-----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, P76d7kvc0Al+G1dcY0keXBxxIXRDbldvn0FF6u8SZi/BgDckgqhTBOQ/OgN1hiRS c27V6xnjFLyBEUi8NxY7/A== 0000950157-97-000013.txt : 19970113 0000950157-97-000013.hdr.sgml : 19970113 ACCESSION NUMBER: 0000950157-97-000013 CONFORMED SUBMISSION TYPE: SC 14D9/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19970110 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: 97504477 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. 4 TO SCHEDULE 14D9 ======================================================================= SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 AMENDMENT NO. 4 to SCHEDULE 14D-9 SOLICITATION/RECOMMENDATION STATEMENT Pursuant to Section 14(d)(4) of the Securities Exchange Act of 1934 CONRAIL INC. (Name of Subject Company) CONRAIL INC. (Name of Person(s) Filing Statement) Common Stock, par value $1.00 per share (including the associated Common Stock Purchase Rights) (Title of Class of Securities) 208368 10 0 (CUSIP Number of Class of Securities) Series A ESOP Convertible Junior Preferred Stock, without par value (including the associated Common Stock Purchase Rights) (Title of Class of Securities) N/A (CUSIP Number of Class of Securities) James D. McGeehan Corporate Secretary Conrail Inc. 2001 Market Street Two Commerce Square Philadelphia, Pennsylvania 19101 (215) 209-4000 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of the Person(s) Filing Statement) With a copy to: Robert A. Kindler, Esq. Cravath, Swaine & Moore Worldwide Plaza 825 Eighth Avenue New York, New York 10019 (212) 474-1000 ======================================================================= 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, December 20, 1996 and January 3, 1997 (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. Item 8. Additional Information to be Furnished. Item 8 of the CSX Schedule 14D-9 is hereby amended and supplemented by adding the following text at the end thereof: On January 9, 1997, the United States District Court for the Eastern District of Pennsylvania denied the motions of Norfolk and the shareholder-plaintiffs for a preliminary injunction to invalidate the Exclusivity Period and to enjoin the shareholder vote scheduled for January 17, 1997, and the motion for summary judgment that CSX and Conrail's directors and executive officers had together violated the provisions of Subchapter 25E. On January 9, 1997, Conrail and CSX issued a joint press release relating to the United States District Court decision. A copy of the United States District Court's decision and the joint press release relating thereto are attached hereto as Exhibits (c)(12) and (a)(16), are incorporated herein by reference and qualify the foregoing summary in its entirety. On January 9, 1997, the STB issued a decision rejecting as premature and unwarranted at this time Norfolk's petition challenging the extension of the Exclusivity Period to December 31, 1998. The text of the STB decision is attached hereto as Exhibit (c)(13), is incorporated herein by reference and qualifies the foregoing summary in its entirety. CSX has filed with the Securities and Exchange Commission a Registration Statement on Form S-4 (Registration No. 333-19523) containing a Joint Proxy Statement/Prospectus relating to the special meetings of shareholders with respect to the Merger, which includes, among other things, pro forma financial statements and notes thereto relating to the CSX Transactions. 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)(16) Text of joint press release issued by Conrail and CSX on January 9, 1997. (c)(12) Text of opinion of Judge Donald VanArtsdalen of the United States District Court for the Eastern District of Pennsylvania as delivered from the bench on January 9, 1997. (c)(13) Text of STB Decision No. 5 of STB Finance Docket No. 33220 dated January 8, 1997. 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 January 10, 1997 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............................ Exhibit Description Page No. - ------- ----------- -------- *(a)(13) Text of press release issued by Conrail dated December 20, 1996.................................. *(a)(14) Text of advertisement published by Conrail and CSX on December 10, 1996........................... *(a)(15) Text of advertisement published by Conrail and CSX on December 12, 1996........................... (a)(16) Text of joint press release issued by Conrail and CSX on January 9, 1997......................... *(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).... Exhibit Description Page No. - ------- ----------- -------- *(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 Solicitation/Recommendation Statement on Schedule 14D-9 of Conrail dated November 6, 1996, as amended, relating to the Norfolk Offer)..................................... *(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)............................... (c)(12) Text of opinion of Judge Donald VanArtsdalen of the United States District Court for the Eastern District of Pennsylvania as delivered from the bench on January 9, 1997........................... (c)(13) Text of STB Decision No. 5 of STB Finance Docket No. 33220 dated January 8, 1997.................... - --------------------- * Previously filed EX-99.1 2 EXHIBIT (A)(16) EXHIBIT (a)(16) CONTACT: CSX Conrail 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 FOR IMMEDIATE RELEASE CSX AND CONRAIL PREVAIL FEDERAL COURT DENIES NORFOLK SOUTHERN'S MOTION -- CSX, Conrail Strategic Merger to Proceed as Planned -- RICHMOND, VA and PHILADELPHIA, PA, January 9, 1997 -- CSX Corporation (CSX) (NYSE: CSX) and Conrail Inc. (Conrail) (NYSE: CRR) said today that they are pleased with the decision by the United States District Court for the Eastern District of Pennsylvania rejecting Norfolk Southern's motion for a preliminary injunction to invalidate the exclusivity period contained in the merger agreement between CSX and Conrail and enjoin the shareholder vote scheduled for January 17. CSX and Conrail issued the following statement: "We are gratified with the Court's decision, which allows us to move forward to the successful completion of the next steps in our merger -- the Conrail shareholder vote on January 17 and the completion of CSX's second $2 billion tender offer shortly thereafter. We believe that our merger is clearly the superior business combination and that Conrail shareholders acknowledge that the merger of CSX and Conrail will offer them the most immediate value combined with the opportunity to participate in the long-term growth of the world's largest transportation and logistics company." CSX Corporation, headquartered in Richmond, Va., is an international transportation company offering a variety of rail, container-shipping, intermodal, trucking, barge and contract logistics management services. Conrail, with corporate headquarters in Philadelphia, Pa., operates an 11,000-mile rail freight network in 12 northeastern and midwestern states, the District of Columbia, and the Province of Quebec. Additional information regarding this announcement can be found on the companies' Web sites on the Internet. CSX's home page can be reached at http://www.CSX.com. Conrail's home page can be reached at http://www.CONRAIL.com. EX-99 3 EXHIBIT (C)(12) EXHIBIT (c)(12) Text of opinion of Judge Donald VanArtsdalen of the United States District Court for the Eastern District of Pennsylvania as delivered from the bench on January 9, 1997. As I've always said in these matters, I think it's important that they be decided promptly. I never won any contest in extemporaneous speaking. I try to explain the reasons for whatever decision I make in this case as best I can on such limited time to decide just exactly what's to be done here. In these two cases, these is as we all know a shareholders meeting of Conrail scheduled for January the 17th, 1997 which is next week. And that meeting is to decide whether Conrail should, as I call it, opt-out of subchapter 25E of the Pennsylvania business corporation law whereby CSX may thereafter proceed by tender offer to acquire approximately 20.1 percent more of Conrail voting stock in order to proceed with the next step of the merger agreement between CSX and Conrail. Plaintiffs in Civil Action 96-7167, which I will call the Norfolk Southern or the NS Corporation plaintiffs, alleging that they are Conrail shareholders seek by a preliminary injunction to prohibit the shareholders meeting from going ahead until a partial summary judgment motion is decided that seeks declaration that a controlled transaction has occurred by reason of CSX's purchase of 19.9 percent of Conrail outstanding stock pursuant to the original tender offer and along with aggregating with various directors and officers stock control alleging that they have formed a group pursuant to 15 Pennsylvania CSA Section 2543, which is a part of the Pennsylvania State Statue on controlling party transactions. And thereby the plaintiffs contend that it triggers the shareholders' rights to obtain fair value and a fair value appraisal for their stock. Also they seek a preliminary injunction against enforcement of a revision to the merger agreement that provided for what I call a no-shop, what some of the witnesses have called no-shop, some have called it a lockout, extension of the - until I believe December 31st, 1998. It was an extension of about 18 months beyond that which was in the original merger agreement. Now, the so-called Ferrara plaintiffs, which is the other civil action, Number 96-7350, likewise seek an injunction and a declaration that the so-called 720-day lockout provision is invalid. I specially set this hearing because I was advised that there would be an application for a preliminary injunction in light of the revised merger agreement which had been apparently made public. There are two, as everybody seems to recognize, two distinct and discrete issues. One is the extension of the so-called no-shop or lockout agreement until 12-31-98, which will coincide with the termination date of the merger agreement itself, or what is often referred to as the so-called drop dead date, whereby if the merger doesn't go through by that date, then under certain conditions at least the agreement can be in effect terminated. And the second issue is whether any of the defendants, that is, Conrail and its board of directors are liable to pay fair share because of the triggering of the control transaction as provided in the business corporation law. As to the 720-day period no-shop or lockout period, the arguments that have been made on the present motions are essentially those or a rehash of the arguments which were made at the prior hearing, in which I denied any relief by reason of the period of lockout that was contained in the original merger agreement. There is no essential difference, as I see it, even though the new agreement as apparently opposed to the prior agreement has a so-called "fiduciary duty opt-out" provision. Beyond that the only change is that the agreement - as to the lockout provision, is that the agreement sets a final date for completion of the merger and government approvals of 12-31-98, and provides that the so-called lockout period shall continue until that time. I see no principled reason, and apparently neither did Professor Coffee who testified at the prior hearing, as I recall his testimony, as to why the lockout could not extend for the full period of the contract, nor is there any reason to think that any particular line of demarcation need be drawn so far as the facts of this case presently before me are concerned. After all, as it seems to me, and I think I expressed this previously, that where a contract is entered into, it is expected that the parties will act in good faith and will not deliberately go out and attempt to shop the contract, if you will, with some other party or to see if they can get a better deal after having entered into a valid contract. If by reason something occurs in the future by which it could be determined that there was a fiduciary duty upon the board of directors to go ahead and take some action by reason of some offer that had been made, if the fiduciary duty so required it, I see no reason why that should make any difference that it is not specifically set forth in the contract. After all, if a contract imposes upon certain of the parties certain fiduciary duties, it seems to me that then becomes practically an unwritten term of the contract or the agreement. And therefore whether this one did not have such a fiduciary duty opt-out and the earlier one did seems to me should make no difference. In addition to which there has been absolutely no showing or no claim that any situation has arisen as yet or will or is likely to arise in the future that would impose any sort of a fiduciary duty upon the board of directors to disregard the lockout or the no-shop provisions of the merger agreement. In addition, defendants have taken no action pursuant to that clause that I am aware of, or about which there has been any testimony that would give rise to any basis for presently prohibiting the meeting of January 17th, 1997 going ahead so far as the no-shop provision is concerned. In other words, even if it could conceivably be that there was something invalid about that particular provision that would have nothing to do as I see it with precluding the shareholders meeting which is in no way to consider anything other than whether or not they should opt-out of the 20 percent rule under the Pennsylvania business corporation law. Now, there is a so-called controlling person or controlling transaction problem. Plaintiffs contend that the fair valuation provisions of 15 Pennsylvania CSA, I think it's Section 2544 has been triggered. In other words, it's the contention of plaintiffs that there was a controlled transaction, and therefore the argument seems to be that because there was a controlled transaction at the meeting of January the 17th, 1997 which is presently scheduled should be enjoined from proceeding. As to the controlled transaction, the argument as I understand it is that the shares acquired by CSX under its original tender offer which was approximately 19.9 percent of the voting shares should be aggregated with the shares held by certain - or perhaps all of the directors and certain of the officers, who it is contended formed a group, and by aggregating those shares, the total number of shares presently held by CSX and the group exceed 20 percent; therefore, controlled transaction has taken place. Formation of a group acting in concert, and that is of course the contention here, that this is a group acting in concert under Section 2543 would normally to me appear to be a fact-specific matter and would not ordinarily be subject to summary judgment and certainly would not be a proper basis for a preliminary injunction. However, on the basis of the evidence presented which as I understand it is probably all of the evidence that would be intended to be presented on this issue at any time, the likelihood of success on the contention that there was a controlled transaction is to me very doubtful. Although it may be expected, it may fully be expected that the board of directors and the officers will continue to support the merger, and to the extent that they are called upon to vote their shares will vote in its favor. But there is certainly no evidence that there was any agreement, express or implied, that the individual - that the officers and directors as individuals would vote their own shares of stock in locked step with that of CSX. In that regard the evidence is pretty clear that the amendment to the merger agreement was negotiated and worked out after very extension negotiations and at a truly arm's length proceeding. It is clear from this that at least during those negotiations CSX and the board of directors of Conrail and the officers of Conrail were not acting as a group or in locked step. I do not find under the present facts that have been established, at least as so far developed, that there has been and established a controlled transaction. To do that I think everybody agrees that they have to aggregate the shares of stock originally purchased by CSX plus some stock held by some one or more of the other directors and officers. Even if there had been a controlled transaction; that is to say, even if they had operated as a group within the meaning of the statute, and I think everybody agrees that there is no case law on the subject except for an opinion written by Judge Gawthrop some years ago, and I'm not sure about the date of that. Although I don't think that it would really make any difference, but I believe that that decision was before the last amendments of the Pennsylvania business corporation law. I don't believe that that would make any difference, because the wording is substantially the same. But I think the facts were somewhat different in that case, and I am not here to judge the validity of the contentions made by the judge in that particular case. It does seem to me, however, that there does have to be some sort of an agreement, express or implied, and I do not find that the evidence establishes that at this particular time under the facts that have been established. But even if there had been, the statute has what I would call an inadvertence escape valve under Section 2541B. After the contention was first raised that there had been a controlled transaction by reason of CSX purchasing 19.9 percent of the stock, CSX sold on the open market 85,000 shares. Now, I have tried somewhat roughly to calculate the various methods by which and the different groups of plaintiffs make different contentions as to who should be considered in the group. But it seems to me no matter how liberally you compute the plaintiff's figures, with CSX having divested itself of 85,000 shares, the present number of shares and those shares of the persons claimed to be members of the group would not at the present time equal 20 percent, even including voting control over the ESOP and the EBT shares, as to which there is some question as to the federal duties that are imposed by Federal Law on the trustees of such shares. Clearly, if inadvertent means unintentional in the subjective sense of the word, clearly there never was an intention to obtain control or to have a control transaction. The whole merger agreement with the so-called two tiered arrangement was carefully structured not to be - not to offend the, if you will - if I may use that expression - the provisions of the Pennsylvania Business Corporation Law which imposes certain rights upon the shareholders to receive fair value if a controlled transaction takes place. If they overlook the possibility of aggregation, I think at best, that would have been negligence, which is by some definitions of the word inadvertent, included within the term of inadvertence. It's clear, of course, that the number of shares they bought were bought advertently. It's clear that they were aware certainly, that officers and directors probably held some shares of stock, although I don't know that there's any evidence that there may or may not be, that they knew the exact numbers at the time of the purchase. Also, it has been argued and I think the record may show that the 19.9 percent that was originally calculated was in error through misinformation as to the number of shares that were outstanding of Conrail at the time. And it has been argued and I have not been able to compute this accurately, but at least, it has been argued that if that were considered, that part of it was considered inadvertence and if they had bought only 19.9 percent of the stock that was actually outstanding as of the time of the purchase, that no matter how you would aggregate, it would still not reach the 20 percent limit. In any event, the statute provides that if the - if there is an inadvertent going over the 20 percent limit, that the fair value rights will not - will not accrue if the controlled transaction - if the party having those shares of stock divests itself of those shares as soon - I think the word is as soon as practical. I'm trying to find the terminology there. Now, CSX did, after it was called to their attention, sell 85,000 shares and as I just read the briefs rather quickly on that score, it would appear to me that to do so cost CSX approximately $900,000. There is no one that has made any argument that they did not divest themselves of the stock as soon as practical. Perhaps plaintiffs would like to make that argument, but I think another thing that must be borne in mind is, even if there was some technical violation of the controlled transaction problem, the purpose of that is to - or one of the purposes certainly, is that there be no votes taken by the controlling parties under those circumstances, unless the other shareholders have a right to obtain fair value. And there has been no vote - there was no vote taken and at the proposed vote to be taken on January the 17th, it is clear that no matter how you compute the matter, the shares of stock, that CSX in combination with any other group of shareholders that could be aggregated under any of the theories submitted by the plaintiffs, would not constitute 20 percent. Consequently, I can see where there has been absolutely no harm done by reason of the purchase of the CSX shares, whether or not and as I say, it's my view from what has been presented here, that it is not a controlled transaction. But even if it were a controlled transaction and even if the shareholders are entitled to receive fair value, that still doesn't explain to me why the meeting set for January the 17th should be enjoined or give any basis for an injunction against it. First of all, shareholders to have received fair value and have no basis under the statute, as I see it, to object to somebody acquiring more than 20 percent or any group acquiring more than 20 percent of the shares of stock. Their only right is to receive fair value. And to do that, they must, as the statute says, object. And I don't know how that's done, but that's what the statute seems to say. And to make a demand to have the shares appraised for fair value. And then there is a rather long - a lot of statutory requirements as to how that procedure would be required to take place. No one has made any demand to receive fair value. No one has objected, as I see it, but aside from that, there is a, as is clear from the statute, there is a complete legal remedy and I would see no reason therefore to enjoin the meeting that is set for January the 17th. In addition to - in addition to that, the meeting that is set for January 17th, one of the arguments that's been made by the plaintiffs is, well, the meeting would be a nullity and therefore, it should be enjoined. Well, if it's a nullity, it's a nullity. But that doesn't mean - therefore, I see no harm that could occur to anyone in that event. I fail to see how, if the meeting is held and if there's a vote and if it's later determined that that's a nullity, I fail to see how the shareholders would in any meaningful way have been harmed. Although, some might have been disappointed if they personally went to attend the meeting. It is clear that Norfolk Southern, as a shareholder, is seeking in every conceivable way to block this merger from proceeding. And of course, to the extent that they do so through legal and lawful means, there is nothing too wrong about that nor are they to be - is it to be criticized for attempting to do so. However, there is no showing on this record that Norfolk Southern, as a shareholder, would be harmed in any way if the shareholders vote on the proposition to opt-out of the provisions of the Pennsylvania Corporation Law proceeds on January the 17th. Now, before a preliminary injunction may be granted, as we all know, there must be first a finding of likelihood of success. On the so-called [720] day no-shop clause, it is my evaluation at this point, that there is no likelihood at all of success on that claim. On the controlled transaction claim, I think that it's unlikely that there would be - they would be - or that the plaintiffs would be successful on that contention. Because, first, I think it's unlikely that there ever was a controlled transaction and if there was, it was clearly inadvertent, at least, if inadvertence means unintentional. And because there was a divesting of a sufficient number of excess shares, so that there would no longer be a control group having more than 20 percent of the stock. That there would be no harm if the vote is taken on January the 17th and there is no showing of any likelihood of harm occurring in the future. Now, as to the harm to the parties, as I think I've said several times, I can see no harm to the plaintiffs by this meeting proceeding on January the 17th. It's conceivable that it could amount, eventually amount to a nullity, but that would not cause any legal harm as I see it. As to the defendants, of course, anything that slows up this progress and the progress of the merger is - does cause severe and substantial harm and injury. And clearly, that is one of the things that the plaintiffs seek in this, by these proceedings, is to impede or slow up the progress of the merger. If I granted either preliminary injunctive relief or granted the summary judgment as requested here, one of the claims, as I understand it, is that I should preliminarily enjoin the hearing set forth January 17th until the summary judgment motion is decided. Whatever order I make here or decide here, undoubtedly if granted, would be appealed. And of course, during the appeal, I have no doubt that the plaintiffs would intend to seek to have any injunctive relief continued during the course of that appeal. And I think that the practical effect of that might well be to so upset the timing of these - of this merger as to perhaps completely throw it off track. In addition, before a preliminary injunction may be given, there must be shown that there is no adequate legal remedy. As I point out clearly under the controlled transaction, there is a complete statutory legal proceeding and remedy, so that there would be no reason to make any injunction as to that. As to the 720-day period during which its agreed that the Conrail board and directors will take no action toward any other bid that might come in, at least until such time as there is some showing that there is some other bid, it is clear that it would not be appropriate to enter an injunction really in affect, while all the - as I see it - the plaintiffs are asking for is some type of declaratory judgment and I don't think that that would be a proper situation to grant a declaratory judgment. I think it would be more in the nature of an advisory opinion. Consequently, to the extent that this is an application for a preliminary injunction, the application will be denied. To the extent that there is an application that I grant summary judgment, the application for a grant of summary judgment is also denied. EX-99 4 EXHIBIT (C)(13) EXHIBIT (c)(13) SERVICE DATE - JANUARY 9, 1997 SURFACE TRANSPORTATION BOARD DECISION STB Finance Docket No. 33220 CSX CORPORATION AND CSX TRANSPORTATION, INC. --CONTROL AND MERGER-- CONRAIL INC. AND CONSOLIDATED RAIL CORPORATION [Decision No. 5] Decided: January 8, 1997 BACKGROUND On October 18, 1996, CSX Corporation (CSXC), CSX Transportation, Inc. (CSXT), Conrail Inc. (CRI), and Consolidated Rail Corporation (CRC)(collectively, applicants) filed a notice of intent (CSX/CR-1) to file an application (hereinafter referred to as the primary application) seeking Board authorization under 49 U.S.C. 11323-25 for: (1) the acquisition of control of CRI by Green Acquisition Corp. (Acquisition), a wholly owned subsidiary of CSXC; (2) the merger of CRI into Acquisition; and (3) the resulting common control of CSXT and CRC by CSXC. Applicants indicate that they expect to file their primary application, and any related applications, on or before March 1, 1997. - -------- CSXC and CSXT are referred to collectively as CSX. CRI and CRC are referred to collectively as Conrail. Decision No. 1, served October 25, 1996, granted applicants' request for a protective order. Decision No. 2, served and published in the Federal Register (61 FR 58613) on November 15, 1996, gave notice to the public of applicants' CSX/CR-1 pre-filing notification, and found that the transaction proposed by applicants is a "major" transaction, as defined at 49 CFR 1180.2(a). Decision No. 3, served and published in the Federal Register (61 FR 58611) on November 15, 1996, invited comments from interested persons on a proposed procedural schedule. Decision No. 4, served December 19, 1996, assigned this proceeding to Administrative Law Judge Jacob Leventhal for the handling of all discovery matters and the initial resolution of all discovery disputes. We will address, in a separate decision, applicants' CSX/CR-6 petition for waiver or clarification of certain railroad consolidation procedures, and for related relief, filed on December 27, 1996. CSXC, Acquisition, and CRI entered into an Agreement and Plan of Merger (the Merger Agreement) dated October 14, 1996, which they amended on November 5, 1996, and further amended on December 18, 1996. On December 27, 1996, Norfolk Southern Corporation and Norfolk Southern Railway Company (collectively, NS) filed a petition for declaratory order that CSXC, CSXT, and Acquisition are in violation of 49 U.S.C. 11323 by reason of a "lock-out provision" in Section 4.2 of the Merger Agreement, as amended on December 18, 1996, and that the amendment to Section 4.2 is void and unenforceable. - -------- The Merger Agreement, as first entered into envisioned: (1) the acquisition by Acquisition of approximately 19.9% of the common stock of CRI; (2) the acquisition by Acquisition of an additional approximately 20.1% of the common stock of CRI; and (3) after Board approval of the primary application, the merger of CRI with and into Acquisition. As amended, however, the Merger Agreement now envisions that the merger of CRI with and into Acquisition will occur prior to Board approval of the primary application. This change means that applicants no longer seek Board authorization for the acquisition of control of CRI by Acquisition, or for the merger of CRI into Acquisition. Applicants, however, continue to seek Board authorization for the common control, by CSXC, of CSXT and CRC. Applicants continue to indicate that they expect to file their primary application, and any related applications, on or before March 1, 1997. NS requests expedited consideration of its petition for declaratory order. NS alternatively requests that, if the Board is unable to reach a decision on the question of unlawful control substantially before January 17, 1997, it should issue a temporary cease and desist order barring Conrail from holding the shareholder meeting now scheduled for January 17, 1997, or barring CSX from requiring the trustee under CSX's voting trust to vote any Conrail shares held in the voting trust in favor of opting out of Subchapter 25E of the Pennsylvania Business Corporation Act or in favor of a CSX/Conrail merger, until the Board is able to decide the question. See Pa. Stat. Ann., tit. 15, sections 2541 through 2548 (West 1995). Without such opt-out, CSX would be required to purchase all Conrail shares for the same cash price as it paid for the first 19.9% (Merger Agreement), Section 5.1(b)). Because we are issuing this decision in advance of the January 17, 1997 shareholder meeting, this alternative request for relief is moot. On December 30, 1996, CSX and Conrail respectively filed letters notifying the Board of their objection to NS' request for expedited consideration, and of their intent to file responses to NS' petition for declaratory order within the time provided by the Board's rules. We are granting NS' request for expedited consideration, and will deny its petition for declaratory order at this time, as we discuss further below. DISCUSSION AND CONCLUSIONS Section 4.2 of the Merger Agreement. Section 4.2 of the Merger Agreement (hereinafter, the "lock-out provision") prohibits Conrail's management for a specified period from taking various actions with respect to any proposal by any entity other than CSX to acquire more than 50% of the assets or voting stock of Conrail (defined in the agreement as a "Takover Proposal"). Section 4.2(a) provides that Conrail may not "(i) solicit, initiate or encourage (including by way of furnishing information) or take any other action designed to facilitate, directly and indirectly, any inquiries or the making of any proposal which constitutes any Takeover Proposal or (ii) participate in any discussions or negotiations regarding any Takeover Proposal . . . ." Section 4.2(b) prohibits Conrail's board or directors for a specified period from (1) withdrawing or modifying its approval or recommendation that shareholders approve the CSX/Conrail merger agreement, (2) approving or recommending any merger agreement with any party other than CSX, or (3) entering into any letter of intent or merger agreement related to any Takeover Proposal. Under the original Merger Agreement, Conrail was permitted to negotiate with respect to other unsolicited takeover proposals after April 12, 1997, if Conrail's board concluded, on advice of counsel, that their fiduciary duties required them to do so. The original Merger Agreement also permitted Conrail to enter into a letter of intent or agreement with another party after April 12, 1997, if Conrail's board concluded that the other party's proposal was superior to CSX's and that CSX was unlikely to acquire 40% of Conrail's stock. In the first amendment (November 5, 1996), the lock-out period was extended 90 days to July 12, 1997. The second amendment (December 18, 1996) extends the lock-out period to December 31, 1998. (Second Amendment at 18.) NS' Arguments. NS states that it wishes to acquire Conrail and is prepared to pay Conrail's shareholders substantially more than CSX is willing to pay; however, provisions of the Merger Agreement have prevented NS from reaching an agreement, or even discussing NS' proposal, with Conrail's management. NS challenges the second amendment to the extent that it prohibits Conrail, without CSX's consent, from entering into a merger agreement with any other company, or even discussing such an agreement with any other company, until 1999, even if Conrail shareholders vote in the next few months to disapprove the proposed CSX merger and even if the Board issues a decision in 1997 refusing to approve that merger. NS makes three main arguments: (1) by the amended lock-out provision, CSX has acquired unlawful control of Conrail in violation of 49 U.S.C. 11323; (2) the lock-out - -------- On December 19, 1996, NS increased its all-cash offer for all of Conrail's outstanding shares to $115 per share. According to NS, its offer would provide Conrail shareholders other than CSX almost $16 per share more than the blended value of cash and securities that CSX is offering current Conrail shareholders for their shares, based on the market price of CSX common stock at closing on December 26, 1996. On that basis, NS estimates that the total amount it is offering to Conrail shareholders other than CSX is approximately $1.16 billion more than what CSX is offering. Under 49 U.S.C 11323 (formerly 49 U.S.C. 11343), certain transactions may be carried out only with the prior approval and authorization of this Board. These include "[a]cquisition of control of a rail carrier by any number of rail carriers," "[a]cquisition of control of at least two carriers by a person that is not a rail carrier," and "[a]cquisition of control of a rail carrier by a person that is not a rail carrier but that controls any number of rail carriers." 49 U.S.C. 11323(a)(3), (4) and (5). restraint cannot be justified as reasonably related to CSX's desire to preserve the status quo pending corporate and regulatory approval; and (3) CSX's unlawful control threatens NS and Conrail's stockholders with immediate irreparable injury which the Board must act to prevent. NS also asserts that, to the extent the lock-out provision precludes Conrail from developing more competitive and innovative services through a combination with NS, the provision shields CSX from increased competition from its two main competitors. Our Analysis. We note that NS has challenged the legality of the amended lock-out provision, as well as other provisions of the CSX/Conrail merger agreement, in an action pending in the United States District Court for the Eastern District of Pennsylvania with claims based on the Pennsylvania corporation laws and the fiduciary duties of Conrail's board of directors. Contrary to NS' assertion that the amended lock-out provision involves an issue of illegal control under 49 U.S.C. 11323 that the Board must address and enforce independently of any issue of state law, we do not find that NS' request is ripe for our consideration, as discussed further below. NS argues that CSX will unlawfully control Conrail because the lock-out will remain in effect until December 31, 1998, even if the Conrail stockholders vote not to approve the proposed CSX/Conrail merger, and even if the Board disapproves the CSX/Conrail merger before the lock-out period expires or imposes conditions unacceptable to the applicants. Conrail has pointed out, however, in its December 30 letter, that NS' case is founded on the uncertainty of future events, rather than on any actual controversy or complaint, and we agree. - -------- CSX and Conrail compete throughout large areas of the Northeast and Midwest, and NS and CSX compete throughout the Southeast and Midwest. CSX and Conrail expect that vote to take place before March 31, 1997. NS acknowledges that a rationale for permitting such an agreement (prior to Board approval) would be to provide a reasonable period of time for parties to an agreement to determine whether their shareholders and their regulators will approve the transaction. NS argues, however, that the lock-out period here is too long because it goes beyond what may be reasonably expected for the Board to consider and act upon the consolidation application of the two railroads themselves, and because it may extend beyond other actions (such as a shareholder vote rejecting the merger) that effectively foreclose the possibility of the transaction taking place as proposed. NS' argument that the amendment increases CSX's control over Conrail is based on the extension of the termination date of the lock-out period by an additional 18 months--from July 12, 1997, to December 31, 1998. While the now 2-year lock-out period appears excessive on its face, we do not find the extended termination date, in and of itself, to be unreasonable at this time, given the complicated and controversial matters facing the parties concerning the proposed control transaction, and given that provision's lack of any meaningful constraint on our jurisdiction as discussed below. As for NS' concern that CSX will be able to use unlawful control afforded by the lock-out provision to coerce a critical vote of Conrail shareholders scheduled for January 17, 1997, by portraying CSX as the only choice available to them, and effectively preclude the possibility of NS' offer from being realized, we believe that the Conrail shareholders are aware of their choices in this highly public controversy, and can pursue legal remedies if they believe that their board of directors breached its fiduciary duty. NS protests the agreement between CSX and Conrail's board of directors to amend the Merger Agreement to preclude Conrail and CSX from pursuing other transactions without the consent of the other through December 31, 1998. We find that voiding or overriding the amendment at this time is premature. As discussed above, we find that NS' petition for relief is premature and unwarranted at this time. We advise the parties, however, that, if a CSX/Conrail merger application is filed, we may exercise our 49 U.S.C. 11324(c) conditioning power to impose certain conditions and/or grant any inconsistent or responsive applications that are found to be in the public interest. We emphasize that, under those circumstances, the preemptive, immunizing force of 49 U.S.C. 11321(a) can preempt contractual rights, including those resulting from the lock-out provision, if necessary to permit a Board-approved transaction to go forward. See Norfolk & Western R. Co. v. Train Dispatchers, 499 U.S. 117 (1991) (Dispatchers) (the immunity provision, which provides that a carrier, corporation, or person participating in a transaction that is approved under 49 U.S.C. 11324 (old 49 U.S.C. 11344) is "exempt from the antitrust laws and from all other law, including State and municipal law, as necessary to let that person carry out the transaction," extends not only to laws but also to contracts). A person cannot effectively preclude our approval of a transaction from going forward simply by entering into a contract that purports to prevent all alternatives to its own preferred outcome. Thus, the lock-out provision would in no way preclude Board approval, as appropriate, of NS/Conrail merger proposal, or any other Conrail merger proposal, or the consummation of such a merger, if approved. This decision will not significantly affect either the quality of the human environment or the conservation of energy resources. It is ordered: 1. NS' petition for declaratory order is denied. 2. This decision is effective on the date of service. By the Board, Chairman Morgan and Vice Chairman Owen. Vernon A. Williams Secretary -----END PRIVACY-ENHANCED MESSAGE-----