<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE
ACT OF 1934
SANTA FE PACIFIC CORPORATION
------------------------------------------------------------
(NAME OF SUBJECT COMPANY)
UNION PACIFIC CORPORATION
UP ACQUISITION CORPORATION
------------------------------------------------------------
(BIDDERS)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
------------------------------------------------------------
(TITLE OF CLASS OF SECURITIES)
802183 1 03
------------------------------------------------------------
(CUSIP NUMBER OF CLASS OF SECURITIES)
RICHARD J. RESSLER
ASSISTANT GENERAL COUNSEL
UNION PACIFIC CORPORATION
EIGHTH AND EATON AVENUES
BETHLEHEM, PENNSYLVANIA 18018
(610) 861-3200
------------------------------------------------------------
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
with a copy to:
PAUL T. SCHNELL, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
TELEPHONE: (212) 735-3000
CALCULATION OF FILING FEE
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------------
Transaction valuation* Amount of filing fee**
- ----------------------------------------------------------------------------------------------
2,028,304,723 405,660.94
- ----------------------------------------------------------------------------------------------
</TABLE>
* For purposes of calculating the filing fee only. This calculation assumes the
purchase of 115,903,127 shares of Common Stock, par value $1.00 per share, of
Santa Fe Pacific Corporation $17.50 net per share in cash.
** The amount of the filing fee, calculated in accordance with Rule 0-11(d) of
the Securities Exchange Act of 1934, as amended, equals 1/50th of one percent
of the aggregate value of cash offered by UP Acquisition Corporation for such
number of shares.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
<TABLE>
<S> <C>
Amount Previously Paid: Not applicable. Filing Party: Not applicable.
Form or Registration No.: Not Date Filed: Not applicable.
applicable.
</TABLE>
Page 1 of 9 pages
Exhibit Index is located on page 9.
<PAGE> 2
14D-1
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------
1. NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
UNION PACIFIC CORPORATION (13-2626465)
- ---------------------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
/ / (a)
---------------------------------------------------------------------------
/ / (b)
---------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
3. SEC USE ONLY
---------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
4. SOURCE OF FUNDS BK, WC
- ---------------------------------------------------------------------------------------------
5. / / CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT OT
ITEMS 2(e) or 2(f)
- ---------------------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION UTAH
- ---------------------------------------------------------------------------------------------
7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON 200 shares
- ---------------------------------------------------------------------------------------------
8. / / CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
- ---------------------------------------------------------------------------------------------
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) *
- ---------------------------------------------------------------------------------------------
10. TYPE OF REPORTING PERSON CO
- ---------------------------------------------------------------------------------------------
</TABLE>
* Less than 1%.
2
<PAGE> 3
14D-1
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------
1. NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
UP ACQUISITION CORPORATION*
- ---------------------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
/ / (a)
---------------------------------------------------------------------------
/ / (b)
---------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
3. SEC USE ONLY
---------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
4. SOURCE OF FUNDS AF
- ---------------------------------------------------------------------------------------------
5. / / CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT OT
ITEMS 2(e) or 2(f)
- ---------------------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION UTAH
- ---------------------------------------------------------------------------------------------
7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON 0 shares
- ---------------------------------------------------------------------------------------------
8. / / CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
- ---------------------------------------------------------------------------------------------
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) 0%
- ---------------------------------------------------------------------------------------------
10. TYPE OF REPORTING PERSON CO
- ---------------------------------------------------------------------------------------------
</TABLE>
- ---------------
* Has not yet received I.R.S. Identification Number.
3
<PAGE> 4
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Santa Fe Pacific Corporation, a
Delaware corporation (the "Company"). The address of the Company's principal
executive offices is 1700 East Golf Road, Schaumburg, Illinois 60173-5860.
(b) This Statement on Schedule 14D-1 relates to the offer by UP Acquisition
Corporation (the "Purchaser"), a Utah corporation and a wholly-owned subsidiary
of Union Pacific Corporation, a Utah corporation ("Parent"), to purchase
115,903,127 shares of Common Stock, par value $1.00 per share (the "Common
Stock"), of Santa Fe Pacific Corporation, a Delaware corporation, or such
greater number of shares of Common Stock as equals 57.1% of the shares of Common
Stock outstanding on a fully diluted basis as of the expiration of the Offer,
upon the terms and subject to the conditions set forth in the Offer to Purchase,
dated November 9, 1994, and in the related Letter of Transmittal (which,
together with any amendments or supplements thereto, constitute the "Offer"), at
a purchase price of $17.50 per share, net to the tendering stockholder in cash.
At October 10, 1994, 202,830,822 shares of the Common Stock were outstanding on
a fully diluted basis. The information set forth in the Introduction of the
Offer to Purchase annexed hereto as Exhibit (a)(1) is incorporated herein by
reference.
(c) The information set forth in Section 6 ("Price Range of the Shares;
Dividends") of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d); (g) This Statement is being filed by the Purchaser and Parent. The
information set forth in Section 8 ("Certain Information Concerning the
Purchaser and Parent") of the Offer to Purchase and Schedule I thereto is
incorporated herein by reference.
(e) and (f) During the last five years, neither the Purchaser, Parent, nor
any persons controlling the Purchaser, nor, to the best knowledge of the
Purchaser or Parent, any of the persons listed on Schedule I to the Offer to
Purchase, (i) has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) was a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction as a result of which
any such person was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting activities subject to, Federal or State
securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Introduction, Section 8 ("Certain
Information Concerning the Purchaser and Parent"), Section 10 ("Background of
the Offer; Contacts with the Company") and Section 11 ("Purpose of the Offer and
the Proposed Merger") of the Offer to Purchase is incorporated herein by
reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in Section 9 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the Introduction and Sections 10
("Background of the Offer; Contacts with the Company") and 11 ("Purpose of the
Offer and the Proposed Merger") of the Offer to Purchase is incorporated herein
by reference.
4
<PAGE> 5
(f)-(g) The information set forth in Section 13 ("Effect of the Offer on
the Market for the Shares; Exchange Listing and Exchange Act Registration") of
the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) The information set forth in the Introduction and Section 8 ("Certain
Information Concerning the Purchaser and Parent") of the Offer to Purchase is
incorporated herein by reference.
(b) The information set forth in Section 8 ("Certain Information Concerning
the Purchaser and Parent") of the Offer to Purchase and Schedule II thereto is
incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction and Sections 8 ("Certain
Information Concerning the Purchaser and Parent"), 10 ("Background of the Offer;
Contacts with the Company") and 11 ("Purpose of the Offer and the Proposed
Merger") of the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and Section 16 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 8 ("Certain Information Concerning the
Purchaser and Parent") of the Offer to Purchase is incorporated herein by
reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) Not applicable.
(b)-(c) The information set forth in the Introduction and Sections 11
("Purpose of the Offer and the Proposed Merger") and 15 ("Certain Legal Matters;
Regulatory Approvals") of the Offer to Purchase is incorporated herein by
reference.
(d) The information set forth in Sections 13 ("Effect of the Offer on the
Market for Shares; Exchange Listing and Exchange Act Registration") and 15
("Certain Legal Matters; Regulatory Approvals") of the Offer to Purchase is
incorporated herein by reference.
(e) The information set forth in Section 15 ("Certain Legal Matters;
Regulatory Approvals") of the Offer to Purchase is incorporated herein by
reference.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively, is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a) (1) Offer to Purchase, dated November 9, 1994.
(2) Letter of Transmittal.
(3) Notice of Guaranteed Delivery.
(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees.
(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
5
<PAGE> 6
(7) Letter to Participants in the Dividend Reinvestment Plan of Santa Fe
Pacific Corporation, dated November 9, 1994.
(8) Text of Press Release, dated November 8, 1994, issued by Parent.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) None.
(g) (1) Consolidated and Amended Complaint ("Consolidated and Amended
Complaint") in connection with In re Santa Fe Pacific Shareholder
Litigation, filed in the Court of Chancery in Delaware on October 14,
1994.
(2) First Amended and Supplemental Complaint ("First Amended and
Supplemental Complaint") in connection with Union Pacific Corporation
and James A. Shattuck v. Santa Fe Pacific Corporation, et. al., filed
in the Court of Chancery in Delaware on October 19, 1994.
(3) Answer of Santa Fe Pacific Corporation defendants to Consolidated and
Amended Complaint.
(4) Answer of Santa Fe Pacific Corporation defendants to First Amended and
Supplemental Complaint.
(5) Order of the Court of Chancery in Delaware, dated October 18, 1994,
denying Union Pacific Corporation's application for expedited
discovery.
(6) Motion to Dismiss First Amended and Supplemental Complaint, filed by
Burlington Northern Inc.
(7) Proxy Statement, dated October 28, 1994 of Parent.
(8) Supplement to Proxy Statement, dated November 9, 1994 of Parent.
6
<PAGE> 7
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.
Dated: November 9, 1994 UNION PACIFIC CORPORATION
By: /s/ GARY M. STUART
---------------------
7
<PAGE> 8
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.
Dated: November 9, 1994 UP ACQUISITION CORPORATION
By: /s/ GARY M. STUART
-----------------------
8
<PAGE> 9
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NO. DESCRIPTION NUMBERED PAGE
------- ----------- -------------
<S> <C>
(a) (1) Offer to Purchase, dated November 9, 1994.....................
(2) Letter of Transmittal.........................................
(3) Notice of Guaranteed Delivery.................................
(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees............................................
(5) Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.....................
(6) Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9........................................
(7) Letter to Participants in the Dividend Reinvestment Plan of
Santa Fe Pacific Corporation, dated November 9, 1994..........
(8) Text of Press Release, dated November 8, 1994, issued by
Parent........................................................
(b) Not applicable................................................
(c) Not applicable................................................
(d) Not applicable................................................
(e) Not applicable................................................
(f) None..........................................................
(g) (1) Consolidated and Amended Complaint ("Consolidated and Amended
Complaint") in connection with In re Santa Fe Pacific
Shareholder Litigation, filed in the Court of Chancery in
Delaware on October 14, 1994..................................
(2) First Amended and Supplemental Complaint ("First Amended and
Supplemental Complaint") in connection with Union Pacific
Corporation and James A. Shattuck v. Santa Fe Pacific
Corporation, et. al., filed in the Court of Chancery in
Delaware on October 19, 1994..................................
(3) Answer of Santa Fe Pacific Corporation defendants to
Consolidated and Amended Complaint............................
(4) Answer of Santa Fe Pacific Corporation defendants to First
Amended and Supplemental Complaint............................
(5) Order of the Court of Chancery in Delaware, dated October 18,
1994, denying Union Pacific Corporation's application for
expedited discovery...........................................
(6) Motion to Dismiss First Amended and Supplemental Complaint,
filed by Burlington Northern Inc. ............................
(7) Proxy Statement, dated October 28, 1994, of the Parent........
(8) Supplement to Proxy Statement, dated November 9, 1994, of the
Parent........................................................
</TABLE>
9
<PAGE> 1
Offer to Purchase for Cash
115,903,127 Shares of Common Stock
of
SANTA FE PACIFIC CORPORATION
at
$17.50 NET PER SHARE IN CASH
by
UP ACQUISITION CORPORATION
a wholly-owned subsidiary of
UNION PACIFIC CORPORATION
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, DECEMBER 8, 1994,
UNLESS THE OFFER IS EXTENDED.
------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES WHICH, WHEN ADDED TO THE SHARES BENEFICIALLY OWNED BY UP ACQUISITION
CORPORATION (THE "PURCHASER") AND ITS AFFILIATES, CONSTITUTES AT LEAST A
MAJORITY OF THE SHARES OUTSTANDING ON A FULLY DILUTED BASIS, (2) SANTA FE
PACIFIC CORPORATION (THE "COMPANY") HAVING ENTERED INTO A DEFINITIVE
MERGER AGREEMENT WITH UNION PACIFIC CORPORATION ("PARENT") AND THE
PURCHASER TO PROVIDE FOR THE ACQUISITION OF THE COMPANY PURSUANT TO
THE OFFER AND THE PROPOSED MERGER DESCRIBED HEREIN, (3) THE
STOCKHOLDERS OF THE COMPANY NOT HAVING APPROVED THE AGREEMENT AND
PLAN OF MERGER BETWEEN THE COMPANY AND BURLINGTON NORTHERN INC.
(THE "BNI/SFP AGREEMENT"), (4) THE PURCHASER BEING SATISFIED THAT
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW HAS BEEN
COMPLIED WITH OR IS INVALID OR OTHERWISE INAPPLICABLE TO THE OFFER
AND THE PROPOSED MERGER, (5) THE PURCHASER BEING SATISFIED THAT
THE BNI/SFP AGREEMENT HAS BEEN TERMINATED IN ACCORDANCE WITH
ITS TERMS AND (6) RECEIPT OF AN INFORMAL WRITTEN OPINION IN
FORM AND SUBSTANCE SATISFACTORY TO THE PURCHASER FROM THE
STAFF OF THE INTERSTATE COMMERCE COMMISSION ("ICC"),
WITHOUT THE IMPOSITION OF ANY CONDITIONS UNACCEPTABLE TO
THE PURCHASER, THAT THE VOTING TRUST TO BE USED IN
CONNECTION WITH THE OFFER AND THE PROPOSED MERGER IS
CONSISTENT WITH THE POLICIES OF THE ICC AGAINST
UNAUTHORIZED ACQUISITIONS OF CONTROL OF A REGULATED
CARRIER. THE OFFER IS ALSO SUBJECT TO OTHER TERMS
AND CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE.
SEE SECTION 14. THE OFFER IS NOT CONDITIONED UPON
RECEIPT OF THE ICC'S APPROVAL OF THE PURCHASER'S
ACQUISITION OF CONTROL OF THE COMPANY. IF THE
STOCKHOLDERS OF THE COMPANY APPROVE THE
BNI/SFP AGREEMENT, THE PURCHASER WILL
TERMINATE THE OFFER.
------------------
IMPORTANT
THE PURCHASER IS CURRENTLY REVIEWING ITS OPTIONS WITH RESPECT TO THE OFFER
AND MAY CONSIDER, AMONG OTHER THINGS, CHANGES TO THE MATERIAL TERMS OF THE
OFFER. IN ADDITION, PARENT AND THE PURCHASER INTEND TO CONTINUE TO SEEK TO
NEGOTIATE WITH THE COMPANY WITH RESPECT TO THE ACQUISITION OF THE COMPANY BY
PARENT OR THE PURCHASER. THE PURCHASER RESERVES THE RIGHT TO AMEND THE OFFER
(INCLUDING AMENDING THE NUMBER OF SHARES TO BE PURCHASED, THE PURCHASE PRICE AND
THE PROPOSED SECOND-STEP MERGER CONSIDERATION) UPON ENTERING INTO A SECOND-STEP
MERGER AGREEMENT WITH THE COMPANY OR TO NEGOTIATE A MERGER AGREEMENT WITH THE
COMPANY NOT INVOLVING A TENDER OFFER PURSUANT TO WHICH THE PURCHASER WOULD
TERMINATE THE OFFER AND THE SHARES WOULD, UPON CONSUMMATION OF SUCH MERGER, BE
CONVERTED INTO CASH, PARENT COMMON STOCK AND/OR OTHER SECURITIES IN SUCH AMOUNTS
AS ARE NEGOTIATED BY PARENT AND THE COMPANY.
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should either (i) complete and sign the Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal and mail or deliver it together with the certificate(s) representing
tendered Shares, and any other required documents, to the Depositary or tender
such Shares pursuant to the procedures for book-entry transfer set forth in
Section 3 or (ii) request such stockholder's broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for such stockholder. A
stockholder whose Shares are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such broker,
dealer, commercial bank, trust company or other nominee if such stockholder
desires to tender such Shares.
A stockholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available, or who cannot comply
with the procedures for book-entry transfer described in this Offer to Purchase
on a timely basis, may tender such Shares by following the procedures for
guaranteed delivery set forth in Section 3.
Questions and requests for assistance, or for additional copies of this
Offer to Purchase, the Letter of Transmittal or other tender offer materials,
may be directed to the Information Agent or the Dealer Manager at their
respective addresses and telephone numbers set forth on the back cover of this
Offer to Purchase. Holders of Shares may also contact brokers, dealers,
commercial banks and trust companies for assistance concerning the Offer.
------------------
The Dealer Manager for the Offer is:
CS First Boston Corporation
November 9, 1994
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
INTRODUCTION........................................................ 3
THE TENDER OFFER.................................................... 6
1. Terms of the Offer............................................ 6
2. Acceptance for Payment and Payment for Shares................. 8
3. Procedures for Tendering Shares............................... 9
4. Withdrawal Rights............................................. 11
5. Certain Federal Income Tax Consequences....................... 12
6. Price Range of Shares; Dividends.............................. 13
7. Certain Information Concerning the Company.................... 13
8. Certain Information Concerning the Purchaser and Parent....... 15
9. Source and Amount of Funds.................................... 18
10. Background of the Offer; Contacts with the Company............ 18
11. Purpose of the Offer and the Proposed Merger.................. 36
12. Dividends and Distributions................................... 38
13. Effect of the Offer on the Market for the Shares; Exchange
Listing and Exchange Act Registration....................... 38
14. Certain Conditions of the Offer............................... 39
15. Certain Legal Matters; Regulatory Approvals................... 42
16. Fees and Expenses............................................. 49
17. Miscellaneous................................................. 49
Schedule I -- Information Concerning the Directors and Executive
Officers of Parent and the Purchaser.............................. I-1
Schedule II -- Transactions in Shares During the Past 60 Days by the
Purchaser and Parent.............................................. II-1
</TABLE>
2
<PAGE> 3
To the Holders of Shares of Common Stock of Santa Fe Pacific Corporation:
INTRODUCTION
UP Acquisition Corporation (the "Purchaser"), a Utah corporation and a
wholly-owned subsidiary of Union Pacific Corporation, a Utah corporation
("Parent"), hereby offers to purchase 115,903,127 shares of Common Stock, par
value $1.00 per share (the "Shares"), of Santa Fe Pacific Corporation, a
Delaware corporation (the "Company"), or such greater number of Shares as equals
57.1% of the Shares outstanding on a fully diluted basis as of the Expiration
Date (as hereinafter defined) (such number of shares being the "Maximum
Number"), at a price of $17.50 per Share, net to the seller in cash, without
interest thereon (the "Offer Price"), upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which, as amended from time to time, together constitute the
"Offer"). Promptly upon the purchase by Parent, the Purchaser or their
affiliates of at least a majority of the outstanding Shares, such Shares will be
deposited in an independent voting trust (the "Voting Trust") in accordance with
the terms of a proposed Voting Trust Agreement to be entered into with the
trustee thereof (the "Voting Trust Agreement") pending approval by the
Interstate Commerce Commission (the "ICC") of the acquisition of control by
Parent and its railroad subsidiaries of the Company and its subsidiary, The
Atchison, Topeka and Santa Fe Railway Company. The Offer is not conditioned upon
such ICC approval. See Section 15. The Proposed Merger (as defined below) would
also not be conditioned on such ICC approval. Immediately prior to consummation
of the Proposed Merger, Parent would place all of the shares of common stock of
the Purchaser (which will become stock of the surviving corporation upon
consummation of the Proposed Merger) into the Voting Trust. See Section 15. The
Offer is conditioned upon issuance by the staff of the ICC of an informal,
non-binding opinion, without the imposition of any conditions unacceptable to
the Purchaser to the effect that the use of the Voting Trust is consistent with
the policies of the ICC against unauthorized acquisitions of control of a
regulated carrier.
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares pursuant to the
Offer. The Purchaser will pay all charges and expenses of CS First Boston
Corporation, as Dealer Manager (in such capacity, the "Dealer Manager"),
Citibank, N.A., as Depositary (the "Depositary"), and Morrow & Co., Inc., as
Information Agent (the "Information Agent"), incurred in connection with the
Offer. See Section 16.
The purpose of the Offer is to acquire a majority of the Shares as the
first step in a negotiated acquisition of the entire equity interest in the
Company. Parent is seeking to negotiate with the Company a definitive
acquisition agreement (the "Proposed Merger Agreement") pursuant to which the
Company would, as soon as practicable following consummation of the Offer,
consummate a merger (the "Proposed Merger") with the Purchaser or another direct
or indirect wholly-owned subsidiary of Parent. In the Proposed Merger, at the
effective time of the Proposed Merger, each Share that is issued and outstanding
immediately prior to the effective time (other than Shares held in the treasury
of the Company or owned by Parent, the Purchaser or any direct or indirect
wholly-owned subsidiary of Parent) would be converted into 0.354 shares of
common stock, par value $2.50 per share, of Parent ("Parent Common Stock"). See
Section 10 and Section 11.
The Proposed Merger Agreement is expected to provide that, upon deposit of
the Shares purchased in the Offer into the Voting Trust and from time to time
thereafter, Southwest Bank of St. Louis, the trustee of the Voting Trust (the
"Trustee") will be entitled to designate up to such number of directors, rounded
up to the next whole number, on the Company's Board of Directors (the "Company's
Board") as will give the Trustee representation on the Company's Board equal to
the product of the total number of directors on the Company's Board multiplied
by the percentage that the aggregate number of Shares then held by the Trustee
bears to the total number of Shares then outstanding. In the Proposed Merger
Agreement, the Company is expected to agree to use its best efforts to cause the
Trustee's designees to be elected as directors of the Company, including
increasing the size of the Company's Board or securing the resignations of
incumbent directors or both.
3
<PAGE> 4
The Offer is conditioned on, among other things, the Company having entered
into a definitive merger agreement with Parent and the Purchaser to provide for
the acquisition of the Company pursuant to the Offer and the Proposed Merger.
See Section 14. BY TENDERING SHARES INTO THE OFFER, THE COMPANY'S STOCKHOLDERS
EFFECTIVELY WILL EXPRESS TO THE COMPANY'S BOARD THAT THEY WISH TO BE ABLE TO
ACCEPT THE OFFER AND TO APPROVE THE PROPOSED MERGER OR A SIMILAR TRANSACTION
WITH PARENT AND ITS AFFILIATES.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES WHICH, WHEN ADDED TO THE SHARES BENEFICIALLY OWNED BY THE PURCHASER AND
ITS AFFILIATES, CONSTITUTES AT LEAST A MAJORITY OF THE SHARES OUTSTANDING ON A
FULLY DILUTED BASIS (THE "MINIMUM CONDITION"), (2) THE COMPANY HAVING ENTERED
INTO A DEFINITIVE MERGER AGREEMENT WITH PARENT AND THE PURCHASER TO PROVIDE FOR
THE ACQUISITION OF THE COMPANY PURSUANT TO THE OFFER AND THE PROPOSED MERGER
(THE "MERGER AGREEMENT CONDITION"), (3) THE STOCKHOLDERS OF THE COMPANY NOT
HAVING APPROVED THE AGREEMENT AND PLAN OF MERGER BETWEEN BURLINGTON NORTHERN
INC. ("BNI") AND THE COMPANY DATED AS OF JUNE 29, 1994, AS AMENDED (THE "BNI/SFP
AGREEMENT") (THE "STOCKHOLDER VOTE CONDITION"), (4) THE PURCHASER BEING
SATISFIED THAT SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW HAS BEEN
COMPLIED WITH OR IS INVALID OR OTHERWISE INAPPLICABLE TO THE OFFER AND THE
PROPOSED MERGER, (5) THE PURCHASER BEING SATISFIED THAT THE BNI/SFP AGREEMENT
HAS BEEN TERMINATED IN ACCORDANCE WITH ITS TERMS AND (6) RECEIPT OF AN INFORMAL
WRITTEN OPINION IN FORM AND SUBSTANCE SATISFACTORY TO THE PURCHASER FROM THE
STAFF OF THE ICC, WITHOUT THE IMPOSITION OF ANY CONDITIONS UNACCEPTABLE TO THE
PURCHASER, THAT THE VOTING TRUST TO BE USED IN CONNECTION WITH THE OFFER AND THE
PROPOSED MERGER IS CONSISTENT WITH THE POLICIES OF THE ICC AGAINST UNAUTHORIZED
ACQUISITIONS OF CONTROL OF A REGULATED CARRIER (THE "VOTING TRUST APPROVAL
CONDITION"). THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS CONTAINED
IN THIS OFFER TO PURCHASE. SEE SECTION 14, WHICH SETS FORTH IN FULL THE
CONDITIONS TO THE OFFER. THE OFFER IS NOT CONDITIONED UPON RECEIPT OF THE ICC'S
APPROVAL OF THE PURCHASER'S ACQUISITION OF CONTROL OF THE COMPANY. IF THE
STOCKHOLDERS OF THE COMPANY APPROVE THE BNI/SFP AGREEMENT, THE PURCHASER WILL
TERMINATE THE OFFER.
THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR ANY MEETING OF
THE COMPANY'S STOCKHOLDERS. PARENT IS CURRENTLY SOLICITING PROXIES IN OPPOSITION
TO THE BNI/SFP AGREEMENT. SUCH SOLICITATION BY PARENT IS BEING MADE ONLY
PURSUANT TO SEPARATE PROXY MATERIALS COMPLYING WITH THE REQUIREMENTS OF SECTION
14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT").
IN ADDITION, THIS OFFER IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF OFFERS
TO BUY ANY SECURITIES WHICH MAY BE ISSUED IN ANY MERGER OR SIMILAR BUSINESS
COMBINATION INVOLVING THE PURCHASER, PARENT OR THE COMPANY. THE ISSUANCE OF SUCH
SECURITIES WOULD HAVE TO BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND SUCH SECURITIES WOULD BE OFFERED ONLY BY
MEANS OF A PROSPECTUS COMPLYING WITH THE REQUIREMENTS OF THE SECURITIES ACT.
The Minimum Condition. The Minimum Condition requires that the number of
Shares tendered and not withdrawn before the expiration of the Offer, together
with the Shares beneficially owned by the Purchaser and its affiliates,
represent at least a majority of the Shares outstanding on a fully diluted
basis. According to the Burlington Northern Inc. and Santa Fe Pacific
Corporation Joint Proxy Statement (the "Santa Fe Joint Proxy Statement") filed
with the Securities and Exchange Commission (the "Commission") pursuant to the
Exchange Act, as of October 10, 1994, there were 186,996,400 Shares outstanding.
According to the Santa Fe Joint Proxy Statement, as of October 10, 1994, there
were 15,834,422 unexercised options to acquire Shares under various employee
stock option plans of the Company. Parent beneficially owns 200 Shares. The
Shares
4
<PAGE> 5
beneficially owned by Parent were recently acquired in open market purchases.
See Schedule II. For purposes of the Offer, "fully diluted basis" assumes that
all outstanding stock options are presently exercisable.
Based on the foregoing and assuming no additional Shares have been issued
since October 10, 1994 (other than Shares issued pursuant to the exercise of the
stock options referred to above), if the Purchaser purchases 101,415,212 Shares
pursuant to the Offer, the Minimum Condition would be satisfied.
The Merger Agreement Condition. The Merger Agreement Condition requires
that the Company enter into a definitive merger agreement with Parent and the
Purchaser that would provide for the acquisition of the Company by the Purchaser
pursuant to the Offer and the Proposed Merger. Under the Delaware General
Corporation Law (the "DGCL"), in order for the Company to enter into the
Proposed Merger Agreement, such agreement must be approved by the Company's
Board. The Purchaser will require that such agreement contain provisions
requiring the Company's Board to adopt a resolution providing, or take such
other corporate action as may be required to ensure, that Section 203 of the
DGCL is inapplicable to the Offer and the Proposed Merger.
On October 5, 1994, Parent made a proposal to acquire the Company in a
negotiated merger transaction in which the Company's stockholders would receive,
per Share, 0.344 of a share of Parent Common Stock, and communicated to the
Company its desire to negotiate a definitive merger agreement on mutually
acceptable terms and conditions. See Section 10. On October 30, 1994, Parent
revised its proposal such that the Company's stockholders would receive, per
Share, 0.407 of a share of Parent Common Stock, and reaffirmed its desire to
negotiate a definitive agreement with the Company. See Section 10. On November
8, 1994, Parent again revised its proposal to provide that Parent would acquire
the Company in a two-step transaction in which Parent would purchase 57.1% of
the outstanding Shares on a fully diluted basis in a cash tender offer for
$17.50 per Share. Parent would acquire the remaining Shares in a merger in which
the Company's stockholders would receive, for each of their remaining Shares,
0.354 of a share of Parent Common Stock. Pursuant to this revised proposal,
Shares obtained in the Offer and the Proposed Merger would be held in the Voting
Trust until approval by the ICC of the acquisition of control of the Company by
Parent. Parent also advised the Company that if the Company's Board prefers,
Parent would be prepared to proceed with its previous proposal to negotiate a
merger, without the use of a voting trust, in which the Company's stockholders
would receive Parent Common Stock having a value of $20 per Share, based on the
market prices at the time such proposal was made. Although Parent has sought to
enter into negotiations with the Company with respect to the Proposed Merger and
intends to continue to pursue such negotiations, there can be no assurance that
such negotiations will occur or, if such negotiations occur, as to the outcome
thereof.
According to the Santa Fe Joint Proxy Statement, the Company has set
November 18, 1994, as the date for a special meeting at which stockholders of
the Company will vote with respect to the proposed merger of the Company and
BNI. On October 28, 1994, Parent filed a definitive Proxy Statement (the "Parent
Proxy Statement") with the Commission in order to solicit proxies from
stockholders of the Company to vote against the proposed merger with BNI. In the
Parent Proxy Statement, Parent has stated that, if the Company's stockholders
approve the proposed merger with BNI, Parent will withdraw its existing proposal
to negotiate a merger with the Company. See Section 10.
Parent has filed suit in the Court of Chancery in the State of Delaware
seeking, among the other things, an injunction requiring the Company to
negotiate with Parent regarding Parent's merger proposal. See Section 15.
The Purchaser presently intends to extend the Offer from time to time until
the Merger Agreement Condition is satisfied or the Purchaser determines, in its
sole discretion, that such condition is not reasonably likely to be satisfied
under then current circumstances. If the Purchaser determines in its sole
discretion that it is unlikely that the Merger Agreement Condition will be
satisfied, the Purchaser will terminate the Offer.
The Stockholder Vote Condition. The Stockholder Vote Condition requires
that the Company's stockholders not approve the BNI/SFP Agreement at the Special
Meeting of Stockholders of the Company scheduled for November 18, 1994 or any
postponements, adjournments or reschedulings thereof (the "Special Meeting").
Parent is presently soliciting proxies from stockholders of the Company to vote
against approval of
5
<PAGE> 6
the BNI/SFP Agreement. Such solicitation is being made pursuant to separate
proxy materials complying with the requirements of Section 14(a) of the Exchange
Act. If the stockholders of the Company approve the BNI/SFP Agreement at the
Special Meeting, the Purchaser will terminate the Offer as a result of the
failure of the Stockholder Vote Condition.
The Voting Trust Approval Condition. The ICC Approval Condition requires
that the staff of the ICC issue an informal, non-binding opinion, without the
imposition of any conditions unacceptable to the Purchaser, to the effect that
the use of the Voting Trust is consistent with the policies of the ICC against
unauthorized acquisitions of control of a regulated carrier. The Voting Trust
Agreement is expected to provide that the Trustee would have sole power to vote
Shares it holds, and would contain certain other terms and conditions designed
to ensure that neither the Purchaser nor Parent would control the Company during
the pendency of the ICC proceedings. Parent and the Purchaser will promptly
request the staff of the ICC to issue such an opinion and believe that they will
obtain such an opinion. Parent understands that the ICC staff generally acts on
such requests within one to two weeks, although there can be no assurance that
the ICC staff will act this quickly. See Section 15.
Certain other conditions to consummation of the Offer are described in
Section 14. The Purchaser expressly reserves the right in its sole discretion to
waive any one or more of the conditions to the Offer. See Section 14.
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
THE TENDER OFFER
1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of the
Offer (including, if the Offer is extended or amended, the terms and conditions
of any extension or amendment), the Purchaser will accept for payment and pay
for the Maximum Number of Shares validly tendered prior to the Expiration Date
(as hereinafter defined) and not withdrawn in accordance with Section 4. The
term "Expiration Date" means 12:00 Midnight, New York City time, on Thursday,
December 8, 1994, unless and until the Purchaser, in its sole discretion, shall
have extended the period of time during which the Offer is open, in which event
the term "Expiration Date" shall mean the latest time and date at which the
Offer, as so extended by the Purchaser, shall expire.
Consummation of the Offer is conditioned upon, among other things,
satisfaction of the Minimum Condition, the Merger Agreement Condition, the
Stockholder Vote Condition and the Voting Trust Approval Condition. If any or
all of such conditions are not satisfied or any or all of the other events set
forth in Section 14 shall have occurred or shall be determined by the Purchaser
to have occurred prior to the Expiration Date, the Purchaser reserves the right
(but shall not be obligated) to (i) decline to purchase any or all of the Shares
tendered and terminate the Offer, and return all tendered Shares to tendering
stockholders, (ii) waive or reduce the Minimum Condition or waive or reduce any
or all other conditions and, subject to complying with applicable rules and
regulations of the Commission, purchase all Shares validly tendered, or (iii)
extend the Offer and, subject to the right of stockholders to withdraw Shares
until the Expiration Date, retain the Shares which have been tendered during the
period or periods for which the Offer is extended.
Upon the terms and subject to the conditions of the Offer, if more than the
Maximum Number of Shares shall be validly tendered and not withdrawn prior to
the Expiration Date, the Purchaser will, upon the terms and subject to the
conditions of the Offer, purchase the Maximum Number of Shares on a pro rata
basis (with adjustments to avoid purchases of fractional Shares) based upon the
number of Shares validly tendered and not withdrawn prior to the Expiration
Date.
Because of the difficulty of determining the precise number of Shares
properly tendered and not withdrawn, if proration is required the Purchaser does
not expect to be able to announce the final proration factor until approximately
seven New York Stock Exchange, Inc. ("NYSE") trading days after the Expiration
Date. Preliminary results of proration will be announced by press release as
promptly as practicable after the Expiration Date. Stockholders may obtain such
preliminary information from the Information Agent and may be able to obtain
such information from their brokers. The Purchaser will not pay for any Shares
accepted for payment pursuant to the Offer until the final proration factor is
known.
6
<PAGE> 7
The Purchaser expressly reserves the right, in its sole discretion, at any
time and from time to time, to extend for any reason the period of time during
which the Offer is open, including the occurrence of any of the events specified
in Section 14, by giving oral or written notice of such extension to the
Depositary. During any such extension, all Shares previously tendered and not
withdrawn will remain subject to the Offer, subject to the rights of a tendering
stockholder to withdraw its Shares. See Section 4.
Subject to the applicable regulations of the Commission, the Purchaser also
expressly reserves the right, in its sole discretion at any time and from time
to time, (i) to delay acceptance for payment of, or, regardless of whether such
Shares were theretofore accepted for payment, payment for, any Shares pending
receipt of any regulatory approval specified in Section 15 (other than approval
by the ICC of the acquisition of control of the Company by Parent or the
Purchaser) or in order to comply in whole or in part with any other applicable
law, (ii) to terminate the Offer and not accept for payment any Shares if any of
the conditions referred to in Section 14 has not been satisfied or upon the
occurrence of any of the events specified in Section 14 and (iii) to waive any
condition or otherwise amend the Offer in any respect by giving oral or written
notice of such delay, termination, waiver or amendment to the Depositary and by
making a public announcement thereof.
The Purchaser acknowledges that (i) Rule 14e-1(c) under the Exchange Act
requires the Purchaser to pay the consideration offered or return the Shares
tendered promptly after the termination or withdrawal of the Offer, and (ii) the
Purchaser may not delay acceptance for payment of, or payment for (except as
provided in clause (i) of the first sentence of the preceding paragraph), any
Shares upon the occurrence of any of the events specified in Section 14 without
extending the period of time during which the Offer is open.
Any such extension, delay, termination, waiver or amendment will be
followed as promptly as practicable by public announcement thereof, such
announcement in the case of an extension to be made no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date. Subject to applicable law (including Rules 14d-4(c), 14d-6(d)
and 14e-1 under the Exchange Act, which require that material changes be
promptly disseminated to stockholders in a manner reasonably designed to inform
them of such changes) and without limiting the manner in which the Purchaser may
choose to make any public announcement, the Purchaser shall have no obligation
to publish, advertise or otherwise communicate any such public announcement
other than by issuing a press release to the Dow Jones News Service.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, the Purchaser will extend the Offer to the extent required by Rules
14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The Purchaser reserves the
right (but shall not be obligated) to accept payment for more than the Maximum
Number of Shares pursuant to the Offer. The Purchaser has no present intention
of exercising such right. If a number of additional Shares in excess of two
percent of the outstanding Shares is to be accepted for payment, and, at the
time notice of the Purchaser's decision to accept for payment such additional
Shares is first published, sent or given to holders of Shares, the Offer is
scheduled to expire at any time earlier than the tenth business day from the
date that such notice is so published, sent or given, the Offer will be extended
until the expiration of such period of ten business days.
If, prior to the Expiration Date, the Purchaser should decide to increase
or decrease the number of Shares being sought or to increase or decrease the
consideration being offered in the Offer, such increase or decrease in the
number of Shares being sought or such increase or decrease in the consideration
being offered will be applicable to all stockholders whose Shares are accepted
for payment pursuant to the Offer and, if at the time notice of any such
increase or decrease in the number of Shares being sought or such increase or
decrease in the consideration being offered is first published, sent or given to
holders of such Shares, the Offer is scheduled to expire at any time earlier
than the period ending on the tenth business day from and including the date
that such notice is first so published, sent or given, the Offer will be
extended at least until the expiration of such ten business day period. For
purposes of the Offer a "business day" means any day other than a Saturday,
Sunday or federal holiday and consists of the time period from 12:01 a.m.
through 12:00 Midnight, New York City time.
7
<PAGE> 8
On November 9, 1994, the Purchaser sent or gave this Offer to Purchase and
the related Letter of Transmittal and other relevant materials to the Company's
stockholders and sent or gave such materials, for subsequent transmittal to
beneficial owners of Shares, to brokers, dealers, commercial banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on the stockholder list of the Company or, if applicable, who are listed
as participants in a clearing agency's security position listing.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and
subject to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of any such extension or amendment), the
Purchaser will purchase, by accepting for payment, and will pay for, the Maximum
Number of Shares validly tendered prior to the Expiration Date (and not properly
withdrawn in accordance with Section 4) as soon as practicable after the later
to occur of (i) the Expiration Date and (ii) the satisfaction or waiver of the
conditions set forth in Section 14. Any determination concerning the
satisfaction of such terms and conditions shall be within the sole discretion of
the Purchaser. See Section 14. The Purchaser expressly reserves the right, in
its sole discretion, to delay acceptance for payment of, or, subject to the
applicable rules of the Commission, payment for, Shares in order to comply in
whole or in part with any applicable law (other than approval by the ICC of the
acquisition of control of the Company by Parent or the Purchaser), including
without limitation the Interstate Commerce Act, as amended (with regard to the
receipt of an ICC staff opinion relating to the Voting Trust). See Section 15.
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (i) the certificates
evidencing such Shares (the "Share Certificates") or timely confirmation of a
book-entry transfer (a "Book-Entry Confirmation") of such Shares, if such
procedure is available, into the Depositary's account at The Depository Trust
Company, the Midwest Securities Trust Company or the Philadelphia Depository
Trust Company (each a "Book-Entry Transfer Facility" and, collectively, the
"Book-Entry Transfer Facilities") pursuant to the procedure set forth in Section
3, (ii) the Letter of Transmittal (or facsimile thereof), properly completed and
duly executed, or an Agent's Message (as defined below) and (iii) any other
documents required by the Letter of Transmittal.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares, that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
Payment for the Shares accepted for payment pursuant to the Offer will be
delayed in the event of proration due to the difficulty of determining the
number of Shares validly tendered and not withdrawn. See Section 1.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, tendered Shares if, as and when the
Purchaser gives oral or written notice to the Depositary of the Purchaser's
acceptance of such Shares for payment. Payment for Shares accepted pursuant to
the Offer will be made by deposit of the aggregate purchase price therefor with
the Depositary, which will act as agent for tendering stockholders for the
purpose of receiving payment from the Purchaser and transmitting payment to such
tendering stockholders. Under no circumstances will interest on the purchase
price for Shares be paid by the Purchaser by reason of any delay in making such
payment. Upon the deposit of funds with the Depositary for the purpose of making
payments to tendering stockholders, the Purchaser's obligation to make such
payment shall be satisfied and tendering stockholders must thereafter look
solely to the Depositary for payment of amounts owed to them by reason of the
acceptance for payment of Shares pursuant to the Offer. The Purchaser will pay
any stock transfer taxes incident to the transfer to it of validly tendered
Shares, except as otherwise provided in Instruction 6 of the Letter of
Transmittal, as well as any charges and expenses of the Depositary and the
Information Agent.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer (including proration due to tenders of
Shares pursuant to the Offer in excess of the Maximum Number of Shares), or if
Share Certificates are submitted evidencing more Shares than are tendered, Share
8
<PAGE> 9
Certificates evidencing unpurchased Shares will be returned, without expense to
the tendering stockholder (or, in the case of Shares tendered by book-entry
transfer into the Depositary's account at a Book-Entry Transfer Facility
pursuant to the procedure set forth in Section 3, such Shares will be credited
to an account maintained at such Book-Entry Transfer Facility), as promptly as
practicable following the expiration or termination of the Offer.
If, prior to the Expiration Date, the Purchaser shall increase the
consideration offered to holders of Shares pursuant to the Offer, such
consideration will be paid to all holders whose Shares are purchased in the
Offer.
The Purchaser reserves the right to transfer or assign, in whole at any
time, or in part from time to time, to one or more of its affiliates, the right
to purchase all or any portion of the Shares tendered pursuant to the Offer, but
any such transfer or assignment will not relieve the Purchaser of its
obligations under the Offer and will in no way prejudice the rights of tendering
stockholders to receive payment for Shares validly tendered and accepted for
payment pursuant to the Offer.
3. PROCEDURES FOR TENDERING SHARES.
Valid Tender of Shares. In order for Shares to be validly tendered
pursuant to the Offer, the Letter of Transmittal or a facsimile thereof,
properly completed and duly executed, with any required signature guarantees, or
an Agent's Message in connection with a book-entry delivery of Shares, and any
other required documents, must be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date and either (i) the Share Certificates evidencing tendered Shares
must be received by the Depositary along with the Letter of Transmittal, or (ii)
Shares must be tendered pursuant to the procedure for book-entry transfer
described below and a Book-Entry Confirmation must be received by the
Depositary, in each case prior to the Expiration Date, or (iii) the tendering
stockholder must comply with the guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at each Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase, and any
financial institution that is a participant in any of the Book-Entry Transfer
Facilities' systems may make book-entry delivery of Shares by causing a
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at a Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for transfer. However, although delivery of
Shares may be effected through book-entry transfer at a Book-Entry Transfer
Facility, the Letter of Transmittal or facsimile thereof, with any required
signature guarantees, or an Agent's Message in connection with a book-entry
delivery of Shares, and any other required documents, must, in any case, be
transmitted to and received by the Depositary at one of its addresses set forth
on the back cover of this Offer to Purchase prior to the Expiration Date or the
guaranteed delivery procedures described below must be complied with.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH
THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO
THE DEPOSITARY.
Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a member firm of a registered national securities exchange, a
member of the National Association of Securities Dealers, Inc. ("NASD") or a
commercial bank or trust company having an office or correspondent in the United
States (each of the foregoing being referred to as an "Eligible Institution"),
unless the Shares tendered thereby are tendered (i) by a registered holder of
Shares who has not completed either the box entitled "Special Delivery
Instructions" or the box entitled "Special Payment Instructions" on the Letter
of Transmittal, or (ii) for the account of an Eligible Institution. See
Instruction 1 of the Letter of Transmittal.
9
<PAGE> 10
If a Share Certificate is registered in the name of a person other than the
signer of the Letter of Transmittal, or if payment is to be made, or a Share
Certificate not accepted for payment or not tendered is to be returned, to a
person other than the registered holder(s), then the Share Certificate must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on the Share
Certificate, with the signature(s) on such Share Certificate or stock powers
guaranteed as described above. See Instructions 1 and 5 of the Letter of
Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates are not immediately
available or time will not permit all required documents to reach the Depositary
prior to the Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis, such Shares may nevertheless be tendered if all the
following conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser herewith, is
received by the Depositary as provided below prior to the Expiration Date;
and
(iii) in the case of a guarantee of Shares, the Share Certificates for
all tendered Shares, in proper form for transfer, or a Book-Entry
Confirmation, together with a properly completed and duly executed Letter
of Transmittal (or manually signed facsimile thereof) with any required
signature guarantee (or, in the case of a book-entry transfer, an Agent's
Message) and any other documents required by such Letter of Transmittal,
are received by the Depositary within five NYSE trading days after the date
of execution of the Notice of Guaranteed Delivery.
Any Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares purchased
pursuant to the Offer will, in all cases, be made only after timely receipt by
the Depositary of (i) the Share Certificates evidencing such Shares, or a
Book-Entry Confirmation of the delivery of such Shares, if available, (ii) a
properly completed and duly executed Letter of Transmittal (or manually signed
facsimile thereof) (or, in the case of a book-entry transfer, an Agent's
Message) and (iii) any other documents required by the Letter of Transmittal.
Backup Federal Withholding Tax. To prevent backup federal income tax
withholding with respect to payment to certain stockholders of the purchase
price of Shares purchased pursuant to the Offer, each such stockholder must
provide the Depositary with such stockholder's correct taxpayer identification
number and certify that such stockholder is not subject to backup federal income
tax withholding by completing the Substitute Form W-9 included in the Letter of
Transmittal. See Instruction 10 of the Letter of Transmittal.
Appointment as Proxy. By executing a Letter of Transmittal as set forth
above, a tendering stockholder irrevocably appoints designees of the Purchaser
as such stockholder's attorneys-in-fact and proxies, in the manner set forth in
the Letter of Transmittal, each with full power of substitution, to the full
extent of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser (and any and all non-cash
dividends, distributions, rights, other Shares, or other securities issued or
issuable in respect of such Shares on or after the date of this Offer to
Purchase). All such proxies shall be considered coupled with an interest in the
tendered Shares. This appointment will be effective if, when, and only to the
extent that, the Purchaser accepts such Shares for payment pursuant to the
Offer. Upon such acceptance for payment, all prior proxies given by such
stockholder with respect to such Shares and other securities will, without
further action, be revoked, and no subsequent proxies may be given. The
designees of the Purchaser will, with respect to the Shares and other securities
for which the appointment is effective, be empowered to exercise all voting and
other rights (subject to the terms of the Voting Trust Agreement so long as it
shall be in effect with respect to the Shares) of such stockholder as they in
their sole discretion may deem proper at any annual, special, adjourned or
postponed meeting of the Company's stockholders, by written consent or
otherwise, and the Purchaser reserves the right to require that, in order for
Shares or other securities to be deemed validly tendered, immediately upon the
Purchaser's acceptance for payment of such
10
<PAGE> 11
Shares the Purchaser must be able to exercise full voting rights with respect to
such Shares and other securities, subject to the terms of the Voting Trust. See
Section 15.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tendered Shares pursuant to any of the procedures described above will be
determined by the Purchaser, in its sole discretion, whose determination will be
final and binding on all parties. The Purchaser reserves the absolute right to
reject any or all tenders of any Shares determined by it not to be in proper
form or if the acceptance for payment of, or payment for, such Shares may, in
the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves
the absolute right, in its sole discretion, to waive any of the conditions of
the Offer or any defect or irregularity in any tender with respect to Shares of
any particular stockholder, whether or not similar defects or irregularities are
waived in the case of other stockholders. No tender of Shares will be deemed to
have been validly made until all defects and irregularities have been cured or
waived.
The Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be final
and binding. None of Parent, the Purchaser, the Dealer Manager, the Depositary,
the Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or will incur any
liability for failure to give any such notification.
The Purchaser's acceptance for payment of Shares tendered pursuant to the
Offer will constitute a binding agreement between the tendering stockholder and
the Purchaser upon the terms and subject to the conditions of the Offer.
4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4,
tenders of Shares made pursuant to the Offer are irrevocable. Shares tendered
pursuant to the Offer may be withdrawn at any time prior to the Expiration Date
and, unless theretofore accepted for payment by the Purchaser pursuant to the
Offer, may also be withdrawn at any time after January 7, 1995, or at such later
time as may apply if the Offer is extended.
If the Purchaser extends the Offer, is delayed in its acceptance for
payment of Shares or is unable to accept Shares for payment pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer, the Depositary may, nevertheless, on behalf of the Purchaser, retain
tendered Shares, and such Shares may not be withdrawn except to the extent that
tendering stockholders are entitled to withdrawal rights as described in this
Section 4. Any such delay will be by an extension of the Offer to the extent
required by law.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder, if different from that of the person who tendered such
Shares. If Share Certificates evidencing Shares to be withdrawn have been
delivered or otherwise identified to the Depositary, then, prior to the release
of such Share Certificates, the serial numbers shown on such Share Certificates
must be submitted to the Depositary and the signature(s) on the notice of
withdrawal must be guaranteed by an Eligible Institution, unless such Shares
have been tendered for the account of an Eligible Institution. If Shares have
been tendered pursuant to the procedure for book-entry transfer as set forth in
Section 3, any notice of withdrawal must also specify the name and number of the
account at the Book-Entry Transfer Facility to be credited with the withdrawn
Shares.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding. None of Parent, the
Purchaser, the Dealer Manager, the Depositary, the Information Agent or any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
Any Shares properly withdrawn will thereafter be deemed to not have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered at any time prior to the Expiration Date by following one of the
procedures described in Section 3.
11
<PAGE> 12
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following discussion is a
summary of the material federal income tax consequences of the Offer and
Proposed Merger to holders of Shares who hold the Shares as capital assets. The
discussion set forth below is for general information only and may not apply to
particular categories of holders of Shares subject to special treatment under
the Internal Revenue Code of 1986, as amended (the "Code"), such as foreign
holders and holders who acquired such Shares pursuant to an exercise of an
employee stock option or otherwise as compensation.
Consequences of the Offer and the Proposed Merger Generally. If the
Proposed Merger is consummated, the Offer and Proposed Merger should be treated
as a single integrated transaction for federal income tax purposes, and the
Offer and Proposed Merger together would be a taxable transaction for federal
income tax purposes and may be a taxable transaction for foreign, state and
local income tax purposes as well. If, for any reason, the Proposed Merger were
not consummated, the receipt of cash pursuant to the Offer would still be a
taxable exchange.
In general, a stockholder of the Company who, pursuant to the Offer,
exchanges Shares for cash will recognize capital gain or loss on the date of
acceptance of Shares for purchase in an amount equal to the difference between
the amount of cash received and the stockholder's adjusted tax basis in the
Shares accepted for payment in the Offer. The gain or loss will be long-term
capital gain or loss if, as of the date of the exchange pursuant to the Offer,
the holder thereof has held such Shares for more than one year.
In general, a stockholder of the Company who, pursuant to the Proposed
Merger, exchanges Shares for Parent Common Stock will recognize capital gain or
loss at the effective time of the Proposed Merger in an amount equal to the
difference between the fair market value of the Parent Common Stock received and
the stockholder's adjusted tax basis in the Shares surrendered. The gain or loss
will be long-term capital gain or loss if, as of the effective time of the
Proposed Merger, the holder thereof had held such Shares for more than one year.
If a holder of Shares owns more than one "block" of stock (i.e., Shares
acquired at the same time in a single transaction) gain or loss must be
determined separately for each block held. In general, the amount of cash or
Parent Common Stock received must be allocated ratably among the blocks in the
proportion that the number of Shares in a particular block bears to the total
number of Shares held by such stockholder.
Withholding. Unless a stockholder complies with certain reporting and/or
certification procedures or is an exempt recipient under applicable provisions
of the Code and Treasury Regulations promulgated thereunder, such stockholder
may be subject to withholding tax of 31% with respect to any cash payments
received pursuant to the Offer and Proposed Merger. Stockholders should consult
their brokers to ensure compliance with such procedures. Foreign stockholders
should consult with their own tax advisors regarding withholding taxes in
general.
THE ABOVE DISCUSSION MAY NOT APPLY TO PARTICULAR CATEGORIES OF HOLDERS OF
SHARES SUBJECT TO SPECIAL TREATMENT UNDER THE CODE, SUCH AS FOREIGN HOLDERS AND
HOLDERS WHOSE SHARES WERE ACQUIRED PURSUANT TO THE EXERCISE OF AN EMPLOYEE STOCK
OPTION OR OTHERWISE AS COMPENSATION. STOCKHOLDERS OF THE COMPANY ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE SPECIFIC TAX CONSEQUENCES OF THE
OFFER AND THE PROPOSED MERGER, INCLUDING ANY STATE, LOCAL OR OTHER TAX
CONSEQUENCES OF THE OFFER AND THE PROPOSED MERGER.
12
<PAGE> 13
6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed and principally
traded on the NYSE and quoted under the symbol SFX. The following table sets
forth, for the quarters indicated, the high and low sales prices per Share on
the NYSE as reported by the Dow Jones News Service. In September, 1994, the
Company completed the disposition of SFP Gold as described in Section 7.
<TABLE>
<CAPTION>
MARKET PRICE
--------------------
HIGH LOW
------- -------
<S> <C> <C>
FISCAL YEAR ENDED DECEMBER 31, 1992:
First Quarter............................................................ $14 1/8 $11 1/8
Second Quarter........................................................... 13 3/8 11
Third Quarter............................................................ 12 7/8 10 7/8
Fourth Quarter........................................................... 13 7/8 10 5/8
FISCAL YEAR ENDED DECEMBER 31, 1993:
First Quarter............................................................ 15 5/8 12 3/4
Second Quarter........................................................... 18 3/8 14 1/2
Third Quarter............................................................ 19 1/8 16 3/4
Fourth Quarter........................................................... 22 1/2 18
FISCAL YEAR ENDED DECEMBER 31, 1994:
First Quarter............................................................ 26 1/4 21 5/8
Second Quarter........................................................... 25 19 3/4
Third Quarter............................................................ 23 18
Fourth Quarter (through November 8, 1994)................................ 15 7/8 12 1/8
</TABLE>
According to the Santa Fe Joint Proxy Statement, the Company paid annual
cash dividends for each of the years ending December 31, 1992 and 1993 in the
amount of ten cents ($.10) per Share. On October 25, 1994, the Company announced
that the Company's Board had declared an annual dividend of ten cents ($.10) per
Share, payable December 1, 1994, to stockholders of record at the close of
business on November 16, 1994.
On October 5, 1994, the day of Parent's issuance of the press release
announcing the transmission of a letter to the Company containing a proposal to
negotiate a business combination with the Company in which stockholders of the
Company would receive, per Share, 0.344 of a share of Parent Common Stock,
valued at $18.00 per Share, based upon the closing price of Parent Common Stock
on October 4, 1994, the reported closing sale price per Share on the NYSE was
$13.00. On October 28, 1994, the last full trading day prior to Parent's
issuance of a press release announcing the transmission of a letter to the
Company containing a revised proposal to negotiate a business combination with
the Company in which stockholders of the Company would receive, per Share, 0.407
of a share of Parent Common Stock, valued at $20.00 per Share, based upon the
closing price of Parent Common Stock on October 28, 1994, the reported closing
price per Share on the NYSE was $15.50. On November 8, 1994, the last full
trading day prior to Parent's issuance of a press release announcing its
intention to commence the Offer, the closing price per Share as reported on the
NYSE was $14 7/8. The Offer represents a 17.6% premium over the reported closing
sale price per Share on November 8, 1994.
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
7. CERTAIN INFORMATION CONCERNING THE COMPANY. The information concerning
the Company contained in this Offer to Purchase, including financial
information, has been taken from or based upon publicly available documents and
records on file with the Commission and other public sources. Neither Parent,
the Purchaser nor the Dealer Manager assumes any responsibility for the accuracy
or completeness of the information concerning the Company contained in such
documents and records or for any failure by the Company to disclose events which
may have occurred or may affect the significance or accuracy of any such
information but which are unknown to Parent, the Purchaser or the Dealer
Manager.
13
<PAGE> 14
According to the Santa Fe Joint Proxy Statement, the Company is a Delaware
corporation and its principal executive offices are located at 1700 East Golf
Road, Schaumburg, Illinois 60173.
According to the Santa Fe Joint Proxy Statement, the Company is a holding
company which owns subsidiaries in two segments of business: Rail, consisting
principally of The Atchison, Topeka and Santa Fe Railway Company, a major Class
I railroad operating in 12 midwestern, western and southwestern states; and
Pipeline, reflecting the Company's interest in a refined petroleum products
pipeline system operating in six western and southwestern states. According to
the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 1994 (the "June 1994 10-Q"), in September 1994, the Company completed the
disposition of its remaining 85.4% interest in Santa Fe Pacific Gold Corporation
("SFP Gold") through a distribution of SFP Gold common stock to holders of the
Shares and, as a result, SFP Gold became an independent entity effective
September 30, 1994. Accordingly, certain fiscal 1993 and comparative prior year
amounts in the Company's consolidated financial statements have been
reclassified to present SFP Gold as a discontinued operation.
Set forth below is certain selected historical consolidated financial
information relating to the Company and its subsidiaries which has been
excerpted or derived from the audited financial information of the Company
contained in the Santa Fe Joint Proxy Statement and the unaudited interim
consolidated financial information of the Company contained in a press release
issued by the Company on October 19, 1994 (the "October 19 Press Release"). More
comprehensive financial information is included in the Company's 1993 Annual
Report to Stockholders (the "1993 Annual Report"), the June 1994 10-Q, the Santa
Fe Joint Proxy Statement and other documents filed by the Company with the
Commission. The financial information that follows is qualified in its entirety
by reference to such reports and other documents, including the financial
statements and related notes contained therein. Such reports and other documents
may be inspected and copies may be obtained from the offices of the Commission
or the NYSE in the manner set forth below.
SANTA FE PACIFIC CORPORATION
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------- ------------------
1993 1992 1991 1994(1) 1993(2)
------ ------ ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.................................. $ 2,409 $ 2,252 $ 2,154 $ 1,970 $ 1,778
Income from continuing operations......... 177 21 62 153 124
Income from discontinued operations,
net of tax.............................. 162 42 34 23 148
Net income (loss)......................... 339 (105)(3) 96 176 272
PER SHARE INFORMATION:
Net income (loss) per Share............... 1.81 (0.57) 0.54 0.93 1.46
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------- AT SEPTEMBER 30,
1993 1992 1994
------- ------ ----------------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total assets.......................................... $ 5,374 $ 4,946 $ 5,316
Total debt, including current portion................. 1,176 1,307 (4)
Stockholders' equity.................................. 1,268 929 1,208
</TABLE>
- ---------------
(1) According to the October 19 Press Release, net income for the nine months
ended September 30, 1994 includes the after-tax effect of the first quarter
gain on the sale of an investment and favorable outcome of a litigation
settlement, and the second quarter credit resulting from changes in post
retirement benefits eligibility and a loss related to an adverse appellate
court decision.
(2) According to the October 19 Press Release, net income for the nine months
ended September 30, 1993 includes the after-tax effect of the first quarter
gain on sale of California lines, the third quarter favorable outcome of
arbitration and litigation settlements, the pipeline special charge and the
retroactive impact of the 1993 tax act.
14
<PAGE> 15
(3) According to the Santa Fe Joint Proxy Statement, net income for the year
ended December 31, 1992 includes a noncash reduction of $163 million, or
$.88 per Share, related to the cumulative effect of adopting SFAS No. 106,
and a $5 million, or $.03 per Share, reduction for an extraordinary charge
on the early retirement of debt.
(4) Not publicly available for September 30, 1994. According to the Santa Fe
Joint Proxy Statement, as of June 30, 1994, such amount was $1,105 million.
The Company is subject to the information and reporting requirements of the
Exchange Act and is required to file reports and other information with the
Commission relating to its business, financial condition and other matters.
Information, as of particular dates, concerning the Company's directors and
officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities, any material interests of such persons in
transactions with the Company and other matters is required to be disclosed in
proxy statements distributed to the Company's stockholders and filed with the
Commission. These reports, proxy statements and other information should be
available for inspection at the public reference facilities of the Commission
located in Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
also should be available for inspection and copying at prescribed rates at the
following regional offices of the Commission: Seven World Trade Center, New
York, New York 10048; and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of this material may also be obtained by mail, upon payment of the
Commission's customary fees, from the Commission's principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549. Reports, proxy statements and other
information concerning the Company should also be available for inspection at
the offices of the NYSE, 20 Broad Street, New York, New York 10005. Except as
otherwise noted in this Offer to Purchase, all of the information with respect
to the Company and its affiliates set forth in this Offer to Purchase has been
derived from publicly available information.
8. CERTAIN INFORMATION CONCERNING THE PURCHASER AND PARENT.
The Purchaser. The Purchaser is a newly incorporated Utah corporation
organized in connection with the Offer and the Proposed Merger and has not
carried on any activities other than in connection with the Offer and the
Proposed Merger. The principal offices of the Purchaser are located at Martin
Tower, Eighth & Eaton Avenues, Bethlehem, Pennsylvania 18018. The Purchaser is a
wholly-owned subsidiary of Parent. Until immediately prior to the time that the
Purchaser will purchase Shares pursuant to the Offer, it is not expected that
the Purchaser will have any significant assets or liabilities or engage in
activities other than those incident to its formation and capitalization and the
transactions contemplated by the Offer and the Proposed Merger. Due to the fact
that the Purchaser is newly formed and has minimal assets and capitalization, no
meaningful financial information regarding the Purchaser is available.
Parent. Parent is a Utah corporation and its principal executive offices
are located at Martin Tower, Eighth and Eaton Avenues, Bethlehem, Pennsylvania
18018.
Parent operates, through subsidiaries, in the areas of rail transportation
(Union Pacific Railroad Company and Missouri Pacific Railroad Company
(collectively, the "Railroad")), oil, gas and mining (Union Pacific Resources
Company ("Resources")), trucking (Overnite Transportation Company ("Overnite")),
and waste management (USPCI, Inc. ("USPCI")). Each of these subsidiaries is
indirectly wholly-owned by Parent. Substantially all of Parent's operations are
in the United States.
The Railroad is the third largest railroad in the United States by mileage,
with over 17,000 route miles linking West Coast and Gulf Coast ports with the
Midwest. The Railroad maintains coordinated schedules with other carriers for
the handling of freight to and from the Atlantic seaboard, the Pacific Coast,
the Southeast, the Southwest, Canada and Mexico. Export and import traffic is
moved through Gulf Coast and Pacific Coast ports and across the Texas-Mexico
border.
Resources is an independent oil and gas company engaged in exploration for
and production of natural gas, crude oil and associated products. Substantially
all of its exploration and production programs are concentrated in the Austin
Chalk trend and Carthage area in eastern Texas and Louisiana, the Union Pacific
Land Grant in Colorado, Wyoming and Utah, the Gulf of Mexico and Canada.
Resources is also responsible for developing Parent's reserves of coal and trona
which are located primarily in the Rocky Mountain region.
15
<PAGE> 16
Overnite, a major interstate trucking company, serves all 50 states and
portions of Canada through 166 service centers and through agency partnerships
with several small, high-quality carriers serving areas not directly covered by
Overnite. As one of the largest trucking companies in the United States,
specializing in less-than-truckload shipments, Overnite transports a variety of
products, including machinery, textiles, plastics, electronics and paper
products.
USPCI provides comprehensive waste management services (analysis,
treatment, recovery, recycling, disposal, remediation and transportation) to
industry and government. On October 20, 1994, Parent announced that its Board of
Directors approved a plan to divest Parent's waste business and on October 31,
1994, Parent announced that it had signed a letter of intent to sell USPCI to
Laidlaw, Inc. The sale is subject to negotiation of a definitive agreement,
following the completion of due diligence, and final approvals by the Boards of
Directors of Parent and Laidlaw, Inc.
Parent is subject to the information and reporting requirements of the
Exchange Act and is required to file reports and other information with the
Commission relating to its business, financial condition and other matters.
Information, as of particular dates, concerning Parent's directors and officers,
their remuneration, stock options granted to them, the principal holders of
Parent's securities, any material interests of such persons in transactions with
Parent and other matters is required to be disclosed in proxy statements
distributed to Parent's stockholders and filed with the Commission. These
reports, proxy statements and other information should be available for
inspection and copies may be obtained in the same manner as set forth for the
Company in Section 7. The Parent Common Stock is listed on the NYSE, and
reports, proxy statements and other information concerning Parent should also be
available for inspection at the offices of the NYSE, 20 Broad Street, New York,
New York 10005.
Set forth below are certain selected consolidated financial data with
respect to Parent and its subsidiaries for Parent's last three fiscal years,
excerpted or derived from audited financial statements presented in Parent's
1993 Annual Report to Stockholders and from the unaudited financial statements
contained in Parent's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1994, in each case filed by Parent with the Commission. More
comprehensive financial information is included in such reports and other
documents filed by Parent with the Commission. The financial information summary
set forth below is qualified in its entirety by reference to those reports and
other documents which have been filed with the Commission, which are
incorporated herein by reference, and all the financial information and related
notes contained therein.
UNION PACIFIC CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------- ---------------------
1993 1992 1991 1994 1993
------ ------ ------ ----- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total operating revenues.................... $ 7,353 $ 7,032 $ 6,778 $ 5,806 $ 5,413
Total operating income...................... 1,495 1,396 480(2) 1,194 1,079
Income from continuing operations........... 715(1) 728 83 723(3) 479
Net income.................................. 530(1) 728 64 290(4) 295(1)
PER SHARE INFORMATION:
Net income per share........................ 2.58 3.57 0.31(2) 1.41(3,4) 1.44(1)
</TABLE>
(Footnotes on following page)
16
<PAGE> 17
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
CASH DIVIDENDS PER SHARE:
First Quarter....................................................... $0.40 $0.37 $0.34
Second Quarter...................................................... 0.40 0.37 0.34
Third Quarter....................................................... 0.43 0.40 0.37
Fourth Quarter...................................................... * 0.40 0.37
</TABLE>
- ---------------
* Dividends for the fourth quarter of 1994 have not yet been declared.
<TABLE>
<CAPTION>
AT DECEMBER 31, AT SEPTEMBER 30,
------------------- -----------------------
1993 1992 1994 1993
------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Properties, net................................... $11,441 $10,600 $12,164 3,4,5) $10,858
Total assets...................................... 15,001 14,098 15,898 14,591
Total current liabilities......................... 2,089 2,084 2,011 1,956
Total stockholders' equity........................ 4,885 4,639 4,924 4,732
Total liabilities and stockholders' equity........ 15,001 14,098 15,898 14,591
</TABLE>
- ---------------
(1) 1993 results include a first quarter net after-tax charge of $175 million
for the adoption of changes in accounting methods and a third quarter $61
million charge for the deferred tax effect of the Omnibus Budget
Reconciliation Act of 1993. Excluding these accounting adjustments, net
income for all of 1993 would have been $766 million ($3.73 net income per
share).
(2) 1991 operating income and net income include an $870 million ($575 million
after-tax) special charge. 1991 operating income and net income, excluding
the special charge, would have been $1,331 million and $639 million,
respectively ($3.16 net income per share), with a return on average common
stockholders' equity of 14.2%.
(3) Pursuant to its plan to dispose of its oil and gas operations in California,
Resources sold its Wilmington oil field and announced its plan to dispose of
its interest in the Point Arguello oil field. In March 1994, Resources sold
its interest in the Wilmington oil field's surface rights and hydrocarbon
reserves, and its interest in the Harbor Cogeneration Plant, to the City of
Long Beach, California, for $405 million in cash and notes. The Wilmington
sale resulted in a $184 million ($116 million after-tax) gain. In addition,
Resources recorded a $24 million ($15 million after-tax) charge for the
disposition of the Point Arguello offshore oil field. Wilmington and Point
Arguello reserves represent approximately 6% of Resources' year-end 1993
proved reserves and their sale will not significantly impact ongoing
operating results.
(4) In September 1994, Parent's Board of Directors approved a formal plan of
disposition for its waste management subsidiary, USPCI. As a result, Parent
reported a $433 million after-tax loss from discontinued operations for the
nine months ended September 30, 1994. This loss included an $8 million
after-tax loss from USPCI's operations and a $654 million ($425 million
after-tax) provision for the loss on disposal. The provision included a
write down of USPCI's assets to net realizable value (including goodwill)
and a reserve for costs associated with the disposition of USPCI. Parent
also contributed $366 million of USPCI's intercompany indebtedness to the
capital of USPCI.
Parent has entered into formal negotiations to sell USPCI. On October 31,
1994, Parent announced its intention to sell USPCI to Laidlaw Inc.
("Laidlaw"), contingent upon Laidlaw's completion of due diligence, approval
by Parent's and Laidlaw's boards of directors and the execution of a
definitive sales agreement. September 1994 and 1993 information has been
restated to reflect the sale of USPCI.
(5) In March 1994, Resources acquired AMAX Oil & Gas Inc. ("AMAX") from Cyprus
AMAX Minerals Company for a net purchase price of $725 million. AMAX's
operations primarily consist of natural gas producing, transportation and
processing properties in West, East and South Texas, Louisiana and Arkansas.
These properties include interests in 14 major fields, encompassing
approximately 600,000 acres and 2,000 producing wells. Resources recorded 92
million barrels of oil equivalent of proved reserves related to the AMAX
acquisition.
17
<PAGE> 18
The name, citizenship, business address, principal occupation or employment
and five-year employment history for each of the directors and executive
officers of the Purchaser and Parent are set forth in Schedule I hereto.
Schedule II hereto sets forth transactions in the Shares effected during
the past 60 days by Parent and its affiliates. Except as set forth in this Offer
to Purchase and Schedule II hereto, none of Parent or the Purchaser, or, to the
best knowledge of Parent or the Purchaser, any of the persons listed in Schedule
I hereto, or any associate or majority-owned subsidiary of such persons,
beneficially owns any equity security of the Company, and none of Parent, the
Purchaser, or, to the best knowledge of Parent or the Purchaser, any of the
other persons referred to above, or any of the respective directors, executive
officers or subsidiaries of any of the foregoing, has effected any transaction
in any equity security of the Company during the past 60 days.
Except as set forth in this Offer to Purchase, none of Parent or the
Purchaser, or, to the best knowledge of the Parent or the Purchaser, any of the
persons listed in Schedule I hereto has any contract, arrangement, understanding
or relationship with any other person with respect to any securities of the
Company, including, without limitation, any contract, arrangement, understanding
or relationship concerning the transfer or the voting of any securities of the
Company, joint ventures, loan or option arrangements, puts or calls, guaranties
of loans, guaranties against loss or the giving or withholding of proxies.
Except as set forth in this Offer to Purchase, none of Parent or the Purchaser,
or, to the best knowledge of Parent or the Purchaser, any of the persons listed
in Schedule I hereto has had any transactions with the Company, or any of its
executive officers, directors or affiliates that would require reporting under
the rules of the Commission.
Except as set forth in this Offer to Purchase, there have been no contacts,
negotiations or transactions between Parent or the Purchaser, or their
respective subsidiaries, or, to the best knowledge of Parent or the Purchaser,
any of the persons listed in Schedule I hereto, on the one hand, and the Company
or its executive officers, directors or affiliates, on the other hand,
concerning a merger, consolidation or acquisition, tender offer or other
acquisition of securities, election of directors, or a sale or other transfer of
a material amount of assets.
9. SOURCE AND AMOUNT OF FUNDS. The Purchaser estimates that the total
amount of funds required to acquire the outstanding Shares pursuant to the Offer
and the Proposed Merger and to pay related fees and expenses will be
approximately $2.1 billion. See Section 16.
The Purchaser plans to obtain the necessary funds through capital
contributions or advances made by Parent. Parent plans to obtain the funds for
such capital contributions or advances from its available cash and working
capital, from advances from the sale of commercial paper and/or pursuant to one
or more loan facilities currently existing or to be obtained from one or more
commercial banks or other financial institutions on terms and conditions to be
determined hereafter. It is anticipated that the indebtedness incurred by Parent
under such loans will be repaid from funds generated internally by Parent and
its subsidiaries (including, after the Proposed Merger, if consummated,
dividends paid by the Company and its subsidiaries), through additional
borrowings, through application of proceeds of dispositions or through a
combination of two or more such sources. No final decisions have been made
concerning the method Parent will employ to repay such indebtedness. Such
decisions when made will be based on Parent's review from time to time of the
advisability of particular actions, as well as on prevailing interest rates and
financial and other economic conditions.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY
In the ordinary course of Parent's long-term strategic review process,
Parent and the Railroad routinely review potential combinations with various
railroads. As part of this process, in the spring of 1994, the Railroad
commenced an internal preliminary review of a possible combination of Parent and
the Company.
On June 6, 1994, Mr. Drew Lewis, Chairman and Chief Executive Officer of
Parent, attempted to contact Mr. Robert D. Krebs, Chairman, President and Chief
Executive Officer of the Company, by telephone. On June 7, 1994, Mr. Krebs
returned Mr. Lewis' telephone call. During the course of the conversation, Mr.
Lewis discussed with Mr. Krebs the recent decision, as previously publicly
announced, of Mr. Richard K. Davidson, Chairman and Chief Executive Officer of
the Railroad, not to join BNI as a senior executive and his election as
President of Parent. In a humorous vein, Mr. Lewis suggested that Mr. Krebs
might be interested in the BNI position that Mr. Davidson had declined to
accept.
18
<PAGE> 19
On June 30, 1994, the Company and BNI announced that they had entered into
a definitive merger agreement (the "BNI/SFP Agreement") pursuant to which the
Company would be merged with and into BNI and each Share would be converted into
0.27 shares of BNI's common stock. As described below, the exchange ratio in the
BNI/SFP Agreement was subsequently increased to 0.34 shares of BNI common stock
for each Share.
In the BNI/SFP Agreement, the Company (referred to therein as "SFP") agreed
to the following provision (the "No Solicitation Provision"):
"SFP will not, and SFP will use its reasonable best efforts to ensure
that its officers, directors, employees or other agents of SFP do not,
directly or indirectly: initiate, solicit or encourage, or take any
action to facilitate the making of, any offer or proposal which
constitutes or is reasonably likely to lead to any Takeover Proposal of
SFP, or, in the event of an unsolicited Takeover Proposal of SFP, except
to the extent required by their fiduciary duties under applicable law if
so advised by outside counsel, engage in negotiations or provide any
confidential information or data to any Person relating to any such
Takeover Proposal. SFP shall notify BNI orally and in writing of any
such inquiries, offers or proposals (including, without limitation, the
terms and conditions of any such proposal and the identity of the person
making it), within 48 hours of the receipt thereof and shall give BNI
five days' advance notice of any agreement to be entered into with or
any information to be supplied to any Person making such inquiry, offer
or proposal. SFP shall immediately cease and cause to be terminated all
existing discussions and negotiations, if any, with any parties
conducted heretofore with respect to any Takeover Proposal of SFP. As
used in this Agreement, "Takeover Proposal" when used in connection with
any Person shall mean any tender or exchange offer, proposal for a
merger, consolidation or other business combination involving such
Person or any Subsidiary of such Person, or any proposal or offer to
acquire in any manner a substantial equity interest in, or a substantial
portion of the assets of such Person or any Subsidiary of such Person,
other than pursuant to the transactions contemplated by this Agreement."
According to the Santa Fe Joint Proxy Statement, consummation of the
proposed transaction between the Company and BNI is subject to various
conditions, including, but not limited to, the affirmative vote by the holders
of a majority of the outstanding shares of the common stock of BNI, the
affirmative vote of the holders of a majority of the outstanding Shares and the
approval by the ICC.
The foregoing description of the BNI/SFP Agreement is qualified in its
entirety by reference to the text of the BNI/SFP Agreement, a copy of which has
been filed by BNI as an exhibit to a Registration Statement on Form S-4 (the
"Form S-4"), including the Santa Fe Joint Proxy Statement, and may be obtained
in the manner described in Section 8 (except that copies may not be available at
regional offices of the Commission).
After announcing the execution of the BNI/SFP Agreement, Mr. Krebs called
Mr. Lewis. During their conversation, and in a press release issued by Parent on
June 30, 1994, Mr. Lewis stated that Parent was studying the proposed
transaction between the Company and BNI to determine its implications for the
railroad industry and for Parent. Thereafter, at the regular meeting of Parent's
Board of Directors (the "Board of Directors") on July 28, 1994, Management
reviewed with the Board of Directors an analysis of the potential impact of a
merger between the Company and BNI as well as various alternatives that could be
considered by Parent.
Thereafter, management of Parent and the Railroad, together with certain
outside advisors to Parent, undertook an extensive analysis of various possible
alternative transactions, including a possible combination with the Company.
On September 1, 1994, the Board of Directors held a telephonic special
meeting during which it discussed the status of several railroad mergers and
analyzed the financial and legal aspects of the various strategic options
available to Parent. Mr. Lewis requested that the Board of Directors appoint a
Special Committee to work with management during the process of evaluating
Parent's possible strategic options. The Board of Directors adopted resolutions
appointing a five-member Special Committee (the "Special Committee") to assist
management in its assessment of railroad strategies.
19
<PAGE> 20
On September 9, 1994, the Special Committee held its first meeting. The
Special Committee generally discussed its role in assisting management of Parent
in its assessment of various strategic alternatives, including a possible
combination with Blue, and reviewed such alternatives with management.
On September 19, 1994, the Special Committee held a telephonic meeting
during which management reviewed the terms of a possible negotiated business
combination with the Company and various alternative courses of action that had
been considered by management and Parent's advisors, including a determination
by Parent not to engage in any major transaction. Management and Parent's
advisors reviewed with the Special Committee the possible use of a voting trust
in connection with a possible business combination. At such meeting, the Special
Committee unanimously agreed to recommend to the full Board of Directors that
Parent proceed with seeking to explore a possible negotiated business
combination with the Company, but determined to defer any decision concerning a
recommendation as to Parent's use of a voting trust pending further analysis and
discussion.
On September 22, 1994, the Board of Directors held a telephonic special
meeting during which management reviewed with the Board of Directors the
recommendations of management and the Special Committee to consider proceeding
with a proposal for a negotiated business combination with the Company, and the
possible benefits of such a transaction to Parent and its shareholders as
previously considered by management, the Special Committee and Parent's
advisors. Management also advised the Board of Directors that the Special
Committee had discussed but not reached a determination with respect to the
possible use of a voting trust, and reviewed various issues relating to the use
of a voting trust. The Board determined that management and Parent's advisors
should continue their evaluation and analysis of possible business combination
transactions with the Company.
At a meeting on September 28, 1994, the Board of Directors and management
reviewed various alternative proposals for a possible business combination with
the Company. The Board concluded that it did not intend at such time to use a
voting trust in a business combination proposal although no final determination
was made.
On October 5, 1994, the Board of Directors determined at a telephonic
special meeting to proceed with a proposal to explore with the Company, in
accordance with the terms of the BNI/SFP Agreement, a possible negotiated
business combination. Later on October 5, Mr. Lewis called Mr. Krebs and
suggested that a meeting be arranged that day in order to discuss a possible
combination of the Company and Parent. Mr. Krebs told Mr. Lewis that the Company
had agreed to be acquired by BNI, that the ICC would not approve an acquisition
of the Company by Parent and, therefore, there was no reason for him to meet
with Mr. Lewis. Mr. Lewis indicated that although he would prefer to meet with
Mr. Krebs to discuss Parent's proposal to negotiate a business combination prior
to making any public announcement of Parent's proposal, Parent intended to
publicly announce its desire to negotiate such a business combination with the
Company even if Mr. Krebs would not agree to the meeting. Mr. Krebs agreed to
meet with Mr. Lewis. Mr. Lewis also called Mr. Gerald Grinstein, Chairman and
Chief Executive Officer of BNI, to request a meeting, but Mr. Grinstein declined
to meet with Mr. Lewis.
On October 5, 1994, Mr. Lewis and Mr. Davidson met with Mr. Krebs and
Robert A. Helman, of the law firm of Mayer, Brown & Platt, counsel for the
Company. Mr. Helman informed Mr. Lewis that he believed the terms of the BNI/SFP
Agreement prohibited discussions with Parent relating to a possible business
combination and that approval by the ICC of such a transaction was unlikely.
Because the No Solicitation Provision in the BNI/SFP Agreement expressly allowed
the Company, its officers, directors, employees or other agents to discuss
possible business combinations with parties other than BNI to the extent
required by their fiduciary duties under applicable law if so advised by outside
counsel, Mr. Lewis advised Mr. Krebs and Mr. Helman that he disagreed with their
position that discussions were prohibited with respect to the proposed terms of
Parent's proposal (the "Original Union Pacific Proposal") and other terms that
Parent might consider, including the possibility of a proposal which could
involve consideration valued at up to $20 per Share or the possible use of a
voting trust.
20
<PAGE> 21
At the end of the meeting, Mr. Lewis delivered the following letter to
Mr. Krebs describing the Original Union Pacific Proposal:
October 5, 1994
Mr. Robert D. Krebs
Chairman, President & CEO
Santa Fe Pacific Corporation
1700 E. Golf Road
Schaumburg, IL 60173
Dear Rob:
I would like to thank you for meeting with Dick and me earlier today
to discuss a possible combination of our two companies. We have long
admired Santa Fe and your excellent management and work force. As we
discussed, we at Union Pacific believe that combining the strengths of
Santa Fe and Union Pacific represents an extraordinary opportunity for our
two companies, our respective shareholders, customers and employees, and
the railroad industry.
I was disappointed by your unwillingness to consider our proposal. As
I mentioned, we view this transaction as a strategic imperative.
Accordingly, I am writing to submit the following proposal to combine our
companies. Because of the very significant benefits that it would provide
to your Company, your shareholders and other constituencies, we ask that
you and your Board of Directors give careful consideration to our proposal.
TERMS
We propose that Union Pacific acquire Santa Fe in a merger in which
Santa Fe shareholders would receive, for each of their shares, .344 of a
share of Union Pacific common stock, having a value of $18 per Santa Fe
share based on yesterday's closing price of Union Pacific stock.
This price represents a premium of 38% over yesterday's closing price
of Santa Fe common stock. Our proposed price also represents a premium of
33% over the current value of the Burlington Northern transaction, which
was endorsed by your financial advisors as fair to your shareholders.
In addition to receiving a substantial premium, your shareholders
would be able to participate in an exceptional opportunity for growth and
increased value through their ongoing interest in what we believe would be
the preeminent railroad company in the country.
Our proposed transaction would be tax-free to both our companies and
to your shareholders. This would allow your shareholders to defer paying
tax, or recognizing gain or loss on their shares, until they sell at a time
of their choice.
BENEFITS OF TRANSACTION
In addition to providing superior benefits for your shareholders, we
believe our transaction will provide greater benefits to the shipping
public and will do more to strengthen rail competition in the west than the
Burlington Northern transaction. A Union Pacific-Santa Fe combination will
produce service breakthroughs that a Burlington Northern-Santa Fe merger
cannot, including more new single-line service and greater savings and
efficiencies. To insure that our transaction will strengthen rail
competition in all affected markets, we are prepared to grant conditions to
Southern Pacific, Burlington Northern or other railroads, including access
to points that would otherwise change from two serving railroads to one,
rights to handle service-sensitive business moving between California,
Chicago and the Midwest, and access to the Kansas and Oklahoma grain
markets.
CONTINUITY OF MANAGEMENT
We have great respect for your management and employees and believe
they would make important contributions to our combined company. We
envision that certain members of the Santa Fe Board would
21
<PAGE> 22
be invited to serve on Union Pacific's Board. This participation would
facilitate the integration and growth of the two companies.
PROCESS
Our Board of Directors strongly supports the proposed transaction and
has authorized management to pursue this proposal with you. We are prepared
to immediately commence negotiation of a definitive merger agreement
containing mutually agreeable terms and conditions.
We have conducted an extensive analysis of Santa Fe based on publicly
available information. While our proposal is necessarily subject to
confirmation, through appropriate due diligence, that our understanding of
Santa Fe based on publicly available information is accurate, we expect
that such due diligence will confirm our view of Santa Fe and its
prospects. We recognize that you will need to conduct a due diligence
review of Union Pacific and its operations, and we are ready to facilitate
that process.
Our transaction, like the proposed Burlington Northern merger, is
contingent upon ICC approval. Although this is a significant matter for
either transaction, we believe that, working together, we can present
strong arguments to the Commission as to the benefits of our transaction to
customers and the industry.
Our proposal also would be subject to termination of your merger
agreement with Burlington Northern, in accordance with the terms of that
agreement, approval of a mutually satisfactory merger agreement by our
respective Boards of Directors, and approval of our respective
shareholders.
Along with our financial advisor, CS First Boston Corporation, and our
legal advisor, Skadden, Arps, Slate, Meagher & Flom, we look forward to
meeting with you and your advisors to discuss our proposal and to working
to implement this transaction. We have the opportunity to build the best
railroad in the country and to provide significant immediate and long-term
benefits for your shareholders.
I am hopeful your Board will conclude that your shareholders should
not be denied the opportunity to consider this offer. We at Union Pacific
are determined to take every appropriate action to pursue this transaction.
In view of the importance of this matter, time is of the essence and we
await your earliest possible response.
Please call me as soon as possible so we can get together to discuss
this matter in detail.
Sincerely,
/s/ Drew Lewis
22
<PAGE> 23
On October 6, 1994, Mr. Krebs delivered the following letter to Mr. Lewis:
October 6, 1994
Mr. Drew Lewis
Chairman and Chief Executive Officer
Union Pacific Corporation
Martin Tower
Eighth and Eaton Avenues
Bethlehem, Pennsylvania 18018
Dear Mr. Lewis:
The Board of Directors of Santa Fe Pacific Corporation ("SFP") has
authorized me to reject, on behalf of SFP, the proposal of Union Pacific
Corporation ("UP") dated October 5, 1994, to acquire SFP. You stated at our
meeting yesterday that UP might be willing to offer more -- $20 per share
-- and would consider using a voting trust for UP's proposed transaction.
These statements are inconsistent with UP's proposal and its press release.
If UP makes a proposal at a fair price and with an adequate provision
for a voting trust that would substantially eliminate the regulatory risk
for SFP shareholders, the Board would consider that proposal in light of
its fiduciary duties.
Sincerely,
/s/ Robert D. Krebs
On October 6, 1994, Parent commenced the Delaware Litigation. See "Certain
Legal Matters; Regulatory Approvals -- Certain Litigation."
On October 11, 1994, Mr. Lewis sent the following letter to Mr. Krebs:
October 11, 1994
Mr. Robert D. Krebs
Chairman, President and CEO
Santa Fe Pacific Corporation
1700 East Golf Road
Schaumburg, IL 60173
Dear Rob:
I am in receipt of your October 6 letter.
In light of your Board's fiduciary obligations, we were disappointed
by your failure to give careful consideration to our proposal or to meet
with us to discuss our transaction. We remain convinced that our proposal
is a superior alternative to your proposed transaction with Burlington
Northern, providing a premium price to your shareholders as well as
significant benefits for shippers and the rail industry.
We believe it is a disservice to your shareholders for you to publicly
speculate, inaccurately, as to the motivation for our proposal rather than
giving us an opportunity to respond to your concerns. We do not understand
how you, your Board and advisors could pass judgment on complex regulatory
matters only one day after receiving our proposal without considering our
analysis of ICC matters, including the unprecedented public benefits that
would result from the UP-Santa Fe transaction and the conditions we are
prepared to grant to other railroads to strengthen rail competition in the
West.
If you and your advisors agree to discuss our proposal in the exercise
of your fiduciary duties in accordance with the terms of your merger
agreement with Burlington Northern, we can present compelling reasons to
convince you that our proposal is superior and in the best interests of
your shareholders, and address your stated concerns regarding regulatory
approvals.
23
<PAGE> 24
As to your stated willingness to consider a "fair price," our current
proposed purchase price represents a significant premium over the value of
the Burlington Northern transaction, which your financial advisors have
already endorsed as fair to your shareholders. We would be prepared to
receive information from you that might justify a greater consideration.
I again call upon you and your Board to give careful consideration to
our proposal and to exercise your fiduciary obligations to meet with us and
our advisors at the earliest possible time. Your shareholders should not be
denied the opportunity to consider our proposal.
Sincerely,
/s/ Drew Lewis
cc: Board of Directors
Santa Fe Pacific Corporation
On October 11, 1994, Mr. Krebs sent the following letter to Mr. Lewis:
October 11, 1994
Mr. Drew Lewis
Chairman and Chief Executive Officer
Union Pacific Corporation
Martin Tower
Eighth and Eaton Avenues
Bethlehem, Pennsylvania 18018
Dear Mr. Lewis:
Your October 11, 1994 letter has been reviewed by the Santa Fe Pacific
board. The board has concluded that your October 11 letter really adds
nothing to your October 5 letter. However, the board has authorized me to
ask you to provide us promptly with Union Pacific's "analysis of ICC
matters," as referenced in your letter. Unless and until we receive
something to change the position set forth in my October 6, 1994 letter to
you, that position still stands.
Sincerely,
/s/ Robert D. Krebs
24
<PAGE> 25
On October 12, 1994, Mr. Lewis sent the following letter to Mr. Krebs:
October 12, 1994
Mr. Robert D. Krebs
Chairman, President and CEO
Santa Fe Pacific Corporation
1700 East Golf Road
Schaumburg, IL 60173
Dear Rob:
We are encouraged by your October 11 response indicating a willingness
to consider our analysis of regulatory matters relating to our proposed
transaction. We will provide materials and would welcome the opportunity,
in accordance with your existing merger agreement, to sit down with you and
your advisors to address your concerns.
We will be in contact with you shortly to arrange the delivery of
materials.
Sincerely,
/s/ Drew Lewis
cc: Board of Directors
Santa Fe Pacific Corporation
On October 12, 1994, BNI filed the Form S-4 with the Commission, including
the Santa Fe Joint Proxy Statement. The Santa Fe Joint Proxy Statement set
November 18, 1994 as the date for a special meeting of the stockholders of each
of the Company and BNI (in each case, the "Special Meeting") for purposes of
voting on the proposed merger with BNI.
On October 13, 1994, Parent announced its intention to solicit proxies from
the Company's stockholders entitled to vote at the Special Meeting for votes
against the proposed merger of the Company and BNI. Also on October 13, 1994,
Parent filed its preliminary Proxy Statement with the Commission.
25
<PAGE> 26
On October 17, 1994, Mr. Lewis sent Mr. Krebs and each of the members of
the Company's Board a copy of a memorandum, dated October 17, 1994 (the "ICC
Memorandum"), prepared by the Railroad's Vice President of Strategic Planning.
The ICC Memorandum described the factual case that Parent would expect to
present to the ICC in its application for approval of a merger with the Company.
Accompanying the ICC Memorandum was the following letter:
October 17, 1994
Mr. Robert D. Krebs
Chairman, President and CEO
Santa Fe Pacific Corporation
1700 East Golf Road
Schaumburg, IL 60173
Dear Rob:
Enclosed is a summary analysis of the case regarding our merger
proposal that we would expect to present to the Interstate Commerce
Commission. We suggest that you review this with your Board and your ICC
counsel.
We are confident that after a review you will see that we have a
strong case for ICC approval. If you have any questions or desire any
additional information, please feel free to contact me.
We look forward to meeting with you to discuss the analysis and our
proposal, in accordance with the terms of your merger agreement with
Burlington Northern Inc.
Sincerely,
/s/ Drew Lewis
cc: Board of Directors
Santa Fe Pacific Corporation
On October 24, 1994, Parent sent to Mr. Krebs and each of the members of
the Company's Board a set of reports from a five-member panel of experts
requested by Parent to review the ICC Memorandum and to express their views on
the prospects for success of Parent's ICC case.
On October 27, 1994, BNI filed with the Commission a Supplemental Joint
Proxy Statement/Prospectus (the "Supplemental Santa Fe Joint Proxy Statement"),
in which stockholders of the Company and BNI were informed that the Company and
BNI had entered into an amendment to the BNI/SFP Agreement, the terms of which,
among other things, modified the exchange ratio such that the merger
consideration would consist of 0.34 shares of BNI common stock for each share of
the Company's common stock. According to the Supplemental Santa Fe Joint Proxy
Statement, on October 26, 1994, the Board of Directors of BNI approved the
increased merger consideration and the Company and BNI entered into an amendment
to the BNI/SFP Agreement.
26
<PAGE> 27
On October 27, 1994, Mr. Krebs sent the following letter to Mr. Lewis:
October 27, 1994
Mr. Drew Lewis
Chairman and Chief Executive Officer
Union Pacific Corporation
Martin Tower
Eighth and Eaton Avenues
Bethlehem, Pennsylvania 18018
Dear Mr. Lewis:
The board of directors of Santa Fe Pacific Corporation (SFP or Santa
Fe) has received the memorandum you sent me on October 17, 1994, which
contained what you described as a "summary analysis of the case regarding
our merger proposal that we would expect to present to the Interstate
Commerce Commission." The board has also received the statements that Union
Pacific Corporation (UP) submitted on October 24, 1994, of experts retained
by UP to provid their views on the ICC issues (the UP panel statement).
After reviewing the foregoing materials, and receiving analysis and
advice from the Santa Fe management and Santa Fe's lawyers and other
experts, the board has concluded and asked me to advise you that it
continues to believe that the UP non-binding proposal dated October 5,
1994, as further described in UP's October 17, 1994 memorandum, is not
likely to be approved by the ICC.
The UP memorandum should be addressed first because it forms the basis
for the statements of the experts you have retained. The UP memorandum is
primarily devoted to a discussion of UP's perception of the benefits of a
merger with Santa Fe rather than the competitive problems such a proposed
merger would create. It is obvious that a merger of two strong western
railroads, including your dominant railroad, would result in benefits for
UP. However, we believe the UP memorandum overstates the benefits of a
UP/Santa Fe merger, superficially addresses the competitive issues the
transaction would raise, and significantly understates the benefits of our
proposed merger with Burlington Northern (BN).
The UP memorandum devotes only three of its fourteen pages to a
discussion of the crucial issue -- whether the ICC would approve a UP/Santa
Fe merger despite a substantial diminution in competition. In analyzing the
competitive implications of a UP/Santa Fe merger, one must start with the
fact -- which UP ignores -- that UP is today the dominant western railroad.
Large size and scope are not by themselves reasons to object to a
railroad merger. But UP does not propose just any railroad merger. It
proposes to merge with Santa Fe, which is its strongest competitor (and one
of only two competitors) on major transcontinental routes (including
Chicago-California and Kansas City-California) originating or terminating
in the nation's most populous state. The significant reduction of
competition on those routes is by itself a competitive problem of great --
and quite possibly dispositive -- magnitude. But there are many other
competitive problems as well.
There are, for example, major problems with respect to specific
commodities. Precise market share data by corridors are not readily
available, but the combined share of western railroad movements handled by
UP and Santa Fe in major categories would be substantial, probably more
than 70% in the important Midwest-Southern California domestic intermodal
category. On a combined basis, UP/Santa Fe would originate and terminate a
great majority of automotive industry movements in the West. Eliminating
competition between UP and Santa Fe would end a fierce rivalry. In 1990,
for example, UP succeeded in underbidding Santa Fe on a contract (valued in
the tens of millions of dollars) to carry all Ford traffic from Kansas City
to California. Ford and other automakers benefit from the lower rates and
improved service associated with such competition.
UP has identified certain conditions it "might" accept in an effort to
cure some of these competitive problems. As to the most severe competitive
problem -- reduced competition among railroads serving the routes between
California and the Upper Midwest and UP/Santa Fe's dominant position on
those routes -- the UP memorandum says only that UP "might accept" a grant
to Southern Pacific (SP), the
27
<PAGE> 28
other carrier that currently does compete in the California-Upper Midwest
corridor, of "trackage rights or other conditions that would significantly
strengthen SP's already-competitive California-Midwest routes." One must
doubt the value of conditions that would only benefit a carrier already
serving the routes in question. Such conditions are unlikely to be
sufficient to compensate for a very substantial diminution in competition
on one of the nation's most important railroad routes.
There is, moreover, no precedent for the extent of conditions that
would address the various competitive issues and level of concentration
that would arise in a UP/Santa Fe combination. Based on the lack of
precedent, we believe that the ICC would be unlikely to approve complex
conditions of the sort that would be necessary to solve all the competitive
problems in such a combination. The ICC is likely to be concerned about
whether such conditions could be implemented, whether they would
effectively solve the competitive problems, and whether the agency could
adequately supervise them. Such conditions also would be economically
costly to UP and Santa Fe, and could eliminate from the deal the value of
any benefits for UP's and Santa Fe's shareholders.
The service benefits and efficiencies described in the UP memorandum
are unlikely to be persuasive to the ICC because many of them are benefits
achievable only at the expense of a reduction in competition in
concentrated markets. Other claims of benefits are overstated; for example,
what UP describes as new single-line service is often, in reality, nothing
more than a better route between origins and destinations that UP already
serves.
UP also rests some of its claims of service improvements on an
apparent misunderstanding of Santa Fe's existing operations. It is unlikely
that substantial reductions in transit times could be realized on
Midwest-California Santa Fe service. For intermodal traffic, Santa Fe
already has frequent departures for the Chicago-Southern California
business, approximately every four hours -- the same frequency UP proposes.
Santa Fe also offers service between Chicago and Northern California
approximately every six hours. With respect to automotive traffic, Santa Fe
already operates solid unit trains to Southern California.
Although some of UP's other claims of new single-line service through
a UP/Santa Fe combination are true, the benefits achievable through those
new opportunities pale in significance compared to opportunities for new
transcontinental single-line service, which the BN/Santa Fe transaction
promises and the UP/Santa Fe proposal does not. The central United States
is thickly populated with railroads, and shippers already enjoy a wide
variety of choices, including single-line choices, for most north-south
routes (where most of UP's genuine new single-line service opportunities
would come). The western United States, by contrast, has relatively few
rail lines. California shippers -- and ports -- in particular have at most
three railroads to choose from, and would have only two at most if UP and
Santa Fe merged. The opportunity through a BN/Santa Fe combination to
provide new single-line service to and from the western United States, and
populous California in particular, is a genuine public benefit of huge
magnitude. Opportunities to provide new single-line service on north-south
routes in the Central United States are not.
UP observes that "this is not the first parallel merger to be
presented to or approved by the ICC." UP then presents a list of
purportedly parallel mergers that the ICC has approved. The list is
unconvincing. For example, UP's Katy merger was, as UP claims, largely
parallel. But the Katy was a relatively small carrier, and the precarious
financial position of the Katy played a role in the ICC's decision.
Wisconsin Central's 1992 acquisition of the Fox River Valley and Green Bay
and Western Railroads was largely parallel, but the acquired roads had
fewer than 500 aggregate route miles. The merger of the Norfolk & Western
and Southern to form Norfolk Southern was, according to the ICC, a
consolidation of railroads that met end-to-end, although there were some
parallel lines. The merger of the Chessie and Family Lines systems to form
CSX was, according to the ICC, basically an end-to-end transaction,
although it had some parallel aspects. In both these cases, UP's claim that
the ICC approved "largely parallel" mergers is unfounded.
The ICC did approve the largely parallel merger of the Great Northern
and the Northern Pacific 26 years ago, over Justice Department opposition.
That merger was comparable in important respects to the proposed UP/Santa
Fe combination: on certain long-haul corridors, the ICC permitted the two
28
<PAGE> 29
strongest of three competitors serving the corridors to merge, on condition
that they grant trackage rights to the third competitor. The unfortunate
consequences that resulted from the ICC's approval of that merger, however,
are hardly likely to lead today's Commission to look favorably on a similar
proposal. The third competitor was the Milwaukee Road, which never
succeeded in becoming a competitive force in the Northern Corridor, and
which ultimately went into bankruptcy and endured years of legal
proceedings before finally seeing the bulk of its assets sold to the Soo
Line.
The proposed UP/Santa Fe merger would be a combination of largely
parallel systems (a horizontal merger). Both the ICC and antitrust
authorities have been skeptical of any claims that horizontal mergers that
otherwise would reduce competition may be rescued by the types of
efficiency claims UP makes. The ICC as a policy matter has declined to use
its authority to create ameliorating conditions to cure anticompetitive
aspects of mergers. In the Santa Fe-Southern Pacific decision, for example,
the ICC said that it will not use its conditioning power to substantially
restructure a transaction beyond the scope proposed.
The UP panel statement did not include any new material information
and therefore it does not change our analysis. It is worth noting that,
while some of the authors of the UP panel statement stated that UP could
make a "credible" case for ICC approval of a UP-SFP merger, none of them,
despite their retention by UP, stated that such approval was likely. In
addition, a few comments on individual views expressed in the UP panel
statement are in order.
Mr. Kharasch's analysis is similar to ours in many respects. In
particular, he recognizes the "very considerable burden of proof" that
proponents of a parallel merger bear, notwithstanding the benefits of such
mergers, which arguably can be greater than the benefits of end-to-end
mergers. Former Commissioner Starrett also correctly observes that "the key
to the success of the UP's case at the ICC will be the ability to fashion"
satisfactory conditions. Furthermore, Mr. Kharasch concedes that it is a
"critical assumption" that UP will agree to conditions that preserve
competition in "all rail markets where there would otherwise be a
significant reduction in rail competition," and all of his favorable
conclusions turn on that assumption. As I have explained above, the UP
memorandum does not provide a satisfactory basis for making that
assumption.
Mr. Kharasch and former Commissioner Starrett do not address the key
point that conditions as extensive as the ones they assume would have a
considerable economic cost for UP and Santa Fe, an economic cost that makes
it impossible to determine what, if any, value the UP proposal would
provide to SFP shareholders. The Commission noted in the MP/UP case that
its general policy statement requires that conditions not frustrate the
ability of applicants to obtain the anticipated public benefits of
consolidation.
Mr. DePodesta seems to take the position, despite his use of the
phrase "favorable consideration," that no one can really know what the ICC
will do, with respect to either BN/Santa Fe or UP/Santa Fe. Mr. DePodesta's
approach -- that no one can even make an educated guess -- is not good
enough for our shareholders, especially when you propose to have Santa Fe
abandon an agreed-to merger with BN on the hope that the ICC might approve
a UP/Santa Fe merger, the terms of which are unknown. That is particularly
true because we believe a UP/Santa Fe merger application would be highly
contested and would be resolved on a schedule substantially longer than the
ICC schedule for BN/Santa Fe. The current BN/Santa Fe schedule calls for a
decision in the first quarter of 1996, whereas a UP/Santa Fe application
might well require the full thirty-one months allowed under the Interstate
Commerce Act. Because of this timing difference, which could be as long as
two years, SFP and its shareholders would be faced with a significantly
longer period of uncertainty while ICC approval was being sought.
Mr. McCormick's position that the United States Department of
Transportation (DOT) would not oppose a UP/Santa Fe transaction has little
if any probative weight. DOT supported the Santa Fe/Southern Pacific
proposal, yet the ICC rejected it. We have considered the likely
unfavorable reaction of the Justice Department to a UP/Santa Fe merger,
which is a far more probative consideration. Mr. Langley addresses only the
shipper benefits from a UP/Santa Fe merger. We have never denied that there
would be benefits. It is the competitive problems and the conditions by
which they would be solved that are crucial.
29
<PAGE> 30
In conclusion, the SFP board, having reviewed analyses of the UP
memorandum from management, SFP's outside ICC experts, and SFP's lawyers,
continues to believe that a UP/SFP merger is not likely to be approved by
the ICC on acceptable terms, that the risks to SFP of a lengthy and
unsuccessful UP/SFP merger application process would be too great, and that
the merger of SFP and BN is in the best interest of SFP and its
shareholders. Because ICC approval of the UP/SFP merger as described in the
UP memorandum is not likely, the SFP board continues to believe that the UP
proposal is illusory and nothing more than an effort by UP to block the
BN/SFP merger in order to avoid the creation of a strong competitor to UP.
Accordingly, the board has directed me to inform you that the board
has reaffirmed its position as set forth in my October 6, 1994 letter to
you. If UP makes a proposal at a fair price and with an adequate provision
for a voting trust that would substantially eliminate the regulatory risk
for SFP shareholders, the board would consider that proposal in light of
its fiduciary duties.
Sincerely,
/s/ Robert D. Krebs
On October 28, 1994, Parent filed the Parent Proxy Statement with the
Commission and announced its intention to mail proxy materials to the Company's
stockholders on or about October 28, 1994, in order to solicit proxies from
stockholders of the Company entitled to vote at the Special Meeting to vote
against the proposed merger of the Company and BNI.
At a meeting on October 28, 1994, Parent's Board of Directors reviewed
various alternative courses of action including increasing the consideration
that Parent was willing to pay in its proposal to acquire the Company and the
possible use of a voting trust. The Board of Directors determined not to change
its position concerning the use of a voting trust and unanimously approved a
revised proposal pursuant to which the Company's stockholders would receive for
each Share .407 of a share of Parent Common Stock, which then had a market value
of $20 per Share.
On October 30, 1994, Parent announced that Mr. Lewis requested and was
granted a short-term medical leave to enter an alcohol treatment program. It was
announced at such time that Mr. Lewis was expected to return to work in four to
six weeks.
On October 30, 1994, Mr. Davidson sent the following letter to Mr. Krebs:
October 30, 1994
Mr. Robert D. Krebs
Chairman, President & CEO
Santa Fe Pacific Corporation
1700 East Golf Road
Schaumburg, Illinois 60173
Dear Rob:
I am writing to submit the following revised proposal to negotiate a
combination of our companies. We ask that you and your Board of Directors,
consistent with your fiduciary obligations and in accordance with the terms
of your existing merger agreement with Burlington Northern, give careful
consideration to our proposal.
We propose to negotiate a tax-free merger in which your shareholders
would receive Union Pacific shares of common stock at a ratio of .407 of a
share for each Santa Fe share of common stock, having a value of $20 per
Santa Fe share based on the closing price of Union Pacific stock on October
28, 1994. We would also consider paying a portion of the consideration in
cash.
This price would represent a premium of 29.0 percent over the closing
price of Santa Fe common stock on October 28, 1994. Our proposed price also
represents a premium of 16.2 percent over the current
30
<PAGE> 31
value of the revised Burlington Northern transaction, which has been
endorsed by your financial advisors as fair to your stockholders.
We are prepared to begin immediate negotiation of a definitive merger
agreement containing mutually agreeable terms and conditions. Our proposal
would continue to be subject to the conditions previously described,
including termination of your merger agreement with Burlington Northern in
accordance with its terms, completion of due diligence, approval of a
mutually satisfactory merger agreement by our respective Boards of
Directors, ICC and other governmental approvals and approval of our
respective shareholders.
We are in receipt of your letter, dated October 27, 1994, concerning
our ICC case. We disagree with many of your statements and will be sending
you shortly a written response addressing those differences. We continue to
believe that you have not given fair consideration to the ICC issue. As we
have said previously, we think it would be far more constructive for your
Board and management to meet with us to discuss how we would propose to
deal with this issue.
Sincerely,
/s/ Dick Davidson
cc: Board of Directors
Santa Fe Pacific Corporation
On November 1, 1994, Mr. Davidson sent the following letter to Mr. Krebs:
November 1, 1994
Mr. Robert D. Krebs
Chairman, President and CEO
Santa Fe Pacific Corporation
1700 East Golf Road
Schaumburg, IL 60173
Dear Rob:
On October 17, we sent to you and the Santa Fe Board a memorandum
describing the case that UP would expect to present to the ICC in support
of a UP/Santa Fe merger, and on October 24, we forwarded a set of reports
from the five-member panel of experts that UP had asked to review the
October 17 memorandum and express their views on the prospects for success
of UP's ICC case. Your October 27 letter to Drew Lewis offers various
comments on the October 17 memorandum and the experts' reports. Your letter
reasserts your contention, first made promptly upon the submission of our
original offer on October 5, that a UP/Santa Fe merger "is not likely to be
approved by the ICC."
UP does not believe that your October 27 letter, any more than your
hasty statement in early October, reflects a fair or open-minded
consideration of the issues. UP's acquisition proposal, as revised on
October 30, offers significantly greater value to Santa Fe shareholders,
based on current market prices, than a BN transaction. We believe that UP
and Santa Fe, working together, can present a compelling case to the ICC
for approval of a merger of their railroads. If Santa Fe were genuinely
interested in evaluating the case that UP and Santa Fe can jointly make to
the ICC in support of a merger of their two railroads, it would, as we have
repeatedly requested, meet with UP, in accordance with the terms of its
merger agreement with BN, to analyze and discuss the issues in depth.
Rather than addressing each and every inaccuracy in your October 27
letter, we shall confine ourselves to some key points. We repeat our
request that Santa Fe's Board and management meet with UP and its advisors
to explore the many opportunities inherent in a merger of our railroads and
to negotiate an acquisition agreement that is in the best interest of Santa
Fe's shareholders and the shipping public.
31
<PAGE> 32
1. The detailed reports of UP's panel of experts support the conclusion
that a UP/Santa Fe merger can be approved by the ICC -- and the strained
efforts in your October 27 letter to find some different message in those
reports, or to dismiss them as "not good enough for our shareholders" or of
"little if any probative weight," are not credible. The five members of the
panel have never represented UP in any matter (save for some minor
consulting on shipper attitudes by Dr. Langley). Moreover, they are
anything but single-minded proponents of rail mergers: former ICC
Commissioner Sterrett voted against the SFSP merger proposal, and Mr.
Kharasch led the successful effort of the railroad opponents to defeat that
proposal. These five noted authorities -- and only these five individuals
-- were asked by UP to review the October 17 memorandum outlining the ICC
case UP intends to make, and to state their conclusions as to the strength
of that case, whatever those conclusions might be. Without exception, the
panelists reached distinctly favorable conclusions as to the case that UP
intends to present to the ICC.
2. While not "denying that there would be benefits" from a UP/Santa Fe
merger, you dismiss those public benefits as "unlikely to be persuasive to
the ICC" and unimportant to the ICC's determination of whether to approve
the transaction. But, as your lawyers surely know, under the governing law
and precedents, public benefits are one of the two vital elements, together
with any adverse effects on competition and essential services, that are
weighed in the ICC's overall public interest determination. The ICC's rail
merger policy statement and a long line of ICC rail merger decisions make
clear that significant public benefits, such as the dramatically improved
transportation quality at lower cost that would result from a UP/Santa Fe
merger, can outweigh even significant anticompetitive effects of a railroad
merger and mandate approval of the merger under the public interest
standard. Significant public benefits are all the more decisive when, as UP
is proposing, any genuine competitive concerns are alleviated through
conditions. Thus, it is plainly mistaken to dismiss, as you do, the very
significant service and efficiency benefits of a UP/Santa Fe merger.
3. The few specific criticisms you offer of the benefits we outlined are
wide of the mark. Your discussion of the extensive new single-line service
that would be offered by a UP/Santa Fe merger, for example, states that
"most" of that new single-line service would be on "north-south routes" in
the "central United States" and suggests that only a BN/Santa Fe merger
would produce "new transcontinental single-line service." This ignores the
number one item on the list in UP's October 17 memorandum of the
competitive single-line service benefits of a UP/Santa Fe merger -- service
across the Southern Corridor between California, Arizona and New Mexico, on
the one hand, and major markets such as New Orleans and the Gulf Coast
chemical producers, on the other hand. Your statement that Santa Fe
intermodal service already is equal to the service that would be provided
by a UP/Santa Fe combination is contradicted by the information submitted
to the ICC last month in the BN/Santa Fe merger application. The
application shows about three intermodal trains per day from Chicago to the
San Francisco Bay Area and about four from Chicago to Los Angeles. There is
no doubt that combining UP and Santa Fe services would permit more frequent
schedules in both corridors. There would also be significant improvements
in automobile handling through instituting new through unit auto trains.
4. You criticize the treatment of the competition issue in UP's October
17 memorandum as inadequate, but it is your letter, not our memorandum,
that fails to address the issue. UP has identified the two markets where we
believe that there are arguably genuine competitive concerns -- the market
for originations of grain in Kansas and Oklahoma, and the market for the
transportation of service-sensitive freight between California and the
Midwest. UP also stated that it will accept conditions to preserve and
enhance rail competition in these markets, and gave specific examples of
such conditions. Our memorandum also stated that UP would accept conditions
granting a second railroad competitive access to every one of the points
served by only UP and Santa Fe -- an offer that BN and Santa Fe have not
made. (Instead, BN and Santa Fe have agreed to terminate their merger
agreement if ICC conditions significantly affect the economic benefits of
the transaction. As you are no doubt aware, there are a substantial number
of points that would be reduced from two serving railroads to one in a
BN/Santa Fe merger, including Amarillo, TX; Lubbock, TX; Superior, NE; Fort
Madison, IA; Galesburg, IL; and Trinidad, CO.) Your only response is to
cite as a potential problem the transportation of service-sensitive
intermodal and automotive traffic in the California-Midwest corridor --
precisely one of the two markets that we identified -- and then to refer to
"many other competitive problems." We wonder what "other
32
<PAGE> 33
competitive problems" you see. Surely they do not arise from the fact that
UP and Santa Fe are parallel between Denver, Chicago, Kansas City,
Dallas/Fort Worth, Houston and Galveston, since BN and Santa Fe are
parallel between all of the same cities -- as well as in other corridors,
such as Denver-West Texas, where UP is not a competitor.
5. You also dismiss the fact that the ICC has approved many rail mergers
that involved significant parallelism, arguing that this precedent is too
small, that one too old, the other not sufficiently parallel, and so on.
But this will not wash. In an interview in Sunday's Chicago Tribune, you
say that Santa Fe recently had extensive merger talks with Southern
Pacific. That merger is not only parallel; unlike UP/Santa Fe, it reduces
major corridors from two railroads to one, and was rejected by the ICC in
1986. But you can only have had these talks with the belief that such a
parallel merger could secure ICC approval. Also, only last June, your
company bid on the Kansas City Southern Railway -- a proposed merger
between strong carriers that both have routes between Kansas City and
points in Texas and Louisiana. Notably, so did BN -- and a BN/KCS merger
would have been a merger between strong carriers with significant parallel
aspects. Evidently Santa Fe and BN have only very recently adopted the view
that parallel mergers cannot be approved by the ICC, and that the express
contrary provision in the ICC's formal rail merger policy statement has
somehow become inoperative.
6. Contrary to your suggestion, a UP/Santa Fe transaction with conditions
that would significantly strengthen SP's California-Midwest routes would
not be at all analogous to a Great Northern/Northern Pacific transaction
with conditions in favor of the Milwaukee Road. SP is a clearly viable
carrier in the midst of a major financial turnaround, as you yourself
recognized in an October 28 interview on the Dow Jones Investor Network;
Milwaukee was in financial distress at the time of the Northern Lines
merger. Moreover, at a time when carload business was the mainstay of the
railroads, the Milwaukee had limited industry access on its Pacific
Extension, whereas SP has the most extensive industry access in California
and is Santa Fe's strongest competitor in that state.
7. You give no weight to UP's proposal to agree up front to the
conditions necessary to address any legitimate competitive concerns -- a
proposal that the experts we consulted considered critical in
distinguishing our approach from that of Santa Fe and SP in the failed SFSP
application. Apparently you disregard this critical factor because of your
belief that the "ICC as a policy matter has declined to use its authority
to create ameliorating conditions to cure anticompetitive aspects of
mergers." But the Commission's policy statement is directly to the
contrary, and one need only cite the examples of UP/MP/WP, in which some
1,400 miles of trackage rights were granted to DRGW, SP and MKT to
ameliorate competitive problems, and UP/MKT, in which extensive conditions
in favor of SP and KCS were approved to ameliorate competitive problems, to
demonstrate that the Commission takes its policy seriously.
8. Finally, you label UP's acquisition proposal "non-binding," as if this
rules it out. Our proposal can become binding very quickly, once Santa Fe
stops seeking to justify its disregard of its stockholders' best interests
by hiding behind untenable arguments about the ICC prospects of a UP/Santa
Fe merger and sits down with us to talk seriously.
Both the service and competition issues relating to a UP/Santa Fe
merger are best addressed by detailed, cooperative discussions between our
companies, rather than by public exchanges of letters. We continue to hope
that Santa Fe will reconsider its refusal to discuss these matters.
Sincerely,
/s/ Dick Davidson
cc: Board of Directors
Santa Fe Pacific Corporation
33
<PAGE> 34
On November 2, 1994, Mr. Krebs sent the following letter to Mr. Davidson:
November 2, 1994
Mr. Richard Davidson
President
Union Pacific Corporation
Martin Tower
Eighth and Eaton Avenues
Bethlehem, Pennsylvania 18018
Dear Mr. Davidson:
I am writing in response to your letters to me dated October 30 and
November 1, 1994 in which you presented an amended proposal of Union
Pacific Corp. ("UP") to acquire Santa Fe Pacific Corp. ("SFP") and
discussed issues relating to whether the Interstate Commerce Commission
(the "ICC") would approve a UP-SFP merger.
The SFP Board has instructed me to tell you that it has rejected UP's
amended proposal, as further described in your November 1 letter and in
earlier materials relating to the ICC issues that UP sent us (the "UP
Amended Proposal"). The Board will continue to recommend to SFP's
shareholders that they approve the merger between SFP and Burlington
Northern Inc. ("BN") called for in our present agreement with BN. The Board
and its advisors believe that a BN-SFP merger will be highly beneficial to
SFP's shareholders as well as the public and that the ICC is likely to
approve the BN-SFP merger.
By contrast, the Board and its advisors believe it is unlikely that
the UP Amended Proposal would receive ICC approval. Whatever the exchange
ratio provided for in the UP proposal, it would be of no benefit to SFP's
shareholders if it would not receive the required regulatory approval. Your
November 1 letter does not change our analysis.
The Board is not willing to recommend abandoning a highly advantageous
transaction with BN in favor of a proposed transaction that not even UP or
its retained advisors can say is likely to receive ICC approval.
Under these circumstances, I must decline your invitation to have a
meeting to discuss your proposal. Such a meeting would cause SFP to run an
unacceptable risk of breaching its agreement with BN.
As I have said twice before in letters to Drew Lewis, if UP makes a
proposal at a fair price and with an adequate provision for a voting trust
that would substantially eliminate the regulatory risk for SFP
shareholders, the Board would consider that proposal in light of its
fiduciary duties.
Sincerely,
/s/ Robert D. Krebs
Robert D. Krebs
Chairman, President and
Chief Executive Officer
On November 5, 1994, the Board met to consider further the various
alternatives available to Parent in connection with its proposal to acquire the
Company, including the possible use of a voting trust for a portion or all of
the Shares to be acquired, the commencement of a tender offer for a portion of
the Shares and the continuation of Parent's existing proposal to acquire the
Company. No decision was reached at the meeting. At a telephonic Board meeting
held on November 8, 1994, the Board of Directors approved the use of a voting
trust to acquire the entire equity interest in the Company and authorized the
Offer and the commencement of negotiations for the Proposed Merger.
34
<PAGE> 35
On November 8, 1994, Mr. Davidson delivered the following letter to
Mr. Krebs:
November 8, 1994
Mr. Robert D. Krebs
Chairman, President and CEO
Santa Fe Pacific Corporation
1700 East Golf Road
Schaumburg, IL 60173
Dear Rob:
You have repeatedly advised Union Pacific Corporation that if it
"make[s] a proposal at a fair price and with an adequate provision for a
voting trust that would substantially eliminate the regulatory risk for SFP
shareholders," your Board "would consider that proposal in light of its
fiduciary duties." We hereby submit just such a proposal. We insist that
you and your Board of Directors, consistent with your fiduciary obligations
and in accordance with the terms of your existing merger agreement with
Burlington Northern Inc., give careful consideration to this proposal. In
light of the November 18 date of your shareholders' meeting to consider the
BN merger, time is of the essence.
Using a voting trust, we propose acquiring all shares of Santa Fe
Pacific Corporation's common stock in a two-step transaction. First, we
would purchase approximately 57% of the shares outstanding on a fully
diluted basis in a cash tender offer for $17.50 per share. We would then
acquire the remaining SFP shares in a merger in which your shareholders
would receive, for each SFP share, a fraction of a UP common share having a
value of $17.50, based on the closing price of UP common stock on November
8, 1994. The stock portion of the consideration represents a ratio of .354
of a UP share for each SFP share.
Your shareholders would effectively receive approximately $10.00 per
share in cash and $7.50 per share in UP stock, assuming that all SFP shares
are tendered in the offer. Both the proposed cash and stock portions of the
consideration would be taxable to SFP shareholders.
The value of our proposed transaction represents a premium of 17.6%
over the closing price of SFP common stock on November 8, 1994. Based on
today's closing prices, the price would also be superior to the value of
the BN transaction that has been endorsed by your financial advisors as
fair to your shareholders. As discussed below, our price represents a
premium to that of the BN transaction, even without factoring in the
uncertainty of Interstate Commerce Commission ("ICC") approval of the BN
transaction and the delay in payment of the purchase price under that
proposal.
Our proposed acquisition, unlike the BN transaction, would not be
contingent upon receipt of ICC approval for the acquisition. At the time we
consummate the tender offer and the merger, we would place the shares of
SFP common stock purchased by us into a voting trust that would be
independent of UP.
Our proposed structure would enable your shareholders to receive
immediate payment of the entire purchase price in the tender offer and
merger following satisfaction of the conditions to those transactions,
without your shareholders bearing any risk relating to ICC approval of our
combination with SFP. By contrast, the proposed BN transaction provides for
a delay of up to several years in payment of any of the purchase price to
SFP shareholders and requires your shareholders to bear the entire ICC
risk.
When your shareholders discount BN's purchase price for the delay in
payment and the ICC risk of non-consummation of the BN transaction, the
premium represented by our proposal is even greater.
We will be commencing our tender offer shortly. We also will be
delivering to you promptly a proposed merger agreement modeled on your
agreement with BN. UP is prepared, in accordance with the terms of your
existing merger agreement with BN, to commence immediate negotiation of our
proposed merger agreement.
Our tender offer will be subject, among other things, to termination
of your merger agreement with BN in accordance with the terms of such
agreement, negotiation of a mutually satisfactory merger agreement with
SFP, the shareholders of SFP not having approved the merger agreement with
BN, at
35
<PAGE> 36
least a majority of the SFP shares being validly tendered and not withdrawn
prior to expiration of the offer, and the issuance of a favorable ICC staff
opinion regarding the terms of our proposed voting trust. On this separate
ICC matter of approval of the voting trust agreement, we are confident that
a favorable ICC staff opinion will be forthcoming.
The proposed merger would also be subject, among other things, to the
approval of SFP shareholders. Our proposal is not subject to a due
diligence, financing condition or approval of UP's shareholders.
Our willingness to pay your shareholders prior to ICC review and
approval of the acquisition reflects our belief that we will be able to
obtain ICC approval and our willingness to negotiate acceptable conditions
necessary for such approval. We remain ready to discuss with you your
concerns relating to ICC approval of the combination of our two companies.
Please be advised that if your Board would prefer to discuss our
previous proposal to negotiate a tax-free merger, without the use of a
voting trust, in which SFP shareholders would receive UP shares having a
value of $20 per SFP share based on market prices at the time of such
proposal, we remain willing to proceed on that basis. The choice is up to
your Board.
Sincerely,
/s/ Dick Davidson
Dick Davidson
President,
Union Pacific Corporation
Chairman and CEO,
Union Pacific Railroad Company
cc: Board of Directors
Santa Fe Pacific Corporation
On November 8, 1994, Parent announced its acquisition proposal described in
the above letter, including its intention to commence the Offer. Parent
commenced the Offer on November 9, 1994.
In addition to advising Santa Fe regarding Parent's ICC analysis in the
manner described above, from time to time over the last two months Parent has
held discussions with various shippers, customers, governmental agencies and
certain rail carriers with respect to the case that Parent would expect to make
for ICC approval of a combination with the Company in order to gain support for
its application for such approval. In such discussions, Parent described the
types of concessions it might be willing to grant to rail carriers in connection
with obtaining ICC approval of its proposed combination with the Company.
Assuming the Company is free to do so without violating the terms of the
BNI/SFP Agreement, Parent intends to continue to seek to negotiate with the
Company with respect to the acquisition of the Company by Parent, whether
pursuant to the Offer and Proposed Merger or otherwise. If such negotiations
result in a definitive merger agreement between the Parent and the Company, the
consideration to be received by holders of Shares could include or consist of
consideration other than cash. Accordingly, such negotiations could result in,
among other things, amendment or termination of the Offer (see Section 14) and
submission of a different acquisition proposal to the Company's stockholders for
their approval.
11. PURPOSE OF THE OFFER AND THE PROPOSED MERGER.
General. The purpose of the Offer is to acquire a majority of the Shares
as the first step in a negotiated acquisition of the entire equity interest in
the Company. The purpose of the Proposed Merger is to acquire all Shares not
beneficially owned by the Purchaser following consummation of the Offer.
The Purchaser is seeking to enter into the Proposed Merger with the Company
as promptly as practicable following consummation of the Offer. Under the
Proposed Merger Agreement, at the effective time of the Proposed Merger, each
Share that is outstanding prior to the effective time (other than Shares held in
the treasury of the Company or owned by Parent, the Purchaser or any direct or
indirect wholly-owned subsidiary of Parent) would be converted into 0.354 shares
of Parent Common Stock.
36
<PAGE> 37
The Proposed Merger Agreement is expected to provide that, upon deposit of
the Shares purchased in the Offer into the Voting Trust and from time to time
thereafter, the Trustee of the Voting Trust would be entitled to designate up to
such number of directors, rounded up to the next whole number, on the Company's
Board as will give the Trustee representation on the Company's Board equal to
the product of the total number of directors on the Company's Board multiplied
by the percentage that the aggregate number of Shares then owned by the Voting
Trust bears to the total number of Shares then outstanding. In the Proposed
Merger Agreement, it is expected that the Company would agree to use its best
efforts to cause the Trustee's designees to be elected as directors of the
Company, including increasing the size of the Company's Board or securing the
resignations of incumbent directors or both.
The Proposed Merger Agreement is expected to provide enhanced incentives
for executives of the Company and Rail during the period in which the Voting
Trust is in effect.
Consummation of the Proposed Merger will require approval by the Company's
Board and the affirmative vote of the holders of a majority of the outstanding
Shares. The Voting Trust Agreement is expected to provide, among other things,
that the Trustee will vote all Shares acquired by it in favor of the Proposed
Merger. If the Purchaser purchases Shares pursuant to the Offer and the Minimum
Condition is satisfied, the Trustee would have a sufficient number of Shares to
approve the Proposed Merger without the affirmative vote of any other holder of
Shares and to elect directors as described below. Although the Purchaser would
seek consummation of the Proposed Merger as soon as practicable following the
purchase of Shares pursuant to the Offer, the exact timing and details of the
Proposed Merger would depend on a variety of factors and legal requirements,
including, among other things, whether the conditions to the Offer have been
satisfied or waived.
The Offer is conditioned upon, among other things, the Company, Parent and
the Purchaser entering into the Proposed Merger Agreement. Although Parent has
sought to enter into negotiations with the Company with respect to the Proposed
Merger Agreement and continues to pursue such negotiations, there can be no
assurance that such negotiations will occur or, if such negotiations occur, as
to the outcome thereof. In the event Parent is unable to negotiate the Proposed
Merger Agreement with the Company, the Purchaser will terminate the Offer. The
Purchaser is currently reviewing its options with respect to the Offer and may
consider, among other things, changes to the material terms of the Offer. The
Purchaser reserves the right to amend the Offer (including amending the number
of Shares to be purchased, the purchase price and the proposed second-step
merger consideration) if it enters into the Proposed Merger Agreement or to
negotiate a merger agreement with the Company not involving a tender offer
pursuant to which the Purchaser would terminate the Offer and the Shares would,
upon consummation of such merger, be converted into cash, Parent Common Stock
and/or other securities in such amounts as are negotiated by Parent and the
Company.
THIS OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES OR CONSENTS OF
STOCKHOLDERS OF THE COMPANY. PARENT IS CURRENTLY SOLICITING PROXIES IN
OPPOSITION TO THE BNI/SFP AGREEMENT. SUCH SOLICITATION IS BEING MADE ONLY
PURSUANT TO SEPARATE PROXY MATERIALS IN COMPLIANCE WITH THE REQUIREMENTS OF
SECTION 14 OF THE EXCHANGE ACT AND THE RULES AND REGULATIONS THEREUNDER. IN
ADDITION, THIS OFFER IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF OFFERS TO
BUY ANY SECURITIES WHICH MAY BE ISSUED IN ANY MERGER OR SIMILAR BUSINESS
COMBINATION INVOLVING THE PURCHASER, PARENT OR THE COMPANY. THE ISSUANCE OF SUCH
SECURITIES WOULD HAVE TO BE REGISTERED UNDER THE SECURITIES ACT AND SUCH
SECURITIES WOULD BE OFFERED ONLY BY MEANS OF A PROSPECTUS COMPLYING WITH THE
REQUIREMENTS OF THE SECURITIES ACT.
Appraisal Rights and Other Matters. No appraisal rights are available in
connection with the Offer and the Proposed Merger. The Commission has adopted
Rule 13e-3 under the Exchange Act which is applicable to certain "going private"
transactions and which may under certain circumstances be applicable to the
Proposed Merger. However, Rule 13e-3 would be inapplicable if (i) the Shares are
deregistered under the Exchange Act prior to the Proposed Merger or other
business combination or (ii) the Proposed Merger or other business combination
is consummated within one year after the purchase of the Shares pursuant to the
37
<PAGE> 38
Offer and the amount paid per Share in the Proposed Merger or other business
combination is at least equal to the amount paid per Share in the Offer. If
applicable, Rule 13e-3 requires, among other things, that certain financial
information concerning the fairness of the proposed transaction and the
consideration offered to minority stockholders in such transaction be filed with
the Commission and disclosed to stockholders prior to consummation of the
transaction.
Plans for the Company. In connection with the Offer, Parent and the
Purchaser have reviewed, and will continue to review, on the basis of publicly
available information, various possible business strategies that they might
consider in the event that the Purchaser acquires control of the Company,
whether pursuant to the Proposed Merger Agreement or otherwise. In addition, if
and to the extent that the Purchaser acquires control of the Company or, subject
to applicable ICC rules and regulations, otherwise obtains access to the books
and records of the Company, Parent and the Purchaser intend to conduct a
detailed review of the Company and its assets, corporate structure, dividend
policy, capitalization, operations, properties, policies, management and
personnel and consider and determine what, if any, changes would be desirable in
light of the circumstances which then exist. Such strategies could include,
among other things, changes in the Company's business, corporate structure,
Restated Certificate of Incorporation, Bylaws, capitalization, management or
dividend policy.
Except as indicated in this Offer to Purchase, neither Parent nor Purchaser
has any present plans or proposals which relate to or would result in an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation, involving the Company or any of its subsidiaries, a sale or
transfer of a material amount of assets of the Company or any of its
subsidiaries or any material change in the Company's capitalization or dividend
policy or any other material changes in the Company's corporate structure or
business, or the composition of the Company's Board or management.
12. DIVIDENDS AND DISTRIBUTIONS. If, on or after the date of this Offer to
Purchase, the Company should split, combine or otherwise change the Shares or
its capitalization, or shall disclose that it has taken any such action, then,
subject to the provisions of Section 14, the Purchaser may, in its sole
judgment, make such adjustments as it deems appropriate to reflect such split,
combination or other change in the purchase price and the other terms of the
Offer (including, without limitation, the number and type of securities offered
to be purchased, the amounts payable therefor and the fees payable hereunder).
If, on or after the date of this Offer to Purchase, the Company should
declare or pay any cash or stock dividend or other distribution on or issue any
rights with respect to the Shares, payable or distributable to stockholders of
record on a date before the transfer to the name of the Purchaser or its nominee
or transferee on the Company's stock transfer records of the Shares accepted for
payment pursuant to the Offer, then, subject to the provisions of Section 14,
(i) the purchase price per Share payable by the Purchaser pursuant to the Offer
will be reduced by the amount of any such cash dividend or cash distribution and
(ii) the whole of any such non-cash dividend, distribution or right will be
received and held by the tendering stockholder for the account of the Purchaser
and shall be required to be promptly remitted and transferred by each tendering
stockholder to the Depositary for the account of the Purchaser, accompanied by
appropriate documentation of transfer. Pending such remittance, the Purchaser
will be entitled to all rights and privileges as owner of any such non-cash
dividend, distribution or right and may withhold the entire purchase price or
deduct from the purchase price the amount or value thereof, as determined by the
Purchaser in its sole discretion.
13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; EXCHANGE LISTING AND
EXCHANGE ACT REGISTRATION.
The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and could reduce the number of
holders of Shares, which could adversely affect the liquidity and market value
of the remaining Shares held by the public.
According to the NYSE's published guidelines, the NYSE would consider
delisting the Shares if, among other things, the number of record holders of at
least 100 Shares should fall below 1,200, the number of publicly held Shares
(exclusive of holdings of officers, directors and their families and other
concentrated holdings of 10% or more ("NYSE Excluded Holdings")) should fall
below 600,000 or the aggregate market value of publicly held Shares (exclusive
of NYSE Excluded Holdings) should fall below $5,000,000. If, as a result of the
purchase of Shares pursuant to the Offer or otherwise, the Shares no longer meet
the
38
<PAGE> 39
requirements of the NYSE for continued listing and the listing of the Shares is
discontinued, the market for the Shares could be adversely affected.
If the NYSE were to delist the Shares, it is possible that the Shares would
continue to trade on another securities exchange or in the over-the-counter
market and that price or other quotations would be reported by such exchange or
through the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") or other sources. The extent of the public market therefor and
the availability of such quotations would depend, however, upon such factors as
the number of stockholders and/or the aggregate market value of such securities
remaining at such time, the interest in maintaining a market in the Shares on
the part of securities firms, the possible termination of registration under the
Exchange Act as described below, and other factors. The Purchaser cannot predict
whether the reduction in the number of Shares that might otherwise trade
publicly would have an adverse or beneficial effect on the market price for or
marketability of the Shares or whether it would cause future market prices to be
greater or less than the Offer Price.
The Shares are currently "margin securities", as such term is defined under
the rules of the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"), which has the effect, among other things, of allowing brokers
to extend credit on the collateral of such securities. Depending upon factors
similar to those described above regarding listing and market quotations,
following the Offer it is possible that the Shares might no longer constitute
"margin securities" for purposes of the margin regulations of the Federal
Reserve Board, in which event such Shares could no longer be used as collateral
for loans made by brokers.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application of the Company to the Commission
if the Shares are not listed on a national securities exchange and there are
fewer than 300 record holders of the Shares. The termination of registration of
the Shares under the Exchange Act would substantially reduce the information
required to be furnished by the Company to holders of Shares and to the
Commission and would make certain provisions of the Exchange Act, such as the
short-swing profit recovery provisions of Section 16(b), the requirement of
furnishing a proxy statement in connection with stockholders' meetings pursuant
to Section 14(a), and the requirements of Rule 13e-3 under the Exchange Act with
respect to "going private" transactions, no longer applicable to the Shares. In
addition, "affiliates" of the Company and persons holding "restricted
securities" of the Company may be deprived of the ability to dispose of such
securities pursuant to Rule 144 promulgated under the Securities Act.
If registration of the Shares under the Exchange Act were terminated, the
Shares would no longer be "margin securities" or be eligible for NASDAQ
reporting.
14. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provisions
of the Offer, and in addition to (and not in limitation of) the Purchaser's
rights to extend and amend the Offer at any time in its sole discretion, the
Purchaser shall not be required to accept for payment or, subject to any
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act (relating to the Purchaser's obligation to pay for or
return tendered Shares promptly after termination or withdrawal of the Offer),
pay for, and may delay the acceptance for payment of or, subject to the
restriction referred to above, the payment for, any tendered Shares, and may
terminate the Offer, if, in the sole judgment of the Purchaser (i) at or prior
to the Expiration Date any one or more of the Minimum Condition, the Merger
Agreement Condition, the Stockholder Vote Condition or the Voting Trust Approval
Condition has not been satisfied, (ii) the Purchaser is not satisfied that
Section 203 of the DGCL has been complied with or is invalid or otherwise
inapplicable to the Offer and the Proposed Merger, (iii) the Purchaser is not
satisfied that the BNI/SFP Agreement has been terminated in accordance with its
terms or (iv) at any time on or after November 9, 1994 and before the time of
payment for any such Shares (whether or not any Shares have theretofore been
accepted for payment pursuant to the Offer) any of the following events shall
occur or shall be determined by the Purchaser to have occurred:
(a) there shall be threatened, instituted or pending any action or
proceeding by any government or governmental authority or agency, domestic
or foreign, or by any other person, domestic or foreign, before any court
or governmental authority or agency, domestic or foreign, (i)(A)
challenging or seeking to make illegal, to delay or otherwise directly or
indirectly to restrain or prohibit the making of the Offer, the acceptance
for payment of or payment for some of or all the Shares by the Purchaser or
Parent or any
39
<PAGE> 40
other affiliates of Parent or the consummation by the Purchaser or Parent
or any other affiliates of Parent of the Proposed Merger or other business
combination with the Company, (B) seeking to obtain damages or (C)
otherwise directly or indirectly relating to the transactions contemplated
by the Offer or any such merger or business combination, (ii) seeking to
prohibit the ownership or operation by Parent, the Purchaser or any other
affiliates of Parent of all or any portion of the business or assets of the
Company and its subsidiaries or of the Purchaser, or to compel Parent, the
Purchaser or any other affiliates of Parent to dispose of or hold
separately all or any portion of the business or assets of the Purchaser or
the Company or any of its subsidiaries or seeking to impose any limitation
on the ability of Parent, the Purchaser or any other affiliates of Parent
to conduct their business or own such assets, (iii) seeking to impose or
confirm limitations on the ability of Parent, the Purchaser or any other
affiliates of Parent effectively to exercise full rights of ownership of
the Shares, including, without limitation, the right to vote any Shares
acquired by any such person on all matters properly presented to the
Company's stockholders, (iv) seeking to require divestiture by Parent, the
Purchaser or any other affiliates of Parent of any Shares, (v) which
otherwise, in the sole judgment of the Purchaser, might materially
adversely affect Parent, the Purchaser or any other affiliates of Parent or
the value of the Shares, or (vi) in the sole judgment of the Purchaser,
materially adversely affecting the business, properties, assets,
liabilities, capitalization, stockholders' equity, condition (financial or
other), operations, licenses or franchises, results of operations or
prospects of the Company or any of its subsidiaries, joint ventures or
partnerships; provided that the condition specified in this paragraph (a)
shall not be deemed to exist by reason of any court proceeding pending on
the date hereof and known to the Purchaser, unless in the sole judgment of
the Purchaser there is any adverse development in any such proceeding after
the date hereof, or before the date hereof if not known to the Purchaser on
the date hereof, which might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (vi) above;
(b) there shall be any action taken, or any statute, rule, regulation,
interpretation, judgment, order or injunction proposed, enacted, enforced,
promulgated, amended, issued or deemed applicable (i) to the Purchaser,
Parent or any affiliate of Parent or (ii) to the Offer or the Proposed
Merger or other business combination by the Purchaser or Parent or any
affiliate of Parent with the Company, by any court, government or
governmental, administrative or regulatory authority or agency, domestic or
foreign, which, in the sole judgment of the Purchaser, might, directly or
indirectly, result in any of the consequences referred to in clauses (i)
through (vi) of paragraph (a) above;
(c) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the business,
properties, assets, liabilities, capitalization, stockholders' equity,
condition (financial or other), operations, licenses, franchises, permits,
permit applications, results of operations or prospects of the Company or
any of its subsidiaries which, in the sole judgment of the Purchaser, is or
may be materially adverse, or the Purchaser shall have become aware of any
fact which, in the sole judgment of the Purchaser, has or may have material
adverse significance with respect to either the value of the Company or any
of its subsidiaries or the value of the Shares to the Purchaser;
(d) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on any national securities
exchange or in the over-the-counter market, any decline in either the Dow
Jones Industrial Average or the Standard & Poor's Index of 500 Industrial
Companies by an amount in excess of 15% measured from the close of business
on November 9, 1994 or any material adverse change in prices generally of
shares on the NYSE, (ii) a declaration of a banking moratorium or any
suspension of payments in respect of banks by federal or state authorities
in the United States, (iii) any limitation (whether or not mandatory) by
any governmental authority or agency on, or other event which, in the sole
judgment of the Purchaser, might affect the extension of credit by banks or
other lending institutions, (iv) a commencement of a war, armed hostilities
or other national or international calamity directly or indirectly
involving the United States, (v) a material change in United States or any
other currency exchange rates or a suspension of, or limitation on, the
markets therefor, or (vi) in the case of any of the foregoing existing at
the time of the commencement of the Offer, a material acceleration or
worsening thereof;
40
<PAGE> 41
(e) the Company or any of its subsidiaries, joint ventures or
partnerships or other affiliates shall have (i) split, combined or
otherwise changed, or authorized or proposed the split, combination or
other change of the Shares or its capitalization, (ii) acquired or
otherwise caused a reduction in the number of, or authorized or proposed
the acquisition or other reduction in the number of, any presently
outstanding Shares or other securities or other equity interests, (iii)
issued, distributed or sold, or authorized or proposed the issuance,
distribution or sale of, additional Shares, other than Shares issued or
sold upon the exercise or conversion (in accordance with the present terms
thereof) of employee stock options outstanding on the date of this Offer to
Purchase, shares of any other class of capital stock or other equity
interests, other voting securities, debt securities or any securities
convertible into, or rights, warrants or options, conditional or otherwise,
to acquire, any of the foregoing, (iv) declared, paid or proposed to
declare or pay any cash dividend or other distribution on any shares of
capital stock of the Company (other than quarterly dividends not exceeding
amounts previously declared by the Company), (v) altered or proposed to
alter any material term of any outstanding security or material contract,
permit or license, (vi) incurred any debt otherwise than in the ordinary
course of business or any debt containing, in the sole judgment of the
Purchaser, burdensome covenants or security provisions, (vii) authorized,
recommended, proposed or entered into an agreement with respect to any
merger, consolidation, recapitalization, liquidation, dissolution, business
combination, acquisition of assets, disposition of assets, release or
relinquishment of any material contractual or other right of the Company or
any its subsidiaries or any comparable event not in the ordinary course of
business, (viii) authorized, recommended, proposed or entered into, or
announced its intention to authorize, recommend, propose or enter into, any
agreement or arrangement with any person or group that in the Purchaser's
sole opinion could adversely affect either the value of the Company or any
of its subsidiaries, joint ventures or partnerships or the value of the
Shares to the Purchaser, (ix) entered into any employment, change in
control, severance, executive compensation or similar agreement,
arrangement or plan with or for one or more of its employees, consultants
or directors, or entered into or amended, or made grants or awards pursuant
to, any agreements, arrangements or plans so as to provide for increased
benefits to one or more employees, consultants or directors, or taken any
action to fund, secure or accelerate the funding of compensation or
benefits provided for one or more employees, consultants or directors,
whether or not as a result of or in connection with the transactions
contemplated by the Offer, (x) except as may be required by law, taken any
action to terminate or amend any employee benefit plan (as defined in
Section 3(c) of the Employee Retirement Income Security Act of 1974, as
amended) of the Company or any of its subsidiaries, or the Purchaser shall
have become aware of any such action which was not previously disclosed in
publicly available filings, or (xi) amended or authorized or proposed any
amendment to its Certificate of Incorporation or Bylaws or similar
organizational documents, or the Purchaser shall become aware that the
Company or any of its subsidiaries shall have proposed or adopted any such
amendment which shall not have been previously disclosed;
(f) a tender or exchange offer for any Shares shall be made or
publicly proposed to be made by any other person (including the Company or
any of its subsidiaries or affiliates), or it shall be publicly disclosed
or the Purchaser shall otherwise learn that (i) any person, entity
(including the Company or any of its subsidiaries) or "group" (within the
meaning of Section 13(d)(3) of the Exchange Act) shall have acquired or
proposed to acquire beneficial ownership of more than 5% of any class or
series of capital stock of the Company (including the Shares), through the
acquisition of stock, the formation of a group or otherwise, or shall have
been granted any right, option or warrant, conditional or otherwise, to
acquire beneficial ownership of more than 5% of any class or series of
capital stock of the Company (including the Shares) other than acquisitions
for bona fide arbitrage purposes only and except as disclosed in a Schedule
13D or 13G on file with the Commission on the date of this Offer to
Purchase, (ii) any such person, entity or group which before the date of
this Offer to Purchase had filed such a Schedule with the Commission has
acquired or proposes to acquire, through the acquisition of stock, the
formation of a group or otherwise, beneficial ownership of 1% or more of
any class or series of capital stock of the Company (including the Shares),
or shall have been granted any right, option or warrant, conditional or
otherwise, to acquire beneficial ownership of 1% or more of any class or
series of capital stock of the Company (including the Shares), (iii) any
person or group shall enter into a definitive agreement or an
41
<PAGE> 42
agreement in principle or made a proposal with respect to a tender offer or
exchange offer or a merger, consolidation or other business combination
with or involving the Company, or with respect to any amendment of or
modification to an existing such transaction or (iv) any person shall file
a Notification and Report Form under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") or made a public
announcement reflecting an intent to acquire the Company or any assets or
securities of the Company;
(g) the Purchaser shall have reached an agreement or understanding
with the Company providing for termination of the Offer, or the Purchaser
or any of its affiliates shall have entered into a definitive agreement or
announced an agreement in principle with the Company providing for a merger
or other business combination with the Company or the purchase of stock or
assets of the Company which does not contemplate the Offer;
(h) (i) any material contractual right of the Company or any of its
subsidiaries or affiliates shall be impaired or otherwise adversely
affected or any material amount of indebtedness of the Company or any of
its subsidiaries, joint ventures or partnerships shall become accelerated
or otherwise become due before its stated due date, in either case with or
without notice or the lapse of time or both, as a result of the
transactions contemplated by the Offer or the Proposed Merger or (ii) any
covenant, term or condition in any of the Company's or any of its
subsidiaries', joint ventures' or partnerships' instruments or agreements
is or may be materially adverse to the value of the Shares in the hands of
the Purchaser (including, but not limited to, any event of default that may
ensue as a result of the consummation of the Offer or the Proposed Merger
or the acquisition of control of the Company); or
(i) Parent or the Purchaser shall not have obtained any waiver,
consent, extension, approval, action or non-action from any governmental
authority or agency (other than approval by the ICC of the acquisition of
control of the Company) which is necessary to consummate the Offer;
which, in the sole judgment of the Purchaser in any such case, and regardless of
the circumstances (including any action or inaction by the Purchaser or any of
its affiliates), giving rise to any such condition, makes it inadvisable to
proceed with the Offer and/or with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of the Purchaser and may
be asserted by the Purchaser in its sole discretion regardless of the
circumstances (including any action or omission by the Purchaser) giving rise to
any such conditions or may be waived by the Purchaser in its sole discretion in
whole or in part at any time and from time to time. The failure by the Purchaser
at any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right and each such right shall be deemed an ongoing right which may
be asserted at any time and from time to time. Any determination by the
Purchaser concerning any condition or event described in this Section 14 shall
be final and binding upon all parties.
15. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS.
General. Except as otherwise disclosed herein, based on a review of
publicly available filings by the Company with the Commission, neither the
Purchaser nor Parent is aware of (i) any license or regulatory permit that
appears to be material to the business of the Company and its subsidiaries,
taken as a whole, that might be adversely affected by the acquisition of Shares
by the Purchaser pursuant to the Offer or the Proposed Merger or (ii) any
approval or other action by any governmental, administrative or regulatory
agency or authority, domestic or foreign that would be required for the
acquisition or ownership of Shares by the Purchaser as contemplated herein.
Should any such approval or other action be required, the Purchaser currently
contemplates that such approval or action would be sought. While the Purchaser
does not currently intend to delay the acceptance for payment of Shares tendered
pursuant to the Offer pending the outcome of any such matter, there can be no
assurance that any such approval or action, if needed, would be obtained or
would be obtained without substantial conditions or that adverse consequences
might not result to the business of the Company, the Purchaser or Parent or that
certain parts of the businesses of the Company, the Purchaser or Parent might
not have to be disposed of in the event that such approvals were not obtained or
any other actions were not taken. The Purchaser's obligation under the Offer to
accept for payment and pay for Shares is subject to certain conditions. See
Section 14.
ICC Matters; The Voting Trust. Certain activities of subsidiaries of the
Company are regulated by the ICC. Provisions of the Interstate Commerce Act
require approval of, or the granting of an exemption from
42
<PAGE> 43
approval by, the ICC for the acquisition of control of two or more carriers
subject to the jurisdiction of the ICC ("Carriers") by a person that is not a
Carrier and for the acquisition or control of a Carrier by a person that is not
a Carrier but that controls any number of Carriers. ICC approval or exemption is
required for, among other things, the Purchaser's acquisition of control of the
Company. The Purchaser intends to deposit the Shares purchased pursuant to the
Offer in the Voting Trust in order to ensure that the Purchaser does not acquire
and directly or indirectly exercise control over the Company prior to obtaining
necessary ICC approvals or exemptions. ICC approval of the Proposed Merger is
not a condition to the Offer. The Offer is conditioned upon the issuance by the
staff of the ICC of an informal, non-binding opinion, without the imposition of
any conditions unacceptable to the Purchaser, that the use of the Voting Trust
is consistent with the policies of the ICC against unauthorized acquisitions of
control of a regulated carrier. Parent and the Purchaser will promptly request
the staff of the ICC to issue such an opinion. Under ICC regulations that have
been in effect since 1979, the ICC staff has the power to issue such opinions.
Generally, the ICC staff has issued such opinions within one to two weeks of a
request, although there can be no assurance that Parent and the Purchaser will
be able to obtain an opinion this quickly.
Recently, the ICC requested public comment with regard to certain issues
raised by a proposed voting trust agreement submitted by Illinois Central
Corporation, under which the stock of Illinois Central Railroad Company would
have been placed in trust and Kansas City Southern Industries, Inc., would have
been merged into Illinois Central Corporation. The Purchaser believes that the
Voting Trust Agreement does not raise issues comparable to those raised by the
Illinois Central/Kansas City Southern transaction. The ICC's concerns with
regard to that transaction focused on a proposal to move top Illinois Central
managers to Kansas City Southern during the pendency of the voting trust. No
such arrangement is being proposed with respect to the proposed acquisition.
However, there can be no assurance that the ICC will not seek changes in, or
request public comment regarding, the Voting Trust Agreement.
Also, it is possible that railroad competitors of the Purchaser, or others,
may argue that the Purchaser should not be permitted to use the voting trust
mechanism to acquire the Company prior to final ICC approval of the acquisition
of control of the Company. The Purchaser believes it is unlikely that such
arguments would prevail, but there can be no assurance in this regard, nor can
there be any assurance that if such arguments are made, it will not cause delay
in obtaining a favorable ICC staff opinion regarding the Voting Trust Agreement.
Pursuant to the terms of the Voting Trust Agreement, it is expected that
the Trustee would hold such Shares until (i) the receipt of ICC approval, (ii)
the Shares are sold to a third party or otherwise disposed of or (iii) the
Voting Trust is otherwise terminated. The Voting Trust Agreement is expected to
provide that the Trustee would have sole power to vote such Shares, and would
contain certain other terms and conditions designed to ensure that neither the
Purchaser nor Parent would control the Company during the pendency of the ICC
proceedings. In addition, it is expected that the Voting Trust would provide
that the Purchaser or its successor in interest would be entitled to receive any
dividends paid by the Company other than stock dividends.
ICC Matters; Acquisition of Control. Set forth below is information
relating to approval of the ICC of the acquisition of control over the Company
by Parent and the Purchaser. As soon as practicable after entering into the
Proposed Merger Agreement an application (the "ICC Application") will be filed
seeking approval of the ICC for the acquisition of control over the Company by
Parent and the Purchaser, and related transactions. Under applicable law and
regulations, the ICC will hold a public hearing on such application, unless it
determines that a public hearing is not necessary in the public interest. In
ruling on the ICC Application, the ICC will consider at least the following: (a)
the effect of the proposed control transaction on the adequacy of transportation
to the public; (b) the effect on the public interest of including, or failing to
include, other carriers in the area served by the railroad operations of Parent
and the Company; (c) the total fixed charges that would result from the proposed
control transaction; (d) the interests of carrier employees affected by the
proposed control transaction; and (e) whether the proposed control transaction
would have an adverse effect on competition among ICC-regulated carriers in the
affected region. The ICC has the authority to impose conditions on its approval
of a control transaction to alleviate competitive or other concerns. If such
conditions are imposed, the applicants can elect to consummate the control
transaction subject to the conditions or can elect not to consummate the
transaction. Parent has indicated a willingness to accept
43
<PAGE> 44
conditions to address legitimate competitive concerns. See Section 10. There is
no assurance that ICC approval will be obtained or obtained on terms that would
be acceptable to Parent.
Three of these factors are, in Parent's view, unlikely to affect whether
the ICC Application is approved by the ICC. As to factor (b) -- inclusion of
other carriers -- the ICC disfavors this remedy, it has rarely been requested,
and Parent believes it is unlikely to be requested by any railroad in a
Parent/Company proceeding. As to factor (c) -- effect on fixed charges -- the
capital structures of Parent and the Company are sufficiently strong that this
factor is unlikely, in Parent's view, to be given any weight by the ICC in
deciding whether to approve a combination of the Company and Parent. As to
factor (d) -- the interest of affected carrier employees -- the ICC has adopted
a standard set of labor protective conditions which it imposes in rail merger
and control transactions, and Parent expects that those conditions would be
imposed upon a merger of Parent and the Company and that this would not affect
approval of the transaction.
The remaining two factors -- factor (a) -- effect on the adequacy of
transportation -- and factor (e) -- effect on rail competition -- are reflected
in the public interest balancing test that the ICC applies in reviewing railroad
mergers like the proposed combination of Parent and the Company. On the one
hand, the ICC considers the public benefits of the transaction in terms of
better service to shippers, efficiencies, cost savings and the like. On the
other hand, the ICC considers any public harms from the transaction. The
principal harm of concern to the ICC, and the principal potential obstacle to
approval of a merger of Parent and the Company, is reduction in competition. In
applying the public interest balancing test, the ICC is guided by Congress'
intent to encourage mergers, consolidations, and joint use of facilities that
tend to rationalize and improve the Nation's rail system.
As described below, Parent will seek to present to the ICC its case that
the acquisition of control of the Company satisfies the public interest
balancing test. First, Parent will seek to show that a combination of the
Company and Parent has significant public benefits. Second, Parent will seek to
show that a combination of the Company and Parent, especially with
competition-enhancing conditions that Parent is prepared to agree to in advance
in favor of Southern Pacific, BNI or other railroads, will have no significant
adverse effect on rail competition, and indeed will strengthen such competition.
Under existing law, the ICC is generally required to enter a final order
with respect to the ICC Application within approximately 31 months after such
application is filed. Under existing law, other railroads and other interested
parties may seek to intervene to oppose the ICC Application or to seek
protective conditions in the event approval by the ICC is granted. In addition,
any appeals from the ICC final order might not be resolved for a substantial
period of time after the entry of such order by the ICC.
Pending receipt of the ICC approval, it is expected that the business and
operations of the Company under the control of the Trustee will be conducted in
the usual and ordinary course of business, and the Company's employees and
management will continue in their present positions.
Parent recently provided the Company's Board with a report summarizing the
key elements of the factual case that would be included in Parent's application
to the ICC for approval of a combination with the Company. The report describes
the substantial rail service improvements and other benefits that Parent
believes would result from a combination of Parent and the Company, including
new single-line service, other significant service benefits, and cost savings
and efficiencies. The report also discusses the possible conditions, such as the
right of other railroads to provide competitive services over the consolidated
system's lines and the sale or lease of lines to other railroads, that Parent
would be prepared to grant to other railroads in order to address competitive
issues relating to a combination with the Company.
With regard to the public benefits of a combination of Parent and the
Company, the report indicates that the combination would create substantial new
single-line service, including for traffic moving across the Southern Corridor
between California and points in Texas, Louisiana and Arkansas, for Parent grain
producers moving product to Company feeder markets in California, Texas and
Arizona, for Company grain producers moving product to export markets, for
Parent shippers in the Pacific Northwest and the Intermountain region moving
commodities to points on the Company's rail lines, and for Company shippers
moving commodities to Gulf ports and Mexico. The report further indicates that a
combination of Parent and the Company would yield new service improvements,
including greater service frequency and reliability and
44
<PAGE> 45
reduced transit time for intermodal, automotive, manifest and bulk commodity
traffic and improved utilization of freight cars, and would attract significant
volumes of traffic from the highway. Finally, the report indicates that a
combination of Parent and the Company will generate major savings and
efficiencies, including capital savings, savings from using shorter routes,
savings from consolidating facilities and eliminating overheads, efficiencies
from using the best technologies and systems of each railroad on the combined
system, and savings from more efficient use of equipment.
With regard to competition, the report indicates that in the two markets
where Parent and the Company would have a combined position that Parent believes
would arguably raise competitive concerns -- the Kansas/Oklahoma grain market
and the market for the handling of service-sensitive traffic between California
and the Midwest -- Parent is prepared to grant conditions to other railroads
that will address those competitive concerns. Such conditions, the report
states, could include, as examples, a sale or lease of Parent's former Oklahoma,
Kansas and Texas Railroad line through Kansas and Oklahoma to Texas, and a grant
of trackage rights or other conditions that would significantly strengthen
Southern Pacific's already competitive California-Midwest routes.
Parent believes that, in the context of a negotiated merger transaction
with the Company and given Parent's willingness to grant appropriate conditions
to other railroads, it will be able to make a credible case for ICC approval.
Parent recently retained a panel of experts on ICC and transportation
matters and asked them to review the case for a possible combination of Parent
and the Company. In reaching their conclusion, these experts reviewed the report
Parent prepared and provided to the Company's Board. Based on their review of
this report, including the benefits and competition-preserving conditions
described therein as summarized above, discussions among members of the panel
and their own analysis and experience in this area, the panelists reached the
following conclusions:
The three ICC experts on the panel concluded:
- Parent has outlined a strong case for ICC approval of a combination with
the Company that warrants favorable consideration by the ICC.
- A combination of Parent and the Company should have good prospects of
obtaining ICC approval.
In reaching these conclusions, the ICC experts stressed, among other
things, Parent's willingness to grant competition-preserving conditions and the
unwillingness of the applicants in the Company/Southern Pacific merger case to
do so; the significant benefits of a Parent/Company merger, including its
potential to alleviate capacity constraints on both railroads and achieve new
levels of service quality; and the importance of such a merger in stimulating
trade with Mexico and agricultural exports.
The federal transportation policy expert on the panel concluded:
- The Department of Transportation is unlikely to oppose, and may well
support, a Parent/Company combination.
In reaching this conclusion, the federal transportation policy expert
stressed that the Parent/Company proposal is in concert with the policy of the
Department of Transportation to develop a more effective intermodal
transportation system for the United States, and with the Department's policy of
increasing the capacity, efficiency and safety of our national highway system.
The expert on logistics and shipper needs concluded:
- A Parent/Company combination would provide major benefits for the
shipping public as well as U.S. industry in general. A combined
Parent/Company will become more cost and service competitive in their
markets to the benefit of rail industry customers.
In reaching this conclusion, the expert on logistics and shipper needs
stressed that a Parent/Company merger will address shipper needs in the areas of
service quality, management of information, reduction in transportation cost,
productive use of transportation assets, reduction of risk and simplification of
supplier relationships.
45
<PAGE> 46
The panel's conclusions also noted that ICC approval is a long and complex
process which can take two years or longer, and that at this stage, one cannot
predict with certainty the outcome of ICC review of either a Parent or a BNI
combination with the Company.
The panel of experts consists of Malcolm M.B. Sterrett, an attorney with
extensive rail transportation experience and a former ICC Commissioner; John F.
DePodesta, an attorney who has represented numerous rail carriers and public
bodies in proceedings before the ICC and a former General Counsel of
Consolidated Rail Corporation; C. John Langley Jr., Ph.D., John H. "Red" Dove
Distinguished Professor of Logistics and Transportation, University of
Tennessee; Walter B. McCormick, Jr., Partner, Bryan Cave, Washington, D.C., and
former General Counsel of the U.S. Department of Transportation; and Robert N.
Kharasch, a Washington, D.C. lawyer for more than 40 years who specialized in
transportation law and who was coordinating counsel for railroad opponents to
the unsuccessful Company/Southern Pacific merger. No member of the panel has
previously represented Parent before the ICC or on any other matter, except that
Dr. C. John Langley, Jr. has in the past done limited consulting for Parent.
IF STOCKHOLDERS WOULD LIKE COPIES OF THE CONCLUSIONS AND REPORTS OF THE
PANEL OF EXPERTS, PLEASE CONTACT MORROW & CO., INC., AT (800) 856-8309
(TOLL-FREE), OR (212) 754-8000 IF IN NEW YORK CITY, AND THEY WILL BE FURNISHED
TO YOU PROMPTLY. COPIES OF SUCH EXPERTS' MATERIALS CAN BE INSPECTED AND COPIED
AT THE PUBLIC REFERENCE FACILITIES MAINTAINED BY THE COMMISSION. COPIES OF THE
CONCLUSIONS AND REPORTS OF THE PANEL OF EXPERTS CAN BE OBTAINED AT PRESCRIBED
RATES BY WRITING TO THE COMMISSION, PUBLIC REFERENCE SECTION, JUDICIARY PLAZA,
450 FIFTH STREET, N.W., WASHINGTON, D.C. 20549.
RECEIPT OF ICC APPROVAL (OTHER THAN APPROVAL OF THE VOTING TRUST DESCRIBED
ABOVE) IS NOT A CONDITION TO CONSUMMATION OF THE OFFER OR THE PROPOSED MERGER.
IF THE ICC APPROVAL IS NOT OBTAINED OR THE ICC IMPOSES UNACCEPTABLE CONDITIONS,
THE PURCHASER WILL BE REQUIRED TO USE ITS BEST EFFORTS TO SELL OR OTHERWISE
DISPOSE OF THE SHARES DEPOSITED IN THE VOTING TRUST AFTER THE ICC ORDER DENYING
SUCH APPROVAL BECOMES FINAL OR PARENT DETERMINES NOT TO CONSUMMATE THE PROPOSED
CONTROL TRANSACTION BECAUSE OF UNACCEPTABLE CONDITIONS. IN SUCH CASE, THE
PURCHASER WOULD BE ENTITLED TO ANY PROCEEDS OF SUCH SALE OR OTHER DISPOSITION.
Antitrust Compliance. Under the HSR Act and the rules that have been
promulgated thereunder by the Federal Trade Commission (the "FTC"), certain
acquisition transactions may not be consummated unless certain information has
been furnished to the Antitrust Division of the Department of Justice (the
"Antitrust Division") and the FTC and certain waiting period requirements have
been satisfied. The notice and waiting period requirements of the HSR Act do not
apply to the affiliation of Parent's and the Company's ICC-regulated railroad
operations, provided that information and documentary material filed with the
ICC in connection with the seeking of ICC approval of the affiliation of such
operations (see "ICC Matters; The Voting Trust") are contemporaneously filed
with the Antitrust Division and the FTC. The staff of the FTC Premerger Office
has informed Parent that the HSR Act does not apply to the formation of the
Voting Trust or the transfer of voting securities to the Voting Trust pursuant
to the Offer.
Prior to the affiliation of Parent's and the Company's operations not
subject to ICC jurisdiction, filings must be made under the HSR Act. Such HSR
filings, or the expiration of waiting periods applicable to such filings, are
not a condition to consummation of the Offer.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
the Purchaser pursuant to the Offer. At any time before or after the purchase of
Shares pursuant to the Offer by the Purchaser, the FTC or the Antitrust Division
could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer or seeking the divestiture of Shares purchased by
the Purchaser or the divestiture of substantial assets of Parent, the Purchaser,
the Company or their respective subsidiaries. Private parties and state
attorneys general may also bring legal action under federal or state antitrust
laws under certain circumstances. Based upon an examination of information
available to the Purchaser relating to the businesses in which Parent, the
Purchaser, the Company and their respective subsidiaries are engaged, the
Purchaser believes that the Offer will not violate the antitrust laws.
Nevertheless, there can be no assurance that a challenge to the Offer on
antitrust grounds will not be made or, if such a challenge is made, what the
result would be. See Section 14 for certain conditions to the Offer, including
conditions with respect to litigation.
46
<PAGE> 47
State Takeover Statutes. The Company is incorporated under the laws of the
State of Delaware. In general, Section 203 of the DGCL prevents an "interested
stockholder" (generally a person who owns or has the right to acquire 15% or
more of a corporation's outstanding voting stock, or an affiliate or associate
thereof) from engaging in a "business combination" (defined to include mergers
and certain other transactions) with a Delaware corporation for a period of
three years following the date such person became an interested stockholder
unless, among other things, prior to such date the board of directors of the
corporation approved either the business combination or the transaction in which
the interested stockholder became an interested stockholder.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In 1982, in Edgar v. MITE Corp., the Supreme
Court of the United States invalidated on constitutional grounds the Illinois
Business Takeover Statute, which, as a matter of state securities law, made
takeovers of corporations meeting certain requirements more difficult. However,
in 1987 in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that
the State of Indiana may, as a matter of corporate law, and, in particular, with
respect to those aspects of corporate law concerning corporate governance,
constitutionally disqualify a potential acquiror from voting on the affairs of a
target corporation without the prior approval of the remaining stockholders. The
state law before the Supreme Court was by its terms applicable only to
corporations that had a substantial number of stockholders in the state and were
incorporated there.
The Company, directly or through subsidiaries, conducts business in a
number of states throughout the United States, some of which have enacted
takeover laws. The Purchaser does not know whether any of these laws will, by
their terms, apply to the Offer and has not complied with any such laws. Should
any person seek to apply any state takeover law, the Purchaser will take such
action as then appears desirable, which may include challenging the validity or
applicability of any such statute in appropriate court proceedings. In the event
it is asserted that one or more state takeover laws is applicable to the Offer
and the Proposed Merger, and an appropriate court does not determine that it is
inapplicable or invalid as applied to the Offer, the Purchaser might be required
to file certain information with, or receive approvals from, the relevant state
authorities. In addition, if enjoined, the Purchaser might be unable to accept
for payment any Shares tendered pursuant to the Offer, or be delayed in
continuing or consummating the Offer. In such case, the Purchaser may not be
obligated to accept for payment any Shares tendered. See Section 14.
Certain Litigation. On October 6, 1994, Parent filed suit in the Court of
Chancery in the State of Delaware (the "Delaware Litigation") against the
Company, BNI and members of the Company's Board seeking, among other things, (a)
a declaratory judgment that the BNI/SFP Agreement was terminable by the Company
in order to allow the Company to accept Parent's merger proposal, (b) a
declaratory judgment that Parent has not tortiously interfered with the
contractual relations of the Company and BNI, and (c) an injunction requiring
the Company to negotiate with Parent regarding Parent's merger proposal. On
October 7, 1994, Parent moved for expedited discovery on the ground that
expedition is essential to permit Parent to obtain timely relief against the
continuing breaches of fiduciary duty by the Company's Board.
On June 30, 1994, four suits were filed in the Court of Chancery in
Delaware by stockholders of the Company against the Company, BNI and the members
of the Company's Board. Each of these suits was filed as a class action on
behalf of all stockholders of the Company except the defendants and their
affiliates, and alleged, among other things, that the defendants had breached
their fiduciary duties to the plaintiffs by agreeing to sell the Company's
railroad assets to BNI for grossly inadequate consideration. On October 6, 1994,
an amended complaint was filed in these actions alleging in addition that the
defendants had breached their fiduciary duties by failing to fully inform
themselves with regard to Parent's merger proposal.
On October 6 and 7, 1994, eight additional suits were filed in the Court of
Chancery in Delaware by stockholders of the Company against the Company, BNI and
the members of the Company's Board. Each of these suits was filed as a class
action on behalf of all stockholders of the Company except the defendants and
their affiliates, and alleged that the defendants had breached their fiduciary
duties to the plaintiffs by failing to negotiate with Parent regarding Parent's
merger proposal.
47
<PAGE> 48
On October 14, 1994, the Company's stockholder-plaintiffs in the twelve
suits previously filed in the Delaware Court of Chancery filed a Consolidated
and Amended Complaint against the Company, the members of the Company's Board
(the "director defendants") and BNI, styled In re Santa Fe Pacific Shareholder
Litigation, Del. Ch., Cons. C.A. No. 13567 (the "Consolidated Shareholder
Action"). The Consolidated Shareholder Action, which was filed as a class action
on behalf of all stockholders of the Company as of June 30, 1994 (except for the
defendants and their affiliates) who are or will be threatened with injury
arising from the defendants' actions, alleged, among other things, that (i) the
director defendants breached their fiduciary duties of care and loyalty by
failing to inform themselves and explore adequately all alternatives available
to the Company's stockholders (including Parent's merger proposal), by approving
and recommending the merger between the Company and BNI, and by approving and
enforcing the BNI/SFP Agreement; (ii) the director defendants breached their
fiduciary duties of disclosure by failing to completely disclose all material
information in the Santa Fe Joint Proxy Statement; and (iii) BNI aided and
abetted such breaches of fiduciary duty. The Consolidated Shareholder Action,
among other things, seeks preliminary and permanent injunctive relief against
the consummation of the merger between the Company and BNI, a court order
requiring the director defendants to explore alternatives with, provide
information to and negotiate in good faith with any bona fide bidder (including
Parent), a court order decreeing that the BNI/SFP Agreement is terminable by the
Company in response to Parent's merger proposal, and invalid under Delaware law,
and joint and several damages against the defendants as a result of their
conduct.
On October 18, 1994, the Delaware Court of Chancery denied Parent's and the
Company's stockholder-plaintiffs' motions for expedited discovery. The Court of
Chancery, among other things, held that because the merger between the Company
and BNI, if approved by the Company's stockholders, could not be consummated for
at least eighteen months, the Court would have sufficient time to evaluate
Parent's and the Company's stockholder-plaintiffs' claims and, if necessary, set
aside the merger between the Company and BNI before any steps are taken to
consummate it.
On October 19, 1994, Parent filed its First Amended and Supplemental
Complaint, and was joined in that action as plaintiff by James A. Shattuck, an
officer of Union Pacific Railroad Company, a subsidiary of Parent, who also is a
stockholder of the Company. The First Amended and Supplemental Complaint is
styled Union Pacific Corporation and James A. Shattuck v. Santa Fe Pacific
Corporation, et al., C.A. No. 13778. In addition to the claims stated and relief
sought in Parent's original complaint, the First Amended and Supplemental
Complaint alleged, among other things, that the Company and the director
defendants have breached their fiduciary duties of candor by joining BNI in a
wrongful campaign to mislead the Company's stockholders (via press releases and
the Santa Fe Joint Proxy Statement) into believing, among other things, that (i)
the Company cannot lawfully consider Parent's merger proposal, (ii) Parent's
merger proposal is illusory and made solely for the purpose of preventing a
merger of the Company and BNI, and (iii) a merger of Parent and the Company
cannot lawfully occur. On October 26, 1994, Santa Fe and the director defendants
filed an Answer denying the allegations of the First Amended and Supplemental
Complaint. On November 2, 1994, BNI moved to dismiss the First Amended and
Supplemental Complaint for failure to state a claim against BNI upon which
relief can be granted.
16. FEES AND EXPENSES. Except as set forth below, neither Parent nor the
Purchaser will pay any fees or commissions to any broker, dealer or other person
for soliciting tenders of Shares pursuant to the Offer.
CS First Boston Corporation ("CS First Boston") is acting as the Dealer
Manager in connection with the Offer and is acting as financial advisor to
Parent in connection with its effort to acquire the Company. Parent has agreed
to pay CS First Boston for its services an initial financial advisory fee of
$500,000, an additional financial advisory fee of $2 million (the "Additional
Advisory Fee"), $1 million of which became payable on October 17, 1994 and the
remaining $1 million of which will become payable on December 31, 1994, an
ongoing quarterly advisory fee of $125,000 payable during the term of the
engagement ("Quarterly Advisory Fees"), with the first payment payable on March
31, 1995, and a transaction fee payable in connection with Parent's proposed
acquisition of the Company, determined based upon the size of such transaction,
but in an amount not to exceed $12.5 million (the "Transaction Fee"). Any
portion of the Additional Advisory Fee and Quarterly Advisory Fees paid prior to
the consummation of Parent's acquisition of the Company will be fully credited
against the Transaction Fee. Parent has also agreed to reimburse CS First Boston
(in its capacity as
48
<PAGE> 49
Dealer Manager and financial advisor) for its reasonable out-of-pocket expenses,
including the fees and expenses of its legal counsel, incurred in connection
with its engagement, and to indemnify CS First Boston and certain related
persons against certain liabilities and expenses in connection with its
engagement, including certain liabilities under the federal securities laws. CS
First Boston has rendered various investment banking and other advisory services
to Parent and its affiliates in the past and is expected to continue to render
such services, for which it has received and will continue to receive customary
compensation from Parent and its affiliates.
The Purchaser has retained Morrow & Co., Inc. ("Morrow") to act as the
Information Agent in connection with the Offer. The Information Agent may
contact holders of Shares by mail, telephone, facsimile, telegraph and personal
interviews and may request brokers, dealers and other nominee stockholders to
forward materials relating to the Offer to beneficial owners of Shares. The
Information Agent will receive reasonable and customary compensation for its
services, will be reimbursed for certain reasonable out-of-pocket expenses and
will be indemnified against certain liabilities and expenses in connection
therewith, including certain liabilities under the federal securities laws.
Parent has also retained Morrow for solicitation and advisory services in
connection with solicitations relating to the Special Meeting, for which Morrow
is to receive an initial proxy advisory retainer fee of $75,000 and an
additional fee of $500,000 in connection with the solicitation of proxies for
the Special Meeting.
In addition, Citibank, N.A. has been retained as the Depositary. The
Depositary has not been retained to make solicitations or recommendations in its
role as Depositary. The Depositary will receive reasonable and customary
compensation for its services, will be reimbursed for certain reasonable
out-of-pocket expenses and will be indemnified against certain liabilities and
expenses in connection therewith, including certain liabilities under the
federal securities laws. Brokers, dealers, commercial banks and trust companies
will be reimbursed by the Purchaser for customary mailing and handling expenses
incurred by them in forwarding offering material to their customers.
17. MISCELLANEOUS. The Purchaser is not aware of any jurisdiction where
the making of the Offer is prohibited by any administrative or judicial action
pursuant to any valid state statute. If the Purchaser becomes aware of any valid
state statute prohibiting the making of the Offer or the acceptance of the
Shares pursuant thereto, Purchaser will make a good faith effort to comply with
such state statute. If, after such good faith effort, the Purchaser cannot
comply with any such state statute, the Offer will not be made to (nor will
tenders be accepted from or on behalf of) the holders of Shares in such state.
In any jurisdiction where the securities, blue sky or other laws require the
Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be
made on behalf of the Purchaser by the Dealer Manager or one or more registered
brokers or dealers which are licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PARENT OR THE PURCHASER NOT CONTAINED IN THIS OFFER
TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Parent and the Purchaser have filed with the Commission a Tender Offer
Statement on Schedule 14D-1 (the "Schedule 14D-1"), together with exhibits,
pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange
Act, furnishing certain additional information with respect to the Offer, and
may file amendments thereto. The Schedule 14D-1 and any amendments thereto,
including exhibits, may be inspected at, and copies may be obtained from, the
same places and in the same manner as set forth in Section 7 (except that they
will not be available at the regional offices of the Commission).
November 9, 1994
UP ACQUISITION CORPORATION
49
<PAGE> 50
SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE
OFFICERS OF PARENT AND THE PURCHASER
1. Directors and Executive Officers of Parent. Set forth below is the name,
current business address, citizenship and the present principal occupation or
employment and material occupations, positions, offices or employments for the
past five years of each director and executive officer of Parent. Unless
otherwise indicated, each person identified below is employed by Parent. The
principal address of Parent and, unless otherwise indicated below, the current
business address for each individual listed below is Martin Tower, Eighth and
Eaton Avenues, Bethlehem, Pennsylvania 18018. Directors are identified by an
asterisk. Each such person is a citizen of the United States.
<TABLE>
<CAPTION>
NAME AND CURRENT PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ------------------------------ ------------------------------------------------------------
<S> <C>
*Drew Lewis Chairman and Chief Executive Officer of Parent. Director,
American Express Company, AT&T Corp., Ford Motor Company,
FPL Group, Inc.
*L. White Matthews, III Executive Vice President-Finance of Parent.
Ursula F. Fairbairn Senior Vice President-Human Resources of Parent since April
1990; prior thereto, Mrs. Fairbairn served as Director of
Education and Management Development for International
Business Machines Corporation.
Carl W. von Bernuth Senior Vice President and General Counsel of Parent since
September 1991; prior thereto, Mr. von Bernuth served as
Vice President and General Counsel of Parent.
Charles E. Billingsley Vice President and Controller of Parent since January 1990;
prior thereto, Mr. Billingsley served as Controller of
Parent.
Thomas W. Boswell President and Chief Executive Officer of Overnite
1000 Semmes Avenue Transportation Company ("Overnite") since March 1991; from
Richmond, VA 23224 March 1990 through March 1991 Mr. Boswell served as Vice
Chairman and Chief Executive Officer of Overnite, and prior
to March 1990 Mr. Boswell served as Vice Chairman of
Overnite.
*Richard K. Davidson President of Parent; Chairman and Chief Executive Officer of
1416 Dodge Street Union Pacific Railroad Company.
Omaha, NE 68179
John E. Dowling Vice President-Corporate Development of Parent since January
1990; prior thereto, Mr. Dowling served as Vice
President-Financial Administration of Parent.
John B. Gremillion, Jr. Vice President-Taxes of Parent since February 1992; prior
thereto, Mr. Gremillion, Jr. served as Director of Taxes of
Parent.
Robert S. Jackson President and Chief Executive Officer of USPCI since May
515 West Greens Road 1991; prior thereto, Mr. Jackson served as Executive Vice
Suite 500 President and Chief Financial Officer of Union Pacific
Houston, TX 77067 Resources Company.
Mary E. McAuliffe Vice President-External Relations of Parent since December
555 13th Street, N.W. 1991; prior thereto, Ms. McAuliffe served as
Suite 450W Director-Washington Affairs, Transportation and Tax of
Washington, DC 20004 Parent.
Gary F. Schuster Vice President-Corporate Relations of Parent.
Gary M. Stuart Vice President and Treasurer of Parent since January 1990;
prior thereto, Mr. Stuart served as Treasurer of Parent.
</TABLE>
I-1
<PAGE> 51
<TABLE>
<CAPTION>
NAME AND CURRENT PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ------------------------------ ------------------------------------------------------------
<S> <C>
Judy L. Swantak Vice President and Corporate Secretary of Parent since
September 1991; from March 1990 to September 1991, Mrs.
Swantak served as Corporate Secretary of Parent and prior
thereto served as Assistant Secretary of Parent.
*Robert P. Bauman Chairman, British Aerospace, p.l.c., aircraft and aerospace
SmithKline Beecham Consumer manufacturer, London, England. Director, Capital Cities/ABC,
Healthcare Inc., CIGNA Corporation, Reuters Holdings p.l.c., SmithKline
1500 Littleton Road Beecham p.l.c., Russell Reynolds & Associates.
Parsippany, NJ 07054
*Richard B. Cheney Former Secretary of Defense. Senior Fellow, American
American Enterprise Institute Enterprise Institute, public policy research, Washington,
1150 17th Street, NW D.C. Director, IGI Inc., Morgan Stanley Group Inc., Procter
Suite 1100 & Gamble Co., US WEST, Inc.
Washington, DC 20036
*E. Virgil Conway Financial Consultant. Chairman, Financial Accounting
101 Park Avenue Standards Advisory Council. Director, Centennial Insurance
31st Floor Company, Metropolitan Transportation Authority. Trustee,
New York, NY 10178 Atlantic Mutual Insurance Company, Consolidated Edison
Company of New York, Inc., HRE Properties, Mutual Funds
Managed by Phoenix Home Life.
*Spencer F. Eccles Chairman and Chief Executive Officer, First Security
First Security Corporation Corporation, bank holding company, Salt Lake City, Utah.
P.O. Box 30006 Director, Anderson Lumber Co., First Security Bank of Utah,
Salt Lake City, UT 84130 Zion's Cooperative Mercantile Institution.
*Elbridge T. Gerry, Jr. Partner, Brown Brothers Harriman & Co., bankers, New York,
Brown Brothers Harriman & Co. New York. Director, Royal Group, Inc.
59 Wall Street
New York, NY 10005
*William H. Gray, III President, United Negro College Fund, Inc., educational
United Negro College Fund, assistance, New York, N.Y. Director, Chase Manhattan Corp.,
Inc. Lotus Development Corp., MBIA Inc., Prudential Insurance
8260 Willow Oaks Corporate Company of America, Rockwell International Corporation,
Drive Scott Paper Company, Warner Lambert Company, Westinghouse
P.O. Box 10444 Electric Corporation.
Fairfax, VA 22031
*Judith Richards Hope Senior Partner, Paul, Hastings, Janofsky & Walker, law firm,
Paul, Hastings, Janofsky & Los Angeles, California and Washington D.C. Director, The
Walker Budd Company, General Mills, Inc., Russell Reynolds &
1299 Pennsylvania Ave., N.W. Associates, Zurich Reinsurance Center Holdings, Inc. Member,
Tenth Floor The Harvard Corporation (The President and Fellows of
Washington, DC 20004 Harvard College).
*Lawrence M. Jones Retired Chairman and Chief Executive Officer, The Coleman
The Coleman Company, Inc. Company, Inc., manufacturer of home and recreational
250 N. St. Francis Street products, Wichita, Kansas. Director, Coleman Company, Inc.,
P.O. Box 1762 Fleming Companies, Inc., Fourth Financial Corp.
Wichita, KS 67201
*Richard J. Mahoney Chairman and Chief Executive Officer, Monsanto Company,
Monsanto Company agricultural, chemical, pharmaceutical and food products,
800 N. Lindbergh Boulevard manmade fibers and plastics, St. Louis, Missouri. Director,
St. Louis, MO 63167 Metropolitan Life Insurance Company.
</TABLE>
I-2
<PAGE> 52
<TABLE>
<CAPTION>
NAME AND CURRENT PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ------------------------------ ------------------------------------------------------------
<S> <C>
*Claudine B. Malone President, Financial and Management Consulting, Inc.,
Financial and Management management consulting, McLean, Virginia. Director, Dell
Consulting, Inc. Computer Corporation, Hannaford Brothers, Hasbro, Inc.,
7570 Potomac Fall Road Houghton Mifflin Company, Imcera Group, The Limited, Inc.,
McLean, VA 22102 S.A.I.C., Scott Paper Company. Trustee, Penn Mutual Life
Insurance Co.
*Jack L. Messman President and Chief Executive Officer, Union Pacific
Union Pacific Resources Resources Company and Chairman of USPCI, Inc. Director, CTD,
Company Inc., Novell, Inc., Tandy, Inc., WaWa, Inc.
801 Cherry Street
Fort Worth, TX 76102
*John R. Meyer Professor, Harvard University, Cambridge, Massachusetts.
Center for Business and Director, Brattle Group Inc., The Dun & Bradstreet
Government Corporation, Rand McNally Co., Inc. Trustee, Mutual Life
Harvard University Insurance Company of New York.
79 Kennedy Street
Cambridge, MA 02138
*Thomas A. Reynolds, Jr. Chairman Emeritus, Winston & Strawn, law firm, Chicago,
Winston & Strawn Illinois, New York, New York and Washington, D.C. Director,
35 West Wacker Drive Gannett Co., Inc., Jefferson Smurfit Group.
Suite 4700
Chicago, IL 60601
*James D. Robinson, III President, J. D. ROBINSON INC., investment services, New
J.D. ROBINSON INC. York, New York Director, Bristol Myers/Squibb Company, The
126 East 56th Street Coca-Cola Company, First Data Corporation, SCI Television,
26th Floor Inc. Senior Adviser, Trust Company of the West.
New York, NY 10022
*Robert W. Roth Retired President and Chief Executive Officer, Jantzen,
1580 Griffen Rd. Inc., sportswear manufacturer, Portland, Oregon. Director,
Pebble Beach, CA 93953 Portland General Electric Company.
*Richard D. Simmons President, International Herald Tribune, communications,
International Herald Tribune Washington, D.C. Director, International Herald Tribune,
1150 15th Street, NW J.P. Morgan & Co., Incorporated, Morgan Guaranty Trust
Washington, DC 20071 Company of New York, The Washington Post Company.
</TABLE>
Except for the directors listed below, each of the directors named in the
preceding tables has held the indicated office or position in his or her
principal occupation for at least five years. Each of the directors listed below
held the office or position first indicated as of five years ago.
Mr. Robert P. Bauman was Chief Executive of SmithKline Beecham p.l.c.
through April 1994 and since such date has been non-executive Chairman of
British Aerospace, p.l.c. Mr. Richard B. Cheney served as Secretary of Defense
through January 20, 1993, and since such date has been Senior Fellow, American
Enterprise Institute. Mr. Richard K. Davidson was Executive Vice President of
the Railroad to August 7, 1991, President and Chief Executive Officer to
September 17, 1991, and since such date has been Chairman and Chief Executive
Officer of the Railroad. Mr. Davidson has also been President of Parent since
May 26, 1994. Mr. William H. Gray, III, served as a member of the United States
House of Representatives from the Second District of Pennsylvania through August
1991 and since such date has been President of United Negro College Fund, Inc.
Mr. Lawrence M. Jones was President and Chief Executive Officer of The Coleman
Company, Inc. through September 1990, and Chairman and Chief Executive Officer
of The Coleman Company, Inc. through December 31, 1993. Mr. Drew Lewis was
Chairman, President and Chief Executive Officer of Parent through May 26, 1994
and since such date has been Chairman and Chief Executive Officer of Parent. Mr.
Lewis also served as Chairman of the Railroad during August and September 1991.
Mr. L. White Matthews, III, was Senior Vice President -- Finance of Parent to
April 16, 1992 and since such date has been Executive Vice President -- Finance
of Parent. Mr. Jack L. Messman was Chairman and Chief
I-3
<PAGE> 53
Executive Officer of USPCI, Inc., to May 1, 1991 and since such date has been
President and Chief Executive Officer of Union Pacific Resources Company and has
continued as Chairman of USPCI. Mr. Thomas A. Reynolds, Jr., was Chairman of
Winston & Strawn through December 31, 1992 and since such date has been Chairman
Emeritus of such firm. Mr. James D. Robinson, III, was Chairman, President and
Chief Executive Officer of American Express Company through July 1991, Chairman
and Chief Executive Officer from August 1991 through January 25, 1993, and
Chairman from January 26 through February 22, 1993. Mr. Richard D. Simmons was
President of The Washington Post Co. (communications) through May 1991 and since
such date has been President of International Herald Tribune.
2. Directors and Executive Officers of the Purchaser. Set forth below is the
name, current business address, citizenship and the present principal occupation
or employment and material occupations, positions, offices or employments for
the past five years of each director and officer of the Purchaser. Unless
otherwise indicated, each person identified below is employed by the Purchaser
and has held such position since the formation of the Purchaser on November 8,
1994. The principal address of the Purchaser and, unless otherwise indicated
below, the current business address for each individual listed below is Martin
Tower, Eighth and Eaton Avenues, Bethlehem, Pennsylvania 18018. Directors are
identified by an asterisk. Each such person is a citizen of the United States.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ------------------------------ ------------------------------------------------------------
<S> <C>
*Richard K. Davidson President of Purchaser (See Part 1 above for material
positions held during the past five years).
*L. White Matthews, III Executive Vice President of Purchaser (See Part 1 above for
material positions held during the past five years).
*Carl W. von Bernuth Vice President and General Counsel of Purchaser (See Part 1
above for material positions held during the past five
years).
Gary M. Stuart Vice President and Treasurer of Purchaser (See Part 1 above
for material positions held during the past five years).
Judy L. Swantak Vice President and Secretary of Purchaser (See Part 1 above
for material positions held during the past five years).
Robert M. Knight, Jr. Assistant Treasurer of Purchaser; Assistant Treasurer of
Parent. Mr. Knight served as Executive Assistant -- Finance
of the Railroad from May 1992 to March 1, 1994 and Director
of Revenue Reporting and Analysis from June 1991 to July
1992. Prior thereto, Mr. Knight served as Controller of
Union Pacific Financial Corporation, a subsidiary of the
Railroad.
Sandra L. Groman Assistant Secretary of Purchaser; Assistant Secretary of
Parent. Prior to December 11, 1989, Ms. Groman served as
Assistant Director, Office of the National Board of
Directors, Girl Scouts of the U.S.A.
Thomas E. Whitaker Assistant Secretary of Purchaser; Assistant Secretary of
Parent.
</TABLE>
I-4
<PAGE> 54
SCHEDULE II
TRANSACTIONS IN SHARES DURING THE PAST 60 DAYS
BY THE PURCHASER AND PARENT
<TABLE>
<CAPTION>
TRANSACTION DATE SHARES ACQUIRED PRICE PER SHARE(3)
- ---------------- --------------- ------------------
<S> <C> <C>
October 6, 1994............................................... 100(1) $14.00
October 6, 1994............................................... 100(2) $13.50
---
Total....................................................... 200
===
</TABLE>
- ---------------
(1) Purchased by Parent in an open market transaction entered into on the
over-the counter market.
(2) Purchased by Parent in an open market transaction executed on the NYSE.
(3) All prices are exclusive of commissions.
II-1
<PAGE> 55
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for the Shares
and any other required documents should be sent by each stockholder of the
Company or his broker, dealer, commercial bank, trust company or other nominee
to the Depositary as follows:
The Depositary for the Offer is:
CITIBANK, N.A.
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand:
(For Eligible Institutions
Citibank, N.A. Only) Citibank, N.A.
c/o Citicorp Data (201) 262-3240 Corporate Trust Window
Distribution, Inc. 111 Wall Street, 5th Floor
P.O. Box 1429 New York, New York
Paramus, New Jersey 07653
By Overnight Courier: Confirm By Telephone: By Telex:
Citibank, N.A. (800) 422-2066 (710) 990-4964
c/o Citicorp Data Answer Back: CDDI PARA
Distribution, Inc.
404 Sette Drive
Paramus, New Jersey 07652
</TABLE>
------------------------------
Any questions or requests for assistance or additional copies of the Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Information Agent or the Dealer Manager at their respective
telephone numbers and locations listed below. You may also contact your broker,
dealer, commercial bank or trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the Offer is:
Morrow & Co., Inc.
909 Third Avenue, 20th Floor 39 South LaSalle Street
New York, New York 10022 Chicago, Illinois 60603
(212) 754-8000 (312) 444-1150
(Call Collect) (Call Collect)
or
Call Toll Free 1-800-662-5200
The Dealer Manager for the Offer is:
CS First Boston Corporation
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
(212) 909-2000 (Call Collect)
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
SANTA FE PACIFIC CORPORATION
AT
$17.50 NET PER SHARE
PURSUANT TO THE OFFER TO PURCHASE DATED NOVEMBER 9, 1994
BY
UP ACQUISITION CORPORATION,
A WHOLLY-OWNED SUBSIDIARY
OF
UNION PACIFIC CORPORATION
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON THURSDAY, DECEMBER 8, 1994, UNLESS EXTENDED
The Depositary for the Offer is:
CITIBANK, N.A.
<TABLE>
<S> <C> <C> <C>
By Mail: By Facsimile Overnight Express By Hand:
Transmission: Mail Courier:
Citibank, N.A. (For Eligible Citibank, N.A. Citibank, N.A.
c/o Citicorp Data Institutions Only) c/o Citicorp Data Corporate Trust Window
Distribution, Inc. (201)262-3240 Distribution, Inc. 111 Wall Street, 5th Floor
P.O. Box 1429 404 Sette Drive New York, New York
Paramus, New Jersey 07653 Paramus, New Jersey 07652
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
THIS LETTER OF TRANSMITTAL IS TO BE USED EITHER IF CERTIFICATES EVIDENCING
SHARES (AS DEFINED BELOW) ARE TO BE FORWARDED HEREWITH OR, UNLESS AN AGENT'S
MESSAGE (AS DEFINED IN THE OFFER TO PURCHASE) IS UTILIZED, IF DELIVERY OF SHARES
IS TO BE MADE BY BOOK-ENTRY TRANSFER TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY
AT THE DEPOSITORY TRUST COMPANY, THE MIDWEST SECURITIES TRUST COMPANY OR THE
PHILADELPHIA DEPOSITORY TRUST COMPANY (EACH, A "BOOK-ENTRY TRANSFER FACILITY"
AND, COLLECTIVELY, THE "BOOK-ENTRY TRANSFER FACILITIES") PURSUANT TO THE
PROCEDURES SET FORTH IN SECTION 3 OF THE OFFER TO PURCHASE. Stockholders whose
certificates evidencing Shares are not immediately available or who cannot
deliver confirmation of the book-entry transfer of their Shares into the
Depositary's account at a Book-Entry Transfer Facility ("Book-Entry
Confirmation") and all other documents required hereby to the Depositary on or
prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase)
must tender their Shares according to the guaranteed delivery procedures set
forth in Section 3 of the
<PAGE> 2
Offer to Purchase. See Instruction 2. Delivery of documents to a Book-Entry
Transfer Facility does not constitute delivery to the Depositary.
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
---------------------------------------------
Check Box of Book-Entry Transfer Facility:
/ / The Depository Trust Company
/ / Midwest Securities Trust Company
/ / Philadelphia Depository Trust Company
Account Number
--------------------------------------------------------------
Transaction Code Number
-----------------------------------------------------
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Owner(s):
--------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
------------------------
Name of Institution that Guaranteed Delivery:
-----------------------------
If Delivered by Book-Entry Transfer, Check Box of Book-Entry Transfer
Facility:
/ / The Depository Trust Company
/ / Midwest Securities Trust Company
/ / Philadelphia Depository Trust Company
Account Number
-------------------------------------------------------------
Transaction Code Number
----------------------------------------------------
2
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- ---------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE(S) TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ---------------------------------------------------------------------------------------------------------
TOTAL NUMBER OF
SHARES NUMBER OF
CERTIFICATE REPRESENTED SHARES
NUMBER(S)* BY CERTIFICATE(S) TENDERED**
- ---------------------------------------------------------------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
TOTAL SHARES
- ---------------------------------------------------------------------------------------------------------
* Need not be completed by stockholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares being delivered to the Depositary are
being tendered. See Instruction 4.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
The names and addresses of the registered holders should be printed, if not
already printed above, exactly as they appear on the certificates representing
Shares tendered hereby. The certificates and number of Shares that the
undersigned wishes to tender should be indicated in the appropriate boxes.
3
<PAGE> 4
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS.
Ladies and Gentlemen:
The undersigned hereby tenders to UP Acquisition Corporation (the
"Purchaser"), a Utah corporation and a wholly-owned subsidiary of Union Pacific
Corporation, a Utah corporation, the above described shares of common stock, par
value $1.00 per share (the "Shares"), of Santa Fe Pacific Corporation, a
Delaware corporation (the "Company"), pursuant to the Purchaser's offer to
purchase 115,903,127 Shares, or such greater number of Shares as equals 57.1% of
the Shares outstanding on a fully diluted basis as of the Expiration Date (the
"Maximum Number"), at a price of $17.50 per share, net to the seller in cash
without interest upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated November 9, 1994 (the "Offer to Purchase"), receipt of
which is hereby acknowledged, and in this Letter of Transmittal (which, together
with any amendments or supplements thereto, constitute the "Offer"). The
Purchaser reserves the right to transfer or assign in whole or from time to time
in part, to one or more of its affiliates the right to purchase Shares tendered
pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith in accordance with the terms and subject to the conditions of
the Offer, the undersigned hereby sells, assigns, and transfers to, or upon the
order of, the Purchaser all right, title and interest in and to all the Shares
that are being tendered hereby (and any and all other Shares or other securities
issued or issuable in respect thereof on or after November 9, 1994) and
irrevocably constitutes and appoints the Depositary the true and lawful agent
and attorney-in-fact of the undersigned with respect to such Shares (and any
such other Shares or securities) with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest), to
(a) deliver certificates for such Shares (and any such other Shares or
securities), or transfer ownership of such Shares (and any such other Shares or
securities) on the account books maintained by a Book-Entry Transfer Facility,
together in either such case with all accompanying evidences of transfer and
authenticity, to or upon the order of the Purchaser upon receipt by the
Depositary, as the undersigned's agent, of the purchase price (adjusted, if
appropriate, as provided in the Offer to Purchase), (b) present such Shares (and
any such other Shares or securities) for transfer on the books of the Company
and (c) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Shares (and any other such Shares or securities), all in
accordance with the terms of the Offer.
If, on or after November 9, 1994, the Company should declare or pay any
cash or stock dividend or other distribution on or issue any rights with respect
to the Shares, payable or distributable to stockholders of record on a date
before the transfer to the name of the Purchaser or its nominee or transferee on
the Company's stock transfer records of the Shares accepted for payment pursuant
to the Offer, then, subject to the provisions of Section 14 of the Offer to
Purchase, (i) the purchase price per Share payable by the Purchaser pursuant to
the Offer will be reduced by the amount of any such cash dividend or cash
distribution and (ii) the whole of any such non-cash dividend, distribution or
right will be received and held by the tendering stockholder for the account of
the Purchaser and shall be required to be promptly remitted and transferred by
each tendering stockholder to the Depositary for the account of the Purchaser,
accompanied by appropriate documentation of transfer. Pending such remittance,
the Purchaser will be entitled to all rights and privileges as owner of any such
non-cash dividend, distribution or right and may withhold the entire purchase
price or deduct from the purchase price the amount of value thereof, as
determined by the Purchaser in its sole discretion.
4
<PAGE> 5
The undersigned hereby irrevocably appoints, L. White Matthews, III,
Richard K. Davidson and Judy L. Swantak and each of them, the attorneys-in-fact
and proxies of the undersigned, each with full power of substitution to the full
extent of such stockholder's rights with respect to tendered Shares (and any and
all other Shares or securities or rights issued or issuable in respect thereof
on or after November 9, 1994), to vote (subject to the terms of the Voting Trust
Agreement (as defined in the Offer to Purchase) so long as it shall be in effect
with respect to the Shares) in such manner as each such attorney and proxy or
his substitute shall in his sole discretion deem proper, and otherwise act
(including without limitation pursuant to written consent) with respect to all
the Shares tendered hereby which have been accepted for payment by the Purchaser
prior to the time of such vote or action, which the undersigned is entitled to
vote at any meeting of stockholders (whether annual or special and whether or
not an adjourned meeting) of the Company, or otherwise. This proxy is coupled
with an interest in the Company and in the Shares and is irrevocable and is
granted in consideration of, and is effective when, if and to the extent that
the Purchaser accepts such Shares for payment pursuant to the Offer. Such
acceptance for payment shall revoke, without further action, all prior proxies
granted by the undersigned at any time with respect to such Shares (and any such
other Shares or other securities) and no subsequent proxies will be given (and
if given will be deemed not to be effective) with respect thereto by the
undersigned. The undersigned acknowledges that in order for Shares to be deemed
validly tendered, immediately upon the acceptance for payment of such Shares,
the Purchaser or the Purchaser's designee must be able to exercise full voting
and other rights of a record and beneficial holder with respect to such Shares.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby (and any and all other Shares or other securities issued or
issuable in respect thereof on or after November 9, 1994), that the undersigned
own(s) the Shares tendered hereby within the meaning of Rule 14e-4 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that
such tender of shares complies with Rule 14e-4 under the Exchange Act, and that,
when the same are accepted for payment by the Purchaser, the Purchaser will
acquire good, marketable and unencumbered title thereto, free and clear of all
liens, restrictions, charges and encumbrances and the same will not be subject
to any adverse claim. The undersigned, upon request, will execute and deliver
any additional documents deemed by the Depositary or the Purchaser to be
necessary or desirable to complete or confirm the sale, assignment and transfer
of the Shares tendered hereby (and any and all such other Shares or other
securities).
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall not be affected by, and shall survive, the death or incapacity
of the undersigned, and any obligation of the undersigned hereunder shall be
binding upon the successors, assigns, heirs, executors, administrators, trustees
in bankruptcy, personal and legal representatives of the undersigned. Except as
stated in the Offer to Purchase, this tender is irrevocable provided that Shares
tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Purchaser upon the terms and subject to the conditions of the Offer. The
undersigned recognizes that under certain circumstances set forth in the Offer
to Purchase, Purchaser may not be required to accept for payment any of the
Shares tendered hereby.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or any certificates for Shares
not tendered or accepted for payment in the name(s) of the undersigned.
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the purchase price and/or return any certificates for
Shares not tendered or accepted for payment (and accompanying documents, as
appropriate) to the undersigned at the address shown below the undersigned's
signature. In the event that both the Special Delivery Instructions and the
Special Payment Instructions are completed, please issue the check for the
purchase price and/or any certificates for Shares not tendered or accepted for
payment in the name of, and deliver such check and/or return such certificates
to the person or persons so indicated. Stockholders delivering Shares by
book-entry transfer may request that any Shares not accepted for payment be
returned by crediting such account maintained at a Book-Entry Transfer Facility
as such stockholder may designate by making an appropriate entry under "Special
Payment Instructions." The undersigned recognizes that the Purchaser has no
obligation pursuant to the Special Payment Instructions to transfer any Shares
from the name of the registered holder thereof if the Purchaser does not accept
for payment any of the Shares so tendered.
5
<PAGE> 6
- -------------------------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6, AND 7)
To be completed ONLY if certificates for Shares not tendered or not
purchased and/or the check for the purchase price of Shares purchased are to be
issued in the name of someone other than the undersigned, or if Shares delivered
by book-entry transfer which are not purchased are to be returned by credit to
an account maintained at a Book-Entry Transfer Facility other than that
designated above.
Issue check and/or certificates to:
Name
---------------------------------------------------------------------------
(PLEASE PRINT)
Address
------------------------------------------------------------------------
(ZIP CODE)
- --------------------------------------------------------------------------------
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
/ / Credit unpurchased Shares delivered by book-entry transfer to the Book-Entry
Transfer Facility account set forth below.
Check appropriate box:
/ / The Depository Trust Company
/ / Midwest Securities Trust Company
/ / Philadelphia Depository Trust Company
- --------------------------------------------------------------------------------
(ACCOUNT NUMBER)
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificates for Shares not tendered or not
purchased and/or the check for the purchase price of Shares purchased are to be
sent to someone other than the undersigned, or to the undersigned at an address
other than that shown above.
Mail check and/or certificates to:
Name
---------------------------------------------------------------------------
(PLEASE PRINT)
Address
-----------------------------------------------------------------------
- -------------------------------------------------------------------------------
(ZIP CODE)
- -------------------------------------------------------------------------------
6
<PAGE> 7
- --------------------------------------------------------------------------------
SIGN HERE
(COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) OF HOLDER(S) OF SHARES
Dated: , 1994
(Must be signed by registered holder(s) exactly as name(s) appear(s) on stock
certificate(s) or on a security position listing or by person(s) authorized to
become registered holder(s) by certificates and documents transmitted herewith.
If signature is by trustees, executors, administrators, guardians,
attorneys-in-fact, agents, officers of corporations or others acting in a
fiduciary or representative capacity, please provide the following information.
See Instruction 5.)
Name(s)
-------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title)
-----------------------------------------------------------
Address
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
-------------------------------------------------
Tax Identification or
Social Security No.
-------------------------------------------------------------
(COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature
------------------------------------------------------------
Name
----------------------------------------------------------------------------
(PLEASE PRINT)
Title
---------------------------------------------------------------------------
Name of Firm
--------------------------------------------------------------------
Address
-------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
--------------------------------------------------
Dated: , 1994
- --------------------------------------------------------------------------------
7
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. No signature guarantee on this Letter of
Transmittal is required (i) if this Letter of Transmittal is signed by the
registered holder of the Shares (which term, for purposes of this document,
shall include any participant in a Book-Entry Transfer Facility whose name
appears on a security position listing as the owner of Shares) tendered
herewith, unless such holder has completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on the
reverse hereof, or (ii) if such Shares are tendered for the account of a member
firm of a registered national securities exchange, a member of the National
Association of Securities Dealers, Inc. or a commercial bank or trust company
having an office or correspondent in the United States (each of the foregoing
being referred to as an "Eligible Institution"). In all other cases, all
signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instruction 5.
2. Delivery of Letter of Transmittal and Certificates. This Letter of
Transmittal is to be completed by stockholders either if certificates are to be
forwarded herewith or if tenders of Shares are to be made pursuant to the
procedures for delivery by book-entry transfer set forth in Section 3 of the
Offer to Purchase. Certificates for all physically tendered Shares, or any
Book-Entry Confirmation of Shares, as the case may be, as well as a properly
completed and duly executed Letter of Transmittal (or manually signed facsimile
thereof), with any required signature guarantees, and any other documents
required by this Letter of Transmittal, or an Agent's Message (as defined
below), in connection with a book-entry transfer, must be transmitted to and
received by the Depositary at one of its addresses set forth herein prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase). If a
stockholder's certificates for Shares are not immediately available or time will
not permit all required documents to reach the Depositary prior to the
Expiration Date or the procedure for book-entry transfer cannot be completed on
a timely basis, such stockholder's Shares may nevertheless be tendered by
properly completing and duly executing the Notice of Guaranteed Delivery
pursuant to the guaranteed delivery procedure set forth in Section 3 of the
Offer to Purchase. Pursuant to such procedure, (i) such tender must be made by
or through an Eligible Institution, (ii) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form provided by the
Purchaser, must be received by the Depositary prior to the Expiration Date, and
(iii) in the case of a guarantee of Shares, the certificates for all tendered
Shares, in proper form for transfer, or a Book-Entry Confirmation, together with
a properly completed and duly executed Letter of Transmittal (or manually signed
facsimile thereof) with any required signature guarantee (or, in the case of a
book-entry transfer, an Agent's Message) and any other documents required by
such Letter of Transmittal, are received by the Depositary within five New York
Stock Exchange, Inc. trading days after the date of execution of the Notice of
Guaranteed Delivery. The term "Agent's Message" means a message, transmitted by
a Book-Entry Transfer Facility to, and received by, the Depositary and forming a
part of a Book-Entry Confirmation, which states that such Book-Entry Transfer
Facility has received an express acknowledgement from the participant in such
Book-Entry Transfer Facility tendering the Shares, that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that the Purchaser may enforce such agreement against the participant.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE CERTIFICATE FOR
SHARES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY
BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING
STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY
THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. EXCEPT AS OTHERWISE PROVIDED IN
THIS INSTRUCTION 2, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED
BY THE DEPOSITARY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution of
this Letter of Transmittal (or a manually signed facsimile thereof), waive any
right to receive any notice of the acceptance of their Shares for payment.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
signed schedule attached hereto.
4. Partial Tenders. (Not applicable to stockholders who tender by
book-entry transfer.) If fewer than all the Shares evidenced by any certificate
submitted are to be tendered, fill in the number of Shares which are to be
tendered in the box entitled "Description of Shares Tendered." In such case, new
certificate(s) for the remainder of the Shares that were evidenced by your old
certificate(s) will be sent to you, unless otherwise provided in the appropriate
box on this Letter of Transmittal, as soon as practicable after the Expiration
Date. All Shares represented by certificates delivered to the Depositary will be
deemed to have been tendered unless otherwise indicated.
8
<PAGE> 9
5. Signatures on Letter of Transmittal, Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond exactly with the name(s) as
written on the face of the certificate(s) without alteration, enlargement or any
change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal or any certificates or stock powers are
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to the Purchaser of such person's authority so to act must be
submitted.
When this Letter of Transmittal is signed by the registered owner(s) of the
Shares listed and transmitted hereby, no endorsement of certificates or separate
stock powers are required unless payment or certificates for Shares not tendered
or purchased are to be issued to a person other than the registered owner(s).
Signatures on such certificates or stock powers must be guaranteed by an
Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Shares listed, the certificates must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear on the certificates. Signatures on
such certificates or stock powers must be guaranteed by an Eligible Institution.
6. Stock Transfer Taxes. Except as set forth in this Instruction 6, the
Purchaser will pay or cause to be paid any stock transfer taxes with respect to
the transfer and sale of purchased Shares to it or its order pursuant to the
Offer. If payment of the purchase price is to be made, or if certificates for
Shares not tendered or purchased are to be registered in the name of, any person
other than the registered holder, or if tendered certificates are registered in
the name of any person other than the person(s) signing this Letter of
Transmittal, the amount of any stock transfer taxes (whether imposed on the
registered holder or such person) payable on account of the transfer to such
person will be deducted from the purchase price unless satisfactory evidence of
the payment of such taxes or exemption therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
7. Special Payment and Delivery Instructions. If a check and/or
certificates for unpurchased Shares are to be issued in the name of a person
other than the signer of this Letter of Transmittal or if a check is to be sent
and/or such certificates are to be returned to someone other than the signer of
this Letter of Transmittal or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed.
Stockholders tendering Shares by book-entry transfer may request that Shares not
purchased be credited to such account maintained at a Book-Entry Transfer
Facility as such stockholder may designate hereon. If no such instructions are
given, such Shares not purchased will be returned by crediting the account at
the Book-Entry Transfer Facility designated above.
8. Requests for Assistance or Additional Copies. Requests for assistance
may be directed to the Dealer Manager or the Information Agent at the addresses
set forth below. Additional copies of the Offer to Purchase, this Letter of
Transmittal, the Notice of Guaranteed Delivery and the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 may be
obtained from the Dealer Manager or the Information Agent at the address set
forth below or from your broker, dealer, commercial bank or trust company.
9. Waiver of Conditions. The conditions of the Offer may be waived, in
whole or in part, by the Purchaser, in its sole discretion, at any time and from
time to time, in the case of any Shares tendered.
9
<PAGE> 10
10. Substitute Form W-9. The tendering stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN") on
Substitute From W-9, which is provided under "Important Tax Information" below,
and to certify whether the stockholder is subject to backup withholding of
Federal income tax. If a tendering stockholder is subject to backup withholding,
the stockholder must cross out item (2) of the Certification box of the
Substitute Form W-9. Failure to provide the information on the Substitute Form
W-9 may subject the tendering stockholder to 31% Federal income tax withholding
with respect to any cash payments received pursuant to the Offer and Proposed
Merger. If the tendering stockholder has not been issued a TIN and has applied
for a number or intends to apply for a number in the near future, he or she
should write "Applied For" in the space provided for the TIN in Part I, and sign
and date the Substitute Form W-9. If "Applied For" is written in Part I and the
Depositary is not provided with a TIN within 60 days, the Depositary will
withhold 31% on all payments of the purchase price until a TIN is provided to
the Depositary.
11. Lost, Destroyed or Stolen Certificates. If any certificate(s)
representing Shares has been lost, destroyed or stolen, the stockholder should
promptly notify the Depositary. The stockholder will then be instructed as to
the steps that must be taken in order to replace the certificate(s). This Letter
of Transmittal and related documents cannot be processed until the procedures
for replacing lost or destroyed certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF), PROPERLY
COMPLETED AND DULY EXECUTED, TOGETHER WITH CERTIFICATES OR CONFIRMATION OF
BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED
DELIVERY, MUST BE RECEIVED BY THE DEPOSITARY AT ONE OF ITS ADDRESSES SET FORTH
HEREIN PRIOR TO THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under Federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required to provide the Depositary with such
stockholder's correct TIN on Substitute Form W-9 below. If such stockholder is
an individual, the TIN is his social security number. If a tendering stockholder
is subject to backup withholding, he must cross out item (2) of the
Certification box on the Substitute Form W-9. If the Depositary is not provided
with the correct TIN, the stockholder may be subject to a $50 penalty imposed by
the Internal Revenue Service. In addition, payments that are made to such
stockholder with respect to Shares purchased pursuant to the Offer may be
subject to backup withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that stockholder must submit to the Depositary a properly completed
Internal Revenue Service Form W-8, signed under penalties of perjury, attesting
to that individual's exempt status. Such statements may be obtained from the
Depositary. Exempt stockholders, other than foreign individuals, should furnish
their TIN, write "Exempt" on the face of the Substitute Form W-9 below, and
sign, date and return the Substitute Form W-9 to the Depositary. See the
enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of his correct TIN by completing the form
below certifying that the TIN provided on the Substitute Form W-9 is correct (or
that such stockholder is awaiting a TIN).
10
<PAGE> 11
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the record owner of the Shares. If
the Shares are in more than one name or are not in the name of the actual owner,
consult the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional guidelines on which number to
report. If the tendering stockholder has not been issued a TIN and has applied
for a number or intends to apply for a number in the near future, he should
write "Applied For" in the space provided for in the TIN in Part I, and sign and
date the Substitute Form W-9. If "Applied For" is written in Part I and the
Depositary is not provided with a TIN within 60 days, the Depositary will
withhold 31% on all payments of the purchase price until a TIN is provided to
the Depositary.
PAYER'S NAME:
-------------------------
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
SUBSTITUTE PART I -- PLEASE PROVIDE YOUR TIN IN THE ------------------------
FORM W-9 BOX AT RIGHT AND CERTIFY BY SIGNING AND Social Security Number
DEPARTMENT OF THE DATING BELOW. OR
TREASURY
INTERNAL REVENUE SERVICE
------------------------------
Employer Identification Number
(If awaiting TIN write
"Applied For")
--------------------------------------------------------------------------
PART II -- For Payees exempt from backup withholding, see the enclosed
Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 and complete as instructed therein.
CERTIFICATION -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or a Taxpayer Identification Number has not been issued to me)
and either (a) I have mailed or delivered an application to receive a
Taxpayer Identification Number to the appropriate Internal Revenue
Service ("IRS") or Social Security Administration office or (b) I
intend to mail or deliver an application in the near future. I
understand that if I do not provide a Taxpayer Identification Number
within sixty (60) days, 31% of all reportable payments made to me
PAYER'S REQUEST FOR thereafter will be withheld until I provide a number, and
TAXPAYER (2) I am not subject to backup withholding either because (a) I am exempt
IDENTIFICATION NUMBER from backup withholding, (b) I have not been notified by the IRS that I
(TIN) am subject to backup withholding as a result of a failure to report
all interest or dividends, or (c) the IRS has notified me that I am
no longer subject to backup withholding.
CERTIFICATE INSTRUCTIONS -- You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding
because of underreporting interest or dividends on your tax return.
However, if after being notified by the IRS that you were subject to
backup withholding you received another notification from the IRS that
you are no longer subject to backup withholding, do not cross out item
(2). (Also see instructions in the enclosed Guidelines.)
- ---------------------------------------------------------------------------------------------------
SIGNATURE DATE , 1994
- ---------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
11
<PAGE> 12
Questions and requests for assistance or additional copies of the Offer to
Purchase, the Letter of Transmittal and other tender offer materials may be
directed to the Information Agent or the Dealer Manager as set forth below:
The Information Agent for the Offer is:
MORROW & CO., INC.
909 Third Avenue, 20th Floor
New York, New York 10022
(212) 754-8000 (Call Collect)
(800) 662-5200
The Dealer Manager for the Offer is:
CS FIRST BOSTON CORPORATION
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
(212) 909-2000 (Call Collect)
12
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
SANTA FE PACIFIC CORPORATION
TO
UP ACQUISITION CORPORATION,
A WHOLLY-OWNED SUBSIDIARY
OF
UNION PACIFIC CORPORATION
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or one substantially in the form
hereof, must be used to accept the Offer (as defined below) if (i) certificates
("Share Certificates") representing shares of Common Stock, par value $1.00 per
share (the "Shares"), of Santa Fe Pacific Corporation, a Delaware corporation,
are not immediately available, (ii) time will not permit all required documents
to reach Citibank, N.A., as Depositary (the "Depositary"), prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase (as defined
below)) or (iii) the procedure for delivery by book-entry transfer cannot be
completed on a timely basis. This Notice of Guaranteed Delivery may be delivered
by hand or mail or transmitted by telegram or facsimile transmission to the
Depositary. See Section 3 of the Offer to Purchase.
The Depositary for the Offer is:
CITIBANK, N.A.
<TABLE>
<S> <C> <C> <C>
By Mail: By Facsimile Overnight Express By Hand:
Transmission: Mail Courier:
Citibank, N.A. (For Eligible Citibank, N.A. Citibank, N.A.
c/o Citicorp Data Institutions Only) c/o Citicorp Data Corporate Trust Window
Distribution, Inc. (201)262-3240 Distribution, Inc. 111 Wall Street, 5th Floor
P.O. Box 1429 404 Sette Drive New York, New York
Paramus, New Jersey 07653 Paramus, New Jersey 07652
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A
LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION"
UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE
APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE> 2
LADIES AND GENTLEMEN:
The undersigned hereby tenders to UP Acquisition Corporation, a Utah
corporation and a wholly-owned subsidiary of Union Pacific Corporation, a Utah
corporation, upon the terms and subject to the conditions set forth in the Offer
to Purchase dated November 9, 1994 and the related Letter of Transmittal (which
together constitute the "Offer"), receipt of which is hereby acknowledged,
_____________ Shares pursuant to the guaranteed delivery procedures set forth in
Section 3 of the Offer to Purchase.
Certificate No(s). (if available) Name(s) of Record Holder(s)
___________________________________________ ___________________________
Check ONE box if Shares will be tendered by ___________________________
book-entry transfer: PLEASE TYPE OR PRINT
/ / The Depository Trust Company Address(es)________________
/ / Midwest Securities Trust Company ___________________________
ZIP CODE
/ / Philadelphia Depository Trust Company
Area Code and Tel. No. ____
Account Number ____________________________
Signature(s)_______________
Dated ______________________________ , 1994 ___________________________
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered national
securities exchange or of the National Association of Securities Dealers Inc. or
which is a commercial bank or trust company having an office or correspondent in
the United States, hereby (a) represents that the tender of shares effected
hereby complies with Rule 14e-4 under the Securities Exchange Act of 1934, as
amended and (b) guarantees delivery to the Depositary, at one of its addresses
set forth above, of certificates representing the Shares tendered hereby in
proper form for transfer, or confirmation of book-entry transfer of such Shares
into the Depositary's accounts at The Depository Trust Company, the Midwest
Securities Trust Company or the Philadelphia Depository Trust Company, in each
case with delivery of a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), and any other required documents, within
five New York Stock Exchange, Inc. trading days after the date hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible Institution.
<TABLE>
<S> <C>
__________________________________ __________________________________
NAME OF FIRM AUTHORIZED SIGNATURE
__________________________________ __________________________________
ADDRESS TITLE
__________________________________ Name _____________________________
ZIP CODE PLEASE TYPE OR PRINT
Area Code and Tel. No. ___________ Date ________________________, 1994
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES
SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
2
<PAGE> 1
(LOGO) CS FIRST BOSTON CS First Boston Corporation
Park Avenue Plaza
New York, New York 10055
Tel: (212) 909-2000
OFFER TO PURCHASE FOR CASH
115,903,127 SHARES OF COMMON STOCK
OF
SANTA FE PACIFIC CORPORATION
AT
$17.50 NET PER SHARE
BY
UP ACQUISITION CORPORATION,
A WHOLLY-OWNED SUBSIDIARY OF
UNION PACIFIC CORPORATION
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, DECEMBER 8, 1994,
UNLESS THE OFFER IS EXTENDED.
November 9, 1994
To Brokers, Dealers, Commercial Banks,
Trust Companies And Other Nominees:
We have been engaged by UP Acquisition Corporation, a Utah corporation (the
"Purchaser") and a wholly-owned subsidiary of Union Pacific Corporation, a Utah
corporation ("Parent"), to act as Dealer Manager in connection with the
Purchaser's offer to purchase 115,903,127 shares of Common Stock, par value
$1.00 per share (the "Shares"), of Santa Fe Pacific Corporation (the "Company"),
or such greater number of Shares as equals 57.1% of the Shares outstanding on a
fully diluted basis as of the expiration of the Offer (the "Maximum Number"), at
$17.50 per Share, net to the seller in cash without interest, upon the terms and
subject to the conditions set forth in the Offer to Purchase dated November 9,
1994 (the "Offer to Purchase") and the related Letter of Transmittal (which,
together, with any amendments or supplements thereto, constitute the "Offer")
enclosed herewith.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST A
MAJORITY OF THE SHARES OUTSTANDING ON A FULLY DILUTED BASIS.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, or who hold
Shares registered in their own names, we are enclosing the following documents:
1. Offer to Purchase;
2. Letter of Transmittal to be used by holders of Shares in accepting the
Offer and tendering Shares;
<PAGE> 2
3. A letter which may be sent to your clients for whose account you hold
Shares registered in your name or in the name of your nominees, with
space provided for obtaining such clients' instructions with regard to
the Offer;
4. Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares are not immediately available or time will not
permit all required documents to reach the Depositary by the Expiration
Date (as defined in the Offer to Purchase) or if the procedure for
book-entry transfer cannot be completed on a timely basis;
5. Guidelines of the Internal Revenue Service for Certification of Taxpayer
Identification Number on Substitute Form W-9; and
6. Return envelope addressed to the Depositary.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will accept for payment and pay for the Maximum
Number of Shares which are validly tendered prior to the Expiration Date and not
theretofore properly withdrawn when, as and if the Purchaser gives oral or
written notice to the Depositary of the Purchaser's acceptance of such Shares
for payment pursuant to the Offer. Payment for Shares purchased pursuant to the
Offer will in all cases be made only after timely receipt by the Depositary of
certificates for such Shares, or timely confirmation of a book-entry transfer of
such Shares into the Depositary's account at The Depository Trust Company, the
Midwest Securities Company or the Philadelphia Depository Trust Company,
pursuant to the procedures described in Section 3 of the Offer to Purchase, a
properly completed and duly executed Letter of Transmittal (or manually signed
facsimile thereof) or an Agent's Message in connection with a book-entry
transfer, and all other documents required by the Letter of Transmittal.
The Purchaser will not pay any fees or commissions to any broker or dealer
or other person (other than the Dealer Manager) in connection with the
solicitation of tenders of Shares pursuant to the Offer. The Purchaser will,
however, upon request, reimburse you for customary mailing and handling expenses
incurred by you in forwarding the enclosed materials to your clients.
The Purchaser will pay or cause to be paid any transfer taxes payable on
the transfer of Shares to it, except as otherwise provided in Instruction 6 of
the enclosed Letter of Transmittal.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, DECEMBER 8, 1994,
UNLESS EXTENDED.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, should be sent to the
Depositary, and certificates representing the tendered Shares should be
delivered or such Shares should be tendered by book-entry transfer, all in
accordance with the Instructions set forth in the Letter of Transmittal and the
Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents prior to the expiration
of the Offer, a tender may be effected by following the guaranteed delivery
procedures specified under Section 3, "Procedure for Tendering Shares" in the
Offer to Purchase.
Any inquiries you may have with respect to the Offer should be addressed to
the Dealer Manager or the Information Agent at their respective addresses and
telephone numbers set forth on the back cover page of the Offer to Purchase.
2
<PAGE> 3
Additional copies of the enclosed materials may be obtained from the
undersigned, at CS First Boston Corporation, telephone (212) 909-2000 (Collect)
or by calling the Information Agent, Morrow & Co., Inc., at (212) 754-8000
(Collect), or from brokers, dealers, commercial banks or trust companies.
Very truly yours,
CS FIRST BOSTON CORPORATION
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY PERSON AS AN AGENT OF PARENT, THE PURCHASER, THE DEPOSITARY, THE
INFORMATION AGENT OR THE DEALER MANAGER, OR ANY AFFILIATE OF ANY OF THE
FOREGOING, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY
STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE
DOCUMENTS ENCLOSED AND THE STATEMENTS CONTAINED THEREIN.
3
<PAGE> 1
OFFER TO PURCHASE FOR CASH
115,903,127 SHARES OF COMMON STOCK
OF
SANTA FE PACIFIC CORPORATION
AT
$17.50 NET PER SHARE
BY
UP ACQUISITION CORPORATION,
A WHOLLY-OWNED SUBSIDIARY OF
UNION PACIFIC CORPORATION
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, DECEMBER 8, 1994,
UNLESS THE OFFER IS EXTENDED.
November 9, 1994
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated November 9,
1994 (the "Offer to Purchase") and a Letter of Transmittal (which, together with
any amendments or supplements thereto, constitute the "Offer") relating to an
offer by UP Acquisition Corporation, a Utah corporation (the "Purchaser") and a
wholly-owned subsidiary of Union Pacific Corporation, a Utah corporation
("Parent"), to purchase 115,903,127 shares of Common Stock, par value $1.00 per
share (collectively, the "Shares"), of Santa Fe Pacific Corporation, a Delaware
corporation (the "Company"), or such greater number of shares as equals 57.1% of
the Shares outstanding on a fully diluted basis as of the expiration of the
Offer, at a purchase price of $17.50 per Share, net to the seller in cash
without interest, upon the terms and subject to the conditions set forth in the
Offer. We are the holder of record of the Shares held by us for your account. A
tender for such Shares can be made only by us as the holder of record and
pursuant to your instructions. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR
YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR
YOUR ACCOUNT.
We request instructions as to whether you wish to tender any or all of such
Shares held by us for your account, pursuant to the terms and conditions set
forth in the Offer.
Your attention is invited to the following:
1. The tender price is $17.50 per Share, net to the seller in cash without
interest.
2. The Offer, proration period and withdrawal rights will expire at 12:00
midnight, New York City time, on Thursday, December 8, 1994, unless the Offer is
extended.
3. The Offer is being made for 115,903,127 Shares or such greater number of
Shares as equals 57.1% of the Shares outstanding on a fully diluted basis as of
the expiration of the Offer. If more than 115,903,127 Shares, or such greater
number of Shares as equals 57.1% of the Shares outstanding as of the expiration
of the Offer, are validly tendered prior to the Expiration Date (as defined in
the Offer to Purchase) and not withdrawn, the Purchaser will, upon the terms and
subject to the conditions of the Offer, accept such Shares for payment on a pro
rata basis, with adjustments to avoid purchases of fractional shares, based upon
the number of Shares validly tendered prior to the Expiration Date and not
withdrawn.
<PAGE> 2
4. The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer at least a
majority of the Shares outstanding on a fully diluted basis, and the Company
having entered into a definitive merger agreement with Parent and the Purchaser
to provide for the acquisition of the Company pursuant to the Offer.
5. Stockholders who tender Shares will not be obligated to pay brokerage
commissions, solicitation fees or, except as set forth in Instruction 6 of the
Letter of Transmittal, transfer taxes on the purchase of Shares by the Purchaser
pursuant to the Offer.
The Purchaser is not aware of any state where the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If the Purchaser becomes aware of any valid state statute prohibiting
the making of the Offer or the acceptance of Shares pursuant thereto, the
Purchaser will make a good faith effort to comply with any such state statute.
If, after such good faith effort, the Purchaser cannot comply with any such
state statute, the Offer will not be made to (nor will tenders be accepted from
or on behalf of) the holders of Shares in such state. In any jurisdiction where
the securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer will be deemed to be made on behalf of the
Purchaser by the Dealer Manager or one or more registered brokers or dealers
licensed under the laws of such jurisdiction.
If you wish to have us tender any or all of your Shares, please complete,
sign and return to us the form set forth below. An envelope to return your
instructions to us is enclosed. Your instructions to us should be forwarded in
ample time to permit us to submit a tender on your behalf prior to the
expiration of the Offer. If you authorize the tender of your Shares, all such
Shares will be tendered unless otherwise specified on the instruction form set
forth below.
------------------------------------
INSTRUCTIONS WITH RESPECT TO THE OFFER
TO PURCHASE FOR CASH SHARES OF COMMON STOCK
OF SANTA FE PACIFIC CORPORATION
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase dated November 9, 1994 and the related Letter of Transmittal
(which, together with any amendments or supplements thereto, constitute the
"Offer") relating to the offer by UP Acquisition Corporation, a Utah corporation
(the "Purchaser"), to purchase 115,903,127 shares of Common Stock, par value
$1.00 per share (the "Shares"), of Santa Fe Pacific Corporation, a Delaware
corporation, or such greater number of Shares as equals 57.1% of the Shares
outstanding on a fully diluted basis as of the expiration of the Offer.
This will instruct you to tender to the Purchaser the number of Shares
indicated below (or if no number is indicated below, all Shares) held by you for
the account of the undersigned, on the terms and subject to the conditions set
forth in the Offer.
- --------------------------------------------
SIGN HERE
NUMBER OF SHARES TO BE TENDERED:*
---------------------------------
SHARES
- --------------------------------------------- --------------------------------
Signature(s)
Account Number:
------------------------------ --------------------------------
Dated: , 1994
--------------------------------- --------------------------------
Please print name(s) and
address(es) here
--------------------------------
Area Code and Telephone Number
--------------------------------
Tax Identification or Social
Security Number(s)
- ---------------
* Unless otherwise indicated, it will be assumed that all of your Shares held by
us for your account are to be tendered.
2
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. -- Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e. 00-0000000. The table below will help determine the number
to give the payer.
<TABLE>
<S> <C> <C> <C>
- ----------------------------------------------------- -----------------------------------------------------
GIVE THE GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF -- NUMBER OF --
- ----------------------------------------------------- -----------------------------------------------------
1. An individual's account The individual 9. A valid trust, estate, or The legal entity
pension trust (Do not furnish the
2. Two or more individuals The actual owner of identifying number
(joint account) the account or, if of the personal
combined funds, representative or
any one of the trustee unless the
individuals(1) legal entity itself
is not designated
3. Husband and wife (joint The actual owner of in the account
account) the account or, if title.)(5)
joint funds, either
person(1) 10. Corporate account The corporation
4. Custodian account of a minor The minor(2) 11. Religious, charitable, or The organization
(Uniform Gift to Minors Act) educational organization
account
5. Adult and minor (joint The adult or, if
account) the minor is the 12. Partnership account held in The partnership
only contributor, the name of the business
the
minor(1) 13. Association, club, or other The organization
tax-
6. Account in the name of The ward, minor, exempt organization
guardian or committee for a or incompetent
designated ward, minor, or person(3) 14. A broker or registered The broker or
incompetent person nominee nominee
7. a. The usual revocable The grantor- 15. Account with the Department The public entity
savings trust account trustee(1) of Agriculture in the name of
(grantor is also trustee) a public entity (such as a
b. So-called trust account The actual owner(1) State or local government,
that is not a legal or valid school district, or prison)
trust under State law that receives agricultural
program payments
8. Sole proprietorship account The owner(4)
_______________________________________________________ ________________________________________________
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- - A corporation.
- - A financial institution.
- - An organization exempt from tax under section 501(a), or an individual
retirement plan.
- - The United States or any agency or instrumentality thereof.
- - A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- - A foreign government, a political subdivision of a foreign government, or any
agency or instrumentality thereof.
- - An international organization or any agency, or instrumentality thereof.
- - A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
- - A real estate investment trust.
- - A common trust fund operated by a bank under section 584(a).
- - An exempt charitable remainder trust, or a nonexempt trust described in
section 4947(a)(1).
- - An entity registered at all times under the Investment Company Act of 1940.
- - A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
- - Payments to nonresident aliens subject to withholding under section 1441.
- - Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- - Payments of patronage dividends where the amount received is not paid in
money.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- - Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the payer's trade or business and you have not provided your
correct taxpayer identification number to the payer.
- - Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- - Payments described in section 6049(b)(5) to non-resident aliens.
- - Payments on tax-free covenant bonds under section 1451.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1984, payers must generally
withhold 20% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. -- If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
under-payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
<PAGE> 1
OFFER TO PURCHASE FOR CASH
115,903,127 SHARES OF COMMON STOCK
OF
SANTA FE PACIFIC CORPORATION
AT
$17.50 NET PER SHARE
BY
UP ACQUISITION CORPORATION,
A WHOLLY-OWNED SUBSIDIARY
OF
UNION PACIFIC CORPORATION
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON THURSDAY, DECEMBER 8, 1994, UNLESS THE OFFER IS EXTENDED.
November 9, 1994
To Participants in the Dividend Reinvestment Plan of Santa Fe Pacific
Corporation:
Enclosed for your consideration are an Offer to Purchase dated November 9,
1994 (the "Offer to Purchase") and a related Letter of Transmittal (which,
together, with any amendments or supplements thereto, constitute the "Offer") in
connection with the offer by UP Acquisition Corporation, a Utah corporation (the
"Purchaser") and a wholly-owned subsidiary of Union Pacific Corporation, a Utah
corporation ("Parent"), to purchase 115,903,127 outstanding shares of Common
Stock, par value $1.00 per share (collectively, the "Shares"), of Santa Fe
Pacific Corporation, a Delaware corporation (the "Company"), or such greater
number of Shares as equals 57.1% of the Shares outstanding on a fully diluted
basis as of the expiration of the Offer, at a purchase price of $17.50 per
Share, net to the seller in cash without interest, upon the terms and subject to
the conditions set forth in the Offer.
Our nominee is the holder of record of Shares held for your account as a
participant in the Dividend Reinvestment Plan of the Company (the "Plan"). A
TENDER OF SUCH SHARES CAN BE MADE ONLY BY US THROUGH OUR NOMINEE AS THE HOLDER
OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS
FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER
SHARES HELD IN YOUR PLAN ACCOUNT.
We request instructions as to whether you wish to have us instruct our
nominee to tender on your behalf any or all of the Shares held in your Plan
account, upon the terms and subject to the conditions set forth in the Offer.
Your attention is directed to the following:
1. The tender price is $17.50 per Share, net to the seller in cash without
interest.
2. The Offer is being made for 115,903,127 Shares or such greater number of
Shares as equals 57.1% of the Shares outstanding on a fully diluted basis as of
the expiration of the Offer. If more than 115,903,127
<PAGE> 2
Shares, or such greater number of Shares as equals 57.1% of the Shares
outstanding as of the expiration of the Offer, are validly tendered prior to the
Expiration Date (as defined in the Offer to Purchase) and not withdrawn, the
Purchaser will, upon the terms and subject to the conditions of the Offer,
accept such Shares for payment on a pro rata basis, with adjustments to avoid
purchases of fractional shares, based upon the number of Shares validly tendered
prior to the Expiration Date and not withdrawn.
3. The Offer, proration period and withdrawal rights will expire at 12:00
midnight, New York City time, on Thursday, December 8, 1994, unless the Offer is
extended.
4. The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer at least a
majority of the Shares outstanding on a fully diluted basis.
5. Stockholders who tender Shares will not be obligated to pay brokerage
commissions, solicitation fees or, except as set forth in Instruction 6 of the
Letter of Transmittal, transfer taxes on the purchase of Shares by the Purchaser
pursuant to the Offer.
If you wish to have us tender any or all of the Shares held in your Plan
account, please so instruct us by completing, executing and returning to us the
instruction form contained in this letter. An envelope in which to return your
instructions to us is enclosed. If you authorize tender of such Shares, all such
Shares will be tendered unless otherwise specified in your instructions. Your
instructions should be forwarded to us in ample time to permit us to instruct
our nominee to submit a tender on your behalf prior to the expiration of the
Offer.
The Offer is made solely by the Offer to Purchase and the Letter of
Transmittal and is being made to all holders of Shares. The Purchaser is not
aware of any state where the making of the Offer is prohibited by administrative
or judicial action pursuant to any valid state statute. If the Purchaser becomes
aware of any valid state statute prohibiting the making of the Offer or the
acceptance of Shares pursuant thereto, the Purchaser will make a good faith
effort to comply with such state statute. If, after such good faith effort, the
Purchaser cannot comply with any such state statute, the Offer will not be made
to (nor will tenders be accepted from or on behalf of) the holders of Shares in
such state. In any jurisdiction where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer will be
deemed to be made on behalf of the Purchaser by the Dealer Manager or one or
more registered brokers or dealers licensed under the laws of such jurisdiction.
Very truly yours,
First Chicago Trust Company of New York, AS
DIVIDEND REINVESTMENT AGENT
2
<PAGE> 3
PAYER'S NAME:
----------------------------------
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
SUBSTITUTE PART I -- Taxpayer Identification ------------------------
FORM W-9 Number -- For all accounts, enter taxpayer Social Security Number
DEPARTMENT OF THE identification number in the box at right. OR
TREASURY (For most individuals, this is your social Employer Identification
INTERNAL REVENUE SERVICE security number. If you do not have a Number
number, see Obtaining a Number in the (If awaiting TIN write
enclosed Guidelines.) Certify by signing "Applied For")
and dating below. Note: If the account is
in more than one name, see the chart in the
enclosed Guidelines to determine which
number to give the payer.
--------------------------------------------------------------------------
Payer's Request for PART II -- For Payees Exempt From Backup Withholding, see the enclosed
Taxpayer Guidelines and complete as instructed therein.
Identification Number
(TIN)
- ---------------------------------------------------------------------------------------------------
CERTIFICATION -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting
for a number to be issued to me) and
(2) I am not subject to backup withholding either because I have not been notified by the Internal
Revenue Service (the "IRS") that I am subject to backup withholding as a result of failure to
report all interest or dividends, or the IRS has notified me that I am no longer subject to
backup withholding.
CERTIFICATE INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the IRS
that you are subject to backup withholding because of underreporting interest or dividends on
your tax return. However, if after being notified by the IRS that you were subject to backup
withholding you received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out item (2). (Also see instructions in the enclosed
Guidelines.)
- ---------------------------------------------------------------------------------------------------
SIGNATURE DATE , 1994
- ---------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
3
<PAGE> 4
INSTRUCTIONS WITH RESPECT TO
THE OFFER TO PURCHASE FOR CASH
115,903,127 SHARES OF COMMON STOCK
OF
SANTA FE PACIFIC CORPORATION
BY
UP ACQUISITION CORPORATION
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated November 9, 1994, and the related Letter of Transmittal
(which, together, with any amendments or supplements thereto, constitute the
"Offer"), in connection with the offer by UP Acquisition Corporation, a Utah
corporation (the "Purchaser") and a wholly-owned subsidiary of Union Pacific
Corporation, a Utah corporation ("Parent"), to purchase 115,903,127 shares of
Common Stock, par value $1.00 per share (collectively, the "Shares") of Santa Fe
Pacific Corporation, a Delaware corporation (the "Company"), or such greater
number of Shares as equals 57.1% of the Shares outstanding as of the expiration
of the Offer. The undersigned understand(s) that the Offer applies to Shares
allocated to the account of the undersigned in the Company's Dividend
Reinvestment Plan (the "Plan").
This will instruct you, as Dividend Reinvestment Agent, to instruct your
nominee to tender the number of Shares indicated below (or, if no number is
indicated below, all Shares) that are held for the Plan account of the
undersigned, upon the terms and subject to the conditions set forth in the
Offer.
Number of Shares to be Tendered:
Shares*
SIGN HERE
------------------------------------
------------------------------------
Signature(s)
------------------------------------
------------------------------------
Please type or print address
------------------------------------
Area Code and Telephone Number
------------------------------------
Taxpayer Identification or
Social Security Number
Dated: , 199
- ---------------
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
4
<PAGE> 1
Union Pacific
Corporation News Release
Contact: 610-881-3382
Gary F. Schuster
Vice President Corporate Relations
Martin Tower
Eighth and Eaton Avenues
Bethlehem, PA 18018
UNION PACIFIC ANNOUNCES TENDER OFFER TO
ACQUIRE 57% OF SANTA FE
--------------------------------------
Seeks to Acquire Santa Fe Pursuant
to Negotiated Merger Agreement
--------------------------------------
Union Pacific Would Use Voting Trust
To Expedite Payment
--------------------------------------
Bethlehem, PA, November 8, 1994 -- Union Pacific Corporation (NYSE: UNP)
announced today a proposal to negotiate an acquisition of Santa Fe Pacific
Corporation (NYSE: SFX) in a two-step transaction, using a voting trust, in
which UP would first purchase approximately 57 percent of SFP's outstanding
common shares in a cash tender offer for $17.50 per share. UP would acquire the
remaining SFP shares in a merger in which SFP shareholders would receive, for
each SFP share, a fraction of a UP common share having a value of $17.50, based
on the closing price of UP common stock on November 8, 1994. UP said it will
commence its tender offer shortly.
Under the UP proposal, SFP shareholders would effectively receive approximately
$10.00 per share in cash and $7.50 per share in UP stock, assuming that all SFP
shares are tendered in the offer. The proposal values SFP at $3.3 billion.
UP's proposal provides for the creation of a voting trust, independent of UP, to
hold the shares of SFP acquired in the tender offer and merger. The voting trust
would allow SFP shareholders to receive immediate payment for their shares in
the tender offer and merger following satisfaction of the conditions to such
transactions, rather than waiting up to several years for Interstate Commerce
Commission approval as in the proposed merger of Burlington Northern Inc. (NYSE:
BNI) with Santa Fe.
<PAGE> 2
Dick Davidson, President of Union Pacific Corporation and Chairman and Chief
Executive Officer of Union Pacific Railroad Company, in a November 8, 1994
letter to Robert D. Krebs, Chairman, President and Chief Executive Officer of
Santa Fe Pacific Corporation, said, "Our proposed acquisition, unlike the
Burlington Northern Inc. transaction, would NOT be contingent upon receipt of
ICC approval for the acquisition . . . . Our proposed structure would enable
your shareholders to receive the entire proposed purchase price in the tender
offer and merger following satisfaction of the conditions to those transactions
without your shareholders bearing any risk relating to ICC approval of our
combination with Santa Fe." Davidson added, "By contrast, the proposed BN
transaction provides for a delay of up to several years in payment of any of the
purchase price to SFP shareholders and requires your shareholders to bear the
entire ICC risk."
The value of UP's proposal represents a premium of 17.6 percent over the closing
price of SFP common stock on November 8, 1994. The proposed price is also
superior to the value of SFP's existing transaction with BN based on today's
closing prices. Davidson said in his letter to Krebs, "When your shareholders
discount BN's purchase price for the delay in payment and the ICC risk of
non-consummation of the BN transaction, the premium represented by our proposal
is even greater."
The Company said it will deliver promptly to SFP a merger agreement modeled on
the BN merger agreement. UP stated it is prepared, in accordance with the terms
of SFP's existing merger agreement with BN, to commence immediate negotiation of
a merger agreement with SFP. Both the cash and stock portions of the
consideration to be paid in the UP proposal would be taxable to SFP
shareholders.
UP's tender offer will be subject, among other things, to termination of SFP's
merger agreement with BN in accordance with the terms of such agreement,
negotiation of a mutually satisfactory merger agreement with SFP, the
shareholders of SFP not having approved the merger agreement with BN, at least a
majority of the SFP shares being validly tendered and not withdrawn prior to
expiration of the offer, and the issuance of a favorable ICC staff opinion
regarding the terms of the proposed voting trust. Davidson said, "On this
separate ICC matter of approval of the voting trust agreement, we are confident
that a favorable ICC staff opinion will be forthcoming."
The proposed merger would also be subject, among other things, to the approval
of SFP shareholders. UP's proposal is not subject to a due diligence or
financing condition or to approval of UP's shareholders.
In his letter to Krebs, Davidson said, "You have repeatedly advised UP that if
it make[s] a proposal at a fair price and with an adequate provision for a
voting trust that would substantially eliminate the regulatory risk for SFP
shareholders, your Board 'would consider that proposal in light of its fiduciary
duties.' We hereby submit just such a proposal."
<PAGE> 3
Davidson also advised Krebs that, alternatively, if SFP's Board so prefers, UP
would be prepared to proceed with its previous proposal to negotiate a tax-free
merger, without the use of a voting trust, in which SFP shareholders would
receive UP shares having a value of $20 per SFP share, based on market prices at
the time such proposal was made. "The choice is up to your Board," said
Davidson. That alternative proposal would value SFP at $3.8 billion, but payment
would not occur until after ICC approval of a UP/SFP combination, which would
require two years or more.
Attached is the full text of a letter from UP to Mr. Krebs on the proposal.
<PAGE> 4
Union Pacific Corporation
November 8, 1994
Mr. Robert D. Krebs
Chairman, President and CEO
Santa Fe Pacific Corporation
1700 East Golf Road
Schaumburg, IL 60173
Dear Rob:
You have repeatedly advised Union Pacific Corporation that if it "make(s) a
proposal at a fair price and with an adequate provision for a voting trust that
would substantially eliminate the regulatory risk for SFP shareholders," your
Board "would consider that proposal in-light of its fiduciary duties." We hereby
submit just such a proposal. We insist that you and your Board of Directors,
consistent with your fiduciary obligations and in accordance with the terms of
your existing merger agreement with Burlington Northern Inc., give careful
consideration to this proposal. In light of the November 18 date of your
shareholders' meeting to consider the BN merger, time is of the essence.
Using a voting trust, we propose acquiring all shares of Santa Fe Pacific
Corporation's common stock in a two-step transaction. First, we would purchase
approximately 57 percent of the shares outstanding on a fully diluted basis in a
cash tender offer for $17.50 per share. We would then acquire the remaining SFP
shares in a merger in which your shareholders would receive, for each SFP share,
a fraction of a UP common share having a value of $17.50, based on the closing
price of UP common stock on November 8, 1994. The stock portion of the
consideration represents a ratio of .354 of a UP share for each SFP share.
Your shareholders would effectively receive approximately $10.00 per share in
cash and $7.50 per share in UP stock, assuming that all SFP shares are tendered
in the offer. Both the proposed cash and stock portions of the considerations
would be taxable to SFP shareholders.
<PAGE> 5
The value of our proposed transaction represents a premium of 17.6 percent over
the closing price of SFP common stock on November 8, 1994. Based on today's
closing prices, the price would also be superior to the value of the BN
transaction that has been endorsed by your financial advisors as fair to your
shareholders. As discussed below, our price represents a premium to that of the
BN transaction, even without factoring in the uncertainty of Interstate Commerce
Commission ("ICC") approval of the BN transaction and the delay in payment of
the purchase price under that proposal.
Our proposed acquisition, unlike the BN transaction, would not be contingent
upon receipt of ICC approval for the acquisition. At the same time we consummate
the tender offer and the merger, we would place the shares of SFP common stock
purchased by us into a voting trust that would be independent of UP.
Our proposed structure would enable your shareholders to receive immediate
payment of the entire purchase price in the tender offer and merger following
satisfaction of the conditions to those transactions, without your shareholders
bearing any risk relating to ICC approval of our combination with SFP. By
contrast, the proposed Burlington Northern transaction provides for a delay of
up to several years in payment of any of the purchase price to SFP shareholders
and requires your shareholders to bear the entire ICC risk.
When your shareholders discount BN's purchase price for the delay in payment and
the ICC risk of non-consummation of the BN transaction, the premium represented
by our proposal is even greater.
We will be commencing our tender offer shortly. We also will be delivering to
you promptly a proposed merger agreement modeled on your agreement with BN. UP
is prepared, in accordance with the terms of your existing merger agreement with
BN, to commence immediate negotiation of our proposed merger agreement.
Our tender offer will be subject, among other things, to termination of your
merger agreement with BN in accordance with the terms of such agreement,
negotiation of a mutually satisfactory merger agreement with SFP, the
shareholders of SFP not having approved the merger agreement with BN, at least a
majority of the SFP shares being validly tendered and not withdrawn prior to
expiration of the offer, and the issuance of a favorable ICC staff opinion
regarding the terms of our proposed voting trust. On this separate ICC matter of
approval of the voting trust agreement, we are confident that a favorable ICC
staff opinion will be forthcoming.
The proposed merger would also be subject, among other things, to the approval
of SFP shareholders. Our proposal is not subject to a due diligence or financing
condition or to approval of UP's shareholders.
<PAGE> 6
Our willingness to pay your shareholders prior to ICC review and approval of the
acquisition reflects our belief that we will be able to obtain ICC approval and
our willingness to negotiate acceptable conditions necessary for such approval.
We remain ready to discuss with you your concerns relating to ICC approval of
the combination of our two companies.
Please be advised that if your Board would prefer to discuss our previous
proposal to negotiate a tax-free merger, without the use of a voting trust, in
which SFP shareholders would receive UP shares having a value of $20 per SFP
share based on market prices at the time of such proposal, we remain willing to
proceed on that basis. The choice is up to your Board.
Sincerely,
Dick Davidson
President,
Union Pacific Corporation
Chairman and CEO,
Union Pacific Railroad Company
cc: Board of Directors
Santa Fe Pacific Corporation
Because of fluctuations in the market value of Union Pacific common stock and
Burlington Northern Inc. common stock, there can be no assurances as to the
actual value that Santa Fe shareholders would receive pursuant to the
second-step merger contemplated by the new Union Pacific proposal or pursuant to
the Santa Fe/Burlington Northern Inc. merger.
This announcement is neither an offer to sell nor a solicitation of offers to
buy any securities which may be issued in any merger or similar business
combination involving Union Pacific and Santa Fe. The issuance of such
securities would have to be registered under the Securities Act of 1933 and such
securities would be offered only by means of a prospectus complying with the
requirements of such Act.
<PAGE> 1
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
IN RE SANTA FE PACIFIC CORPORATION ) CONSOLIDATED
SHAREHOLDER LITIGATION ) CIVIL ACTION NO. 13567
CONSOLIDATED AND AMEDNED COMPLAINT
Plaintiffs, by and through their attorneys, allege upon information and
belief except as to themselves and their own actions, which they allege upon
knowledge, as follows:
SUMMARY OF ACTION
1. This action initially arose from breaches of fiduciary duties
in connection with the individual defendants' agreement to sell Santa Fe
Pacific Corporation ("Santa Fe") to Burlington Northern Inc. ("BNI") for
grossly inadequate consideration and in breach of their fiduciary duties.
Plaintiffs allege that they and other public shareholders of Santa Fe common
stock are entitled to enjoin the proposed BNI Transaction (as defined below)
or, alternatively, to recover damages in the event that the transaction is
consummated. Plaintiffs bring this action on behalf of the public holders of
the outstanding common shares of Santa Fe for injunctive and other relief in
connection with an improperly timed and structured scheme conceived by
defendants hereinafter described.
2. The result of defendants' actions is that BNI may acquire Santa
Fe at an unconscionably unfair price, dramatically below the underlying and
real value of Santa Fe common stock, in a transaction which is unfairly timed
and structured and misleadingly disclosed.
<PAGE> 2
THE PARTIES
3. Plaintiffs have been, at all times relevant to this action, and
are owners of Santa Fe common stock.
4. Defendant Santa Fe is a Delaware corporation with its principal
executive offices located at 1700 East Golf Road, Schaumburg, IL 60173-5860.
Santa Fe is a holding company which provides railway transportation, prior to
the Spin-Off (as defined below) conducted gold mining operations, and owns an
interest in a refined petroleum products pipeline system. Santa Fe currently
has over 186 million shares of common stock outstanding held by approximately
75,000 shareholders of record.
5. Defendant Robert D. Krebs is Chairman of the Board, President,
Chief Executive Officer and a director of Santa Fe and is an officer of Santa
Fe's subsidiary. His compensation for 1993 was in excess of $800,000.
Defendant Krebs will be President and Chief Executive Officer of the combined
entity if the BNI Transaction is consummated.
6. Defendants Bill M. Lindig, Roy S. Roberts, John S.
Runnells II, Robert H. West, Joseph F. Alibrandi, George Deukmejian, Jean Head
Sisco, Michael A. Morphy and Edward F. Swift (collectively together with Robert
D.Krebs the "individual defendants") are all members
of Santa Fe's Board of Directors.
7. The individual defendants, as directors of Santa Fe owe
fiduciary duties of good faith, loyalty, fair dealing, due care, and full
disclosure to plaintiffs and the other members of the Class (as defined below).
2
<PAGE> 3
8. Defendant BNI is a Delaware corporation with its principal
place of business at 3800 Continental Plaza, 777 Main Street, Fort Worth, Texas
76102-5384. BNI is a holding company with subsidiaries that provide railroad
transportation services; explore for, develop and produce oil, gas, coal, and
minerals; lease locomotives, freight cars, and commuter passenger cars;
transport and sell natural gas; sell timber and logs; manufacture and sell
forest products; and manage and develop real estate. BNI has knowledge of the
facts and circumstances described below and will benefit from the BNI
Transaction.
9. BNI's Chairman, President, and Chief Executive Officer, Gerald
Grinstein, who will be Chairman of the new combined entity if the BNI
Transaction is consummated, received approvimately $2.5 million in compensation
from BNI in 1993.
CLASS ACTION ALLEGATIONS
10. Plaintiffs bring this action pursuant to Rule 23 of the Rules
of this Court, on behalf of themselves and all other shareholders of Santa Fe
as of June 30, 1994 (except the defendants herein and any persons, firm, trust,
corporation, or other entity related to or affiliated with them and their
successors in interest), who are or will be threatened with injury arising from
defendants' actions, as is more fully described herein (the "Class").
11. This action is properly maintainable as a class action for the
following reasons:
3
<PAGE> 4
a. The Class is so numerous that joinder of all members is
impracticable. There are approximately 75,000 record shareholders of Santa Fe
stock and many more beneficial owners who are members of the Class.
b. Members of the Class are scattered throughout the
United States and are so numerous that it is impracticable to bring them all
before this Court.
c. There are questions of law and fact that are common to
the Class and that predominate over questions affecting any individual class
member. The common questions include, inter alia, the following:
(1) Whether the transaction as timed, structured
and disclosed denies shareholders information necessary to make an informed
decision whether to vote for the transaction;
(2) Whether the individual defendants, as directors
of Santa Fe have fulfilled, and are capable of fulfilling, their fiduciary
duties to plaintiffs and the other members of the Class, including their duties
of entire fairness, loyalty, due care, and full disclosure; and
(3) Whether plaintiffs and the other members of the
Class would be irreparably damaged were defendants not enjoined from the
conduct described herein.
d. The claims of plaintiffs are typical of the claims of
the other members of the Class in that all members of the Class will be damaged
by defendants' actions.
4
<PAGE> 5
e. Plaintiffs are committed to prosecuting this action and
have retained competent counsel experienced in litigation of this nature.
Plaintiffs are adequate representatives of the Class and will fairly and
adequately protect the interests of the Class.
f. Plaintiffs anticipate that there will not be any
difficulty in the management of this litigation as a class action.
g. The prosecution of separate actions by individual
members of the Class would create a risk of inconsistent or varying
adjudications with respect to individual members of the Class which would
establish incompatible standards of conduct for the party opposing the Class.
h. Defendants have acted or refused to act on grounds
generally applicable to the Class, thereby making appropriate final injunctive
relief or corresponding declaratory relief with respect to the Class as a
whole.
12. At all relevant times, the shares of Santa Fe were publicly
traded on the New York Stock Exchange.
APPROVAL AND ANNOUNCEMENT OF THE BNI TRANSACTION
13. In April 1994, Santa Fe announced that it would take public
approximately 14.6% of the shares it held in Santa Fe Pacific Gold Corporation
("Gold Sub") and was considering subsequently spinning off the remaining shares
of Gold Sub to Santa Fe's public shareholders. The Gold Sub shares were sold
to the public on June 23, 1994, and were priced at $14 per Gold Sub share.
5
<PAGE> 6
Sante Fe had been pursuing a policy of paring down its holdings to concentrate
on its core railroad assets. The apparent purpose of this policy and,
therefore, the spinoff, was to cause the market to properly value Santa Fe's
core railroad business. Before the spinoff could be accomplished, however, the
individual defendants agreed to sell the post-spinoff Santa Fe to BNI in a
stock-for-stock transaction in which shareholders are to receive 0.27 share of
BNI common stock for each share of Santa Fe (the "BNI Transaction").
14. Santa Fe and BNI apparently had engaged in negotiations
relating to a combination of the two companies in late 1993. However,
negotiations broke off on Nobember 29, 1993 and did not resume until June 24,
1994. On that same day, June 24, however, the Santa Fe board also determined
to proceed with a bid to acquire the railway operations of Kansas City Southern
Industries ("KCSI"). The Santa Fe board approved of the BNI Transaction on
June 29, 1994, only five days after Sana Fe had resumed negotiations with BNI
and only five days after the Santa Fe board had authorized a bid for KCSI.
Shortly thereafter, the Santa Fe board determined to withdraw the KCSI bid.
The plans for the BNI Transaction publicly were announced on or about June 30,
1994. The announcement of the BNI Transaction had the effect of capping the
market for Santa Fe's stock. A shareholder meeting to vote on the BNI
Transaction has now been set for November 18, 1994.
15. At the same time of the announcement of the BNI Transaction,
Santa Fe announced the spinoff of the remaining Gold
6
<PAGE> 7
Sub shares, with Santa Fe shareholders to receive one share of Gold Sub stock
for every 1.7 share of Santa Fe stock they held (the "Spin-Off"). The Spin-Off
was completed be September 30, 1994.
THE UNFAIR AND INADEQUATE BNI OFFER
16. The BNI Transaction price of 0.27 BNI common share in exchange
for each Santa Fe common share together with the terms of the Spin-Off offered
little or no premium for Santa Fe shareholders. Santa Fe stock had been
trading in the $20 - $23 range in the weeks before the announcement of the BNI
Transaction and the Spin-Off. At the time of the announcement of the BNI
Transaction, the one share of Gold Sub for every 1.7 shares of Santa Fe common
stock that Santa Fe shareholders were to receive in the Spin-Off represented
approximately $8.24 per Santa Fe share in value. Consequently, at that time,
the spunoff Gold Sub shares and the BNI shares represented a package
of approximately $22.69 in market value.
17. In addition, Santa Fe common stock closed at $12.625 on
October 5, 1994. BNI common stock closed at $49.375 on October 5, 1994.
Therefore, the exchange price of 0.27 share of BNI stock, to which defendants
have agreed, had an implied value on October 5, 1994, the day of the Union
Pacific Offer (as defined below), of only $13.33 per share of Santa Fe common
stock. The BNI Transaction does not provide Santa Fe shareholders with
consideration which fairly and adequately takes into account the value of Santa
Fe's common stock.
7
<PAGE> 8
18. Further, the defendants agreed to the BNI Transaction with BNI
without ever allowing the market to reflect the value of Santa Fe's railroad
assets alone. Therefore, the individual defendants were without knowledge of
the market's valuation of the railroad assets when they agreed to the BNI
Transaction.
THE SUPERIOR UNION PACIFIC OFFER IS HASTILY REJECTED
19. On October 5, 1994, Union Pacific Corp. ("Union Pacific"),
the nation's largest railroad based on revenues, issued a press release
announcing a proposal to merge with Santa Fe, pursuant to which stockholders of
Santa Fe would receive .344 shares of Union Pacific stock for each Santa Fe
share (the "Union Pacific Offer"). Based on the closing price of Union Pacific
stock on October 5, 1994, the Union Pacific Offer represented value of
approximately $18 per Santa Fe share. The Union Pacific Offer represented
approximately a 38% premium over the $12.625 closing price of Santa Fe on
October 5, 1994. The BNI Transaction, based on BNI's trading price on October
5, 1994, represented value of $13.33 per Santa Fe share. Thus, the Union
Pacific proposal was, on October 5, 33% higher than the price represented by
the BNI Transaction. The Union Pacific Offer is subject to, among other
conditions, the termination of Santa Fe's agreement with BNI.
20. Notwithstanding the greater value represented by the Union
Pacific Offer, and the complex issues before it, Santa Fe's Board rejected
Union Pacific's bid hastily and without fair and reasonable
investigation or consideration. Santa Fe's Board,
8
<PAGE> 9
apparently as advised by counsel, reasoned that Santa Fe was subject to a
binding Merger Agreement and that Union Pacific could not obtain ICC approval
for any combination with Santa Fe. Within a day, and despite the complex
issues involved in, inter alia, ICC review, Santa Fe's Board formalized its
summary rejection without any negotiations. Santa Fe then publicly stated that
a Union Pacific/Santa Fe combination could not obtain ICC approval and that the
Union Pacific offer was solely to obstruct the BNI Merger. Santa Fe also
suggested that the Union Pacific Offer, at $18 in value, did not constitute a
fair price, even though it offered substantially greater value than the BNI
Transaction.
21. Thereafter, Union Pacific stated that it would consider
increasing its offer to $20 per share in value. To that end, Union Pacific has
requested Santa Fe to provide it with additional information in connection with
Union Pacific's consideration of increasing its offer. Santa Fe, however, has
refused to provide any information to Union Pacific. Thus, notwithstanding the
Santa Fe Board's right under the Merger Agreement, and fiduciary duty to
negotiate with and provide information to Union Pacific, in breach of its
fiduciary duties, the Board refused to negotiate or even provide confidential
information.
THE MERGER AGREEMENT ATTEMPTS TO LOCK IN
THE SHAREHOLDERS AND LOCK OUT UNION PACIFIC
22. The Santa Fe/BNI Agreement and Plan of Merger dated as of
June 29, 1994 ("Merger Agreement") is terminable by either party if the
stockholders reject the BNI Transaction. However, the
9
<PAGE> 10
Merger Agreement does not provide for termination of the Merger Agreement in
the event that an offer superior to the BNI Transaction is received by Santa
Fe. Thus, the Board, according to the Merger Agreement, does not have the
right to terminate the Merger Agreement in response to the Union Pacific
Offer, but only has the right, if advised by outside counsel as required by
their fiduciary duties, to engage in negotiations or provide confidential
information or data to Union Pacific and to withdraw, modify or amend their
recommendation that Santa Fe stockholders approve the Merger Agreement.
23. Accordingly, even if Santa Fe's Board concluded that Union
Pacific's offer currently is superior, Santa Fe's Board has no express
termination right under the Merger Agreement. Under such circumstances the
Board would have to withdraw its recommendation in favor of the BNI
Transaction, thereby precluding a shareholder vote. However, according to the
express terms of the Merger Agreement, in the absence of a shareholder vote
against the BNI Transaction, the Board would be unable to terminate the Merger
Agreement. Thus, the unterminated Merger Agreement would remain in full force
and effect. The purported absence of the right of the Santa Fe Board to
terminate the Merger Agreement in the face of a superior offer is a violation
of law and thus void. As such, and notwithstanding the terms of the Merger
Agreement, the Santa Fe Board has an implied right to terminate the Merger
Agreement if it receives a superior offer to the BNI Transaction.
<PAGE> 11
UNION PACIFIC MAY WALK
24. If the BNI Transaction is approved by the stockholders of Santa
Fe and BNI, the transaction cannot be consummated until approval of the
Interstate Commerce Commission ("ICC"), a process expected to require at least
535 days according to the Proxy Statement. However, Union Pacific has
indicated it will withdraw its offer if the Santa Fe stockholders vote to
approve the BNI Transaction, because, according to Union Pacific, Santa Fe has
threatened to bring a tortious interference claim against Union Pacific and its
CEO. If that occurs, the only higher bid currently available to Santa Fe
stockholders will disappear, leaving Santa Fe's stockholders, who would have
lost the opportunity for a higher offer, in limbo for 1-1/2 years or more.
25. As directors of Santa Fe, the individual defendants were and
are under a duty to fully inform themselves before taking action, or agreeing
to refrain from taking action, to elicit, promote, consider and evaluate
reasonable and bona fide offers for Santa Fe, and to assure that a "level
playing field" exists when more than one bidder for the Company emerges, and
not to favor one bidder over another, unless the individual defendants' actions
are designed to assure and are reasonably related to achieving the best
transaction for Santa Fe shareholders. The individual defendants breached
their fiduciary duties by, among other matters, failing to fully inform
themselves about available alternatives to the BNI Transaction, including a
transaction with Union Pacific, and without fully informing themselves about
the value of Santa Fe.
11
<PAGE> 12
Instead, the individual defendants, in disregard of their fiduciary duties to
Santa Fe shareholders, have refused to disturb the BNI Transaction, whose
consummation will result in the entrenchment of one or more of their members,
including the election of Defendant Krebs as President and CEO of the combined
entity, securing for him the continued and potentially greater emoluments of
such positions.
26. If the breaches of fiduciary duty described herein are permitted to
continue, the Santa Fe shareholders will forever lose the opportunity to have
the value of their Company arrived at through competitive bidding on a legal
playing field and the opportunity to consider any other bidders which may come
forward.
27. Indeed, if a stockholder vote is held before the Santa Fe directors are
required to fulfill their fiduciary obligations fully to inform themselves about
the Union Pacific proposal, Union Pacific likely will withdraw its bid, thus
depriving Santa Fe stockholders of the opportunity to consider a superior offer.
THE MATERIALLY MISLEADING AND DEFICIENT PROXY STATEMENT
28. As a result of statements in press releases which preceded the
Burlington Northern, Inc. and Santa Fe Pacific Corporation Joint Proxy
Statement/Burlington Northern, Inc. Prospectus dated October 12, 1994 (the
"Proxy Statement") and the materially misleading and deficient Proxy Statement,
the stockholders cannot exercise a fully informed vote. Santa Fe previously
issued public statements to the effect that Union Pacific's superior offer could
not survive ICC review and was made
12
<PAGE> 13
solely to obstruct the Merger Agreement. According to Union Pacific, however,
Santa Fe's statements were issued without any reasonable effort to explore with
Union Pacific the extent of any ICC risk, the steps that might be taken to
ameliorate any such risk, or Union Pacific's determination to push forward with
an offer. Nor did Santa Fe's statements reveal the risks attendant to a Santa
Fe/BNI transaction. Now, Santa Fe has disseminated its Proxy Statement which
includes further misleading statements and omits critical material facts.
29. The Proxy Statement, as a reason for rejecting the Union Pacific
Offer, provides "No. 4. Binding Agreement. The SFP Board noted that SFP has no
right to terminate the Merger Agreement...." Notwithstanding the claim in the
Proxy Statement, as a matter of law, the Santa Fe board has an implied right to
terminate the Merger Agreement as a result of the superior Union Pacific Offer.
30. The Proxy Statement also states that the Santa Fe Board
determined that if Union Pacific were to make a proposal at a fair price and
with an adequate provision for a voting trust it would consider the proposal in
light of its fiduciary duties. Implicit in this statement is the Santa Fe
Board's view that the Union Pacific Offer does not represent a fair price. Yet,
there is no explanation concerning how the Santa Fe Board could consider the
BNI proposal to be a fair price and recommend approval of such proposal to the
Santa Fe stockholders when such proposal represents substantially less value
than the current Union Pacific Offer. Nor
13
<PAGE> 14
is there any discussion of Union Pacific's response, if any, to Santa Fe's
suggestion of a voting trust.
31. The Proxy Statement, in conclusory fashion, provides that one of
the primary reasons why the Santa Fe Board determined to reject the Union
Pacific Offer was its conclusion that a combination with Union Pacific would
not receive ICC approval. However, although the Proxy Statement discusses the
need for the BNI Transaction to receive ICC approval, there is no discussion of
the risks in seeking ICC approval of the BNI Transaction. Accordingly, the
Santa Fe stockholders are asked to accept the Santa Fe Board's conclusion
regarding the Union Pacific Offer, reached in no more than one day, that a
Union Pacific transaction would not receive ICC approval, and are asked to
approve of a BNI Transaction, without sufficient facts necessary to weigh and
compare the likelihood of obtaining ICC approval for both transactions.
32. Further, the Proxy Statement discloses that on June 24, 1994,
only five days prior to approval by the Santa Fe Board of the BNI Transaction,
Santa Fe authorized a bid to acquire Kansas City Southern Railway and related
transportation businesses ("KCSR"). Yet, the Santa Fe stockholders are not told
the terms of such bid, the potential benefits and value to the Santa Fe
stockholders from a combination between Santa Fe and KCSR, or the comparative
values to the Santa Fe stockholders from a Santa Fe/KCSR combination versus the
BNI Transaction. In fact, the Proxy Statement acknowledges that Santa Fe
management reported to the
14
<PAGE> 15
Santa Fe Board on May 24, 1994, that both a BNI and KCSR transaction would have
advantages, but in their view a BNI Transaction would be superior for Santa Fe
and its shareholders. Again, there is no disclosure concerning the advantages of
a KCSR transaction, nor why management viewed a BNI Transaction as superior.
Further, there is inadequate disclosure as to why the KCSR bid was withdrawn by
Santa Fe.
33. Similarly, the Proxy Statement provides that at the same time
Santa Fe was authorized to submit a bid for KCSR, it resumed negotiations with
BNI, approving the BNI Transaction some five days later. Yet, there is no
disclosure in the Proxy Statement concerning the substance of the resumed
negotiations. The substance of any such negotiations are particularly important
considering that BNI and Santa Fe had not engaged in negotiations since
November of 1993.
34. In addition, the Proxy Statement provides that the Santa Fe
Board, in approving of the BNI Transaction, considered, among other things,
advice as to the background of negotiations which had occurred since 1993.
There is no explanation of the advice received by the Santa Fe Board, nor its
significance in the Board's determination to approve the BNI Transaction.
35. The Proxy Statement also provides that Union Pacific stated in a
letter dated October 11, 1994 that it was prepared to receive information from
Santa Fe that might justify an increased price. Although the Proxy Statement
states that the Santa Fe board decided to re-affirm its prior position on the
Union Pacific Offer,
15
<PAGE> 16
it does not disclose that Santa Fe has failed to provide Union Pacific with any
confidential information.
36. The information shareholders have when they vote upon the BNI
Transaction is particularly important in this instance because Santa Fe's
shareholders will not have the right of appraisal. In that case, they will only
have the option of accepting or rejecting the BNI Transaction by shareholder
vote.
37. By reason of the foregoing acts, practices and course of conduct
of defendants, plaintiffs and the other members of the Class have been and will
be damaged because they will not receive their fair proportion of the value of
Santa Fe's assets and business, which far exceeds the BNI Transaction
consideration, in the unfair BNI Transaction at issue, have been and will be
prevented from making an informed decision whether to approve the BNI
Transaction, and will wrongfully be impeded from considering any other third
party offer for greater consideration, including the Union Pacific Offer.
COUNT I
(BREACH OF FIDUCIARY DUTIES OF CARE AND LOYALTY)
38. Plaintiffs repeat and reallege paragraphs 1 through 37 above as if
fully set forth herein.
39. The individual defendants, by virtue of their positions as
directors of Santa Fe, owe fiduciary duties to Santa Fe and its shareholders
including the highest duties of good faith, loyalty and care. These duties
include, but are not limited to, the obligation to inform themselves adequately
and to consider and fairly evaluate all offers for Santa Fe, not to place their
self
16
<PAGE> 17
interest ahead of the interest of Santa Fe stockholders, and to conduct the
affairs of Santa Fe with due care.
40. The individual defendants have breached their fiduciary duties
by inter alia, failing to inform themselves adequately and to explore
adequately all alternatives available for the Santa Fe stockholders, including
informing themselves regarding and exploring the Union Pacific Offer, by
approving and recommending to the Santa Fe stockholders the inferior BNI
Transaction, and by approving and enforcing a merger agreement, which by its
terms is violative of the law.
41. Unless enjoined by this Court, the individual defendants will
continue to breach their fiduciary duties owed to plaitiffs and the Class and
may consummate the BNI Transaction to the irreparable harm of plaintiffs and
the Class.
42. Plaintiffs and the other members of the Class have no adequate
remedy at law.
COUNT II
(BREACH OF FIDUCIARY DUTY OF DISCLOSURE)
43. Plaintiffs repeat and reallege the allegations in paragraphs 1
through 42 above as if fully set forth herein.
44. The individual defendants have breached their fiduciary duty of
disclosure in the Proxy Statement. The foregoing material misrepresentations
and the indivudual defendants' failure to completely disclose all material
information in the Proxy Statement constitutes a serious breach of their duty
of disclosure.
45. Unless enjoined by this Court, the individual defendants will
continue to breach their fiduciary duties owed to
17
<PAGE> 18
plaintiffs and the Class and may consummate the BNI Transaction to
the irreparable harm of plaintiffs and the Class.
46. Plaintiffs and the other members of the Class have
no adequate remedy of law.
COUNT III
(AIDING AND ABETTING BREACHES OF FIDUCIARY DUTY)
47. Plaintiffs repeat and reallege the allegations of
paragraphs 1 through 46 above as if fully set forth herein.
48. BNI had knowledge of the individual defendants'
fiduciary duties and knowingly and substantially participated and
assisted in the individual defendants' breaches of fiduciary
duties, and therefore, aided and abetted such breaches of fiduciary
duties described above.
49. Plaintiffs have no adequate remedy at law.
50. WHEREFORE, plaintiffs demand judgment as follows:
a. Declaring this to be a proper class action and naming
plaintiffs as Class representatives and their attorneys as Class counsel:
b. Ordering defendants to carry out their
fiduciary duties to plaintiffs and the other members of the Class,
including those of duty of care, loyalty, full disclosure, and
entire fairness:
c. Granting preliminary and permanent injunctive
relief against the consummation of the BNI Transaction as
described herein;
18
<PAGE> 19
d. Ordering the individual defendants to explore alternatives and to
negotiate in good faith with all interested persons, including but not
limited to Union Pacific;
e. Ordering the individual defendants to provide access to information
concerning Santa Fe and/or the BNI Transaction to any bona fide bidder,
including Union Pacific;
f. In the event the BNI Transaction is consummated, rescinding the BNI
Transaction and awarding rescissory damages;
g. Decreeing that the Merger Agreement has an implied right of
termination in response to a superior offer for the Company or, in the
alternative, invalidating as unlawful the absence of such a termination
provision in the Merger Agreement;
h. Ordering defendants, jointly and severally, to pay to plaintiffs
and to other members of the Class all damages suffered and to be suffered
by them as the result of the acts alleged herein;
i. Ordering defendants, jointly and severally, to account to
plaintiffs and the Class for all profits realized and to be realized by
them as a result of the actions complained of and, pending such accounting,
to hold such profits in a constructive trust for the benefit of plaintiffs
and other members of the Class;
j. Awarding plaintiffs the costs and disbursements of the action
including allowances for plaintiffs' reasonable attorneys and experts fees;
and
19
<PAGE> 20
k. Granting such other and further relief as may be just and proper in the
premises.
Dated: October 14, 1994 CHIMICLES, JACOBSEN & TIKELLIS
/s/ JAMES C. STRUM
--------------------------------------
Pamela S. Tikellis
James C. Strum
Robert J. Kriner, Jr.
One Rodney Square
P.O. Box 1035
Wilmington, Delaware 19899
Chair of the Executive
Committee and Co-Delaware
Liaison Counsel for Plaintiffs
ROSENTHAL, MONHAIT, GROSS &
GODDESS, P.A.
Joseph A. Rosenthal
Norman M. Monhait
First Federal Plaza
P.O. Box 1070
Wilmington, Delaware 19899
Co-Delaware Liaison Counsel for
Plaintiffs
OF COUNSEL:
BERGER & MONTAGUE, P.C.
1622 Locust Street
Philadelphia, PA 19103
(215) 875-3000
BURT & PUCILLO
Esperante
222 Lakeview Avenue, Suite 960
West Palm Beach, FL 33401
(610) 658-0900
GOODKIND, LABATON, RUDOFF & SUCHAROW
100 Park Avenue, 12th Floor
New York, NY 10017
(212) 907-0700
20
<PAGE> 21
WECHSLER, SKIRNICK, HARWOOD, HALEBIAN & FEFFER
555 Madison Avenue
New York, NY 10022
(212) 935-7400
WOLF, HALDENSTEIN, ADLER, FREEMAN & HERZ
270 Madison Avenue
New York, NY 10016
(212) 545-4600
Members of the Executive Committee
21
<PAGE> 22
CERTIFICATE OF SERVICE
I, James C. Strum, October 14, 1994 I caused two copies of the foregoing
Consolidated And Amended Complaint to be served upon counsel as follows:
Anne C. Foster, Esquire
Richards, Layton & Finger
One Rodney Square
Wilmington, DE 19801
Kenneth J. Nachbar, Esquire
Morris, Nichols, Arsht & Tunnell
1201 North Market Street
Wilmington, DE 19899-1347
/s/James C. Strum
---------------------------
James C. Strum
22
<PAGE> 1
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
)
UNION PACIFIC CORPORATION )
and JAMES A. SHATTUCK, )
)
Plaintiffs, )
)
v. )
) Civil Action No. 13778
SANTA FE PACIFIC CORPORATION, )
BILL M. LINDIG, ROY S. )
ROBERTS, JOHN S. RUNNELLS II, )
ROBERT H. WEST, JOSEPH F. )
ALIBRANDI, GEORGE DEUKMEJIAN, )
JEAN HEAD SISCO, ROBERT D. )
KREBS, MICHAEL A. MORPHY, )
EDWARD F. SWIFT, and )
BURLINGTON NORTHERN, INC., )
)
)
Defendants. )
)
FIRST AMENDED AND SUPPLEMENTAL COMPLAINT(1)
Plaintiffs, Union Pacific Corporation ("Union Pacific") and
James A. Shattuck, by their undersigned attorneys, by and for their first
amended and supplemen-
____________________
(1) Attached as Exhibit A hereto is a copy of this First Amended
and Supplemental Complaint which, pursuant to Chancery Court
Rule 15(aa), is marked to indicate the differences between
this document and the original complaint filed in C.A. No.
13778 as follows: new language appears in boldface type and
deletions are indicated by a caret.
<PAGE> 2
tal complaint, allege upon knowledge as to themselves and upon information and
belief as to all other matters, as follows:
1. This action is brought for injunctive and declaratory
relief to address a wrongful course of conduct by defendants which is designed
to deprive Santa Fe Pacific Corporation ("Santa Fe") shareholders of the
opportunity to consider and receive a merger proposal from Union Pacific
Corporation ("Union Pacific") amounting to some $3.4 billion. Union Pacific's
proposal offers value to Santa Fe shareholders that is approximately 33% higher
than that offered pursuant to a pending merger proposal from Burlington
Northern Inc. ("Burlington Northern").
2. The Santa Fe board of directors (the "Board") openly
admits that it has not and will not consider the vastly higher Union Pacific
proposal, claiming that it is constrained by the contractual provisions of the
merger agreement it entered with Burlington Northern (the "Merger Agreement"),
which is to be considered and voted upon by Santa Fe shareholders on November
18, 1994. The Board's refusal to consider the Union Pacific proposal flies in
the face of its fiduciary duties under Delaware law.
2
<PAGE> 3
3. Santa Fe and Burlington Northern also have jointly
engaged in a wrongful campaign to mislead Santa Fe's shareholders into
believing, among other things, that (i) Santa Fe cannot lawfully consider the
Union Pacific proposal; (ii) the Union Pacific proposal is illusory and made
solely for the purpose of preventing a merger of Santa Fe and Burlington
Northern; and (iii) a merger of Union Pacific and Santa Fe cannot lawfully
occur.
THE PARTIES
4. Plaintiff Union Pacific is a corporation organized
and existing under the laws of the State of Utah, with its principal office and
place of business at Eighth and Eaton Avenues, Bethlehem, Pennsylvania. Union
Pacific has been the owner of Santa Fe common stock since October 6, 1994.
5. Plaintiff James A. Shattuck has been, at all times
relevant to this action, and is the owner of Santa Fe common stock.
6. Burlington Northern is a corporation organized and
existing under the laws of the State of Delaware, with its principal office and
place of business at 777 Main Street, Fort Worth, Texas.
3
<PAGE> 4
7. Santa Fe is a corporation organized and existing
under the laws of the State of Delaware, with its principal office and place of
business at 1700 East Golf Road, Schaumburg, Illinois.
8. Robert D. Krebs is Chairman of the Board of
Directors, President and Chief Executive Officer of Santa Fe.
9. The other directors of Santa Fe are defendants Bill
M. Lindig, Roy S. Roberts, John S. Runnells II, Robert
H. West, Joseph F. Alibrandi, George Deukmejian, Jean Head Sisco, Michael A.
Morphy and Edward F. Swift (collectively with Mr. Krebs, the "Director
Defendants").
THE BURLINGTON NORTHERN-SANTA FE MERGER AGREEMENT
10. On June 29, 1994, defendants Burlington Northern and
Santa Fe entered into the Merger Agreement, which provides for the merger of
Santa Fe with and into Burlington Northern (the "BNI Merger"). Pursuant to
the Merger Agreement, each Santa Fe shareholder would receive .27 shares of
Burlington Northern stock for each share of Santa Fe stock, representing a
value of $13.50 per Santa Fe share, based on the closing price on October 4,
1994.
11. The Merger Agreement does not by its express terms
permit termination based on the fiduciary
4
<PAGE> 5
duty of the directors of Santa Fe to secure and recommend to the stockholders
of Santa Fe a later, better offer. Indeed, the Santa Fe Board has been advised
by its counsel that it has no right to terminate the Merger Agreement in order
to facilitate a higher offer. Such advice is -- on its face -- contrary to
Delaware law, as recently expressed in Paramount Communications v. QVC Network,
Del. Supr., 637 A.2d 34 (1994).
12. The Merger Agreement does give limited recognition to
the Board's continuing fiduciary duties, but does not permit the Board to
respond effectively to a higher offer. For example, Section 5.8 of the Merger
Agreement provides that Santa Fe may not:
initiate, solicit or encourage, or take any action to facilitate the
making of, any offer or proposal which constitutes or is reasonably
likely to lead to any Takeover Proposal of SFP [Santa Fe], or, in the
event of an unsolicited Takeover Proposal of SFP, except to the extent
required by their fiduciary duties under applicable law if so advised
by outside counsel, engage in negotiations or provide any confidential
information or data to any Person relating to any such Takeover
Proposal.
(emphasis added). Additionally, Section 5.2 of the Merger Agreement provides
that:
The board of directors of SFP [Santa Fe] shall recommend approval and
adoption of this Agreement and the Merger by its stockholders;
provided, however, that prior to the SFP Stockholder Meeting such
recommendation may be withdrawn, modified or amended to the extent
that, as a result of the commencement
5
<PAGE> 6
or receipt of a Takeover Proposal ... relating to SFP, the board of
directors of SFP deems it necessary to do so in the exercise of its
fiduciary obligations to SFP stockholders after being so advised by
counsel.
(emphasis added)
13. Pursuant to Section 10.1, a stockholder vote
rejecting the Merger Agreement gives the parties the right to terminate the
Merger Agreement. However, no vote of Santa Fe shareholders to consider the
BNI Merger even could be held if the Board were to exercise its fiduciary
obligation to withdraw its recommendation in favor of a higher offer. Absent
stockholder rejection or the occurrence of certain other limited events, the
Merger Agreement will remain in effect until December 31, 1997.
14. Thus, as applied by the Director Defendants, the
Merger Agreement creates the ultimate lock-up. If, for example, a competing
bidder were to offer $100 per share to merge with Santa Fe, the Board would be
permitted to revoke its recommendation of the BNI Merger, but would not be able
to terminate the Merger Agreement. Because no rational potential bidder
(including Union Pacific) would be willing to propose a competing merger that
is not conditioned on the termination of the Merger Agreement in accordance
with its terms, the Board is pre-
6
<PAGE> 7
cluded from entering a competing merger agreement until January 1, 1998 at
the earliest.
UNION PACIFIC'S MERGER PROPOSAL
15. The Board of Directors of Union Pacific met on
October 5, 1994 and authorized the management of Union Pacific to pursue a
merger with Santa Fe. The Board authorized the proposal for a variety of valid
business reasons. Among these are that a merger with Union Pacific would
benefit the shareholders of Santa Fe, the shareholders of Union Pacific and
customers of the two companies by making a quantum leap towards a 21st century
transportation system.
16. The board of Union Pacific determined at its October
5, 1994 meeting and at previous meetings that a combination of Union Pacific
and Santa Fe would produce major service improvements that a merger of
Burlington Northern and Santa Fe could not, including more new single-line
service, and greater savings and efficiencies. The board of Union Pacific also
determined that a combination of Union Pacific and Santa Fe would strengthen
western rail competition in a way that a merger of Burlington Northern and
Santa Fe could not.
17. Later that same day, representatives of Union Pacific
met in Chicago with Mr. Krebs and counsel
7
<PAGE> 8
to Santa Fe to propose the merger of Union Pacific and Santa Fe. The Union
Pacific proposal provided that each Santa Fe shareholder would receive .344
shares of Union Pacific stock, worth approximately $18.00 per Santa Fe share.
This represented a premium of 38% over the then current market price of Santa
Fe shares, and of 33% over the value which they would receive for their shares
in the Burlington Northern transaction. Union Pacific's proposal was subject
to the termination of the Merger Agreement in accordance with its terms.
SANTA FE REFUSES TO EVEN
CONSIDER UNION PACIFIC'S PROPOSAL
18. The response of Santa Fe's representatives to Union
Pacific's proposal was instantaneous. Santa Fe's counsel, speaking on behalf
of Mr. Krebs and himself, stated that (i) the Merger Agreement prohibited
negotiations with Union Pacific; (ii) Union Pacific could not obtain Interstate
Commerce Commission ("ICC") approval for any combination with Santa Fe; and
(iii) Santa Fe and Burlington Northern would bring suit for tortious
interference against both Union Pacific and its Chief Executive Officer,
personally, if Union Pacific's proposal was advanced.
8
<PAGE> 9
19. Mr. Krebs' adamant, negative response is not
surprising. In violation of his fiduciary duty of loyalty to Santa Fe and its
stockholders, defendant Krebs primarily is promoting the Merger Agreement out
of self-interest, because he stands to become the CEO of the combined
Burlington Northern/Santa Fe enterprise.
20. Thus, without regard to the facts of Union Pacific's
proposal, without an examination of their fiduciary duties under the
circumstances, and without the Board obtaining an opinion from outside counsel,
Mr. Krebs and his counsel responded for Santa Fe by rejecting Union Pacific's
proposal out of hand. This self-serving, uninformed, knee-jerk reaction
constituted a breach of the fiduciary duties of care and loyalty.
21. The Board then compounded Mr. Krebs' breaches of
fiduciary duty the very next day. Despite the superior value offered by Union
Pacific, and the complex issues before it, the Board hastily voted to reject
Union Pacific's proposal without seeking any communication with, or information
from, Union Pacific. The Board did not even seriously consider the Union
Pacific proposal, choosing instead to rely solely on (i) the advice of counsel
that Santa Fe had no right to terminate the Merger Agreement, which advice was
incor-
9
<PAGE> 10
rect as a matter of Delaware law; and (ii) the self-serving "belief" of
Mr. Krebs -- who will become the President and CEO of the combined Burlington
Northern/Santa Fe enterprise if the BNI Merger is approved -- that the Union
Pacific proposal would not get ICC approval and was intended to prevent
consummation of the BNI Merger.
SANTA FE'S FALSE AND MISLEADING DISCLOSURES
22. Santa Fe and Burlington Northern then embarked upon a
wrongful campaign to mislead Santa Fe's shareholders and the investing public
into believing that (i) Santa Fe cannot lawfully consider the Union Pacific
proposal; (ii) the Union Pacific proposal is illusory and was made solely for
the purpose of preventing the BNI Merger; and (iii) a merger of Union Pacific
and Santa Fe cannot lawfully occur.
23. On or about October 6, 1994, Santa Fe issued a press
release stating:
Robert D. Krebs, chairman, president and chief executive officer,
stated his belief that the Union Pacific proposal is unlikely to
achieve ICC approval and is motivated more by a desire to derail the
Burlington Northern/Santa Fe merger than to achieve its own
transaction with Santa Fe.
...
Union Pacific has now decided to interject a proposal which has little
chance of being consummated
10
<PAGE> 11
because Union Pacific does not want to compete with a merged
Burlington Northern Santa Fe railway.
These assertions have been widely reported in the press.
24. On October 13, 1994, Santa Fe and Burlington Northern
disseminated their Joint Proxy Statement For Special Meetings of Stockholders
to consider and vote on the BNI Merger (the "Joint Proxy Statement").
25. The Joint Proxy Statement wrongfully claims that
Santa Fe does not have the right to terminate the Merger Agreement to secure a
superior offer. For example, in a section entitled "Binding Agreement," the
Joint Proxy Statement discloses that:
The [Santa Fe] Board noted that [Santa Fe] has no right to terminate
the Merger Agreement and that it is important to avoid breaches of the
Merger Agreement, particularly in light of the [Board's] belief that
the [BNI Merger] is in the best interest of [Santa Fe] stockholders
because (1) the [BNI Merger] has significant benefits for [Santa Fe]
stockholders and (2) if the Merger Agreement is terminated and if the
[Union Pacific] Proposal cannot be consummated, [Santa Fe] would be
left without a strategic combination which is required to protect and
enhance shareholder value.
Joint Proxy Statement at 12, 44 (emphasis added). The Joint Proxy Statement,
however, fails to disclose that, under Delaware law, the Merger Agreement is
invalid or unenforceable to the extent it prevents the Board from considering
and securing superior proposals. Thus, Santa Fe stockholders have not been
informed that the Board can
11
<PAGE> 12
terminate the Merger Agreement to facilitate a superior offer, or that the
Merger Agreement is void as against public policy.
26. The Joint Proxy Statement also discloses that the
Board:
decided, after being advised by outside counsel that its fiduciary
duties under applicable law required such a step, that [Santa Fe]
should communicate to [Union Pacific] that, if [Union Pacific] were to
make a proposal at a fair price and with an adequate provision for a
voting trust that would substantially eliminate the regulatory risk
for [Santa Fe] stockholders, the [Board] would consider that proposal
in light of its fiduciary duties.
Joint Proxy Statement at 12, 44. This statement is misleading for several
reasons. First, it does not disclose that the price offered by Union Pacific
is irrelevant to the Santa Fe Board because Union Pacific's proposal is
conditioned on termination of the Merger Agreement in accordance with its
terms, which the Board has concluded it cannot terminate. Second, it does not
disclose that the Merger Agreement, as construed by the Director Defendants,
precludes the Board from agreeing to a transaction with Union Pacific until
January 1, 1998. Third, it suggests that the $18.00 per share value offered in
the Union Pacific proposal is not a fair price, even though Santa Fe's
financial advisors have opined that the lower price offered in the BNI Merger
is fair.
12
<PAGE> 13
27. The Joint Proxy Statement also attempts to create the
false impression that the Board carefully considered the Union Pacific proposal
before rejecting it. See Joint Proxy Statement at 11-12, 43-44. In fact,
however, the Board rejected the Union Pacific proposal out-of-hand the day
after it was made, based on its conclusion that the Merger Agreement prevented
Santa Fe from accepting superior merger proposals, and its perception --
evidently based on Mr. Krebs' self-serving belief -- that Union Pacific's
proposal could not get ICC approval and was intended instead to prevent
consummation of the BNI Merger:
The [Santa Fe] Board perceived the [Union Pacific] Proposal as
apparently designed to prevent the consummation of the [BNI Merger]
and the creation of a strong competitor to [Union Pacific]. The
[Santa Fe] board based this perception on Mr. Krebs' belief that ICC
approval of a [Union Pacific/Santa Fe] combination is unlikely and on
the timing of the [Union Pacific] Proposal.
Joint Proxy Statement at 44.
28. Unless the illegal actions set forth above are
enjoined, Union Pacific and Santa Fe shareholders will be irreparably harmed.
A vote of Santa Fe shareholders on the BNI Merger without full and fair
disclosure of all material facts by the Defendants, in an atmosphere of
complete candor, would have a chilling effect
13
<PAGE> 14
on Union Pacific's proposal and could forever deprive Santa Fe shareholders of
the opportunity to consider an offer superior to the BNI Merger.
COUNT I
(DECLARATORY RELIEF AGAINST SANTA FE
AND THE DIRECTOR DEFENDANTS)
29. Plaintiffs repeat and reallege each of the preceding
paragraphs as if fully set forth here.
30. The construction of the Merger Agreement affects the
rights and legal relations of plaintiffs, Santa Fe and the Director Defendants,
and the parties' interests are real and adverse.
31. Plaintiffs have a legitimate interest in prompt
resolution of the construction of the Merger Agreement and will suffer
unnecessary hardship from delay.
32. Pursuant to 10 Del. C. Section 6502, plaintiffs are
entitled to a declaration that the Merger Agreement, either impliedly or by
operation of law, permits Santa Fe to terminate the Merger Agreement in order
to accept a superior proposal from Union Pacific. Alternatively, Plaintiffs
seek a declaration that the Merger Agreement is invalid and unenforceable as a
matter of law for its failure to provide necessary and appropriate provisions
14
<PAGE> 15
permitting its termination by Santa Fe in order to secure a more favorable
transaction for the Santa Fe stockholders.
33. Plaintiffs have no adequate remedy at law.
COUNT II
(BREACH OF THE FIDUCIARY DUTIES OF
LOYALTY AND CARE BY THE DIRECTOR DEFENDANTS)
34. Plaintiffs repeat and reallege each of the preceding
paragraphs as if fully set forth here.
35. By virtue of their positions as directors of Santa
Fe, the Director Defendants owe fiduciary duties to Santa Fe and its
shareholders, and as a consequence, owed it and them the highest duty of good
faith and loyalty. That duty includes but is not limited to the obligation to
consider and fairly evaluate all offers for Santa Fe and not to put
self-interests and personal considerations of directors ahead of the interests
of Santa Fe's stockholders. The Director Defendants are also obligated to
conduct the affairs of Santa Fe with due care.
36. The immediate and threatening rejection of the Union
Pacific proposal by Mr. Krebs and his counsel was lacking in good faith and
could not have been the product of a reasonable inquiry and investigation. The
15
<PAGE> 16
adamancy of the rejections reflects Mr. Krebs' self-interest in the
accomplishment of the BNI Merger so that he might become President and Chief
Executive Officer of the powerful surviving entity.
37. Mr. Krebs and the Director Defendants have breached
and are threatening further to breach their fiduciary duties to Santa Fe and
its shareholders by refusing to negotiate with Union Pacific regarding its
merger proposal, which would provide significantly higher value to Santa Fe's
stockholders.
38. Unless enjoined by this Court, the Director
Defendants will continue to breach their fiduciary duties to the detriment of
Santa Fe and its shareholders and Union Pacific.
39. Plaintiffs have no adequate remedy at law.
COUNT III
(BREACH OF FIDUCIARY DUTY OF CANDOR
BY SANTA FE AND THE DIRECTOR DEFENDANTS)
40. Plaintiffs repeat and reallege each of the preceding
paragraphs as if fully set forth here.
41. Santa Fe, and by virtue of their positions as
directors of Santa Fe, the Director Defendants, owe a fiduciary duty to the
shareholders of Santa Fe, which requires them to disclose all material facts
relevant to
16
<PAGE> 17
the shareholder vote on the BNI Merger in an atmosphere of complete candor.
42. Santa Fe and the Director Defendants have breached
their duty of candor by making false and misleading statements regarding, among
other things, (i) Santa Fe's ability to terminate the Merger Agreement and
consider the Union Pacific proposal; and (ii) Union Pacific's purposes in
proposing to merge with Santa Fe.
43. Unless enjoined, these breaches of the fiduciary duty
of candor will continue and the shareholders of Santa Fe will be denied the
right to vote on the Merger Agreement in an atmosphere of complete candor.
44. Plaintiffs have no adequate remedy at law.
COUNT IV
(DECLARATORY RELIEF AGAINST
BURLINGTON NORTHERN AND SANTA FE)
45. Union Pacific repeats and realleges each of the
preceding paragraphs as if fully set forth here.
46. The validity and propriety of Union Pacific's actions
affects the rights and legal relations of Union
Pacific, Burlington Northern and Santa Fe, and the parties' interests are real
and adverse.
17
<PAGE> 18
47. Union Pacific has a legitimate interest in prompt
resolution of the validity and propriety of its actions and will suffer
unnecessary hardship from delay.
48. Union Pacific's actions in proposing a merger with
Santa Fe are entirely justified because they are based on demonstrable benefits
of the merger proposal for Union Pacific, Santa Fe, and the nation's railroad
system.
49. Union Pacific's actions cannot induce a breach of the
Merger Agreement by Santa Fe because Union Pacific's merger proposal is subject
to termination of the Merger Agreement in accordance with its own terms.
50. Accordingly, pursuant to 10 Del. C. Section 6501,
Union Pacific is entitled to a declaration that its actions in preparing and
proposing a merger with Santa Fe have not and will not tortiously interfere
with the contractual or other legal rights of Burlington Northern and Santa Fe.
WHEREFORE, plaintiffs pray for judgment as follows:
(a) Declaring that the Merger Agreement is terminable by Santa Fe
in order to permit it to accept Union Pacific's superior merger proposal.
Alternatively, declaring that the Merger Agreement is invalid and unenforceable
as a matter of law for its failure to make
18
<PAGE> 19
provision permitting its termination by Santa Fe in order to permit Santa Fe to
secure a more favorable transaction for the Santa Fe stockholders.
(b) Declaring that the Joint Proxy Statement is false and
misleading and enjoining Santa Fe and the Director Defendants from making any
additional materially false and misleading disclosures relating to the BNI
Merger or Union Pacific's proposal;
(c) Enjoining the November 18, 1994 special meeting of Santa Fe
shareholders;
(d) Mandatorily enjoining Santa Fe to negotiate with Union Pacific
regarding Union Pacific's merger proposal.
(e) Declaring that Union Pacific has not tortiously interfered
with the contractual or other legal rights of the defen- dants.
(f) Enjoining the defendants from instituting, continuing or
maintaining any action in any other jurisdiction alleging, in whole or in part,
that Union Pacific has tortiously interfered with the contractual or other
legal rights of the defendants.
(g) Granting plaintiffs the costs of this action, including
reasonable attorneys' fees.
19
<PAGE> 20
(h) Awarding such further relief and declaration of the rights and
legal relations of the parties to this action as the Court may deem
appropriate.
________________________
David J. Margules
KLEHR, HARRISON, HARVEY,
BRANZBURG & ELLERS
222 Delaware Avenue
Suite 1101
Wilmington, DE 19801
(302) 426-1189
Attorneys for Plaintiffs
Of Counsel:
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM
One Rodney Square
P.O. Box 636
Wilmington, DE 19899
(302) 651-3000
Dated: October 19, 1994
20
<PAGE> 1
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- -------------------------------------x
:
IN RE SANTA FE PACIFIC CORPORATION : CONSOLIDATED
SHAREHOLDER LITIGATION : CIVIL ACTION NO. 13587
- -------------------------------------x
ANSWER TO THE SANTA FE DEFENDANTS TO THE
CONSOLIDATED AND AMENDED COMPLAINT
Defendant Santa Fe Pacific Corporation ("Santa Fe") and its directors, Bill
M. Lindig, Roy S. Roberts, John S. Runnells II, Robert H. West, Joseph F.
Alibrandi, George Deukmejian, Jean Head Sisco, Robert D. Krebs, Michael A.
Morphy and Edward F. Swift, (hereinafter "Santa Fe defendants"), by their
counsel, for their answer to the Consolidated and Amended Complaint, state as
follows:
1. The Santa Fe defendants deny the allegations of paragraph 1, except as
to those assertions which merely characterize plaintiff's purported action, for
which no response is required.
2. The Santa Fe defendants deny the allegations of paragraph 2.
3. The Santa Fe defendants are without sufficient knowledge or information
to form a belief as to the truth or falsity of the allegations of paragraph 3.
4. The Santa Fe defendants admit the allegations of paragraph 4.
<PAGE> 2
5. The Santa Fe defendants admit the allegations contained in the first
sentence of paragraph 5; deny the allegations contained in the second sentence
of paragraph 5, and refer to, and incorporate herein by reference, the
description of Mr. Krebs' 1993 compensation contained in the Proxy Statement
issued in connection with the annual meeting of Santa Fe stockholders that took
place on April 26, 1994; and deny the allegations contained in the third
sentence of paragraph 5 and state that it is presently anticipated that Mr.
Krebs will become the President and Chief Executive Officer of the combined
entity if and when the merger transaction is consummated.
6. The Santa Fe defendants admit the allegations of paragraph 6.
7. The allegations of paragraph 7 state conclusions of law to which no
responsive pleading is required.
8. The allegations of paragraph 8 are directed solely to Burlington
Northern; accordingly, no response by the Santa Fe defendants is required.
9. The allegations of paragraph 9 are directed solely to Burlington
Northern; accordingly, no response by the Santa Fe defendants is required.
10. The allegations of paragraph 10 state conclusions of law to which no
responsive pleading is required. To the extent such allegations are deemed to
constitute allegations of fact, the Santa Fe defendants deny them.
2
<PAGE> 3
11. The allegations of paragraph 11 state conclusions of law to which no
responsive pleading is required. To the extent such allegations are deemed to
constitute allegations of fact, the Santa Fe defendants deny them.
12. The Santa Fe defendants admit the allegations of paragraph 12.
13. The Santa Fe defendants deny the allegations of paragraph 13, except
that they admit that approximately 14% of the shares in Gold Sub held by Santa
Fe were sold to the public in an IPO; that the initial price was $14 per Gold
Sub share; that the balance of the Gold Sub shares were spun off to Santa Fe
shareholders in September 1994; and that the initial share exchange ratio
provided for in the Merger Agreement was .27 share of Burlington Northern stock
for each share of Santa Fe stock. Further answering, the Santa Fe defendants
refer to, and incorporate herein by reference, Santa Fe's public statements and
prospectus relating to the "Gold spinoff" and the pertinent portions of the
Joint Proxy Statement.
14. The Santa Fe defendants deny the allegations of paragraph 14, except
they admit that the Santa Fe Board approved the Burlington Northern transaction
on June 29, 1994; that a shareholder meeting to vote on the transaction has been
set for November 18, 1994; that Santa Fe and Burlington Northern engaged in
negotiations during 1993; that on November 29, 1993, both companies separately
concluded that they could not reach agreement on an exchange ratio; that during
the next six months,
3
<PAGE> 4
the Santa Fe Board was kept informed of and discussed the possibility of
resuming merger negotiations with Burlington Northern; and that such
negotiations were resumed on or about June 24, 1994. Further answering, the
Santa Fe defendants refer to, and incorporate herein by reference, the pertinent
portions of the Joint Proxy Statement.
15. The Santa Fe defendants deny the allegations of paragraph 15, except
that they admit that in the Gold spinoff, Santa Fe shareholders received one
share of Gold Sub for each 1.7 shares of Santa Fe stock; and that the spinoff
was completed in September 1994. Further answering, the Santa Fe defendants
refer to, and incorporate herein by reference, Santa Fe's public statements
relating to the "Gold spinoff" and the pertinent portions of the Joint Proxy
Statement.
16. The Santa Fe defendants deny the allegations of paragraph 16, except
that they admit that Santa Fe stock had been trading in the $20-$23 per share
range prior to the announcements of the Merger Agreement and the spinoff; and
that at the initial offering price of $14 per share of Gold Sub stock, the 1.7:1
ratio works out to $8.23-$8.24 for each Santa Fe share. Further answering, the
Santa Fe defendants refer to, and incorporate herein by reference, the Merger
Agreement, reference to which is made for the terms and contents thereof, and
the pertinent portions of the Joint Proxy Statement.
17. The Santa Fe defendants deny the allegations of paragraph 17 except
that they admit that Santa Fe common stock
4
<PAGE> 5
closed at $12.625 and Burlington Northern common stock closed at $49.375 on
October 5, 1994.
18. The Santa Fe defendants deny the allegations on paragraph 18.
19. The Santa Fe defendants deny the allegations of paragraph 19, except
they admit that Union Pacific issued a press release that announced a purported
proposal to merge with Santa Fe; that such proposal was subject to a large
number of conditions, including Union Pacific Board approval, due diligence, the
termination of the Merger Agreement and approval of the merger by the Interstate
Commerce Commission (the "ICC"); that this proposal specified an exchange ratio
of .344; that Santa Fe common stock closed at $12.625 on October 5, 1994; and
Burlington Northern common stock closed at $49.375 on October 5, 1994. Further
answering, the Santa Fe defendants refer to, and incorporate by reference
herein, the Union Pacific press release and the pertinent portions of the Joint
Proxy Statement.
20. The Santa Fe defendants deny the allegations of paragraph 20, and refer
to, and incorporate herein by reference, the pertinent portions of the Joint
Proxy Statement.
21. The Santa Fe defendants deny the allegations of paragraph 21, and refer
to, and incorporate by reference herein, the Merger Agreement, reference to
which is made for the terms and contents thereof, and to the pertinent portions
of the Joint Proxy Statement.
5
<PAGE> 6
22. The Santa Fe defendants deny the allegations of paragraph 22, except
that they admit that the Merger Agreement may be terminated by either party in
the event the transaction is rejected by the Santa Fe or Burlington Northern
stockholders; further answering, the Santa Fe defendants refer to, and
incorporate herein by reference, the Merger Agreement, reference to which is
made for the terms and contents thereof.
23. To the extent paragraph 23 states conclusions of law, no response is
required. To the extent it sets out factual allegations, the Santa Fe defendants
deny those allegations and refer to, and incorporate herein by reference, the
Merger Agreement, reference to which is made for the terms and contents thereof.
24. The Santa Fe defendants deny the allegations of paragraph 24, except
that they admit that the Burlington Northern transaction cannot be consummated
without ICC approval.
25. The first sentence of paragraph 25 contains conclusions of law to which
no responsive pleading is required; the Santa Fe defendants deny the remaining
allegations of this paragraph.
26. The Santa Fe defendants deny the allegations of paragraph 26.
27. The Santa Fe defendants deny the allegations of paragraph 27.
28. The Santa Fe defendants deny the allegations of paragraph 28, state
that the Joint Proxy Statement makes full and fair disclosure of all material
facts, and refer to, and
6
<PAGE> 7
incorporate by reference herein, the pertinent portions of that Joint Proxy
Statement.
29. The Santa Fe defendants deny the allegations of paragraph 29, state
that the Joint Proxy Statement makes full and fair disclosure of all material
facts, and refer to, and incorporate by reference herein, the pertinent portions
of that Joint Proxy Statement.
30. The Santa Fe defendants deny the allegations of paragraph 30, state
that the Joint Proxy Statement makes full and fair disclosure of all material
facts, and refer to, and incorporate by reference herein, the pertinent portions
of that Joint Proxy Statement.
31. The Santa Fe defendants deny the allegations of paragraph 31, state
that the Joint Proxy Statement makes full and fair disclosure of all material
facts, and refer to, and incorporate by reference herein, the pertinent portions
of that Joint Proxy Statement.
32. The Santa Fe defendants deny the allegations of paragraph 32, state
that the Joint Proxy Statement makes full and fair disclosure of all material
facts, and refer to, and incorporate by reference herein, the pertinent portions
of that Joint Proxy Statement.
33. The Santa Fe defendants deny the allegations of paragraph 33, state
that the Joint Proxy Statement makes full and fair disclosure of all material
facts, and refer to, and
7
<PAGE> 8
incorporate herein by reference, the pertinent portions of that Joint Proxy
Statement.
34. The Santa Fe defendants deny the allegations of paragraph 34, state
that the Joint Proxy Statement makes full and fair disclosure of all material
facts, and refer to, and incorporate herein by reference, the pertinent portions
of that Joint Proxy Statement.
35. The Santa Fe defendants deny the allegations of paragraph 35, state
that the Joint Proxy Statement makes full and fair disclosure of all material
facts, and refer to, and incorporate herein by reference, the pertinent portions
of that Joint Proxy Statement.
36. The allegations of paragraph 36 state conclusions of law to which no
responsive pleading is required.
37. The Santa Fe defendants deny the allegations of paragraph 37.
38. The Santa Fe defendants repeat and restate their answers to the
preceding paragraphs.
39. The allegations of paragraph 39 state conclusions of law to which no
responsive pleading is required.
40. The Santa Fe defendants deny the allegations of paragraph 40.
41. The Santa Fe defendants deny the allegations of paragraph 41.
42. The Santa Fe defendants deny the allegations of paragraph 42.
8
<PAGE> 9
43. The Santa Fe defendants repeat and restate their answers to the
preceding paragraphs.
44. The Santa Fe defendants deny the allegations of paragraph 44.
45. The Santa Fe defendants deny the allegations of paragraph 45.
46. The Santa Fe defendants deny the allegations of paragraph 46.
47-49. The allegations of these paragraphs are directed solely to
Burlington Northern; accordingly no response by the Santa Fe defendants is
required. To the extent that the allegations of these paragraphs can be read as
being directed in any way to any of the Santa Fe defendants, the Santa Fe
defendants deny such allegations.
FIRST AFFIRMATIVE DEFENSE
For their First Affirmative Defense, the Santa Fe defendants state that the
plaintiffs have failed to state a claim upon which relief may be granted.
WHEREFORE, the Santa Fe defendants request that the Court dismiss the
plaintiff's Consolidated and Amended Complaint, with prejudice, and award to the
Santa Fe defendants their costs herein, including attorneys' fees, and such
other and further relief as the Court deems just and proper.
9
<PAGE> 10
<TABLE>
<S> <C>
Of Counsel:
/s/ SCOTT R. HAIBER
R. Franklin Balotti
Mayer, Brown & Platt Anne C. Foster
190 South LaSalle Street Scott R. Haiber
Chicago, Illinois 60603-3441 Richards, Layton & Finger
(312) 782-0600 One Rodney Square
P.O. Box 551
Dated: November 3, 1994 Wilmington, Delaware 19899
(302) 658-6541
Attorneys for the
Santa Fe Defendants
</TABLE>
10
<PAGE> 11
CERTIFICATE OF SERVICE
It is hereby certified that two copies of the foregoing Answer Of The Santa
Fe Defendants To The Consolidated And Amended Complaint were served this 3rd day
of November, 1994, by hand delivery on local counsel as follows:
Pamela S. Tikellis, Esquire
Chimicles, Jacobsen & Tikellis
One Rodney Square
P.O. Box 1035
Wilmington, Delaware 19899
Kenneth J. Nachbar, Esquire
Morris, Nichols, Arsht & Tunnell
1201 N. Market Street
P.O. Box 1347
Wilmington, Delaware 19899
Norman N. Monhait, Esquire
Rosenthal, Monhait, Gross & Goddess
First Federal Plaza
P.O. Box 1070
Wilmington, Delaware 19899
Irving Morris, Esquire
Morris and Morris
1105 N. Market Street, #1600
P.O. Box 2166
Wilmington, Delaware 19899
/s/ SCOTT R. HAIBER
--------------------------------------
Scott R. Haiber
<PAGE> 1
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
UNION PACIFIC CORPORATION )
and JAMES A. SHATTUCK, )
)
Plaintiffs, )
)
v. ) Civil Action No. 13778
)
)
SANTA FE PACIFIC CORPORATION, )
BILL M. LINDIG, ROY S. ROBERTS, )
JOHN S. RUNNELLS II, ROBERT H. )
WEST, JOSEPH F. ALIBRANDI, )
GEORGE DEUKMEJIAN, JEAN HEAD )
SISCO, ROBERT D. KREBS, MICHAEL A. )
MORPHY, EDWARD F. SWIFT, and )
BURLINGTON NORTHERN, INC., )
)
)
Defendants )
ANSWER OF THE SANTA FE DEFENDANTS TO THE
FIRST AMENDED AND SUPPLEMENTAL COMPLAINT
OF UNION PACIFIC CORPORATION AND JAMES A. SHATTUCK
Defendant Santa Fe Pacific Corporation ("Santa Fe") and its directors,
Bill M. Lindig, Roy S. Roberts, John S. Runnels II, Robert H. West, Joseph F.
Alibrandi, George Deukmejian, Jean Head Sisco, Robert D. Krebs, Michael A.
Morphy and Edward F. Swift (hereinafter "Santa Fe defendants"), by their
counsel, for their answer to the First Amended and Supplemental Complaint of
plaintiffs Union Pacific Corporation ("UP") and James A. Shattuck, state as
follows:
-1-
<PAGE> 2
1. The Santa Fe defendants admit that plaintiffs' action purports to
seek injunctive and declaratory relief, but deny the remaining allegations of
paragraph 1.
2. The Santa Fe defendants deny the allegations of paragraph 2.
3. The Santa Fe defendants deny the allegations of paragraph 3.
4. The Santa Fe defendants admit the allegations contained in the
first sentence of paragraph 4. The Santa Fe defendants are without knowledge or
information sufficient to permit them to form a belief as to the truth or
falsity of the allegations contained in the second sentence of paragraph 4.
5. The Santa Fe defendants are without knowledge or information
sufficient to permit them to form a belief as to the truth or falsity of the
allegations of paragraph 5.
6. The Santa Fe defendants admit the allegations of paragraph 6.
7. The Santa Fe defendants admit the allegations of paragraph 7.
8. The Santa Fe defendants admit the allegations of paragraph 8.
9. The Santa Fe defendants admit the allegations of paragraph 9.
10. The Santa Fe defendants deny the allegations of paragraph 10,
except that they admit that on or about June 29, 1994, Santa Fe and Burlington
Northern ("BN") entered into the Merger Agreement, reference to which is made
for the terms and contents thereof.
11. The Santa Fe defendants deny the allegations contained in the
first sentence of paragraph 11, except that they admit that the allegations
refer to the Merger Agreement, reference to which is made for the terms and
contents thereof, The Santa Fe defendants deny the allegations contained in the
second sentence of paragraph 11; by way
-2-
<PAGE> 3
of further answer, the advice provided to the Santa Fe board is accurately
reflected in the Joint Proxy Statement, the pertinent portions of which are
incorporated herein by reference. The allegations contained in the third
sentence of paragraph 11 state conclusions of law to which no responsive
pleading is required.
12. The Santa Fe defendants deny the allegations of paragraph 12,
except that they admit that the allegations refer to the Merger Agreement,
reference to which is made for the terms and contents thereof.
13. The Santa Fe defendants deny the allegations of paragraph 13,
except that to the extent that the allegations call for conclusions of law, no
responsive pleading is required; by way of further answer, the allegations of
paragraph 13 refer to the Merger Agreement, reference to which is made for the
terms and contents thereof.
14. The allegations of paragraph 14 state conclusions of law to
which no responsive pleading is required.
15. With respect to the allegations of paragraph 15, the Santa Fe
defendants state that they are without knowledge of information sufficient to
permit them to form a belief as to the truth or falsity of such allegations,
except that the Santa Fe defendants believe, for the reasons set out in the
Joint Proxy Statement, the pertinent portions of which are incorporated herein
by reference, that the purported proposal of UP was not primarily motivated by
a desire on the part of UP or its Board to achieve a UP/Sante Fe transaction
but rather by a desire to derail the BN/Sante Fe merger.
-3-
<PAGE> 4
16. With respect to the allegations of paragraph 16, the Santa Fe
defendants state that they are without knowledge or information sufficient to
permit them to form a belief as to the truth or falsity of such allegations,
except that the Santa Fe defendants believe, for the reasons set out in the
Joint Proxy Statement, the pertinent portions of which are incorporated herin
by reference, that the purported proposal of UP was not primarily motivated by
a desire on the part of UP or its Board to achieve a UP/Santa Fe transaction
but rather by a desire to derail the BN/Santa Fe merger.
17. The Santa Fe defendants deny the allegations of paragraph 17,
except that they admit that the October 5, 1994 meeting between UP
representatives and Mr. Krebs and Santa Fe's counsel and UP's purported
proposal are accurately described in the Joint Proxy Statement, the pertinent
portions of which are incorporated herein by reference.
18. The Santa Fe defendants deny the allegations of paragraph 18.
19. The Santa Fe defendants deny the allegations of paragraph 19.
20. The Santa Fe defendants deny the allegations of paragraph 20.
21. The Santa Fe defendants deny the allegations of paragraph 21,
except that to the extent that conclusions of law are stated therein, no
responsive pleading is required.
22. The Santa Fe defendants deny the allegations of paragraph 22.
23. The Santa Fe defendants deny the allegations of paragraph 23
except that they admit that the plaintiffs have accurately quoted selected
portions of a press release issued by Santa Fe on October 6, 1994, and that the
contents of such press release have been reported in the press.
-4-
<PAGE> 5
24. The Santa Fe defendants deny the allegations of paragraph 24,
except that they admit that the Joint Proxy Statement was mailed to
shareholders on or about October 14, 1994.
25. The Santa Fe defendants deny the allegations of paragraph 25,
except that to the extent that conclusions of law are stated therein, no
responsive pleading is required; by way of further answer, paragraph 25 refers
to the Joint Proxy Statement and the Merger Agreement, reference to which
documents is made for the terms and contents thereof.
26. The Santa Fe defendants deny the allegations of paragraph 26,
except that they admit that the plaintiffs have accurately quoted selected
portions of the Joint Proxy Statement; by way of further answer, the Santa Fe
defendants state that the Joint Proxy Statement is not misleading in any
respect; that the plaintiffs have mischaracterized both the Merger Agreement
and the description of the Board's actions, considerations and deliberations
contained in the Joint Proxy Statement; and that such actions, considerations
and deliberations are accurately described in the Joint Proxy Statement, the
pertinent portions of which are incorporated herein by reference.
27. The Santa Fe defendants deny the allegations of paragraph 27; by
way of further answer, the allegations of paragraph 27 refer to the Joint Proxy
Statement, reference to which is made for the terms and contents thereof.
28. The Santa Fe defendants deny the allegations of paragraph 28.
29. The Santa Fe defendants repeat and restate their answers to each
of the preceding paragraphs.
-5-
<PAGE> 6
30. The allegations of paragraph 30 state conclusions of law to which
no responsive pleading is required.
31. The Santa Fe defendants deny the allegations of paragraph 31.
32. The Santa Fe defendants deny the allegations contained in the
first sentence of paragraph 32. With respect to the second sentence of this
paragraph, this sentence merely states the alternative relief that the
plaintiffs claim to be seeking, to which no answer is required; to the extent
that this second sentence contains factual allegations to which an answer is
required, the Santa Fe defendants deny those allegations.
33. The Santa Fe defendants deny the allegations of paragraph 33.
34. The Santa Fe defendants repeat and restate their answers to each
of the preceding paragraphs.
35. The allegations of paragraph 35 state conclusions of law to which
no responsive pleading is required.
36. The Santa Fe defendants deny the allegations of paragraph 36.
37. The Santa Fe defendants deny the allegations of paragraph 37.
38. The Santa Fe defendants deny the allegations of paragraph 38.
39. The Santa Fe defendants deny the allegations of paragraph 39.
40. The Santa Fe defendants repeat and restate their answers to each
of the preceding paragraphs.
41. The allegations of paragraph 41 state conclusions of law to which
no responsive pleading is required.
-6-
<PAGE> 7
42. The Santa Fe defendants deny the allegations of paragraph 42.
43. The Santa Fe defendants deny the allegations of paragraph 43.
44. The Santa Fe defendants deny the allegations of paragraph 44.
45. The Santa Fe defendants repeat and restate their answers to each
of the preceding paragraphs.
46. The allegations of paragraph 46 state conclusions of law to which
no responsive pleading is required.
47. The Santa Fe defendants deny the allegations of paragraph 47.
48. The Santa Fe defendants deny the allegations of paragraph 48.
49. The Santa Fe defendants deny the allegations of paragraph 49.
50. The Santa Fe defendants deny the allegations of paragraph 50.
FIRST AFFIRMATIVE DEFENSE
For their First Affirmative Defense, the Santa Fe defendants state that the
plaintiffs have failed to state a claim upon which relief may be granted.
SECOND AFFIRMATIVE DEFENSE
For their Second Affirmative Defense, the Santa Fe defendants state that UP
lacks standing to assert the purported claims for relief contained in
Counts I-III.
THIRD AFFIRMATIVE DEFENSE
For their Third Affirmative Defense, the Santa Fe defendants state that UP
is not entitled to declaratory relief under the circumstances alleged in
Count IV.
-7-
<PAGE> 8
FOURTH AFFIRMATIVE DEFENSE
For their Fourth Affirmative Defense, the Santa Fe defendants state that UP
is barred from receiving equitable relief because it comes into this Court with
unclean hands.
FIFTH AFFIRMATIVE DEFENSE
For their Fifth Affirmative Defense, the Santa Fe defendants state that the
purported claim asserted by UP in Count I is barred under the doctrine of
laches.
SIXTH AFFIRMATIVE DEFENSE
For their Sixth Affirmative Defense, the Santa Fe defendants state that
this Court lacks subject matter jurisdiction over plaintiffs' claims for
declaratory relief for which an adequate remedy exists at law.
SEVENTH AFFIRMATIVE DEFENSE
For their Seventh Affirmative Defense, the Santa Fe defendants state,
upon information and belief, that plaintiff James A. Shattuck is not a real
party in interest and plaintiffs have made no showing that he was a stockholder
of Santa Fe at all relevant times.
EIGHTH AFFIRMATIVE DEFENSE
For their Eighth Affirmative Defense, the Santa Fe defendants state that
the action of plaintiff James A. Shattuck should be either stayed or dismissed
because of the existence of a prior pending action.
WHEREFORE, the Santa Fe defendants request that the Court dismiss the
plaintiffs' First Amended and Supplemental Complaint, with prejudice, and award
to the
-8-
<PAGE> 9
Santa Fe defendants their costs herein, including attorneys' fees, and such
other and further relief as the Court deems just and proper.
/s/ ANNE C. FOSTER
--------------------------------
R. Franklin Balotti
Anne C. Foster
Scott R. Haiber
Of Counsel: Richards, Layton & Finger
One Rodney Square
Mayer, Brown & Platt P.O. Box 551
190 South LaSalle Street Wilmington, Delaware 19899
Chicago, Illinois 60603-3441 (302) 658-6541
(312) 782-0600 Attorneys for the Santa Fe
Pacific Corporation
Defendants
Dated: October 26, 1994
-9-
<PAGE> 10
CERTIFICATE OF SERVICE
I hereby certify that on October 26, 1994, I caused to be served two copies
of the foregoing Answer to the following attorneys of record at the addresses
indicated:
BY REGULAR MAIL:
David J. Margules, Esquire
Klehr, Harrison, Harvey,
Branzburg & Ellers
Suite 1101
222 Delaware Avenue
Wilmington, DE 19801-1621
Stephen P. Lamb, Esquire
Skadden, Arps, Slate, Meagher & Flom
One Rodney Square
P.O. Box 636
Wilmington, DE 19899
Kenneth J. Nachbar, Esquire
Morris Nichols Arsht & Tunnell
1201 North Market Street
P.O. Box 1347
Wilmington, DE 19899-1347
/s/ ANNE C. FOSTER
--------------------------------------
Anne C. Foster
<PAGE> 1
COURT OF CHANCERY
OF THE
STATE OF DELAWARE
JACK B JACOBS COURTHOUSE
VICE CHANCELLOR WILMINGTON DELAWARE 19801
October 18, 1994
Stephen P. Lamb, Esquire Norman M. Monhait, Esquire
Skadden Arps Slate Meagher Rosenthal, Monhait, Gross
& Flom & Goddess, P.A.
P.O. Box 636 P.O. Box 1070
Wilmington, DE 19899 Wilmington, DE 19899
David J. Margules, Esquire R. Franklin Balotti, Esquire
Klehr, Harrison, Harven, Richards, Layton & Finger
Branzburg & Ellers P.O. Box 551
222 Delaware Avenue Wilmington, DE 19899
Suite 1101
Wilmington, DE 19801
Pamela S. Tikellis, Esquire Kenneth J. Nachbar, Esquire
Chimicles Jacobsen & Tikellis Morris Nichols Arsht &
P.O. Box 1035 Tunnell
Wilmington, DE 19899 P.O. Box 1347
Wilmington, DE 19899-1347
Re: UNION PACIFIC CORPORATION & SANTA fE PACIFIC CORPORATION, ET AL.,
C. A. NO. 13778; IN RE SANTA FE PACIFIC CORPORATION SHAREHOLDER
LITIGATION, CONSOL, C. A. NO. 13587
DATE SUBMITTED: OCTOBER 17, 1994
Dear Counsel:
Pending is an application for expedited discovery and an expedited hearing
on the plaintiffs' motion for a preliminary injunction. Having reviewed
counsels' respective memoranda and related correspondence dated October 13, 14,
and 17, 1994, I conclude that no colorable threat of irreparable harm has been
articulated or shown that would warrant intervention by this Court on the
expedited schedule being requested.
<PAGE> 2
* * *
The plaintiffs have asked me to order a hearing and expedited discovery
on their motion for a preliminary injunction, on a schedule that would enable
the motion to be heard and decided before the taking of a vote at the
November 18, 1994, shareholders' meeting of Santa Fe Pacific Corporation
("Santa Fe"). The injunctive relief that plaintiffs seek would include an
order preventing the vote from being taken.
The plaintiffs contend that this expedited schedule is required,
because a shareholder vote approving the proposed merger agreement between
Santa Fe and Burlington Northern, Inc. ("BNI") would vest in BNI rights that
would legally preclude Santa Fe from terminating the agreement, despite any
higher offer by plaintiff Union Pacific Corporation ("Union Pacific") or any
other bidder.(1) Because the lower priced Santa Fe-BNI transaction is claimed
to be the product of breaches of fiduciary duties by the Santa Fe directors, a
shareholder vote approving that transaction (with its accompanying preclusive
effect) would (it is argued) inflict upon Santa Fe shareholders irreparable
harm that could not be remedied at a later time. Therefore, plaintiffs
conclude, this Court must hear and decide the preliminary injunction motion
before any shareholder vote is taken.
In my opinion, that argument is fatally flawed because under no
scenario could a shareholder vote inflict harm that could not be remedied after
the shareholders' meeting.
First, all parties agree that if the proposed merger agreement is
approved bySanta Fe shareholders, in no event could it be consummated for at
least eighteen months--the time needed for the Interstate Commerce Commission
approval process to run its course. That time is amply
___________________________
(1) Plaintiffs argue that an "approving" shareholder vote would have
that preclusive effect because the merger agreement has no "fiduciary
out" termination provision and, by its terms, can be terminated only if
the shareholders turn down the merger. In fact, that is not the case.
See Sec. 10.1 (iii) of the Merger Agreement, quoted at p. 4. infra-
<PAGE> 3
sufficient for this Court to evaluate the plaintiffs' claims on their merits,
and should the plaintiffs prevail, to set aside the merger before any steps are
taken to consummate it.
Second, if a shareholder vote were taken and the shareholders rejected
the Santa Fe-Union Pacific merger proposal, no judicial action would be
needed since the transaction would have been defeated by the shareholders
themselves. In that vein, it is noteworthy that Union Pacific, which asks this
Court to prevent Santa Fe's shareholders from voting, is presently waging a
proxy contest in an effort to persuade those shareholders to defeat the
proposed merger. Should Union Pacific succeed in that effort, it would need no
relief from this Court.
Third, if the shareholders did vote to approve the challenged merger
proposal, two other scenarios might arise, neither of which has been shown to
be capable of producing irreparable harm. Assuming (arguendo) that the vote
were tainted by reason of proxy disclosure violations (as the shareholder
plaintiffs allege in their most recent amended complaint), then the
shareholders' vote could be judicially nullified after the meeting. Any
judicially nullified shareholder approval could not have the legal effect of
"vesting" irrremediable rights in BNI. If, on the other hand, the merger were
approved after full disclosure of all material facts(2), on what basis could a
fully informed business decision by Santa Fe shareholders to accept a
transaction whose value is less than being offered by Union Pacific, constitute
irreparable harm to those shareholders? To that question plaintiffs offer no
straightforward or persuasive answer.
Finally, even if a fully informed shareholder decision to approve the
merger would operate to vest rights that BNI did not possess before the vote,
the Merger Agreement
_______________________
(2) Certainly Union Pacific would be endeavoring to present a full
picture of its position of its position in its proxy material.
3
<PAGE> 4
nonetheless expressly permits the merger to be abandoned, and the Agreement to
be terminated:
"[A]t any time prior to the Effective Time (notwithstanding any
approval of the Agreement by the stockholders of [BNI] or [Santa Fe])...
by either [BNI] or [Santa Fe], if any judgment, injunction, order, or
decree enjoining [BNI] or [Santa Fe], from consummating the Merger is
entered and such judgment, injuction, order or decree should become
final and nonappealable."
Merger Agreement, Sec. 10.1 (iii).
* * *
For these reasons, the plaintiffs have failed to demonstrate a need for
this Court to involve itself in this dispute before Santa Fe's stockholders
decide whether or not to approve the Santa Fe-BNI merger. If after the
shareholder vote the plaintiffs are able to present a cognizable basis for
seeking expedited relief, any proceeding to determine their entitlement to such
relief can be scheduled promptly thereafter. Accordingly, the plaintiffs' motion
for expedited proceedings is denied. IT IS SO ORDERED.
Very truly yours,
/s/ Jack B. Jacobs
cc: Register in Chancery
4
<PAGE> 1
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
<TABLE>
<S> <C>
UNION PACIFIC CORPORATION :
AND JAMES A. SHATTUCK, :
v. Plaintiffs :
SANTA FE PACIFIC CORPORATION, BILL M. : Civil Action No. 13778
LINDIG, ROY S. ROBERTS, JOHN S. :
RUNNELLS, II, ROBERT H. WEST, JOSEPH F. :
ALIBRANDI, GEORGE DEUKMEJIAN, JEAN HEAD :
SISCO, ROBERT D. KREBS, MICHAEL A. MORPHY,:
EDWARD F. SWIFT and BURLINGTON NORTHERN, :
INC. Defendants. :
</TABLE>
NOTICE OF MOTION
TO: Stephen P. Lamb, Esquire
Skadden Arps Slate Meagher & Flom
One Rodney Square
Wilmington, Delaware 19801
David J. Margules, Esquire
Klehr Harrison Harvey Branzburg & Ellers
Suite 1101, 222 Delaware Avenue
Wilmington, Delaware 19899
Pamela S. Tikellis, Esquire
Chimicles Jacobsen & Tikellis
One Rodney Square
Wilmington, Delaware 19801
Anne C. Foster, Esquire
Richards Layton & Finger
One Rodney Square
Wilmington, Delaware 19801
PLEASE TAKE NOTICE that the undersigned defendant will present the attached
Motion To Dismiss at the convenience of Court and counsel.
<PAGE> 2
<TABLE>
<S> <C>
MORRIS, NICHOLS, ARSHT & TUNNELL
/s/ KENNETH J. NACHBAR
Kenneth J. Nachbar
OF COUNSEL: 1201 N. Market Street
P.O. Box 1347
DAVIS POLK & WARDWELL Wilmington, Delaware 19899
Dennis E. Glazer (302) 658-9200
Vincent T. Chang Attorneys for Defendant
450 Lexington Avenue Burlington Northern Inc.
New York, NY 10017
(212) 450-4000
November 2, 1994
</TABLE>
2
<PAGE> 3
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
UNION PACIFIC CORPORATION, :
and JAMES A. SHATTUCK, :
:
Plaintiffs, :
v. :
:
SANTA FE PACIFIC CORPORATION, :
: Civil Action No. 13778
BILL M. LINDIG, ROY S. ROBERTS, :
JOHN S. RUNNELLS, II, ROBERT H. :
WEST, JOSEPH F. ALIBRANDI, :
GEORGE DEUKMEJIAN, JEAN HEAD :
SISCO, ROBERT D. KREBS, MICHAEL :
A. MORPHY, EDWARD F. SWIFT and :
BURLINGTON NORTHERN, INC., :
Defendants. :
MOTION TO DISMISS
Defendant Burlington Northern Inc. ("Burlington Northern") hereby moves
pursuant to Chancery Court Rule 12(b)(6) to dismiss the First Amended And
Supplemental Complaint in the referenced action on the grounds that the
Complaint fails to state a claim against Burlington Northern upon which relief
can be granted.
MORRIS, NICHOLS, ARSHT & TUNNEL
/s/ KENNETH J. NACHBAR
Kenneth J. Nachbar
1201 N. Market Street
P.O. Box 1347
Wilmington, Delaware 19899
(302) 658-9200
Attorneys for Defendant
Burlington Northern Inc.
OF COUNSEL:
DAVIS POLK & WARDWELL
Dennis E. Glazer
Vincent T. Chang
450 Lexington Avenue
New York, NY 10017
(212) 450-4000
<PAGE> 4
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 2nd day of November, 1994, two copies of the
foregoing Motion To Dismiss were served, by hand delivery, upon the following:
Stephen P. Lamb, Esquire
Skadden Arps Slate Meagher & Flom
One Rodney Square
Wilmington, Delaware 19801
David J. Margules, Esquire
Klehr Harrison Harvey Branzburg & Ellers
Suite 1101, 222 Delaware Avenue
Wilmington, Delaware 19899
Pamela S. Tikellis, Esquire
Chimicles Jacobsen & Tikellis
One Rodney Square
Wilmington, Delaware 19801
Anne C. Foster, Esquire
Richards, Layton & Finger
One Rodney Square
Wilmington, Delaware 19801
KENNETH J. NACHBAR
Kenneth J. Nachbar
<PAGE> 1
SPECIAL MEETING OF STOCKHOLDERS
OF
SANTA FE PACIFIC CORPORATION
------------------------------------
PROXY STATEMENT
OF
UNION PACIFIC CORPORATION
------------------------------------
SOLICITATION OF PROXIES
IN OPPOSITION TO THE PROPOSED MERGER OF
SANTA FE PACIFIC CORPORATION AND
BURLINGTON NORTHERN INC.
This Proxy Statement is furnished by Union Pacific Corporation, a Utah
corporation ("Union Pacific"), in connection with its solicitation of proxies to
be used at a special meeting of stockholders of Santa Fe Pacific Corporation, a
Delaware corporation ("Santa Fe"), and at any adjournments, postponements or
reschedulings thereof (the "Special Meeting"). Pursuant to this Proxy Statement,
Union Pacific is soliciting proxies from stockholders of Santa Fe to vote
against Santa Fe's proposal to merge Santa Fe with and into Burlington Northern
Inc., a Delaware corporation ("BN") (such proposed merger, the "Santa Fe/BN
Merger"). According to the Burlington Northern Inc. and Santa Fe Pacific
Corporation Joint Proxy Statement (the "Santa Fe Joint Proxy Statement"), Santa
Fe has fixed November 18, 1994 as the date of the Special Meeting and October
19, 1994 as the record date for determining those stockholders of Santa Fe who
will be entitled to vote at the Special Meeting (the "Record Date"). This Proxy
Statement and the enclosed proxy are first being sent or given to stockholders
of Santa Fe on or about October 28, 1994. The principal executive offices of
Santa Fe are located at 1700 East Golf Road, Schaumburg, Illinois 60173-5860.
The principal executive offices of Union Pacific are located at Martin Tower,
Eighth and Eaton Avenues, Bethlehem, Pennsylvania 18018.
On October 5, 1994, Union Pacific made a proposal to acquire Santa Fe in a
negotiated merger transaction (the "Union Pacific Proposal"), pursuant to which
based on then current market prices the stockholders of Santa Fe would have
received Union Pacific common stock representing a substantial premium to the
consideration then being offered in the Santa Fe/BN Merger. On October 11, 1994,
Union Pacific advised Santa Fe that it is prepared to receive information from
Santa Fe that might justify a higher price. On October 27, 1994, BN announced
that it had raised the price it proposed to pay in the Santa Fe/BN Merger, and
based on current market prices of Union Pacific common stock and BN common stock
as of October 26, 1994, the Union Pacific Proposal does not currently represent
a premium to the consideration currently being offered in the Santa Fe/BN
Merger. Union Pacific stands ready to enter into immediate negotiations with
Santa Fe concerning a superior alternative to the Santa Fe/BN Merger. THE UNION
PACIFIC PROPOSAL CONSTITUTES AN INVITATION TO THE BOARD OF DIRECTORS OF SANTA FE
TO ENTER INTO MERGER NEGOTIATIONS WITH UNION PACIFIC. THE UNION PACIFIC PROPOSAL
IS SUBJECT TO CERTAIN MATERIAL CONDITIONS WHICH MAY AFFECT THE ABILITY TO
CONSUMMATE A TRANSACTION WITH SANTA FE, AND DOES NOT CONSTITUTE A LEGALLY
BINDING OBLIGATION ON THE PART OF UNION PACIFIC. Because of fluctuations in the
market value of Union Pacific common stock and BN common stock, there can be no
assurances as to the actual value that Santa Fe stockholders would receive
pursuant to the Union Pacific Proposal or the Santa Fe/BN Merger. See "Union
Pacific Proposal".
<PAGE> 2
IMPORTANT
- --------------------------------- --------------------------------------
UNION PACIFIC WILL WITHDRAW THE UNION PACIFIC PROPOSAL IF
STOCKHOLDERS OF SANTA FE APPROVE THE SANTA FE/BN MERGER.
- -------------------------------------------------------------------------------
REJECTION OF THE SANTA FE/BN MERGER WILL SEND AN IMPORTANT MESSAGE TO YOUR
BOARD THAT YOU WANT THEM TO NEGOTIATE WITH UNION PACIFIC IN AN EFFORT TO
POSSIBLY MAXIMIZE THE VALUE OF YOUR SHARES.
EVEN IF YOU HAVE ALREADY SENT A PROXY TO THE BOARD OF DIRECTORS OF SANTA
FE, YOU HAVE EVERY RIGHT TO CHANGE YOUR VOTE. YOU MAY REVOKE THAT PROXY AND VOTE
AGAINST THE SANTA FE/BN MERGER BY SIGNING, DATING AND MAILING THE ENCLOSED GOLD
PROXY IN THE ENCLOSED SELF-ADDRESSED ENVELOPE. NO POSTAGE IS NECESSARY IF YOUR
PROXY IS MAILED IN THE UNITED STATES.
PLEASE SIGN, DATE AND MAIL THE GOLD PROXY TODAY.
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY OR HOW FEW SHARES YOU OWN.
THIS PROXY STATEMENT IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF
OFFERS TO BUY ANY SECURITIES WHICH MAY BE ISSUED IN ANY MERGER OR SIMILAR
BUSINESS COMBINATION INVOLVING UNION PACIFIC AND SANTA FE. THE ISSUANCE OF SUCH
SECURITIES WOULD HAVE TO BE REGISTERED UNDER THE SECURITIES ACT OF 1933 AND SUCH
SECURITIES WOULD BE OFFERED ONLY BY MEANS OF A PROSPECTUS COMPLYING WITH THE
REQUIREMENTS OF SUCH ACT.
2
<PAGE> 3
SEND A MESSAGE TO THE SANTA FE BOARD
The Santa Fe Board of Directors has scheduled a Special Meeting of
Stockholders for November 18, 1994, and is trying to solicit votes to approve
the Santa Fe/BN Merger. According to the Santa Fe Joint Proxy Statement, it
could take almost 18 months to obtain regulatory approval from the Interstate
Commerce Commission ("ICC") and "there can be no assurance that the ICC will
issue a decision any sooner than the 31-month period permitted the ICC by law."
The Santa Fe/BN Merger cannot occur until ICC approval is obtained.
Union Pacific believes that there is no reason for the Santa Fe Board to
require Santa Fe stockholders to vote on the Santa Fe/BN Merger now, nor is
there any reason for Santa Fe stockholders to rush to judgment on that
transaction. Since the Santa Fe Board is insisting on proceeding with a
stockholder vote on November 18, 1994, Union Pacific believes that Santa Fe
stockholders can best protect their interests by voting AGAINST the merger with
BN. By voting AGAINST the Santa Fe/BN Merger, stockholders can send a strong
message to Santa Fe's directors that they should negotiate with Union Pacific in
accordance with the terms of Santa Fe's existing merger agreement with BN.
On October 27, 1994, BN announced that it had raised the price it proposed
to pay in the Santa Fe/BN Merger, and based on current market prices of Union
Pacific common stock and BN common stock as of October 26, 1994, the Union
Pacific Proposal does not currently represent a premium to the consideration
currently being offered in the Santa Fe/BN Merger. Union Pacific stands ready to
enter into immediate negotiations with Santa Fe concerning a superior
alternative to the Santa Fe/BN Merger.
In addition, based on the current dividend rates of Union Pacific and BN,
on a per share equivalent basis the Union Pacific Proposal would provide Santa
Fe stockholders with an indicated annual dividend of $.59 for each Santa Fe
share, as compared to only $.41 per share pursuant to the Santa Fe/BN Merger.
The indicated annual dividend rate is determined by multiplying (i) the current
annual dividend rate on shares of common stock of Union Pacific or BN, as the
case may be, by (ii) the applicable exchange ratio. There can be no assurance
that BN or Union Pacific will continue to pay dividends at rates currently in
effect or will pay any dividend in the future.
The Union Pacific Proposal, which is a stock-for-stock merger proposal, is
intended to be tax-free to stockholders of Santa Fe. If the combination of Union
Pacific and Santa Fe is structured differently, it will not necessarily be
tax-free to stockholders of Santa Fe.
3
<PAGE> 4
UNION PACIFIC PROPOSAL
On October 5, 1994, Mr. Drew Lewis, Chairman and Chief Executive Officer,
and Richard K. Davidson, President, of Union Pacific met with Mr. Robert D.
Krebs, Chairman, President and Chief Executive Officer of Santa Fe, and Robert
A. Helman, of the law firm of Mayer, Brown & Platt, counsel for Santa Fe. At the
end of the meeting, Mr. Lewis delivered the following letter to Mr. Krebs
describing the Union Pacific Proposal:
October 5, 1994
Mr. Robert D. Krebs
Chairman, President & CEO
Santa Fe Pacific Corporation
1700 E. Golf Road
Schaumburg, IL 60173
Dear Rob:
I would like to thank you for meeting with Dick and me earlier
today to discuss a possible combination of our two companies. We have
long admired Santa Fe and your excellent management and work force. As
we discussed, we at Union Pacific believe that combining the strengths
of Santa Fe and Union Pacific represents an extraordinary opportunity
for our two companies, our respective shareholders, customers and
employees, and the railroad industry.
I was disappointed by your unwillingness to consider our proposal.
As I mentioned, we view this transaction as a strategic imperative.
Accordingly, I am writing to submit the following proposal to combine
our companies. Because of the very significant benefits that it would
provide to your Company, your shareholders and other constituencies, we
ask that you and your Board of Directors give careful consideration to
our proposal.
Mr. Lewis' letter then set forth certain terms of the Union Pacific Proposal,
and discussed, among other things, Union Pacific's views of the benefits of a
possible combination of Union Pacific and Santa Fe. The letter concluded by
stating:
Our Board of Directors strongly supports the proposed transaction
and has authorized management to pursue this proposal with you. We are
prepared to immediately commence negotiation of a definitive merger
agreement containing mutually agreeable terms and conditions.
We have conducted an extensive analysis of Santa Fe based on
publicly available information. While our proposal is necessarily
subject to confirmation, through appropriate due diligence, that our
understanding of Santa Fe based on publicly available information is
accurate, we expect that such due diligence will confirm our view of
Santa Fe and its prospects. We recognize that you will need to conduct a
due diligence review of Union Pacific and its operations, and we are
ready to facilitate that process.
4
<PAGE> 5
Our transaction, like the proposed Burlington Northern merger, is
contingent upon ICC approval. Although this is a significant matter for
either transaction, we believe that, working together, we can present
strong arguments to the Commission as to the benefits of our transaction
to customers and the industry.
Our proposal also would be subject to termination of your merger
agreement with Burlington Northern, in accordance with the terms of that
agreement, approval of a mutually satisfactory merger agreement by our
respective Boards of Directors, and approval of our respective
shareholders.
Along with our financial advisor, CS First Boston Corporation, and
our legal advisor, Skadden, Arps, Slate, Meagher & Flom, we look forward
to meeting with you and your advisors to discuss our proposal and to
working to implement this transaction. We have the opportunity to build
the best railroad in the country and to provide significant immediate
and long-term benefits for your shareholders.
I am hopeful your Board will conclude that your shareholders should
not be denied the opportunity to consider this offer. We at Union
Pacific are determined to take every appropriate action to pursue this
transaction. In view of the importance of this matter, time is of the
essence and we await your earliest possible response.
Please call me as soon as possible so we can get together to
discuss this matter in detail.
Sincerely,
/s/ Drew Lewis
5
<PAGE> 6
On October 6, 1994, Mr. Krebs delivered the following letter to Mr. Lewis:
October 6, 1994
Mr. Drew Lewis
Chairman and Chief Executive Officer
Union Pacific Corporation
Martin Tower
Eighth and Eaton Avenues
Bethlehem, Pennsylvania 18018
Dear Mr. Lewis:
The Board of Directors of Santa Fe Pacific Corporation ("SFP") has
authorized me to reject, on behalf of SFP, the proposal of Union Pacific
Corporation ("UP") dated October 5, 1994, to acquire SFP. You stated at
our meeting yesterday that UP might be willing to offer more . . . and
would consider using a voting trust for UP's proposed transaction. These
statements are inconsistent with UP's proposal and its press release.
If UP makes a proposal at a fair price and with an adequate
provision for a voting trust that would substantially eliminate the
regulatory risk for SFP shareholders, the Board would consider that
proposal in light of its fiduciary duties.
Sincerely,
/s/ Robert D. Krebs
The use of a voting trust would permit stockholders to receive
consideration in a transaction prior to receiving ICC approval, which, as
discussed below, involves a lengthy review process. If a voting trust is not
used in a transaction, ICC approval must be obtained prior to consummating a
transaction and prior to stockholders receiving any consideration. At the
present time, Union Pacific does not intend to modify the Union Pacific Proposal
to include the use of a voting trust, although no final determination has been
made.
6
<PAGE> 7
On October 11, 1994, Mr. Lewis sent a letter to Mr. Krebs expressing
disappointment with Santa Fe's failure to give careful consideration to the
Union Pacific Proposal or to meet with Union Pacific to discuss a transaction,
and stating, among other things, that Union Pacific would be prepared to receive
information from Santa Fe that might justify a greater consideration.
On October 11, 1994, Mr. Krebs sent the following letter to Mr. Lewis:
October 11, 1994
Mr. Drew Lewis
Chairman and Chief Executive Officer
Union Pacific Corporation
Martin Tower
Eighth and Eaton Avenues
Bethlehem, Pennsylvania 18018
Dear Mr. Lewis:
Your October 11, 1994 letter has been reviewed by the Santa Fe
Pacific board. The board has concluded that your October 11 letter
really adds nothing to your October 5 letter. However, the board has
authorized me to ask you to provide us promptly with Union Pacific's
"analysis of ICC matters," as referenced in your letter. Unless and
until we receive something to change the position set forth in my
October 6, 1994 letter to you, that position still stands.
Sincerely,
/s/ ROBERT D. KREBS
Chairman, President and
Chief Executive Officer
7
<PAGE> 8
On October 12, 1994, Mr. Lewis sent the following letter to Mr. Krebs:
October 12, 1994
Mr. Robert D. Krebs
Chairman, President and CEO
Santa Fe Pacific Corporation
1700 East Golf Road
Schaumburg, IL 60173
Dear Rob:
We are encouraged by your October 11 response indicating a
willingness to consider our analysis of regulatory matters relating to
our proposed transaction. We will provide materials and would welcome
the opportunity, in accordance with your existing merger agreement, to
sit down with you and your advisors to address your concerns.
We will be in contact with you shortly to arrange the delivery of
materials.
Sincerely,
/s/ Drew Lewis
cc: Board of Directors
Santa Fe Pacific Corporation
8
<PAGE> 9
ICC MATTERS
Both the Santa Fe/BN Merger and a combination of Santa Fe and Union Pacific
would require approval of the ICC. ICC approval is a long and complex process
which can take two years or longer. Union Pacific believes that one cannot
predict what the ultimate outcome will be and, because one cannot predict such
outcome, the issue of ICC approval presents a significant risk to consummating
the Union Pacific Proposal. Under the Interstate Commerce Act, the ICC is
required to approve a merger between railroads, such as Santa Fe and Union
Pacific, if it finds that the transaction is consistent with the public
interest. In making that determination, the ICC must consider at least the
following factors: (i) the effect of the proposed transaction on the adequacy of
transportation to the public; (ii) the effect on the public interest of
including, or failing to include, other rail carriers in the area involved in
the proposed transaction; (iii) the total fixed charges that result from the
proposed transaction; (iv) the interest of carrier employees affected by the
proposed transaction; and (v) whether the proposed transaction would have an
adverse effect on competition among rail carriers in the affected region.
Three of these factors are, in Union Pacific's view, unlikely to affect
whether a Union Pacific/Santa Fe merger is approved by the ICC. As to factor
(ii) -- inclusion of other railroads -- the ICC disfavors this remedy, it has
rarely been requested, and Union Pacific believes it is unlikely to be requested
by any railroad in a Union Pacific/Santa Fe proceeding. As to factor
(iii) -- effect on fixed charges -- the transaction presently proposed, a
stock-for-stock merger, would have no effect on total fixed charges, and, in any
case, the capital structures of Union Pacific and Santa Fe are sufficiently
strong that this factor is unlikely, in Union Pacific's view, to be given any
weight by the ICC in deciding whether to approve a Union Pacific/Santa Fe
merger. As to factor (iv) -- the interest of affected carrier employees -- the
ICC has adopted a standard set of labor protective conditions which it imposes
in rail merger and control transactions, and Union Pacific expects that those
conditions would be imposed upon a Union Pacific/Santa Fe merger and that this
would not affect approval of the transaction.
The remaining two factors -- factor (i), effect on the adequacy of
transportation, and factor (v), effect on rail competition -- are reflected in
the public interest balancing test that the ICC applies in reviewing railroad
mergers like the proposed Union Pacific and Santa Fe combination. On the one
hand, the ICC considers the public benefits of the transaction in terms of
better service to shippers, efficiencies, cost savings and the like. On the
other hand, the ICC considers any public harms from the transaction. The
principal harm of concern to the ICC, and the principal potential obstacle to
approval of a Union Pacific/Santa Fe merger, is reduction in competition. In
applying the public interest balancing test, the ICC is guided by Congress'
intent to encourage mergers, consolidations, and joint use of facilities that
tend to rationalize and improve the Nation's rail system.
The ICC has the authority to approve a merger subject to conditions -- such
as grants of trackage rights to other railroads -- that will ameliorate harms
that otherwise would result. Also, the ICC favors private settlements aimed at
resolving claims of competitive harm through the imposition of agreed-upon
conditions. If a merger, as conditioned, is in the public interest, it will be
approved.
As described in the following paragraph, Union Pacific will seek to present
to the ICC its case that the merger of Union Pacific and Santa Fe satisfies the
public interest balancing test. First, Union Pacific will seek to show that a
Union Pacific/Santa Fe merger has significant public benefits. Second, Union
Pacific will seek to show that a Union Pacific/Santa Fe merger, especially with
competition-enhancing conditions that Union Pacific is prepared to agree to in
advance in favor of Southern Pacific, BN or other railroads, will have no
significant adverse effect on rail competition, and indeed will strengthen such
competition.
9
<PAGE> 10
Union Pacific recently provided the Santa Fe Board with a report
summarizing the key elements of the factual case that would be included in Union
Pacific's application to the ICC for approval of a combination with Santa Fe.
The report describes the substantial rail service improvements and other
benefits that Union Pacific believes would result from a Union Pacific/Santa Fe
combination, including new single-line service, other significant service
benefits, and cost savings and efficiencies. The report also discusses the
possible conditions, such as the right of other railroads to provide competitive
services over the consolidated system's lines and the sale or lease of lines to
other railroads, that Union Pacific would be prepared to grant to other
railroads in order to address competitive issues relating to a combination with
Santa Fe.
With regard to the public benefits of a Union Pacific/Santa Fe merger, the
report indicates that the merger would create substantial new single-line
service, including for traffic moving across the Southern Corridor between
California and points in Texas, Louisiana and Arkansas, for Union Pacific grain
producers moving product to Santa Fe feeder markets in California, Texas and
Arizona, for Santa Fe grain producers moving product to export markets, for
Union Pacific shippers in the Pacific Northwest and the Intermountain region
moving commodities to points on the Santa Fe, and for Santa Fe shippers moving
commodities to Gulf ports and Mexico. The report further indicates that a Union
Pacific/Santa Fe merger would yield new service improvements, including greater
service frequency and reliability and reduced transit time for intermodal,
automotive, manifest and bulk commodity traffic and improved utilization of
freight cars, and would attract significant volumes of traffic from the highway.
Finally, the report indicates that a Union Pacific/Santa Fe merger will generate
major savings and efficiencies, including capital savings, savings from using
shorter routes, savings from consolidating facilities and eliminating overheads,
efficiencies from using the best technologies and systems of each railroad on
the combined system, and savings from more efficient use of equipment.
With regard to competition, the report indicates that in the two markets
where Union Pacific/Santa Fe would have a combined position that Union Pacific
believes would arguably raise competitive concerns -- the Kansas/Oklahoma grain
market and the market for the handling of service-sensitive traffic between
California and the Midwest -- Union Pacific is prepared to grant conditions to
other railroads that will address those competitive concerns. Such conditions,
the report states, could include, as examples, a sale or lease of Union
Pacific's former Oklahoma, Kansas and Texas Railroad line through Kansas and
Oklahoma to Texas, and a grant of trackage rights or other conditions that would
significantly strengthen Southern Pacific's already competitive
California-Midwest routes.
Union Pacific believes that, in the context of a negotiated merger
transaction with Santa Fe and given Union Pacific's willingness to grant
appropriate conditions to other railroads, it will be able to make a credible
case for ICC approval.
Union Pacific recently retained a panel of experts on ICC and
transportation matters and asked them to review the case for a possible Union
Pacific/Santa Fe combination. In reaching their conclusion, these experts
reviewed the report Union Pacific prepared and provided to the Santa Fe Board.
Based on their review of this report, including the benefits and
competition-preserving conditions described therein as summarized above,
discussions among members of the panel and their own analysis and experience in
this area, the panelists reached the following conclusions:
The three ICC experts on the panel concluded:
- Union Pacific has outlined a strong case for ICC approval of a
combination with Santa Fe that warrants favorable consideration by the
ICC.
- A Union Pacific/Santa Fe combination should have good prospects of
obtaining ICC approval.
10
<PAGE> 11
In reaching these conclusions, the ICC experts stressed, among other
things, Union Pacific's willingness to grant competition-preserving conditions
and the unwillingness of the applicants in the Santa Fe/Southern Pacific merger
case to do so; the significant benefits of a Union Pacific/Santa Fe merger,
including its potential to alleviate capacity constraints on both railroads and
achieve new levels of service quality; and the importance of such a merger in
stimulating trade with Mexico and agricultural exports.
The federal transportation policy expert on the panel concluded:
- The Department of Transportation is unlikely to oppose, and may well
support, a Union Pacific/ Santa Fe combination.
In reaching this conclusion, the federal transportation policy expert
stressed that the Union Pacific/Santa Fe proposal is in concert with the policy
of the Department of Transportation to develop a more effective intermodal
transportation system for the United States, and with the Department's policy of
increasing the capacity, efficiency and safety of our national highway system.
The expert on logistics and shipper needs concluded:
- A Union Pacific/Santa Fe combination would provide major benefits for the
shipping public as well as U.S. industry in general. A combined Union
Pacific/Santa Fe will become more cost and service competitive in their
markets to the benefit of rail industry customers.
In reaching this conclusion, the expert on logistics and shipper needs
stressed that a Union Pacific/Santa Fe merger will address shipper needs in the
areas of service quality, management of information, reduction in transportation
cost, productive use of transportation assets, reduction of risk and
simplification of supplier relationships.
The panel's conclusions also noted that ICC approval is a long and complex
process which can take two years or longer, and that at this stage, one cannot
predict with certainty the outcome of ICC review of either a Union Pacific or a
BN combination with Santa Fe.
The panel of experts consists of Malcolm M.B. Sterrett, an attorney with
extensive rail transportation experience and a former ICC Commissioner; John F.
DePodesta, an attorney who has represented numerous rail carriers and public
bodies in proceedings before the ICC and a former General Counsel of
Consolidated Rail Corporation; C. John Langley Jr., Ph.D., John H. "Red" Dove
Distinguished Professor of Logistics and Transportation, University of
Tennessee; Walter B. McCormick, Jr., Partner, Bryan Cave, Washington, D.C., and
former General Counsel of the U.S. Department of Transportation; and Robert N.
Kharasch, a Washington, D.C. lawyer for more than 40 years who specialized in
transportation law and who was coordinating counsel for railroad opponents to
the unsuccessful Santa Fe/Southern Pacific merger. No member of the panel has
previously represented Union Pacific before the ICC or on any other matter,
except that Dr. C. John Langley, Jr. has in the past done limited consulting for
Union Pacific.
IF YOU WOULD LIKE COPIES OF THE CONCLUSIONS AND REPORTS OF THE PANEL OF
EXPERTS, PLEASE CONTACT MORROW & CO., INC., AT (800) 856-8309 (TOLL-FREE), OR
(212) 754-8000 IF IN NEW YORK CITY, AND THEY WILL BE FURNISHED TO YOU PROMPTLY.
COPIES OF SUCH EXPERTS' MATERIALS CAN BE INSPECTED AND COPIED AT THE PUBLIC
REFERENCE FACILITIES MAINTAINED BY THE SECURITIES AND EXCHANGE COMMISSION (THE
"SEC") AT ROOM 1024, JUDICIARY PLAZA, 450 FIFTH STREET, N.W., WASHINGTON, D.C.
20549, AND AT THE SEC'S REGIONAL OFFICES IN NEW YORK (7 WORLD TRADE CENTER, 13TH
FLOOR, NEW YORK, NEW YORK 10048) AND IN CHICAGO (NORTHWESTERN ATRIUM CENTER,
SUITE 1400, 500 WEST MADISON STREET, CHICAGO, ILLINOIS 60661). COPIES OF THE
CONCLUSIONS AND REPORTS OF THE PANEL OF EXPERTS CAN BE OBTAINED AT PRESCRIBED
RATES BY WRITING TO THE SEC, PUBLIC REFERENCE SECTION, JUDICIARY PLAZA, 450
FIFTH STREET, N.W., WASHINGTON, D.C. 20549.
11
<PAGE> 12
SANTA FE/BN MERGER PROPOSAL
Santa Fe has distributed the Santa Fe Joint Proxy Statement to Santa Fe
stockholders describing the terms of the Santa Fe/BN Merger, as well as other
related matters. A summary description of the Santa Fe/BN Merger based on
publicly available information appears below under "Summary of the Santa Fe/BN
Merger".
Union Pacific is soliciting proxies from stockholders of Santa Fe in
opposition to the Santa Fe/BN Merger. Union Pacific urges all stockholders of
Santa Fe to vote AGAINST the Santa Fe/BN Merger.
SUMMARY OF THE SANTA FE/BN MERGER
The Santa Fe/BN Merger provides for the merger of Santa Fe with and into
BN. Under the terms of the Santa Fe/BN Merger as originally proposed, each
outstanding share of Santa Fe common stock (subject to certain exceptions) would
have been converted into 0.27 of a share of common stock of BN, valued at $13.50
per share of Santa Fe common stock, based upon the closing price of BN common
stock on October 27, 1994. On October 27, 1994, BN announced that it had
increased the exchange ratio in the Santa Fe/BN Merger to 0.34 of a share of
common stock of BN, valued at $17.00 per share of Santa Fe common stock, based
upon the closing price of BN common stock on October 27, 1994. According to the
Santa Fe Joint Proxy Statement, the Santa Fe/BN Merger is intended to be
tax-free to stockholders of Santa Fe.
The obligation of the parties to effect the Santa Fe/BN Merger is subject
to certain conditions, including, among others, approval by stockholders of
Santa Fe and by stockholders of BN and certain regulatory approvals. One of the
required approvals is approval of the Interstate Commerce Commission. The Santa
Fe/BN Merger must be approved by the holders of a majority of the outstanding
shares of Santa Fe common stock and the holders of a majority of the outstanding
shares of BN common stock. According to the Santa Fe Joint Proxy Statement,
Santa Fe has fixed November 18, 1994 as the date of the Special Meeting and
October 19, 1994 as the Record Date for determining those stockholders of Santa
Fe who will be entitled to vote at the Special Meeting.
OTHER INFORMATION
Approval of the Santa Fe/BN Merger requires the affirmative vote of the
holders of a majority of all outstanding shares of Santa Fe common stock. All
outstanding shares of Santa Fe common stock as of the close of business on the
Record Date will be entitled to vote at the Special Meeting. Each share of Santa
Fe common stock is entitled to one vote. According to the Santa Fe Joint Proxy
Statement, there were outstanding 186,996,400 shares of Santa Fe common stock as
of October 10, 1994. As of the date hereof, Union Pacific beneficially owns 200
shares of Santa Fe common stock. Shares of Santa Fe common stock not voted
(including broker non-votes) and shares of Santa Fe common stock voted to
"abstain" from such vote will have the same effect as a vote "against" the Santa
Fe/BN Merger.
The accompanying GOLD proxy will be voted in accordance with the
stockholder's instructions on such GOLD proxy. Stockholders may vote against the
Santa Fe/BN Merger by marking the proper box on the GOLD proxy. If no
instructions are given, the GOLD proxy will be voted AGAINST the Santa Fe/BN
Merger.
UNION PACIFIC STRONGLY RECOMMENDS A VOTE AGAINST THE SANTA FE/BN MERGER.
12
<PAGE> 13
VOTING YOUR SHARES
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, WE URGE YOU TO VOTE
AGAINST THE SANTA FE/BN MERGER ON THE ENCLOSED GOLD PROXY AND IMMEDIATELY MAIL
IT IN THE ENCLOSED ENVELOPE. YOU MAY DO THIS EVEN IF YOU HAVE ALREADY SENT IN A
DIFFERENT PROXY SOLICITED BY SANTA FE'S BOARD OF DIRECTORS. IT IS THE LATEST
DATED PROXY THAT COUNTS. EXECUTION AND DELIVERY OF A PROXY BY A RECORD HOLDER OF
SHARES OF SANTA FE COMMON STOCK WILL BE PRESUMED TO BE A PROXY WITH RESPECT TO
ALL SHARES OF SANTA FE COMMON STOCK HELD BY SUCH RECORD HOLDER UNLESS THE PROXY
SPECIFIES OTHERWISE.
YOU MAY REVOKE ANY PROXY YOU SUBMIT (WHETHER THE WHITE PROXY SOLICITED BY
SANTA FE OR THE GOLD PROXY SOLICITED BY UNION PACIFIC) AT ANY TIME PRIOR TO ITS
EXERCISE BY ATTENDING THE SPECIAL MEETING AND VOTING IN PERSON, BY SUBMITTING A
DULY EXECUTED LATER DATED PROXY OR BY SUBMITTING A WRITTEN NOTICE OF REVOCATION.
UNLESS REVOKED IN THE MANNER SET FORTH ABOVE, DULY EXECUTED PROXIES IN THE FORM
ENCLOSED WILL BE VOTED AT THE SPECIAL MEETING ON THE PROPOSED SANTA FE/BN MERGER
IN ACCORDANCE WITH YOUR INSTRUCTIONS. IN THE ABSENCE OF SUCH INSTRUCTIONS, SUCH
PROXIES WILL BE VOTED AGAINST THE SANTA FE/BN MERGER. IF ANY OTHER MATTERS ARE
PROPERLY BROUGHT BEFORE THE SPECIAL MEETING, SUCH PROXIES WILL BE VOTED ON SUCH
MATTERS AS UNION PACIFIC, IN ITS SOLE DISCRETION, MAY DETERMINE.
YOUR VOTE IS IMPORTANT.
PLEASE SIGN, DATE AND RETURN THE GOLD PROXY TODAY.
IF YOU HAVE ALREADY SENT A PROXY TO THE BOARD OF DIRECTORS OF SANTA FE, YOU
MAY REVOKE THAT PROXY AND VOTE AGAINST THE SANTA FE/BN MERGER BY SIGNING, DATING
AND MAILING THE ENCLOSED GOLD PROXY.
If you have any questions about the voting of shares of Santa Fe common
stock, please call:
MORROW & CO., INC.
Call Toll Free: (800) 856-8309
In New York City, call: (212) 754-8000
13
<PAGE> 14
CERTAIN LITIGATION CONCERNING
THE SANTA FE/BN MERGER
On October 6, 1994, Union Pacific filed suit in the Court of Chancery in
Delaware against Santa Fe, BN and the members of the Board of Directors of Santa
Fe seeking, among other things, a declaratory judgment that the Merger Agreement
between Santa Fe and BN is terminable by Santa Fe in order to allow Santa Fe to
accept Union Pacific's merger proposal, and an injunction requiring Santa Fe to
negotiate with Union Pacific regarding the Union Pacific Proposal. Union Pacific
is also seeking a declaratory judgment that Union Pacific has not tortiously
interfered with the contractual relations of Santa Fe and BN. On October 7,
1994, Union Pacific moved for expedited discovery on the ground that expedition
is essential to permit Union Pacific to obtain timely relief against the
continuing breaches of fiduciary duty by the Board of Directors of Santa Fe. As
of October 21, 1994, the defendants had not yet filed an answer.
On June 30, 1994, four suits were filed in the Court of Chancery in
Delaware by stockholders of Santa Fe against Santa Fe, BN and the members of the
Board of Directors of Santa Fe. Each of these suits was filed as a class action
on behalf of all stockholders of Santa Fe except the defendants and their
affiliates, and alleged, among other things, that the defendants had breached
their fiduciary duties to the plaintiffs by agreeing to sell Santa Fe's railroad
assets to BN for grossly inadequate consideration. On October 6, 1994, an
amended complaint was filed in these actions alleging in addition that the
defendants had breached their fiduciary duties by failing to fully inform
themselves with regard to the Union Pacific Proposal.
On October 6 and 7, 1994, eight additional suits were filed in the Court of
Chancery in Delaware by stockholders of Santa Fe against Santa Fe, BN and the
members of the Board of Directors of Santa Fe. Each of these suits was filed as
a class action on behalf of all stockholders of Santa Fe except the defendants
and their affiliates, and alleged, among other things, that the defendants had
breached their fiduciary duties to the plaintiffs by failing to negotiate with
Union Pacific regarding the Union Pacific Proposal.
On October 14, 1994, the Santa Fe stockholder-plaintiffs in the twelve
suits previously filed in the Delaware Court of Chancery filed a Consolidated
and Amended Complaint against Santa Fe, the members of its Board of Directors
(the "director defendants") and BN, styled In re Santa Fe Pacific Shareholder
Litigation, Del. Ch., Cons. C.A. No. 13567 (the "Consolidated Shareholder
Action"). The Consolidated Shareholder Action, which was filed as a class action
on behalf of all stockholders of Santa Fe as of June 30, 1994 (except for the
defendants and their affiliates) who are or will be threatened with injury
arising from the defendants' actions, alleged, among other things, that (i) the
director defendants breached their fiduciary duties of care and loyalty by
failing to inform themselves and explore adequately all alternatives available
to Santa Fe stockholders (including the Union Pacific Proposal), by approving
and recommending the Santa Fe/BN Merger, and by approving and enforcing the
Merger Agreement; (ii) the director defendants breached their fiduciary duties
of disclosure by failing to completely disclose all material information in the
Santa Fe Joint Proxy Statement; and (iii) BN aided and abetted such breaches of
fiduciary duty. The Consolidated Shareholder Action, among other things, seeks
preliminary and permanent injunctive relief against the consummation of the
Santa Fe/BN Merger, a court order requiring the director defendants to explore
alternatives with, provide information to and negotiate in good faith with any
bona fide bidder (including Union Pacific), a court order decreeing that the
Merger Agreement is terminable by Santa Fe in response to the Union Pacific
Proposal, and invalid under Delaware law, and joint and several damages against
the defendants as a result of their conduct.
14
<PAGE> 15
On October 18, 1994, the Delaware Court of Chancery denied Union Pacific's
and the Santa Fe stockholder-plaintiffs' motions for expedited discovery. The
Court of Chancery, among other things, held that because the Santa Fe/BN Merger,
if approved by Santa Fe stockholders, could not be consummated for at least
eighteen months, the Court would have sufficient time to evaluate Union
Pacific's and the Santa Fe stockholder-plaintiffs' claims and, if necessary, set
aside the Santa Fe/BN Merger before any steps are taken to consummate it.
On October 19, 1994, Union Pacific filed its First Amended and Supplemental
Complaint, and was joined in that action as plaintiff by James A. Shattuck, an
officer of Union Pacific Railroad Company, a subsidiary of Union Pacific, who
also is a stockholder of Santa Fe. The First Amended and Supplemental Complaint
is styled Union Pacific Corporation and James A. Shattuck v. Santa Fe Pacific
Corporation, et. al., C.A. No. 13778. In addition to the claims stated and
relief sought in Union Pacific's original complaint, the First Amended and
Supplemental Complaint alleged, among other things, that Santa Fe and the
director defendants have breached their fiduciary duties of candor by joining BN
in a wrongful campaign to mislead Santa Fe's stockholders (via press releases
and the Santa Fe Joint Proxy Statement) into believing, among other things, that
(i) Santa Fe cannot lawfully consider the Union Pacific Proposal; (ii) the Union
Pacific Proposal is illusory and made solely for the purpose of preventing a
merger of Santa Fe and Burlington Northern; and (iii) a merger of Union Pacific
and Santa Fe cannot lawfully occur.
SOLICITATION OF PROXIES
Proxies will be solicited by mail, telephone, telefax and in person. Union
Pacific has retained Morrow & Co., Inc. ("Morrow") for solicitation and advisory
services in connection with solicitations relating to the Special Meeting, for
which Morrow is to receive an initial proxy advisory retainer fee of $75,000 and
an additional fee of $500,000 in connection with the solicitation of proxies for
the Special Meeting. Union Pacific has also agreed to reimburse Morrow for its
reasonable out-of-pocket expenses and indemnify Morrow against certain
liabilities and expenses, including reasonable legal fees and related charges.
Morrow will solicit proxies for the Special Meeting from individuals, brokers,
banks, bank nominees and other institutional holders. Directors, officers and
employees of Union Pacific may assist in the solicitation of proxies without any
additional remuneration. The entire expense of soliciting proxies for the
Special Meeting by or on behalf of Union Pacific is being borne by Union
Pacific.
CS First Boston Corporation ("CS First Boston") is acting as financial
advisor to Union Pacific in connection with its effort to acquire Santa Fe.
Union Pacific has agreed to pay CS First Boston for its services an initial
financial advisory fee of $500,000, an additional financial advisory fee of $2
million (the "Additional Advisory Fee"), $1 million of which was paid on October
17, 1994 and the remaining $1 million of which will become payable on December
31, 1994, an ongoing quarterly advisory fee of $125,000 payable during the term
of the engagement ("Quarterly Advisory Fees"), with the first payment payable on
March 31, 1995, and a transaction fee payable in connection with Union Pacific's
proposed acquisition of Santa Fe, determined based on the size of such
transaction, but in an amount not to exceed $12.5 million (the "Transaction
Fee"). Any portion of the Additional Advisory Fee and Quarterly Advisory Fees
paid prior to consummation of Union Pacific's acquisition of Santa Fe will be
fully credited against the Transaction Fee. Union Pacific has also agreed to
reimburse CS First Boston for its reasonable out-of-pocket expenses, including
the fees and expenses of its legal counsel, incurred in connection with its
engagement, and to indemnify CS First Boston and certain related persons against
certain liabilities and expenses in connection with its engagement, including
certain liabilities under the federal securities laws. In connection with CS
First Boston's engagement as financial
15
<PAGE> 16
advisor, Union Pacific anticipates that certain employees of CS First Boston may
communicate in person, by telephone or otherwise with a limited number of
institutions, brokers or other persons who are stockholders of Santa Fe for the
purpose of assisting in the solicitation of proxies for the Special Meeting. CS
First Boston will not receive any fee for or in connection with such
solicitation activities apart from the fees which it is otherwise entitled to
receive as described above. CS First Boston has rendered various investment
banking and other advisory services to Union Pacific and its affiliates in the
past and is expected to continue to render such services, for which it has
received and will continue to receive customary compensation from Union Pacific
and its affiliates.
CERTAIN INFORMATION ABOUT UNION PACIFIC
Union Pacific, incorporated in Utah, operates, through subsidiaries, in the
areas of rail transportation (Union Pacific Railroad Company and Missouri
Pacific Railroad Company (collectively, the "Railroad")), oil, gas and mining
(Union Pacific Resources Company ("Resources")), trucking (Overnite
Transportation Company ("Overnite")), and waste management (USPCI, Inc.
("USPCI")). Each of these subsidiaries is indirectly wholly-owned by Union
Pacific. Substantially all of Union Pacific's operations are in the United
States.
The Railroad is the third largest railroad in the United States by mileage,
with over 17,000 route miles linking West Coast and Gulf Coast ports with the
Midwest. The Railroad maintains coordinated schedules with other carriers for
the handling of freight to and from the Atlantic seaboard, the Pacific Coast,
the Southeast, the Southwest, Canada and Mexico. Export and import traffic is
moved through Gulf Coast and Pacific Coast ports and across the Texas-Mexico
border.
Resources is an independent oil and gas company engaged in exploration for
and production of natural gas, crude oil and associated products. Substantially
all of its exploration and production programs are concentrated in the Austin
Chalk trend and Carthage area in eastern Texas and Louisiana, the Union Pacific
Land Grant in Colorado, Wyoming and Utah, the Gulf of Mexico and Canada.
Resources is also responsible for developing Resources' reserves of coal and
trona which are located primarily in the Rocky Mountain region.
Overnite, a major interstate trucking company, serves all 50 states and
portions of Canada through 166 service centers and through agency partnerships
with several small, high-quality carriers serving areas not directly covered by
Overnite. As one of the largest trucking companies in the United States,
specializing in less-than-truckload shipments, Overnite transports a variety of
products, including machinery, textiles, plastics, electronics and paper
products.
USPCI provides comprehensive waste management services (analysis,
treatment, recovery, recycling, disposal, remediation and transportation) to
industry and government. On October 20, 1994, Union Pacific announced that its
Board of Directors approved a plan to divest Union Pacific's waste business.
16
<PAGE> 17
OTHER INFORMATION
The information concerning Santa Fe and the Santa Fe/BN Merger contained
herein has been taken from, or based upon, publicly available documents on file
with the Securities and Exchange Commission and other publicly available
information. Although Union Pacific has no knowledge that would indicate that
statements relating to Santa Fe or the Santa Fe/BN Merger contained in this
Proxy Statement in reliance upon publicly available information are inaccurate
or incomplete, it has not to date had access to the books and records of Santa
Fe, was not involved in the preparation of such information and statements and
is not in a position to verify any such information or statements. Accordingly,
Union Pacific does not take any responsibility for the accuracy or completeness
of such information or for any failure by Santa Fe to disclose events that may
have occurred and may affect the significance or accuracy of any such
information.
Reference is made to the Santa Fe Joint Proxy Statement for information
concerning the common stock of Santa Fe, the beneficial ownership of such stock
by the principal holders thereof, other information concerning Santa Fe's
management, the procedures for submitting proposals for consideration at the
next annual meeting of stockholders of Santa Fe and certain other matters
regarding Santa Fe and the Special Meeting. Union Pacific assumes no
responsibility for the accuracy or completeness of any such information.
Union Pacific is not aware of any other matter to be considered at the
Special Meeting. However, if any other matter properly comes before the Special
Meeting, Union Pacific will vote all proxies held by it as Union Pacific, in its
sole discretion, may determine.
PLEASE SIGN, DATE AND MAIL THE ENCLOSED GOLD PROXY TODAY. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES. BY SIGNING AND MAILING THE ENCLOSED
GOLD PROXY, ANY PROXY PREVIOUSLY SIGNED BY YOU RELATING TO THE SUBJECT MATTER
HEREOF WILL BE AUTOMATICALLY REVOKED.
UNION PACIFIC CORPORATION
Dated October 28, 1994
17
<PAGE> 18
[This Page Intentionally Left Blank.]
18
<PAGE> 19
SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS AND
EXECUTIVE OFFICERS OF UNION PACIFIC
AND CERTAIN EMPLOYEES AND OTHER
REPRESENTATIVES OF UNION PACIFIC
The following table sets forth the name and title of persons who may be
deemed to be participants on behalf of Union Pacific in the solicitation of
proxies from stockholders of Santa Fe. Unless otherwise indicated, the principal
business address of each director, executive officer, employee or representative
is Martin Tower, Eighth and Eaton Avenues, Bethlehem, Pennsylvania 18018.
DIRECTORS AND EXECUTIVE OFFICERS OF UNION PACIFIC
<TABLE>
<CAPTION>
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITION
- ------------------ --------
<S> <C>
Robert P. Bauman..................... Director.
SmithKline Beecham Consumer
Healthcare
1500 Littleton Road
Parsippany, NJ 07054
Charles E. Billingsley............... Vice President and Controller of Union Pacific.
Richard B. Cheney.................... Director.
American Enterprise Institute
1150 17th Street, NW
Suite 1100
Washington, DC 20036
E. Virgil Conway..................... Director.
101 Park Avenue
31st Floor
New York, NY 10178
Richard K. Davidson.................. Director, President of Union Pacific.
Union Pacific Railroad Company
1416 Dodge Street
Omaha, NE 68179
John E. Dowling...................... Vice President -- Corporate Development of Union
Pacific.
Spencer F. Eccles.................... Director.
First Security Corporation
P.O. Box 30006
Salt Lake City, UT 84130
Ursula F. Fairbairn.................. Senior Vice President -- Human Resources of Union
Pacific.
Elbridge T. Gerry, Jr. .............. Director.
Brown Brothers Harriman & Co.
59 Wall Street
New York, NY 10005
</TABLE>
19
<PAGE> 20
<TABLE>
<CAPTION>
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITION
- ------------------ --------
<S> <C>
William H. Gray, III................. Director.
United Negro College Fund, Inc.
8260 Willow Oaks Corporate Drive
P.O. Box 10444
Fairfax, VA 22031
John B. Gremillion, Jr. ............. Vice President -- Taxes of Union Pacific.
Judith Richards Hope................. Director.
Paul, Hastings, Janofsky & Walker
1299 Pennsylvania Avenue, N.W.
Tenth Floor
Washington, DC 20004
Lawrence M. Jones.................... Director.
The Coleman Company, Inc.
250 N. St. Francis Street
P.O. Box 1762
Wichita, KS 67201
Drew Lewis........................... Director, Chairman and Chief Executive Officer of
Union Pacific.
Richard J. Mahoney................... Director.
Monsanto Company
800 N. Lindbergh Boulevard
St. Louis, MO 63167
Claudine B. Malone................... Director.
Financial & Management Consulting,
Inc.
7570 Potomac Fall Road
McLean, VA 22102
L. White Matthews, III............... Director, Executive Vice President -- Finance of Union
Pacific.
Mary E. McAuliffe.................... Vice President -- External Relations of Union Pacific.
555-13th Street, N.W.
Suite 450W
Washington, DC 20004
Jack L. Messman...................... Director.
Union Pacific Resources Company
801 Cherry Street
Fort Worth, TX 76102
John R. Meyer........................ Director.
Center for Business and Government
Harvard University
79 Kennedy Street
Cambridge, MA 02138
</TABLE>
20
<PAGE> 21
<TABLE>
<CAPTION>
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITION
- ------------------ --------
<S> <C>
Thomas A. Reynolds, Jr. ............. Director.
Winston & Strawn
35 West Wacker Drive
Suite 4700
Chicago, IL 60601
James D. Robinson, III............... Director.
J. D. Robinson Inc.
126 East 56th Street
26th Floor
New York, NY 10022
Robert W. Roth....................... Director.
P.O. Box 1219
Pebble Beach, CA 93953
Gary F. Schuster..................... Vice President -- Corporate Relations of Union
Pacific.
Richard D. Simmons................... Director.
International Herald Tribune
1150 15th Street, NW
Washington, DC 20071
Gary M. Stuart....................... Vice President and Treasurer of Union Pacific.
Judy L. Swantak...................... Vice President and Corporate Secretary of Union
Pacific.
Carl W. von Bernuth.................. Senior Vice President and General Counsel of Union
Pacific.
</TABLE>
CERTAIN EMPLOYEES AND OTHER REPRESENTATIVES
OF UNION PACIFIC WHO MAY ALSO SOLICIT PROXIES
<TABLE>
<CAPTION>
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITION
- ------------------ --------
<S> <C>
Mary S. Jones...................... Assistant Treasurer of Union Pacific.
Gary W. Grosz...................... Manager -- Investor Relations of Union Pacific.
John J. Koraleski.................. Executive Vice President, Finance and Information
Technologies of Union Pacific Railroad Company.
James A. Shattuck.................. Executive Vice President, Marketing and Sales of Union
Pacific Railroad Company.
Arthur L. Shoener.................. Executive Vice President, Operations of Union Pacific
Railroad Company.
James V. Dolan..................... Vice President, Law of Union Pacific Railroad Company.
Michael F. Kelly................... Vice President, Marketing -- Services of Union Pacific
Railroad Company.
John H. Rebensdorf................. Vice President, Strategic Planning of Union Pacific
Railroad Company.
</TABLE>
21
<PAGE> 22
<TABLE>
<CAPTION>
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITION
- ------------------ --------
<S> <C>
Richard H. Bott.................... Managing Director at CS First Boston.
CS First Boston
55 East 52nd Street
New York, NY 10055
David A. DeNunzio.................. Managing Director at CS First Boston.
CS First Boston
55 East 52nd Street
New York, NY 10055
Gerald M. Lodge.................... Managing Director at CS First Boston.
CS First Boston
55 East 52nd Street
New York, NY 10055
Stephen C. Month................... Director at CS First Boston.
CS First Boston
55 East 52nd Street
New York, NY 10055
Scott R. White..................... Associate at CS First Boston.
CS First Boston
55 East 52nd Street
New York, NY 10055
Samuel H. Schwartz................. Associate at CS First Boston.
CS First Boston
55 East 52nd Street
New York, NY 10055
Caroline P. Sykes.................. Analyst at CS First Boston.
CS First Boston
55 East 52nd Street
New York, NY 10055
</TABLE>
In the normal course of its business, CS First Boston may trade the debt
and equity securities of Santa Fe for its own account and the accounts of its
customers and, accordingly, may at any time hold a long or short position in
such securities. As of October 27, 1994, CS First Boston held a net short
position of less than 1% of all the outstanding shares of Santa Fe common stock.
SHARES HELD BY UNION PACIFIC, ITS DIRECTORS AND EXECUTIVE OFFICERS
Union Pacific is the beneficial holder of 200 shares of Santa Fe common
stock purchased on October 6, 1994. 100 of such shares were purchased for $14
per share in an open market transaction entered into on the over-the-counter
market and 100 of such shares were purchased for $13 1/2 per share in an open
market transaction executed on the NYSE. No directors or executive officers of
Union Pacific own any shares of Santa Fe common stock.
22
<PAGE> 23
- ------------------------------------------------------------------------------
ADDITIONAL INFORMATION
If your shares of Santa Fe common stock are held in the name of a bank or
broker, only your bank or broker can vote your shares of Santa Fe common stock
and only upon receipt of your specific instructions. Please instruct your bank
or broker to execute the GOLD proxy card today. If you have any questions or
require any assistance in voting your shares of Santa Fe common stock, please
call:
MORROW & CO., INC.
Call Toll Free: (800) 856-8309
909 Third Avenue
New York, New York 10022
In New York City, call: (212) 754-8000
- ------------------------------------------------------------------------------
<PAGE> 1
SPECIAL MEETING OF STOCKHOLDERS
OF
SANTA FE PACIFIC CORPORATION
------------------------------------
SUPPLEMENT TO PROXY STATEMENT
OF
UNION PACIFIC CORPORATION
------------------------------------
SOLICITATION OF PROXIES
IN OPPOSITION TO THE PROPOSED MERGER OF
SANTA FE PACIFIC CORPORATION AND
BURLINGTON NORTHERN INC.
This Proxy Statement Supplement is furnished by Union Pacific Corporation,
a Utah corporation ("Union Pacific"), in connection with its solicitation of
proxies to be used at a special meeting of stockholders of Santa Fe Pacific
Corporation, a Delaware corporation ("Santa Fe"), and at any adjournments,
postponements or reschedulings thereof (the "Special Meeting"). Union Pacific is
soliciting proxies from stockholders of Santa Fe to vote against Santa Fe's
proposal to merge Santa Fe with and into Burlington Northern Inc., a Delaware
corporation ("BN") (such proposed merger, the "Santa Fe/BN Merger"). According
to the Burlington Northern Inc. and Santa Fe Pacific Corporation Joint Proxy
Statement (the "Santa Fe Joint Proxy Statement"), the Special Meeting is
scheduled to be held on Friday, November 18, 1994, at 3:00 p.m., Chicago time,
at the Hyatt Regency O'Hare, 9300 West Bryn Mawr Avenue, Rosemont, Illinois.
This Proxy Statement Supplement amends and modifies, and should be read in
conjunction with, Union Pacific's Proxy Statement, dated October 28, 1994 (the
"Union Pacific Proxy Statement"), which was first sent or given to stockholders
of Santa Fe on or about October 28, 1994. Capitalized terms used herein and not
otherwise defined herein shall have the respective meanings assigned to such
terms in the Union Pacific Proxy Statement.
The Revised Union Pacific Proposal described in this Proxy Statement
Supplement is conditioned, among other things, on termination of the Santa Fe/BN
merger agreement in accordance with its terms, the stockholders of Santa Fe not
having approved the Santa Fe/BN Merger and negotiation of a mutually
satisfactory merger agreement between Santa Fe and Union Pacific in accordance
with the terms of Santa Fe's existing merger agreement with BN.
<PAGE> 2
IMPORTANT
- --------------------------------- ------------------------------------
UNION PACIFIC WILL WITHDRAW THE REVISED UNION PACIFIC PROPOSAL
IF STOCKHOLDERS OF SANTA FE APPROVE THE SANTA FE/BN MERGER.
- -------------------------------------------------------------------------------
EVEN IF YOU HAVE ALREADY VOTED IN FAVOR OF THE SANTA FE/BN MERGER, YOU HAVE
EVERY RIGHT TO CHANGE YOUR VOTE. YOU MAY REVOKE YOUR PRIOR PROXY AND VOTE
AGAINST THE SANTA FE/BN MERGER BY SIGNING, DATING AND MAILING THE ENCLOSED GOLD
PROXY IN THE ENCLOSED SELF-ADDRESSED ENVELOPE. NO POSTAGE IS NECESSARY IF YOUR
PROXY IS MAILED IN THE UNITED STATES.
PLEASE SIGN, DATE AND MAIL THE GOLD PROXY TODAY. YOUR VOTE IS IMPORTANT NO
MATTER HOW MANY OR HOW FEW SHARES YOU OWN.
THIS PROXY STATEMENT SUPPLEMENT IS NEITHER AN OFFER TO SELL NOR A
SOLICITATION OF OFFERS TO BUY ANY SECURITIES WHICH MAY BE ISSUED IN ANY MERGER
OR SIMILAR BUSINESS COMBINATION INVOLVING UNION PACIFIC AND SANTA FE. THE
ISSUANCE OF SUCH SECURITIES WOULD HAVE TO BE REGISTERED UNDER THE SECURITIES ACT
OF 1933 AND SUCH SECURITIES WOULD BE OFFERED ONLY BY MEANS OF A PROSPECTUS
COMPLYING WITH THE REQUIREMENTS OF SUCH ACT.
2
<PAGE> 3
THE REVISED UNION PACIFIC PROPOSAL AND
TENDER OFFER TO STOCKHOLDERS OF SANTA FE
On November 8, 1994, Union Pacific made a proposal to acquire Santa Fe in a
negotiated merger transaction (the "Revised Union Pacific Proposal"). Pursuant
to the Revised Union Pacific Proposal, Union Pacific would acquire Santa Fe in a
two-step transaction in which Union Pacific would purchase approximately 57% of
the Company's outstanding shares of common stock on a fully diluted basis in a
cash tender offer for $17.50 per share. Union Pacific would acquire the
remaining shares of Santa Fe common stock in a second-step merger in exchange
for Union Pacific common stock (the "Proposed Merger"). Based on the closing
price of Union Pacific's common stock on November 8, 1994 (the last trading day
prior to the public announcement of the Revised Union Pacific Proposal), the
consideration to be received in the second-step merger would have a value
equivalent to the tender offer price.
Under the Revised Union Pacific Proposal, Union Pacific has proposed to
place all shares of Santa Fe common stock acquired by Union Pacific (whether
pursuant to the first-step cash tender offer or the second-step merger) into a
voting trust (the "Voting Trust") that would be independent of Union Pacific.
Neither the cash tender offer nor the Proposed Merger would be conditioned upon
receipt of Interstate Commerce Commission ("ICC") approval (other than approval
of the Voting Trust -- see "ICC Matters; The Voting Trust"). The Revised Union
Pacific Proposal is subject, among other things, to termination of the
Burlington Northern/Santa Fe merger agreement in accordance with its terms,
negotiation of a mutually satisfactory merger agreement with Santa Fe in
accordance with the terms of Santa Fe's existing merger agreement with BN and
approval of the respective Boards of Directors of Santa Fe and Union Pacific. A
vote of stockholders of Santa Fe and Union Pacific is not required to consummate
the cash tender offer. Approval of Santa Fe stockholders (but not Union Pacific
stockholders) is required to consummate the second-step merger. The Santa Fe/BN
Merger is subject to approval of the ICC and the respective stockholders of
Burlington Northern and Santa Fe. The Revised Union Pacific Proposal would be a
taxable transaction for federal income tax purposes.
Union Pacific stands ready to enter into immediate negotiations with Santa
Fe concerning the Revised Union Pacific Proposal. In addition, Union Pacific has
advised Santa Fe that it is also prepared to negotiate Union Pacific's previous
proposal to negotiate a stock-for-stock merger, without a Voting Trust, as
described in the Union Pacific Proxy Statement and other solicitation materials
previously sent to Santa Fe stockholders. THE REVISED UNION PACIFIC PROPOSAL
CONSTITUTES AN INVITATION TO THE BOARD OF DIRECTORS OF SANTA FE TO ENTER INTO
MERGER NEGOTIATIONS WITH UNION PACIFIC. THE REVISED UNION PACIFIC PROPOSAL IS
SUBJECT TO CERTAIN MATERIAL CONDITIONS AS DESCRIBED HEREIN WHICH MAY AFFECT THE
ABILITY TO CONSUMMATE A TRANSACTION WITH SANTA FE, AND DOES NOT CONSTITUTE A
LEGALLY BINDING OBLIGATION ON THE PART OF UNION PACIFIC. Because of fluctuations
in the market value of Union Pacific common stock and BN common stock, there can
be no assurances as to the actual value that Santa Fe stockholders would receive
pursuant to the Proposed Merger or the Santa Fe/BN Merger.
On November 9, 1994, UP Acquisition Corporation, a Utah corporation and a
wholly owned subsidiary of Union Pacific (the "Purchaser"), commenced a cash
tender offer (the "Offer") to acquire 115,903,127 shares of Santa Fe common
stock at $17.50 net per share. The Offer, proration period and withdrawal rights
will expire at 12:00 midnight, New York City Time on Thursday, December 8, 1994,
unless the Offer is extended. A complete description of the terms and conditions
of the Offer and certain additional information
3
<PAGE> 4
relating to the Voting Trust is contained in the Offer to Purchase dated
November 9, 1994 (as it may be amended from time to time, the "Offer to
Purchase"). A copy of the Offer to Purchase may be obtained without charge from
Morrow & Co., Inc., by calling either of the telephone numbers set forth at the
end of this Proxy Statement Supplement.
THIS PROXY STATEMENT SUPPLEMENT IS NEITHER AN OFFER TO PURCHASE NOR A
SOLICITATION OF OFFERS TO SELL SHARES OF SANTA FE COMMON STOCK. ANY SUCH OFFER
IS MADE ONLY PURSUANT TO THE OFFER TO PURCHASE.
TENDERING SHARES OF SANTA FE COMMON STOCK WILL NOT CONSTITUTE THE GRANT OF
A PROXY TO VOTE IN CONNECTION WITH THE SANTA FE/BN MERGER. ACCORDINGLY, UNION
PACIFIC URGES SANTA FE STOCKHOLDERS TO SUBMIT A GOLD PROXY TO VOTE AGAINST THE
SANTA FE/BN MERGER, WHETHER OR NOT YOU TENDER YOUR SANTA FE SHARES PURSUANT TO
THE OFFER.
The Offer is conditioned on, among other things, (1) there being validly
tendered and not withdrawn prior to the expiration of the Offer a number of
Santa Fe shares which, when added to the Santa Fe shares beneficially owned by
the Purchaser and its affiliates, constitutes at least a majority of the Santa
Fe shares outstanding on a fully diluted basis, (2) Santa Fe having entered into
a definitive Merger Agreement with Union Pacific and the Purchaser to provide
for the acquisition of Santa Fe pursuant to the Offer and the Proposed Merger,
(3) the stockholders of Santa Fe not having approved the Santa Fe/BN Merger (the
"Stockholder Vote Condition"), (4) the Purchaser being satisfied that Section
203 of the Delaware General Corporation Law has been complied with or is invalid
or otherwise inapplicable to the Offer and the Proposed Merger, (5) the
Purchaser being satisfied that the Agreement and Plan of Merger providing for
the Santa Fe/BN Merger has been terminated in accordance with its terms and (6)
receipt of an informal written opinion in form and substance satisfactory to the
Purchaser from the Staff of the ICC, without the imposition of any conditions
unacceptable to the Purchaser, that the Voting Trust to be used in connection
with the Offer and the Proposed Merger is consistent with the policies of the
ICC against unauthorized acquisitions of control of a regulated carrier. The
Offer is also subject to other terms and conditions described in the Offer to
Purchase. The Offer is not subject to the ICC's approval of the Purchaser's
acquisition of control of Santa Fe (other than approval of the Voting
Trust -- see "ICC Matters; The Voting Trust"), a due diligence condition or
Union Pacific obtaining financing.
The Offer is subject to conditions which may or may not be satisfied.
Unless all of the conditions to the Offer are either satisfied or waived, there
can be no assurances that Union Pacific will purchase any shares of Santa Fe
common stock pursuant to the Offer.
The Purchaser is currently reviewing its options with respect to the Offer
and may consider, among other things, changes to the material terms of the
Offer. In addition, Union Pacific and the Purchaser intend to continue to seek
to negotiate with Santa Fe with respect to the acquisition of Santa Fe by Union
Pacific or the Purchaser. The Purchaser has reserved the right to amend the
Offer (including amending the number of shares to be purchased, the purchase
price and the proposed second-step merger consideration) upon entry into a
second-step merger agreement with Santa Fe or to negotiate a merger agreement
with Santa Fe not involving a tender offer pursuant to which the Purchaser would
terminate the Offer and the shares of Santa Fe common stock would, upon
consummation of such merger, be converted into cash, Union Pacific common stock
and/or securities in such amounts as are negotiated by Union Pacific and Santa
Fe. Accordingly, such
4
<PAGE> 5
negotiations could result in, among other things, amendment or termination of
the Offer and submission of a different acquisition proposal to Santa Fe's
stockholders for their approval.
The purpose of the Offer is to acquire a majority of the shares of Santa Fe
common stock as the first-step in a negotiated acquisition of the entire equity
interest in Santa Fe. Union Pacific is seeking to negotiate with Santa Fe a
definitive merger agreement pursuant to which Santa Fe would, as soon as
practicable following consummation of the Offer, consummate a merger or other
business combination with the Purchaser or another direct or indirect
wholly-owned subsidiary of Union Pacific.
THERE IS NO REQUIREMENT THAT SANTA FE STOCKHOLDERS WISHING TO ACCEPT THE
OFFER VOTE THEIR SHARES OF COMMON STOCK IN ANY SPECIFIC WAY AND THERE IS NO
REQUIREMENT THAT SANTA FE STOCKHOLDERS TENDER THEIR SHARES IN ORDER TO VOTE
AGAINST THE SANTA FE/BN MERGER. However, by voting AGAINST the Santa Fe/BN
Merger, stockholders will be voting to satisfy one of the conditions to the
Offer. Even if the Stockholder Vote Condition is satisfied, there can be no
assurance that the other conditions to the Offer will be satisfied and
accordingly there can be no assurance that any shares of Santa Fe common stock
will be purchased in the Offer.
ICC MATTERS; THE VOTING TRUST
Certain activities of subsidiaries of Santa Fe are regulated by the ICC.
Provisions of the Interstate Commerce Act require approval of, or the granting
of an exemption from approval by, the ICC for the acquisition of control of two
or more carriers subject to the jurisdiction of the ICC ("Carriers") by a person
that is not a Carrier and for the acquisition or control of a Carrier by a
person that is not a Carrier but that controls any number of Carriers. ICC
approval or exemption is required for, among other things, the Purchaser's
acquisition of control of Santa Fe. The Purchaser intends to deposit the shares
of Santa Fe common stock purchased pursuant to the Offer or the Proposed Merger
or otherwise in the Voting Trust in order to ensure that the Purchaser does not
acquire and directly or indirectly exercise control over Santa Fe prior to
obtaining necessary ICC approvals or exemptions. ICC approval is not a condition
to the Offer or the Proposed Merger. However, the Offer and the Proposed Merger
are conditioned upon issuance by the Staff of the ICC of an informal,
non-binding opinion, without the imposition of any conditions unacceptable to
the Purchaser, that the use of the Voting Trust is consistent with the policies
of the ICC against unauthorized acquisition of control of a regulated carrier.
Union Pacific and the Purchaser will promptly request the Staff of the ICC to
issue such an opinion. Under ICC regulations that have been in effect since
1979, the ICC Staff has the power to issue such opinions. Generally, the ICC
Staff has issued such opinions within one to two weeks of a request, although
there can be no assurance that Union Pacific and Purchaser will be able to
obtain an opinion this quickly. Union Pacific and Purchaser believe they will
obtain such opinion from the Staff of the ICC.
Recently, the ICC requested public comment with regard to certain issues
raised by a proposed voting trust agreement submitted by Illinois Central
Corporation, under which the stock of Illinois Central Railroad Company would
have been placed in trust and Kansas City Southern Industries, Inc., would have
been merged into Illinois Central Corporation. Union Pacific believes that the
Voting Trust Agreement does not raise issues comparable to those raised by the
Illinois Central/Kansas City Southern transaction. The ICC's concerns with
regard to that transaction focused on a proposal to move top Illinois Central
managers to Kansas City Southern during the pendency of the voting trust. No
such arrangement is being proposed with respect to
5
<PAGE> 6
the proposed acquisition. However, there can be no assurance that the ICC will
not seek changes in, or request public comment regarding, the Voting Trust
Agreement.
Also, it is possible that railroad competitors of Union Pacific, or others,
may argue that Union Pacific should not be permitted to use the voting trust
mechanism to acquire Santa Fe prior to final ICC approval of the acquisition of
control of Santa Fe. Union Pacific believes it is unlikely that such arguments
would prevail, but there can be no assurance in this regard, nor can there be
any assurance that if such arguments are made, it will not cause delay in
obtaining a favorable ICC Staff opinion regarding the Voting Trust Agreement.
Pursuant to the proposed terms of the Voting Trust, it is expected that
Southwest Bank of St. Louis (the "Trustee") would hold the shares of Santa Fe
common stock until (i) the receipt of ICC approval, (ii) the shares are sold to
a third party or otherwise disposed of or (iii) the Voting Trust is otherwise
terminated. The Voting Trust is expected to provide that the Trustee would have
sole power to vote the Santa Fe shares held in the Voting Trust, and would
contain certain other terms and conditions designed to ensure that neither the
Purchaser nor Union Pacific would control Santa Fe during the pendency of the
ICC proceedings. In addition, it is expected that the Voting Trust would provide
that the Purchaser or its successor in interest would be entitled to receive any
dividends paid by Santa Fe other than stock dividends.
RECEIPT OF ICC APPROVAL (OTHER THAN APPROVAL OF THE VOTING TRUST AS
DESCRIBED ABOVE) IS NOT A CONDITION TO CONSUMMATION OF THE OFFER OR THE PROPOSED
MERGER. IF THE ICC APPROVAL IS NOT OBTAINED OR THE ICC IMPOSES UNACCEPTABLE
CONDITIONS, THE PURCHASER WILL BE REQUIRED TO USE ITS BEST EFFORTS TO SELL OR
OTHERWISE DISPOSE OF THE SHARES OF SANTA FE COMMON STOCK DEPOSITED IN THE VOTING
TRUST AFTER THE ICC ORDER DENYING SUCH APPROVAL BECOMES FINAL OR AFTER UNION
PACIFIC DETERMINES NOT TO ASSUME CONTROL OF THE SANTA FE SHARES BECAUSE
UNACCEPTABLE CONDITIONS WOULD BE IMPOSED BY THE ICC. IN SUCH CASE, THE PURCHASER
WOULD BE ENTITLED TO ANY PROCEEDS OF SUCH SALE OR OTHER DISPOSITION.
CERTAIN LITIGATION CONCERNING
THE SANTA FE/BN MERGER -- RECENT DEVELOPMENTS
On October 26, 1994, Santa Fe and the director defendants filed an Answer
denying the allegations of the First Amended and Supplemental Complaint. On
November 2, 1994, BN moved to dismiss the First Amended and Supplemental
Complaint for failure to state a claim against BN upon which relief can be
granted.
ADDITIONAL INFORMATION REGARDING PARTICIPANTS
In addition to the persons identified in Schedule I to the Union Pacific
Proxy Statement, the following persons may be deemed to be participants on
behalf of Union Pacific in the solicitation of proxies from stockholders of
Santa Fe. The principal business address of each such person is Martin Tower,
Eighth and Eaton Avenues, Bethlehem, PA 18018. Such persons are: David A.
Heywood, General Tax Counsel -- Federal; Robert M. Knight, Jr., Assistant
Treasurer -- Banking and Cash Management; John B. Larsen, Assistant
Treasurer -- Corporate Finance and Development; Fred H. van Naerssen,
Director -- Accounting Practice and Planning; Joseph E. O'Connor, Jr.,
Director -- Planning; and Thomas O. Powell, Assistant Controller -- Planning and
Analysis. None of the foregoing persons own any shares of Santa Fe common stock,
except for Mr. Heywood who beneficially owns 48 shares.
6
<PAGE> 7
------------------------------------
PLEASE SIGN, DATE AND MAIL THE ENCLOSED GOLD PROXY TODAY. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES. BY SIGNING AND MAILING THE ENCLOSED
GOLD PROXY, ANY PROXY PREVIOUSLY SIGNED BY YOU RELATING TO THE SUBJECT MATTER
HEREOF WILL BE AUTOMATICALLY REVOKED.
UNION PACIFIC CORPORATION
Dated: November 9, 1994
7
<PAGE> 8
- -------------------------------------------------------------------------------
ADDITIONAL INFORMATION
If your shares of Santa Fe common stock are held in the name of a bank or
broker, only your bank or broker can vote your shares of Santa Fe common stock
and only upon receipt of your specific instructions. Please instruct your bank
or broker to execute the GOLD proxy card today. If you have any questions or
require any assistance in voting your shares of Santa Fe common stock, please
call:
MORROW & CO., INC.
Call Toll Free: (800) 662-5200
909 Third Avenue
New York, New York 10022
In New York City, call: (212) 754-8000
- -------------------------------------------------------------------------------
