-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, nPm3+uu1dMzPK+imkD/yCf4d2Vwoq5L+l4Lv6VDwBUVql36A/GbdNRC/qP/JpMO+ /+LV3Y9jC7NOBASN8XxHBg== 0000897732-95-000015.txt : 19950627 0000897732-95-000015.hdr.sgml : 19950627 ACCESSION NUMBER: 0000897732-95-000015 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19950626 SROS: NYSE SROS: PHLX 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: 95549199 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: 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 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 SC 13D 1 CONRAIL INC. SCHEDULE 13D JUNE 1995 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 Conrail Inc. ------------ (Name of Issuer) Common Stock, Par Value $1 Per Share ------------------------------------ (Title of Class of Securities) 20836810 -------------- (CUSIP Number) Carol Condie Cheryl Cook, Esq. Mellon Bank, N.A. Conrail Inc. One Mellon Bank Center 2001 Market Street Suite 3346 Two Commerce Square Pittsburgh, PA 15258-0001 Philadelphia, PA 10101 (412) 234-8820 (215) 209-4000 - ------------------------------------------------------------- (Name, address and telephone number of persons authorized to receive notices and communications) June 15, 1995 _____________________________________________________________ (Date of Event which requires Filing of this Statement) If the filing person had previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box: [ ] Check the following box if a fee is being paid with this statement: [X] ___________________ _________________ CUSIP NO. 20836810 Page 2 of 9 pages - ------------------- ----------------- ___________________________________________________________ 1. Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person Mellon Bank, N.A., as Trustee of the Conrail Inc. Employee Benefits Trust ____________________________________________________________ 2. Check the Appropriate Box if a Member of a Group (a) [ ] (b) [ ] Not Applicable ____________________________________________________________ 3. SEC Use only ____________________________________________________________ 4. Source of Funds SC, OO - ------------------------------------------------------------ 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) [ ] ____________________________________________________________ 6. Citizenship or Place of Organization Pennsylvania ____________________________________________________________ Number of Shares 7. Sole Voting Power Beneficially 0 Owned by Each 8. Shared Voting Power Reporting Person 4,728,132 With 9. Sole Dispositive Power 0 10. Shared Dispositive Power 4,728,132 ____________________________________________________________ 11. Aggregate Amount Beneficially Owned by Each Reporting Person 4,728,132 shares ____________________________________________________________ 12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares [ ] ____________________________________________________________ 13. Percent of Class Represented by Amount in Row (11) 6.0% ____________________________________________________________ 14. Type of Reporting Person BK, OO ____________________________________________________________ ___________________ _________________ CUSIP NO. 20836810 Page 3 of 9 pages - ------------------- ----------------- Item 1. Security and Issuer ------------------- The class of equity securities to which this Schedule relates is the Common Stock, par value $1 per share ("Common Stock"), of Conrail Inc., a Pennsylvania corporation (the "Issuer"). The principal executive offices of the Issuer are located at 2001 Market Street, Two Commerce Square, Philadelphia, PA 10101. Item 2. Identity and Background ----------------------- This Schedule is being filed by the Conrail Inc. Employee Benefits Trust (the "Trust"). The address of the Trust is c/o Mellon Bank, N.A., One Mellon Bank Center, Suite 3346, Pittsburgh, PA 15258-0001. The address of the trustee of the Trust (the "Trustee") is Mellon Bank, N.A., One Mellon Bank Center, Suite 3346, Pittsburgh, PA 15258-0001. The Trust is a trust organized under the laws of the Commonwealth of Pennsylvania and is not engaged in the conduct of any business. The Trustee is a national banking association organized under the laws of the United States. Except as described herein, during the past five years, neither the Trust nor the Trustee has been (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is ___________________ _________________ CUSIP NO. 20836810 Page 4 of 9 pages - ------------------- ----------------- subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, Federal or state securities laws or finding any violation with respect to such laws. In January 1992, the office of the Comptroller of the Currency accepted an Offer of Settlement from Mellon Bank, N.A., in an administrative proceeding, under which Mellon Bank agreed not to violate section 15C of the Securities Act of 1934, in connection with its participation in the primary distribution of certain debt securities issued by various government enterprises. Item 3. Source and Amount of Funds or Other Consideration ------------------------------------------------- On June 15, 1995, the Issuer and the Trustee entered into a trust agreement creating the Trust (the "Trust Agreement"). A copy of the Trust Agreement is annexed hereto as Exhibit 1. Pursuant to the terms of the Trust Agreement, the Issuer sold 4,728,132 shares of Common Stock to the Trust at a price equal to $52.875 per share (the last reported sales price on the New York Stock Exchange Composite Tape on June 15, 1995), or an aggregate purchase price of $249,999,979.50. The purchase price is evidenced by a promissory note (the "Note") delivered by the Trustee to the Issuer. The form of such Note is set forth as Exhibit B to the Trust Agreement. The Note bears interest at the rate of 6.90% per annum and is payable in installments as provided therein. ___________________ _________________ CUSIP NO. 20836810 Page 5 of 9 pages - ------------------- ----------------- The Issuer may from time to time contribute cash to the Trust, which, together with earnings of the Trust (primarily dividends on the shares of Common Stock), will be applied to payment of principal and interest on the Note. If the contributions to, and earnings of, the Trust are insufficient to satisfy any installment of principal and interest on the due date thereof, the Issuer may, in its discretion, forgive such installment to the extent of the insufficiency. The Note may be prepaid in a similar manner. Item 4. Purpose of Transaction ---------------------- The Issuer has advised the Trustee that the Trust was created to provide for the satisfaction of certain obligations of the Issuer and its affiliates under various employee benefit plans of the Issuer, including those providing for the acquisition by employees of shares of Common Stock. In addition, the Issuer has advised the Trustee that the Trust was formed for the purpose of enhancing the Issuer's financial flexibility. Although the Issuer has also advised the Trustee that the purchase of shares of Common Stock by the Trust is not intended to be an antitakeover device, such purchase may be considered to have certain antitakeover effects. The Trust holds approximately 6.0% of the outstanding shares of Common Stock. The Trust Agreement provides that shares held by the Trustee shall be voted in the same proportion and manner as any shares of voting stock of the Issuer held in accounts of participants ___________________ _________________ CUSIP NO. 20836810 Page 6 of 9 pages - ------------------- ----------------- in the Issuer's Matched Savings Plan (the "MSP"), and also provides for a similar procedure in the case of a tender or exchange offer for shares of Common Stock. Such participants direct the voting or tender of shares held in their MSP accounts. See Item 5 below. Under the Pennsylvania Business Corporation Law, various transactions including adoption of a plan of merger or share exchange would require the approval of a majority of the outstanding shares of Common Stock. The transfer of shares of Common Stock to the Trust may, in the absence of employee support, make more difficult or discourage such transactions or a tender offer or proxy contest, whether or not other shareholders regard the particular transactions or proposals as favorable to the Issuer. Item 5. Interest in Securities of the Issuer ------------------------------------ The Trust holds 4,728,132 shares of Common Stock, as to which it may be deemed to have shared power to vote or to direct the vote or to dispose or direct the disposition, as hereinafter stated. The filing of this Schedule 13D by the Trust does not constitute, and should not be construed as, an admission that the Trustee beneficially owns any securities covered by this Schedule or is required to file this Schedule. The Trustee disclaims beneficial ownership of the securities covered by this Schedule. Shares of Common Stock acquired pursuant to the Trust Agreement are held in the Trust and will be released ___________________ _________________ CUSIP NO. 20836810 Page 7 of 9 pages - ------------------- ----------------- as the principal of the Note is paid or forgiven and will be transferred to or for the benefit of certain employee benefit plans of the Issuer (the "Plans") in the manner set forth in the Trust Agreement. As of the date hereof, no shares of Common Stock have been released from the Trust pursuant to the terms of the Trust Agreement. The Issuer has advised the Trustee that contributions, if any, by the Issuer to the Plans will be decreased by the value of the released shares transferred to the Plans from the Trust. The Trustee has no discretion in the manner in which the Common Stock will be voted. Under the Trust Agreement, participants in the MSP will, in effect, determine the proportion and manner in which shares of Common Stock held in the Trust are voted or are tendered in response to any tender or exchange offer for shares of Common Stock. Participants in the MSP direct the voting and tendering of shares of voting stock of the Issuer held in their accounts. All voting and other actions taken by individual MSP participants will be held in confidence and not disclosed to any person, including officers and employees of the Issuer. ___________________ _________________ CUSIP NO. 20836810 Page 8 of 9 pages - ------------------- ----------------- Item 6. Contracts, Arrangements, Understandings or ------------------------------------------ Relationships with Respect to Securities of the ----------------------------------------------- Issuer ------ The Issuer and the Trustee, as trustee for the Trust, have entered into the Trust Agreement, and the Trustee, as trustee for the Trust, has issued the Note to the Issuer in payment for the 4,728,132 shares of Common Stock issued to the Trust. See also Items 3 and 5 of this Schedule. Item 7. Material to be Filed as Exhibits -------------------------------- 1 -- The Conrail Inc. Employee Benefits Trust Agreement dated June 15, 1995, between Conrail Inc. and Mellon Bank, N.A., as Trustee. 2 -- Form of Promissory Note dated June 15, 1995, delivered to Conrail Inc. by Mellon Bank, N.A., as Trustee. ___________________ _________________ CUSIP NO. 20836810 Page 9 of 9 pages - ------------------- ----------------- SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. MELLON BANK, N.A., as Trustee of the Conrail Inc. Employee Benefits Trust By /s/ ------------------------- Name: Allan M. Seaman Title: Associate Counsel Dated: June 26, 1995 EX-1 2 CONRAIL INC. EMPLOYEE BENEFITS TRUST AGREEMENT CONRAIL INC. EMPLOYEE BENEFITS TRUST AGREEMENT TRUST AGREEMENT, dated June 15, 1995, by and between CONRAIL INC., a Pennsylvania corporation (the "Company"), and MELLON BANK, N.A., as trustee of the Trust created hereby (the "Trustee"). The Company is or may become obligated in respect of existing and future incentive, compensation and benefit plans and arrangements to make payments to or for the benefit of past, present or future employees and directors, or their respective beneficiaries. For the purpose of providing for the satisfaction, in whole or in part, of certain of such obligations, as the Board of Directors of the Company may from time to time determine, the Company desires to establish a trust (the "Trust"), which shall be a grantor trust within the meaning of Section 671 of the Internal Revenue Code of 1986, as amended (the "Code"), the assets of which shall be subject to the claims of the Company's existing or future general creditors. NOW, THEREFORE, in consideration of the mutual agreements contained herein and for other good and valuable consideration, the parties hereto agree as follows: 2 ARTICLE I Establishment ------------- SECTION 1.1. Trust Fund. The assets held at any ----------- time and from time to time under the Trust collectively are herein referred to as the "Trust Fund" and shall consist of contributions received by the Trustee, proceeds of any loans, investments and reinvestments thereof and the earnings and income thereon, less disbursements thereof. At no time shall the assets of the Trust Fund consist of direct interests in real property or leaseholds. Except as herein otherwise provided, title to the assets of the Trust Fund shall at all times be vested in the Trustee and securities that are part of the Trust Fund shall be held in such manner that the Trustee's name and the fiduciary capacity in which the securities are held are fully disclosed, subject to the right of the Trustee to hold title in the name of a nominee. This Trust shall be known as the Conrail Inc. Employee Benefits Trust. The Company and the Trustee intend the Trust to be an independent legal entity. SECTION 1.2. Trustee Acceptance. The Trustee ------------------- hereby accepts this Trust and all the Company's right, title and interest in the property transferred to the Trust and all other property coming into the possession of the Trustee pursuant to the terms of this Agreement, and the Trustee agrees to hold, administer and distribute the Trust property and the income therefrom according to the terms and conditions hereof. 3 SECTION 1.3. Grantor Trust. The Trust shall be a -------------- grantor trust within the meaning of Section 671 of the Code and shall be construed accordingly. The Trust shall not be subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the assets of the Trust shall not be treated as the assets of any employee benefit plan subject to ERISA. The Trust Fund shall at all times remain subject to the claims of the Company's general creditors. SECTION 1.4. Separate Entity. The principal of ---------------- the Trust Fund, any earnings thereon and the proceeds of any dispositions thereof shall be held separate and apart from funds of the Company and shall be used exclusively for the uses and purposes set forth in this Agreement. No employee benefit plan of the Company or any of its subsidiaries (including the Plans (as defined in Article II)), or any participant in any such plan or any employee of the Company or any of its subsidiaries, shall have any rights to, claims against, or beneficial interest in, any assets of the Trust. The Company (acting through the SECT Committee) may make all decisions required or permitted to be made by it pursuant to this Agreement in its sole and absolute discretion, and shall have no express or implied duty to act as a fiduciary 4 of, or in the best interest of, the participants of the Plans or the employees of the Company. SECTION 1.5. Irrevocability. The Trust shall not --------------- be revocable by the Company. ARTICLE II Definitions ----------- The following definitions shall apply to the Trust: "Additional Note" means any Promissory Note of the --------------- Trust to the Company, representing indebtedness of the Trust incurred to purchase Company Stock, other than the Promissory Note dated as of June 15, 1995. "Board" means the Board of Directors of the ----- Company. "Business Day" means any day that is not a ------------ Saturday, Sunday or legal holiday in the Commonwealth of Pennsylvania or the State of New York, on which the New York Stock Exchange is open for trading in New York City. "Company Stock" means shares of Common Stock, par ------------- value $1.00 per share, of the Company. "ESOP Preferred Stock" means shares of Series A -------------------- Convertible Junior Preferred Stock, no par value, of the Company. "Fair Market Value" means, with respect to Company ----------------- Stock, the last sales price per share of Company Stock as 5 reported on the New York Stock Exchange Composite Tape as of any particular date. "Matched Savings Plan" means the Consolidated Rail -------------------- Corporation Matched Savings Plan. "Matched Savings Plan Trustee" means the bank, ---------------------------- trust company or other financial institution at the time serving as trustee under the Matched Savings Plan. "Note" means the Promissory Note of the Trust to ---- the Company dated June 15, 1995, representing indebtedness of the Trust incurred to purchase Company Stock, and any Additional Note. "Plan" or "Plans" means any employee or director ---- ----- incentive, compensation or benefit plan or arrangement listed on Exhibit A annexed hereto. The SECT Committee may add to or delete from Exhibit A such employee or director incentive, compensation or benefit plans or arrangements of the Company or its subsidiaries as the SECT Committee, in its sole discretion, shall determine. The Trustee is not a party to any such plan and shall not be charged with knowledge of the terms of any such plan. "SECT Committee" means the committee appointed by -------------- the Board to administer certain matters related to the Trust. 6 "Trust Year" means the calendar year, except the ---------- first Trust Year which shall begin on the date first written above and end on December 31, 1995. ARTICLE III Funding the Trust ----------------- SECTION 3.1. Delivery of Company Stock. -------------------------- Concurrently with the execution of this Agreement, the Company is conveying to the Trust 4,728,132 shares of Company Stock, to be administered and disposed of by the Trustee as provided in Article IV. Concurrently with the execution of this Agreement, the Trustee, on behalf of the Trust, is delivering to the Company a Note in payment of the purchase price for the Company Stock so conveyed, in a principal amount equal to 4,728,132 multiplied by the last sales price as reported on the New York Stock Exchange Composite Tape on June 15, 1995, such Note to be substantially in the form set forth as Exhibit B annexed hereto. From time to time on and after the date hereof, the Company may convey to the Trust additional shares of Company Stock, to be administered and disposed of by the Trustee as provided in Article IV. Concurrently with any such conveyance, the Trustee, on behalf of the Trust, will deliver to the Company an Additional Note in payment of the purchase price of Company Stock so conveyed, in a 7 principal amount equal to the number of shares of Company Stock so conveyed multiplied by the last sales price as reported on the New York Stock Exchange Composite Tape on the date of such conveyance, such Additional Note to be substantially in the form set forth as Exhibit B annexed hereto. SECTION 3.2. Distributions. Distributions paid ------------- in cash on assets held by the Trust shall be used to pay interest on the Note as it becomes due. Any excess remaining after such payment may, in accordance with the directions of the SECT Committee, be applied to the payment of principal thereon or distributed to or for the benefit of Plans. Non-cash distributions paid on assets held by the Trust shall, in accordance with the directions of the SECT Committee, be either held in the Trust or reduced to cash as soon as practicable and used in the same manner as cash distributions. In all cases, unless otherwise instructed by the SECT Committee, the Trustee shall temporarily invest cash in accordance with Article VI to the extent it is not, at the time, distributed to or for the benefit of Plans. SECTION 3.3. Contributions. In each Trust Year -------------- the Company may, in its sole discretion, contribute cash to the Trust in amounts and at times that, when added to the earnings of the Trust, will be sufficient to enable the Trust to make interest and principal payments on the Note as they come due. In the event contributions to, and 8 earnings of, the Trust are insufficient to satisfy any installment of principal and interest on the due date thereof, the Company (acting through the SECT Committee) may, in its discretion, forgive such installment to the extent of the insufficiency. The Trust shall have no remedy for any failure by the Company to make any contribution to the Trust. All contributions to the Trust shall be used to make principal and interest payments on the Note. Unless otherwise instructed by the SECT Committee, the Trustee shall temporarily invest cash in accordance with Article VI to the extent any cash is not, at the time, used to make principal and interest payments on the Note. The Trustee shall be under no duty or obligation to require the Company to make any cash or other contributions to the Trust. SECTION 3.4. Prepayments. The Company may, ------------ from time to time, contribute cash to the Trust in amounts sufficient to enable the Trust to prepay, in whole or in part, principal (and accrued interest thereon to the date of prepayment) of the Note at any time without premium or penalty or, in lieu of such prepayment, the SECT Committee may, from time to time, direct that all or any part of such principal (and interest accrued thereon) shall be forgiven and the amount so directed shall be forgiven. Each such prepayment of principal shall be applied to reduce installments of principal thereafter due on the Note. 9 ARTICLE IV Release of Company Stock and Allocations ---------------------------------------- SECTION 4.1. Release of Company Stock from Trust. ------------------------------------ As soon as practicable after each payment, forgiveness or prepayment, if any, of principal (and accrued interest thereon) of the Note is made, a number of shares of Company Stock shall be made available for transfer from the Trust ("Released Shares") in the manner set forth in Section 4.2. The total number of such shares shall equal the number of shares of Company Stock held in the Trust which are not Released Shares immediately prior to the payment, forgiveness or prepayment multiplied by a fraction, the numerator of which shall be the amount of principal paid or prepaid by the Trust on the Note or forgiven upon such payment or prepayment date or date of forgiveness and the denominator of which shall be the sum of the numerator plus the remaining principal amount of the Note. No fractional shares shall be released. If at any time fractional shares would otherwise be released, the number of Released Shares shall be rounded down to the next whole number. The number of Released Shares, determined as aforesaid, shall be certified to the Trustee by the SECT Committee. SECTION 4.2. Disposition of Released Shares. ------------------------------- Released Shares shall be transferred to or for the benefit of such Plans (or their participants and beneficiaries) as 10 the SECT Committee, in its sole discretion, shall determine; provided that the SECT Committee may direct the -------- Trustee to sell Released Shares and transfer the proceeds thereof to or for the benefit of Plans (or their participants and beneficiaries) to the extent that contributions to such Plans are required to be in the form of cash. The SECT Committee may direct the Trustee as to the timing and manner of the sale of Released Shares in order to comply with applicable law and to avoid, if possible, adverse effects on the publicly traded market price of Company Stock; provided that all Released Shares must be sold or transferred within twelve months of their becoming Released Shares. In the event that the SECT Committee directs the Trustee to sell Released Shares, the Company may purchase such Released Shares from the Trust at the Fair Market Value of Company Stock on the Business Day of such sale. SECTION 4.3. Transfer of Other Assets. Any ------------------------- assets other than Company Stock held in the Trust may, at the direction of the SECT Committee, either be used to pay interest and principal on the Note or be transferred by the Trustee in such amounts and at such times to or for the benefit of such Plans (or their participants and beneficiaries) as the SECT Committee shall, in its sole discretion, determine. 11 SECTION 4.4. Rights Regarding Common Stock. ------------------------------ (a) Voting Rights. The Trustee shall follow the -------------- directions of the Matched Savings Plan participants with respect to the manner of voting of Company Stock held by the Trust on each matter pending before an annual or special meeting of shareholders of the Company. In connection with any such meeting of shareholders, the SECT Committee shall cause the Matched Savings Plan Trustee to provide the Trustee with certification of the directions received from the Matched Savings Plan participants directing the Matched Savings Plan Trustee whether and how to vote or abstain with respect to any ESOP Preferred Stock or Company Stock held by the Matched Savings Plan. Upon receipt by the Trustee of such certification, the Trustee shall, on each such matter, vote or abstain with respect to the shares of Company Stock held by the Trust in the same proportion and manner as the Matched Savings Plan participants directed the Matched Savings Plan Trustee to vote or abstain with respect to any ESOP Preferred Stock or Company Stock held by the Matched Savings Plan. (b) Tender or Exchange Offer. If a tender or ------------------------- exchange offer is commenced for Company Stock by a person other than the Company (or a subsidiary of the Company), the SECT Committee shall cause the Matched Savings Plan Trustee to provide the Trustee with certification of the 12 directions received from the Matched Savings Plan participants direct ing the Matched Savings Plan Trustee whether to tender or exchange any ESOP Preferred Stock or Company Stock held by the Matched Savings Plan and upon receipt by the Trustee of such certification, the Company Stock held by the Trust shall be tendered or exchanged, or not tendered or exchanged, by the Trustee in the same proportion and manner as the Matched Savings Plan participants directed the Matched Savings Plan Trustee with respect to any ESOP Preferred Stock or Company Stock held by the Matched Savings Plan. If a tender or exchange offer is commenced for Company Stock by the Company (or a subsidiary of the Company), the Trustee shall not tender or exchange the Company Stock held by the Trust. (c) Confidentiality. All voting and other ---------------- actions taken by individual participants in the Matched Savings Plan shall be held confidential by the Trustee and shall not be divulged or released to any person, including officers and employees of the Company and its affiliates. (d) Trustee Action. Except as provided in --------------- Sections 4.4(a) and (b) above, the Trustee shall not make any recommendations regarding the manner of exercising any rights under this Section 4.4, including whether or not any rights should be exercised. 13 SECTION 4.5. Withholding. The Trustee shall ------------ withhold any taxes from any payment to the extent required by applicable law and in such amounts as shall be directed by the SECT Committee. SECTION 4.6. Registration. (a) Promptly ------------- following the execution of this Agreement, the Company shall prepare and file with the Securities and Exchange Commission (the "SEC") a "shelf" registration statement on Form S-3 or on any other appropriate form (such registration statement, as it may be amended or supplemented from time to time, being hereinafter referred to as the "Registration Statement") in accordance with Rule 415 under the Securities Act of 1933, as amended (the "Securities Act"), providing for the registration of the Company Stock held by the Trust. The Company shall use its reasonable efforts to cause such Registration Statement and all required filings under state securities laws to become effective and to keep such Registration Statement and required filings, or any sub sequently filed Registration Statement and required filings, continuously effective until the termination of the Trust. The Company will notify the Trustee of the effectiveness of the Registration Statement and shall furnish to the Trustee such number of copies as the Trustee may reasonably request of the Registration Statement (including any amendments, supplements and exhibits), the prospectus 14 contained therein (including each preliminary prospectus and any summary prospectus), any documents incorporated by reference in the Registration Statement and such other documents as the Trustee may reasonably request in order to facilitate its sale of Released Shares of Company Stock held in the Trust in the manner described in the Registration Statement. The Trustee shall not sell, exchange or transfer any Company Stock except as directed by the SECT Committee, except as provided in Section 4.4(b). ARTICLE V Bankruptcy or Insolvency ------------------------ SECTION 5.1. Deliveries to Creditors of the Company. --------------------------------------- The Trust Fund is and shall remain at all times subject to the claims of the general creditors of the Company. Moreover, neither the Trustee nor the Company shall create any security interest in the Trust Fund in favor of any Plan or any creditor. If the Trustee receives the notice provided for in Section 5.2, or if the Trustee otherwise receives actual notice that the Company is insolvent or bankrupt as defined in Section 5.2, the Trustee shall make no further distributions from the Trust Fund but shall deliver the entire amount of the Trust Fund as a court of competent jurisdiction, or duly appointed receiver or other person authorized to act by such a court, may direct. The Trustee shall resume distribution of the Trust Fund as directed by the Company under the 15 terms hereof, upon not less than 30 days' advance notice to the Company, if it determines that the Company was not, or is no longer, bankrupt or insolvent. Such determination shall be made in a timely fashion, and shall be based upon a decision of a court of competent jurisdiction or a certification by the Chief Executive Officer of the Company of such a determination of its Board of Directors. The Trustee shall have no duty to inquire as to whether the Company is bankrupt or insolvent. SECTION 5.2. Notification of Bankruptcy or ----------------------------- Insolvency. The Company shall advise the Trustee promptly - ----------- in writing of the Company's bankruptcy or insolvency. The Company shall be considered bankrupt or insolvent upon the occurrence of any of the following: (i) the Company shall make an assignment for the benefit of creditors, file a petition in bankruptcy, petition or apply to any tribunal for the appointment of a custodian, receiver, liquidator, sequestrator or trustee for it or a substantial part of its assets, or shall commence any case under any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation or similar law or statute of any jurisdiction (Federal or state), whether now or hereafter in effect; or there shall 16 have been filed any such petition or application, or any such case shall have been commenced against it, in which an order for relief is entered or which remains undismissed for a period of 120 days; or the Company by any act or omission shall indicate its consent to, approval of or acquiescence in (a) any such petition, application or case or order for relief or (b) the appointment of any custodian, receiver or trustee for it or any substantial part of its property, or shall suffer any such custodianship, receivership or trusteeship to continue undischarged for a period of 120 days; or (ii) the Company shall generally not pay its debts as such debts become due or shall cease to pay its debts generally in the ordinary course of business. ARTICLE VI Investments ----------- SECTION 6.1. Investments. The Trustee shall ------------ invest and reinvest the cash held in Trust Fund exclusively in Company Stock; provided, however, that the -------- ------- Trustee may invest any portion of cash held in the Trust Fund temporarily in (i) United States Government obligations with maturities of less than one year, (ii) commercial paper, maturing not more than 90 days after the date of such investment, issued by a corporation organized 17 and existing under the laws of the United States of America or any jurisdiction thereof, with a rating, at the date of such investment, of "P-1" (or higher) according to Moody's Investor Services Inc. or "A-1" (or higher) according to Standard & Poor's Corporation, (iii) interest- bearing accounts (including at a banking institution of the Trustee or an affiliate) including, but not limited to, certificates of deposit, time deposits, savings accounts and money market accounts, with maturities of less than one year, or (iv) a common, collective or pooled trust fund maintained by the Trustee or an affiliate of the Trustee, which trust fund's investments are substantially limited to those described in clauses (i), (ii) and (iii) of this Section 6.1, in which event such part of the Trust Fund so invested shall be subject to all the terms and provisions of the common, collective or pooled trust fund that contemplate the commingling for investment purposes of such trust assets with trust assets of other trusts. The Company acknowledges that any collective fund utilized may provide for the lending of its securities and the trustee of any such collective fund may receive income from the lending of such securities that is separate and apart from the income such trustee might receive as a collective fund trustee or as the Trustee. 18 SECTION 6.2. Trustee's Duties. The Trustee ----------------- shall have no duty to determine or review the merit or suitability of investing the Trust Fund in Company Stock for the objectives of the Trust, and the Trustee shall have no liability for actions taken by it in conformity with Section 6.1. ARTICLE VII Accounting by Trustee --------------------- The Trustee shall keep accurate and detailed records of all investments, receipts, disbursements and other transactions. All such records shall be open to inspection and audit at all reasonable times by the Company. Within sixty days following the close of each Trust Year and within sixty days after the removal or resignation of a Trustee, the Trustee shall deliver to the Company a written account of its administration of the Trust during such year or during the period from the close of the last preceding Trust Year to the date of such removal or resignation, setting forth all investments, receipts, disbursements and other transactions effected by it, including a description of all securities and investments purchased and sold with the cost and net proceeds of such purchases or sales, and showing all cash, securities and other property held in the Trust at the end of such year or as of the date of such removal or resignation, as the case may be. All tax returns and 19 other regulatory filings required by the Trust shall be prepared by the Company. The Trustee shall make such filings as shall be directed by the Company and shall be entitled to rely on the accuracy of all returns and filings so prepared by the Company. ARTICLE VIII Responsibility and Powers of Trustee ------------------------------------ SECTION 8.1. Duty of Trustee. The Trustee ---------------- shall not be liable in connection with the performance of its duties hereunder except for its negligence or bad faith; provided, however, that the Trustee shall incur no - -------- ------- liability for any action taken by the Trustee pursuant to a direction, request, or approval given by the Company, the Board or the SECT Committee in accordance with the terms of this Agreement; and provided further that the -------- ------- Trustee shall invest the Trust Fund only as provided in Article VI and the Trustee shall incur no liability by reason of lack of diversification of the Trust Fund. SECTION 8.2. Indemnification of Trustee. The --------------------------- Company shall indemnify and hold the Trustee harmless from any liabilities, claims or expenses that it may incur in the exercise and performance of its powers and duties hereunder, including reasonable attorneys' fees and expenses, and that are not due to its negligence or bad faith, including any liability alleged to have resulted from a violation of law, including, without limitation, 20 the Securities Act or the rules and regulations of any authority having jurisdiction over the Company or any of its affairs. SECTION 8.3. Management and Control of Trust Fund. ------------------------------------- Subject to the terms of this Agreement, the Trustee shall have exclusive authority, discretion and responsibility to manage and control the assets of the Trust Fund. SECTION 8.4. Powers of the Trustee. Without in ---------------------- any way limiting the powers and discretion conferred upon it by the other provisions of this Agreement or by law, but subject to Article IV, Article VI and any other provisions of this Agreement, the Trustee is expressly authorized and empowered: (i) to sell, exchange, convey, transfer or otherwise dispose of any property held by it by private contract or at public auction, and no person dealing with the Trustee shall be bound to see to the application of the purchase money or to inquire into the validity, expediency or propriety of any such sale or other disposition; (ii) to enter into contracts or to make commitments either alone or in concert with others to sell at any future date any property held in the Trust Fund or to purchase any property which it may be authorized to acquire hereunder; 21 (iii) to vote any stocks, bonds or other securities; to give general or special proxies or powers of attorney with or without power of substitution; to exercise any conversion privileges, subscription rights or other options and to make any payments incidental thereto; to consent to or otherwise participate in corporate reorganizations or other changes affecting corporate securities and to delegate discretionary powers and to pay any assessments or charges in connection therewith; and generally to exercise any of the powers of an owner with respect to stocks, bonds, securities or other property held in the Trust Fund; (iv) to make, execute, acknowledge and deliver any and all documents of transfer and conveyance and any and all other instruments that may be necessary or appropriate to carry out the powers herein granted; (v) to register any investment held in the Trust Fund in its own name or in the name of a nominee and to hold any investment in bearer form, or to combine certif- icates representing such investments with certificates of the same issue held by the Trustee in other fiduciary capacities, or to deposit or to arrange for the deposit of such securities in a qualified central depositary even though, when so deposited, such securities may be merged and held in bulk in the name of the nominee of such 22 depositary with other securities deposited therein by any other person, or to deposit or to arrange for the deposit of any securities issued by the United States Government, or any agency or instrumentality thereof, with a Federal Reserve Bank, but the books and records of the Trustee shall at all times show that all such investments are part of the Trust Fund; (vi) to deposit all or any part of the Trust Fund in interest-bearing accounts maintained by, or savings certificates issued by, the Trustee, in its separate corporate capacity, or in any other banking institution affiliated with the Trustee; (vii) to maintain cash balances with itself or an affiliate to meet anticipated distributions from, or administrative expenses of, the Trust Fund without incurring any obligation to pay interest thereon; and (viii) to do all things that the Trustee reasonably deems necessary to carry out the purposes of this Trust. ARTICLE IX Compensation of Trustee ----------------------- The Trustee shall be entitled to receive such reasonable compensation for its services as shall be agreed upon in writing by the Company and the Trustee. To the extent the compensation and expenses of the Trustee are not paid 23 directly by the Company, they shall be paid by the Trust, but in all events shall remain an obligation of the Company. ARTICLE X Action by the SECT Committee ---------------------------- Any action with respect to the Trust by the SECT Committee shall be taken by vote or consent of at least a majority of its members or by any member authorized by the SECT Committee to take action with respect thereto and shall be communicated to the Trustee by the chairman or any other member designated by the SECT Committee. ARTICLE XI Replacement of Trustee ---------------------- The Trustee may, with 30 days' advance written notice, be removed at any time by the Company or may resign, in which case a new trustee shall appointed by the Company. Any successor trustee appointed by the Company shall be an independent, institutional trustee. ARTICLE XII Amendment or Termination; Notices --------------------------------- SECTION 12.1. Amendment. This Agreement may be ---------- amended at any time and to any extent by a written instrument executed by the Trustee and the Company, except to make the Trust revocable or to change the provisions of, or to make any provision inconsistent with, Sections 4.4(a) and (b), Section 24 12.1, Section 12.2 or Section 12.3. Notwithstanding the foregoing, in the event the employee stock ownership plan that comprises part of the Matched Saving Plan or the employee bene- fit plan or plans contained in any amendment of Sections 4.4(a) and (b) pursuant to paragraph (i) below no longer exists or no longer holds voting stock of the Company, Sections 4.4(a) and (b) may be amended as follows: (i) if voting stock of the Company is held in another employee benefit plan or plans in which a broad cross- section of nonunion employees of the Company can confidentially direct the voting, then the Company may amend Sections 4.4(a) and (b) to provide that the Trustee shall follow the directions of the participants in one or more of such plans with respect to the manner of voting the Company Stock held by the Trust and, in the event of a tender or exchange offer for Company Stock, whether to tender or exchange the Company Stock held by the Trust; (ii) if (i) is not applicable, the Company may amend Sections 4.4(a) and (b) to provide mechanics to allow the Company Stock held by the Trust to be voted and, in the event of a tender or exchange offer, to be tendered or exchanged as directed confidentially by a broad cross section of nonunion employees of the Company other than executive officers (as such term is defined in Rule 3b-7 25 promulgated pursuant to the Securities Exchange Act of 1934, as amended). SECTION 12.2. Termination. The Trust shall ------------ terminate upon the earlier of (i) June 14, 2010, or (ii) the date on which the Trust no longer holds any assets. SECTION 12.3. Effect of Termination. Upon ---------------------- termination of the Trust, the Trustee shall sell sufficient remaining assets of the Trust so that the proceeds of such sale, together with any other available cash, can be applied to pay in full the remaining principal of the Note and any accrued but unpaid interest thereon. The SECT Committee may direct the Trustee as to the timing and manner of the sale, if any, of Company Stock in order to comply with applicable law and to avoid, if possible, adverse effects on the publicly traded market price of Company Stock. The proceeds of sale shall first be paid to the Company, up to the amount of any unpaid principal and interest on the Note except to the extent forgiven by the Company. In the event the proceeds of the sale shall be insufficient to discharge the Note in its entirety, the Company shall be deemed to have forgiven all amounts that shall remain due and owing thereon. Any assets or Company Stock remaining in the Trust, or the proceeds of the sale thereof, shall be distributed to or for the benefit of any employee benefit plan (including one or more of the Plans) in which a broad cross-section of nonunion employees of 26 the Company or its subsidiaries participate, as the SECT Committee shall, in its sole discretion, determine. SECTION 12.4. Notices. Any notice, report, demand -------- or waiver required or permitted hereunder shall be in writing and shall be given personally, delivered by overnight delivery service or sent by telecopier, addresses as follows: If to the Company: Conrail Inc. 2001 Market Street Two Commerce Square Philadelphia, PA 10101 Telephone No.: (215) 209-4000 Telecopier No.: (215) 209-4819 Attention: Timothy O'Toole If to the Trustee: Mellon Bank, N.A. One Mellon Bank Center Suite 3346 Pittsburgh, PA 15258-0001 Telephone No.: (412) 234-8820 Telecopier No.: (412) 234-7937 Attention: Carol Condie, Trust Officer Notices shall be effective only upon receipt. The Company and the Trustee may change the address to which notices, requests and other communications are to be sent to it by giving written notice of such address change to the other parties in conformity with this Section 12.4. 27 ARTICLE XIII Severability ------------ Any provision of this Agreement prohibited by law shall be ineffective to the extent to any such prohibition without invalidating the remaining provisions hereof. ARTICLE XIV Governing Law ------------- This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. IN WITNESS WHEREOF, the Company and the Trustee have executed this Agreement as of the date set forth above. CONRAIL INC., by /s/ ----------------------------------- Name: Timothy T. O'Toole Title: Vice President - Treasurer MELLON BANK, N.A., Trustee, by /s/ ----------------------------------- Name: Kerry Nelson Title: Vice President Exhibit A --------- Designated Plans ---------------- 1. Annual Performance Achievement Reward Plan 2. Annual Performance Achievement Reward PLUS Plan 3. Worker Safety Awards Plan 4. Non-Agreement Employee Life, Dismemberment and Disability Benefits Plan 5. Long Term Disability Payment Plan 6. Employee Claim Settlement Plan 7. Non-Agreement Employee Medical and Dental Plan 8. Consolidated Rail Corporation Non-Agreement Retirees Medical Plan EX-2 3 FORM OF PROMISSORY NOTE DATED JUNE 15, 1995 Exhibit B --------- PROMISSORY NOTE Philadelphia, Pennsylvania June 15, 1995 FOR VALUE RECEIVED, the undersigned, Mellon Bank, N.A., solely in its capacity as Trustee (the "Trustee") of the Conrail Inc. Employee Benefits Trust (the "Trust"), hereby promises on behalf of the Trust to pay to the order of Conrail Inc. ("Conrail") the sum of $249,999,979.50, together with interest thereon as hereinafter set forth. Interest shall be paid (computed on the basis of a 360-day year of twelve 30-day months) on the unpaid principal balance, at an interest rate (the "Interest Rate") of 6.90% per annum. Interest shall accrue from the date hereof on the unpaid balance, and shall be paid on each March 16, June 16, September 16 and December 16, commencing September 16, 1995. All principal and accrued and unpaid interest thereon shall be payable on June 14, 2010. In the event contributions to, and earnings of, the Trust are insufficient to satisfy any installment of principal and interest on the due date thereof, the Company (acting through the SECT Committee) may, in its discretion, forgive such installment to the extent of the insufficiency. Principal (and accrued unpaid interest thereon) of this Note may be prepaid in whole or in part at any time and from time to time without penalty and may, in the manner set forth in the Trust Agreement, dated as of June 15, 1995, between the Trustee and Conrail, be forgiven. Each prepayment (or forgiveness) of principal shall be applied to reduce installments of principal thereafter due on the Note in the order of their scheduled maturities. Whenever any prepayment falls due on a Saturday, Sunday or public holiday, such payment shall be made on the next succeeding business day. Upon termination of the Trust, the entire unpaid balance of principal and interest shall be immediately payable. The Company shall, and is hereby authorized to, record on the schedule attached hereto as Schedule I, or to otherwise record in accordance with its usual practice, the date and amount of each principal payment or forgiveness of such payment; provided, however, that failure to do so shall ----------------- not affect the Trust's obligation to pay amounts due hereunder. All payments received hereunder shall be applied in the following order: first, to the payment of any costs (including attorneys' fees) incurred by the holder hereof in 2 collecting any amounts hereunder; second, to the payment of accrued but unpaid interest; and third, to the payment of the principal amount outstanding. This Note shall be governed by and construed under the laws of the Commonwealth of Pennsylvania. The Trust hereby waives presentment, demand, protest and notice of dishonor. This Note is issued by the Trust pursuant to the Trust Agreement and is entitled to the benefits thereof. The Trustee is executing this Note solely in its capacity as trustee of the Trust. The Trustee shall have no liability or obligation of any kind in its individual capacity to the Company or its successors as a result of the execution or issuance of this Note. All payments of principal and interest in respect of this Note shall be made in transferable United States dollars in immediately available funds to the order of the holder hereof by wire transfer to such account at such financial institution as may be specified from time to time by the holder hereof to the Trustee in writing. Any failure of the holder to exercise any right, remedy or recourse shall not be deemed a waiver or release of same, such waiver or release or any other modification of any such right, remedy or recourse to be effective only if set forth in a written document executed by the holder and then only to the extent specifically recited therein. A waiver or release with reference to one event shall not be construed as continuing, as a bar to or as a waiver or release of any subsequent event. The acceptance by the holder of payment hereunder that is less than payment in full of all amounts due and payable at the time of such payment shall not constitute a waiver of the right to exercise any right, remedy or recourse at that time or at any subsequent time, or nullify any prior exercise of any such right, remedy or recourse without the express written consent of the holder. The Company's rights under this Note are nonassignable and nontransferable, and any purported assignment or transfer of this Note or the Company's rights hereunder shall be null and void. Subject to the provisions hereof, and to the extent not inconsistent with applicable law, in the event of default hereunder, the Trust agrees to pay all reasonable 3 costs of collection hereof when billed therefor, including reasonable attorneys' fees, whether or not action shall be instituted to enforce this Note. MELLON BANK, N.A., as Trustee, by /s/ ----------------------- Name: Kerry Nelson Title: Vice President SCHEDULE I Principal Payment/Forgiveness Record ------------------------------------ Outstanding Date Payment/Forgiveness Principal Amount -------- ------------------- ----------------- $ $ -----END PRIVACY-ENHANCED MESSAGE-----