-----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, IoxZEJjPuxeOJ3NxIbHlDq9565KhBVg79e1E+xlTWXVNf88ztMc9f2a+2iGBzENp 2kxJ300nMUjUXW4F8R6LvQ== 0000897732-95-000028.txt : 19951119 0000897732-95-000028.hdr.sgml : 19951119 ACCESSION NUMBER: 0000897732-95-000028 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: NYSE SROS: PHLX FILER: 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12184 FILM NUMBER: 95589513 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 10-Q 1 10Q -BODY SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (X)Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30,1995 ----------------- or ( )Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to ----- ------ Commission file number 1-12184 ------- CONRAIL INC. ---------------------------------------------------- (Exact name of registrant as specified in its charter) Pennsylvania 23-2728514 - ----------------------------------- ------------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2001 Market Street, Philadelphia, Pennsylvania 19101 - ----------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (215) 209-4000 - ---------------------------------------------------------------------- (Registrant's telephone number, including area code) - ---------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Number of shares of Conrail Inc. common stock outstanding (as of October 31, 1995) 82,617,767. CONRAIL INC. INDEX Page Number ------------ PART I. FINANCIAL INFORMATION Item 1. Financial Statements: Condensed Consolidated Statements of Income - Quarters and nine months ended September 30, 1995 and 1994 3 Condensed Consolidated Balance Sheets - September 30, 1995 and December 31, 1994 4 Condensed Consolidated Statements of Cash Flows - Nine months ended September 30, 1995 and 1994 5 Notes to Condensed Consolidated Financial Statements 6 Report of Independent Accountants 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II. OTHER INFORMATION Item 2. Changes in Securities 14 Item 6. Exhibits and Reports on Form 8-K 14 SIGNATURES 15 2 PART I. FINANCIAL INFORMATION CONRAIL INC. Item 1. Financial Statements. -------------------- CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
($ In Millions Except Per Share Data) Quarters Ended Nine Months Ended September 30, September 30, -------------- ---------------- 1995 1994 1995 1994 ---- ---- ------ ------ Revenues $923 $949 $2,735 $2,747 Operating expenses Way and structures 117 121 368 386 Equipment 187 204 575 623 Transportation 319 346 992 1,038 General and administrative 92 84 298 265 Early retirement program 84 ---- ---- ------ ------ Total operating expenses 715 755 2,233 2,396 ---- ---- ------ ------ Income from operations 208 194 502 351 Interest expense (49) (48) (147) (143) Other income, net 29 28 89 79 ---- ---- ------ ------ Income before income taxes 188 174 444 287 Income taxes 72 68 150 112 ---- ---- ------ ------ Net income $116 $106 $ 294 $ 175 ==== ==== ====== ====== Net income per common share Primary $1.44 $1.29 $ 3.61 $ 2.07 Fully diluted 1.31 1.17 3.28 1.91 Dividends per common share $.425 $.375 $1.175 $1.025 Weighted average number of shares used in computing earnings per share (thousands) Primary 78,664 79,461 78,837 79,839 Fully diluted 88,525 89,324 88,853 89,747 Ratio of earnings to fixed charges 4.02x 4.04x 3.28x 2.63x See accompanying notes.
3 CONRAIL INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
($ In Millions) September 30, December 31, 1995 1994 ------------- ------------ ASSETS Current assets Cash and cash equivalents $ 81 $ 43 Accounts receivable 662 646 Deferred tax assets 249 249 Material and supplies 165 164 Other current assets 30 23 ------ ------ Total current assets 1,187 1,125 Property and equipment, net 6,680 6,498 Other assets 816 699 ------ ------ Total assets $8,683 $8,322 ====== ====== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Short-term borrowings 174 112 Current maturities of long-term debt 114 130 Accounts payable 166 119 Wages and employee benefits 175 169 Casualty reserves 107 103 Accrued and other current liabilities 502 568 ------ ------ Total current liabilities 1,238 1,201 Long-term debt 2,037 1,940 Casualty reserves 208 212 Deferred income taxes 1,329 1,203 Special income tax obligation 459 513 Other liabilities 332 328 ------ ------ Total liabilities 5,603 5,397 ------ ------ Stockholders' equity Series A ESOP convertible junior preferred stock 282 283 Unearned ESOP compensation (235) (243) Common stock 85 80 Additional paid-in capital 2,179 1,848 Employee benefits trust (325) Retained earnings 1,245 1,056 ------ ------ 3,231 3,024 Treasury stock (151) (99) ------ ------ Total stockholders' equity 3,080 2,925 ------ ------ Total liabilities and stockholders' equity $8,683 $8,322 ====== ====== See accompanying notes.
4 CONRAIL INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
($ In Millions) Nine Months Ended September 30, ---------------- 1995 1994 ----- ----- Cash flows from operating activities $ 515 $ 468 ----- ----- Cash flows from investing activities Property and equipment acquisitions (327) (371) Net payments for capital lease buyouts (26) Other (37) (44) ----- ----- Net cash used in investing activities (390) (415) ----- ----- Cash flows from financing activities Repurchase of common stock (52) (64) Net proceeds from short-term borrowings 62 107 Proceeds from long-term debt 85 114 Payment of long-term debt (75) (120) Dividends paid on common stock (94) (81) Dividends paid on preferred stock (21) (16) Other 8 14 ----- ----- Net cash used in financing activities (87) (46) ----- ----- Increase in cash and cash equivalents 38 7 Cash and cash equivalents Beginning of period 43 38 ----- ----- End of period $ 81 $ 45 ===== ===== See accompanying notes.
5 CONRAIL INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. The unaudited financial statements contained herein present the consolidated financial position of Conrail Inc.(the "Company") as of September 30, 1995 and December 31, 1994, the consolidated results of operations for the three and nine-month periods ending September 30, 1995 and 1994 and the consolidated cash flows for the nine-month periods ended September 30, 1995 and 1994. In the opinion of management, these financial statements include all adjustments, consisting of normal recurring adjustments, necessary to present fairly the results for the interim periods included. The rules and regulations of the Securities and Exchange Commission permit certain information and footnote disclosures, ordinarily required by generally accepted accounting principles, to be condensed or omitted from interim financial reports. Accordingly, the financial statements included herein should be read in conjunction with the audited financial statements and notes for the year ended December 31, 1994, presented in the Company's Annual Report on Form 10-K. 2. As a result of a decrease in a state income tax rate enacted during the second quarter of 1995, income tax expense for the nine months ended September 30, 1995 was reduced by $21 million representing the effects of adjusting deferred income taxes and the special income tax obligation for the rate decrease as required under SFAS 109, "Accounting for Income Taxes". 3. In June 1995, the Company completed the disposition of the last of two major waste disposal facilities of Concord Resources, Inc.("Concord"). The dispositions had no financial statement impact as the Company's investment in Concord had been reserved in 1993. 4. During the first quarter of 1994, the Company recorded a charge of $51 million (after tax benefits of $33 million) for a non-union employee voluntary early retirement program and related costs. The majority of the cost of the early retirement program is being paid from the Company's overfunded pension plan. 6 5. In July 1994, the Board of Directors authorized a $100 million common stock repurchase program. During the first nine months of 1995, the Company acquired 923,806 shares for approximately $52 million under this program, and at September 30, 1995 approximately $39 million remained available from the authorization. In April 1995, the Company's Board of Directors approved an additional $250 million multi-year stock repurchase program. 6. In June 1995, the Company issued approximately 4.7 million shares of its common stock to the Conrail Employee Benefits Trust (the "Trust") in exchange for a promissory note of $250 million at an interest rate of 6.9%. The Trust will be used to fund certain employee benefits and other forms of compensation over its fifteen-year term. The amount representing unearned employee benefits is recorded as a deduction from stockholders' equity and is reduced as benefits and compensation are paid through the release of shares from the Trust. The shares owned by the Trust are valued at the closing market price as of the end of each reporting period, with the corresponding changes in the balance of the Trust reflected in additional paid-in capital. Shares held by the Trust are not considered outstanding for earnings per share computations until released by the Trust, but do have voting and dividend rights. 7. Information regarding contingent liabilities and litigation was included in Note 12 to Consolidated Financial Statements and Part I, Item 3 - Legal Proceedings in the Company's Annual Report on Form 10-K for the year ended December 31, 1994. There have been no material developments with respect to these matters during the first nine months of 1995, except as disclosed in the Annual Report on Form 10-K and the quarterly report on Form 10-Q for the periods ended June 30, 1995. 7 REPORT OF INDEPENDENT ACCOUNTANTS The Stockholders and Board of Directors of Conrail Inc. We have reviewed the accompanying condensed consolidated balance sheet of Conrail Inc. and its subsidiaries (the "Company") as of September 30, 1995 and the related condensed consolidated statements of income for the three and nine months ended September 30, 1995 and September 30, 1994 and the condensed consolidated statements of cash flows for the nine months ended September 30, 1995 and September 30, 1994. This financial information is the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with generally accepted accounting principles. We previously audited in accordance with generally accepted auditing standards, the consolidated balance sheet as of December 31, 1994, and the related consolidated statements of income, of stockholders' equity and of cash flows for the year then ended (not presented herein), and in our report dated January 23, 1995 we expressed an unqualified opinion on those consolidated financial statements and included an explanatory paragraph describing the Company's change in methods of accounting for income taxes and postretirement benefits other than pensions in 1993. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1994, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived. PRICE WATERHOUSE LLP Thirty South Seventeenth Street Philadelphia, PA 19103 October 18, 1995 8 CONRAIL INC. Item 2. Management's Discussion and Analysis of Financial ------------------------------------------------- Condition and Results of Operations. ----------------------------------- Results of Operations - --------------------- Overview - -------- Net income for Conrail Inc. ("Conrail" or the "Company") was $116 million for the third quarter of 1995 compared with $106 million for the third quarter of 1994. Net income for the first nine months of 1995 was $294 million compared with $175 million for the first nine months of 1994. Results for the first nine months of 1995 include recognition of a $21 million reduction in income taxes related to a decrease in a state tax rate enacted during the second quarter of 1995 (see Note 2 to the Condensed Consolidated Financial Statements). Results for 1994 include a one-time charge of $51 million (net of tax benefits of $33 million) relating to a non-union early retirement program and related costs that the Company recorded in the first quarter of 1994 (see Note 4 to the Condensed Consolidated Financial Statements). Absent the tax benefit and the one-time charge related to the early retirement program, Conrail's net income would have been $273 million and $226 million for the first nine months of 1995 and 1994, respectively. Net income per common share for the third quarter of 1995 was $1.44 on a primary basis and $1.31 on a fully diluted basis compared with $1.29 and $1.17 on the same bases for the third quarter of 1994. Net income per common share for the nine months of 1995 was $3.61 on a primary basis and $3.28 on a fully diluted basis compared with $2.07 and $1.91 on the respective bases for the same nine-month period of 1994. Excluding the one-time tax benefit for the first nine months of 1995, net income per common share would have been $3.34 on a primary basis and $3.05 on a fully diluted basis. Without the one-time charge in the first nine months of 1994, net income per common share would have been $2.71 on a primary basis and $2.48 on a fully diluted basis. Traffic volume continued to decline for both the quarter and nine months ended September 30, 1995 compared with the same periods in 1994. The most significant declines were experienced in the Intermodal Service Group. The Company now projects an overall decline in line haul revenue of 1.0% to 2.0% for the year. Despite the traffic volume declines experienced during the first three quarters, the Company has not changed its goal of achieving a 79.5% operating ratio (operating expenses as a percent of revenues) for 1995. The Company continues to evaluate certain portions of its route system and other operating assets to determine the extent to which they effectively and economically support its current and expected operations, with a view toward disposing of those assets that do not. As of September 30, 1995, the Company had designated 7,800 miles of lines for such evaluation, which are in various stages of completion. Of those lines, to date, the Company has identified 1,600 miles that may be sold and 500 miles to be retained. Certain of the lines to be sold are the subject of current negotiations, which could conclude in 1995. At 9 this time, the Company is not able to estimate the total number of miles that may eventually be sold or the potential effect on the Company's financial statements. It is possible that the Company's adoption of a formal plan for the disposition, or the actual disposition, of the assets identified as a result of such analyses could have a significant adverse effect on the Company's financial statements in the reporting period in which either such event occurred. Third Quarter 1995 compared with Third Quarter 1994 - --------------------------------------------------- Net income for the third quarter of 1995 was $116 million versus $106 million for the third quarter of 1994. Operating revenues (primarily freight line haul revenues, but also including switching, demurrage and incidental revenues) decreased $26 million, or 2.7%, from $949 million in the third quarter of 1994 to $923 million in the third quarter of 1995. A 7.8% decline in traffic volume in units (freight cars and intermodal trailers and containers) resulted in a $70 million decrease in revenues, that was partially offset by an improvement in average revenue per unit which increased revenues by $44 million. The increase in average revenue per unit is attributable to increases in average rates, $33 million, and a favorable traffic mix, $11 million. Operating expenses decreased $40 million, or 5.3%, from $755 million in the third quarter of 1994 to $715 million in the third quarter of 1995. The following table sets forth the operating expenses for the two periods: Third Quarter -------------- Increase ($ In Millions) 1995 1994 (Decrease) ---- ---- -------- Compensation and benefits $304 $305 $ (1) Fuel 38 46 (8) Material and supplies 35 49 (14) Equipment rents 91 96 (5) Depreciation and amortization 74 69 5 Casualties and insurance 47 59 (12) Other 126 131 (5) ---- ---- ---- $715 $755 $(40) ==== ==== ==== Compensation and benefits as a percent of revenues was 33.0% in the third quarter of 1995 as compared with 32.2% in the third quarter of 1994. The decrease in material and supplies expense of $14 million, or 28.6%, is attributable principally to a lower level of maintenance, primarily locomotive overhauls, and track and freight car repairs. 10 Casualties and insurance costs decreased $12 million, or 20.3%, primarily as a result of an unfavorable year-to-date estimated cost per claim adjustment made in the third quarter of 1994 and fewer employee claims in the third quarter of 1995 which were partially offset by costs of several large adverse verdicts in 1995. Conrail's operating ratio was 77.5% for the third quarter of 1995, compared with 79.6% for the third quarter of 1994. First Nine Months of 1995 compared with First Nine Months of 1994 - ----------------------------------------------------------------- Net income for the first nine months of 1995 was $294 million which included the aforementioned tax benefit of $21 million recorded during the second quarter (see Note 2 to the Condensed Consolidated Financial Statements). Net income for the first nine months of 1994 was $175 million and included the one-time after-tax charge of $51 million related to the early retirement program (see Note 4 to the Condensed Consolidated Financial Statements). Operating revenues decreased $12 million, or .4%, to $2,735 million for the first nine months of 1995 from $2,747 million for the first nine months of 1994. A 4.7% decrease in traffic volume resulted in a $122 million decrease in revenues that was partially offset by revenue increases related to higher average rates, $80 million, and favorable traffic mix, $17 million. Other revenues increased $13 million. Operating expenses decreased $163 million, or 6.8%, from $2,396 million in the first nine months of 1994, which included the $84 million charge related to the non-union voluntary early retirement program and related costs, to $2,233 million in the first nine months of 1995. The following table sets forth the operating expenses for the two periods: First Nine Months ----------------- Increase ($ In Millions) 1995 1994 (Decrease) ------ ------ -------- Compensation and benefits $ 958 $ 957 $ 1 Fuel 125 140 (15) Material and supplies 134 162 (28) Equipment rents 259 289 (30) Depreciation and amortization 220 208 12 Casualties and insurance 123 143 (20) Other 414 413 1 Early retirement program 84 (84) ------ ------ ----- $2,233 $2,396 $(163) ====== ====== ====== Compensation and benefits as a percent of revenues was 35.0% in the first nine months of 1995 as compared with 34.8% in the first nine months of 1994. 11 Fuel costs decreased $15 million, or 10.7%, as a result of lower traffic volume, greater efficiencies and lower average fuel prices. The decrease of $28 million, or 17.3%, in material and supplies cost was attributable to a lower level of repair and maintenance expenditures. Equipment rents decreased $30 million, or 10.4%, primarily as a result of fewer foreign cars on line and improved equipment utilization. Casualties and insurance costs decreased $20 million, or 14.0%, primarily as a result of an unfavorable year-to-date estimated cost per claim adjustment made in the third quarter of 1994 and fewer employee personal injury claims in 1995, which were partially offset by several large adverse verdicts in 1995. Conrail's operating ratio was 81.7% for the first nine months of 1995, compared with 87.2% for the first nine months of 1994. Without the $84 million one-time charge for the early retirement program, the operating ratio for the first nine months of 1994 would have been 84.1%. Other income, net increased $10 million, or 12.7%, primarily due to the $8 million gain from a property sale completed during the second quarter of 1995. The Company's effective income tax rate for the first nine months of 1995 was 33.8% compared with 39.0% for the same period of 1994. The decrease is primarily related to a $21 million reduction in income taxes as a result of a decrease in a state income tax rate which was enacted during the second quarter of 1995(see Note 2 to the Condensed Consolidated Financial Statements). Liquidity and Capital Resources - ------------------------------- The Company's cash and cash equivalents increased $38 million in the first nine months of 1995, from $43 million at December 31, 1994 to $81 million at September 30, 1995. Cash generated from operations, primarily from its wholly-owned subsidiary, Consolidated Rail Corporation ("CRC"), and borrowings are the Company's principal sources of liquidity and are used primarily for capital expenditures, debt service and dividends. In the first nine months of 1995, operating activities provided cash of $515 million and net proceeds from short-term borrowings and long- term debt provided $72 million. The principal uses of cash were for property and equipment acquisitions, $327 million; net payments for capital lease buyouts, $26 million; repurchases of common stock, $52 million; and cash dividends on common and preferred stock, $115 million. A working capital (current assets less current liabilities) deficiency of $51 million existed at September 30, 1995 as compared with a deficiency of $76 million at December 31, 1994. Management believes that the Company's financial position allows it sufficient access to credit sources on investment grade terms, and, if necessary, additional intermediate or long-term debt could be obtained for working capital requirements. 12 During the first nine months of 1995, CRC issued $89 million of commercial paper and repaid $52 million. At September 30, 1995, $249 million of commercial paper remained outstanding, of which $100 million is classified as long-term debt since it is expected to be refinanced through subsequent issuances of commercial paper and is supported by a long-term credit facility. During September 1995, CRC borrowed $25 million under its uncollateralized bank credit agreement at an interest rate of 6.0%, which was repaid in October 1995. In July 1994, the Board of Directors authorized a fourth common stock repurchase program of up to $100 million. During the first nine months of 1995, the Company acquired 923,806 shares for $52 million, bringing the total acquired under this program through September 30, 1995 to 1,099,306 shares at a cost of approximately $61 million. At September 30, 1995, approximately $39 million remained from this program. In April 1995, the Board of Directors approved an additional $250 million multi-year stock repurchase program. In response to lower than expected traffic and revenues, the Company reduced its planned capital expenditures for 1995 from $550 million to $500 million. Other Matters - ------------- On September 20, 1995, the Board of Directors adopted amendments to the By-laws of the Corporation to require advance written notice (a "Shareholder's Notice") of (1) any business or proposal to be brought by any shareholder of the Corporation at an annual meeting of shareholders (which notice must contain certain specified information relating to any such business or proposal and any such shareholder) and (2) any shareholder's intention to nominate a director at a shareholder meeting (which notice must contain certain specified information relating to any such shareholder and any such nominee). The requirements set forth in the By-laws are in addition to all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters described above. A copy of the Amended and Restated By-laws of the Corporation is included as Exhibit 3.1 to this report. To receive a copy of the Amended and Restated By-laws, please contact the Office of the Corporate Secretary, 22-C Two Commerce Square, 2001 Market Street, Philadelphia, PA 19101-1422. Pursuant to the By-laws, with respect to the 1996 Annual Meeting currently scheduled for May 15, 1996, a Shareholder's Notice must be delivered to or mailed to, postage prepaid, and received at the principal executive offices of the Corporation no later than February 17, 1996 and no earlier than January 18, 1996. A Shareholder's Notice should be addressed to the Secretary of the Corporation at the address set forth above. 13 PART II. OTHER INFORMATION CONRAIL INC. Item 2. Changes in Securities. --------------------- On September 20, 1995, the Company amended its Rights Agreement to, among other things, extend its term and increase the Purchase Price (as defined in the Rights Agreement) for a share of its common stock from $105 to $205. In addition, the Rights Agreement was amended to provide for the declaration of a dividend of one Right for each share of Series A ESOP Convertible Junior Preferred Stock, without par value, which dividend was payable on October 2, 1995, and to subject the redemption of the Rights, amendment of the Rights Agreement and other matters to the approval of Continuing Directors (as defined in the Rights Agreement). Item 6. Exhibits and Reports on Form 8-K. -------------------------------- (a) Exhibits 3.1 Amended and Restated By-laws of the Registrant. 4.1 Amendment to Rights Agreement of the Registrant dated as of September 20, 1995, filed as Exhibit 3.4(i)(i) to the Registrant's Form 8-B/A dated as of September 25, 1995 and incorporated herein by reference. 10.1 Form of Severance Agreement. 11 Statement of earnings per share computations. 12 Computations of the ratio of earnings to fixed charges. 15 Letter re unaudited interim financial information from Price Waterhouse LLP. 27 Financial data schedule. (b) Reports on Form 8-K None 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CONRAIL INC. Registrant /S/ Bruce B. Wilson ------------------------------- Bruce B. Wilson Senior Vice President - Law /S/ H. W. Brown ------------------------------- H. W. Brown Senior Vice President - Finance and Administration (Principal Financial Officer) Date: November 9, 1995 15 EXHIBIT INDEX ------------- Exhibit No. - ------- 3.1 Amended and Restated By-laws of the Registrant. 10.1 Form of Severance Agreement. 11 Statement of earnings per share computations. 12 Computations of the ratio of earnings to fixed charges. 15 Letter re unaudited interim financial information from Price Waterhouse LLP. 27 Financial data schedule. Exhibit 4.1 is incorporated by reference. EX-3 2 Exhibit 3.1 ----------- CONRAIL INC. A PENNSYLVANIA CORPORATION AMENDED AND RESTATED BYLAWS ARTICLE I OFFICES Section 1.1. Registered Office. The registered office ----------------- of Conrail Inc. (the "Corporation") in the Commonwealth of Pennsylvania shall be at Two Commerce Square, 2001 Market Street, Philadelphia, Pennsylvania 19101 or at such other place as the Board of Directors of the Corporation (the "Board") may specify in a statement of change of registered office filed with the Department of State of the Commonwealth of Pennsylvania. Section 1.2. Other Offices. The Corporation may also ------------- have an office or offices at such other place or places either within or without the Commonwealth of Pennsylvania as the Board may from time to time determine or the business of the Corporation requires. ARTICLE II MEETINGS OF THE SHAREHOLDERS Section 2.1. Place. All meetings of the shareholders ----- shall be held at such places, either within or without the Commonwealth of Pennsylvania, as the Board may from time to time determine. Shareholders are not permitted to act without a meeting. Section 2.2. Annual Meeting. A meeting of the -------------- shareholders for the election of directors and the transaction of such other business as may be properly brought before the meeting shall be held on the third Wednesday in April in each calendar year or, if that be a legal holiday, on the first day thereafter that is not a legal holiday, or on such other date as the Board shall designate. If the annual meeting is not called and held within six months after the third Wednesday in April, or such other date as the Board has designated in any specific year, any shareholder may call a meeting of shareholders for the election of directors at any time after the expiration of the six-month period commencing on the third Wednesday in April, or such designated date, as the case may be. Elections of directors, whether at annual meetings or special meetings, need not be by written ballot, except upon demand by a shareholder entitled to vote at the election and before the voting begins. Section 2.3. Special meetings. Special meetings of ---------------- the shareholders, for any purpose or purposes, may be called at any time by the Chief Executive Officer of the Corporation or by the Board, upon written request delivered to the Secretary of the Corporation. In addition, an "interested shareholder" (as defined in Section 2553 of the Pennsylvania Business Corporation Law of 1988 as it may from time to time be amended (the "1988 BCL")) may, upon written request delivered to the Secretary of the Corporation, call a special meeting for the purposes of approving a business combination under either subsection (3) or (4) of Section 2555 of the 1988 BCL. Any request for a special meeting of shareholders shall state the general nature of the business to be transacted at the meeting. Upon receipt of any such request, it shall be the duty of the Secretary of the Corporation to give notice, in a manner consistent with Section 2.5 of these Bylaws, of a special meeting of the shareholders to be held at such time as the Secretary of the Corporation may fix, which time may not be, in the case of a special meeting of shareholders called pursuant to a statutory right, more than sixty (60) days after receipt by the Secretary of the Corporation of such request. If the Secretary of the Corporation shall neglect or refuse to fix the time of the meeting and give notice thereof, the person or persons calling the meeting may do so. Section 2.4. Scope of Special Meetings. Business ------------------------- transacted at any special meeting shall be confined to the business stated in the notice. Section 2.5. Notice. Written notice of any meeting of ------ the shareholders, stating the place, the date and hour thereof and the matters to be voted on at such meeting, shall be give in a manner consistent with the applicable provisions of Section 14 of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, or any successor act or regulation (the "Exchange Act"), by, or at the direction of, the Secretary of the Corporation or, in the absence of the Secretary of the Corporation, any Assistant Secretary of the Corporation, at least twenty (20) days before the date named for such meeting, to each shareholder entitled to vote thereat on the date fixed as a record date in accordance with Section 7.1 of these Bylaws, or if no record date be fixed, then of record thirty (30) days next preceding the date of the meeting, at such address as appears on the transfer books of the Corporation. Any notice of any meeting of shareholders shall state that, for purposes of any meeting that has been previously adjourned for one or more periods aggregating at least fifteen (15) days because of an absence of a quorum, the shareholders entitled to vote who attend such a meeting, although 2 less than a quorum pursuant to Section 2.6 of these Bylaws, shall nevertheless constitute a quorum for the purposes of acting upon any matter set forth in the original notice of the meeting which was so adjourned. Section 2.6. Quorum. The shareholders present in ------ person or by proxy, entitled to cast a majority of the votes that all shareholders are entitled to cast on a particular matter to be acted upon at the meeting, shall constitute a quorum for the purposes of consideration and action on the matter. Shares of the Corporation owned by it, directly or indirectly, and controlled by the Board of Directors, directly or indirectly, shall not be counted in determining the total number of outstanding shares for quorum purposes. The shareholders present in person or by proxy at a duly organized meeting of shareholders can continue to conduct the business of the meeting until the adjournment thereof, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. If a meeting of shareholders cannot be organized because a quorum has not attended, the shareholders present in person or by proxy may, except as otherwise provided by the 1988 BCL and subject to the provisions of Section 2.7 of these Bylaws, adjourn the meeting to such time and place as they may determine. Section 2.7. Adjournment. Any meeting of the ----------- shareholders, including one at which directors are to be elected, may be adjourned for such period as the shareholders present in person or by proxy and entitled to vote shall direct. Unless otherwise provided in a bylaw adopted by the shareholders, the shareholders entitled to vote present in person or by proxy, although less than a quorum pursuant to Section 2.6 of these Bylaws, shall nevertheless constitute a quorum for the purpose of (i) electing directors at a meeting called for the election of directors that has been previously adjourned for lack of a quorum, and (ii) acting, at a meeting that has been previously adjourned for one or more periods aggregating at least fifteen (15) days because of an absence of a quorum, upon any matter set forth in the original notice of the meeting that was adjourned, provided that such original notice shall have complied with the last sentence of Section 2.5 of these Bylaws. Other than as provided in the last sentence of Section 2.5 of these Bylaws, no notice of any adjourned meeting or the business to be conducted threat need be give other than an announcement at the meeting at which the adjournment is taken, unless the Board fixes a new record date for the adjourned meeting. At any adjourned meeting at which a quorum shall be present, any business may be transacted that might have been transacted at the meeting as originally noticed. Section 2.8. Majority Vote. Any matter brought before ------------- 3 a duly organized meeting of shareholders for a vote of the shareholders shall be decided by a majority of the votes cast at such meeting by the shareholders present in person or by proxy and entitled to vote thereon, unless the matter is one for which a different vote is required by express provision of (i) the 1988 BCL, (ii) the Amended and Restated Articles of Incorporation of the Corporation as they may from time to time be amended (the "Articles") or (iii) a bylaw adopted by the shareholders, in any of which cases such express provision shall govern and control the decision on such matter. Section 2.9. Voting Rights. Except as otherwise ------------- provided by statute or the Articles, at every meeting of the shareholders every shareholder entitled to vote shall have the right to one vote for each share having voting power standing in his name on the books of the Corporation. Section 2.10. Proxies. Every shareholder entitled to ------- vote at a meeting of the shareholders may authorize another person or persons to act for him by proxy. Every proxy shall be executed in writing by the shareholder, or by the shareholder's duly authorized attorney-in-fact, and filed with the Secretary of the Corporation. The presence of, or vote or other action at a meeting of shareholders by a proxy of, a shareholder shall constitute the presence of, or vote or action by the shareholder. A proxy, unless coupled with an interest, shall be revocable at will, notwithstanding any other agreement or any provision in the proxy to the contrary, but the revocation of a proxy shall not be effective until notice thereof has been given to the Secretary of the Corporation. No unrevoked proxy shall be valid after three (3) years from the date of its execution, unless a longer time is expressly provided therein. A proxy shall not be revoked by the death or incapacity of the maker unless, before the vote is counted, written notice of such death or incapacity is given to the Secretary of the Corporation. Section 2.11. Voting Lists. The officer or agent ------------ having charge of the transfer books for securities of the Corporation shall either (i) make a complete list of the shareholders entitled to vote at each meeting of shareholders, arranged in alphabetical order, with the address of, and the number of shares of stock held by, each shareholder, which list shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting, or (ii) otherwise make such information available at the meeting. Section 2.12. Judges of Election. In advance of any ------------------ 4 meeting of the shareholders, the Board may appoint judges of election, who need not be shareholders, to act at such meeting or any adjournment thereof. If judges of election are not so appointed, the presiding officer of the meeting may, and on the request of any shareholder or his proxy shall, make such appointment at the meeting. The number of judges shall be one or three, as determined by the Board. No person who is a candidate for office shall act as a judge. The judges of election shall do all such acts as may be proper to conduct the election or vote with fairness to all shareholders, and shall make a written report of any matter determined by them and execute a certificate of any fact found by them, if requested by the presiding officer of the meeting or any shareholder of the proxy of any shareholder. If there be three judges of election, the decision, act or certificate of a majority shall be effective in all respects as the decision, act or certificate of all. Section 2.13. No Participation by Conference Call. No ----------------------------------- shareholder may participate in any meeting of shareholders by means of conference telephone or similar communications equipment. Section 2.14. Presiding Officer. At each meeting of ----------------- the shareholders, the Chairman of the Board, or, in his absence, his designee, or, in their absence, a presiding officer chosen by a majority of the votes cast by the shareholders present in person or by proxy and entitled to vote at such meeting, shall act as presiding officer of the meeting and shall have plenary power in conducting the meeting with regard to setting an agenda, keeping order, limiting debate and prescribing such rules of the meeting as from time to time are useful and proper. The Secretary or an Assistant Secretary of the Corporation, or, in the absence of the Secretary and all Assistant Secretaries, a person whom the presiding officer of such meeting shall appoint, shall act as secretary of the meeting and keep the minutes thereof. Section 2.15. Notice of Shareholder Business. At an ------------------------------ annual meeting of the shareholders, only such business shall be conducted, and only such proposals shall be acted upon, as shall have been brought before the meeting (i) pursuant to the Corporation's notice of meeting, (ii) by or at the direction of the Board or (iii) by any shareholder of the Corporation who is a shareholder of record at the time of giving of the notice provided for in this Bylaw, who shall be entitled to vote at such meeting and who complies with the notice procedures set forth in this Section. For business to be properly brought before an annual meeting by a shareholder, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a shareholder's notice must be delivered to or mailed to, postage prepaid, and received at the principal executive 5 offices of the Corporation not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the meeting is changed by more than 30 days from such anniversary date, notice by the shareholder to be timely must be received no later than the close of business on the 10th day following the earlier of the day on which notice of the date of the meeting was mailed or public disclosure was made. A shareholder's notice to the Secretary shall set forth as to each matter the shareholder proposes to bring before the meeting (1) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (2) a representation that the shareholder is a holder of record of shares of the Corporation's capital stock entitled to vote at such meeting and intends to appear in person or by proxy to bring such matter before the meeting, (3) the name and address, as they appear on the Corporation's books, of the shareholder proposing such business, and the name and address of the beneficial owner, if any, on whose behalf the proposal is made, (4) the class and number of shares of the Corporation which are owned beneficially and of record by such shareholder of record and by the beneficial owner, if any, on whose behalf the proposal is made, (5) any material interest of such shareholder of record and the beneficial owner, if any, on whose behalf the proposal is made in such business and (6) a description of all arrangements and understandings between the shareholder of record and the beneficial owner, if any, on whose behalf the proposal is made and any other person or persons (naming such person or persons) pursuant to which the proposal is to be made. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted, and no proposal shall be acted upon, at an annual meeting except in accordance with the procedures set forth in this Section. The presiding officer of the meeting shall, if the facts warrant, determine and declare to the meeting that business or a proposal was not properly brought before the meeting in accordance with the procedures prescribed by these Bylaws, and if he should so determine, he shall so declare to the meeting and any such business or proposal not properly brought before the meeting shall not be transacted. Notwithstanding the foregoing provisions of this Section, a shareholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section. 6 ARTICLE III DIRECTORS Section 3.1. Number of Directors and Classification of ----------------------------------------- Board. The Board shall consist of thirteen members. Except as - ----- provided in Section 3.4 of these Bylaws in the case of vacancies, directors shall be elected by the shareholders. The directors shall be classified with respect to the time for which they shall severally hold office by dividing them into three classes, one of which shall consist of five members and two of which shall consist of four members each. Each class of directors shall serve for a term of three years, which terms shall commence in three consecutive years. At each annual meeting of the shareholders the successors to the class of directors whose term expires that year shall be elected to hold office for the term of three years and until his successor is elected and qualified or until his earlier death, resignation or removal, so that the term of office of one class of directors shall expire in each year. If at any meeting of shareholders, directors of more than one class are to be elected, each class of directors shall be elected in a separate election. Section 3.2. Qualifications. Directors shall be -------------- natural persons of full age and need not be residents of the Commonwealth of Pennsylvania or security holders of the Corporation. Section 3.3. Nominations of Directors. Subject to the ------------------------ rights of holders of any series of preferred stock or any other class of capital stock of the Corporation (other than Common Stock) then outstanding, only persons who are nominated in accordance with the procedures set forth in this Section shall be eligible to serve as directors. Nominations of persons for election to the Board of the Corporation may be made at a meeting of shareholders (i) by or at the direction of the Board, (ii) by or at the direction of a committee of the Board to which the Board has delegated the authority to make such nominations or (iii) by any shareholder of the Corporation who is a shareholder of record at the time of giving of notice provided for in this Section, who shall be entitled to vote for the election of directors at the meeting and who complies with the notice procedures set forth in this Section. Such nominations, other than those made by or at the direction of the Board or a committee of the Board, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a shareholder's notice shall be delivered to or mailed to, postage prepaid, and received at the principal executive offices of the Corporation (a) in the case of an annual meeting, not less than 90 days nor more than 120 days 7 prior to the first anniversary of the preceding year's annual meeting (provided, however, that in the event that the date of the annual meeting is changed by more than 30 days from such anniversary date, notice by the shareholder to be timely must be so received not later than the close of business on the 10th day following the earlier of the day on which notice of the date of the meeting was mailed or public disclosure was made), and (b) in the case of a special meeting at which directors are to be elected, not later than the close of business on the 10th day following the earlier of the day on which notice of the date of the meeting was mailed or public disclosure was made. Such shareholder's notice shall set forth (1) as to each person whom the shareholder proposes to nominate for election as a director, (A) the name, age, business address and residence address of the proposed nominee, (B) the principal occupation or employment of the proposed nominee, (C) the class and number of shares of capital stock of the Corporation which are beneficially owned by the proposed nominee, (D) a description of all arrangements or understandings between the shareholder and each proposed nominee and any other persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder, (E) all other information relating to such proposed nominee that is required to be disclosed in solicitations of proxies for election of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended and (F) the written consent of the proposed nominee to serve as a director of the Corporation if so elected; (2) as to the shareholder giving the notice (A) the name and address, as they appear on the Corporation's books, of such shareholder, (B) a representation that the shareholder is a holder of record of shares of the Corporation's capital stock entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the proposed nominee or nominees specified in the notice and (C) the class and number of shares of the Corporation which are beneficially owned by such shareholder and also which are owned of record by such shareholder; and (3) as to the beneficial owner, if any, on whose behalf the nomination is made, (A) the name and address of such person and (B) the class and number of shares of the Corporation which are beneficially owned by such person. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a director of the Corporation. No person shall be eligible to serve as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section. The presiding officer of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by this Section, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. Notwithstanding the foregoing provisions of this 8 Section, a shareholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section. Section 3.4. Vacancies. Vacancies in the Board shall --------- be filled by a majority of the remaining members of the Board though less than a quorum, and each director so elected shall serve until the next selection of the class for which such director was chosen, and until a successor has been selected and qualified or until such director's earlier death, resignation or removal. If one or more directors resign from the Board effective at a future date, the directors then in office, including those who have so resigned, shall have the power to fill the vacancies by a majority vote, such vote to take effect when the resignations become effective. Section 3.5. Powers. The business and affairs of the ------ Corporation shall be managed under the direction of the Board which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Articles or by these Bylaws directed or required to be exercised and done by the shareholders. Section 3.6. Place of meetings. Meetings of the Board ----------------- may be held at such places within or without the Commonwealth of Pennsylvania as, in the case of a regular meeting, the Board may from time to time designate, or, in the case of a special meeting, as may be designated in the notice calling the meeting. Section 3.7. First Meeting of Newly Elected Board. ------------------------------------ The first meeting of each newly elected Board shall be held as soon as practicable after the meeting of shareholders at which such directors were elected, and if held on the day and at the place where the annual meeting of the shareholders was held, no notice shall be required other than announcement at the annual meeting of shareholders. If such first meeting of the newly- elected Board is not so held, notice of such meeting shall be given in the same manner as set forth in Section 3.8 of these Bylaws with respect to notice of regular meetings of the Board. Section 3.8. Regular Meetings of the Board. Regular ----------------------------- meetings of the Board may be held at such times and places as shall be determined from time to time by resolution of at least a majority of the whole Board at a duly convened meeting, or by unanimous written consent. Notice of each regular meeting of the Board shall specify the date, place and hour of the meeting, as well as the general nature of the business to be conducted at the 9 meeting, and shall be given to each director, to his or her address or telex, TWX, telecopier or telephone number as supplied by such director to the Corporation for the purpose of notice, at least twenty-four (24) hours before the meeting if given personally or by telephone, telex, TWX (with answer back received) or telecopier, at least forty-eight (48) hours before the meeting if given by telegram (with messenger service specified), express mail (postage prepaid) or courier service (charges prepaid), and at least five (5) days before the meeting if given by first class mail (postage prepaid). If the notice is sent by mail, telegraph or courier service, it shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or with a telegraph office or courier service for delivery to that person, or, in the case of telex or TWX, when dispatched. Section 3.9. Special Meetings of the Board. Special ----------------------------- meetings of the Board may be called by the Chief Executive Officer, and shall be called by the Chief Executive Officer or by the Secretary on the written request of two directors. Notice of the date, place and hour of each special meeting of the Board shall be given within the same time and in the same manner provided for notice of regular meetings in Section 3.8 of these Bylaws, and shall also specify the general nature of the business to be conducted at such meeting. Section 3.10. Quorum of the Board. At all meetings of ------------------- the Board the presence of a majority of the directors in office shall constitute a quorum for the transaction of business, and the acts of a majority of the directors present at the meeting at which a quorum is present shall be the acts of the Board. If a quorum shall not be present at any meeting of directors, the directors present thereat may adjourn the meeting. It shall not be necessary to give any notice of the adjourned meeting or of the business to be transacted thereat other than by announcement at the meeting at which such adjournment is taken. Section 3.11. Organization. The Secretary, or in his ------------ absence, an Assistant Secretary of the Corporation, or in the absence of the Secretary and all Assistant Secretaries, a person whom the chairman of such meeting shall appoint, shall act as secretary of such meeting and keep the minutes thereof. Section 3.12. Committees of Directors. The Board may, ----------------------- by resolution adopted by a majority of the directors in office, establish one or more committees, each committee to consist of three or more of the directors, and may designate one or more directors as alternate members of any committee who may replace any absent or disqualified member at any meeting of the committee or for the purposes of any written action by the committee. Any 10 such committee, to the extent provided in such resolution or in these Bylaws, shall have and may exercise all of the powers and authority of the Board; provided that no such committee shall have any power or authority to (i) submit to the shareholders any action requiring the approval of shareholders under the 1988 BCL, (ii) create or fill vacancies on the Board, (iii) adopt, amend or repeal Bylaws, (iv) amend or repeal any resolution of the Board that by its terms in amendable or repealable only by the Board, (v) act on any matter committed by these Bylaws or resolution of the Board to another committee of the Board, (vi) adopt a plan or an agreement of merger or consolidation, or (vii) amend the Articles or adopt a resolution proposing an amendment to the Articles. In the absence or disqualification of a member or alternate member or members of a committee, the member or members thereof present at any meeting of such committee and not disqualified from voting, whether or not a quorum is present, may unanimously appoint another director to act at the meeting in place of any absent or disqualified member. Minutes of all meetings of any committee of the Board shall be kept by the person designated by such committee to keep such minutes. Copies of such minutes and any writing setting forth an action taken by written consent without a meeting shall be distributed to each member of the Board promptly after such meeting is held or such action is taken. Each committee of the Board shall serve at the pleasure of the Board. Section 3.13. Audit Committee. The Board shall --------------- designate an Audit Committee, consisting of three of more directors, each of whom shall be independent of management and free from any relationship that would interfere with the exercise of independent judgment as a committee member. It shall be the responsibility of the Audit Committee to evaluate for, and recommend to, the Board, as appropriate, the selection of the Corporation's independent auditors, the scope of the audits to be conducted, and the purpose and adequacy of reserves; to monitor and make recommendations in respect to the internal audit program; and to review significant accounting policies, including any major changes to those policies. Section 3.14. Ethics Committee. The Board shall ---------------- designate an Ethics Committee, consisting of three or more members, each of whom shall be independent of management and free from any relationship that would interfere with the independent judgment as a committee member. It shall be the responsibility of the Ethics Committee to review, and recommend to the Board, as appropriate, matters relating to the business conduct of the corporation and its employees and other matters of public interest, including environmental quality, safety and equal employment. 11 Section 3.15. Nominating Committee. The Board shall -------------------- designate a Nominating Committee consisting of three or more members, each of whom shall be independent of management and free from any relationship that would interfere with the independent judgment as a committee member. It shall be the responsibility of the Nominating Committee to recommend to the Board of Directors, without regard to sex, race, religion or national origin, individuals to be nominated for election to the Board of Directors, including the position of Chairman, President, and Chief Executive Officer; to periodically review Board procedures, making such recommendations to the Board as may be appropriate, and to provide for a process through which the performance of the Board of Directors and its members is reviewed and evaluated, reporting to the Board of Directors, as appropriate. Section 3.16. Compensation Committee. The Board shall ---------------------- designate a Compensation Committee, consisting of three or more members, each of whom shall be independent of management and free from any relationship that would interfere with the independent judgment as a committee member. It shall be the responsibility of the Compensation Committee to review matters relating to compensation policies and proposed significant changes in the structure of the organization and personnel and, as appropriate, make recommendations to the Board of Directors. Section 3.17 Finance Committee. The Board shall ----------------- designate a Finance Committee, consisting of five or more members. It shall be the responsibility of the Finance Committee to review matters relating to the financial condition and performance of the corporation, including the financial aspects of pension matters and, as appropriate, make recommendations to the Board of Directors, and to exercise, to the extent permitted by the law of Pennsylvania and the bylaws of the Corporation, the authority of the Board of Directors in the management of the business and the affairs of the Corporation on days other than those on which the Board of Directors meets and to report such actions to the Board of Directors. Section 3.18. Participation in Board Meetings by ---------------------------------- Telephone. One or more directors may participate in a meeting of - --------- the Board or of a committee of the Board by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and all directors so participating shall be deemed present to the meeting. Section 3.19. Action by Written Consent of Directors. -------------------------------------- 12 Any action which may be taken at a meeting of the Board or of the members of a committee of the Board may be taken without a meeting if, prior or subsequent to the action, a consent or consents in writing setting forth the action so taken shall be signed by all of the directors or the members of the committee, as the case may be, and filed with the Secretary of the Corporation. Section 3.20. Compensation of Directors. The Board of ------------------------- Directors may, by resolution, fix the compensation of directors for their services. A director may also serve the Corporation in any other capacity and receive compensation therefor. Section 3.21. Chairman of the Board. The Board shall --------------------- appoint a Chairman of the Board who shall, if present, preside at all meetings of the Board and at all meetings of the shareholders. ARTICLE IV OFFICERS Section 4.1. Principal Officers. The principal ------------------ officers of the Corporation shall be chosen by the Board, and shall include a Chief Executive Officer, one or more Senior Vice Presidents, one or more Vice Presidents, a Secretary, and a Treasurer. The Board shall designate one officer (who need not be a principal officer but shall not be an assistant officer) to be the chief financial officer of the Corporation and another officer (who need not be a principal officer but shall not be an assistant officer) to be the chief accounting office of the Corporation. All officers shall be natural persons of full age. Any number of offices may be held by the same person. Section 4.2. Election of Principal Officers. The ------------------------------ Board, immediately after each annual meeting of the shareholders, shall elect the principal officers of the Corporation, each of whom shall hold office for a term of one year or such other term as the Board may provide, and until his successor has been elected and qualified or until his earlier death, resignation of removal. Each principal officer shall have such authority and perform such duties as the Board of Directors may from time to time determine. Section 4.3. Other Officers. The Corporation may have -------------- such other officers, assistant officers, agents and employees as the Board or the Chief Executive Officer may deem necessary, each of whom shall hold office for such period, have such authority and perform such duties as the Board or the Chief Executive Officer may from time to time determine. The Board may delegate to any 13 principal officer the power to appoint or remove and set the compensation of any such other officers and any such agents or employees. Section 4.4. Compensation of Officers. Except as ------------------------ provided in Section 4.3 of these Bylaws, the salaries of all officers of the Corporation shall be fixed by the Board. Section 4.5. Removal of Officers. Any officer or ------------------- agent of the Corporation may be removed by the Board with or without cause, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Vacancies of any office shall be filled by the Board. Election or appointment of an officer or agent shall not of itself create contract rights. Section 4.6. Bonds. If required by the Board, any ----- officer shall give the Corporation a bond, in such sum and with such surety of sureties as may be satisfactory to the Board, for the faithful discharge of the duties of his or her office and for the restoration to the Corporation, in the case of his or her death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his or her possession or under his or her control belonging to the Corporation. ARTICLE V SHARE CERTIFICATES Section 5.1. Certificate for Shares. The certificates ---------------------- representing shares of the Corporation shall be numbered and registered in a share register as they are issued. The share register shall exhibit the names and addresses of all registered holders and the number and class of shares and the series, if any, held by each. The certificates shall state that the Corporation is incorporated under the laws of the Commonwealth of Pennsylvania, the name of the registered holder and the number and class of shares and the series, if any, represented thereby. If, under the Articles, the Corporation is authorized to issue shares of more than one class or series, each certificate shall set forth, or shall contain a statement that the Corporation will furnish to any shareholder upon request and without charge, a full or summary statement of the designations, voting rights, preferences, limitations and special rights of the shares of each class or series authorized to be issued so far as they have been fixed and determined and the authority of the Board to fix and determine such rights. 14 Section 5.2. Execution. Every share certificate shall --------- be executed, by facsimile or otherwise, by or on behalf of the Corporation by the Chief Executive Officer or by any Senior Vice President or by the Secretary. In case any officer who has executed, or whose facsimile signature has been placed upon, any share certificate shall have ceased to be such officer, because of death, resignation or otherwise, before the certificate is issued, it may be issued by the Corporation with the same effect as if the officer had not ceased to be such at the time of its issue. ARTICLE VI SHARE TRANSFER Section 6.1. Transfer of Shares. Upon presentment to the ------------------ Corporation or its transfer agent of a share certificate duly endorsed by the appropriate person or accompanied by proper evidence of succession, assignment or authority to transfer, a new certificate shall be issued to the person entitled thereto and the old certificate canceled and the transfer registered upon the books of the Corporation, unless the Corporation or its transfer agent has a duty to inquire as to adverse claims with respect to such transfer that has not been discharged or unless the Corporation or its transfer agent requests reasonable evidence of the rightfulness of the transfer and such evidence is not submitted. The Corporation shall have no duty to inquire into adverse claims with respect to transfers of its securities or the rightfulness thereof unless (a) the Corporation has received a written notification of an adverse claim at a time and in a manner that affords the Corporation a reasonable opportunity to act on it before the issuance of a new, reissued or re-registered share certificate and the notification identifies the claimant, the registered owner and the issue of which the share or shares are a part and provides an address for communications directed to the claimant; or (b) the Corporation has required and obtained, with respect to a fiduciary, a copy of a will, trust, indenture, articles of co-partnership, bylaws or other controlling instruments, for a purpose other than to obtain appropriate evidence of the appointment or incumbency of the fiduciary, and such documents indicate, upon reasonable inspection, the existence of an adverse claim. Section 6.2. Discharge of Duty of Inquiry. The ---------------------------- Corporation may discharge any duty of inquiry by any reasonable means, including notifying an adverse claimant by registered or certified mail at the address furnished by him or, if there is no such address, at the claimant's residence or regular place of business, that the security has been presented for registration of transfer by a named person, and that the transfer will be 15 registered unless within thirty (30) days from the date of mailing the notification, either (a) an appropriate restraining order, injunction or other process issues from a court of competent jurisdiction or (b) an indemnity bond, sufficient in the Corporation's judgment to protect the Corporation and any transfer agent, registrar or other agent of the Corporation involved from any loss that it or they may suffer by complying with the adverse claim, is filed with the Corporation. ARTICLE VII RECORD DATE; IDENTITY OF SHAREHOLDERS Section 7.1. Fixing Record Date. The Board may fix a ------------------ time, not more than ninety (90) days before the date of any meeting of the shareholders (other than an adjourned meeting) or the date set for any other purpose, including without limitation, the payment of any dividend or distribution, the allotment of rights, or any change or conversion or exchange of securities, as a record date for the determination of the shareholders entitled to notice of, and to vote at, any such meeting, or entitled to receive payment of any such dividend or distribution, or to receive any such allotment of rights, or to exercise the rights in respect to any such change, conversion or exchange of securities. Except as otherwise provided in Section 7.2 of these Bylaws, only such shareholders as shall be shareholders of record on the date so fixed shall be entitled to notice of, and to vote at, such meeting or to receive payment of such dividend or distribution or to receive such allotment of rights or to exercise such rights, as the case may be, notwithstanding any transfer of any securities on the books of the Corporation after any record date so fixed. When a determination of shareholders of record has been made as provided in this Section 7.1 for purposes of a meeting, the determination shall apply to any adjournment of such meeting unless the Board fixes a new record date for the adjourned meeting. Section 7.2. Certification of Nominee. The Board may ------------------------ adopt a procedure whereby a shareholder may certify in writing to the Secretary of the Corporation that all or a portion of the shares registered in the name of the shareholder are held for the account of a specified person or persons. The Board, in adopting such procedure, may specify (i) the classification of shareholder who may certify, (ii) the purpose or purposes for which the certification may be made, (iii) the form of certification and the information to be contained therein, (iv) as to certifications with respect to a record date, the date after the record date by which the certification must be received by the Secretary of the Corporation, and (v) such other provisions with respect to the procedure as the Board deems necessary or desirable. Upon receipt 16 by the Secretary of the Corporation of a certification complying with the procedure, the persons specified in the certification shall be deemed, for the purpose or purposes set forth in the certification, to be the holders of record of the number of shares specified instead of the person making the certification. ARTICLE VIII REGISTERED SHAREHOLDERS Section 8.1. Registered Shareholders. Before due ----------------------- presentment for transfer of any security, the Corporation shall treat the registered owner thereof as the person exclusively entitled to vote, to receive notifications and otherwise to exercise all the rights and powers of an owner, and shall not be bound to recognize any equitable or other claim or interest in such securities, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the Commonwealth of Pennsylvania or Section 7.2 of these Bylaws. ARTICLE IX LOST CERTIFICATES Section 9.1. Lost Certificates. If the owner of a ----------------- share certificate claims that it has been lost, destroyed, or wrongfully taken, the Corporation shall issue a new certificate in place of the original certificate if the owner so requests before the Corporation has notice that the certificate has been acquired by a bona fide purchaser, and if the owner has filed with the Corporation an indemnity bond and an affidavit of the facts satisfactory to the Board or its designated agent, and has complied with such other reasonable requirements, if any, as the Board may deem appropriate. ARTICLE X DISTRIBUTIONS Section 10.1. Payment. Distributions upon the capital ------- stock of the Corporation, whether by dividend, purchase or redemption or other acquisition of its shares, together with stock dividends and stock splits, may be declared by the Board at any regular or special meeting of the Board, subject to the limitations set forth in Section 1551 of the 1988 BCL and may be paid in cash, in property, or in securities, including debt securities, of the Corporation except that stock dividends and stock splits may be paid only in the shares of the Corporation. 17 Section 10.2. Reserves. Before the making of any -------- distributions with respect to the capital stock of the Corporation, there may be set aside out of any funds of the Corporation available for distributions such sum or sums as the Board from time to time, in its absolute discretion, deems proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Board shall deem conducive to the interests of the Corporation, and the Board may abolish any such reserve in the manner in which it was created. ARTICLE XI MISCELLANEOUS; LIABILITY AND INDEMNIFICATION Section 11.1. Checks and Notes. All checks or demands ---------------- for money and notes of the Corporation shall be signed by such officer or officers as the Board may from time to time designate. Section 11.2. Fiscal Year. The fiscal year of the ----------- Corporation shall be as determined by the Board. Section 11.3. Seal. The corporate seal shall have ---- inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Pennsylvania." Such seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced. The affixation of the corporate seal shall not be necessary to the valid execution, assignment or endorsement of any instrument or other document by the Corporation. Section 11.4. Waiver of Notice. Whenever any notice is ---------------- required to be given by statute or by the Articles or by these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed the equivalent of the giving of such notice. The business to be transacted at the meeting shall be specified in the waiver of notice of such meeting. Attendance of any person entitled to notice, either in person or by proxy, at any meeting shall constitute a waiver of notice of such meeting, except where any person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened. Section 11.5. Continuing Applicability. The provisions ------------------------ of Sections 11.6, 11.7 and 11.8 of these Bylaws shall continue as to any person who has ceased to be a director, officer, other 18 employee or agent of the Corporation and shall inure to the benefit of the heirs and personal representatives of such person. Section 11.6. Director's Liability. A director of the -------------------- Corporation shall not be personally liable for monetary damages as such for any action taken, or any failure to take any action, unless (a) such director has breached or failed to perform the duties of his office under Section 8363 of Title 42 of Pennsylvania Consolidated Statutes, known as the Directors' Liability Act, and (b) the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness, or unless such liability is imposed pursuant to a criminal statute or for the payment of taxes. Section 11.7. Indemnification. The Corporation shall --------------- indemnify any director or officer and shall have the power by action of the Board of Directors to indemnify any employee or agent other than an officer of the Corporation with respect to any threatened, pending or completed action, suit or proceeding (including actions by or in right of the Corporation to procure a judgment in its favor) arising out of, or in connection with, any actual or alleged act or omission or the status of such indemnified person in his capacity as a director, officer, employee or agent of the Corporation or in his capacity as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, if requested to serve in such capacity by the Corporation, against expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred, unless the person's action or failure to act that gave rise to the claim for indemnification is determined by a court to have constituted willful misconduct or recklessness. Expenses incurred by any director or officer in defending a civil or criminal action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such director or officer is not entitled to be indemnified by the Corporation. Expenses incurred by any employee or agent other than an officer in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon approval of the Board of Directors and receipt of an undertaking by or on behalf of such employee or agent to repay such amount if it shall ultimately be determined that such employee or agent is not entitled to be indemnified by the Corporation. The Corporation may purchase and maintain insurance or establish a separate fund for the purpose of satisfying its indemnification obligations. This Section 11.7 and Section 11.6 shall not apply to any actions filed prior to their adoption nor 19 to any breach or failure of performance of duty by any director or officer occurring prior to their adoption. Section 11.8. Mandatory Indemnification. Without ------------------------- limiting the foregoing and applicable to any action filed at any time, with respect to any act, omission or circumstance, the Corporation shall indemnify any person who was or is a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding (including actions by or in right of the Corporation to procure a judgment in its favor) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred, if such person has been successful on the merits or otherwise in any such action or upon a determination in the specific case that such indemnification is proper in the circumstances because he has met the applicable standard of conduct set forth in the 1988 BCL. The Corporation may purchase and maintain insurance for the purposes of indemnification on behalf of any or all persons to the full extent permitted under the 1988 BCL. ARTICLE XII BYLAW AMENDMENTS Section 12.1. Amendments. These Bylaws may be altered, ---------- amended or repealed by a majority vote of the shareholders entitled to vote thereon at any regular or special meeting duly convened after notice to the shareholders of that purpose, or except for a bylaw on a subject expressly committed to the shareholders by the 1988 BCL, by a majority vote of the members of the Board at any regular or special meeting duly convened, subject always to the power of the shareholders to change such action by the directors. Any change in these Bylaws shall take effect when adopted, except as otherwise provided in the resolution effecting the change. 20 EX-10 3 20 Exhibit 10.1 ------------ Form Of Severance Agreement ---------------------------- This agreement, dated as of August 1, 1995, between Conrail Inc. ("Company") and ("Agreement") (1) memorializes your entitlement to certain rights and benefits hereinafter detailed that mature upon, and only upon, your Termination (this and other terms not defined in the text are defined in Attachment A hereto) following a Change in Control; (2) absent such Termination, is not intended to affect, and shall not be construed as affecting, the compensation and benefits you are entitled to receive; and (3) is not under any circumstances a contract or guarantee of employment with the Company. Except as herein expressly provided, your rights under any and all employee retirement income or welfare benefit policies, plans, programs or arrangements of the Company in which you participate shall be governed by the terms thereof and shall not be enlarged hereunder or otherwise affected hereby. You are intended to rely on this Agreement. Its terms and protections reflect the Company's beliefs that, in the event of a potential Change in Control, (a) the best interests of its stockholders require management focus and continuity; and (b) such focus and continuity will be enhanced by providing economic protection to officers and other key employees whose employment is most likely to be affected adversely by such a change. At the recommendation of its Compensation Committee ("Committee"), which is composed entirely of non-employee directors, the Board of Directors of the Company ("Board") has directed the Company to offer this Agreement to you. For purposes of the Agreement, references to the Company shall include, as appropriate, its principal subsidiary, Consolidated Rail Corporation. I. Effective Date and Term The Agreement is effective and its term ("Term") begins on the date hereof. The Term ends on the earliest of (a) the date, prior to a Change in Control, you cease to be an employee of the Company, (b) the date, prior to a Change in Control, you cease to be employed by the Company at Salary Grade Level [ ] or above, or any comparable successor Salary Grade Level, and (c) the date, prior to a Change in Control, that is twenty-four (24) months after you or the Company gives notice to the other of the termination of this Agreement, provided, however, that if a Change in Control occurs during the Term hereof, this Agreement shall terminate on the later of (x) after a period of thirty- six (36) months, beginning on the day next following a Change in Control, or (y) after a period of twenty-four (24) months from a Final Regulatory Decision, beginning on the day next following a Change in Control, if such Change in Control is subject to approval prior to consummation by the Interstate Commerce Commission or some successor agency performing the same review and approval function (such period being, the "Change in Control Period"). For purposes hereof, a "Final Regulatory Decision" shall be the effective date of a final decision by such regulatory agency. II. Binding on Successors The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization, share exchange or otherwise) to all or substantially all of the business and/or assets of the Company ("Successor"; and such result, "Succession") by agreement, in form and substance satisfactory to the Company's chief legal officer, or his designee(s), serving immediately prior to the Change in Control, expressly to assume and agree to perform this Agreement in the same manner and to the same extent the Company would have been required to perform it had no such Succession occurred. This Agreement shall be binding upon and inure to the benefit of the Company and any Successor (and, from and after any such Succession, that Successor shall be deemed the "Company" for purposes of this Agreement), but otherwise the Company shall not assign or transfer any of its rights, or delegate any of its duties or obligations, hereunder. III. Protection Afforded by the Agreement During the Change in Control Period Except as limited by subparagraph (vii) concerning retirement, in the event of your Termination during the Change in Control Period, the Company shall (1) pay you within ten (10) business days after your Termination Date the amounts indicated in subparagraphs (i) (A) and (B), (iii) and (iv); (2) continue to provide the Additional Benefits detailed in subparagraph (v); (3) pay or afford the other amounts or credits provided in subparagraphs (i) (C) and (D), (ii) and (vi); and (4) pay and provide the Tax Assistance Payments and other benefits defined and called for herein: (i) ACCRUED OBLIGATIONS. In full satisfaction of any and all claims you have or may have for compensation earned through prior service performed by you for the Company prior to your Termination Date: (A) a lump-sum payment in an amount equal to your Base Pay to the extent not theretofore paid; and (B) a lump-sum payment in an amount equal to any cash compensation previously deferred (together with any accrued interest and earnings thereon, including any matching amounts earned as a result of the deferral) and any accrued vacation pay, in each case to the extent not theretofore paid. (C) Any previously deferred compensation held in the form of Company or successor securities (together with matching amounts of such securities earned as a result of the deferral or as the result of dividend reinvestment, if any) shall be delivered to you within ten (10) business days of the Termination Date, with all remaining restrictions thereon, if any, being treated as having lapsed as of the day prior to the Termination Date; provided however, in the event you are subject to Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), delivery of such securities may be delayed for some period of time to the extent required to comply with applicable provisions of Section 16, during which period such securities shall not be forfeited notwithstanding your Termination and after which period such securities shall be delivered to you at the earliest possible date. Notwithstanding the foregoing, your entitlement to cash amounts deferred and Company securities allocated to you in connection with your participation, if any, in the Company's 401(k) Matched Savings 2 Plan and Employee Stock Ownership Plan, or any successor plan, shall be governed exclusively by the terms of such plan and not by this subsection (C). (D) In addition, for that portion of the calendar year prior to your Termination Date, you shall be entitled to receive, on the date such pay is paid to other employees of the Company, as bonus or incentive pay, an amount equal to the product of (i) the amount you would have received had you been employed on December 31 of the year that includes your Termination Date, under the Company's Annual Performance Achievement Reward Plan, Annual Performance Achievement Reward Plus Plan or Senior Executive Performance Plan, as applicable, (or any successor(s)) in effect for that year, multiplied by (ii) the percentage (carried to three decimal places) derived by dividing (a) the number of calendar days in that year which immediately precedes your Termination Date by (b) 365. (ii) STOCK OPTIONS. Any stock options granted to you by the Company that have not vested prior to your Termination Date shall be vested as of the day prior to your Termination Date and shall be exerciseable in accordance with the terms of the applicable granting agreement, provided however, in the event you are subject to Section 16 of the Exchange Act, your right to exercise the options vesting pursuant to this Agreement or to dispose of shares acquired through the exercise of such options may be delayed to the extent required to comply with applicable provisions of Section 16, during which period of delay such securities shall not be forfeited notwithstanding your Termination. For purposes of applying the terms of any granting agreement to options vesting pursuant to this Agreement, your Termination shall be characterized and shall have the effect as set forth in Item (L) of Attachment A. (iii) PERFORMANCE SHARE EQUIVALENT. In lieu of your having any entitlement to unearned Performance Shares that you have been awarded and as to which a performance period has not been completed on or before your Termination Date, you shall receive a cash payment equal to the Performance Share Equivalent (determined in accordance with Item (H) of Attachment A). (iv) SEVERANCE PAY. In lieu of, and in full satisfaction of any and all claims you have or may have thereafter to receive cash compensation or awards under or otherwise to participate in or under any feature of any compensation policy, plan, program or arrangement of the Company subsequent to your Termination, a lump-sum payment ("Severance Pay") in an amount that is three (3) times the sum of: (A) an amount equal to your Base Pay (determined in accordance with Item (B)(ii) of Attachment A); and (B) an amount equal to your Highest Recent Incentive Award (determined in accordance with Item (G) of Attachment A). (v) ADDITIONAL BENEFITS. For the thirty-six (36) months next following your Termination Date, the Company shall arrange to provide you with Additional Benefits substantially similar to those you were entitled to receive immediately prior to your Termination Date (and if and to the extent that such benefits shall not or cannot be paid or provided under any policy, plan, program or arrangements of the Company for whatever reason, the Company shall itself pay or provide for the 3 payment of such Additional Benefits to you, your dependents and your beneficiaries). Without otherwise limiting the purposes or effects of the provisions under the caption "No Mitigation Obligation," infra, Additional Benefits to which you are entitled pursuant to the first sentence of this subparagraph (v) shall be reduced to the extent you actually receive comparable Additional Benefits from another employer during such period following your Termination Date, and you shall report to the Company any such benefits actually received. (vi) CREDITABLE SERVICE FOR RETIREMENT. For purposes of determining your creditable service under the Company's various plans providing retirement income, including without limitation any supplemental retirement plans and any agreement(s) with you, you shall receive an additional thirty-six (36) months of creditable service under each of such plans or agreements. However, the additional service shall not be credited to you under any plan where the effect of crediting such additional service would violate Section 401(a) of the Internal Revenue Code of 1986, as amended ("Code"), but shall instead be credited under any retirement plan supplemental to a retirement plan to which Section 401(a) of the Code relates. Notwithstanding the foregoing, in the case of a Board-appointed officer, such creditable service shall not be greater than the number that is equal to the number of months (calculated in accordance with the terms of the applicable plan) between (a) that officer's Termination Date and (b) the date on which such officer attains the mandatory retirement date for that officer, if any, in effect at the time of the Change in Control. Your rights under such programs and plans shall be governed by the terms thereof and, except as herein expressly provided, shall not be enlarged hereunder or otherwise affected hereby. (vii) SPECIAL PROVISO FOR THOSE ELIGIBLE TO RETIRE. If on your Termination Date you are eligible to retire under the provisions of any of the Company's retirement plans, as in effect either immediately preceding the Change in Control or on your Termination Date, you may elect to retire on your Termination Date by giving the Company written notice, postmarked or accepted for next-day delivery by a private delivery service no later than noon on the business day next succeeding your Termination Date. If and only if you make this election, your retirement will be deemed to have occurred simultaneously with your Termination Date (provided, however, that the "effective date" of such retirement for purposes of such retirement plans shall be as provided under such plans), and your rights concerning Performance Shares, options, Additional Benefits, compensation deferred in the form of securities and pro rata incentive pay shall be governed by the retiree (or any specific change in control) provisions of the applicable plans, as in effect either immediately preceding the Change in Control or on your Termination Date, and not by subparagraphs (i)(C), (i)(D), (ii), (iii) and (v) hereof. There shall be no right of setoff or counterclaim in respect of any claim, debt or obligation against any payment to, or benefit for, you provided for in this Agreement, except as expressly provided in subsection (v). Without limiting your rights to arbitration, at law or in equity, if the Company fails on a timely basis to make any payment required to be made pursuant to provisions under this caption, the Company shall pay interest on the amount thereof at an annualized rate of interest equal to three percent (3%) above the then-applicable Prime Rate ("Prime Rate" means the rate of interest publicly announced as its prime rate 4 by Morgan Guaranty Trust Company of New York, or such other nationally recognized banking institution as the Company may, from time to time, select). IV. Certain Tax Payments by the Company Notwithstanding anything in the Agreement to the contrary, in the event of (a) your Termination and (b) the determination (as hereinafter provided) that any required payment by the Company to or for your benefit, whether paid or payable pursuant to the terms of the Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right, or similar right, or the lapse or termination of any restriction on the vesting or exercisability of any of the foregoing including without limitation the acceleration of the vesting or lapse of deferral periods under the Company's Long-Term Incentive Plans (individually and collectively, "Payment"), would be subject to the excise tax imposed by Section 4999 of the Code or any successor provision thereto by reason of the Payment's being considered "contingent on a change in ownership or control" of the Company within the meaning of Section 280G of the Code (or any successor provision thereto), or any interest or penalties with respect to such excise tax (collectively, "Excise Tax"), then you shall be entitled to receive an additional payment or payments (individually or collectively, "Tax Assistance Payment"), which shall include an amount such that, after you pay (1) all taxes (including any interest or penalties imposed with respect to such taxes) and (2) any Excise Tax imposed upon the Tax Assistance Payment, you retain so much of the Tax Assistance Payment as is equal to the Excise Tax imposed on the Payment. Subject to the provisions hereinafter concerning your providing notice of a claim by the Internal Revenue Service, all determinations required to be made under these provisions, including whether an Excise Tax is payable by you, the amount of such Excise Tax and whether the Company is required to pay you a Tax Assistance Payment and the amount of such Tax Assistance Payment, if any, shall be made by Price Waterhouse LLP, or such other nationally recognized accounting firm retained by the Company and reasonably acceptable to you ("Accounting Firm"). The Company shall direct the Accounting Firm to submit its determination and detailed supporting calculations to both you and the Company within thirty (30) days after the Termination Date, if applicable, and any such other time or times as you or the Company may request. If the Accounting Firm determines that any Excise Tax is payable by you, the Company shall pay the required Tax Assistance Payment to you within ten (10) business days after the Company receives such determination and calculations with respect to any Payment to you. Any federal tax returns you file shall be prepared and filed on a basis consistent with the determination of the Accounting Firm with respect to the Excise Tax payable by you. If the Accounting Firm determines that you are required to pay no Excise Tax, it shall (at the same time it makes such determination) furnish you and the Company an opinion that you have substantial authority not to report any Excise Tax on your federal income tax return. However, in view of the uncertainty concerning application of Section 4999 of the Code (or any successor provision thereto) at the time of any determination made hereunder by the Accounting Firm, it is possible that a Tax Assistance Payment that should have been made by the Company will not have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event the Company exhausts or fails to pursue its remedies pursuant to the provisions concerning notice of a claim by the Internal Revenue Service, and you thereafter are required to make a 5 payment of any Excise Tax, you shall direct the Accounting Firm to determine the amount of the Underpayment and to submit its determination and detailed supporting calculations as promptly as possible both to you and to the Company, which shall pay the amount of such Underpayment to you or for your benefit within ten (10) business days following the Company's receipt of such determination and calculations. Each of you and the Company shall provide the Accounting Firm access to and copies of any books, records and documents in your or its possession, as the case may be, reasonably requested by the Accounting Firm, and shall otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determination and calculations required or contemplated hereunder. The Company shall bear the fees and expenses of the Accounting Firm for services hereunder. If, for any reason, you initially pay such fees and expenses, the Company shall reimburse you the full amount of the same within ten (10) business days following receipt from you of a statement and reasonable evidence of your payment thereof. You shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the Company to pay a Tax Assistance Payment. You shall give such notification as promptly as practicable, but in no event later than the tenth (10th) business day next following your receipt of such claim, and you further shall apprise the Company of the nature of such claim and the date on which it is required to be paid (in each case, to the extent known to you). You shall not pay or otherwise satisfy such claim prior to the earlier of (a) the expiration of the thirty (30)-calendar-day period next following the date on which you give notice to the Company or (b) the date any payment of the amount with respect to such claim is due. If the Company notifies you in writing prior to the expiration of such period that it desires to contest such claim, you shall: (1) provide the Company any written records or documents in your possession relating to such claim and reasonably requested by the Company; (2) take such action in connection with contesting such claim as the Company reasonably shall request in writing from time to time, including without limitation accepting legal representation with respect to such claim by an attorney competent in respect of the subject matter and reasonably selected by the Company; (3) cooperate with the Company in good faith in order effectively to contest such claim; and (4) permit the Company to participate in any proceedings relating to such claim, provided, however, that the Company directly shall bear and pay all costs and expenses (including without limitation, interest and penalties) incurred in connection with such contest and shall indemnify you and hold you harmless, on an after-tax basis, from and against any and all Excise Tax or income tax (including without limitation, interest and penalties with respect thereto), imposed as a result of such representation and payment of costs and expenses. Without limiting the foregoing, the Company shall control all proceedings taken in connection with the contest of any claim contemplated by these provisions and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim (provided, however, that you may participate therein at your own cost and expense) and may, at its option, either direct you to pay the tax claimed and sue for a refund 6 or contest the claim in any permissible manner, and you agree to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs you to pay the tax claimed and to sue for a refund, the Company shall advance the amount of such payment to you, and pay on a current basis all costs of litigation, including without limitation attorneys' fees, on an interest-free basis and shall agree to and shall indemnify you and hold you harmless, on an after-tax basis, from any Excise Tax or income tax, including without limitation, interest and penalties with respect thereto, imposed with respect to such advance; and provided further, however, that any extension of the statute of limitations relating to payment of taxes for your taxable year with respect to which the contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of any such contested claim shall be limited to issues with respect to which a Tax Assistance Payment would be payable hereunder, and you shall be entitled to settle or to contest, as the case may be, any other issue(s) raised by the Internal Revenue Service or any other taxing authority. If, after you receive an amount advanced by the Company pursuant to provisions of the last full paragraph, you receive any refund with respect to such claim, you shall (subject to the Company's complying with any applicable provisions of the same paragraph) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after any taxes applicable thereto). If, after you receive such an amount advanced by the Company, a determination is made that you shall not be entitled to any refund with respect to such claim and the Company does not notify you in writing of its intent to contest such denial or refund prior to expiration of thirty (30) calendar days after such determination, then such advance shall be forgiven and shall not be required to be repaid, and the amount of such advance shall offset, to the extent thereof, the amount of the Tax Assistance Payment the Company is required to pay you hereunder. V. No Mitigation Obligation You and the Company acknowledge that it will be difficult, and that it may be time-consuming or impossible, for you to find reasonably comparable employment following the Termination Date. Accordingly, you and the Company agree that payments made by the Company pursuant to this Agreement will be liquidated damages (and in lieu of any claim for any breach whatsoever of this Agreement by the Company) and that you will not be required to mitigate the amount of any such payment by seeking other employment or otherwise, nor shall any profits, income, earnings or other benefits from any source whatsoever create any mitigation, offset reduction or other obligation on your part hereunder or otherwise, except as expressly provided in the materials, supra, concerning Additional Benefits. VI. Arbitration Except as otherwise expressly provided under the caption "Certain Tax Payments by the Company," any controversy or claim between you and the Company arising out of or relating to the existence, enforceability, terms or application of this Agreement or any breach or alleged breach thereof, shall be settled by three (3) arbitrators, one of whom shall be appointed-by the Company, one by you and the third of whom shall be appointed by the first two arbitrators. If the first two arbitrators 7 cannot agree on the third arbitrator required to be appointed hereunder, then such arbitrator shall be appointed by the Chief Judge of the United States District Court for the district having jurisdiction of the city or other municipality in which the arbitration is to be held. The arbitration shall be conducted in accordance with the rules of the American Arbitration Association, except with respect to the selection of arbitrators, which shall be as hereinbefore provided. Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. The arbitrators shall have no authority to award punitive, incidental or consequential damages, and they shall apply the substantive law of the Commonwealth of Pennsylvania in reaching a decision. If you determine in good faith to retain legal counsel and/or to incur other reasonable costs or expenses in connection with any such arbitration or to enforce any or all of your rights under this Agreement or under any arbitration award, the Company shall pay all such attorneys' fees, costs and expenses you incur in connection with non-frivolous applications to interpret or enforce your rights, including enforcement of any arbitration award in court, regardless of the final outcome. In addition, during the pendency of such arbitration, the Company will continue to pay you, with the customary frequency, the greater of your Base Pay as in effect immediately prior to the Change in Control or immediately prior to your Termination and to provide Benefits until the controversy or claim finally is resolved in accordance herewith. These payments and the provision of Benefits hereunder shall be in addition to, and not in derogation or mitigation of any other payment or benefit due you under this Agreement. Notwithstanding any other provision hereof, the parties' respective rights and obligations under this Caption will survive a termination or expiration of this Agreement or the Termination of your employment for any reason whatsoever. VII. Employment Rights Nothing expressed or implied in this Agreement shall create any right or duty on your part or that of the Company to have you remain in the employment of the Company prior to or following any Change in Control. VIII. Withholding of Taxes The Company may withhold from any amounts payable under this Agreement all federal, state, city, local or other taxes as shall be required pursuant to any law or governmental regulation or ruling. IX. Personal Nature of Agreement This Agreement is personal in nature, and neither you nor the Company (except as provided under the caption "Binding on Successors"), without the prior written consent of the other, shall assign or transfer any of its rights, or delegate any of its duties or obligations, except as expressly provided under this caption. Without limiting the generality and effect of the foregoing, your right to receive payments hereunder shall not be assignable or transferable, whether by pledge, creation of 8 a security interest or otherwise, other than by a transfer by will or by the laws of descent and distribution; in no event shall the Company have any obligation or liability to recognize or honor any attempted assignment or transfer that is contrary hereto. X. Consent to Amendment of Benefit Plans and Awards. To the extent the provisions of this Agreement operate to amend the terms of or awards outstanding under certain benefit or incentive award plans, and the terms of such plans or awards require approval of such amendment by the Company, or an authorized representative thereof, and/or your consent thereto (including your consent to amend the terms of outstanding awards, if any), (i) the offering of this Agreement pursuant to the direction of the Board shall constitute the express authorization of the Company and its approval of the amendment of such plan or award in the manner set forth herein, and (ii) your consent to the terms hereof shall signify your consent to the amendment of such plan or award, as required, as of the date hereof. XI. Notice For all purposes of this Agreement, all communications, including without limitation, notices, consents, requests and approvals, provided for herein shall be in writing and shall be deemed to have been duly given when (1) actually delivered or (2) if mailed, five (5) business days after having been mailed by United States registered or certified mail, return receipt requested, postage prepaid, (i) if to the Company, to the attention of its Corporate Secretary at its principal executive office at the time, and (ii) if to you, at the address at the time on file with the Company as your principal residence address, or (iii) in either case, to such other address as either the Company or you shall have furnished the other in writing and in accordance herewith, provided, however, that notices of change of address hereunder shall be effective only upon actual receipt. XI. Governing Law The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the Commonwealth of Pennsylvania, without giving effect to the Commonwealth's principles of conflict of law, save those permitting the parties to an agreement to stipulate the substantive law applicable to the agreement and the procedural law applicable to suits, actions or proceedings relating to it. For purposes of interpreting this agreement, time is of the essence. 9 XII. Validity/Severability If any provision of this Agreement or the application of any provision hereof to any person (including a Person) or circumstance is held invalid, illegal or unenforceable, the remainder of this Agreement and the application of such provision to any other person (including a Person) shall not be affected, and the provision(s) so held to be invalid, illegal or unenforceable shall be reformed or excised in good faith by the Company, without the necessity of your agreeing thereto, to the extent (and only to the extent) necessary to make it or them valid, legal or enforceable. XIII. Miscellaneous No provision of this Agreement may be amended, modified, waived or discharged unless such amendment, modification, waiver or discharge is agreed to in a writing signed by you and the Company. No waiver by either party hereto at any time of any breach or of compliance with any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. XIV. Counterparts This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and all of which together shall constitute but one and the same instrument. IN WITNESS WHEREOF, the Board of Directors of the Company has directed that this Agreement be executed and delivered on its behalf by one or more officers of the Company thereunto duly authorized, as of the day and year first above written, and you have indicated your acceptance of and intent to be bound by this Agreement in the space provided below. CONRAIL INC. By: ---------------------------------------- Frank H. Nichols Senior Vice President - Organizational Performance Accepted: By: -------------------------------- Name: ------------------------------ Title: ----------------------------- 10 ATTACHMENT A CERTAIN DEFINITIONS For purposes of this Agreement: (A) Additional Benefits refers to, as to each listed plan, the greater of all those benefits associated with or accruing as a result of your continued participation in the following plans, or portions of plans, of the Company in which you are participating or are eligible to participate (whether funded by actual insurance or self-insured by the Company) immediately prior to (a) the Change in Control or (b) your Termination: 1. Non-Agreement Employee Medical and Dental Plan 2. Non-Agreement Employee Life, Dismemberment and Disability Benefits Plan 3. Long Term Disability Plan The term "Additional Benefits" shall not include benefits of any type under any other plans, policies or programs. (B) Base Pay means (i) in determining whether a Termination has occurred, the gross amount of your annual salary in effect on the date of a Change in Control (the gross amount you actually were paid in the pay period coinciding with or immediately preceding the date of the Change in Control, multiplied by the number of pay periods in the year or otherwise determined and expressed as an annual amount). (ii) in calculating the amount of Severance Pay, the greater of (a) the amount calculated under Item (B)(i); (b) the amount calculated as provided in Item (B)(i), but substituting "Termination Date" for "Change in Control" wherever the latter term appears. (C) Beneficial Owner means any Person who, under Rule 13d-3 (or successor rules or regulations thereto) promulgated under the Securities Exchange Act of 1934, as amended, (the "Exchange Act") would be deemed beneficially to own Voting Stock. (D) Benefits means any of the perquisites, benefits and service credit for benefits provided under any and all employee retirement income or welfare benefit policies, plans, programs or arrangements in which you participate immediately prior to the Change in Control, including without limitation any stock option, stock purchase, stock appreciation, savings, pension, supplemental executive retirement or other retirement income or welfare benefit, deferred compensation, incentive compensation, group and/or executive life, health, medical/ hospital or other insurance (whether funded by actual insurance or self-insured by the Company), disability, salary continuation, expense reimbursement or other employee benefit policies, plans, programs or arrangements that now exist, or any equivalent successor policies, 11 plans, programs or arrangements that may be adopted hereafter by the Company providing perquisites, benefits and service credit for benefits at least as great as are payable thereunder prior to a Change in Control, provided, however, that your rights under such policies, plans, programs or arrangements shall be governed by the terms thereof and shall not be enlarged hereunder or otherwise affected hereby. (E) Cause refers to your having engaged in any of the following if the result of the same is materially harmful to the Company: (i) an intentional act of fraud, embezzlement or theft in connection with your duties or in the course of your employment with the Company; (ii) intentional wrongful damage to property of the Company; (iii) intentional wrongful disclosure of secret processes or of confidential information of the Company; (iv) intentional violation of the Company's policy or policies regarding ethical conduct as in effect immediately prior to a Change in Control; or (v) intentional and continued gross failure to substantially perform your duties with the Company (other than resulting from injury or disease or for reasons that would constitute a Termination under Item (K)(i) hereof) as determined in good faith by a majority of the Board and after such failure continues for thirty (30) days following written demand for substantial performance from the Board detailing the manner in which the Board believes you have failed to perform. For these purposes, an act or failure to act on your part shall be deemed "intentional" only if you acted or omitted to act otherwise than in accordance with your good faith business judgment of the best interests of the Company; in determining whether this standard has been satisfied, you shall be afforded all the presumptions and be entitled to all the protections available to directors or officers under Section 1712 of the Pennsylvania Business Corporation Law. (F) A Change in Control occurs upon any one of the following circumstances or events: (i) The stockholders of the Company approve a transaction or transactions (however denominated or effectuated) with another corporation or other Person ("Combination"), and immediately after such transaction(s) less than eighty percent (80%) of the combined voting power of the then-outstanding securities of such corporation or Person will be held in the aggregate by the holders of securities entitled, immediately prior to such Combination, to vote generally in the election of directors of the Company ("Voting Stock"); (ii) The stockholders of the Company approve a consolidation (however denominated or effectuated) pursuant to a recommendation of the Board; (iii) At any time, Continuing Directors (as herein defined) shall not constitute a majority of the members of the Board ("Continuing Director" means (i) each individual who has been a director of the Company for at least twenty-four (24) consecutive months before such time and (ii) each individual who was nominated or elected to be a 12 director of the Company by at least two thirds of the Continuing Directors at the time of such nomination or election); (iv) The stockholders of the Company approve the sale of all or substantially all of its assets to any other corporation or other Person, and less than eighty percent (80%) of the combined voting power of the then-outstanding securities of such corporation or Person immediately after such transaction will be held in the aggregate by the holders of Voting Stock immediately prior to such sale; (v) A report is filed on Schedule 13D or Schedule 14D-l (or any successor schedule, form or report), pursuant to the Exchange Act, disclosing that any Person has become the Beneficial Owner of 20 or more percent of the voting power of Voting Stock; (vi) The stockholders of the Company approve a plan of complete liquidation or dissolution of the Company; or (vii) The Board determines by a majority vote that, because of the occurrence, or the threat or imminence of the occurrence, of another event or situation with import or effects similar to the foregoing, those who have accepted an agreement of this type are entitled to its protections. Notwithstanding the provisions of the foregoing subparagraph (v), unless otherwise determined in a specific case by majority vote of the Board, a Change in Control for purposes of this Agreement shall not be deemed to have occurred solely because (a) the Company, (b) an entity of which the Company is the direct or indirect Beneficial Owner (as herein defined) of 50 or more percent of the voting securities or (c) any Company-sponsored employee stock ownership plan or any other employee benefit plan of the Company either files or becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule 14D-l, Form 8-K, or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act, disclosing beneficial ownership by it of shares of Voting Stock, whether in excess of 20 percent or otherwise, or because the Company reports that a change in control of the Company has or may have occurred or will or may occur in the future by reason of such beneficial ownership. (G) Highest Recent Incentive Award for purposes of calculating Severance Pay shall be an amount equal to the highest incentive payment earned by you under the Company's Annual Performance Achievement Reward and Reward Plus Plans or Senior Executive Performance Plan, as applicable, or such comparable successor incentive compensation plans, during any one of the last three full fiscal years prior either to the Change in Control or your Termination Date (annualized in the event that you were not employed by the Company for the whole of such fiscal year.) The determination of the Highest Recent Incentive Award shall be made without regard to whether you elected to defer receipt of all or any portion of such award in any given year, but shall be considered in the year in which such award was earned. Note that your Highest Recent Incentive Award is to be computed as of a date that is immediately prior to the Change in Control and immediately prior to your Termination Date, and you are to use the date that entitles you to the larger of the two Highest Recent Incentive Award calculations, to the extent they differ. Thus, if following a Change in Control you remain employed by the Company or its successor and thereby earn an incentive award that is greater than that earned during any one of the three full fiscal years prior to the Change in Control, 13 this computation is intended to give you the benefit of such corporate results in calculating your Severance Pay. (H) Performance Share Equivalent means the product of the (a) Fair Market Value (as hereinafter defined) of the type of Conrail Inc. security or successor security ("Security") which could be earned as a result of the settlement of the Performance Shares, multiplied by (b) the number of Equivalent Shares (as hereinafter defined) to which you are deemed to be entitled on your Termination Date, calculated as follows: (i) If on your Termination Date the Security is listed on the New York Stock Exchange ("Exchange"), (a) The Fair Market Value of each such unearned Performance Share shall be the value of a share of such Security (i) on your Termination Date or (ii) if fewer than 100,000 shares of such Security were traded on the Exchange on your Termination Date, then on the next succeeding day on which at least 100,000 shares trade on the Exchange. Value, on any date, is the mean of the high and low prices at which shares of the Security trade on such date as reported in the Composite Transactions for such date by The Wall Street Journal. (b) Equivalent Shares is the whole number (any fraction/decimal to be rounded to the next whole number) that is equal to the number of shares of the Security you would have been entitled to receive as Performance Shares, assuming satisfaction of all performance criteria associated with such Performance Shares. (ii) If, at the time of the Change in Control or during the Change in Control Period, the Security ceases to be listed on the Exchange ("Cessation Date"), (a) Fair Market Value shall be computed as provided under (i)(a) hereof, but substituting Cessation Date for Termination Date; and (b) Equivalent Shares shall be computed as provided under (i)(b) hereof. (J) Person means any (i) "person" as that term is used and defined in the attached copy of Section 14(d)(2) of the Exchange Act as in effect on the effective date of this Agreement, and (ii) "affiliate" or "associate" of any person (as defined in Item (J)(i)) as those terms are used and defined in the attached copy of Rule 12b-2 of the General Rules and Regulations under the Exchange Act as in effect on the effective date of this Agreement. (K) Termination means: (i) Your decision to leave the employ of the Company if, following a Change in Control and during the Change in Control Period, any of the following occurs, provided, however, that your continued employment 14 after the occurrence of one or more of the following shall not constitute consent to, or a waiver of rights with respect to, circumstances that-empower you to leave the employ of the Company: (a) You are not elected or reelected to the office of the Company you held immediately prior to the Change in Control or, if you were serving as a director of the Company immediately prior to the Change in Control, you are removed as a director; (b) Your Base Pay is, or when annualized will be, less than the amount determined in accordance with Item (B)(i) herein, and any such diminution is more than de minimus and was not effected in connection with a similar proportionate reduction affecting generally all management employees of the Company and of any corporation or Person controlling the Company; (c) Without your prior written consent, the Company, except to meet the requirements of applicable federal or state law, (i) terminates or reduces the value or scope of your rights to any Benefits, (ii) such action results in more than a de minimus reduction in the value of such Benefits and was not effected in connection with a similar termination or proportionate reduction affecting generally all management employees of the Company and of any corporation or Person controlling the Company, and (iii) the Company does not remedy any such termination or reduction, as the case may be, within ten (10) calendar days after its receipt of written notice from you; (d) You determine in good faith that, following a Change in Control, you have been rendered substantially unable to carry out or have suffered a substantial reduction in any of the substantial authorities, powers, functions, responsibilities or duties attached to the position you held immediately prior to the Change in Control, which situation is not remedied within ten (10) calendar days after receipt by the Company of written notice from you that you have made such a determination; (e) The liquidation, dissolution, merger, consolidation or reorganization of the Company or the transfer of all or a significant portion of its business and/or assets, unless the successor or successors (by liquidation, merger, consolidation, reorganization or otherwise) to which all or a significant portion of its business and/or assets have been transferred (directly or by operation of law) shall have assumed all the duties and obligations of the Company under this Agreement pursuant to the provisions under the Agreement caption "Binding on Successors;" (f) The Company requires you to relocate your principal location of work outside a circle having (i) as its center your principal location of work immediately prior to the Change in Control and (ii) a radius of forty (40) miles, or requires you to travel away from your office in the course of discharging your responsibilities or duties hereunder significantly more (in terms either of consecutive days or of aggregate days in any calendar year) than was required of you immediately prior to the Change in Control, without (in either case) your prior written consent; or (g) Without limiting the generality or the effect of the foregoing, any material breach of this Agreement by the Company or any successor thereto. OR 15 (ii) The termination of your employment by the Company during the Change in Control Period, for any reason except: (a) Your death; (b) Your Total Disability, as defined in the Company's Long Term Disability Plan (or any plan that is successor or in addition thereto), as then in effect; (c) Your retirement (i) pursuant to any Board-approved policy or plan, if any, on the terms in effect immediately prior to the Change in Control providing for mandatory retirement of certain personnel, or (ii) pursuant to the terms of any Board-approved early retirement or similar program providing enhanced benefits upon retirement, other than as provided pursuant to this Agreement. (d) Cause. (iii) For purposes of determining your status and rights under any plan pursuant to which you receive Benefits, including any incentive compensation and stock option plans, your Termination, other than pursuant to (ii)(a) through (d), shall be treated as involuntary. In the event your termination is covered by any one of (ii)(a) through (d), your rights and status will be determined in accordance with the applicable terms of such plans, except to the extent otherwise expressly set forth herein. (L) Termination Date means the date specified in the Notice of Termination (hereinafter defined), provided, however, that if, prior to the Termination Date, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the Termination, then the Termination Date shall be the date on which the dispute finally is determined, either by mutual written agreement of the parties, by a binding arbitration award or by a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); and provided, further, that the Termination Date shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. For these purposes, any purported termination of your employment by the Company or by you during the Change in Control Period shall be communicated by written Notice of Termination to the other party hereto, delivered in accordance with the caption concerning "Notice" in the Agreement. The Notice of Termination shall (i) indicate the specific Termination provision relied upon hereunder; (ii) to the extent applicable, set forth in reasonable detail the facts and circumstances claimed to provide a basis for Termination under the provision(s) so indicated; and (iii) shall specify the Termination Date, which: (a) if the Termination is for Cause, shall be a date not less than thirty (30) days from the date the Notice of Termination is given; and 16 (b) if the Termination is not for Cause, shall be a date not less than fifteen (15) nor more than sixty (60) days after such Notice of Termination is given. - ----------------------------------------------------------------------- Securities Laws References - -Section 14(d)(2) of the Securities Exchange Act of 1934 When two or more persons act as a partnership, limited partnership, syndicate, or other group for the purpose of acquiring, holding, or disposing of securities of any issuer, such syndicate or group shall be deemed a "person" for purposes of this subsection. - -Section 12b-2 of the General Rules and Regulations, Securities Exchange Act of 1934 An "affiliate" of, or a person "affiliated" with, a specified person, is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified. The term "associate" used to indicate a relationship with any person, means (1) any corporation or organization (other than the registrant or a majority-owned subsidiary of the registrant) of which such person is an officer or partner or is, directly or indirectly, the beneficial owner of 10 percent or more of any class of equity securities, (2) any trust or other estate in which such person has a substantial beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity, and (3) any relative or spouse of such person, or any relative of such spouse, who has the same home as such person or who is a director or officer of the registrant or any of its parents or subsidiaries. 17 EX-11 4 Exhibit 11 ---------- CONRAIL INC. ------------ EARNINGS PER SHARE COMPUTATIONS -------------------------------
($ In Millions Except Per Share) Quarters Ended Nine Months Ended September 30, September 30, ---------------- ----------------- 1995 1994 1995 1994 ---- ---- ---- ---- Net income - ---------- Primary Net income $116 $106 $294 $175 Dividends declared on Series A ESOP convertible junior preferred stock (ESOP Stock), net of tax benefit (2) (4) (9) (10) ---- ---- ---- ---- $114 $102 $285 $165 ==== ==== ==== ==== Fully diluted Net income 116 106 294 175 Nondiscretionary adjustment (1) (1) (1) (3) (5) ---- ---- ---- ---- $115 $105 $291 $170 ==== ==== ==== ==== Weighted average number of shares (2) - --------------------------------- Primary Weighted average number of common shares outstanding 78,035,787 78,943,971 78,295,582 79,184,111 Effect of shares issuable under employee stock compensation plans 628,223 516,629 541,007 655,369 ---------- ---------- ---------- ---------- 78,664,010 79,460,600 78,836,589 79,839,480 ========== ========== ========== ========== Fully diluted Weighted average number of common shares outstanding 78,035,787 78,943,971 78,295,582 79,184,111 Series A ESOP convertible junior preferred stock 9,793,741 9,863,383 9,807,260 9,907,107 Effect of shares issuable under employee stock compensation plans 695,858 516,629 749,716 655,369 ---------- ---------- ---------- ---------- 88,525,386 89,323,983 88,852,558 89,746,587 ========== ========== ========== ========== Net income per common share Primary $1.44 $1.29 $3.61 $2.07 Fully diluted 1.31 1.17 3.28 1.91
Page 1 of 2 Exhibit 11 ---------- CONRAIL INC. ------------ EARNINGS PER SHARE COMPUTATIONS ------------------------------- Notes: 1. Represents the increase, net of income tax benefits, in ESOP-related expenses assuming conversion of all ESOP Stock to common stock. 2. Shares held by the Employee Benefits Trust (the "Trust") are not considered outstanding for earnings per share computations until issued by the Trust. Page 2 of 2 EX-12 5 Exhibit 12 ---------- CONRAIL INC. ------------ COMPUTATIONS OF THE RATIO OF EARNINGS TO FIXED CHARGES ------------------------------------------------------
($ In Millions) Quarters Ended Nine Months Ended September 30, September 30, -------------- ----------------- 1995 1994 1995 1994 ---- ---- ---- ---- Earnings - -------- Pre-tax income $188 $174 $444 $287 Add: Interest expense 49 48 147 143 Rental expense interest factor 12 7 42 25 Less equity in undistributed earnings of 20%-50% owned companies (4) (3) (14) (10) ---- ---- ---- ---- Earnings available for fixed charges $245 $226 $619 $445 ==== ==== ==== ==== Fixed charges - ------------- Interest expense 49 48 147 143 Rental expense interest factor 12 7 42 25 Capitalized interest 1 1 ---- ---- ---- ---- Fixed charges $ 61 $ 56 $189 $169 ==== ==== ==== ==== Ratio of earnings to fixed charges 4.02x 4.04x 3.28x 2.63x For purposes of computing the ratio of earning to fixed charges, earnings represent income before income taxes plus fixed charges, less equity in undistributed earnings of 20% to 50% owned companies. Fixed charges represent interest expense together with any interest capitalized and a portion of rent under long-term operating leases representative of an interest factor.
EX-15 6 Exhibit 15 ---------- November 9, 1995 Securities and Exchange Commission 450 Fifth Street, NW Washington, DC 20549 Dear Sirs: We are aware that Conrail Inc. has incorporated by reference our report dated October 18, 1995 (issued pursuant to the provisions of Statement of Auditing Standards No. 71) in the following documents: * Registration Statement on Form S-8 No. 33-19155 * Registration Statement on Form S-8 No. 33-44140 * Registration Statement on Form S-8 No. 33-57717 * Registration Statement on Form S-8 No. 33-60445 * Propectus constituting part of Registration Statement on Form S-3 No. 33-64670 * Propectus constituting part of Registration Statement on Form S-3 No. 33-62929. We are also aware of our responsibilities under the Securities Act of 1933 and that pursuant to Rule 436(c) our report dated October 18, 1995 shall not be considered part of a registration statement prepared or certified by us or a report prepared or certified by us within the meaning of Sections 7 and 11 of the Securities Act of 1933. Very truly yours, PRICE WATERHOUSE LLP Thirty South Seventeenth Street Philadelphia, PA 19103 EX-27 7
5 Exhibit 27 ---------- CONRAIL INC. FINANCIAL DATA SCHEDULE ($ In Millions Except Per Share)
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q. 1,000,000 DEC-31-1995 JAN-01-1995 SEP-30-1995 9-MOS 81 0 662 0 165 1,187 6,680 0 8,683 1,238 2,037 0 282 85 2,713 8,683 0 2,735 0 2,233 0 0 147 444 150 294 0 0 0 294 3.61 3.28
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