-----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, M3ecDfPgkLsZ/tYuDtxp5W+jTj8jMOXRrEd4EhshMnlFMh5xgaiCJHfK5af2h+vh wUTsgvYNIdoFOp6PYKtIDw== 0000950157-96-000487.txt : 19961223 0000950157-96-000487.hdr.sgml : 19961223 ACCESSION NUMBER: 0000950157-96-000487 CONFORMED SUBMISSION TYPE: SC 14D9/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19961220 SROS: NYSE SROS: PHLX SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CONRAIL INC CENTRAL INDEX KEY: 0000897732 STANDARD INDUSTRIAL CLASSIFICATION: RAILROADS, LINE-HAUL OPERATING [4011] IRS NUMBER: 232728514 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-42777 FILM NUMBER: 96684396 BUSINESS ADDRESS: STREET 1: TWO COMMERCE SQ STREET 2: P O BOX 41417 CITY: PHILADELPHIA STATE: PA ZIP: 19101-1417 BUSINESS PHONE: 2152094434 MAIL ADDRESS: STREET 1: P.O. BOX 41429 STREET 2: 2001 MARKET STREET CITY: PHILADELPHIA STATE: PA ZIP: 19101-1429 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CONRAIL INC CENTRAL INDEX KEY: 0000897732 STANDARD INDUSTRIAL CLASSIFICATION: RAILROADS, LINE-HAUL OPERATING [4011] IRS NUMBER: 232728514 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9/A BUSINESS ADDRESS: STREET 1: TWO COMMERCE SQ STREET 2: P O BOX 41417 CITY: PHILADELPHIA STATE: PA ZIP: 19101-1417 BUSINESS PHONE: 2152094434 MAIL ADDRESS: STREET 1: P.O. BOX 41429 STREET 2: 2001 MARKET STREET CITY: PHILADELPHIA STATE: PA ZIP: 19101-1429 SC 14D9/A 1 AMENDMENT NO. 2 TO SCHEDULE 14D-9 ===================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------------ AMENDMENT NO. 2 to SCHEDULE 14D-9 SOLICITATION/RECOMMENDATION STATEMENT Pursuant to Section 14(d)(4) of the Securities Exchange Act of 1934 ------------------------------------ CONRAIL INC. (Name of Subject Company) ------------------------------------ CONRAIL INC. (Name of Person(s) Filing Statement) ------------------------------------ Common Stock, par value $1.00 per share (including the associated Common Stock Purchase Rights) (Title of Class of Securities) 208368 10 0 (CUSIP Number of Class of Securities) ------------------------------------ Series A ESOP Convertible Junior Preferred Stock, without par value (including the associated Common Stock Purchase Rights) (Title of Class of Securities) N/A (CUSIP Number of Class of Securities) ------------------------------------ James D. McGeehan Corporate Secretary Conrail Inc. 2001 Market Street Two Commerce Square Philadelphia, Pennsylvania 19101 (215) 209-4000 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of the Person(s) Filing Statement) With a copy to: Robert A. Kindler, Esq. Cravath, Swaine & Moore Worldwide Plaza 825 Eighth Avenue New York, New York 10019 (212) 474-1000 ===================================================================== INTRODUCTION Conrail Inc. ("Conrail") hereby amends and supplements its Solicitation/Recommendation Statement on Schedule 14D-9, originally filed on December 6, 1996, and amended on December 12, 1996 (as amended, the "CSX Schedule 14D-9") with respect to an offer by Green Acquisition Corp., a Pennsylvania corporation ("Purchaser") and a wholly owned subsidiary of CSX Corporation, a Virginia corporation ("CSX"), to purchase up to an aggregate of 18,344,845 Shares of Conrail. Capitalized terms not defined herein have the meanings assigned thereto in the CSX Schedule 14D-9. Items 4 and 8 of the CSX Schedule 14D-9 are hereby amended and supplemented by adding the following text at the end thereof: On December 19, 1996, CSX and Conrail issued a press release, pursuant to which they announced that they had entered into the Second Amendment to the Merger Agreement dated as of December 18, 1996 (the "Second Amendment") to, among other things, (i) increase the consideration payable pursuant to the Merger, (ii) accelerate the consummation of the Merger to immediately following the receipt of applicable shareholder approvals and prior to Surface Transportation Board approval and (iii) extend the period (the "Exclusivity Period") during which the Conrail Board has agreed under the Merger Agreement not to withdraw or modify its recommendations of the CSX Transactions, approve or recommend any takeover proposal or cause Conrail to enter into any agreement related to any takeover proposal to December 31, 1998. On December 18, 1996, the Second Amendment was approved by the Conrail Board and the disinterested members of the Conrail Board, with one abstention. Mr. David B. Lewis advised the Conrail Board that while he continues to fully support the Offer and the Merger, he wished to abstain from the vote approving the Second Amendment in light of the provision in the Second Amendment extending the Exclusivity Period to December 31, 1998. The Conrail Board continues to believe that a merger of equals with CSX is in the best interests of Conrail; the Conrail Board believes that the amended terms of the Merger Agreement represent a significant improvement over the original terms of the CSX Transactions. The Conrail Board, including the disinterested members of the Conrail Board, also reaffirmed its determination that the transactions contemplated by the Merger Agreement (such as the Offer and the Merger) are in the best interests of Conrail (taking into account all the Conrail constituencies affected by such proposed transactions, the short-term and long-term interests of Conrail, the resources, intent and conduct (past, stated and potential) of any person seeking to acquire control of Conrail, and all other pertinent factors). Accordingly, the Conrail Board recommends that the shareholders of Conrail who desire to receive cash for a portion of their Shares tender their Shares pursuant to the Offer. The Conrail Board, including the disinterested members of the Conrail Board, also determined that a sale of Conrail to Norfolk would not be in the best interests of Conrail (taking into account all the Conrail constituencies affected by such proposed transactions, the short-term and long-term interests of Conrail, the resources, intent and conduct (past, stated and potential) of any person seeking to acquire control of Conrail, and all other pertinent factors). Accordingly, the Conrail Board recommends that the shareholders of Conrail not tender their Shares pursuant to the Norfolk Offer. At the December 18 Conrail Board meeting, the Conrail Board received fairness opinions from Lazard Freres and Morgan Stanley, copies of which are attached hereto as Exhibits (a)(9) and (a)(10), respectively, are incorporated herein by reference and qualify the foregoing summary in its entirety. In making the determinations and recommendations set forth above, the Conrail Board considered the foregoing fairness opinions as well as the same factors which previously led the Conrail Board to recommend the Offer and the Merger. The terms and conditions of the Offer and the Merger Agreement (as amended) are described in the Offer to Purchase, as supplemented by the Supplement to the Offer to Purchase dated December 19, 1996 (the "Supplement"), a copy of which is filed as Exhibit (a)(11) hereto and is incorporated herein by reference. A copy of the Second Amendment and a copy of the press release are attached hereto as Exhibits (c)(10) and (a)(12), respectively, are incorporated herein by reference and qualify the foregoing summary in its entirety. On December 19, 1996, Norfolk announced that it had increased the price offered in the Norfolk Offer to $115 per Share. On December 20, 1996, Conrail issued a press release, announcing that the Conrail Board has rejected the revised Norfolk Offer and continues to recommend that Conrail shareholders not tender their shares pursuant to the Norfolk Offer. Norfolk Litigation. On December 13, 1996, Norfolk amended its complaint to add claims (a) that any postponement by Conrail of the Pennsylvania Special Meeting scheduled for December 23, 1996 (assuming such postponement was caused by Conrail having failed to receive the requisite number of votes for approval) would be, and that granting CSX the right to consent to such postponement was, a breach of the fiduciary duties of the directors of Conrail, and (b) that CSX has, in effect, acquired more than 20% of the Shares (within the meaning of Subchapter 25E) by virtue of the allegation that shares owned by CSX should be aggregated with Shares that could be voted by directors of Conrail and, accordingly, that CSX is obligated to pay "fair value" in cash, to be determined pursuant to Subchapter 25E, to all shareholders of Conrail other than CSX. Norfolk also added allegations to its Federal securities law claims that the defendants had made misleading statements regarding the possibility that the consideration being offered by CSX might be improved. At a hearing on December 17, 1996, the Court granted a limited injunction enjoining the defendants from postponing, adjourning or not convening the Pennsylvania Special Meeting scheduled for December 23, 1996, by reason of Conrail or its nominees not having received sufficient proxies to assure approval of the Articles Amendment. The Court specified that adjournment or postponement for other reasons would be permissible under the injunction. Item 9. Materials to be filed as Exhibits. Item 9 of the CSX Schedule 14D-9 is hereby amended and supplemented by adding the following text thereto: (a)(9) Opinion of Lazard Freres & Co. LLC dated December 18, 1996. (a)(10) Opinion of Morgan Stanley & Co. Incorporated dated December 18, 1996. (a)(11) Supplement to the Offer to Purchase dated December 19, 1996 (incorporated by reference to Exhibit (a)(15) to the 14D-1). (a)(12) Text of press release issued by CSX and Conrail dated December 19, 1996. (a)(13) Text of press release issued by Conrail dated December 20, 1996. (c)(10) Second Amendment to Agreement and Plan of Merger dated as of December 18, 1996 (incorporated by reference to Exhibit (c)(6) to the 14D-1). (c)(11) Form of Amended and Restated Voting Trust Agreement (incorporated by reference to Exhibit (c)(7) to the 14D-1). SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. CONRAIL INC. By /s/ Timothy T. O'Toole ------------------------------------- Name: Timothy T. O'Toole Title: Senior Vice President--Finance Dated as of December 20, 1996 EXHIBIT INDEX Exhibit Description Page No. - ------- ----------- -------- *(a)(1) Offer to Purchase dated December 6, 1996 (incorporated by reference to Exhibit (a)(1) to CSX's and Purchaser's Tender Offer Statement on Schedule 14D-1 dated December 6, 1996, as amended (the "CSX 14D-1"))........................................ *(a)(2) Letter of Transmittal (incorporated by reference to Exhibit (a)(2) to the CSX 14D-1).......................................... *(a)(3) Text of press release issued by CSX dated December 6, 1996 (incorporated by reference to Exhibit (a)(7) to the CSX 14D-1).......................................... *(a)(4) Letter to shareholders of Conrail dated December 6, 1996............................................ *(a)(5) Form of Summary Advertisement dated December 6, 1996 (incorporated by reference to Exhibit (a)(5) to the CSX 14D-1).......................................... *(a)(6) Opinion of Lazard Freres & Co. LLC (incorporated by reference to Exhibit (a)(14) to the Solicitation/ Recommendation Statement on Schedule 14D-9 of Conrail dated October 16, 1996, as amended, relating to the First Offer (the "First 14D-9"))........................................ *(a)(7) Opinion of Morgan Stanley & Co. Incorporated (incorporated by reference to Exhibit (a)(15) to the First 14D-9).......................................... *(a)(8) Text of press release issued by Conrail and CSX dated December 10, 1996............................................ (a)(9) Opinion of Lazard Freres & Co. LLC dated December 18, 1996............................................ (a)(10) Opinion of Morgan Stanley & Co. Incorporated dated December 18, 1996............................................ (a)(11) Supplement to the Offer to Purchase dated December 19, 1996 (incorporated by reference to Exhibit (a)(15) to the 14D-1).......................................... (a)(12) Text of press release issued by CSX and Conrail dated December 19, 1996......................... (a)(13) Test of press release issued by Conrail dated December 20, 1996............................................ Exhibit Description Page No. - ------- ----------- -------- (b) Not applicable................................. *(c)(1) Agreement and Plan of Merger dated as of October 14, 1996 (incorporated by reference to Exhibit (c)(1) to CSX's and Purchaser's Tender Offer Statement on Schedule 14D-1 dated October 16, 1996, as amended, relating to the First Offer (the "First CSX 14D-1"))....................................... *(c)(2) First Amendment to Agreement and Plan of Merger dated as of November 5, 1996 (incorporated by reference to Exhibit (c)(7) to the First CSX 14D-1)......................................... *(c)(3) Conrail Stock Option Agreement dated as of October 14, 1996 (incorporated by reference to Exhibit (c)(2) to the First CSX 14D-1)..................................... *(c)(4) CSX Stock Option Agreement dated as of October 14, 1996 (incorporated by reference to Exhibit (c)(3) to the First CSX 14D-1)..................................... *(c)(5) Voting Trust Agreement dated as of October 15, 1996 (incorporated by reference to Exhibit (c)(4) to the First CSX 14D-1)..................................... *(c)(6) Employment Agreement of Mr. LeVan dated as of October 14, 1996 (incorporated by reference to Exhibit (c)(5) to the First 14D-9)..................................... *(c)(7) Change of Control Agreement of Mr. LeVan dated as of October 14, 1996 (incorporated by reference to Exhibit (c)(6) to the First 14D-9)..................................... *(c)(8) Answer and Defenses of Conrail, CSX and the individual defendants to Second Amended Complaint, and Counterclaim of Conrail and CSX in Norfolk Southern et al. v. Conrail Inc. et al., filed on December 5, 1996, in the United States District Court for the Eastern District of Pennsylvania (incorporated by reference to Exhibit (c)(8) to the Solicitatio Recommendation Statement on Schedule 14D-9 of Conrail dated November 6, 1996, as amended, relating to the Norfolk Offer)....................................... Exhibit Description Page No. - ------- ----------- -------- *(c)(9) Pages 4-5 and 9-14 of Conrail's Proxy Statement dated April 3, 1996 (incorporated by reference to Exhibit (c)(7) to the First 14D-9).......................................... (c)(10) Second Amendment to Agreement and Plan of Merger dated as of December 18, 1996 (incorporated by reference to Exhibit (c)(6) to the 14D-1).......................................... (c)(11) Form of Amended and Restated Voting Trust Agreement (incorporated by reference to Exhibit (c)(7) to the 14D-1).......................................... - --------------------- * Previously filed EX-99.A.9 2 EXHIBIT (A)(9) OPINION EXHIBIT (a)(9) December 18, 1996 The Board of Directors Conrail Inc. 2001 Market Street Philadelphia, PA 19103 Dear Members of the Board: You have requested our opinion as to the fairness, from a financial point of view, to the holders of shares of Common Stock, par value $1 per share ("Common Stock"), and of Series A ESOP Convertible Preferred Stock (such Preferred Stock together with the Common Stock is referred to as the "Shares") of Conrail Inc. (the "Company") of the consideration to be received in a series of transactions (collectively, the "Transactions") pursuant to the Agreement and Plan of Merger among the Company, CSX Corporation ("CSX") and Green Acquisition Corp. ("Tender Sub"), dated as of October 14, 1996, as amended as of November 5, 1996 and as further amended as of December 18, 1996 (collectively the "Merger Agreement"). Pursuant to the Merger Agreement, on November 21, 1996, Tender Sub accepted for payment pursuant to an offer to purchase (the "First Offer") 19.9% of the outstanding Shares at a price of $110.00 per share net in cash (the "Offer Consideration"). The terms of the Merger Agreement provide, among other things, that (i) if certain conditions are satisfied, Tender Sub will accept for payment pursuant to an offer to purchase (the "Second Offer" and together with the First Offer, the "Offer") additional Shares such that the Shares purchased in the First Offer and the Second Offer will total a number of Shares (the "Designated Number") equal to 40% of the fully diluted Shares excluding the Option Shares referred to below (the "Fully Diluted Shares") and (ii) subject to, among other things, the favorable required vote of holders of Shares, pursuant to the First Merger and the Second Merger (each as defined in the Merger Agreement and collectively referred to herein as the "Merger"), each remaining outstanding Share (other than Shares owned by the Company as treasury stock or owned by CSX, Tender Sub or any other subsidiary of CSX and other than Shares held by holders who properly exercise and perfect dissenter's rights, if any) will be converted into the right to receive (the "Merger Consideration") (x) 1.85619 shares of Common Stock of CSX, par value $1.00 per share ("CSX Common Stock"), and (y) convertible preferred stock of CSX (the "Additional Securities") having a value to be determined in accordance with the terms of the Merger Agreement on a fully distributed basis equal to $16 per Share; provided that if less than the Designated Number of Shares is purchased pursuant to the Offer, the Merger Consideration will be adjusted so that when taken together with the Offer, 60 percent of the Fully Diluted Shares will each have been converted into the right to receive the Merger Consideration and 40 percent of the Fully Diluted Shares will have received or been converted into the right to receive an amount of cash equal to the Offer Consideration. The Offer Consideration and the Merger Consideration are collectively referred to herein as the "Consideration." In connection with the rendering of this opinion, we have: (i) Reviewed the terms and conditions of the Merger Agreement and the financial terms of the Transactions, all as set forth in the Merger Agreement, and the option agreement between Company and CSX pursuant to which CSX was granted the right to purchase shares of Common Stock (the "Option Shares") and the option agreement between CSX and the Company pursuant to which the Company was granted the right to purchase shares of CSX Common Stock, each dated October 14, 1996 (collectively, the "Option Agreements"); (ii) Analyzed certain historical business and financial information relating to the Company and CSX; (iii) Reviewed certain financial forecasts and other data provided to us by the Company and CSX relating to the businesses of the Company and CSX, respectively, including the most recent business plan for the Company prepared by the Company's senior management, in the form furnished to us; (iv) Conducted discussions with members of the senior managements of the Company and CSX with respect to the businesses and prospects of the Company and CSX, respectively, the strategic objectives of each and possible benefits which might be realized following the Merger; (v) Reviewed public information with respect to certain other companies in the lines of businesses we believe to be generally comparable in whole or in part to the businesses of the Company and CSX and reviewed the financial terms of certain other business combinations involving companies in lines of businesses we believe to be generally comparable in whole or in part to the businesses of the Company and CSX that have recently been effected; (vi) Reviewed the historical stock prices and trading volumes of Common Stock and CSX Common Stock; and (vii) Conducted such other financial studies, analyses and investigations as we deemed appropriate. We have relied upon the accuracy and completeness of the foregoing financial and other information and have not assumed any responsibility for independent verification of such information or any independent valuation or appraisal of any of the assets of the Company or CSX nor have we been furnished with any such appraisals. With respect to financial forecasts, we have assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and judgments of managements of the Company and CSX as to the future financial performance of the Company and CSX, respectively. We assume no responsibility for and express no view as to such forecasts or the assumptions on which they are based. Our opinion is necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to us as of, the date hereof. In rendering our opinion, we have assumed that (i) the Transactions will be consummated substantially on the terms described in the Merger Agreement, without any waiver of any material terms or conditions by any party thereto, and that obtaining the necessary regulatory approvals for the Transactions will not have an adverse effect on CSX or the Company or on the trading value of CSX Common Stock or the Additional Securities and (ii) the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended. We were not requested to, and did not, solicit third party offers to acquire all or any part of the Company. We are acting as financial advisor to the Company's Board of Directors in connection with the Transactions and will receive fees for such services, a substantial portion of which fees are contingent upon the consummation of the Transactions. Our Firm has in the past provided and is currently providing investment banking and financial advisory services to the Company and has received customary fees for rendering such services. Our Firm has in the past also provided investment banking and financial advisory services to CSX and has received customary fees for rendering such services. Our engagement and the opinion expressed herein are for the benefit of the Company's Board of Directors and our opinion is rendered in connection with its consideration of the Transactions. This opinion is not intended to and does not constitute a recommendation to any holder of Shares as to whether such holder should tender Shares pursuant to the Offer or vote to approve the Merger Agreement and the transactions contemplated thereby. It is understood that, except for inclusion of this letter in its entirety in a proxy statement or tender offer recommendation statement on Schedule 14D-9 from the Company to holders of Shares relating to the Transactions, this letter may not be disclosed or otherwise referred to without our prior written consent, except as may otherwise be required by law or by a court of competent jurisdiction. As you know, on October 24, 1996, Norfolk Southern Corporation commenced a tender offer (the "NSC Offer") for all of the outstanding Shares at a price per Share of $100 net in cash, which per Share price was increased to $110 on November 8, 1996. Counsel to the Company has advised the Company's Board of Directors that the fact that the NSC Offer is subject to, among other conditions, the termination of the Merger Agreement and that the Company is currently contractually prohibited from terminating the Merger Agreement pursuant to Section 4.2(b) thereof creates significant legal uncertainty relating to the consummation of the NSC Offer. Counsel to the Company has advised the Company's Board of Directors that, under Pennsylvania law, in considering a proposed business combination, the Company's Board of Directors is empowered to take into account the long-term interests of the Company and all of its constituencies, not solely the highest price for the Company's Shares. Accordingly, at your request, in rendering our opinion, we did not address the relative merits of the Transactions, including said Section 4.2(b), the NSC Offer and any alternative potential transactions. Based on and subject to the foregoing, we are of the opinion that, as of the date hereof, the Consideration to be received by the holders of Shares pursuant to the Offer and the Merger, when taken together, is fair to such holders (other than CSX, Tender Sub or any other subsidiary of CSX), from a financial point of view. Very truly yours, LAZARD FRERES & CO. LLC By /s/ J. ROBERT LOVEJOY ----------------------- J. Robert Lovejoy Managing Director EX-99.A.10 3 EXHIBIT (A)(10) OPINION EXHIBIT (a)(10) December 18, 1996 Board of Directors Conrail Inc. 2000 Market Street Philadelphia, PA 19101-1422 Gentlemen and Mesdames: We understand that Conrail Inc. (the "Company"), CSX Corporation ("CSX") and Green Acquisition Corp., a wholly- owned subsidiary of CSX ("Acquisition Sub"), have entered into an Agreement and Plan of Merger, dated as of October 14, 1996 as amended as of November 5, 1996, and as further amended as of December 18, 1996 (collectively, the "Merger Agreement"). Pursuant to the Merger Agreement, on November 21, 1996, Acquisition Sub accepted for payment pursuant to an offer to purchase (the "First Offer") 19.9% of the issued and outstanding shares of common stock, par value $1 per share (the "Company Common Stock"), and Series A ESOP Convertible Junior Preferred Stock (together with the Company Common Stock, the "Shares") of the Company, for $110.00 per share net to the seller in cash (the "Offer Consideration"). The terms of the Merger Agreement provided, among other things, that: (i) if certain conditions are satisfied, Acquisition Sub will accept for payment pursuant to an offer to purchase (the "Second Offer" and, together with the First Offer, the "Offer") additional Shares such that the Shares purchased in the First Offer and the Second Offer will total a number of Shares (the "Designated Number") equal to 40% of the fully-diluted Shares, excluding the Option Shares referred to below (the "Diluted Shares"); and (ii) upon the receipt of certain shareholder approvals and satisfaction of other conditions thereto, pursuant to the First Merger and the Second Merger (each as defined in the Merger Agreement and collectively referred to herein as the "Merger," and the "Merger" together with the Offer, the "Transaction"), the surviving corporation will become a wholly-owned subsidiary of CSX and each outstanding share of the Company Common Stock, other than shares held in treasury or held by CSX or its subsidiaries, will be converted into the right to receive (x) 1.85619 shares of common stock, par value $1.00 per share (the "CSX Common Stock"), of CSX (the "Stock Consideration" and, together with the Offer Consideration, the "Merger Consideration," and the Merger Consideration, together with the Offer Consideration, the "Consideration"); and (y) convertible preferred stock of CSX ("Additional Securities") having a fully-distributed trading value equal to $16 per Share to be determined in acordance with the terms of the Merger Agreement; provided that if less than the Designated Number of Shares are purchased pursuant to the Offer, the Consideration will be adjusted so that when taken together with the Offer, 60% of the Fully Diluted Shares will each have been converted into the right to receive the Merger Consideration, and 40% of the Fully Diluted Shares will have received or been converted into the right to receive an amount of cash equal to the Offer Consideration. The terms and conditions of the Offer and the Merger are more fully set forth in the Merger Agreement. You have asked for our opinion as to whether the Consideration to be received by the holders of Shares pursuant to the Offer and the Merger, taken together, is fair from a financial point of view to such holders. For purposes of the opinion set forth herein, we have: (i) reviewed certain publicly-available financial statements and other information of the Company and CSX, respectively; (ii) reviewed certain internal financial statements and other financial and operating data concerning the Company and CSX prepared by the managements of the Company and CSX, respectively; (iii) reviewed certain financial projections for CSX prepared by the management of CSX; (iv) reviewed certain financial projections, including estimates of certain potential benefits of the proposed business combination, prepared by the management of the Company; (v) discussed, on a limited basis, the past and current operations and financial condition and the prospects of the Company and CSX with senior executives of the Company and CSX, respectively; (vi) reviewed the reported prices and trading activity for the Company Common Stock and the CSX Common Stock; (vii) compared the financial performance of the Company and CSX and the prices and trading activity of the Company Common Stock and the CSX Common Stock with that of certain other comparable, publicly-traded companies and their securities; (viii) reviewed the financial terms, to the extent publicly available, of certain comparable acquisition transactions; (ix) participated in discussions among representatives of the Company, CSX and their financial and legal advisors; (x) reviewed the Merger Agreement and certain related documents; and (xi) performed such other analyses and considered such other factors as we have deemed appropriate. We have assumed and relied upon without independent verification the accuracy and completeness of the information reviewed by us for the purposes of this opinion. With respect to the financial projections, including estimates of certain potential benefits of the proposed business combination, we have assumed that they have been reasonably prepared on bases reflecting the best currently- available estimates and judgment of the future financial performance of the Company and CSX, respectively. We have not made any independent valuation or appraisal of the assets or liabilities of the Company or CSX, nor have we been furnished with any such appraisals. In arriving at our opinion, we have assumed (i) that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, and (ii) that obtaining all the necessary regulatory and governmental approvals for the Merger will not have an adverse effect on the Company, CSX or on the trading value of the CSX Common Stock or the Additional Securities. We have assumed that the Offer and the Merger will be consummated substantially in accordance with the terms set forth in the Merger Agreement, without any waiver of any material terms or conditions by any party thereto. Our opinion is necessarily based on economic, market and other conditions in effect on, and the information made available to us as of, the date thereof. In arriving at our opinion, we were not authorized to solicit, and did not solicit, interest from any party with respect to the acquisition of the Company or any of its assets. We have been engaged to provide this opinion to the Board of Directors of the Company in connection with this transaction and will receive a fee for our services. In the past, Morgan Stanley & Co. Incorporated and its affiliates have provided financial advisory and financing services for the Company and CSX and have received fees for the rendering of these services. It is understood that this letter is for the information of the Board of Directors of the Company and may not be used for any other purpose without our prior written consent, except that this opinion may be included in its entirety in any filing made by the Company with the Securities and Exchange Commission with respect to the Offer and the Merger. In addition, we express no opinion and make no recommendation as to whether the holders of the Company Common Stock should tender such shares pursuant to the Offer or vote at the stockholders' meeting held in connection with the Merger. As you know, on October 24, 1996, Norfolk Southern Corporation commenced a tender offer (the "NSC Offer") for all of the outstanding Shares at a price per Share of $100 net in cash, which per Share price was increased to $110 on November 8, 1996. Counsel to the Company has advised the Company's Board of Directors that the fact that the NSC Offer is subject to, among other conditions, the termination of the Merger Agreement, and that the Company is currently contractually prohibited from terminating the Merger Agreement pursuant to Section 4.2(b) thereof creates significant legal uncertainty relating to the consummation of the NSC Offer, Counsel to the Company has advised the Company's Board of Directors that, under Pennsylvania law, in considering a proposed business combination, the Company's Board of Directors is empowered to take into account the long-term interests of the Company and all of its constituencies, not solely the highest price for the Company's Shares. Accordingly, at your request, in rendering our opinion, we did not address the relative merits of the Transaction, including said Section 4.2(b), the NSC Offer and any alternative potential transaction. Based on the foregoing, we are of the opinion on the date thereof that the Consideration to be received by the holders of Shares pursuant to the Offer and the Merger, taken together, is fair from a financial point of view to such holders (other than CSX, Acquisition Sub or any other subsidiary of CSX). Very truly yours, MORGAN STANLEY & CO., INCORPORATED, By: /s/ MAHMOUD A. MAMDANI --------------------------- Mahmoud A. Mamdani Managing Director EX-99.A.12 4 PRESS RELEASE EXHIBIT (a)(12) FOR IMMEDIATE RELEASE CONTACTS: CSX Corporation Conrail Inc. Thomas E. Hoppin Craig R. MacQueen (804) 782-1450 (215) 209-4594 Kekst and Company Abernathy MacGregor Group Richard Wolff Joele Frank/Dan Katcher (212) 593-2655 (212) 371-5999 CSX AND CONRAIL INCREASE MERGER CONSIDERATION BY $16 PER SHARE VOTING TRUST TO PERMIT EARLY 1997 PAYMENT OF MERGER CONSIDERATION TO CONRAIL SHAREHOLDERS CASH PORTION TO REMAIN AT $110 PER CONRAIL SHARE TENDER OFFER EXTENDED UNTIL JANUARY 22, 1997 SPECIAL CONRAIL SHAREHOLDER MEETING NOW SCHEDULED FOR JANUARY 17, 1997 Philadelphia, PA and Richmond, VA (December 19, 1996) -- Conrail Inc. [NYSE:CRR] and CSX Corporation [NYSE:CSX] announced today that they have amended their merger agreement to increase the merger consideration by $16 per Conrail share, or approximately $870 million in the aggregate. Conrail shareholders will also benefit from the significant value of receiving the merger consideration earlier than previously contemplated. Conrail shareholders will now receive in the merger, for 60% of their shares, an additional $16 per share in CSX convertible preferred stock, the terms of which will be set prior to the merger so that such securities would trade at par on a fully distributed basis. This is in addition to the tax-free 1.85619 shares of CSX common stock to be received in the merger. The amended agreement also provides that the merger will occur at the time of the CSX and Conrail shareholders meetings for approval of matters related to the merger. These meetings are expected to be held in the first quarter of 1997. Upon shareholder approval and consummation of the merger, the Conrail shareholders would receive the merger consideration of CSX common stock and CSX convertible preferred stock. All the Conrail stock acquired by CSX, both in the tender and in the merger, would be placed in a voting trust pending the outcome of the Surface Transportation Board's (STB) proceeding. CSX has already purchased 19.9% of Conrail's common and ESOP preferred stock, through a tender offer for $110 in cash per Conrail share. CSX is currently offering to purchase up to an additional 18,344,845 shares of Conrail through a second cash tender offer at $110 per share. David M. LeVan, chairman, president and chief executive officer of Conrail, said "Because of the actions taken by the Conrail board, our shareholders are receiving extraordinary value in our strategic merger-of-equals with CSX. The original terms of the merger provided our shareholders with a price at the high end of what has been paid in railroad mergers. That price has since been increased by more than $1.5 billion before taking into account the significant value associated with receiving the merger consideration in early 1997. In every respect, this merger holds great potential and clearly offers the best possible result for Conrail. This amendment to the merger agreement reaffirms the decision of the Conrail board that it is not willing to agree to the sale of Conrail to Norfolk Southern." John W. Snow, chairman, president and chief executive officer of CSX said "The actions taken by the CSX and Conrail boards allow us to move on to the next stage of the process, the filing of our merger application with the STB. We are confident that we will present a strong case and look forward to building the world's leading transportation and logistics company." The amended merger agreement provides that the period of time during which each of Conrail and CSX has agreed that it will not discuss or agree to any takeover proposal with a third party has been extended to the termination date under the merger agreement, December 31, 1998. CSX and Conrail also announced that the CSX tender offer has been extended to 5:00 p.m., Eastern Standard Time, on January 22, 1997 and the special shareholders meeting seeking approval of the opt-out of the Pennsylvania statute has been postponed to 2:00 p.m., Eastern Standard Time, on January 17, 1997. CSX has been advised by the depositary, on a preliminary basis, that fewer than 100,000 shares have been tendered into the CSX offer as of the close of business on December 18, 1996. Conrail, with corporate headquarters in Philadelphia, PA, operates an 11,000-mile rail freight network in 12 northeastern and midwestern states, the District of Columbia, and the Province of Quebec. Conrail's home page on the Internet can be reached at http://www.CONRAIL.com. CSX, headquartered in Richmond, VA, is an international company offering a variety of rail, container-shipping, intermodal, trucking, barge and contract logistics management services. CSX's home page on the Internet can be reached at http://www.CSX.com. EX-99.A.13 5 PRESS RELEASE EXHIBIT (a)(13) FOR IMMEDIATE RELEASE CONTACTS: Conrail Inc. Abernathy MacGregor Group Craig MacQueen Joele Frank/Dan Katcher (215) 209-4594 (212) 371-5999 CONRAIL REJECTS NORFOLK SOUTHERN'S REVISED HOSTILE OFFER ------------------------------------------------------------ Philadelphia, PA, (December 20, 1996)--Conrail Inc. [NYSE:CRR] announced today that its board of directors has rejected Norfolk Southern's revised $115 per share unsolicited tender offer. David M. LeVan, chairman, president, and chief executive officer of Conrail said, "The Conrail board has again confirmed that a merger of equals with CSX, and not a sale to Norfolk Southern, is in the best interests of Conrail and its constituencies, including its shareholders, employees, suppliers, customers and communities served. The CSX transaction provides extraordinary value to our shareholders which would not have been available without the actions taken by the Conrail board. Conrail, with corporate headquarters in Philadelphia, PA, operates an 11,000-mile rail freight network in 12 northeastern and midwestern states, the District of Columbia, and the Province of Quebec. Conrail's home page can be reached at http://www.CONRAIL.com. ### -----END PRIVACY-ENHANCED MESSAGE-----