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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 12
TO
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
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CONRAIL INC.
(NAME OF SUBJECT COMPANY)
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CONRAIL INC.
(NAME OF PERSON(S) FILING STATEMENT)
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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)
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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)
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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
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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, January 3,
1997, January 10, 1997, January 14, 1997, January 16, 1997, January 21, 1997,
January 28, 1997, February 3, 1997 and February 12, 1997 (as amended, the
"Schedule 14D-9"), with respect to an offer by Green Acquisition Corp., a wholly
owned subsidiary of CSX Corporation ("CSX") to purchase all the outstanding
Shares. Capitalized terms not defined herein have the meanings assigned thereto
in the Schedule 14D-9.
ITEM 2. TENDER OFFER OF THE BIDDER.
Item 2 of the Schedule 14D-9 is hereby amended and supplemented as follows:
On March 7, 1997, Conrail, CSX and Purchaser entered into a Third Amendment
(the "Third Amendment") to the Merger Agreement. Pursuant to the Merger
Agreement (as so amended), (i) the price per Share offered in the Offer has been
increased from $110 to $115, net to the seller in cash, without interest, and
the number of Shares sought pursuant to the Offer has been increased to all
outstanding Shares and the expiration date of the Offer has been extended to
5:00 p.m., New York City time, on Friday April 18, 1997 (subject to further
extension to June 2, 1997 without the consent of Conrail and whether or not all
the conditions have then been satisfied), (ii) the consideration paid per Share
in the Merger for all remaining outstanding Shares following consummation of the
Offer has been increased to $115 in cash and (iii) the conditions to the Offer
relating to Subchapter E becoming inapplicable to Conrail and relating pending
governmental actions or proceedings have been deleted, and a condition has been
added that a minimum number of Shares are tendered to the Offer which, together
with the Shares already owned by CSX and Purchaser, represents more than a
majority of the outstanding Shares on a fully diluted basis (the "Minimum
Condition"). In addition, neither the Offer nor the Merger is subject to CSX's
having obtained financing.
The Third Amendment also provides that CSX will have sole control over the
STB approval process and will be free to conduct by itself discussions with
other railroads, including Norfolk, relating to competitive issues raised by the
CSX Transactions, and to enter into any resulting agreement. It is anticipated
that CSX and Norfolk will negotiate an appropriate division of Conrail's assets;
however, neither the Offer nor the Merger is conditioned on CSX's reaching an
agreement with Norfolk. The Third Amendment states that Conrail will cooperate
with CSX in pursuing the foregoing, including by amending the Merger Agreement
to facilitate an arrangement or agreement with Norfolk, such as an agreement
pursuant to which Norfolk would join the Offer and buy a portion of the Shares;
provided that any such amendment will not change the form or amount of the
consideration to be paid in the Offer or the Merger or otherwise adversely
affect the benefits to be received by Conrail shareholders or employees under
the Merger Agreement or delay or adversely affect the CSX Transactions.
Pursuant to the Third Amendment, three members of Conrail's board of
directors approved by CSX shall be invited to join the CSX Board of Directors
and a transition team will be established, the leadership of which will include
senior executive officers of CSX and Conrail to ensure the orderly operation of
Conrail during the STB approval process and an orderly transition thereafter.
Although the headquarters of the combined company will no longer be located in
Philadelphia, CSX has stated that it intends, following STB approval, to
maintain Conrail's Juniata locomotive shops at Altoona, Pennsylvania, Conrail's
Sam Ray car shops at Hollidaysburg, Pennsylvania, Conrail's Pittsburgh service
center and a major operating presence in Philadelphia (including the
headquarters of the surviving corporation).
Pursuant to the Third Amendment, Conrail's option to purchase 43,090,773
shares of CSX Stock has been cancelled, and Conrail's right to receive a
termination fee in the event of the termination of the Merger Agreement in
connection with certain takeover proposals for CSX has been eliminated. The
Conrail Stock Option Agreement and the right of CSX to receive a termination fee
remain intact.
Under the Third Amendment, Conrail and CSX agreed to reduce from December
31, 1998 to December 31, 1997 the period of time during which the Conrail Board
is prohibited from (i) withdrawing or
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modifying, or publicly proposing to withdraw or modify, its approval or
recommendation of the CSX Transactions, in a manner adverse to CSX, (ii)
approving or recommending, or publicly proposing to approve or recommend, any
competing proposal or (iii) causing Conrail to enter into any agreement related
to any such competing proposal.
Under the Merger Agreement as amended, Conrail may terminate the Merger
Agreement in the event that after June 2, 1997, CSX and Purchaser fail to
consummate the Offer for any reason other than the non-occurrence of any
condition to the Offer. In the event that CSX and Purchaser fail to consummate
the Offer under such circumstances, Conrail will be entitled to exercise any
additional remedies it may have.
Under the Merger Agreement as amended, CSX has the right to unilaterally
increase the price offered in the Offer (without making any change in the
consideration per Share payable in the Merger), subject to the obligation to
cause the Offer to remain open for 10 business days following the date any such
change is publicly announced. Pursuant to the Merger Agreement, however, CSX
cannot change the consideration payable in the Merger without the consent of
Conrail.
The terms and conditions of the Offer and the Merger Agreement are
described under the captions "TERMS OF THE OFFER; PRORATION; EXPIRATION DATE"
and "MERGER AGREEMENT; OTHER AGREEMENTS" in the Offer to Purchase, as
supplemented by the Supplement to the Offer to Purchase dated March 7, 1997 (the
"Supplement"), a copy which is filed as Exhibit (a)(30) hereto and is
incorporated herein by reference. The foregoing summary description is qualified
in its entirety by reference to the Offer to Purchase and its supplements filed
as Exhibits (a)(1), (a)(11) and (a)(30) hereto.
ITEM 3. IDENTITY AND BACKGROUND.
Item 3 is hereby amended and supplemented as follows:
(b)(2) Certain Executive Compensation and Other Employee-Related Matters in
Connection with the Merger.
Effects of Merger on Employee Benefit and Stock Plans. CSX shall cause the
Surviving Corporation to honor all obligations under employment agreements and
employee benefit plans, programs and policies and arrangements of Conrail in
accordance with the terms of the Merger Agreement and, after the date of STB
approval, to provide benefits to those Conrail employees transferred to Parent
or another entity on a basis no less favorable in the aggregate than those
provided to similarly situated employees of such entity. The Surviving
Corporation will provide severance or supplemental retirement benefits to
non-union employees (other than executive level employees) who are terminated
within three years of STB approval equal to between 6 months and 24 months of
salary (depending upon an employee's service). Medical coverage will also be
continued for these employees for specified periods. The Surviving Corporation
will also establish a stay bonus program that provides a lump sum cash payment
to non-union employees who remain employed until the date of STB approval with
additional payments made to those employees who remain employed for up to six
months thereafter.
In accordance with the Merger Agreement, all holders of outstanding stock
options will receive a payment equal to the spread between the option price and
the Amended Second Offer Price multiplied by the number of shares of Conrail
Common Stock subject to the option. In addition, the Merger Agreement permits
Conrail to accelerate the vesting of any non-vested grants of performance
shares.
Executive Agreements. Following the date of STB approval, Mr. LeVan will
no longer be employed by the Surviving Corporation. Conrail and CSX have agreed
that CSX shall pay Mr. LeVan on the date of STB approval, in lieu of any stay
bonus and severance or termination benefits, a lump sum equal to the economic
value of the LeVan Agreement (as reasonably determined by the parties in good
faith). Conrail executives (other than Mr. LeVan) will be paid the value of
their "change of control" contracts in accordance with the terms thereof if
their employment with the Surviving Corporation terminates under certain
circumstances after the close of the Amended Second Offer or if they remained
employed by the Surviving Corporation until May 31, 1998.
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ITEM 4. THE SOLICITATION OR RECOMMENDATION.
Item 4 is hereby amended and supplemented as follows:
(a) Recommendation of the Board of Directors.
At meetings held on March 3, 1997 and March 7, 1997, the Conrail Board,
including the disinterested members of the Conrail Board, determined that the
terms of the Merger Agreement (as amended) are in the best interests of Conrail
and its constituencies. ACCORDINGLY, THE CONRAIL BOARD UNANIMOUSLY RECOMMENDS
THAT THE SHAREHOLDERS OF CONRAIL TENDER THEIR SHARES PURSUANT TO THE OFFER.
The Conrail Board recommends that shareholders tender their Shares pursuant
to the Offer because it has determined that the CSX Transactions are in the best
interests of Conrail and its constituencies. Although the Conrail Board would
have preferred for Conrail's system to remain intact, the CSX Transactions
represent the best possible transactions under the circumstances as they
developed. Not only is the value to be received by Conrail's shareholders
pursuant to the terms of the CSX Transactions unprecedented as compared to other
comparable railroad business combinations, but the CSX Transactions provide the
opportunity for shareholders to receive such consideration within 90 days with
no regulatory risk. The Merger Agreement also provides protection in the form of
stay bonuses and enhanced severance arrangements for Conrail employees not
protected by collective bargaining agreements, and states that CSX intends to
make a substantial commitment to preserving operations in Pennsylvania.
Copies of two press releases announcing the Conrail Board's actions over
the last week, and a letter to the shareholders of Conrail communicating the
Conrail Board's recommendations are filed as Exhibits (a)(29), (a)(31) and
(a)(32) hereto, respectively, and are incorporated herein by reference.
(b)(1) Background.
The information contained under the caption "BACKGROUND OF THE OFFER SINCE
DECEMBER 19, 1996; CONTACTS WITH THE COMPANY" in the Supplement is incorporated
herein by reference.
(2) Reasons for Recommendation.
In making the determinations and recommendations set forth above in Section
(a) of this Item 4, the Conrail Board considered a number of factors, including,
without limitation, the following:
(i) The historical and recent market prices of the Shares and the fact
that the Offer and the Merger will enable shareholders to realize an
extraordinary premium over the prices at which the Shares traded prior to
execution of the Merger Agreement.
(ii) The receipt by the Conrail Board of fairness opinions of Lazard
Freres & Co. LLC ("Lazard Freres") and Morgan Stanley & Co. Incorporated
("Morgan Stanley"), dated March 7, 1997, to the effect that the
consideration to be received by Conrail's shareholders in the Offer and the
Merger, taken together, is fair to such shareholders from a financial point
of view. In rendering their respective fairness opinions, based on the
factors described therein and at the request of counsel for the Conrail
Board, neither Lazard Freres nor Morgan Stanley addressed the relative
merits of the CSX Transactions, including Section 4.2(b) of the Merger
Agreement, the Proposed Norfolk Transactions or any alternative potential
transactions (copies of such opinions setting forth assumptions made and
matters considered by Lazard Freres and Morgan Stanley are filed as
Exhibits (a)(33) and (a)(34), respectively, and should be read in their
entirety).
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(iii) The view of the Conrail Board that the CSX Transactions provide
extraordinary value to Conrail shareholders within 90 days with no
regulatory risk, and that the Offer is not conditioned on CSX's obtaining
financing or reaching an agreement with Norfolk.
(iv) The view of the Conrail Board that the Merger Agreement provides
adequate protections for Conrail's employees and for local communities in
Pennsylvania.
(v) The fact that several of the conditions to the Norfolk Offer can
only be satisfied if the Conrail Board takes certain actions, which as
described above the Conrail Board agreed not to take until after November
30, 1997 and thereafter only if certain conditions are satisfied.
ITEM 9. MATERIALS TO BE FILED AS EXHIBITS.
Item 9 of the Schedule 14D-9 is hereby amended and supplemented by adding
the following text thereto:
(a)(29) Text of press release issued by Conrail dated March 3, 1997.
+(a)(30) Supplement to the Offer to Purchase dated March 7, 1997 (incorporated by
reference to Exhibit (a)(32) to the CSX 14D-1).
(a)(31) Text of press release issued by Conrail dated March 7, 1997.
+(a)(32) Letter to shareholders dated March 7, 1997.
+(a)(33) Opinion of Lazard Freres & Co. LLC dated March 7, 1997.
+(a)(34) Opinion of Morgan Stanley & Co. Incorporated dated March 7, 1997.
(c)(14) Third Amendment dated as of March 7, 1997 to the Agreement and Plan of Merger
(incorporated by reference to Exhibit (c)(12) to the CSX 14D-1).
(c)(15) Form of Amended and Restated Voting Trust Agreement (incorporated by reference to
Exhibit (c)(13) to the CSX 14D-1).
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+ Included in materials mailed to shareholders of Conrail.
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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/ JOHN A. MCKELVEY
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Name: John A. McKelvey
Title: Senior Vice
President -- Finance
Dated as of March 7, 1997
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EXHIBIT INDEX
EXHIBIT DESCRIPTION PAGE NO.
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*(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 CSX 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.........
*(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 dated January 9,
1997....................................................................
*(a)(17) Text of joint press release issued by Conrail and CSX dated January 13,
1997....................................................................
*(a)(18) Text of joint press release issued by Conrail and CSX dated January 15,
1997....................................................................
*(a)(19) Text of press release issued by Conrail dated January 19, 1997..........
*(a)(20) Text of press release issued by Conrail dated January 22, 1997
(incorporated by reference to Exhibit (a)(26) to the Norfolk 14D-9).....
*(a)(21) Text of press release issued by Conrail dated January 23, 1997
(incorporated by reference to Exhibit (a)(27) to the Norfolk 14D-9).....
*(a)(22) Text of press release issued by Conrail dated January 28, 1997
(incorporated by reference to Exhibit (a)(24) to the Norfolk 14 D-9)....
*(a)(23) Text of joint advertisement published by Conrail and CSX on January 29,
1997....................................................................
*(a)(24) Text of press release issued by Conrail on January 31, 1997.............
*(a)(25) Text of joint press release issued by Conrail, CSX and Norfolk on
January 31, 1997........................................................
*(a)(26) Text of press release issued by Norfolk dated February 10, 1997.........
*(a)(27) Text of press release issued by Conrail dated February 10, 1997.........
*(a)(28) Text of press release issued by CSX dated February 14, 1997.............
(a)(29) Text of press release issued by Conrail dated March 3, 1997.............
(a)(30) Supplement to the Offer to Purchase dated March 7, 1997 (incorporated by
reference to Exhibit (a)(32) to the CSX 14D-1)..........................
(a)(31) Text of press release issued by Conrail dated March 7, 1997.............
(a)(32) Letter to shareholders dated March 7, 1997..............................
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EXHIBIT DESCRIPTION PAGE NO.
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(a)(33) Opinion of Lazard Freres & Co. LLC dated March 7, 1997..................
(a)(34) Opinion of Morgan Stanley & Co. Incorporated dated March 7, 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)........
*(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.................................................................
(c)(14) Third Amendment dated as of March 7, 1997 to the Agreement and Plan of
Merger (incorporated by reference to Exhibit (c)(12) to the CSX
14D-1)..................................................................
(c)(15) Form of Amended and Restated Voting Trust Agreement (incorporated by
reference to Exhibit (c)(13) to the CSX 14D-1)..........................
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* Previously filed