, the "Green Shareholders Meetings") for the purpose of obtaining -41- 51 the Green Merger Shareholder Approval. The parties agree that the solicitation of the proxies for the Green Pennsylvania Shareholder Approval shall be solicited solely by Green and its agents. Without limiting the generality of the foregoing, but subject to Section 4.2(b), Green agrees that its obligations pursuant to the first sentence of this Section 5.1(b) shall not be affected by the commencement, public proposal, public disclosure or communication to Green of any Takeover Proposal in respect of Green. Green shall, through its Board of Directors, recommend to its shareholders the approval and adoption of the Offer and the matters to be considered at the Green Shareholders Meetings, except to the extent that the Board of Directors of Green shall have withdrawn or modified its approval or recommendation of the Offer or the matters to be considered at the Green Shareholders Meetings or terminated this Agreement in accordance with Section 4.2(b). Subject to the terms of the Voting Trust Agreement, White shall cause all shares of Green Common Stock and Green ESOP Preferred Stock acquired by it or its wholly owned subsidiaries pursuant to the Offer (which shall be deposited in the Voting Trust) or otherwise to be voted in favor of approval and adoption of the matters to be considered at the Green Shareholders Meetings. In the event that the matters to be considered at the Green Pennsylvania Shareholders Meeting are not approved at a meeting called for such purpose, from time to time Green may, and shall at the request of White, duly call, give notice of, convene and hold one or more meeting(s) of shareholders thereafter for the purpose of obtaining the Green Pennsylvania Shareholder Approval, in which case all obligations hereunder respecting the Green Pennsylvania Shareholders Meeting shall apply in respect of such other meeting(s). (c) White shall, as soon as practicable following the date of this Agreement, duly call, give notice of, convene and hold a meeting of its shareholders (the "White Shareholders Meeting") for the purpose of obtaining the White Shareholder Approval. Without limiting the generality of the foregoing but subject to Section 4.2(b), White agrees that its obligations pursuant to the first sentence of this Section 5.1(c) shall not be affected by the commencement, public proposal, public disclosure or commencement of any Takeover Proposal in respect of White. White shall, through its Board of Directors, recommend to its shareholders the approval and adoption of the matters to be considered at the White Shareholders Meeting, except to the extent that the Board of Directors of White shall have withdrawn or modified its recommendation of the matters to be considered at the White Shareholders Meeting and terminated this Agreement in accordance with Section 4.2(b). (d) White and Green shall use reasonable efforts to hold the Green Merger Shareholders Meeting and the White Shareholders Meeting on the same date. (e) As promptly as practicable following the date of the White Shareholder Approval, White shall take such action as may be necessary or advisable so that, subject to the terms and conditions hereof, the articles of incorporation of White shall, at the Effective Time, be amended to be substantially in the form of Exhibit C hereto (such articles, as in effect on the date hereof, the "White Articles" and, as so -42- 52 amended, the "Amended White Articles"), including the filing of the Amended White Articles with the State Corporation Commission of Virginia. (f) As promptly as practicable following the date of the Green Pennsylvania Shareholder Approval, if obtained, Green shall take such action as may be necessary or advisable so that, subject to the terms and conditions hereof, the articles of incorporation of Green shall be amended to reflect the inapplicability of Subchapter E (Control Transactions) of Chapter 25 of the Pennsylvania Law as contemplated by Section 3.1(k) hereof (such articles, as in effect on the date hereof, the "Green Articles" and, as so amended, the "Amended Green Articles"), including the filing of the Amended Green Articles with the Pennsylvania Department of State, provided that the Amended Green Articles shall not be filed until immediately prior to the consummation of any purchase of Green Common Stock that would cause White to own 20% or more of the outstanding voting power of Green (including, as applicable, consummation of the Offer or the Second Offer, exercise of the Green Stock Option Agreement or otherwise) and White shall give Green prior notice thereof. SECTION 5.2. Letters of Accountants. (a) Green shall use reasonable efforts to cause to be delivered to White two letters from Green's independent accountants, one dated a date within two business days before the date on which the Form S-4 shall become effective and one dated a date within two business days before the date of the applicable shareholders meeting, each addressed to White, in form and substance reasonably satisfactory to White and customary in scope and substance for comfort letters delivered by independent public accountants in connection with registration statements similar to the Form S-4. (b) White shall use reasonable efforts to cause to be delivered to Green two letters from White's independent accountants, one dated a date within two business days before the date on which the Form S-4 shall become effective and one dated a date within two business days before the date of the applicable shareholders meeting, each addressed to Green, in form and substance reasonably satisfactory to Green and customary in scope and substance for comfort letters delivered by independent public accountants in connection with registration statements similar to the Form S-4. SECTION 5.3. Tax-Free Reorganization. (a) The parties intend the transaction to qualify as a reorganization under Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code. Each party and its affiliates shall use reasonable efforts to cause the Merger to so qualify and to obtain, as of the Closing Date, the opinions (the "Tax Opinions") of Wachtell, Lipton, Rosen & Katz, counsel to White, and Cravath, Swaine & Moore, counsel to Green, in each case to the effect that the Merger (whether or not the Offer and/or the Second Offer is integrated with the Merger for federal income tax purposes) shall qualify as a reorganization within the meaning of Section 368 of the Code; it being understood that in rendering such Tax Opinions, such tax counsel shall be entitled to rely upon representations of officers of Green and White substantially in the form of Exhibits F and G. Neither party nor its affiliate shall take any -43- 53 action that would cause the Merger not to qualify as a reorganization under those Sections except to the extent that such action is specifically contemplated by this Agreement. The parties shall take the position for all purposes that the Merger qualifies as a reorganization under those Sections unless and until the parties fail to obtain either of such Tax Opinions as of the Closing Date. (b) White and Green agree that while the Merger will constitute a "Change of Control" for purposes of the White Benefit Plans and the Green Benefit Plans, they will not treat the Merger as a change in the ownership or effective control of White or a change in the ownership of a substantial portion of the assets of White, each within the meaning of Section 280G of the Code, unless otherwise required to do so by a determination (as defined in Section 1313 of the Code). SECTION 5.4. Access to Information; Confidentiality. Subject to the Confidentiality Agreement, each of Green and White shall, and shall cause each of its respective subsidiaries to, afford to the other party and to the officers, employees, accountants, counsel, financial advisors and other representatives of such other party, reasonable access during normal business hours during the period prior to the Effective Time to all their respective properties, books, contracts, commitments, personnel and records and, during such period, each of Green and White shall, and shall cause each of its respective subsidiaries to, furnish promptly to the other party (a) a copy of each report, schedule, registration statement and other document filed by it during such period pursuant to the requirements of federal or state securities laws and (b) all other information concerning its business, properties and personnel as such other party may reasonably request; provided, however, that access to certain Green or White information may require the entry of a protective order by the STB, after which date full access shall be granted to such information consistent with this paragraph and subject to the terms of such order. Each of Green and White shall hold, and shall cause its respective officers, employees, accountants, counsel, financial advisors and other representatives and affiliates to hold, any nonpublic information in accordance with the terms of the Confidentiality Agreement, dated October 8, 1996, between White and Green, as amended and supplemented (the "Confidentiality Agreement"). SECTION 5.5. Reasonable Efforts. (a) Upon the terms and subject to the conditions set forth in this Agreement, each of the parties agrees to act in good faith toward and to use all reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Offer, the Merger and the other transactions contemplated by this Agreement and the Option Agreements, including (i) the obtaining of all necessary actions or nonactions, waivers, consents and approvals from Governmental Entities and the making of all necessary registrations and filings (including filings with Governmental Entities, such as those referred to in Sections 3.1(d) and 3.2(d)) and the taking of all reasonable steps as may be necessary to -44- 54 obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Entity, (ii) the obtaining of all necessary consents, approvals or waivers from third parties, (iii) the defending of any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the Option Agreements or the consummation of the transactions contemplated by this Agreement or the Option Agreements, including seeking to have any stay or temporary restraining order entered by any court or other Governmental Entity vacated or reversed, and (iv) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, this Agreement and the Option Agreements. Nothing set forth in this Section 5.5(a) shall limit or affect actions permitted to be taken pursuant to Section 4.2. Without limiting the generality of the foregoing, the parties (x) shall make and cause their respective subsidiaries to make all necessary filings, as soon as practicable, including those required with the STB and applicable transportation regulations and laws in order to facilitate prompt consummation of the Offer, the Merger and the transactions contemplated hereby and by the Option Agreements, (y) shall use reasonable efforts to provide such information and communications to Governmental Entities as such Governmental Entities may reasonably request and (z) shall provide to the other party copies of all applications in advance of filing or submission of such applications to Governmental Entities in connection with this Agreement or the Option Agreements and shall keep the other party apprised of the status of matters relating to completion of the transactions contemplated hereby; provided that either party may redact confidential portions as may be necessary or appropriate. (b) In furtherance of the foregoing, Green and White shall, and each shall cause each of its subsidiaries to, take all such actions as are necessary to (i) cooperate with one another to prepare and present to the STB as soon as practicable all filings and other presentations in connection with seeking any STB approval, exemption or other authorization necessary to consummate the transactions contemplated by this Agreement and the Option Agreements, (ii) prosecute such filings and other presentations with diligence, (iii) diligently oppose any objections to, appeals from or petitions to reconsider or reopen any such STB approval by persons not party to this Agreement and (iv) take all such further action as reasonably may be necessary to obtain a final order or orders of the STB approving such transactions consistent with this Agreement and the Option Agreements. (c) In connection with and without limiting the foregoing, Green and White shall (i) take all action necessary to ensure that no state anti-takeover statute or similar statute or regulation is or becomes operative with respect to the Offer, the Merger, this Agreement, the Option Agreements or any of the other transactions contemplated by this Agreement or the Option Agreements and (ii) if any state anti-takeover statute or similar statute or regulation is or becomes operative with respect to the Offer, the Merger, this Agreement, the Option Agreements or any other transaction contemplated by this Agreement or the Option Agreements, take all action necessary to ensure that the Offer, the Merger and the other transactions contemplated by this Agreement and the -45- 55 Option Agreements may be consummated as promptly as practicable on the terms contemplated by this Agreement and the Option Agreements and otherwise to minimize the effect of such statute or regulation on the Merger and the other transactions contemplated by this Agreement and the Option Agreements. SECTION 5.6. Stock Options. (a) As soon as practicable following the date of this Agreement, the Board of Directors of Green (or, if appropriate, any committee administering the Green Stock Plans) shall adopt such resolutions or take such other actions as may be required to effect the following: (i) adjust the terms of all outstanding Green Employee Stock Options granted under Green Stock Plans, whether vested or unvested, as necessary to provide that, at the Effective Time, each Green Employee Stock Option outstanding immediately prior to the Effective Time shall be deemed to constitute an option to acquire, on the same terms and conditions as were applicable under such Green Employee Stock Option, the same number of shares of White Common Stock as the holder of such Green Employee Stock Option would have been entitled to receive pursuant to the Merger had such holder exercised such Green Employee Stock Option in full immediately prior to the Effective Time, at a price per share of White Common Stock equal to (A) the aggregate exercise price for the shares of Green Common Stock otherwise purchasable pursuant to such Green Employee Stock Option divided by (B) the aggregate number of shares of White Common Stock deemed purchasable pursuant to such Green Employee Stock Option (each, as so adjusted, an "Adjusted Option"); provided, however, that in the case of any option to which Section 421 of the Code applies by reason of its qualification under any of Sections 422 through 424 of the Code ("qualified stock options"), the option price, the number of shares purchasable pursuant to such option and the terms and conditions of exercise of such option shall be determined in order to comply with Section 424 of the Code; and (ii) make such other changes to the Green Stock Plans as Green and White may agree are appropriate to give effect to the Merger. (b) As soon as practicable after the Effective Time, White shall deliver to the holders of Green Employee Stock Options appropriate notices setting forth such holders' rights pursuant to the -46- 56 respective Green Stock Plans and the agreements evidencing the grants of such Green Employee Stock Options and that such Green Employee Stock Options and agreements shall be assumed by White and shall continue in effect on the same terms and conditions (subject to the adjustments required by this Section 5.6 after giving effect to the Merger). White shall comply with the terms of the Green Stock Plans and ensure, to the extent required by, and subject to the provisions of, such Green Stock Plans, that the Green Employee Stock Options which qualified as qualified stock options prior to the Effective Time continue to qualify as qualified stock options after the Effective Time. (c) White shall take such actions as are reasonably necessary for the assumption of the Green Stock Plans pursuant to Section 5.6(a), including the reservation, issuance and listing of White Common Stock as is necessary to effectuate the transactions contemplated by Section 5.6(a). As soon as reasonably practicable after the Effective Time, White shall prepare and file with the SEC one or more registration statement(s) on Form S-8 or other appropriate form with respect to shares of White Common Stock subject to Green Employee Stock Options issued under such Green Stock Plans and shall use all reasonable efforts to maintain the effectiveness of such registration statement or registration statements covering such Green Employee Stock Options (and maintain the current status of the prospectus or prospectuses contained therein) for so long as such Green Employee Stock Options remain outstanding. With respect to those individuals, if any, who subsequent to the Effective Time will be subject to the reporting requirements under Section 16(a) of the Exchange Act, where applicable, White shall use all reasonable efforts to administer the Green Stock Plans assumed pursuant to Section 5.6(b) in a manner that complies with Rule 16b-3 promulgated under the Exchange Act to the extent the applicable Green Stock Plan complied with such rule prior to the Merger. (d) A holder of an Adjusted Option may exercise such Adjusted Option in whole or in part in accordance with its terms by delivering a properly executed notice of exercise to White, together with the consideration therefor and the federal withholding tax information, if any, required in accordance with the related Green Stock Plan. (e) Except as otherwise contemplated by this Section 5.6 and except to the extent required under the respective terms of the Green Employee Stock Options, all restrictions or limitations on transfer and vesting with respect to Green Employee Stock Options awarded under the Green Stock Plans or any other plan, program or arrangement of Green or any of its subsidiaries, to the extent that such restrictions or limitations shall not have already lapsed, shall remain in full force and effect with respect to such options after giving effect to the Merger and the assumption by White as set forth above. SECTION 5.7. Certain Employee Matters. Following the Effective Time, White shall cause the Surviving Corporation to honor all obligations under employment agreements and employee benefit plans, programs, policies and arrangements of Green or White the existence of which does not constitute a violation of this Agreement in accordance with -47- 57 the terms thereof and agrees to provide employees of Green with benefits no less favorable in the aggregate than those provided to similarly situated White employees. Notwithstanding the foregoing, for a period of two years following the Effective Time, White shall, or shall cause the Surviving Corporation to, establish and maintain a plan to provide severance and termination benefits to all non-union employees of Green and White terminated as a result of, or in connection with, the Merger, which benefits shall be determined consistent with industry standards and taking into account those benefits provided in recent similar transactions in the industry. SECTION 5.8. Indemnification, Exculpation and Insurance. (a) White agrees that all rights to indemnification and exculpation from liabilities for acts or omissions occurring at or prior to the Effective Time now existing in favor of the current or former directors or officers of Green and its subsidiaries as provided in their respective certificates of incorporation or by-laws (or comparable organizational documents) and any indemnification agreements of Green, the existence of which does not constitute a breach of this Agreement, shall be assumed by the Surviving Corporation in the Merger, without further action, as of the Effective Time and shall survive the Merger and shall continue in full force and effect in accordance with their terms. In addition, from and after the Effective Time, directors and officers of Green who become directors or officers of White shall be entitled to the same indemnity rights and protections as are afforded to other directors and officers of White. (b) In the event that White or any of its successors or assigns (i) consolidates with or merges into any other person and is not the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any person, then, and in each such case, proper provision will be made so that the successors and assigns of White assume the obligations set forth in this Section. (c) For three years after the Effective Time, White shall provide, if available on commercially reasonable terms, officers' and directors' liability insurance in respect of acts or omissions occurring prior to the Effective Time, including but not limited to the transactions contemplated by this Agreement, covering each person currently covered by Green's officers' and directors' liability insurance policy, or who becomes covered by such policy prior to the Effective Time, on terms with respect to coverage and amount no less favorable than those of such policy in effect on the date hereof, provided that in satisfying its obligation under this Section White shall not be obligated to pay premiums in excess of 150% of the amount per annum Green paid in its last full fiscal year, and provided further that White shall nevertheless be obligated to provide such coverage as may be obtained for such amount. (d) The provisions of this Section 5.8 (i) are intended to be for the benefit of, and will be enforceable by, each indemnified party, his or her heirs and his or her representatives and (ii) are in -48- 58 addition to, and not in substitution for, any other rights to indemnification or contribution that any such person may have by contract or otherwise. SECTION 5.9. Fees and Expenses. (a) Except as set forth in this Section 5.9, all fees and expenses incurred in connection with the Offer, the Merger, this Agreement, the Option Agreements and the transactions contemplated by this Agreement and the Option Agreements shall be paid by the party incurring such fees or expenses, whether or not the Merger is consummated, except that each of White and Green shall bear and pay one-half of the costs and expenses incurred in connection with (i) the filing, printing and mailing of the Offer Documents, the Schedule 14D-9, the Green Pennsylvania Proxy Statement, the Form S-4 and the Joint Proxy Statement (including SEC filing fees) and (ii) the application to be filed with the STB (including filing fees). (b) In the event that (i) a Takeover Proposal in respect of Green shall have been made known to Green or any of its subsidiaries or has been made directly to its shareholders generally or any person shall have publicly announced an intention (whether or not conditional) to make such a Takeover Proposal and thereafter this Agreement is terminated by either White or Green pursuant to Section 7.1(b)(i) or (ii), or (ii) this Agreement is terminated (x) by Green pursuant to Section 7.1(h) or (y) by White pursuant to Section 7.1(e), then Green shall promptly, but in no event later than two days after the date of such termination, pay White a fee equal to $300 million by wire transfer of same day funds (the "Termination Fee"); provided, however, that no Termination Fee shall be payable to White pursuant to clause (i) of this paragraph (b) unless and until within 24 months of such termination Green or any of its subsidiaries enters into any Acquisition Agreement or consummates any Takeover Proposal, and such Termination Fee shall be payable upon entering into such Acquisition Agreement or consummating such Takeover Proposal. Green acknowledges that the agreements contained in this Section 5.9(b) are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, White would not enter into this Agreement; accordingly, if Green fails promptly to pay the amount due pursuant to this Section 5.9(b), and, in order to obtain such payment, White commences a suit which results in a judgment against Green for the fee set forth in this Section 5.9(b), Green shall pay to White its costs and expenses (including attorneys' fees and expenses) in connection with such suit, together with interest on the amount of the fee at the prime rate of Citibank N.A. in effect on the date such payment was required to be made. (c) In the event that (i) a Takeover Proposal in respect of White shall have been made known to White or any of its subsidiaries or has been made directly to its shareholders generally or any person shall have publicly announced an intention (whether or not conditional) to make such a Takeover Proposal and thereafter this Agreement is terminated by either White or Green pursuant to Section 7.1(b)(i) or (iii), or (ii) this Agreement is terminated (x) by White pursuant to Section 7.1(d) or (y) by Green pursuant to -49- 59 Section 7.1(i), then White shall promptly, but in no event later than two days after the date of such termination, pay Green the Termination Fee by wire transfer of same day funds; provided, however, that no Termination Fee shall be payable to Green pursuant to clause (i) of this paragraph (c) unless and until within 24 months of such termination White or any of its subsidiaries enters into any Acquisition Agreement or consummates any Takeover Proposal, and such Termination Fee shall be payable upon entering into such Acquisition Agreement or consummating such Takeover Proposal. White acknowledges that the agreements contained in this Section 5.9(c) are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, Green would not enter into this Agreement; accordingly, if White fails promptly to pay the amount due pursuant to this Section 5.9(c), and, in order to obtain such payment, Green commences a suit which results in a judgment against White for the fee set forth in this Section 5.9(c), White shall pay to Green its costs and expenses (including attorneys' fees and expenses) in connection with such suit, together with interest on the amount of the fee at the prime rate of Citibank N.A. in effect on the date such payment was required to be made. (d) Green and White agree that either White or Tender Sub shall pay any state or local sales, use, transfer tax or similar tax (including any real property transfer or gains tax) imposed on the shareholders of Green and which is attributable to the transfer (or deemed transfer) of the assets held by Green or any subsidiary of Green, including any penalties and interest relating to such tax, and in any case arising as a result of the consummation of the Offer, the Second Offer (if any) and/or the Merger (collectively, "Transfer Taxes"). Green and White agree to cooperate with each other in the filing of any returns with respect to Transfer Taxes, and in the filing of any returns relating to similar taxes imposed on Green, including supplying in a timely manner a complete list of all real property interests held by Green and its subsidiaries and any information with respect to such property that is reasonably necessary to complete such returns. The portion of the consideration allocable to the assets giving rise to such Transfer Tax shall be agreed to by Green and White. SECTION 5.10. Public Announcements. White and Green shall consult with each other before issuing, and provide each other the opportunity to review, comment upon and concur with, any press release or other public statements with respect to the transactions contemplated by this Agreement, including the Offer and the Merger, and the Option Agreements, and shall not issue any such press release or make any such public statement prior to such consultation, except as either party may determine is required by applicable law, court process or by obligations pursuant to any listing agreement with any national securities exchange. The parties agree that the initial press release to be issued with respect to the transactions contemplated by this Agreement and the Option Agreements shall be in the form heretofore agreed to by the parties. SECTION 5.11. Affiliates. Prior to the Closing Date, Green shall deliver to White a letter identifying all persons who are, at -50- 60 the time this Agreement is submitted for adoption by it to the shareholders of Green, "affiliates" of Green for purposes of Rule 145 under the Securities Act. Green shall use all reasonable efforts to cause each such person to deliver to White on or prior to the Closing Date a written agreement substantially in the form attached as Exhibit B hereto. SECTION 5.12. NYSE Listing. White shall use reasonable efforts to cause the shares of White Common Stock to be issued in the Merger, under the Green Stock Plans and pursuant to the White Stock Option Agreement to be approved for listing on the NYSE, subject to official notice of issuance, prior to the Closing Date. Green shall use reasonable efforts to cause the shares of Green Common Stock to be issued pursuant to the Green Stock Option Agreement to be approved for listing on the NYSE, subject to official notice of issuance, prior to the Closing Date. SECTION 5.13. Shareholder Litigation. Each of Green and White shall give the other the reasonable opportunity to participate in the defense of any shareholder litigation against Green or White, as applicable, and its directors relating to the transactions contemplated by this Agreement and the Option Agreements. SECTION 5.14. Green Rights Agreement. The Board of Directors of Green shall take all further action (in addition to that referred to in Section 3.1(n)) reasonably requested in writing by White (including redeeming the Green Rights immediately prior to the Effective Time or amending the Green Rights Agreement) in order to render the Green Rights inapplicable to the Offer, the Merger and the other transactions contemplated by this Agreement and the Green Stock Option Agreement. Except as provided above with respect to the Offer, the Merger and the other transactions contemplated by this Agreement and the Green Stock Option Agreement, the Board of Directors of Green shall not (a) amend the Green Rights Agreement or (b) take any action with respect to, or make any determination under, the Green Rights Agreement, including a redemption of the Green Rights or any action to facilitate a Takeover Proposal in respect of Green. SECTION 5.15. White Rights Agreement. The Board of Directors of White shall take all further action (in addition to that referred to in Section 3.2(n)) reasonably requested in writing by Green in order to render the White Rights inapplicable to the White Stock Option Agreement. The Board of Directors of White shall not (a) amend the White Rights Agreement or (b) take any action with respect to, or make any determination under, the White Rights Agreement, to facilitate a Takeover Proposal in respect of White. SECTION 5.16. (a) Corporate Headquarters. White and Green agree that, following the consummation of the Merger, the corporate headquarters of White shall be located in Philadelphia, Pennsylvania, and each agrees to take all necessary action to effect the relocation of White's corporate headquarters. -51- 61 (b) Governance. The Board of Directors of each party shall take action to cause the governance of White at the Effective Time to be as provided in Exhibit A. SECTION 5.17. Registration Rights. Green or White, as applicable (such party, the "issuing party"), shall, if requested by the other party hereto (such party, the "requesting party") at any time and from time to time within three years after the termination of this Agreement, as expeditiously as possible prepare and file up to three registration statements under the Securities Act if such registration is necessary in order to permit the sale or other disposition of any or all securities that have been deposited in the Voting Trust in the case of White, or acquired by exercise of the White Stock Option Agreement, in the case of Green, in accordance with the intended method of sale or other disposition stated by the requesting party, including a "shelf" registration statement under Rule 415 under the Securities Act or any successor provision; and the issuing party shall use its best efforts to qualify such securities under any applicable state securities laws. The requesting party agrees to use reasonable efforts to cause, and to cause any underwriters of any sale or other disposition to cause, any sale or other disposition pursuant to such registration statement to be effected on a widely distributed basis. The issuing party shall use reasonable efforts to cause each such registration statement to become effective, to obtain all consents or waivers of other parties which are required therefor, and to keep such registration statement effective for such period not in excess of 180 calendar days from the day such registration statement first becomes effective as may be reasonably necessary to effect such sale or other disposition. The obligations of the issuing party hereunder to file a registration statement and to maintain its effectiveness may be suspended for one or more periods of time not exceeding 60 calendar days in the aggregate with respect to any registration statement if the Board of Directors of the issuing party shall have determined that the filing of such registration statement or the maintenance of its effectiveness would require disclosure of nonpublic information that would materially and adversely affect the issuing party. Any registration statement prepared and filed under this Section, and any sale covered thereby, shall be at the issuing party's expense except for underwriting discounts or commission, brokers' fees and the fees and disbursements of the requesting party's counsel related thereto. The requesting party shall provide all information reasonably requested by the issuing party for inclusion in any registration statement to be filed hereunder. If, during the time periods referred to in the first sentence of this Section, the issuing party effects a registration under the Securities Act of the issuing party's securities for its own account or for any other of its shareholders (other than on Form S-4 or Form S-8, or any successor form), it shall allow the other party hereto (in such case, the "requesting party") the right to participate in such registration, and such participation shall not affect the obligation of the issuing party to effect demand registration statements for the requesting party under this Section; provided that, if the managing underwriters of such offering advise the issuing party in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in such offering, the issuing party shall include the securities requested to be -52- 62 included therein by White pro rata with the securities intended to be included therein by the issuing party. In connection with any registration pursuant to this Section, Green and White shall provide each other and any underwriter of the offering with customary representations, warranties, covenants, indemnification, and contribution in connection with such registration. SECTION 5.18. Financing. White shall use its best efforts to obtain as soon as practicable sufficient financing, on terms reasonably acceptable to White, to enable consummation of the Offer and the Merger. ARTICLE VI CONDITIONS PRECEDENT SECTION 6.1. Conditions to Each Party's Obligation To Effect the Merger. The respective obligation of each party to effect the Merger is subject to the satisfaction or waiver on or prior to the Closing Date of the following conditions: (a) Shareholder Approvals. Each of the Green Merger Shareholder Approval and the White Shareholder Approval shall have been obtained. (b) HSR Act. Any applicable waiting period (and any extension thereof) under the HSR Act shall have been terminated or shall have expired. (c) No Injunctions or Restraints. No judgment, order, decree, statute, law, ordinance, rule, regulation, temporary restraining order, preliminary or permanent injunction or other order enacted, entered, promulgated, enforced or issued by any court of competent jurisdiction or other Governmental Entity or other legal restraint or prohibition (collectively, "Restraints") preventing the consummation of the Merger shall be in effect; provided, however, that the party seeking to assert this condition shall have used reasonable efforts to prevent the entry of any such Restraints and to appeal as promptly as possible any such Restraints that may be entered. In addition, there shall not be any Restraint enacted, entered, enforced or promulgated that is reasonably likely to result, directly or indirectly, in a material adverse effect with respect to Green and White on a combined basis; provided, however, that the party seeking to assert this condition shall have used reasonable efforts to prevent the entry of any such Restraints and to appeal as promptly as possible any such Restraints that may be entered. -53- 63 (d) NYSE Listing. The shares of White Common Stock issuable to Green's shareholders pursuant to this Agreement and under the Green Stock Plans shall have been approved for listing on the NYSE, subject to official notice of issuance. SECTION 6.2. Conditions to Obligation of White. The obligation of White to effect the Merger is further subject to satisfaction or waiver of the following conditions: (a) Compliance. Green shall not have breached or failed to observe or perform in any material respect any of its covenants or agreements hereunder to be performed by it at or prior to the Closing Date, and the representations and warranties of Green set forth herein shall be true and accurate both when made and at and as of the Closing Date, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date), except where the breach or failure to observe or perform such covenants or agreements, or the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to "materiality" or "material adverse effect" set forth therein), does not have, and is not likely to have, individually or in the aggregate, a material adverse effect on Green. (b) No Material Adverse Change. At any time after the date of this Agreement there shall not have occurred any material adverse change relating to Green. (c) Offer. Tender Sub shall have purchased shares of Green Common Stock in the Offer or, if not, White and Tender Sub shall have obtained sufficient financing, on terms reasonably acceptable to White, to enable consummation of the Merger. (d) Regulatory Approval. The STB shall have issued a decision (which decision shall not have been stayed or enjoined) that (A) constitutes a final order approving, exempting or otherwise authorizing consummation of the Merger and all other material transactions contemplated by this Agreement (or subsequently presented to the STB by agreement of Green and White) as may require such authorization and (B) does not (1) change or disapprove of the consideration to be given in the Merger or other material provisions of Article II of this Agreement or (2) impose on White, Green, or any of their respective subsidiaries any other terms or conditions (including, without limitation, labor protective provisions but excluding conditions heretofore imposed by the ICC in New York Dock Railway--Control--Brooklyn Eastern District, 360 I.C.C. 60 (1979)) that materially and adversely affect the long-term benefits expected to be received by White from the transactions contemplated by this Agreement. -54- 64 (e) Other Governmental Entity Actions. All actions by or in respect of or filings with any Governmental Entity required to permit the consummation of the Merger (other than approval of the STB, which is addressed above) shall have been obtained but excluding any consent, approval, clearance or confirmation the failure to obtain which would not have a material adverse effect on White, Green or, after the Effective Time, the Surviving Corporation. SECTION 6.3. Conditions to Obligation of Green. The obligation of Green to effect the Merger is further subject to satisfaction or waiver of the following conditions: (a) Compliance. White shall not have breached or failed to observe or perform in any material respect any of its covenants or agreements hereunder to be performed by it at or prior to the Closing Date, and the representations and warranties of White set forth herein shall be true and accurate both when made and at and as of the Closing Date, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date), except where the breach or failure to observe or perform such covenants and agreements, or the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to "materiality" or "material adverse effect" set forth therein), does not have, and is not likely to have, individually or in the aggregate, a material adverse effect on White. (b) No Material Adverse Change. At any time after the date of this Agreement there shall not have occurred any material adverse change relating to White. (c) Regulatory Approval. The STB shall have issued a decision (which decision shall not have been stayed or enjoined) that (i) constitutes a final order approving, exempting or otherwise authorizing consummation of the Merger and all other material transactions contemplated hereby and thereby or subsequently presented to the STB by agreement of the White and Green, as may require such authorization and (ii) does not change or disapprove of the consideration to be given in the Merger or other material provisions of Article II of this Agreement. SECTION 6.4. Frustration of Closing Conditions. Neither White nor Green may rely on the failure of any condition set forth in Section 6.1, 6.2 or 6.3, as the case may be, to be satisfied if such failure was caused by such party's failure to use reasonable efforts to consummate the Merger and the other transactions contemplated by this Agreement and the Option Agreements, as required by and subject to Section 5.5. ARTICLE VII -55- 65 TERMINATION, AMENDMENT AND WAIVER SECTION 7.1 Termination. This Agreement may be terminated at any time prior to the Effective Time, whether before or after either of the Green Shareholder Approvals or the White Shareholder Approval only as provided below: (a) by mutual written consent of White and Green; (b) by either White or Green: (i) if the Merger shall not have been consummated by December 31, 1998; provided, however, that the right to terminate this Agreement pursuant to this Section 7.1(b)(i) shall not be available to any party whose failure to perform any of its obligations under this Agreement results in the failure of the Merger to be consummated by such time; (ii) if, at a Green Merger Shareholders Meeting duly convened therefor or at any adjournment or postponement thereof, the Green Merger Shareholder Approval shall not have been obtained; (iii) if, at a White Shareholders Meeting duly convened therefor or at any adjournment or postponement thereof, the White Shareholder Approval shall not have been obtained; or (iv) if any Governmental Entity shall have issued a Restraint or taken any other action permanently enjoining, restraining or otherwise prohibiting the consummation of the Merger or any of the other transactions contemplated by this Agreement and such Restraint or other action shall have become final and nonappealable; provided, however, that the party seeking to terminate this Agreement pursuant to this clause (iv) shall have used all reasonable efforts to prevent the entry of and to remove such Restraint or other action; (c) by White, if Green shall have breached or failed to perform in any material respect any of its representations, warranties, covenants or other agreements contained in this Agreement, which breach or failure to perform (A) would give rise to -56- 66 the failure of the condition set forth in Section 6.2(a), and (B) cannot be or has not been cured within 30 days after the giving of written notice to Green of such breach (a "Green Material Breach") (provided that White is not then in White Material Breach of any representation, warranty, covenant or other agreement contained in this Agreement and provided that, if such breach is curable through the exercise of Green's best efforts, this Agreement may not be terminated hereunder for so long as Green is so using its best efforts to cure such breach); (d) by White in accordance with Section 4.2(b); provided that it has complied with all provisions contained in Section 4.2, including the notice provisions therein, and that it complies with applicable requirements of Section 5.9; (e) by White if (i) the Board of Directors of Green (or, if applicable, any committee thereof) shall have withdrawn or modified in a manner adverse to White its approval or recommendation of the Offer or the Merger or the matters to be considered at the Green Shareholders Meetings or failed to reconfirm its recommendation within 15 business days after a written request to do so, or approved or recommended any Takeover Proposal in respect of Green or (ii) the Board of Directors of Green or any committee thereof shall have resolved to take any of the foregoing actions; (f) by White, if Green or any of its officers, directors, employees, representatives or agents shall take any of the actions that would be proscribed by Section 4.2 but for the exceptions therein allowing certain actions to be taken pursuant to the proviso in the first sentence of Section 4.2(a) or the second sentence of Section 4.2(b); (g) by Green, if White shall have breached or failed to perform in any material respect any of its representations, warranties, covenants or other agreements contained in this Agreement, which breach or failure to perform (A) would give rise to the failure of the condition set forth in Section 6.3(a), and (B) cannot be or has not been cured within 30 days after the giving of written notice to White of such breach (a "White Material Breach") (provided that Green is not then in Green Material Breach of any representation, warranty, covenant or other agreement contained in this Agreement and provided that, if such breach is curable through the exercise of White's best efforts, this Agreement may not be terminated hereunder for so long as White is so using its best efforts to cure such breach); (h) by Green in accordance with Section 4.2(b); provided that it has complied with all provisions contained in Section 4.2, including the notice provisions therein, and that it complies with applicable requirements of Section 5.9; -57- 67 (i) by Green if (i) the Board of Directors of White (or, if applicable, any committee thereof) shall have withdrawn or modified in a manner adverse to Green its approval or recommendation of the matters to be considered at the White Shareholders Meeting, or failed to reconfirm its recommendation within 15 business days after a written request to do so, or approved or recommended any White Takeover Proposal or (ii) the Board of Directors of White or any committee thereof shall have resolved to take any of the foregoing actions; or (j) by Green, if White or any of its officers, directors, employees, representatives or agents shall take any of the actions that would be proscribed by Section 4.2 but for the exceptions therein allowing certain actions to be taken pursuant to the proviso in the first sentence of Section 4.2(a) or the second sentence of Section 4.2(b). SECTION 7.2 Effect of Termination. In the event of termination of this Agreement by either Green or White as provided in Section 7.1, this Agreement shall forthwith become void and have no effect, without any liability or obligation on the part of White or Green, other than the provisions of Section 1.9, Section 3.1(m), Section 3.2(m), the last sentence of Section 5.4, Section 5.9, Section 5.17, this Section 7.2 and Article VIII, which provisions survive such termination, and except to the extent that such termination results from the willful and material breach by a party of any of its representations, warranties, covenants or agreements set forth in this Agreement. SECTION 7.3 Amendment. This Agreement may be amended by the parties at any time before or after any of the Green Shareholder Approvals or the White Shareholder Approval; provided, however, that after any such approval, there shall not be made any amendment that by law requires further approval by the shareholders of Green or White without the further approval of such shareholders. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties. SECTION 7.4 Extension; Waiver. At any time prior to the Effective Time, a party may (a) extend the time for the performance of any of the obligations or other acts of the other parties, (b) waive any inaccuracies in the representations and warranties of the other parties contained in this Agreement or in any document delivered pursuant to this Agreement or (c) subject to the proviso of Section 7.3, waive compliance by the other party with any of the agreements or conditions contained in this Agreement. Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights. SECTION 7.5 Procedure for Termination, Amendment, Extension or Waiver. A termination of this Agreement pursuant to -58- 68 Section 7.1, an amendment of this Agreement pursuant to Section 7.3 or an extension or waiver pursuant to Section 7.4 shall, in order to be effective, require, in the case of White or Green, action by its Board of Directors or, with respect to any amendment to this Agreement, the duly authorized committee of its Board of Directors. ARTICLE VIII GENERAL PROVISIONS SECTION 8.1 Nonsurvival of Representations and Warranties. None of the representations and warranties in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time. This Section 8.1 shall not limit any covenant or agreement of the parties which by its terms contemplates performance after the Effective Time. SECTION 8.2 Notices. All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given if delivered personally, telecopied (which is confirmed) or sent by overnight courier (providing proof of delivery) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to White or Tender Sub, to CSX Corporation One James Center 901 East Cary Street Richmond, VA 23219 Telecopy No.: (804) 783-1380 Attention: Mark Aron with copies to: CSX Corporation One James Center 901 East Cary Street Richmond, VA 23219 Telecopy No.: (804) 783-1355 Attention: Peter Shudtz -59- 69 Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, New York 10019 Telecopy No.: (212) 403-2000 Attention: Pamela S. Seymon, Esq.; and (b) if to Green, to Conrail Inc. 2001 Market Street Philadelphia, PA 19103 Telecopy No.: (215) 209-4068 Attention: Bruce B. Wilson Senior Vice President - Law with a copy to: Cravath, Swaine & Moore Worldwide Plaza 825 Eighth Avenue New York, New York 10019 Telecopy No.: (212) 474-3700 Attention: Robert A. Kindler, Esq. SECTION 8.3. Definitions. For purposes of this Agreement: (a) an "affiliate" of any person means another person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first person; (b) "material adverse change" or "material adverse effect" means, when used in connection with Green or White, any change, effect, event or occurrence that is materially adverse to the business, financial condition or results of operations of such party and its subsidiaries taken as a whole or materially impairs the ability of such person to consummate the transactions contemplated hereby (including the Offer and the Merger) and by the -60- 70 Option Agreements other than any change, effect, event or occurrence relating to the United States economy in general or to the transportation industry in general, and not specifically relating to Green or White or their respective subsidiaries; (c) "material" means, when used in connection with Green or White, material to the business, financial condition or results of operations of such party and its subsidiaries taken as a whole or materially impairing the ability of such person to consummate the transactions contemplated hereby (including the Offer and the Merger) and by the Option Agreements other than any change, effect, event or occurrence relating to the United States economy in general or to the transportation industry in general, and not specifically relating to Green or White or their respective subsidiaries, and the term "materially" has a correlative meaning; (d) "person" means an individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or other entity; (e) a "subsidiary" of any person means another person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its Board of Directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first person; and (f) "knowledge" of any person which is not an individual means the knowledge of such person's executive officers after reasonable inquiry. SECTION 8.4 Interpretation. When a reference is made in this Agreement to an Article, Section or Exhibit, such reference shall be to an Article or Section of, or an Exhibit to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation". The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by -61- 71 waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. References to a person are also to its permitted successors and assigns. SECTION 8.5. Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. SECTION 8.6. Entire Agreement; No Third-Party Beneficiaries. This Agreement (including the documents and instruments referred to herein), the Option Agreements and the Confidentiality Agreement (a) constitute the entire agreement, and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter of this Agreement and (b) except for the provisions of Article II, Section 5.6 and Section 5.8, are not intended to confer upon any person other than the parties any rights or remedies. SECTION 8.7. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF LAWS THEREOF; PROVIDED, HOWEVER, THAT THE LAWS OF THE RESPECTIVE STATES OF INCORPORATION OF EACH OF THE PARTIES HERETO SHALL GOVERN THE RELATIVE RIGHTS, OBLIGATIONS, POWERS, DUTIES AND OTHER INTERNAL AFFAIRS OF SUCH PARTY AND ITS BOARD OF DIRECTORS. SECTION 8.8. Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by either of the parties hereto without the prior written consent of the other party. Any assignment in violation of the preceding sentence shall be void. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns. SECTION 8.9. ENFORCEMENT. THE PARTIES AGREE THAT IRREPARABLE DAMAGE WOULD OCCUR AND THAT THE PARTIES WOULD NOT HAVE ANY ADEQUATE REMEDY AT LAW IN THE EVENT THAT ANY OF THE PROVISIONS OF THIS AGREEMENT WERE NOT PERFORMED IN ACCORDANCE WITH THEIR SPECIFIC TERMS OR WERE OTHERWISE BREACHED. IT IS ACCORDINGLY AGREED THAT THE PARTIES SHALL BE ENTITLED TO AN INJUNCTION OR INJUNCTIONS TO PREVENT BREACHES OF THIS AGREEMENT AND TO ENFORCE SPECIFICALLY THE TERMS AND PROVISIONS OF THIS AGREEMENT IN ANY FEDERAL COURT LOCATED IN THE STATE OF NEW YORK OR IN NEW YORK STATE COURT, THIS BEING IN ADDITION TO ANY OTHER REMEDY TO WHICH THEY ARE ENTITLED AT LAW OR IN EQUITY. IN ADDITION, EACH OF THE PARTIES HERETO (A) CONSENTS TO SUBMIT ITSELF TO THE PERSONAL JURISDICTION OF ANY FEDERAL COURT LOCATED IN THE STATE OF NEW YORK OR ANY NEW YORK STATE COURT IN THE EVENT ANY DISPUTE ARISES OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (B) AGREES THAT IT WILL NOT ATTEMPT TO -62- 72 DENY OR DEFEAT SUCH PERSONAL JURISDICTION BY MOTION OR OTHER REQUEST FOR LEAVE FROM ANY SUCH COURT, AND (C) AGREES THAT IT WILL NOT BRING ANY ACTION RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT IN ANY COURT OTHER THAN A FEDERAL COURT SITTING IN THE STATE OF NEW YORK OR A NEW YORK STATE COURT. SECTION 8.10. Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. SECTION 8.11. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible. -63- 73 IN WITNESS WHEREOF, Conrail Inc., Green Acquisition Corp. and CSX Corporation have caused this Agreement to be signed by their respective officers thereunto duly authorized, all as of the date first written above. CONRAIL INC. by --------------------------- Name: Title: GREEN ACQUISITION CORP. by --------------------------- Name: Title: CSX CORPORATION by --------------------------- Name: Title: -64- 74 EXHIBIT A CORPORATE GOVERNANCE Board of Directors Following the Effective Time The Board of Directors of White will consist of the current Chairman of the Boards of each of White and Green and an even number of other directors (all of whom shall be outside directors) to be agreed upon, of whom 50% shall be designated by each of White and Green. Committees of the Board of Directors and Chairpersons of Committees The Board of Directors of White shall initially have six committees: the finance and planning committee, the executive committee, the audit committee, the ethics committee, the compensation committee and the nominating committee. Each committee will be comprised of four directors, of which two shall be designated by each of White and Green. The only committees on which the current Chairman of the Board of each of White and Green will serve will be the executive committee and the finance and planning committee, and the current Chairman and Chief Executive Officer of White will chair the executive committee and designate the chair of the finance and planning committee. White will designate the chairperson of the compensation committee and the audit committee and Green will designate the chairperson of the nominating committee and the ethics committee. Executive Management Immediately following the Effective Time and for two years thereafter, the current Chairman and Chief Executive Officer of White shall continue as the Chairman and Chief Executive Officer of White and the current Chairman of the Board and Chief Executive Officer of Green shall be President and Chief Operating Officer of White and President and Chief Executive Officer of each of its railroad subsidiaries (the "Railroad CEO"). Immediately following such period, the current Chairman and Chief Executive Officer of White shall continue as Chairman of White for an additional two-year period (and Chairman Emeritus for a one-year period 75 thereafter) and the current Chairman of the Board and Chief Executive Officer of Green shall be elected to the additional office of Chief Executive Officer of White on the second anniversary of the Effective Time and shall succeed as Chairman of White at the end of such additional two-year period. The foregoing arrangements under this heading "Executive Management" may be altered only by a vote, following the Effective Time, of 75% of the members of the Board of Directors of White. White Articles of Incorporation On the Closing Date, the Articles of Incorporation of White shall be amended to change the corporate name of White to a new neutral name not including, except with the prior written consent of each of Green and White, any aspect of the names of either Green or White or their subsidiaries or predecessors. White By-laws On the Closing Date, the White By-laws shall be amended to provide that any amendment to or modification of the arrangements set forth under the heading "Executive Management" or of the employment agreements with the current Chairman of White and Green entered into as of the date of this Agreement shall require a vote of 75% of the members of the Board of Directors of White. A-1 76 EXHIBIT C FORM OF AMENDED AND RESTATED ARTICLES OF INCORPORATION(*) Article I NAME The name of the Corporation is [TO BE DETERMINED IN ACCORDANCE WITH MERGER AGREEMENT]. Article II PURPOSE The purpose for which the Corporation is organized is to transact any lawful business not required to be specifically stated in the Articles of Incorporation. Article III AUTHORIZED STOCK 3.1 Number and Designation. (a) The Corporation shall have authority to issue five hundred million (500,000,000) shares of Common Stock, par value $1.00 per share, twenty-five million (25,000,000) shares of Serial Preferred Stock, without par value, and twenty-five million (25,000,000) shares of Preferred Stock, without par value. (b) The Board of Directors may determine the preferences, limitations and relative rights, to the extent permitted by the Virginia Stock Corporation Act, of any class of shares of Preferred Stock before the issuance of any shares of that class, or of one or more series within a class before the issuance of any shares of that series. Each class or - ------------------ (*) Amendments are underlined herein 77 EXHIBIT C series shall be appropriately designated by a distinguishing designation prior to the issuance of any shares thereof. Except to the extent otherwise permitted by the Virginia Stock C-2 78 Corporation Act, the Preferred Stock of a series shall have preferences, limitations and relative rights identical with those of other shares of the same series and, except to the extent otherwise provided in the description of the series, with those of shares of other series of the same class. (c) Prior to the issuance of any shares of a class or series of Preferred Stock, (1) the Board of Directors shall establish such class or series by adopting a resolution and by filing with the State Corporation Commission of Virginia articles of amendment setting forth the designation and number of shares of the class or series and the preferences, limitations and relative rights thereof and (2) the State Corporation Commission of Virginia shall have issued a certificate of amendment with respect thereto. 3.2 Preemptive Rights. No holder of capital stock of the Corporation of any class shall have any preemptive right to subscribe to or purchase (i) any shares of capital stock of this Corporation, (ii) any securities convertible into such shares or (iii) any options, warrants or rights to purchase such shares or securities convertible into any such shares. Article IV SERIAL PREFERRED STOCK 4.1 Issuance in Series. The Board of Directors is hereby empowered to cause the Serial Preferred Stock of the Corporation to be issued in series with such of the variations permitted by clauses (a)-(h), both inclusive, of this Section 4.1 as shall have been fixed and determined by the Board of Directors with respect to any series prior to the issue of any shares of such series. The shares of the Serial Preferred Stock of different series may vary as to: (a) the number of shares constituting such series and the designation of such series, which shall be such C-2 79 as to distinguish the shares thereof from the shares of all other series and classes; (b) the rate of dividend, the time of payment and, if cumulative, the dates from which dividends shall be cumulative, and the extent of participation rights, if any; (c) any right to vote with holders of shares of any other series or class and any right to vote as a class, either generally or as a condition to specified corporate action; (d) the price at and the terms and conditions on which shares may be redeemed; (e) the amount payable upon shares in event of involuntary liquidation; (f) the amount payable upon shares in event of voluntary liquidation; (g) any sinking fund provisions for the redemption or purchase of shares; and (h) the terms and conditions on which shares may be converted, if the shares of any series are issued with the privilege of conversion. The shares of all series of Serial Preferred Stock shall be identical except as, within the limits set forth above in this Section 4.1, shall have been fixed and determined by the Board of Directors prior to the issuance thereof. [Deleted] On the date of these Amended and Restated Articles of Incorporation, there were authorized, but unissued, 3,000,000 shares of the Series B Junior Participating Preferred Stock. The date on which such series was authorized by the Board of Directors and the preferences, limitations and relative rights of the shares of such series not is set forth in Article X hereof. Prior to the date of these Amended and Restated Articles of Incorporation, the C-3 80 Corporation had issued the Series A $7.00 Cumulative Convertible Preferred Stock, the Market Auction Preferred Stock, Series C-1 and the Market Auction Preferred Stock, Series C-2. On that date all of the shares of each of the aforesaid series which had been issued had been redeemed by the Corporation and no share of any such series remained issued and outstanding. Each such series provided that shares of the series, when purchased, redeemed or otherwise acquired by the Corporation, would become authorized but unissued shares of Preferred Stock, undesignated as to series. 4.2 Dividends. The holders of the Serial Preferred Stock of each series shall be entitled to receive, if and when declared payable by the Board of Directors, dividends in lawful money of the United States of America, at the dividend rate for such series, and not exceeding such rate except to the extent of any participation right. Such dividends shall be payable on such dates as shall be fixed for such series. Dividends, if cumulative and in arrears, shall not bear interest. No dividends shall be declared or paid upon or set apart for the Common Stock or for stock of any other class hereafter created ranking junior to the Serial Preferred Stock in respect of dividends or assets (hereinafter called Junior Stock), and no shares of Serial Preferred Stock, Common Stock or Junior Stock shall be purchased, redeemed or otherwise reacquired for a consideration, nor shall any funds be set aside for or paid to any sinking fund therefor, unless and until (i) full dividends on the outstanding Serial Preferred Stock at the dividend rate or rates therefor, together with the full additional amount required by any participation right, shall have been paid or declared and set apart for payment with respect to all past dividend periods, to the extent that the holders of the Serial Preferred Stock are entitled to dividends with respect to any past dividend period, and the current dividend period, and (ii) all mandatory sinking fund payments that shall have become due in respect of any series of the Serial Preferred Stock shall have been made. Unless full dividends with respect to all past dividend periods on the outstanding Serial Preferred Stock at the dividend rate or rates therefor, to the extent the holders of the Serial Preferred Stock are entitled to dividends with respect to any particular past dividend period, together with C-4 81 the full additional amount required by any participation right, shall have been paid or declared and set apart for payment and all mandatory sinking fund payments that shall have become due in respect of any series of the Serial Preferred Stock shall have been made, no distributions shall be made to the holders of the Serial Preferred Stock of any series unless distributions are made to the holders of the Serial Preferred Stock of all series then outstanding in proportion to the aggregate amounts of the deficiencies in payments due to the respective series, and all payments shall be applied, first, to dividends accrued and in arrears, next, to any amount required by any participation right, and, finally, to mandatory sinking fund payments. The terms "current dividend period" and "past dividend period" mean, if two or more series of Serial Preferred Stock having different dividend periods are at the same time outstanding, the current dividend period or any past dividend period, as the case may be, with respect to each such series. 4.3 Preference on Liquidation. In the event of any liquidation, dissolution or winding up of the Corporation, the holders of the Serial Preferred Stock of each series shall be entitled to receive, for each share thereof, the fixed liquidation price for such series, plus, in case such liquidation, dissolution or winding up shall have been voluntary, the fixed liquidation premium for such series, if any, together in all cases with a sum equal to all dividends accrued or in arrears thereon and the full additional amount required by any participation right, before any distribution of the assets shall be made to holders of the Common Stock or Junior Stock; but the holders of the Serial Preferred Stock shall be entitled to no further participation in such distribution. If, upon any such liquidation, dissolution or winding up, the assets distributable among the holders of the Serial Preferred Stock shall be insufficient to permit the payment of the full preferential amounts aforesaid, then such assets shall be distributed among the holders of the Serial Preferred Stock then outstanding ratably in proportion to the full preferential amounts to which they are respectively entitled. For the purposes of this Section 4.3, the expression "dividends accrued or in arrears" means, in respect of each share of the Serial Preferred Stock of any series at a particular time, an amount equal to the product of the rate of C-5 82 dividend per annum applicable to the shares of such series multiplied by the number of years and any fractional part of a year that shall have elapsed from the date when dividends on such shares became cumulative to the particular time in question less the total amount of dividends actually paid on the shares of such series or declared and set apart for payment thereon; provided, however, that, if the dividends on such shares shall not be fully cumulative, such expression shall mean the dividends, if any, cumulative in respect of such shares for the period stated in the articles of serial designation creating such shares less all dividends paid in or with respect to such period. Article V COMMON STOCK 5.1 Dividends. Subject to the provisions of law and the rights of holders of shares at the time outstanding of all classes of stock having prior rights as to dividends, the holders of Common Stock at the time outstanding shall be entitled to receive such dividends at such times and in such amounts as the Board of Directors may deem advisable. 5.2 Liquidation. In the event of any liquidation, dissolution or winding up (whether voluntary or involuntary) of the Corporation, after the payment or provision for payment in full for all debts and other liabilities of the Corporation and all preferential amounts to which the holders of shares at the time outstanding of all classes of stock having prior rights thereto shall be entitled, the remaining net assets of the Corporation shall be distributed ratably among the holders of the shares at the time outstanding of Common Stock. 5.3 Voting Rights. The holders of Common Stock shall be entitled to one vote per share on all matters. Article VI NUMBER OF DIRECTORS C-6 83 The number of directors shall be fixed by the By-Laws or, in the absence of a By-law fixing the number, the number shall be four. Article VII LIMIT ON LIABILITY AND INDEMNIFICATION 7.1 Definitions. For purposes of this Article the following definitions shall apply: (a) "Corporation" means this Corporation, including Chessie System, Inc. and Seaboard Coast Line Industries, Inc. and no other predecessor entity or other legal entity; (b) "expenses" include counsel fees, expert witness fees, and costs of investigation, litigation and appeal, as well as any amounts expended in asserting a claim for indemnification; (c) "liability" means the obligation to pay a judgment, settlement, penalty, fine, or other such obligation, including, without limitation, any excise tax assessed with respect to an employee benefit plan; (d) "legal entity" means a corporation, partnership, joint venture, trust, employee benefit plan or other enterprise; (e) "predecessor entity" means a legal entity the existence of which ceased upon its acquisition by the Corporation in a merger or otherwise; and (f) "proceeding" means any threatened, pending, or completed action, suit, proceeding or appeal whether civil, criminal, administrative or investigative and whether formal or informal. C-7 84 7.2 Limit on Liability. In every instance permitted by the Virginia Stock Corporation Act, as it exists on the date hereof or may hereafter be amended, the liability of a director or officer of the Corporation to the Corporation or its shareholders arising out of a single transaction, occurrence or course of conduct shall be limited to one dollar. 7.3 Indemnification of Directors and Officers. The Corporation shall indemnify any individual who is, was or is threatened to be made a party to a proceeding (including a proceeding by or in the right of the Corporation) because such individual is or was a director or officer of the Corporation, or because such individual is or was serving the Corporation or any other legal entity in any capacity at the request of the Corporation, against all liabilities and reasonable expenses incurred in the proceeding except such liabilities and expenses as are incurred because of such individual's willful misconduct or knowing violation of the criminal law. Service as a director or officer of a legal entity controlled by the Corporation shall be deemed service at the request of the Corporation. The determination that indemnification under this Section 7.3 is permissible and the evaluation as to the reasonableness of expenses in a specific case shall be made, in the case of a director, as provided by law, and in the case of an officer, as provided in Section 7.4 of this Article; provided, however, that if a majority of the directors of the Corporation has changed after the date of the alleged conduct giving rise to a claim for indemnification, such determination and evaluation shall, at the option of the person claiming indemnification, be made by special legal counsel agreed upon by the Board of Directors and such person. Unless a determination has been made that indemnification is not permissible, the Corporation shall make advances and reimbursements for expenses incurred by a director or officer in a proceeding upon receipt of an undertaking from such director or officer to repay the same if it is ultimately determined that such director or officer is not entitled to indemnification. Such undertaking shall be an unlimited, unsecured general obligation of the director or officer and shall be accepted without reference to such director's or officer's ability to make repayment. The termination of a proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not of C-8 85 itself create a presumption that a director or officer acted in such a manner as to make such director or officer ineligible for indemnification. The Corporation is authorized to contract in advance to indemnify and make advances and reimbursements for expenses to any of its directors or officers to the same extent provided in this Section 7.3. 7.4 Indemnification of Others. The Corporation may, to a lesser extent or to the same extent that it is required to provide indemnification and make advances and reimbursements for expenses to its directors and officers pursuant to Section 7.3 of this Article, provide indemnification and make advances and reimbursements for expenses to its employees and agents, the directors, officers, employees and agents of its subsidiaries and predecessor entities, and any person serving any other legal entity in any capacity at the request of the Corporation, and may contract in advance to do so. The determination that indemnification under this Section 7.4 is permissible, the authorization of such indemnification and the evaluation as to the reasonableness of expenses in a specific case shall be made as authorized from time to time by general or specific action of the Board of Directors, which action may be taken before or after a claim for indemnification is made, or is otherwise provided by law. No person's rights under Section 7.3 of this Article shall be limited by the provisions of this Section 7.4. 7.5 Miscellaneous. The rights of each person entitled to indemnification under this Article shall inure to the benefit of such person's heirs, executors and administrators. Special legal counsel selected to make determinations under this Article may be counsel for the Corporation. Indemnification pursuant to this Article shall not be exclusive of any other right of indemnification to which any person may be entitled, including indemnification pursuant to a valid contract, indemnification by legal entities other than the Corporation and indemnification under policies of insurance purchased and maintained by the Corporation or others. However, no person shall be entitled to indemnification by the Corporation to the extent such person is indemnified by another, including an insurer. The Corporation is authorized to purchase and maintain insurance against any liability it may have under this Article or to C-9 86 protect any of the persons named above against any liability arising from their service to the Corporation or any other legal entity at the request of the Corporation regardless of the Corporation's power to indemnify against such liability. The provisions of this Article shall not be deemed to preclude the Corporation from entering into contracts otherwise permitted by law with any individuals or legal entities, including those named above. If any provision of this Article or its application to any person or circumstances is held invalid by a court of competent jurisdiction, the invalidity shall not affect other provisions or applications of this Article, and to this end the provisions of this Article are severable. 7.6 Application; Amendments. The provisions of this Article shall be applicable from and after its adoption even though some or all of the underlying conduct or events relating to a proceeding may have occurred before its adoption. No amendment, modification or repeal of this Article shall diminish the rights provided hereunder to any person arising from conduct or events occurring before the adoption of such amendment, modification or repeal. Article VIII UNSURRENDERED SHARES OF CHESSIE SYSTEM, INC. AND SEABOARD COAST LINE INDUSTRIES, INC. 8.1 Conversion of Shares. On October 31, 1980 (the "Merger Date"), the outstanding shares of Chessie Systems, Inc. ("Chessie") and Seaboard Coast Line Industries, Inc. ("Industries") were converted by operation of law into shares of the Corporation. 8.2 Failure to Surrender Shares. No holder of a Chessie or Industries common stock certificate shall be entitled to vote at any meeting of stockholders of the Corporation or to receive any dividends from the Corporation until surrender of his certificate in exchange for a certificate for shares of the Corporation's Common Stock. Upon such surrender, there shall be paid to the holder the amount of C-10 87 dividends (without interest thereon) that have theretofore become payable, but that have not been paid by reason of the foregoing, with respect to the number of whole shares of the Corporation's Common Stock represented by the certificates issued in exchange. The Corporation shall, however, be entitled after the Merger Date to treat the certificates of outstanding common stock of Chessie and Industries as evidencing the ownership of the number of full shares of the Corporation's Common Stock into which the Chessie and Industries shares, represented by such certificates, shall have been converted, notwithstanding the failure to surrender such certificates. Article IX [Deleted.] Article X SERIAL PREFERRED STOCK, SERIES B Pursuant to a resolution adopted by the Board of Directors of the Corporation on April 29, 1986, 3,000,000 shares of Serial Preferred Stock constitute a series of Serial Preferred Stock designated as the Junior Participating Preferred Stock, Series B (the "Series B Stock"), the shares of which have the following rights and preferences: 10.1 Designation and Amount. The shares of such series shall be designated as "Junior Participating Preferred Stock, Series B" and the number of shares constituting such series shall be 3,000,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of the Series B Stock to a number less than that of the shares then outstanding. 10.2 Dividends and Distributions. (a) Subject to the prior and superior rights of the holders of any shares of any C-11 88 series of Preferred Stock ranking prior and superior to the shares of the Series B Stock with respect to dividends, the holders of shares of the Series B Stock, in preference to the holders of Common Stock of the Corporation and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the fifteenth day (or, if not a business day, the preceding business day) of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of the Series B Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-class dividends or other distributions, other than a dividend payable in shares of Common Stock, or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of the Series B Stock. In the event the Corporation shall at any time declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of the Series B Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common C-12 89 Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (b) The Corporation shall declare a dividend or distribution on the Series B Stock as provided in paragraph (a) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series B Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (c) Dividends shall begin to accrue and be cumulative on outstanding shares of the Series B Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of the Series B Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of the Series B Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of the Series B Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of the Series B Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof. C-13 90 10.3 Voting Rights. The holders of shares of the Series B Stock shall have the following voting rights: (a) Subject to the provision for adjustment hereinafter set forth, each share of the Series B Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the shareholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of the Series B Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (b) Except as otherwise provided herein or by law, the holders of shares of the Series B Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of shareholders of the Corporation. (c) Except as set forth herein, holders of the Series B Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. 10.4 Certain Restrictions. (a) Whenever quarterly dividends or other dividends or distributions payable on the Series B Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of the Series B Stock outstanding shall have been paid in full, the Corporation shall not: C-14 91 (i) declare, set apart or pay dividends on or make any other distributions on the Common Stock or any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series B Stock; (ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series B Stock, except dividends paid ratably on the Series B Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; or (iii) redeem or purchase or otherwise acquire for consideration shares of the Series B Stock, any such parity stock or any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) with the Series B Stock, or set aside for or pay to any sinking fund therefor. (b) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (a) of this Section 4 purchase or otherwise acquire such shares at such time and in such manner. 10.5 Reacquired Shares. Any shares of the Series B Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein. 10.6 Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (1) to the holders of shares of Common Stock or of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series B Stock unless, prior thereto, the holders of C-15 92 shares of the Series B Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of the Series B Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of Common Stock, or (2) to the holders of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series B Stock, except distributions made ratably on the Series B Stock and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of the Series B Stock were entitled immediately prior to such event under the provision of clause (1) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. 10.7 Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of the Series B Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on Common Stock payable C-16 93 in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of the Series B Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. 10.8 No Redemption. The shares of the Series B Stock shall not be redeemable. 10.9 Rank. The Series B Stock shall rank junior to all other series of the Corporation's preferred stock outstanding as of April 29, 1986, as to the payment of dividends and the distribution of assets. 10.10 Amendment. The Articles of Incorporation shall not be amended in any manner which would materially alter or change the power, preferences or special rights of the Series B Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of the Series B Stock, voting together as a single voting group. Article XI CERTAIN VOTING MATTERS (a) As to each voting group entitled to vote on an amendment or restatement of these Articles of Incorporation the vote required for approval shall be (i) the vote required by the terms of these Articles of Incorporation, as amended or as restated from time to time, if such terms specifically require the approval of more than a majority of the votes entitled to be cast thereon by such voting group; or (ii) if clause (i) of this Article is not applicable, a majority of the votes entitled to be cast thereon. C-17 94 (b) As to any plan of merger or share exchange to which the Corporation is a party, or any sale, lease, exchange or other disposition of all or substantially all of the assets or property of the Corporation other than in the usual and regular course of business, for which the Virginia Stock Corporation Act requires an affirmative vote of more than two-thirds of the votes cast by shareholders entitled to vote thereon, but which requirement may be reduced to a lesser percentage under the Virginia Stock Corporation Act if the lesser percentage is specified in the articles of incorporation of the Corporation, the affirmative vote of the holders of a majority of the outstanding shares of each voting group entitled to vote on the transaction at a meeting at which a quorum of the voting group exists shall be required in lieu of the affirmative vote otherwise required under the Virginia Stock Corporation Act. C-18 95 EXHIBIT D CONDITIONS TO THE OFFER Notwithstanding any other provisions of the Offer, and in addition to (and not in limitation of) Tender Sub's rights to extend and amend the Offer at any time in its sole discretion (subject to the provisions of the Merger Agreement), Tender Sub shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating to Tender Sub's obligation to pay for or return tendered shares of Green Common Stock or Green ESOP Preferred Stock promptly after termination or withdrawal of the Offer), pay for, and may delay the acceptance for payment of or, subject to the restriction referred to above, the payment for, any tendered shares of Green Common Stock or Green ESOP Preferred Stock, and may terminate the Offer as to any shares of Green Common Stock or Green ESOP Preferred Stock not then paid for, if (1) (i) Tender Sub does not receive prior to the expiration of the Offer an informal written opinion in form and substance reasonably satisfactory to Tender Sub from the staff of the STB, without the imposition of any conditions unacceptable to Tender Sub, that the use of the voting trust substantially reflected in the form of voting trust agreement contemplated by the Merger Agreement (the "Voting Trust") is consistent with the policies of the STB against unauthorized acquisitions of control of a regulated carrier, or (ii) Tender Sub does not receive prior to the expiration of the Offer an informal statement from the Premerger Notification Office that the transactions contemplated by the Offer, the Merger Agreement and the Green Stock Option Agreement are not subject to, or are exempt from, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), or in the absence of the receipt of such informal statement, any applicable waiting period under the HSR Act shall have expired or been terminated prior to the expiration of the Offer, or (2) at any time on or after October 14, 1996 and prior to the acceptance for payment of shares of Green Common Stock and Green ESOP Preferred Stock, any of the following events shall occur: (a) there shall be instituted or pending any action or proceeding by any government or governmental authority or agency, domestic or foreign, (i) challenging or 96 EXHIBIT D seeking to make illegal, to delay materially or otherwise directly or indirectly to restrain or prohibit the making of the Offer, the acceptance for payment of or payment D-1 97 for some of or all the shares of Green Common Stock or Green ESOP Preferred Stock by White or Tender Sub or the consummation by White or Tender Sub of the Merger, seeking to obtain material damages relating to the Merger Agreement, the Option Agreements or any of the transactions contemplated thereby or otherwise seeking to prohibit directly or indirectly the transactions contemplated by the Offer or the Merger Agreement, or challenging or seeking to make illegal the transactions contemplated by the Option Agreements or otherwise directly or indirectly to restrain, prohibit or delay the transactions contemplated by the Option Agreements, (ii) except for the Voting Trust, seeking to restrain, prohibit or delay White's, Tender Sub's or any of their subsidiaries' ownership or operation of all or any material portion of the business or assets of Green and its subsidiaries, taken as a whole, or to compel White or any of its subsidiaries to dispose of or hold separate all or any material portion of the business or assets of Green and its subsidiaries, taken as a whole, (iii) except for the Voting Trust, seeking to impose or confirm material limitations on the ability of White, Tender Sub or any of their subsidiaries or affiliates effectively to exercise full rights of ownership of the shares of Green Common Stock, including, without limitation, the right to vote any shares of Green Common Stock acquired or owned by White, Tender Sub or any of their subsidiaries on all matters properly presented to Green's shareholders, or (iv) seeking to require divestiture by White or Tender Sub or any of their subsidiaries of any shares of Green Common Stock, in the case of any of (i) through (iv) above, which actions or proceedings are reasonably likely to have a material adverse effect on White; or (b) there shall be any action taken, or any statute, rule, regulation, injunction, order or decree enacted, enforced, promulgated, issued or deemed applicable to the transactions contemplated by the Offer or the Merger Agreement, by or before any court, government or governmental authority or agency, domestic or foreign, that, directly or indirectly, results in any of the consequences referred to in paragraph (a) above; or D-2 98 (c) prior to the expiration of the Offer there shall not have been validly tendered and not withdrawn an aggregate of at least 17,860,124 shares of Green Common Stock and Green ESOP Preferred Stock; or (d) the Board of Directors of Green shall have withdrawn, modified or changed in a manner adverse to White or Tender Sub its approval or recommendation of the Offer or the matters to be considered at the Green Shareholders Meetings or shall have recommended a Takeover Proposal or other business combination, or Green shall have entered into an agreement in principle (or similar agreement) or definitive agreement providing for a Takeover Proposal (as defined in the Merger Agreement) or other business combination with a person or entity other than White or Tender Sub (or the Board of Directors of Green resolves to do any of the foregoing); or (e) Green shall have breached or failed to observe or perform in any material respect any of its covenants or agreements under the Merger Agreement, or any of the representations and warranties of Green set forth in the Merger Agreement shall not be true and accurate both when made and as of the date of consummation of the Offer, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date), except where the breach or failure to observe or perform such covenants or agreements, or the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to "materiality" or "material adverse effect" set forth therein), does not have, and is not likely to have, individually or in the aggregate, a material adverse effect on Green. (f) the Merger Agreement shall have been terminated in accordance with its terms; or (g) White and Tender Sub shall not have obtained sufficient financing, on terms reasonably acceptable to White, to enable consummation of the Offer and the Merger; D-3 99 which, in the reasonable judgment of White or Tender Sub in any such case, and regardless of the circumstances (including any action or omission by White or Tender Sub not inconsistent with the terms of the Merger Agreement) giving rise to any such condition, makes it inadvisable to proceed with such acceptance for payment or payment. The foregoing conditions are for the sole benefit of White and Tender Sub and may be asserted by White or Tender Sub regardless of the circumstances giving rise to any such condition (including any action or omission by White or Tender Sub not inconsistent with the terms of the Merger Agreement) or may be waived by White or Tender Sub in whole or in part at any time and from time to time in their reasonable discretion (subject to Section 1.1(a) of the Merger Agreement). The failure by White or Tender Sub at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right; the waiver of any such right with respect to particular facts and other circumstances shall not be deemed a waiver with respect to any other facts and circumstances; and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. D-4 EX-99.C2 11 COMPANY STOCK OPTION AGREEMENT 1 EXECUTION COPY GREEN STOCK OPTION AGREEMENT GREEN STOCK OPTION AGREEMENT, dated as of October 14, 1996 (the "Agreement"), by and between Conrail Inc., a Pennsylvania corporation ("Issuer"), and CSX Corporation, a Virginia corporation ("Grantee"). RECITALS A. Issuer and Grantee have entered into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), providing for, among other things, the merger of Issuer with and into a subsidiary of Grantee with such subsidiary as the surviving corporation in the Merger. B. As a condition and inducement to Grantee's willingness to enter into the Merger Agreement and the White Stock Option Agreement, Grantee has requested that Issuer agree, and Issuer has agreed, to grant Grantee the Option. C. As a condition and inducement to Issuer's willingness to enter into the Merger Agreement and this Agreement, Issuer has requested that Grantee agree, and Grantee has agreed, to grant Issuer an option to purchase shares of Grantee's common stock on substantially the same terms as the Option. D. Terms not defined herein shall have the meanings set forth in the Merger Agreement. NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein Issuer and Grantee agree as follows: 1. Grant of Option. Subject to the terms and conditions set forth herein, Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase up to 15,955,477 (as adjusted as set forth herein) shares (the "Option Shares") of Common Stock, par value $1.00 per share ("Issuer Common Stock"), of Issuer at a purchase price of $92.50 (as adjusted as set forth herein) per Option Share (the "Purchase Price"). 2. Exercise of Option. (a) Subject to any applicable requirements of law, Grantee may exercise the Option, in whole but not in part, at any one 2 time after the first to occur of (x) any event as a result of which the Grantee is entitled to receive the Termination Fee pursuant to the Merger Agreement and (y) the consummation of the Offer (the first of such events to occur, a "Purchase Event"); provided, however, that except as provided in the last sentence of this Section 2(a), the Option shall terminate and be of no further force and effect upon the earliest to occur of (A) the Effective Time, (B) 18 months after the first occurrence of a Purchase Event and (C) termination of the Merger Agreement in accordance with its terms prior to the occurrence of a Purchase Event, unless the Grantee has the right to receive a Termination Fee following such termination upon the occurrence of certain events, in which case the Option shall not terminate until the later of (x) six months following the time such Termination Fee becomes payable and (y) the expiration of the period in which the Grantee has such right to receive a Termination Fee. Notwithstanding the termination of the Option, Grantee shall be entitled to purchase the Option Shares if it has exercised the Option in accordance with the terms hereof prior to the termination of the Option and the termination of the Option shall not affect any rights hereunder which by their terms do not terminate or expire prior to or as of such termination. (b) In the event that Grantee wishes to exercise the Option, it shall send to Issuer a written notice (the date of which being herein referred to as the "Notice Date") to that effect which notice also specifies a date not earlier than three business days nor later than 20 business days from the Notice Date for the closing of such purchase (the "Option Closing Date"); provided, however, that (i) if the closing of the purchase and sale pursuant to the Option (the "Option Closing") cannot be consummated by reason of any applicable judgment, decree, order, law or regulation, the period of time that otherwise would run pursuant to this sentence shall run instead from the date on which such restriction on consummation has expired or been terminated and (ii) without limiting the foregoing, if prior notification to or approval of any regulatory authority is required in connection with such purchase, Grantee and Issuer shall promptly file the required notice or application for approval and shall cooperate in the expeditious filing of such notice or application, and the period of time that otherwise would run pursuant to this sentence shall run instead from the date on which, as the case may be, (A) any required notification period has expired or been terminated or (B) any required approval has been obtained, and in either event, any requisite waiting period has expired or been terminated. The place of the Option Closing shall be at the offices of Cravath, Swaine & Moore, 825 Eighth Avenue, New York, New York, and the time of the Option Closing shall be 10:00 a.m. (Eastern Time) on the Option Closing Date. 3. Payment and Delivery of Certificates. (a) At the Option Closing, Grantee shall pay to Issuer in immediately available funds by wire transfer to a bank account designated in writing by Issuer an amount equal to the Purchase Price multiplied by the number of Option Shares. (b) At the Option Closing, simultaneously with the delivery of immediately available funds as provided in Section 3(a), Issuer shall deliver to the trustee under the Voting Trust a certificate or certificates representing the Option Shares to be purchased at the Option Closing, which Option Shares shall be free and clear of all liens, claims, charges and encumbrances of any kind whatsoever. If at the time of issuance of the Option -2- 3 Shares pursuant to the exercise of the Option hereunder, Issuer shall not have redeemed the Green Rights, or shall have issued any similar securities, then each Option Share issued pursuant to such exercise shall also represent a corresponding Green Right or new rights with terms substantially the same as and at least as favorable to Grantee as are provided under the Green Rights Agreement or any similar agreement then in effect. (c) Certificates for the Option Shares delivered at the Option Closing shall have typed or printed thereon a restrictive legend which shall read substantially as follows: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCK OPTION AGREEMENT, DATED AS OF OCTOBER 14, 1996, A COPY OF WHICH MAY BE OBTAINED FROM THE SECRETARY OF GREEN CORPORATION AT ITS PRINCIPAL EXECUTIVE OFFICES." It is understood and agreed that the reference to restrictions arising under the Securities Act in the above legend shall be removed by delivery of substitute certificate(s) without such reference upon the sale of the Option Shares pursuant to the registration rights under the Merger Agreement. 4. Representations and Warranties of Issuer. Issuer hereby represents and warrants to Grantee as follows: (a) Due Authorization. Issuer has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Issuer and the consummation by Issuer of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Issuer. This Agreement has been duly executed and delivered by Issuer and constitutes a legal, valid and binding obligation of Issuer, enforceable against Issuer in accordance with its terms. (b) Authorized Stock. Issuer's representations and warranties in Section 3.1(c) of the Merger Agreement are incorporated herein by reference. Without limiting the generality or effect of the foregoing, Issuer has taken all necessary corporate and other action to authorize and reserve and, to permit it to issue, and, at all times from the date hereof until the obligation to deliver Option Shares upon the exercise of the Option terminates, -3- 4 shall have reserved for issuance, upon exercise of the Option, shares of Issuer Common Stock necessary for Grantee to exercise the Option, and Issuer shall take all necessary corporate action to authorize and reserve for issuance all additional shares of Issuer Common Stock or other securities which may be issued pursuant to Section 6 upon exercise of the Option. The shares of Issuer Common Stock to be issued upon due exercise of the Option, including all additional shares of Issuer Common Stock or other securities which may be issuable upon exercise of the Option or any Substitute Option pursuant to Section 6, upon issuance pursuant hereto, shall be duly and validly issued, fully paid and nonassessable, and shall be delivered free and clear of all liens, claims, charges and encumbrances of any kind or nature whatsoever, including without limitation any preemptive rights of any stockholder of Issuer. (c) No Conflicts. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated by this Agreement and compliance with the provisions of this Agreement shall not, conflict with, or result in any violation of, or default (with or without notice or lapse of time or both) under, or give rise to a right of termination, cancellation, or acceleration of any obligation or loss of a material benefit under, or result in the creation of any Lien upon any of the properties or assets of Issuer or any of its Significant Subsidiaries under, (i) the certificate of incorporation or by-laws of Issuer or the comparable organizational documents of any Significant Subsidiary of Issuer, (ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise, or license applicable to Issuer or any Significant Subsidiary of Issuer or their respective properties or assets, or (iii) subject to approval of the STB of the Voting Trust to the extent contemplated by Exhibit D to the Merger Agreement, any judgment, order, decree, statute, law, ordinance, rule, or regulation applicable to Issuer or any of its Significant Subsidiaries or their respective properties or assets, other than, in the case of clauses (ii) and (iii), any such conflicts, violations, defaults, rights, losses, or Liens that individually or in the aggregate would not (x) have a material adverse effect on Issuer, (y) impair the ability of Issuer to perform its obligations under this Agreement or the Merger Agreement or (z) prevent or materially delay the consummation of any of the transactions contemplated by this Agreement. (d) State Takeover Statutes. Assuming that Grantee, together with its affiliates, does not have voting power with respect to such number of shares of Issuer capital stock as would represent, together with the Option Shares, 20% or more of the votes that all Issuer shareholders would be entitled to cast in an election of directors as of the date of exercise of the Option, the Board of Directors of Issuer has taken all action necessary or advisable so as to render inoperative with respect to the transactions contemplated hereby all applicable state anti-takeover statutes. -4- 5 (e) Issuer Rights Amendment. The Green Rights Agreement has been amended as set forth in the Merger Agreement, and such amendment, insofar as it relates to the transactions contemplated by this Agreement, shall not be further amended or revoked (including by adopting another rights (or similar) agreement without any such amendment) without the prior consent of Grantee in its sole discretion. 5. Representations and Warranties of Grantee. Grantee hereby represents and warrants to Issuer that: (a) Due Authorization. Grantee has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Grantee and the consummation by Grantee of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Grantee. This Agreement has been duly executed and delivered by Grantee and constitutes a legal, valid and binding obligation of Grantee, enforceable against Grantee in accordance with its terms. (b) No Conflicts. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated by this Agreement and compliance with the provisions of this Agreement hereby shall not, conflict with or result in any violation of, or default (with or without notice or lapse of time or both) under, or give rise to a right of termination, cancellation, or acceleration of any obligation or loss of a material benefit under, or result in the creation of any Lien upon any of the properties or assets of Grantee or any of its Significant Subsidiaries under, (i) the certificate of incorporation or by-laws of Grantee or the comparable organizational documents of any Significant Subsidiary of Grantee, (ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise, or license applicable to Grantee or any Significant Subsidiary of Grantee or their respective properties or assets, or (iii) assuming approval by the STB of the Voting Trust to the extent contemplated by Exhibit D to the Merger Agreement, any judgment, order, decree, statute, law, ordinance, rule, or regulation applicable to Grantee or any of its Significant Subsidiaries or their respective properties or assets, other than, in the case of clauses (ii) and (iii), any such conflicts, violations, defaults, rights, losses, or Liens that individually or in the aggregate would not (x) have a material adverse effect on Grantee, (y) impair the ability of Grantee to perform its obligations under this Agreement or the Merger Agreement or (z) prevent or materially delay the consummation of any of the transactions contemplated by this Agreement. (c) Purchase Not for Distribution. Any Option Shares or other securities acquired by Grantee upon exercise of the Option shall not be transferred or otherwise disposed of except in a -5- 6 transaction registered, or exempt from registration, under the Securities Act. 6. Adjustment upon Changes in Capitalization, Etc. (a) In the event of any change in Issuer Common Stock by reason of a stock dividend, split-up, merger, recapitalization, combination, exchange of shares, or similar transaction, the type and number of shares or securities subject to the Option, and the Purchase Price therefor, shall be adjusted appropriately, and proper provision shall be made in the agreements governing such transaction, so that Grantee shall receive upon exercise of the Option the number and class of shares or other securities or property that Grantee would have received in respect of Issuer Common Stock if the Option had been exercised immediately prior to such event or the record date therefor, as applicable. Subject to Section 1, and without limiting the parties' relative rights and obligations under the Merger Agreement, if any additional shares of Issuer Common Stock are issued after the date of this Agreement (other than pursuant to an event described in the first sentence of this Section 6(a)), the number of shares of Issuer Common Stock subject to the Option shall be adjusted so that, after such issuance, it equals 19.9% of the number of shares of Issuer Common Stock then issued and outstanding, without giving effect to any shares subject to or issued pursuant to the Option. (b) Without limiting the parties' relative rights and obligations under the Merger Agreement, in the event that Issuer enters into an agreement (i) to consolidate with or merge into any person, other than Grantee or one of its subsidiaries, and Issuer shall not be the continuing or surviving corporation in such consolidation or merger, (ii) to permit any person, other than Grantee or one of its subsidiaries, to merge into Issuer and Issuer shall be the continuing or surviving corporation, but in connection with such merger, the shares of Issuer Common Stock outstanding immediately prior to the consummation of such merger shall be changed into or exchanged for stock or other securities of Issuer or any other person or cash or any other property, or the shares of Issuer Common Stock outstanding immediately prior to the consummation of such merger shall, after such merger, represent less than 50% of the outstanding voting securities of the merged company, or (iii) to sell or otherwise transfer all or substantially all of its assets to any person, other than Grantee or one of its subsidiaries, then, and in each such case, the agreement governing such transaction shall make proper provision so that the Option shall, upon the consummation of any such transaction and upon the terms and conditions set forth herein, be converted into, or exchanged for, an option with identical terms appropriately adjusted to acquire the number and class of shares or other securities or property that Grantee would have received in respect of Issuer Common Stock if the Option had been exercised immediately prior to such consolidation, merger, sale, or transfer, or the record date therefor, as applicable. (c) If, prior to the termination of the Option in accordance with Section 2 or the Notice Date, Issuer enters into any agreement pursuant to which all outstanding shares of Issuer Common Stock are to be purchased for, or converted into the right to receive in whole or in part (other than in respect of fractional shares) cash (a "Transaction"), -6- 7 Issuer covenants that proper provision shall be made in such agreement to provide that, if the Option shall not theretofore have been exercised, then upon the consummation of the Transaction (which in the case of a Transaction involving a tender offer shall be when shares of Issuer Common Stock are accepted for payment), Grantee shall receive in exchange for the cancellation of the Option an amount in cash equal to the Cash Consideration. For purposes of this Agreement, the term "Cash Consideration" means the number of Option Shares multiplied by the difference between (A) the closing market price per share of Issuer Common Stock on the day immediately prior to the consummation of such Transaction and (B) the Purchase Price. 7. Registration Rights. The registration rights under the Merger Agreement shall be applicable to the Option Shares. 8. Transfers; Exercise; Voting Trust. The Option Shares may not be sold, assigned, transferred, or otherwise disposed of except as provided in the Voting Trust Agreement. The Option may not be exercised except under, and in all respects subject to the terms of, the Voting Trust Agreement. 9. Listing. If Issuer Common Stock or any other securities to be acquired upon exercise of the Option are then listed on the NYSE (or any other national securities exchange or national securities quotation system), Issuer, upon the request of Grantee, shall promptly file an application to list the shares of Issuer Common Stock or other securities to be acquired upon exercise of the Option on the NYSE (and any such other national securities exchange or national securities quotation system) and shall use reasonable efforts to obtain approval of such listing as promptly as practicable. 10. Loss or Mutilation. Upon receipt by Issuer of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Agreement, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Agreement, if mutilated, Issuer shall execute and deliver a new Agreement of like tenor and date. Any such new Agreement executed and delivered shall constitute an additional contractual obligation on the part of Issuer, whether or not the Agreement so lost, stolen, destroyed, or mutilated shall at any time be enforceable by anyone. 11. Miscellaneous. -7- 8 (a) Expenses. Except as otherwise provided in the Merger Agreement, each of the parties hereto shall bear and pay all costs and expenses incurred by it or on its behalf in connection with the transactions contemplated hereunder, including fees and expenses of its own financial consultants, investment bankers, accountants and counsel. (b) Amendment. This Agreement may not be amended, except by an instrument in writing signed on behalf of each of the parties. (c) Extension; Waiver. Any agreement on the part of a party to waive any provision of this Agreement, or to extend the time for performance, shall be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights. (d) Entire Agreement; No Third-Party Beneficiaries. This Agreement, the Merger Agreement (including the documents and instruments referred to therein) and the Confidentiality Agreement (i) constitute the entire agreement, and supersede all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter of this Agreement, and (ii) except as provided in Section 8.6 of the Merger Agreement, are not intended to confer upon any person other than the parties any rights or remedies. (e) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF LAWS THEREOF; PROVIDED, HOWEVER, THAT THE LAWS OF THE RESPECTIVE STATES OF INCORPORATION OF EACH OF THE PARTIES HERETO SHALL GOVERN THE RELATIVE RIGHTS, OBLIGATIONS, POWERS, DUTIES AND OTHER INTERNAL AFFAIRS OF SUCH PARTY AND ITS BOARD OF DIRECTORS. (f) Notices. All notices, requests, claims, demands, and other communications under this Agreement must be in writing and shall be deemed given if delivered personally, telecopied (which is confirmed), or sent by overnight courier (providing proof of delivery) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (i) if to Grantee, to CSX Corporation One James Center 901 East Cary Street Richmond, VA 23219 Telecopy No.: (804) 783-1380 Attention: Mark Aron -8- 9 with copies to: CSX Corporation One James Center 901 East Cary Street Richmond, VA 23219 Telecopy No.: (804) 783-1355 Attention: Peter Shudtz Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, New York 10019 Telecopy No.: (212) 403-2000 Attention: Pamela S. Seymon, Esq.; and (ii) if to Issuer, to Conrail Inc. 2001 Market Street Philadelphia, PA 19103 Telecopy No.: (215) 209-4068 Attention: Bruce B. Wilson Senior Vice President - Law with a copy to: Cravath, Swaine & Moore Worldwide Plaza 825 Eighth Avenue New York, New York 10019 Telecopy No.: (212) 474-3700 Attention: Robert A. Kindler, Esq. (g) Assignment. Neither this Agreement nor any of the rights, interests, or obligations under this Agreement may be assigned or -9- 10 delegated, in whole or in part, by operation of law or otherwise, by Issuer or Grantee without the prior written consent of the other. Any assignment or delegation in violation of the preceding sentence shall be void. (h) Further Assurances. In the event of any exercise of the Option by Grantee, Issuer and Grantee shall execute and deliver all other documents and instruments and take all other Section that may be reasonably necessary in order to consummate the transactions provided for by such exercise. (i) ENFORCEMENT. THE PARTIES AGREE THAT IRREPARABLE DAMAGE WOULD OCCUR AND THAT THE PARTIES WOULD NOT HAVE ANY ADEQUATE REMEDY AT LAW IN THE EVENT THAT ANY OF THE PROVISIONS OF THIS AGREEMENT WERE NOT PERFORMED IN ACCORDANCE WITH THEIR SPECIFIC TERMS OR WERE OTHERWISE BREACHED. IT IS ACCORDINGLY AGREED THAT THE PARTIES SHALL BE ENTITLED TO AN INJUNCTION OR INJUNCTIONS TO PREVENT BREACHES OF THIS AGREEMENT AND TO ENFORCE SPECIFICALLY THE TERMS AND PROVISIONS OF THIS AGREEMENT IN ANY FEDERAL COURT LOCATED IN THE STATE OF NEW YORK OR IN NEW YORK STATE COURT, THE FOREGOING BEING IN ADDITION TO ANY OTHER REMEDY TO WHICH THEY ARE ENTITLED AT LAW OR IN EQUITY. IN ADDITION, EACH OF THE PARTIES HERETO (I) CONSENTS TO SUBMIT ITSELF TO THE PERSONAL JURISDICTION OF ANY FEDERAL COURT LOCATED IN THE STATE OF NEW YORK OR ANY NEW YORK STATE COURT IN THE EVENT ANY DISPUTE ARISES OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (II) AGREES THAT IT SHALL NOT ATTEMPT TO DENY OR DEFEAT SUCH PERSONAL JURISDICTION BY MOTION OR OTHER REQUEST FOR LEAVE FROM ANY SUCH COURT, AND (III) AGREES THAT IT SHALL NOT BRING ANY ACTION RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT IN ANY COURT OTHER THAN A FEDERAL COURT SITTING IN THE STATE OF NEW YORK OR A NEW YORK STATE COURT. -10- 11 IN WITNESS WHEREOF, Issuer and Grantee have caused this Agreement to be signed by their respective officers thereunto duly authorized as of the day and year first written above. CONRAIL INC. By: /s/ --------------- Name: Title: CSX CORPORATION By: /s/ --------------- Name: Title: -11- EX-99.C3 12 PARENT STOCK OPTION AGREEMENT 1 EXECUTION COPY WHITE STOCK OPTION AGREEMENT WHITE STOCK OPTION AGREEMENT, dated as of October 14, 1996 (the "Agreement"), by and between Conrail Inc., a Pennsylvania corporation ("Grantee"), and CSX Corporation, a Virginia corporation ("Issuer"). RECITALS A. Issuer and Grantee have entered into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), providing for, among other things, the merger of Grantee with and into a subsidiary of Issuer with such subsidiary as the surviving corporation in the Merger. B. As a condition and inducement to Grantee's willingness to enter into the Merger Agreement and the Green Stock Option Agreement, Grantee has requested that Issuer agree, and Issuer has agreed, to grant Grantee the Option. C. As a condition and inducement to Issuer's willingness to enter into the Merger Agreement and this Agreement, Issuer has requested that Grantee agree, and Grantee has agreed, to grant Issuer an option to purchase shares of Grantee's common stock on substantially the same terms as the Option. D. Terms not defined herein shall have the meanings set forth in the Merger Agreement. NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein Issuer and Grantee agree as follows: 1. Grant of Option. Subject to the terms and conditions set forth herein, Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase up to 43,090,773 (as adjusted as set forth herein) shares (the "Option Shares") of Common Stock, par value $1.00 per share ("Issuer Common Stock"), of Issuer at a purchase price of $64.82 (as adjusted as set forth herein) per Option Share (the "Purchase Price"). 2. Exercise of Option. (a) Subject to any applicable requirements of law including, without limitation, the establish- 2 ment of a voting trust (the "Voting Trust") substantially in the form of Exhibit E to the Merger Agreement as may be required under applicable transportation law, Grantee may exercise the Option, in whole but not in part, at any one time after any event as a result of which the Grantee is entitled to receive the Termination Fee pursuant to the Merger Agreement (a "Purchase Event"); provided, however, that except as provided in the last sentence of this Section 2(a), the Option shall terminate and be of no further force and effect upon the earliest to occur of (A) the Effective Time, (B) 18 months after the first occurrence of a Purchase Event and (C) termination of the Merger Agreement in accordance with its terms prior to the occurrence of a Purchase Event, unless the Grantee has the right to receive a Termination Fee following such termination upon the occurrence of certain events, in which case the Option shall not terminate until the later of (x) six months following the time such Termination Fee becomes payable and (y) the expiration of the period in which the Grantee has such right to receive a Termination Fee. Notwithstanding the termination of the Option, Grantee shall be entitled to purchase the Option Shares if it has exercised the Option in accordance with the terms hereof prior to the termination of the Option and the termination of the Option shall not affect any rights hereunder which by their terms do not terminate or expire prior to or as of such termination. (b) In the event that Grantee wishes to exercise the Option, it shall send to Issuer a written notice (the date of which being herein referred to as the "Notice Date") to that effect which notice also specifies a date not earlier than three business days nor later than 20 business days from the Notice Date for the closing of such purchase (the "Option Closing Date"); provided, however, that (i) if the closing of the purchase and sale pursuant to the Option (the "Option Closing") cannot be consummated by reason of any applicable judgment, decree, order, law or regulation, the period of time that otherwise would run pursuant to this sentence shall run instead from the date on which such restriction on consummation has expired or been terminated and (ii) without limiting the foregoing, if prior notification to or approval of any regulatory authority is required in connection with such purchase, Grantee and Issuer shall promptly file the required notice or application for approval and shall cooperate in -2- 3 the expeditious filing of such notice or application, and the period of time that otherwise would run pursuant to this sentence shall run instead from the date on which, as the case may be, (A) any required notification period has expired or been terminated or (B) any required approval has been obtained, and in either event, any requisite waiting period has expired or been terminated. The place of the Option Closing shall be at the offices of Cravath, Swaine & Moore, 825 Eighth Avenue, New York, New York, and the time of the Option Closing shall be 10:00 a.m. (Eastern Time) on the Option Closing Date. 3. Payment and Delivery of Certificates. (a) At the Option Closing, Grantee shall pay to Issuer in immediately available funds by wire transfer to a bank account designated in writing by Issuer an amount equal to the Purchase Price multiplied by the number of Option Shares. (b) At the Option Closing, simultaneously with the delivery of immediately available funds as provided in Section 3(a), Issuer shall deliver to the trustee under the Voting Trust a certificate or certificates representing the Option Shares to be purchased at the Option Closing, which Option Shares shall be free and clear of all liens, claims, charges and encumbrances of any kind whatsoever. If at the time of issuance of the Option Shares pursuant to the exercise of the Option hereunder, Issuer shall not have redeemed the Green Rights, or shall have issued any similar securities, then each Option Share issued pursuant to such exercise shall also represent a corresponding Green Right or new rights with terms substantially the same as and at least as favorable to Grantee as are provided under the Green Rights Agreement or any similar agreement then in effect. (c) Certificates for the Option Shares delivered at the Option Closing shall have typed or printed thereon a restrictive legend which shall read substantially as follows: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED -3- 4 OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCK OPTION AGREEMENT, DATED AS OF OCTOBER 14, 1996, A COPY OF WHICH MAY BE OBTAINED FROM THE SECRETARY OF GREEN CORPORATION AT ITS PRINCIPAL EXECUTIVE OFFICES." It is understood and agreed that the reference to restrictions arising under the Securities Act in the above legend shall be removed by delivery of substitute certificate(s) without such reference upon the sale of the Option Shares pursuant to the registration rights under the Merger Agreement. 4. Representations and Warranties of Issuer. Issuer hereby represents and warrants to Grantee as follows: (a) Due Authorization. Issuer has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Issuer and the consummation by Issuer of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Issuer. This Agreement has been duly executed and delivered by Issuer and constitutes a legal, valid and binding obligation of Issuer, enforceable against Issuer in accordance with its terms. (b) Authorized Stock. Issuer's representations and warranties in Section 3.2(c) of the Merger Agreement are incorporated herein by reference. Without limiting the generality or effect of the foregoing, Issuer has taken all necessary corporate and other action to authorize and reserve and, to permit it to issue, and, at all times from the date hereof until the obligation to deliver Option Shares upon the exercise of the Option terminates, shall have reserved for issuance, upon exercise of the Option, shares of Issuer Common Stock necessary for Grantee to exercise the Option, and Issuer shall take all -4- 5 necessary corporate action to authorize and reserve for issuance all additional shares of Issuer Common Stock or other securities which may be issued pursuant to Section 6 upon exercise of the Option. The shares of Issuer Common Stock to be issued upon due exercise of the Option, including all additional shares of Issuer Common Stock or other securities which may be issuable upon exercise of the Option or any Substitute Option pursuant to Section 6, upon issuance pursuant hereto, shall be duly and validly issued, fully paid and nonassessable, and shall be delivered free and clear of all liens, claims, charges and encumbrances of any kind or nature whatsoever, including without limitation any preemptive rights of any stockholder of Issuer. (c) No Conflicts. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated by this Agreement and compliance with the provisions of this Agreement shall not, conflict with, or result in any violation of, or default (with or without notice or lapse of time or both) under, or give rise to a right of termination, cancellation, or acceleration of any obligation or loss of a material benefit under, or result in the creation of any Lien upon any of the properties or assets of Issuer or any of its Significant Subsidiaries under, (i) the certificate of incorporation or by-laws of Issuer or the comparable organizational documents of any Significant Subsidiary of Issuer, (ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise, or license applicable to Issuer or any Significant Subsidiary of Issuer or their respective properties or assets, or (iii) subject to approval of the STB of the Voting Trust to the extent contemplated by Exhibit D to the Merger Agreement, any judgment, order, decree, statute, law, ordinance, rule, or regulation applicable to Issuer or any of its Significant Subsidiaries or their respective properties or assets, other than, in the case -5- 6 of clauses (ii) and (iii), any such conflicts, violations, defaults, rights, losses, or Liens that individually or in the aggregate would not (x) have a material adverse effect on Issuer, (y) impair the ability of Issuer to perform its obligations under this Agreement or the Merger Agreement or (z) prevent or materially delay the consummation of any of the transactions contemplated by this Agreement. (d) State Takeover Statutes. Assuming that Grantee, together with its affiliates, does not have voting power with respect to such number of shares of Issuer capital stock as would represent more than 10% of any class of outstanding voting shares of the Issuer as of the date hereof, the Board of Directors of Issuer has taken all action necessary or advisable so as to render inoperative with respect to the transactions contemplated hereby all applicable state anti-takeover statutes. (e) Issuer Rights Amendment. The White Rights Agreement has been amended as set forth in the Merger Agreement, and such amendment, insofar as it relates to the transactions contemplated by this Agreement, shall not be further amended or revoked (including by adopting another rights (or similar) agreement without any such amendment) without the prior consent of Grantee in its sole discretion. 5. Representations and Warranties of Grantee. Grantee hereby represents and warrants to Issuer that: (a) Due Authorization. Grantee has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Grantee and the consummation by Grantee of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Grantee. This Agreement has been duly executed and delivered by Grantee and constitutes a legal, valid and binding -6- 7 obligation of Grantee, enforceable against Grantee in accordance with its terms. (b) No Conflicts. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated by this Agreement and compliance with the provisions of this Agreement hereby shall not, conflict with or result in any violation of, or default (with or without notice or lapse of time or both) under, or give rise to a right of termination, cancellation, or acceleration of any obligation or loss of a material benefit under, or result in the creation of any Lien upon any of the properties or assets of Grantee or any of its Significant Subsidiaries under, (i) the certificate of incorporation or by-laws of Grantee or the comparable organizational documents of any Significant Subsidiary of Grantee, (ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise, or license applicable to Grantee or any Significant Subsidiary of Grantee or their respective properties or assets, or (iii) assuming approval by the STB of the Voting Trust to the extent contemplated by Exhibit D to the Merger Agreement, any judgment, order, decree, statute, law, ordinance, rule, or regulation applicable to Grantee or any of its Significant Subsidiaries or their respective properties or assets, other than, in the case of clauses (ii) and (iii), any such conflicts, violations, defaults, rights, losses, or Liens that individually or in the aggregate would not (x) have a material adverse effect on Grantee, (y) impair the ability of Grantee to perform its obligations under this Agreement or the Merger Agreement or (z) prevent or materially delay the consummation of any of the transactions contemplated by this Agreement. (c) Purchase Not for Distribution. Any Option Shares or other securities acquired by Grantee upon exercise of the Option shall not be transferred or otherwise -7- 8 disposed of except in a transaction registered, or exempt from registration, under the Securities Act. 6. Adjustment upon Changes in Capitalization, Etc. (a) In the event of any change in Issuer Common Stock by reason of a stock dividend, split-up, merger, recapitalization, combination, exchange of shares, or similar transaction, the type and number of shares or securities subject to the Option, and the Purchase Price therefor, shall be adjusted appropriately, and proper provision shall be made in the agreements governing such transaction, so that Grantee shall receive upon exercise of the Option the number and class of shares or other securities or property that Grantee would have received in respect of Issuer Common Stock if the Option had been exercised immediately prior to such event or the record date therefor, as applicable. Subject to Section 1, and without limiting the parties' relative rights and obligations under the Merger Agreement, if any additional shares of Issuer Common Stock are issued after the date of this Agreement (other than pursuant to an event described in the first sentence of this Section 6(a)), the number of shares of Issuer Common Stock subject to the Option shall be adjusted so that, after such issuance, it equals 19.9% of the number of shares of Issuer Common Stock then issued and outstanding, without giving effect to any shares subject to or issued pursuant to the Option. (b) Without limiting the parties' relative rights and obligations under the Merger Agreement, in the event that Issuer enters into an agreement (i) to consolidate with or merge into any person, other than Grantee or one of its subsidiaries, and Issuer shall not be the continuing or surviving corporation in such consolidation or merger, (ii) to permit any person, other than Grantee or one of its subsidiaries, to merge into Issuer and Issuer shall be the continuing or surviving corporation, but in connection with such merger, the shares of Issuer Common Stock outstanding immediately prior to the consummation of such merger shall be changed into or exchanged for stock or other securities of Issuer or any other person or cash or any other property, or the shares of Issuer Common Stock outstanding immediately prior to the consummation of such merger shall, after such merger, represent less than 50% of the outstanding voting securities of the merged company, or (iii) to sell or otherwise transfer all or substantially all of its assets to any person, other than Grantee or one of its subsidiaries, then, and in -8- 9 each such case, the agreement governing such transaction shall make proper provision so that the Option shall, upon the consummation of any such transaction and upon the terms and conditions set forth herein, be converted into, or exchanged for, an option with identical terms appropriately adjusted to acquire the number and class of shares or other securities or property that Grantee would have received in respect of Issuer Common Stock if the Option had been exercised immediately prior to such consolidation, merger, sale, or transfer, or the record date therefor, as applicable. (c) If, prior to the termination of the Option in accordance with Section 2 or the Notice Date, Issuer enters into any agreement pursuant to which all outstanding shares of Issuer Common Stock are to be purchased for, or converted into the right to receive in whole or in part (other than in respect of fractional shares) cash (a "Transaction"), Issuer covenants that proper provision shall be made in such agreement to provide that, if the Option shall not theretofore have been exercised, then upon the consummation of the Transaction (which in the case of a Transaction involving a tender offer shall be when shares of Issuer Common Stock are accepted for payment), Grantee shall receive in exchange for the cancellation of the Option an amount in cash equal to the Cash Consideration. For purposes of this Agreement, the term "Cash Consideration" means the number of Option Shares multiplied by the difference between (A) the closing market price per share of Issuer Common Stock on the day immediately prior to the consummation of such Transaction and (B) the Purchase Price. 7. Registration Rights. The registration rights under the Merger Agreement shall be applicable to the Option Shares. 8. Transfers; Exercise; Voting Trust. The Option Shares may not be sold, assigned, transferred, or otherwise disposed of except as provided in the Voting Trust Agreement. The Option may not be exercised except under, and is in all respects subject to the terms of, the Voting Trust Agreement. 9. Listing. If Issuer Common Stock or any other securities to be acquired upon exercise of the Option are then listed -9- 10 on the NYSE (or any other national securities exchange or national securities quotation system), Issuer, upon the request of Grantee, shall promptly file an application to list the shares of Issuer Common Stock or other securities to be acquired upon exercise of the Option on the NYSE (and any such other national securities exchange or national securities quotation system) and shall use reasonable efforts to obtain approval of such listing as promptly as practicable. 10. Loss or Mutilation. Upon receipt by Issuer of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Agreement, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Agreement, if mutilated, Issuer shall execute and deliver a new Agreement of like tenor and date. Any such new Agreement executed and delivered shall constitute an additional contractual obligation on the part of Issuer, whether or not the Agreement so lost, stolen, destroyed, or mutilated shall at any time be enforceable by anyone. 11. Miscellaneous. (a) Expenses. Except as otherwise provided in the Merger Agreement, each of the parties hereto shall bear and pay all costs and expenses incurred by it or on its behalf in connection with the transactions contemplated hereunder, including fees and expenses of its own financial consultants, investment bankers, accountants and counsel. (b) Amendment. This Agreement may not be amended, except by an instrument in writing signed on behalf of each of the parties. (c) Extension; Waiver. Any agreement on the part of a party to waive any provision of this Agreement, or to extend the time for performance, shall be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights. (d) Entire Agreement; No Third-Party Beneficiaries. This Agreement, the Merger Agreement (including the documents and -10- 11 instruments referred to therein) and the Confidentiality Agreement (i) constitute the entire agreement, and supersede all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter of this Agreement, and (ii) except as provided in Section 8.6 of the Merger Agreement, are not intended to confer upon any person other than the parties any rights or remedies. (e) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF LAWS THEREOF; PROVIDED, HOWEVER, THAT THE LAWS OF THE RESPECTIVE STATES OF INCORPORATION OF EACH OF THE PARTIES HERETO SHALL GOVERN THE RELATIVE RIGHTS, OBLIGATIONS, POWERS, DUTIES AND OTHER INTERNAL AFFAIRS OF SUCH PARTY AND ITS BOARD OF DIRECTORS. (f) Notices. All notices, requests, claims, demands, and other communications under this Agreement must be in writing and shall be deemed given if delivered personally, telecopied (which is confirmed), or sent by overnight courier (providing proof of delivery) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (i) if to Issuer, to CSX Corporation One James Center 901 East Cary Street Richmond, VA 23219 Telecopy No.: (804) 783-1380 Attention: Mark Aron with copies to: CSX Corporation One James Center 901 East Cary Street -11- 12 Richmond, VA 23219 Telecopy No.: (804) 783-1355 Attention: Peter Shudtz Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, New York 10019 Telecopy No.: (212) 403-2000 Attention: Pamela S. Seymon, Esq.; and (ii) if to Grantee, to Conrail Inc. 2001 Market Street Philadelphia, PA 19103 Telecopy No.: (215) 209-4068 Attention: Bruce B. Wilson Senior Vice President - Law with a copy to: Cravath, Swaine & Moore Worldwide Plaza 825 Eighth Avenue New York, New York 10019 Telecopy No.: (212) 474-3700 Attention: Robert A. Kindler, Esq. (g) Assignment. Neither this Agreement nor any of the rights, interests, or obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of law or otherwise, by Issuer or Grantee without the prior written consent of -12- 13 the other. Any assignment or delegation in violation of the preceding sentence shall be void. (h) Further Assurances. In the event of any exercise of the Option by Grantee, Issuer and Grantee shall execute and deliver all other documents and instruments and take all other Section that may be reasonably necessary in order to consummate the transactions provided for by such exercise. (i) ENFORCEMENT. THE PARTIES AGREE THAT IRREPARABLE DAMAGE WOULD OCCUR AND THAT THE PARTIES WOULD NOT HAVE ANY ADEQUATE REMEDY AT LAW IN THE EVENT THAT ANY OF THE PROVISIONS OF THIS AGREEMENT WERE NOT PERFORMED IN ACCORDANCE WITH THEIR SPECIFIC TERMS OR WERE OTHERWISE BREACHED. IT IS ACCORDINGLY AGREED THAT THE PARTIES SHALL BE ENTITLED TO AN INJUNCTION OR INJUNCTIONS TO PREVENT BREACHES OF THIS AGREEMENT AND TO ENFORCE SPECIFICALLY THE TERMS AND PROVISIONS OF THIS AGREEMENT IN ANY FEDERAL COURT LOCATED IN THE STATE OF NEW YORK OR IN NEW YORK STATE COURT, THE FOREGOING BEING IN ADDITION TO ANY OTHER REMEDY TO WHICH THEY ARE ENTITLED AT LAW OR IN EQUITY. IN ADDITION, EACH OF THE PARTIES HERETO (I) CONSENTS TO SUBMIT ITSELF TO THE PERSONAL JURISDICTION OF ANY FEDERAL COURT LOCATED IN THE STATE OF NEW YORK OR ANY NEW YORK STATE COURT IN THE EVENT ANY DISPUTE ARISES OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (II) AGREES THAT IT SHALL NOT ATTEMPT TO DENY OR DEFEAT SUCH PERSONAL JURISDICTION BY MOTION OR OTHER REQUEST FOR LEAVE FROM ANY SUCH COURT, AND (III) AGREES THAT IT SHALL NOT BRING ANY ACTION RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT IN ANY COURT OTHER THAN A FEDERAL COURT SITTING IN THE STATE OF NEW YORK OR A NEW YORK STATE COURT. -13- 14 IN WITNESS WHEREOF, Issuer and Grantee have caused this Agreement to be signed by their respective officers thereunto duly authorized as of the day and year first written above. CONRAIL, INC. By: /s/ ------------------------------------------ Name: Title: CSX CORPORATION By: /s/ ------------------------------------------ Name: Title: -14- EX-99.C4 13 FORM OF VOTING TRUST AGREEMENT 1 EXHIBIT E THE VOTING TRUST AGREEMENT THIS VOTING TRUST AGREEMENT, dated as of _____________, 1996, by and among White Corporation, a Virginia corporation ("Parent"), Green Acquisition Corp., a Pennsylvania corporation and a wholly-owned subsidiary of Parent ("Acquiror"), and The ___________________ Bank (the "Trustee"), W I T N E S S E T H: WHEREAS, Parent, Acquiror and Green, a Pennsylvania corporation (the "Company"), have entered into an Agreement and Plan of Merger, dated as of October 14, 1996 (as it may be amended from time to time, the "Merger Agreement"; capitalized terms used but not defined herein shall have the meanings set forth therein), pursuant to which (i) Acquiror shall commence the Offer (and in certain circumstances a Second Offer) (collectively, the "Tender Offer") for shares of Common Stock of the Company (all such shares accepted for payment pursuant to the Tender Offer or otherwise received, acquired or purchased by or on behalf of Parent or Acquiror, including pursuant to the Option Agreement, the "Acquired Shares"), and (ii) the Company will merge with Acquiror pursuant to the Merger; WHEREAS, Parent, Acquiror and the Company have entered into a Stock Option Agreement, dated as of October 14, 2 1996 (as it may be amended from time to time, the "Option Agreement") providing Parent and Acquiror the option to purchase 15,955,477 shares of common stock of the Company; WHEREAS, Parent and Acquiror wish (and are obligated pursuant to the Merger Agreement and the Option Agreement), simultaneously with the acceptance for payment of such Acquired Shares pursuant to the Tender Offer, the Option Agreement or otherwise to deposit such Shares of Common Stock in an independent, irrevocable voting trust, pursuant to the rules of the Surface Transportation Board (the "STB"), in order to avoid any allegation or assertion that the Parent or the Acquiror is controlling or has the power to control the Company prior to the receipt of any required STB approval or exemption; WHEREAS, neither the Trustee nor any of its affiliates has any officers or board members in common or any direct or indirect business arrangements or dealings (as described in Paragraph 9 hereof) with the Parent or the Acquiror or any of their affiliates; and WHEREAS, the Trustee is willing to act as voting trustee pursuant to the terms of this Trust Agreement and the rules of the Surface Transportation Board ("STB"), NOW THEREFORE, the parties hereto agree as follows: E-1 3 1. Creation of Trust - The Parent and the Acquiror hereby appoint the ____________ Bank as Trustee hereunder, and the Bank hereby accepts said appointment and agrees to act as Trustee under this Trust Agreement as provided herein. 2. Trust Is Irrevocable - This Trust Agreement and the nomination of the Trustee during the term of the trust shall be irrevocable by the Parent and the Acquiror and their affiliates and shall terminate only in accordance with, and to the extent of, the provisions of Paragraphs 8 and 14 hereof. 3. Deposit of Trust Stock - The Parent and the Acquiror agree that, prior to acceptance of Acquired Shares purchased pursuant to the Tender Offer, the Acquiror will direct the depositary for the Tender Offer to transfer to the Trustee any such Acquired Shares purchased pursuant to the Tender Offer. The Parent and the Acquiror also agree that simultaneously with receipt, acquisition or purchase of any additional shares of Common Stock by either of them, directly or indirectly, or by any of their affiliates, including, without limitation, upon any exercise of the option provided for in the Option Agreement, they will transfer to the Trustee the certificate or certificates for such shares. All such certificates shall be duly endorsed or accompanied by proper instruments duly executed for transfer thereof to the Trustee E-2 4 or otherwise validly and properly transferred, and shall be exchanged for one or more Voting Trust Certificates substantially in the form attached hereto as Exhibit A (the "Trust Certificates"), with the blanks therein appropriately filled in. All shares of Common Stock at any time delivered to the Trustee hereunder are called the "Trust Stock." The Trustee shall present to the Company all certificates representing Trust Stock for surrender and cancellation and for the issuance and delivery to the Trustee of new certificates registered in the name of the Trustee or its nominee. 4. Powers of Trustee - The Trustee shall be present, in person or represented by proxy, at all annual and special meetings of shareholders of the Company so that all Trust Stock may be counted for the purposes of determining the presence of a quorum at such meetings. Parent and Acquiror agree, and the Trustee acknowledges, that the Trustee shall not participate in or interfere with the management of the Company and shall take no other actions with respect to the Company except in accordance with the terms hereof. The Trustee shall exercise all voting rights in respect of the Trust Stock to approve and effect the Merger, and in favor of any proposal or action necessary or desirable to effect, or consistent with the effectuation of, the Parent and Acquiror's acquisition of the Company, pursuant to the Merger Agreement, and without limiting the generality of the E-3 5 foregoing, if there shall be with respect to the Board of Directors of the Company an "Election Contest" as defined in the Proxy Rules of the Securities and Exchange Commission, in which one slate of nominees shall support the effectuation of the Merger and another oppose it, in favor of the slate supporting the effectuation of the Merger. In addition, for so long as the Merger Agreement is in effect, the Trustee shall exercise all voting rights in respect of the Trust Stock, to cause any other proposed merger, business combination or similar transaction (including, without limitation, any consolidation, sale or purchase of assets, reorganization, recapitalization, liquidation or winding up of or by the Company) involving the Company, but not involving the Parent or one of its subsidiaries or affiliates (otherwise than in connection with a disposition pursuant to Paragraph 8), not to be effected. In addition, the Trustee shall exercise all voting rights in respect of the Trust Stock in favor of any proposal or action necessary or desirable to dispose of Trust Stock in accordance with Paragraph 8 hereof. Except as provided in the three immediately preceding sentences, the Trustee shall vote all shares of Trust Stock with respect to all matters, including without limitation the election or removal of directors, voted on by the shareholders of the Company (whether at a regular or special meeting or pursuant to a unanimous written consent) in the same proportion as all shares of Common Stock (other than Trust Stock) E-4 6 are voted with respect to such matters. In exercising its voting rights in accordance with this Paragraph 4, the Trustee shall take such actions at all annual, special or other meetings of stockholders of the Company or in connection with any and all consents of shareholders in lieu of a meeting. 5. Further Provisions Concerning Voting of Trust Stock - The Trustee shall be entitled and it shall be its duty to exercise any and all voting rights in respect of the Trust Stock either in person or by proxy, as hereinafter provided (including without limitation Paragraphs 4 and 8(b) hereof), unless otherwise directed by the STB or a court of competent jurisdiction. Subject to Paragraph 4, the Trustee shall not exercise the voting powers of the Trust Stock in any way so as to create any dependence or intercorporate relationship between (i) any or all of the Parent, the Acquiror and their affiliates, on the one hand, and (ii) the Company or its affiliates, on the other hand. The term "affiliate" or "affiliates" wherever used in this Trust Agreement shall have the meaning specified in Section 11323(c) of Title 49 of the United States Code, as amended. The Trustee shall not, without the prior approval of the STB, vote the Trust Stock to elect any officer, director, nominee or representative of the Parent, the Acquiror or their affiliates as an officer or director of the Company or of any affiliate of the Company. The Trustee shall be kept informed E-5 7 respecting the business operations of the Company by means of the financial statements and other public disclosure documents periodically filed by the Company and affiliates of the Company with the Securities and Exchange Commission (the "SEC") and the STB, and by means of information respecting the Company contained in such statements and other documents filed by the Parent with the SEC and the STB, copies of which shall be promptly furnished to the Trustee by the Company or the Parent, as the case may be, and the Trustee shall be fully protected in relying upon such information. The Trustee shall not be liable for any mistakes of fact or law or any error of judgment, or for any act or omission, except as a result of the Trustee's willful misconduct or gross negligence. Notwithstanding the foregoing provisions of this Paragraph 5, however, the registered holder of any Trust Certificate may at any time with the prior written approval of the Company -- but only with the prior written approval of the STB -- instruct the Trustee in writing to vote the Trust Stock represented by such Trust Certificate in any manner, in which case the Trustee shall vote such shares in accordance with such instructions. 6. Transfer of Trust Certificates - The Trust Certificates shall be transferable only with the prior written consent of the Company. They may be transferred on the books of the Trustee by the registered holder upon the surrender thereof properly assigned, in accordance with rules E-6 8 from time to time established for the purpose by the Trustee. Until so transferred, the Trustee may treat the registered holder as owner for all purposes. Each transferee of a Trust Certificate issued hereunder shall, by his acceptance thereof, assent to and become a party to this Trust Agreement, and shall assume all attendant rights and obligations. Any such transfer in violation of this Paragraph 6 shall be null and void. 7. Dividends and Distributions - Pending the termination of this Trust as hereinafter provided, the Trustee shall, immediately following the receipt of each cash dividend or cash distribution as may be declared and paid upon the Trust Stock, pay the same over to or as directed by the Acquiror or to or as directed by the holder of the Trust Certificates hereunder as then appearing on the books of the Trustee. The Trustee shall receive and hold dividends and distributions other than cash upon the same terms and conditions as the Trust Stock and shall issue Trust Certificates representing any new or additional securities that may be paid as dividends or otherwise distributed upon the Trust Stock to the registered holders of Trust Certificates in proportion to their respective interests. 8. Disposition of Trust Stock; Termination of Trust - (a) This Trust is accepted by the Trustee subject to the right hereby reserved in the Parent at any time to sell or make any other disposition of the whole or any part of the Trust Stock, but only as E-7 9 permitted by subparagraph (e) below, whether or not an event described in subparagraph (b) below has occurred. The Trustee shall take all actions reasonably requested by the Parent (including, without limitation, exercising all voting rights in respect of Trust Stock in favor of any proposal or action necessary or desirable to effect, or consistent with the effectuation of or with respect to any proposed sale or other disposition of the whole or any part of the Trust Stock by the Acquiror or Parent that is otherwise permitted pursuant to this Paragraph 8, including, without limitation, in connection with the exercise by Parent of its registration rights under the Merger Agreement. The Trustee shall be entitled to rely on a certification from the Parent, signed by its President or one of its Vice Presidents and under its corporate seal, that a disposition of the whole or any part of the Trust Stock is being made in accordance with the requirements of subparagraph (e) below. In the event of a permitted sale of Trust Stock by the Acquiror, the Trustee shall, to the extent the consideration therefor is payable to or controllable by the Trustee, promptly pay, or cause to be paid, upon the order of the Acquiror the net proceeds of such sale to the registered holders of the Trust Certificates in proportion to their respective interests. It is the intention of this Paragraph that no violation of 49 U.S.C. Section 11323 will result from a termination of this Trust. (b) In each case under this subparagraph (b), subject to the prior written consent of the Company, in the event the STB by final order shall (i) approve or exempt the acquisition of control of the Company by the Acquiror, the E-8 10 Parent or any of their affiliates or (ii) approve or exempt a merger between the Company and the Acquiror, the Parent or any of their affiliates, then immediately upon the direction of the Parent and the delivery of a certified copy of such order of the STB or other governmental authority with respect thereof, or, in the event that Subtitle IV of Title 49 of the United States Code, or other controlling law, is amended to allow the Acquiror, the Parent or their affiliates to acquire control of the Company without obtaining STB or other governmental approval, upon delivery of an opinion of independent counsel selected by the Trustee that no order of the STB or other governmental authority is required, the Trustee shall either (x) transfer to or upon the order of the Acquiror, the Parent or the holder or holders of Trust Certificates hereunder as then appearing on the records of the Trustee, its right, title and interest in and to all of the Trust Stock then held by it in accordance with the terms, conditions and agreements of this Trust Agreement and not theretofore transferred by it as provided in subparagraph (a) hereof, or (y) if shareholder approval has not previously been obtained, vote the Trust Stock with respect to any such merger between the Company and the Acquiror, the Parent or any affiliate of either as directed by the holder or holders of a majority in interest of the Trust Certificates, and upon any such merger this Trust shall cease and come to an end. (c)(i) Upon consummation of the Merger, the Trust Stock shall be canceled and retired and shall cease to exist in accordance with Section 2.1(c) of the Merger Agreement, and thereafter this Trust shall cease and come to an end. E-9 11 (ii) In the event that the Merger Agreement terminates in accordance with its terms, Parent shall use its best efforts to sell the Trust Stock during a period of two years after such termination or such extension of that period as the STB shall approve and the Company shall reasonably approve. Any such disposition shall be subject to the requirements of subparagraph (e) below, and to any jurisdiction of the STB to oversee Parent's divestiture of Trust Stock. At all times, the Trustee shall continue to perform its duties under this Trust Agreement and, should Parent be unsuccessful in its efforts to sell or distribute the Trust Stock during the period referred to, the Trustee shall then as soon as practicable, and subject to the requirements of subparagraph (e) below, sell the Trust Stock for cash to eligible purchasers in such manner and for such price as the Trustee in its discretion shall deem reasonable after consultation with Parent. (An "eligible purchaser" hereunder shall be a person or entity that is not affiliated with Parent and which has all necessary regulatory authority, if any, to purchase the Trust Stock.) Parent agrees to cooperate with the Trustee in effecting such disposition and the Trustee agrees to act in accordance with any direction made by Parent as to any specific terms or method of disposition, to the extent not inconsistent with any of the terms of this Trust Agreement, including subparagraph (e) below, and with the requirements of the terms of any STB or court order. The proceeds of the sale E-10 12 shall be distributed to or upon the order of Parent or, on a pro rata basis, to the holder or holders of the Trust Certificates hereunder as then known to the Trustee. The Trustee may, in its reasonable discretion, require the surrender to it of the Trust Certificates hereunder before paying to the holder his share of the proceeds. Upon disposition of all the Trust Stock pursuant to this paragraph 8(c)(ii), this Trust shall cease and come to an end. (d) Unless sooner terminated pursuant to any other provision herein contained, this Trust Agreement shall terminate on December 31, 2016, and may be extended by the parties hereto, so long as no violation of 49 U.S.C. Section 11323 will result from such termination or extension. All Trust Stock and any other property held by the Trustee hereunder upon such termination shall be distributed to or upon the order of the Acquiror. The Trustee may, in its reasonable discretion, require the surrender to it of the Trust Certificates hereunder before the release or transfer of the stock interests evidenced thereby. (e) No disposition of Trust Stock shall be made except pursuant to one or more broadly distributed public offerings and subject to all necessary regulatory approvals, if any. Notwithstanding the foregoing, Trust Stock may be distributed as otherwise directed by Parent, with the prior written consent of the Company, in which case the Trustee shall be entitled to rely on a certificate of Parent (acknowledged by the Company) that such person or entity to whom the Trust Stock is disposed is not any affiliate of the Parent and has all necessary regu- E-11 13 latory authority, if any is necessary, to purchase such Trust Stock. The Trustee shall promptly inform the STB of any transfer or disposition of Trust Stock pursuant to this Paragraph 8. (f) Except as expressly provided in this Paragraph 8, the Trustee shall not dispose of, or in any way encumber, the Trust Stock, and any transfer, sale or encumbrance in violation of the foregoing shall be null and void. 9. Independence of the Trustee - Neither the Trustee nor any affiliate of the Trustee may have (i) any officers, or members of their respective boards of directors, in common with the Acquiror, the Parent, or any affiliate of either, or (ii) any direct or indirect business arrangements or dealings, financial or otherwise, with the Acquiror, the Parent or any affiliate of either, other than dealings pertaining to the establishment and carrying out of this voting trust. Mere investment in the stock or securities of the Acquiror or the Parent or any affiliate of either by the Trustee, short of obtaining a controlling interest, will not be considered a proscribed business arrangement or dealing, but in no event shall any such investment by the Trustee in voting securities of the Acquiror, the Parent or their affiliates exceed five percent of their outstanding voting securities and in no event shall the Trustee hold a proportion of such voting securities so substantial as to permit the Trustee in any way to control or direct the affairs E-12 14 of the Acquiror, the Parent or their affiliates. Neither the Acquiror, the Parent nor their affiliates shall purchase the stock or securities of the Trustee or any affiliate of the Trustee. 10. Compensation of the Trustee - The Trustee shall be entitled to receive reasonable and customary compensation for all services rendered by it as Trustee under the terms hereof and said compensation to the Trustee, together with all counsel fees, taxes, or other expenses reasonably incurred hereunder, shall be promptly paid by the Acquiror or the Parent. 11. Trustee May Act Through Agents - The Trustee may at any time or from time to time appoint an agent or agents and may delegate to such agent or agents the performance of any administrative duty of the Trustee. 12. Concerning the Responsibilities and Indemnification of the Trustee - The Trustee shall not be answerable for the default or misconduct of any agent or attorney appointed by it in pursuance hereof if such agent or attorney has been selected with reasonable care. The duties and responsibilities of the Trustee shall be limited to those expressly set forth in this Trust Agreement. The Trustee shall not be responsible for the sufficiency or the accuracy of the form, execution, validity or genuineness of the Trust Stock, or of any documents relating thereto, or for any lack E-13 15 of endorsement thereon, or for any description therein, nor shall the Trustee be responsible or liable in any respect on account of the identity, authority or rights of the persons executing or delivering or purporting to execute or deliver any such Trust Stock or document or endorsement or this Trust Agreement, except for the execution and delivery of this Trust Agreement by this Trustee. The Acquiror and the Parent agree that they will at all times protect, indemnify and save harmless the Trustee from any loss, cost or expense of any kind or character whatsoever in connection with this Trust except those, if any, growing out of the negligence or willful misconduct of the Trustee, and will at all times themselves undertake, assume full responsibility for, and pay all costs and expense of any suit or litigation of any character, including any proceedings before the STB, with respect to the Trust Stock of this Trust Agreement, and if the Trustee shall be made a party thereto, the Acquiror or the Parent will pay all costs and expenses, including reasonable counsel fees, to which the Trustee may be subject by reason thereof; provided, however, that the Acquiror and the Parent shall not be responsible for the cost and expense of any suit that the Trustee shall settle without first obtaining the Parent's written consent. The Trustee may consult with counsel and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or omitted E-14 16 or suffered by the Trustee hereunder in good faith and in accordance with such opinion. 13. Trustee to Give Account to Holders - To the extent requested to do so by the Acquiror or any registered holder of a Trust Certificate, the Trustee shall furnish to the party making such request full information with respect to (i) all property theretofore delivered to it as Trustee, (ii) all property then held by it as Trustee, and (iii) all actions theretofore taken by it as Trustee. 14. Resignation, Succession, Disqualification of Trustee - The Trustee, or any trustee hereafter appointed, may at any time resign by giving sixty days' written notice of resignation to the Parent and the STB. The Parent shall at least fifteen days prior to the effective date of such notice appoint a successor trustee which shall (i) satisfy the requirements of Paragraph 9 hereof and (ii) be a corporation organized and doing business under the laws of the United States or of any State thereof and authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by federal or state authority. If no successor trustee shall have been appointed and shall have accepted appointment at least fifteen days prior to the effective date of such notice of resignation, the resigning Trustee may petition any competent authority or E-15 17 court of competent jurisdiction for the appointment of a successor trustee. Upon written assumption by the successor trustee of the Trustee's powers and duties hereunder, a copy of the instrument of assumption shall be delivered by the Trustee to the Parent and the STB and all registered holders of Trust Certificates shall be notified of its assumption, whereupon the Trustee shall be discharged of the powers and duties of the Trustee hereunder and the successor trustee shall become vested with such powers and duties. In the event of any material violation by the Trustee of the terms and conditions of this Trust Agreement, the Trustee shall become disqualified from acting as trustee hereunder as soon as a successor trustee shall have been selected in the manner provided by this paragraph. 15. Amendment - Subject to the requirements of Section 1.9 of the Merger Agreement, this Trust Agreement may from time to time be modified or amended by agreement executed by the Trustee, the Acquiror (if executed prior to the Merger), the Parent and all registered holders of the Trust Certificates (i) pursuant to an order of the STB, (ii) with the prior approval of the STB, (iii) in order to comply with any order of the STB or (iv) upon receipt of an opinion of counsel satisfactory to the Trustee and the holders of Trust Certificates that an order of the STB approving such modification or amendment is not required and E-16 18 that the amendment is consistent with the STB's regulations regarding voting trusts. 16. Governing Law; Powers of the STB - The provisions of this Trust Agreement and of the rights and obligations of the parties hereunder shall be governed by the laws of the Commonwealth of Pennsylvania, except that to the extent any provision hereof may be found inconsistent with subtitle IV, title 49, United States Code or regulations promulgated thereunder, such statute and regulations shall control and such provision hereof shall be given effect only to the extent permitted by such statute and regulations. In the event that the STB shall, at any time hereafter by final order, find that compliance with law requires any other or different action by the Trustee than is provided herein, the Trustee shall act in accordance with such final order instead of the provisions of this Trust Agreement. 17. Counterparts - This Trust Agreement is executed in four counterparts, each of which shall constitute an original, and one of which shall be held by each of the Parent and the Acquiror and the other two shall be held by the Trustee, one of which shall be subject to inspection by holders of Trust Certificates on reasonable notice during business hours. E-17 19 18. Filing With the STB - A copy of this Agreement and any amendments or modifications thereto shall be filed with the STB by the Acquiror. 19. Successors and Assigns - This Trust Agreement shall be binding upon the successors and assigns to the parties hereto, including without limitation successors to the Acquiror and the Parent by merger, consolidation or otherwise. The parties agree that the Company shall be an express third party beneficiary of this Trust Agreement. Except as otherwise expressly set forth herein, any consent required from the Company hereunder shall be granted or withheld in the Company's sole discretion. 20. Succession of Functions - The term "STB" includes any successor agency or governmental department that is authorized to carry out the responsibilities now carried out by the STB with respect to the consideration of the consistency with the public interest of rail mergers and combinations, the regulation of voting trusts in respect of the acquisition of securities of rail carriers or companies controlling them, and the exemption of approved rail mergers and combinations from the antitrust laws. 21. Notices - Any notice which any party hereto may give to the other hereunder shall be in writing and shall be given by hand delivery, or by first class E-18 20 registered mail, or by overnight courier service, or by facsimile transmission confirmed by one of the aforesaid methods, sent, If to Purchaser or Acquiror, to White Corporation --------------------------- --------------------------- Attention: General Counsel If to the Trustee, to --------------------------- --------------------------- --------------------------- And if to the holders of Trust Certificates, to them at their addresses as shown on the records maintained by the Trustee. 22. Remedies - Each of the parties hereto acknowledges and agrees that in the event of any breach of this Agreement, each non-breaching party would be irreparably and immediately harmed and could not be made whole by monetary damages. It is accordingly agreed that the parties hereto (a) will waive, in any action for specific performance, the defense of adequacy of a remedy at law and (b) shall be entitled, in addition to any other remedy to which they may be entitled at law or in equity, to an order compelling specific performance of this Agreement in any E-19 21 action instituted in any state or federal court sitting in Philadelphia, Pennsylvania. Each party hereto consents to personal jurisdiction in any such action brought in any state or federal court sitting in Philadelphia, Pennsylvania. IN WITNESS WHEREOF, White Corporation and Green Acquisition Corp. have caused this Trust Agreement to be executed by their authorized officers and their corporate seals to be affixed, attested by their Secretaries or Assistant Secretaries, and the Bank has caused this Trust Agreement to be executed by one of its Assistant Vice Presidents and its corporate seal to be affixed, attested to by one of its Assistant Corporate Trust Officers, all as of the day and year first above written. Attest: WHITE CORPORATION _______________________________ By_____________________________ Secretary Attest: GREEN ACQUISITION CORP. _______________________________ By_____________________________ Secretary Attest: __________________BANK E-20 22 ________________________________ _______________________________ No. EXHIBIT A _____________________________ _____________ Shares VOTING TRUST CERTIFICATE FOR COMMON STOCK, of _____________________CORPORATION INCORPORATED UNDER THE LAWS OF THE STATE OF______________________________ THIS IS TO CERTIFY that ___________________ will be entitled, on the surrender of this Certificate, to receive on the termination of the Voting Trust Agreement hereinafter referred to, or otherwise as provided in Paragraph 8 of said Voting Trust Agreement, a certificate or certificates for _________ shares of the Common Stock, $ par value, of_________________ Corporation, a_________ corporation (the "Company"). This Certificate is issued pursuant to, and the rights of the holder hereof are subject to and limited by, the terms of a Voting Trust Agreement, dated as of____________ , 1996, executed by ___________ Corporation, a corporation,__________________ Corporation, a___________________ corporation, and the ___________ Bank, as Voting Trustee, a copy of which Voting Trust Agreement is on file in the registered office of said corporation at__________, and open to inspection of any stockholder of the Company and the holder hereof. The Voting Trust Agreement, unless earlier terminated (or extended) pursuant to the terms thereof, will terminate on December 31, 2016, so long as no violation of 49 U.S.C. Section 11323 will result from such termination. The holder of this Certificate shall be entitled to the benefits of said Voting Trust Agreement, including the right to receive payment equal to the cash dividends, if any, paid by the Company with respect to the number of shares represented by this Certificate. This Certificate shall be transferable only on the books of the undersigned Voting Trustee or any successor, to be kept by it, on surrender hereof by the registered holder in person or by attorney duly authorized in accordance with the E-21 23 provisions of said Voting Trust Agreement, and until so transferred, the Voting Trustee may treat the registered holder as the owner of this Voting Trust Certificate for all purposes whatsoever, unaffected by any notice to the contrary. By accepting this Certificate, the holder hereof assents to all the provisions of, and becomes a party to, said Voting Trust Agreement. IN WITNESS WHEREOF, the Voting Trustee has caused this Certificate to be signed by its officer duly authorized. Dated: THE ________________ BANK By____________________________________ Authorized Officer E-22 24 [FORM OF BACK OF VOTING TRUST CERTIFICATE] FOR VALUE RECEIVED________________________________ hereby sells, assigns, and transfers unto___________________ the within Voting Trust Certificate and all rights and interests represented thereby, and does hereby irrevocably constitute and appoint _________________________ Attorney to transfer said Voting Trust Certificate on the books of the within mentioned Voting Trustee, with full power of substitution in the premises. _____________________________ Dated: In the Presence of: ____________________________ E-23 -----END PRIVACY-ENHANCED MESSAGE-----