ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Wednesday, July 31, 1996 TAG: 9607310037
SECTION: BUSINESS PAGE: B8 EDITION: METRO
SOURCE: GREG EDWARDS STAFF WRITER
NORFOLK SOUTHERN has already paid more than $17 million in an agreement with North Carolina Railroad.
Norfolk Southern Corp.'s lease of 317 miles of track from the North Carolina Railroad Co. was blocked Tuesday by a federal judge in the Tar Heel state.
But NS spokesman Bob Fort said the judge's ruling shouldn't have an immediate effect on Norfolk Southern's operations in North Carolina. "We'll operate as we have been," he said.
A U.S. District Court judge enjoined the North Carolina Railroad from implementing terms of a lease extension for which the company thought it had obtained shareholder approval last December. Some disgruntled shareholders, who contend NS' payment is too low, have challenged the lease and had boycotted a Dec. 15 shareholders vote on it.
The court found that a proxy for 4,000 shares of North Carolina Railroad stock had been revoked before the shareholders vote, meaning a required quorum of minority shareholders wasn't present for the vote. The state of North Carolina owns three-fourths of the company's stock with the rest owned by 800 individual shareholders.
The 30-year agreement had called for NS to pay $8 million a year to rent the track. The contract is retroactive to Jan. 1, 1995. NS has already paid more than $17 million in rental fees under the extension agreement, the NCRR Co. said.
NS and its predecessor Southern Railway Co. have operated over the track - which runs from Morehead City on the Atlantic Coast to Charlotte - since 1884. The western segment between Charlotte and Greensboro is on NS' main line between Washington, D.C. and New Orleans and is the most heavily used, NS spokesman Bob Auman of Roanoke said.
Fort said terms of the lease were agreed to by the management of both companies after extensive negotiations. "Both Norfolk Southern and North Carolina Railroad Co. judge these terms to be fair and that's the assumption we'll be operating on," Fort said.
Fort said it will be up to the NCRR to deal with the court's ruling, whether that means going to its shareholders again for their approval or following some other course.
Scott Saylor, executive vice president and general counsel for the NCRR, said the company's shareholders will be meeting again soon to discuss their options. He noted that the court looked at the legality of the proxy and did not address the merits of the lease, itself.
"In 1995, our board of directors determined, after weighing the alternatives, that the lease extension with Norfolk Southern was in the best interest of shareholders," Saylor said.
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