<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 16, 1996
REGISTRATION NO. 33-64707
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
POST-EFFECTIVE AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
UNION PACIFIC CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
UTAH 4011 13-2626465
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
MARTIN TOWER, EIGHTH AND EATON AVENUES
BETHLEHEM, PENNSYLVANIA 18018
(610) 861-3200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
RICHARD J. RESSLER, ESQ.
ASSISTANT GENERAL COUNSEL
UNION PACIFIC CORPORATION
MARTIN TOWER, EIGHTH AND EATON AVENUES
BETHLEHEM, PENNSYLVANIA 18018
(610) 861-3200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
Copies to:
<TABLE>
<S> <C>
CANNON Y. HARVEY, ESQ. CARL W. VON BERNUTH, ESQ.
SOUTHERN PACIFIC RAIL CORPORATION SENIOR VICE PRESIDENT AND GENERAL COUNSEL
SOUTHERN PACIFIC BUILDING UNION PACIFIC CORPORATION
ONE MARKET PLAZA MARTIN TOWER, EIGHTH AND EATON AVENUES
SAN FRANCISCO, CALIFORNIA 94105 BETHLEHEM, PENNSYLVANIA 18018
PETER D. LYONS, ESQ. PAUL T. SCHNELL, ESQ.
SHEARMAN & STERLING SKADDEN, ARPS, SLATE, MEAGHER & FLOM
599 LEXINGTON AVENUE 919 THIRD AVENUE
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10022
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Post-Effective Amendment No. 2 to the Registration
Statement is declared effective and all other conditions to the merger of
Southern Pacific Rail Corporation ('SP') with and into either (i) Union Pacific
Railroad Company ('UPRR'), a wholly owned subsidiary of the Registrant, (ii) UP
Holding Company, Inc., a wholly owned subsidiary of the Registrant, or (iii)
Union Pacific Merger Co., a wholly owned subsidiary of the Registrant (the
'Merger'), as described in the enclosed Joint Proxy Statement/Prospectus, have
been satisfied or waived.
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED(1) PRICE PER UNIT OFFERING PRICE REGISTRATION FEE(3)
<S> <C> <C> <C> <C>
Common Stock, par value $2.50 per
share.............................. 38,613,370 (2) (2) $739,549.12
</TABLE>
- ------------------
(1) Assumes that 94,989,839 shares of common stock, par value $.001 per share
(the 'Common Stock' or the 'Shares'), of SP are converted into shares of
Union Pacific Corporation ('UP') common stock, par value $2.50 per share
(the 'UP Common Stock'), at the exchange ratio of .4065 shares of UP Common
Stock for each Share pursuant to the Merger.
(2) Estimated pursuant to Rules 457(f)(1), 457(f)(3), and 457(c) under the
Securities Act of 1933, as amended (the 'Securities Act') solely for the
purpose of calculating the registration fee, based on $23.0625 per share,
the average of the high and low sale prices for a share of Common Stock of
SP on the New York Stock Exchange Composite Tape on November 27, 1995.
(3) The registration fee for the shares of UP Common Stock registered hereby has
been calculated pursuant to Rule 457(f)(1) and 457(f)(3) under the
Securities Act as follows: 1/29th of one percent of the difference between
(i) $23.0625, the average of the reported high and low sales prices of a
share of Common Stock of SP on the New York Stock Exchange Composite Tape on
November 27, 1995, multiplied by 118,737,298, the number of shares of Common
Stock expected to be converted in the Merger and (ii) $593,686,500
(representing the product of (a) 158,316,398 multiplied by 15%, the number
of shares of Common Stock expected to be purchased by UP pursuant to the
Merger for cash and (b) $25, the per Share cash consideration to be paid by
UP for such Shares). Pursuant to Rule 457(b) under the Securities Act,
$573,806.72 previously paid on September 12, 1995 upon filing with the
Commission of preliminary proxy material of UP and SP has been credited
against the registration fee payable in connection with this filing. The
balance of the registration fee was paid on December 1, 1995.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
UNION PACIFIC CORPORATION
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K
SHOWING THE LOCATION IN THE JOINT PROXY STATEMENT/PROSPECTUS
OF THE INFORMATION REQUIRED TO BE INCLUDED THEREIN
IN RESPONSE TO PART I OF FORM S-4
<TABLE>
<CAPTION>
LOCATION OR CAPTION IN
FORM S-4 ITEM NUMBER AND CAPTION JOINT PROXY STATEMENT/PROSPECTUS
- -------------------------------------------------------- ---------------------------------------------------------
<S> <C>
A. INFORMATION ABOUT THE TRANSACTION.
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus..... Facing Page of Registration Statement; Cross Reference
Sheet; Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus................................. Available Information; Incorporation of Certain Documents
by Reference; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information.............. Summary
4. Terms of the Transaction..................... Summary; The Merger; The Amended Merger Agreement;
Shareholders Agreements; Amended and Restated
Registration Rights Agreements; Voting Trust Agreement;
Other Legal Matters; Regulatory Approval; Description
of UP Capital Stock; Comparison of the Rights of
Stockholders of SP and UP under Delaware and Utah Law
5. Pro Forma Financial Information.............. Unaudited Pro Forma Financial Statements of UP and SP;
Unaudited Restated Financial Statements of UP;
Unaudited Pro Forma Financial Statements of Resources
6. Material Contacts with the Company Being
Acquired................................... Summary; The Merger; The Amended Merger Agreement;
Shareholders Agreements; Amended and Restated
Registration Rights Agreements; The Companies
7. Additional Information Required for
Reoffering by Persons and Parties Deemed to
be Underwriters............................ *
8. Interests of Named Experts and Counsel....... Experts; Legal Opinion
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ *
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
LOCATION OR CAPTION IN
FORM S-4 ITEM NUMBER AND CAPTION JOINT PROXY STATEMENT/PROSPECTUS
- -------------------------------------------------------- ---------------------------------------------------------
<S> <C>
B. INFORMATION ABOUT THE REGISTRANT.
10. Information with Respect to S-3
Registrants................................ Incorporation of Certain Documents by Reference; Summary;
The Merger; Unaudited Pro Forma Financial Statements of
UP and SP; Unaudited Pro Forma Financial Statements of
Resources; The Companies; Description of UP Capital
Stock
11. Incorporation of Certain Information by
Reference.................................. Incorporation of Certain Documents by Reference
12. Information with Respect to S-2 or S-3
Registrants................................ *
13. Incorporation of Certain Information by
Reference.................................. *
14. Information with Respect to Registrants Other
Than S-2 or S-3 Registrants................ *
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED.
15. Information with Respect to S-3 Companies.... Incorporation of Certain Documents by Reference; Summary;
The Merger; Unaudited Pro Forma Financial Statements of
UP and SP; Unaudited Pro Forma Financial Statements of
Resources; The Companies
16. Information with Respect to S-2 or S-3
Companies.................................. *
17. Information with Respect to Companies Other
Than S-2 or S-3 Companies.................. *
D. VOTING AND MANAGEMENT INFORMATION.
18. Information if Proxies, Consents or
Authorizations are to be Solicited......... Cover Page; Incorporation of Certain Documents by
Reference; Summary; The Special Meeting; The Merger;
Stockholders' Proposals
19. Information if Proxies, Consents or
Authorizations are not to be Solicited, or
in an Exchange Offer....................... *
</TABLE>
- ------------------
* Not Applicable.
ii
<PAGE>
SOUTHERN PACIFIC RAIL CORPORATION
PROXY STATEMENT
FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 16, 1996
UNION PACIFIC CORPORATION
PROSPECTUS
COMMON STOCK
This Joint Proxy Statement/Prospectus relates to the proposed merger (the
'Merger') of Southern Pacific Rail Corporation, a Delaware corporation ('SP'),
with and into either Union Pacific Railroad Company, a Utah corporation ('UPRR')
and a wholly owned subsidiary of Union Pacific Corporation, a Utah corporation
('UP'), or UP Holding Company, Inc., a Utah corporation and a wholly owned
subsidiary of UP ('Holding'), or Union Pacific Merger Co., a Delaware
corporation and a wholly owned subsidiary of UP ('Mergerco'), pursuant to an
Amended and Restated Agreement and Plan of Merger, dated as of July 12, 1996
(the 'Amended Merger Agreement'), by and among UP, UPRR, Holding, Mergerco and
SP. References herein to 'Newco' shall mean either or both of Holding and/or
Mergerco, as the context may require. The Amended Merger Agreement amends and
restates in its entirety the Agreement and Plan of Merger, dated as of August 3,
1995, as amended (the 'Original Merger Agreement'), by and among SP, UP, UPRR
and UP Acquisition Corporation, a former Delaware corporation and an indirect
wholly owned subsidiary of UP ('UP Acquisition'), that was approved and adopted
by the SP stockholders at a special meeting of SP stockholders on January 17,
1996.
If the Merger is consummated, each share of common stock, par value $.001
per share (the 'Common Stock' or the 'Shares'), of SP (other than treasury stock
and Shares that are owned by UP or any direct or indirect wholly owned
subsidiary of UP, which Shares will be cancelled and retired) at the Effective
Time (as defined herein) shall be converted, subject to proration and the
limitations described herein, at the election of such holder, into the right to
receive (i) .4065 shares of common stock of UP, par value $2.50 per share ('UP
Common Stock'), (ii) $25.00 in cash, without interest thereon (the 'Cash
Consideration') or (iii) a combination thereof. The aggregate number of Shares
to be converted into the right to receive UP Common Stock pursuant to the Merger
will be equal as nearly as practicable to 60% of all outstanding Shares at the
time of the Merger; and the number of Shares to be converted into the right to
receive the Cash Consideration pursuant to the Merger, together with the
39,034,471 Shares acquired by UP Acquisition (the 'Acquired Shares') pursuant to
its tender offer dated August 9, 1995 to purchase up to 39,034,471 Shares at a
price of $25.00 per Share, net to the seller in cash, without interest thereon
(the 'Offer'), will be equal as nearly as practicable to 40% of all outstanding
Shares at the time of the Merger. Accordingly, of the Shares outstanding
immediately prior to the Merger (other than the Acquired Shares), 20% of such
Shares will be acquired for cash and 80% of such Shares will be acquired in
exchange for shares of UP Common Stock. On September 7, 1995, UP Acquisition
accepted 39,034,471 Shares for payment pursuant to the Offer and simultaneously
deposited such Shares into a Voting Trust (as defined herein). The consummation
of the Merger is subject to various conditions, including, among other things,
approval of the Merger by the United States Surface Transportation Board, the
successor to the Interstate Commerce Commission (the 'STB'). On July 3, 1996,
the STB voted to approve the Merger subject to certain conditions. The STB's
final written decision is expected by August 12, 1996. If, as expected, the
written decision does not contain terms materially different from those voted
upon by the STB on July 3, 1996, UP has indicated that it expects to proceed
with the transaction in accordance with and subject to the terms and conditions
of the Amended Merger Agreement. For a description of the STB decision and the
conditions imposed, see 'OTHER LEGAL MATTERS; REGULATORY APPROVAL--STB
Approval.' The Amended Merger Agreement is attached hereto as Annex B and is
incorporated herein by reference.
On July 15, 1996, the closing price of UP Common Stock on the NYSE (as
defined herein) was $68.50 per share. Accordingly, the market value of .4065
shares of UP Common Stock, based on such closing price, was $27.85. THE MARKET
VALUE OF THE UP COMMON STOCK AFTER THE EFFECTIVE TIME WILL, AMONG OTHER THINGS,
DEPEND UPON, AND IS EXPECTED TO FLUCTUATE WITH, THE PERFORMANCE OF UP, WHETHER
OR NOT THE SPIN-OFF (AS DEFINED HEREIN) OCCURS, CONDITIONS (ECONOMIC OR
OTHERWISE) AFFECTING THE RAILROAD, TRUCKING AND OIL AND GAS INDUSTRIES, AND
MARKET CONDITIONS AND OTHER FACTORS THAT GENERALLY INFLUENCE PRICES OF
SECURITIES. MOREOVER, THERE CAN BE NO ASSURANCE THAT AT OR AFTER THE EFFECTIVE
TIME THE MARKET VALUE OF THE UP COMMON STOCK AND THE CASH CONSIDERATION TO BE
RECEIVED IN THE MERGER WILL BE EQUAL. BECAUSE THE TAX CONSEQUENCES OF RECEIVING
CASH OR UP COMMON STOCK WILL DIFFER, SP STOCKHOLDERS ARE URGED TO READ CAREFULLY
THE INFORMATION SET FORTH UNDER THE CAPTION 'THE MERGER--CERTAIN FEDERAL INCOME
TAX CONSEQUENCES.'
This Joint Proxy Statement/Prospectus is being furnished to the stockholders
of SP in connection with the solicitation of proxies by the Board of Directors
of SP for use at the Special Meeting to be held at the Mandarin Oriental Hotel,
222 Sansome Street, San Francisco, California on August 16, 1996, commencing at
10 a.m., local time (the 'Special Meeting') for the purposes described herein.
BECAUSE CERTAIN SUBSTANTIAL HOLDERS OF COMMON STOCK HAVE AGREED TO VOTE ALL
OF THEIR SHARES (REPRESENTING APPROXIMATELY 31.1% OF THE OUTSTANDING SHARES) IN
FAVOR OF THE MERGER AND HAVE GRANTED UP IRREVOCABLE PROXIES TO VOTE SUCH SHARES
IN FAVOR OF THE MERGER, AND BECAUSE THE TRUSTEE OF THE VOTING TRUST IS REQUIRED
TO VOTE ALL OF THE ACQUIRED SHARES DEPOSITED THEREIN (REPRESENTING APPROXIMATELY
25% OF THE OUTSTANDING SHARES) IN FAVOR OF THE MERGER, A VOTE IN FAVOR OF
APPROVAL AND ADOPTION OF THE AMENDED MERGER AGREEMENT IS ASSURED WITHOUT THE
VOTE OF ANY OTHER HOLDER OF SHARES. SEE 'THE SPECIAL MEETING--VOTES REQUIRED;
PRINCIPAL STOCKHOLDERS.'
This Joint Proxy Statement/Prospectus also constitutes a prospectus of UP
with respect to up to 38,613,370 shares of UP Common Stock issuable to the
stockholders of SP in the Merger.
All information herein concerning UP Acquisition, UPRR, Newco and UP has
been furnished by UP and all information herein concerning SP has been furnished
by SP.
This Joint Proxy Statement/Prospectus and the accompanying form of proxy are
first being mailed to the stockholders of SP on or about July 17, 1996.
THE PROPOSED MERGER AND THE OTHER MATTERS TO BE ACTED UPON AT THE SPECIAL
MEETING ARE DESCRIBED IN DETAIL IN THIS JOINT PROXY STATEMENT/PROSPECTUS. THE
PROPOSED MERGER IS A COMPLEX TRANSACTION. SP STOCKHOLDERS ARE STRONGLY URGED TO
READ AND CONSIDER CAREFULLY THIS JOINT PROXY STATEMENT/PROSPECTUS IN ITS
ENTIRETY.
------------------------
THE SECURITIES TO BE ISSUED IN CONNECTION WITH THE MERGER HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
The date of this Joint Proxy Statement/Prospectus is July 16, 1996.
<PAGE>
AVAILABLE INFORMATION
Each of UP and SP is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the 'Exchange Act'), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the 'Commission'). The reports, proxy
statements and other information filed by each of UP and SP with the Commission
can be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
should be available at the Commission's Regional Offices at 7 World Trade
Center, Thirteenth Floor, New York, New York 10048, and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such materials may also be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission also
maintains a site on the World Wide Web at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The Shares and the UP
Common Stock are each listed on the New York Stock Exchange, Inc. ('NYSE').
Certain of the reports, proxy statements and other information filed by each of
UP and SP may be inspected at the offices of the NYSE at 20 Broad Street, New
York, New York 10005.
UP has filed with the Commission a registration statement on Form S-4
(together with any amendments thereto, the 'Registration Statement') under the
Securities Act of 1933, as amended (the 'Securities Act'), relating to the
shares of UP Common Stock offered hereby. This Joint Proxy Statement/Prospectus
does not contain all of the information set forth in the Registration Statement
and the exhibits thereto filed by UP, certain portions of which have been
omitted pursuant to the rules and regulations of the Commission. The
Registration Statement and exhibits thereto may be inspected without charge at
the offices of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and copies thereof may be obtained from the Commission at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by UP pursuant
to the Exchange Act are incorporated by reference in this Joint Proxy
Statement/Prospectus:
1. UP's Annual Report on Form 10-K for the fiscal year ended December
31, 1995, as amended (which incorporates by reference certain
information from UP's Proxy Statement relating to the 1996 Annual
Meeting of Stockholders (the '1996 UP Proxy Statement'));
2. The 1996 UP Proxy Statement;
3. UP's Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1996;
4. The description of capital stock of UP, including UP Common Stock,
that is contained in the registration statement filed under the
Exchange Act under File No. 1-6075, including all amendments or
reports filed for the purpose of updating such description; and
5. Schedule 13D and Tender Offer Statement on Schedule 14D-1 of UP, UP
Acquisition and UPRR dated August 9, 1995, as amended by Amendment
No. 1 thereto dated August 10, 1995, Amendment No. 2 thereto dated
August 11, 1995, Amendment No. 3 thereto dated August 17, 1995,
Amendment No. 4 thereto dated August 28, 1995, Amendment No. 5
thereto dated August 29, 1995, Amendment No. 6 thereto dated
September 7, 1995, Amendment No. 7 thereto dated September 15,
1995, Amendment No. 8 to the Schedule 13D dated September 28, 1995,
Amendment No. 9 to the Schedule 13D dated October 24, 1995,
Amendment No. 10 to the Schedule 13D dated December 1, 1995,
Amendment No. 11 to the Schedule 13D dated January 18, 1996,
Amendment No. 12 to the Schedule 13D dated February 2, 1996,
Amendment No. 13 to the Schedule 13D dated April 30, 1996 and
Amendment No. 14 to the Schedule 13D dated July 9, 1996.
2
<PAGE>
The following documents previously filed with the Commission by SP pursuant
to the Exchange Act are incorporated by reference in this Joint Proxy
Statement/Prospectus:
1. SP's Annual Report on Form 10-K for the year ended December 31,
1995 (which incorporates by reference certain information from SP's
Proxy Statement relating to the 1996 Annual Meeting of Stockholders
(the '1996 SP Proxy Statement'));
2. The 1996 SP Proxy Statement;
3. SP's Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1996; and
4. SP's Solicitation/Recommendation Statement on Schedule 14D-9 dated
August 9, 1995, as amended by Amendment No. 1 thereto dated
September 7, 1995 and Amendment No. 2 thereto dated September 8,
1995 (the 'Schedule 14D-9').
All documents filed by UP and SP pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Joint Proxy
Statement/Prospectus and prior to the date of the Special Meeting shall be
deemed to be incorporated by reference in this Joint Proxy Statement/Prospectus
and be a part hereof from the dates of filing such documents or reports. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Joint Proxy Statement/Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed to
be incorporated herein modifies or supersedes such statement. Any such statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Joint Proxy Statement/Prospectus.
------------------------
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN
CERTAIN EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE TO SUCH DOCUMENTS) ARE AVAILABLE WITHOUT CHARGE TO ANY
PERSON, INCLUDING ANY BENEFICIAL OWNER TO WHOM A COPY OF THIS JOINT PROXY
STATEMENT/PROSPECTUS HAS BEEN DELIVERED, UPON WRITTEN OR ORAL REQUEST, IN THE
CASE OF UP DOCUMENTS, TO UNION PACIFIC CORPORATION, MARTIN TOWER, EIGHTH & EATON
AVENUES, BETHLEHEM, PENNSYLVANIA 18018, ATTENTION: CORPORATE SECRETARY,
TELEPHONE NUMBER (610) 861-3200, AND, IN THE CASE OF SP DOCUMENTS, TO SOUTHERN
PACIFIC RAIL CORPORATION, SOUTHERN PACIFIC BUILDING, ONE MARKET PLAZA, SAN
FRANCISCO, CALIFORNIA 94105, ATTENTION: CORPORATE SECRETARY, TELEPHONE NUMBER
(415) 541-1000. IN ORDER TO ENSURE DELIVERY PRIOR TO THE SPECIAL MEETING,
REQUESTS SHOULD BE RECEIVED BY AUGUST 8, 1996.
------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS OR THE DOCUMENTS
INCORPORATED HEREIN BY REFERENCE IN CONNECTION WITH THE OFFERING AND THE
SOLICITATIONS MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY UP, UP
ACQUISITION, UPRR, NEWCO OR SP. THIS JOINT PROXY STATEMENT/PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF ANY OFFER TO PURCHASE, ANY
SECURITIES, OR THE SOLICITATION OF A PROXY IN ANY JURISDICTION IN WHICH, OR TO
ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF UP COMMON STOCK MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE INFORMATION SET
FORTH HEREIN OR IN THE AFFAIRS OF UP, NEWCO, UPRR OR SP SINCE THE DATE
HEREOF OTHER THAN AS SET FORTH IN THE DOCUMENTS INCORPORATED HEREIN BY
REFERENCE.
------------------------
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
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<S> <C>
AVAILABLE INFORMATION...................................................................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................................................ 2
SUMMARY.................................................................................................... 6
The Parties.............................................................................................. 6
The Merger............................................................................................... 7
Comparative Market Prices and Dividends.................................................................. 15
Other Legal Matters; Regulatory Approvals................................................................ 16
The Special Meeting...................................................................................... 16
SELECTED HISTORICAL CONSOLIDATED AND PRO FORMA FINANCIAL DATA.............................................. 17
INTRODUCTION............................................................................................... 23
THE SPECIAL MEETING........................................................................................ 24
Purpose of Special Meeting............................................................................... 24
Date, Place and Time..................................................................................... 24
Record Date; Quorum...................................................................................... 24
Votes Required; Principal Stockholders................................................................... 24
Proxies; Voting and Revocation........................................................................... 25
Other Matters............................................................................................ 25
Solicitation of Proxies.................................................................................. 25
THE MERGER................................................................................................. 26
General.................................................................................................. 26
Background of the Merger................................................................................. 26
Recommendation of the SP Board of Directors; Reasons for the Merger...................................... 31
Opinion of SP's Financial Advisor........................................................................ 33
Interests of Certain Persons............................................................................. 38
Certain Projected Financial Information.................................................................. 42
Estimated Synergies...................................................................................... 43
Merger Consideration..................................................................................... 44
Effective Time........................................................................................... 44
Financing of the Transaction............................................................................. 45
Accounting Treatment..................................................................................... 45
Election Procedures...................................................................................... 45
Expenses Related to the Merger........................................................................... 48
Certain Federal Income Tax Consequences.................................................................. 48
Absence of Dissenters' Rights............................................................................ 51
THE AMENDED MERGER AGREEMENT............................................................................... 52
Effectiveness of the Amended Merger Agreement............................................................ 52
The Offer................................................................................................ 52
The Merger and the Alternative Merger.................................................................... 52
Conversion of Shares..................................................................................... 53
Equity Incentive Plan.................................................................................... 54
Board of Directors....................................................................................... 54
Interim Operations of SP................................................................................. 55
Interim Operations of UP................................................................................. 56
No Solicitation.......................................................................................... 57
Directors' and Officers' Insurance and Indemnification................................................... 57
Spin-Off................................................................................................. 58
Compensation and Benefits................................................................................ 58
Representations and Warranties........................................................................... 59
Conditions to the Merger................................................................................. 59
Termination.............................................................................................. 61
SHAREHOLDERS AGREEMENTS.................................................................................... 62
Effectiveness of the Shareholders Agreements............................................................. 62
Amended and Restated Anschutz Shareholders Agreement..................................................... 62
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
SECTION PAGE
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<S> <C>
Amended and Restated MSLEF Shareholder Agreement......................................................... 71
Amended and Restated UP Shareholders Agreement........................................................... 73
Amended and Restated Anschutz/Resources Shareholders Agreement........................................... 79
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENTS........................................................ 83
VOTING TRUST AGREEMENT..................................................................................... 83
COMPARATIVE MARKET PRICES AND DIVIDENDS.................................................................... 85
UNAUDITED PRO FORMA FINANCIAL STATEMENTS OF UP AND SP...................................................... 86
UNAUDITED PRO FORMA FINANCIAL STATEMENTS OF RESOURCES...................................................... 93
THE COMPANIES.............................................................................................. 97
Southern Pacific Rail Corporation........................................................................ 97
Union Pacific Corporation................................................................................ 97
The Railroad............................................................................................. 98
UP Acquisition Corporation............................................................................... 98
Holding.................................................................................................. 99
Mergerco................................................................................................. 99
Resources Spin-Off....................................................................................... 99
Certain Operating Relationships.......................................................................... 99
OTHER LEGAL MATTERS; REGULATORY APPROVAL................................................................... 101
General.................................................................................................. 101
Antitrust................................................................................................ 101
The Voting Trust......................................................................................... 101
STB Approval............................................................................................. 102
State Takeover Statutes.................................................................................. 105
DESCRIPTION OF UP CAPITAL STOCK............................................................................ 106
COMPARISON OF THE RIGHTS OF STOCKHOLDERS OF SP AND UP UNDER DELAWARE AND UTAH LAW.......................... 106
Authorized Capital Stock................................................................................. 107
Board of Directors....................................................................................... 109
Repurchase and Redemption of Shares...................................................................... 110
Payment of Dividends to Stockholders..................................................................... 111
Preemptive Rights........................................................................................ 111
Amendments to Articles or Certificate of Incorporation................................................... 111
Amendments to By-laws.................................................................................... 112
Stockholder Approval of Certain Extraordinary Transactions............................................... 113
Dissenters' Rights....................................................................................... 114
Special Meeting of Stockholders.......................................................................... 115
Stockholder Consent to Action Without a Meeting.......................................................... 115
Liquidation Rights....................................................................................... 115
EXPERTS.................................................................................................... 116
LEGAL OPINION.............................................................................................. 116
STOCKHOLDERS' PROPOSALS.................................................................................... 116
ANNEXES
Annex A -- Glossary of Certain Defined Terms............................................................ A-1
Annex B -- Amended and Restated Agreement and Plan of Merger............................................ B-1
Annex C -- Opinion of Morgan Stanley & Co. Incorporated................................................. C-1
Annex D -- Amended and Restated Anschutz Shareholders Agreement......................................... D-1
Annex E -- Amended and Restated MSLEF Shareholder Agreement............................................. E-1
Annex F -- Amended and Restated Parent Shareholders Agreement........................................... F-1
Annex G -- Amended and Restated Anschutz/Spinco Shareholders Agreement.................................. G-1
Annex H -- Amended and Restated Registration Rights Agreement........................................... H-1
Annex I -- Amended and Restated Registration Rights Agreement........................................... I-1
Annex J -- Amended and Restated Registration Rights Agreement........................................... J-1
Annex K -- Voting Trust Agreement....................................................................... K-1
</TABLE>
5
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SUMMARY
The following is a summary of certain information contained elsewhere in
this Joint Proxy Statement/Prospectus. This summary is qualified in its entirety
by reference to the more detailed information contained elsewhere in this Joint
Proxy Statement/Prospectus, the Annexes hereto and the documents referred to
herein. Stockholders are urged to review carefully this Joint Proxy
Statement/Prospectus, the Amended Merger Agreement (as defined below) attached
hereto as Annex B and the other Annexes attached hereto.
THE PARTIES
Southern Pacific Rail Corporation
Southern Pacific Rail Corporation, a Delaware corporation ('SP'), is a
holding company primarily engaged through its subsidiaries in the rail
transportation business. SP, whose rail operations date from the 1860's,
operates in 16 states and transports freight over approximately 16,400 miles of
main track linking West Coast and Gulf Coast ports to large population centers
in the midwest. SP has generated significant cash flow from the sale of its
traditional and transit corridor real estate. See 'THE COMPANIES--Southern
Pacific Rail Corporation.' The principal executive office of SP is located at
Southern Pacific Building, One Market Plaza, San Francisco, California 94105,
telephone number (415) 541-1000.
Union Pacific Corporation
Union Pacific Corporation, a Utah corporation ('UP'), is primarily a
holding company principally engaged in (i) rail transportation, (ii) oil, gas
and mining and (iii) trucking. UP engages in rail transportation through its
subsidiaries, Union Pacific Railroad Company, a Utah corporation ('UPRR'), and
Missouri Pacific Railroad Company, a Delaware corporation ('MPRR'). UPRR and
MPRR are collectively referred to herein as the 'Railroad,' which term also
includes the operations of Chicago and North Western Railway Company, which was
merged into UPRR on October 1, 1995. UP engages in the oil, gas and mining
business through its 83% owned subsidiary, Union Pacific Resources Group Inc.
('Resources'). Resources is one of the largest independent oil and gas companies
in North America. UP operates in the trucking industry through its subsidiary,
Overnite Transportation Company. The principal information and communication
technology needs for UP are provided by its subsidiary, Union Pacific
Technologies, Inc. ('UP Tech'), which also markets its systems and services to
third parties. Each of these subsidiaries, except for Resources, is wholly owned
by UP. See 'THE COMPANIES--Union Pacific Corporation,' '--The Railroad' and 'THE
COMPANIES--Resources Spin-Off.' The principal executive office of UP is located
at Martin Tower, Eighth & Eaton Avenues, Bethlehem, Pennsylvania 18018,
telephone number (610) 861-3200.
The Railroad
The Railroad is engaged in the rail transportation business. It is the
second largest railroad in the United States by mileage, with approximately
22,700 route miles linking West Coast and Gulf Coast ports to the Midwest. See
'THE COMPANIES--The Railroad.' The principal executive office of the Railroad is
1416 Dodge Street, Omaha, Nebraska 68179, telephone number (402) 271-5000.
Resources Spin-Off
On August 4, 1995, Resources filed a registration statement on Form S-1
with the Securities and Exchange Commission (the 'Commission') in connection
with an initial public offering (the 'IPO') of shares of its common stock (the
'Resources Common Stock'), representing no more than 17.25% of the outstanding
shares of Resources Common Stock (after giving effect to the issuance of shares
in the IPO and shares to be issued to employees or reserved for issuance with
respect to employee options). On October 16 and 17, 1995, Resources sold
42,500,000 shares of Resources Common Stock in the IPO. UP intends, subject to
certain conditions, including the receipt of a ruling from the Internal Revenue
Service (the 'IRS') as to the tax-free nature of the Spin-Off (as defined
below), to distribute pro rata to its stockholders all of the remaining shares
of Resources Common Stock held by UP (representing approximately 83% of the
outstanding shares of Resources Common Stock) by means of a tax-free
distribution (the 'Spin-Off'). The Amended Merger Agreement (as defined herein)
provides that UP will not effect the Spin-Off until after the consummation of
the Merger (as defined herein) or termination of the Amended Merger Agreement.
No assurance can be given that a favorable tax ruling will be obtained. Even if
a favorable IRS ruling is obtained, there can be no assurance that the Spin-Off
will occur. See 'THE COMPANIES--Resources Spin-Off.' The principal executive
office of Resources is 801 Cherry Street, Fort Worth, Texas 76101, telephone
number (817) 877-6000.
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THE MERGER
General
The Board of Directors of SP has unanimously approved an Amended and
Restated Agreement and Plan of Merger, dated as of July 12, 1996 (the 'Amended
Merger Agreement'), by and among UP, UPRR, UP Holding Company, Inc., a Utah
corporation and a wholly owned subsidiary of UP ('Holding'), Union Pacific
Merger Co., a Delaware corporation and a wholly owned subsidiary of UP
('Mergerco'), and SP. The Amended Merger Agreement amends and restates in its
entirety the Agreement and Plan of Merger, dated as of August 3, 1995, as
amended (the 'Original Merger Agreement'), by and among SP, UP, UPRR and UP
Acquisition Corporation, a former Delaware corporation and indirect wholly owned
subsidiary of UP ('UP Acquisition'), that was approved and adopted by the SP
stockholders at a special meeting of SP stockholders on January 17, 1996. The
Original Merger Agreement shall remain in effect, and the Amended Merger
Agreement shall not be effective, until receipt of approval of the Amended
Merger Agreement by the SP stockholders. References herein to 'Newco' shall mean
either or both of Holding and/or Mergerco, as the context may require. Subject
to the satisfaction or waiver (where permissible) of certain conditions, UP will
acquire SP through the merger of SP with and into either UPRR (the 'Original
Merger') or, in the alternative, Newco (the 'Alternative Merger' and, in the
alternative with the Original Merger, the 'Merger'). As a result of the Merger,
the separate corporate existence of SP will cease and either UPRR or Newco, as
the case may be, will be the surviving corporation (the 'Surviving Corporation'
and, if Newco is the surviving corporation, also referred to herein as the
'Alternative Surviving Corporation'). In the event that all of the conditions to
the Alternative Merger and the Original Merger are satisfied, UP and SP, at the
sole election of UP, will consummate either the Alternative Merger or the
Original Merger; provided, however, that in the event that the conditions to the
Alternative Merger are not satisfied but the conditions to the Original Merger
are satisfied, the Original Merger, previously approved by SP stockholders at
the Special Meeting of Stockholders of SP held on January 17, 1996, would be
consummated without delay. See 'THE MERGER' and 'THE AMENDED MERGER AGREEMENT'.
The reason for the alternative structure is to maximize, on a tax-efficient
basis, UP's flexibility after the Merger in achieving additional service
improvements and operating efficiencies while maintaining the same tax
consequences to SP stockholders described in the Joint Proxy
Statement/Prospectus relating to the Original Merger Agreement. The changes made
by the Amended Merger Agreement will have no substantive impact on the SP
stockholders.
If the Merger is consummated, each share of common stock, par value $.001
per share, of SP (each, a 'Share') (other than treasury stock and Shares that
are owned by UP, UPRR, Newco or any other direct or indirect wholly owned
subsidiary of UP, which Shares will be cancelled and retired) at the Effective
Time (as defined herein) shall be converted, at the election of each
stockholder, subject to proration and the limitations described herein, into the
right to receive (i) .4065 shares of common stock of UP (the 'UP Common Stock'),
par value $2.50 per share (the 'Stock Consideration'), (ii) $25.00 in cash,
without interest thereon (the 'Cash Consideration' and, together with the Stock
Consideration, the 'Merger Consideration') or (iii) a combination thereof.
The aggregate number of Shares to be converted into the right to receive UP
Common Stock in the Merger pursuant to the Amended Merger Agreement will be
equal as nearly as practicable to 60% of all outstanding Shares at the time of
the Merger; and the aggregate number of Shares to be converted into the right to
receive the Cash Consideration in the Merger pursuant to the Amended Merger
Agreement, together with the Acquired Shares (as defined herein), will be equal
as nearly as practicable to 40% of all outstanding Shares at the time of the
Merger. Accordingly, of the Shares outstanding immediately prior to the Merger
(other than the Acquired Shares), 20% of such Shares will be acquired for cash
and 80% of such Shares will be acquired in exchange for shares of UP Common
Stock. See 'THE MERGER--Election Procedures' and 'THE AMENDED MERGER
AGREEMENT--Conversion of Shares.' On July 15, 1996, the closing price of UP
Common Stock on the New York Stock Exchange, Inc. ('NYSE') was $68.50 per share.
Accordingly, the market value of .4065 shares of UP Common Stock, based on such
closing price, was $27.85. THE MARKET VALUE OF THE UP COMMON STOCK AFTER THE
EFFECTIVE TIME (AS DEFINED HEREIN) WILL, AMONG OTHER THINGS, DEPEND UPON, AND IS
EXPECTED TO FLUCTUATE WITH, THE PERFORMANCE OF UP, WHETHER OR NOT THE SPIN-OFF
OCCURS, CONDITIONS (ECONOMIC OR OTHERWISE) AFFECTING THE RAILROAD, TRUCKING AND
OIL AND GAS INDUSTRIES, AND MARKET CONDITIONS AND OTHER FACTORS THAT GENERALLY
INFLUENCE PRICES OF SECURITIES. MOREOVER, THERE CAN BE NO ASSURANCE THAT AT OR
AFTER THE EFFECTIVE TIME THE MARKET VALUE OF THE STOCK CONSIDERATION AND THE
CASH CONSIDERATION TO BE RECEIVED
7
<PAGE>
IN THE MERGER WILL BE EQUAL. BECAUSE THE TAX CONSEQUENCES OF RECEIVING CASH OR
UP COMMON STOCK WILL DIFFER, SP STOCKHOLDERS ARE URGED TO READ CAREFULLY THE
INFORMATION SET FORTH UNDER THE CAPTION 'THE MERGER--CERTAIN FEDERAL INCOME TAX
CONSEQUENCES.'
Votes Required; Principal Stockholders
The affirmative vote of a majority of the outstanding Shares on the Record
Date (as defined herein) is required to approve and adopt the Amended Merger
Agreement. Each Share is entitled to one vote on each matter on which the
respective holders of such Shares are entitled to vote.
As of the Record Date, directors and executive officers of SP, and their
affiliates (other than the Anschutz Shareholders and MSLEF (each as defined
herein)), were beneficial owners of an aggregate of 48,442 Shares (approximately
.03% of the Shares then outstanding). The directors and executive officers of SP
have indicated that they intend to vote their Shares in favor of approval and
adoption of the Amended Merger Agreement. Pursuant to shareholders agreements
between UP and certain holders of Shares, who as of the Record Date owned in the
aggregate approximately 31.1% of all outstanding Shares, such shareholders have
agreed, among other things, to vote all Shares beneficially owned by them in
favor of approval and adoption of the Amended Merger Agreement and have granted
UP irrevocable proxies to vote such Shares in favor of approval and adoption of
the Amended Merger Agreement. See 'SHAREHOLDERS AGREEMENTS.'
Pursuant to the Voting Trust Agreement (as defined herein), the Trustee (as
defined herein) thereunder is required to vote in favor of the approval and
adoption of the Amended Merger Agreement all of the 39,034,471 Shares
(representing approximately 25% of the outstanding Shares) acquired by UP
Acquisition (the 'Acquired Shares') pursuant to its tender offer (the 'Offer'),
dated August 9, 1995, to purchase up to 39,034,471 Shares.
On June 25, 1996, UP Acquisition was merged with and into UPRR, with UPRR
as the surviving corporation. On June 27, 1996, UPRR declared a dividend of the
voting trust certificates representing the Acquired Shares (the 'Voting
Certificates') held in the voting trust (the 'Voting Trust') and distributed the
Voting Certificates to UPRR's shareholders (consisting of UP and certain of its
subsidiaries). The Voting Certificates held by one such shareholder were
subsequently distributed to UP so that all of the Voting Certificates are
currently held by UP and Mergerco. See 'VOTING TRUST AGREEMENT.'
BECAUSE CERTAIN SUBSTANTIAL HOLDERS OF COMMON STOCK HAVE AGREED, AS
DESCRIBED ABOVE, TO VOTE ALL OF THEIR SHARES (REPRESENTING APPROXIMATELY 31.1%
OF THE OUTSTANDING SHARES) IN FAVOR OF THE MERGER AND HAVE GRANTED UP
IRREVOCABLE PROXIES TO VOTE SUCH SHARES IN FAVOR OF THE MERGER, AND BECAUSE THE
TRUSTEE OF THE VOTING TRUST IS REQUIRED TO VOTE ALL OF THE ACQUIRED SHARES
DEPOSITED THEREIN (REPRESENTING 25% OF THE OUTSTANDING SHARES) IN FAVOR OF THE
MERGER, A VOTE IN FAVOR OF THE APPROVAL AND ADOPTION OF THE AMENDED MERGER
AGREEMENT IS ASSURED WITHOUT THE VOTE OF ANY OTHER HOLDER OF SHARES. SEE 'THE
SPECIAL MEETING--VOTES REQUIRED; PRINCIPAL STOCKHOLDERS.'
RECOMMENDATION OF THE SP BOARD OF DIRECTORS
The Board of Directors of SP has unanimously determined that the terms of
the Merger are fair to, and in the best interests of, SP and its stockholders
and has unanimously approved the Amended Merger Agreement and the transactions
contemplated thereby and recommends approval and adoption thereof by the
stockholders of SP. See 'THE MERGER--Recommendation of the SP Board of
Directors; Reasons for the Merger.' Neither SP nor the SP Board of Directors
makes any recommendation as to whether stockholders should elect to receive the
Cash Consideration or the Stock Consideration in the Merger. Each stockholder
must make his or her own decision with respect to such election.
OPINION OF SP'S FINANCIAL ADVISOR
Morgan Stanley & Co. Incorporated ('Morgan Stanley'), financial advisor to
SP, has delivered its written opinion to the Board of Directors of SP, dated
August 3, 1995, to the effect that the consideration of $25.00 per Share in cash
for up to 39,034,471 Shares to be acquired pursuant to the Offer (the 'Offer
Consideration') and the Merger Consideration to be received by the holders of
Shares pursuant to the Offer and the Original Merger, taken together, is fair
from a financial point of view to such holders. The full text of Morgan
Stanley's opinion, which sets forth, among other things, assumptions made,
procedures followed, matters considered and limitations on the review
undertaken, is attached as Annex C to this Joint Proxy Statement/Prospectus and
is incorporated
8
<PAGE>
herein by reference. Morgan Stanley Leveraged Equity Fund II, L.P., a Delaware
limited partnership ('MSLEF'), is an affiliate of Morgan Stanley and is one of
the shareholders who have entered into a Shareholder Agreement with UP. See
'--Interests of Certain Persons--Certain Other Matters,' 'THE MERGER--Opinion of
SP's Financial Advisor,' '--Interests of Certain Persons,' 'SHAREHOLDERS
AGREEMENTS--Amended and Restated MSLEF Shareholder Agreement' and Annex C.
Morgan Stanley has consented to the use in this Joint Proxy Statement/Prospectus
of its opinion relating to the Original Merger.
INTERESTS OF CERTAIN PERSONS
Directorships and Officerships; Matters Related to Mr. Anschutz.
Pursuant to a Shareholders Agreement (the 'Amended Anschutz Shareholders
Agreement'), dated as of August 3, 1995, as amended and restated in its entirety
as of July 12, 1996, by and among UP, The Anschutz Corporation, a Kansas
corporation ('TAC'), Anschutz Foundation, a Colorado not-for-profit corporation
(the 'Foundation'), and Mr. Philip F. Anschutz ('Mr. Anschutz' and, collectively
with TAC and the Foundation, the 'Anschutz Shareholders'), the Anschutz
Shareholders have agreed, among other things, to vote all Shares beneficially
owned by them in favor of the Merger and to comply with certain 'standstill'
agreements and restrictions on dispositions of UP Common Stock to be received in
the Merger. In addition, pursuant to a Shareholders Agreement (the 'Amended
Anschutz/Resources Shareholders Agreement'), dated as of August 3, 1995, as
amended and restated in its entirety as of July 12, 1996, by and among Resources
and the Anschutz Shareholders, the Anschutz Shareholders have agreed, among
other things, to comply with certain 'standstill' agreements and restrictions on
dispositions of shares of Resources Common Stock to be received in the Spin-Off.
The Amended Anschutz Shareholders Agreement also provides that, after the
Effective Time, the Board of Directors of UP will elect Mr. Anschutz, or another
designee of Mr. Anschutz reasonably acceptable to UP, as a director of UP's
Board of Directors and, if Mr. Anschutz is the designee, will appoint Mr.
Anschutz as Vice Chairman of the Board. Resources has agreed, pursuant to the
Amended Anschutz/Resources Shareholders Agreement, to cause a designee of TAC
(other than Mr. Anschutz or persons with certain relationships to TAC) to be
appointed as a director of Resources' Board of Directors on or prior to the
consummation of the Spin-Off. See 'SHAREHOLDERS AGREEMENTS--Amended and Restated
Anschutz Shareholders Agreement' and 'Amended and Restated Anschutz/Resources
Shareholders Agreement.'
The original Anschutz Shareholders Agreement, dated as of August 3, 1995,
shall remain in effect, and the Amended Anschutz Shareholders Agreement shall
not be effective, until the stockholders of SP have approved the Amended Merger
Agreement at the Special Meeting.
Registration Rights
TAC and the Foundation have been granted certain demand and 'piggy-back'
registration rights in respect of any disposition by them of the UP Common Stock
and Resources Common Stock to be acquired in the Merger and the Spin-Off,
respectively. The registration rights granted by UP and Resources to TAC and the
Foundation are substantially the same as the rights held by TAC and the
Foundation with respect to the Shares owned by them. All expenses associated
with the registration of UP Common Stock and Resources Common Stock pursuant to
the exercise of demand or piggy-back registration rights will be borne by UP and
Resources, respectively, with the exception of underwriting discounts and
commissions and any expenses of TAC and the Foundation in connection with such
registration. In addition, each of UP and Resources has agreed to provide, under
certain circumstances, indemnification in favor of TAC and the Foundation with
respect to information contained in a registration statement filed pursuant to
such registration rights (except for information provided by TAC or the
Foundation). Similarly, TAC and the Foundation have agreed to provide, under
certain circumstances, indemnification in favor of UP or Resources, as the case
may be, with respect to information furnished by them to UP or Resources, as the
case may be, for use in a registration statement filed pursuant to such
registration rights. See 'AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENTS.'
9
<PAGE>
Resources' Relationship with the Anschutz Shareholders
As a result of the Merger and the Spin-Off, it is possible that the
Anschutz Shareholders may become significant shareholders in Resources
immediately after the Spin-Off. The size of the Anschutz Shareholders' holdings
of Resources Common Stock and the presence of a designee of the Anschutz
Shareholders elected to the Board of Directors of Resources may influence the
management and policies of Resources. Resources competes with TAC, an Anschutz
Shareholder engaged in oil and gas activities, in Colorado, Wyoming, Utah, the
Gulf of Mexico, southern Louisiana and southern Texas, and, accordingly, certain
conflicts of interest between Resources and the Anschutz Shareholders may arise
in the future relating to their past and ongoing relationship. Such conflicts
may arise in connection with Resources' efforts to acquire producing properties
and companies, pursue farm-ins and other exploration agreements and hire and
retain skilled industry personnel. In addition, Resources has been involved in
significant litigation with the Anschutz Shareholders, including TAC, and is
currently a party to pending arbitration. See 'THE MERGER--Interests of Certain
Persons.'
Existing Employment Agreements
SP maintains employment agreements with a number of executives, including
Messrs. Davis, Starzel, Orris, Harvey, Matthews, Parsons and Galardi. These
agreements provide, among other things, for the payment of certain severance and
other benefits upon certain qualifying terminations of the employment of such
officers. SP will be obligated to make certain payments to each of Messrs.
Davis, Starzel, Orris, Harvey, Matthews, Parsons and Galardi in the event that
such person is terminated by SP other than for cause or, with the exception of
Mr. Parsons, such person resigns following certain changes in his employment
status. The existing employment agreements with Messrs. Davis, Starzel, Matthews
and Parsons provide for certain home purchase loans (respectively in the amounts
of $600,000, $600,000, $300,000 plus the balance of Mr. Matthews' San Francisco
residence loan and $350,000) that are interest free during employment. If the
employment of Messrs. Davis, Starzel or Matthews is terminated by SP other than
for cause, the remaining balance of the respective loan will be forgiven.
Existing Employment and Benefit Arrangements
The Amended Merger Agreement provides that UP shall cause the Surviving
Corporation and its subsidiaries to honor and assume the existing SP employment
agreements, supplemental executive retirement agreements and stock bonus
agreements, including those described above for the named executive officers. In
addition, in the case of the Alternative Merger, UPRR has agreed to guarantee
the obligations of Newco, as the Surviving Corporation, under the foregoing
agreements. See 'THE MERGER--Interests of Certain Persons.'
Management Continuity Plan
Pursuant to the Amended Merger Agreement, SP and its subsidiaries have
established a Management Continuity Plan (the 'MCP') that provides for up to two
payments to certain non-union employees of SP or its subsidiaries based upon
their continued employment and performance for a specific period. The Amended
Merger Agreement provides that SP may make MCP awards in an aggregate amount of
up to $15,700,000, and also provides that the maximum amount payable under the
MCP will not exceed $1,400,000 and $900,000 for Messrs. Davis and Orris,
respectively, and $700,000 for each of Messrs. Starzel, Harvey, Matthews and
Parsons. In addition, in the case of the Alternative Merger, UPRR has agreed to
guaranty the obligations of Newco, as the Surviving Corporation, under the MCP.
See 'THE MERGER--Interests of Certain Persons.'
Equity Incentive Plan
Pursuant to the Amended Merger Agreement, the compensation committee of
SP's Board of Directors administering the Southern Pacific Rail Corporation
Equity Incentive Plan (the 'SP EIP') adopted resolutions to assure that no
holder of an outstanding award under the SP EIP with respect to which Shares
might otherwise be issued at or after the Effective Time will have any right to
receive equity securities of SP, the Surviving Corporation or any subsidiary of
SP at or after the Effective Time. See 'THE MERGER--Interests of Certain
Persons.'
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<PAGE>
Severance Arrangements
In addition to the severance arrangements provided under the individual
employment agreements and SP's existing severance plan, SP and its subsidiaries,
pursuant to the Amended Merger Agreement, established an enhanced severance
program (the 'Enhanced Severance Program') to provide certain additional
severance amounts to certain terminated, non-union employees who become entitled
to severance pursuant to either the existing severance plan, the substantially
identical plans established for certain subsidiaries which do not currently have
a severance plan, or the individual employment agreements which provide
severance benefits. The Amended Merger Agreement provides that the Enhanced
Severance Program plus all severance otherwise payable may provide aggregate
benefits not in excess of $22,000,000 to all employees covered by the Enhanced
Severance Program, and also provides that the total amount of severance benefits
that may be paid to Messrs. Davis, Orris, Starzel, Harvey, Matthews and Parsons
(excluding certain miscellaneous items) will not exceed $1,600,000, $1,350,000,
$1,050,000, $1,050,000, $1,050,000 and $1,020,833, respectively. In addition, in
the case of the Alternative Merger, UPRR has agreed to guaranty the obligations
of Newco, as the Surviving Corporation, under the Enhanced Severance Program.
See 'THE MERGER--Interests of Certain Persons.'
Certain Other Matters
MSLEF, a substantial stockholder of SP and a party to a Shareholder
Agreement with UP, is an affiliate of Morgan Stanley, financial advisor to SP.
Both Morgan Stanley and MSLEF's sole general partner, Morgan Stanley Leveraged
Equity Fund II, Inc. ('MSLEF II'), are wholly owned subsidiaries of Morgan
Stanley Group Inc. Mr. Frank V. Sica, a member of the Board of Directors of SP
since October 1989, is a Managing Director of Morgan Stanley and a Vice Chairman
and Director of MSLEF II. As of the Record Date, MSLEF owned 8,310,877 Shares,
representing approximately 5.3% of the then outstanding Shares. Pursuant to the
MSLEF Shareholder Agreement, dated as of August 3, 1995, as amended and restated
in its entirety as of July 12, 1996, by and among UP and MSLEF (the 'Amended
MSLEF Shareholder Agreement'), MSLEF has agreed, among other things, to vote all
Shares beneficially owned by it in favor of approval and adoption of the Merger.
Morgan Stanley participated in the underwriting syndicate for the IPO, but not
as a lead or co-lead underwriter, for the Resources' IPO. Since January 1, 1991,
Morgan Stanley, as financial advisor to SP, has received aggregate fees and
underwriting discounts of more than $29.4 million from SP, excluding fees in
connection with the Merger. Morgan Stanley will be entitled to advisory and
transaction fees for services to SP in connection with the Merger. Morgan
Stanley is entitled to an advisory fee for its time and efforts on the
engagement and an announcement fee aggregating $4 million, of which $2 million
was paid in August, 1995 and the remaining $2 million was paid following
approval of the Original Merger Agreement by SP's stockholders on January 17,
1996. SP has also agreed to pay Morgan Stanley a transaction fee equal to the
lesser of (x) $16 million and (y) 0.425% of the aggregate value of the
Consideration. Although Morgan Stanley's actual fee will depend upon the price
of UP Common Stock at the Effective Time, based upon the $68.50 per share
closing price of UP Common Stock on July 15, 1996, the aggregate value of the
Consideration would have been approximately $4.3 billion and Morgan Stanley's
transaction fee would have been $16 million. Any amounts paid or payable to
Morgan Stanley as advisory fees or announcement fees will be credited against
the transaction fee. See 'THE MERGER--Opinion of SP's Financial Advisor,'
'--Interests of Certain Persons' and 'SHAREHOLDERS AGREEMENTS.'
Indemnification
Pursuant to the terms of the Amended Merger Agreement, UP has agreed that
at all times after the Effective Time, it will indemnify, or will cause the
Surviving Corporation and its subsidiaries to indemnify, each director, officer,
employee or agent of SP (an 'Indemnified Party') to the same extent and in the
same manner as is now provided in the respective charters or by-laws of SP and
the subsidiaries of SP or otherwise in effect on the date of the Original Merger
Agreement, with respect to any claim, liability, loss, damage, cost or expense
(whenever asserted or claimed) ('Indemnified Liability') based in whole or in
part on, or arising in whole or in part out of, any matter existing or occurring
at or prior to the Effective Time. In addition, in the case of the Alternative
Merger, UPRR has agreed to guaranty the obligations of Newco, as the Surviving
Corporation, under the foregoing agreement. See 'THE MERGER--Interests of
Certain Persons.'
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MERGER CONSIDERATION
If the Merger is consummated, each Share (other than Shares that are owned
by SP as treasury stock and any Shares owned by UP, UPRR, Newco or any other
direct or indirect wholly owned subsidiary of UP, which Shares will be cancelled
and retired) shall at the Effective Time be converted, at the election of the
holder, subject to proration and the limitations described below, into the right
to receive (i) the Stock Consideration, (ii) the Cash Consideration or (iii) a
combination thereof.
The aggregate number of Shares to be converted into the right to receive
the Stock Consideration in the Merger pursuant to the Amended Merger Agreement
will be equal as nearly as practicable to 60% of all outstanding Shares at the
time of the Merger; and the aggregate number of Shares to be converted into the
right to receive the Cash Consideration in the Merger pursuant to the Amended
Merger Agreement, together with the Acquired Shares, will be equal as nearly as
practicable to 40% of all outstanding Shares at the time of the Merger.
Accordingly, of the Shares outstanding immediately prior to the Merger (other
than the Acquired Shares), 20% of such Shares will be acquired for cash and 80%
of such Shares will be acquired in exchange for shares of UP Common Stock. See
'THE MERGER--Election Procedures' and 'THE AMENDED MERGER AGREEMENT--Conversion
of Shares.'
Effective Time
The Merger will become effective upon the date (the 'Effective Time') on
which (i) in the case of the Original Merger, a certificate of merger (the
'Certificate of Merger') and articles of merger (the 'Articles of Merger'), each
with respect to the Original Merger, has been duly filed with the Secretary of
State of the State of Delaware and the Division of Corporations and Commercial
Code of the State of Utah, respectively, (ii) in the case of the Alternative
Merger, either (x) where SP will be merged with and into Mergerco, a certificate
of merger (the 'Alternative Certificate of Merger') has been duly filed with the
Secretary of State of the State of Delaware, or (y) where SP will be merged with
and into Holding, the Alternative Certificate of Merger and articles of merger
(the 'Alternative Articles of Merger') have been duly filed with the Secretary
of State of the State of Delaware and with the Division of Corporations and
Commercial Code of the State of Utah, respectively, or (iii) the parties have
agreed upon and have so specified in the Certificate of Merger or the
Alternative Certificate of Merger and Articles of Merger or Alternative Articles
of Merger, as the case may be.
Conditions to the Merger
The obligations of UP and SP to consummate the Merger are subject to the
satisfaction or waiver (where permissible) of various conditions, including,
among others, the approval (without certain conditions) of the Merger by the
United States Surface Transportation Board ('STB'), the successor to the
Interstate Commerce Commission ('ICC'), and the absence of any order or other
legal restraint or prohibition preventing the consummation of the Merger. The
STB Application (as defined herein) was filed on November 30, 1995. Since the
filing of the STB Application, the STB received evidentiary submissions and
briefs in connection with the proposed Merger. The STB heard oral arguments on
the proposed Merger on July 1, 1996 and the STB held a voting conference on the
proposed Merger on July 3, 1996. At the voting conference, the STB announced the
following decision: to approve the Merger subject to a number of conditions,
principally (a) a settlement agreement between UP/SP and BNSF (as defined
herein) under which BNSF will receive trackage rights over more than 4,000 miles
of UP/SP track and will purchase over 300 miles of UP/SP lines, augmented in a
number of ways to expand BNSF's ability to gain access to traffic (e.g., through
transloading facilities (facilities where goods are transferred between trucks
and railcars) and build-ins of rail lines to exclusively-served customers,
through serving new shipper facilities on the lines over which it will have
trackage rights, and through opening to BNSF 50% of all traffic now committed
under contracts to UP or SP by shippers served by UP and SP and no other
railroad), (b) a settlement agreement between UP/SP and the Chemical
Manufacturers Association which provides certain additional protections to
shippers, (c) a settlement agreement between UP/SP and Utah Railway Company
('Utah Railway') under which Utah Railway will receive access to certain coal
mines and loading facilities in Utah and trackage rights over SP from Utah
Railway's line in Utah to Grand Junction, Colorado, (d) the grant of trackage
rights to the Texas Mexican Railway ('Tex Mex') over UP/SP lines between Corpus
Christi/Robstown, Texas, and Beaumont, Texas, via Houston, Texas, restricted to
traffic moving on Tex Mex's Laredo-Corpus Christi/Robstown line, including
terminal-area trackage rights in Houston, (e) environmental
12
<PAGE>
mitigation conditions, including a condition restricting increases in train
volumes through Reno, Nevada, and Wichita, Kansas, for 18 months following the
Merger while a consultant conducts a study of possible measures to reduce the
potential adverse impact of increased rail traffic through those communities and
the STB decides upon such measures, (f) standard labor protective conditions and
(g) a 5-year oversight process, pursuant to which the STB will review whether
the conditions imposed on the Merger have effectively addressed competitive
issues. A final written STB decision regarding the proposed Merger is expected
by August 12, 1996. If, as expected, the written decision does not contain terms
materially different from those voted upon by the STB on July 3, 1996, UP has
indicated that it expects to proceed with the transaction in accordance with and
subject to the terms and conditions of the Amended Merger Agreement. References
herein to 'STB' shall include, as applicable, the ICC, its predecessor. See
'OTHER LEGAL MATTERS--REGULATORY APPROVAL--STB Approval' and 'THE AMENDED MERGER
AGREEMENT--Conditions to the Merger.'
Election Procedures
Each holder of Shares (other than Shares owned by SP as treasury stock and
Shares owned by UP, UPRR, Newco or any other direct or indirect wholly owned
subsidiary of UP, which Shares will be cancelled and retired at the Effective
Time) has the right, subject to proration and the limitations described below,
to elect to receive (an 'Election'):
(i) the Stock Consideration (the 'Stock Election');
(ii) the Cash Consideration of $25.00 per Share (the 'Cash Election');
or
(iii) a combination thereof.
The purpose of the election procedure is to permit holders of Shares to
express their preferences for the type of consideration they wish to receive in
the Merger, provided that a number of Shares (together with the Acquired Shares)
as nearly as practicable equal to 40% of the outstanding Shares be converted
into the right to receive the Cash Consideration, and a number of Shares as
nearly as practicable equal to 60% of the outstanding Shares be converted into
the Stock Consideration. On July 15, 1996, the closing price of UP Common Stock
on the NYSE was $68.50 per share. Accordingly, the market value of .4065 shares
of UP Common Stock, based on such closing price, was $27.85. SP STOCKHOLDERS ARE
BEING FURNISHED WITH A FORM OF ELECTION (AS DEFINED HEREIN) TO MAKE THEIR
ELECTION IN CONNECTION WITH THE MERGER. UP has set September 9, 1996 as the
Election Deadline (as defined herein).
THE MARKET VALUE OF THE UP COMMON STOCK AFTER THE EFFECTIVE TIME WILL,
AMONG OTHER THINGS, DEPEND UPON, AND IS EXPECTED TO FLUCTUATE WITH, THE
PERFORMANCE OF UP, WHETHER OR NOT THE SPIN-OFF OCCURS, CONDITIONS (ECONOMIC OR
OTHERWISE) AFFECTING THE RAILROAD, TRUCKING AND OIL AND GAS INDUSTRIES AND
MARKET CONDITIONS AND OTHER FACTORS THAT GENERALLY INFLUENCE PRICES OF
SECURITIES.
MOREOVER, THERE CAN BE NO ASSURANCE THAT AT OR AFTER THE EFFECTIVE TIME THE
MARKET VALUE OF THE STOCK CONSIDERATION AND THE CASH CONSIDERATION TO BE
RECEIVED IN THE MERGER WILL BE EQUAL. BECAUSE THE TAX CONSEQUENCES OF RECEIVING
CASH OR UP COMMON STOCK WILL DIFFER, SP STOCKHOLDERS ARE URGED TO READ CAREFULLY
THE INFORMATION SET FORTH UNDER THE CAPTION 'THE MERGER--CERTAIN FEDERAL INCOME
TAX CONSEQUENCES.'
ALTHOUGH THERE CAN BE NO ASSURANCE THAT A HOLDER OF SHARES WILL RECEIVE THE
CONSIDERATION THAT HE OR SHE ELECTS AS TO ALL OF HIS OR HER SHARES, A HOLDER OF
SHARES HAVING A PREFERENCE AS TO THE FORM OF CONSIDERATION TO BE RECEIVED FOR
HIS OR HER SHARES SHOULD MAKE AN ELECTION, BECAUSE SHARES AS TO WHICH AN
ELECTION HAS BEEN MADE WILL BE GIVEN PRIORITY IN ALLOCATING SUCH CONSIDERATION
OVER SHARES AS TO WHICH NO ELECTION IS RECEIVED.
Stockholders of SP will have the right to change or withdraw a prior
Election at any time prior to the Election Deadline. For further important
information concerning the election and allocation procedures, see
13
<PAGE>
'THE MERGER--Election Procedures' and 'THE AMENDED MERGER AGREEMENT--Conversion
of Shares.'
Certain Federal Income Tax Consequences
The Offer and the Merger should be treated as a single integrated
transaction for federal income tax purposes. Consequently, the Offer and the
Merger should, in the aggregate, qualify as a reorganization pursuant to
Sections 368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code of 1986, as
amended (the 'Code'). In such event, generally (i) UP, UPRR, Newco and SP will
not recognize any gain or loss pursuant to the Offer and the Merger, (ii) a
stockholder of SP who receives solely cash in exchange for Shares pursuant to
the Offer and/or the Merger will recognize gain or loss, (iii) a stockholder of
SP who did not exchange any Shares pursuant to the Offer and who receives solely
UP Common Stock in exchange for Shares pursuant to the Merger will not recognize
any gain or loss (except with respect to cash received in lieu of fractional
shares), and (iv) a stockholder of SP who receives a combination of cash and UP
Common Stock in exchange for such stockholder's Shares pursuant to the Offer
and/or the Merger will not recognize loss but will recognize gain, if any, to
the extent of the cash received. If the Offer and the Merger are treated as
integrated, the federal income tax consequences to a stockholder of SP may be,
depending on such stockholder's particular circumstances, less favorable than
the federal income tax consequences to such stockholder if the Offer and the
Merger are not treated as integrated.
Alternatively, if the Offer and the Merger were treated as separate
transactions for federal income tax purposes, the receipt of cash by a
stockholder of SP pursuant to the Offer would be a taxable sale, while the
Merger should still qualify as a reorganization pursuant to Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code.
THE TAX CONSEQUENCES DISCUSSED ABOVE MAY NOT APPLY TO CERTAIN CATEGORIES OF
STOCKHOLDERS SUBJECT TO SPECIAL TREATMENT UNDER THE CODE, SUCH AS FOREIGN
STOCKHOLDERS OF SP AND STOCKHOLDERS OF SP WHOSE SHARES WERE ACQUIRED AS
COMPENSATION. STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO
DETERMINE THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE OFFER AND THE MERGER,
INCLUDING ANY FEDERAL, STATE, LOCAL OR OTHER TAX CONSEQUENCES (INCLUDING ANY TAX
RETURN FILING OR OTHER TAX REPORTING REQUIREMENTS) OF THE OFFER AND THE MERGER.
See 'THE MERGER--Certain Federal Income Tax Consequences.'
Absence of Dissenters' Rights
In accordance with the United States Supreme Court decision, Schwabacher v.
United States, 334 U.S. 192 (1948), stockholders of SP will not have any
dissenters' rights under state law, unless the STB or a court of competent
jurisdiction determines that state-law dissenters' rights are available to
holders of Shares. See 'THE MERGER--Absence of Dissenters' Rights' and
'COMPARISON OF THE RIGHTS OF STOCKHOLDERS OF SP AND UP UNDER DELAWARE AND UTAH
LAW--Dissenters' Rights.'
VOTING TRUST AGREEMENT
Certain activities of subsidiaries of UP and SP are regulated by the STB.
STB approval or exemption is required for, among other things, acquisition of
control of SP by UP or any affiliate of UP. UP Acquisition deposited the
Acquired Shares purchased pursuant to the Offer into the Voting Trust in order
to ensure that UP and its affiliates do not acquire or directly or indirectly
exercise control over SP and its affiliates prior to obtaining necessary STB
approvals or exemptions.
On August 24, 1995, counsel for UP received an informal written opinion
from the staff of the ICC authorizing the use of the Voting Trust to hold Shares
acquired in the Offer. On September 7, 1995, UP Acquisition accepted the
Acquired Shares for purchase in the Offer and simultaneously deposited such
Shares in the Voting Trust. On June 25, 1996, UP Acquisition was merged with and
into UPRR, with UPRR as the surviving corporation. On June 27, 1996, UPRR
declared a dividend of the Voting Certificates and distributed the Voting
Certificates to its shareholders (consisting of UP and certain of its
subsidiaries). The Voting Certificates held by one such shareholder were
subsequently distributed to UP so that all of the Voting Certificates are
currently held by UP and Mergerco. See 'VOTING TRUST AGREEMENT.'
14
<PAGE>
Pursuant to a Voting Trust Agreement (the 'Voting Trust Agreement'), dated
as of August 3, 1995, by and among UP, UP Acquisition and Southwest Bank of St.
Louis, a Missouri banking corporation (the 'Trustee'), the Trustee is required
to vote the Acquired Shares in favor of the approval and adoption of the Amended
Merger Agreement, in favor of any proposal necessary to effectuate UP's
acquisition of SP pursuant to the Amended Merger Agreement, and, so long as the
Amended Merger Agreement is in effect, subject to certain exceptions, against
any other proposed merger, business combination or similar transaction involving
SP. See 'VOTING TRUST AGREEMENT.'
COMPARATIVE MARKET PRICES AND DIVIDENDS
Each of the UP Common Stock and the Shares is listed and principally traded
on the NYSE. The following table sets forth the high and low sale prices for
each of the UP Common Stock and the Shares on the NYSE Composite Tape and
dividends paid per share with respect to the UP Common Stock for the periods
indicated as reported in published financial sources. No dividends have been
paid with respect to the Shares since SP's initial public offering in 1993.
<TABLE>
<CAPTION>
UP
COMMON STOCK
---------------------------------------
DIVIDENDS THE SHARES*
PAID PER -------------------------
HIGH LOW SHARE HIGH LOW
---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1993
First Quarter............... $ 62 3/8 $ 56 7/8 $ .37 -- --
Second Quarter.............. 65 3/4 58 3/4 .37 -- --
Third Quarter............... 67 58 3/8 .40 $ 16 3/4** $ 14 1/4**
Fourth Quarter.............. 64 7/8 57 7/8 .40 21 3/8 15 1/4
1994
First Quarter............... $ 67 1/8 $ 55 1/2 $ .40 $ 24 3/8 $ 18 5/8
Second Quarter.............. 59 3/4 55 3/8 .40 23 3/4 19 1/8
Third Quarter............... 60 1/8 52 3/4 .43 21 3/4 18 3/8
Fourth Quarter.............. 53 3/4 43 3/4 .43 19 7/8 16 5/8
1995
First Quarter............... $ 56 1/8 $ 45 5/8 $ .43 $ 19 7/8 $ 16
Second Quarter.............. 56 3/4 51 3/4 .43 19 14 1/2
Third Quarter............... 69 1/2 55 1/8 .43 25 1/4 15 7/8
Fourth Quarter.............. 70 1/8 61 1/2 .43 24 1/2 21 1/2
1996
First Quarter............... $ 73 1/8 $ 64 1/8 $ .43 $ 25 3/4 $ 23 1/4
Second Quarter.............. 72 1/4 65 1/2 .43 25 1/2 21 7/8
Third Quarter (through July
15, 1996)................ 74 68 3/8 -- 28 1/4 24 3/4
</TABLE>
- ------------------
* SP has not paid a dividend with respect to the Shares since public trading
began.
** Public trading in the Shares began on August 10, 1993.
15
<PAGE>
On August 2, 1995, the last full trading day prior to the joint public
announcement of the proposed Merger, the last sale prices reported for UP Common
Stock and the Shares on the NYSE Composite Tape were $64 3/8 per share and
$19 5/8 per Share, respectively. On July 15, 1996, the last full trading day for
which information was available prior to the printing and mailing of this Joint
Proxy Statement/Prospectus, the last sale prices reported for UP Common Stock
and the Shares on the NYSE Composite Tape were $68 1/2 per share and $26 1/2 per
Share, respectively.
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THEIR
SHARES AND THE UP COMMON STOCK.
IT IS A CONDITION TO SP'S OBLIGATION TO CONSUMMATE THE MERGER THAT THE
SHARES OF UP COMMON STOCK TO BE ISSUED PURSUANT TO THIS JOINT PROXY
STATEMENT/PROSPECTUS SHALL HAVE BEEN APPROVED FOR LISTING ON THE NYSE SUBJECT TO
OFFICIAL NOTICE OF ISSUANCE. SEE 'THE AMENDED MERGER AGREEMENT--CONDITIONS TO
THE MERGER.'
OTHER LEGAL MATTERS; REGULATORY APPROVALS
Antitrust
The notice and waiting period requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the 'HSR Act'), do not apply to
the affiliation of UP's and SP's STB-regulated railroad operations, provided
that information and documentary material filed with the STB in connection with
the seeking of STB approval of the affiliation of such operations are
contemporaneously filed with the Antitrust Division of the Department of Justice
and the Federal Trade Commission (the 'FTC'). Counsel for UP has been advised by
the Premerger Notification Office of the FTC that the Offer and the Merger are
exempt from the HSR Act.
Acquisition of Control
On November 30, 1995, UP, SP and various of their affiliates filed an
application with the ICC, the predecessor of the STB (the 'STB Application'),
seeking approval for the acquisition of control over SP and its affiliates by UP
and its affiliates, the Merger, and related transactions. Pending receipt of
final STB approval, the business and operations of SP are being conducted in the
usual and ordinary course of business, and SP's employees and management are
continuing in their present positions. Approval of the Merger by the STB
(without certain conditions) is a condition to the consummation of the Merger.
See 'OTHER LEGAL MATTERS; REGULATORY APPROVAL--STB Approval' and 'THE AMENDED
MERGER AGREEMENT--Conditions to the Merger.'
THE SPECIAL MEETING
Special Meeting
This Joint Proxy Statement/Prospectus is being furnished in connection with
the solicitation
of proxies by SP's Board of Directors for use at a special meeting of SP
stockholders to be held at the Mandarin Oriental Hotel, 222 Sansome Street, San
Francisco, California, on August 16, 1996 at 10 a.m., local time (the 'Special
Meeting'). The purpose of the Special Meeting is to consider and vote upon the
approval and adoption of the Amended Merger Agreement.
THE BOARD OF DIRECTORS OF SP HAS UNANIMOUSLY APPROVED THE AMENDED MERGER
AGREEMENT AND RECOMMENDS THAT ITS STOCKHOLDERS VOTE FOR THE APPROVAL AND
ADOPTION OF THE AMENDED MERGER AGREEMENT.
Neither SP nor your Board of Directors makes any recommendation as to
whether stockholders should elect to receive the Cash Consideration or the Stock
Consideration in the Merger. Each stockholder must make his or her own decision
with respect to such election.
16
<PAGE>
Record Date
The Board of Directors of SP has fixed the close of business on July 15,
1996 as the record date (the 'Record Date') for the determination of
stockholders of SP entitled to notice of, and to vote at, the Special Meeting.
Only holders of record of the Shares on the Record Date are entitled to vote.
Matter to be Considered at the Special Meeting
At the Special Meeting, the stockholders of SP will consider and vote upon
a proposal to approve and adopt the Amended Merger Agreement. The Amended Merger
Agreement provides for, among other things, the Merger of SP with and into UPRR
pursuant to the Original Merger or, in the alternative, the Merger of SP with
and into Newco pursuant to the Alternative Merger. See 'THE SPECIAL
MEETING--Purpose of the Special Meeting.'
Prior Special Meeting
In connection with the Original Merger Agreement, SP held a Special Meeting
of Stockholders on January 17, 1996 at which SP stockholders approved the
Original Merger Agreement providing for, among other things, the Original
Merger. SP is convening the Special Meeting to approve and adopt the Amended
Merger Agreement that provides for the alternative structure by which SP may be
merged with and into Newco.
SELECTED HISTORICAL CONSOLIDATED AND PRO FORMA FINANCIAL DATA
The following summary sets forth certain unaudited historical consolidated
financial data, restated UP historical financial data to reflect Resources as
discontinued operations and selected unaudited pro forma financial data. This
financial data should be read in conjunction with the historical consolidated
financial data, including the notes thereto, which are incorporated herein by
reference, and in conjunction with the unaudited pro forma financial statements
and related notes thereto included elsewhere in this Joint Proxy
Statement/Prospectus. See 'INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE,'
'AVAILABLE INFORMATION,' 'UNAUDITED PRO FORMA FINANCIAL STATEMENTS OF UP AND SP'
and 'UNAUDITED PRO FORMA FINANCIAL STATEMENTS OF RESOURCES.'
17
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following tables set forth certain selected historical financial data
of UP and SP for each of the last five years and selected unaudited historical
financial data for the three months ended March 31, 1996 and 1995. The selected
historical financial data for the last five years has been derived from the
audited historical financial statements of UP and SP and should be read in
conjunction with such information. The three month information is derived from
the unaudited books and records of both UP and SP and includes, in the opinion
of the management of each company, all adjustments necessary to present fairly
the information for each period. Such adjustments include only normal recurring
adjustments. Such data is not necessarily indicative of an entire year's results
or future operating results. All historical UP data presents Resources as a
discontinued operation. See Note 2 to the Financial Statements, incorporated by
reference, in UP's 1995 Annual Report on Form 10-K.
SELECTED HISTORICAL FINANCIAL DATA FOR UNION PACIFIC CORPORATION(3)
(In millions, except per share amounts)
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS ENDED
MARCH 31, AT OR FOR THE YEAR ENDED DECEMBER 31,
------------------ ---------------------------------------------------
1996 1995 1995(1) 1994 1993 1992 1991(2)
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues............ $ 1,968 $ 1,664 $ 7,486 $ 6,492 $ 6,002 $ 5,773 $ 5,687
Operating income.............. 265 279 1,341 1,244 1,112 1,082 221
Income (loss) from continuing
operations.................. 107 130 619 568 412 456 (123)
Income (loss) from
discontinued
operations(3)............... 49 61 327 (22) 234 272 187
Cumulative effect of
accounting changes(4)....... -- -- -- -- (116) -- --
Net income.................... 156 191 946 546 530 728 64
PER SHARE DATA:
Income (loss) from continuing
operations.................. $ 0.52 $ 0.63 $ 3.01 $ 2.76 $ 2.00 $ 2.24 $ (0.60)
Income (loss) from
discontinued
operations(3)............... 0.24 0.30 1.59 (0.10) 1.14 1.33 0.91
Cumulative effect of
accounting changes(4)....... -- -- -- -- (0.56) -- --
Net income.................... 0.76 0.93 4.60 2.66 2.58 3.57 0.31
Book value.................... 31.19 25.32 30.93 24.92 23.81 22.75 20.52
Cash dividends declared....... 0.43 0.43 1.72 1.66 1.54 1.42 1.31
BALANCE SHEET DATA:
Total assets.................. $19,609 $14,304 $19,446 $14,543 $13,797 $12,901 $12,272
Total debt.................... 6,354 4,229 6,364 4,479 4,105 4,035 3,966
Stockholders' equity.......... 6,436 5,204 6,364 5,131 4,885 4,639 4,163
</TABLE>
18
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA FOR SOUTHERN PACIFIC RAIL CORPORATION
(In millions, except per share amounts)
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS
ENDED MARCH 31, AT OR FOR THE YEAR ENDED DECEMBER 31,
----------------- ----------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues............ $ 785 $ 767 $3,151 $3,143 $2,919 $2,878 $2,786
Operating income (loss)(2).... 53 57 149 346 103 109 (168)
Income (loss) from continuing
operations(5)............... 6 17 (3) 248 (45) 33 (176)
Cumulative effect of
accounting
changes/extraordinary
item(4)..................... -- -- -- (6) (104) -- --
Net income (loss)............. 6 17 (3) 242 (149) 33 (176)
PER SHARE DATA:
Income (loss) from continuing
operations(5)............... $ 0.04 $ 0.11 $ (0.02) $ 1.63 $(0.46) $ 0.24 $(1.85)
Cumulative effect of
accounting
changes/extraordinary
item(4)..................... -- -- -- (0.04) (0.93) -- --
Net income (loss)............. 0.04 0.11 (0.02) 1.59 (1.39) 0.24 (1.85)
Book value.................... 6.84 6.92 6.79 6.98 2.81 (0.77) (1.01)
BALANCE SHEET DATA:
Total assets.................. $ 4,683 $4,123 $4,749 $4,152 $3,434 $3,205 $3,355
Total debt(6)................. 1,759 1,200 1,758 1,149 1,475 1,329 1,411
Stockholders' equity
(deficit)(6)................ 1,067 1,081 1,061 1,059 313 (77) (101)
</TABLE>
- ------------------
(1) On April 25, 1995, UP completed the acquisition of the 71.6% of CNW's common
stock not previously owned by UP for $1.2 billion. UP funded the acquisition
through the issuance of commercial paper, a portion of which UP subsequently
refinanced with $850 million of notes and debentures. For the year ended
December 31, 1994, CNW had operating revenues of $1.13 billion, net income
of $84 million and assets of $2.22 billion.
(2) SP recorded a pre-tax special charge of $65 million in 1995, and UP and SP
recorded pre-tax special charges of $790 million and $260 million,
respectively, in 1991 related to work force reductions, operational
consolidation and the sale, lease or abandonment of light density rail
lines. Included in UP's 1991 income from discontinued operations is an
additional $80 million of restructuring charges.
(3) Resources--On July 27, 1995, UP's Board of Directors approved a formal plan
to exit its natural resources business. The plan included an initial public
offering by Resources (UP's natural resources subsidiary) of 17.1 percent of
its outstanding common stock which was completed on October 16 and 17, 1995.
Following the IPO, subject to the receipt of a favorable ruling from the IRS
expected in August 1996 and the satisfaction of certain other conditions, UP
intends to distribute the remaining common stock of Resources pro rata on a
tax-free basis to UP's shareholders. Prior years' amounts reflect Resources
as a discontinued operation.
Sale of USPCI, Inc. ('USPCI')--At year-end 1994, UP completed the sale of
USPCI to Laidlaw Inc. ('Laidlaw') for $225 million. The sale resulted in an
after-tax net loss of $404 million. Amounts for 1994 and prior years have
been restated to present USPCI as a discontinued operation.
(4) In 1994, SP recorded a $6 million after tax charge for the adoption of a new
Financial Accounting Standards Board's ('FASB') pronouncement covering
post-employment benefit costs. In 1993, UP and SP adopted the FASB's
pronouncements covering the recognition of postretirement benefits other
than pensions and accounting for income taxes. UP also adopted a pro rata
method of recognizing transportation revenues and expenses. In 1993, UP and
SP recorded after tax charges of $116 million and $104 million,
respectively, to record the cumulative effect of adopting these accounting
changes.
(5) SP recognized pre-tax gains from real estate sales and transit corridor
sales of $15 million and $14 million, respectively, in the three-month
periods ended March 31, 1996 and 1995, and $31 million, $262 million, $25
19
<PAGE>
million, $118 million and $68 million, respectively, in the years ended
December 31, 1995, 1994, 1993, 1992 and 1991. Although these real estate
sales and transit corridor sales are expected to continue, gains from such
sales will be substantially reduced once the Merger is completed as a result
of the book value of such properties being written up to estimated market
value in purchase accounting. Cash flow from such sales will not be affected
by the purchase accounting adjustment.
(6) Total debt and stockholders' equity excludes SP's Redeemable Preference
Stock and Preferred Stock which is included in Other Liabilities.
SELECTED UNAUDITED SUMMARY PRO FORMA FINANCIAL DATA
The following selected unaudited pro forma financial information for UP and
SP gives effect to the Offer, the Merger, the IPO and Spin-Off and the
acquisition of CNW. The applicable transactions are reflected in the pro forma
combined balance sheet as if they occurred on March 31, 1996 and in the pro
forma combined statements of income as if they occurred at the beginning of the
periods presented. The Merger will be accounted for under the purchase method of
accounting. The unaudited pro forma financial statements are prepared for
illustrative purposes only and are not necessarily indicative of the financial
position or results of operations that might have occurred had the applicable
transactions actually taken place on the dates indicated, or of future results
of operations or financial position of the stand alone or combined entities. The
unaudited pro forma financial statements are based on the historical
consolidated financial statements of UP, SP and CNW and should be read in
conjunction with (i) such historical financial statements and the notes thereto,
which in the case of UP and SP are incorporated by reference in this Joint Proxy
Statement/Prospectus, (ii) the unaudited selected pro forma financial data and
unaudited comparative per share data, including the notes thereto, appearing
elsewhere in this Joint Proxy Statement/Prospectus and (iii) the selected
historical financial data appearing elsewhere in this Joint Proxy
Statement/Prospectus. See 'UNAUDITED PRO FORMA FINANCIAL STATEMENTS OF UP AND
SP.'
<TABLE>
<CAPTION>
AT OR FOR THE AT OR FOR THE
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 1996 DECEMBER 31, 1995
------------------ -----------------
(IN MILLIONS)
<S> <C> <C>
INCOME STATEMENT DATA:
Operating revenues........................... $ 2,753 $11,032
Income from continuing operations............ 86 548
BALANCE SHEET DATA:
Total assets................................. $ 26,546 (A)
Total debt................................... 8,279 (A)
Stockholders' equity......................... 7,832 (A)
</TABLE>
- ------------------
(A) Not required.
20
<PAGE>
UNAUDITED COMPARATIVE PER SHARE DATA
The following table sets forth for UP Common Stock and the Shares certain
SP and UP historical data, and pro forma equivalent per share data for the three
months ended March 31, 1996 and for the year ended December 31, 1995. The
information presented herein should be read in conjunction with the historical
financial statements and notes thereto incorporated by reference in this Joint
Proxy Statement/Prospectus, and the selected historical financial data and
unaudited pro forma combined financial statements found elsewhere in this Joint
Proxy Statement/ Prospectus. Equivalent historical per share data is derived
from the audited financial statements of UP and SP. Equivalent pro forma per
share data of UP Common Stock is derived from the pro forma combined financial
statements found elsewhere in this Joint Proxy Statement/Prospectus. Pro Forma
SP common stock per Share data is calculated based upon pro forma combined per
share data allocable to the 94 million SP Shares that will be converted into
shares of UP Common Stock upon completion of the Merger based upon the exchange
ratio of .4065 shares of UP Common Stock for each SP Share converted into UP
Common Stock.
<TABLE>
<CAPTION>
AT OR FOR THE AT OR FOR THE
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 1996 DECEMBER 31, 1995
------------------ -----------------
(UNAUDITED)
<S> <C> <C>
UP COMMON STOCK:
Income from continuing
operations
Historical.................. $ 0.52 $ 3.01
Pro forma................... 0.35 2.25
Book value
Historical.................. 31.19 30.93
Pro forma................... 32.05 31.82
Cash dividends declared
Historical.................. 0.43 1.72
Pro forma................... 0.43 1.72
SP COMMON STOCK:
Income (loss) from continuing
operations
Historical.................. $ 0.04 $ (0.02)
Pro forma................... 0.14 0.91
Book value
Historical.................. 6.84 6.79
Pro forma................... 13.03 12.93
Cash dividends declared
Historical.................. N/A N/A
Pro forma................... 0.17 0.70
</TABLE>
- ------------------
(1) Resources--On July 27, 1995, UP's Board of Directors approved a formal plan
to exit its natural resources business. The plan included an initial public
offering by Resources (UP's natural resources subsidiary) of 17.1 percent of
its outstanding common stock. Following the IPO, which was completed on
October 16 and 17, 1995, subject to the receipt of a favorable ruling from
the IRS expected in August 1996 and the satisfaction of certain other
conditions, UP intends to distribute the remaining common stock of Resources
on a tax-free basis pro rata to UP's shareholders. Prior years' amounts have
been restated to present Resources as a discontinued operation.
21
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
OF
UNION PACIFIC RESOURCES GROUP INC.
The following tables set forth certain historical and pro forma financial
data of Resources and its predecessors as of March 31, 1996 and December 31,
1995 which have been excluded from income (loss) from continuing operations in
the selected historical consolidated financial data of UP as a result of UP's
plan to dispose of its natural resources business segment comprised of Resources
initially through an IPO of 17.1% of Resources Common Stock and the subsequent
Spin-Off. The IPO of Resources was completed on October 16 and 17, 1995 and the
Spin-Off is contingent upon certain conditions. In addition, the Spin-Off will
not occur prior to the earlier of the termination of the Amended Merger
Agreement or consummation of the Merger. See 'THE COMPANIES--Resources
Spin-Off.' In addition, the historical financial statements reflect a
contractual reallocation of Resources pension asset amounts which have been
determined in accordance with generally accepted accounting principles. The pro
forma adjustments include the amount of pension assets transferred to Resources
from UP.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
--------------------------------------- ---------------------------------------
AT OR FOR THE AT OR FOR THE
THREE MONTHS AT OR FOR THE THREE MONTHS AT OR FOR THE
ENDED YEAR ENDED ENDED YEAR ENDED
MARCH 31, 1996 DECEMBER 31, 1995 MARCH 31, 1996 DECEMBER 31, 1995
------------------ ----------------- ------------------ -----------------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues....... $ 389 $ 1,456 $ 389 $ 1,456
Operating income......... 97 470 95 455
Net income............... 59 351 58 311
PER SHARE DATA:
Net income............... $ 0.24 N/A $ 0.23 $ 1.25
BALANCE SHEET DATA:
Total assets............. $3,228 N/A $3,214 N/A
Total debt............... 579 N/A 579 N/A
Stockholders' equity..... 1,361 N/A 1,305 N/A
</TABLE>
See 'UNAUDITED PRO FORMA FINANCIAL STATEMENTS OF RESOURCES.'
22
<PAGE>
INTRODUCTION
This Joint Proxy Statement/Prospectus is being furnished to the
stockholders of Southern Pacific Rail Corporation, a Delaware corporation
('SP'), in connection with the solicitation of proxies by the Board of Directors
of SP for use at the special meeting of stockholders of SP to be held at the
Mandarin Oriental Hotel, 222 Sansome Street, San Francisco, California on August
16, 1996 at 10 a.m., local time (the 'Special Meeting'), and at any adjournments
or postponements thereof.
At the Special Meeting, the stockholders of SP will be asked to consider
the proposed merger of SP with and into either (i) Union Pacific Railroad
Company ('UPRR'), a Utah corporation and a wholly owned subsidiary of Union
Pacific Corporation, a Utah corporation ('UP') (the 'Original Merger'), or (ii)
Newco (as defined below) (the 'Alternative Merger' and, alternatively with the
Original Merger, the 'Merger') pursuant to the Amended and Restated Agreement
and Plan of Merger, dated as of July 12, 1996 (the 'Amended Merger Agreement'),
by and among UP, UPRR, UP Holding Company, Inc., a Utah corporation and a wholly
owned subsidiary of UP ('Holding'), Union Pacific Merger Co., a Delaware
corporation and a wholly owned subsidiary of UP ('Mergerco'), and SP. The
Amended Merger Agreement amends and restates in its entirety the Agreement and
Plan of Merger, dated as of August 3, 1995, as amended (the 'Original Merger
Agreement'), by and among SP, UP, UPRR and UP Acquisition Corporation, a former
Delaware corporation and indirect wholly owned subsidiary of UP, that was
approved and adopted by the SP stockholders at a special meeting of SP
stockholders on January 17, 1996. The Original Merger Agreement will remain in
effect, and the Amended Merger Agreement will not be effective, until the SP
stockholders approve the Amended Merger Agreement. References herein to 'Newco'
shall mean either or both of Holding and/or Mergerco, as the context may
require.
If the Merger is consummated, each share of common stock, par value $.001
per share (the 'Shares') of SP (other than Shares owned by SP as treasury stock
and Shares that are owned by UP or any direct or indirect wholly owned
subsidiary of UP, which Shares will be cancelled and retired at the Effective
Time (as defined herein)) shall be converted, at the election of the holder,
subject to proration and the limitations described herein, into the right to
receive (i) .4065 shares of common stock of UP ('UP Common Stock'), par value
$2.50 per share (the 'Stock Consideration'), (ii) $25.00 in cash, without
interest thereon (the 'Cash Consideration'), or (iii) a combination thereof. The
aggregate number of Shares to be converted into the right to receive UP Common
Stock in the Merger pursuant to the Amended Merger Agreement will be equal as
nearly as practicable to 60% of all outstanding Shares at the time of the
Merger; and the aggregate number of Shares to be converted into the right to
receive the Cash Consideration in the Merger pursuant to the Amended Merger
Agreement, together with the 39,034,471 Shares acquired by UP Acquisition (the
'Acquired Shares') pursuant to UP Acquisition's previously completed tender
offer to purchase up to 39,034,471 Shares at a price of $25.00 per Share, net to
the seller in cash, without interest thereon (the 'Offer'), will be equal as
nearly as practicable to 40% of all outstanding Shares at the time of the
Merger. Accordingly, of the Shares outstanding immediately prior to the Merger
(other than the Acquired Shares), 20% of such Shares will be acquired for cash
and 80% of such Shares will be acquired in exchange for shares of UP Common
Stock. On July 15, 1996, the closing price of UP Common Stock on the New York
York Stock Exchange, Inc. ('NYSE'), was $68.50 per share. Accordingly, the
market value of .4065 shares of UP Common Stock, based on such closing price,
was $27.85. THE MARKET VALUE OF THE UP COMMON STOCK AFTER THE EFFECTIVE TIME (AS
DEFINED HEREIN) WILL, AMONG OTHER THINGS, DEPEND UPON, AND IS EXPECTED TO
FLUCTUATE WITH, THE PERFORMANCE OF UP, WHETHER OR NOT THE SPIN-OFF (AS DEFINED
HEREIN) OCCURS, CONDITIONS (ECONOMIC OR OTHERWISE) AFFECTING THE RAILROAD,
TRUCKING AND OIL AND GAS INDUSTRIES, AND MARKET CONDITIONS AND OTHER FACTORS
THAT GENERALLY INFLUENCE PRICES OF SECURITIES. MOREOVER, THERE CAN BE NO
ASSURANCE THAT AT OR AFTER THE EFFECTIVE TIME THE MARKET VALUE OF THE STOCK
CONSIDERATION AND THE CASH CONSIDERATION TO BE RECEIVED IN THE MERGER WILL BE
EQUAL. BECAUSE THE TAX CONSEQUENCES OF RECEIVING CASH OR UP COMMON STOCK WILL
DIFFER, SP STOCKHOLDERS ARE URGED TO READ CAREFULLY THE INFORMATION SET FORTH
UNDER THE CAPTION 'THE MERGER--CERTAIN FEDERAL INCOME TAX CONSEQUENCES.'
This Joint Proxy Statement/Prospectus also constitutes a prospectus of UP
with respect to up to 38,613,370 shares of UP Common Stock issuable to the
stockholders of SP in the Merger. It is a condition to SP's obligation to
consummate the Merger that such shares of UP Common Stock shall have been
approved for listing on the NYSE, subject to official notice of issuance. See
'DESCRIPTION OF UP CAPITAL STOCK.'
All information herein concerning UP Acquisition, UPRR, Resources, Newco
and UP has been furnished by UP and all information herein concerning SP has
been furnished by SP.
This Joint Proxy Statement/Prospectus and the accompanying form of proxy
are first being mailed to the stockholders of SP on or about July 17, 1996.
23
<PAGE>
THE SPECIAL MEETING
PURPOSE OF SPECIAL MEETING
This Joint Proxy Statement/Prospectus is being furnished in connection with
the solicitation of proxies by SP's Board of Directors for use at the Special
Meeting. The purpose of the Special Meeting is to consider and vote upon the
approval and adoption of the Amended Merger Agreement. In connection with the
Original Merger Agreement, SP held a Special Meeting of Stockholders on January
17, 1996 at which SP stockholders approved the Original Merger Agreement. SP is
convening the Special Meeting to approve and adopt the Amended Merger Agreement
that provides for the alternative structure by which SP may be merged with and
into Newco.
THE BOARD OF DIRECTORS OF SP HAS UNANIMOUSLY APPROVED THE AMENDED MERGER
AGREEMENT AND RECOMMENDS THAT ITS STOCKHOLDERS VOTE FOR THE APPROVAL AND
ADOPTION OF THE AMENDED MERGER AGREEMENT.
DATE, PLACE AND TIME
The Special Meeting will be held at the Mandarin Oriental Hotel, 222
Sansome Street, San Francisco, California on August 16, 1996, commencing at 10
a.m., local time.
RECORD DATE; QUORUM
The Board of Directors of SP has fixed the close of business on July 15,
1996 as the record date (the 'Record Date') for the determination of
stockholders of SP entitled to notice of, and to vote at, the Special Meeting.
As of the Record Date, there were issued and outstanding approximately
156,154,639 Shares entitled to vote at the Special Meeting. Each holder of
Shares outstanding on the Record Date is entitled to one vote for each Share so
held, exercisable in person or by properly executed and delivered proxy, at the
Special Meeting. The presence of the holders of at least a majority of the
Shares outstanding on the Record Date, whether present in person or by properly
executed and delivered proxy, will constitute a quorum for purposes of the
Special Meeting.
VOTES REQUIRED; PRINCIPAL STOCKHOLDERS
The affirmative vote of the holders of at least a majority of the
outstanding Shares entitled to vote at the Special Meeting is required to
approve and adopt the Amended Merger Agreement.
As of the Record Date, directors and executive officers of SP, and their
affiliates (other than the Anschutz Shareholders (as defined below) and MSLEF),
were beneficial owners of an aggregate of 48,442 Shares (approximately .03% of
the Shares then outstanding). The directors and executive officers of SP have
indicated that they intend to vote their Shares in favor of approval and
adoption of the Amended Merger Agreement. As described under 'SHAREHOLDER
AGREEMENTS--Amended Anschutz Shareholders Agreement' below, Mr. Philip F.
Anschutz, Chairman of SP, TAC (as defined below), an affiliate of Mr. Anschutz,
and the Foundation (as defined below) of which he is a director, are required to
vote the 40,322,612 Shares beneficially owned by them in favor of the approval
and adoption of the Amended Merger Agreement. Information concerning the
directors and executive officers of SP, their Share ownership and the Share
ownership of certain principal stockholders of SP is included in SP's Annual
Report on Form 10-K for the year ended December 31, 1995. See 'INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE.'
Pursuant to a Shareholders Agreement (the 'Amended Anschutz Shareholders
Agreement'), dated as of August 3, 1995, as amended and restated in its entirety
as of July 12, 1996, by and among UP, The Anschutz Corporation, a Kansas
corporation ('TAC'), Anschutz Foundation, a Colorado not-for-profit corporation
(the 'Foundation'), and Mr. Philip F. Anschutz ('Mr. Anschutz' and, collectively
with TAC and the Foundation, the 'Anschutz Shareholders'), the Anschutz
Shareholders have agreed, among other things, to vote all Shares owned by them
in favor of the approval and adoption of the Amended Merger Agreement. As of the
Record Date, the Anschutz Shareholders beneficially owned 40,322,612 Shares,
representing approximately 25.8% of the outstanding Shares.
In addition, pursuant to a Shareholder Agreement (the 'Amended MSLEF
Shareholder Agreement'), dated as of August 3, 1995 as amended and restated in
its entirety as of July 12, 1996, by and between UP and MSLEF, MSLEF has agreed,
among other things, to vote all Shares owned by it in favor of the approval and
adoption of the
24
<PAGE>
Amended Merger Agreement. As of the Record Date, MSLEF owned 8,310,877 Shares,
representing approximately 5.3% of the outstanding Shares.
Similarly, pursuant to a Shareholders Agreement (the 'UP Shareholders
Agreement'), dated as of August 3, 1995 as amended and restated in its entirety
as of July 12, 1996, by and among UP, Mergerco and SP, UP and Mergerco have
agreed, among other things, to vote or cause to be voted all of the Acquired
Shares in the Offer in favor of the approval and adoption of the Amended Merger
Agreement.
In connection with the Offer, UP Acquisition deposited the Acquired Shares
into the Voting Trust (as defined herein). Pursuant to the Voting Trust
Agreement (as defined herein), the Trustee (as defined herein) has agreed to act
as trustee in respect of the Voting Trust. In such capacity, the Trustee is
required to vote all the Acquired Shares in favor of the approval and adoption
of the Merger and, so long as the Amended Merger Agreement is in effect, subject
to certain exceptions, against any other proposed merger, business combination
or similar transaction involving SP.
BECAUSE THE ANSCHUTZ SHAREHOLDERS AND MSLEF HAVE AGREED TO VOTE ALL OF
THEIR SHARES (REPRESENTING APPROXIMATELY 31.1% OF THE OUTSTANDING SHARES) IN
FAVOR OF THE MERGER AND HAVE GRANTED UP IRREVOCABLE PROXIES TO VOTE SUCH SHARES
IN FAVOR OF THE MERGER, AND BECAUSE THE TRUSTEE OF THE VOTING TRUST IS REQUIRED
TO VOTE ALL OF THE ACQUIRED SHARES DEPOSITED THEREIN (REPRESENTING APPROXIMATELY
25.0% OF THE OUTSTANDING SHARES) IN FAVOR OF THE MERGER, A VOTE IN FAVOR OF THE
APPROVAL AND ADOPTION OF THE AMENDED MERGER AGREEMENT IS ASSURED WITHOUT THE
VOTE OF ANY OTHER HOLDER OF SHARES.
PROXIES; VOTING AND REVOCATION
Each properly executed proxy received prior to the vote at the Special
Meeting will be voted in the manner directed therein by the holder of Shares. A
holder of Shares may vote by proxy if he or she is unable to attend the Special
Meeting in person, or wishes to have his or her Shares voted by proxy even if he
or she does attend the Special Meeting. IF A PROXY IS SUBMITTED BUT NO
DIRECTIONS ARE GIVEN THEREIN, SHARES OF COMMON STOCK REPRESENTED BY THE PROXY
WILL BE VOTED FOR THE APPROVAL AND ADOPTION OF THE AMENDED MERGER AGREEMENT.
Because the approval and adoption of the Amended Merger Agreement by
stockholders of SP requires the affirmative vote of a majority of the Shares
outstanding as of the Record Date, failures to submit a proxy, abstentions and
broker non-votes will have the same effect as a vote against approval of the
Amended Merger Agreement.
A proxy may be revoked by the person giving such proxy at any time before
it is exercised by (i) providing written notice of such revocation to the
Secretary of SP, (ii) submitting a proxy having a later date, or (iii) appearing
at the Special Meeting and voting in person.
OTHER MATTERS
SP's Board of Directors knows of no other matter that will be presented for
action at the Special Meeting. If, however, any other matter properly comes
before the Special Meeting, the persons named in the proxy or their substitutes
will vote thereon in accordance with their discretion.
SOLICITATION OF PROXIES
SP will pay the expenses of soliciting proxies from the holders of Shares.
This solicitation is being made by mail, telephone, telegram and other means of
communication. Officers and employees of SP may also take part in the
solicitation, but will not receive additional compensation for doing so other
than reimbursement of any out-of-pocket expenses incurred in connection
therewith. Arrangements will also be made with brokerage houses and other
custodians, nominees and fiduciaries for the forwarding of solicitation
materials to the beneficial owners of Shares held of record by such persons, and
SP will reimburse such custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses in connection therewith.
STOCKHOLDERS OF SP SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR PROXY
CARDS.
25
<PAGE>
THE MERGER
GENERAL
The Board of Directors of SP has unanimously approved the Amended Merger
Agreement, which provides for the Merger at the Effective Time. Pursuant to the
terms of the Amended Merger Agreement, subject to the satisfaction or waiver
(where permissible) of certain conditions, including, among other things, the
approval of the Merger by the STB and the requisite approval of the Amended
Merger Agreement by the holders of the Shares, UP will acquire SP through the
Merger of SP with and into either UPRR, pursuant to the Original Merger, or
Newco, pursuant to the Alternative Merger. As a result of the Merger, holders of
Shares will receive cash and/or will become holders of UP Common Stock and UPRR
or Newco, as the case may be, will be the surviving corporation (in the case of
the Original Merger the 'Original Surviving Corporation', and in the case of the
Alternative Merger, the 'Alternative Surviving Corporation', and alternatively
referred to herein as the 'Surviving Corporation'). In all cases, the Surviving
Corporation will be a wholly owned subsidiary of UP. In the event that all of
the conditions to the Alternative Merger and the Original Merger are satisfied,
UP and SP, at the sole election of UP, will consummate either the Alternative
Merger or the Original Merger; provided, however, that in the event that the
conditions to the Alternative Merger are not satisfied, the Original Merger,
previously approved by SP stockholders at the Special Meeting of stockholders of
SP held on January 17, 1996, will be consummated without delay, subject to the
satisfaction of the conditions thereto. See 'THE MERGER'; and 'THE AMENDED
MERGER AGREEMENT.' The Original Merger Agreement will remain in effect, and the
Amended Merger Agreement will not be effective, until the SP stockholders
approve the Amended Merger Agreement.
If the Merger is consummated, each Share (other than Shares owned by SP as
treasury stock and Shares that are owned by UP or any direct or indirect wholly
owned subsidiary of UP, which Shares will be cancelled and retired) at the
Effective Time shall be converted, at the election of the holder, subject to
proration and the limitations described herein, into the right to receive (i)
.4065 shares of UP Common Stock, (ii) the Cash Consideration or (iii) a
combination thereof. The aggregate number of Shares to be converted into the
right to receive UP Common Stock in the Merger pursuant to the Amended Merger
Agreement will be equal as nearly as practicable to 60% of all outstanding
Shares at the time of the Merger; and the aggregate of the number of Shares to
be converted into the right to receive the Cash Consideration in the Merger
pursuant to the Amended Merger Agreement, together with the Acquired Shares,
will be equal as nearly as practicable to 40% of all outstanding Shares at the
time of the Merger. See 'THE MERGER--Election Procedures' and 'THE AMENDED
MERGER AGREEMENT--Conversion of Shares.' Accordingly, of the Shares outstanding
immediately prior to the Merger (other than the Acquired Shares), 20% of such
Shares will be acquired for cash and 80% of such Shares will be acquired in
exchange for shares of UP Common Stock.
The Board of Directors of SP believes that the terms of the Amended Merger
Agreement are fair to, and in the best interests of, SP and its stockholders and
unanimously recommends that the stockholders of SP vote to approve and adopt the
Amended Merger Agreement and the transactions contemplated thereby. Neither SP
nor the SP Board makes any recommendation as to whether stockholders should
elect to receive the Cash Consideration or Stock Consideration in the Merger.
Each stockholder must make his or her own decision with respect to such
election.
BACKGROUND OF THE MERGER
In the ordinary course of UP's long-term strategic review process, UP and
UPRR routinely analyze potential combinations with various railroad companies.
Beginning in mid-1994, certain senior officers of UP and SP had occasional,
informal discussions regarding the possibility and desirability of an
acquisition of SP by UP and other possible transactions. On September 8, 1994,
UP and SP entered into a confidentiality agreement in connection with these
discussions, but the discussions terminated later in September 1994.
In late February 1995 and continuing through mid-April 1995, certain senior
officers and directors of UP and SP had a number of meetings and telephone
conversations to discuss, on a preliminary basis, a possible acquisition of SP
by UP. In connection with such preliminary discussions, on April 8, 1995, UP's
legal counsel provided to SP and its legal counsel a draft merger agreement. No
negotiations were ever conducted concerning such draft agreement. In mid-April
1995, UP and SP discontinued discussions concerning a possible transaction due
to an inability to reach agreement on the structure and terms thereof.
26
<PAGE>
Discussions and meetings concerning a possible transaction resumed in late
June 1995 among certain senior officers of UP and SP. At a meeting on July 17,
1995, senior officers of UP and SP established a preliminary basis for
continuing discussions to seek to reach an agreement concerning a transaction
and for proceeding with a due diligence review. Such officers of UP and SP
determined to continue discussions on the basis of the following tentative
terms, among others: UP would acquire up to 25% of the outstanding Shares in a
cash tender offer at $25.00 per Share and, following receipt of STB approval and
the satisfaction of other conditions, would acquire the remaining Shares in a
'cash election' merger in which stockholders of SP would receive, at their
election, for each Share, cash consideration of $25.00, or a fraction of a share
of UP Common Stock determined by dividing $25.00 by the average closing price of
UP Common Stock prior to the merger (subject to a pricing 'collar' mechanism
which would result in not more than .4464 shares of UP Common Stock nor less
than .4065 shares being issued per Share). In such transaction, 60% of the
Shares would be converted into UP Common Stock and the remaining 40% into cash,
including the Shares to be acquired in the tender offer.
At the July 17, 1995 meeting, UP indicated to Mr. Anschutz that its
willingness to continue discussions was conditioned upon, among other things,
the willingness of the Anschutz Shareholders and MSLEF to consider agreeing to
vote their Shares, representing at such time approximately 31.8% and 8.5%,
respectively, of the outstanding Shares, in favor of the merger. Mr. Anschutz
indicated that the Anschutz Shareholders would be willing to consider such an
agreement if SP and UP could negotiate satisfactory terms for a transaction, and
provided that satisfactory terms concerning an agreement between the Anschutz
Shareholders and UP could be negotiated. Subsequently, UP was advised that MSLEF
also would be willing to consider an agreement to vote its Shares in favor of
the merger if SP and UP could negotiate satisfactory terms for a transaction,
and subject to MSLEF's negotiation of satisfactory terms of an agreement with
UP.
Management of UP and SP each conditioned their willingness to continue
discussions concerning a possible transaction upon, among other things, the
negotiation of satisfactory terms and the negotiation and execution of
definitive transaction agreements, a satisfactory due diligence review, and the
approval of their respective Boards of Directors. SP also indicated to UP that
its willingness to continue discussions was conditioned upon the willingness of
UP to enter into an appropriate agreement restricting voting, additional
acquisitions and dispositions of Shares to be purchased by UP in the Offer.
Following the July 17, 1995 meeting, extensive due diligence was conducted
by SP, UP and their respective legal, financial and accounting advisors. In
addition, senior officers of SP and UP and their respective counsel met and
talked regularly to negotiate the terms of the transaction and the definitive
agreements providing for the transaction, and senior officers of UP and its
counsel negotiated with the Anschutz Shareholders, MSLEF and their respective
counsel the terms of their transactions and the definitive agreements therefor.
On July 21, 1995, at a special telephonic meeting of UP's Board of
Directors (the 'UP Board'), UP's management and financial and legal advisors
reviewed with the UP Board the status of discussions with SP and various
strategic, financial and legal considerations concerning a possible transaction
with SP. No decision was reached by the UP Board, but it was the consensus of
directors that management and UP's advisors should continue discussions with SP
concerning a possible transaction.
On July 27, 1995, at a regularly scheduled meeting, the UP Board analyzed
and reviewed, with UP's management and financial and legal advisors, among other
things, various strategic, financial and legal considerations concerning a
possible transaction with SP, the potential terms of a transaction and the
status of negotiations. (At several earlier meetings, the UP Board had reviewed
the strategic considerations and other issues, as well as the status of any
discussions then being conducted, regarding such an acquisition.) At the July 27
meeting, UP's management and financial and legal advisors made presentations to
the UP Board concerning various aspects of the possible transaction. No decision
was reached by the UP Board at the meeting, but it was the consensus of
directors that management and UP's advisors should continue to negotiate with SP
and report back to the UP Board once management was prepared to make a
recommendation. At its July 27, 1995 meeting, the UP Board approved the IPO.
Following the meeting, UP issued a press release announcing the IPO.
On July 27, 1995, at a regularly scheduled meeting, the Board of Directors
of SP (the 'SP Board') analyzed and reviewed, with SP's management and financial
and legal advisors, among other things, various strategic, financial and legal
considerations concerning a possible transaction with UP, the potential terms of
a transaction and the status of negotiations. At the July 27 meeting, SP's
management and financial and legal advisors made presentations to the SP Board
concerning various aspects of the possible transaction. No decision
27
<PAGE>
was reached by the SP Board at the meeting, but it was the consensus of
directors that management and SP's advisors should continue to negotiate with UP
and report back to the SP Board once SP's management was prepared to make a
recommendation.
On August 2, 1995, senior officers of UP and SP met and had various
telephone conversations to discuss the progress of the negotiations to date,
certain issues between the parties that had not been resolved, and the results
of due diligence. With respect to the proposed pricing for the transaction, the
parties agreed to a fixed exchange ratio of .4065 shares of UP Common Stock per
Share for the stock portion of the purchase price, in place of the previously
discussed 'floating' exchange ratio with a pricing 'collar'.
On August 3, 1995, the UP Board held a special telephonic meeting to
review, with the advice and assistance of the UP Board's financial and legal
advisors, the proposed Original Merger Agreement and certain ancillary
agreements (including the Anschutz Shareholders Agreement, the UP Shareholders
Agreement and the MSLEF Shareholder Agreement in their original forms prior to
amendment) and the transactions contemplated thereby, including the Offer and
Original Merger. At such meeting, UP's management and financial and legal
advisors made presentations to the UP Board concerning the transaction, and UP's
financial advisor, CS First Boston Corporation ('CS First Boston'), rendered to
the UP Board an oral opinion (which was subsequently confirmed in writing) to
the effect that, as of such date, the consideration to be paid by UP in the
Offer and the Original Merger, taken together, was fair to UP from a financial
point of view. Following the UP Board's review of the transaction, the UP Board
unanimously approved (with three directors absent and one director abstaining
because of an affiliation with Morgan Stanley (as defined herein), the financial
advisor to SP in connection with the transaction and an affiliate of MSLEF, a
party to the MSLEF Shareholder Agreement in its capacity as a stockholder of SP)
the proposed Original Merger Agreement, and certain ancillary agreements
(including the Anschutz Shareholders Agreement, the UP Shareholders Agreement
and the MSLEF Shareholder Agreement in their original forms prior to amendment)
and the transactions contemplated thereby, and authorized, subject to completion
of negotiation of a limited number of remaining issues, the execution and
delivery of such agreements.
Also on August 3, 1995, the SP Board held a special meeting to review, with
the advice and assistance of the SP Board's financial and legal advisors, the
proposed Original Merger Agreement and Ancillary Agreements and the transactions
contemplated thereby, including the Offer and Original Merger. At such meeting,
SP's management and financial and legal advisors made presentations to the SP
Board concerning the transaction and SP's financial advisor, Morgan Stanley &
Co. Incorporated ('Morgan Stanley'), provided an oral opinion (which was
subsequently confirmed in writing) that on the date of the Original Merger
Agreement the consideration to be received by the holders of Shares pursuant to
the Offer and the Original Merger, taken together, is fair from a financial
point of view to such holders. Following the SP Board's review of the
transaction, the SP Board unanimously approved the proposed Original Merger
Agreement and certain ancillary agreements and the transactions contemplated
thereby, authorized (subject to completion of negotiation of a limited number of
remaining issues) the execution and delivery of such agreements, determined that
the Offer and the Original Merger are fair to, and in the best interests of, the
holders of Shares, recommended that stockholders of SP who desire to receive
cash for their Shares accept the Offer and tender their Shares pursuant to the
Offer, and recommended that stockholders of SP approve and adopt the Original
Merger Agreement. The SP Board's approval of the Original Merger Agreement and
certain ancillary agreements and the transactions contemplated thereby
constituted approval for purposes of Section 203 of the Delaware General
Corporation Law ('DGCL') such that the provisions of the statute are not
applicable to such agreements, the Original Merger Agreement or the transactions
contemplated thereby (see 'OTHER LEGAL MATTERS; REGULATORY APPROVAL--State
Takeover Statutes').
Following the August 3, 1995 UP and SP Board meetings described above, the
following joint press release was issued:
BETHLEHEM, PA, Aug. 3--Union Pacific Corporation (NYSE: UNP) and
Southern Pacific Rail Corporation (NYSE: RSP) announced today that they
have reached an agreement providing for the merger of Southern Pacific with
Union Pacific. The $5.4 billion transaction would form North America's
largest railroad, a 34,000-mile network operating in 25 states and serving
both Mexico and Canada. The two railroad companies had combined 1994
operating revenues of $9.54 billion.
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The agreement, approved today by the Boards of Directors of Union
Pacific and Southern Pacific, is subject to execution of a definitive
merger agreement, which is expected to be signed very shortly. Under terms
of the agreement, Union Pacific would make a first-step cash tender offer
of $25.00 a share for up to 25 percent of the Common Stock of Southern
Pacific. The tender offer would commence next week. The shares purchased in
the tender offer will be held in a voting trust. Following completion of
the offer, and the satisfaction of other conditions, including approval by
the Interstate Commerce Commission (ICC), Southern Pacific will be merged
with Union Pacific Corporation. Upon completing the transaction, each share
of Southern Pacific stock will be converted, at the holder's election
(subject to proration), into the right to receive $25.00 in cash or .4065
shares of Union Pacific Common Stock. As a result of the transaction, 60
percent of Southern Pacific shares will be converted into Union Pacific
stock and the remaining 40 percent into cash, including the shares acquired
in the original tender offer. The two companies expect to file an
application with the ICC no later than December 1.
Union Pacific also stated that the previously announced spin-off of
Union Pacific Resources would be consummated after completion of the
transaction. The initial public offering of shares of Union Pacific
Resources will proceed as scheduled.
In connection with the merger, Philip Anschutz, a major shareholder of
Southern Pacific, will be appointed non-executive Vice Chairman of the
Board of Directors of Union Pacific following completion of the transaction
and will enter into a customary seven-year standstill agreement. In
addition, Mr. Anschutz, who owns 31 percent of Southern Pacific, and the
Morgan Stanley Leveraged Equity Fund, which owns seven percent of Southern
Pacific, have agreed to vote their shares in favor of the transaction.
'When completed, this transaction will deliver major benefits for
customers,' said Drew Lewis, Union Pacific's Chairman and Chief Executive
Officer. 'The combined system will be able to offer new services that
neither Union Pacific nor Southern Pacific can offer on its own. The new
system will yield extensive new single-line service, faster schedules, more
frequent and reliable service, shorter routes and improved equipment
utilization. Benefits from operating efficiencies, facility consolidations,
cost savings and increased traffic are estimated to be in excess of $500
million per year.'
During the afternoon and evening of August 3, 1995, senior officers of SP
and UP, Mr. Anschutz and MSLEF and their respective counsel resolved all
remaining issues to the mutual satisfaction of the parties, and the Original
Merger Agreement and certain ancillary agreements were executed and delivered by
all parties thereto.
Prior to the commencement of trading on the morning of August 4, 1995, UP
issued the following press release:
BETHLEHEM, PA, Aug. 4--Union Pacific Corporation (NYSE: UNP) announced
today that it has executed a definitive merger agreement for the previously
announced merger with Southern Pacific Rail Corporation (NYSE: RSP). Under
the terms of the agreement, Union Pacific will make a first-step cash
tender offer of $25.00 per share for up to 25 percent of the Common Stock
of Southern Pacific. Following completion of the transaction, each share of
Southern Pacific stock will be converted, subject to proration, into the
right to receive $25.00 in cash or .4065 shares of Union Pacific Common
Stock. As a result of the transaction, 60 percent of Southern Pacific's
shares will be converted into Union Pacific stock and the remaining 40
percent, including the shares acquired in the original tender offer, will
be converted into cash.
The Merger is subject to receipt of Interstate Commerce Commission
(ICC) approval and other customary conditions.
On August 9, 1995, UP and the UP Acquisition commenced the Offer, and UP
issued the following press release:
BETHLEHEM, PA, August 9, 1995--Union Pacific Corporation (NYSE: UNP)
announced today that UP Acquisition Corporation, its indirect wholly owned
subsidiary, will commence today a cash tender offer for up to 25 percent of
the Common Stock of Southern Pacific Rail Corporation (NYSE: RSP) at a
price of $25.00 per share. The tender offer is scheduled to expire at
midnight on Wednesday, September 6, 1995.
The Offer is being made as the first step of the acquisition of
Southern Pacific pursuant to the previously announced merger agreement
between Union Pacific and Southern Pacific.
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On August 9, 1995, SP filed its Schedule 14D-9 Solicitation/Recommendation
Statement recommending that holders of Shares who desire to receive cash in
connection with the Original Merger and the transactions contemplated thereby
tender their Shares in the Offer.
On August 9, 1995, UP issued the following press release:
BETHLEHEM, PA, August 9--Union Pacific Corporation (NYSE: UNP)
announced today that its counsel was orally advised by the Premerger
Notification Office of the Federal Trade Commission that its previously
announced tender offer for common stock of Southern Pacific Rail
Corporation (NYSE: RSP) and related merger are exempt from the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR). Accordingly,
Union Pacific currently expects that the condition to its tender offer
concerning HSR review will be satisfied.
On August 17, 1995, UP's counsel received written confirmation from the
Federal Trade Commission that the Offer and Merger are exempt from the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the 'HSR
Act').
On August 24, 1995, counsel for UP received an informal written opinion
from the staff of the ICC that the Voting Trust will effectively insulate UP and
its affiliates from the violation of the Interstate Commerce Act and ICC policy
that would result from an unauthorized acquisition by UP of control of SP.
On September 6, 1995, the Offer expired and on September 7, 1995, pursuant
to the Offer, UP Acquisition accepted for payment (subject to proration)
39,034,471 Shares validly tendered according to the terms of the Offer and
simultaneously deposited such Shares into the Voting Trust.
On September 15, 1995, UP Acquisition purchased the Acquired Shares.
In a decision served on October 19, 1995, the ICC adopted a 255-day
procedural schedule following the filing of the STB Application for
consideration of the approval of the Merger.
On November 30, 1995, UP, SP and various of their affiliates filed the STB
Application for approval of the Merger.
On January 17, 1996, SP held a Special Meeting of stockholders at which the
SP stockholders approved the Original Merger Agreement.
Since the filing of the STB Application, the STB received evidentiary
submissions and briefs in connection with the proposed Merger. The STB heard
oral arguments on the proposed Merger on July 1, 1996 and the STB held a voting
conference on the proposed Merger on July 3, 1996. At the voting conference, the
STB announced the following decision: to approve the Merger subject to a number
of conditions, principally (a) a settlement agreement between UP/SP and
Burlington Northern Railroad Company and The Atchison, Topeka and Sante Fe
Railroad Company (collectively, 'BNSF') under which BNSF will receive trackage
rights over more than 4,000 miles of UP/SP track and will purchase over 300
miles of UP/SP lines, augmented in a number of ways to expand BNSF's ability to
gain access to traffic (e.g., through transloading facilities (facilities where
goods are transferred between trucks and railcars) and build-ins of rail lines
to exclusively-served customers, through serving new shipper facilities on the
lines over which it will have trackage rights, and through opening to BNSF 50%
of all traffic now committed under contracts to UP or SP by shippers served by
UP and SP and no other railroad), (b) a settlement agreement between UP/SP and
the Chemical Manufacturers Association which provides certain additional
protections to shippers, (c) a settlement agreement between UP/SP and Utah
Railway Company ('Utah Railway') under which Utah Railway will receive access to
certain coal mines and loading facilities in Utah and trackage rights over SP
from Utah Railway's line in Utah to Grand Junction, Colorado, (d) the grant of
trackage rights to the Texas Mexican Railway ('Tex Mex') over UP/SP lines
between Corpus Christi/Robstown, Texas, and Beaumont, Texas, via Houston, Texas,
restricted to traffic moving on Tex Mex's Laredo-Corpus Christi/Robstown line,
including terminal-area trackage rights in Houston, (e) environmental mitigation
conditions, including a condition restricting increases in train volumes through
Reno, Nevada, and Wichita, Kansas, for 18 months following the Merger while a
consultant conducts a study of possible measures to reduce the potential adverse
impact of increased rail traffic through those communities and the STB decides
upon such measures, (f) standard labor protective conditions, and (g) a 5-year
oversight process, pursuant to which the STB will review whether the conditions
imposed on the Merger have effectively addressed competitive issues. A final
written STB decision regarding the proposed Merger is expected by August 12,
1996. If, as expected, the
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written decision does not contain terms materially different from those voted
upon by the STB on July 3, 1996, UP has indicated that it expects to proceed
with the transaction in accordance with and subject to the terms and conditions
of the Amended Merger Agreement.
On June 25, 1996, UP Acquisition was merged with and into UPRR, with UPRR
as the surviving corporation.
In order to maximize, on a tax-efficient basis, UP's flexibility in
improving customer relations, achieving additional service improvements and
increasing operating efficiencies after the Merger, with respect to its various
railroad operations, while maintaining the same tax consequences of the Merger
to SP stockholders, UP, UPRR and SP determined it was advisable to provide for
the Alternative Merger by which SP could be merged with and into Newco.
Accordingly, on July 12, 1996, the parties executed the Amended Merger
Agreement.
RECOMMENDATION OF THE SP BOARD OF DIRECTORS; REASONS FOR THE MERGER
At a special meeting held on August 3, 1995, the SP Board unanimously (i)
determined that the terms of the Offer and the Original Merger are fair to, and
in the best interests of, SP and its stockholders and (ii) approved the Original
Merger Agreement, the Ancillary Agreements and the transactions contemplated
thereby and recommended approval and adoption thereof by the stockholders of SP.
In reaching these determinations, the SP Board consulted with management of SP,
as well as its financial and legal advisors.
The SP Board and SP's senior management have continually reviewed the
current and future state of SP's strategic position and its short-term and
long-term prospects, including alternatives to remaining an independent company.
Early in 1995, following UP's announcement that it would not pursue a
business combination involving Santa Fe Pacific Corporation ('Santa Fe'), SP's
management concluded that the proposed merger of Burlington Northern Inc. and
Santa Fe was likely to be consummated in 1995. In light of this development,
SP's management again reviewed SP's business and prospects and SP's expected
future competitive situation. In connection with that review, SP's management
considered possible business combinations with UP and other entities in the
transportation industry. Following that review, SP's management concluded that a
business combination with UP was likely to be more advantageous to SP and its
stockholders than any other business combination.
In light of, among other things, the review described in the immediately
preceding paragraph, the SP Board determined that it would be in the best
interests of SP and its stockholders to approve the Original Merger Agreement
and the transactions contemplated thereby. In approving the Original Merger
Agreement and the transactions contemplated thereby, the SP Board considered a
number of factors, including, but not limited to, the following:
(i) the presentations by management of SP (at SP Board meetings on
July 27, and August 3, 1995 and at previous SP Board meetings) regarding
the financial condition, results of operations, business and prospects of
SP, including the prospects of SP if it remains independent and the
recommendation of the Merger by management of SP;
(ii) the strategic fit between SP and UP offers the opportunity for
substantial synergies and the transaction structure allows SP stockholders
who receive the Merger Consideration in the form of UP Common Stock to
participate in these synergies through continued ownership of the combined
company;
(iii) the uncertainties in the railroad industry, the likelihood of
continued consolidation in the industry and the possibility that changes in
the industry, depending on their nature, could be disadvantageous to SP. In
this regard, the SP Board and the management of SP believe that the
combined company, through increased competitiveness and financial strength,
would be better able to respond to the changes in the industry and to take
advantage of the opportunities that such changes might bring;
(iv) the Original Merger provides the opportunity to SP stockholders
who receive UP Common Stock in the Original Merger to participate in the
potential benefits of the proposed Spin-Off (as defined herein) of
Resources;
(v) information provided by Morgan Stanley at the July 27, and August
3, 1995 SP Board meetings and the August 3, 1995 opinion of Morgan Stanley
to the effect that, as of the date of the opinion, the Offer Consideration
and the Merger Consideration to be received by SP's stockholders pursuant
to the Offer and
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the Original Merger, taken together, are fair from a financial point of
view to SP's stockholders. The full text of the opinion of Morgan Stanley,
which sets forth the procedures followed, the factors considered and the
assumptions made by Morgan Stanley, is attached hereto as Annex C to this
Joint Proxy Statement/Prospectus and is incorporated herein by reference.
STOCKHOLDERS ARE URGED TO READ THE OPINION OF MORGAN STANLEY CAREFULLY AND
IN ITS ENTIRETY. See also '--Opinion of SP's Financial Advisor' below;
(vi) the historical trading prices of the Shares and that the $25.00
per Share to be paid in the Offer and as the Cash Consideration in the
Original Merger represents a premium of approximately 33.7% over the $18.70
average closing sale price for the Shares on the NYSE for the 20 business
days prior to the announcement of the Original Merger and the transactions
contemplated thereby;
(vii) the expected future trading values of the Shares in light of,
among other things, the historical trading multiples of other United States
railroad companies;
(viii) the opportunity for SP stockholders to receive UP Common Stock
in an exchange that is tax-free for federal income tax purposes (except to
the extent of any cash received) and thus continue to participate in the
growth of the combined business and in the potential appreciation in the
value of UP Common Stock without paying current United States federal
income tax on the receipt of their UP Common Stock;
(ix) the terms and conditions of the Original Merger Agreement,
including the amount and form of the Merger Consideration, the parties'
representations, warranties, covenants and agreements, and the conditions
to their respective obligations set forth in the Original Merger Agreement;
(x) the uncertainties and length of time attendant to obtaining the
requisite STB approval; the SP Board also considered that the uncertainties
were alleviated significantly both by the terms of the Original Merger
Agreement, pursuant to which UP, UPRR and UP Acquisition are obligated to
proceed with the transaction even if the STB imposes conditions upon its
approval so long as such conditions do not change or disapprove of the
Merger Consideration or the transaction structure (which allowed the
stockholders who tendered their Shares in the Offer to receive a
substantial premium for 25% or more of their Shares prior to the receipt of
STB approval) or impose conditions which would materially and adversely
affect the long-term benefits expected to be received by UP from the
transactions contemplated by the Original Merger Agreement;
(xi) in light of a potentially lengthy STB approval process, a fixed
exchange ratio may prove disadvantageous if during such approval period the
shares of UP Common Stock were to decline in value;
(xii) the views expressed by management that there did not appear to
be any other party with which SP would be as good a strategic fit as UP,
and that it was unlikely that any other party would propose a transaction
that, taken as a whole, would be more favorable to SP and its stockholders;
and
(xiii) the Original Merger Agreement permitted the SP Board, in the
exercise of its fiduciary duties, at any time prior to the purchase of at
least 15% of the outstanding Shares pursuant to the Offer, to engage in
negotiations with or to furnish information to third parties in response to
unsolicited, written alternative acquisition proposals after the date of
the Original Merger Agreement and to terminate the Original Merger
Agreement in favor of a superior alternative acquisition proposal, and that
SP received no such alternative acquisition proposals.
The SP Board did not assign relative weights to the above factors or
determine that any factor was of particular importance. Rather, the SP Board
viewed its position and recommendations as being based on the totality of the
information presented to, and considered by, it.
The SP Board recognized that, while there can be no assurance as to the
level of growth or profits to be attained by SP in the future and there can be
no assurance that the requisite STB and other regulatory approvals for the
Original Merger will be obtained, the Original Merger and the transactions
contemplated thereby give SP's stockholders the opportunity to receive UP Common
Stock pursuant to the Original Merger and thereby participate in the synergies
expected to be created by the combination of SP with UP and the future growth
and profits of the combined company. See '--Estimated Synergies' below.
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It is expected that, if the Merger is not consummated, SP's current
management, under the general direction of the SP Board, will continue to manage
SP as an ongoing business.
At a special meeting held on June 27, 1996, the SP Board unanimously (i)
determined that the terms of the Amended Merger Agreement and Alternative Merger
are fair to, and in the best interests of, SP and its stockholders and (ii)
approved the Amended Merger Agreement, the Amended Stockholder Agreements and
the transactions contemplated thereby and recommended approval and adoption
thereof by the stockholders of SP. In reaching these determinations, the SP
Board consulted with management of SP, as well as its financial and legal
advisors.
THE SP BOARD HAS DETERMINED THAT THE AMENDMENT TO THE ORIGINAL MERGER
AGREEMENT WILL HAVE NO SUBSTANTIVE IMPACT ON SP STOCKHOLDERS. EXCEPT FOR THE UP
SUBSIDIARY WITH WHICH SP COULD BE MERGED (AND CONFORMING TECHNICAL CHANGES TO
THE ORIGINAL MERGER AGREEMENT), ALL ASPECTS OF THE MERGER, INCLUDING THE
CONSIDERATION TO BE PAID TO SP STOCKHOLDERS, THE ELECTION PROCEDURES WITH
RESPECT TO THE FORM OF CONSIDERATION (CASH OR UP COMMON STOCK) TO BE RECEIVED BY
SP STOCKHOLDERS AND THE INCOME TAX CONSEQUENCES OF THE MERGER TO SP
STOCKHOLDERS, REMAIN THE SAME AS DESCRIBED IN THE JOINT PROXY
STATEMENT/PROSPECTUS DATED DECEMBER 12, 1995 PREVIOUSLY DELIVERED TO SP
STOCKHOLDERS.
The reason for the alternative structure is to maximize UP's flexibility in
achieving additional service improvements and increasing operating efficiencies
after the Merger, with respect to its various railroad operations, while
maintaining the same tax consequences to SP stockholders described in the
previous proxy statement.
OPINION OF SP'S FINANCIAL ADVISOR
SP retained Morgan Stanley to act as SP's financial advisor in connection
with the Offer, the Merger and related matters based upon Morgan Stanley's
qualifications, expertise and reputation, as well as Morgan Stanley's prior
investment banking relationship and familiarity with SP. At the August 3, 1995
special meeting of the SP Board, Morgan Stanley rendered an oral opinion to the
SP Board that, as of such date, the Offer Consideration and the Merger
Consideration (collectively, the 'Consideration') to be received by the holders
of Shares pursuant to the Offer and the Original Merger, taken together, are
fair from a financial point of view to such holders. Morgan Stanley subsequently
confirmed its oral opinion by delivery of a written opinion dated August 3,
1995.
THE FULL TEXT OF MORGAN STANLEY'S OPINION, DATED AUGUST 3, 1995, WHICH SETS
FORTH, AMONG OTHER THINGS, ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS
CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS ANNEX C TO
THIS JOINT PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE.
SP'S STOCKHOLDERS ARE URGED TO READ THE MORGAN STANLEY OPINION IN ITS ENTIRETY.
MORGAN STANLEY'S OPINION ADDRESSES ONLY THE FAIRNESS OF THE CONSIDERATION FROM A
FINANCIAL POINT OF VIEW TO THE HOLDERS OF SHARES AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY HOLDER OF SHARES AS TO HOW TO VOTE AT THE SPECIAL MEETING.
THE SUMMARY OF THE OPINION OF MORGAN STANLEY SET FORTH IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF SUCH OPINION.
In connection with rendering its opinion dated August 3, 1995, Morgan
Stanley, among other things: (i) analyzed certain publicly available financial
statements and other information of SP and UP; (ii) reviewed certain internal
financial statements and other financial and operating data concerning SP and UP
prepared by the management of SP and UP, respectively; (iii) reviewed certain
financial projections for SP, including estimates of certain potential benefits
of the proposed business combination, prepared by the management of SP; (iv)
reviewed certain financial projections for UP prepared by the management of UP;
(v) discussed on a limited basis the past and current operations and financial
conditions and the prospects of SP and UP with senior executives of SP and UP,
respectively; (vi) reviewed the reported prices and trading activity for the
Shares and the UP Common Stock; (vii) compared the financial performance of SP
and the prices and trading activity of Shares with that of certain other
comparable publicly-traded companies and their securities; (viii) reviewed the
financial terms, to the extent publicly available, of certain comparable
acquisition transactions; (ix) discussed certain issues relating to the proposed
Spin-Off with senior executives of UP; (x) participated in discussions among
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representatives of SP, UP and their financial and legal advisors; (xi) reviewed
the Original Merger Agreement and certain related documents; and (xii) performed
such other analyses as it deemed appropriate.
In rendering its opinion, Morgan Stanley assumed and relied upon, without
independent verification, the accuracy and completeness of the information it
reviewed for purposes of its opinion. Morgan Stanley also assumed that the
financial projections, including the estimates of SP of certain potential
benefits of the proposed business combination, were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the future
financial performance of SP and UP, respectively. Morgan Stanley did not make an
independent valuation or appraisal of the assets or liabilities of SP or UP, nor
was it furnished with any such appraisal. Morgan Stanley's opinion was
necessarily based on economic, market and other conditions as in effect on, and
the information made available to it as of, the date thereof. In arriving at its
opinion, Morgan Stanley was not authorized to solicit, and did not solicit,
interest from any party with respect to the acquisition of SP or any of its
assets.
The following is a brief summary of the analyses performed by Morgan
Stanley and reviewed with the SP Board on July 27 and August 3, 1995 in
connection with Morgan Stanley's opinion to the SP Board:
SP Common Stock Performance. Morgan Stanley's analysis of the Share
performance consisted of: a historical analysis of closing prices and trading
volumes from January 1, 1994 to July 28, 1995; SP's indexed price performance
from January 1, 1994 to July 28, 1995 relative to the S&P 400 and relative to a
Comparable Index, which included Burlington Northern, Inc., Canadian Pacific,
Ltd., Conrail Inc., CSX Corp., Norfolk Southern Corp. and UP; and the high and
low prices in the twelve months ended July 28, 1995. The Shares have moved
closely with the Comparable Index since January 1994 and both the Shares and the
Comparable Index have been outperformed by the S&P 400 during the same period.
In the twelve months ended July 28, 1995, the Shares reached a high of $21.38
per Share and a low of $14.50 per Share. Morgan Stanley noted that the $25.00
per Share to be paid in the Offer and as the Cash Consideration in the Original
Merger represents a substantial premium to the trading prices of Shares over the
prior 12 months.
UP Common Stock Performance. Morgan Stanley's analysis of UP Common Stock
performance consisted of a historical analysis of: closing prices and trading
volumes from January 1, 1992 to July 28, 1995; UP's indexed price performance
from January 1, 1994 to July 28, 1995 relative to the S&P 400 and relative to a
Comparable Index, which included Burlington Northern, Inc., Canadian Pacific,
Ltd., Conrail Inc., CSX Corp., Norfolk Southern Corp. and SP; and the high and
low prices in the twelve months ended July 28, 1995. UP Common Stock has moved
closely with the Comparable Index since January, 1994 and both UP Common Stock
and the Comparable Index have been outperformed by the S&P 400 during the same
period. In the twelve months ended July 28, 1995, UP Common Stock reached a high
of $66.63 per share and a low of $43.75 per share. On July 28, 1995, the closing
price of UP Common Stock of $66.125 per share was at the high end of such range.
Comparable Company Analysis. Comparable company analysis ('Comparable
Company Analysis') examines a company's operating performance relative to a
group of publicly traded peers. Based on relative performance and outlook for a
company versus its peers, this analysis enables an implied unaffected market
trading value to be determined. Morgan Stanley analyzed the operating
performance of SP and UP relative to six North American railroad companies
deemed by Morgan Stanley to be reasonably comparable to SP and UP. These
companies are as follows: Burlington Northern, Inc., Canadian Pacific, Ltd.,
Conrail Inc., CSX Corp., Norfolk Southern Corp., and Santa Fe Pacific Corp.
(these six companies along with SP and UP constitute the 'Comparable
Companies'). Historical financial information used in connection with the ratios
provided below with respect to the Comparable Companies is as of the most recent
financial statements publicly available for each company as of August 3, 1995.
Morgan Stanley analyzed the relative performance and value for SP and UP by
comparing certain market trading statistics for SP and UP with the Comparable
Companies. Market information used in calculating the ratios provided below is
as of July 28, 1995. Among the market trading information considered in the
valuation analysis was market price to earnings per share ('EPS') estimates for
1995 and 1996 (which, for SP, were 23.8x and 14.0x, respectively, and for UP,
were 14.7x and 12.8x, respectively; the medians for the Comparable Companies
were 13.5x and 12.2x, respectively). EPS estimates for SP, UP and the Comparable
Companies were based on estimates provided by the Institutional Brokers Estimate
System ('IBES'). As a result of the foregoing
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procedures, Morgan Stanley noted that the multiples for SP and UP were generally
within the range of the multiples for the selected comparable companies.
No company utilized in the Comparable Companies analysis as a comparison is
identical to SP or UP. Accordingly, an analysis of the results of the foregoing
necessarily involves complex considerations and judgments concerning differences
in financial and operating characteristics of SP and UP and other factors that
could affect the public trading value of the Comparable Companies or company to
which they are being compared. Mathematical analysis (such as determining the
average or median) is not in itself a meaningful method of using comparable
company data.
Comparable Transaction Analysis. Morgan Stanley performed an analysis of
precedent transactions involving North American railroad companies in order to
obtain a valuation range for the Shares based upon selected merger and
acquisition transactions in the railroad industry. Multiples of aggregate value
(aggregate value equals the fully diluted equity value of the offer plus any
debt assumed less cash and option proceeds) to be received by the stockholders
of SP in the Original Merger to revenues, to earnings before interest, taxes,
depreciation and amortization ('EBITDA'), and to earnings before interest and
taxes ('EBIT') were compared with multiples paid in certain other merger and
acquisition transactions involving North American railroad companies from
December 28, 1987 through March 17, 1995. The comparison included a total of 13
transactions. The transactions included: UP and CNW; Illinois Central Corp. and
Kansas City Southern Industries, Inc. (terminated prior to closing); Burlington
Northern, Inc. and Santa Fe Pacific Corporation; Kansas City Southern Industries
Inc. and MidSouth Corp.; Wisconsin Central Transportation Corp. (Fox Valley and
Western) and Itel Corp. (Fox River Valley Railroad and Green Bay & Western
Railroad); Virginia Retirement Systems and Richmond, Fredericksburg & Potomac
Railroad System; CSX Corp. and Richmond, Fredericksburg & Potomac Railroad
System; Virginia Retirement System and CSC Corp. (RF&P Corp.); Canadian Pacific
Ltd. and Delaware & Hudson Railway Co., Canadian Pacific Ltd. and Soo Line
Corp.; Blackstone Capital Partners L.P. & Others and CNW; Prospect Group Inc.
and Illinois Central Transportation Co.; and Rio Grande Industries, Inc. and
Santa Fe (SP Transportation Company). Based on an analysis of those
transactions, a range of 1.3x to 1.8x last twelve months revenue, 7.5x to 9.0x
last twelve months EBITDA and 10.5x to 12.5x last twelve months EBIT were
applied to SP's corresponding financial statistics to suggest per Share equity
value ranges of $16.54 to $25.65, $13.93 to $18.67, and $13.89 to $18.40,
respectively. Morgan Stanley noted that the $25.00 per Share to be paid in the
Offer and as the Cash Consideration in the Original Merger would be at the high
end of this indicated valuation range.
No transaction utilized in the comparable transaction analysis is identical
to the Original Merger. Accordingly, an analysis of the results of the foregoing
necessarily involves complex considerations and judgments concerning differences
in financial and operating characteristics of SP and UP and other factors that
could affect the acquisition value of the companies to which they are being
compared. Mathematical analysis (such as determining the average or median) is
not itself a meaningful method of using comparable transaction data.
Discounted Cash Flow Analysis. Morgan Stanley performed a discounted cash
flow analysis to calculate a present value of the stand-alone unleveraged free
cash flows that SP and UP are expected to generate if SP and UP perform in
accordance with scenarios based upon certain financial forecasts prepared by the
managements of SP and UP, respectively (each a 'Management Case'). With respect
to UP, Morgan Stanley analyzed a second set of financial forecasts based upon
IBES earnings estimates and IBES projected earnings growth rates ('IBES Case').
To arrive at valuations of SP and UP projected cash flows, Morgan Stanley
discounted the estimated unleveraged free cash flows that resulted from the
aforementioned assumptions over a ten-year period ending with the 2005 calendar
year using a range of discount rates of 12.0% to 13.0%. Unleveraged free cash
flows were calculated as the after-tax operating earnings of SP and UP,
respectively, plus depreciation and amortization and other non-cash items, plus
(or minus) net changes in non-cash working capital, minus projected capital
expenditures. Morgan Stanley added to the present values of the cash flows the
terminal values of SP and UP, respectively, in the year 2005, and discounted the
terminal value back using the range of discount rates described above. The
terminal value was calculated using the perpetuity method, assuming a range of
perpetual growth rates of between 3% and 4% for SP and 4% to 5% for UP. Based on
this analysis, Morgan Stanley calculated per Share equity value of SP ranging
from $14.26 to $19.28 on a fully diluted basis. The per share equity values
calculated for UP ranged from $54.35 to $74.13 based on the Management Case and
$47.87 to $66.69 based on
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the IBES Case, in each case on a fully diluted basis. The per share equity value
ranges for SP and UP implied by the discounted cash flow methodology were
discussed with the SP Board as one means for considering the value of such
companies' unleveraged free operating cash flows.
Historical Exchange Ratio Analysis. Morgan Stanley analyzed the historical
exchange ratio between the Shares and UP Common Stock over several time periods.
For each time period selected, the high, average and low exchange ratios were
calculated. The time periods selected for analysis were as follows: January 1,
1994 to July 28, 1995, last one year, last six months, last 90 days, last 60
days, last 30 days, last 10 days and closing price on July 28, 1995 (for which
only one exchange ratio was calculated). The average exchange ratio for each
aforementioned time period was .348, .345, .318, .300, .299, .304, .317 and
.307, respectively. Morgan Stanley observed that the .4065 exchange ratio with
respect to the Stock Consideration reflected a substantial premium to the ratio
of UP to SP common stock prices over various periods during the previous 18
months.
Segment Trading Analysis. Another valuation methodology employed by Morgan
Stanley with respect to UP was an assessment of the fully distributed value of
UP's transportation operations (railroad and trucking) and its natural resources
operations following a 17.25% IPO of Resources Common Stock (as defined in 'THE
COMPANIES--Resources Spin-Off') and the Spin-Off of all remaining Resources
Common Stock. With respect to UP's transportation operations, Morgan Stanley
applied the Comparable Company analysis methodology described above in order to
estimate a fully distributed market trading value based upon the relative
operating performance of their respective railroad and trucking peers. With
respect to Resources, Morgan Stanley estimated a stand-alone value based upon
(i) a valuation of Resources' proved exploration and production reserves,
undeveloped acreage, minerals, gas plant operations, pipeline operations and
other assets, (ii) a multiple of 1994 EBITDA based upon relative operating
performance of its publicly traded industry peers, and (iii) a multiple of 1994
cash flow from operations based upon relative operating performance of its
publicly traded industry peers. In performing these analyses, Morgan Stanley
utilized historical financial data from UP's public filings and Resources'
published 1994 Financial and Operating Statistics, and pro forma financial
forecasts (1995-1999) provided by UP for its transportation and natural
resources operations. Such financial forecasts reflected the projected pro forma
impact of the IPO and Spin-Off.
Based upon Morgan Stanley's segment trading analysis, the equity value
calculated for the transportation operations ranged from $43.39 to $50.70 per UP
share and the equity value calculated for UP shareholders' post-IPO ownership
interest in Resources ranged from $15.98 to $20.01 per UP share (such Resources
values do not include the 17.25% stake in Resources assumed to be held by public
stockholders buying Resources Common Stock in the IPO). This analysis was
reviewed with the SP Board in order to allow the SP Board to consider the
potential trading value of the UP and Resources common stock which certain SP
stockholders would ultimately hold following the Spin-Off.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. Morgan
Stanley believes that its analyses must be considered as a whole and that
selecting portions of its analyses, without considering the entirety of the
analyses, would create an incomplete view of the process underlying its opinion.
In addition, Morgan Stanley may have given various analyses more or less weight
than other analyses, and may have deemed various assumptions more or less
probable than other assumptions, so that the ranges of valuations resulting for
any particular analysis described above should not be taken to be Morgan
Stanley's view of the actual value of SP.
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of SP and UP. The analyses
performed by Morgan Stanley are not necessarily indicative of actual values,
which may be significantly more or less favorable than suggested by such
analyses. Such analyses were prepared solely as a part of Morgan Stanley's
analysis of the fairness of the Consideration to the holders of Shares and were
reviewed with the SP Board in connection with the delivery of Morgan Stanley's
opinion dated August 3, 1995. The analyses do not purport to be appraisals or to
reflect the prices at which SP or UP might actually be sold. Because such
estimates are inherently subject to uncertainty, none of SP, Morgan Stanley or
any other person assumes responsibility for their accuracy. In addition, as
described above, Morgan Stanley's opinion and the information provided by it to
the SP Board were two of many factors taken into consideration by the SP Board
in making its determination to approve the Merger. Consequently, the Morgan
Stanley analyses described above
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should not be viewed as determinative of the SP Board's or SP management's
opinion with respect to the value of SP or of whether the SP Board or SP
management would have been willing to agree to different Consideration.
The SP Board retained Morgan Stanley based upon its experience and
expertise. Morgan Stanley is an internationally recognized investment banking
and advisory firm. Morgan Stanley, as part of its investment banking business,
is continually engaged in the valuation of businesses and securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for corporate and other purposes. Morgan Stanley is a
full service securities firm engaged in securities trading and brokerage
activities, as well as providing investment banking and financial advisory
services. In the ordinary course of its trading and brokerage activities, Morgan
Stanley or its affiliates may at any time hold long or short positions, and may
trade or otherwise effect transactions, for its own account or the accounts of
customers, in debt or equity securities of SP or UP. In the past, Morgan Stanley
and its affiliates have provided financial advisory and financing services to SP
and have received customary fees for the rendering of these services. Recent
services rendered by Morgan Stanley to SP include serving as lead underwriter
for the debt portion of three leveraged lease financings in 1994 and 1995 and as
a co-placement agent for the equity portions of a 1994 and a 1995 leveraged
lease financing. Additionally, Morgan Stanley co-managed SP's offering of 9 3/8%
Senior Notes due 2005 in August 1993, lead-managed SP's August 10, 1993 initial
public offering of common stock and lead-managed SP's February 23, 1994 and
August 4, 1994 secondary offerings of common stock. Since January 1, 1991,
Morgan Stanley has received aggregate fees and underwriting discounts of more
than $28 million from SP. In the past, Morgan Stanley has also provided
financial advisory and financing services to UP and has received its customary
fees for the rendering of such services. Recent services rendered by Morgan
Stanley to UP include serving as underwriter for the 1995 issuance of UP's 8.35%
Debentures due May 1, 2025, for which Morgan Stanley received underwriting fees
of $450,000 and as underwriter for UPRR in connection with the issuance of pass
through certificates representing interests in equipment trust certificates
issued to finance railroad equipment, for which Morgan Stanley received
underwriting fees of approximately $700,000.
MSLEF is a substantial stockholder of SP. The sole general partner of MSLEF
is Morgan Stanley Leveraged Equity Fund II, Inc. ('MSLEF II'), a wholly owned
subsidiary of Morgan Stanley Group Inc. Morgan Stanley is a wholly owned
subsidiary of Morgan Stanley Group Inc. Each of MSLEF II, Inc. and Morgan
Stanley Group Inc. may be deemed to have shared voting and dispositive power
with respect to the Shares held by MSLEF. As of the Record Date, MSLEF was the
record and beneficial owner of, and had the right to vote and to dispose of, an
aggregate of 8,310,877 Shares, representing approximately 5.3% of the then
outstanding Shares. Mr. Frank V. Sica, a member of the SP Board since October
1989, is a Managing Director of Morgan Stanley and a Vice Chairman and Director
of MSLEF II. In addition, Mr. Richard B. Cheney is a director of both UP and
Morgan Stanley Group Inc. and, as a UP director, abstained from voting with
respect to the Offer and Merger because of his position with Morgan Stanley
Group Inc.
The consideration to be received by the stockholders of SP pursuant to the
Original Merger was determined through negotiations between SP and UP and was
approved by the SP Board. Morgan Stanley provided advice to SP during the course
of such negotiations, but did not make a recommendation with respect to the
amount of the Consideration. Morgan Stanley has consented to the use in this
Joint Proxy Statement/Prospectus of its opinion dated August 3, 1995.
Morgan Stanley has been retained by SP to act as financial advisor to SP
with respect to the Offer, the Original Merger and matters arising in connection
therewith. Pursuant to a letter agreement dated November 7, 1994 (the
'Engagement Letter') between SP and Morgan Stanley, Morgan Stanley is entitled
to an advisory fee for its time and efforts on the engagement and an
announcement fee aggregating $4 million, of which $2 million was paid in August
1995 and the remaining $2 million was paid upon stockholder approval of the
Original Merger. SP has also agreed to pay Morgan Stanley a transaction fee
equal to the lesser of (x) $16 million and (y) 0.425% of the aggregate value of
the Consideration, against which the $4 million fee will be credited. Although
Morgan Stanley's actual fee will depend upon the price of UP Common Stock at the
Effective Time, based upon the $66.625 per share closing price of UP Common
Stock on December 11, 1995, the aggregate value of the Consideration would have
been approximately $4.3 billion and Morgan Stanley's transaction fee would have
been $16 million. Any amounts paid or payable to Morgan Stanley as advisory fees
or announcement fees will be credited against the transaction fee. SP has agreed
to reimburse Morgan Stanley for its out-of-pocket expenses, including reasonable
fees and expenses of its counsel, and to indemnify Morgan Stanley for
liabilities
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and expenses arising out of the Offer, the Original Merger and the transactions
in connection therewith, including liabilities under federal securities laws.
INTERESTS OF CERTAIN PERSONS
Certain members of SP's management and SP's Board of Directors may be
deemed to have certain interests in the Merger that are in addition to their
interests as stockholders of SP generally. SP's Board of Directors was aware of
these interests and considered them, among other matters, in approving the
Original Merger Agreement and the Amended Merger Agreement and the transactions
contemplated thereby.
Directorships and Officerships; Matters Related to Mr. Anschutz. The
Amended Anschutz Shareholders Agreement provides that after the Effective Time,
the UP Board will elect Mr. Anschutz (currently Chairman of SP), or another
designee reasonably acceptable to UP, as a director of UP's Board of Directors
and, if Mr. Anschutz is the designee, will appoint Mr. Anschutz as Vice Chairman
of the Board. The Amended Anschutz Shareholders Agreement also provides for
certain 'standstill' and other restrictions and limitations with respect to the
UP Common Stock to be acquired by Mr. Anschutz and his affiliates in the Merger.
See 'SHAREHOLDERS AGREEMENTS--Amended and Restated Anschutz Shareholders
Agreement.'
The Amended Anschutz/Resources Shareholders Agreement provides that
Resources will cause a designee of TAC (other than Mr. Anschutz or persons with
certain relationships to TAC) to be appointed as a director of Resources' Board
of Directors on or prior to the consummation of the Spin-Off. See 'SHAREHOLDERS
AGREEMENTS--Amended and Restated Anschutz/Resources Shareholders Agreement.'
TAC and the Foundation have been granted certain demand and 'piggy-back'
registration rights in respect of any disposition by them of the UP Common Stock
and Resources Common Stock to be acquired in the Merger and the Spin-Off,
respectively. These registration rights are substantially the same as
registration rights held by TAC and the Foundation with respect to the SP Shares
owned by them. All expenses associated with the registration of UP Common Stock
and Resources Common Stock pursuant to the exercise of demand or piggy-back
registration rights will be borne by UP and Resources, respectively, with the
exception of underwriting discounts and commissions and any expenses of TAC and
the Foundation in connection with such registration. In addition, each of UP and
Resources has agreed to provide, under certain circumstances, indemnification in
favor of TAC and the Foundation with respect to information contained in a
registration statement (except for information provided by TAC or the
Foundation). Similarly, TAC and the Foundation have agreed to provide, under
certain circumstances, indemnification in favor of UP or Resources, as the case
may be, with respect to information furnished by them to UP or Resources, as the
case may be, for use in a registration statement. See 'AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENTS.'
As of the Record Date, the Anschutz Shareholders beneficially owned
40,322,612 shares, representing approximately 25.8% of the then outstanding
Shares.
Resources' Relationship with the Anschutz Shareholders
As a result of the Merger and the Spin-Off, it is possible that the
Anschutz Shareholders may become significant shareholders in Resources
immediately after the Spin-Off. The size of the Anschutz Shareholders' holdings
of Resources Common Stock and the presence of a designee of the Anschutz
Shareholders elected to the Board of Directors of Resources may influence the
management and policies of Resources. Resources competes with TAC, an Anschutz
Shareholder engaged in oil and gas activities, in Colorado, Wyoming, Utah, the
Gulf of Mexico, southern Louisiana and southern Texas, and, accordingly, certain
conflicts of interest between Resources and the Anschutz Shareholders may arise
in the future relating to their past and ongoing relationship. Such conflicts
may arise in connection with Resources' efforts to acquire producing properties
and companies, pursue farm-ins and other exploration agreements and hire and
retain skilled industry personnel. In addition, Resources has been involved in
significant litigation with the Anschutz Shareholders, including TAC, and is
currently a party to pending arbitration.
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Interests of SP Directors and Executive Officers
Existing Employment Agreements. SP maintains employment agreements with a
number of executives, including Messrs. Davis, Starzel, Orris, Harvey, Matthews,
Parsons and Galardi. These agreements provide, among other things, for the
payment of certain severance and other benefits upon certain qualifying
terminations of the employment of such officers. If Mr. Davis' employment is
terminated other than for cause, or if Mr. Davis' title or duties have
substantially changed and he resigns prior to March 1, 1998, SP will be
obligated to make certain payments to him, including an amount equal to the
greater of $1,000,000 or 75% of the base pay he would have received had he
remained employed for the full period. If the employment of any of Messrs.
Starzel, Orris, Harvey and Matthews is terminated by SP other than for cause, or
if any of them should resign following certain changes in their employment
status (such as a change in their title or duties or a reduction in their
salary, or both), SP will be obligated to make certain payments, including an
amount equal to two times the respective annual base salaries in effect on the
date of employment termination. If the employment of Mr. Parsons is terminated
by SP other than for cause, SP will be obligated to make certain payments to
him, including an amount equal to his base salary between the date of
termination of employment and June 1, 1998. If the employment of Mr. Galardi is
terminated by SP other than for cause, or if he resigns following a reduction in
title or relocation other than to Denver or San Francisco, SP will be obligated
to make certain payments to him, including an amount equal to one year's base
salary. The base salary for 1996 for Mr. Davis and Mr. Orris is $600,000 and
$450,000, respectively, and $350,000 for each of Messrs. Starzel, Harvey,
Parsons and Matthews, with an increase of Mr. Matthews' annual base salary under
his employment agreement to $400,000 effective July 1, 1996.
The existing employment agreements with Messrs. Davis, Starzel, Matthews
and Parsons provide for certain home purchase loans (respectively in the amounts
of $600,000, $600,000, $300,000 plus the balance of Mr. Matthews' San Francisco
residence loan and $350,000) that are interest free during employment. If the
employment of Messrs. Davis, Starzel or Matthews is terminated by SP other than
for cause, the remaining balance of the respective loan will be forgiven.
The employment agreements and certain supplemental retirement agreements
with Messrs. Starzel, Orris, Harvey and Matthews provide each of them with
supplemental retirement benefits commencing on specified dates (or prior thereto
with appropriate actuarial reduction) and in specified monthly amounts (subject
to certain adjustments to reflect increases in the cost of living prior to
commencement of payment), which payments would continue until the later of their
death or the death of their respective spouses; provided, that the specified
monthly amount for Mr. Orris will be offset by his retirement benefits under the
Southern Pacific Rail Corporation Pension Plan. The supplemental retirement
benefit for each of Messrs. Starzel, Orris and Harvey is $10,000 per month upon
reaching age 62. Mr. Matthews may elect to receive $8,500 per month beginning on
September 1, 2005 or $7,500 per month beginning at any time after September 1,
2000 but before September 1, 2005 unless Mr. Matthews voluntarily resigns his
employment prior to September 1, 2005. The employment agreement with Mr. Parsons
provides for crediting certain additional years of service pursuant to a
supplemental retirement arrangement such that he will be treated as having
accrued 27 years of benefit service with SP as of his starting date, June 1,
1995.
Existing Employment and Benefit Arrangements. The Amended Merger Agreement
provides that UP shall cause the Surviving Corporation and its subsidiaries to
honor and assume the existing employment agreements, supplemental executive
retirement agreements and stock bonus agreements, including those described
above for the named executive officers. UP shall also cause the Surviving
Corporation and its subsidiaries to honor and assume SP's other employee benefit
plans and employee programs; provided, however, that the other employee benefit
plans and employee programs may be amended or terminated at any time in
accordance with applicable law (except to the extent benefits have already
vested thereunder). In addition, in the case of the Alternative Merger, UPRR has
agreed to guarantee the obligations of the Alternative Surviving Corporation
under the foregoing agreements, plans and programs. The Amended Merger Agreement
further provides that the existing severance plan for employees of SP and its
subsidiaries who are terminated other than for cause shall be continued in
effect for at least one year following the Effective Time.
Management Continuity Plan. Pursuant to the Original Merger Agreement, SP
and its subsidiaries have established an MCP that provides for up to two
payments to certain non-union employees of SP or its subsidiaries based upon
their continued employment and performance during the period from the date of
the Original Merger
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Agreement (or date of hire or promotion, if later) to the date of the payment
(or, in the case of the first payment, a date which shortly precedes the date of
payment). In order to be eligible to participate in the MCP, an employee must
generally waive his or her right, if any, to receive a payment from any other
incentive plan maintained by SP or its subsidiaries or the Surviving Corporation
(or its subsidiaries), including, without limitation, the stock bonus
arrangements described in SP's Notice of Annual Meeting and Proxy Statement
dated March 27, 1995 (the '1995 SP Proxy Statement'), other than the right of
Messrs. Starzel and Harvey under separate agreements to receive 16,666 Shares
each on January 1, 1997 if they have not voluntarily resigned. Under the MCP,
payment of awards will be made in two parts, with either 50% or 60% of the award
paid prior to December 31, 1995 (depending on the classification of the
employee), and the remaining portion payable at the earlier of the 60th day
following the Effective Time or any earlier date of the employee's qualifying
termination of employment. In order to be entitled to the second portion of the
award under the MCP, the employee must be employed by SP or its subsidiaries at
the Effective Time and must remain in employment for at least 60 days
immediately following the Effective Time, unless such employment is earlier
terminated at the request of the Surviving Corporation or its subsidiaries. The
Amended Merger Agreement provides that SP may make MCP awards in an aggregate
amount up to $15,700,000, and the Amended Merger Agreement also provides that
the maximum amount payable under the MCP will not exceed $1,400,000 and $900,000
for Messrs. Davis and Orris, respectively, and $700,000 for each of Messrs.
Starzel, Harvey, Matthews and Parsons. Pursuant to the MCP, Messrs. Davis,
Orris, Starzel, Harvey, Matthews and Parsons received $840,000, $540,000,
$400,000, $420,000, $420,000 and $420,000, respectively, at the end of 1995. In
addition, in the case of the Alternative Merger, UPRR has agreed to guaranty the
obligations of Newco, as the Surviving Corporation, under the MCP.
Equity Incentive Plan. Pursuant to the Original Merger Agreement, the
compensation committee of the SP Board administering the SP EIP adopted
resolutions to assure that no holder of an outstanding award with respect to
which Shares might otherwise be issued at or after the Effective Time will have
any right to receive equity securities of SP, the Surviving Corporation or any
of their subsidiaries at or after the Effective Time. UP and the Surviving
Corporation have agreed to cause the committee under the SP EIP to make adequate
provision for the adjustment of outstanding awards under the Stock Bonus
Agreements issued pursuant to and in accordance with the terms of the SP EIP. SP
will also ensure that, following the Effective Time, no participant in any other
stock based plan, agreement, program or arrangement (including, without
limitation, the Southern Pacific Rail Corporation Employee Stock Purchase Plan)
will have any right thereunder to acquire equity securities of SP, the Surviving
Corporation or any of their subsidiaries.
Severance Arrangements. In addition to the severance arrangements provided
under the individual employment agreements, and SP's existing severance plan, SP
and its subsidiaries, pursuant to the Original Merger Agreement, established an
enhanced severance program (the 'Enhanced Severance Program') to provide certain
additional severance amounts to certain terminated, non-union employees who
become entitled to severance pursuant to the existing severance plan, the
substantially identical plans that have been established for certain other
subsidiaries or the individual employment agreements which provide severance
benefits. The Merger Agreement provides that the Enhanced Severance Program plus
all severance otherwise payable may provide aggregate benefits not in excess of
$22,000,000 to all employees covered by the Enhanced Severance Program, and also
provides that the total amount of severance benefits that may be paid to Messrs.
Davis, Orris, Starzel, Harvey, Matthews and Parsons (excluding certain
miscellaneous items) will not exceed $1,600,000, $1,350,000, $1,050,000,
$1,050,000, $1,050,000 and $1,020,833, respectively. For purposes of the
Enhanced Severance Program, participants will be divided into three categories,
and the severance amount payable will range from an additional one year's base
salary for certain employees (in addition to the severance otherwise payable) to
the incremental amount necessary to provide an aggregate of 18 months or one
year of severance for other employees. In addition, in the case of the
Alternative Merger, UPRR has agreed to guaranty the obligations of Newco, as the
Surviving Corporation, under the Enhanced Severance Program.
It is anticipated that SP will pay its executive officers a maximum of
approximately $13.5 million in payments related to the proposed Merger if the
employment of all such officers is terminated. No payments will be made to UP
officers as a result of the change of control.
Certain additional information with respect to executive compensation and
related employee benefits and other information concerning SP's executive
officers or directors, as modified by the foregoing discussion, is set
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forth in the 1996 SP Proxy Statement. See 'INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE.'
Indemnification. Pursuant to the terms of the Amended Merger Agreement, UP
has agreed that at all times after the Effective Time it will indemnify, or will
cause the Surviving Corporation and its subsidiaries to indemnify, each
director, officer, employee or agent of SP (an 'Indemnified Party') to the same
extent and in the same manner as is now provided in the respective charters or
by-laws of SP and such subsidiaries or otherwise in effect on the date of the
Original Merger Agreement, with respect to any claim, liability, loss, damage,
cost or expense (whenever asserted or claimed) ('Indemnified Liability') based
in whole or in part on, or arising in whole or in part out of, any matter
existing or occurring at or prior to the Effective Time. UP will, and will cause
the Surviving Corporation to, maintain in effect for not less than six years
after consummation of the Merger the current policies of directors' and
officers' liability insurance maintained by SP and its subsidiaries on the date
hereof or at least the same coverage; provided, however, that if the aggregate
annual premiums for such insurance at any time during such period will exceed
200% of the per annum rate of premium currently paid by SP and its subsidiaries
for such insurance on the date of the Original Merger Agreement, then UP will
cause the Surviving Corporation to provide the maximum coverage that will be
available at an annual premium equal to 200% of such rate, and UP, in addition
to the indemnification provided above, will indemnify the Indemnified Parties
for the balance of such insurance coverage on the same terms and conditions as
though UP were the insurer under those policies. Without limiting the foregoing,
in the event any Indemnified Party becomes involved in any capacity in any
action, proceeding or investigation based in whole or in part on any matter,
including the transactions contemplated by the Amended Merger Agreement,
existing or occurring at or prior to the Effective Time, then to the extent
permitted by law, UP will, or will cause the Surviving Corporation to,
periodically advance to the Indemnified Party its legal and other expenses,
subject to the provision by such Indemnified Party of an undertaking to
reimburse the amounts so advanced in the event of a final determination by a
court of competent jurisdiction that such Indemnified Party is not entitled
thereto. In addition, in the case of the Alternative Merger, UPRR has agreed to
guaranty the obligations of Newco, as the Surviving Corporation, under the
foregoing agreements.
Certain Relationships and Related Transactions
Certain information with respect to certain transactions between SP and
certain affiliates of Mr. Anschutz or TAC is set forth in the 1996 SP Proxy
Statement, under the section entitled 'Compensation Committee Interlocks and
Insider Participation,' and is incorporated herein by reference. See
'INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE' and 'AVAILABLE INFORMATION.'
SP plans to continue its activities under these agreements, as disclosed to UP
pursuant to the Amended Merger Agreement. SP also is considering, and has so
disclosed to UP pursuant to the Original Merger Agreement, certain other
proposed transactions with TAC or one of TAC's affiliates involving (i) the
purchase by an affiliate of TAC of certain tracts of land, (ii) amendments to
the pipeline easement described in the 1995 SP Proxy Statement and (iii) the
grant to an affiliate of TAC of additional fiber optic easements of the type
generally referenced in the 1995 SP Proxy Statement. Completion of these
proposed transactions is subject to approval by independent directors of SP
after receipt of an appraisal or valuation from an independent appraiser or
expert that the terms are fair to SP and comparable to an arms-length
transaction with an unaffiliated party. See 'THE AMENDED MERGER
AGREEMENT--Interim Operations of SP.'
Certain Other Matters
MSLEF is a substantial stockholder of SP. The sole general partner of MSLEF
is MSLEF II, a wholly owned subsidiary of Morgan Stanley Group Inc. Each of
MSLEF II and Morgan Stanley Group Inc. may be deemed to have shared voting and
dispositive power with respect to the Shares held by MSLEF. As of the Record
Date, MSLEF was the record and beneficial owner of, and had the right to vote
and to dispose of, an aggregate of 8,310,877 Shares, representing approximately
5.3% of the then outstanding Shares. MSLEF has entered into the Amended MSLEF
Shareholder Agreement (as defined herein), which contains voting provisions
substantially similar to those contained in the Amended Anschutz Shareholders
Agreement. Mr. Frank V. Sica, a member of the Board of Directors of SP since
October 1989, is a Managing Director of Morgan Stanley and a Vice Chairman and
Director of MSLEF II. Morgan Stanley has acted as financial advisor to SP in
connection with the
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Offer and the Merger and has rendered to the SP Board an opinion that the
Consideration to be received by the SP stockholders pursuant to the Offer and
the Merger, taken together, is fair from a financial point of view to such
stockholders. Morgan Stanley is a wholly owned subsidiary of Morgan Stanley
Group Inc. See 'THE MERGER--Opinion of SP's Financial Advisor.' Morgan Stanley
participated in the underwriting syndicate, but not as a lead or co-lead
underwriter, for the IPO. As previously described, Morgan Stanley is entitled to
an advisory fee from SP for its time and efforts in connection with the Offer
and the Merger and an announcement fee aggregating $4 million, of which $2
million was paid in August 1995 and the remaining $2 million was paid upon
stockholder approval of the Merger. SP has also agreed to pay Morgan Stanley a
transaction fee equal to the lesser of (x) $16 million and (y) 0.425% of the
aggregate value of the Consideration, against which the $4 million fee will be
credited. Any amounts paid or payable to Morgan Stanley as advisory or
announcement fees will be credited against the transaction fee.
CERTAIN PROJECTED FINANCIAL INFORMATION
SP, in March 1995, provided UP and its financial advisors with certain
business and financial information which UP and SP believe was not publicly
available. Such information included, among other things, certain financial
projections for 1995 through 1999 (the 'March SP Projections') prepared by
management of SP as a long-range plan. In late July, SP furnished UP with
updated financial projections for 1995 and 1996 (the 'July SP Projections'),
which updated projections reflected a decline in projected results from the
March SP Projections. The July SP Projections did not take into account any of
the potential effects of the transactions contemplated by the Offer and the
Merger. SP does not as a matter of course publicly disclose internal projections
as to future revenues, earnings or financial condition.
Although both the March SP Projections and July SP Projections were based
upon assumptions believed to have been reasonable when they were made, based on,
among other things, SP's operating performance and results since the execution
of the Original Merger Agreement (see 'UNAUDITED PRO FORMA FINANCIAL STATEMENTS
OF UP AND SP'), changes in freight mix and volumes, the general economic outlook
and other matters, as of the date of this Joint Proxy Statement/Prospectus, SP's
management does not believe that SP's operating results reflected in either the
March SP Projections or the July SP Projections will be attained. The March SP
Projections showed operating revenues of $3.327 billion in 1995 increasing to
$3.976 billion in 1999, operating income of $448 million in 1995 increasing to
$799 million in 1999, and net income of $203 million in 1995 increasing to $391
million in 1999. The March SP Projections assumed gains from real estate sales
(excluding the sales of major properties and transit corridors) of $67 million
in 1995 and $60 million thereafter. The March SP Projections also included cash
flow data which showed operating cash flows of $309 million in 1995 increasing
to $618 million in 1999, available cash of $688 million in 1995 increasing to
$814 million in 1999, and a net change in cash of $(28) million in 1995, $121
million in 1996, $254 million in 1997, $315 million in 1998 and $264 million
in 1999. In connection with the March SP Projections, SP also furnished UP
with projected balance sheets of SP for the years 1995 through 1999. Such
balance sheets projected total assets of SP increasing from $4,684 million
at December 31, 1995 to $7,062 million at December 31, 1999, and total
stockholders' equity increasing from $1,261 million at December 31, 1995 to
$2,564 million at December 31, 1999. The July SP Projections showed operating
revenues of approximately $3.2 billion in 1995 and $3.3 billion in 1996,
operating income of approximately $320 million to $280 million in 1995 and
approximately $445 million in 1996, and net income of approximately $134
million to $110 million in 1995 and approximately $201 million in 1996.
THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR
COMPLIANCE WITH PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES
ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS. THE
PROJECTIONS ARE INCLUDED IN THIS JOINT PROXY STATEMENT/PROSPECTUS ONLY BECAUSE
SUCH INFORMATION WAS PROVIDED TO UP. NONE OF SP, UP, NEWCO, UPRR OR ANY PARTY TO
WHOM THE PROJECTIONS WERE PROVIDED ASSUMES ANY RESPONSIBILITY FOR THE ACCURACY
OF SUCH INFORMATION. AS DESCRIBED ABOVE, ALTHOUGH UP HAS BEEN ADVISED BY SP THAT
THESE PROJECTIONS WERE CONSIDERED REASONABLE BY SP AT THE TIME THEY WERE
FURNISHED TO UP, SP'S MANAGEMENT NO LONGER BELIEVES THAT SP'S OPERATING RESULTS
REFLECTED IN SUCH PROJECTIONS WILL BE ACHIEVED. ACCORDINGLY, ACTUAL RESULTS ARE
LIKELY TO VARY MATERIALLY FROM THOSE SHOWN. THE PROJECTIONS HAVE NOT BEEN
EXAMINED OR COMPILED BY SP'S INDEPENDENT PUBLIC ACCOUNTANTS. FOR THESE REASONS,
AS WELL AS THE BASES ON WHICH SUCH PROJECTIONS WERE COMPILED, IT IS LIKELY THAT
SUCH
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PROJECTIONS WILL NOT BE REALIZED. THE INCLUSION OF SUCH PROJECTIONS HEREIN
SHOULD NOT BE REGARDED AS AN INDICATION THAT SP, UP, NEWCO, UPRR OR ANY OTHER
PARTY WHO RECEIVED SUCH INFORMATION CONSIDERS IT AN ACCURATE PREDICTION OF
FUTURE EVENTS.
ESTIMATED SYNERGIES
UP and SP filed an application for approval of the Merger with the ICC on
November 30, 1995 (the 'STB Application'). As part of that application, UP and
SP indicated to the ICC that, in their view, the Merger will yield annual
benefits to the merged company of approximately $660 million once the Merger has
been fully implemented over a projected five year period. These benefits consist
of a significant increase in operating income as well as an avoidance of certain
annual capital expenditures. This projected increase in operating income from
the Merger is expected to result from both operating efficiencies and increased
revenues. The STB Application states that the estimated annual increase in
operating income will be approximately $612 million per year when the Merger is
fully implemented after five years. This increase is projected to be achieved
over the first five years following consummation of the Merger with
approximately 38% of the increase expected to be achieved by the end of the
first year and over 90% of the increase expected to be achieved by the end of
the third year. This projected increase in operating income does not include the
noncash effects of applying purchase accounting as shown on the pro forma
combined statements of operations or of increased depreciation from additional
capital expenditures described below needed to obtain these benefits. The
avoidance of certain capital expenditures is projected to be $48 million
annually. All of these estimated Merger benefits use 1994 as a base year and are
stated in 1994 dollars.
The STB Application states that significant savings will be achieved in the
general and administrative, overhead and support functions of the merged
company. The application identifies approximately $105 million annually in
estimated savings after five years, not including savings in personnel costs.
The material assumption underlying these savings is improved efficiency
associated with information systems and purchasing.
The STB Application also states that a number of opportunities exist for
significant reduction in operating costs and improvement in equipment
utilization. These operating efficiencies are expected to be achieved through
operations and transportation savings, maintenance of way and equipment savings,
and mileage savings from use of shorter, more efficient routes. These
operational savings are estimated to be approximately $170 million annually
after five years, not including savings in personnel costs. The material
assumptions underlying these savings are included in the Operating Plan that is
part of the STB Application. The Operating Plan describes the internal rerouting
of traffic, consolidation of common point facilities and rationalization of
system facilities that will be implemented after the Merger.
The STB Application states that significant savings will be achieved
through reduction in general and administrative and operating positions. The
application identifies approximately $261 million in estimated annual savings
after five years. The material assumption underlying these savings is that
duplicative activities will be eliminated and productivity will be improved
through rationalization, centralization and application of improved systems
technology.
The STB Application also states that freight revenues will increase as a
result of the Merger. Traffic increases associated with extending length of
haul, diversions from other railroads, trucks and water carriers, and
stimulation of new shipments are projected to increase revenues (net of costs
associated with this traffic) by about $76 million annually after five years.
This includes the impact of implementing the agreement with BNSF to maintain
competition at all locations that would go from two serving railroads to one.
The material assumptions underlying these revenue gains are faster, more
frequent and more reliable service, extended single line service and related
efficiencies. UP and SP have conducted studies that show how these improvements
will divert traffic from other railroads and attract additional intermodal
traffic by diverting traffic from truck to rail.
In order to achieve these increases in operating income, it is estimated
that certain nonrecurring cash costs of $1,266 million would be incurred during
the first five years after the Merger. Employee separation, relocation and other
one-time costs are estimated to be $357 million. In addition, $1,207 million in
projected incremental capital expenditures (net of the reduction in capital
expenditures referred to in the first paragraph of this section) in the first 5
years will be required to implement the Merger but will be partially offset by
asset sales resulting
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from the Merger estimated to be $298 million. Approximately 55 percent of the
incremental capital expenditures are projected to be spent on the SP system
while approximately 45 percent will be spent on the UP system.
Management of UP estimates the possible ongoing Merger benefits to
operating income will be achieved as follows: $233 million benefit during the
first year following consummation of the Merger (assumed to occur in September
1996), $481 million benefit during the second year following the Merger, $577
million benefit during the third year following the Merger, $595 million during
the fourth year following the Merger and $612 million during the fifth year
following the Merger. These benefits exclude the effect of one-time costs
related to the Merger referred to in the previous paragraph since the amount of
such costs that will be charged to expense cannot presently be determined. UP
estimates that the Merger would result in the initial dilution in UP's earnings
per share from continuing operations of less than 10% in calendar 1996 and
slightly more than 10% in 1997, and would be accretive in 1998.
The additional conditions imposed by the STB at the July 3, 1996 voting
conference are expected to reduce the foregoing benefits of the Merger, although
such reduction is not expected to be material to the combined operations of UP
and its subsidiaries following the Merger.
THE FOREGOING ESTIMATES ARE INHERENTLY SUBJECT TO SIGNIFICANT UNCERTAINTIES
AND CONTINGENCIES, MANY OF WHICH ARE BEYOND THE CONTROL OF UP. THERE CAN BE NO
ASSURANCE THAT THEY WILL BE ACHIEVED AND ACTUAL RESULTS MAY VARY MATERIALLY FROM
THOSE ESTIMATED. THE INCLUSION OF SUCH ESTIMATES HEREIN SHOULD NOT BE REGARDED
AS AN INDICATION THAT UP, UPRR, NEWCO, SP OR ANY OTHER PARTY CONSIDERS SUCH
ESTIMATES AN ACCURATE PREDICTION OF FUTURE EVENTS.
MERGER CONSIDERATION
Pursuant to the Amended Merger Agreement, each Share (other than Shares
owned by SP as treasury stock and Shares owned by UP, UPRR, Newco or any other
direct or indirect wholly owned subsidiary of UP, which Shares will be cancelled
and retired at the Effective Time) shall at the Effective Time, be converted, at
the election of the holder, subject to proration and the limitations described
below, into the right to receive (i) the Stock Consideration, (ii) the Cash
Consideration or (iii) a combination thereof. Holders of Shares will be
permitted to make a Stock Election and/or a Cash Election (each as defined in
'--Election Procedures') with respect to all or any portion of the Shares held
by such holder. The aggregate number of Shares to be converted into the right to
receive UP Common Stock in the Merger pursuant to the Amended Merger Agreement
will be equal as nearly as practicable to 60% of all outstanding Shares at the
time of the Merger; and the aggregate number of Shares to be converted into the
right to receive the Cash Consideration in the Merger pursuant to the Amended
Merger Agreement, together with the Acquired Shares, will be equal as nearly as
practicable to 40% of all outstanding Shares. Accordingly, of the Shares
outstanding immediately prior to the Merger (other than the Acquired Shares),
20% of such Shares will be acquired for cash and 80% of such Shares will be
acquired in exchange for shares of UP Common Stock. See '--Election Procedures'
and 'THE AMENDED MERGER AGREEMENT--Conversion of Shares.'
EFFECTIVE TIME
The Merger will become effective, following the satisfaction or waiver
(where permissible) of the conditions set forth in the Merger Agreement, upon
the date (the 'Effective Time') on which (i) in the case of the Original Merger,
the articles of merger (the 'Articles of Merger') and a certificate of merger
(the 'Certificate of Merger'), each with respect to the Original Merger, have
been duly filed with the Division of Corporations and Commercial Code of the
State of Utah and the Secretary of State of the State of Delaware, respectively,
(ii) in the case of the Alternative Merger, either (x) where SP will be merged
with and into Mergerco, the Alternative Certificate of Merger has been duly
filed with the Secretary of State of the State of Delaware or (y) where SP will
be merged with and into Holding, the Alternative Certificate of Merger and the
Alternative Articles of Merger have been duly filed with the Secretary of State
of the State of Delaware and with the Division of Corporations and Commercial
Code of the State of Utah, respectively, or (iii) the parties have agreed upon
and have so specified in the Articles of Merger or the Alternative Articles of
Merger, as the case may be, and the Certificate of Merger or the Alternative
Certificate of Merger, as the case may be, and such time is hereinafter referred
to as the 'Effective Time.'
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FINANCING OF THE TRANSACTION
UP estimates that the total amount of funds required to pay the Cash
Consideration and to pay all related costs and expenses will be approximately
$600 million.
UP plans to obtain the necessary funds from available cash and working
capital, and either pursuant to an existing $2.8 billion credit facility with
various commercial banks (the '$2.8 Billion Facility') and other credit
facilities which may be established in the future (the $2.8 Billion Facility,
and any such future facility, the 'Facilities'), or through the issuance of long
or short-term debt securities (including commercial paper notes) (the 'Debt
Securities'). The $2.8 Billion Facility is described below.
UP expects to repay all or a portion of the balances outstanding on June
30, 1996 under the $2.8 Billion Facility ($271 million) prior to the date that
the Cash Consideration will be paid. It is anticipated that such repayment will
be made from internally generated funds, sales of receivables or through the
issuance of long or short-term debt securities. No final decisions have been
made concerning the method UP will employ to repay such indebtedness. Such
decisions when made will be based on UP'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.
UP's commercial paper program involves the private placement of unsecured,
commercial paper notes with maturities of up to 270 days. The commercial paper
generally has an effective interest rate approximating the then market rate of
interest for commercial paper of similar rating, currently approximating 5.5%.
On April 4, 1996, UP entered into the $2.8 Billion Facility with Chase
Securities Inc. and Citicorp Securities, Inc., as Co-Arrangers, Chase Securities
Inc., as Syndication Agent, Citibank, N.A., as Documentation Agent, Chemical
Bank, as Administrative Agent, and the other banks named therein, which provides
UP with a revolving credit facility in the amount of $2.8 billion which will
terminate on April 4, 2001.
The interest rate on the drawings under the $2.8 Billion Facility is
expected to be in the range of .130% to .375% above the London Interbank Offered
Rate ('LIBOR') per annum, and would be in addition to a facility fee ranging
from .070% to .250% per annum, in each case based on UP's credit rating.
The foregoing description of the terms and provisions of the $2.8 Billion
Facility is qualified in its entirety by reference to the text of the credit
agreement relating to the $2.8 Billion Facility, a copy of which is filed as an
exhibit to the Registration Statement and is incorporated herein by reference.
The proceeds of the $2.8 Billion Facility are available for general
corporate purposes of UP which would include the financing for the Merger.
ACCOUNTING TREATMENT
The Merger will be accounted for under the 'purchase' method of accounting
in accordance with generally accepted accounting principles ('GAAP').
ELECTION PROCEDURES
Elections. The Amended Merger Agreement provides that each holder of
Shares (other than Shares owned by SP as treasury stock and any Shares owned by
UP, UPRR, Newco or any other direct or indirect wholly owned subsidiary of UP,
which Shares will be cancelled and retired at the Effective Time) has the right,
subject to the proration and the limitations described below, to submit a
request (an 'Election') specifying the number of Shares owned by such holder
which such holder desires to have converted into either:
(i) .4065 shares of UP Common Stock per Share (the 'Stock Election');
or
(ii) the Cash Consideration (the 'Cash Election').
Holders of Shares will be permitted to make a Stock Election and/or a Cash
Election with respect to all or any portion of the Shares held by such holder.
All Stock Elections and Cash Elections must be made on the Form of Election
which is being mailed to SP stockholders together with this Joint Proxy
Statement/Prospectus. Additional copies of the Form of Election will
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be available upon request from Harris Trust Company of New York, as exchange
agent (the 'Exchange Agent'), at 77 Water Street, 4th Floor, New York, N.Y.
10005.
The purpose of the Election procedure is to permit holders of Shares to
express their preferences for the type of consideration they wish to receive in
the Merger, provided that a number of Shares (together with the Acquired Shares)
as nearly as practicable equal to 40% of the outstanding Shares be converted
into the right to receive the Cash Consideration, and a number of shares as
nearly as practicable equal to 60% of the outstanding Shares, be converted into
the right to receive UP Common Stock. As discussed below, subject to the
proration and the limitations described below, the Stock Elections and Cash
Elections made by holders of Shares will be honored in issuing shares of UP
Common Stock and the Cash Consideration after the Effective Time.
ALTHOUGH THERE CAN BE NO ASSURANCE THAT A HOLDER OF SHARES WILL RECEIVE THE
CONSIDERATION THAT HE OR SHE ELECTS AS TO ALL OF HIS OR HER SHARES, A HOLDER OF
SHARES HAVING A PREFERENCE AS TO THE FORM OF CONSIDERATION TO BE RECEIVED FOR
HIS OR HER SHARES SHOULD MAKE AN ELECTION, BECAUSE SHARES AS TO WHICH AN
ELECTION HAS BEEN MADE WILL BE GIVEN PRIORITY IN ALLOCATING SUCH CONSIDERATION
OVER SHARES AS TO WHICH NO ELECTION IS RECEIVED. NEITHER SP NOR THE SP BOARD
MAKES ANY RECOMMENDATION AS TO WHETHER STOCKHOLDERS SHOULD ELECT TO RECEIVE THE
CASH CONSIDERATION OR THE STOCK CONSIDERATION IN THE MERGER. EACH STOCKHOLDER
MUST MAKE HIS OR HER OWN DECISION WITH RESPECT TO SUCH ELECTION. IF A
STOCKHOLDER MAKES NO ELECTION, HE OR SHE WILL RECEIVE THE CASH CONSIDERATION
AND/OR THE STOCK CONSIDERATION IN THE MERGER AS DESCRIBED BELOW.
Failure of a holder of Shares to complete properly and to return the Form
of Election, together with certificates representing such holder's Shares, or an
appropriate guarantee of delivery of certificates for such Shares, to the
Exchange Agent by the Election Deadline and to comply with the election
procedures described in this Joint Proxy Statement/Prospectus and the Form of
Election (including the instructions thereto) will cause such holder's Shares to
be converted into UP Common Stock or the right to receive the Cash Consideration
without regard to the preference of such holder of Shares.
As used herein, 'Election Deadline' means the date announced by UP, in a
news release delivered to the Dow Jones News Service, as the last day on which
Forms of Election will be accepted; provided, that such date shall be a business
day no earlier than twenty business days prior to the Effective Time and no
later than the date on which the Effective Time occurs and shall be at least
five business days following the date of such news release; provided further,
that UP shall have the right to set a later date as the Election Deadline so
long as such later date is no later than the date on which the Effective Time
occurs. UP has set September 9, 1996 as the Election Deadline.
On July 15, 1996, the closing price of UP Common Stock on the NYSE was
$68.50 per share. Accordingly, the market value of .4065 shares of UP Common
Stock, based on such closing price, was $27.85. THE MARKET VALUE OF THE UP
COMMON STOCK AFTER THE EFFECTIVE TIME WILL, AMONG OTHER THINGS, DEPEND UPON, AND
IS EXPECTED TO FLUCTUATE WITH, THE PERFORMANCE OF UP, WHETHER OR NOT THE
SPIN-OFF OCCURS, CONDITIONS (ECONOMIC OR OTHERWISE) AFFECTING THE RAILROAD,
TRUCKING AND OIL AND GAS INDUSTRIES AND MARKET CONDITIONS AND OTHER FACTORS THAT
GENERALLY INFLUENCE PRICES OF SECURITIES. MOREOVER, THERE CAN BE NO ASSURANCE
THAT AT OR AFTER THE EFFECTIVE TIME THE MARKET VALUE OF THE STOCK CONSIDERATION
AND THE CASH CONSIDERATION TO BE RECEIVED IN THE MERGER WILL BE EQUAL. BECAUSE
THE TAX CONSEQUENCES OF RECEIVING CASH OR UP COMMON STOCK WILL DIFFER, SP
STOCKHOLDERS ARE URGED TO READ CAREFULLY THE INFORMATION SET FORTH UNDER THE
CAPTION '--CERTAIN FEDERAL INCOME TAX CONSEQUENCES' BELOW.
Completing the Form of Election. To make a proper Election, a holder of
Shares must have delivered to the Exchange Agent at the address specified in the
Form of Election, prior to the Election Deadline the following:
(a) a Form of Election properly completed in accordance with the
instructions thereon and signed by the record holder of the Shares as to
which such Election is being made, and
(b) either (i) the certificates for such Shares or (ii) an appropriate
guarantee of delivery of certificates for such Shares.
A form of the guarantee of delivery will be set forth in the Form of
Election, and, unless stock certificates are submitted with the Form of
Election, a guarantee of delivery must be properly executed by a member of any
registered national securities exchange or a member of the National Association
of Securities Dealers, Inc.
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('NASD') or a bank, broker, dealer, credit union or other entity that is a
member in good standing of the Securities Transfer Agent's Medallion Program,
and certificates for the Shares covered by such guarantee must in fact be
received by the Exchange Agent by the time specified in such guarantee for a
valid Form of Election to have been submitted.
Withdrawal and Change of Elections. Any holder of Shares may, at any time
prior to the Election Deadline, change his or her Election by submitting to the
Exchange Agent a properly completed and signed revised Form of Election and all
required additional documents, provided that the Exchange Agent receives such
revised Form of Election and other necessary documents prior to the Election
Deadline. Any holder of Shares may, at any time prior to the Election Deadline,
revoke his or her prior valid Election by written notice received by the
Exchange Agent prior to the Election Deadline or by written withdrawal prior to
the Election Deadline of his or her certificates for Shares (or of the guarantee
of delivery of such certificates) previously deposited with the Exchange Agent.
All Elections will be revoked automatically if the Exchange Agent is
notified in writing by UP or SP that the Merger Agreement has been terminated.
Any holder of Shares who has deposited certificates for Shares of SP with the
Exchange Agent will have the right to withdraw such certificates by written
notice received by the Exchange Agent prior to the Election Deadline and thereby
revoke his or her Election as of the Election Deadline if the Merger shall not
have been consummated prior thereto.
Other Rules. UP has the right to make rules, not inconsistent with the
terms of the Amended Merger Agreement, governing the validity of Forms of
Election, the manner and extent to which Elections are to be taken into account
in making the determinations required by the Amended Merger Agreement, the
issuance and delivery of certificates for UP Common Stock for Shares converted
into such stock in the Merger and the payment of cash for Shares converted into
the right to receive the Cash Consideration in the Merger.
Allocation of UP Common Stock and Cash Consideration; Proration. The
aggregate number of Shares to be converted into UP Common Stock pursuant to the
Merger will be equal as nearly as practicable to 60% of all outstanding Shares
immediately prior to the Effective Time; and the number of Shares to be
converted into the right to receive the Cash Consideration in the Merger
pursuant to the Amended Merger Agreement, together with the Acquired Shares,
will be equal as nearly as practicable to 40% of all outstanding Shares
immediately prior to the Effective Time.
If Stock Elections are received for a number of Shares that is 60% or less
of the outstanding Shares immediately prior to the Effective Time, each Share
covered by a Stock Election will be converted in the Merger into .4065 of a
share of UP Common Stock (the 'Conversion Fraction'). In the event that between
the date of the Merger Agreement and the Effective Time, the issued and
outstanding shares of UP Common Stock will have been affected or changed into a
different number of shares or a different class of shares as a result of a stock
split, reverse stock split, stock dividend, spin-off, extraordinary dividend,
recapitalization, reclassification or other similar transaction with a record
date within such period, the Conversion Fraction will be appropriately adjusted.
If Stock Elections are received for more than 60% of the outstanding
Shares, each Share as to which an Election is not in effect at the Election
Deadline (other than Shares purchased pursuant to the Offer) (a 'Non-Electing
Share') and each Share for which a Cash Election has been received will be
converted into the right to receive the Cash Consideration in the Merger, and
the Shares for which Stock Elections have been received will be converted into
UP Common Stock and the right to receive the Cash Consideration in the following
manner:
(1) The Exchange Agent will distribute with respect to Shares as to
which a Stock Election has been made a number of shares of UP Common Stock
equal to the Conversion Fraction with respect to a fraction of such Shares,
the numerator of which fraction shall be 60% of the number of outstanding
Shares and the denominator of which shall be the aggregate number of Shares
covered by Stock Elections; and
(2) Shares covered by a Stock Election and not fully converted into
the right to receive UP Common Stock as set forth in clause (1) above will
be converted in the Merger into the right to receive the Cash Consideration
for each Share so converted.
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If the number of Acquired Shares and Shares for which Cash Elections are
received in the aggregate is 40% or less of the outstanding Shares, each Share
covered by a Cash Election will be converted in the Merger into the right to
receive the Cash Consideration.
If the number of Acquired Shares and Shares for which Cash Elections are
received in the aggregate is more than 40% of the outstanding Shares, each
Non-Electing Share and each Share for which a Stock Election has been received
will be converted in the Merger into a fraction of a share of UP Common Stock
equal to the Conversion Fraction, and the Shares for which Cash Elections have
been received will be converted into the right to receive the Cash Consideration
and UP Common Stock in the following manner:
(1) The Exchange Agent will distribute with respect to Shares as to
which a Cash Election has been made the Cash Consideration with respect to
a fraction of such Shares, the numerator of which fraction will be 40% of
the number of outstanding Shares minus the number of Acquired Shares and
the denominator of which will be the aggregate number of Shares covered by
Cash Elections; and
(2) Shares covered by a Cash Election and not fully converted into the
right to receive the Cash Consideration as set forth in clause (1) above
will be converted in the Merger into the right to receive a number of
shares of UP Common Stock equal to the Conversion Fraction for each Share
so converted.
If Stock Elections are received for less than 60% of the outstanding Shares
and Cash Elections, together with the Acquired Shares, are received for less
than 40% of the outstanding Shares, the Exchange Agent will distribute with
respect to each Non-Electing Share, the Cash Consideration with respect to a
fraction of such Non-Electing Share, where such fraction is calculated in a
manner that will result in the sum of (i) the number of Shares converted into
cash pursuant to this paragraph, (ii) the number of Shares for which Cash
Elections have been received and (iii) the number of Shares purchased pursuant
to the Offer being as close as practicable to 40% of the outstanding Shares.
Each Non-Electing Share not converted into the right to receive the Cash
Consideration as set forth in the preceding sentence will be converted in the
Merger into the right to receive a number of shares of UP Common Stock equal to
the Conversion Fraction for each Non-Electing Share so converted.
In lieu of any fractional share of UP Common Stock, UP will pay to each
former stockholder of SP who otherwise would be entitled to receive a fractional
share of UP Common Stock an amount in cash determined by multiplying (i) the
Average UP Share Price on the date on which the Effective Time occurs by (ii)
the fractional interest in a share of UP Common Stock to which such holder would
otherwise be entitled. For purposes hereof, the 'Average UP Share Price' shall
mean the average closing sales price, rounded to four decimal points, of UP
Common Stock as reported on the New York Stock Exchange Composite Tape, for the
twenty consecutive trading days ending on the trading day which is five trading
days prior to the Effective Time.
AS A RESULT OF THE PRORATION AND OTHER LIMITATIONS, HOLDERS OF SHARES OF SP
COMMON STOCK MAY RECEIVE SHARES OF UP COMMON STOCK OR THE CASH CONSIDERATION IN
AMOUNTS THAT MAY VARY FROM THE AMOUNTS SUCH HOLDERS ELECT TO RECEIVE. SUCH
HOLDERS WILL NOT BE ABLE TO CHANGE THE AMOUNTS OF UP COMMON STOCK OR THE CASH
CONSIDERATION ALLOCATED TO THEM.
EXPENSES RELATED TO THE MERGER
UP estimates its third-party transactions costs in connection with the
Merger to be approximately $30 million which will be included in the purchase
price allocation. SP estimates its third-party transaction costs in connection
with the Merger to be approximately $20 million which are charged to expense as
incurred.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of the material federal income tax
consequences of the Offer and Merger to holders of Shares who hold the Shares as
capital assets and is based upon the advice of counsel to UP and SP. The
discussion set forth below is for general information only and may not apply to
certain 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 whose Shares were acquired as compensation. This summary is based
upon laws, regulations, rulings and decisions currently in effect, all of which
are subject to change, retroactively or prospectively, and to possibly differing
interpretations. No advance ruling will be requested from the Internal Revenue
Service (the 'IRS')
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regarding the tax consequences of the Merger and, accordingly, there can be no
assurance that the IRS will agree with the discussion of the tax consequences of
the Offer and the Merger set forth below.
Tax Consequences of the Offer and the Merger Generally. The Offer and the
Merger will more likely than not be treated as a single integrated transaction
for federal income tax purposes. Consequently, the Offer and the Merger should,
in the aggregate, qualify as a reorganization pursuant to Sections 368(a)(1)(A)
and 368(a)(2)(D) of the Code. In such event, generally (i) UP, UPRR, Newco and
SP will not recognize any gain or loss pursuant to the Offer and the Merger,
(ii) a stockholder of SP who receives solely cash in exchange for Shares
pursuant to the Offer and/or the Merger will recognize gain or loss, (iii) a
stockholder of SP who did not exchange any Shares pursuant to the Offer and who
receives solely UP Common Stock in exchange for Shares pursuant to the Merger
will not recognize any gain or loss, and (iv) a stockholder of SP who receives a
combination of cash and UP Common Stock in exchange for such stockholder's
Shares pursuant to the Offer and/or the Merger will not recognize loss but will
recognize gain, if any, to the extent of the cash received. If the Offer and the
Merger are treated as integrated, the federal income tax consequences to a
stockholder of SP may be, depending on such stockholder's particular
circumstances, less favorable than the federal income tax consequences to such
stockholder if the Offer and the Merger are not treated as integrated.
Alternatively, if the Offer and the Merger were treated as separate
transactions for federal income tax purposes, the receipt of cash by a
stockholder of SP pursuant to the Offer would be a taxable sale, while the
Merger should still qualify as a reorganization pursuant to Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code.
Tax Consequences if the Offer and the Merger are Treated as a Single
Integrated Transaction.
Exchange of Shares Solely for Cash. In general, a stockholder of SP who,
pursuant to the Offer and/or the Merger, exchanges all of the Shares actually
owned by such stockholder solely for cash will recognize capital gain or loss
equal to the difference between the amount of cash received and such
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 date of the exchange, the
holder thereof has held such Shares for more than one year. Gain or loss will be
calculated separately for each identifiable block of Shares surrendered pursuant
to the Offer and/or the Merger.
Exchange of Shares Solely for UP Common Stock. A stockholder of SP who
exchanges no Shares for cash pursuant to the Offer and who, pursuant to the
Merger, exchanges all of the Shares actually owned by such stockholder solely
for shares of UP Common Stock will not recognize any gain or loss on such
exchange. Such stockholder may recognize gain or loss, however, to the extent
cash is received in lieu of a fractional share of UP Common Stock, as discussed
below. The aggregate adjusted tax basis of the shares of UP Common Stock
received in such exchange will be equal to the aggregate adjusted tax basis of
the Shares surrendered therefor, and the holding period of the UP Common Stock
received will include the holding period of the Shares surrendered in exchange
therefor.
Exchange of Shares for UP Common Stock and Cash. A stockholder of SP who,
pursuant to the Offer and/or the Merger, exchanges all of the Shares actually
owned by such stockholder for a combination of shares of UP Common Stock and
cash will not recognize any loss on such exchange. Such stockholder will realize
gain equal to the excess, if any, of (i) the cash and the aggregate fair market
value of UP Common Stock received pursuant to the Offer and/or the Merger over
(ii) such stockholder's aggregate adjusted tax basis in the Shares exchanged
therefor, but will recognize any realized gain as taxable income only to the
extent of the cash received.
Any gain recognized by a stockholder of SP who receives a combination of UP
Common Stock and cash pursuant to the Offer and/or the Merger will be treated as
capital gain unless the receipt of the cash has the effect of the distribution
of a dividend for federal income tax purposes, in which case such recognized
gain will be treated as ordinary dividend income to the extent of such
stockholder's ratable share of SP's accumulated earnings and profits.
For purposes of determining whether the cash received pursuant to the Offer
and/or the Merger will be treated as a dividend for federal income tax purposes,
a stockholder of SP will be treated as if such stockholder first exchanged all
of such stockholder's Shares solely for UP Common Stock and then UP immediately
redeemed a portion of such UP Common Stock in exchange for the cash such
stockholder actually received.
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In general, the determination as to whether the cash received will be
treated as received pursuant to a sale or exchange (generating capital gain) or
a dividend distribution (generating ordinary income) depends upon whether and to
what extent there is a reduction in the stockholder's deemed percentage stock
ownership of UP. A stockholder of SP who exchanges such stockholder's Shares for
a combination of UP Common Stock and cash will recognize capital gain rather
than dividend income if the deemed redemption by UP (described in the preceding
paragraph) is either (a) 'substantially disproportionate' with respect to such
stockholder or (b) is 'not essentially equivalent to a dividend.'
A stockholder of SP will satisfy the 'substantially disproportionate' test
if (i) the percentage of the outstanding stock of UP actually and constructively
owned by such stockholder immediately after the deemed redemption by UP as a
result of the Offer, Merger, or otherwise, is less than 80% of (ii) the
percentage of the outstanding stock of UP that such SP stockholder is deemed
actually and constructively to have owned immediately before the deemed
redemption by UP.
Whether the deemed exchange and subsequent redemption transaction are 'not
essentially equivalent to a dividend' with respect to a stockholder of SP will
depend upon such stockholder's particular circumstances. In order to reach such
conclusion, it must be determined that the transaction results in a 'meaningful
reduction' in such SP stockholder's deemed percentage stock ownership of UP. In
determining whether a reduction in an SP stockholder's deemed percentage stock
ownership has occurred, the percentage described in clause (i) of the previous
paragraph should be compared to the percentage described in clause (ii) of the
previous paragraph. Even if a stockholder of SP does not satisfy the
'substantially disproportionate' test described above, the IRS has ruled that a
minority stockholder in a publicly held corporation whose relative stock
interest is minimal and who exercises no control with respect to corporate
affairs is considered to have a 'meaningful reduction' if such stockholder has a
reduction in such stockholder's percentage stock ownership.
In most circumstances, therefore, gain recognized by a stockholder of SP
who exchanges such stockholder's Shares for a combination of UP Common Stock and
cash will not be ordinary income but will be capital gain, which will constitute
long-term capital gain if the holding period for such Shares was greater than
one year as of the date of the exchange. Therefore, UP intends to treat cash
payments pursuant to the Offer and the Merger as proceeds arising from the sale
or exchange of Shares, rather than as dividends, for federal income tax
reporting purposes. Stockholders of SP who receive such cash should, however,
consult their own tax advisors to determine the proper treatment of such cash
payments in their individual situations (including the impact, if any, of SP or
UP stock owned by persons related to such SP stockholder).
The aggregate tax basis of UP Common Stock received by a stockholder of SP
who, pursuant to the Offer and/or the Merger, exchanges such stockholder's
Shares for a combination of UP Common Stock and cash will be the same as the
aggregate tax basis of the Shares surrendered therefor, decreased by the cash
received and increased by the amount of gain recognized, if any (including any
portion of such gain that is treated as a dividend). The holding period of the
UP Common Stock received will include the holding period of the Shares
surrendered in exchange therefor.
Cash Received in Lieu of a Fractional Interest of UP Common Stock. Cash
received in lieu of a fractional share of UP Common Stock will be treated as
received in redemption of such fractional interest, and gain or loss will be
recognized, measured by the difference between the amount of cash received and
the portion of the basis of the Shares allocable to such fractional interest.
Such gain or loss will generally constitute capital gain or loss, and will
generally be long-term capital gain or loss if the holding period for such
Shares was greater than one year as of the date of the exchange.
Tax Consequences if the Offer and the Merger are Treated as Separate
Transactions.
Although counsel to UP believes such result to be unlikely, if the Offer
and the Merger were treated as separate transactions for federal income tax
purposes, the receipt of cash pursuant to the Offer would be a taxable sale,
while the Merger should still qualify as a reorganization pursuant to Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code. Accordingly, a stockholder of SP who
received cash pursuant to the Offer would recognize gain or loss equal to the
difference between (i) the amount of cash received pursuant to the Offer and
(ii) the stockholder's adjusted tax basis in the Shares surrendered in the
Offer. The gain or loss would be long-term capital gain or loss if, as of the
date of the sale, such stockholder had held such stock for more than one year.
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A stockholder of SP who received UP Common Stock and/or cash pursuant to
the Merger would be subject to the federal income tax rules concerning
reorganizations discussed above under 'Tax Consequences if the Offer and the
Merger are Treated as a Single Integrated Transaction' with respect to the
consideration received in the Merger.
Withholding
Unless a stockholder of SP 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 Merger. Stockholders of SP should consult
their brokers or the Depositary to ensure compliance with such procedures.
Foreign stockholders should consult with their own tax advisors regarding
withholding taxes in general.
Opinions of Counsel
Each of Skadden, Arps, Slate, Meagher & Flom ('Skadden Arps'), counsel to
UP, and Shearman & Sterling, counsel to SP, has opined that the foregoing
discussion is a fair and accurate summary of the material United States federal
income tax consequences of the Offer and the Merger. In addition, Skadden Arps
has opined that, under current law, the Merger (whether or not the Offer is
integrated with the Merger for federal income tax purposes) will qualify as a
reorganization pursuant to Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code.
Each of such opinions referred to above is subject to the conditions,
qualifications and assumptions set forth therein and has been filed as an
exhibit to the Registration Statement.
THE FOREGOING DISCUSSION MAY NOT APPLY TO CERTAIN CATEGORIES OF
STOCKHOLDERS SUBJECT TO SPECIAL TREATMENT UNDER THE CODE, SUCH AS FOREIGN
STOCKHOLDERS OF SP AND STOCKHOLDERS OF SP WHOSE SHARES WERE ACQUIRED AS
COMPENSATION. STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO
DETERMINE THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE OFFER AND THE MERGER,
INCLUDING ANY FEDERAL, STATE, LOCAL OR OTHER TAX CONSEQUENCES (INCLUDING ANY TAX
RETURN FILING OR OTHER TAX REPORTING REQUIREMENTS) OF THE OFFER AND THE MERGER.
ABSENCE OF DISSENTERS' RIGHTS
In accordance with the United States Supreme Court decision, Schwabacher v.
United States, 334 U.S. 192 (1948), stockholders of SP will not have any
dissenters' rights under state law, unless (i) the STB or a court of competent
jurisdiction determines that state-law dissenters' rights are available to
holders of Shares or (ii) the relevant provisions under the Interstate Commerce
Act (the 'ICA') are changed in a way which would make state-law dissenters'
rights available. UP considers it unlikely that the STB or a court will
determine that state-law dissenters' rights are available to holders of Shares.
As part of the approval of the Merger, UP and SP have requested as part of the
STB Application a determination of the STB that the terms of the Merger are just
and reasonable. The STB voted on July 3, 1996 to grant this request, which was
not opposed by any party, and it is expected that the final written decision of
the STB, to be issued on or before August 12, 1996, will so hold. It is UP's and
SP's understanding that upon the issuance of such a determination, state-law
dissenters' rights will be preempted. Stockholders of SP have had an opportunity
to participate in the STB proceeding. See 'OTHER LEGAL MATTERS; REGULATORY
APPROVALS--STB Approval.'
If dissenters' rights are available to holders of Shares, such rights will
be provided in accordance with Section 262 of the DGCL which generally provides
that any stockholder of a corporation who does not wish to accept the
consideration paid pursuant to the business combination has the right to seek an
appraisal and be paid in cash the 'fair value' of its shares (exclusive of any
element of value arising from the accomplishment or expectation of the business
combination) judicially determined, provided that such holder complies with the
provisions of Section 262 of DGCL.
Appraisal rights cannot be exercised at this time. If any stockholders of
SP become entitled to appraisal rights in connection with the Merger (or similar
business combination), they will receive additional information concerning any
available appraisal rights and the procedures to be followed in connection
therewith before such stockholders have to take any action relating thereto.
Stockholders of SP who sold Shares in the Offer were not entitled to exercise
any appraisal rights with respect to Shares purchased in the Offer.
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THE AMENDED MERGER AGREEMENT
THE FOLLOWING IS A SUMMARY OF CERTAIN PROVISIONS OF THE AMENDED MERGER
AGREEMENT. THE SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE AMENDED
MERGER AGREEMENT WHICH IS ATTACHED HERETO AS ANNEX B AND IS INCORPORATED HEREIN
BY REFERENCE. CAPITALIZED TERMS USED AND NOT OTHERWISE DEFINED HEREIN OR IN THE
FOLLOWING SUMMARY SHALL HAVE THE MEANINGS SET FORTH IN THE AMENDED MERGER
AGREEMENT.
EFFECTIVENESS OF THE AMENDED MERGER AGREEMENT
The Original Merger Agreement shall remain in effect, and the Amended
Merger Agreement shall not be effective, until the stockholders of SP have
approved the Alternative Merger at the Special Meeting.
THE OFFER
Pursuant to the Original Merger Agreement, on September 7, 1995, UP
Acquisition accepted for payment the Acquired Shares in the Offer and
simultaneously deposited such Acquired Shares into the Voting Trust. On
September 15, 1995, UP Acquisition paid for and purchased the Acquired Shares.
The Voting Trust may not be modified or amended without the prior written
approval of SP unless such modification or amendment is not inconsistent with
the Merger Agreement or the Ancillary Agreements and is not adverse to SP or its
stockholders. See 'VOTING TRUST AGREEMENT.'
THE MERGER AND THE ALTERNATIVE MERGER
Pursuant to the Original Merger Agreement and in accordance with the Utah
Revised Business Corporation Act ('UBCA'), on June 25, 1996, UPRR and UP
Acquisition consummated a merger (the 'UP Acquisition Merger') pursuant to which
UP Acquisition was merged with and into UPRR, with UPRR as the surviving
corporation.
If the conditions with respect to the Alternative Merger are not satisfied
or waived at the time when the condition relating to STB approval of the Merger
has been satisfied, subject to the terms and conditions of the Original Merger
Agreement and in accordance with the DGCL and the UBCA, at the Effective Time,
SP and UPRR will consummate the Original Merger pursuant to which (i) SP shall
be merged with and into UPRR and the separate corporate existence of SP will
thereupon cease, (ii) UPRR will be the successor (the 'Surviving Corporation')
in the Original Merger and will continue to be governed by the laws of the State
of Utah, and (iii) the separate corporate existence of UPRR will continue
unaffected by the Original Merger. Pursuant to the Original Merger, (x) the
Articles of Incorporation of UPRR, as in effect immediately prior to the
Effective Time, will be the Articles of Incorporation of the Surviving
Corporation until thereafter amended, and (y) the By-laws of UPRR, as in effect
immediately prior to the Effective Time, will be the By-laws of the Surviving
Corporation until thereafter amended. The Merger shall have the effects set
forth in the UBCA and the DGCL.
The Amended Merger Agreement also provides that if all of the conditions to
the Original Merger and the Alternative Merger are satisfied or waived, subject
to the terms of the Amended Merger Agreement and in accordance with the DGCL, at
the Effective Time, UP will have the option not to proceed with the Original
Merger but to proceed instead with the Alternative Merger, pursuant to which (i)
SP shall be merged with and into either Holding or Mergerco, as selected by UP,
and the separate corporate existence of SP shall thereupon cease and (ii) Newco
shall be the successor or surviving corporation in the Alternative Merger (the
'Alternative Surviving Corporation') and shall continue to be governed by the
laws of the State of Utah or the State of Delaware, as applicable. Pursuant to
the Alternative Merger, (x) the Certificate of Incorporation or Articles of
Incorporation of Newco, as in effect immediately prior to the Alternative
Effective Time, shall be the Certificate of Incorporation or Articles of
Incorporation of the Alternative Surviving Corporation after the Alternative
Effective Time until thereafter amended as provided by law and such Certificate
of Incorporation or Articles of Incorporation, and (y) the By-laws of Newco, as
in effect immediately prior to the Alternative Effective Time, shall be the
By-laws of the Alternative Surviving Corporation until thereafter amended as
provided by law and such By-laws. If the conditions to the Original Merger are
satisfied prior to the satisfaction of the conditions to the Alternative Merger,
SP and UPRR will proceed, without delay, to consummate the Original Merger as
described above.
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CONVERSION OF SHARES
In the event the Alternative Merger is consummated, each share of Common
Stock, par value $.01 per share, of Newco issued and outstanding immediately
prior to the Effective Time will, at the Effective Time, by virtue of the
Alternative Merger and without any action on the part of UP, be converted into
and become one fully paid and nonassessable share of common stock of the
Alternative Surviving Corporation.
The Amended Merger Agreement provides that in the event the Original Merger
is consummated, each issued and outstanding share of Common Stock of UPRR
immediately prior to the Effective Time will, at the Effective Time, by virtue
of the Original Merger and without any action on the part of UP, be converted
into one fully paid and nonassessable share of Common Stock of the Surviving
Corporation.
The Amended Merger Agreement provides that, as of the Effective Time, each
issued and outstanding Share (other than Shares that are owned by SP as treasury
stock and any Shares owned by UP, UPRR, Newco, the Surviving Corporation or the
Alternative Surviving Corporation, or any other direct or indirect wholly owned
subsidiary of UP, which shares at the Effective Time will be cancelled and
retired) will be converted into the right to receive (i) the Cash Consideration,
(ii) the Stock Consideration or (iii) a combination thereof. Holders of Shares
will be permitted to make a Stock Election and/or a Cash Election with respect
to all or any portion of the Shares held by such holder.
Each holder of Shares, as more fully set forth in the Amended Merger
Agreement (other than holders of Shares to be cancelled), will have the right to
make an Election specifying the number of Shares owned by such holder which such
holder desires to have converted into the Stock Consideration by making a Stock
Election and the number of Shares that such holder desires to have converted
into the Cash Consideration by making a Cash Election.
The aggregate number of Shares to be converted into UP Common Stock
pursuant to the Merger will be equal as nearly as practicable to 60% of all
outstanding Shares immediately prior to the Effective Time; and the number of
Shares to be converted into the right to receive the Cash Consideration in the
Merger pursuant to the Amended Merger Agreement, together with the Acquired
Shares, will be equal as nearly as practicable to 40% of all outstanding Shares
immediately prior to the Effective Time.
If Stock Elections are received for a number of Shares that is 60% or less
of the outstanding Shares, each Share covered by a Stock Election will be
converted in the Merger into .4065 of a share of UP Common Stock. In the event
that between the date of the Original Merger Agreement and the Effective Time
the issued and outstanding shares of UP Common Stock will have been affected or
changed into a different number of shares or a different class of shares as a
result of a stock split, reverse stock split, stock dividend, spin-off,
extraordinary dividend, recapitalization, reclassification or other similar
transaction with a record date within such period, the Conversion Fraction shall
be appropriately adjusted.
If Stock Elections are received for more than 60% of the outstanding
Shares, each Non-Electing Share and each Share for which a Cash Election has
been received will be converted into the right to receive the Cash Consideration
in the Merger and Shares for which Stock Elections have been received will be
converted into UP Common Stock and the right to receive the Cash Consideration
in the following manner:
(1) The Exchange Agent will distribute with respect to Shares as to
which a Stock Election has been made a number of shares of UP Common Stock
equal to the Conversion Fraction with respect to a fraction of such Shares,
the numerator of which fraction will be 60% of the number of outstanding
Shares and the denominator of which shall be the aggregate number of Shares
covered by Stock Elections; and
(2) Shares covered by a Stock Election and not fully converted into
the right to receive UP Common Stock as set forth in clause (1) above will be
converted in the Merger into the right to receive the Cash Consideration for
each Share so converted.
If the number of Acquired Shares and Shares for which Cash Elections are
received in the aggregate is 40% or less of the outstanding Shares, each Share
covered by a Cash Election will be converted in the Merger into the right to
receive the Cash Consideration.
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If the number of Acquired Shares and Shares for which Cash Elections are
received in the aggregate is more than 40% of the outstanding Shares, each
Non-Electing Share and each Share for which a Stock Election has been received
will be converted in the Merger into a fraction of a share of UP Common Stock
equal to the Conversion Fraction, and the Shares for which Cash Elections have
been received will be converted into the right to receive the Cash Consideration
and UP Common Stock in the following manner:
(1) The Exchange Agent will distribute with respect to Shares as to
which a Cash Election has been made the Cash Consideration with respect to
a fraction of such Shares, the numerator of which fraction will be 40% of
the number of outstanding Shares minus the number of Acquired Shares and
the denominator of which will be the aggregate number of Shares covered by
Cash Elections; and
(2) Shares covered by a Cash Election and not fully converted into the
right to receive the Cash Consideration as set forth in clause (1) above will be
converted in the Merger into the right to receive a number of shares of UP
Common Stock equal to the Conversion Fraction for each Share so converted.
The Amended Merger Agreement provides that if (x) Stock Elections are
received for less than 60% of the outstanding Shares and (y) the number of
Acquired Shares and Shares for which Cash Elections are received in the
aggregate is less than 40% of the outstanding Shares, the Exchange Agent will
distribute with respect to each Non-Electing Share, the Cash Consideration with
respect to a fraction of such Non-Electing Share, where such fraction is
calculated in a manner that will result in the sum of (i) the number of Shares
converted into cash pursuant to this paragraph, (ii) the number of Shares for
which Cash Elections have been received and (iii) the number of Acquired Shares
being as close as practicable to 40% of the outstanding Shares. Each
Non-Electing Share not converted into the right to receive the Cash
Consideration as set forth in the preceding sentence will be converted in the
Merger into the right to receive a number of shares of UP Common Stock equal to
the Conversion Fraction for each Non-Electing Share so converted.
In lieu of any fractional share of UP Common Stock, UP will pay to each
former stockholder of SP who otherwise would be entitled to receive a fractional
share of UP Common Stock an amount in cash determined by multiplying (i) the
Average UP Share Price on the date on which the Effective Time occurs by (ii)
the fractional interest in a share of UP Common Stock to which such holder would
otherwise be entitled.
EQUITY INCENTIVE PLAN
Pursuant to the Original Merger Agreement, prior to the purchase of Shares
pursuant to the Offer, the Board of Directors of SP adopted resolutions and SP
took such other actions as it deemed necessary to assure that no holder of an
outstanding award under the SP Equity Incentive Plan (the 'SP EIP') with respect
to which Shares might otherwise be issued at or after the Effective Time will
have any right to receive equity securities of SP, the Surviving Corporation or
any subsidiary at or after the Effective Time (any such right having been
adjusted to be a right to receive other securities, property or cash in
accordance with the SP EIP). SP will also ensure that, following the Effective
Time, no participant in any other stock-based plan, agreement, program or
arrangement (including, without limitation, the Employee Stock Purchase Plan)
will have any right thereunder to acquire equity securities of SP, the Surviving
Corporation, or any subsidiary.
BOARD OF DIRECTORS
In the event the merger of SP with and into UPRR is consummated, the
directors and officers of UPRR at the Effective Time will, from and after the
Effective Time, be the initial directors and officers, respectively, of the
Surviving Corporation until their successors have been duly elected or appointed
or qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and By-laws.
In the event the Alternative Merger is consummated, the directors and
officers of Newco at the Effective Time shall, from and after the Effective
Time, be the initial directors and officers, respectively, of the Alternative
Surviving Corporation until their successors shall have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Alternative Surviving Corporation's Certificate of
Incorporation or Articles of Incorporation, as the case may be, and By-laws.
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INTERIM OPERATIONS OF SP
In the Amended Merger Agreement, SP has agreed that, except as expressly
provided in the Amended Merger Agreement or consented to in writing by UP, prior
to the Effective Time: (i) the business of SP and its subsidiaries will be
conducted only in the ordinary course of business consistent with past practice
or pursuant to Customary Actions (as defined below) and, to the extent
consistent therewith, each of SP and its subsidiaries will use its reasonable
best efforts to preserve its business organization intact and maintain its
existing relations with customers, suppliers, employees, creditors and business
partners; (ii) SP will not, directly or indirectly, split, combine or reclassify
the outstanding Shares or any outstanding capital stock of any of the
subsidiaries of SP; and (iii) neither SP nor any of its subsidiaries shall (a)
amend its certificate of incorporation or by-laws or similar organizational
documents; (b) declare, set aside or pay any dividend or other distribution
payable in cash, stock or property with respect to its capital stock other than
dividends paid by subsidiaries of SP to SP; (c) issue, sell, transfer, pledge,
dispose of or encumber any additional shares of, or securities convertible into
or exchangeable for, or options, warrants, calls, commitments or rights of any
kind to acquire, any shares of capital stock of any class of SP or its
subsidiaries, other than issuances pursuant to the exercise of stock-based
awards outstanding on the date of the Original Merger Agreement; (d) transfer,
lease, license, sell, mortgage, pledge, dispose of, or encumber any material
assets other than in the ordinary course of business consistent with past
practice or pursuant to existing agreements previously disclosed to UP; (e)
redeem, purchase or otherwise acquire directly or indirectly any of its capital
stock; (f) (A) grant any increase in the compensation payable, or to become
payable, by SP or any of its subsidiaries to any officer or employee (including
through any new award made under, or the exercise of any discretion under, the
SP EIP; however, Chairman's Circle Awards in accordance with past practice may
be made payable in cash or, with the written consent of UP, in Shares);
provided, however, that SP may increase compensation (x) as required pursuant to
collective bargaining agreements and (y) for employees who have merit promotions
and/or industry-competitive salary adjustments in the ordinary course of
business consistent with past practice; (B) adopt any new, or amend or otherwise
increase, or accelerate the payment or vesting of the amounts payable, or to
become payable, under any existing, bonus, incentive compensation, deferred
compensation, severance, profit sharing, stock option, stock purchase,
insurance, pension, retirement or other employee benefit plan, agreement or
arrangement; (C) enter into any, or amend any existing, employment or severance
agreement with or, except in accordance with the existing written policies of
SP, grant any severance or termination pay to any officer, director or employee
of SP or any of its subsidiaries; (D) make any additional contributions to any
grantor trust created by SP to provide funding for non-tax-qualified employee
benefits or compensation; or (E) provide any severance program to any subsidiary
which does not have a severance program as of the date of the Original Merger
Agreement, other than a program which is substantially identical to the Southern
Pacific Lines Non-Agreement Severance Benefit Plan as revised on August 25,
1993; provided, however, the foregoing clauses (f)(A) and (f)(C) will not apply
with respect to the initial compensation package for any officer or employee
hired after the date of the Original Merger Agreement if such package is
industry-competitive and conforms to past practice; (g) modify, amend or
terminate any of the Company Agreements (as defined in the Amended Merger
Agreement) or waive, release or assign any material rights or claims, except in
the ordinary course of business consistent with past practice and except for a
Customary Action; (h) permit any material insurance policy naming SP or a
subsidiary as a beneficiary or a loss payable payee to be cancelled or
terminated without notice to UP, except in the ordinary course of business
consistent with past practice and except for a Customary Action; (i) except as
previously disclosed to UP in writing, incur or assume any debt except for (A)
borrowings under existing credit facilities in an amount not to exceed $450
million and replacements therefor and refinancings thereof; provided, however,
that SP and its subsidiaries will not prepay or call any long-term borrowings;
(B) capital leases under SP's existing program to finance the rebuilding of
freight cars and to finance equipment under existing purchase commitments; and
(C) borrowings in the ordinary course of business consistent with past practice
that do not exceed $12.5 million in the fiscal year ending December 31, 1995,
$25 million in the fiscal year ending December 31, 1996 and $12.5 million in the
fiscal quarter ending March 31, 1997; (j) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person, except in the ordinary
course of business consistent with past practice; (k) make any loans, advances
or capital contributions to, or investments in, any other person (other than to
wholly owned subsidiaries of SP or customary loans or advances to employees in
accordance with past practice); (l) enter into any material commitment
(including, but not limited to, any capital
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expenditure or purchase of assets) other than in the ordinary course of business
consistent with past practice or, in the case of capital expenditures, pursuant
to Customary Actions; (m) change any of the accounting principles used by it
unless required by GAAP; (n) pay, discharge or satisfy any claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction of any such
claims, liabilities or obligations (1) reflected or reserved against in, or
contemplated by, the consolidated financial statements (or the notes thereto) of
SP and its consolidated subsidiaries; (2) incurred in the ordinary course of
business consistent with past practice, or which are Customary Actions; or (3)
which are legally required to be paid, discharged or satisfied; (o) except as
previously disclosed to UP in writing, adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring, recapitalization
or other material reorganization of SP or any of its subsidiaries or any
agreement relating to a Takeover Proposal (as defined in the Amended Merger
Agreement) (other than the Merger); (p) knowingly take, or agree to commit to
take, any action that would make any representation or warranty of SP contained
in the Amended Merger Agreement inaccurate in any respect at, or as of any time
prior to, the Effective Time; (q) other than between or among wholly owned
subsidiaries of SP which remain wholly owned or between SP and its wholly owned
subsidiaries which remain wholly owned, neither SP nor any of its subsidiaries
will engage in any transaction with, or enter into any agreement, arrangement,
or understanding with, directly or indirectly, any of SP's affiliates,
including, without limitation, any transactions, agreements, arrangements or
understandings with any affiliate or other person covered under Item 404 of
Regulation S-K under the Securities Act of 1933, as amended (the 'Securities
Act'), that would be required to be disclosed under such Item 404, other than
pursuant to such agreements, arrangements, or understandings existing on the
date of the Original Merger Agreement or as disclosed in writing to UP and UP
Acquisition on the date of the Original Merger Agreement; provided, however,
that any such agreement, arrangement or understanding disclosed in such writing
shall be approved by at least two independent directors of SP, after having
received an appraisal or valuation from an independent appraiser or expert
(reasonably acceptable to UP) that the terms are fair to SP and are no less
favorable to SP than could be obtained in an arms' length transaction with an
unaffiliated party, and, provided, further, that SP provides UP with all
information concerning any such agreement, arrangement or understanding that UP
may reasonably request; and (r) enter into an agreement, contract, commitment or
arrangement to do any of the foregoing, or to authorize, recommend, propose or
announce an intention to do any of the foregoing.
SP has disclosed to UP in writing pursuant to the covenant in the Amended
Merger Agreement pertaining to transactions with related parties described in
clause (q) of the preceding paragraph that Southern Pacific Transportation
Company, a subsidiary of SP ('SPT') is considering, among others, the following
transactions with certain affiliates: (i) an affiliate of TAC has been
negotiating since mid-1994 to purchase from SPT certain land that SPT owns in
downtown Denver; (ii) Majestic/Anschutz Venture L.P., an affiliate of the
Anschutz Shareholders, has expressed an interest in purchasing land owned by SPT
in downtown Los Angeles; (iii) Pacific Pipeline System, Inc., an affiliate of
the Anschutz Shareholders, is seeking to amend an existing easement to build a
pipeline on SPT's right-of-way in California; and (iv) SPT expects to grant
additional fiber optic easements to QWest Communications Corporation, an
affiliate of the Anschutz Shareholders. The foregoing four proposed transactions
are subject to the procedures for engaging in transactions with related parties
described in the two provisos to clause (q) of the preceding paragraph.
For purposes of the Amended Merger Agreement, a 'Customary Action' means an
action taken which occurs in the ordinary course of the relevant person's
business and where the taking of such action is generally recognized as being
customary and prudent for other major enterprises in such person's line of
business.
INTERIM OPERATIONS OF UP
In the Amended Merger Agreement, UP has agreed that, except as expressly
provided in the Amended Merger Agreement, or with the prior written consent of
SP, after the date of the Original Merger Agreement and prior to the Effective
Time: (i) UP will not, directly or indirectly, split, combine or reclassify the
outstanding UP Common Stock; (ii) UP will not: (a) amend its articles of
incorporation; or (b) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to its capital
stock except for quarterly cash dividends consistent in amount with past
practice, provided that UP may increase its dividend rate
consistent with the amount reflected in UP's long-range plan previously
furnished to SP, and except for dividends paid by UP's subsidiaries to UP or its
subsidiaries; (iii) neither UP nor any of its subsidiaries shall change any of
the accounting principles used by it unless required by GAAP; (iv) UP will not
issue, sell, transfer, pledge or
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dispose of direct or indirect beneficial ownership of the capital stock of UPRR
or permit UPRR to sell, transfer or dispose of any substantial portion, or all
of the assets, of UPRR; and (v) neither UP nor any of its subsidiaries will
enter into an agreement, contract, commitment or arrangement to do any of the
foregoing, or to authorize, recommend, propose or announce an intention to do
any of the foregoing. In addition, UP has also agreed that it will not
consummate any business combination by and between Missouri Pacific Railroad
Corporation, an indirect wholly-owned subsidiary of UP, and UPRR prior to the
Effective Time.
NO SOLICITATION
In the Amended Merger Agreement, SP has agreed that neither SP nor any of
its subsidiaries and affiliates over which it exercises control will, and SP
(and its subsidiaries and affiliates over which it exercises control) will use
their best efforts to ensure that their respective officers, directors,
employees, investment bankers, attorneys, accountants and other agents 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 (as defined in the Amended
Merger Agreement). SP also agreed that it will, and will cause its subsidiaries
and affiliates and their respective officers, directors, employees, investment
bankers, attorneys, accountants and other agents to, immediately cease and cause
to be terminated all existing discussions and negotiations that have taken place
prior to the date of the Amended Merger Agreement, if any, with any parties with
respect to any Takeover Proposal relating to SP. The Amended Merger Agreement
provides that SP may engage in discussions and negotiations with, or provide any
information or data to, a third party concerning an unsolicited written Takeover
Proposal for SP or any subsidiary or affiliate if in the opinion of the Board of
Directors of SP, after having received the oral or written opinion of outside
legal counsel, the failure to engage in such negotiations or discussions or
provide such information would result in a breach of the fiduciary duties of the
SP Board under applicable law. SP has agreed to (i) notify UP, UPRR and Newco of
any such offers, proposals or Takeover Proposals within 24 hours of the receipt
thereof, (ii) thereafter inform UP on a reasonable basis of the status and
content of any discussions or negotiations with such a third party, including
any material changes to the terms and conditions thereof, and (iii) give UP
three days' advance notice of any information to be supplied to any person
making such offer, proposal, inquiry or Takeover Proposal. As used in the
Amended Merger Agreement, 'Takeover Proposal' when used in connection with any
person shall mean any tender or exchange offer involving the capital stock of
such person, any proposal for a merger, consolidation or other business
combination involving such person or any subsidiary of such person, any proposal
or offer to acquire in any manner a substantial equity interest in, or a
substantial portion of the business or assets of, such person or any subsidiary
of such person, any proposal or offer with respect to any recapitalization or
restructuring with respect to such person or any subsidiary of such person or
any proposal or offer with respect to any other transaction similar to any of
the foregoing with respect to such person or any subsidiary of such person other
than pursuant to the transactions to be effected pursuant to the Amended Merger
Agreement.
DIRECTORS' AND OFFICERS' INSURANCE AND INDEMNIFICATION
In the Amended Merger Agreement, UP has agreed that at all times after the
Effective Time, it will indemnify, or will cause the Surviving Corporation or
the Alternative Surviving Corporation, as the case may be, and its subsidiaries
to indemnify, each person who is, or has been prior to the date of the Amended
Merger Agreement, an employee, agent, director or officer of SP or of any of
SP's subsidiaries, successors and assigns (individually, an 'Indemnified Party'
and, collectively, the 'Indemnified Parties') to the same extent and in the same
manner as is now provided in the respective charters or by-laws of SP and its
subsidiaries or otherwise in effect on the date of the Original Merger
Agreement, with respect to any claim, liability, loss, damage, cost or expense
(whenever asserted or claimed) ('Indemnified Liability') based in whole or in
part on, or arising in whole or in part out of, any matter existing or occurring
at or prior to the Effective Time. The Amended Merger Agreement also provides
that UP will, and will cause the Surviving Corporation or the Alternative
Surviving Corporation, as the case may be, to, maintain in effect for not less
than six years after consummation of the Merger the current policies of
directors' and officers' liability insurance maintained by SP and its
subsidiaries on the date of the Original Merger Agreement (provided that UP may
substitute therefor policies having at least the same coverage and containing
terms and conditions which are no less advantageous to the persons currently
covered by such policies as insured) with respect to matters existing or
occurring at or prior to the Effective Time; provided, however, that if the
aggregate annual premiums for such insurance at any time during such period will
exceed 200% of the per annum rate of premium currently paid by SP and its
subsidiaries for such insurance on the date of the Original Merger Agreement,
then UP will cause the Surviving Corporation or the
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Alternative Surviving Corporation, as the case may be, to, and the Surviving
Corporation or the Alternative Surviving Corporation, as the case may be, will,
provide the maximum coverage that will then be available at an annual premium
equal to 200% of such rate, and UP, in addition to the indemnification provided
above, will indemnify the Indemnified Parties for the balance of such insurance
coverage on the same terms and conditions as though UP were the insurer under
those policies. In the event any Indemnified Party becomes involved in any
capacity in any action, proceeding or investigation based on, or arising from,
in whole or in part, any matter, including the transactions contemplated by the
Amended Merger Agreement, existing or occurring at or prior to the Effective
Time, then, to the extent permitted by law, UP will, or will cause the Surviving
Corporation or the Alternative Surviving Corporation, as the case may be, to,
periodically advance to such Indemnified Party its legal and other expenses
(including the cost of any investigation and preparation incurred in connection
therewith), subject to the provision by such Indemnified Party of an undertaking
to reimburse the amounts so advanced in the event of a final determination by a
court of competent jurisdiction that such Indemnified Party is not entitled
thereto. In addition, in the case of the Alternative Merger, UPRR has agreed to
guarantee the obligations of the Alternative Surviving Corporation under the
foregoing indemnification provisions.
SPIN-OFF
Pursuant to the Amended Merger Agreement, UP has agreed that no dividend
shall be declared for any distribution of shares of capital stock of Resources
or for the distribution to UP's stockholders of any proceeds of any other
disposition of Resources or the assets thereof, and no declaration of, or record
date for, any such distribution shall occur, until after the consummation of the
Merger. If any tax opinion or IRS private letter ruling is requested by UP and
issued in connection with such distribution of shares of capital stock of
Resources, such tax opinion or IRS private letter ruling shall provide that no
income, gain or loss will be recognized by UP's stockholders (including former
SP stockholders who receive UP Common Stock in the Merger) upon the receipt of
Resources Common Stock. See 'THE COMPANIES--Resources Spin-Off.'
COMPENSATION AND BENEFITS
Pursuant to the Amended Merger Agreement, UP has agreed to cause the
Surviving Corporation and its subsidiaries to honor and assume the Employment
Agreements, Contractual Supplemental Executive Retirement Agreements and Stock
Bonus Agreements (each as defined in the Amended Merger Agreement) disclosed to
UP pursuant to the Original Merger Agreement. UP has also agreed to cause the
Surviving Corporation or the Alternative Surviving Corporation, as the case may
be, and its subsidiaries to honor and assume SP's employee benefit plans,
programs and arrangements disclosed to UP pursuant to the Original Merger
Agreement. In addition, in the case of the Alternative Merger, UPRR has agreed
to guarantee the obligations of the Alternative Surviving Corporation under the
foregoing agreements, plans, programs and arrangements and the Management
Continuity Plan and enhanced severance program described below.
The Amended Merger Agreement provides that nothing therein shall prohibit
UP, the Surviving Corporation or the Alternative Surviving Corporation, as the
case may be, or its subsidiaries from amending or terminating any such plan,
program or arrangement at any time in accordance with applicable law (except as
to benefits already vested thereunder); provided that the severance plan for
employees of SP and its subsidiaries who are terminated other than for cause, as
in effect on the date of the Original Merger Agreement, will be continued in
effect for at least one year following the Effective Time.
UP and the Surviving Corporation or the Alternative Surviving Corporation,
as the case may be, have agreed to cause the committee under the SP EIP to make
adequate provision for the adjustment of outstanding awards under the Stock
Bonus Agreements issued under the SP EIP and in accordance with the terms
thereof.
As described more fully in the Amended Merger Agreement and in the section
'THE MERGER--Interests of Certain Persons,' SP and its subsidiaries have
established a Management Continuity Plan (the 'MCP') that will provide certain
payments described in the Amended Merger Agreement (the 'MCP Awards') to certain
Nonagreement Employees of SP or its subsidiaries (whether employed at the date
of the Original Merger Agreement or hired subsequently). Promptly after the
later of (i) the establishment of the MCP or (ii) a Nonagreement Employee's date
of hire (or promotion, if applicable), SP will communicate in writing to each
Nonagreement Employee who is eligible to participate in the MCP the amount of
his or her potential MCP Award and its conditions of payment.
As described more fully in the Amended Merger Agreement and in the section
'THE MERGER--Interests of Certain Persons,' promptly after completion of the
purchase of Shares pursuant to the Offer, SP and its
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subsidiaries established an enhanced severance program to provide certain
additional severance amounts to terminated Nonagreement Employees who become
entitled to severance pursuant to (i) the Southern Pacific Line Non-Agreement
Severance Benefit Plan as revised August 25, 1993, (ii) the substantially
identical plans that have been established for certain subsidiaries which do not
currently have a severance plan, or (iii) the individual agreements in existence
on the date of the Amended Merger Agreement which provide severance benefits.
REPRESENTATIONS AND WARRANTIES
In the Amended Merger Agreement, SP has made customary representations and
warranties to UP, UPRR and Newco with respect to, among other things, its
organization, authorization, capitalization, financial statements, public
filings, employee benefit plans, defaults, information in this Joint Proxy
Statement/Prospectus, compliance with laws, litigation, tax matters, real
property, environmental matters, consents and approvals, opinions of financial
advisors, undisclosed liabilities, contracts, assets, transactions with
affiliates, the validity of the Amended Merger Agreement, corporate actions and
the absence of certain changes. In the Amended Merger Agreement, UP, UPRR and
Newco have made customary representations and warranties to SP with respect to,
among other things, organization, authorization, capitalization, financial
statements, public filings, employee benefit plans, information in the Joint
Proxy Statement/Prospectus, compliance with laws, litigation, tax matters,
environmental matters, consents and approvals, undisclosed liabilities, absence
of certain changes, opinions of financial advisors, corporate actions, the
validity of the Amended Merger Agreement and financing to fund the purchase of
the Shares pursuant to the Offer and to pay the Cash Consideration pursuant to
the Merger.
CONDITIONS TO THE MERGER
Under the Amended Merger Agreement, the obligations of SP, on the one hand,
and UP, UPRR and Newco, on the other hand, to consummate the Merger are subject
to the satisfaction (or, if permissible, waiver by the party for whose benefit
such conditions exist) of the following conditions: (a) in the case of the
Alternative Merger, the Amended Merger Agreement shall have been adopted by the
stockholders of SP in accordance with the DGCL (following the consummation of
the Offer, the Shares owned by UP Acquisition, together with the Shares owned by
the Anschutz Shareholders and MSLEF, represent more than a majority of the
outstanding Shares and accordingly the vote of other shareholders of SP is not
necessary to approve the Merger); (b) if required by the rules of the NYSE, or
by law, the issuance of UP Common Stock in the Merger shall have been approved
by the stockholders of UP; (c) no court, arbitrator or governmental body, agency
or official shall have issued any order, decree or ruling and there shall not be
any statute, rule or regulation, restraining, enjoining or prohibiting the
consummation of the Merger or which would materially and adversely affect the
long-term benefits expected to be received by UP from the transactions
contemplated by the Amended Merger Agreement; and (d) the Registration Statement
and, in the case of the Alternative Merger, the Amended Registration Statement
shall have become effective under the Securities Act and no stop order
suspending effectiveness of the Registration Statement and, in the case of the
Alternative Merger, the Amended Registration Statement shall have been issued
and no proceeding for that purpose shall have been initiated or threatened by
the Commission.
The obligations of UP, UPRR and Newco to consummate the Merger are subject
to the satisfaction (or waiver) of the following further conditions: (a) the
representations and warranties of SP shall have been true and accurate both when
made and (except for those representations and warranties that address matters
only as of a particular date or only with respect to a specific period of time
which need only be true and accurate as of such date or with respect to such
period) as of the Effective Time as if made at and as of such time, except where
the failure of such representations and warranties to be so true and correct
(without giving effect to any limitation as to 'materiality' or 'material
adverse effect' set forth therein) would not have and is not reasonably likely
to have a material adverse effect on SP and its subsidiaries; (b) SP shall have
performed in all material respects its obligations required to be performed by
it under the Amended Merger Agreement at or prior to the Effective Time; (c)(i)
the STB shall have issued a decision (which decision shall not have been stayed
or enjoined) that (A) constitutes a final order approving, exempting or
otherwise authorizing consummation of the Merger and all other transactions
contemplated by the Amended Merger Agreement and the Ancillary Agreements (or
subsequently presented to the STB by agreement of UP and SP) as may require such
authorization and (B) does not (1) change or disapprove of the Merger
Consideration or other material provisions of Article II of the Amended Merger
Agreement or (2) impose on UP, SP or any of their respective subsidiaries any
other terms or conditions (including, without limitation, labor protective
provisions but excluding conditions heretofore imposed by the ICC (as
predecessor to the STB) in New York Dock Railway-Control-Brooklyn Eastern
District, 360
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I.C.C. 60 (1979)) that materially and adversely affect the long-term benefits
expected to be received by UP from the transactions contemplated by the Amended
Merger Agreement; or (ii) no successor to the ICC (other than a Similar
Successor) shall have required any divestiture, hold separate, or other
restriction or action in connection with the expiration or termination of any
waiting period applicable to the Merger or the transactions contemplated by the
Amended Merger Agreement, or in connection with any other action by or in
respect of or filing with such successor, that would materially and adversely
affect the long-term benefits expected to be received by UP from the
transactions contemplated by the Amended Merger Agreement; (d) all actions by or
in respect of or filings with any governmental body, agency, official, or
authority required to permit the consummation of the Merger (other than approval
of the STB, which is addressed in clause (c) above) shall have been obtained but
excluding any consent, approval, clearance or confirmation the failure to obtain
which would not have a material adverse effect on UP, SP or, after the Effective
Time, the Surviving Corporation or the Alternative Surviving Corporation, as the
case may be; (e) each of the Ancillary Agreements shall be valid, in full force
and effect and complied with in all material respects (including, without
limitation, the absence of any challenge, change or disapproval of the Ancillary
Agreements by the STB or any successor), except for such failure to be in full
force and effect and such non-compliance that does not materially and adversely
affect the benefits expected to be received by UP, UPRR, UP Acquisition and
Newco under the Amended Anschutz Shareholders Agreement, the Amended UP
Acquisition/SP RRA (as defined in 'AMENDED AND RESTATED REGISTRATION RIGHTS
AGREEMENTS'), the Amended Merger Agreement and the Ancillary Agreements to the
extent a party thereto; (f) since the date of the Original Merger Agreement,
there shall not have occurred any event, change or effect having, or which would
be reasonably likely to have, individually or in the aggregate (after taking
into account the proceeds of insurance coverage), a material adverse effect on
SP and its subsidiaries, taken as a whole, as a result of or arising out of
'force majeure' (where 'force majeure' shall mean any act of God (including,
without limitation, earthquake, hurricane, flood, tornado or fire)), accident,
damage to or destruction of facilities, properties or assets (tangible or
intangible), war, civil disturbance, national calamity (excluding an economic
crisis in and of itself) or acts of terrorism; and (g) UP shall have received an
opinion of nationally recognized tax counsel to UP, to the effect that the
Merger (whether or not the Offer is integrated with the Merger for federal
income tax purposes) will qualify as a reorganization within the meaning of
Section 368 of the Code and, in rendering such opinion, tax counsel may rely
upon representations provided by the parties hereto as well as certain
stockholders of the parties.
Pursuant to the Amended Merger Agreement, such parties have agreed that the
condition to the Merger set forth in clause (d) above was not intended by the
parties to, and does not, extend to any waiting period pursuant to the HSR Act
applicable to the acquisition by the Anschutz Shareholders of UP Common Stock
pursuant to the Merger; provided, however, that, if all waiting periods
applicable under the HSR Act to the acquisition by the Anschutz Shareholders of
UP Common Stock pursuant to the Merger shall not have expired or been terminated
at the time of the Merger, the Anschutz Shareholders will take appropriate
action, and UP will cooperate with the Anschutz Shareholders, to enable the
Merger to close without delay and without violation of the HSR Act.
The obligations of SP to consummate the Merger are subject to the
satisfaction (or waiver by SP) of the following further conditions: (a) the
representations and warranties of UP, UPRR and, in the case of the Alternative
Merger, Newco (other than the representations and warranties set forth in
Sections 4.7 (no undisclosed liabilities), 4.10 (employee benefit plans; ERISA),
4.11 (taxes) and 4.12 (environmental) of the Amended Merger Agreement) shall
have been true and accurate both when made and as of the Effective Time as if
made at and as of such time, except where the failure of such representations
and warranties to be so true and correct (without giving effect to any
limitation as to 'materiality' or 'material adverse effect' set forth therein),
would not have and is not reasonably likely to have, individually or in the
aggregate, a material adverse effect on UP and its subsidiaries; (b) each of UP,
UPRR, UP Acquisition and Newco shall have performed in all material respects all
of the respective obligations required to be performed by UP, UPRR, UP
Acquisition and Newco, as the case may be, under the Amended Merger Agreement at
or prior to the Effective Time; (c) the UP Common Stock to be issued in the
Merger shall have been approved for listing on the NYSE; (d) the STB shall have
issued a decision (which decision shall not have been stayed or enjoined) that
(i) constitutes a final order approving, exempting or otherwise authorizing
consummation of the Merger and all other transactions contemplated by the
Amended Merger Agreement or subsequently presented to the STB by agreement of SP
and UP, as may require such authorization and (ii) does not change or disapprove
of the Merger Consideration or other material provisions of Article II of the
Amended Merger Agreement; (e) since the date of the Original Merger Agreement,
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there shall not have occurred any event, change or effect having, or which would
be reasonably likely to have, individually or in the aggregate (after taking
into account the proceeds of insurance coverage), a material adverse effect on
UP and its subsidiaries, taken as a whole, as a result of or arising out of
'force majeure' (where 'force majeure' shall mean any act of God (including,
without limitation, earthquake, hurricane, flood, tornado or fire)), accident,
damage to or destruction of facilities, properties or assets (tangible or
intangible), war, civil disturbance, national calamity (excluding an economic
crisis in and of itself) or acts of terrorism; and (f) SP shall have received an
opinion of nationally recognized tax counsel to SP, to the effect that the
Merger (whether or not the Offer is integrated with the Merger for federal
income tax purposes) will qualify as a reorganization within the meaning of
Section 368(a) of the Code and, in rendering such opinion, tax counsel may rely
upon representations provided by the parties hereto as well as certain
stockholders of the parties.
TERMINATION
The Amended Merger Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval by the stockholders of SP, (a)
by mutual consent of the Board of Directors of UP and the Board of Directors of
SP, or (b) by either the Board of Directors of UP or the Board of Directors of
SP (i) if the Merger will not have occurred on or prior to March 31, 1997;
provided, however, that the right to terminate the Amended Merger Agreement will
not be available to any party whose failure to fulfill any obligations under the
Amended Merger Agreement has been the cause of, or resulted in, the failure of
the Merger to occur on or before such date, or (ii) if any governmental entity
shall have issued an order, decree or ruling or taken any other action (which
order, decree, ruling or other action the parties shall use their best efforts
to lift), in each case permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by the Merger Agreement and such
order, decree, ruling or other action shall have become final and
non-appealable.
The Amended Merger Agreement may be terminated by the Board of Directors of
SP, if UP or UPRR (x) breaches or fails in any material respect to perform or
comply with any of its material covenants and agreements contained in the
Amended Merger Agreement or (y) breaches its representations and warranties in
any material respect and such breach would have or would be reasonably likely to
have a material adverse effect on UP and its subsidiaries, in each case such
that the conditions to the Merger set forth in the Amended Merger Agreement
would not be satisfied; provided, however, that if any such breach is curable by
the breaching party through the exercise of the breaching party's best efforts
and for so long as the breaching party will be so using its best efforts to cure
such breach, SP may not terminate the Amended Merger Agreement pursuant to this
paragraph.
The Amended Merger Agreement may be terminated by the Board of Directors of
UP (i) if SP (x) breaches or fails in any material respect to perform or comply
with any of its material covenants and agreements contained in the Amended
Merger Agreement or (y) breaches its representations and warranties in any
material respect and such breach would have or would be reasonably likely to
have a material adverse effect on SP and its subsidiaries, in each case such
that the conditions to the Merger set forth in the Amended Merger Agreement
would not be satisfied; provided, however, that if any such breach is curable by
SP through the exercise of SP's best efforts and for so long as SP will be so
using its best efforts to cure such breach, UP may not terminate the Amended
Merger Agreement pursuant to this clause (i); or (ii) if (A) prior to the
Effective Time, the Board of Directors of SP shall have withdrawn or modified or
changed in a manner adverse to UP, Newco or UPRR its approval or recommendation
of the Offer, the Amended Merger Agreement or the Merger or shall have
recommended a Takeover Proposal or other business combination, or shall have
entered into an agreement in principle (or similar agreement) or definitive
agreement providing for a Takeover Proposal or other business combination with a
person or entity other than UP, Newco, UPRR, or their subsidiaries (or the Board
of Directors of SP resolves to do any of the foregoing), or (B) prior to the
certification of the vote of SP's shareholders to approve the Merger at the
Special Meeting, it shall have been publicly disclosed or UP or UPRR shall have
learned that (x) any person, entity or 'group' (as that term is defined in
Section 13(d)(3) of the Exchange Act), other than UP, its subsidiaries or the
Anschutz Shareholders, shall have acquired beneficial ownership, of more than
25% of any class or series of capital stock of SP (including the Shares) or (y)
any such person, entity or group which, prior to the date of the Original Merger
Agreement, had filed a Schedule 13D with the Commission, shall have acquired or
proposed to acquire beneficial ownership of additional shares of any class or
series of capital stock of SP (including the Shares), through the acquisition of
stock, the formation of a group or otherwise, constituting 1% or more of any
such class or series. SP has advised UP that as of the date of the Original
Merger Agreement, no person, entity or group had so filed a Schedule 13D with
the Commission.
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SHAREHOLDERS AGREEMENTS
THE FOLLOWING ARE SUMMARIES OF CERTAIN PROVISIONS OF THE SHAREHOLDERS
AGREEMENTS. THE SUMMARIES ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE
SHAREHOLDERS AGREEMENTS WHICH ARE INCORPORATED HEREIN BY REFERENCE. CAPITALIZED
TERMS NOT OTHERWISE DEFINED HEREIN OR IN THE FOLLOWING SUMMARIES SHALL HAVE THE
MEANINGS SET FORTH IN THE APPLICABLE SHAREHOLDERS AGREEMENT.
EFFECTIVENESS OF THE SHAREHOLDERS AGREEMENTS
The original Shareholders Agreements, each dated as of August 3, 1995, as
amended, shall remain in effect, and the Amended and Restated Shareholders
Agreements, dated as of July 12, 1996, shall not be effective (other than
certain provisions entitled 'Voting of Common Stock; Irrevocable Proxy',
'Restrictions on Transfer, Proxies; No Solicitation', and which are immediately
effective), until the stockholders of SP have approved the Alternative Merger at
the Special Meeting.
AMENDED AND RESTATED ANSCHUTZ SHAREHOLDERS AGREEMENT
Pledge. The Amended Anschutz Shareholders Agreement provides that TAC has
advised UP that Shares Beneficially Owned (as defined in the Amended Anschutz
Shareholders Agreement) by TAC are or may be pledged to Bank of America National
Trust and Savings Association or Citibank, N.A., respectively (collectively, the
'Banks') pursuant to pledge agreements (substantially in the forms reviewed by
UP, collectively, the 'Existing Pledge Agreements') to secure indebtedness
borrowed from the Banks. In the Amended Anschutz Shareholders Agreement, TAC
represents and warrants that (i) the Existing Pledge Agreements do not or,
before indebtedness borrowed therefrom is secured by any such Shares, will not,
prevent, limit or interfere with TAC's compliance with, or performance of its
obligations under, the Amended Anschutz Shareholders Agreement, absent a default
under the applicable Existing Pledge Agreements and (ii) it is not in default
under the Existing Pledge Agreements. Prior to the execution of the original
Anschutz Shareholders Agreement (the 'Original Anschutz Shareholders
Agreement'), TAC delivered to UP a letter from Bank of America National Trust
and Savings Association acknowledging the Original Anschutz Shareholders
Agreement and agreeing in effect that, notwithstanding any default under the
applicable Existing Pledge Agreement, TAC shall have the right to exercise all
voting rights with respect to SP Common Stock pledged thereunder as set forth in
the Original Anschutz Shareholders Agreement and the proxy described below. TAC
shall deliver to UP a similar letter from Citibank, N.A. before shares of SP
Common Stock shall be pledged under the applicable Existing Pledge Agreement to
secure any indebtedness. The Anschutz Shareholders may, subsequent to the date
of the Original Anschutz Shareholders Agreement, effect one or more pledges of
SP Voting Securities (as defined in the Amended Anschutz Shareholders Agreement)
or UP Voting Securities (as defined in the Amended Anschutz Shareholders
Agreement) to be received pursuant to the Merger or otherwise, or grants of
security interests therein, to one or more financial institutions (other than
the Banks) that are not Affiliates of any Anschutz Shareholder (collectively,
'Other Financial Institutions') as security for the payment of bona fide
indebtedness owed by one or more of the Anschutz Shareholders or their
Affiliates to such Other Financial Institutions. Except as set forth in the
proviso below, neither the Banks nor any Other Financial Institution which
hereafter becomes a pledgee of SP Voting Securities or UP Voting Securities
shall incur any obligations under the Original Anschutz Shareholders Agreement
or Amended Anschutz Shareholders Agreement with respect to such SP Voting
Securities or such UP Voting Securities, as the case may be, or shall be
restricted from exercising any right of enforcement or foreclosure with respect
to any related security interest or lien; provided, however, that it shall be a
condition to any such pledge to any Other Financial Institution that, in the
case of SP Voting Securities, the pledgee shall agree that TAC (and UP with
respect to the proxy described below) shall have the right to exercise all
voting rights with respect to SP Voting Securities pledged thereunder as set
forth in the Amended Anschutz Shareholders Agreement and the proxy described
below and, in the case of SP Voting Securities or UP Voting Securities, no such
pledge shall prevent, limit or interfere with Anschutz Shareholders' compliance
with, or performance of their obligations under, the Amended Anschutz
Shareholders Agreement, absent a default under such pledge agreement. The
obligations of the Banks and the Other Financial Institutions with respect to
voting of SP Common Stock and the proxy described below shall terminate on the
earlier of (x) the consummation of the Merger and (y) the termination of the
Amended Merger Agreement in accordance with the terms thereof.
Voting of Common Stock; Irrevocable Proxy; No Solicitation. The Amended
Anschutz Shareholders Agreement provides that the Anschutz Shareholders, during
the period commencing on the date of the Original
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Anschutz Shareholders Agreement and continuing until the earlier of (x) the
consummation of the Merger, (y) six months following the termination of the
Amended Merger Agreement in accordance with Section 7.1(d)(ii) of the Amended
Merger Agreement (permitting UP to terminate the Amended Merger Agreement if the
Board of Directors of SP shall have withdrawn, or modified or changed in a
manner adverse to UP, UPRR, or Newco its approval or recommendation of the
Amended Merger Agreement or recommended a Takeover Proposal, or entered into an
agreement providing for a Takeover Proposal with a person or entity other than
UP, UPRR or Newco or their subsidiaries, or prior to SP's shareholders approval
of the Merger, any person, entity or group, other than UP or its subsidiaries,
or the Anschutz Shareholders, shall have acquired beneficial ownership of more
than 25% of the capital stock of SP, or any such person, entity or group which,
prior to the date of the Amended Merger Agreement, had filed a Schedule 13D with
the Commission, shall have acquired beneficial ownership of additional shares of
SP constituting 1% or more of SP) (such termination sections of the Amended
Merger Agreement being referred to herein as the 'Fiduciary-out Termination
Provisions'), and (z) upon the termination of the Amended Merger Agreement in
accordance with any provision of Section 7.1 thereof, other than the
Fiduciary-out Termination Provisions (such period being referred to as the
'Voting Period'), at any meeting (whether annual or special, and whether or not
an adjourned or postponed meeting) of SP's stockholders, however called, or in
connection with any written consent of SP's stockholders, subject to the absence
of a preliminary or permanent injunction or other final order by any United
States federal court or state court barring such action, the Anschutz
Shareholders shall vote (or cause to be voted) all Shares and all other SP
Voting Securities beneficially owned by them, (i) in favor of the Merger, the
execution and delivery by SP of the Amended Merger Agreement and the approval
and adoption of the Amended Merger Agreement and the terms thereof and each of
the other actions contemplated by the Amended Merger Agreement, the Amended
Anschutz Shareholders Agreement and the Ancillary Agreements (as defined in the
Amended Merger Agreement) and any actions required in furtherance thereof; (ii)
against any action or agreement that would (A) result in a breach of any
covenant, representation or warranty or any other obligation or agreement of SP
under the Amended Merger Agreement or any of the Ancillary Agreements to which
it is a party or of the Anschutz Shareholders under the Amended Anschutz
Shareholders Agreement or (B) impede, interfere with, delay, postpone, or
adversely affect the Merger or the transactions contemplated by the Amended
Merger Agreement, the Amended Anschutz Shareholders Agreement and the Ancillary
Agreements; and (iii) except as otherwise agreed to in writing in advance by UP,
against the following actions (other than the Merger and the transactions
contemplated by the Amended Merger Agreement, the Amended Anschutz Shareholders
Agreement and the Ancillary Agreements): (A) any extraordinary corporate
transaction, such as a merger, consolidation or other business combination
involving SP or any of its subsidiaries; (B) any sale, lease or transfer of a
substantial portion of the assets or business of SP or its subsidiaries, or
reorganization, restructuring, recapitalization, special dividend, dissolution
or liquidation of SP or its subsidiaries; or (C) any change in the present
capitalization of SP including any proposal to sell a substantial equity
interest in SP or any of its subsidiaries. The Anschutz Shareholders have agreed
not to enter into any agreement, arrangement or understanding with any Person
(as defined in the Amended Anschutz Shareholders Agreement) the effect of which
would be inconsistent or violative of the foregoing provisions and agreements.
The Amended Anschutz Shareholders Agreement provides that at the request of
UP (which request has been made), each Anschutz Shareholder, in furtherance of
the transactions contemplated by the Amended Anschutz Shareholders Agreement and
by the Amended Merger Agreement and the Ancillary Agreements, and in order to
secure the performance by Anschutz Shareholders of their duties under the
Amended Anschutz Shareholders Agreement, shall promptly execute and deliver to
UP an irrevocable proxy. The proxy entitles the holder thereof to vote the
Shares subject thereto with respect to all matters referred to in the preceding
paragraph. The Anschutz Shareholders acknowledge and agree that such irrevocable
proxy shall be coupled with an interest, shall constitute, among other things,
an inducement for UP to enter into the Amended Anschutz Shareholders Agreement,
the Amended Merger Agreement and the Ancillary Agreements to which it is a
party, shall be irrevocable during the Voting Period and shall not be terminated
by operation of law or upon the occurrence of any event.
Restrictions on Transfer, Proxies; No Solicitation. The Amended Anschutz
Shareholders Agreement provides that the Anschutz Shareholders shall not, during
the Voting Period, directly or indirectly: (i) except as described in 'Pledge'
above, Transfer (as defined in the Amended Anschutz Shareholders Agreement)
(including but not limited to the Transfer of any securities of an Affiliate (as
defined in the Amended Anschutz
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Shareholders Agreement) which is the record holder or Beneficial Owner of SP
Voting Securities if, as the result of such Transfer, such Person would cease to
be an Affiliate of a Shareholder) to any Person any or all of the SP Voting
Securities Beneficially Owned by Anschutz Shareholders, provided that an
Anschutz Shareholder may Transfer SP Voting Securities to any other Anschutz
Shareholder; (ii) except in respect of the irrevocable proxy and voting
agreement referred to above, grant any proxies or powers of attorney, deposit
any SP Voting Securities into a voting trust or enter into a voting agreement,
understanding or arrangement with respect to SP Voting Securities; or (iii) take
any action that would make any representation or warranty of the Anschutz
Shareholders contained in the Amended Anschutz Shareholders Agreement untrue or
incorrect or would result in a breach by Anschutz Shareholders of their
obligations under the Amended Anschutz Shareholders Agreement or a breach by SP
of its obligations under the Amended Merger Agreement or any of the Ancillary
Agreements to which it is a party. Notwithstanding any provisions of the Amended
Anschutz Shareholders Agreement to the contrary, the Anschutz Shareholders may
Transfer in the aggregate, following the consummation of the Offer and prior to
the Effective Time, a number of Shares in the aggregate not greater than 10% of
the Shares Beneficially Owned by the Anschutz Shareholders immediately following
consummation of the Offer; provided, however, that any such Shares which are so
Transferred by TAC, or Transferred by the Foundation in an amount in excess of
1,558,254 Shares, prior to the Special Meeting, shall continue to be subject to
the voting agreement and the proxy described above, and, as a condition to any
such Transfer of Shares, the Anschutz Shareholders shall enter into a written
agreement with the transferee of such Shares, in form and substance satisfactory
to UP, granting the Anschutz Shareholders the right to vote such Shares in
accordance with the voting agreement and the proxy referred to above.
The Amended Anschutz Shareholders Agreement provides that during the Voting
Period, the Anschutz Shareholders shall not, and shall cause their respective
Affiliates and the respective officers, directors, employees, associates,
partners, investment bankers, attorneys, accountants and other agents and
representatives of Anschutz Shareholders and their subsidiaries and affiliates
(collectively, 'Representatives') not to, directly or indirectly, (i) 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 (as defined in the Amended Merger Agreement) of SP or any Affiliate, or
any inquiry with respect thereto, or (ii) in the event of an unsolicited
Takeover Proposal for SP or any Affiliate of SP, engage in negotiations or
discussions with, or provide any information or data to, any Person (other than
UP, any of its Affiliates or representatives) relating to any Takeover Proposal.
The Anschutz Shareholders shall notify UP orally and in writing of any such
offers, proposals, or inquiries relating to the purchase or acquisition by any
Person of the Shares Beneficially Owned by the Anschutz Shareholders (including,
without limitation, the terms and conditions thereof and the identity of the
Person making it), within 24 hours of the receipt thereof, provided that
Anschutz Shareholders shall have no such notification obligation with respect to
any proposal, offer or inquiry relating to any Takeover Proposal (which Takeover
Proposal notification shall be reported to the Board of Directors of SP) other
than to the extent that such proposal contemplates treating Anschutz
Shareholders, as shareholders of SP, in any manner different than or
inconsistent with the treatment of other shareholders of SP, whether as to
terms, the entering into of separate agreements or otherwise. The Anschutz
Shareholders have agreed to, and to cause their Representatives to, immediately
cease and cause to be terminated all existing activities, discussions and
negotiations, if any, with any parties conducted prior to the date of the
Anschutz Shareholders Agreement with respect to any Takeover Proposal relating
to SP, other than discussions or negotiations with UP and its Affiliates.
The Amended Anschutz Shareholders Agreement provides that, during the
Voting Period, the Anschutz Shareholders will not, and will cause their
Affiliates not to, directly or indirectly, make any public comment, statement or
communication, or take any action that would otherwise require any public
disclosure by the Anschutz Shareholders, UP or any other Person (as defined in
the Amended Anschutz Shareholders Agreement), concerning the Merger, the Offer,
the Spin-Off and the other transactions contemplated by the Amended Merger
Agreement, the Amended Anschutz Shareholders Agreement and the Ancillary
Agreements, except for any disclosure (i) concerning the status of Anschutz
Shareholders as parties to such agreements, the terms thereof, and their
beneficial ownership of Shares required pursuant to Section 13(d) of the
Exchange Act, or (ii) required pursuant to the Schedule 14D-9 or this Joint
Proxy Statement/Prospectus.
The Amended Anschutz Shareholders Agreement provides that, notwithstanding
the restrictions described in the second preceding paragraph, any Person who is
a director or officer of SP may exercise his fiduciary duties in his capacity as
a director or officer with respect to SP, as opposed to taking action with
respect to the direct or
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indirect ownership of any Shares, and no such exercise of fiduciary duties shall
be deemed to be a breach of, or a violation of such restrictions described in,
such paragraph and none of the Anschutz Shareholders shall have any liability
thereunder for any such exercise of fiduciary duties by such Person in his
capacity as a director and officer of SP.
Standstill and Related Provisions. The Amended Anschutz Shareholders
Agreement provides that, subject to the paragraph immediately following item
(xi) below, the Anschutz Shareholders, for a period commencing on the date of
the Amended Anschutz Shareholders Agreement and terminating on the seventh
anniversary of the Effective Time or, if earlier, the termination of the Amended
Anschutz Shareholders Agreement in accordance with the terms thereof (the
'Standstill Period'), without the prior written consent of the Board of
Directors of UP (the 'UP Board') specifically expressed in a resolution adopted
by a majority of the directors of UP, the Anschutz Shareholders will not, and
the Anschutz Shareholders will cause each of their respective Affiliates (as
defined in the Amended Merger Agreement) not to, directly or indirectly, alone
or in concert with others:
(i) acquire, offer or propose to acquire, or agree to acquire (except,
in any case, by way of (A) following consummation of the Merger, stock
dividends or other distributions or rights offerings made available to
holders of any shares of UP Common Stock generally, share-splits,
reclassifications, recapitalizations, reorganizations and any other similar
action taken by UP, (B) following consummation of the Merger, the
conversion, exercise or exchange of UP Voting Securities in accordance with
the terms thereof, (C) the issuance and delivery of UP Voting Securities
pursuant to the Amended Merger Agreement and (D) following consummation of
the Merger, the acquisition of not more than 131,723 shares of UP Common
Stock pursuant to a certain purchase agreement (as amended from time to
time, the 'Purchase Agreement'), provided, that any such securities shall
be subject to the provisions of the Amended Anschutz Shareholders
Agreement), directly or indirectly, whether by purchase, tender or exchange
offer, through the acquisition of control of another Person, by joining a
partnership, limited partnership, syndicate or other 'group' (within the
meaning of Section 13(d)(3) of the Exchange Act) (other than groups
consisting solely of Anschutz Shareholders and their Affiliates, all of
which are or, prior to the formation of such group, become, parties to the
Amended Anschutz Shareholders Agreement) or otherwise, any UP Voting
Securities; provided, however, that if UP shall issue additional UP Voting
Securities following consummation of the Merger, Anschutz Shareholders and
their Affiliates may purchase or acquire additional UP Voting Securities to
bring their Beneficial Ownership up to the greater of 5.5% and the
percentage of outstanding UP Voting Securities Beneficially Owned by the
Anschutz Shareholders immediately prior to such issuance by UP; provided,
further, without limiting the immediately preceding proviso, if as a result
of Transfers of UP Voting Securities, Anschutz Shareholders Beneficially
Own less than 5.5% of the then outstanding shares of UP Voting Securities,
Anschutz Shareholders may purchase or acquire additional UP Voting
Securities to bring their Beneficial Ownership up to, but not in excess of,
5.5% of the then outstanding shares of UP Voting Securities. In addition,
in the event that a Shareholder or an Affiliate thereof inadvertently and
without knowledge (an 'Inadvertent Acquisition') indirectly acquires
Beneficial Ownership of not more than one-quarter of one percent of the UP
Voting Securities in excess of the amount permitted to be owned by the
Anschutz Shareholders pursuant to this paragraph pursuant to a transaction
by which a Person (that was not then an Affiliate of a Shareholder before
the consummation of such transaction) owning UP Voting Securities becomes
an Affiliate of such Shareholder, then all UP Voting Securities so acquired
shall thereupon become subject to the Amended Anschutz Shareholders
Agreement and such Shareholder shall be deemed not to have breached the
Amended Anschutz Shareholders Agreement provided that such Shareholder,
within 120 days thereafter, causes a number of such UP Voting Securities in
excess of the amount permitted to be so owned (or, at the election of such
Shareholder, an equal number of the other UP Voting Securities that are
Beneficially Owned by a Shareholder) to be Transferred, in a transaction
subject to the provisions described in 'Limitations on Disposition' below,
to a transferee that is not a Shareholder, an Affiliate thereof or a member
of a 'group' in which a Shareholder or an Affiliate is included (or, if UP
or its assignee shall exercise any purchase rights under the second
paragraph of the provisions described in '--Limitations on Disposition'
below, to UP or its assignee);
(ii) make, or in any way participate, directly or indirectly, in any
'solicitation' (as such term is used in the proxy rules of the SEC) of
proxies or consents (whether or not relating to the election or removal of
directors), seek to advise, encourage or influence any Person with respect
to the voting of any UP Voting
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Securities, initiate, propose or otherwise 'solicit' (as such term is used
in the proxy rules of the SEC) shareholders of UP for the approval of
shareholder proposals, whether made pursuant to Rule 14a-8 of the Exchange
Act or otherwise, or induce or attempt to induce any other Person to
initiate any such shareholder proposal or otherwise communicate with UP's
shareholders or others pursuant to Rule 14a-1(2)(iv) under the Exchange Act
or otherwise;
(iii) seek, propose, or make any statement with respect to, any
merger, consolidation, business combination, tender or exchange offer, sale
or purchase of assets, sale or purchase of securities, dissolution,
liquidation, reorganization, restructuring, recapitalization, change in
capitalization, change in corporate structure or business or similar
transaction involving UP or its subsidiaries (including Resources) (any of
the foregoing being referred to herein as a 'Specified UP Transaction');
provided that the foregoing shall not prevent (A) voting of UP Common Stock
in the manner described in the last paragraph under '--Standstill and
Related Provisions' (but shall prevent any public comment, statement or
communication, and any action that would otherwise require any public
disclosure by the Anschutz Shareholders, UP or any other Person, concerning
such voting) or (B) the Anschutz Shareholder Designee (as defined below
under '--UP Covenants') from exercising his fiduciary duties in his
capacity as a director by participating in any Board deliberations or vote
of the Board of Directors of UP with respect to a Specified UP Transaction;
(iv) form, join or in any way participate in a 'group' (within the
meaning of Section 13(d)(3) of the Exchange Act) with respect to any UP
Voting Securities, other than groups consisting solely of Anschutz
Shareholders and their Affiliates;
(v) deposit any UP Voting Securities in any voting trust or subject
any UP Voting Securities to any arrangement or agreement with respect to
the voting of any UP Voting Securities except as set forth in the Amended
Anschutz Shareholders Agreement;
(vi) call or seek to have called any meeting of the stockholders of UP
or execute any written consent with respect to UP or UP Voting Securities;
provided that the foregoing shall not prevent the Anschutz Shareholder
Designee from exercising his fiduciary duties in his capacity as a director
by participating in any Board deliberations or vote of the Board of
Directors of UP with respect to the calling of any annual meeting of
shareholders of UP;
(vii) otherwise act, alone or in concert with others, to control or
seek to control or influence or seek to influence the management, Board of
Directors or policies of UP (except to the extent the actions by a
Shareholder Designee relating to UP's Board of Directors in the exercise of
his fiduciary duties in his capacity as a director may be viewed as
influencing or seeking to influence the management, Board of Directors or
policies of UP);
(viii) seek, alone or in concert with others, representation on the UP
Board (except as described below under 'UP Covenants'), or seek the removal
of any member of such Board or a change in the composition or size of such
Board;
(ix) make any publicly disclosed proposal, comment, statement or
communication (including, without limitation, any request to amend, waive
or terminate any provision of the Amended Anschutz Shareholders Agreement
other than the 'standstill' restrictions described in these items
(i)-(xi)), or make any proposal, comment, statement or communication
(including, without limitation, any request to amend, waive or terminate
any provision of the Amended Anschutz Shareholders Agreement other than the
'standstill' restrictions described in these items (i)-(xi)) in a manner
that would require any public disclosure by the Anschutz Shareholders, UP
or any other Person, or enter into any discussion with any Person (other
than directors and officers of UP), regarding any of the foregoing;
(x) make or disclose any request to amend, waive or terminate any of
the 'standstill' restrictions set forth in these items (i)-(xi); or
(xi) have any discussions or communications, or enter into any
arrangements, understandings or agreements (whether written or oral) with,
or advise, finance, assist or encourage, any other Person in connection
with any of the foregoing, or take any action inconsistent with the
foregoing, or make any
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investment in or enter into any arrangement with, any other Person that
engages, or offers or proposes to engage, in any of the foregoing.
The restrictions described above shall not prevent Anschutz Shareholders
from (A) performing their obligations and exercising their rights under the
Amended Anschutz Shareholders Agreement, including, without limitation, (w)
Transferring any SP Voting Securities or UP Voting Securities in accordance with
the terms thereof, (x) selecting the Anschutz Shareholder Designee, (y) serving
in the positions described in or resigning from such positions contemplated by
the Amended Anschutz Shareholders Agreement, and (z) voting in accordance with
the terms thereof and granting a proxy to UP in accordance with the terms
thereof; (B) communicating in a non-public manner with any other Shareholder or
their Affiliates; and (C) complying with the requirements of Sections 13(d) and
16(a) of the Exchange Act and the rules and regulations thereunder, in each
case, as from time to time in effect, or any successor provisions or rules with
respect thereto, or any other applicable law, rule, regulation, judgment,
decree, ruling, order, award, injunction, or other official action of any
agency, bureau, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government (whether federal, state,
county or local, domestic or foreign).
The Amended Anschutz Shareholders Agreement provides that during the period
commencing on the date of the Anschutz Shareholders Agreement and continuing
until the earlier of (x) the consummation of the Merger and (y) the termination
of the Amended Merger Agreement, Anschutz Shareholders will not, and Anschutz
Shareholders will cause each of their respective Affiliates not to, directly or
indirectly, alone or in concert with others, acquire, offer or propose to
acquire, or agree to acquire, whether by purchase, tender or exchange offer,
through the acquisition of control of another Person, by joining a partnership,
limited partnership, syndicate or other 'group' or otherwise, any SP Voting
Securities (except pursuant to the Purchase Agreement and by way of stock
dividends or other distributions or rights offerings made available to holders
of any shares of SP Common Stock generally, stock-splits, reclassifications,
recapitalizations, reorganizations and any other similar action taken by SP).
The Amended Anschutz Shareholders Agreement provides that subject to the
receipt of proper notice and the absence of a preliminary or permanent
injunction or other final order by any United States federal court or state
court barring such action, during the Standstill Period, the Anschutz
Shareholders will, and will cause their Affiliates to, (i) be present, in person
or represented by proxy, at all annual and special meetings of shareholders of
UP so that all UP Common Stock Beneficially Owned by the Anschutz Shareholders
and their affiliates and then entitled to vote may be counted for the purposes
of determining the presence of a quorum at such meetings, and (ii) vote in
accordance with the recommendation of the Board of Directors of UP in the
election of directors and as directed by the Persons acting as Proxies in
respect of proxies solicited by the Board of Directors of UP with respect to the
election of directors (including the manner in which such UP Common Stock shall
be cumulated). On all other matters presented for a vote of shareholders of UP,
Anschutz Shareholders may vote in their discretion.
Limitations on Disposition. The Amended Anschutz Shareholders Agreement
provides that during the Standstill Period, the Anschutz Shareholders will not,
and will cause their Affiliates not to, directly or indirectly, without the
prior written consent of the UP Board specifically expressed in a resolution
adopted by a majority of the directors of UP, Transfer any UP Voting Securities
(including but not limited to the Transfer of any securities of an Affiliate
which is the record holder or Beneficial Owner of UP Voting Securities, if as
the result of such Transfer, such Person would cease to be an Affiliate of a
Shareholder), if, to the knowledge of the Anschutz Shareholders or any of their
Affiliates, after due inquiry which is reasonable in the circumstances (and
which shall include, with respect to the Transfer of 1% or more of the UP Voting
Securities then outstanding in one transaction, or a series of related
transactions, specific inquiry with respect to the identity of the acquiror of
such UP Voting Securities and the number of UP Voting Securities that,
immediately following such transaction or transactions, would be Beneficially
Owned by such acquiror, together with its Affiliates and any members of a
'group' (within the meaning of Section 13(d)(3) of the Exchange Act) of which
such acquiror is a member), immediately following such transaction the acquiror
of such UP Voting Securities, together with its Affiliates and any members of
such a group, would Beneficially Own in the aggregate 4% or more of the UP
Voting Securities then outstanding; provided that, without the prior written
consent of the Board of Directors of UP, (i) Anschutz Shareholders and their
Affiliates may Transfer any number of UP Voting Securities to any other
Shareholder, any Affiliate of a Shareholder or to any heirs, distributees,
guardians, administrators, executors, legal representatives
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or similar successors in interest of any Anschutz Shareholder, provided that (A)
such transferee, if not then an Anschutz Shareholder, shall become a party to
the Amended Anschutz Shareholders Agreement and agree in writing to perform and
comply with all of the obligations of such transferor Shareholder under the
Amended Anschutz Shareholders Agreement, and thereupon such transferee shall be
deemed to be a Shareholder party to the Amended Anschutz Shareholders Agreement
for all purposes of the Amended Anschutz Shareholders Agreement, and (B) if the
transferee is not prior thereto a Shareholder, the transferor shall remain
liable for such transferee's performance of and compliance with the obligations
of the transferor under the Amended Anschutz Shareholders Agreement, (ii)
Anschutz Shareholders and their Affiliates may Transfer UP Voting Securities in
a tender offer, merger, or other similar business combination transaction
approved by the Board of Directors of UP, and (iii) Anschutz Shareholders may
pledge their UP Voting Securities as provided in the Amended Anschutz
Shareholders Agreement and the pledgee may Transfer such UP Voting Securities in
connection with the enforcement or foreclosure of any related security interest
or lien following a default.
The Amended Anschutz Shareholders Agreement provides that during the
Standstill Period, if to the knowledge of the Anschutz Shareholders after making
due inquiry which is reasonable under the circumstances, immediately following
the Transfer of any UP Voting Securities the acquiror thereof, together with its
Affiliates and any members of a 'group' (within the meaning of Section 13(d)(3)
of the Exchange Act), would Beneficially Own in the aggregate 2% or more of the
outstanding UP Voting Securities (a '2% Sale'), Anschutz Shareholders shall,
prior to effecting any such Transfer, offer UP a right of first refusal to
purchase the shares proposed to be Transferred on the following terms. Anschutz
Shareholders shall provide UP with written notice (the '2% Sale Notice') of any
proposed 2% Sale, which 2% Sale Notice shall contain the identity of the
purchaser, the number of shares of UP Voting Securities proposed to be
Transferred to such purchaser, the purchase price for such shares and the form
of consideration payable for such shares. The 2% Sale Notice shall also contain
an irrevocable offer to sell the shares subject to such 2% Sale Notice to UP for
cash at a price equal to the price contained in such 2% Sale Notice. UP shall
have the right and option, by written notice delivered to such Anschutz
Shareholder (the 'Purchase Notice') within 15 days of receipt of the 2% Sale
Notice, to accept such offer as to all, but not less than all, of the UP Voting
Securities subject to such 2% Sale Notice. UP shall have the right to assign to
any Person such right to purchase the shares subject to the 2% Sale Notice. In
the event UP (or its assignee) elects to purchase the shares subject to the 2%
Sale Notice, the closing of the purchase of the UP Voting Securities shall occur
at the principal office of UP (or its assignee) on or before the 30th day
following such Anschutz Shareholder's receipt of the Purchase Notice. In the
event UP does not elect to purchase the shares subject to the 2% Sale Notice,
such Shareholder shall be free, for a period of 30 days following the receipt of
notice from UP of its election not to purchase such shares or, in the absence of
any such notice, for a period of 30 days following the 15th day after receipt by
UP of the 2% Sale Notice, to sell the shares subject to the 2% Sale Notice in
accordance with the terms of, and to the person identified in, the 2% Sale
Notice. If such sale is not effected within such 30-day period such shares shall
remain subject to the provisions of the Amended Anschutz Shareholders Agreement.
Notwithstanding the foregoing, the right of first refusal described in this
paragraph shall not apply to the sale by Anschutz Shareholders of UP Voting
Securities (i) made in an underwritten public offering pursuant to an effective
registration statement under the Securities Act, or (ii) made in a transaction
permitted pursuant to, and made in compliance with, clauses (i) or (iii) of the
proviso in the immediately preceding paragraph, or (iii) made in a tender offer,
merger or other similar business combination transaction approved by the Board
of Directors of UP. Any proposed sale by Anschutz Shareholders of UP Voting
Securities shall be subject to the restrictions on sales to an acquiror which
would Beneficially Own 4% or more of the outstanding UP Voting Securities, as
described in the immediately preceding paragraph, whether or not UP exercises
its right of first refusal and consummates the purchase of UP Voting Securities.
If UP (or its assignee) exercises its right to purchase any UP Voting Securities
but fails to complete the purchase thereof for any reason other than the failure
of such Shareholder to perform its obligations thereunder with respect to such
purchase, then, on the 30th day following such Shareholder's receipt of the
Purchase Notice, such UP Voting Securities shall cease to be subject to the
voting obligations described in the last paragraph under '--Standstill and
Related Provisions' above, the transfer restrictions and right of first refusal
described in this '--Limitations on Disposition' section and the requirement
that certain legends be placed on the certificates representing such UP Voting
Securities. If the purchase price described in any 2% Sale Notice is not solely
made up of cash or marketable securities, the 2% Sale Notice shall include a
good faith estimate of the cash equivalent of such other consideration, and the
consideration payable by UP or its assignee (if UP elects to purchase (or to
have its
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assignee purchase) the UP Voting Securities described in the 2% Sale Notice) in
place of such other consideration shall be cash equal to the amount of such
estimate; provided, however, that if UP in good faith disagrees with such
estimate and states a different good faith estimate in the Purchase Notice, and
if UP and such Shareholder cannot agree on the cash equivalent of such other
(i.e., other than cash or marketable securities) consideration, such cash
equivalent shall be determined by a reputable investment banking firm without
material connections with either party. Such investment banking firm shall be
selected by both parties or, if they shall be unable to agree, by an arbitrator
appointed by the American Arbitration Association. The fees and expenses of any
such investment banking firm and/or arbitrator shall be shared equally by UP and
such Shareholder, unless otherwise determined by such firm or arbitrator. In the
event of such differing estimates by UP and such Shareholder, periods of time
which would otherwise run under the provisions described in this paragraph from
the date of such Shareholder's receipt of the Purchase Notice shall run instead
from the date on which the parties agree on such cash equivalent or, in the
absence of such agreement, the date on which such cash equivalent is determined
by such investment banking firm. If the purchase price described in any 2% Sale
Notice shall include marketable securities, the purchase price payable by UP (or
its designee) shall include, to the extent marketable securities were included
as a portion of the consideration provided for in the 2% Sale Notice, an amount
in cash determined by reference to the Current Market Price (as defined in the
Amended Anschutz Shareholders Agreement) of such securities on the day the
Purchase Notice is received by such Shareholder.
The Amended Anschutz Shareholders Agreement provides that in connection
with any proposed privately negotiated sale by any Anschutz Shareholders of UP
Voting Securities representing in excess of 3.9% of the then outstanding shares
of UP Voting Securities, UP will cooperate with and permit the proposed
purchaser to conduct a due diligence review reasonable under the circumstances
of UP and its Subsidiaries and their respective business and operations,
including, without limitation, reasonable access during normal business hours to
their executive officers, and, if reasonable under the circumstances, their
properties subject to execution by such purchaser of a customary confidentiality
agreement; provided that UP shall not be required to permit more than two such
due diligence reviews in any twelve-month period.
UP Covenants. The Amended Anschutz Shareholders Agreement provides that on
or prior to the Effective Time, the Board of Directors of UP will take all
action necessary to elect Mr. Anschutz, or another individual selected by TAC
and reasonably acceptable to the Board of Directors of UP (such director being
referred to as the 'Anschutz Shareholder Designee') as a director of UP's Board
of Directors and to appoint Mr. Anschutz, but not any other Anschutz Shareholder
Designee, as Vice Chairman of the Board of Directors as of the Effective Time.
Subject to the following sentence of this paragraph, after the Effective Time
and during the Standstill Period, UP shall include the Anschutz Shareholder
Designee in the Board of Directors' slate of nominees for election as directors
at UP's annual meeting of shareholders and shall recommend that the Anschutz
Shareholder Designee be elected as a director of UP. The Anschutz Shareholder
Designee, if requested by UP, shall resign from UP's Board of Directors (a)
effective not later than the next annual meeting of shareholders of UP, if
Anschutz Shareholders and their Affiliates Beneficially Own less than 4% of the
UP Voting Securities then outstanding, provided, however that the Amended
Anschutz Shareholders Agreement shall continue in full force and effect until
the date of such resignation, or (b) immediately if the Anschutz Shareholders
violate or breach any of the material terms or provisions of the Amended
Anschutz Shareholders Agreement. Notwithstanding any resignation pursuant to
clause (b) of the preceding sentence, all of the provisions of the Amended
Anschutz Shareholders Agreement other than those described in this 'UP
Covenants' section shall continue in full force and effect. The duties and
responsibilities of the Vice Chairman shall be as assigned by the Board of
Directors of UP or by the Chairman of the Board of UP, and the Vice Chairman
shall receive no additional compensation for serving in such position. So long
as a Shareholder Designee serves as a member of the Board of Directors of UP, UP
agrees that the Anschutz Shareholder Designee shall serve (subject to the
applicable requirements of the NYSE or any other security exchange on which the
UP Common Stock is listed, or if not so listed, under the rules or regulations
of the NASD) as a member of the Executive, Finance and Corporate Development,
and Compensation, Benefits and Nominating Committee of the UP Board; provided,
however that UP shall not be obligated to cause the Anschutz Shareholder
Designee to become a member of the Compensation, Benefits and Nominating
Committee of the UP Board if, and only for so long as, in the opinion of tax
counsel for UP (which may be internal or outside counsel), the membership of the
Anschutz Shareholder Designee on such Committee would be likely to cause the
disallowance of any deduction by UP for federal income tax purposes under
Section 162(m) of the Code or any other provision of, or regulation under, the
Code now or hereafter in effect.
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UP acknowledges that the Anschutz Shareholder Designee, consistent with his
rights and duties as a director, shall have access to all information that he
may request concerning actions taken by the Compensation, Benefits and
Nominating Committee. Except as otherwise provided in the Amended Anschutz
Shareholders Agreement, upon the termination of the Amended Anschutz
Shareholders Agreement, if so requested by UP, the Anschutz Shareholder Designee
shall resign as a director of UP's Board of Directors.
In the event that any Shareholder Designee shall cease to be a member of
the Board of Directors by reason of death, disability or resignation (other than
resignations required pursuant to the provisions of the immediately preceding
paragraph), UP shall replace such Shareholder Designee with another Shareholder
Designee at the next meeting of the Board of Directors.
The Anschutz Shareholder Designee, upon nomination or appointment as a
director of UP, shall agree in writing to comply with the obligations of the
Anschutz Shareholders described in the first paragraph (and the numbered items
related thereto) of '--Standstill and Related Provisions' above and the
obligation of such Shareholder Designee under this paragraph.
Without the prior written consent of Anschutz Shareholders, UP shall not
take or recommend to its shareholders any action which would impose limitations,
not imposed on other stockholders of UP, on the enjoyment by any of Anschutz
Shareholders and their Affiliates of the legal rights generally enjoyed by
shareholders of UP, other than those imposed by the terms of the Amended
Anschutz Shareholders Agreement, the Amended Merger Agreement and the Ancillary
Agreements; provided, however, that the foregoing shall not prevent UP from
implementing or adopting a Shareholder Rights Plan or issuing a similar security
which has a 'trigger' threshold of not less than the greater of 10% of the
outstanding shares of UP Common Stock or the amount then Beneficially Owned by
Anschutz Shareholders not in violation of the Amended Anschutz Shareholders
Agreement.
Additional Limitation on Dispositions. The Amended Anschutz Shareholders
Agreement provides that notwithstanding any other provision thereof, TAC will
not, and will cause its Affiliates not to, for a period of two years commencing
as of the Effective Time (the 'Reorganization Continuity Period'), enter into
any transaction or arrangement to the extent such transaction or arrangement
(combined with any other transactions or arrangements entered into by TAC or its
Affiliates) would result in TAC having entered into an Economic Disposition (as
defined below) with respect to an amount of UP Voting Securities received by TAC
in the Merger that exceeds the Threshold Amount (as defined below) unless the
condition described in the following paragraph is satisfied, regardless of
whether such transaction or arrangement would be treated as a sale, exchange or
other taxable disposition of such UP Voting Securities for United States federal
income tax purposes. For purposes of this subsection, the 'Threshold Amount'
equals the number of UP Voting Securities received by TAC in the Merger
multiplied by the following fraction: the numerator is 20% and the denominator
is (A) the percentage of outstanding SP Common Stock held by TAC as of the date
of the Anschutz Shareholders Agreement minus (B) the percentage of outstanding
SP Common Stock that TAC exchanges for cash in the Offer or the Merger. For
purposes of this subsection, an 'Economic Disposition' of shares of UP Voting
Securities shall mean (i) any transaction or arrangement (including an outright
sale) that would be treated as a sale, exchange or other taxable disposition for
United States federal income tax purposes of shares of UP Voting Securities
received in the Merger and (ii) any transaction or arrangement (or combination
of transactions or arrangements) entered into by or on behalf of TAC or its
Affiliates that reduces the economic benefits and burdens to TAC of owning
shares of UP Voting Securities (including any swap transaction, notional
principal contract or the acquisition or grant of any calls, puts or other
options, whether or not cash settlement is permitted or required) to such an
extent that such transaction or arrangement causes TAC not to satisfy the
'continuity of proprietary interest' requirement under Section 368 of the Code
with respect to such shares.
The Amended Anschutz Shareholders Agreement provides that during the
Reorganization Continuity Period, at least thirty (30) business days prior to
entering into any proposed transaction or arrangement (combined with any other
transactions or arrangements entered into by TAC) relating to or involving any
shares of UP Voting Securities in excess of the Threshold Amount (a 'Proposed
Transaction'), TAC must provide at its expense a written opinion of nationally
recognized tax counsel, in form and substance reasonably acceptable to UP, that
the Proposed Transaction will not adversely affect the treatment of the Merger
as a reorganization within the meaning of Section 368 of the Code.
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The Amended Anschutz Shareholders Agreement provides that the bona fide
pledge of any UP Voting Securities, or the bona fide grant of a security
interest therein, to secure the payment of bona fide indebtedness owed by TAC or
any of its Affiliates, and the sale, exchange or disposition, or Economic
Disposition, at the direction of the pledgee or holder of a security interest,
of any of such UP Voting Securities in connection with the exercise of any right
of enforcement or foreclosure in respect thereof, shall not be subject to or
prevented by the restrictions set forth in this 'Additional Limitations on
Dispositions' section.
The Amended Anschutz Shareholders Agreement provides that the Threshold
Amount and the number of shares of UP Voting Securities that are or have been
subject to an Economic Disposition shall be adjusted, as of any date of
determination, to give effect to any stock dividends, share-splits,
reclassifications, recapitalizations, reorganizations or other similar actions
that shall have been taken by UP as of such date with respect to the UP Voting
Securities.
Termination. The Amended Anschutz Shareholders Agreement provides that,
except as otherwise provided therein, the Amended Anschutz Shareholders
Agreement shall terminate (a) if the Effective Time does not occur, upon the
termination of the Amended Merger Agreement, provided, however, that if the
Amended Merger Agreement shall have been terminated pursuant to the
Fiduciary-out Termination Provisions, the provisions described under '--Voting
of Common Stock; Irrevocable Proxy; No Solicitation' and '--Restrictions on
Transfer, Proxies; No Solicitation' above shall survive the termination of the
Anschutz Shareholders Agreement for a period of six months, or (b) if the
Effective Time does occur, on the earliest to occur of (1) the seventh
anniversary of the Effective Time, (2) at such time that the Anschutz
Shareholders Beneficially Own, and continue to Beneficially Own, in the
aggregate, less than 4% of the UP Voting Securities then outstanding, it being
understood, however, that if the Anschutz Shareholders at any time Beneficially
Own in the aggregate less than 4% of the UP Voting Securities then outstanding
but, prior to the seventh anniversary of the Effective Time, subsequently
acquire Beneficial Ownership of any UP Voting Securities (except pursuant to
clauses (A), (B) or (C) of the parenthetical exception to the first sentence in
item (i) under '--Standstill and Related Provisions' above or in an Inadvertent
Acquisition) such that immediately following such acquisition Anschutz
Shareholders become Beneficial Owners in the aggregate of more than 4% of the UP
Voting Securities then outstanding, the 'standstill' restrictions and
limitations on disposition provisions, among others, in the Amended Anschutz
Shareholders Agreement shall be effective and in full force again as if no such
termination had occurred, and (3) if at any time that the Shareholders
Beneficially Own in the aggregate more than 4% of the UP Voting Securities then
outstanding and the Shareholder Designee shall not have resigned as a director
(i) the Anschutz Shareholder Designee shall not be elected as a director of UP
as provided in the Amended Anschutz Shareholders Agreement, (ii) if and so long
as Mr. Anschutz shall be a director of UP, Mr. Anschutz (but not any other
Shareholder Designee) shall not be appointed Vice Chairman of the Board of
Directors, (iii) subject to applicable requirements of the NYSE or any other
security exchange on which the UP Common Stock is listed, or if not so listed,
under the rules or regulations of the NASD, a Shareholder Designee who is then a
director shall not be appointed as a member of the Executive, Finance and
Corporate Development, and Compensation, Benefits and Nominating Committees,
respectively, of the Board of Directors of UP (or committees having similar
functions) or (iv) UP shall have breached its covenant described in the second
paragraph of '--UP Covenants' above, provided that TAC, for itself and on behalf
of all other Anschutz Shareholders, may by written notice to UP irrevocably
elect that, from and after the delivery thereof, the references in this
paragraph and in '--UP Covenants' above to '4%' be deleted and replaced by
references to '3%.'
AMENDED AND RESTATED MSLEF SHAREHOLDER AGREEMENT
Voting of SP Common Stock; Irrevocable Proxy; No Acquisition of Additional
SP Voting Securities. The Amended MSLEF Shareholder Agreement provides that
during the period commencing on the date of the original MSLEF Shareholder
Agreement (the 'Original MSLEF Shareholder Agreement') and continuing until the
earlier of (x) the consummation of the Merger and (y) six months following the
termination of the Amended Merger Agreement in accordance with the Fiduciary-out
Termination Provisions, and (z) upon the termination of the Amended Merger
Agreement other than pursuant to the Fiduciary-out Termination Provisions (such
period being referred to as the 'Voting Period') at any meeting (whether annual
or special, and whether or not an adjourned or postponed meeting) of SP's
shareholders, however called, or in connection with any written consent of SP's
shareholders, subject to the absence of a preliminary or permanent injunction or
other final order by any
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United States federal court or state court barring such action, MSLEF shall vote
(or cause to be voted) the Shares and all other SP Voting Securities that it
Beneficially Owns, whether owned on the date of the Original MSLEF Shareholder
Agreement or thereafter acquired, (i) in favor of the Merger, the execution and
delivery by SP of the Amended Merger Agreement and the approval and adoption of
the Amended Merger Agreement and the terms thereof and each of the other actions
contemplated by the Amended Merger Agreement, the Amended MSLEF Shareholder
Agreement and the Ancillary Agreements and any actions required in furtherance
thereof; (ii) against any action or agreement that would (A) result in a
material breach of any covenant, representation or warranty or any other
obligation or agreement of SP under the Amended Merger Agreement or any of the
Ancillary Agreements to which it is a party or of MSLEF under the Amended MSLEF
Shareholder Agreement or (B) in the judgment of UP as communicated in writing to
MSLEF, impede, interfere with, delay, postpone, or adversely affect the Offer,
the Merger or the transactions contemplated by the Amended Merger Agreement, the
Amended MSLEF Shareholder Agreement and the Ancillary Agreements; and (iii)
except as otherwise agreed to in writing in advance by UP, against the following
actions (other than the Merger and the transactions contemplated by the Amended
Merger Agreement, the Amended MSLEF Shareholder Agreement and the Ancillary
Agreements): (A) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving SP or any of its
subsidiaries; (B) any sale, lease or transfer of a substantial portion of the
assets or business of SP or its subsidiaries, or reorganization, restructuring,
recapitalization, special dividend, dissolution or liquidation of SP or its
subsidiaries; or (C) any change in the present capitalization of SP including
any proposal to sell a substantial equity interest in SP or any of its
subsidiaries. MSLEF has agreed not to enter into any agreement, arrangement or
understanding with any Person the effect of which would be inconsistent with or
violative of the provisions and agreements described in this subsection.
The Amended MSLEF Shareholder Agreement provides that, at the request of UP
(which request has been made), MSLEF, in furtherance of the transactions
contemplated by the MSLEF Shareholder Agreement and by the Amended Merger
Agreement and the Ancillary Agreements, and in order to secure the performance
by Amended MSLEF of its duties under the Amended MSLEF Shareholder Agreement,
shall promptly execute and deliver to UP an irrevocable proxy. MSLEF
acknowledges and agrees that the proxy executed and delivered pursuant to this
paragraph shall be coupled with an interest, shall constitute, among other
things, an inducement for UP to enter into the Amended MSLEF Shareholder
Agreement, the Amended Merger Agreement and the Ancillary Agreements to which it
is a party, shall be irrevocable during the Voting Period and shall not be
terminated by operation of law or upon the occurrence of any event.
MSLEF agrees that during the period commencing on the date of the Original
MSLEF Shareholder Agreement and continuing until the earlier of (x) the
consummation of the Merger and (y) the termination of the Amended Merger
Agreement, MSLEF will not, and will cause its general partner not to, acquire,
offer or propose to acquire, or agree to acquire, whether by purchase, tender or
exchange offer, any SP Voting Securities.
Restrictions on Transfer, Proxies; No Solicitation. MSLEF shall not,
during the Voting Period, directly or indirectly: (i) except as provided under
'Tender of Shares' above or this paragraph, Transfer to any Person any or all of
the SP Voting Securities Beneficially Owned by MSLEF; (ii) except as provided in
the second paragraph of the preceding Subsection, grant any proxies or powers of
attorney, deposit any such SP Voting Securities into a voting trust or enter
into a voting agreement, understanding or arrangement with respect to SP Voting
Securities; or (iii) take any action that would make any representation or
warranty of MSLEF contained in the Amended MSLEF Shareholder Agreement untrue or
incorrect or would result in a breach by MSLEF of its obligations under the
Amended MSLEF Shareholder Agreement or a breach by SP of its obligations under
the Merger Agreement or any of the Ancillary Agreements to which it is a party.
Notwithstanding any provisions of the Amended MSLEF Shareholder Agreement to the
contrary, MSLEF may Transfer in the aggregate, following the consummation of the
Offer and prior to the Effective Time, a portion of the Shares in the aggregate
not greater than 10% of the Shares Beneficially Owned by MSLEF immediately
following the consummation of the Offer.
The Amended MSLEF Shareholder Agreement provides that MSLEF shall not, and
shall cause its general partner not to, directly or indirectly, (i) 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 (as defined in the Amended Merger Agreement) of SP or any Affiliate or
any inquiry with respect thereto, or (ii) in the event of an unsolicited written
Takeover Proposal for SP or any Affiliate of SP, engage in negotiations or
discussions with,
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or provide any information or data to, any Person (other than UP, any of its
Affiliates or representatives) relating to any Takeover Proposal. MSLEF shall
notify UP orally and in writing of any such offers, proposals or inquiries
relating to the purchase or acquisition by any Person of the Shares Beneficially
Owned by MSLEF (including, without limitation, the terms and conditions thereof
and the identity of the Person making it), within 24 hours of the receipt
thereof. MSLEF shall, and shall cause its general partner to, immediately cease
and cause to be terminated all existing activities, discussions and
negotiations, if any, with any parties conducted heretofore with respect to any
Takeover Proposal relating to SP, other than discussions or negotiations with UP
and its Affiliates.
The Amended MSLEF Shareholder Agreement provides that MSLEF will not, and
will cause its general partner not to, directly or indirectly, make any public
comment, statement or communication, or take any action that would otherwise
require any public disclosure by MSLEF, UP or any other Person, concerning the
Merger, the Offer, the Spin-off and the other transactions contemplated by the
Amended Merger Agreement, the Amended MSLEF Shareholder Agreement and the
Ancillary Agreements, except for any disclosure (i) concerning the status of
MSLEF as a party to such agreement, the terms thereof, and its beneficial
ownership of Shares, required pursuant to Section 13(d) or Section 16 of the
Exchange Act or (ii) required in the Schedule 14D-9 or this Joint Proxy
Statement/Prospectus.
Notwithstanding the restrictions described in the Amended MSLEF Shareholder
Agreement, any Person who is a director or officer of SP may exercise his
fiduciary duties in his capacity as a director or officer with respect to SP, as
opposed to taking action with respect to the direct or indirect ownership of any
Shares, and no such exercise of fiduciary duties shall be deemed to be a breach
of, or a violation of the restrictions set forth in, the second preceding
paragraph and MSLEF shall not have any liability hereunder for any such exercise
of fiduciary duties by such Person in his capacity as a director and officer of
SP.
Termination. The Amended MSLEF Shareholder Agreement provides that, except
as otherwise provided therein, the MSLEF Shareholder Agreement shall terminate
at the end of the Voting Period.
AMENDED AND RESTATED UP SHAREHOLDERS AGREEMENT
Voting of SP Common Stock; Irrevocable Proxy. The Amended UP Shareholders
Agreement provides that during the period commencing on the date of the original
UP Shareholders Agreement (the 'Original UP Shareholders Agreement') and
continuing until the earlier of (x) the consummation of the Merger and (y) the
termination of the Amended Merger Agreement in accordance with the termination
provisions thereof, at any meeting (whether annual or special, and whether or
not an adjourned or postponed meeting) of SP's stockholders, however called, or
in connection with any written consent of SP's stockholders, subject to the
absence of a preliminary or permanent injunction or other final order by any
United States federal court or state court barring such action, UP and Newco
(collectively, the 'UP Shareholders') shall vote (or cause to be voted) the
Shares purchased pursuant to the Offer and all other SP Voting Securities that
they Beneficially Own, whether owned on the date of the Original UP Shareholders
Agreement or thereafter acquired, (i) in favor of the Merger, the execution and
delivery by SP of the Amended Merger Agreement and the approval and adoption of
the Amended Merger Agreement and the terms thereof and each of the other actions
contemplated by the Amended Merger Agreement, the Amended UP Shareholders
Agreement and the Ancillary Agreements and any actions required in furtherance
thereof; (ii) with respect to the election or removal of directors, in the same
proportion as all SP Voting Securities that are not Beneficially Owned by UP
Shareholders that vote with respect to such matter ('Voted Non-Shareholder
Securities') have been voted with respect to such matter; (iii) with respect to
any other proposed merger, business combination, or similar transaction
(including, without limitation, any consolidation, sale of all or substantially
all the assets, recapitalization, liquidation or winding up or other Specified
SP Transaction (as defined herein)) involving SP (other than the transactions
contemplated by the Amended Merger Agreement), as the UP Shareholders may
determine, in their sole discretion; and (iv) unless either (A) one of the
transactions described in clause (iii) above has been proposed or (B) the matter
being proposed would impose on UP Shareholders limitations, not imposed on other
shareholders of SP, on the enjoyment of any of the UP Shareholders and their
Affiliates of the legal rights generally enjoyed by stockholders of SP, with
respect to all matters submitted to a vote of SP's stockholders not specified in
clauses (i), (ii) or (iii) above, in the same proportion as all Voted
Non-Shareholder Securities have been voted with respect to such matter. UP
Shareholders shall not enter into any agreement or understanding with any Person
the effect of which would be inconsistent or violative of the provisions and
agreements contained in this and the following
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paragraph. As more fully described under the section below entitled 'Standstill
and Related Provisions,' UP Shareholders are also subject to certain voting
restrictions following termination of the Amended Merger Agreement.
The Amended UP Shareholders Agreement provides that UP Shareholders (or the
Trustee, if the Shares are held in the Voting Trust), in furtherance of the
transactions contemplated thereby and by the Amended Merger Agreement and the
Ancillary Agreements, and in order to secure the performance by UP Shareholders
of their duties under the Amended UP Shareholders Agreement, shall following
consummation of the Offer execute and deliver to SP an irrevocable proxy. UP
Shareholders acknowledge and agree that such proxy shall be coupled with an
interest, shall constitute, among other things, an inducement for SP to enter
into the Amended UP Shareholders Agreement, the Amended Merger Agreement and the
Ancillary Agreements to which it is a party, shall be irrevocable until the
earlier of the SP Special Meeting or the termination of the Amended Merger
Agreement in accordance with its terms and shall not be terminated by operation
of law or upon the occurrence of any event.
Restrictions on Transfer; Proxies; Pledges. The Amended UP Shareholders
Agreement provides that UP Shareholders shall not, during the period commencing
on the date of the Original UP Shareholders Agreement and continuing until the
first to occur of (x) the consummation of the Merger or (y) the termination of
the Amended Merger Agreement pursuant to the terms thereof, directly or
indirectly: (i) Transfer to any Person (other than to the Voting Trust) any or
all of the SP Voting Securities (or any interest therein) which it may
thereafter acquire in the Offer or otherwise; (ii) except as provided in the
Amended UP Shareholders Agreement and except for the Voting Trust, grant any
proxies or powers of attorney, deposit any SP Voting Securities into a voting
trust or enter into a voting agreement, understanding or arrangement with
respect to SP Voting Securities; (iii) take any action that would make any
representation or warranty of UP Shareholders contained in the Amended UP
Shareholders Agreement untrue or incorrect or would result in a breach by UP
Shareholders of their respective obligations under the Amended UP Shareholders
Agreement or would result in a breach by UP Shareholders of their respective
obligations under the Amended Merger Agreement or any of the Ancillary
Agreements to which it is a party; or (iv) take certain action covered by
certain of the standstill related provisions of the Amended UP Shareholders
Agreement, provided, however, in the event a bona fide proposal for a Specified
SP Transaction is made by any Person (other than the UP Shareholders and their
Affiliates), only the restrictions set forth in Section 4(a)(viii) (seeking
Board representation) of the Amended UP Shareholders Agreement shall be
applicable.
The Amended UP Shareholders Agreement provides that following termination
of the Amended Merger Agreement in accordance with its terms, UP Shareholders
may effect one or more pledges of SP Voting Securities or grants of security
interests therein, to one or more banks or other financial institutions that are
not Affiliates of any UP Shareholder as security for the payment of bona fide
full recourse indebtedness owed by UP or UPRR to such banks or financial
institutions. Except as set forth in the proviso below, such banks and financial
institutions shall not incur any obligations under the Amended UP Shareholders
Agreement with respect to such SP Voting Securities or shall be restricted from
exercising any right of enforcement or foreclosure with respect to any related
security interest or lien; provided, however, that it shall be a condition to
any such pledge that the pledgee shall agree to be bound by the provisions of
the Amended UP Shareholders Agreement, except that following an event of default
or foreclosure, the pledgee shall be permitted to sell, subject only to the
right of first refusal set forth in the Amended UP Shareholders Agreement, (x)
an unlimited number of Voting SP Securities to any Person that is not, and does
not control, a Class I Railroad (as defined in the Amended Merger Agreement) and
(y) up to 4% of the then outstanding shares of SP Voting Securities to a Class I
Railroad.
Standstill and Related Provisions. The Amended UP Shareholders Agreement
provides that subject to the paragraph immediately following item (xi) below, in
the event that the Amended Merger Agreement is terminated in accordance with the
terms thereof other than pursuant to the Fiduciary-out Termination Provisions,
but only in such event, UP Shareholders agree that for a period commencing on
the date of such termination and continuing until the termination of the Amended
UP Shareholders Agreement in accordance with the terms described under
'Termination' below (any such period being hereafter referred to as the 'UP
Standstill Period'), without the prior written consent of the Board of Directors
of SP (the 'SP Board') specifically expressed in a resolution adopted by a
majority of the directors of SP, UP Shareholders will not, and UP Shareholders
will cause each of their respective Affiliates not to, directly or indirectly,
alone or in concert with others:
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(i) acquire, offer or propose to acquire, or agree to acquire (except,
in any case, by way of (A) stock dividends or other distributions or rights
offerings made available to holders of any shares of SP Common Stock
generally, share-splits, reclassifications, recapitalizations,
reorganizations and any other similar action taken by SP, and (B) the
conversion, exercise or exchange of SP Voting Securities in accordance with
the terms thereof, provided, that any such securities shall be subject to
the provisions of the Amended UP Shareholders Agreement), directly or
indirectly, whether by purchase, tender or exchange offer, through the
acquisition of control of another Person, by joining a partnership, limited
partnership, syndicate or other 'group' (within the meaning of Section
13(d)(3) of the Exchange Act) (other than groups consisting solely of UP
Shareholders and their Affiliates, all of which are or, prior to the
formation of such group, become parties to the Amended UP Shareholders
Agreement) or otherwise, any SP Voting Securities; provided, however, that
if, solely as a result of the issuance by SP of additional SP Voting
Securities, UP Shareholders and their Affiliates Beneficially Own less than
the amount of shares of SP Voting Securities Beneficially Owned immediately
following the consummation of the Offer (the 'Ownership Limit'), UP
Shareholders may purchase or acquire additional SP Voting Securities to
bring their Beneficial Ownership up to the greater of 5.5% and the
percentage of outstanding SP Voting Securities Beneficially Owned by the UP
Shareholders immediately prior to such issuance by SP; provided, further,
if as a result of Transfers of SP Voting Securities, UP Shareholders
Beneficially Own less than 5.5% of the then outstanding SP Voting
Securities, UP Shareholders may purchase or acquire additional SP Voting
Securities to bring their Beneficial Ownership up to, but not in excess of,
5.5% of the then outstanding shares of SP Voting Securities. In addition,
in the event that a UP Shareholder or an Affiliate thereof inadvertently
and without knowledge indirectly acquires Beneficial Ownership of not more
than one-quarter of one percent of SP Voting Securities in excess of the
amount permitted to be owned by the UP Shareholders pursuant to this
paragraph pursuant to a transaction by which a Person (that was not then an
Affiliate of a UP Shareholder before the consummation of such transaction)
owning SP Voting Securities becomes an Affiliate of such UP Shareholder,
then all SP Voting Securities so acquired shall thereupon become subject to
the Amended UP Shareholders Agreement and such UP Shareholder shall be
deemed not to have breached the Amended UP Shareholders Agreement provided
that such UP Shareholder, within 120 days thereafter, causes a number of
such SP Voting Securities in excess of the amount permitted to be so owned
(or, at the election of such UP Shareholder, an equal number of the other
SP Voting Securities that are Beneficially Owned by a UP Shareholder) to be
Transferred, in a transaction subject to the provisions described in
'Limitations on Disposition' below, to a transferee that is not a UP
Shareholder, an Affiliate thereof or a member of a 'group' in which a UP
Shareholder or an Affiliate is included (or, if UP or its assignee shall
exercise any purchase rights under the second paragraph of 'Limitations on
Disposition' below, to SP or its assignee);
(ii) make, or in any way participate, directly or indirectly, in any
'solicitation' (as such term is used in the proxy rules of the SEC) of
proxies or consents (whether or not relating to the election or removal of
directors), seek to advise, encourage or influence any Person with respect
to the voting of any SP Voting Securities, initiate, propose or otherwise
'solicit' (as such term is used in the proxy rules of the SEC) stockholders
of SP for the approval of stockholder proposals, whether made pursuant to
Rule 14a-8 of the Exchange Act or otherwise, or induce or attempt to induce
any other Person to initiate any such stockholder proposal or otherwise
communicate with the UP's shareholders or others pursuant to Rule
14a-1(2)(iv) under the Exchange Act or otherwise;
(iii) seek, propose, or make any statement with respect to, any
merger, consolidation, business combination, tender or exchange offer, sale
or purchase of assets, sale or purchase of securities, dissolution,
liquidation, reorganization, restructuring, recapitalization, change in
capitalization, change in corporate structure or business or similar
transaction involving SP or its subsidiaries (any of the foregoing being
referred to herein as a 'Specified SP Transaction'); provided that the
foregoing shall not prevent voting in accordance with the final paragraph
of this subsection (but shall prevent any public comment, statement or
communication, and any action that would otherwise require any public
disclosure by UP Shareholders, SP or any other Person, concerning such
voting);
(iv) form, join or in any way participate in a 'group' (within the
meaning of Section 13(d)(3) of the Exchange Act) with respect to any SP
Voting Securities, other than groups consisting solely of UP Shareholders
and their Affiliates;
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(v) except for the Voting Trust, deposit any SP Voting Securities in
any voting trust or subject any SP Voting Securities to any arrangement or
agreement with respect to the voting of any SP Voting Securities, other
than the Amended UP Shareholders Agreement;
(vi) call or seek to have called any meeting of the stockholders of SP
or execute any written consent with respect to SP or SP Voting Securities;
(vii) otherwise act, alone or in concert with others, to control or
seek to control or influence or seek to influence the management, Board of
Directors or policies of SP;
(viii) seek, alone or in concert with others, representation on the
Board of Directors of SP, or seek the removal of any member of such Board
or a change in the composition or size of such Board;
(ix) make any publicly disclosed proposal, comment, statement or
communication (including, without limitation, any request to amend, waive
or terminate any provision of the Amended UP Shareholders Agreement other
than the 'standstill' provisions described in these items (i)-(xi)), or
make any proposal, comment, statement or communication (including, without
limitation, any request to amend, waive or terminate any provision of the
Amended UP Shareholders Agreement other than the 'standstill' provisions
described in these items (i)-(xi)) in a manner that would require any
public disclosure by UP Shareholders or any other Person, or enter into any
discussion with any Person (other than directors and officers of SP),
regarding any of the foregoing;
(x) make or disclose any request to amend, waive or terminate any of
the standstill provisions of the Amended UP Shareholders Agreement; or
(xi) have any discussions or communications, or enter into any
arrangements, understandings or agreements (whether written or oral) with,
or advise, finance, assist or encourage, any other Person in connection
with any of the foregoing, or take any action inconsistent with the
foregoing, or make any investment in or enter into any arrangement with,
any other Person that engages, or offers or proposes to engage, in any of
the foregoing.
The restrictions set forth above shall not prevent UP Shareholders from (A)
performing their obligations and exercising their rights under the Amended UP
Shareholders Agreement, including, without limitation, (x) Transferring any SP
Voting Securities in accordance with the Amended UP Shareholders Agreement or to
the Voting Trust, and (y) voting and granting a proxy to SP in accordance with
the Amended UP Shareholders Agreement; (B) communicating in a non-public manner
with any other UP Shareholder or its Affiliates; and (C) complying with the
requirements of Sections 13(d) and 16(a) of the Exchange Act and the rules and
regulations thereunder, in each case, as from time to time in effect, or any
successor provisions or rules with respect thereto, or any other applicable law,
rule, regulation, judgment, decree, ruling, order, award, injunction, or other
official action of any agency, bureau, commission, court, department, official,
political subdivision, tribunal or other instrumentality of any government
(whether federal, state, county or local, domestic or foreign).
The Amended UP Shareholders Agreement provides that subject to the receipt
of proper notice and the absence of a preliminary or permanent injunction or
other final order by any United States federal court or state court barring such
action, UP Shareholders agree that during any UP Standstill Period UP
Shareholders will, and will cause their Affiliates to, (i) be present, in person
or represented by proxy, at all annual and special meetings of stockholders of
SP so that all SP Voting Securities Beneficially Owned by UP Shareholders and
their Affiliates and then entitled to vote may be counted for the purposes of
determining the presence of a quorum at such meetings; and (ii) with respect to
the election or removal of directors, vote in the same proportion as all Voted
Non-Shareholder Securities have been voted with respect to such matter; and
(iii) with respect to any proposed merger, business combination, or similar
transaction (including, without limitation, any consolidation, sale of all or
substantially all the assets, recapitalization, liquidation or winding up or
other Specified SP Transaction) involving SP, vote as the UP Shareholders may
determine, in their sole discretion; and (iv) unless the matter being proposed
would impose on UP Shareholders limitations, not imposed on other stockholders
of SP, on the enjoyment of any of the UP Shareholders and their Affiliates of
the legal rights generally enjoyed by stockholders of SP, with respect to all
matters submitted to a vote of SP's stockholders not specified in clause (ii) or
(iii) above, vote in the same proportion as all Voted Non-Shareholder Securities
have been voted with respect to such matter.
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Limitations on Disposition. The Amended UP Shareholders Agreement provides
that UP Shareholders, during the Standstill Period, will not, and will cause
their Affiliates not to, directly or indirectly, without the prior written
consent of the Board of Directors of SP specifically expressed in a resolution
adopted by a majority of the directors of SP, Transfer to any Person any SP
Voting Securities (including but not limited to the Transfer of any securities
of an Affiliate which is the record holder or Beneficial Owner of SP Voting
Securities, if, as the result of such Transfer, such Person would cease to be an
Affiliate of a UP Shareholder), if, to the knowledge of the UP Shareholders or
any of their Affiliates, after due inquiry which is reasonable in the
circumstances (and which shall include, with respect to the Transfer of 1% or
more of SP Voting Securities then outstanding in one transaction, or a series of
related transactions, specific inquiry with respect to the identity of the
acquiror of such SP Voting Securities and the number of SP Voting Securities
that, immediately following such transaction or transactions, would be
Beneficially Owned by such acquiror, together with its Affiliates and any
members of a 'group' (within the meaning of Section 13(d)(3) of the Exchange
Act) of which such acquiror is a member), immediately following such transaction
the acquiror of such SP Voting Securities, together with its Affiliates and any
members of such a group, would Beneficially Own in the aggregate 6% (or 4% in
the event that the purchaser is or controls a Class I Railroad) or more of SP
Voting Securities then outstanding; provided that, without the prior written
consent of the Board of Directors of SP, (i) UP Shareholders and their
Affiliates may Transfer any number of SP Voting Securities to any other UP
Shareholder or any Affiliate of a UP Shareholder, provided that (A) such
transferee, if not then a UP Shareholder, shall become a party to the UP
Shareholders Agreement and agree in writing to perform and comply with all of
the obligations of such transferor UP Shareholder under the Amended UP
Shareholders Agreement, and thereupon such transferee shall be deemed to be a UP
Shareholder party thereto for all purposes of the Amended UP Shareholders
Agreement, and (B) if the transferee is not prior thereto a UP Shareholder, the
transferor shall remain liable for such transferee's performance of and
compliance with the obligations of the transferor under the Amended UP
Shareholders Agreement, (ii) UP Shareholders and their Affiliates may Transfer
SP Voting Securities in a tender offer, merger, or other similar business
combination transaction approved by the Board of Directors of SP, and (iii) UP
Shareholders may pledge their UP Voting Securities as provided in the second
paragraph of 'Restrictions on Transfer; Proxies; Pledges' above and the pledgee
may Transfer such SP Voting Securities as contemplated by the proviso in such
paragraph.
The Amended UP Shareholders Agreement provides that during the UP
Standstill Period, if to the knowledge of the UP Shareholders after making due
inquiry which is reasonable under the circumstances, immediately following the
Transfer of any SP Voting Securities the acquiror thereof, together with its
Affiliates and any members of a 'group' (within the meaning of Section 13(d)(3)
of the Exchange Act), would Beneficially Own in the aggregate 2% or more of the
outstanding SP Voting Securities (a '2% Sale'), UP Shareholders shall, prior to
effecting any such Transfer, offer SP a right of first refusal to purchase the
shares proposed to be Transferred on the following terms. UP Shareholders shall
provide SP with written notice (the '2% Sale Notice') of any proposed 2% Sale,
which 2% Sale Notice shall contain the identity of the purchaser, the number of
shares of SP Voting Securities proposed to be Transferred to such purchaser, the
purchase price for such shares and the form of consideration payable for such
shares. The 2% Sale Notice shall also contain an irrevocable offer to sell the
shares subject to such 2% Sale Notice to SP for cash at a price equal to the
price contained in such 2% Sale Notice. SP shall have the right and option, by
written notice delivered to such UP Shareholder (the 'Purchase Notice') within
15 days of receipt of the 2% Sale Notice, to accept such offer as to all, but
not less than all, of SP Voting Securities subject to such 2% Sale Notice. SP
shall have the right to assign to any Person such right to purchase SP Voting
Securities subject to the 2% Sale Notice. In the event SP (or its assignee)
elects to purchase SP Voting Securities subject to the 2% Sale Notice, the
closing of the purchase of SP Voting Securities shall occur at the principal
office of SP (or its assignee) on or before the 30th day following such UP
Shareholder's receipt of the Purchase Notice. In the event SP does not elect to
purchase the shares subject to the 2% Sale Notice, such UP Shareholder shall be
free, for a period of 30 days following the receipt of notice from UP of its
election not to purchase such SP Voting Securities or, in the absence of any
such notice, for a period of 30 days following the 15th day after receipt by SP
of the 2% Sale Notice, to sell SP Voting Securities subject to the 2% Sale
Notice in accordance with the terms of, and to the person identified in, the 2%
Sale Notice. If such sale is not effected within such 30 day period such SP
Voting Securities shall remain subject to the provisions of the Amended UP
Shareholders Agreement. Notwithstanding the foregoing, the right of first
refusal set forth in this paragraph shall not apply to the Transfer by UP
Shareholders of SP Voting Securities (i) made in
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an underwritten public offering pursuant to an effective registration statement
under the Securities Act, or (ii) made in a transaction permitted pursuant to,
and made in compliance with, clauses (i) or (iii) of the proviso to the first
paragraph of 'Limitations on Disposition' above, or (iii) made in a tender
offer, merger or other similar business combination transaction approved by the
Board of Directors of SP. Any proposed sale by UP Shareholders of SP Voting
Securities shall be subject to the restrictions on sales to an acquiror which
would Beneficially Own 6% (or 4%, in the event that the purchaser is or controls
a Class I Railroad) or more of the outstanding SP Voting Securities, as
described in the immediately preceding paragraph, whether or not SP exercises
its right of first refusal and consummates the purchase of UP Voting Securities.
If SP (or its assignee) exercises its right to purchase any SP Voting Securities
but fails to complete the purchase thereof for any reason other than the failure
of such UP Shareholder to perform its obligations hereunder with respect to such
purchase, then, on the 30th day following such UP Shareholder's receipt of the
Purchase Notice, such SP Voting Securities shall cease to be subject to the
voting requirements, the limitations on disposition and the stop transfer
provisions of the Amended UP Shareholders Agreement for any purpose whatsoever.
If the purchase price described in any 2% Sale Notice is not solely made up of
cash or marketable securities, the 2% Sale Notice shall include a good faith
estimate of the cash equivalent of such other consideration, and the
consideration payable by SP or its assignee (if SP elects to purchase (or to
have assignee purchase) SP Voting Securities described in the 2% Sale Notice) in
place of such other consideration shall be cash equal to the amount of such
estimate; provided, however, that if UP in good faith disagrees with such
estimate and states a different good faith estimate in the Purchase Notice, and
if SP and such UP Shareholder cannot agree on the cash equivalent of such other
(i.e., other than cash or marketable securities) consideration, such cash
equivalent shall be determined by a reputable investment banking firm without
material connections with either party. Such investment banking firm shall be
selected by both parties or, if they shall be unable to agree, by an arbitrator
appointed by the American Arbitration Association. The fees and expenses of any
such investment banking firm and/or arbitrator shall be shared equally by SP and
such UP Shareholder, unless otherwise determined by such firm or arbitrator. In
the event of such differing estimates by SP and such UP Shareholder, periods of
time which would otherwise run under this paragraph from the date of such UP
Shareholder's receipt of the Purchase Notice shall run instead from the date on
which the parties agree on such cash equivalent or, in the absence of such
agreement, the date on which such cash equivalent is determined by such
investment banking firm. If the purchase price described in any 2% Sale Notice
shall include marketable securities, the purchase price payable by SP (or its
designee) shall include, to the extent marketable securities were included as a
portion of the consideration provided for in the 2% Sale Notice, an amount in
cash determined by reference to the Current Market Price of such securities on
the day the Purchase Notice is received by such UP Shareholder.
The Amended UP Shareholders Agreement provides that in connection with any
proposed privately negotiated sale by any UP Shareholders of SP Voting
Securities representing in excess of 3.9% of the then outstanding SP Voting
Securities, SP will cooperate with and permit the proposed purchaser to conduct
a due diligence review that is reasonable under the circumstances of SP and its
subsidiaries and their respective business and operations, including, without
limitation, reasonable access during normal business hours to their executive
officers and, if reasonable under the circumstances, their properties, subject
to execution by such purchaser of a customary confidentiality agreement;
provided that SP shall not be required to permit more than two such due
diligence reviews in any twelve-month period.
The Amended UP Shareholders Agreement provides that notwithstanding any
provision to the contrary contained therein, and without being subject to any of
the restrictions set forth therein, UP Shareholders and their Affiliates may (i)
transfer or distribute, by means of dividend, exchange offer or other
distribution, any shares of SP Voting Securities to UP's stockholders and (ii)
transfer or dispose of SP Voting Securities in connection with an underwritten
public offering of debt or equity securities of UP which are convertible or
exchangeable into SP Voting Securities, it being agreed that SP shall fully
cooperate with UP in connection with any such disposition, including by filing
any necessary registration statement with the SEC and entering into a customary
underwriting agreement, if necessary.
Limitation on SP Action. The Amended UP Shareholders Agreement provides
that without the prior written consent of UP Shareholders, SP shall not take or
recommend to its stockholders any action which would impose limitations, not
imposed on other stockholders of SP, on the enjoyment by any of the UP
Shareholders and their Affiliates of the legal rights generally enjoyed by
shareholders of SP, other than those imposed by the terms of the Amended UP
Shareholders Agreement, the Amended Merger Agreement, and the Ancillary
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Agreements; provided, however, that the foregoing shall not prevent SP from
implementing or adopting a Shareholder Rights Plan or issuing a similar security
which has a 'trigger' threshold of not less than two percentage points greater
than the percentage of outstanding shares of SP Common Stock then Beneficially
Owned by the UP Shareholders.
Access to Information. The Amended UP Shareholders Agreement provides that
SP shall (and shall cause each of its subsidiaries to) afford to the officers,
employees, accountants, counsel, financing sources and other representatives of
UP Shareholders, access, during normal business hours, during the term of the
Amended UP Shareholders Agreement, to all of its and its subsidiaries'
properties, books, contracts, commitments and records and, during such period,
SP shall (and shall cause each of its subsidiaries to) furnish promptly to UP
Shareholders (a) a copy of each report, schedule, registration statement and
other document filed or received by it during such period pursuant to the
requirements of federal securities laws and (b) all other information concerning
its business, properties and personnel as UP Shareholders may reasonably
request; provided, however, that access to certain SP information may require
the entry of a protective order by the STB, after which date full access will be
granted to such information consistent with this paragraph and subject to the
terms of such order. Unless otherwise required by law, UP Shareholders will hold
any such information which is nonpublic in confidence in accordance with the
provisions of the existing confidentiality agreement between SP and UP, subject
to the requirements of applicable law.
Termination. The Amended UP Shareholders Agreement provides that except as
otherwise provided therein, the Amended UP Shareholders Agreement shall
terminate (i) if the Effective Time or the Alternative Effective Time, as the
case may be, does occur, on the Effective Time or the Alternative Effective
Time, as the case may be, or (ii) if the Effective Time or the Alternative
Effective Time, as the case may be, does not occur, at such time that UP
Shareholders Beneficially Own, and continue to Beneficially Own, in the
aggregate less than 4% of SP Voting Securities then outstanding, it being
understood that if, under the circumstances of this clause (ii), the UP
Shareholders Beneficially Own less than 4% of SP Voting Securities then
outstanding but prior to the seventh anniversary of the date of the Amended UP
Shareholders Agreement, subsequently become Beneficial Owners of more than 4% of
SP Voting Securities then outstanding, the standstill and limitations on
disposition provisions, among others, in the Amended UP Shareholders Agreement
shall become effective and in full force again as if no such termination had
occurred.
Voting Trust. The Amended UP Shareholders Agreement provides that the
parties thereto acknowledge and agree that the Trustee shall be entitled to
exercise any and all rights, and shall be subject to any and all obligations, of
Amended UP Shareholders under the UP Shareholders Agreement (as if a UP
Shareholder party thereto) it being understood that the standstill provisions
thereof shall not be applicable to the Trustee or the Voting Trust (other than
the provisions incorporated by reference into the restrictions on transfer
provisions thereof).
AMENDED AND RESTATED ANSCHUTZ/RESOURCES SHAREHOLDERS AGREEMENT
Effectiveness. The Amended Anschutz/Resources Shareholders Agreement
provides that such Agreement (other than certain provisions thereof, including,
among others, the provisions described under 'Pledge' and 'Public Comments;
Fiduciary Duties' below which shall be effective immediately following approval
of the Merger by the stockholders of SP at the Special Meeting) shall become
effective only upon consummation of the Spin-Off, and the Amended
Anschutz/Resources Shareholders Agreement shall terminate and be void and of no
further force or effect if the Amended Merger Agreement is terminated in
accordance with the termination provisions thereof.
Pledge. The Amended Anschutz/Resources Shareholders Agreement provides
that TAC has advised UP that Shares Beneficially Owned by TAC are or may be
pledged to the Banks pursuant to the Existing Pledge Agreements to secure
indebtedness borrowed from the Banks. In the Amended Anschutz/Resources
Shareholders Agreement TAC represents and warrants that the Existing Pledge
Agreements do not or, before indebtedness borrowed therefrom is secured by any
such shares, will not prevent, limit or interfere with TAC's compliance with, or
performance of its obligations under, the Amended Anschutz/Resources
Shareholders Agreement, absent a default under the applicable Existing Pledge
Agreements. TAC represents and warrants that it is not in default under the
Existing Pledge Agreements. Before Resources Voting Securities shall be pledged
to secure indebtedness owed under an Existing Pledge Agreement, TAC shall
deliver to UP a letter from Bank of America National Trust and Savings
Association or Citibank, N.A., as the case may be, acknowledging the original
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Anschutz/Resources Shareholders Agreement (the 'Original Anschutz/Resources
Shareholders Agreement') and agreeing that, notwithstanding any default under
the Existing Pledge Agreement, TAC shall have the right to exercise all voting
rights with respect to SP Common Stock or Resources Voting Securities pledged
thereunder. Anschutz Shareholders may hereafter effect one or more pledges of SP
Voting Securities or Resources Voting Securities, or grants of security
interests therein, to one or more financial institutions (other than the Banks)
that are not Affiliates of any Anschutz Shareholder as security for the payment
of bona fide indebtedness owed by one or more of the Anschutz Shareholders or
their Affiliates to such financial institutions. Except as set forth in the
proviso below, neither the Bank nor any financial institution which after the
date of the Original Anschutz/Spinco Agreement becomes a pledgee of SP Voting
Securities or Resources Voting Securities shall incur any obligations under the
Original Anschutz/Resources Shareholders Agreement or the Amended
Anschutz/Resources Shareholders Agreement with respect to such SP Voting
Securities or Resources Voting Securities or shall be restricted from exercising
any right of enforcement or foreclosure with respect to any related security
interest or lien; provided, however, that it shall be a condition to any such
pledge to any Other Financial Institution that the pledgee shall agree that TAC
shall have the right to exercise all voting rights with respect to SP Voting
Securities or Resources Voting Securities pledged thereunder and no such pledge
shall prevent, limit or interfere with Anschutz Shareholders' compliance with,
or performance of their obligations under, the Amended Anschutz/ Resources
Shareholders Agreement, absent a default under such pledge agreement.
Public Comments; Fiduciary Duties. The Amended Anschutz/Resources
Shareholders Agreement provides that during the Resources Standstill Period,
Anschutz Shareholders will not, and will cause their Affiliates not to, directly
or indirectly, make any public comment, statement or communication, or take any
action that would otherwise require any public disclosure by Anschutz
Shareholders, UP, Resources or any other Person, concerning the Merger, the
Offer, the Spin-Off and the other transactions contemplated by the Amended
Merger Agreement, the Amended Anschutz/Resources Shareholders Agreement and the
Ancillary Agreements, except for any disclosure (i) concerning the status of
Anschutz Shareholders as parties to such agreements, the terms thereof, and
their beneficial ownership of Shares required pursuant to Section 13(d) of the
Exchange Act or (ii) required in the Schedule 14D-9 or this Joint Proxy
Statement/Prospectus.
The Amended Anschutz/Resources Shareholders Agreement provides that the
parties acknowledge that any Person who is a director or officer of SP may
exercise his fiduciary duties in his capacity as a director or officer with
respect to SP, as opposed to taking action with respect to the direct or
indirect ownership of any Shares, and no such exercise of fiduciary duties shall
be deemed to be a breach of, or a violation of the restrictions set forth in,
the Amended Anschutz/Resources Shareholders Agreement and none of the Anschutz
Shareholders shall have any liability hereunder for any such exercise of
fiduciary duties by such Person in his capacity as a director and officer of SP.
Standstill and Related Provisions. The Amended Anschutz/Resources
Shareholders Agreement provides for virtually the same 'standstill' restrictions
and voting obligations with respect to the Anschutz Shareholders as those
contained in the Anschutz Shareholders Agreement except that the restrictions
and obligations apply to Resources and the Resources Voting Securities. In
addition, in the event that UP in its sole discretion should determine that the
Anschutz Shareholders' voting obligations pursuant to the Amended
Anschutz/Resources Shareholders Agreement could adversely affect the tax-free
nature of the Spin-Off, such provision shall be deemed to be stricken therefrom.
See '--Amended and Restated Anschutz Shareholders Agreement--Standstill and
Related Provisions' above.
Limitations on Disposition. The Amended Anschutz/Resources Shareholders
Agreement provides for virtually the same limitations on dispositions by the
Anschutz Shareholders as those contained in the Amended Anschutz Shareholders
Agreement except that the restrictions and obligations apply to Resources and
the Resources Voting Securities. See '--Amended and Restated Anschutz
Shareholders Agreement--Limitations on Disposition' above.
Resources Covenants. The Amended Anschutz/Resources Shareholders Agreement
provides that on or prior to the consummation of the Spin-Off, the Board of
Directors of Resources will take all action necessary to elect a designee of TAC
who is not an Affiliate of, and does not have any business relationship with,
any of the Anschutz Shareholders or their Affiliates, and is reasonably
acceptable to the Board of Directors of Resources (the 'Resources Shareholder
Designee') as a director of Resources' Board of Directors. In the event that the
Resources Shareholder Designee shall resign, become disabled or be removed as a
member of Resources' Board of Directors (except in
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circumstances, other than item (vi) below, in which the Resources Shareholder
Designee was required (including if requested by Resources) to resign as a
director pursuant to the terms of the Amended Anschutz/Resources Shareholders
Agreement), TAC shall have the right to select a new Resources Shareholder
Designee. Anschutz Shareholders acknowledge that as a condition precedent to the
appointment of the Resources Shareholder Designee to Resources' Board of
Directors, the Resources Shareholder Designee shall enter into an agreement, in
form and substance satisfactory to Resources and its counsel, to the effect
that:
(i) the Resources Shareholder Designee agrees that the Resources
Shareholder Designee will not provide, disclose, or otherwise make
available, directly or indirectly, any confidential or non-public
information relating to Resources or its subsidiaries, including
competitively sensitive information, to the Anschutz Shareholders, or their
Affiliates or Representatives (as defined in the Amended Anschutz/Resources
Shareholders Agreement);
(ii) the Resources Shareholder Designee will not voluntarily receive,
directly or indirectly, any confidential or non-public information relating
to any business, company or entity affiliated with any of the Anschutz
Shareholders which competes in any way with, or is a potential competitor
of, Resources (a 'Competing Business'), and, in the event the Resources
Shareholder Designee involuntarily receives, or receives on an unsolicited
basis, such confidential or non-public information, the Resources
Shareholder Designee agrees to report to Resources the fact that the
Resources Shareholder Designee received such information;
(iii) in connection with actions taken as a director of Resources, the
Resources Shareholder Designee will not take into account or consider the
impact or effect of such actions on the Anschutz Shareholders (other than
in their capacity as shareholders of Resources), their Affiliates or on any
Competing Business;
(iv) the Resources Shareholder Designee will not serve as an officer,
director or employee of, or become a shareholder, partner or equity
investor in, any Competing Business so long as such Resources Shareholder
Designee serves as a director of Resources;
(v) none of the Resources Shareholder Designee, any family member of
the Resources Shareholder Designee or any person controlled by the
Resources Shareholder Designee will have any business relationship with,
enter into any arrangements or understandings relating to such business
relationship with, or receive any compensation, gifts or other forms of
consideration from, the Anschutz Shareholders or their Affiliates so long
as the Resources Shareholder Designee is a director of Resources; and
(vi) the Resources Shareholder Designee, if requested by Resources (A)
will immediately resign as a director of Resources in the event that the
FTC shall institute, commence, or threaten any action, proceeding or
inquiry relating to the Resources Shareholder Designee's position as a
director of Resources, provided, that in the event of one or more
resignations pursuant to this clause (A), the Anschutz Shareholders shall
have the right in each such event to designate a new Resources Shareholder
Designee in accordance with the terms of the Amended Anschutz/Resources
Shareholders Agreement; (B) will resign as a director of Resources not
later than the next annual meeting of shareholders of Resources in the
event that the Anschutz Shareholders and their Affiliates Beneficially Own
less than 4% of Resources' Voting Securities then outstanding, provided,
however, that the Amended Anschutz/Resources Shareholders Agreement shall
continue in full force and effect until the date of such resignation and
(C) will immediately resign if the Anschutz Shareholders violate or breach
any of the material terms or provisions of the Amended Anschutz/Resources
Shareholders Agreement. Notwithstanding any resignation pursuant to clause
(C) of the preceding sentence, all of the provisions of the Amended
Anschutz/Resources Shareholders Agreement other than those described in
this subsection shall continue in full force and effect.
So long as Anschutz Shareholders and their Affiliates continue to
Beneficially Own in excess of 4% of the Resources Voting Securities then
outstanding and so long as the Amended Anschutz/Resources Shareholders Agreement
shall not have been terminated, Resources shall include the Anschutz Shareholder
Designee in the Board of Directors' slate of nominees for election as directors
at Resources' annual meeting of shareholders and shall recommend that the
Resources Shareholder Designee be elected as a director of Resources.
So long as a Resources Shareholder Designee serves as a member of the Board
of Directors of Resources, Resources agrees that the Anschutz Shareholder
Designee shall serve (subject to the applicable requirements of the FTC, the
NYSE or any other security exchange on which the Resources Common Stock is
listed, or if not so listed, under the rules or regulations of the NASD) as a
member of the Executive, Finance and Corporate
81
<PAGE>
Development, and Compensation, Benefits and Nominating Committees of the Board
(or the three committees having similar functions). Except as otherwise provided
in the Amended Anschutz/Resources Shareholders Agreement, upon the termination
of the Amended Anschutz/Resources Shareholders Agreement, if requested by
Resources, the Resources Shareholder Designee shall resign as a director of
Resources' Board of Directors.
The Amended Anschutz/Resources Shareholders Agreement provides that in the
event that the Resources Shareholder Designee shall cease to be a member of the
Board of Directors by reason of death, disability or resignation (except in
circumstances in which TAC shall not have the right to select a new Shareholder
Designee as described in the first paragraph under 'Resources Covenants' above),
Resources shall replace such Resources Shareholder Designee with another
Resources Shareholder Designee at the next meeting of the Board of Directors.
The Amended Anschutz/Resources Shareholders Agreement provides that the
Resources Shareholder Designee, upon nomination or appointment as a director of
Resources, shall agree in writing to comply with the obligations of the Anschutz
Shareholders under the 'standstill' restrictions of the Amended
Anschutz/Resources Shareholders Agreement referred to under 'Standstill and
Related Provisions' above and the other obligation of such Resources Shareholder
Designee under the Amended Anschutz/Resources Shareholders Agreement.
The Amended Anschutz/Resources Shareholders Agreement provides that without
the prior written consent of Anschutz Shareholders, Resources shall not take or
recommend to its shareholders any action which would impose limitations, not
imposed on other shareholders of Resources, on the enjoyment by any of Anschutz
Shareholders and their Affiliates of the legal rights generally enjoyed by
shareholders of Resources, other than those imposed by the terms of the Amended
Anschutz/Resources Shareholders Agreement, the Amended Merger Agreement and the
Ancillary Agreements; provided, however, that the foregoing shall not prevent
Resources from implementing or adopting a Shareholder Rights Plan or issuing a
similar security which has a 'trigger' threshold of not less than the greater of
10% of the outstanding shares of Resources Common Stock or the amount then
Beneficially Owned by Anschutz Shareholders not in violation of the Amended
Anschutz/Resources Shareholders Agreement.
Termination. The Amended Anschutz/Resources Shareholders Agreement
provides that except as otherwise provided therein, the Amended
Anschutz/Resources Shareholders Agreement shall terminate on the earliest to
occur of (1) the seventh anniversary of the Effective Time, (2) following
consummation of the Spin-Off, at such time that the Anschutz Shareholders
Beneficially Own, and continue to Beneficially Own, in the aggregate, less than
4% of the Resources Voting Securities then outstanding, it being understood,
however, that if the Anschutz Shareholders at any time Beneficially Own in the
aggregate less than 4% of the Resources Voting Securities then outstanding but,
prior to the seventh anniversary of the Effective Time, subsequently acquire
Beneficial Ownership of any Resources Voting Securities (except pursuant to the
provisions in the Anschutz/Resources Shareholders Agreement comparable to
clauses (A), (B) or (C) of the parenthetical exception to the first sentence in
item (i) under the first paragraph of 'Standstill and Related Provisions' under
'Amended Anschutz Shareholders Agreement' above or in an Inadvertent
Acquisition) if immediately following such acquisition Anschutz Shareholders
become Beneficial Owners in the aggregate of more than 4% of the Resources
Voting Securities then outstanding, the standstill and limitations on
disposition provisions, among others, of the Anschutz/Resources Shareholders
Agreement shall be effective and in full force again as if no such termination
had occurred and (3) if at any time that the Anschutz Shareholders Beneficially
Own in the aggregate more than 4% of the Resources Voting Securities then
outstanding (i) the Resources Shareholder Designee shall not be elected as a
director of Resources (other than as a result of a resignation or non-election
in accordance with certain provisions of the Amended Anschutz/Resources
Shareholders Agreement), (ii) subject to applicable requirements of the FTC, the
NYSE or any other security exchange on which the Resources Common Stock is
listed, or if not so listed, under the rules or regulations of the National
Association of Securities Dealers, the Resources Shareholder Designee who is
then a director shall not be appointed as a member of the Executive, Finance and
Corporate Development, and Compensation, Benefits and Nominating Committees,
respectively, of the Board of Directors of Resources (or committees having
similar functions) or (iii) Resources shall have breached its covenant described
in the fourth paragraph under 'Resources Covenants'; provided that TAC, for
itself and on behalf of all other Anschutz Shareholders, may by written notice
to Resources irrevocably elect that, from and after the delivery thereof, the
references in this paragraph and in 'Resources Covenants' above to '4%' be
deleted and replaced by references to '3%.'
82
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENTS
THE FOLLOWING ARE SUMMARIES OF CERTAIN PROVISIONS OF CERTAIN REGISTRATION
RIGHTS AGREEMENTS (THE 'REGISTRATION RIGHTS AGREEMENTS') ENTERED INTO IN
CONNECTION WITH THE MERGER AND THE SPIN-OFF. THE SUMMARIES ARE QUALIFIED IN
THEIR ENTIRETY BY REFERENCE TO THE REGISTRATION RIGHTS AGREEMENTS WHICH ARE
INCORPORATED HEREIN BY REFERENCE. CAPITALIZED TERMS NOT OTHERWISE DEFINED HEREIN
OR IN THE FOLLOWING SUMMARIES SHALL HAVE THE MEANINGS SET FORTH IN THE
APPLICABLE REGISTRATION RIGHTS AGREEMENT.
The original Registration Rights Agreements will remain effective and the
Amended Registration Rights Agreements will not become effective until the
stockholders of SP approve the Amended Merger Agreement.
Pursuant to an Amended and Restated Registration Rights Agreement (the
'Amended Anschutz/UP RRA'), dated as of August 3, 1995, as amended and restated
as of July 12, 1996, by and among UP, TAC and the Foundation, TAC and the
Foundation are granted, subject to the terms and conditions therein specified,
three demand and unlimited 'piggy-back' registration rights in respect of the
shares of UP Common Stock to be received by them in the Merger. These rights are
substantially the same as the registration rights held by TAC and the Foundation
with respect to the SP Shares they now own. The exercise of registration rights
is subject to the approval of the managing underwriter of the offering being
registered by UP; if the managing underwriter believes that inclusion of the
requesting stockholders' shares would have a material adverse effect on the
offering, the managing underwriter may reduce the number of shares to be
registered in accordance with the priorities set forth in the Amended
Anschutz/UP RRA. All expenses associated with the registration of UP Common
Stock pursuant to the exercise of demand or piggy-back registration rights will
be borne by UP, with the exception of underwriting discounts and commissions and
any expenses of TAC and the Foundation in connection with such registration. The
Amended Anschutz/UP RRA also provides for, under certain circumstances,
indemnification by UP in favor of TAC and the Foundation and by TAC and the
Foundation in favor of UP with respect to certain information contained in a
registration statement pursuant to such registration rights.
Pursuant to an Amended and Restated Registration Rights Agreement (the
'Amended Anschutz/Resources RRA'), dated as of August 3, 1995, as amended and
restated as of July 12, 1996, by and among Resources, TAC and the Foundation,
TAC and the Foundation are granted, subject to the terms and conditions therein
specified, three demand and unlimited 'piggy-back' registration rights in
respect of the shares of Resources Common Stock to be received by them in the
Spin-Off. The exercise of registration rights is subject to the approval of the
managing underwriter of the offering being registered by Resources; if the
managing underwriter believes that inclusion of the requesting stockholders'
shares would have a material adverse effect on the offering, the managing
underwriter may reduce the number of shares to be registered in accordance with
the priorities set forth in the Amended Anschutz/Resources RRA. All expenses
associated with the registration of Resources Common Stock pursuant to the
exercise of demand or piggy-back registration rights will be borne by Resources,
with the exception of underwriting discounts and commissions and any expenses of
TAC and the Foundation in connection with such registration. The
Anschutz/Resources RRA also provides for, under certain circumstances,
indemnification by Resources in favor of TAC and the Foundation and by TAC and
the Foundation in favor of Resources with respect to certain information
contained in a registration statement pursuant to such registration rights.
Pursuant to an Amended and Restated Registration Rights Agreement (the
'Amended UP/SP RRA'), dated as of August 3, 1995, as amended and restated as of
July 12, 1996, by and among UP, Holding and Mergerco and SP, UP has, subject to
the terms and conditions therein specified, six demand and unlimited
'piggy-back' registration rights in respect of the Shares purchased pursuant to
the Offer. The exercise of registration rights is subject to the approval of the
managing underwriter of the offering being registered by SP; if the managing
underwriter believes that inclusion of UP's Shares would have a material adverse
effect on the offering, the managing underwriter may reduce the number of shares
to be registered in accordance with the priorities set forth in the Amended
UP/SP RRA. All expenses associated with the registration of Shares pursuant to
the exercise of demand or piggy-back registration rights will be borne by SP,
with the exception of underwriting discounts and commissions and any expenses of
UP in connection with such registration. The Amended UP/SP RRA also provides,
under certain circumstances, for indemnification by SP in favor of UP and by UP
in favor of SP with respect to certain information contained in a registration
statement pursuant to such registration rights.
VOTING TRUST AGREEMENT
Pursuant to the Voting Trust Agreement, dated as of August 3, 1995, by and
among UP, UP Acquisition and Southwest Bank of St. Louis, a Missouri banking
corporation, as Trustee, the Trustee has agreed to act as trustee in respect of
the Voting Trust. On August 24, 1995, counsel for UP received from the staff of
the ICC an informal written opinion that the Voting Trust will effectively
insulate UP and its affiliates from the violation of the Interstate Commerce Act
and ICC policy that would result from an unauthorized acquisition by UP of
control of SP. See 'OTHER LEGAL MATTERS; REGULATORY APPROVAL--STB Approval.' On
September 7,
83
<PAGE>
1995, UP Acquisition accepted for payment the Acquired Shares and simultaneously
deposited such Shares in the Voting Trust. In its capacity as Trustee of the
Voting Trust, the Trustee will vote the Acquired Shares deposited therein (the
'Trust Stock') in favor of the Merger, in favor of any proposal necessary to
effectuate UP's acquisition of SP pursuant to the Amended Merger Agreement, and,
so long as the Amended Merger Agreement is in effect, subject to certain
exceptions, against any other proposed merger, business combination or similar
transaction involving SP. On all other matters (including the election or
removal of directors), the Trustee will vote the Trust Stock in the same
proportion as all other Shares are voted with respect to such matters. See
'SHAREHOLDERS AGREEMENTS--Amended UP Shareholders Agreement--Limitations on
Disposition' for a description of certain provisions of the UP Shareholders
Agreement concerning dispositions.
Pending the termination of the Voting Trust, the Trustee shall pay to UP
Acquisition all cash dividends and cash distributions paid on the Trust Stock.
The Voting Trust Agreement provides that the Voting Trust is subject to the
rights of UP provided in the UP Shareholders Agreement with respect to the
disposition of the Trust Stock. The Trustee has agreed to take all actions
reasonably requested by UP with respect to any proposed sale or disposition of
the Trust Stock by UP Acquisition, including, without limitation, in connection
with the exercise of rights under the Merger Agreement, the UP/SP RRA and the UP
Shareholders Agreement. Upon (i) approval or exemption by the STB of the
Transactions (as defined in the Voting Trust Agreement) or a similar transaction
between SP and UPRR, UP or any of their affiliates or (ii) if the law is
amended, delivery to the Trustee of an opinion of independent legal counsel that
no STB or other governmental approval is required, the Trustee shall either
transfer the Trust Stock to UP Acquisition or, if stockholder approval of the
Merger has not previously been obtained, vote the Trust Stock in favor of the
Merger.
In the event that the Amended Merger Agreement terminates in accordance
with its terms or the condition set forth in Section 6.2(c) of the Amended
Merger Agreement (STB approval or exemption from approval of the Merger) is not
satisfied or waived by UP and UP Acquisition, UP has agreed to use its best
efforts, consistent with its rights under and subject to the terms of the
Amended UP Shareholders Agreement and the Amended UP/SP RRA, to sell the Trust
Stock to one or more eligible purchasers, to sell or distribute the Trust Stock
in a public offering made under the Securities Act, to distribute such Trust
Stock to stockholders of UP, or otherwise to dispose of the Trust Stock within
two years. Such disposition shall be subject to any jurisdiction of the STB to
oversee UP's divestiture of the Trust Stock. In its August 24, 1995 informal
written opinion to UP counsel, the staff of the ICC (predecessor to the STB)
stated that the ICC has adequate authority to assure that divestiture is prompt.
The Trustee would continue to perform its duties under the Voting Trust
Agreement and, should UP be unsuccessful in its efforts to sell or distribute
the Trust Stock during the two-year period, the Trustee, subject to the terms of
the UP Shareholders Agreement, shall as soon as practicable sell the Trust Stock
for cash to one or more eligible purchasers in such manner and for such price as
the Trustee in its discretion shall deem reasonable after consultation with UP.
(An 'eligible purchaser' thereunder shall be a person or entity that is not
affiliated with UP and which has all necessary regulatory authority, if any, to
purchase the Trust Stock.) The Voting Trust Agreement further provides that UP
would cooperate with the Trustee in effecting such disposition and that the
Trustee would act in accordance with any direction made by UP as to any specific
terms or method of disposition, to the extent not inconsistent with the
requirements of the terms of any STB or court order. The proceeds of the sale
would be distributed to UP.
The Voting Trust Agreement also provides that if the STB issues an order
that termination of the Voting Trust will not cause UP or its affiliates to
control SP, the Trustee will transfer the Trust Stock to UP Acquisition and the
Voting Trust shall terminate. See 'OTHER LEGAL MATTERS; REGULATORY
APPROVAL--Antitrust.'
The Voting Trust Agreement provides that the Trustee shall receive
reasonable and customary compensation and indemnification from UP and UP
Acquisition.
Pursuant to the Amended Merger Agreement, the Voting Trust Agreement may
not be modified or amended without the prior written approval of SP unless such
modification or amendment is not inconsistent with the Amended Merger Agreement
or the Ancillary Agreements and is not adverse to SP or its stockholders. In its
August 24, 1995 informal written opinion to UP's counsel, the staff of the ICC
stated that the ICC retains the power to override any such modification or
amendment and/or to implement its own modification or amendments to the extent
any provision in the Voting Trust Agreement is found to be inconsistent with the
ICA.
On June 25, 1996, UP Acquisition was merged with and into UPRR, with UPRR
as the surviving corporation. On June 27, 1996, UPRR declared a dividend of the
Voting Certificates and distributed the Voting Certificates to its shareholders
(consisting of UP and certain of its subsidiaries). The Voting Certificates held
by one such shareholder were subsequently distributed to UP so that all of the
Voting Certificates are currently held by UP and Mergerco.
84
<PAGE>
COMPARATIVE MARKET PRICES AND DIVIDENDS
Each of UP Common Stock and the Shares is listed and principally traded on
the NYSE. The following table sets forth the high and low sale prices for each
of UP Common Stock and the Shares and dividends paid per share of UP Common
Stock for the periods indicated as reported in published financial sources. No
dividends have been paid with respect to the Shares since SP's initial public
offering in August 1993.
<TABLE>
<CAPTION>
UP
COMMON STOCK THE SHARES
-------------------------- ----------------------------
DIVIDENDS DIVIDENDS
PAID PER PAID PER
HIGH LOW SHARE HIGH LOW SHARE
---- --- --------- ---- --- ---------
<S> <C> <C> <C> <C> <C> <C>
1993
First Quarter............... $62 3/8 $56 7/8 $ .37 -- -- --
Second Quarter.............. 65 3/4 58 3/4 .37 -- -- --
Third Quarter............... 67 58 3/8 .40 $ 16 3/4* $14 1/4* --
Fourth Quarter.............. 64 7/8 57 7/8 .40 21 3/8 15 1/4 --
1994
First Quarter............... $67 1/8 $55 1/2 $ .40 $ 24 3/8 $18 5/8 --
Second Quarter.............. 59 3/4 55 3/8 .40 23 3/4 19 1/8 --
Third Quarter............... 60 1/8 52 3/4 .43 21 3/4 18 3/8 --
Fourth Quarter.............. 53 3/4 43 3/4 .43 19 7/8 16 5/8 --
1995
First Quarter............... $56 1/8 $45 5/8 $ .43 $ 19 7/8 $16 --
Second Quarter.............. 56 3/4 51 3/4 .43 19 14 1/2 --
Third Quarter............... 69 1/2 55 1/8 .43 25 1/4 15 7/8 --
Fourth Quarter.............. 70 1/8 61 1/2 .43 24 1/2 21 1/2 --
1996
First Quarter............... $73 1/8 $64 1/8 $ .43 $ 25 3/4 $23 1/4 --
Second Quarter.............. 72 1/4 65 1/2 .43 25 1/2 21 7/8 --
Third Quarter (through July
15, 1996)................ 74 68 3/8 -- 28 1/4 24 3/4 --
</TABLE>
- ------------------
* Public trading in the Shares began on August 10, 1993.
On August 2, 1995, the last full trading day prior to the joint public
announcement of the proposed Merger, the last sale prices reported for UP Common
Stock and the Shares on the NYSE Composite Tape were $64 3/8 per share and
$19 5/8 per Share, respectively. On July 15, 1996, the last full trading day for
which information was available prior to the printing and mailing of this Joint
Proxy Statement/Prospectus, the last sale prices reported for UP Common Stock
and the Shares on the NYSE Composite Tape were $68 1/2 per share and $26 1/2 per
Share, respectively.
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THEIR
SHARES AND THE UP COMMON STOCK.
85
<PAGE>
UNAUDITED PRO FORMA FINANCIAL STATEMENTS OF UP AND SP
The unaudited pro forma financial statements of UP and SP included herein
have been prepared by UP to reflect four events: (i) the purchase in the Offer
of 25% of the outstanding Shares at $25.00 per Share, (ii) the purchase in the
Merger of an additional 15% of the outstanding Shares at $25.00 per Share in
cash and the exchange of the remaining 60% of the outstanding Shares for UP
Common Stock at a conversion ratio of .4065 shares of UP Common Stock per Share
in the Merger, (iii) the planned subsequent Spin-Off of Resources and (iv) the
pro forma full year effect of the acquisition of CNW. The SP and Spin-Off
transactions are reflected in the pro forma combined balance sheet as if they
occurred on March 31, 1996 and the SP, CNW and Spin-off transactions are
reflected in the pro forma combined statements of income as if they occurred at
the beginning of the periods presented.
The Merger will be accounted for under the purchase method. The pro forma
combined adjustments do not reflect synergies, and accordingly, do not account
for any potential increases in operating income, any estimated cost savings or
adjustments to conform accounting practices or one-time UP costs associated with
elimination of duplicate facilities and payments to employees. See '--Notes to
Pro Forma Combined Financial Statements' and 'THE MERGER--Estimated Synergies.'
The unaudited pro forma financial statements are prepared for illustrative
purposes only and are based on the assumptions set forth in the notes to such
statements. The unaudited pro forma financial statements are not necessarily
indicative of the financial position or results of operations that might have
occurred had the applicable transactions actually taken place on the dates
indicated, or of future results of operations or financial position of the
stand-alone or combined entities. Consummation of the Merger is conditioned
upon, among other things, approval of the Merger by the STB. See 'OTHER LEGAL
MATTERS; REGULATORY APPROVAL--STB Approval.'
The unaudited pro forma financial statements are based on the historical
consolidated financial statements of UP, SP and CNW and should be read in
conjunction with (i) such historical financial statements and the notes thereto,
which, in the case of UP and SP, are incorporated by reference in this Joint
Proxy Statement/Prospectus, (ii) the unaudited selected pro forma financial data
and unaudited comparative per share data, including the notes thereto, appearing
elsewhere in this Joint Proxy Statement/Prospectus and (iii) the selected
historical financial data appearing elsewhere in this Joint Proxy
Statement/Prospectus.
86
<PAGE>
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SOUTHERN UNION PACIFIC
HISTORICAL PACIFIC CORPORATION/
SOUTHERN RAIL SOUTHERN
CNW RESOURCES UNION PACIFIC PACIFIC CORPORATION PACIFIC RAIL
UNION PACIFIC ACQUISITION SPIN-OFF CORPORATION RAIL ACQUISITION CORPORATION
CORPORATION ADJUSTMENTS(A) ADJUSTMENTS PRO FORMA CORPORATION ADJUSTMENTS PRO FORMA
------------- -------------- ----------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues....... $ 7,486 $ 395 $ $ 7,881 $ 3,151 $ $11,032
------------- ------- ----------- ------------- ----------- ----------- -------------
Operating Expenses:
Salaries, wages and
benefits............ 2,826 151 2,977 1,120 4,097
Depreciation and
amortization........ 642 38 680 161 87(H) 928
Equipment and other
rents............... 769 51 820 324 1,144
Fuel and utilities..... 574 28 602 262 864
Materials and
supplies............ 377 28 405 174 579
Special charge......... -- -- -- 65 65
Other costs............ 957 28 985 896 1,881
------------- ------- ----------- ------------- ----------- ----------- -------------
Total............... 6,145 324 6,469 3,002 87 9,558
------------- ------- ----------- ------------- ----------- ----------- -------------
Operating Income......... 1,341 71 1,412 149 (87) 1,474
------------- ------- ----------- ------------- ----------- ----------- -------------
Gains from sale of
property............... 76 -- 76 31 (31)(I) 76
Other income, net........ 65 (11) (12)(D) 42 (34) 1 (K) 9
Interest expense......... (450) (61) 82 (E) (429) (145) (94)(J)
18 (K) (650)
Corporate expenses....... (99) -- 12 (F) (87) -- (87)
------------- ------- ----------- ------------- ----------- ----------- -------------
Income before income
taxes.................. 933 (1) 82 1,014 1 (193) 822
Income taxes............. (314) 2 (31)(G) (343) (4) 73 (G) (274)
------------- ------- ----------- ------------- ----------- ----------- -------------
Income (loss) from
continuing
operations............. $ 619 $ 1 $ 51 $ 671 $ (3) $(120) $ 548
------------- ------- ----------- ------------- ----------- ----------- -------------
------------- ------- ----------- ------------- ----------- ----------- -------------
Earnings Per Share:
Income (loss) from
continuing
operations.......... $ 3.01 $ 3.26 $(0.02) $ 2.25
Number of shares used
in the computation
of earnings per
share............... 205.8 205.8 156.1 243.9(L)
</TABLE>
See Notes to Pro Forma Combined Financial Statements of UP and SP.
87
<PAGE>
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SOUTHERN UNION PACIFIC
HISTORICAL PACIFIC CORPORATION/
SOUTHERN RAIL SOUTHERN
RESOURCES UNION PACIFIC PACIFIC CORPORATION PACIFIC RAIL
UNION PACIFIC SPIN-OFF CORPORATION RAIL ACQUISITION CORPORATION
CORPORATION ADJUSTMENTS PRO FORMA CORPORATION ADJUSTMENTS PRO FORMA
------------- ----------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues....... $ 1,968 $ $ 1,968 $ 785 $ $ 2,753
------------- ----- ------------- ----------- ----------- -------------
Operating Expenses:
Salaries, wages and
benefits............ 773 773 283 1,056
Depreciation and
amortization........ 172 172 43 22 (H) 237
Equipment and other
rents............... 227 227 80 307
Fuel and utilities..... 164 164 65 229
Materials and
supplies............ 117 117 30 147
Special charge......... -- -- -- --
Other costs............ 250 250 231 481
------------- ----- ------------- ----------- ----------- -------------
Total............... 1,703 1,703 732 22 2,457
------------- ----- ------------- ----------- ----------- -------------
Operating Income......... 265 265 53 (22) 296
------------- ----- ------------- ----------- ----------- -------------
Gains from sale of
property............... 8 8 15 (15)(I) 8
Other income, net........ 10 (11)(D) (1) (14) -- (K) (15)
Interest expense......... (117) 9 (M) (108) (44) (12)(J)
5 (K) (159)
Corporate expenses....... (28) 2 (N) (26) (26)
------------- ----- ------------- ----------- ----------- -------------
Income before income
taxes.................. 138 -- 138 10 (44) 104
Income taxes............. (31) -- (G) (31) (4) 17 (G) (18)
------------- ----- ------------- ----------- ----------- -------------
Income from continuing
operations............. $ 107 $ -- $ 107 $ 6 $ (27) $ 86
------------- ----- ------------- ----------- ----------- -------------
------------- ----- ------------- ----------- ----------- -------------
Earnings Per Share:
Income from continuing
operations.......... $ 0.52 $ 0.52 $ 0.04 $ 0.35
Number of shares used
in the computation
of earnings per
share............... 206.3 206.3 156.2 244.4 (L)
</TABLE>
See Notes to Pro Forma Combined Financial Statements of UP and SP.
88
<PAGE>
PRO FORMA COMBINED BALANCE SHEET
AS OF MARCH 31, 1996
(IN MILLIONS)
<TABLE>
<CAPTION>
ADJUSTED
HISTORICAL AMOUNTS UNION PACIFIC UNION PACIFIC
(UNAUDITED) CORPORATION/ CORPORATION/
-------------------------- SOUTHERN SOUTHERN
UNION SOUTHERN PACIFIC RAIL RESOURCES PACIFIC RAIL
PACIFIC PACIFIC RAIL SP PURCHASE PRICE CORPORATION SPIN-OFF CORPORATION
CORPORATION CORPORATION ALLOCATION PRO FORMA ADJUSTMENTS PRO FORMA
------------ ------------ ----------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............. $ 79 $ 51 $ $ 130 $ $ 130
Notes receivable...................... 652 7 659 (650)(M) 9
Other current assets.................. 915 384 1,299 1,299
------------ ------------ ------- ------------- ----------- -------------
Total current assets............... 1,646 442 2,088 (650) 1,438
Real estate held for sale............... -- 343 516 (O) 859 859
Investments, net........................ 1,447 -- (976)(O) 471 471
Properties, net......................... 14,260 3,725 4,725 (O) 22,710 22,710
Net assets of discontinued
operations (D)........................ 1,361 -- 1,361 (1,361)(P) --
Excess acquisition costs................ 717 -- 717 717
Other assets............................ 178 173 351 351
------------ ------------ ------- ------------- ----------- -------------
Total assets.......................... $ 19,609 $ 4,683 $ 4,265 $28,557 $(2,011) $26,546
------------ ------------ ------- ------------- ----------- -------------
------------ ------------ ------- ------------- ----------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current liabilities................... $ 1,749 $ 922 $ $ 2,671 $ $ 2,671
Debt due within
one year........................... 225 57 282 282
------------ ------------ ------- ------------- ----------- -------------
Total current
liabilities...................... 1,974 979 2,953 2,953
Debt due after one year................. 6,129 1,702 586 (O)
30 (O)
200 (K) 8,647 (650)(M) 7,997
Deferred income taxes................... 3,595 223 1,838 (O) 5,656 34 (N) 5,690
Minority interest-- Resources........... 226 -- 226 (226)(P) --
Other liabilities....................... 1,249 712 187 (O)
15 (K) 2,163 (89)(N) 2,074
Stockholders' equity.................... 6,436 1,067 (1,067)(O)
2,476 (O) 8,912 (1,080)(P) 7,832
------------ ------------ ------- ------------- ----------- -------------
Total liabilities and
stockholders' equity............... $ 19,609 $ 4,683 $ 4,265 $28,557 $(2,011) $26,546
------------ ------------ ------- ------------- ----------- -------------
------------ ------------ ------- ------------- ----------- -------------
</TABLE>
See Notes to Pro Forma Combined Financial Statements of UP and SP.
89
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(A) On April 24, 1995, UP acquired the remaining 71.6% of CNW's
outstanding common stock not previously owned by UP for $1,170 million. The
acquisition of CNW has been accounted for as a purchase and CNW's results have
been consolidated into UP's historical 1995 results as of May 1, 1995.
The following shows CNW's historically reported amounts plus pro forma
adjustments for the period January 1, 1995 through April 30, 1995 which are
included in the Pro Forma Financial Statements as an adjustment to reflect the
annualization of the impact the CNW acquisition had on UP's 1995 operating
results:
FOR THE PERIOD JANUARY 1, 1995 THROUGH APRIL 30, 1995
(IN MILLIONS)
<TABLE>
<CAPTION>
CONSOLIDATION
HISTORICAL CNW ADJUSTMENTS PRO FORMA CNW
-------------- ------------- -------------
<S> <C> <C> <C>
Operating Revenues................................... $407 $ (12)(B) $ 395
Operating Expenses................................... (319) (11)(C)
6 (B) (324)
------ ----- ------
Operating Income..................................... 88 (17) 71
Other Income/Expense-Net............................. (5) (6)(B) (11)
Interest Expense..................................... (33) (28)(C) (61)
------ ----- ------
Income before Income Taxes........................... 50 (51) (1)
Income Taxes......................................... (17) 19 (G) 2
------ ----- ------
Income from Continuing Operations.................... $ 33 $ (32) $ 1
------ ----- ------
------ ----- ------
</TABLE>
(B) The Pro Forma Combined Statement of Income as of December 31, 1995 has
been adjusted to include CNW's historical results as if the CNW acquisition had
occurred as of January 1, 1995 and includes a reduction of operating revenues to
eliminate UP's recognition of CNW's equity earnings of $12 million, a reduction
of CNW's operating costs and UP's other income of $6 million to reflect the
elimination of intercompany leasing activity and a reduction of income tax
expense resulting from the prior two adjustments.
(C) As a result of the revaluation of CNW's assets to fair market value as
part of the allocation of the purchase price of CNW, annual depreciation expense
will increase $33 million. In addition, annual interest expense will increase by
$85 million reflecting UP's borrowings of $1,170 million at an average interest
rate of 7.3% per annum (the actual average interest rate of the debt securities
used to finance the CNW acquisition).
(D) In July 1995, UP's Board of Directors approved a formal plan to exit
its natural resources business. The plan included the IPO of 17.1% of Resources
Common Stock which occurred in October 1995. In addition, the plan includes the
distribution of UP's remaining investment in Resources on a pro rata, tax free
basis once a favorable ruling from the Internal Revenue Service is received and
the Merger is completed or terminated. These events are expected to occur in
late 1996. The Pro Forma Financial Statements include an adjustment to eliminate
interest income recorded for Resources' $650 million 8.5% note to UP which must
be repaid by Resources within 90 days of the distribution (see Note (M) below)
net of intercompany interest expense.
Resources is presented as a discontinued operation in UP's historical
financial statements. See Note 2 to the financial statements incorporated by
reference in UP's 1995 Annual Report on Form 10-K.
(E) Represents the repayment of outstanding commercial paper balances at
the weighted average commercial paper interest rate for 1995 of 6% with the
proceeds from Resources' $1,562 million dividend ($912 million received in
October 1995 and $650 million payable within 90 days of the final distribution
(see Note (M)).
(F) Represents administrative savings UP will recognize as a result of the
IPO and Spin-Off. These savings include the pension expense reduction discussed
in Note (N) below, lower stock-based compensation costs for executives and
reduced personnel costs.
(G) Tax-effected pro forma adjustments have been determined using a
marginal tax tate of 38%.
90
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(H) The SP purchase price will be allocated to the assets and liabilities
acquired based on their fair market value. An initial purchase price allocation
(see Note (O) below) resulted in annual increase in depreciation expense of $87
million ($54 million after tax). The purchase price will be allocated at the
consummation of the Merger and might be revised for a period of up to one year
as additional information is obtained. As a result, the final purchase price
allocation could be different from the amounts included in Note (O) below.
Nevertheless, management believes the final impact on its results will not be
materially different from the amounts included in the Pro Forma Financial
Statements because the majority of the purchase price will be allocated to
long-lived assets and land used for transportation purposes.
The increase in annual depreciation reflects a $3,030 million increase in
the book value of track, grading and other roadway assets depreciated over an
average life of 48 years and a $195 million increase in the book value of
equipment depreciated over an average of 8.0 years. The remaining purchase price
is allocated to land used for transportation purposes and real estate held for
sale.
(I) Gains on property sales recorded by SP are revised because future
gains or losses on property sales are not expected to occur as a result of the
reevaluation of real estate held for sale to market value as part of the SP
purchase price allocation.
(J) The $976 million Offer (see Note (O)), which occurred in September
1995, was initially financed by UP's available credit facilities, of which $2.5
billion are currently available. The December 31, 1995 Pro Forma Financial
Statements have been adjusted to reflect a full year of interest for the Offer
based on the credit facility's 1995 weighted average interest rate of 5.7% per
annum.
The cash portion of the Merger of $586 million will initially be financed
by UP's $2.8 Billion Facility. However, it is management's intent to refinance
such amounts on a long-term basis. As a result, the Pro Forma Financial
Statements at December 31, 1995 and March 31, 1996 reflect interest costs based
upon a current long-term market interest rate of 8.5% per annum.
A portion of the actual interst rate may be LIBOR based and, therefore,
would be variable rather than fixed. If all of the interest rates were variable,
a 0.125% change in the interest rate would cause total annual interest to change
by approximately $2 million.
(K) In conjunction with the allocation of the SP purchase price, a debt
and preferred stock premium is created by revaluing SP's debt and preferred
stock to fair market value. The premium will be amortized over the average
remaining life of the debt of 11 years and of the preferred stock of 14 years.
(L) The number of shares of UP Common Stock outstanding used in the
determination of pro forma earnings per share include 205.8 million weighted
average shares of UP Common Stock as of December 31, 1995 plus 38.1 million
additional shares of UP Common Stock issued in conjunction with the Merger and
206.3 million weighted average shares of UP Common Stock outstanding as of March
31, 1996 plus 38.1 million additional shares of UP Common Stock to be issued in
conjunction with the Merger.
(M) In conjunction with the IPO, Resources declared a $1,562 million
dividend to UP consisting of $912 million in cash and a $650 million note
bearing interest at 8.5% per annum and payable within 90 days of the
distribution of UP's remaining investment in Resources. The Pro Forma Financial
Statements reflect the final distribution of UP's remaining interest in
Resources, including the repayment of Resources' $650 million note. Such
proceeds are anticipated to repay outstanding commercial paper balances of UP
which has a weighted average annual interest rate of 5.5% as of March 31, 1996.
(N) The Pro Forma Financial Statements reflect a contractual reallocation
of pension assets to UP from Resources that differ from historical December 31,
1995 pension asset allocations between UP and Resources under the UP Pension
Plan. As a result of the separation of Resources from the UP Pension Plan and
the resulting reallocation of pension assets, UP will receive additional pension
assets estimated at $89 million, related deferred taxes of $34 million and will
realize annual estimated pension expense savings of $7 million.
(O) In September 1995, UP acquired SP Shares in the Offer representing 25%
of the outstanding SP Shares at $25.00 per share. After STB approval, UP will
acquire the remaining SP Shares for cash and UP
91
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Common Stock so that 40% of the consideration for the SP Shares is paid in cash,
including the Shares previously acquired in September 1995, and 60% in UP Common
Stock.
The purchase price is determined as follows and assumes a market value of
each share of UP Common Stock of $65.00, the value at August 3, 1995 (the date
the Merger was announced), and that there are 156.2 million SP Shares
outstanding:
<TABLE>
<CAPTION>
IN MILLIONS
-----------
<S> <C>
First-Step Cash Tender (39.0 million Shares at $25.00 per Share)............................ $ 976
Merger Cash Purchase (23.4 million Shares at $25.00 per Share).............................. 586
Merger Exchange of Shares (93.7 million Shares converted into UP Common Stock at a
conversion ratio of .4065 UP Common Stock for each Share at an assumed UP market price of
$65.00 per share)......................................................................... 2,476
Transactions Costs.......................................................................... 30
-----------
Pro Forma Purchase Price.................................................................... $ 4,068
-----------
-----------
</TABLE>
The Merger will be accounted for as a purchase. The initial allocation of
the Pro Forma Purchase Price is as follows:
<TABLE>
<CAPTION>
MARCH 31, 1996
--------------
<S> <C>
Purchase price.......................................................................... $4,068
Pre-tax Merger costs.................................................................... 187
Equity acquired......................................................................... (1,067)
-------
Unallocated purchase price.............................................................. $3,188
-------
-------
Purchase Price Allocation:
Property and equipment................................................................ $4,725
Real estate held for sale............................................................. 516
Debt premium.......................................................................... (200)
Preferred stock premium............................................................... (15)
Deferred income taxes................................................................. (1,838)
-------
Total.............................................................................. $3,188
-------
-------
</TABLE>
The purchase price allocation includes $187 million pre-tax Merger costs
($116 million after tax) as follows:
<TABLE>
<CAPTION>
IN MILLIONS
-----------
<S> <C>
Termination of employees.................................................................... $ 94
Relocation of employees..................................................................... 38
Costs to terminate the IBM contract for computer services................................... 15
Other Merger costs.......................................................................... 40
-----------
Total.................................................................................. $ 187
-----------
-----------
</TABLE>
Merger costs include the termination of approximately 1,700 employees and
the relocation of approximately 1,500 employees.
(P) Reflects the final distribution of UP's ownership interest in
Resources to UP stockholders via dividend.
92
<PAGE>
UNAUDITED PRO FORMA FINANCIAL STATEMENTS OF RESOURCES
The pro forma financial statements presented below reflect the effects of
adjustments to the historical combined financial statements and notes thereto of
Resources necessary to give pro forma effect to the IPO and other events in
connection therewith, which occurred on October 16 and 17, 1995, and the
Spin-Off, as if such transactions had occurred at the beginning of each of the
periods presented for purposes of the pro forma statements of income and as of
March 31, 1996 for purposes of the pro forma statement of financial position.
Because Resources represents a large discontinued operation, the financial
statements of Resources are significant to the overall results of UP. Since the
Spin-Off is not scheduled to occur until after the consummation of the Merger
and is subject to, among other things, receipt of an IRS ruling, SP stockholders
may find the disclosure in the pro forma financial statements presented below
helpful in showing the effect of the IPO and Spin-Off on Resources' financial
position.
Management believes that the assumptions used provide a reasonable basis on
which to present the pro forma financial data. The pro forma financial
statements are provided for informational purposes only and should not be
construed to be indicative of Resources' results of operations or financial
position had the IPO, the other events in connection therewith and the Spin-Off
been consummated on or as of the dates assumed, and are not intended to project
Resources' results of operations or its financial position for any future period
or as of any future date.
93
<PAGE>
UNION PACIFIC RESOURCES GROUP INC. AND PREDECESSORS
PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995 AND THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995 THREE MONTHS ENDED MARCH 31, 1996
-------------------------------------- --------------------------------------
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- --------- ---------- ----------- ---------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Operating revenues............ $1,456 $ $ 1,456 $ 389 $ $ 389
---------- ----- --------- ---------- --- ---------
Operating expenses:
Production.................. 218 218 63 63
Exploration................. 89 89 30 30
Plants, pipelines and
marketing................ 161 161 60 60
Minerals.................... 9 9 1 1
Depreciation, depletion and
amortization............. 459 459 124 124
General and
administrative........... 50 15 (A) 65 14 2 (F) 16
---------- ----- --------- ---------- --- ---------
Total.................... 986 15 1,001 292 2 294
---------- ----- --------- ---------- --- ---------
Operating income.............. 470 (15) 455 97 (2) 95
Other income (I).............. 7 (4)(B) 3 2 2
Interest expense.............. (19) (45)(C) (64) (13) (13)
---------- ----- --------- ---------- --- ---------
Income before income taxes.... 458 (64) 394 86 (2) 84
Income taxes.................. (107) 24 (D) (83) (27) 1 (D) (26)
---------- ----- --------- ---------- --- ---------
Net income.................... $ 351 $ (40) $ 311 $ 59 $(1) $ 58
---------- ----- --------- ---------- --- ---------
---------- ----- --------- ---------- --- ---------
Net income per share of
Common Stock................ N/A $ 1.25 $ 0.24 $ 0.23
Shares of Common Stock
outstanding................. N/A 249.7 (E) 249.9 249.9 (E)
</TABLE>
See Notes to the Pro Forma Financial Statements of Resources.
94
<PAGE>
UNION PACIFIC RESOURCES GROUP INC.
PRO FORMA STATEMENT OF FINANCIAL POSITION
AS OF MARCH 31, 1996
(IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and temporary investments.......................................... $ 27 $ $ 27
Accounts receivable--net................................................ 226 226
Inventories............................................................. 46 46
Other................................................................... 54 54
---------- ----------- ---------
Total current assets................................................. 353 353
Properties--net........................................................... 2,760 2,760
Intangible and other assets............................................... 115 (14)(F) 101
---------- ----------- ---------
Total assets......................................................... $3,228 $ (14) $ 3,214
---------- ----------- ---------
---------- ----------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................................ $ 306 $ $ 306
Accrued taxes payable................................................... 80 80
Note payable to and advances from UP--net............................... 478 (478)(C/G) --
Other................................................................... 65 65
---------- ----------- ---------
Total current liabilities............................................ 929 (478) 451
Long-term debt............................................................ 101 478 (C/G) 579
Deferred income taxes..................................................... 446 (33)(F) 413
Other long-term liabilities............................................... 391 75 (F) 466
Stockholders' equity...................................................... 1,361 (56)(F) 1,305
---------- ----------- ---------
Total liabilities and stockholders' equity........................... $3,228 $ (14) $ 3,214
---------- ----------- ---------
---------- ----------- ---------
</TABLE>
See Notes to the Pro Forma Financial Statements of Resources.
95
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS OF RESOURCES
<TABLE>
<S> <C>
(A) In July 1995, UP's Board of Directors approved a formal plan to exit its natural resources business. The plan
included the IPO of 17.1% of Resources Common Stock which occurred in October 1995. A final distribution of
UP's remaining ownership in Resources will occur on a pro rata, tax free basis once a favorable ruling from
the Internal Revenue Service is received and the Merger is completed or terminated. These events are expected
to occur in late 1996.
The Pro Forma Financial Statements have been adjusted to reflect costs that Resources will incur as a result
of becoming a stand-alone entity. These costs include (1) additional administrative personnel for services
previously provided to Resources by UP such as accounting, cash management, SEC compliance, internal audit,
the office of the corporate secretary, shareholder relations, legal, government relations, tax compliance and
employee benefits, (2) additional third-party fees such as audit fees, actuarial fees, legal fees and stock
transfer fees, (3) additional pension costs associated with the reallocation of pension assets between UP and
Resources (see (F) below), (4) additional stock compensation costs related to Resources' employee retention
shares and (5) fees paid to UP for certain financial guarantees provided to Resources. The pro forma effect
for the year ended December 31, 1995 for such costs was $15 million.
(B) In conjunction with the IPO, Resources transferred via dividend to UP a $59 million intercompany receivable.
As a result, Resources' other income is reduced by the actual amount of interest income Resources had
recognized in 1995 on the intercompany receivable balance to UP.
(C) In conjunction with the IPO, Resources declared a $1,562 million dividend to UP consisting of $912 million in
cash and a $650 million note bearing interest at 8.5% per annum and payable within 90 days of the final
distribution of UP's remaining investment in Resources. Resources funded the cash dividend with the $844
million of net proceeds from the IPO and $68 million of borrowings under its $100 million bank credit facility
which carried a weighted average interest rate of 6.1% per annum in 1995.
The Pro Forma Financial Statements reflect the final distribution of UP's investment in Resources including
Resources' repayment of the $650 million note held by UP. Resources currently intends to refinance amounts
owed to UP on a long-term basis prior to the final distribution of Resources.
(D) Tax-effected pro forma adjustments have been determined using a marginal tax rate of 37.5%.
(E) The calculation of Resources' pro forma earnings per share ('EPS') as of December 31, 1995 are based upon
249.7 million average common shares outstanding during the period from completion of the IPO until December
31, 1995 including shares issuable upon exercise of outstanding stock options determined using the treasury
stock method. EPS, as of March 31, 1996, is based upon average common shares outstanding of 249.9 million, for
the period including shares issuable upon exercise of outstanding stock options under the treasury stock
method.
(F) The Pro Forma Financial Statements reflect a contractual reallocation of pension assets to UP from Resources
that differs from historical December 31, 1995 pension asset allocations between UP and Resources under the UP
Pension Plan. As a result of the separation of Resources from the UP Pension Plan and the resulting
reallocation of pension assets, Resources will transfer to UP pension assets estimated at $89 million, related
deferred taxes of $33 million and will realize annual estimated pension expense of $7 million in excess of
what has historically been reported.
(G) In October 1995, Resources entered into a cash management agreement with UP. Under the terms of the agreement,
Resources is required to remit to UP all cash generated by its operations and may borrow up to a maximum of
$200 million. The agreement carries an interest rate of 8.5% per annum and must be repaid 90 days after the
final distribution of Resources. At March 31, 1996, UP owed Resources $172 million under the cash management
agreement.
</TABLE>
96
<PAGE>
THE COMPANIES
SOUTHERN PACIFIC RAIL CORPORATION
SP is a holding company that, through the integrated network of its
principal subsidiaries, transports freight over approximately 16,400 miles of
main track throughout the western United States. SP operates in 16 states over
five main routes. SP serves most West Coast ports and large population centers
west of the Mississippi and connects with eastern railroads at Chicago, St.
Louis, Kansas City, Memphis and New Orleans. SP's rail lines reach the principal
Gulf ports south from Chicago and east from the Los Angeles basin. SP
interchanges with Mexican railroads at six gateways into Mexico.
The principal commodities hauled in SP's carload operations are chemicals
and petroleum products, food and agricultural products, forest products
(including paper, paper products and lumber) and coal. Intermodal container and
trailer operations continue to be SP's largest single-traffic category,
representing approximately 26% of 1995 gross freight revenues. SP's leadership
in the U.S. intermodal business is based in part on its advantageous geographic
position on the Pacific Rim and on its Intermodal Container Transport Facility,
the nation's busiest international container facility, serving the ports of Los
Angeles and Long Beach. In 1995, SP's largest five shippers accounted for less
than 17% of gross freight revenues, with no shipper providing more than 7% of
such revenue.
SP's rail operations date from the 1860's when the predecessor of its
principal subsidiary, Southern Pacific Transportation Company ('SPT'), began as
the western half of America's first transcontinental railroad. SP became the
nation's sixth largest railroad, based on revenues, in October 1988 when it
acquired SPT from Santa Fe Pacific Corporation ('Santa Fe'). In 1989 and 1990,
SP acquired access to Chicago from St. Louis and Kansas City, respectively. For
the five years preceding the acquisition by SP, SPT had been held in trust
pending the decision of the ICC that denied Santa Fe's requested merger with
SPT.
In addition to its rail business, the disposition, in support of SP's rail
operations, of urban and intercity corridors and surplus real estate, mostly in
metropolitan areas along SP's rights of way, is a major component of SP's
business strategy and is conducted as part of its ordinary course of business.
SP markets properties that are classified generally into two distinct types:
transit corridors and consolidated freight corridors, which are typically sold
to public agencies, and traditional real estate, which is typically sold to
different groups of potential buyers. SP historically has received substantial
cash flow from traditional real estate sales and leasing activities. More
recently, the transit corridor sales have become a significant source of cash
with SP usually retaining operating rights over these corridors to continue
freight rail service to its customers. From January 1, 1989 through December 31,
1995, SP received over $1.8 billion in proceeds from its real estate asset
disposition program. Although these real estate sales and transit corridor sales
are expected to continue, gains from such sales will be substantially reduced
once the Merger is completed as a result of the book value of such properties
being written up to estimated market value in purchase accounting. Cash flow
from such sales will not be affected by the purchase accounting adjustment.
SP was incorporated in Delaware in 1988. Its principal executive offices
are located at Southern Pacific Building, One Market Plaza, San Francisco,
California 94105, and its telephone number is (415) 541-1000.
UNION PACIFIC CORPORATION
UP is a Utah corporation, organized in 1969, with principal executive
offices located at Martin Tower, Eighth and Eaton Avenues, Bethlehem,
Pennsylvania 18018.
UP operates, through its subsidiaries, in the areas of rail transportation
(UPRR and MPRR), oil, gas and mining (Resources), trucking (Overnite
Transportation Company ('Overnite')), and information and communications
technology (Union Pacific Technologies, Inc. ('UP Tech')). Each of these
subsidiaries, except for Resources, is wholly owned by UP. Substantially all of
UP's operations are in the United States.
Overnite, a major interstate trucking company, serves all 50 states and
portions of Canada through 174 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,
Overnite serves 95 percent of the United States population and specializes in
the less-than-truckload shipment business. Overnite
97
<PAGE>
transports a variety of products, including machinery, textiles, plastics,
electronics and paper products. Overnite competes on the basis of service and
price with both regional and national motor carriers.
Resources is one of the largest independent oil and gas companies in North
America and is engaged primarily in the exploration for and the development and
production of natural gas, natural gas liquids and crude oil in several major
producing basins in the United States and Canada. Resources markets its own
production, and purchases and re-sells third-party production, focusing on
direct marketing to the natural gas end user, with particular emphasis on the
power generation market. Resources also engages in the hard minerals business
through its nonoperated joint venture and royalty interests in several coal and
trona (natural soda ash) mines located on lands in Wyoming.
Resources competes for oil and gas reserves and technology advances with
smaller companies as well as with the larger integrated oil companies. In its
marketing activities, Resources competes with other hydrocarbon producers and
marketers. Mining operations also are subject to competition from a number of
companies, many of which have larger operations.
For a description of UP's IPO of shares of Resources Common Stock and the
Spin-Off, see '-- Resources Spin-Off' below.
UP Tech assists UP's other operating companies in the design, development,
and implementation of their information and communication needs. In addition, UP
Tech seeks out opportunities to market, both domestically and internationally,
internally developed systems and services to third parties.
Additional information concerning UP and its subsidiaries is contained in
UP's Annual Report on Form 10-K for the year ended December 31, 1995 and its
other public filings. See 'INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE' and
'AVAILABLE INFORMATION.'
THE RAILROAD
The Railroad is the second largest railroad in the United States by
mileage, with approximately 22,700 route miles linking West Coast and Gulf Coast
ports with the Midwest. The Railroad maintains coordinated service with other
carriers for the handling of freight throughout the United States, Canada and
Mexico. The Railroad handles exported and imported freight throughout the
system, principally through the Gulf Coast and Pacific Coast ports and across
the Texas-Mexico border. Major categories of freight hauled by the Railroad are
automotive, chemicals, energy (coal), food, consumer, government, grains and
grain products, intermodal, forest products and metals and minerals.
The Railroad, like the SP rail system, is subject to competition from other
railroads, motor carriers and barge operators, based on both price and service,
as well as to other competitive constraints. Most of its railroad operations are
conducted in corridors served by competing railroads and by motor carriers.
Motor carrier competition is particularly strong for intermodal traffic. Barge
competition can be particularly pronounced for bulk commodities in certain
markets. Other competitive constraints, such as the need to keep customers
competitive in their markets, are also important.
UP ACQUISITION CORPORATION
UP Acquisition was a Delaware corporation organized in 1995 and did not
carry on any significant activities other than activities undertaken in
connection with the Offer and the Merger. The principal offices of UP
Acquisition were located at Martin Tower, Eighth & Eaton Avenues, Bethlehem,
Pennsylvania 18018. UP Acquisition was a direct wholly owned subsidiary of UPRR
and an indirect wholly owned subsidiary of UP. Immediately prior to the Offer,
UP Acquisition did not have any significant assets or liabilities or engage in
activities other than those incident to the transactions contemplated by the
Offer and the Merger. Upon the expiration of the Offer, on September 7, 1995, UP
Acquisition accepted the Acquired Shares for payment and simultaneously
deposited such Acquired Shares in the Voting Trust in accordance with the terms
of the Voting Trust Agreement. On September 15, 1995, UP Acquisition purchased
and paid for the Acquired Shares. See 'VOTING TRUST AGREEMENT' and 'OTHER LEGAL
MATTERS; REGULATORY APPROVAL--STB Approval.' On June 25, 1996, UP Acquisition
was merged with and into UPRR and the separate corporate
98
<PAGE>
existence of UP Acquisition ceased. See 'THE MERGER' and 'THE AMENDED MERGER
AGREEMENT.'
HOLDING
Holding is a Utah corporation organized in 1995. Holding owns indirectly
21.6% of the stock of UPRR but has not carried on any significant activities
other than activities undertaken in connection with the Amended Merger
Agreement. The principal offices of Holding are located at Martin Tower, Eighth
& Eaton Avenues, Bethlehem, PA 18018. Holding is a direct wholly owned
subsidiary of UP.
MERGERCO
Mergerco is a Delaware corporation organized in 1996. Mergerco owns
approximately 12.7% of the common stock of UPRR but has not carried on any
significant activities other than activities undertaken in connection with the
Amended Merger Agreement. The principal offices of Mergerco are located at
Martin Tower, Eighth & Eaton Avenues, Bethlehem, PA 18018. Mergerco is a direct
wholly owned subsidiary of UP.
RESOURCES SPIN-OFF
On August 4, 1995, Resources filed a registration statement on Form S-1
with the Commission in connection with the IPO of shares of its common stock
(the 'Resources Common Stock'), representing no more than 17.25% of the
outstanding shares of Resources Common Stock (after giving effect to the
issuance of shares in the IPO and shares to be issued to employees or reserved
for issuance with respect to employee options). On October 16 and 17, 1995,
Resources sold 42,500,000 shares of Resources Common Stock in the IPO. UP
intends, subject to certain conditions, to distribute pro rata to its
stockholders all of the remaining shares of Resources Common Stock held by UP
following the IPO (representing approximately 83% of the outstanding shares of
Resources Common Stock) by means of a tax-free distribution (the 'Spin-Off').
Pursuant to the Amended Merger Agreement, UP has agreed that no dividend shall
be declared for any distribution of shares of capital stock of Resources or for
the distribution to UP's stockholders of any proceeds of any other disposition
of Resources or the assets thereof, and no declaration of or record date for any
such distribution shall occur, until after the consummation of the Merger or
termination of the Amended Merger Agreement.
The Spin-Off will be subject to declaration by UP's Board of Directors,
which declaration is expected to be subject to (1) the receipt of a favorable
ruling from the IRS as to the tax-free nature of the transaction and (2) the
absence of any change in market conditions or other circumstances that causes
the Board of Directors of UP to conclude that the Spin-Off is not in the best
interests of the stockholders of UP. On October 18, 1995, UP filed with the IRS
a request for ruling that the Spin-Off and certain related transactions will be
tax-free to UP and its shareholders (including holders of UP Common Stock issued
in the Merger). UP has not determined what action it would take if it were not
to receive the favorable tax ruling. Alternatives would include, without
limitation, completing the Spin-Off based on an opinion of counsel, selling
additional shares of Resources Common Stock to reduce UP's investment in
Resources, or continuing to maintain Resources as a subsidiary. No assurance can
be given that such favorable tax ruling will be obtained. Pursuant to the
Amended Merger Agreement, UP has agreed that in connection with any tax opinion
or IRS private letter ruling, such opinion or ruling shall provide that no
income, gain or loss will be recognized by UP's stockholders (including former
stockholders of SP who receive UP Common Stock in the Merger) upon receipt of
Resources Common Stock. Even if a favorable IRS ruling is obtained, there can be
no assurance that the Spin-Off will occur or that UP will not sell its shares of
Resources Common Stock.
CERTAIN OPERATING RELATIONSHIPS
The rail subsidiaries of each of UP, on the one hand, and SP, on the other
hand, have operating relationships with each other. For purposes of this
subsection, the term 'SPT' includes SPT, The Denver and Rio Grande Western
Railroad Company, the St. Louis Southwestern Railway Company, SPCSL Corp. and
other rail carrier subsidiaries of each, while the term 'Railroad' includes UPRR
and MPRR and other rail carrier subsidiaries of each. Approximately 9%, 8% and
8% of SPT's total loads in 1993, 1994 and 1995, respectively, were interchanged
with the Railroad. Additionally, approximately 4%, 3% and 8% of the Railroad's
total loads in
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1993, 1994 and 1995, respectively, were interchanged with SPT. Major interchange
locations between the Railroad and SPT include Ogden, UT, Colton, CA, Portland,
OR, and El Paso, TX. In connection with such interchanges, either or both of
SPT's and the Railroad's railroad subsidiaries may be the party billing the
shipper of such interchange freight, and in cases where one of the parties bills
for the entire shipment, such party will periodically remit to the other party
the net amount of the proceeds due to such other carrier in accordance with
standard industry practice. In addition, the Railroad and SPT, often together
with other railroads, cooperate in terminal switching operations at various
locations including Los Angeles, CA, St. Louis, MO, East St. Louis, IL, Denver,
CO, and Houston, TX. SPT and the Railroad also have proprietary interests in
various terminal companies in their service territories, including the Alton &
Southern Railway Company in East St. Louis, IL, as to which each is a 50% owner.
In addition to the foregoing, the Railroad and SPT are parties to various
trackage rights agreements pursuant to which the Railroad operates over
approximately 704 miles of SPT track and SPT operates over approximately 2,340
miles of Railroad track. For example, (i) the Railroad and SPT have a paired
track arrangement where each uses certain trackage of the other between Alazon
and Weso, NV, (ii) the two companies have granted each other reciprocal trackage
rights between Paragould, AR and Valley Jct., IL whereby the Railroad operates
over 113 miles of SPT trackage between Paragould and Illmo, Jct. and SPT
operates over 119 miles of Railroad trackage between Valley Jct. and Simbco
Jct., IL, (iii) SPT has bridge rights over 431 miles of Railroad trackage
between Pueblo, CO and Herington, KS, and (iv) SPT has bridge trackage rights
over the Railroad's trackage between Kansas City, MO and St. Louis, MO. During
1993, 1994 and 1995, payments from SPT to the Railroad under all trackage rights
agreements totaled approximately $53,355,000, $46,500,000 and $61,202,000,
respectively, while payments under all trackage rights agreements from the
Railroad to SPT totalled approximately $11,969,000, $10,372,000 and $10,005,000
during 1993, 1994 and 1995, respectively.
As is not unusual in the railroad industry, disputes have arisen between
the Railroad and SPT over the interpretation and/or operation of trackage rights
agreements between the two. Currently, trackage rights agreement disputes
between the Railroad and SPT exist on the following matters:
o Whether SPT as a trackage rights tenant is obligated to pay a share
(approximately $1.5 million) of the cost of past separation
allowance/reserve board payments for employees on the Railroad's Pueblo,
CO line and a share (approximately $2.5 million) of capital costs and
operating costs for the Railroad's Harriman Dispatch Center.
o Whether SPT is contractually obligated to indemnify the Railroad for
damages resulting from derailments on the Railroad's line at Cody, KS and
East Acoma, NV.
In addition, by Settlement Agreement and Release dated March 31, 1995, the
Railroad and SPT settled disputes between the two concerning (i) SPT's payment
of rent and interest to the Railroad for SPT's use of trackage rights over the
Railroad's lines between St. Louis and Kansas City, and (ii) SPT allegations
that the Railroad engaged in past service and dispatching discrimination against
SPT over the St. Louis-Kansas City trackage rights and other portions of the
Railroad's rail system. Among other things, pursuant to this settlement (i) SPT
paid the Railroad $30,756,012 on April 3, 1995, and (ii) SPT paid the Railroad
(a) $1,076,460 as simple interest on the unpaid balance of the settlement amount
on each of October 3, 1995 and April 3, 1996, and (b) the balance of $30,756,012
on April 3, 1996.
Disputes also exist between the Railroad and SPT concerning the Railroad's
proposed build-in to shippers (Amoco, Chevron and Exxon) currently exclusively
served by SPT at Mont Belvieu, TX.
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OTHER LEGAL MATTERS; REGULATORY APPROVAL
GENERAL
Except as otherwise disclosed herein, based on representations and
warranties made by SP in the Amended Merger Agreement and a review of publicly
available information by SP with the Commission, none of Newco, UPRR or UP is
aware of (i) any license or regulatory permit that appears to be material to the
business of SP and its subsidiaries, taken as a whole, that might be adversely
affected as a result of the acquisition of the Acquired Shares by UP Acquisition
pursuant to the Offer or the acquisition of Shares by UP or UPRR pursuant to the
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 UP, UP Acquisition or UPRR as
contemplated herein. Should any such approval or other action be required, UP,
Newco and UPRR currently contemplate that such approval or action would be
sought.
ANTITRUST
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the 'HSR Act'), and the rules that have been promulgated thereunder by 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 Federal Trade Commission (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
UP's and SP's STB-regulated railroad operations, provided that information and
documentary material filed with the STB in connection with the seeking of STB
approval of the affiliation of such operations are contemporaneously filed with
the Antitrust Division and the FTC. UP has complied with these contemporaneous
filing requirements and therefore believes that the notice and waiting period
requirements do not apply to the Transactions. UP, UPRR and Newco believe that
the Offer and the Merger are not subject to the HSR Act. UP, UPRR and UP
Acquisition requested the FTC to confirm this understanding and counsel for UP
has been advised by the Premerger Notification Office of the FTC, in a letter
dated August 17, 1995, that the Offer and the Merger are exempt from the HSR
Act. In such letter, the FTC noted UP's agreement that should the Trustee of the
Voting Trust transfer Shares to UP (upon the issuance by the ICC of an order
that the termination of the Voting Trust will not cause UP or its affiliates to
control SP), UP will make any required HSR filings.
THE VOTING TRUST
Certain activities of subsidiaries of SP and UP are regulated by the STB.
Provisions of the Interstate Commerce Act (the 'ICA') require approval of, or
the granting of an exemption from approval by, the STB for the acquisition of
control of two or more carriers subject to the jurisdiction of the STB
('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. STB approval or exemption is required for, among other
things, acquisition of control by UP or its affiliates of SP. UP does not
believe that ownership by UP or any UP affiliate of the Acquired Shares would
have given UP and its affiliates control of SP and its affiliates. Nonetheless,
UP Acquisition deposited the Acquired Shares in the Voting Trust in order to
ensure that UP and its affiliates do not acquire or directly or indirectly
exercise control over SP and its affiliates prior to obtaining necessary STB
approvals or exemptions.
On August 24, 1995, counsel for UP received an informal written opinion
from the staff of the ICC that the Voting Trust would effectively insulate UP
and its affiliates from the violation of the Interstate Commerce Act and ICC
policy that would result from an unauthorized acquisition by UP of control of
SP.
On September 7, 1995, UP Acquisition accepted for payment the Acquired
Shares and simultaneously deposited such Acquired Shares in the Voting Trust. On
September 15, 1995, UP Acquisition paid for and purchased the Acquired Shares.
On June 25, 1996, UP Acquisition was merged with and into UPRR, with UPRR as the
surviving corporation. On June 27, 1996, UPRR declared a dividend of the Voting
Certificates and distributed the Voting Certificates to its shareholders
(consisting of UP and certain of its subsidiaries). The Voting Certificates held
by one such shareholder were subsequently distributed to UP so that all of the
Voting Certificates are currently held by UP and Mergerco.
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Pursuant to the terms of the Voting Trust Agreement, it is expected that
the Trustee would hold the Acquired Shares until (i) the receipt of STB
approval, (ii) the Acquired Shares are sold to a third party or otherwise
disposed of, or (iii) the Voting Trust is otherwise terminated. The Voting Trust
Agreement that has been approved by the staff of the ICC provides that the
Trustee will have sole power to vote the Acquired Shares in the Voting Trust,
will vote those Acquired Shares in favor of the Merger, will vote the Acquired
Shares in favor of any permitted disposition of the Acquired Shares and, so long
as the Merger Agreement is in effect, against any other proposed merger,
business combination or similar transaction involving SP, and, on all other
matters, will vote the Acquired Shares in proportion to the vote of all other
stockholders of SP. The Voting Trust Agreement contains certain other terms and
conditions designed to ensure that neither UP Acquisition nor UP will control SP
during the pendency of the STB proceedings. In addition, the Voting Trust
Agreement provides that UP Acquisition or its successor in interest will be
entitled to receive any dividends paid by SP other than stock dividends. See
'VOTING TRUST AGREEMENT.'
STB APPROVAL
Set forth below is information relating to approval by the STB of the
acquisition of control over SP and its affiliates by UP and its affiliates. On
November 30, 1995, UP, SP and various of their affiliates filed an application
(the 'STB Application') seeking approval of the ICC (the predecessor of the STB)
for the acquisition of control over SP and its affiliates by UP and its
affiliates, the Merger, and related transactions. Since the filing of the STB
Application, the STB received evidentiary submissions and briefs in connection
with the proposed Merger. The STB heard oral arguments on the proposed Merger on
July 1, 1996 and the STB held a voting conference on the proposed Merger on July
3, 1996. At the voting conference, the STB announced the following decision: to
approve the Merger subject to a number of conditions, principally (a) the
settlement agreement between UP/SP and BNSF (as described below) under which
BNSF will receive trackage rights over more than 4,000 miles of UP/SP track and
will purchase over 300 miles of UP/SP lines, augmented in a number of ways to
expand BNSF's ability to gain access to traffic (e.g., through transloading
facilities (facilities where goods are transferred between trucks and railcars)
and build-ins of rail lines to exclusively-served customers, through serving new
shipper facilities on the lines over which it will have trackage rights, and
through opening to BNSF of all 50% of all traffic now committed under contracts
to UP or SP by shippers served by UP and SP and no other railroad), (b) the
settlement agreement between UP/SP and the Chemical Manufacturers Association
(as described below) which provides certain additional protections to shippers,
(c) a settlement agreement between UP/SP and Utah Railway under which Utah
Railway will receive access to certain coal mines and loading facilities in Utah
and trackage rights over SP from Utah Railway's line in Utah to Grand Junction,
Colorado, (d) the grant of trackage rights to Tex Mex over UP/SP lines between
Corpus Christi/Robstown, Texas, and Beaumont, Texas, via Houston, Texas,
restricted to traffic moving on Tex Mex's Laredo-Corpus Christi/Robstown line,
including terminal-area trackage rights in Houston, (e) environmental mitigation
conditions, including a condition restricting increases in train volumes through
Reno, Nevada, and Wichita, Kansas, for 18 months following the Merger while a
consultant conducts a study of possible measures to reduce the potential adverse
impact of increased rail traffic through those communities and the STB decides
upon such measures, (f) standard labor protective conditions, and (g) a 5-year
oversight process, pursuant to which the STB will review whether the conditions
imposed on the Merger have effectively addressed competitive issues. A final
written STB decision regarding the proposed Merger is expected by August 12,
1996.
In its final written decision, it is expected that the STB will consider at
least the following five factors: (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 UP and SP; (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 STB-regulated Carriers in the affected region. The STB 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. UP has indicated a willingness to
accept conditions to preserve rail competition where the Railroad and SP are the
only rail competitors, and, together with SP and certain of its subsidiaries,
has entered into an agreement with Burlington Northern Railroad Company and The
Atchison, Topeka and Santa Fe Railroad Company, which is described below. The
obligations
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of UP, UPRR and Newco to consummate the Merger are conditioned upon, among other
things, the issuance by the STB of a decision (which decision shall not have
been stayed or enjoined) that (A) constitutes a final order approving, exempting
or otherwise authorizing consummation of the Merger and all other transactions
contemplated by the Amended Merger Agreement and the Ancillary Agreements (or
subsequently presented to the STB by agreement of UP and SP) as may require such
authorization and (B) does not (1) change or disapprove of the Merger
Consideration or other material provisions of Article II of the Amended Merger
Agreement or (2) impose on UP, SP or any of their respective Subsidiaries (as
defined in the Amended Merger Agreement) any other terms or conditions
(including, without limitation, labor protective provisions but excluding
conditions heretofore imposed by the ICC in New York Dock
Railway-Control-Brooklyn Eastern District, 360 I.C.C. 60 (1979)) that materially
and adversely affect the long-term benefits expected to be received by UP from
the transactions contemplated by the Merger Agreement. If, as expected, the
final written decision of the STB does not contain terms materially different
from those voted upon by the STB on July 3, 1996, UP has indicated that it
expects to proceed with the transaction in accordance with and subject to the
terms and conditions of the Amended Merger Agreement.
Three of the five factors listed above are, in UP's view, unlikely to
affect whether the STB Application is approved by the STB. As to factor
(b)--inclusion of other Carriers--the STB disfavors this remedy, and it was not
requested by any railroad in a UP/SP proceeding. As to factor (c)--effect on
fixed charges--the capital structure of the resulting company will be
sufficiently strong that this factor is unlikely, in UP's view, to be given
weight by the STB in deciding whether to approve a combination of SP and UP. As
to factor (d)--the interest of affected Carrier employees--the STB has adopted a
standard set of labor protective conditions--the New York Dock conditions
referred to above--which it imposes in rail merger and control transactions, and
UP expects that those conditions which the STB voted on July 3 to impose, will
not affect approval of the transaction. Moreover, labor unions representing a
majority of UP and SP rail employees have announced that they support the
Merger.
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 STB applies in reviewing railroad
mergers like the proposed combination of UP and SP. On the one hand, the STB
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 STB
considers any public harm from the transaction. The principal harm of concern to
the STB, and the principal issue that has been raised by parties opposing
approval of a merger of UP and SP or seeking the imposition of conditions
thereto, is reduction in competition. In applying the public interest balancing
test, the STB 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.
UP and SP believe that they presented a strong case to the STB that the
acquisition of control of SP satisfies the public interest balancing test, and
the STB, based on its July 3 vote, agreed. First, UP and SP believe that they
demonstrated that a combination of SP and UP has significant public benefits.
Second, UP and SP believe that they demonstrated that a combination of SP and
UP, especially with competition-preserving conditions that UP has agreed to (see
description of BNSF Agreement (as defined herein) below), will have no
significant adverse effect on rail competition, and indeed will strengthen such
competition.
Under the law applicable to the STB Application, the STB is generally
required to enter a final order with respect to the STB Application within
approximately 31 months after such application is filed; however, the STB has
adopted a procedural schedule under which it will render a final decision 255
days after the application is filed. The STB Application was filed on November
30, 1995.
Since the filing of the STB Application, nearly 2,000 support statements
were filed with the STB. Of such support statements, some 1,300 were provided by
customers of UPRR and its affiliate, MPRR (collectively, the 'Railroad'), and
SP. In addition, the Governors or transportation agencies of 21 of the 25 states
served by the Railroad and SP have formally endorsed the Merger, as have some
650 legislators, public officials and chambers of commerce. The Merger has also
received formal endorsements from every major Pacific Coast port and the Gulf
Coast ports of Houston, Corpus Christi, Brownsville and Lake Charles.
Furthermore, seven labor organizations representing the majority of the
unionized workforce of the Railroad and SP have formally endorsed the Merger.
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However, the Merger attracted substantial opposition and numerous parties
have requested that conditions be imposed. On or before the March 29, 1996
filing deadline, numerous parties including the Texas Railroad Commission, the
National Industrial Transportation League and the U.S. Department of
Agriculture, filed statements opposing the Merger with the STB and, in many
cases, requesting that conditions be imposed on the transaction. On April 12,
1996, the U.S. Department of Justice filed its comments in opposition to the
Merger. Certain other Class I railroads also filed opposition statements.
On April 29, 1996, UP and SP filed their rebuttal with the STB in response
to the opposition statements. Rebuttal to the comments of UP/SP and others were
filed by certain parties on May 14, 1996. Legal briefs were filed with the STB
on June 3, 1996. In its brief, the U.S. Department of Transportation announced
that it was opposed to the transaction unless certain conditions, including the
divestiture of SP lines in Texas, Louisiana and Arkansas were imposed. Oral
arguments before the STB were held on July 1, 1996. As described above, the STB
voting conference on the Merger was held on July 3, 1996 with the final STB
written decision due by August 12, 1996.
Should the final written decision of the STB contain terms materially
different from those voted upon by the STB on July 3, 1996 and as a result UP
elects under the terms of the Amended Merger Agreement not to complete the
Merger, a subsequent disposition of the SP Shares owned by UP could result in a
significant loss. However, UP believes that the Merger will be approved without
terms materially different from those voted upon by the STB.
Although the final written decision of the STB is expected by August 12,
1996, there is no assurance that STB approval will be obtained by such date. In
addition, any appeals from the STB final order might not be resolved for a
substantial period of time after the entry of such order by the STB.
The obligations of UP, UPRR and Newco to consummate the Merger are subject
to the condition that, among other things, the STB shall not have required any
divestiture, hold separate, or other restriction or action in connection with
the expiration or termination of any waiting period applicable to the Amended
Merger Agreement and the transactions contemplated thereby, or in connection
with any other action by or in respect of or filing with such successor, that
would materially and adversely affect the long-term benefits expected to be
received by UP from the transactions contemplated by the Amended Merger
Agreement.
Pending receipt of the final written decision of the STB, it is expected
that the business and operations of SP will be conducted in the usual and
ordinary course of business, and SP's employees and management will continue in
their present positions.
On September 25, 1995, UP and certain of its subsidiaries, SP and certain
of its subsidiaries, and BNSF entered into an agreement (the 'BNSF Agreement')
pursuant to which, among other things, UP and SP, on the one hand, and BNSF, on
the other hand, agreed to grant each other various trackage rights and UP and SP
agreed to sell certain lines to BNSF following the Merger, and BNSF agreed not
to oppose UP's application to control SP in UP's case before the STB, not to
seek any conditions in such case, not to support any requests for conditions
filed by other parties and not to assist other parties in pursuing their
requests. Among other things, these rights will allow BNSF to serve shippers who
would otherwise lose a choice of two railroads as a result of the Merger. The
trackage rights and line sales pursuant to the BNSF Agreement will be effective
only upon UP's acquisition of control of SP. UP and SP agreed to ask the STB to
impose the BNSF Agreement as a condition to approval of UP's application for
control of SP. During the pendency of UP's case before the STB, UP and SP agreed
not to enter into agreements with other parties, without BNSF's written consent,
which would grant rights to other parties granted to BNSF or inconsistent with
those granted to BNSF which would substantially impair the overall economic
value of the rights granted to BNSF under the BNSF Agreement. The BNSF Agreement
was amended on June 27, 1996 to confer certain additional rights on BNSF.
Pursuant to the BNSF Agreement, UP and SP will share more than 4,100 miles
of track with BNSF under trackage rights and will sell more than 335 miles of
track to BNSF. The sale of track will total approximately $150 million. As part
of the BNSF Agreement, UP will also obtain certain trackage and access rights
from BNSF. Trackage rights are a contractual arrangement between railroads which
generally allow one railroad to operate its trains with its own crew over the
tracks of another railroad for a fee.
The principal areas covered by the BNSF Agreement are as follows:
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West Coast-Intermountain. BNSF will operate over various UP and SP
lines in California, Utah, Nevada and Colorado and will purchase a Northern
California line segment of UP. UP will obtain trackage and other rights
from BNSF in California, Oregon and elsewhere in the region.
Texas-Louisiana. BNSF will operate over certain UP and SP routes in
Texas and Louisiana, and will acquire certain lines from UP and SP with UP
retaining certain trackage rights.
Houston-Memphis-St. Louis. BNSF will operate over SP and UP track to
give BNSF a more direct route between Houston and Memphis, and improved
access to St. Louis.
A settlement agreement with Illinois Central Railroad Company ('IC')
provided that IC would not oppose the STB Application. UP and SP agreed to
negotiate first with IC if certain additional competitive conditions beyond the
BNSF Agreement were imposed by the STB and UP still decided to proceed with the
Merger. Similar negotiating obligations were contained in settlements with
Wisconsin Central Ltd. and CSX Corporation. The conditions that the STB voted to
impose on July 3, 1996 would not trigger any of these negotiating obligations.
On April 18, 1996, UP reached a settlement agreement with the Chemical
Manufacturers Association ('CMA') that addressed concerns that CMA and other
shippers and shipper organizations had with respect to the acquisition and
resulted in CMA withdrawing its opposition to the Merger. CMA is a 200-member
trade group whose members produce 90% of the chemical industry's annual output.
Individual members of CMA were free to support or oppose the Merger and some
continued to oppose it.
Other railroads, including Conrail, Inc. ('Conrail') and Kansas City
Southern Railway Company, sought other conditions, including divestiture of
lines. UP and SP believe such requests are not meritorious in view of, among
other things, the BNSF Agreement and the STB voted to reject them on July 3,
1996.
On June 5, 1996, Conrail proposed to UP that Conrail acquire, for $1.9
billion (which represented an increase from a prior $1.5 billion offer by
Conrail), major portions of SP's rail system. On June 7, 1996, UP advised
Conrail that it rejected such offer.
On July 12, 1996, the City of Reno, Nevada filed a complaint against
the STB in the U.S. District Court for the District of Nevada, seeking a
writ of mandamus directing the STB to prepare, with regard to alleged
impacts of the Merger on Reno and the surrounding area, an environmental
impact statement pursuant to the National Environmental Policy Act and
a conformity determination pursuant to the Clean Air Act. The STB would
also be required to order UP/SP to maintain the status quo with respect
to rail operations in the Reno area pending environmental review. UP
believes the suit is without merit because, among other things, the
District Court lacks jurisdiction, the suit is premature, and neither an
environmental impact statement nor a conformity determination is
required. UP expects to intervene as a party and seek the suit's
dismissal. UP anticipates that the STB will also seek dismissal of the
suit.
STATE TAKEOVER STATUTES
As a Delaware corporation, SP is subject to Section 203 ('Section 203') of
the DGCL. Section 203 would prevent an 'Interested Stockholder' (generally
defined as a person beneficially owning 15% or more of a corporation's voting
stock) from engaging in a 'Business Combination' (as defined in Section 203)
with a Delaware corporation for three years following the date such person
became an Interested Stockholder unless: (i) before such person became an
Interested Stockholder, the board of directors of the corporation approved the
transaction in which the Interested Stockholder became an Interested Stockholder
or approved the Business Combination, (ii) upon consummation of the transaction
which resulted in the Interested Stockholder becoming an Interested Stockholder,
the Interested Stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time that the transaction commenced (excluding
stock held by directors who are also officers and by employee stock ownership
plans that do not allow plan participants to determine confidentially whether to
tender shares) or (iii) following the transaction in which such person became an
Interested Stockholder, the Business Combination is (x) approved by the board of
directors of the corporation and (y) authorized at a meeting of stockholders by
the affirmative vote of the holders of at least 66-2/3% of the outstanding
voting stock of the corporation not owned by the Interested Stockholder. In
accordance with the provisions of Section 203, the SP Board has approved the
transactions contemplated by the Amended Merger Agreement and the Ancillary
Agreements. Accordingly, the transactions contemplated by the Amended Merger
Agreement and the Ancillary Agreements are exempt from the provisions of Section
203.
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
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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.
SP, directly or through subsidiaries, conducts business in a number of
states throughout the United States, some of which have enacted takeover laws.
UP does not know whether any of these laws will, by their terms, apply to the
Offer or the Merger and has not complied with any such laws. Should any person
seek to apply any state takeover law, UP 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 or the Merger, and an
appropriate court does not determine that it is inapplicable or invalid as
applied to the Offer, UPRR, Newco and/or UP might be required to file certain
information with, or receive approvals from, the relevant state authorities.
DESCRIPTION OF UP CAPITAL STOCK
Under UP's Revised Articles of Incorporation, UP's authorized capital stock
consists of 500,000,000 shares of UP Common Stock and 20,000,000 shares of
Preferred Stock, no par value (the 'UP Preferred Stock').
UP Common Stock. Assuming the Merger occurred as of November 30, 1995,
immediately following the issuance of 38,082,030 shares of UP Common Stock
issuable to stockholders of SP in the Merger, 243,678,588 shares of UP Common
Stock will be issued and outstanding. An additional 20,561,168 shares of UP
Common Stock were reserved for issuance, primarily for exercise of stock options
and issuance of shares of restricted UP Common Stock under UP's 1993 Stock
Option and Retention Stock Plan, the 1990 Retention Stock Plan and the 1988
Stock Option and Restricted Stock Plan. Subject to the preferential rights of
the UP Preferred Stock, the holders of UP Common Stock are entitled to receive,
to the extent permitted by law, such dividends as may be declared from time to
time by the Board of Directors of UP. Holders of UP Common Stock are entitled to
receive in connection with the dissolution of UP, after distribution in full of
the preferential amount to be distributed to the holders of shares of the UP
Preferred Stock, all the remaining assets of UP, of whatever kind, available for
distribution to holders of UP Common Stock ratably in proportion to the number
of shares of UP Common Stock held by them respectively.
Each holder of UP Common Stock is entitled to one vote in respect of each
share of such stock and, in most circumstances, votes together, share for share,
with the holders of any outstanding UP Preferred Stock as one voting group. See
'COMPARISON OF THE RIGHTS OF SHAREHOLDERS OF SP AND UP UNDER DELAWARE AND UTAH
LAW--Voting Rights.'
In electing directors, each holder of UP Common Stock is entitled to one
vote per share. No holder of UP Common Stock has any preemptive right to
subscribe for any securities of UP. UP does not have a shareholders rights plan.
UP Preferred Stock. No shares of UP Preferred Stock will be issued or
outstanding immediately following the Merger. UP's Board of Directors is
authorized to issue UP Preferred Stock in one or more series and to determine
liquidation preferences, dividend rights, conversion rights, repurchase rights
or redemption rights and other terms, including sinking fund provisions. See
'COMPARISON OF THE RIGHTS OF STOCKHOLDERS OF SP AND UP UNDER DELAWARE AND UTAH
LAW--Authorized Capital Stock.'
COMPARISON OF THE RIGHTS OF STOCKHOLDERS OF
SP AND UP UNDER DELAWARE AND UTAH LAW
UP is a Utah corporation subject to the provisions of the UBCA. SP is a
Delaware corporation subject to the provisions of the DGCL. The rights of
current stockholders of SP are governed by SP's Amended and Restated Certificate
of Incorporation (the 'SP Certificate of Incorporation') and By-laws (the 'SP
By-laws') and the DGCL. Upon consummation of the Merger, stockholders of SP who
receive UP Common Stock in exchange for their shares of SP Common Stock will
become shareholders of UP and, at the Effective Time, their rights as
shareholders will be determined by the UP Revised Articles of Incorporation (the
'UP Articles of Incorporation') and the UP By-laws (the 'UP By-laws') and the
UBCA.
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The following is a summary of the material differences in the rights of
stockholders of SP under the SP Certificate of Incorporation, the SP By-laws and
the DGCL, on the one hand, and the rights of shareholders of UP under the UP
Articles of Incorporation, the UP By-laws and the UBCA, on the other hand. The
following discussion does not purport to be a complete discussion of, and is
qualified in its entirety by reference to, the UBCA, the DGCL and the UP
Articles of Incorporation, the SP Certificate of Incorporation, the UP By-laws
and the SP By-laws.
AUTHORIZED CAPITAL STOCK
Voting Rights
UP. Under the UBCA, voting is by voting groups. A voting group is defined
as all shares of one or more classes or series that under the articles of
incorporation or the UBCA are entitled to vote and be counted together
collectively on a matter. Under the UP Articles of Incorporation, holders of UP
Common Stock are entitled to one vote in respect of each share of stock held,
and vote together, share for share, with the holders of the UP Preferred Stock
as one voting group for the election of directors and upon all other matters
voted upon by the shareholders, subject to certain exceptions. Under the UBCA
and the UP Articles of Incorporation, the requisite vote to approve a matter
varies. Directors are elected by a plurality of the votes cast. Other matters,
other than certain extraordinary matters, brought to a shareholder vote are
considered to be approved if the number of votes cast in favor of the matter
exceeds the number of votes cast against the matter. See 'Amendments to Articles
or Certificate of Incorporation' and 'Authorized Capital Stock--Preferred
Stock'.
SP. Under the DGCL, every corporation may issue one or more classes of
stock or one or more series of stock within any class. Subject to certain
exceptions, the DGCL does not require class voting. Each class and series may
have such voting powers as shall be stated in the certificate of incorporation;
however, unless otherwise provided in the certificate of incorporation, each
stockholder shall be entitled to one vote for each share. The SP Certificate of
Incorporation provides that each holder of Common Stock shall have one vote for
each such share. Under the DGCL, the requisite vote to approve a matter varies.
Directors are elected by a plurality of the votes of the shares present at a
meeting, in person or by proxy, and entitled to vote for the election of
directors. In all other matters, subject to certain exceptions, the affirmative
vote of the majority of shares present, in person or by proxy, at a meeting and
entitled to vote shall be the act of the stockholders.
Cumulative Voting
UP. The UP Articles of Incorporation previously provided that holders of
UP Common Stock and UP Preferred Stock had cumulative voting rights in the
election of directors. At the 1996 Annual Meeting of Shareholders of UP, the
shareholders of UP approved an amendment to UP's Articles of Incorporation which
eliminated cumulative voting in the election of directors of UP at all elections
occurring after UP's 1996 Annual Meeting. Accordingly, directors will be elected
at each annual meeting of shareholders by a plurality of the votes cast.
SP. The SP Certificate of Incorporation does not allow cumulative voting
in the election of directors or for any other purpose and the SP By-laws provide
that directors shall be elected at each annual meeting of stockholders by a
plurality of the votes present in person or represented by proxy at the meeting
and entitled to vote for the election of directors.
Preferred Stock
UP. The UP Articles of Incorporation provide for the authorization and the
issuance of 20,000,000 shares of UP Preferred Stock in one or more series.
Currently, there are no shares of UP Preferred Stock outstanding. Under the UBCA
and the UP Articles of Incorporation, the Board of Directors of UP has the
authority to fix the preferences, limitations and relative rights of the shares
of each such series, including the dividend rate, conversion rights, voting
rights, terms of redemption and liquidation preferences, and the number of
shares constituting each such series, without any further vote or action of the
shareholders; provided, however, that under the terms of the UP Articles of
Incorporation (i) each share of UP Preferred Stock shall be entitled to one vote
for each share held, and the UP Preferred Stock and the UP Common Stock shall,
generally, vote together as
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one voting group except (A) as otherwise provided by law or the UP Articles of
Incorporation and (B) while the holders of UP Preferred Stock, voting as a
single voting group, are entitled to elect two directors as described below,
they are not entitled to participate with the UP Common Stock in the election of
any other directors and (ii) UP Preferred Stock shall not entitle the holder to
receive dividends in the form of stock of UP of any class or series, or
property.
Under the UP Articles of Incorporation, subject to certain exceptions, at
any time that any UP Preferred Stock is outstanding UP may not, without the
approval of a majority of the shares of the UP Preferred Stock then outstanding,
(i) increase the authorized number of shares of UP Preferred Stock, (ii) create,
or increase the authorized number of shares of, any class of UP Preferred Stock
ranking on a parity with the UP Preferred Stock either as to dividends or upon
liquidation, (iii) sell, lease, or convey all or substantially all of the
property or business of UP, (iv) voluntarily liquidate, dissolve or wind up UP,
or (v) merge UP with another corporation unless the surviving corporation will
have no stock either authorized or outstanding prior in rank, either as to
dividends or upon liquidation, to the UP Preferred Stock or shares of the
surviving corporation issued in exchange therefor. The UP Articles of
Incorporation also provide that at any time that any UP Preferred Stock is
outstanding UP may not, without the affirmative vote or consent of the holders
of at least 66 2/3% of the shares of UP Preferred Stock then outstanding, (i)
create, or increase the authorized number of shares of, any class of stock which
ranks prior to the UP Preferred Stock, either as to dividends or upon
liquidation, or (ii) amend, alter or repeal any of the provisions of the UP
Articles of Incorporation or the resolutions of the Board of Directors providing
for the issue of any series of UP Preferred Stock so as adversely to affect the
preferences, rights or powers of the UP Preferred Stock. The UBCA also provides
that in connection with certain matters the UP Preferred Stock may vote as a
separate voting group. See 'Amendments to Articles or Certificate of
Incorporation--UP'.
If dividends on one or more series of the UP Preferred Stock are in
arrears, and such arrears aggregate an amount equal to six quarterly dividends
or more, holders of the UP Preferred Stock are entitled to elect two additional
directors to the Board of Directors.
SP. The SP Certificate of Incorporation provides for the authorization and
the issuance of 10,000,000 shares of preferred stock, par value of $0.01 per
share (the 'SP Preferred Stock'). The SP Certificate of Incorporation provides
for the designation of one series of SP Preferred Stock as 12% Cumulative
Redeemable Exchangeable Preferred Stock (the 'Exchangeable Preferred Stock').
Subject to certain exceptions, the holders of the Exchangeable Preferred Stock
are not entitled to vote on any matter submitted to a vote of stockholders. If
any of the Exchangeable Preferred Stock is outstanding, SP shall not, either
directly or indirectly, or through a merger or consolidation, (i) amend, alter
or repeal the SP Certificate of Incorporation to change the powers, preferences
or special rights of the Exchangeable Preferred Stock, or (ii) authorize, issue,
create or increase any SP Preferred Stock entitled to a preference over the
Exchangeable Preferred Stock with respect to any dividends or distributions upon
liquidation, dissolution or winding up of SP, or any additional shares of
Exchangeable Preferred Stock, without the approval of 66 2/3% of the outstanding
shares of Exchangeable Preferred Stock; provided, however, that after 25% or
more of the outstanding shares of Exchangeable Preferred Stock are sold pursuant
to a registration statement filed pursuant to the Securities Act, the actions
referred to in clauses (i) and (ii) above may be taken with the consent or
affirmative vote of the holders of at least a majority in number of the
outstanding shares of Exchangeable Preferred Stock, voting as a separate class;
provided, further, that, at any time, the affirmative vote at a meeting of
holders of Exchangeable Preferred Stock called for such purpose, or written
consent of the holders of each share of Exchangeable Preferred Stock, shall be
required for any amendment of the SP Certificate of Incorporation that (x)
reduces the rate or extends the time of payment of dividends on the Exchangeable
Preferred Stock, extends the date of any mandatory redemption thereof, reduces
the amount payable on any redemption thereof, alters SP's obligation to make
sinking fund payments as provided therein or changes the amount of debentures
issuable upon exchange of the Exchangeable Preferred Stock or (y) reduces the
number of shares of Exchangeable Preferred Stock, the consent of the holders of
which is required for any such amendment. If dividends on the Exchangeable
Preferred Stock are in arrears more than four consecutive quarters, holders of
SP Preferred Stock are entitled to elect one additional director to the Board of
Directors. Currently, there are no shares of Exchangeable Preferred Stock
outstanding.
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BOARD OF DIRECTORS
Number of Directors and Classified Board
UP. The UP Articles of Incorporation provide that the number of directors
of the corporation shall be such as shall be fixed by the UP By-laws, but shall
not be less than three directors. At the 1996 Annual Meeting of Shareholders of
UP, the shareholders of UP approved an amendment to UP's Articles of
Incorporation which declassified the Board of Directors of UP. The UP Articles
of Incorporation provide that at each annual meeting of shareholders, commencing
with the Annual Meeting of Shareholders in 1997, the successors of the directors
whose terms expire in that year will be elected for a one-year term.
Accordingly, upon expiration in 1999 of the terms of the directors elected at
the 1996 Annual Meeting, all directors of UP would be elected to hold office for
a one-year term.
SP. The SP By-laws provide that the number of directors that shall
constitute the whole Board of Directors shall be fixed from time to time by
resolution of the Board of Directors but shall not be less than three directors
nor more than twelve directors. The SP By-laws provide for the election of the
entire Board of Directors at each annual meeting.
Removal of Directors
UP. The UBCA provides that one or more directors of a corporation may be
removed by the shareholders, with or without cause, at any meeting of
shareholders expressly called for that purpose, unless such corporation's
articles of incorporation provide for removal only for cause. Under the UBCA, if
a director is elected by a voting group of shareholders, only the shareholders
of that voting group may participate in the vote to remove him. Furthermore, no
director may be removed if the votes of a sufficient number of shares are cast
against removal which, at an election of the class of directors of which the
director is a member (or at an election of the entire board of directors
commencing at the 1999 annual meeting), would have been sufficient to elect the
director if cumulative voting were applicable. Directors may also be removed in
a judicial proceeding brought by the corporation or by shareholders holding at
least 10% of the outstanding shares of any class. The UP Articles of
Incorporation provide that a director may be removed without cause only by a
vote of the holders of two-thirds of the shares then entitled to vote at an
election of directors.
SP. The DGCL provides that any director or the entire board of directors
may be removed, with or without cause, by the holders of a majority of the
shares entitled to vote at an election of directors. However, in the case of a
corporation whose board is classified, the directors may be removed only for
cause unless the certificate of incorporation otherwise provides. The SP
Certificate of Incorporation provides for the removal of any director or the
entire board of directors, with or without cause, by the holders of a majority
of the shares then entitled to vote at an election of directors, except that if
the holders of shares of any class or series are entitled to elect directors by
provisions of the SP Certificate of Incorporation, then the vote of that class
shall control the removal without cause of those directors.
Indemnification
UP. The UBCA generally provides that a corporation may indemnify an
individual made a party to a proceeding because he is or was a director,
officer, employee, fiduciary or agent of the corporation, against any liability
incurred in the proceeding if (i) the individual's conduct was in good faith,
(ii) the individual reasonably believed that his conduct was in, or not opposed
to, the corporation's best interests, and (iii) in the case of a criminal
proceeding he had no reasonable cause to believe his conduct was unlawful;
provided, however, that (x) in the case of an action by or in the right of the
corporation, indemnification is limited to reasonable expenses incurred in
connection with the proceeding and (y) the corporation may not, unless
authorized by a court of competent jurisdiction, indemnify an individual (A) in
connection with a proceeding by or in the right of the corporation in which the
individual was adjudged liable to the corporation, or (B) in connection with any
other proceeding in which the individual is adjudged liable on the basis that he
derived an improper personal benefit. In a judicial proceeding under the
foregoing clause (y), in order to authorize indemnification the court must
determine that the individual is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances. A director or officer
is entitled to mandatory indemnification if he was successful, on the merits or
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otherwise, in the defense of any proceeding, or in the defense of any claim,
issue or matter in the proceeding, against the reasonable expenses incurred by
him in connection with the proceeding or claim with respect to which he was
successful. A corporation may also indemnify and advance expenses to an officer,
employee, fiduciary or agent to a greater extent if not inconsistent with public
policy and if provided for by the articles of incorporation, by-laws, general or
specific action of its board of directors or contract. See 'THE
MERGER--Interests of Certain Persons.'
SP. The DGCL provides that a director, employee, officer or agent of a
Delaware corporation may be indemnified against liability (other than in an
action by or in the right of the corporation) and other costs incurred by such
person in connection with such proceeding, provided such person acted in good
faith and in a manner such person reasonably believed to be in, or at least not
opposed to, the best interests of the corporation, and, with respect to any
criminal proceeding, had no reason to believe the conduct was unlawful. For
actions or suits brought by or in the name of the corporation, the DGCL provides
that a director, employee, officer or agent of a corporation may be indemnified
against expenses incurred by such person in connection with such proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in, or at least not opposed to, the best interests of the corporation,
except that if such person is adjudged to be liable to the corporation, such
person can be indemnified if and only to the extent that a court determines that
despite the adjudication of liability, in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses as the court shall deem proper. See 'THE MERGER-- Interests of Certain
Persons.'
Liability
UP. The UBCA provides that a director or officer of a Utah corporation is
not liable to the corporation or its shareholders for any action taken, or any
failure to take any action, as an officer or director, as the case may be,
unless (i) the director or officer has breached or failed to perform the duties
of the office which generally require that the director or officer acted (A) in
good faith, (B) with the care an ordinarily prudent person in like position
would exercise under similar circumstances and (C) in a manner the director or
officer reasonably believes to be in the best interests of the corporation and
(ii) the breach or failure to perform constitutes gross negligence, willful
misconduct, or intentional infliction of harm on the corporation or the
shareholders. The UBCA permits a corporation to eliminate or limit the liability
of a director to the corporation or its shareholders for monetary damages for
any action taken or failure to take any action, as a director, except liability
for (i) the amount of a financial benefit received by a director to which he is
not entitled; (ii) an intentional infliction of harm on the corporation or its
shareholders; (iii) voting for or assenting to an unlawful distribution of
assets as defined under the UBCA or (iv) an intentional violation of criminal
law. The UP Articles of Incorporation provide that to the fullest extent
permitted by the UBCA as now, or as it may in the future be, in effect, no
director shall be liable to the corporation or its shareholders for monetary
damages for breach of fiduciary duty as a director.
SP. The DGCL provides that a corporation may include, in its articles or
certificate of incorporation, a provision which limits or eliminates the
personal liability of a director to the corporation and its stockholders or
stockholders for monetary damages for such person's conduct as a director,
provided that such provision may not so limit a director's liability (i) for a
breach of his or her duty of loyalty to the corporation or its stockholders;
(ii) for acts or omissions not in good faith or involving intentional misconduct
or a knowing violation of law; (iii) for unlawful payments of dividends, certain
stock repurchases or redemptions; or (iv) for any transaction from which the
director derived an improper personal benefit. The SP Certificate of
Incorporation provides that, to the fullest extent permitted by the DGCL, as it
exists or may hereafter be amended, a director shall not be liable to SP or its
stockholders for monetary damages for breach of fiduciary duty as a director.
REPURCHASE AND REDEMPTION OF SHARES
UP. The UBCA provides that a corporation may acquire its own shares and
provides that shares so acquired constitute authorized but unissued shares;
provided, however, that no repurchase may be made if, after giving effect to the
repurchase (i) the corporation would not be able to pay its debts as they become
due in the usual course of business or (ii) the corporation's total assets would
be less than the sum of its total liabilities plus, unless the articles of
incorporation permit otherwise, the amount that would be needed, if the
corporation were to
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be dissolved at the time of the repurchase or redemption, to satisfy the
preferential rights upon dissolution of shareholders whose preferential rights
are superior to those whose shares are being repurchased or redeemed.
SP. The DGCL provides that a corporation may redeem or repurchase any of
its shares for cash, or other property, including debt securities, except when
the capital of the corporation is impaired, or when such repurchase or
redemption would impair the capital of the corporation.
PAYMENT OF DIVIDENDS TO STOCKHOLDERS
UP. The UBCA generally provides that the board of directors may authorize
and the corporation may make distributions to shareholders provided that no
distribution may be made if after giving effect to the dividend (i) the
corporation would not be able to pay its debts as they become due in the usual
course of business or (ii) the corporation's total assets would be less than the
sum of its total liabilities plus, unless the articles of incorporation permit
otherwise, the amount that would be needed, if the corporation were to be
dissolved at the time of the distribution, to satisfy the preferential rights
upon dissolution of shareholders whose preferential rights are superior to those
receiving the distribution. The UP Articles of Incorporation provide that the
holders of UP Common Stock are entitled to dividends subject to the preferential
rights of the UP Preferred Stock, to the extent permitted by law, as may be
declared from time to time by the Board of Directors of UP and the holders of UP
Common Stock have the exclusive right to receive any dividends which may be
declared payable in stock of UP of any class or in property.
SP. The DGCL provides that a corporation, subject to any restrictions in
its certificate of incorporation, may declare and pay dividends upon its shares
of capital stock either out of its surplus (as determined under the statute) or,
in the event there is no such surplus, out of its net profits for the fiscal
year in which the dividend is declared and/or the preceding fiscal year. Further
restrictions on dividends apply in the event a corporation has issued shares
possessing a preference upon the distribution of assets. The SP Certificate of
Incorporation grants to the Board of Directors the power to set dividend payment
dates and the rate at which they shall be paid on the SP Preferred Stock.
PREEMPTIVE RIGHTS
UP. The UBCA provides that the shareholders of a corporation do not have a
preemptive right to acquire the corporation's unissued shares except to the
extent the articles of incorporation so provide. The UP Articles of
Incorporation do not provide for preemptive rights.
SP. The DGCL provides that no stockholder of a Delaware corporation shall
have any preemptive right to subscribe to an additional issue of stock or to any
security convertible into such stock unless such right is expressly granted in
the articles or certificate of incorporation. The SP Certificate of
Incorporation expressly states that no stockholder of SP shall have any
preemptive rights.
AMENDMENTS TO ARTICLES OR CERTIFICATE OF INCORPORATION
UP. The UBCA provides that a corporation's board of directors may make
certain limited amendments to the articles of incorporation without the approval
of the shareholders. All other amendments must be submitted to the shareholders
for their approval with the recommendation of the board of directors unless the
board of directors determines that, because of conflicts of interest or other
special circumstances, it should make no recommendation and communicates to the
shareholders the basis for its determination not to make a recommendation. To be
approved the amendment must be approved by (i) a majority of the votes entitled
to be cast on the amendment by any voting group with respect to which the
amendment would create dissenters' rights; (ii) a majority of the votes entitled
to be cast on the amendment by any voting group with respect to which the
amendment would materially and adversely affect the rights in respect of the
shares of the voting group because it (A) alters or abolishes a preferential
right of the shares, (B) creates, alters or abolishes a right in respect of
redemption, including a provision respecting a sinking fund, (C) alters or
abolishes a preemptive right of the holder of the shares to acquire shares or
other securities, (D) excludes or limits the right of the shares to vote on any
matter or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights, or (E)
reduces the number of shares owned by a shareholder to a fraction of a share or
scrip if the fraction is to be acquired for cash or the scrip is to be voided;
and (iii) a plurality of the votes cast
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within each other separate voting group entitled to vote on the amendment. The
UBCA provides that holders of a class of shares are entitled to vote as a
separate voting group on a proposed amendment, if shareholder voting is
otherwise required on the proposed amendment, if it would (i) increase or
decrease the aggregate number of authorized shares of the class, (ii) effect an
exchange or reclassification of all or part of the shares of the class into
shares of another class, (iii) effect an exchange or reclassification, or create
the right of exchange, of all or part of the shares of another class into shares
of the class, (iv) change the designations, rights, preferences, or limitations
of all or part of the shares of the class, (v) change the shares of all or part
of the class into a different number of shares of the same class, (vi) create a
new class of shares having rights or preferences with respect to distributions
or on dissolution that are prior, superior, or substantially equal to the shares
of the class, (vii) increase the rights, preferences, or number of authorized
shares of any class that, after giving effect to the amendment, have rights or
preferences with respect to distributions or on dissolution which are prior,
superior, or substantially equal to the shares of the class, (viii) limit or
deny an existing preemptive right of all or part of the shares of the class or
(ix) cancel or otherwise affect rights to distributions or dividends that have
accumulated but not yet been declared on all or part of the shares of the class.
The UP Articles of Incorporation provide that, subject to the protective
conditions and restrictions of any outstanding UP Preferred Stock, any amendment
which increases or decreases the authorized capital stock of any class may be
approved by the affirmative vote of a majority of the outstanding shares of the
voting stock of the corporation. The UP Articles of Incorporation provide that
the UP Preferred Stock may vote as a separate voting group on certain matters
which would be effected through an amendment of the UP Articles of
Incorporation. See 'Authorized Capital Stock--Preferred Stock.' The UP Articles
of Incorporation also provide that any amendment to Article 5 (relating to
removal of directors) may only be made with the affirmative vote of the holders
of at least 66 2/3% of the shares of capital stock entitled to vote on the
amendment. The UP Articles of Incorporation also provide that certain amendments
to Article 8 (relating to transactions between UP and certain of its
shareholders) may only be made with the approval of a majority of the voting
stock, excluding any shares held by any Interested Stockholder. See 'Stockholder
Approval of Certain Extraordinary Transactions--UP.'
SP. The DGCL provides that amendments to the certificate of incorporation
must be approved by a resolution of the board of directors declaring the
advisability of the amendment, and by the affirmative vote of a majority of the
outstanding shares entitled to vote and by a majority of the outstanding stock
of each class entitled to vote separately as a class on the amendment. If an
amendment would increase or decrease the number of authorized shares of a class,
increase or decrease the par value of the shares of a class or alter or change
the powers, preferences or other special rights of a class of outstanding shares
so as to adversely affect the class, then a majority of shares of that class
also must approve the amendment. Holders of Exchangeable Preferred Stock are
entitled to vote as a separate class on certain matters which would affect their
rights and which would be effected through an amendment to the SP Certificate of
Incorporation. See 'Authorized Capital Stock--Preferred Stock.'
AMENDMENTS TO BY-LAWS
UP. The UBCA provides that generally the board of directors may amend a
corporation's by-laws at any time, except to the extent that a corporation's
articles or certificate of incorporation, a corporation's by-laws, or the UBCA
reserves such power exclusively to a corporation's shareholders. The UBCA
provides that shareholders may amend a corporation's by-laws at any time, even
though the by-laws may also be amended at any time by the board of directors.
The UP By-laws provide that, except as otherwise provided by Utah law, the UP
By-laws may be altered, amended or repealed at a general meeting of the
shareholders by a majority vote of those present in person or by proxy or at any
meeting of the Board of Directors by a majority vote of all the members of the
Board.
SP. The DGCL provides that stockholders may amend the by-laws of a
corporation, provided that the corporation may, in its articles or certificate
of incorporation, also confer such power upon the board of directors. The SP
Certificate of Incorporation provides that the SP Board of Directors may adopt,
amend or repeal the SP By-laws; provided, however, that such power does not
divest nor limit the power of the stockholders to do the same.
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STOCKHOLDER APPROVAL OF CERTAIN EXTRAORDINARY TRANSACTIONS
The DGCL and the UBCA both generally provide that a merger, consolidation
(in the case of the DGCL), share exchange (in the case of the UBCA), sale, lease
or exchange of all or substantially all of a corporation's assets may be
effected upon a vote of the holders of a majority of a corporation's outstanding
shares. In the case of the UBCA, voting by voting groups is required for a
merger if the plan of merger contains a provision which would affect a class of
shares in a way which would require group voting for an amendment adding such a
provision to the articles of incorporation. See '--Amendments to Articles or
Certificate of Incorporation.' Generally, neither the DGCL nor the UBCA requires
a stockholder vote of the surviving corporation in a merger if (i) the merger
does not amend the existing certificate of incorporation, (ii) each outstanding
share of the surviving corporation before the merger is unchanged or, in the
case of the DGCL, becomes a treasury share of the surviving corporation, (iii)
in the case of the DGCL, the number of shares to be issued by the surviving
corporation in the merger does not exceed 20% of the shares outstanding
immediately prior to such issuance and (iv) in the case of the UBCA, neither
'voting shares' (shares entitled to vote unconditionally in the election of
directors) nor 'participating shares' (shares entitled to participate without
limitation in distributions) of the surviving corporation issued as a result of
the merger exceeds 20% of voting shares or participating shares, respectively,
outstanding immediately prior to the Merger.
The DGCL provides that certain business combinations (generally mergers,
consolidations and sales of 10% or more of a corporation's assets) between
Delaware corporations and 'Interested Stockholders' are prohibited. As defined
under the DGCL, 'Interested Stockholders' include, among others, persons who
beneficially own 15% or more of the outstanding stock of a corporation. The DGCL
bars business combinations between an Interested Stockholder and the corporation
for a period of three years after any such person or group has become an
Interested Stockholder. The DGCL contains exceptions to the prohibition which
allows such combinations if, as a result of the transaction which causes a
person to become an Interested Stockholder, such person owned 85% or more of the
outstanding voting stock (with certain exceptions at the time the transaction
commenced). Another provision exempts from the coverage of the DGCL any
transaction approved by the corporation's board of directors and two-thirds of
the outstanding voting stock not held by the Interested Stockholder. See 'OTHER
LEGAL MATTERS; REGULATORY APPROVAL-- State Takeover Statutes.'
Although the UBCA has no provisions similar to the DGCL provision described
in the immediately preceding paragraph, Utah law affords a different type of
protection against unsolicited takeovers. The Utah Control Shares Acquisitions
Act (the 'Utah Control Shares Act') provides that 'control shares' of an
'issuing public corporation' (other than a corporation whose articles of
incorporation or bylaws provide that the Utah Control Shares Act shall not be
applicable to such corporation) which are acquired in a 'control share
acquisition' shall have no voting rights unless such rights are granted by a
resolution approved by the shareholders of the 'issuing public corporation' who
are not (i) the acquiring person or members of his group, (ii) officers of the
'issuing public corporation' or (iii) persons who are both an employee and
director of the 'issuing public corporation.'
Under Utah law, the term 'control share acquisition' is generally defined
as the acquisition, directly or indirectly, by any person of ownership of, or
the power to exercise or direct the exercise of voting power with respect to,
issued and outstanding 'control shares.' The term 'control shares' is defined as
shares which, when added to all other shares of the corporation owned by such
person or in respect of which such person may exercise or direct the exercise of
voting power, would entitle that person, immediately after the acquisition of
the shares (directly or indirectly, alone or as a part of a group), to exercise
or direct the exercise of voting power of the issuing public corporation in the
election of directors within any of the following ranges of voting power: (1)
one-fifth or more but less than one-third of all voting power, (2) one-third or
more but less than a majority of all voting power, or (3) a majority or more of
all voting power.
The term 'issuing public corporation' is defined as a corporation which is
organized under the laws of Utah and has (i) 100 or more shareholders; (ii) its
principal place of business, its principal office, or substantial assets in
Utah; and (iii) either (A) more than 10% of its shareholders resident in Utah,
(B) more than 10% of its shares owned by Utah residents or (C) 10,000
shareholders resident in the state. In determining whether a corporation is an
'issuing public corporation,' the residence of the shareholder is presumed to be
the address
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appearing in the records of the corporation and shares held by banks or other
depository institutions (other than as guardian or trustee), brokers or nominees
are disregarded.
If the shareholders of a corporation vote to approve the exercise of voting
rights by the 'acquiring person' and the 'acquiring person' has acquired
'control shares' with a majority or more of all of the voting power, then the
shareholders of the 'issuing public corporation' are entitled to appraisal
rights. UP does not presently come within the definition of an 'issuing public
corporation' and accordingly the Utah Control Share Act is not applicable to it
at present.
UP. The UP Articles of Incorporation provide that, in addition to any
affirmative vote required by the UBCA, a Business Combination shall require the
affirmative vote of not less than a majority of the votes entitled to be cast by
the holders of outstanding shares of voting stock excluding voting stock
beneficially owned by any Interested Shareholder. The UP Articles of
Incorporation contain exceptions to the prohibition which allow such
combinations (i) if the Business Combination shall have been approved by a
majority of the Continuing Directors; or (ii) if, among other requirements, the
aggregate value to be received per share by holders of UP Common Stock shall be
at least equal to the highest amount determined under the following: (a) the
highest per share price paid by the Interested Shareholder within the two-year
period immediately prior to (x) the first public announcement of the proposed
Business Combination or (y) in the transaction in which it becomes an Interested
Shareholder, whichever is higher; and (b) the fair market value per share of UP
Common Stock on the announcement date of the Business Combination or the date on
which the Interested Shareholder becomes an Interested Shareholder, whichever is
higher.
The term 'Interested Shareholder' is generally defined as any person who
beneficially owns 10% or more of the votes entitled to be cast by the holders of
all the then outstanding shares of voting stock. The term 'Continuing Director'
is generally defined as any member of the Board of Directors who is not an
affiliate, associate or representative of an Interested Shareholder and was a
member of the Board of Directors prior to the time that an Interested
Shareholder became an Interested Shareholder or is a successor of a Continuing
Director who is recommended or elected to succeed the Continuing Director by a
majority of the Continuing Directors. The term 'Business Combination' is
generally defined as (i) any merger of UP or any of its subsidiaries with the
Interested Shareholder or any other company which is or after the merger would
be an associate or affiliate of the Interested Shareholder, (ii) any sale,
lease, exchange, mortgage, transfer or other disposition, loan, guaranty, joint
venture participation, or other arrangement with or for the benefit of any
Interested Shareholder or any associate or affiliate of the Interested
Shareholder involving assets, securities or commitments of UP, any UP
subsidiary, or any Interested Shareholder or any associate or affiliate of any
Interested Shareholder having an aggregate value or amount equal to or in excess
of $50 million or, with respect to certain transactions, constituting more than
5% of the book value of the total assets of UP or, with respect to certain
transactions, constituting 5% of the shareholder's equity of UP, (iii) the
adoption of any plan or proposal for the liquidation or dissolution of UP which
is voted for or consented to by the Interested Shareholder, (iv) any
reclassification of securities or recapitalization of UP that has the effect of
increasing the proportionate ownership of the Interested Shareholder, or (v) any
agreement, contract, or arrangement providing for any one or more of the actions
specified in the foregoing clauses (i) to (iv).
SP. The SP Certificate of Incorporation has no provision similar to the UP
Articles of Incorporation provision described in the immediately preceding
paragraph.
DISSENTERS' RIGHTS
UP. The UBCA provides for dissenters' rights in a variety of transactions
including: (i) any plan of merger to which a corporation is a party requiring a
shareholder vote or in which a corporation is merged into its parent and no vote
of the shareholders of the subsidiary corporation is required under the UBCA;
(ii) certain sales, leases, exchanges or other dispositions of all or
substantially all of the assets of a corporation or a subsidiary; (iii) share
exchanges where the corporation is the acquired corporation and (iv) in
connection with certain 'control share acquisitions.' See 'Stockholder Approval
of Certain Extraordinary Transactions.' However, except to the extent otherwise
provided by the Board of Directors, shareholders are not entitled to dissenters'
rights in connection with a merger, share exchange or sale of assets if (i)
their stock is either listed on a national securities exchange or on the
National Market System of NASDAQ or held of record by 2,000 or more shareholders
and
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(ii) the shareholders will receive for their shares only (a) shares of the
corporation surviving the consummation of the plan of merger or share exchange,
(b) shares of a corporation whose shares are listed on a national securities
exchange or the National Market System of NASDAQ or held of record by more than
2,000 holders, or (c) cash in lieu of fractional shares or any combination
thereof. UP Common Stock currently is listed for trading on the NYSE and has
more than 2,000 shareholders of record.
SP. The DGCL provides for appraisal rights in the case of a statutory
merger, and consolidation (or sale of substantially all the assets of a
corporation, if provided for in the certificate of incorporation) except that
such rights are not available (i) for shares of stock of the surviving
corporation if no vote of its stockholders is required for such transaction
under the DGCL, unless otherwise provided in the articles or certificate of
incorporation, (ii) for shares of stock listed on a national securities
exchange, designated on NASDAQ or held of record by more than 2,000 stockholders
or (iii) stockholders are not required by the terms of the merger or
consolidation to accept anything in consideration other than shares of stock of
the surviving corporation, shares of stock of another corporation which are all
listed on a national securities exchange or designated on NASDAQ or held by such
number of record holders, cash in lieu of fractional shares of such stock, or
any combination thereof. The SP Certificate of Incorporation does not provide
for greater appraisal rights than those set forth in the DGCL. See 'THE
MERGER--Absence of Dissenters' Rights.'
SPECIAL MEETING OF STOCKHOLDERS
UP. The UBCA provides that special meetings of a corporation's
shareholders may be called by the board of directors or such other persons
authorized by the by-laws to call a special meeting or by the holders of at
least one-tenth of all the votes entitled to be cast on any issue proposed to be
considered at the special meeting. The UP By-laws provide that special meetings
may be called by the Board of Directors or by the Executive Committee.
SP. The DGCL provides that special meetings of stockholders of a
corporation may be called by the board of directors or by such persons as are
authorized by the corporation's articles or certificate of incorporation or by-
laws provided that notice of such stockholders' meeting is given to all
stockholders of record entitled to vote thereon not less than 10 nor more than
60 days prior to the meeting. The SP By-laws provide that such meetings may be
called by the Chairman or the President or Board of Directors, and shall be
called by the Chairman or the President at the request of stockholders owning
not less than a majority of all shares issued and outstanding and entitled to
vote at the meeting.
STOCKHOLDER CONSENT TO ACTION WITHOUT A MEETING
UP. The UBCA generally provides that, with respect to corporations in
existence on July 1, 1992, action may not be taken by the written consent of
less than all of the shareholders entitled to vote on the subject matter of the
action until the date a resolution providing otherwise is approved either (i) by
the consent of all shareholders entitled to vote on the subject matter of the
resolution or (ii) at a meeting of the shareholders by the vote of a number of
shareholders equal to the number of shareholders who would be required to
approve an amendment to the articles of incorporation including such provision.
UP was in existence on July 1, 1992 and no such action has been taken by the
shareholders of UP.
SP. The DGCL provides that, unless otherwise provided in the articles or
certificate of incorporation, any action which may be taken at any meeting of
stockholders may be taken without a meeting, prior notice or a vote, if written
consents setting forth the action taken are signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to take such action if the action were taken at a meeting. The SP By-laws
provide for such actions by written consent.
LIQUIDATION RIGHTS
UP. The UBCA provides that after filing articles of dissolution and as
part of the process of liquidating and winding up its affairs a corporation may,
after discharging or providing for the discharge of its liabilities, distribute
its remaining property among its shareholders according to their interests.
Under the UBCA, a corporation may create one or more classes or series of shares
entitled to a preference on liquidation thereby entitling such class to be paid
an amount out of the assets of the corporation available to the shareholders of
the
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corporation in advance of one or more other classes or series of shares. Under
the UP Articles of Incorporation and the UBCA, the Board of Directors of UP, in
establishing the rights, powers and preferences of a series of the Preferred
Stock, may establish such a liquidation preference.
SP. Generally, under the DGCL, a corporation may create one or more
classes or series of stock which classes or series may have such preferences as
shall be stated and expressed in the certificate of incorporation or in the
resolution adopted by the board of directors providing for the issue of such
stock pursuant to authority expressly vested in it by the provisions of its
certificate of incorporation. These preferences may include a priority on the
distribution of assets in liquidation. The SP Certificate of Incorporation
provides for distribution to holders of SP Preferred Stock of preferential or
other payment over SP Common Stock upon the liquidation, dissolution or winding
up of SP.
EXPERTS
The consolidated financial statements of UP incorporated in this Joint
Proxy Statement/Prospectus by reference from the Annual Report on Form 10-K of
UP for the year ended December 31, 1995 have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report, which contains an
explanatory paragraph describing changes in accounting principles and which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
The consolidated financial statements and schedule of SP incorporated in
this Joint Proxy Statement/Prospectus by reference from the Annual Report on
Form 10-K of SP for the year ended December 31, 1995 have been audited by KPMG
Peat Marwick LLP, independent auditors, for the periods indicated in their
reports, which contain an explanatory paragraph describing changes in accounting
principles and which is incorporated herein by reference, and have been so
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
LEGAL OPINION
The validity of the shares of UP Common Stock to be issued in connection
with the Merger offered hereby will be passed upon by Parsons Behle & Latimer.
In addition, Skadden, Arps, Slate, Meagher and Flom and Shearman & Sterling have
delivered opinions to UP and SP, respectively, as to certain tax matters.
STOCKHOLDERS' PROPOSALS
Any stockholder wishing to submit a proposal to SP for consideration for
inclusion in its proxy statement relating to its 1997 Annual Meeting of
Stockholders must deliver such proposal to SP by December 5, 1996. If the Merger
is consummated, it is not anticipated that any such meeting would be held.
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ANNEX A
GLOSSARY OF CERTAIN DEFINED TERMS
The following terms used in the Joint Proxy Statement/Prospectus are
defined below:
'Acquired Shares' shall mean the 39,034,471 Shares UP Acquisition acquired
pursuant to the Offer.
'Alternative Articles of Merger' shall mean the articles of merger with
respect to the Alternative Merger, duly filed with the Division of Corporations
and Commercial Code of the State of Utah.
'Alternative Certificate of Merger' shall mean the certificate of merger
with respect to the Alternative Merger, duly filed with the Secretary of State
of the State of Delaware.
'Alternative Effective Time' shall mean the time and date of the filing of
the Alternative Certificate of Merger with the Secretary of State of the State
of Delaware or the Alternative Certificate of Merger and the Alternative
Articles of Merger with the Secretary of State of the State of Delaware and the
Division of Corporations and Commercial Code of the State of Utah, respectively,
or such time as is agreed upon by the parties and specified in the Alternative
Certificate of Merger or Alternative Certificate of Merger and the Alternative
Articles of Merger.
'Alternative Surviving Corporation' shall mean Newco.
'Amended Anschutz/Resources RRA' shall mean the Registration Rights
Agreement, dated as of August 3, 1995, as amended and restated as of July 12,
1996, by and among Resources, TAC and the Foundation.
'Amended Anschutz/Resources Shareholders Agreement' shall mean the
Shareholders Agreement, dated as of August 3, 1995, as amended and restated as
of July 12, 1996, by and among Resources and the Anschutz Shareholders.
'Amended Anschutz Shareholders Agreement' shall mean the Shareholders
Agreement, dated as of August 3, 1995, as amended and restated as of July 12,
1996, by and among UP and the Anschutz Shareholders.
'Amended Anschutz/UP RRA' shall mean the Registration Rights Agreement,
dated as of August 3, 1995, as amended and restated as of July 12, 1996, by and
among UP, TAC and the Foundation.
'Amended Merger Agreement' shall mean the Amended and Restated Agreement
and Plan of Merger, dated as of August 3, 1995, as amended and restated as of
July 12, 1996, by and among UP, UPRR, Holding, Mergerco and SP.
'Amended MSLEF Shareholder Agreement' shall mean the Shareholder Agreement
dated as of August 3, 1995, as amended and restated as of July 12, 1996, by and
among UP and MSLEF.
'Amended UP Shareholders Agreement' shall mean the Shareholders Agreement
dated as of August 3, 1995 as amended and restated as of July 12, 1996, by and
among UP, Mergerco and SP.
'Amended UP/SP RRA' shall mean the Registration Rights Agreement dated as
of August 3, 1995 as amended and restated as of July 12, 1996, by and among UP,
Newco and SP.
'Anschutz Shareholder Designee' shall mean Mr. Anschutz or another
individual selected by TAC and reasonably acceptable to the Board of Directors
of UP.
'Anschutz Shareholders' shall mean Mr. Anschutz, TAC and the Foundation.
'Antitrust Division' shall mean the Antitrust Division of the Department of
Justice.
'Articles of Merger' shall mean the articles of merger, with respect to the
Merger, duly filed with the Division of Corporations and Commercial Code of the
State of Utah.
'Average UP Share Price' shall mean the average closing sales price,
rounded to four decimal points, of UP Common Stock as reported on the New York
Stock Exchange Composite Tape, for the twenty consecutive trading days ending on
the trading day which is five trading days prior to the Effective Time.
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'Banks' shall mean Bank of America National Trust and Savings Association
and Citibank, N.A., collectively.
'BNSF' shall mean Burlington Northern Railroad Company and The Atchison,
Topeka and Santa Fe Railroad Company, collectively.
'BNSF Agreement' shall have the meaning ascribed to such term in the Joint
Proxy Statement/Prospectus under the heading entitled 'OTHER LEGAL MATTERS;
REGULATORY APPROVAL--STB Approval.'
'Business Combination' shall mean a merger, consolidation, sale, lease or
exchange of all or substantially all of a company's assets.
'Carriers' shall mean carriers subject to the jurisdiction of the ICC.
'Cash Consideration' shall mean $25.00 in cash, without interest.
'Cash Election' shall mean an election of a holder of Shares to receive the
Cash Consideration pursuant to the Merger.
'Certificate of Merger' shall mean the certificate of merger with respect
to the Merger, duly filed with the Secretary of State of the State of Delaware.
'CNWR' shall mean Chicago and North Western Railway Company, a Delaware
corporation.
'Code' shall mean the Internal Revenue Code of 1986, as amended.
'Commission' shall mean the Securities and Exchange Commission.
'Comparable Company Analysis' shall mean the analysis of a company's
operating performance relative to a group of publicly traded peers.
'Competing Business' shall mean a company or entity affiliated with any of
the Anschutz Shareholders which competes in any way with, or is a potential
competitor of, Resources.
'Conrail' shall mean Conrail, Inc.
'Consideration' shall mean the Offer Consideration and the Merger
Consideration, collectively.
'Continuing Director' shall mean any member of the UP Board of Directors
who is not an affiliate or representative of an Interested Shareholder and was a
member of the UP Board of Directors prior to the time that an Interested
Shareholder became an Interested Shareholder.
'Conversion Fraction' shall mean the conversion in the Merger into .4065 of
a share of UP Common Stock of each Share to be converted into UP Common Stock.
'CS First Boston' shall mean CS First Boston Corporation, UP's financial
advisor.
'Customary Action' shall mean an action taken which occurs in the ordinary
course of the relevant person's business and where the taking of such action is
generally recognized as being customary and prudent for other major enterprises
in such person's line of business.
'Debt Securities' shall mean long or short-term debt securities including
commercial paper notes.
'DGCL' shall mean the Delaware General Corporation Law.
'Economic Disposition' of shares of UP Voting Securities shall mean (i) any
transaction or arrangement (including an outright sale) that would be treated as
a sale, exchange or other taxable disposition for United States federal income
tax purposes of shares of UP Voting Securities received in the Merger and (ii)
any transaction or arrangement (or combination of transactions or arrangements)
entered into by or on behalf of TAC or its Affiliates that reduces the economic
benefits and burdens to TAC of owning shares of UP Voting Securities (including
any swap transaction, notional principal contract or the acquisition or grant of
any calls, puts or other options, whether or not cash settlement is permitted or
required) to such an extent that such transaction or arrangement causes TAC not
to satisfy the 'continuity of proprietary interest' requirement under Section
368 of the Code with respect to such shares.
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'Effective Time' shall mean the time and date of the filing of the
Certificate of Merger and Articles of Merger with the Secretary of State of the
State of Delaware and the Division of Corporations and Commercial Code of the
State of Utah, respectively, in the case of the merger of SP with and into UPRR
and or such time as is agreed upon by the parties and specified in the
Certificate of Merger and Articles of Merger.
'Election Procedures' shall have the meaning ascribed to it in the Joint
Proxy Statement/Prospectus and the Form of Election.
'Election' shall mean the right, subject to proration and the limitations
of each holder of Shares (other than Shares owned by SP as treasury stock and
Shares owned by UP, UPRR or any other direct or indirect wholly owned subsidiary
of UP, which Shares will be cancelled and retired at the Effective Time) to
elect to receive the Stock Consideration, the Cash Consideration or a
combination thereof.
'Election Deadline' shall mean the date announced by UP, in a news release
delivered to the Dow Jones News Service, as the last day on which Forms of
Election will be accepted.
'eligible purchaser' shall mean a person or entity that is not affiliated
with UP and which has all necessary regulatory authority, if any, to purchase
the Trust Stock.
'Enhanced Severance Program' shall mean an enhanced severance program
established by SP and its subsidiaries pursuant to the Merger Agreement.
'Exchange Act' shall mean the Securities Exchange Act of 1934, as amended.
'Exchange Agent' shall mean Citibank, N.A.
'Exchangeable Preferred Stock' shall mean the 12% Cumulative Redeemable
Exchangeable Preferred Stock provided for by the SP Certificate of
Incorporation.
'Existing Pledge Agreements' shall mean the pledge agreements,
substantially in the form reviewed by UP.
'Facilities' shall mean the $2.8 Billion Facility and any future facility.
'FASB' shall mean the Financial Accounting Standards Board.
'Fiduciary-out Termination Provisions' shall mean the termination sections
of the Merger Agreement.
'Foundation' shall mean the Anschutz Foundation, a Colorado not-for-profit
corporation.
'FTC' shall mean the Federal Trade Commission.
'group' shall have the meaning ascribed to it in Section 13(d)(3) of the
Exchange Act.
'Holding' shall mean UP Holding Company, Inc., a Utah corporation.
'HSR Act' shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
'IBES' shall mean the Institutional Brokers Estimate System.
'IBES Case' shall mean the IBES projected earnings growth rates.
'ICA' shall mean the Interstate Commerce Act.
'ICC' shall mean the Interstate Commerce Commission.
'Inadvertent Acquisition' shall mean the event that a Shareholder or an
Affiliate inadvertently and without knowledge indirectly acquires Beneficial
Ownership of not more than one-quarter of one percent of the UP Voting
Securities in excess of the amount permitted to be owned by the Anschutz
Shareholders.
'Indemnified Liability' shall mean any claim, liability, loss, damage, cost
or expense (whenever asserted or claimed).
'Indemnified Party' shall mean each director, officer, employee or agent of
SP.
'Initial Surviving Corporation' shall mean UPRR.
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'Interested Shareholder' shall mean any person who beneficially owns 10% or
more of the votes entitled to be cast by the holders of all the then outstanding
shares of voting stock.
'Interested Stockholder' shall include, among others, a person beneficially
owning 15% or more of a corporation's voting stock.
'IPO' shall mean the initial public offering of the Resources Common Stock.
'IRS' shall mean the Internal Revenue Service.
'July SP Projections' shall mean the updated financial projections for 1995
and 1996 furnished to UP by SP in late July.
'Laidlaw' shall mean Laidlaw Inc.
'LIBOR' shall mean the London Interbank Offered Rate.
'MCP' shall mean Management Continuity Plan.
'March SP Projections' shall mean certain financial projections for 1995
through 1999 prepared by management of SP as a long range plan.
'MCP Awards' shall mean certain payments described in the Merger Agreement
to certain Nonagreement Employees of SP or its subsidiaries.
'Merger' shall mean the proposed merger of SP with and into UPRR or Newco,
pursuant to which SP will be merged into UPRR or Newco.
'Mergerco' shall mean Union Pacific Merger Co., a Delaware corporation.
'Merger Consideration' shall mean the Cash Consideration and Stock
Consideration, collectively.
'Mergers' shall mean the merger consummated by SP and the Initial Surviving
Corporation and the UP Acquisition Merger.
'Morgan Stanley' shall mean Morgan Stanley & Co. Incorporated, financial
advisor to SP.
'MPRR' shall mean Missouri Pacific Railroad Company, a Delaware
corporation.
'Mr. Anschutz' shall mean Mr. Philip F. Anschutz, Chairman of the Board of
SP.
'MSLEF' shall mean the Morgan Stanley Leveraged Equity Fund II, L.P., a
Delaware limited partnership.
'MSLEF II' shall the mean Morgan Stanley Leveraged Equity Fund II, Inc.
'NASD' shall mean the National Association of Securities Dealers, Inc.
'Newco' shall mean either Mergerco or Holding or both, as the context may
require.
'Nonagreement Employee' shall mean an employee who is not subject to a
collective bargaining agreement.
'Non-Electing Share' shall mean each Share as to which an Election is not
in effect at the Election Deadline (other than Shares purchased pursuant to the
Offer).
'NYSE' shall mean The New York Stock Exchange, Inc.
'Offer' shall mean UP's offer to purchase Shares at a price of $25.00 per
Share, net to the seller in cash, without interest thereon.
'Offer Consideration' shall mean $25.00 per Share in cash.
'Original Merger Agreement' shall mean the Agreement and Plan of Merger,
dated as of August 3, 1995, by and among UP, UP Acquisition, UPRR and SP.
'Other Financial Institutions' shall mean one or more financial
institutions (other than the Banks) that are not Affiliates of any Anschutz
Shareholder.
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'Overnite' shall mean Overnite Transportation Company.
'Ownership Limit' shall mean the amount of shares of SP Voting Securities
Beneficially Owned by UP, UP Acquisition and their Affiliates immediately
following the consummation of the Offer.
'Proposed Transaction' shall mean any proposed transaction or arrangement
(combined with any other transactions or arrangements entered into by TAC)
relating to or involving any shares of UP Voting Securities in excess of the
Threshold Amount.
'Purchase Notice' shall have the meaning ascribed to it in the section of
the Joint Proxy Statement/Prospectus entitled 'SHAREHOLDERS AGREEMENTS--Amended
and Restated Anschutz Shareholders Agreement--Limitations on Disposition.'
'Railroad' shall mean UPRR and MPRR, collectively. The term 'Railroad' also
includes the operations of Chicago and North Western Railway Company, which was
merged into UPRR on October 1, 1995.
'Record Date' shall mean the close of business on July 15, 1996.
'Registration Statement' shall mean the registration statement on Form S-4
(together with any amendments thereto) filed by UP with the Commission.
'Reorganization Continuity Period' shall mean a period of two years
commencing as of the Effective Time.
'Representatives' shall mean the respective Affiliates and the respective
officers, directors, employees, associates, partners, investment bankers,
attorneys, accountants and other agents and representatives of the Anschutz
Shareholders and their subsidiaries and affiliates.
'Resources' shall mean Union Pacific Resources Group Inc.
'Resources Common Stock' shall mean the shares of common stock of
Resources.
'Resources Shareholder Designee' shall mean a designee of TAC who is not an
Affiliate of, and does not have any business relationship with, any of the
Anschutz Shareholders or their Affiliates, and is reasonably acceptable to the
Board of Directors of Resources.
'Santa Fe' shall mean Santa Fe Pacific Corporation.
'Section 203' shall mean Section 203 of the Delaware General Corporation
Law.
'Securities Act' shall mean the Securities Act of 1933, as amended.
'Shares' shall mean shares of SP common stock, par value $.001 per share.
'SP' shall mean Southern Pacific Rail Corporation, a Delaware corporation.
'SP Board' shall mean the Board of Directors of SP.
'SP By-Laws' shall mean the by-laws of SP.
'SP Certificate of Incorporation' shall mean SP's Revised Certificate of
Incorporation.
'Special Meeting' shall mean the meeting to be held at the Mandarin
Oriental Hotel, 222 Sansome Street, San Francisco, California on August 16,
1996.
'Specified SP Transaction' shall mean any merger, consolidation, business
combination, tender or exchange offer, sale or purchase of assets, sale or
purchase of securities, dissolution, liquidation, reorganization, restructuring,
recapitalization, change in capitalization, change in corporate structure or
business or similar transaction involving SP or its subsidiaries.
'Specified UP Transaction' shall mean any merger, consolidation, business
combination, tender or exchange offer, sale or purchase of assets, sale or
purchase of securities, dissolution, liquidation, reorganization, restructuring,
recapitalization, change in capitalization, change in corporate structure or
business or similar transaction involving UP or its subsidiaries (including
Resources).
'SP EIP' shall mean the Southern Pacific Rail Corporation Equity Incentive
Plan.
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'Spin-Off' shall mean the pro rata distribution by UP to its stockholders
of shares of Resources Common Stock.
'SP Preferred Stock' shall mean the preferred stock of SP, par value $0.01
per share.
'SPT' shall mean Southern Pacific Transportation Company, a subsidiary of
SP.
'Standstill Period' shall mean the period commencing on the date of the
Anschutz Shareholders Agreement and terminating on the seventh anniversary of
the Effective Time, or, if earlier, the termination of the Anschutz Shareholders
Agreement in accordance with the terms thereof.
'STB' shall mean the United States Surface Transportation Board.
'STB Application' shall mean the application UP, SP and various of their
affiliates filed with the ICC on November 30, 1995.
'Stock Consideration' shall mean .4065 of a share of UP Common Stock for
each Share exchanged.
'Stock Election' shall mean an election to receive the Stock Consideration.
'Sub Merger Effective Time' shall have the meaning ascribed to it in the
Amended Merger Agreement.
'Surviving Corporation' shall mean UPRR, Holding or Mergerco, as the case
may be.
'TAC' shall mean The Anschutz Corporation, a Kansas corporation.
'Takeover Proposal' shall mean, when used in connection with any person,
any tender or exchange offer involving the capital stock of such person, any
proposal for a merger, consolidation or other business combination involving
such person or any subsidiary of such person, any proposal or offer to acquire
in any manner a substantial equity interest in, or a substantial portion of the
business or assets of, such person or any subsidiary of such person, any
proposal or offer with respect to any recapitalization or restructuring with
respect to such person or any subsidiary of such person or any proposal or offer
with respect to any other transaction similar to any of the foregoing with
respect to such person or any subsidiary of such person other than pursuant to
the transactions to be effected pursuant to the Merger Agreement.
'Threshold Amount' shall be an amount equal to the number of UP Voting
Securities received by TAC in the Merger multiplied by the following fraction:
the numerator is 20% and the denominator is (A) the percentage of outstanding SP
Common Stock held by TAC as of the date of the original Anschutz Shareholders
Agreement minus (B) the percentage of outstanding SP Common Stock that TAC
exchanges for cash in the Offer or the Merger.
'Trust Stock' shall mean the Acquired Shares deposited into the Voting
Trust.
'Trustee' shall mean Southwest Bank of St. Louis, a Missouri banking
corporation.
'UBCA' shall mean the Revised Utah Business Corporation Act.
'UP' shall mean Union Pacific Corporation, a Utah corporation.
'UP Acquisition' shall mean UP Acquisition Corporation, a former direct
wholly owned subsidiary of UPRR and a former indirect wholly owned subsidiary of
UP.
'UP Acquisition Common Stock' shall mean each issued and outstanding share
of common stock of UP Acquisition.
'UP Acquisition Merger' shall mean the merger between UPRR and UP
Acquisition.
'UP Articles of Incorporation' shall mean the UP Revised Articles of
Incorporation.
'UP Board' shall mean the Board of Directors of UP.
'UP By-laws' shall mean the by-laws of UP.
'UP Common Stock' shall mean shares of UP common stock, par value $2.50 per
share.
'UP Preferred Stock' shall mean shares of preferred stock, no par value, of
UP.
'UP Shareholders' shall mean the shareholders of UP and the shareholders of
UP Acquisition, collectively.
A-6
<PAGE>
'UP Standstill Period' shall mean the period commencing on the date on
which the Amended Merger Agreement is terminated in accordance with the terms
thereof other than pursuant to the Fiduciary-out Termination Provisions, and
continuing until the termination of the Amended UP Shareholders Agreement in
accordance with the terms thereof.
'UP Tech' shall mean Union Pacific Technologies, Inc.
'UPRC' shall mean the Union Pacific Resources Company, the principal UP
subsidiary responsible for managing UP's natural resources business.
'UPRR' shall mean the Union Pacific Railroad Company, a Utah corporation.
'USPCI' shall mean USPCI, Inc.
'Utah Control Shares Act' shall mean the Utah Control Shares Acquisition
Act.
'Voted Non-Shareholder Securities' shall mean the proportion of SP Voting
Securities that are not Beneficially Owned by UP Shareholders that vote.
'Voting Period' shall have the meaning ascribed to it in the section of the
Joint Proxy Statement/Prospectus entitled 'SHAREHOLDERS AGREEMENTS--Amended and
Restated Anschutz Shareholders Agreement--Voting of Common Stock; Irrevocable
Proxy; No Solicitation.'
'Voting Trust' shall refer to the voting trust described in the attached
Joint Proxy Statement/Prospectus.
'Voting Trust Agreement' shall mean the Voting Trust Agreement, dated as of
August 3, 1995, by and among UP, UP Acquisition and the Trustee.
'$2.8 Billion Facility' shall mean UP's $2.8 billion credit facility with
various commercial banks.
'1995 SP Proxy Statement' shall mean SP's Proxy Statement for SP's 1995
Annual Meeting of Stockholders.
'1996 SP Proxy Statement' shall mean SP's Proxy Statement for SP's 1996
Annual Meeting of Shareholders.
'2% Sale' shall mean the transfer of any UP Voting Securities pursuant to
which the acquiror thereof, together with its Affiliates and any members of a
'group', would Beneficially Own in the aggregate 2% or more of the outstanding
UP Voting Securities.
'2% Sale Notice' shall mean written notice to be provided to UP by the
Anschutz Shareholders of any proposed 2% Sale, which 2% Sale Notice shall
contain the identity of the purchaser, the number of shares of UP Voting
Securities proposed to be Transferred to such purchaser, the purchase price for
such shares and the form of consideration payable for such shares.
A-7
<PAGE>
ANNEX B
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
BY AND AMONG
UNION PACIFIC CORPORATION,
UNION PACIFIC RAILROAD COMPANY,
SOUTHERN PACIFIC RAIL CORPORATION,
UP HOLDING COMPANY, INC.,
AND
UNION PACIFIC MERGER CO.
DATED AS OF
JULY 12, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I -- THE OFFER AND MERGER AND ALTERNATIVE MERGER................. B-3
Section 1.1 The Offer......................................... B-3
Section 1.2 Company Actions................................... B-3
Section 1.3 The Mergers and the Alternative Merger............ B-4
Section 1.4 Effective Time.................................... B-5
Section 1.5 Closing........................................... B-5
Section 1.6 Directors and Officers of Surviving Corporation,
and the Alternative Surviving Corporation....... B-5
Section 1.7 Stockholders' Meeting............................. B-5
Section 1.8 Voting Trust...................................... B-6
ARTICLE II -- CONVERSION OF SHARES....................................... B-6
Section 2.1 Conversion of Shares.............................. B-6
Section 2.2 Election Procedure................................ B-7
Section 2.3 Issuance of Parent Common Stock and Payment of
Cash Consideration; Proration................... B-8
Section 2.4 Issuance of Parent Common Stock................... B-9
Section 2.5 Payment of Cash Consideration..................... B-10
Section 2.6 Equity Incentive Plan............................. B-10
Section 2.7 Stock Transfer Books.............................. B-10
Section 2.8 No Dissenter's Rights............................. B-10
ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF THE COMPANY............. B-11
Section 3.1 Organization...................................... B-11
Section 3.2 Capitalization.................................... B-11
Section 3.3 Corporate Authorization; Validity of Agreement;
Company Action.................................. B-12
Section 3.4 Consents and Approvals; No Violations............. B-13
Section 3.5 SEC Reports and Financial Statements.............. B-13
Section 3.6 Absence of Certain Changes........................ B-13
Section 3.7 No Undisclosed Liabilities........................ B-14
Section 3.8 Information in Proxy Statement/Prospectus......... B-14
Section 3.9 Employee Benefit Plans; ERISA..................... B-15
Section 3.10 Litigation; Compliance with Law................... B-16
Section 3.11 No Default........................................ B-16
Section 3.12 Taxes............................................. B-17
Section 3.13 Contracts......................................... B-18
Section 3.14 Assets; Real Property............................. B-18
Section 3.15 Environmental Matters............................. B-18
Section 3.16 Transactions with Affiliates...................... B-20
Section 3.17 Opinion of Financial Advisor...................... B-21
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF PARENT, UPRR AND NEWCO... B-21
Section 4.1 Organization...................................... B-21
Section 4.2 Capitalization.................................... B-21
Section 4.3 Corporate Authorization; Validity of Agreement;
Necessary Action................................ B-22
Section 4.4 Consents and Approvals; No Violations............. B-22
Section 4.5 SEC Reports and Financial Statements.............. B-23
Section 4.6 Absence of Certain Changes........................ B-23
Section 4.7 No Undisclosed Liabilities........................ B-23
Section 4.8 Information in Proxy Statement/Prospectus......... B-23
Section 4.9 Litigation; Compliance with Law................... B-24
Section 4.10 Employee Benefit Plan; ERISA...................... B-24
Section 4.11 Taxes............................................. B-24
Section 4.12 Environmental..................................... B-25
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 4.13 Financing......................................... B-25
Section 4.14 Opinion of Financial Advisor...................... B-25
ARTICLE V -- COVENANTS................................................... B-25
Section 5.1 Interim Operations of the Company................. B-25
Section 5.2 Interim Operations of Parent...................... B-27
Section 5.3 Access to Information............................. B-27
Section 5.4 Spinco Spin-off................................... B-28
Section 5.5 Consents and Approvals............................ B-28
Section 5.6 Employee Benefits................................. B-29
Section 5.7 No Solicitation................................... B-30
Section 5.8 Additional Agreements............................. B-31
Section 5.9 Publicity......................................... B-31
Section 5.10 Notification of Certain Matters................... B-31
Section 5.11 Directors' and Officers' Insurance and
Indemnification................................. B-31
Section 5.12 Rule 145 Affiliates............................... B-32
Section 5.13 Cooperation....................................... B-33
Section 5.14 Proxy Statement/Prospectus........................ B-33
Section 5.15 Tax-Free Reorganization........................... B-33
Section 5.16 Restructuring..................................... B-33
Section 5.17 HSR Act........................................... B-34
ARTICLE VI -- CONDITIONS................................................. B-34
Section 6.1 Conditions to the Obligations of Each Party....... B-34
Section 6.2 Conditions to the Obligations of Parent, UPRR and
Newco........................................... B-34
Section 6.3 Conditions to the Obligations of the Company...... B-36
ARTICLE VII -- TERMINATION............................................... B-37
Section 7.1 Termination....................................... B-37
Section 7.2 Effect of Termination............................. B-38
ARTICLE VIII -- MISCELLANEOUS............................................ B-38
Section 8.1 Fees and Expenses................................. B-38
Section 8.2 Finders' Fees..................................... B-38
Section 8.3 Amendment and Modification........................ B-38
Section 8.4 Nonsurvival of Representations and Warranties..... B-38
Section 8.5 Notices........................................... B-38
Section 8.6 Interpretation.................................... B-39
Section 8.7 Counterparts...................................... B-40
Section 8.8 Entire Agreement; No Third Party Beneficiaries; B-40
Rights of Ownership.............................
Section 8.9 Severability...................................... B-40
Section 8.10 Specific Performance.............................. B-40
Section 8.11 Governing Law..................................... B-40
Section 8.12 Assignment........................................ B-40
</TABLE>
<TABLE>
<S> <C>
Exhibit A Amended and Restated Anschutz Stockholder Agreement
Exhibit B Amended and Restated MSLEF Stockholder Agreement
Exhibit C Amended and Restated Anschutz/Parent Registration Rights
Agreement
Exhibit D Amended and Restated Anschutz/Spinco Stockholder Agreement
Exhibit E Amended and Restated Anschutz/Spinco Registration Rights
Agreement
Exhibit F Amended and Restated Parent Stockholder Agreement
Exhibit G Amended and Restated Parent/Company Registration Rights
Agreement
Exhibit H Form of Voting Trust Agreement
Exhibit I Amended and Restated Form of Affiliate Agreement
</TABLE>
ii
<PAGE>
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this 'Agreement'), dated
as of July 12, 1996, by and among Union Pacific Corporation, a Utah corporation
('Parent'), Union Pacific Railroad Company, a Utah corporation and a wholly
owned subsidiary of Parent ('UPRR'), Southern Pacific Rail Corporation, a
Delaware corporation (the 'Company'), UP Holding Company, Inc., a Utah
corporation and a direct wholly owned subsidiary of Parent ('Holding'), and
Union Pacific Merger Co., a Delaware corporation and a direct wholly owned
subsidiary of Parent ('Mergerco'). References herein to 'Newco' shall mean
either Holding or Mergerco or both, as the context may require.
WHEREAS, Parent, UP Acquisition Corporation, a former Delaware corporation
and indirect wholly owned subsidiary of Parent ('Sub'), UPRR and the Company
entered into an Agreement and Plan of Merger, dated as of August 3, 1995 (the
'Original Merger Agreement'), and the original parties to the Original Merger
Agreement wish to amend and restate such Original Merger Agreement in its
entirety to add Newco as a party thereto in order to permit an alternative
structure for the acquisition of the Company by Parent;
WHEREAS, Sub has merged with and into UPRR, with UPRR as the surviving
corporation (the 'Sub Merger') and, accordingly, the surviving original parties
to the Original Merger Agreement wish to amend and restate the Original Merger
Agreement in its entirety to reflect the fact that the Sub Merger has occurred;
WHEREAS, the Boards of Directors of Parent, UPRR, Newco and the Company
have approved, and deem it advisable and in the best interests of their
respective stockholders to consummate, the acquisition of the Company by Parent
upon the terms and subject to the conditions set forth herein;
WHEREAS, Sub purchased the Shares (as defined in Section 1.1) pursuant to a
cash tender offer which was followed by the Sub Merger, which, in turn, will be
followed by either (a) a merger of the Company with and into Holding or Mergerco
(the 'Alternative Merger'), with Holding or Mergerco, as the case may be, as the
surviving corporation, provided, that certain conditions to this Agreement are
met and UP elects the Alternative Merger or, in the event such conditions are
not met or UP does not so elect, (b) a merger of the Company with and into UPRR
(the 'Merger');
WHEREAS, as a condition and inducement to Parent's, UPRR's and Sub's
entering into the Original Merger Agreement and incurring the obligations set
forth therein, concurrently with the execution and delivery of the Original
Merger Agreement, Parent entered into Stockholder Agreements with The Anschutz
Corporation, a Kansas corporation ('TAC'), Anschutz Foundation (the
'Foundation') and Philip F. Anschutz ('Mr. Anschutz,' and together with TAC and
the Foundation, the 'Anschutz Holders'), in the form of Exhibit A thereto (the
'Original Anschutz Stockholder Agreement'), and Morgan Stanley Leveraged Equity
Fund II, L.P. ('MSLEF'), in the form of Exhibit B thereto (the 'Original MSLEF
Stockholder Agreement'), pursuant to which, among other things, such
stockholders have agreed to vote the Shares then owned by such stockholder in
favor of the Merger provided for therein and, in the case of the Anschutz
Holders, to abide by certain agreements relating to the shares of Parent Common
Stock (as defined in Section 1.7) to be received by the Anschutz Holders in the
Merger;
WHEREAS, as a condition and inducement to Parent's, UPRR's and Newco's
entering into this Agreement and incurring the obligations set forth herein,
concurrently with the execution and delivery of this Agreement, Parent and the
Anschutz Holders are entering into an Amended and Restated Anschutz Stockholder
Agreement (the 'Amended Anschutz Stockholder Agreement'), in the form of Exhibit
A hereto, and Parent and MSLEF are entering into an Amended and Restated MSLEF
Stockholder Agreement (the 'Amended MSLEF Stockholder Agreement'), in the form
of Exhibit B hereto;
WHEREAS, concurrently with the execution and delivery of the Original
Merger Agreement, Parent, TAC and the Foundation entered into a Registration
Rights Agreement, in the form of Exhibit C thereto (as amended on July 12, 1996
to reflect the amendment and restatement of the Original Merger Agreement
(including the replacement of Sub by Newco as a party) the 'Amended
Anschutz/Parent Registration Rights Agreement', a copy of which is attached
hereto as Exhibit C), pursuant to which, among other things, Parent granted TAC
and the Foundation certain registration rights with respect to shares of Parent
Common Stock to be received by TAC and the Foundation in the Merger;
B-1
<PAGE>
WHEREAS, as a condition and inducement to Parent's and Sub's entering into
the Original Merger Agreement and incurring the obligations set forth therein,
and in furtherance of Parent's proposed spin-off (the 'Spin-off') of shares of
an entity owning Parent's oil and gas exploration and production operations and
related assets ('Spinco') described in Section 5.4 hereof, concurrently with the
execution and delivery of the Original Merger Agreement, Parent caused Spinco to
enter into, and the Anschutz Holders entered into, (a) an Agreement, in the form
of Exhibit D thereto (as amended on July 12, 1996 to reflect the amendment and
restatement of the Original Merger Agreement (including the replacement of Sub
by Newco as a party) the 'Anschutz/Spinco Stockholder Agreement', a copy of
which is attached hereto as Exhibit D), pursuant to which, among other things,
the Anschutz Holders have agreed to abide by certain agreements relating to the
shares of Spinco stock to be received by the Anschutz Holders in the Spin-off,
and (b) an Agreement, in the form of Exhibit E thereto (as amended on July 12,
1996 to reflect the amendment and restatement of the Original Merger Agreement
(including the replacement of Sub by Newco as a party) the 'Amended
Anschutz/Spinco Registration Rights Agreement', a copy of which is attached
hereto as Exhibit E), pursuant to which, among other things, Spinco granted TAC
and the Foundation certain registration rights with respect to shares of Spinco
stock to be received by TAC and the Foundation in the Spin-off, such agreements
to be effective subject to, and only upon consummation of, the Spin-off;
WHEREAS, as a condition and inducement to the Company's, Parent's, UPRR's
and Sub's entering into the Original Merger Agreement and incurring the
obligations set forth therein, concurrently with the execution and delivery of
the Original Merger Agreement, the parties thereto entered into an Agreement, in
the form of Exhibit F thereto (as amended on July 12, 1996 to reflect the
amendment and restatement of the Original Merger Agreement (including the
replacement of Sub by Mergerco as a party) the 'Amended Parent Stockholder
Agreement', a copy of which is attached hereto as Exhibit F, and, collectively
with the Original Anschutz Stockholder Agreement, the Amended Anschutz
Stockholder Agreement, the Original MSLEF Stockholder Agreement, the Amended
MSLEF Stockholder Agreement and the Anschutz/Spinco Stockholder Agreement, the
'Stockholder Agreements'), pursuant to which, among other things, the parties
have made certain agreements relating to the Shares purchased in the Offer (as
defined in Section 1.1);
WHEREAS, as a condition and inducement to Parent's, UPRR's and Sub's
entering into the Original Merger Agreement and incurring the obligations set
forth therein, concurrently with the execution and delivery of the Original
Merger Agreement, the parties thereto entered into an Agreement, in the form of
Exhibit G thereto (as amended on July 12, 1996 to reflect the amendment and
restatement of the Original Merger Agreement (including the replacement of Sub
by Newco as a party) the 'Amended Parent/Company Registration Rights Agreement',
a copy of which is attached hereto as Exhibit G, and, together with the Amended
Anschutz/Parent Registration Rights Agreement, the Amended Anschutz/Spinco
Registration Rights Agreement and the Stockholder Agreements, the 'Ancillary
Agreements'), pursuant to which, among other things, the Company granted to
Parent, UPRR and Sub certain registration rights with respect to Shares
purchased by Sub in the Offer;
WHEREAS, the Board of Directors of the Company has approved the
transactions contemplated by each of the Original Merger Agreement and this
Agreement and the Ancillary Agreements in accordance with the provisions of
Section 203 of the Delaware General Corporation Law (the 'DGCL') and has
resolved to recommend the acceptance of the Offer and the approval of the Merger
or the Alternative Merger, as the case may be, by the holders of Shares; and
WHEREAS, for United States federal income tax purposes, it is intended that
the Merger or the Alternative Merger, as the case may be, provided for herein
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the 'Code'), and the rules and
regulations promulgated thereunder, and this Agreement is intended to be and is
adopted as a plan of reorganization within the meaning of Section 368 of the
Code;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Ancillary Agreements, the parties hereto agree as follows:
B-2
<PAGE>
ARTICLE I
THE OFFER AND MERGER AND ALTERNATIVE MERGER
Section 1.1 The Offer. (a) Following execution of the Original Merger
Agreement, Sub commenced (within the meaning of Rule 14d-2 under the Securities
Exchange Act of 1934, as amended (the 'Exchange Act')) an offer (the 'Offer') to
purchase for cash up to 39,034,471 shares of the issued and outstanding common
stock, par value $.001 per share (referred to herein as either the 'Shares' or
'Company Common Stock'), of the Company at a price of $25.00 per Share, net to
the seller in cash (such price being referred to herein as the 'Offer Price').
Sub accepted for payment and paid for the Shares tendered.
(b) Parent, UPRR and Sub filed with the United States Securities and
Exchange Commission (the 'SEC') a Tender Offer Statement on Schedule 14D-1 with
respect to the Offer (together with all amendments and supplements thereto and
including the exhibits thereto, the 'Schedule 14D-1') which included, as
exhibits, the Offer to Purchase and a form of letter of transmittal and summary
advertisement (collectively, together with any amendments and supplements
thereto, the 'Offer Documents'). Parent and UPRR represent that the Offer
Documents complied in all material respects with the provisions of applicable
federal securities laws and, on the date filed with the SEC and on the date
first published, sent or given to the Company's stockholders, did not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation is made by Parent, UPRR or Sub with
respect to information supplied by the Company in writing for inclusion in the
Offer Documents. The information supplied by the Company for inclusion in the
Offer Documents did not, on the date filed with the SEC and on the date first
published, sent or given to the Company's stockholders, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
Section 1.2 Company Actions.
(a) The Company approved of and consented to the Offer and represents that
the Board of Directors, at a meeting or meetings duly called and held, has
unanimously (i) determined that the Original Merger Agreement and this Agreement
and the transactions contemplated thereby and hereby, including, without
limitation, the Offer, the Merger and, if applicable, the Alternative Merger, as
the case may be, the Ancillary Agreements to which the Company is a party and
the transactions contemplated thereby, are fair to and in the best interests of
the holders of Shares, (ii) approved the Original Merger Agreement, this
Agreement and the transactions contemplated thereby and hereby, including,
without limitation, the Offer and the Merger and, if applicable, the Alternative
Merger, and approved the Ancillary Agreements and the transactions contemplated
thereby, such determination and approval constituting approval thereof for
purposes of Section 203 of the DGCL, and (iii) recommended that the stockholders
of the Company desiring to receive cash for their Shares accept the Offer and
tender their Shares thereunder to Sub and that all stockholders of the Company
approve and adopt the Original Merger Agreement and this Agreement.
(b) Concurrently with the commencement of the Offer, the Company filed with
the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (together with
all amendments and supplements thereto and including the exhibits thereto, the
'Schedule 14D-9') which contained the recommendation referred to in clauses (i)
and (ii) of Section 1.2(a) hereof and clause 1.2(a)(iii) of the Original Merger
Agreement. The Company represents that the Schedule 14D-9 complied in all
material respects with the provisions of applicable federal securities laws and,
on the date filed with the SEC and on the date first published, sent or given to
the Company's stockholders, did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no representation is
made by the Company with respect to information supplied by Parent, UPRR or Sub
for inclusion in the Schedule 14D-9. The information supplied by Parent, UPRR
and Sub for inclusion in the Schedule 14D-9 did not, on the date filed with the
SEC and on the date first published, sent or given to the Company's
stockholders, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
B-3
<PAGE>
(c) The Company has received the written opinion of Morgan Stanley & Co.,
Incorporated ('Morgan Stanley'), dated as of the date of the Original Merger
Agreement, to the effect that, as of such date, the consideration to be received
by holders of Shares (other than Sub and its affiliates) pursuant to the Offer
and Merger, taken together, is fair from a financial point of view to such
holders (the 'Company Fairness Opinion'). The Company has delivered to Parent a
copy of the Company Fairness Opinion, together with Morgan Stanley's
authorization to the inclusion of the Company Fairness Opinion in the Offer
Documents and the Proxy Statement/Prospectus and the New Proxy
Statement/Prospectus (as such terms are defined in Section 1.7).
(d) The Original Merger Agreement shall remain in effect, and this
Agreement shall not be effective, until the stockholders of the Company have
approved the Alternative Merger at the Alternative Company Special Meeting (as
defined in Section 1.7(b)).
Section 1.3 The Mergers and the Alternative Merger. (a) In accordance
with the UBCA and the DGCL, at the Sub Merger Effective Time, UPRR and Sub
consummated the Sub Merger pursuant to which (i) Sub was merged with and into
UPRR and the separate corporate existence of Sub thereupon ceased, (ii) UPRR
became the successor or surviving corporation (the 'Initial Surviving
Corporation') in the Sub Merger and continues to be governed by the laws of the
State of Utah, and (iii) the separate corporate existence of UPRR with all its
rights, privileges, immunities, powers and franchises continues unaffected by
the Sub Merger. Pursuant to the Sub Merger, (x) the Certificate of Incorporation
of UPRR, as in effect immediately prior to the Sub Merger Effective Time (as
defined in Section 1.4), became the Certificate of Incorporation of the Initial
Surviving Corporation until thereafter amended as provided by law and such
Certificate of Incorporation, and (y) the By-laws of UPRR, as in effect
immediately prior to the Sub Merger Effective Time, became the By-laws of the
Initial Surviving Corporation until thereafter amended as provided by law, the
Certificate of Incorporation of the Initial Surviving Corporation and such
By-laws. The Sub Merger shall have the effects set forth in the UBCA and the
DGCL.
(b) If (i) the conditions set forth in Article VI hereof with respect to
the Alternative Merger are not satisfied or waived upon satisfaction of the
condition set forth in Section 6.2(c) hereof or (ii) UP does not elect the
Alternative Merger, subject to the terms and conditions of this Agreement,
including without limitation, Section 1.3(c) hereof, and in accordance with the
DGCL and the UBCA, at the Effective Time, the Company and UPRR shall consummate
a merger (the 'Merger', and together with the Sub Merger, the 'Mergers')
pursuant to which (i) the Company shall be merged with and into UPRR and the
separate corporate existence of the Company shall thereupon cease, (ii) UPRR
shall be the successor or surviving corporation in the Merger (the 'Surviving
Corporation') and shall continue to be governed by the laws of the State of
Utah, and (iii) the separate corporate existence of UPRR with all its rights,
privileges, immunities, powers and franchises shall continue unaffected by the
Merger. Pursuant to the Merger, (x) the Certificate of Incorporation of UPRR, as
in effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Certificate of Incorporation, and (y) the By-laws of UPRR, as in
effect immediately prior to the Effective Time, shall be the By-laws of the
Surviving Corporation until thereafter amended as provided by law, the
Certificate of Incorporation of the Surviving Corporation and such By-laws. The
Merger shall have the effects set forth in the UBCA and the DGCL.
(c) In the event that all of the conditions to the Alternative Merger set
forth in Article VI hereof are satisfied or waived, and UP elects to carry out
the Alternative Merger subject to the terms of this Agreement and in accordance
with the DGCL and, if applicable, the UBCA, at the Alternative Effective Time
(as hereinafter defined), the Company and Parent agree that they shall not
consummate the Merger but instead shall consummate the Alternative Merger
pursuant to which (i) the Company shall be merged with and into either Holding
or Mergerco, as selected by Parent, and the separate corporate existence of the
Company shall thereupon cease and (ii) Newco shall be the successor or surviving
corporation in the Alternative Merger (the 'Alternative Surviving Corporation')
and shall continue to be governed by the laws of the State of Utah or the State
of Delaware, as applicable. Pursuant to the Alternative Merger, (x) the
Certificate of Incorporation of Newco, as in effect immediately prior to the
Alternative Effective Time shall be the Certificate of Incorporation of the
Alternative Surviving Corporation after the Alternative Effective Time until
thereafter amended as provided by law and such Certificate of Incorporation, and
(y) the By-laws of Newco, as in effect immediately prior to the Alternative
Effective Time shall be the By-laws of the Alternative Surviving Corporation
until thereafter amended as provided by law and such By-laws.
B-4
<PAGE>
Section 1.4 Effective Time. (a) Parent, UPRR and Sub have caused Articles
of Merger (the 'Sub Articles of Merger') and a Certificate of Merger (the 'Sub
Certificate of Merger'), each with respect to the Sub Merger, to be executed and
filed with the Division of Corporations and Commercial Code of the State of Utah
(the 'Division') as provided in the UBCA and with the Secretary of State of the
State of Delaware (the 'Secretary of State') as provided in the DGCL,
respectively. The Sub Merger became effective on the date on which the Sub
Articles of Merger and the Sub Certificate of Merger were filed with the
Division and the Secretary of State, respectively, and such time is hereinafter
referred to as the 'Sub Merger Effective Time'.
(b) If the Alternative Merger is not consummated, Parent, UPRR and the
Company will cause Articles of Merger (the 'Articles of Merger') and a
Certificate of Merger (the 'Certificate of Merger'), each with respect to the
Merger, to be executed and filed on the date of the Closing (as defined in
Section 1.5) (or on such other date as Parent and the Company may agree) with
the Division as provided in the UBCA and the Secretary of State as provided in
the DGCL, respectively. The Merger shall become effective on the date on which
the Articles of Merger and the Certificate of Merger have been duly filed with
the Division and the Secretary of State, respectively, or such time as is agreed
upon by the parties and so specified in the Articles of Merger and Certificate
of Merger, and such time is hereinafter referred to as the 'Effective Time'.
(c) If the Alternative Merger is consummated, Parent, the Company and Newco
will cause a Certificate of Merger (the 'Alternative Certificate of Merger')
and, if applicable, Articles of Merger (the 'Alternative Articles of Merger'),
with respect to the Alternative Merger, to be executed and filed on a date as
soon as practicable following the satisfaction of the condition specified in
Section 6.2(c) hereof (or on such later date as Parent and the Company may
agree) with the Secretary of State as provided in the DGCL and the Division as
provided in the UBCA, respectively. The Alternative Merger shall become
effective on the date on which the Alternative Certificate of Merger and the
Alternative Articles of Merger, if applicable, have been duly filed with the
Secretary of State and the Division, respectively, or such time as is agreed
upon by the parties and so specified in the Alternative Certificate of Merger
and the Alternative Articles of Merger, and such time is hereinafter referred to
as the 'Alternative Effective Time.'
Section 1.5 Closing. The closing of the Merger or the Alternative Merger,
as the case may be, (the 'Closing') will take place at 10:00 a.m., New York City
time, on a date to be specified by the parties, which shall be no later than the
third business day after satisfaction or waiver of all of the conditions set
forth in Article VI hereof (the 'Closing Date'), at the offices of Skadden,
Arps, Slate, Meagher & Flom, 919 Third Avenue, New York, New York, unless
another time, date or place is agreed to in writing by the parties hereto.
Section 1.6 Directors and Officers of the Surviving Corporation and the
Alternative Surviving Corporation. (a) In the event that the Merger is
consummated, the directors and officers of UPRR at the Effective Time shall,
from and after the Effective Time, be the initial directors and officers,
respectively, of the Surviving Corporation until their successors shall have
been duly elected or appointed or qualified or until their earlier death,
resignation or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and By-laws.
(b) In the event that the Alternative Merger is consummated, the directors
and officers of Newco at the Alternative Effective Time shall, from and after
the Alternative Effective Time, be the initial directors and officers,
respectively, of the Alternative Surviving Corporation until their successors
shall have been duly elected or appointed and qualified or until their earlier
death, resignation or removal in accordance with the Alternative Surviving
Corporation's Certificate of Incorporation or Articles of Incorporation, as the
case may be, and By-laws.
Section 1.7 Stockholders' Meeting. (a) In order to consummate the Merger,
the Company, acting through its Board of Directors, in accordance with
applicable law duly called, gave notice of, convened and held a special meeting
of its stockholders (the 'Company Special Meeting'), after the registration
statement on Form S-4 (together with all amendments, schedules, and exhibits
thereto) filed by Parent in connection with the registration of the shares of
Common Stock, par value $2.50 per share, of Parent ('Parent Common Stock'), to
be issued by Parent in the Merger (the 'Registration Statement') was declared
effective. The Company included in the joint proxy statement/prospectus forming
a part of the Registration Statement (the 'Proxy Statement/Prospectus') the
recommendation of the Board of Directors of the Company that stockholders of the
Company vote in favor of the approval of the Merger and the adoption of the
Original Merger Agreement.
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(b) In order to consummate the Alternative Merger, the Company, acting
through its Board of Directors, shall, in accordance with applicable law, duly
call, give notice of, convene and hold a special meeting of its stockholders
(the 'Alternative Company Special Meeting'), as soon as practicable after the
post-effective amendment to the Registration Statement or, if necessary, a new
Registration Statement on Form S-4 (in either case, the 'Amended Registration
Statement') is declared effective, for the purpose of considering and taking
action upon this Agreement. The Company shall include in the new Joint Proxy
Statement/Prospectus forming a part of the Amended Registration Statement (the
'New Proxy Statement/Prospectus') the recommendation of the Board of Directors
of the Company that stockholders of the Company vote in favor of the approval of
the Alternative Merger and the adoption of this Agreement.
Section 1.8 Voting Trust. Simultaneously with the purchase by Sub of
Shares pursuant to the Offer, such Shares were deposited in a voting trust (the
'Voting Trust') in accordance with the terms and conditions of a voting trust
agreement in the form attached to the Original Merger Agreement as Exhibit H.
The Voting Trust may not be modified or amended without the prior written
approval of the Company unless such modification or amendment is not
inconsistent with this Agreement or the Ancillary Agreements and is not adverse
to the Company or its shareholders.
ARTICLE II
CONVERSION OF SHARES
Section 2.1 Conversion of Shares. (a) Each share of Common Stock, par
value $.01 per share, of UPRR issued and outstanding immediately prior to the
Sub Merger Effective Time was, at the Sub Merger Effective Time, converted into
and became one fully paid and nonassessable share of common stock of the Initial
Surviving Corporation.
(b) Each share of Common Stock, par value $.01 per share, of Sub (the 'Sub
Common Stock'), issued and outstanding immediately prior to the Sub Merger
Effective Time was, at the Sub Merger Effective Time, by virtue of the Sub
Merger and without any action on the part of UPRR, cancelled and retired and
ceased to exist.
(c) In the event that the Merger is consummated, each share of Common
Stock, par value $.01 per share, of UPRR issued and outstanding immediately
prior to the Effective Time shall, at the Effective Time, by virtue of the
Merger and without any action on the part of Parent, be converted into one fully
paid and nonassessable share of common stock, par value $.01 per share, of the
Surviving Corporation.
(d) In the event that the Alternative Merger is consummated, each share of
Common Stock, par value $.01 per share, of Newco issued and outstanding
immediately prior to the Alternative Effective Time shall, at the Alternative
Effective Time, by virtue of the Alternative Merger and without any action on
the part of Parent, be converted into one fully paid and nonassessable share of
common stock of the Alternative Surviving Corporation.
(e) Each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time, or the Alternative Effective Time, as the case may
be, (other than Shares to be cancelled pursuant to Section 2.1(f) hereof) shall,
at the Effective Time, or the Alternative Effective Time, as the case may be, by
virtue of the Merger or the Alternative Merger, as the case may be, and without
any action on the part of the holder thereof, be converted into the right to
receive such number of duly authorized, validly issued, fully paid and
nonassessable shares of Parent Common Stock or cash, without any interest
thereon, as specified in Section 2.3 hereof.
(f) All shares of Company Common Stock that are owned by the Company as
treasury stock and any shares of Company Common Stock owned by Parent, Newco,
UPRR, the Surviving Corporation or the Alternative Surviving Corporation, or any
other direct or indirect wholly owned Subsidiary (as defined in Section 3.1
hereof) of Parent shall, at the Effective Time, or the Alternative Effective
Time, as the case may be, be cancelled and retired and shall cease to exist and
no Parent Common Stock or other consideration shall be delivered in exchange
therefor.
(g) On and after the Effective Time, or the Alternative Effective Time, as
the case may be, holders of certificates which immediately prior to the
Effective Time, or the Alternative Effective Time, as the case may be,
represented outstanding Shares (the 'Certificates') shall cease to have any
rights as stockholders of the
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Company, except the right to receive the consideration set forth in this Article
II (the 'Merger Consideration') for each Share held by them.
Section 2.2 Election Procedure. Each holder of Shares (other than holders
of Shares to be cancelled as set forth in Section 2.1(f)) shall have the right
to submit a request specifying the number of Shares that such holder desires to
have converted into shares of Parent Common Stock in the Merger or the
Alternative Merger, as the case may be, and the number of Shares that such
holder desires to have converted into the right to receive $25.00 per Share,
without interest (the 'Cash Consideration'), in the Merger or the Alternative
Merger, as the case may be, in accordance with the following procedure:
(a) Each holder of Shares may specify in a request made in accordance with
the provisions of this Section 2.2 (herein called an 'Election') (i) the number
of Shares owned by such holder that such holder desires to have converted into
Parent Common Stock in the Merger or the Alternative Merger, as the case may be,
(a 'Stock Election') and (ii) the number of Shares owned by such holder that
such holder desires to have converted into the right to receive the Cash
Consideration in the Merger or the Alternative Merger, as the case may be, (a
'Cash Election').
(b) Parent shall prepare a form reasonably acceptable to the Company (the
'Form of Election') which shall be mailed to the Company's stockholders in
accordance with Section 2.2(c) so as to permit the Company's stockholders to
exercise their right to make an Election prior to the Election Deadline (as
defined in Section 2.2(d)).
(c) Parent shall use all reasonable efforts to make the Form of Election
available to all stockholders of the Company at least ten business days prior to
the Election Deadline.
(d) Any Election shall have been made properly only if the person
authorized to receive Elections and to act as exchange agent under this
Agreement (the 'Exchange Agent') shall have received, by 5:00 p.m. local time in
the city in which the principal office of such Exchange Agent is located, on the
date of the Election Deadline, a Form of Election properly completed and signed
and accompanied by certificates for the Shares to which such Form of Election
relates (or by an appropriate guarantee of delivery of such certificates, as set
forth in such Form of Election, from a member of any registered national
securities exchange or of the National Association of Securities Dealers, Inc.
or a commercial bank or trust company in the United States provided such
certificates are in fact delivered to the Exchange Agent by the time required in
such guarantee of delivery). Failure to deliver Shares covered by such a
guarantee of delivery within the time set forth on such guarantee shall be
deemed to invalidate any otherwise properly made Election. As used herein,
'Election Deadline' means the date announced by Parent, in a news release
delivered to the Dow Jones News Service, as the last day on which Forms of
Election will be accepted; provided, that such date shall be a business day no
earlier than twenty business days prior to the Effective Time or the Alternative
Effective Time, as the case may be, and no later than the date on which the
Effective Time or the Alternative Effective Time, as the case may be, occurs and
shall be at least five business days following the date of such news release;
provided further, that Parent shall have the right to set a later date as the
Election Deadline so long as such later date is no later than the date on which
the Effective Time or the Alternative Effective Time, as the case may be,
occurs.
(e) Any Company stockholder may at any time prior to the Election Deadline
change his or her Election by written notice received by the Exchange Agent
prior to the Election Deadline accompanied by a properly completed and signed,
revised Form of Election.
(f) Any Company stockholder may, at any time prior to the Election
Deadline, revoke his or her Election by written notice received by the Exchange
Agent prior to the Election Deadline or by withdrawal prior to the Election
Deadline of his or her certificates for Shares, or of the guarantee of delivery
of such certificates, previously deposited with the Exchange Agent. All
Elections shall be revoked automatically if the Exchange Agent is notified in
writing by Parent or the Company that this Agreement has been terminated. Any
Company stockholder who shall have deposited certificates for Shares with the
Exchange Agent shall have the right to withdraw such certificates by written
notice received by the Exchange Agent and thereby revoke his Election as of the
Election Deadline if the Merger or the Alternative Merger, as the case may be,
shall not have been consummated prior thereto.
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(g) Parent shall have the right to make rules, not inconsistent with the
terms of this Agreement, governing the validity of the Forms of Election, the
manner and extent to which Elections are to be taken into account in making the
determinations prescribed by Section 2.3, the issuance and delivery of
certificates for Parent Common Stock into which Shares are converted in the
Merger or the Alternative Merger, as the case may be, and the payment of cash
for Shares converted into the right to receive the Cash Consideration in the
Merger or the Alternative Merger, as the case may be.
Section 2.3 Issuance of Parent Common Stock and Payment of Cash
Consideration; Proration. The manner in which each Share (other than Shares to
be cancelled as set forth in Section 2.1(f)) shall be converted into Parent
Common Stock or the right to receive the Cash Consideration at the Effective
Time or the Alternative Effective Time, as the case may be, shall be as set
forth in this Section 2.3. All references to 'outstanding' Shares in this
Section 2.3 shall mean (i) all Shares outstanding immediately prior to the
Effective Time or the Alternative Effective Time, as the case may be, including,
without limitation, all Shares acquired by Sub pursuant to the Offer (the
'Tendered Shares') minus (ii) Shares owned by Parent or by any direct or
indirect wholly-owned subsidiary of Parent (other than the Tendered Shares).
(a) As is more fully set forth below, the aggregate number of Shares to be
converted into Parent Common Stock pursuant to the Merger or the Alternative
Merger, as the case may be, shall be equal as nearly as practicable to 60% of
all outstanding Shares; and the number of Shares to be converted into the right
to receive the Cash Consideration in the Merger or the Alternative Merger, as
the case may be, pursuant to this Agreement, together with the Tendered Shares,
shall be equal as nearly as practicable to 40% of all outstanding Shares.
(b) If Stock Elections are received for a number of Shares that is 60% or
less of the outstanding Shares, each Share covered by a Stock Election shall be
converted in the Merger or the Alternative Merger, as the case may be, into
.4065 of a share of Parent Common Stock (the 'Conversion Fraction'). In the
event that between the date of the Original Merger Agreement and the Effective
Time or the Alternative Effective Time, as the case may be, the issued and
outstanding shares of Parent Common Stock shall have been affected or changed
into a different number of shares or a different class of shares as a result of
a stock split, reverse stock split, stock dividend, spin-off, extraordinary
dividend, recapitalization, reclassification or other similar transaction with a
record date within such period, the Conversion Fraction shall be appropriately
adjusted.
(c) If Stock Elections are received for more than 60% of the outstanding
Shares, each Non-Electing Share (as defined in Section 2.3(g)) and each Share
for which a Cash Election has been received shall be converted into the right to
receive the Cash Consideration in the Merger or the Alternative Merger, as the
case may be, and the Shares for which Stock Elections have been received shall
be converted into Parent Common Stock and the right to receive the Cash
Consideration in the following manner:
(1) The Exchange Agent will distribute with respect to Shares as to
which a Stock Election has been made a number of shares of Parent Common
Stock equal to the Conversion Fraction with respect to a fraction of such
Shares, the numerator of which fraction shall be 60% of the number of
outstanding Shares and the denominator of which shall be the aggregate
number of Shares covered by Stock Elections.
(2) Shares covered by a Stock Election and not fully converted into
the right to receive Parent Common Stock as set forth in clause (1) above
shall be converted in the Merger or the Alternative Merger, as the case may
be, into the right to receive the Cash Consideration for each Share so
converted.
(d) If the number of Tendered Shares and Shares for which Cash Elections
are received in the aggregate is 40% or less of the outstanding Shares, each
Share covered by a Cash Election shall be converted in the Merger or the
Alternative Merger, as the case may be, into the right to receive the Cash
Consideration.
(e) If the number of Tendered Shares and Shares for which Cash Elections
are received in the aggregate is more than 40% of the outstanding Shares, each
Non-Electing Share (as defined in Section 2.3(g)) and each Share for which a
Stock Election has been received shall be converted in the Merger or the
Alternative Merger, as the case may be, into a fraction of a share of Parent
Common Stock equal to the Conversion Fraction, and, the Shares
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for which Cash Elections have been received shall be converted into the right to
receive the Cash Consideration and Parent Common Stock in the following manner:
(1) The Exchange Agent will distribute with respect to Shares as to
which a Cash Election has been made the Cash Consideration with respect to
a fraction of such Shares, the numerator of which fraction shall be 40% of
the number of outstanding Shares minus the number of Tendered Shares and
the denominator of which shall be the aggregate number of Shares covered by
Cash Elections.
(2) Shares covered by a Cash Election and not fully converted into the
right to receive the Cash Consideration as set forth in clause (1) above
shall be converted in the Merger or the Alternative Merger, as the case may
be, into the right to receive a number of shares of Parent Common Stock
equal to the Conversion Fraction for each Share so converted.
(f) If Non-Electing Shares are not converted under either Section 2.3(c) or
Section 2.3(e), the Exchange Agent shall distribute with respect to each such
Non-Electing Share, the Cash Consideration with respect to a fraction of such
Non-Electing Share, where such fraction is calculated in a manner that will
result in the sum of (i) the number of Shares converted into cash pursuant to
this Section 2.3(f), (ii) the number of Shares for which Cash Elections have
been received and (iii) the number of Shares purchased pursuant to the Offer
being as close as practicable to 40% of the outstanding Shares. Each
Non-Electing Share not converted into the right to receive the Cash
Consideration as set forth in the preceding sentence shall be converted in the
Merger or the Alternative Merger, as the case may be, into the right to receive
a number of shares of Parent Common Stock equal to the Conversion Fraction for
each Non-Electing Share so converted.
(g) For the purposes of this Section 2.3, outstanding Shares as to which an
Election is not in effect at the Election Deadline (other than Shares purchased
pursuant to the Offer) shall be called 'Non-Electing Shares'. If Parent and the
Company shall determine that any Election is not properly made with respect to
any Shares, such Election shall be deemed to be not in effect, and the Shares
covered by such Election shall, for purposes hereof, be deemed to be
Non-Electing Shares.
(h) No certificates or scrip representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of Certificates, no
dividend or distribution with respect to shares shall be payable on or with
respect to any fractional share and such fractional share interests shall not
entitle the owner thereof to vote or to any other rights of a stockholder of
Parent. In lieu of any such fractional share of Parent Common Stock, Parent
shall pay to each former stockholder of the Company who otherwise would be
entitled to receive a fractional share of Parent Common Stock an amount in cash
determined by multiplying (i) the Average Parent Share Price (as defined below)
on the date on which the Effective Time or the Alternative Effective Time, as
the case may be, occurs by (ii) the fractional interest in a share of Parent
Common Stock to which such holder would otherwise be entitled. For purposes
hereof, the 'Average Parent Share Price' shall mean the average closing sales
price, rounded to four decimal points, of the Parent Common Stock as reported on
the New York Stock Exchange Composite Tape, for the twenty (20) consecutive
trading days ending on the trading day which is five (5) trading days prior to
the Effective Time or the Alternative Effective Time, as the case may be.
Section 2.4 Issuance of Parent Common Stock. Immediately following the
Effective Time or the Alternative Effective Time, as the case may be, Parent
shall deliver, in trust, to the Exchange Agent, for the benefit of the holders
of Shares, certificates representing an aggregate number of shares of Parent
Common Stock as nearly as practicable equal to the product of the Conversion
Fraction and the number of Shares to be converted into Parent Common Stock as
determined in Section 2.3. As soon as practicable after the Effective Time or
the Alternative Effective Time, as the case may be, each holder of Shares
converted into Parent Common Stock pursuant to this Article II, upon surrender
to the Exchange Agent (to the extent not previously surrendered with a Form of
Election) of one or more certificates for such Shares for cancellation, shall be
entitled to receive certificates representing the number of shares of Parent
Common Stock into which such Shares shall have been converted in the Merger or
the Alternative Merger, as the case may be. No dividends or distributions that
have been declared will be paid to persons entitled to receive certificates for
shares of Parent Common Stock until such persons surrender their certificates
for Shares, at which time all such dividends shall be paid. In no event shall
the persons entitled to receive such dividends be entitled to receive interest
on such dividends. If any certificate for such Parent Common Stock is to be
issued in a name other than that in which the certificate for Shares surrendered
in exchange therefor is registered, it shall be a condition of such exchange
that the person
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requesting such exchange shall pay to the Exchange Agent any transfer or other
taxes required by reason of issuance of certificates for such Parent Common
Stock in a name other than the registered holder of the certificate surrendered,
or shall establish to the satisfaction of the Exchange Agent that such tax has
been paid or is not applicable. Notwithstanding the foregoing, neither the
Exchange Agent nor any party hereto shall be liable to a holder of Shares for
any Parent Common Stock or dividends thereon delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
Section 2.5 Payment of Cash Consideration. At the Closing, Parent shall
deposit in trust with the Exchange Agent, for the benefit of the holders of
Shares, an amount in cash equal to $25.00 multiplied by the number of Shares to
be converted into the right to receive the Cash Consideration as determined in
Section 2.3. As soon as practicable after the Effective Time or the Alternative
Effective Time, as the case may be, the Exchange Agent shall distribute to
holders of Shares converted into the right to receive the Cash Consideration
pursuant to this Article II, upon surrender to the Exchange Agent (to the extent
not previously surrendered with a Form of Election) of one or more certificates
for such Shares for cancellation, a bank check for an amount equal to $25.00
times the number of Shares so converted. In no event shall the holder of any
such surrendered certificates be entitled to receive interest on any of the Cash
Consideration to be received in the Merger or the Alternative Merger, as the
case may be. If such check is to be issued in the name of a person other than
the person in whose name the certificates for the Shares surrendered for
exchange therefor are registered, it shall be a condition of the exchange that
the person requesting such exchange shall pay to the Exchange Agent any transfer
or other taxes required by reason of issuance of such check to a person other
than the registered holder of the certificates surrendered, or shall establish
to the satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to a holder of Shares for any amount paid to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
Section 2.6 Equity Incentive Plan. The Board of Directors of the Company
(or, if appropriate, any committee administering the Equity Incentive Plan) has
adopted such resolutions or taken such other actions as were necessary to assure
that no holder of an outstanding Award with respect to which Shares might
otherwise be issued at or after the Effective Time or the Alternative Effective
Time, as the case may be, shall have any right to receive equity securities of
the Company, the Surviving Corporation, the Alternative Surviving Corporation or
any Subsidiary (as defined below) at or after the Effective Time or the
Alternative Effective Time, as the case may be, (any such right having been
adjusted to be a right to receive other securities, property or cash in
accordance with Section 5.2(b) of the Equity Incentive Plan). The Company shall
also ensure that, following the Effective Time or the Alternative Effective
Time, as the case may be, no participant in any other stock-based plan,
agreement, program or arrangement (including, without limitation, the Employee
Stock Purchase Plan) shall have any right thereunder to acquire equity
securities of the Company, the Surviving Corporation or the Alternative
Surviving Corporation, as the case may be, or any Subsidiary.
Section 2.7 Stock Transfer Books. At the Effective Time or the
Alternative Effective Time, as the case may be, the stock transfer books of the
Company shall be closed and there shall be no further registration of transfers
of Shares on the records of the Company. If, after the Effective Time or the
Alternative Effective Time, as the case may be, certificates representing Shares
are presented to the Surviving Corporation or the Alternative Surviving
Corporation, they shall be cancelled and exchanged for cash and/or certificates
representing Parent Common Stock pursuant to this Article II.
Section 2.8 No Dissenter's Rights. In accordance with Schwabacher v.
United States, 334 U.S. 192 (1948), stockholders of the Company will not have
any dissenter's rights, provided, however, that if the Surface Transportation
Board of the United States Department of Transportation (the 'STB'), the
successor agency to the Interstate Commerce Commission, (or any successor
agency) or a court of competent jurisdiction determines that dissenter's rights
are available to holders of Shares, then holders of Shares shall be provided
with dissenter's rights in accordance with the DGCL.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent, UPRR and Newco as follows:
Section 3.1 Organization. Each of the Company and its Subsidiaries is a
corporation, partnership or other entity duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization, and has all requisite corporate or other power and authority and
all necessary governmental approvals to own, lease and operate its properties
and to carry on its business as now being conducted, except where the failure to
be so organized, existing and in good standing or to have such power, authority
and governmental approvals would not have a material adverse effect on the
Company and its Subsidiaries taken as a whole. Each of the Company and its
Subsidiaries is duly qualified or licensed to do business and in good standing
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing would not, in the aggregate, have a material adverse effect on the
Company and its Subsidiaries taken as a whole. As used in this Agreement, the
word 'Subsidiary' means, with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, of which (i) such party or
any other Subsidiary of such party is a general partner (excluding such
partnerships where such party or any Subsidiary of such party do not have a
majority of the voting interest in such partnership) or (ii) at least a majority
of the securities or other interests having by their terms ordinary voting power
to elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries. As used in
this Agreement (except to the extent used in Sections 6.1(c), 6.2(c) and 6.2(e)
hereof and conditions (j) and (k) to the Offer set forth in Annex A of the
Original Merger Agreement), any reference to any event, change or effect having
a material adverse effect on or with respect to any entity (or group of entities
taken as a whole) means such event, change or effect, individually or in the
aggregate with such other events, changes, or effects, which is materially
adverse to the financial condition, business, results of operations, assets,
liabilities (after taking into account any corresponding increase in assets) or
properties of such entity. If 'material adverse effect' is used with respect to
more than one entity, it shall mean such events, changes or effects with respect
to all such entities taken as a whole. Section 3.1 of the Disclosure Schedule
delivered by the Company to Parent on or prior to the date of the Original
Merger Agreement (the 'Disclosure Schedule') sets forth a complete list of the
Company's Subsidiaries.
Section 3.2 Capitalization. (a) The authorized capital stock of the
Company consists of 300,000,000 Shares and 10,000,000 preferred shares, par
value $.01 per share (the 'Preferred Stock'). As of the date of the Original
Merger Agreement, (i) 156,137,884 shares of Company Common Stock were issued and
outstanding and 2,178,514 shares of Company Common Stock were reserved for
issuance pursuant to awards previously granted pursuant to the Company's 1993
Equity Incentive Plan (the 'Equity Incentive Plan'), (ii) no shares of Preferred
Stock were issued and outstanding, and (iii) no Shares or shares of Preferred
Stock were issued and held in the treasury of the Company. All the outstanding
shares of the Company's capital stock are, and all shares which may be issued
pursuant to the Equity Incentive Plan will be, when issued in accordance with
the respective terms thereof, duly authorized, validly issued, fully paid and
non-assessable. Except as disclosed in Section 3.2(a) of the Disclosure
Schedule, there are no bonds, debentures, notes or other indebtedness having
voting rights (or convertible into securities having such rights) ('Voting
Debt') of the Company or any of its Subsidiaries issued and outstanding. Except
as set forth above and except for the transactions contemplated by this
Agreement, as of the date of the Original Merger Agreement, (i) there were no
shares of capital stock of the Company authorized, issued or outstanding and
(ii) there were no existing options, warrants, calls, preemptive rights,
subscriptions or other rights, convertible securities, agreements, arrangements
or commitments of any character, relating to the issued or unissued capital
stock of the Company or any of its Subsidiaries, obligating the Company or any
of its Subsidiaries to issue, transfer or sell or cause to be issued,
transferred or sold any shares of capital stock or Voting Debt of, or other
equity interest in, the Company or any of its Subsidiaries or securities
convertible into or exchangeable for such shares or equity interests or
obligations of the Company or any of its Subsidiaries to grant, extend or enter
into any such option, warrant, call, subscription or other right, convertible
security, agreement, arrangement or commitment. Except as disclosed in Section
3.2(a) of the Disclosure Schedule, there are no outstanding contractual
obligations of the Company or any of its Subsidiaries to
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repurchase, redeem or otherwise acquire any Shares or the capital stock of the
Company or any subsidiary or affiliate of the Company or to provide funds to
make any investment (in the form of a loan, capital contribution or otherwise)
in any Subsidiary or any other entity. Except as permitted by this Agreement,
following the Merger or the Alternative Merger, as the case may be, neither the
Company nor any of its Subsidiaries will have any obligation to issue, transfer
or sell any shares of its capital stock pursuant to any employee benefit plan or
otherwise.
(b) Except as disclosed in Section 3.2(b) of the Disclosure Schedule, all
of the outstanding shares of capital stock of each of the Subsidiaries are
beneficially owned by the Company, directly or indirectly, and all such shares
have been validly issued and are fully paid and nonassessable and are owned by
either the Company or one of its Subsidiaries free and clear of all liens,
charges, security interests, options, claims or encumbrances of any nature
whatsoever.
(c) Except for the Corporate Matters Agreement, dated as of August 1, 1993,
among the Company, MSLEF, TAC and certain other parties referred to therein, and
the Amended Parent Stockholder Agreement, there are no voting trusts or other
agreements or understandings to which the Company or any of its Subsidiaries is
a party with respect to the voting of the capital stock of the Company or any of
the Subsidiaries. None of the Company or its Subsidiaries is required to redeem,
repurchase or otherwise acquire shares of capital stock of the Company, or any
of its Subsidiaries, respectively, as a result of the transactions contemplated
by this Agreement. The Company has delivered to Parent a letter agreement which
causes the termination, as of the Effective Time, or the Alternative Effective
Time, as the case may be, of the Corporate Matters Agreement.
(d) At the Effective Time or the Alternative Effective Time, as the case
may be, the number of shares of Company Common Stock outstanding shall not
exceed 158,316,398.
Section 3.3 Corporate Authorization; Validity of Agreement; Company
Action. (a) The Company has full corporate power and authority to execute and
deliver this Agreement, the Amended Parent Stockholder Agreement and the Amended
Parent/Company Registration Rights Agreement and, subject in the case of this
Agreement to obtaining any necessary approval of its stockholders as
contemplated by Section 1.7 hereof with respect to the Alternative Merger, to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance by the Company of this Agreement, the Amended Parent
Stockholder Agreement and the Amended Parent/Company Registration Rights
Agreement, and the consummation by it of the transactions contemplated hereby
and thereby, have been duly and validly authorized by its Board of Directors
and, except in the case of this Agreement for obtaining the approval of its
stockholders as contemplated by Section 1.7 hereof with respect to the
Alternative Merger, no other corporate action or proceedings on the part of the
Company is necessary to authorize the execution and delivery by the Company of
this Agreement, the Amended Parent Stockholder Agreement and the Amended
Parent/Company Registration Rights Agreement and the consummation by it of the
transactions contemplated hereby and thereby. Each of this Agreement, the
Amended Parent Stockholder Agreement and the Parent/Company Registration Rights
Agreement has been duly executed and delivered by the Company and, assuming this
Agreement, the Amended Parent Stockholder Agreement and the Amended
Parent/Company Registration Rights Agreement constitute valid and binding
obligations of Parent, UPRR and Newco to the extent a party thereto, constitute
valid and binding obligations of the Company enforceable against the Company in
accordance with their respective terms, except that (i) such enforcement may be
subject to applicable bankruptcy, insolvency or other similar laws, now or
hereafter in effect, affecting creditors' rights generally, and (ii) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
(b) The Board of Directors of the Company has duly and validly approved and
taken all corporate action required to be taken by the Board of Directors for
the consummation of the transactions contemplated by this Agreement (including,
without limitation, the Offer, the acquisition of Shares pursuant to the Offer,
the Merger or the Alternative Merger, as the case may be, and the Ancillary
Agreements to which it is a party), the Amended Parent Stockholder Agreement and
the Amended Parent/Company Registration Rights Agreement, including, but not
limited to, all actions necessary to render the provisions of Section 203 of the
DGCL inapplicable to such transactions. The affirmative vote of the holders of a
majority of the Shares is the only vote of the holders of any class or series of
Company capital stock necessary to approve the Merger or the Alternative Merger.
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Section 3.4 Consents and Approvals; No Violations. Except as disclosed in
Section 3.4 of the Disclosure Schedule, and except for all filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the Exchange Act, the Interstate Commerce Act (the
'ICA'), the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the 'HSR Act'), if any, and for the approval of this Agreement by the Company's
stockholders and the filing and recordation of the Certificate of Merger or the
Alternative Certificate of Merger, as the case may be, and the Articles of
Merger or the Alternative Articles of Merger, as the case may be, as required by
the DGCL and the UBCA, neither the execution, delivery or performance of this
Agreement, the Amended Parent Stockholder Agreement or the Amended
Parent/Company Registration Rights Agreement by the Company nor the consummation
by the Company of the transactions contemplated hereby or thereby nor compliance
by the Company with any of the provisions hereof or thereof will (i) conflict
with or result in any breach of any provision of the certificate of
incorporation or by-laws or similar organizational documents of the Company or
of any of its Subsidiaries, (ii) require any filing with, or permit,
authorization, consent or approval of, any court, arbitral tribunal,
administrative agency or commission or other governmental or other regulatory
authority or agency (a 'Governmental Entity'), except where the failure to
obtain such permits, authorizations, consents or approvals or to make such
filings would not have a material adverse effect on the Company and its
Subsidiaries and would not, or would not be reasonably likely to, materially
impair the consummation of the Offer or the Ancillary Agreements or the ability
of the Company to consummate the Merger, the Alternative Merger, or the other
transactions contemplated hereby or thereby, (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amendment, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, guarantee, other evidence of indebtedness
(collectively, the 'Debt Instruments'), lease, license, contract, agreement or
other instrument or obligation to which the Company or any of its Subsidiaries
is a party or by which any of them or any of their properties or assets may be
bound (a 'Company Agreement') or (iv) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company, any of its
Subsidiaries or any of their properties or assets, except in the case of clause
(iii) or (iv) for such violations, breaches or defaults which would not,
individually or in the aggregate, have a material adverse effect on the Company
and its Subsidiaries, and which would not, or would not be reasonably likely to,
materially impair the consummation of the Offer or the Ancillary Agreements or
the ability of the Company to consummate the Merger, the Alternative Merger or
the other transactions contemplated hereby or thereby.
Section 3.5 SEC Reports and Financial Statements. The Company has filed
with the SEC, and has heretofore made available to Parent true and complete
copies of, all forms, reports, schedules, statements and other documents
required to be filed by it and its Subsidiaries since January 1, 1992 under the
Exchange Act or the Securities Act (as such documents have been amended since
the time of their filing, collectively, the 'Company SEC Documents'). As of
their respective dates or, if amended, as of the date of the last such
amendment, the Company SEC Documents, including, without limitation, any
financial statements or schedules included therein (a) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading and (b) complied
in all material respects with the applicable requirements of the Exchange Act
and the Securities Act, as the case may be, and the applicable rules and
regulations of the SEC thereunder. Each of the consolidated financial statements
included in the Company SEC Documents have been prepared from, and are in
accordance with, the books and records of the Company and/or its consolidated
Subsidiaries, comply in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with United States generally
accepted accounting principles ('GAAP') applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present in all material respects the consolidated financial position and the
consolidated results of operations and cash flows (and changes in financial
position, if any) of the Company and its consolidated Subsidiaries as at the
dates thereof or for the periods presented therein.
Section 3.6 Absence of Certain Changes. Except to the extent disclosed in
the Company SEC Documents filed prior to the date of the Original Merger
Agreement or as otherwise disclosed to Parent in Section 3.6 of the Disclosure
Schedule, from June 30, 1995 through the date of the Original Merger Agreement,
the Company and its Subsidiaries had conducted their respective businesses and
operations in the ordinary course of business consistent with past practice.
From June 30, 1995 through the date of the Original Merger Agreement, there had
not occurred (i) any events, changes, or effects (including the incurrence of
any liabilities of any nature, whether
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or not accrued, contingent or otherwise) having or, which would be reasonably
likely to have, individually or in the aggregate, a material adverse effect on
the Company and its Subsidiaries; (ii) any declaration, setting aside or payment
of any dividend or other distribution (whether in cash, stock or property) with
respect to the equity interests of the Company or of any of its Subsidiaries,
other than regular quarterly cash dividends or dividends paid by wholly owned
Subsidiaries; or (iii) any change by the Company or any of its Subsidiaries in
accounting principles or methods, except insofar as may be required by a change
in GAAP. Except as set forth on Schedule 3.6 of the Disclosure Schedule, from
June 30, 1995 through the date of the Original Merger Agreement, neither the
Company nor any of its Subsidiaries had taken any of the actions prohibited by
Section 5.1 hereof.
Section 3.7 No Undisclosed Liabilities. Except (a) to the extent disclosed
in the Company SEC Documents filed prior to the date of the Original Merger
Agreement and (b) for liabilities and obligations incurred in the ordinary
course of business consistent with past practice, during the period from June
30, 1995 through the date of the Original Merger Agreement, neither the Company
nor any of its Subsidiaries had incurred any liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, that had, or would be
reasonably likely to have had, a material adverse effect on the Company and its
Subsidiaries or would be required to be reflected or reserved against on a
consolidated balance sheet of the Company and its Subsidiaries (including the
notes thereto) prepared in accordance with GAAP as applied in preparing the June
30, 1995 consolidated balance sheet of the Company and its Subsidiaries. Section
3.7 of the Disclosure Schedule sets forth each instrument evidencing
indebtedness of the Company and its Subsidiaries which will accelerate or become
due or payable, or result in a right of redemption or repurchase on the part of
the holder of such indebtedness, or with respect to which any other payment or
amount will become due or payable, in any such case with or without due notice
or lapse of time, as a result of this Agreement, the Merger, the Alternative
Merger, the Ancillary Agreements or the other transactions contemplated hereby
and thereby.
Section 3.8 Information in Proxy Statement/Prospectus. (a) The Proxy
Statement/Prospectus, at the date mailed to the Company's stockholders, on the
date filed with the SEC and at the time of the Company Special Meeting, did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, provided, however, that no representation is made by the Company
with respect to statements made therein based on information supplied by Parent,
UPRR or Sub for inclusion in the Proxy Statement/Prospectus. None of the
information supplied by the Company for inclusion or incorporation by reference
in the Registration Statement, at the date it became effective and at the time
of the Company Special Meeting contained any untrue statement of a material fact
or omitted to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. Subject to the proviso set forth in the
second preceding sentence, the Proxy Statement/Prospectus complied in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
(b) The New Proxy Statement/Prospectus (or any amendment thereof or
supplement thereto), at the date mailed to the Company's stockholders, on the
date filed with the SEC and at the time of the Alternative Company Special
Meeting, will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading, provided, however, that no representation is made by the
Company with respect to statements made therein based on information supplied by
Parent, UPRR or Newco for inclusion in the New Proxy Statement/Prospectus. None
of the information supplied by the Company for inclusion or incorporation by
reference in the Amended Registration Statement will, at the date it becomes
effective and at the time of the Alternative Company Special Meeting contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. Subject to
the proviso set forth in the second preceding sentence, the New Proxy
Statement/Prospectus will comply in all material respects with the provisions of
the Exchange Act and the rules and regulations thereunder.
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<PAGE>
Section 3.9 Employee Benefit Plans; ERISA. As of the date of the Original
Merger Agreement, except as set forth in Section 3.9 of the Disclosure Schedule:
(a) there were no material employee benefit plans, arrangements,
practices, contracts or agreements (including, without limitation,
employment agreements, change of control employment agreements and
severance agreements, incentive compensation, bonus, stock option, stock
appreciation rights and stock purchase plans) of any type (including but
not limited to plans described in section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ('ERISA')), maintained by the
Company, any of its Subsidiaries or any trade or business, whether or not
incorporated (an 'ERISA Affiliate'), that together with the Company would
be deemed a 'controlled group' within the meaning of section 4001(a)(14) of
ERISA, or with respect to which the Company or any of its Subsidiaries has
or may have a liability, other than those listed on Section 3.9(a) of the
Disclosure Schedule (the 'Benefit Plans'). Except as disclosed in Schedule
3.9(a)(ii) (or as otherwise permitted by this Agreement) neither the
Company nor any ERISA Affiliate had any formal plan or commitment, whether
legally binding or not, to create any additional Benefit Plan or modify or
change any existing Benefit Plan that would affect any employee or
terminated employee of the Company or any ERISA Affiliate.
(b) Except as disclosed in Schedule 3.9(b), under the applicable laws
of all jurisdictions within the United States of America and all foreign
jurisdictions, with respect to any Benefit Plan, there were no material
amounts accrued but unpaid as of the date of the most recent balance sheet
prior to the Original Merger Agreement that were not reflected on that
balance sheet prepared in accordance with GAAP.
(c) With respect to each Benefit Plan except as disclosed on Schedule
3.9(c) and as would not have a Material Adverse Effect on the Company and
its Subsidiaries: (i) if intended to qualify under section 401(a), 401(k)
or 403(a) of the Code, such plan so qualified, and its trust was exempt
from taxation under section 501(a) of the Code; (ii) such plan had been
administered in accordance with its terms and applicable law; (iii) no
breach of fiduciary duty had occurred; (iv) no disputes were pending, or,
to the knowledge of the Company, threatened; (v) no prohibited transaction
(within the meaning of Section 406 of ERISA) had occurred; and (vi) all
contributions and premiums due (including any extensions for such
contributions and premiums) had been made in full.
(d) Except as disclosed in Schedule 3.9(d), none of the Benefit Plans
had incurred or will incur any 'accumulated funding deficiency,' as such
term is defined in section 412 of the Code, whether or not waived.
(e) Except as disclosed on Schedule 3.9(e): (i) neither the Company
nor any ERISA Affiliate had incurred any liability under Title IV of ERISA
since the effective date of ERISA that had not been satisfied in full
except as would not have had or would not have been reasonably likely to
have a material adverse effect on the Company and its Subsidiaries
(including sections 4063-4064 and 4069 of ERISA) and, to the knowledge of
the Company, no basis for any such liability existed; (ii) neither the
Company nor any ERISA Affiliate maintained (or contributed to), or had
maintained (or had contributed to) within the last six years, any employee
benefit plan that is subject to Title IV of ERISA; and (iii) there was no
pending dispute between the Company or any ERISA Affiliate concerning
payment of contributions or payment of withdrawal liability payments.
(f) With respect to each Benefit Plan that is a 'welfare plan' (as
defined in section 3(1) of ERISA), except as specifically disclosed in
Section 3.9(f) of the Disclosure Schedule, no such plan provided medical or
death benefits with respect to current or former employees of the Company
or any of its Subsidiaries beyond their termination of employment, other
than on an employee-pay-all basis, and each such welfare plan may be
amended or terminated by the Company or any of its Subsidiaries at any time
with respect to such former or current employees.
(g) With respect to each Benefit Plan that was intended to provide
special tax treatment to participants (including sections 79, 105, 106,
125, 127 and 129 of the Code), to the Company's knowledge, such Benefit
Plan had satisfied all of the material requirements for the receipt of such
special tax treatment since January 1, 1992.
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<PAGE>
(h) Except as specifically set forth in Section 3.9(h) of the
Disclosure Schedule, the consummation of the transactions contemplated by
this Agreement will not (i) entitle any individual to severance pay or
accelerate the time of payment or vesting, or increase the amount, of
compensation or benefits due to any individual with respect to any Benefit
Plan, or (ii) constitute or result in a prohibited transaction under
section 4975 of the Code or section 406 or 407 of ERISA with respect to any
Benefit Plan.
(i) Except as disclosed on Schedule 3.9(i), neither the Company, any
Benefits Affiliate nor any 'administrator' as that term is defined in
section 3(16) of ERISA, had any liability with respect to or connected with
any Benefit Plan for excise taxes payable under the Code or civil penalties
payable under ERISA and, to the Company's knowledge, no basis for any such
liability existed.
(j) Except as disclosed on Schedule 3.9(j), there was no Benefit Plan
that was a 'multiemployer plan,' as such term is defined in section 3(37)
of ERISA, or which is covered by section 4063 or 4064 of ERISA.
(k) With respect to each Benefit Plan except Plans in which employees
of Parent or its Affiliates participated and except Multiemployer Plans
from which the Company had withdrawn, the Company had delivered or made
available to Parent accurate and complete (with inadvertent or de minimis
omissions) copies of all plan texts, summary plan descriptions, summaries
of material modifications, trust agreements and other related agreements
including all amendments to the foregoing; the two most recent annual
reports; the most recent annual and periodic accounting of plan assets; the
most recent determination letter received from the United States Internal
Revenue Service (the 'Service'); and the two most recent actuarial reports,
to the extent any of the foregoing may be applicable to a particular
Benefit Plan.
(l) With respect to each Benefit Plan that was a 'group health plan'
as such term is defined in section 5000(b) of the Code, except as
specifically set forth in Section 3.9(l) of the Disclosure Schedule, to the
Company's knowledge, each such Benefit Plan complied and had complied with
the requirements of Part 6 of Title I of ERISA and Sections 4980B and 5000
of the Code except where the failure to so comply would not have had a
material adverse effect on the Company and its Subsidiaries.
(m) There were no material plans, arrangements, practices, contracts
or agreements (including change of control agreements, severance
agreements, retirement agreements, stock option or purchase agreements,
medical or death benefit agreements) maintained by the Company or an ERISA
Affiliate or with respect to which the Company or any of its Subsidiaries
had a material liability to a director or former director (as a director)
of the Company or an ERISA Affiliate other than those listed on Section
3.9(m) of the Disclosure Schedule or disclosed in the Company's most recent
proxy statement (the 'Director Plans'). Neither the Company nor any ERISA
Affiliate had any formal plan or commitment, whether legally binding or
not, to create any Director Plan or modify or change any existing Director
Plan that would have affected any director or former director of the
Company or any ERISA Affiliate.
Section 3.10 Litigation; Compliance with Law.
(a) Except to the extent disclosed in the Company SEC Documents filed prior
to the date of the Original Merger Agreement, as of the date of the Original
Merger Agreement, there was no suit, claim, action, proceeding or investigation
pending or, to the best knowledge of the Company, threatened against or
affecting, the Company or any of its Subsidiaries which, individually or in the
aggregate, was reasonably likely to have a material adverse effect on the
Company and its Subsidiaries, or would, or would be reasonably likely to,
materially impair the consummation of the Offer or the Ancillary Agreements or
the ability of the Company to consummate the Merger, the Alternative Merger, or
the other transactions contemplated hereby or thereby.
(b) The Company and its Subsidiaries have complied with all laws, statutes,
regulations, rules, ordinances, and judgments, decrees, orders, writs and
injunctions, of any court or governmental entity relating to any of the property
owned, leased or used by them, or applicable to their business, including, but
not limited to, equal employment opportunity, discrimination, occupational
safety and health, environmental, interstate commerce, antitrust laws, ERISA and
laws relating to Taxes (as defined in Section 3.12) except where the failure to
so comply would not have a material adverse effect on the Company and its
Subsidiaries.
Section 3.11 No Default. The business of the Company and each of its
Subsidiaries is not being conducted in default or violation of any term,
condition or provision of (a) its respective articles of incorporation or
by-laws
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or similar organizational documents, (b) any Company Agreement or (c) except as
disclosed in Section 3.11 of the Disclosure Schedule, any federal, state, local
or foreign law, statute, regulation, rule, ordinance, judgment, decree, order,
writ, injunction, concession, grant, franchise, permit or license or other
governmental authorization or approval applicable to the Company or any of its
Subsidiaries, excluding from the foregoing clauses (b) and (c), defaults or
violations that would not have a material adverse effect on the Company and its
Subsidiaries or would not, or would not be reasonably likely to, materially
impair the consummation of the Offer or the Ancillary Agreements or the ability
of the Company to consummate the Merger or the Alternative Merger, as the case
may be, or the other transactions contemplated hereby or thereby. No
investigation or review by any Governmental Entity with respect to the Company
or any of its Subsidiaries is pending or, to the best knowledge of the Company,
threatened, nor to the best knowledge of the Company, has any Governmental
Entity indicated an intention to conduct the same, except such investigation or
review as would not reasonably be expected to have a material adverse effect on
the Company and its Subsidiaries, or would not materially impair the
consummation of the Offer or the Ancillary Agreements or the ability of the
Company to consummate the Merger, the Alternative Merger or the other
transactions contemplated hereby or thereby.
Section 3.12 Taxes. (a) As of the date of the Original Merger Agreement,
except as set forth in Section 3.12 of the Disclosure Schedule and except as
such failure of any representation or warranty made in this Section 3.12(a) to
be true and correct which would not have a material adverse effect on the
Company and its Subsidiaries:
(i) the Company and its Subsidiaries had (I) duly filed (or there have
been filed on their behalf) with the appropriate governmental authorities
all Tax Returns (as hereinafter defined) required to be filed by them and
such Tax Returns are true, correct and complete, and (II) duly paid in full
or made provision in accordance with GAAP (or there has been paid or
provision has been made on their behalf) for the payment of all Taxes (as
hereinafter defined) for all periods ending through the date hereof;
(ii) the Company and its Subsidiaries had complied in all respects
with all applicable laws, rules and regulations relating to the payment and
withholding of Taxes (including withholding of Taxes pursuant to Sections
1441 and 1442 of the Code or similar provisions under any foreign laws) and
had, within the time and the manner prescribed by law, withheld from
employee wages and paid over to the proper governmental authorities all
amounts required to be so withheld and paid over under applicable laws;
(iii) no federal, state, local or foreign audits or other
administrative proceedings or court proceedings were presently pending with
regard to any Taxes or Tax Returns of the Company or its Subsidiaries and
neither the Company nor its Subsidiaries had received a written notice of
any pending audits or proceedings;
(iv) neither the Service nor any other taxing authority (whether
domestic or foreign) had asserted, or to the best knowledge of the Company,
was threatening to assert, against the Company or any of its Subsidiaries
any deficiency or claim for Taxes; and
(v) all transactions that could have given rise to an understatement
of the federal income tax liability of the Company or any of its
Subsidiaries within the meaning of Section 6662(d) of the Code were
adequately disclosed on Tax Returns in accordance with Section
6662(d)(2)(B) of the Code if there was no substantial authority for the
treatment giving rise to such understatement.
(b) As of the date of the Original Merger Agreement, except as set forth in
Section 3.12 of the Disclosure Schedule:
(i) there were no material liens for Taxes upon any property or assets
of the Company or any Subsidiary thereof, except for liens for Taxes not
yet due and payable and liens for Taxes that are being contested in good
faith by appropriate proceedings;
(ii) neither the Company nor any of its Subsidiaries had agreed to or
was required to make any adjustment under Section 481(a) of the Code;
(iii) the federal income Tax Returns of the Company and its
Subsidiaries had been examined by the Service (or the applicable statutes
of limitation for the assessment of federal income Taxes for such periods
have expired) for all periods through and including December 31, 1990,
except for the periods during which the Company or any Subsidiary was a
member of the Santa Fe Pacific Corporation consolidated group;
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<PAGE>
(iv) neither the Company nor any of its Subsidiaries was a party to
any material agreement providing for the allocation or sharing of Taxes;
and
(v) neither the Company nor any of its Subsidiaries had, with regard
to any assets or property held or acquired by any of them, filed a consent
to the application of Section 341(f) of the Code, or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as such term is defined in Section 341(f)(4) of the Code) owned by the
Company or any of its Subsidiaries.
(c) The schedules attached to the copy of the 1993 consolidated federal
income tax return of the Company provided to Parent accurately reflected the net
operating loss carryovers, investment tax credit carryovers and other carryovers
of the Company and its Subsidiaries as of the end of the 1993 taxable year,
except to the extent such carryovers were subject to adjustment as a result of
items reflected in the Revenue Agent's Report, Engineer's Report and Protest for
the taxable periods ending July 31, 1989, December 31, 1989 and December 31,
1990 and any items raised in the audit currently being conducted by the Internal
Revenue Service for the 1991 through 1993 taxable years. The Company will
provide to Parent a copy of the similar schedules attached to the 1994
consolidated Federal income tax return of the Company within 45 days after the
date such return is filed with the Internal Revenue Service. Except as set forth
in Section 3.12 of the Disclosure Schedule such carryovers were not subject to
limitations imposed by Sections 382, 383 or 384 of the Code (or any predecessor
thereto) or otherwise (including under Sections 1.1502-21 and 1502-22 of the
Treasury Regulations).
(d) 'Taxes' shall mean any and all taxes, charges, fees, levies or other
assessments, including, without limitation, income, gross receipts, excise, real
or personal property, sales, withholding, social security, railroad retirement,
railroad unemployment, occupation, use, service, service use, license, net
worth, payroll, franchise, transfer and recording taxes, fees and charges,
imposed by the Service or any taxing authority (whether domestic or foreign
including, without limitation, any state, county, local or foreign government or
any subdivision or taxing agency thereof (including a United States
possession)), whether computed on a separate, consolidated, unitary, combined or
any other basis; and such term shall include any interest whether paid or
received, fines, penalties or additional amounts attributable to, or imposed
upon, or with respect to, any such taxes, charges, fees, levies or other
assessments. 'Tax Return' shall mean any report, return, document, declaration
or other information or filing required to be supplied to any taxing authority
or jurisdiction (foreign or domestic) with respect to Taxes, including, without
limitation, information returns, any documents with respect to or accompanying
payments of estimated Taxes, or with respect to or accompanying requests for the
extension of time in which to file any such report, return, document,
declaration or other information.
Section 3.13 Contracts. Each Company Agreement is valid, binding and
enforceable and in full force and effect, except where failure to be valid,
binding and enforceable and in full force and effect would not have a material
adverse effect on the Company and its Subsidiaries, and there are no defaults
thereunder, except those defaults that would not have a material adverse effect
on the Company and its Subsidiaries. Neither the Company nor any Subsidiary is a
party to any agreement that expressly limits the ability of the Company or any
Subsidiary to compete in or conduct any line of business or compete with any
person or in any geographic area or during any period of time, other than
existing cooperative agreements or arrangements with other rail carriers or
customers in the ordinary course of business consistent with past practice.
Section 3.14 Assets; Real Property. The assets, properties, rights and
contracts, including, without limitation (as applicable), title thereto, of the
Company and its Subsidiaries, taken as a whole, are sufficient to permit the
Company and its Subsidiaries to conduct their business as it is currently being
conducted, except where the failure to have such assets, properties, rights and
contracts would not have a material adverse effect on the Company and its
Subsidiaries. All material real property owned by the Company and its
Subsidiaries (the 'Real Property') is owned free and clear of all liens,
charges, security interests, options, claims, mortgages, pledges, easements,
rights-of-way or other encumbrances and restrictions of any nature whatsoever,
except as described in Section 3.14(b) of the Disclosure Schedule and those that
do not materially adversely interfere with the use of such Real Property as
currently used.
Section 3.15 Environmental Matters. As of the date of the Original Merger
Agreement, except to the extent disclosed in the Company SEC Documents filed
prior to the date of the Original Merger Agreement or as set forth in Section
3.15 of the Disclosure Schedule and except as would not have a material adverse
effect on the Company and its Subsidiaries:
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(a) The Company and its Subsidiaries had obtained all permits,
licenses and other authorizations which were required under the
Environmental Laws (as hereafter defined) for the ownership, use and
operation of each location owned, operated or leased by the Company or its
Subsidiaries (the 'Property'), all such permits, licenses and
authorizations were in effect, no appeal nor any other action was pending
to revoke or modify in a manner adverse to the Company any such permit,
license or authorization, and the Company and its Subsidiaries were in full
compliance with all terms and conditions of all such permits, licenses and
authorizations.
(b) The Company, its Subsidiaries and the Property were in compliance
with all Environmental Laws including, without limitation, all
restrictions, conditions, standards, limitations, prohibitions,
requirements, obligations, schedules and timetables contained in the
Environmental Laws or contained in any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder.
(c) The Company had made available to Parent true and complete copies
of (i) all environmental studies submitted to or issued by a governmental
agency or made by or at the direction of the Company or its Subsidiaries
relating to the Property or any other property or facility previously
owned, operated or leased by the Company for which the Company reasonably
would be expected to be exposed to material Environmental Liabilities and
Costs and (ii) and all studies or reports relating to the health and
welfare of employees of the Company and to the impact of any Hazardous
Substances, Oils, Pollutants or Contaminants from any facility of the
Company upon residents in the area of the facilities and upon surrounding
properties.
(d) There was no civil, criminal or administrative action, suit,
demand, claim, hearing, notice of violation, investigation, proceeding,
notice or demand letter which would reasonably be expected to result in
liability existing or pending, or to the best knowledge of the Company
threatened, relating to the Company, its Subsidiaries, the Property or any
other property or facility owned, operated or leased, or previously owned
operated or leased by the Company or its Subsidiaries relating in any way
to the Environmental Laws or any regulations, code, plan, order, decree,
judgment, injunction, notice or demand letter issued, entered, promulgated
or approved thereunder.
(e) Neither the Company nor any of its Subsidiaries had, and to the
best of the Company's knowledge, no other person had, Released, placed,
stored, buried or dumped any Hazardous Substances, Oils, Pollutants or
Contaminants or any other wastes produced by, or resulting from, any
business, commercial or industrial activities, operations or processes, on
or beneath the Property or any property formerly owned, operated or leased
by the Company or its Subsidiaries except for inventories of such
substances to be used, and wastes generated therefrom, in the ordinary
course of business of the Company (which inventories and wastes, if any,
were disposed of in accordance with applicable laws and regulations and in
a manner such that there had been no Release of any such substances into
the environment in violation of the Environmental Laws).
(f) No Release, or Cleanup had occurred at the Property which could
have resulted in the assertion or creation of a lien on the Property by any
governmental body or agency with respect thereto, nor had any such
assertion of a lien been made by any governmental body or agency with
respect thereto.
(g) Neither the Company nor any of its Subsidiaries had received any
written notice or order from any governmental agency or private or public
entity advising it that it was responsible for or potentially responsible
for paying for any material cost of Cleanup of any Hazardous Substances,
Oils, Pollutants or Contaminants or any other waste or substance and
neither the Company nor its Subsidiaries had entered into any such
agreements concerning such Cleanup, nor was the Company aware of any facts
which might reasonably have given rise to such notice, order or agreement.
(h) Neither the Company nor any of its Subsidiaries were undertaking
any Cleanup, removal, treatment or remediation of any Hazardous Substances,
Oils, Pollutants or Contaminants which would, or would reasonably be
expected to, expose the Company to Material Environmental Liabilities and
Costs.
(i) With regard to the Company, its Subsidiaries and the Property,
there were no past or present (or, to the best knowledge of the Company,
future) events, conditions, circumstances, activities, practices,
incidents, actions or plans which may have interfered with or prevented
compliance or continued
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compliance, with the Environmental Laws as in effect on the date hereof or
with any regulation, code, plan, order, decree, judgment, injunction,
notice or demand letter issued, entered, promulgated or approved
thereunder, or which may have given rise to any common law or legal
liability under the Environmental Laws, based on or related to the
manufacture, generation, processing, distribution, use, treatment, storage,
place of disposal, transport or handling, or the Release or threatened
Release into the indoor or outdoor environment by the Company or its
Subsidiaries or a facility of the Company or its Subsidiaries, of any
Hazardous Substances, Oils, Pollutants or Contaminants.
(j) For purposes of this Section 3.15, the following definitions shall
apply:
'Cleanup' means all actions required by Environmental Laws to: (1)
clean up, remove, treat or remediate Hazardous Substances, Oils,
Pollutants or Contaminants in the indoor or outdoor environment; (2)
prevent the Release of Hazardous Substances, Oils, Pollutants or
Contaminants so that they do not migrate, endanger or threaten to
endanger public health or welfare or the indoor or outdoor environment;
(3) perform studies and investigations and monitoring and care; or (4)
respond to any government requests for information or documents in any
way relating to clean up, removal, treatment or remediation or potential
clean up, removal, treatment or remediation of Hazardous Substances,
Oils, Pollutants or Contaminants in the workplace or outdoor
environment.
'Environmental Laws' means all applicable foreign, federal, state
and local laws, common law, regulations, rules and ordinances relating
to pollution or protection of health, safety and the environment,
including, without limitation, laws relating to Releases or threatened
Releases of Hazardous Substances, Oils, Pollutants or Contaminants into
the indoor or outdoor environment (including, without limitation,
ambient air, surface water, groundwater, land, surface and subsurface
strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, Release, transport or handling of
Hazardous Substances, Oils, Pollutants or Contaminants, and all laws and
regulations with regard to recordkeeping, notification, disclosure and
reporting requirements respecting chemicals, Hazardous Substances, Oils,
Pollutants or Contaminants, and all laws relating to endangered or
threatened species of fish, wildlife and plants and the management or
use of natural resources.
'Hazardous Substances, Oils, Pollutants or Contaminants' means all
substances defined as such in the National Oil and Hazardous Substances
Pollution Contingency Plan, 40 C.F.R. Section 300.5, or defined as such
by, or regulated as such under, any Environmental Law.
'Environmental Liabilities and Costs' means all liabilities,
obligations, responsibilities, obligations to conduct cleanup, losses,
damages, deficiencies, punitive damages, consequential damages, treble
damages, costs and expenses (including, without limitation, all
reasonable fees, disbursements and expenses of counsel, expert and
consulting fees and costs of investigations and feasibility studies and
responding to government requests for information or documents), fines,
penalties, restitution and monetary sanctions, interest, direct or
indirect, known or unknown, absolute or contingent, past, present or
future, resulting from any claim or demand, by any person or entity,
whether based in contract, tort, implied or express warranty, strict
liability, joint and several liability, criminal or civil statute, under
any Environmental Law, or arising from environmental, health or safety
conditions, or the Release or threatened Release of Hazardous
Substances, Oils, Pollutants or Contaminants into the environment, as a
result of past or present ownership, leasing or operation of any
Properties, owned, leased or operated by the Company.
'Release' means any release, spill, emission, discharge, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment (including, without
limitation, ambient air, surface water, groundwater, and surface or
subsurface strata) or into or out of any property, including the
movement of Hazardous Substances, Oils, Pollutants or Contaminants
through or in the air, soil, surface water, groundwater or property.
Section 3.16 Transactions with Affiliates. Except to the extent disclosed
in the Company SEC Documents filed prior to the date of the Original Merger
Agreement, continuing activities under the terms of the agreements listed in
Section 3.16 of the Disclosure Schedule or as disclosed in writing to Parent and
Sub on the date of the
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Original Merger Agreement, from January 1, 1992 through the date of the Original
Merger Agreement there had been no transactions, agreements, arrangements or
understandings between the Company or its Subsidiaries, on the one hand, and the
Company's affiliates (other than wholly owned Subsidiaries of the Company) or
other Persons, on the other hand, that would be required to be disclosed under
Item 404 of Regulation S-K under the Securities Act.
Section 3.17 Opinion of Financial Advisor. The Company has received an
opinion from Morgan Stanley to the effect that the consideration to be received
by the stockholders of the Company pursuant to the Offer and Merger, taken
together, as of the date of the Original Merger Agreement, was fair from a
financial point of view to such stockholders, a copy of which opinion has been
delivered to Parent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT, UPRR AND NEWCO
Parent, UPRR and Newco represent and warrant to the Company as follows:
Section 4.1 Organization. Each of Parent, UPRR, Holding, and Mergerco is a
corporation duly organized, validly existing and in good standing under the laws
of Utah, Utah, Utah and Delaware, respectively, and has all requisite corporate
or other power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as now being
conducted, except where the failure to be so organized, existing and in good
standing or to have such power, authority and governmental approvals would not
have a material adverse effect on Parent and its Subsidiaries. Parent and each
of its Subsidiaries is duly qualified or licensed to do business and in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification or
licensing necessary, except where the failure to be so duly qualified or
licensed and in good standing would not have a material adverse effect on Parent
and its Subsidiaries taken as a whole.
Section 4.2 Capitalization. (a) The authorized capital stock of Parent
consists of 500,000,000 shares of Parent Common Stock and 20,000,000 preferred
shares, no par value (the 'Parent Preferred Stock'). As of the date of the
Original Merger Agreement, (i) 205,359,000 shares of Parent Common Stock were
issued and outstanding, (ii) no shares of Parent Preferred Stock were issued and
outstanding, (iii) 26,593,616 shares of Parent Common Stock and no shares of
Parent Preferred Stock were issued and held in the treasury of Parent, and (iv)
9,699,504 shares of Parent Common Stock were reserved for issuance upon exercise
of then outstanding options and 9,914,320 shares of Parent Common Stock were
reserved for issuance under Parent's 1993 Stock Option and Retention Stock Plan,
the 1990 Retention Stock Plan and the 1988 Stock Option and Restricted Stock
Plan (collectively, the 'Parent Plans'). All of the outstanding shares of
Parent's capital stock are, and all shares which may be issued pursuant to the
exercise of outstanding options or pursuant to the Parent Plans will be, when
issued in accordance with the respective terms thereof, duly authorized, validly
issued, fully paid and non-assessable. Except for Parent's 4.75% Convertible
Debentures due April 1, 1999 there are no bonds, debentures, notes or other
indebtedness having voting rights (or convertible into securities having such
rights) ('Parent Voting Debt') of Parent or any of its Subsidiaries issued and
outstanding. Except as set forth above, and except as set forth in Section 4.2
of the Disclosure Schedule delivered to the Company on or prior to the date of
the Original Merger Agreement (the 'Parent Disclosure Schedule') and except for
transactions contemplated by this Agreement, as of the date of the Original
Merger Agreement, (i) there were no shares of capital stock of Parent
authorized, issued or outstanding and (ii) there were no existing options,
warrants, calls, pre-emptive rights, subscriptions or other rights, convertible
securities, agreements, arrangements or commitments of any character, relating
to the issued or unissued capital stock of Parent or any of its Subsidiaries,
obligating Parent or any of its Subsidiaries to issue, transfer or sell or cause
to be issued, transferred or sold any shares of capital stock or Parent Voting
Debt of, or other equity interest in, Parent or any of its Subsidiaries or
securities convertible into or exchangeable for such shares or equity interests
or obligations of Parent or any of its Subsidiaries to grant, extend or enter
into any such option, warrant, call, subscription or other right, convertible
security, agreement, arrangement or commitment. There were no outstanding
contractual obligations of Parent or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any shares of Parent Common Stock or the capital
stock of Parent or any subsidiary or affiliate of Parent or to provide funds to
make any investment (in the form of a loan, capital contribution or otherwise)
in any Subsidiary or any other entity.
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(b) There are no voting trusts or other agreements or understandings to
which Parent or any of its Subsidiaries is a party with respect to the voting of
the capital stock of Parent or its Subsidiaries. None of Parent or its
Subsidiaries is required to redeem, repurchase or otherwise acquire shares of
capital stock of Parent, or any of its Subsidiaries, respectively, as a result
of the transactions contemplated by this Agreement.
Section 4.3 Corporate Authorization; Validity of Agreement; Necessary
Action. Each of Parent, UPRR and Newco has full corporate power and authority
to execute and deliver this Agreement, and each of Parent and UPRR and has full
corporate power and authority to execute and deliver the Amended Parent
Stockholder Agreement and the Amended Parent/Company Registration Rights
Agreement to which it is a party and to consummate the transactions contemplated
hereby and thereby. The execution, delivery and performance by Parent, UPRR and
Newco of this Agreement, and the execution, delivery and performance by Parent,
UPRR and Newco of the Amended Parent Stockholder Agreement and the Amended
Parent/Company Registration Rights Agreement to which they are parties and the
consummation by Parent, UPRR and Newco of the transactions contemplated hereby
and thereby have been duly and validly authorized by their respective Boards of
Directors and, no other corporate action or proceedings on the part of Parent,
UPRR and Newco are necessary to authorize the execution and delivery by Parent,
UPRR and Newco of this Agreement, or Parent, UPRR and Newco of the Amended
Parent Stockholder Agreement and the Amended Parent/Company Registration Rights
Agreement to which they are parties and the consummation by Parent, UPRR and
Newco of the transactions contemplated hereby and thereby. Each of this
Agreement, the Amended Parent Stockholder Agreement and the Amended
Parent/Company Registration Rights Agreement has been duly executed and
delivered by Parent, UPRR and Newco as the case may be to the extent a party
thereto, and, assuming this Agreement, the Amended Parent Stockholder Agreement
and the Amended Parent/Company Registration Rights Agreement constitute valid
and binding obligations of the Company, constitute valid and binding obligations
of each of Parent, UPRR and Newco, as the case may be to the extent a party
thereto, enforceable against them in accordance with their respective terms,
except that (i) such enforcement may be subject to applicable bankruptcy,
insolvency or other similar laws, now or hereafter in effect, affecting
creditors' rights generally, and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought. The shares of Parent Common Stock to be issued pursuant to the
Merger or the Alternative Merger, as the case may be, will be duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights.
Section 4.4 Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, the Securities Act, the
DGCL, the UBCA, the ICA, the HSR Act, if any, state blue sky laws and any
applicable state takeover laws, neither the execution, delivery or performance
of this Agreement, the Amended Parent Stockholder Agreement and the Amended
Parent/Company Registration Rights Agreement by Parent, UPRR or Newco, as the
case may be to the extent a party thereto, nor the consummation by Parent, UPRR
or Newco of the transactions contemplated hereby or thereby nor compliance by
Parent, UPRR or Newco with any of the provisions hereof or thereof will (i)
conflict with or result in any breach of any provision of the certificate of
incorporation or by-laws of Parent, UPRR or Newco, (ii) require any filing with,
or permit, authorization, consent or approval of, any Governmental Entity
(except where the failure to obtain such permits, authorizations, consents or
approvals or to make such filings would not have a material adverse effect on
Parent and its Subsidiaries or would not, or would not be reasonably likely to,
materially impair the consummation of the Ancillary Agreements or the ability of
Parent, UPRR and Newco to consummate the Offer, the Merger, or the ability of
Parent and Newco to consummate the Alternative Merger, or the other transactions
contemplated hereby or thereby), (iii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or acceleration)
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, guarantee, other evidence of indebtedness, lease, license, contract,
agreement or other instrument or obligation to which Parent or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Parent, any of its Subsidiaries or any
of their properties or assets, except in the case of clauses (iii) and (iv) for
violations, breaches or defaults which would not have a material adverse effect
on Parent and its Subsidiaries or would not, or would not be reasonably likely
to, materially impair the consummation of the Ancillary Agreements or the
ability of Parent and UPRR to consummate the Merger, or
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the ability of Parent and Newco to consummate the Alternative Merger, or the
other transactions contemplated hereby or thereby.
Section 4.5 SEC Reports and Financial Statements. Parent has filed with
the SEC, and has heretofore made available to the Company true and complete
copies of, all forms, reports, schedules, statements and other documents
required to be filed by it and its Subsidiaries since January 1, 1992 under the
Exchange Act or the Securities Act (as such documents have been amended since
the time of their filing, collectively, the 'Parent SEC Documents'). As of their
respective dates or, if amended, as of the date of the last such amendment, the
Parent SEC Documents, including, without limitation, any financial statements or
schedules included therein (a) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading and (b) complied in all material
respects with the applicable requirements of the Exchange Act and the Securities
Act, as the case may be, and the applicable rules and regulations of the SEC
thereunder. Each of the consolidated financial statements included in the Parent
SEC Documents have been prepared from, and are in accordance with, the books and
records of Parent and/or its consolidated Subsidiaries, comply in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present in all
material respects the consolidated financial position and the consolidated
results of operations and cash flows (and changes in financial position, if any)
of Parent and its consolidated Subsidiaries as at the dates thereof or for the
periods presented therein.
Section 4.6 Absence of Certain Changes. Except as contemplated by Section
5.4 hereof or to the extent disclosed in the Parent SEC Documents filed prior to
the date of the Original Merger Agreement, from June 30, 1995 through the date
of the Original Merger Agreement, Parent and its Subsidiaries had conducted
their respective businesses in the ordinary course of business consistent with
past practice. From June 30, 1995 through the date of the Original Merger
Agreement, there had not occurred (i) any events, changes, or effects (including
the incurrence of any liabilities of any nature, whether or not accrued,
contingent or otherwise) having or, which would be reasonably likely to have,
individually or in the aggregate, a material adverse effect on Parent and its
Subsidiaries; (ii) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to the
equity interests of Parent or of any of its Subsidiaries other than regular
quarterly cash dividends or dividends paid by wholly owned Subsidiaries; or
(iii) any change by Parent or any of its Subsidiaries in accounting principles
or methods, except insofar as may be required by a change in GAAP.
Section 4.7 No Undisclosed Liabilities. Except (a) to the extent disclosed
in the Parent SEC Documents filed prior to the date of the Original Merger
Agreement and (b) for liabilities and obligations incurred in the ordinary
course of business consistent with past practice, during the period from June
30, 1995 through the date of the Original Merger Agreement, neither Parent nor
any of its Subsidiaries had incurred any liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, that have, or would be
reasonably likely to have, a material adverse effect on Parent and its
Subsidiaries or would be required to be reflected or reserved against on a
consolidated balance sheet of Parent and its Subsidiaries (including the notes
thereto) prepared in accordance with GAAP as applied in preparing the June 30,
1995 consolidated balance sheet of Parent and its Subsidiaries.
Section 4.8 Information in Proxy Statement/Prospectus. The Registration
Statement, at the date that it became effective and at the time of the Company
Special Meeting, did not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, provided, however, that no representation was made by
Parent, UPRR or Sub with respect to statements made therein based on information
supplied by the Company for inclusion in the Registration Statement. In the case
of the Alternative Merger, the Amended Registration Statement (or any amendment
thereof or supplement thereto), at the date it becomes effective and at the time
of the Alternative Company Special Meeting, will not contain any untrue
statement of a meratial fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading, provided, however,
that no representation is made by Parent, UPRR or Newco with respect to
statements made therein
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based on information supplied by the Company for inclusion in the Amended
Registration Statement. None of the information supplied by (x) Parent, UPRR or
Sub for inclusion or incorporation by reference in the Proxy
Statement/Prospectus or (y) Parent, UPRR or Newco for inclusion or incorporation
by reference in the New Proxy Statement/Prospectus contained, in the case of the
Merger, at the date mailed to stockholders and at the time of the Company
Special Meeting or will contain, in the case of the Alternative Merger, at the
date mailed to stockholders and at the time of the Alternative Company Special
Meeting, any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. Subject to the proviso set forth in the second preceding sentence,
the Registration Statement did, and the Amended Registration Statement will,
comply in all material respects with the provisions of the Securities Act and
Exchange Act, respectively, and the rules and regulations thereunder.
Section 4.9 Litigation; Compliance with Law.
(a) Except to the extent disclosed in the Parent SEC Documents filed prior
to the date of the Original Merger Agreement, as of the date of the Original
Merger Agreement, there was no suit, claim, action, proceeding or investigation
pending or, to the best knowledge of Parent, threatened against or affecting,
Parent or any of its Subsidiaries, which, individually or in the aggregate, was
reasonably likely to have a material adverse effect on Parent and its
Subsidiaries or would, or would be reasonably likely to, materially impair the
consummation of the Ancillary Agreements or the ability of Parent to consummate
the Offer, the Merger, the Alternative Merger or the other transactions
contemplated hereby or thereby.
(b) Parent and its Subsidiaries have complied with all laws, statutes,
regulations, rules, ordinances, and judgments, decrees, orders, writs and
injunctions, of any court or governmental entity relating to any of the property
owned, leased or used by them, or applicable to their business, including, but
not limited to, equal employment opportunity, discrimination, occupational
safety and health, environmental, interstate commerce and antitrust laws, except
where the failure to so comply would not have a material adverse effect on
Parent and its Subsidiaries.
Section 4.10 Employee Benefit Plan; ERISA. As of the date of the Original
Merger Agreement, except as would not have a material adverse effect on Parent
and its Subsidiaries, the material employee benefit plans, arrangements,
practices, contracts and agreements (including, without limitation, employment
agreements, change of control employment agreements and severance agreements,
incentive compensation, bonus, stock option, stock appreciation rights and stock
purchase plans, and including, but not limited to, plans described in section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
('ERISA')), maintained by Parent, any of its Subsidiaries or any trade or
business, whether or not incorporated, that together with Parent would be deemed
a 'controlled group' within the meaning of section 4001(a)(14) of ERISA, or with
respect to which the Parent or any of its subsidiaries has or may have a
liability (the 'Parent Plans') were in substantial compliance with applicable
laws, including ERISA and the Internal Revenue Code of 1986, as amended from
time to time.
Section 4.11 Taxes. As of the date of the Original Merger Agreement,
except as set forth in Section 4.11(a) of the Parent Disclosure Schedule (which
schedule was provided by Parent to Company within twenty (20) business days of
the date of the Original Merger Agreement) and except as such failure of any
representation or warranty made in this Section 4.11(a) to be true and correct
which would not have a material adverse effect on the Parent and its
Subsidiaries:
(a) Parent and its Subsidiaries had (i) duly filed (or there had
been filed on their behalf) with the appropriate governmental authorities
all Tax Returns required to be filed by them and such Tax Returns were
true, correct and complete, and (ii) duly paid in full or made provision in
accordance with GAAP (or there had been paid or provision had been made on
their behalf) for the payment of all Taxes for all periods ending through
the date of the Original Merger Agreement; and
(b) Parent and its Subsidiaries had complied in all respects with all
applicable laws, rules and regulations relating to the payment and
withholding of Taxes (including withholding of Taxes pursuant to Sections
1441 and 1442 of the Code or similar provisions under any foreign laws) and
had, within the time and the manner prescribed by law, withheld from
employee wages and paid over to the proper governmental authorities all
amounts required to be so withheld and paid over under applicable laws.
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Section 4.12 Environmental. As of the date of the Original Merger
Agreement, except as set forth in the Parent SEC Documents, to the best
knowledge of the Chief Executive Officer, Chief Financial Officer, the most
senior officer, and the most senior legal officer directly in charge of
environmental matters of Parent, there were no Environmental Liabilities and
Costs of Parent and its Subsidiaries that would have or are reasonably likely to
have a material adverse effect on Parent and its Subsidiaries.
Section 4.13 Financing. Either Parent, UPRR or Newco has, or will have
prior to the satisfaction of the conditions to the Merger or the Alternative
Merger, as the case may be, sufficient funds available to purchase the Shares
pursuant to the Offer and the Shares converted into the right to receive Cash
Consideration in the Merger or the Alternative Merger, as the case may be.
Section 4.14 Opinion of Financial Advisor. Parent has received an opinion
from CS First Boston Corporation ('CS First Boston') dated the date of the
Original Merger Agreement to the effect that, as of such date, the consideration
to be paid by Parent in the Offer and the Merger, taken together, was fair to
Parent from a financial point of view, a copy of which opinion has been
delivered to the Company.
ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company. The Company covenants and
agrees that, except (i) as expressly provided in this Agreement, or (ii) with
the prior written consent of Parent, after the date of the Original Merger
Agreement and prior to the Effective Time, or the Alternative Effective Time, as
the case may be:
(a) the business of the Company and its Subsidiaries shall be
conducted only in the ordinary course of business consistent with past
practice or pursuant to Customary Actions and, to the extent consistent
therewith, each of the Company and its Subsidiaries shall use its best
efforts to preserve its business organization intact and maintain its
existing relations with customers, suppliers, employees, creditors and
business partners;
(b) except as disclosed in Section 5.1(b) of the Disclosure Schedule,
the Company will not, directly or indirectly, split, combine or reclassify
the outstanding Company Common Stock, or any outstanding capital stock of
any of the Subsidiaries of the Company;
(c) neither the Company nor any of its Subsidiaries shall: (i) except
as disclosed in Section 5.1(c) of the Disclosure Schedule, amend its
articles of incorporation or by-laws or similar organizational documents;
(ii) declare, set aside or pay any dividend or other distribution payable
in cash, stock or property with respect to its capital stock other than
dividends paid by the Company's Subsidiaries to the Company or its
Subsidiaries; (iii) issue, sell, transfer, pledge, dispose of or encumber
any additional shares of, or securities convertible into or exchangeable
for, or options, warrants, calls, commitments or rights of any kind to
acquire, any shares of capital stock of any class of the Company or its
Subsidiaries, other than issuances pursuant to exercise of stock-based
awards outstanding on the date of the Original Merger Agreement as
disclosed in Section 3.2 or in Section 5.1(c) of the Disclosure Schedule;
(iv) transfer, lease, license, sell, mortgage, pledge, dispose of, or
encumber any material assets other than (a) in the ordinary course of
business consistent with past practice or (b) pursuant to existing
agreements disclosed in Section 5.1(c) of the Disclosure Schedule; or (v)
except as set forth on Section 5.1(c) of the Disclosure Schedule, redeem,
purchase or otherwise acquire directly or indirectly any of its capital
stock;
(d) neither the Company nor any of its Subsidiaries shall: (i) except
as otherwise provided in this Agreement, grant any increase in the
compensation payable or to become payable by the Company or any of its
Subsidiaries to any officer or employee (including through any new award
made under, or the exercise of any discretion under, the Southern Pacific
Rail Corporation Equity Incentive Plan; however, Chairman's Circle Awards
in accordance with past practice may be made payable in cash or, with the
written consent of Parent, in Shares), provided, however, the Company may
increase compensation (x) as required pursuant to collective bargaining
agreements and (y) for employees who have merit promotions and/or industry-
competitive salary adjustments in the ordinary course and consistent with
past practice; (ii) adopt any new,
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or amend or otherwise increase, or accelerate the payment or vesting of the
amounts payable or to become payable under any existing, bonus, incentive
compensation, deferred compensation, severance, profit sharing, stock
option, stock purchase, insurance, pension, retirement or other employee
benefit plan, agreement or arrangement; (iii) enter into any, or amend any
existing, employment or severance agreement with or, except in accordance
with the existing written policies of the Company, grant any severance or
termination pay to any officer, director or employee of the Company or any
of its Subsidiaries; or (iv) make any additional contributions to any
grantor trust created by the Company to provide funding for non-tax-
qualified employee benefits or compensation; or (v) provide any severance
program to any Subsidiary which does not have a severance program as of the
date of the Original Merger Agreement, other than a program which is
substantially identical to the Southern Pacific Lines Non-Agreement
Severance Benefit Plan as revised on August 25, 1993; provided, however,
the foregoing clauses (i) and (iii) shall not apply with respect to the
initial compensation package for any officer or employee hired after the
date of the Original Merger Agreement if such package is
industry-competitive and conforms to past practice;
(e) neither the Company nor any of its Subsidiaries shall modify,
amend or terminate any of the Company Agreements or waive, release or
assign any material rights or claims, except in the ordinary course of
business consistent with past practice and except for a Customary Action;
(f) neither the Company nor any of its Subsidiaries shall permit any
material insurance policy naming it as a beneficiary or a loss payable
payee to be cancelled or terminated without notice to Parent, except in the
ordinary course of business consistent with past practice and except for a
Customary Action;
(g) except as set forth in Section 5.1(g) of the Disclosure Schedule,
neither the Company nor any of its Subsidiaries shall: (i) incur or assume
any debt except for (A) borrowings under existing credit facilities in an
amount not to exceed $450 million and replacements therefor and
refinancings thereof; provided, however, that the Company and its
Subsidiaries shall not prepay or call any long-term borrowings; (B) capital
leases under the Company's existing program to finance the rebuilding of
freight cars and to finance equipment under existing purchase commitments;
and (C) borrowings in the ordinary course of business consistent with past
practice that do not exceed $12.5 million in the fiscal year ending
December 31, 1995, $25 million in the fiscal year ending December 31, 1996
and $12.5 million in the fiscal quarter ending March 31, 1997; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other
person, except in the ordinary course of business consistent with past
practice; (iii) make any loans, advances or capital contributions to, or
investments in, any other person (other than to wholly owned Subsidiaries
of the Company or customary loans or advances to employees in accordance
with past practice); or (iv) enter into any material commitment (including,
but not limited to, any capital expenditure or purchase of assets) other
than in the ordinary course of business consistent with past practice or,
in the case of capital expenditures, pursuant to Customary Actions;
(h) neither the Company nor any of its Subsidiaries shall change any
of the accounting principles used by it unless required by GAAP;
(i) neither the Company nor any of its Subsidiaries shall pay,
discharge or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction of any such claims, liabilities or
obligations, (x) reflected or reserved against in, or contemplated by, the
consolidated financial statements (or the notes thereto) of the Company and
its consolidated Subsidiaries, (y) incurred in the ordinary course of
business consistent with past practice or which are Customary Actions or
(z) which are legally required to be paid, discharged or satisfied;
(j) except as disclosed in Section 5.1(j) of the Disclosure Schedule,
neither the Company nor any of its Subsidiaries will adopt a plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other material reorganization of the
Company or any of its Subsidiaries or any agreement relating to a Takeover
Proposal (as defined in Section 5.6) (other than the Merger or the
Alternative Merger, as the case may be);
(k) neither the Company nor any of its Subsidiaries knowingly will
take, or agree to commit to take, any action that would make any
representation or warranty of the Company contained herein inaccurate in
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any respect at, or as of any time prior to, the Effective Time or the
Alternative Effective Time, as the case may be;
(l) other than between or among wholly owned Subsidiaries of the
Company which remain wholly owned or between the Company and its wholly
owned Subsidiaries which remain wholly owned, neither the Company nor any
of its Subsidiaries will engage in any transaction with, or enter into any
agreement, arrangement, or understanding with, directly or indirectly, any
of the Company's affiliates, including, without limitation, any
transactions, agreements, arrangements or understandings with any affiliate
or other Person covered under Item 404 of Regulation S-K under the
Securities Act that would be required to be disclosed under such Item 404,
other than pursuant to such agreements, arrangements, or understandings
existing on the date of the Original Merger Agreement (which are set forth
on Section 5.1(l) of the Disclosure Schedule) or as disclosed in writing to
Parent and Sub on the date of the Original Merger Agreement; provided,
however, that any such agreement, arrangement or understanding disclosed in
such writing shall be approved by at least two independent directors of the
Company, after having received an appraisal or valuation from an
independent appraiser or expert (reasonably acceptable to Parent) that the
terms are fair to the Company and are no less favorable to the Company than
could be obtained in an arms-length transaction with an unaffiliated party,
and, provided, further, that the Company provides Parent with all
information concerning any such agreement, arrangement or understanding
that Parent may reasonably request; and
(m) neither the Company nor any of its Subsidiaries will enter into an
agreement, contract, commitment or arrangement to do any of the foregoing,
or to authorize, recommend, propose or announce an intention to do any of
the foregoing.
For the purposes of this Agreement, a 'Customary Action' means an action
taken which occurs in the ordinary course of the relevant person's business and
where the taking of such action is generally recognized as being customary and
prudent for other major enterprises in such person's line of business.
Section 5.2 Interim Operations of Parent. Parent covenants and agrees
that, except (i) as expressly provided in this Agreement, or (ii) with the prior
written consent of the Company, after the date of the Original Merger Agreement
and prior to the Effective Time or the Alternative Effective Time, as the case
may be:
(a) Parent will not, directly or indirectly, split, combine or
reclassify the outstanding Parent Common Stock;
(b) Parent shall not: (i) amend its articles of incorporation; or
(ii) declare, set aside or pay any dividend or other distribution payable
in cash, stock or property with respect to its capital stock except for
quarterly cash dividends consistent in amount with past practice, provided
that Parent may increase its dividend rate consistent with the amount
reflected in Parent's long-range plan previously furnished to the Company,
and except for dividends paid by Parent's Subsidiaries to Parent or its
Subsidiaries;
(c) neither Parent nor any of its Subsidiaries shall change any of the
accounting principles used by it unless required by GAAP;
(d) Parent will not issue, sell, transfer, pledge or dispose of direct
or indirect beneficial ownership of the capital stock of UPRR or permit
UPRR to sell, transfer or dispose of any substantial portion of or all of
the assets of UPRR; and
(e) neither Parent nor any of its Subsidiaries will enter into an
agreement, contract, commitment or arrangement to do any of the foregoing,
or to authorize, recommend, propose or announce an intention to do any of
the foregoing.
Section 5.3 Access to Information. (a) To the extent permitted by
applicable law, the Company shall (and shall cause each of its Subsidiaries to)
afford to the officers, employees, accountants, counsel, financing sources and
other representatives of Parent, access, during normal business hours, during
the period prior to the Effective Time or the Alternative Effective Time, as the
case may be, to all of its and its Subsidiaries' properties, books, contracts,
commitments and records (including any Tax Returns or other Tax related
information pertaining to the Company and its Subsidiaries) and, during such
period, the Company shall (and shall cause each of its Subsidiaries to) furnish
promptly to Parent (a) a copy of each report, schedule, registration statement
and other
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document filed or received by it during such period pursuant to the requirements
of federal securities laws and (b) all other information concerning its
business, properties and personnel as Parent may reasonably request (including
any Tax Returns or other Tax related information pertaining to the Company and
its Subsidiaries); provided, however, that access to certain Company information
may require the entry of a protective order by the STB, after which date full
access will be granted to such information consistent with this paragraph and
subject to the terms of such order. Parent will hold any such information which
is nonpublic in confidence in accordance with the provisions of the existing
confidentiality agreement between the Company and Parent (the 'Confidentiality
Agreement').
(b) To the extent permitted by applicable law, Parent shall (and shall
cause each of its Subsidiaries to) afford to the officers, employees,
accountants, counsel, financing sources and other representatives of the
Company, access, during normal business hours, during the period prior to the
Effective Time or the Alternative Effective Time, as the case may be, to all of
its and its Subsidiaries' properties, books, contracts, commitments and records
(including any Tax Returns or other Tax related information pertaining to Parent
and its Subsidiaries) and, during such period, Parent shall (and shall cause
each of its Subsidiaries to) furnish promptly to the Company (a) a copy of each
report, schedule, registration statement and other document filed or received by
it during such period pursuant to the requirements of the federal securities
laws and (b) all other information as the Company may reasonably request
(including any Tax Returns or other Tax related information pertaining to Parent
and its Subsidiaries); provided, however, that access to certain Parent
information may require the entry of a protective order by the STB, after which
date full access will be granted to such information consistent with this
paragraph and subject to the terms of such order. The Company will hold any such
information which is nonpublic in confidence in accordance with the provisions
of the Confidentiality Agreement.
Section 5.4 Spinco Spin-off. The Company acknowledges that Spinco has
effected an initial public offering of no more than 17.25% (not including
employee shares or employee options) of, and Parent has announced its intention
to distribute to its stockholders, as a pro rata dividend, the remainder of, the
shares of capital stock of Spinco. Parent agrees that no dividend shall be
declared for any distribution of shares of capital stock of Spinco or for the
distribution to Parent's stockholders of any proceeds or any other disposition
of Spinco or the assets thereof, and no declaration of or record date for any
such distribution shall occur, until after the consummation of the Merger or the
Alternative Merger, as the case may be. If any tax opinion or IRS private letter
ruling is requested by Parent and issued in connection with such distribution of
shares of capital stock of Spinco, such tax opinion or IRS private letter ruling
shall provide that no income, gain or loss will be recognized by Parent
stockholders (including former Company stockholders who receive Parent stock in
the Merger or the Alternative Merger, as the case may be) upon the receipt of
Spinco stock.
Section 5.5 Consents and Approvals. (a) Parent and the Company shall, and
each shall cause each of its Subsidiaries to, subject to the following sentence,
(i) cooperate with one another to prepare and present to the STB, or any
successor applying substantially similar standards of review and procedures (a
'Similar Successor'), as soon as practicable all filings and other presentations
in connection with seeking any STB approval, exemption or other authorization
necessary to consummate the transactions contemplated by this Agreement
(including, without limitation, the matters contemplated by Section 5.3 hereof)
and the Ancillary Agreements, (ii) prosecute such filings and other
presentations with diligence, (iii) diligently oppose any objections to, appeals
from or petitions to reconsider or reopen any such STB approval by persons not
party to this Agreement, and (iv) take all such further action as in Parent's
and the Company's judgment reasonably may facilitate obtaining a final order or
orders of the STB approving such transactions consistent with this Agreement and
the Ancillary Agreements. Subject to consultation with the Company and after
giving good faith consideration to the views of the Company, Parent shall have
final authority over the development, presentation and conduct of the STB case,
including over decisions as to whether to agree to or acquiesce in conditions.
(b) Each of the Company, Parent, UPRR and Newco will take all reasonable
actions necessary to comply promptly with all legal requirements which may be
imposed on it with respect to this Agreement and the Ancillary Agreements and
the transactions contemplated hereby and thereby (which actions shall include,
without limitation, furnishing all information in connection with approvals of
or filings with any Governmental Entity, including, without limitation, any
schedule, or reports required to be filed with the SEC, (other than the STB
which is covered by subsection (a) of this Section 5.5)), and will promptly
cooperate with and furnish information to each other in connection with any such
requirements imposed upon any of them or any of their
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Subsidiaries in connection with this Agreement and the Ancillary Agreements and
the transactions contemplated hereby and thereby. Each of the Company, Parent,
UPRR and Newco will, and will cause its Subsidiaries to, take all reasonable
actions necessary to obtain any consent, authorization, order or approval of, or
any exemption by, any Governmental Entity or other public or private third party
(other than the STB which is covered by subsection (a) of this Section 5.5),
required to be obtained or made by Parent, UPRR, Newco, the Company or any of
their Subsidiaries in connection with the Offer, the Merger or the Alternative
Merger, as the case may be, or the taking of any action contemplated by this
Agreement or the Ancillary Agreements. Subject to consultation with the Company
and after giving good faith consideration to the views of the Company, Parent
shall have final authority over the development, presentation and conduct of any
case before a Governmental Entity in connection with this Agreement, the
Ancillary Agreements and the transactions contemplated hereby and thereby.
Section 5.6 Employee Benefits. (a) Parent agrees to cause Surviving
Corporation or the Alternative Surviving Corporation, as the case may be, and
its Subsidiaries to honor and assume, and Surviving Corporation, or the
Alternative Surviving Corporation, as the case may be, agrees to honor and
assume, the Employment Agreements, Contractual Supplemental Executive Retirement
Agreements and Stock Bonus Agreements, all as listed under those categories on
Section 3.9(a)(i) of the Disclosure Schedule, true and accurate copies of which
have previously been made available to Parent. In addition, in the case of the
Alternative Merger, UPRR agrees to guarantee the obligation of the Alternative
Surviving Corporation under the foregoing agreements. Notwithstanding the
foregoing, nothing in this Section 5.6 shall be deemed to require the employment
of any nonagreement employee to be continued for any particular period of time.
(b) Parent agrees to cause Surviving Corporation or the Alternative
Surviving Corporation, as the case may be, and its Subsidiaries to honor and
assume, and Surviving Corporation, or the Alternative Surviving Corporation, as
the case may be, agrees to honor and assume, the Company's employee benefit
plans and employee programs, arrangements and agreements listed on Section 3.9
of the Disclosure Schedule, true and accurate copies of which have previously
been made available to Parent. In addition, in the case of the Alternative
Merger, UPRR agrees to guarantee the obligation of the Alternative Surviving
Corporation under the foregoing plans, programs, arrangements and agreements and
under the Management Continuity Plan and the Enhanced Severance Program
described in Sections 5.6(d) and (e) hereof, respectively. Nothing in this
Agreement shall prohibit Parent, Surviving Corporation or the Alternative
Surviving Corporation, as the case may be, or its Subsidiaries from amending or
terminating any such plan, program, arrangement or agreement at any time in
accordance with applicable law (except as to benefits already vested
thereunder); provided that the severance plan for employees of the Company and
its Subsidiaries who are terminated other than for cause, as in effect on the
date of the Original Merger Agreement, shall be continued in effect for at least
one year following the Effective Time or the Alternative Effective Time, as the
case may be.
(c) Parent and Surviving Corporation or the Alternative Surviving
Corporation, as the case may be, agree to cause the Committee under the Southern
Pacific Rail Corporation Equity Incentive Plan (the 'EIP') to make adequate
provision for the adjustment of outstanding Awards under the Stock Bonus
Agreements issued under the EIP, in accordance with Section 5.2(b) of EIP.
(d) The Company and its Subsidiaries have established a 'Management
Continuity Plan (the 'MCP')' to provide certain payments described in Section
5.6(d) of the Disclosure Schedule (the 'MCP Awards') to certain nonagreement
employees of the Company or its Subsidiaries (whether employed at the date of
the Original Merger Agreement or hired subsequently). Promptly after the later
of (i) the establishment of the MCP or (ii) a nonagreement employee's date of
hire (or promotion, if applicable), the Company will communicate in writing to
each nonagreement employee who is eligible to participate in the MCP the amount
of his or her potential MCP Award and its conditions of payment. Certain
eligible nonagreement employees and their potential MCP Awards are listed in
Section 5.6(d) of the Disclosure Schedule; other eligible employees will be
designated at the later of the date the MCP is established or the respective
employee's date of hire (or promotion, if applicable). In order to become an
'MCP Participant', the eligible employee must waive, within 60 days of the later
of completion of purchase of Shares pursuant to the Offer or his or her date of
hire (or promotion, if applicable), any right to receive a payment from any
other incentive plan, incentive program or incentive arrangement maintained by
the Company (or its Subsidiaries) or the Surviving Corporation, or the
Alternative Surviving Corporation, as the case
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may be, (or its Subsidiaries), except for rights under the two Stock Bonus
Agreements listed in Section 3.9(a), Part I of the Stock Bonus Agreement
category, of the Disclosure Schedule.
Payment of each MCP Award shall be made in two parts, subject to the
respective MCP Participant's fulfilling certain conditions:
First Payment:
If the MCP Participant was employed by the Company or its Subsidiaries
on December 15, 1995 and had not, prior to December 15, 1995, received a
written notice from the employer that the MCP Participant is not fulfilling
his or her work performance obligations, then, if the MCP Participant was a
Group I Employee, sixty percent (60%) of the MCP Award was paid to such MCP
Participant prior to December 31, 1995, or, if the MCP Participant was not
a Group I Employee, fifty percent (50%) of the MCP Award was paid to such
MCP Participant prior to December 31, 1995.
Second Payment:
If the MCP Participant is employed by the Company or its Subsidiaries
at the Effective Time or the Alternative Effective Time, as the case may
be, and has not, prior to such time, received a written notice from the
employer that the MCP Participant is not fulfilling his or her work
performance obligations, the MCP Participant becomes entitled to the
remainder of his or her MCP Award (the 'Second Payment'), subject to the
further condition that the MCP Participant continue to be so employed for
at least sixty (60) days immediately following the Effective Time or the
Alternative Effective Time, as the case may be, unless such employment is
earlier terminated at the request of the Surviving Corporation, or the
Alternative Surviving Corporation, as the case may be, or its Subsidiaries.
The Second Payment shall be made at the earlier of the 60th day following
the Effective Time or the Alternative Effective Time, as the case may be,
or the day of such earlier termination.
(e) The Company and its Subsidiaries have established an enhanced severance
program (the 'Enhanced Severance Program') that will provide certain additional
severance amounts to terminated nonagreement employees who become entitled to
severance pursuant to (i) the Southern Pacific Line Non-Agreement Severance
Benefit Plan as revised August 25, 1993 (the 'Severance Plan'), (ii) the
substantially identical plans established for certain Subsidiaries which did not
have a severance plan on the date of the Original Merger Agreement (the 'New
Identical Plans'), or (iii) the individual agreements in existence on the date
of the Original Merger Agreement which provide severance benefits. The payments
to be made pursuant to this Section 5.6(e) are described in Section 5.6(e) of
the Disclosure Schedule. Parent agrees to cause the Surviving Corporation or the
Alternative Surviving Corporation, as the case may be, and its Subsidiaries to
maintain and honor, and the Surviving Corporation or the Alternative Surviving
Corporation, as the case may be, agrees that it will maintain and honor, the
Enhanced Severance Program, the Severance Plan and the New Identical Plans,
without any amendment, for one year after the Effective Time or the Alternative
Effective Time, as the case may be. Parent and Surviving Corporation, or the
Alternative Surviving Corporation, as the case may be, agree the Severance Plan
and New Identical Plans may be amended to provide that the following events
shall constitute a constructive termination thereunder which will entitle a
Group A or Group B Employee to severance thereunder: (i) reduction in base
salary, (ii) being required to work at a job which is not commensurate with the
individual's skills, or (iii) being required to accept a new principal place of
work which is at least fifty (50) miles farther from the individual's old
residence than the individual's old residence was from the individual's former
place of work. Parent and Surviving Corporation, or the Alternative Surviving
Corporation, as the case may be, agree the Severance Plan and New Identical
Plans may be amended to provide that the following event shall constitute a
constructive termination thereunder which will entitle a Group C Employee to
severance thereunder: reduction in base salary.
Section 5.7 No Solicitation. (a) The Company (and its Subsidiaries, and
affiliates over which it exercises control) will not, and the Company (and its
Subsidiaries, and affiliates over which it exercises control) will use their
best efforts to ensure that their respective officers, directors, employees,
investment bankers, attorneys, accountants and other agents do not, directly or
indirectly: (i) 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 (as defined below) of the Company or any
Subsidiary or an inquiry with respect thereto, or, (ii) in the
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event of an unsolicited Takeover Proposal for the Company or any Subsidiary or
affiliate of the Company, engage in negotiations or discussions with, or provide
any information or data to, any corporation, partnership, person or other entity
or group (other than Parent, any of its affiliates or representatives)
('Person') relating to any Takeover Proposal, except in the case of clause (ii)
above to the extent that the Company's Board of Directors determines, after
having received the oral or written opinion of outside legal counsel to the
Company, that the failure to engage in such negotiation or discussions or
provide such information would result in a breach of the Board of Directors'
fiduciary duties under applicable law. The Company shall notify Parent, UPRR and
Newco orally and in writing of any such offers, proposals, inquiries or Takeover
Proposals (including, without limitation, the material terms and conditions
thereof and the identity of the Person making it), within 24 hours of the
receipt thereof, shall thereafter inform Parent on a reasonable basis of the
status and content of any discussions or negotiations with such a third party,
including any material changes to the terms and conditions thereof, and shall
give Parent three days' advance notice of any information to be supplied to any
Person making such offer, proposal, inquiry or Takeover Proposal. The Company
shall, and shall cause its Subsidiaries and affiliates, and their respective
officers, directors, employees, investment bankers, attorneys, accountants and
other agents to, immediately cease and cause to be terminated all discussions
and negotiations that have taken place prior to the date of the Original Merger
Agreement, if any, with any parties conducted heretofore with respect to any
Takeover Proposal relating to the Company.
(b) As used in this Agreement, 'Takeover Proposal' when used in connection
with any Person shall mean any tender or exchange offer involving the capital
stock of such Person, any proposal for a merger, consolidation or other business
combination involving such Person or any Subsidiary of such Person, any proposal
or offer to acquire in any manner a substantial equity interest in, or a
substantial portion of the business or assets of, such Person or any Subsidiary
of such Person, any proposal or offer with respect to any recapitalization or
restructuring with respect to such Person or any Subsidiary of such Person or
any proposal or offer with respect to any other transaction similar to any of
the foregoing with respect to such Person or any Subsidiary of such Person other
than pursuant to the transactions to be effected pursuant to this Agreement.
Section 5.8 Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its best efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable, whether under applicable laws and
regulations or otherwise, or to remove any injunctions or other impediments or
delays, legal or otherwise, to consummate and make effective the Merger or the
Alternative Merger, as the case may be, and the other transactions contemplated
by this Agreement. In case at any time after the Effective Time or the
Alternative Effective Time, as the case may be, any further action is necessary
or desirable to carry out the purposes of this Agreement, the proper officers
and directors of the Company and Parent shall use their best efforts to take, or
cause to be taken, all such necessary actions.
Section 5.9 Publicity. So long as this Agreement is in effect, neither the
Company nor Parent nor affiliates which either of them control shall issue or
cause the publication of any press release or other public statement or
announcement with respect to this Agreement or the Ancillary Agreements or the
transactions contemplated hereby or thereby without the prior consultation of
the other party, except as may be required by law or by obligations pursuant to
any listing agreement with a national securities exchange.
Section 5.10 Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(a) the occurrence, or non-occurrence of any event the occurrence or
non-occurrence of which would cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at or prior to
the Effective Time or the Alternative Effective Time, as the case may be, and
(b) any material failure of the Company or Parent, as the case may be, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 5.10 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
Section 5.11 Directors' and Officers' Insurance and
Indemnification. Parent agrees that at all times after the Effective Time or
the Alternative Effective Time, as the case may be, it shall indemnify, or shall
cause the Surviving Corporation, or the Alternative Surviving Corporation, as
the case may be, and its Subsidiaries to indemnify, each person who is now, or
has been at any time prior to the date hereof, an employee, agent, director
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or officer of the Company or of any of the Company's Subsidiaries, successors
and assigns (individually an 'Indemnified Party' and collectively the
'Indemnified Parties'), to the same extent and in the same manner as is now
provided in the respective charters or by-laws of the Company and such
Subsidiaries or otherwise in effect on the date of the Original Merger
Agreement, with respect to any claim, liability, loss, damage, cost or expense
(whenever asserted or claimed) ('Indemnified Liability') based in whole or in
part on, or arising in whole or in part out of, any matter existing or occurring
at or prior to the Effective Time or the Alternative Effective Time, as the case
may be. Parent shall, and shall cause the Surviving Corporation, or the
Alternative Surviving Corporation, as the case may be, to, maintain in effect
for not less than six (6) years after consummation of the Merger or the
Alternative Merger, as the case may be, the current policies of directors' and
officers' liability insurance maintained by the Company and its Subsidiaries on
the date of the Original Merger Agreement (provided that Parent may substitute
therefor policies having at least the same coverage and containing terms and
conditions which are no less advantageous to the persons currently covered by
such policies as insured) with respect to matters existing or occurring at or
prior to the Effective Time or the Alternative Effective Time, as the case may
be; provided, however, that if the aggregate annual premiums for such insurance
at any time during such period shall exceed 200% of the per annum rate of
premium currently paid by the Company and its Subsidiaries for such insurance on
the date of this Agreement, then Parent shall cause the Surviving Corporation or
the Alternative Surviving Corporation, as the case may be, to, and the Surviving
Corporation or the Alternative Surviving Corporation, as the case may be, shall,
provide the maximum coverage that shall then be available at an annual premium
equal to 200% of such rate, and Parent, in addition to the indemnification
provided above in this Section 5.11, shall indemnify the Indemnified Parties for
the balance of such insurance coverage on the same terms and conditions as
though Parent were the insurer under those policies. Without limiting the
foregoing, in the event any Indemnified Party becomes involved in any capacity
in any action, proceeding or investigation based in whole or in part on, or
arising in whole or in part out of, any matter, including the transactions
contemplated hereby, existing or occurring at or prior to the Effective Time or
the Alternative Effective Time, as the case may be, then to the extent permitted
by law Parent shall, or shall cause the Surviving Corporation, or the
Alternative Surviving Corporation, as the case may be, to, periodically advance
to such Indemnified Party its legal and other expenses (including the cost of
any investigation and preparation incurred in connection therewith), subject to
the provision by such Indemnified Party of an undertaking to reimburse the
amounts so advanced in the event of a final determination by a court of
competent jurisdiction that such Indemnified Party is not entitled thereto.
Promptly after receipt by an Indemnified Party of notice of the assertion (an
'Assertion') of any claim or the commencement of any action against him in
respect to which indemnity or reimbursement may be sought against Parent, the
Company, the Surviving Corporation, or the Alternative Surviving Corporation, as
the case may be, or a Subsidiary of the Company or the Surviving Corporation, or
the Alternative Surviving Corporation, as the case may be, ('Indemnitors')
hereunder, such Indemnified Party shall notify any Indemnitor in writing of the
Assertion, but the failure to so notify any Indemnitor shall not relieve any
Indemnitor of any liability it may have to such Indemnified Party hereunder
except where such failure shall have materially and irreversibly prejudiced
Indemnitor in defending against such Assertion. Indemnitors shall be entitled to
participate in and, to the extent Indemnitors elect by written notice to such
Indemnified Party within 30 days after receipt by any Indemnitor of notice of
such Assertion, to assume the defense of such Assertion, at their own expense,
with counsel chosen by Indemnitors and reasonably satisfactory to such
Indemnified Party. Notwithstanding that Indemnitors shall have elected by such
written notice to assume the defense of any Assertion, such Indemnified Party
shall have the right to participate in the investigation and defense thereof,
with separate counsel chosen by such Indemnified party, but in such event the
fees and expenses of such counsel shall be paid by such Indemnified Party. No
Indemnified Party shall settle any Assertion without the prior written consent
of Parent, nor shall Parent settle any Assertion without either (i) the written
consent of all Indemnified Parties against whom such Assertion was made, or (ii)
obtaining a general release from the party making the Assertion for all
Indemnified Parties as a condition of such settlement. The provisions of this
Section 5.11 are intended for the benefit of, and shall be enforceable by, the
respective Indemnified Parties. In addition, in the case of the Alternative
Merger, UPRR agrees to guarantee the obligations of the Alternative Surviving
Corporation under this Section 5.11.
Section 5.12 Rule 145 Affiliates. At least 40 days prior to the Closing
Date, the Company shall deliver to Parent a letter identifying, to the best of
the Company's knowledge, all persons who were, at the time of the Company
Special Meeting or, in the event of an Alternative Company Special Meeting, who
are, at the time of
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the Alternative Company Special Meeting, deemed to be 'affiliates' of the
Company for purposes of Rule 145 under the Securities Act ('Company
Affiliates'). The Company shall use its best efforts to cause each Person who is
identified as a Company Affiliate to deliver to Parent at least 30 days prior to
the Closing Date an agreement substantially in the form of Exhibit I to this
Agreement.
Section 5.13 Cooperation. Parent and the Company shall together, or
pursuant to an allocation of responsibility to be agreed upon between them,
coordinate and cooperate (a) with respect to the timing of the Alternative
Company Special Meeting, if applicable, (b) in determining whether any action by
or in respect of, or filing with, any Governmental Entity (other than the STB
which is covered by Section 5.5(a) hereof) is required, or any actions,
consents, approvals or waivers are required to be obtained from parties to any
material contracts, in connection with the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements, and (c) in seeking
any such actions, consents, approvals or waivers or making any such filings,
furnishing information required in connection therewith and timely seeking to
obtain any such actions, consents, approvals or waivers. Subject to the terms
and conditions of this Agreement, Parent and the Company will each use its best
efforts to have the Amended Registration Statement declared effective under the
Securities Act as promptly as practicable after the Amended Registration
Statement is filed, and Parent and the Company shall, subject to applicable law,
confer on a regular and frequent basis with one or more representatives of one
another to report operational matters of significance to the Merger or the
Alternative Merger, as the case may be, and the general status of ongoing
operations insofar as relevant to the Merger or the Alternative Merger, as the
case may be, provided that the parties will not confer on any matter to the
extent inconsistent with law.
Section 5.14 Proxy Statement/Prospectus. (a) [Intentionally Omitted.]
(b) As soon as practicable following the execution of this Agreement,
Parent and the Company shall prepare and file with the SEC the New Proxy
Statement/Prospectus and each shall use its best efforts to have the New Proxy
Statement/Prospectus cleared by the SEC as promptly as practicable. As soon as
practicable following such clearance, Parent shall prepare and file with the SEC
the Amended Registration Statement, of which the New Proxy Statement/Prospectus
will form a part, and shall use its best efforts to have the Amended
Registration Statement declared effective by the SEC as promptly as practicable
thereafter. Parent and the Company shall cooperate with each other in the
preparation of the New Proxy Statement/Prospectus, and each will provide to the
other promptly copies of all correspondence between it or any of its
representatives and the SEC. Each of the Company and Parent shall furnish all
information concerning it required to be included in the Amended Registration
Statement and the New Proxy Statement/Prospectus, and as promptly as practicable
after the effectiveness of the Amended Registration Statement, the New Proxy
Statement/Prospectus will be mailed to the stockholders of the Company. No
amendment or supplement to the Amended Registration Statement or the New Proxy
Statement/Prospectus will be made without the approval of each of the Company
and Parent, which approval will not be unreasonably withheld or delayed. Each of
the Company and Parent will advise the other promptly after it receives notice
thereof, of the time when the Amended Registration Statement has become
effective or any amendment thereto or any supplement or amendment to the New
Proxy Statement/Prospectus has been filed, or the issuance of any stop order, or
the suspension of the qualification of Parent Common Stock to be issued in the
Merger or the Alternative Merger, as the case may be, for offering or sale in
any jurisdiction, or of any request by the SEC or the NYSE for amendment of the
Amended Registration Statement or the New Proxy Statement/Prospectus.
Section 5.15 Tax-Free Reorganization. The parties intend the transaction
to qualify as a reorganization under Sections 368(a)(1)(A) and 368(a)(2)(D) of
the Code; each party and its affiliates shall use all reasonable efforts to
cause the Merger or the Alternative Merger, as the case may be, to so qualify;
neither party nor any affiliate shall take any action that would cause the
Merger or the Alternative Merger, as the case may be, not to qualify as a
reorganization under those Sections; and the parties will take the position for
all purposes that the Merger or the Alternative Merger, as the case may be,
qualifies as a reorganization under those Sections.
Section 5.16 Restructuring. Parent has caused (a) Union Pacific Holdings,
Inc. ('Holdings') to distribute all of its assets and liabilities (by merger or
otherwise) to Parent in a complete liquidation under Section 332 of the Code and
(b) Sub to distribute all of its assets and liabilities (by merger or otherwise)
to UPRR in a complete liquidation under Section 332 of the Code.
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Section 5.17 HSR Act. (a) The parties hereto agree that the condition set
forth in Section 6.2(d) hereof was not intended by the parties to, and does not,
extend to any waiting period pursuant to the HSR Act applicable to the
acquisition by the Anschutz Holders of Parent Common Stock pursuant to the
Merger or the Alternative Merger, as the case may be; provided, however, that,
if all waiting periods applicable under the HSR Act to the acquisition by the
Anschutz Holders of Parent Common Stock pursuant to the Merger or the
Alternative Merger, as the case may be, shall not have expired or been
terminated at the time of the Merger or the Alternative Merger, as the case may
be, the Anschutz Holders will take appropriate action, and Parent and the
Company will cooperate with Anschutz Holders, to enable the Merger or the
Alternative Merger, as the case may be, to close without delay and without
violation of the HSR Act, including, for example, by entering into an
appropriate escrow agreement or other arrangement pending divestiture or
completion of HSR Act review.
(b) Each of the parties hereto agrees to use its best efforts to take, or
cause all things necessary, proper or advisable, whether under applicable laws
and regulations or otherwise, to cause all applicable waiting periods under the
HSR Act to expire or terminate with respect to the acquisition by the Anschutz
Holders of Parent Common Stock pursuant to the Merger or the Alternative Merger,
as the case may be; provided, however, that none of the parties hereto or their
Subsidiaries shall be required to take any action that would be materially
harmful to their businesses, assets, operations, financial condition or results
of operations.
Section 5.18 MoPac Business Combination. Parent shall not consummate any
business combination by and between Missouri Pacific Railroad Corporation, an
indirect wholly owned subsidiary of Parent, and UPRR prior to the Effective Time
or the Alternative Effective Time, as the case may be.
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to the Obligations of Each Party. The obligations
of the Company, on the one hand, and Parent, UPRR and, in the case of the
Alternative Merger, Newco, on the other hand, to consummate the Merger or the
Alternative Merger, as the case may be, are subject to the satisfaction (or, if
permissible, waiver by the party for whose benefit such conditions exist) of the
following conditions:
(a) In the case of the Alternative Merger, this Agreement, and in the
case of the Merger, the Original Merger Agreement, shall have been adopted by
the stockholders of the Company in accordance with the DGCL;
(b) if required by the rules of the New York Stock Exchange, Inc.
('NYSE') or by law, the issuance of Parent Common Stock in the Merger or
the Alternative Merger, as the case may be, shall have been approved by the
stockholders of Parent in accordance with the rules of the NYSE and
applicable law;
(c) no court, arbitrator or governmental body, agency or official
shall have issued any order, decree or ruling and there shall not be any
statute, rule or regulation, restraining, enjoining or prohibiting the
consummation of the Merger or the Alternative Merger, as the case may be,
or which would materially and adversely affect the long-term benefits
expected to be received by Parent from the transactions contemplated by
this Agreement; and
(d) the Registration Statement and, in the case of the Alternative
Merger, the Amended Registration Statement, shall have become effective
under the Securities Act and no stop order suspending effectiveness of the
Registration Statement, and, in the case of the Alternative Merger, the
Amended Registration Statement, shall have been issued and no proceeding
for that purpose shall have been initiated or threatened by the SEC.
Section 6.2 Conditions to the Obligations of Parent, UPRR and Newco. The
obligations of Parent, UPRR, and, in the case of the Alternative Merger, Newco,
to consummate the Merger or the Alternative Merger, as the case may be, are
subject to the satisfaction (or waiver by Parent) of the following further
conditions:
(a) the representations and warranties of the Company made in the
Original Merger Agreement and this Agreement shall have been true and
accurate both when made and (except for those representations and
warranties that address matters only as of a particular date or only with
respect to a specific period of time which need only be true and accurate
as of such date or with respect to such period) as of the Effective Time
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or the Alternative Effective Time, as the case may be, as if made at and as
of such time, except where the failure of such representations and
warranties to be so true and correct (without giving effect to any
limitation as to 'materiality' or 'material adverse effect' set forth
therein), would not have and is not reasonably likely to have a material
adverse effect on the Company and its Subsidiaries;
(b) the Company shall have performed in all material respects its
obligations hereunder required to be performed by it at or prior to the
Effective Time or the Alternative Effective Time, as the case may be;
(c) (i) the STB shall have issued a decision (which decision shall not
have been stayed or enjoined) that (A) constitutes a final order approving,
exempting or otherwise authorizing consummation of the Merger or the
Alternative Merger, as the case may be, and all other transactions
contemplated by this Agreement and the Ancillary Agreements (or
subsequently presented to the STB by agreement of Parent and the Company)
as may require such authorization and (B) does not (1) change or disapprove
of the Merger Consideration or other material provisions of Article II of
this Agreement or (2) impose on Parent, the Company or any of their
respective Subsidiaries any other terms or conditions (including, without
limitation, labor protective provisions but excluding conditions heretofore
imposed by the Interstate Commerce Commission (the predecessor of the STB)
in New York Dock Railway--Control--Brooklyn Eastern District, 360 I.C.C. 60
(1979)) that materially and adversely affect the long-term benefits
expected to be received by Parent from the transactions contemplated by
this Agreement; or (ii) no successor to the ICC (other than a Similar
Successor) shall have required any divestiture, hold separate, or other
restriction or action in connection with the expiration or termination of
any waiting period applicable to this Agreement and the transactions
contemplated hereby, or in connection with any other action by or in
respect of or filing with such successor, that would materially and
adversely affect the long-term benefits expected to be received by Parent
from the transactions contemplated by this Agreement;
(d) all actions by or in respect of or filings with any governmental
body, agency official, or authority required to permit the consummation of
the Merger or the Alternative Merger, as the case may be, (other than
approval of the STB, which is addressed in Section 6.2(c) hereof) shall
have been obtained but excluding any consent, approval, clearance or
confirmation the failure to obtain which would not have a material adverse
effect on Parent, the Company or, after the Effective Time or the
Alternative Effective Time, as the case may be, the Surviving Corporation,
or the Alternative Surviving Corporation, as the case may be;
(e) each of the Ancillary Agreements shall be valid, in full force and
effect and complied with in all material respects (including, without
limitation, the absence of any challenge, change or disapproval of the
Ancillary Agreements by the STB or any successor), except for such failure
to be in full force and effect and such non-compliance that does not
materially and adversely affect the benefits expected to be received by
Parent, UPRR and Newco under the Amended Anschutz Stockholder Agreement,
the Amended Parent/Company Registration Rights Agreement, this Agreement
and the Ancillary Agreements to the extent a party thereto;
(f) since the date of the Original Merger Agreement, there shall not
have occurred any event, change or effect having, or which would be
reasonably likely to have, individually or in the aggregate (after taking
into account the proceeds of insurance coverage), a material adverse effect
on the Company and its Subsidiaries, taken as a whole, as a result of or
arising out of 'force majeure' (where 'force majeure' shall mean any act of
God (including, without limitation, earthquake, hurricane, flood, tornado
or fire)), accident, damage to or destruction of facilities, properties or
assets (tangible or intangible), war, civil disturbance, national calamity
(excluding an economic crisis in and of itself) or acts of terrorism; and
(g) Parent shall have received an opinion of nationally recognized tax
counsel to Parent, to the effect that the Merger or the Alternative Merger,
as the case may be, (whether or not the Offer is integrated with the Merger
or the Alternative Merger, as the case may be, for federal income tax
purposes) will qualify as a reorganization within the meaning of Section
368 of the Code and in rendering such opinion tax counsel may rely upon
representations provided by the parties hereto as well as certain
stockholders of the parties.
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Section 6.3 Conditions to the Obligations of the Company. The obligations
of the Company to consummate the Merger or the Alternative Merger, as the case
may be, are subject to the satisfaction (or waiver by the Company) of the
following further conditions:
(a) the representations and warranties of Parent and UPRR, and in the
case of the Alternative Merger, Newco, made in the Original Merger
Agreement and in this Agreement (other than the representations and
warranties set forth in Sections 4.7, 4.10, 4.11 and 4.12) shall have been
true and accurate both when made and (except for those representations and
warranties that address matters only as of a particular date or only with
respect to a specific period of time which need only be true and accurate
as of such date or with respect to such period) as of the Effective Time or
the Alternative Effective Time, as the case may be, as if made at and as of
such time, except where the failure of such representations and warranties
to be so true and correct (without giving effect to any limitation as to
'materiality' or 'material adverse effect' set forth therein), would not
have and is not reasonably likely to have, individually or in the
aggregate, a material adverse effect on Parent and its Subsidiaries;
(b) each of Parent, Sub and UPRR, and in the case of the Alternative
Merger, Newco, shall have performed in all material respects all of the
respective obligations hereunder required to be performed by Parent, Sub
and UPRR and, in the case of the Alternative Merger, Newco, as the case may
be, at or prior to the Effective Time or the Alternative Effective Time, as
the case may be;
(c) the Parent Common Stock to be issued in the Merger, or the
Alternative Merger, as the case may be, shall have been approved for
listing on the New York Stock Exchange, subject to official notice of
issuance;
(d) the STB shall have issued a decision (which decision shall not
have been stayed or enjoined) that (i) constitutes a final order approving,
exempting or otherwise authorizing consummation of the Merger, or the
Alternative Merger, as the case may be, and all other transactions
contemplated by this Agreement or subsequently presented to the STB by
agreement of the Company and Parent, as may require such authorization and
(ii) does not change or disapprove of the Merger Consideration or other
material provisions of Article II of this Agreement;
(e) since the date of the Original Merger Agreement, there shall not
have occurred any event, change or effect having, or which would be
reasonably likely to have, individually or in the aggregate (after taking
into account the proceeds of insurance coverage), a material adverse effect
on Parent and its Subsidiaries, taken as a whole, as a result of or arising
out of 'force majeure' (where 'force majeure' shall mean any act of God
(including, without limitation, earthquake, hurricane, flood, tornado or
fire)), accident, damage to or destruction of facilities, properties or
assets (tangible or intangible), war, civil disturbance, national calamity
(excluding an economic crisis in and of itself) or acts of terrorism; and
(f) the Company shall have received an opinion of nationally
recognized tax counsel to the Company, to the effect that the Merger or the
Alternative Merger, as the case may be (whether or not the Offer is
integrated with the Merger or the Alternative Merger, as the case may be,
for federal income tax purposes), will qualify as a reorganization within
the meaning of Section 368(a) of the Code and in rendering such opinion tax
counsel may rely upon representations provided by the parties hereto as
well as certain stockholders of the parties.
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ARTICLE VII
TERMINATION
Section 7.1 Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the Merger and the
Alternative Merger, as the case may be, contemplated herein may be abandoned at
any time prior to the Effective Time or the Alternative Effective Time, as the
case may be, whether before or after stockholder approval thereof:
(a) By the mutual consent of the Board of Directors of Parent and the
Board of Directors of the Company.
(b) By either of the Board of Directors of the Company or the Board of
Directors of Parent:
(i) if the Merger or the Alternative Merger, as the case may be,
shall not have occurred on or prior to March 31, 1997; provided,
however, that the right to terminate this Agreement under this Section
7.1(b)(i) shall not be available to any party whose failure to fulfill
any obligation under this Agreement has been the cause of, or resulted
in, the failure of the Merger or the Alternative Merger, as the case may
be, to occur on or prior to such date;
(ii) if any Governmental Entity shall have issued an order, decree
or ruling or taken any other action (which order, decree, ruling or
other action the parties hereto shall use their best efforts to lift),
in each case permanently restraining, enjoining or otherwise prohibiting
the transactions contemplated by this Agreement and such order, decree,
ruling or other action shall have become final and non-appealable; or
(c) By the Board of Directors of the Company, if Parent or UPRR (x)
breaches or fails in any material respect to perform or comply with any of
its material covenants and agreements contained herein or (y) breaches its
representations and warranties in any material respect and such breach
would have or would be reasonably likely to have a material adverse effect
on Parent and its Subsidiaries, in each case such that the conditions set
forth in Section 6.1 or Section 6.3 would not be satisfied; provided,
however, that if any such breach is curable by the breaching party through
the exercise of the breaching party's best efforts and for so long as the
breaching party shall be so using its best efforts to cure such breach, the
Company may not terminate this Agreement pursuant to this Section 7.1(c);
(d) By the Board of Directors of Parent:
(i) if the Company (x) breaches or fails in any material respect to
perform or comply with any of its material covenants and agreements
contained herein or (y) breaches its representations and warranties in
any material respect and such breach would have or would be reasonably
likely to have a material adverse effect on the Company and its
Subsidiaries, in each case such that the conditions set forth in Section
6.1 or Section 6.2 would not be satisfied; provided, however, that if
any such breach is curable by the Company through the exercise of the
Company's best efforts and for so long as the Company shall be so using
its best efforts to cure such breach, Parent may not terminate this
Agreement pursuant to this Section 7.1(d)(i); or
(ii) if (A) prior to the Effective Time or the Alternative
Effective Time, as the case may be, the Board of Directors of the
Company shall have withdrawn, or modified or changed in a manner adverse
to Parent, UPRR or Newco its approval or recommendation of this
Agreement or the Offer or the Merger or Alternative Merger, as the case
may be, or shall have recommended a Takeover Proposal or other business
combination, or the Company shall have entered into an agreement in
principle (or similar agreement) or definitive agreement providing for a
Takeover Proposal or other business combination with a person or entity
other than Parent, UPRR, Newco or their Subsidiaries (or the Board of
Directors of the Company resolves to do any of the foregoing), or (B)
prior to the certification of the vote of the Company's shareholders to
approve the Alternative Merger at the Alternative Company Special
Meeting, it shall have been publicly disclosed or Parent or UPRR shall
have learned that (x) any person, entity or 'group' (as that term is
defined in Section 13(d)(3) of the Exchange Act) (an 'Acquiring
Person'), other than Parent or its Subsidiaries, or the Anschutz
Holders, shall have acquired beneficial ownership (determined pursuant
to Rule 13d-3 promulgated under the Exchange
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Act) of more than 25% 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
option, right or warrant, conditional or otherwise, to acquire
beneficial ownership of more than 25% of any class or series of capital
stock of the Company (including the Shares) other than as disclosed in a
Schedule 13D on file with the SEC on the date of the Original Merger
Agreement; or (y) any such person, entity or 'group' (as that term is
defined in Section 13(d)(3) of the Exchange Act), other than Parent or
its Subsidiaries, or the Anschutz Holders, which, prior to the date of
the Original Merger Agreement, had filed a Schedule 13D with the SEC,
shall have acquired or proposed to acquire beneficial ownership
(determined pursuant to Rule 13d-3 promulgated under the Exchange Act)
of additional shares 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, constituting 1% or more of any such
class or series, or shall have been granted any option, right or
warrant, conditional or otherwise, to acquire beneficial ownership of
additional shares of any class or series of capital stock of the Company
(including the Shares) constituting 1% or more of any such class or
series.
Section 7.2 Effect of Termination. In the event of the termination of this
Agreement as provided in Section 7.1, written notice thereof shall forthwith be
given to the other party or parties specifying the provision hereof pursuant to
which such termination is made, and this Agreement shall forthwith become null
and void, and there shall be no liability on the part of the Parent, UPRR, Newco
or the Company except (A) for fraud or for material breach of this Agreement and
(B) as set forth in Sections 8.1 and 8.2 hereof.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Fees and Expenses. The expenses incurred in connection with
printing the New Proxy Statement/Prospectus and the Amended Registration
Statement, as well as the filing fees relating thereto shall be paid by Parent.
All legal fees and disbursements incurred in connection with this Agreement and
the Ancillary Agreements and the consummation of the transactions contemplated
hereby and thereby shall be paid by the party incurring such expenses.
Section 8.2 Finders' Fees. (a) Except for Morgan Stanley, a copy of whose
engagement agreement has been or will be provided to Parent and whose fees will
be paid by the Company, there is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act on behalf of the
Company or any of its Subsidiaries who might be entitled to any fee or
commission from the Company or any of its Subsidiaries upon consummation of the
transactions contemplated by this Agreement.
(b) Except for CS First Boston, a copy of whose engagement agreement has
been or will be provided to the Company and whose fees will be paid by Parent,
there is no investment banker, broker, finder or other intermediary which has
been retained by or is authorized to act on behalf of Parent or any of its
Subsidiaries who might be entitled to any fee or commission from Parent or any
of its Subsidiaries upon consummation of the transactions contemplated by this
Agreement.
Section 8.3 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified and supplemented in any and all respects,
whether before or after any vote of the stockholders of the Company contemplated
hereby, by written agreement of the parties hereto, pursuant to action taken by
their respective Boards of Directors, at any time prior to the Closing Date with
respect to any of the terms contained herein; provided, however, that after the
approval of this Agreement by the stockholders of the Company, no such
amendment, modification or supplement shall reduce or change the consideration
to be received by the Company's stockholders in the Merger or the Alternative
Merger, as the case may be.
Section 8.4 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any schedule, instrument
or other document delivered pursuant to this Agreement shall survive the
Effective Time or the Alternative Effective Time, as the case may be.
Section 8.5 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed) or sent by an overnight courier service,
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such as FedEx, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Parent, UPRR or Newco, to:
Union Pacific Corporation
Martin Tower
Eighth & Eaton Avenues
Bethlehem, Pennsylvania 18018
Attention: Carl W. von Bernuth, Esq.
Telephone No.: (610) 861-3200
Telecopy No.: (610) 861-3111
with a copy to:
Paul T. Schnell, Esq.
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Telephone No.: (212) 735-3000
Telecopy No.: (212) 735-2001
and
(b) if to the Company, to:
Southern Pacific Rail Corporation
Southern Pacific Building
One Market Plaza
San Francisco, California 94105
Attention: Cannon Y. Harvey, Esq.
Telephone No.: (415) 541-1000
Telecopy No.: (415) 541-1881
with a copy to:
Joseph W. Morrisey, Jr., Esq.
Holme Roberts & Owen LLC
1700 Lincoln
Suite 4100
Denver, Colorado 80203
Telephone No.: (303) 861-7000
Telecopy No.: (303) 866-0200
and
Peter D. Lyons, Esq.
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telephone No.: (212) 848-4000
Telecopy No.: (212) 848-7179
Section 8.6 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. Whenever the words 'include', 'includes' or 'including' are
used in this Agreement they shall be deemed to be followed by the words 'without
limitation'. The phrase 'made available' in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available. The phrases 'the date of this
Agreement', 'the date hereof', and terms of similar import, unless the context
otherwise requires, shall be
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<PAGE>
deemed to refer to July 12, 1996. As used in this Agreement, the term
'affiliate(s)' shall have the meaning set forth in Rule l2b-2 of the Exchange
Act.
Section 8.7 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
Section 8.8 Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership. This Agreement, the Ancillary Agreements and the Confidentiality
Agreement (including the exhibits hereto and the documents and the instruments
referred to herein and therein): (a) constitute the entire agreement and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof, and (b) except as
provided in Section 5.6 with respect to the obligations of the Company
thereunder and Section 5.11, are not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
Section 8.9 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void, unenforceable or against its regulatory policy,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
Section 8.10 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to the remedy of specific performance of the terms hereof, in addition
to any other remedy at law or equity.
Section 8.11 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware without giving effect to
the principles of conflicts of law thereof.
Section 8.12 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
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<PAGE>
IN WITNESS WHEREOF, Parent, UPRR, Holding, Mergerco and the Company have
caused this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
UNION PACIFIC CORPORATION
By: /s/ CARL W. VON BERNUTH
--------------------------------
Name: Carl W. von Bernuth
Title: Senior Vice President--Law
UNION PACIFIC RAILROAD COMPANY
By: /s/ CARL W. VON BERNUTH
-------------------------------
Name: Carl W. von Bernuth
Title: Vice President and
General Counsel
SOUTHERN PACIFIC RAIL CORPORATION
By: /s/ JERRY DAVIS
-------------------------------
Name: Jerry Davis
Title: President and Chief
Executive Officer
UP HOLDING COMPANY, INC.
By: /s/ CARL W. VON BERNUTH
-------------------------------
Name: Carl W. von Bernuth
Title: Vice President
UNION PACIFIC MERGER CO.
By: /s/ CARL W. VON BERNUTH
-------------------------------
Name: Carl W. von Bernuth
Title: Vice President
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<PAGE>
ANNEX C
August 3, 1995
Board of Directors
Southern Pacific Rail Corporation
Southern Pacific Building
One Market Plaza
San Francisco, CA 94105
Gentlemen:
We understand that Southern Pacific Rail Corporation (the 'Company'), Union
Pacific Corporation (the 'Buyer'), Union Pacific Railroad Company, an indirect
wholly owned subsidiary of the Buyer, and UP Acquisition Corporation, also an
indirect wholly owned subsidiary of the Buyer ('Acquisition Sub') have entered
into an Agreement and Plan of Merger, dated as of August 3, 1995 (the 'Merger
Agreement'), which provides, among other things, for (i) the commencement by
Acquisition Sub of a tender offer (the 'Offer') for up to 39,034,471 shares of
the issued and outstanding shares of common stock, par value $.001 per share
(the 'Company Common Stock'), of the Company for $25.00 per share net to the
seller in cash (the 'Offer Consideration'), and (ii) upon receipt of certain
U.S. regulatory approvals, the subsequent merger (the 'Merger') of the Company
with and into Acquisition Sub. Pursuant to the Merger, the Company will become a
wholly owned subsidiary of the Buyer and each outstanding share of the Company
Common Stock, other than shares held in treasury or held by the Buyer and its
affiliates, will be converted into the right to receive, at the holder's
election, either (i) $25.00 in cash (the 'Cash Consideration') or (ii) 0.4065
shares of common stock, par value $2.50 per share (the 'Buyer Common Stock'), of
the Buyer (the 'Stock Consideration,' and together with the Cash Consideration
and the Offer Consideration, the 'Consideration'), subject to adjustment in
either case in certain circumstances. The terms and conditions of the Offer and
the Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the Consideration to be
received by the holders of shares of Company Common Stock pursuant to the Offer
and the Merger, taken together, is fair from a financial point of view to such
holders.
For purposes of the opinion set forth herein, we have:
(i) analyzed certain publicly available financial statements and
other information of the Company and the Buyer, respectively;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning the Company and the
Buyer prepared by the managements of the Company and the
Buyer, respectively;
(iii) reviewed certain financial projections for the Buyer prepared
by the management of the Buyer;
(iv) reviewed certain financial projections for the Company,
including estimates of certain potential benefits of the
proposed business combination, prepared by the management of
the Company;
(v) discussed on a limited basis the past and current operations
and financial condition and the prospects of the Company and
the Buyer with senior executives of the Company and the Buyer,
respectively;
(vi) reviewed the reported prices and trading activity for the
Company Common Stock and the Buyer Common Stock;
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(vii) compared the financial performance of the Company and the
prices and trading activity of the Company Common Stock with
that of certain other comparable publicly-traded companies and
their securities;
(viii) reviewed the financial terms, to the extent publicly
available, of certain comparable acquisition transactions;
(ix) discussed certain issues relating to the proposed spin-off of
the Buyer's oil and gas exploration and production operations
with senior executives of the Buyer;
(x) participated in discussions among representatives of the
Company, the Buyer and their financial and legal advisors;
(xi) reviewed the Merger Agreement and certain related documents;
and
(xii) performed such other analyses as we have deemed appropriate.
We have assumed and relied upon, without independent verification, the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial projections, including the estimates
of the Company of certain potential benefits of the proposed business
combination, we have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the future
financial performance of the Company and the Buyer, respectively. We have not
made any independent valuation or appraisal of the assets or liabilities of the
Company or the Buyer, nor have we been furnished with any such appraisals. Our
opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof.
In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any party with respect to the acquisition of the Company
or any of its assets.
We express no opinion and make no recommendations as to whether the holders
of Company Common Stock should elect to receive either the Offer Consideration,
the Cash Consideration or the Stock Consideration.
We have acted as financial advisor to the Board of Directors of the Company
in connection with this transaction and will receive a fee for our services. In
the past, Morgan Stanley & Co. Incorporated ('Morgan Stanley') and its
affiliates have provided financial advisory and financing services for the
Company and the Buyer and have received fees for the rendering of these
services. In addition, the Morgan Stanley Leveraged Equity Fund II, L.P., an
affiliate of Morgan Stanley, owns approximately 8.5% of the outstanding shares
of Company Common Stock as of the date hereof and Mr. Frank V. Sica, a Managing
Director of Morgan Stanley, is a member of the Board of Directors of the
Company.
It is understood that this letter is for the information of the Board of
Directors of the Company and may not be used for any other purpose without our
prior written consent. We consent, however, to the inclusion of this opinion as
an exhibit to any Schedule 14D-9, proxy or registration statement distributed in
connection with the Offer or the Merger.
Based on the foregoing, we are of the opinion on the date hereof that the
Consideration to be received by the holders of shares of Company Common Stock
pursuant to the Offer and the Merger, taken together, is fair from a financial
point of view to such holders.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ MAHMOUD A. MAMDANI
-------------------------------
MAHMOUD A. MAMDANI
Principal
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<PAGE>
ANNEX D
AMENDED AND RESTATED ANSCHUTZ SHAREHOLDERS AGREEMENT
AMENDED AND RESTATED AGREEMENT, dated as of July 12, 1996 (this
'Agreement'), by and among Union Pacific Corporation, a Utah corporation
('Parent'), Union Pacific Railroad Company, a Utah corporation and a wholly
owned subsidiary of Parent ('Purchaser'), The Anschutz Corporation, a Kansas
corporation ('TAC'), Anschutz Foundation, a Colorado not-for-profit corporation
(the 'Foundation'), and Mr. Philip F. Anschutz ('Mr. Anschutz' and, collectively
with TAC and the Foundation, the 'Shareholders').
W I T N E S S E T H :
WHEREAS, Parent, UP Acquisition Corporation, a former Delaware corporation
and an indirect wholly owned subsidiary of Parent ('Sub'), TAC, the Foundation
and Mr. Anschutz entered into an agreement dated as of August 3, 1995 as amended
(the 'Original Anschutz Agreement'), and the surviving parties to the Original
Anschutz Agreement wish to amend and restate such Original Anschutz Agreement in
its entirety;
WHEREAS, Sub has merged with and into UPRR, with UPRR as the surviving
corporation (the 'Sub Merger') and, accordingly, the parties to the Original
Anschutz Agreement wish to amend and restate the Original Anschutz Agreement in
its entirety to reflect the fact that the Sub Merger has occurred and to
eliminate Sub as a party thereto;
WHEREAS, simultaneously with the execution of the Original Anschutz
Agreement, Parent, Purchaser, Sub, and Southern Pacific Rail Corporation, a
Delaware corporation (the 'Company'), entered into an Agreement and Plan of
Merger (the 'Original Merger Agreement'), pursuant to which (i) Sub purchased
39,034,471 shares of common stock, $.001 par value, of the Company (the 'Company
Common Stock') pursuant to a cash tender offer (the 'Offer') and (ii) the
Company would be merged with and into Purchaser with Purchaser as the surviving
corporation (the 'Merger');
WHEREAS, Parent, the Purchaser, UP Holding Company, Inc., a Utah
corporation ('Holding'), Union Pacific Merger Co., a Delaware corporation
('Mergerco'), and the Company entered into an Amended and Restated Agreement and
Plan of Merger, dated as of July 12, 1996 (the 'Amended Merger Agreement'), in
order to permit an alternative structure for the acquisition of the Company by
Parent pursuant to which the Company would merge with and into either Holding or
Mergerco at the election of Parent, with Holding or Mergerco, as the case may
be, as the surviving corporation (the 'Alternative Merger');
WHEREAS, as of the date of the Original Anschutz Agreement, the
Shareholders were the record and beneficial owner of, and had the sole right to
vote and dispose of, an aggregate of 49,643,008 shares (the 'Shares') of Company
Common Stock; and
WHEREAS, as an inducement and a condition to its entering into the Amended
Merger Agreement and the Ancillary Agreements (as defined in the Amended Merger
Agreement), and incurring the obligations set forth therein, including the Offer
and the Merger and the Alternative Merger, as the case may be, Parent has
required that Shareholders agree, and Shareholders have agreed, to enter into
this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual premises,
representations, warranties, covenants and agreements contained herein and in
the Amended Merger Agreement and the Ancillary Agreements, the parties hereto,
intending to be legally bound hereby, agree as follows:
1. Certain Definitions. Capitalized terms used and not defined herein
have the respective meanings ascribed to them in the Amended Merger Agreement.
In addition, for purposes of this Agreement:
(a) 'Affiliate' shall mean, with respect to any specified Person, any
Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the Person
specified. For purposes of this Agreement, with respect to any Shareholder,
'Affiliate' shall not include the Company or Parent and the Persons that
directly, or indirectly through one or more intermediaries, are controlled
by the Company or Parent, as the case may be.
(b) 'Beneficially Own' or 'Beneficial Ownership' with respect to any
securities shall mean having 'beneficial ownership' of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the 'Exchange Act')), including pursuant to any
agreement, arrangement or understanding, whether or not in writing. Without
duplicative counting of the same
D-1
<PAGE>
securities by the same holder, securities Beneficially Owned by a Person
shall include securities Beneficially Owned by all Affiliates of such
Person and all other Persons with whom such Person would constitute a
'group' within the meaning of Section 13(d) of the Exchange Act and the
rules promulgated thereunder.
(c) 'Company Voting Securities' shall mean any securities of the
Company entitled, or which may be entitled, to vote generally in the
election of directors and any securities convertible into or exercisable or
exchangeable for such securities (whether or not subject to contingencies
with respect to any matter or proposal submitted for the vote or consent of
shareholders of the Company). For purposes of determining the percentage of
Company Voting Securities Beneficially Owned by a Person, securities
Beneficially Owned by any such Person that are convertible, exercisable or
exchangeable for securities entitled to vote shall be deemed to be
converted, exercised or exchanged and shall represent the number of
securities of the Company entitled to vote into which such convertible,
exercisable or exchangeable securities (disregarding for such purposes any
restrictions on conversion, exercise or exchange) are then convertible,
exchangeable or exercisable.
(d) 'Current Market Price' shall mean, as applied to any class of
stock on any date, the average of the daily 'Closing Prices' (as
hereinafter defined) for the 20 consecutive trading days immediately prior
to the date in question. The term 'Closing Price' on any day shall mean the
last sales price, regular way, per share of such stock on such day, or if
no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted
to trading on the New York Stock Exchange or, if shares of such stock are
not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities exchange
on which the shares of such stock are listed or admitted to trading, or, if
the shares of such stock are not listed or admitted to trading on any
national securities exchange on the NASDAQ National Market System or, if
the shares of such stock are not quoted on the NASDAQ National Market
System, the average of the high bid and low asked prices in the
over-the-counter market as reported by the National Association of
Securities Dealers Inc.'s Automated Quotation System.
(e) 'including' shall mean including without limitation.
(f) 'Parent Voting Securities' shall mean any securities of Parent
entitled, or which may be entitled, to vote generally in the election of
directors and any securities convertible into or exercisable or
exchangeable for such securities (whether or not subject to contingencies
with respect to any matter or proposal submitted for the vote or consent of
shareholders of Parent). For purposes of this Agreement, Parent Voting
Securities shall not include Company Voting Securities. For purposes of
determining the percentage of Parent Voting Securities Beneficially Owned
by a Person, securities Beneficially Owned by any such Person that are
convertible, exercisable or exchangeable for securities entitled to vote
shall be deemed to be converted, exercised or exchanged and shall represent
the number of securities of Parent entitled to vote into which such
convertible, exercisable or exchangeable securities (disregarding for such
purposes any restrictions on conversion, exercise or exchange) are then
convertible, exchangeable or exercisable.
(g) 'Person' shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
(h) 'Transfer' shall mean, with respect to a security, the sale,
transfer, pledge, hypothecation, encumbrance, assignment or disposition of
such security or the Beneficial Ownership thereof, the offer to make such a
sale, transfer or other disposition, and each option, agreement,
arrangement or understanding, whether or not in writing, to effect any of
the foregoing. As a verb, 'Transfer' shall have a correlative meaning.
2. Tender of Shares; Pledge. (a) [Intentionally omitted.]
(b) TAC has advised Parent that shares of Company Common Stock Beneficially
Owned by TAC are or may be pledged to Bank of America National Trust and Savings
Association or Citibank, N.A., respectively (collectively, the 'Banks') pursuant
to pledge agreements (substantially in the forms reviewed by Parent,
collectively, the 'Existing Pledge Agreements') to secure indebtedness borrowed
from the Banks. TAC represents and warrants that the Existing Pledge Agreements
do not or, before indebtedness borrowed therefrom is secured by any such shares,
will not prevent, limit or interfere with TAC's compliance with, or performance
of
D-2
<PAGE>
its obligations under, this Agreement, absent a default under the applicable
Existing Pledge Agreements. TAC represents and warrants that it is not in
default under the Existing Pledge Agreements. TAC has heretofore delivered to
Parent a letter from Bank of America National Trust and Savings Association
acknowledging the Original Anschutz Agreement and agreeing in effect that,
notwithstanding any default under the Existing Pledge Agreement, TAC (and Parent
with respect to the proxy described in Section 3(b) hereof) shall have the right
to exercise all voting rights with respect to the Company Common Stock pledged
thereunder as set forth in Section 3 of the Original Anschutz Agreement and the
proxy described in Section 3(b) hereof. TAC shall deliver to Parent a similar
letter from Citibank, N.A. before shares of Company Common Stock shall be
pledged under the applicable Existing Pledge Agreement to secure any
indebtedness. Shareholders may hereafter effect one or more pledges of Company
Voting Securities or Parent Voting Securities to be received pursuant to the
Merger or the Alternative Merger, as the case may be, or otherwise, or grants of
security interests therein, to one or more financial institutions (other than
the Banks) that are not Affiliates of any Shareholder (collectively, 'Other
Financial Institutions') as security for the payment of bona fide indebtedness
owed by one or more of the Shareholders or their Affiliates to such Other
Financial Institutions. Except as set forth in the proviso below, neither the
Bank nor any Other Financial Institution which after the date of the Original
Anschutz Agreement becomes a pledgee of Company Voting Securities or Parent
Voting Securities shall incur any obligations under the Original Anschutz
Agreement or this Agreement with respect to such Company Voting Securities or
such Parent Voting Securities, as the case may be, or shall be restricted from
exercising any right of enforcement or foreclosure with respect to any related
security interest or lien; provided, however, that it shall be a condition to
any such pledge to any Other Financial Institution that, in the case of Company
Voting Securities, the pledgee shall agree that TAC (and Parent with respect to
the proxy described in Section 3(b) hereof) shall have the right to exercise all
voting rights with respect to the Company Voting Securities pledged thereunder
as set forth in Section 3 of this Agreement and the proxy described in Section
3(b) hereof and, in the case of Company Voting Securities or Parent Voting
Securities, no such pledge shall prevent, limit or interfere with Shareholders'
compliance with, or performance of their obligations under, this Agreement,
absent a default under such pledge agreement. The obligations of the Banks and
the Other Financial Institutions under or with respect to Section 3 hereof and
such proxy shall terminate on the earlier of (x) the consummation of the Merger
or the Alternative Merger and (y) the termination of the Amended Merger
Agreement in accordance with Article VII thereof.
3. Voting of Company Common Stock; Irrevocable Proxy.
(a) Shareholders hereby agree that during the period commencing on the date
of the Original Anschutz Agreement and continuing until the earlier of (x) the
consummation of the Merger or the Alternative Merger, as the case may be, and
(y) six months following the termination of the Amended Merger Agreement in
accordance with Section 7.1(d)(ii) thereof, and (z) upon the termination of the
Amended Merger Agreement in accordance with any provision of Section 7.1 other
than Section 7.1(d)(ii) (such period being referred to as the 'Voting Period'),
at any meeting (whether annual or special, and whether or not an adjourned or
postponed meeting) of the Company's shareholders, however called, or in
connection with any written consent of the Company's shareholders, subject to
the absence of a preliminary or permanent injunction or other final order by any
United States federal court or state court barring such action, Shareholders
shall vote (or cause to be voted) the Shares and all other Company Voting
Securities that they Beneficially Own, whether owned on the date of the Original
Anschutz Agreement or thereafter acquired: (i) in favor of the Merger or the
Alternative Merger, as the case may be, the execution and delivery by the
Company of the Original Merger Agreement, the Amended Merger Agreement and the
approval and adoption of the Original Merger Agreement, the Amended Merger
Agreement and the terms thereof and each of the other actions contemplated by
the Original Merger Agreement, the Amended Merger Agreement, this Agreement and
the Ancillary Agreements and any actions required in furtherance thereof and
hereof; (ii) against any action or agreement that would (A) result in a breach
of any covenant, representation or warranty or any other obligation or agreement
of the Company under the Original Merger Agreement, the Amended Merger Agreement
or any of the Ancillary Agreements to which it is a party or of Shareholders
under this Agreement or (B) impede, interfere with, delay, postpone, or
adversely affect the Merger or the Alternative Merger, as the case may be, or
the transactions contemplated by the Merger Agreement, the Amended Merger
Agreement, this Agreement and the Ancillary Agreements; and (iii) except as
otherwise agreed to in writing in advance by Parent, against the following
actions (other than the Merger or the Alternative Merger, as the case may be,
and the transactions contemplated by the Original Merger Agreement and the
Amended Merger Agreement, this Agreement and the Ancillary Agreements): (A) any
extraordinary
D-3
<PAGE>
corporate transaction, such as a merger, consolidation or other business
combination involving the Company or any of its subsidiaries; (B) any sale,
lease or transfer of a substantial portion of the assets or business of the
Company or its subsidiaries, or reorganization, restructuring, recapitalization,
special dividend, dissolution or liquidation of the Company or its subsidiaries;
or (C) any change in the present capitalization of the Company including any
proposal to sell a substantial equity interest in the Company or any of its
subsidiaries. Shareholders shall not enter into any agreement, arrangement or
understanding with any Person the effect of which would be inconsistent or
violative of the provisions and agreements contained in this Section 3.
(b) At the request of Parent, each Shareholder, in furtherance of the
transactions contemplated hereby and by the Amended Merger Agreement and the
Ancillary Agreements, and in order to secure the performance by Shareholders of
their duties under this Agreement, shall promptly execute and deliver to Parent
an irrevocable proxy, in the form of Exhibit A hereto. Shareholders acknowledge
and agree that the proxy executed and delivered pursuant to this Section 3(b)
shall be coupled with an interest, shall constitute, among other things, an
inducement for Parent to enter into this Agreement, the Amended Merger Agreement
and the Ancillary Agreements to which it is a party, shall be irrevocable during
the Voting Period and shall not be terminated by operation of law or upon the
occurrence of any event.
4. Restrictions on Transfer, Proxies; No Solicitation. (a) Shareholders
shall not, during the Voting Period, directly or indirectly: (i) except as
provided in Section 2 hereof, Transfer (including but not limited to the
Transfer of any securities of an Affiliate which is the record holder or
Beneficial Owner of Company Voting Securities if, as the result of such
Transfer, such Person would cease to be an Affiliate of a Shareholder) to any
Person any or all of the Company Voting Securities Beneficially Owned by
Shareholders, provided that a Shareholder may Transfer Company Voting Securities
to any other Shareholder, (ii) except as provided in Sections 2(b) and 3(b) of
this Agreement, grant any proxies or powers of attorney, deposit any such
Company Voting Securities into a voting trust or enter into a voting agreement,
understanding or arrangement with respect to the Company Voting Securities; or
(iii) take any action that would make any representation or warranty of
Shareholders contained herein untrue or incorrect or would result in a breach by
Shareholders of their obligations under this Agreement or a breach by the
Company of its obligations under the Amended Merger Agreement or any of the
Ancillary Agreements to which it is a party. Notwithstanding any provisions of
this Agreement to the contrary, Shareholders may Transfer in the aggregate,
following the date that the Offer was consummated and prior to the Effective
Time or the Alternative Effective Time, as the case may be, a number of Shares
in the aggregate not greater than 10% of the Shares Beneficially Owned by
Shareholders immediately following the date that the Offer was consummated; and
provided, further, that any such Shares which are so Transferred by TAC, or
Transferred by the Foundation in an amount in excess of 1,558,254 Shares, prior
to the Company Special Meeting, shall continue to be subject to the voting
agreement in Section 3(a) hereof and the proxy referred to in Section 3(b)
hereof, and, as a condition to any such Transfer of Shares, Shareholders shall
enter into a written agreement with the transferee of such Shares, in form and
substance satisfactory to Parent, granting Shareholders the right to vote such
Shares in accordance with the Voting Agreement in Section 3(a) hereof and the
proxy referred to in Section 3(b) hereof.
(b) During the Voting Period, Shareholders shall not, and shall cause their
respective Affiliates and the respective officers, directors, employees,
partners, investment bankers, attorneys, accountants and other agents and
representatives of Shareholders and such Affiliates (such Affiliates, officers,
directors, employees, partners, investment bankers, attorneys, accountants,
agents and representatives of any Person are hereinafter collectively referred
to as the 'Representatives' of such Person) not to, directly or indirectly, (i)
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 (as defined in the Amended Merger Agreement) of the Company or
any Affiliate or any inquiry with respect thereto, or (ii) in the event of an
unsolicited Takeover Proposal for the Company or any Affiliate of the Company,
engage in negotiations or discussions with, or provide any information or data
to, any Person (other than Parent, any of its Affiliates or representatives)
relating to any Takeover Proposal. Shareholders shall notify Parent orally and
in writing of any such offers, proposals, or inquiries relating to the purchase
or acquisition by any Person of the Shares Beneficially Owned by the
Shareholders (including, without limitation, the terms and conditions thereof
and the identity of the Person making it), within 24 hours of the receipt
thereof; provided that Shareholders shall have no such notification obligation
with respect to any proposal, offer or inquiry relating to any Takeover Proposal
(which Takeover Proposal notification shall be reported to the Board of
Directors of the Company) other than to the extent that such proposal
contemplates
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<PAGE>
treating Shareholders, as shareholders of the Company, in any manner different
than or inconsistent with the treatment of other shareholders of the Company,
whether as to terms, the entering into of separate agreements or otherwise.
Shareholders shall, and shall cause their Representatives to, immediately cease
and cause to be terminated all existing activities, discussions and
negotiations, if any, with any parties conducted heretofore with respect to any
Takeover Proposal relating to the Company, other than discussions or
negotiations with Parent and its Affiliates.
(c) During the Voting Period, Shareholders will not, and will cause their
Affiliates not to, directly or indirectly, make any public comment, statement or
communication, or take any action that would otherwise require any public
disclosure by Shareholders, Parent or any other Person, concerning the Merger,
the Alternative Merger, the Offer, the Spin-off (as described in Section 5.4 of
the Amended Merger Agreement) and the other transactions contemplated by the
Original Merger Agreement, the Amended Merger Agreement, the Original Anschutz
Agreement, this Agreement and the Ancillary Agreements, except for any
disclosure (i) concerning the status of Shareholders as parties to such
agreements, the terms thereof, and their beneficial ownership of Shares required
pursuant to Section 13 (d) of the Exchange Act or (ii) required in the Schedule
14D-9 or the Proxy Statement/Prospectus or the New Proxy Statement/Prospectus.
(d) Notwithstanding the restrictions set forth in Section 4(b), any Person
who is a director or officer of the Company may exercise his fiduciary duties in
his capacity as a director or officer with respect to the Company, as opposed to
taking action with respect to the direct or indirect ownership of any Shares,
and no such exercise of fiduciary duties shall be deemed to be a breach of, or a
violation of the restrictions set forth in, Section 4(b) and none of the
Shareholders shall have any liability hereunder for any such exercise of
fiduciary duties by such Person in his capacity as a director and officer of the
Company. Nothing in this Section 4(d) shall relieve or affect any of the
Company's or its Affiliates' obligations under the Amended Merger Agreement.
5. Standstill and Related Provisions.
(a) Subject to the paragraph at the end of this Subsection 5(a),
Shareholders agree that for a period commencing on the date of the Original
Anschutz Agreement and terminating on the seventh anniversary of the Effective
Time or the Alternative Effective Time, as the case may be, or, if earlier, the
termination of this Agreement in accordance with the terms of Section 13 hereof
(the 'Standstill Period'), without the prior written consent of the Board of
Directors of Parent (the 'Board') specifically expressed in a resolution adopted
by a majority of the directors of Parent, Shareholders will not, and
Shareholders will cause each of their respective Affiliates not to, directly or
indirectly, alone or in concert with others:
(i) acquire, offer or propose to acquire, or agree to acquire (except,
in any case, by way of (A) following consummation of the Merger or the
Alternative Merger, as the case may be, stock dividends or other
distributions or rights offerings made available to holders of any shares
of Parent Common Stock generally, share-splits, reclassifications,
recapitalizations, reorganizations and any other similar action taken by
Parent, (B) following consummation of the Merger or the Alternative Merger,
as the case may be, the conversion, exercise or exchange of Parent Voting
Securities in accordance with the terms thereof, (C) the issuance and
delivery of Parent Voting Securities pursuant to the Amended Merger
Agreement and (D) following consummation of the Merger or the Alternative
Merger, as the case may be, the acquisition of not more than 131,723 shares
of Parent Common Stock pursuant to the Airplane Purchase Agreement dated as
of May 5, 1994 between TAC and Learjet Inc. (as amended from time to time,
the 'Airplane Purchase Agreement'), provided, that any such securities
shall be subject to the provisions hereof), directly or indirectly, whether
by purchase, tender or exchange offer, through the acquisition of control
of another Person, by joining a partnership, limited partnership, syndicate
or other 'group' (within the meaning of Section 13(d)(3) of the Exchange
Act) (other than groups consisting solely of Shareholders and their
Affiliates, all of which are or, prior to the formation of such group,
become, parties to this Agreement) or otherwise, any Parent Voting
Securities; provided, however, that if Parent shall issue additional Parent
Voting Securities following consummation of the Merger or the Alternative
Merger, as the case may be, Shareholders and their Affiliates may purchase
or acquire additional Parent Voting Securities to bring their Beneficial
Ownership up to the greater of 5.5% and the percentage of outstanding
Parent Voting Securities Beneficially Owned by the Shareholders immediately
prior to such issuance by Parent; provided, further, without limiting the
immediately preceding proviso, if as a result of Transfers of Parent Voting
Securities, Shareholders Beneficially Own less than 5.5% of the then
outstanding shares of Parent Voting Securities,
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Shareholders may purchase or acquire additional Parent Voting Securities to
bring their Beneficial Ownership up to, but not in excess of, 5.5% of the
then outstanding shares of Parent Voting Securities. In addition, in the
event that a Shareholder or an Affiliate thereof inadvertently and without
knowledge (an 'Inadvertent Acquisition') indirectly acquires Beneficial
Ownership of not more than one-quarter of one percent of the Parent Voting
Securities in excess of the amount permitted to be owned by the
Shareholders pursuant to this Section 5(a) pursuant to a transaction by
which a Person (that was not then an Affiliate of a Shareholder before the
consummation of such transaction) owning Parent Voting Securities becomes
an Affiliate of such Shareholder, then all Parent Voting Securities so
acquired shall thereupon become subject to this Agreement and such
Shareholder shall be deemed not to have breached this Agreement provided
that such Shareholder, within 120 days thereafter, causes a number of such
Parent Voting Securities in excess of the amount permitted to be so owned
(or, at the election of such Shareholder, an equal number of the other
Parent Voting Securities that are Beneficially Owned by a Shareholder) to
be Transferred, in a transaction subject to Section 6 hereof, to a
transferee that is not a Shareholder, an Affiliate thereof or a member of a
'group' in which a Shareholder or an Affiliate is included (or, if Parent
or its assignee shall exercise any purchase rights under Section 6(b)
hereof, to Parent or its assignee);
(ii) make, or in any way participate, directly or indirectly, in any
'solicitation' (as such term is used in the proxy rules of the Securities
and Exchange Commission as in effect on the date hereof) of proxies or
consents (whether or not relating to the election or removal of directors),
seek to advise, encourage or influence any Person with respect to the
voting of any Parent Voting Securities, initiate, propose or otherwise
'solicit' (as such term is used in the proxy rules of the Securities and
Exchange Commission as in effect on the date hereof) shareholders of Parent
for the approval of shareholder proposals, whether made pursuant to Rule
14a-8 of the Exchange Act or otherwise, or induce or attempt to induce any
other Person to initiate any such shareholder proposal or otherwise
communicate with the Parent's shareholders or others pursuant to Rule
14a-1(2)(iv) under the Exchange Act or otherwise;
(iii) seek, propose, or make any statement with respect to, any
merger, consolidation, business combination, tender or exchange offer, sale
or purchase of assets, sale or purchase of securities, dissolution,
liquidation, reorganization, restructuring, recapitalization, change in
capitalization, change in corporate structure or business or similar
transaction involving Parent or its subsidiaries (including Spinco) (any of
the foregoing being referred to herein as a 'Specified Parent
Transaction'); provided that the foregoing shall not prevent (A) voting in
accordance with Section 5(c) hereof (but shall prevent any public comment,
statement or communication, and any action that would otherwise require any
public disclosure by Shareholders, Parent or any other Person, concerning
such voting) or (B) the Shareholder Designee (as defined in Section 7
hereof) from exercising his fiduciary duties in his capacity as a director
by participating in any Board deliberations or vote of the Board of
Directors of Parent with respect to a Specified Parent Transaction;
(iv) form, join or in any way participate in a 'group' (within the
meaning of Section 13(d)(3) of the Exchange Act) with respect to any Parent
Voting Securities, other than groups consisting solely of Shareholders and
their Affiliates;
(v) deposit any Parent Voting Securities in any voting trust or
subject any Parent Voting Securities to any arrangement or agreement with
respect to the voting of any Parent Voting Securities except as set forth
in this Agreement;
(vi) call or seek to have called any meeting of the stockholders of
Parent or execute any written consent with respect to Parent or Parent
Voting Securities; provided that the foregoing shall not prevent the
Shareholder Designee from exercising his fiduciary duties in his capacity
as a director by participating in any Board deliberations or vote of the
Board of Directors of Parent with respect to the calling of any annual
meeting of shareholders of Parent;
(vii) otherwise act, alone or in concert with others, to control or
seek to control or influence or seek to influence the management, Board of
Directors or policies of Parent (except to the extent the actions by a
Shareholder Designee relating to Parent's Board of Directors in the
exercise of his fiduciary duties in his capacity as a director may be
viewed as influencing or seeking to influence the management, Board of
Directors or policies of Parent);
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(viii) seek, alone or in concert with others, representation on the
Board of Directors of Parent (except as provided in Section 7 of this
Agreement), or seek the removal of any member of such Board or a change in
the composition or size of such Board;
(ix) make any publicly disclosed proposal, comment, statement or
communication (including, without limitation, any request to amend, waive
or terminate any provision of this Agreement other than Section 5(a)), or
make any proposal, comment, statement or communication (including, without
limitation, any request to amend, waive or terminate any provision of this
Agreement other than Section 5(a)) in a manner that would require any
public disclosure by Shareholders, Parent or any other Person, or enter
into any discussion with any Person (other than directors and officers of
Parent), regarding any of the foregoing;
(x) make or disclose any request to amend, waive or terminate any
provision of Section 5(a) of this Agreement; or
(xi) have any discussions or communications, or enter into any
arrangements, understandings or agreements (whether written or oral) with,
or advise, finance, assist or encourage, any other Person in connection
with any of the foregoing, or take any action inconsistent with the
foregoing, or make any investment in or enter into any arrangement with,
any other Person that engages, or offers or proposes to engage, in any of
the foregoing.
The restrictions set forth in this Section 5(a) shall not prevent Shareholders
from (A) performing their obligations and exercising their rights under this
Agreement, including, without limitation, (w) Transferring any Company Voting
Securities or Parent Voting Securities in accordance with Sections 2(b), 4 and 6
hereof, (x) selecting the Shareholder Designee, (y) serving in the positions
described in or resigning from such positions as described in Section 7(a)
hereof, and (z) voting in accordance with Sections 3(a) and 5(c) hereof and
granting a proxy to Parent in accordance with Section 3(b) hereof; (B)
communicating in a non-public manner with any other Shareholder or their
Affiliates; and (C) complying with the requirements of Sections 13(d) and 16(a)
of the Exchange Act and the rules and regulations thereunder, in each case, as
from time to time in effect, or any successor provisions or rules with respect
thereto, or any other applicable law, rule, regulation, judgment, decree,
ruling, order, award, injunction, or other official action of any agency,
bureau, commission, court, department, official, political subdivision, tribunal
or other instrumentality of any government (whether federal, state, county or
local, domestic or foreign).
(b) Shareholders agree that during the period commencing on the date of the
Original Anschutz Agreement and continuing until the earlier of (x) the
consummation of the Merger, or the Alternative Merger, as the case may be, and
(y) the termination of the Amended Merger Agreement, Shareholders will not, and
Shareholders will cause each of their respective Affiliates not to, directly or
indirectly, alone or in concert with others, acquire, offer or propose to
acquire, or agree to acquire, whether by purchase, tender or exchange offer,
though the acquisition of control of another Person, by joining a partnership,
limited partnership, syndicate or other 'group' or otherwise, any Company Voting
Securities (except pursuant to the Airplane Purchase Agreement and by way of
stock dividends or other distributions or rights offerings made available to
holders of any shares of Company Common Stock generally, stock-splits,
reclassifications, recapitalizations, reorganizations and any other similar
action taken by Company).
(c) Subject to the receipt of proper notice and the absence of a
preliminary or permanent injunction or other final order by any United States
federal court or state court barring such action, Shareholders agree that during
the Standstill Period Shareholders will, and will cause their Affiliates to, (i)
be present, in person or represented by proxy, at all annual and special
meetings of shareholders of Parent so that all Parent Common Stock Beneficially
Owned by Shareholders and their Affiliates and then entitled to vote may be
counted for the purposes of determining the presence of a quorum at such
meetings, and (ii) vote in accordance with the recommendation of the Board of
Directors of Parent in the election of directors and as directed by the Persons
acting as Proxies in respect of proxies solicited by the Board of Directors of
Parent with respect to the election of directors (including the manner in which
such Parent Common Stock shall be cumulated). On all other matters presented for
a vote of shareholders of Parent, Shareholders may vote in their discretion.
6. Limitations on Disposition. (a) Shareholders agree that during the
Standstill Period they will not, and will cause their Affiliates not to,
directly or indirectly, without the prior written consent of the Board of
Directors of Parent specifically expressed in a resolution adopted by a majority
of the directors of Parent, Transfer to any
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Person any Parent Voting Securities (including but not limited to the Transfer
of any securities of an Affiliate which is the record holder or Beneficial Owner
of Parent Voting Securities, if (as the result of such Transfer, such Person
would cease to be an Affiliate of a Shareholder), if, to the knowledge of the
Shareholders or any of their Affiliates, after due inquiry which is reasonable
in the circumstances (and which shall include, with respect to the Transfer of
1% or more of the Parent Voting Securities then outstanding in one transaction,
or a series of related transactions, specific inquiry with respect to the
identity of the acquiror of such Parent Voting Securities and the number of
Parent Voting Securities that, immediately following such transaction or
transactions, would be Beneficially Owned by such acquiror, together with its
Affiliates and any members of a 'group' (within the meaning of Section 13(d)(3)
of the Exchange Act) of which such acquiror is a member), immediately following
such transaction the acquiror of such Parent Voting Securities, together with
its Affiliates and any members of such a group, would Beneficially Own in the
aggregate 4% or more of the Parent Voting Securities then outstanding; provided
that, without the prior written consent of the Board of Directors of Parent, (i)
Shareholders and their Affiliates may Transfer any number of Parent Voting
Securities to any other Shareholder, any Affiliate of a Shareholder or to any
heirs, distributees, guardians, administrators, executors, legal representatives
or similar successors in interest of any Shareholder, provided that (A) such
transferee, if not then a Shareholder, shall become a party to this Agreement
and agree in writing to perform and comply with all of the obligations of such
transferor Shareholder under this Agreement, and thereupon such transferee shall
be deemed to be a Shareholder party hereto for all purposes of this Agreement,
and (B) if the transferee is not prior thereto a Shareholder, the transferor
shall remain liable for such transferee's performance of and compliance with the
obligations of the transferor under this Agreement, (ii) Shareholders and their
Affiliates may Transfer Parent Voting Securities in a tender offer, merger, or
other similar business combination transaction approved by the Board of
Directors of Parent, and (iii) Shareholders may pledge their Parent Voting
Securities as provided in Section 2(b) hereof and the pledgee may Transfer such
Parent Voting Securities in connection with the enforcement or foreclosure of
any related security interest or lien following a default.
(b) During the Standstill Period, if to the knowledge of the Shareholders
after making due inquiry which is reasonable under the circumstances,
immediately following the Transfer of any Parent Voting Securities the acquiror
thereof, together with its Affiliates and any members of a 'group' (within the
meaning of Section 13(d)(3) of the Exchange Act), would Beneficially Own in the
aggregate 2% or more of the outstanding Parent Voting Securities (a '2% Sale'),
Shareholders shall, prior to effecting any such Transfer, offer Parent a right
of first refusal to purchase the shares proposed to be Transferred on the
following terms. Shareholders shall provide Parent with written notice (the '2%
Sale Notice') of any proposed 2% Sale, which 2% Sale Notice shall contain the
identity of the purchaser, the number of shares of Parent Voting Securities
proposed to be Transferred to such purchaser, the purchase price for such shares
and the form of consideration payable for such shares. The 2% Sale Notice shall
also contain an irrevocable offer to sell the shares subject to such 2% Sale
Notice to Parent for cash at a price equal to the price contained in such 2%
Sale Notice. Parent shall have the right and option, by written notice delivered
to such Shareholder (the 'Purchase Notice') within 15 days of receipt of the 2%
Sale Notice, to accept such offer as to all, but not less than all, of the
Parent Voting Securities subject to such 2% Sale Notice. Parent shall have the
right to assign to any Person such right to purchase the shares subject to the
2% Sale Notice. In the event Parent (or its assignee) elects to purchase the
shares subject to the 2% Sale Notice, the closing of the purchase of the Parent
Voting Securities shall occur at the principal office of Parent (or its
assignee) on or before the 30th day following such Shareholder's receipt of the
Purchase Notice. In the event Parent does not elect to purchase the shares
subject to the 2% Sale Notice, such Shareholder shall be free, for a period of
30 days following the receipt of notice from Parent of its election not to
purchase such shares or, in the absence of any such notice, for a period of 30
days following the 15th day after receipt by Parent of the 2% Sale Notice, to
sell the shares subject to the 2% Sale Notice in accordance with the terms of,
and to the person identified in, the 2% Sale Notice. If such sale is not
effected within such 30 day period such shares shall remain subject to the
provisions of this Agreement. Notwithstanding the foregoing, the right of first
refusal set forth in this Subsection (b) shall not apply to the sale by
Shareholders of Parent Voting Securities (i) made in an underwritten public
offering pursuant to an effective registration statement under the Securities
Act, or (ii) made in a transaction permitted pursuant to, and made in compliance
with, clauses (i) or (iii) of the proviso to Section 6(a) hereof, or (iii) made
in a tender offer, merger or other similar business combination transaction
approved by the Board of Directors of Parent. Any proposed sale by Shareholders
of Parent Voting Securities shall be subject to the restrictions on sales to an
acquiror which would Beneficially Own 4% or more of the outstanding Parent
Voting
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Securities, as set forth in Section 6(a) hereof, whether or not Parent exercises
its right of first refusal and consummates the purchase of Parent Voting
Securities. If Parent (or its assignee) exercises its right to purchase any
Parent Voting Securities but fails to complete the purchase thereof for any
reason other than the failure of such Shareholder to perform its obligations
hereunder with respect to such purchase, then, on the 30th day following such
Shareholder's receipt of the Purchase Notice, such Parent Voting Securities
shall cease to be subject to Sections 5(c), 6 and 12 hereof for any purpose
whatsoever. If the purchase price described in any 2% Sale Notice is not solely
made up of cash or marketable securities, the 2% Sale Notice shall include a
good faith estimate of the cash equivalent of such other consideration, and the
consideration payable by Parent or its assignee (if Parent elects to purchase
(or to have assignee purchase) the Parent Voting Securities described in the 2%
Sale Notice) in place of such other consideration shall be cash equal to the
amount of such estimate; provided, however, that if Parent in good faith
disagrees with such estimate and states a different good faith estimate in the
Purchase Notice, and if Parent and such Shareholder cannot agree on the cash
equivalent of such other (i.e., other than cash or marketable securities)
consideration, such cash equivalent shall be determined by a reputable
investment banking firm without material connections with either party. Such
investment banking firm shall be selected by both parties or, if they shall be
unable to agree, by an arbitrator appointed by the American Arbitration
Association. The fees and expenses of any such investment banking firm and/or
arbitrator shall be shared equally by Parent and such Shareholder, unless
otherwise determined by such firm or arbitrator. In the event of such differing
estimates by Parent and such Shareholder, periods of time which would otherwise
run under this Section 6(b) from the date of such Shareholder's receipt of the
Purchase Notice shall run instead from the date on which the parties agree on
such cash equivalent or, in the absence of such agreement, the date on which
such cash equivalent is determined by such investment banking firm. If the
purchase price described in any 2% Sale Notice shall include marketable
securities, the purchase price payable by Parent (or its designee) shall
include, to the extent marketable securities were included as a portion of the
consideration provided for in the 2% Sale Notice, an amount in cash determined
by reference to the Current Market Price of such securities on the day the
Purchase Notice is received by such Shareholder.
(c) Not later than the tenth day following the end of any calendar month
during the Standstill Period in which one or more dispositions of Parent Voting
Securities by Shareholders or any of their Affiliates shall have occurred, the
relevant Shareholder shall give written notice to Parent of all such
dispositions. Such notice shall state the date upon which each such disposition
was effected, the price and other terms of each such disposition, the number and
type of Parent Voting Securities involved in each such disposition, the means by
which each such disposition was effected and, to the extent known, the identity
of the Persons acquiring such Parent Voting Securities.
(d) In connection with any proposed privately negotiated sale by any
Shareholders of Parent Voting Securities representing in excess of 3.9% of the
then outstanding shares of Parent Voting Securities, Parent will cooperate with
and permit the proposed purchaser to conduct a due diligence review reasonable
under the circumstances of Parent and its Subsidiaries and their respective
business and operations, including, without limitation, reasonable access during
normal business hours to their executive officers, and, if reasonable under the
circumstances, their properties subject to execution by such purchaser of a
customary confidentiality agreement; provided that Parent shall not be required
to permit more than two such due diligence reviews in any twelve-month period.
7. Parent Covenants. (a) On or prior to the Effective Time or the
Alternative Effective Time, as the case may be, the Board of Directors of Parent
will take all action necessary to elect Mr. Anschutz, or another individual
selected by TAC and reasonably acceptable to the Board of Directors of Parent
(such director being referred to as the 'Shareholder Designee') as a director of
Parent's Board of Directors and to appoint Mr. Anschutz, but not any other
Shareholder Designee, as Vice Chairman of the Board of Directors as of the
Effective Time or the Alternative Effective Time, as the case may be. Subject to
the following sentence of this Section 7, after the Effective Time or the
Alternative Effective Time, as the case may be, and during the Standstill
Period, Parent shall include the Shareholder Designee in the Board of Directors'
slate of nominees for election as directors at Parent's annual meeting of
shareholders and shall recommend that the Shareholder Designee be elected as a
director of Parent. The Shareholder Designee, if requested by Parent, shall
resign from Parent's Board of Directors (a) effective not later than the next
annual meeting of shareholders of Parent, if Shareholders and their Affiliates
Beneficially Own less than 4% of the Parent Voting Securities then outstanding,
provided, however that this Agreement shall continue in full force and effect
until the date of such resignation, or (b) immediately if the Shareholders
violate or breach any of the material terms or provisions of this Agreement.
Notwithstanding any resignation pursuant to clause (b) of the preceding
sentence, all of the provisions of this
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Agreement other than this Section 7 shall continue in full force and effect. The
duties and responsibilities of the Vice Chairman shall be as assigned by the
Board of Directors of Parent or by the Chairman of the Board, and the Vice
Chairman shall receive no additional compensation for serving in such position.
So long as a Shareholder Designee serves as a member of the Board of Directors
of Parent, Parent agrees that the Shareholder Designee shall serve (subject to
the applicable requirements of the New York Stock Exchange or any other security
exchange on which the Parent Common Stock is listed, or if not so listed, under
the rules or regulations of the National Association of Securities Dealers) as a
member of the Executive, Finance and Corporate Development, and Compensation,
Benefits and Nominating Committees of the Board; provided, however that Parent
shall not be obligated to cause the Shareholder Designee to become a member of
the Compensation, Benefits and Nominating Committee of the Board if, and only
for so long as, in the opinion of tax counsel for Parent (which may be internal
or outside counsel), the membership of the Shareholder Designee on such
Committee would be likely to cause the disallowance of any deduction by Parent
for federal income tax purposes under Section 162(m) of the Code or any other
provision of, or regulation under, the Code now or hereafter in effect. Parent
acknowledges that the Shareholder Designee, consistent with his rights and
duties as a director, shall have access to all information that he may request
concerning actions taken by the Compensation, Benefits and Nominating Committee.
Except as otherwise provided in this Section 7, upon the termination of this
Agreement, if so requested by Parent, the Shareholder Designee shall resign as a
director of the Parent's Board of Directors.
(b) In the event that any Shareholder Designee shall cease to be a member
of the Board of Directors by reason of death, disability or resignation (other
than resignations required pursuant to the provisions of this Section 7), Parent
shall replace such Shareholder Designee with another Shareholder Designee at the
next meeting of the Board of Directors.
(c) The Shareholder Designee, upon nomination or appointment as a director
of Parent, shall agree in writing to comply with the obligations of the
Shareholders under Section 5(a) hereof and the obligation of such Shareholder
Designee under this Section 7(c).
(d) Without the prior written consent of Shareholders, Parent shall not
take or recommend to its shareholders any action which would impose limitations,
not imposed on other Shareholders of Parent, on the enjoyment by any of
Shareholders and their Affiliates of the legal rights generally enjoyed by
shareholders of Parent, other than those imposed by the terms of this Agreement,
the Original Anschutz Agreement, the Original Merger Agreement, the Amended
Merger Agreement and the Ancillary Agreements; provided, however, that the
foregoing shall not prevent Parent from implementing or adopting a Shareholder
Rights Plan or issuing a similar security which has a 'trigger' threshold of not
less than the greater of 10% of the outstanding shares of Parent Common Stock or
the amount then Beneficially Owned by Shareholders not in violation of this
Agreement.
8. Additional Limitation on Dispositions. (a) Notwithstanding any other
provision of this Agreement, TAC agrees that it will not, and will cause its
Affiliates not to, for a period of two years commencing as of the Effective Time
or the Alternative Effective Time, as the case may be (the 'Reorganization
Continuity Period'), enter into any transaction or arrangement to the extent
such transaction or arrangement (combined with any other transactions or
arrangements entered into by TAC or its Affiliates) would result in TAC having
entered into an Economic Disposition with respect to an amount of Parent Voting
Securities received by TAC in the Merger or the Alternative Merger, as the case
may be, that exceeds the Threshold Amount unless the condition described in
Section 8(b) is satisfied, regardless of whether such transaction or arrangement
would be treated as a sale, exchange or other taxable disposition of such Parent
Voting Securities for United States federal income tax purposes. For purposes of
this Section 8, the 'Threshold Amount' equals the number of Parent Voting
Securities received by TAC in the Merger or the Alternative Merger, as the case
may be, multiplied by the following fraction: the numerator is 20 per cent and
the denominator is (A) the percentage of outstanding Company Common Stock held
by TAC as of the date of the Original Anschutz Agreement minus (B) the
percentage of outstanding Company Common Stock that TAC exchanged for cash in
the Offer or the Merger or the Alternative Merger, as the case may be. For
purposes of this Section 8, an 'Economic Disposition' of shares of Parent Voting
Securities shall mean (i) any transaction or arrangement (including an outright
sale) that would be treated as a sale, exchange or other taxable disposition for
United States federal income tax purposes of shares of Parent Voting Securities
received in the Merger or the Alternative Merger, as the case may be, and (ii)
any transaction or arrangement (or combination of transactions or arrangements)
entered into by or on behalf of TAC or its Affiliates that reduces the economic
benefits and burdens to TAC of owning shares of Parent Voting Securities
(including any swap transaction, notional principal contract or the acquisition
or grant of any calls,
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puts or other options, whether or not cash settlement is permitted or required)
to such an extent that such transaction or arrangement causes TAC not to satisfy
the 'continuity of proprietary interest' requirement under Section 368 of the
Internal Revenue Code of 1986, as amended (the 'Code') with respect to such
shares.
(b) During the Reorganization Continuity Period, at least thirty (30)
business days prior to entering into any proposed transaction or arrangement
(combined with any other transactions or arrangements entered into by TAC)
relating to or involving any shares of Parent Voting Securities in excess of the
Threshold Amount (a 'Proposed Transaction'), TAC must provide at its expense a
written opinion of nationally recognized tax counsel, in form and substance
reasonably acceptable to Parent, that the Proposed Transaction will not
adversely affect the treatment of the Merger as a reorganization within the
meaning of Section 368 of the Code.
(c) The bona fide pledge of any Parent Voting Securities, or the bona fide
grant of a security interest therein, to secure the payment of bona fide
indebtedness owed by TAC or any of its Affiliates, and the sale, exchange or
disposition, or Economic Disposition, at the direction of the pledgee or holder
of a security interest, of any of such Parent Voting Securities in connection
with the exercise of any right of enforcement or foreclosure in respect thereof,
shall not be subject to or prevented by this Section 8.
(d) The Threshold Amount and the number of shares of Parent Voting
Securities that are or have been subject to an Economic Disposition shall be
adjusted, as of any date of determination, to give effect to any stock
dividends, share-splits, reclassifications, recapitalizations, reorganizations
or other similar actions that shall have been taken by Parent as of such date
with respect to the Parent Voting Securities.
9. Representations and Warranties of Shareholders. Shareholders hereby
represent and warrant to Parent as follows:
(a) TAC is a corporation duly organized and validly existing under the
laws of the State of Kansas and is in good standing under the laws of the
State of Kansas. The Foundation is a not-for-profit corporation duly
organized and existing under the laws of the State of Colorado.
Shareholders have all necessary power and authority to execute and deliver
this Agreement and perform their obligations hereunder. The execution and
delivery by TAC and the Foundation of this Agreement and the performance by
TAC and the Foundation of their obligations hereunder have been duly and
validly authorized by the Board of Directors of TAC and the Foundation, and
by the sole stockholder of TAC, and no other proceedings or actions on the
part of any Shareholder are necessary to authorize the execution, delivery
or performance of this Agreement or the consummation of the transactions
contemplated hereby.
(b) This Agreement has been duly and validly executed and delivered by
Shareholders and constitutes the valid and binding agreement of
Shareholders, enforceable against Shareholders in accordance with its terms
except to the extent (i) such enforcement may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors rights and (ii)
the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
(c) Each Shareholder is the sole record holder and Beneficial Owner of
the number of Shares listed opposite such Shareholder's name on the
signature page hereof, and, except as provided in Section 2(b) hereof and
to the extent created by either or both of the Corporate Matters Agreement
(the 'Corporate Matters Agreement') and the Shareholder Agreement, each
dated as of August 1, 1993 and among Company, MSLEF and certain other
parties, TAC and certain other parties thereto, each of which the
Shareholders agree to terminate as of the Effective Time and the
Alternative Effective Time, as the case may be, has good and marketable
title to all of such Shares, free and clear of all liens, claims, options,
proxies, voting agreements, security interests, charges and encumbrances.
The Shares constitute all of the capital stock of the Company Beneficially
Owned by Shareholders, and except for the Shares, neither Shareholders nor
any of their Affiliates Beneficially Owns or has any right to acquire
(whether currently, upon lapse of time, following the satisfaction of any
conditions, upon the occurrence of any event or any combination of the
foregoing) any Company Voting Securities, except that TAC has the right to
acquire up to 520,188 (less any amount subsequently sold by Learjet, Inc.
or its assignee) shares of the Company Common Stock pursuant to the
Airplane Purchase Agreement. Except as provided in Section 2(b) hereof and
in this Section 9(c), each Shareholder has sole power to vote and to
dispose of the Shares Beneficially Owned by such Shareholder, and sole
power to issue instructions with respect to such Shares to the extent
appropriate in respect of the matters set forth in this Agreement, sole
power to demand appraisal rights and sole power
D-11
<PAGE>
to agree to all of the matters set forth in this Agreement, in each case
with respect to all of such Shares, with no limitations, qualifications or
restrictions on such rights, subject to applicable securities laws and the
terms of this Agreement. Shareholders do not beneficially own or have any
right to acquire (whether currently, upon lapse of time, following the
satisfaction of any conditions, upon the occurrence of any event or any
combination of the foregoing), except pursuant to the Merger or the
Alternative Merger, as the case may be, any Parent Voting Securities.
(d) Except for filings, authorizations, consents and approvals as may
be required under, and other applicable requirements of, the Hart-Scott
Rodino Antitrust Improvements Act of 1976 (the 'HSR Act'), with respect to
the acquisition by Shareholders of Parent Voting Securities in the Merger
or the Alternative Merger, as the case may be, the Securities Exchange Act
of 1934, and the ICA, in each case as amended, (i) no filing with, and no
permit, authorization, consent or approval of, any state or federal
governmental body or authority is necessary for the execution of this
Agreement by Shareholders and the consummation by Shareholders of the
transactions contemplated hereby and (ii) none of the execution and
delivery of this Agreement by Shareholders, the consummation by
Shareholders of the transactions contemplated hereby or compliance by
Shareholders with any of the provisions hereof shall (A) conflict with or
result in any breach of the certificate or incorporation or by-laws or
other organizational documents of TAC or the Foundation, (B) result in a
violation or breach of, or constitute (with or without notice or lapse of
time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration) under any
of the terms, conditions or provisions of any note, loan agreement, bond,
mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind to
which any Shareholder is a party or by which any Shareholder or any of its
properties or assets (including the Shares) may be bound, or (C) violate
any order, writ, injunction, decree, judgment, statute, rule or regulation
applicable to any Shareholder or any of its properties or assets. To the
best knowledge of Shareholders, no litigation is pending or threatened
involving Shareholders or the Company relating in any way to this
Agreement, the Original Anschutz Agreement, the Original Merger Agreement,
the Amended Merger Agreement, the Ancillary Agreements, or any transactions
contemplated hereby or thereby.
(e) Shareholders understand and acknowledge that Parent is entering
into, and causing the Purchaser to enter into the Amended Merger Agreement
and the Ancillary Agreements, and is incurring the obligations set forth
therein, in reliance upon Shareholders' execution and delivery of this
Agreement.
(f) Except for Morgan Stanley & Co. Incorporated, no broker,
investment banker, financial adviser or other person is entitled to any
broker's, finder's, financial adviser's or other similar fee or commission
in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of Shareholders.
(g) Shareholders have no plan or intention, and as of the Effective
Time or the Alternative Effective Time, as the case may be, will have no
plan or intention to sell, exchange or otherwise dispose of any of the
shares of Parent Voting Securities that they receive in the Merger or the
Alternative Merger, as the case may be.
(h) Shareholders have no plan or intention and, provided the IRS
requests such a representation, will represent (in the form requested by
Parent) that as of the effective date of the distribution of the shares of
Spinco capital stock (the 'Spin-off') they will have no plan or intention,
to sell, exchange, transfer by gift, or otherwise dispose of any of the
shares of Spinco capital stock they receive in the Spin-off.
D-12
<PAGE>
(i) Shareholders will make such representations as may reasonably be
requested by Parent (provided such representations are true at the time
given), and in such form as may reasonably be requested by Parent, for use
in connection with the request by Parent that the Internal Revenue Service
issue a private letter ruling with respect to the tax consequences of the
Spin-off.
10. Representations and Warranties of Parent. Parent hereby represents
and warrants to Shareholders as follows:
(a) Parent is a corporation duly organized and validly existing under
the laws of the State of Utah and is in good standing under the laws of the
state of its incorporation. Parent has all necessary corporate power and
authority to execute and deliver this Agreement and perform its obligations
hereunder. The execution and delivery by Parent of this Agreement and the
performance by Parent of its obligations hereunder have been duly and
validly authorized by the Board of Directors of Parent and no other
corporate proceedings on the part of Parent are necessary to authorize the
execution, delivery or performance of this Agreement or the consummation of
the transactions contemplated hereby.
(b) This Agreement has been duly and validly executed and delivered by
Parent and constitutes a valid and binding agreement of Parent, enforceable
against Parent in accordance with its terms except to the extent (i) such
enforcement may be limited by applicable bankruptcy, insolvency or similar
laws affecting creditors rights and (ii) the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(c) Except for filings, authorizations, consents and approvals as may
be required under, and other applicable requirements of, the ICA, the HSR
Act, with respect to the sale of Parent Voting Securities to Shareholders
in the Merger or the Alternative Merger, as the case may be, and the ICA
(i) no filing with, and no permit, authorization, consent or approval of,
any state or federal public body or authority is necessary for the
execution of this Agreement by Parent and the consummation by Parent of the
transactions contemplated hereby and (ii) none of the execution and
delivery of this Agreement by Parent, the consummation by Parent of the
transactions contemplated hereby or compliance by Parent with any of the
provisions hereof shall (A) conflict with or result in any breach of the
certificate of incorporation or by-laws of Parent, (B) result in a
violation or breach of, or constitute (with or without notice or lapse of
time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration) under any
of the terms, conditions or provisions of any note, loan agreement, bond,
mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind to
which Parent is a party or by which Parent or any of its properties or
assets may be bound, or (C) violate any order, writ, injunction, decree,
judgment, statute, rule or regulation applicable to Parent or any of its
properties or assets. To the best knowledge of Parent, no litigation is
pending or threatened involving Parent relating in any way to this
Agreement, the Original Anschutz Agreement, the Original Merger Agreement,
the Amended Merger Agreement, the Ancillary Agreements, or any transactions
contemplated hereby or thereby.
(d) Except for CS First Boston Corporation, no broker, investment
banker, financial adviser or other person is entitled to any broker's,
finder's, financial adviser's or other similar fee or commission in
connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of Parent.
11. Further Assurances. (a) From time to time, at the other party's
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further lawful action as may
be necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement.
(b) Shareholders have entered into an amendment to the existing
Registration Rights Agreement, forming Exhibit A to the Corporate Matters
Agreement, by and among the Company and the parties named therein for the
purpose of, among other things, providing the Shareholders with (i) registration
rights for the sale of certain shares of Company Common Stock held by them and
(ii) certain financial and other information related to the Company on an
ongoing basis.
D-13
<PAGE>
12. Stop Transfer; Legend.
(a) Shareholders agree with and covenant to Parent that Shareholders shall
not request that the Company or Parent, as the case may be, register the
transfer (book-entry or otherwise) of any certificated or uncertificated
interest representing any of the securities of the Company or of Parent, as the
case may be, unless such transfer is made in compliance with this Agreement.
(b) During the Standstill Period, Shareholders shall promptly surrender to
the Company all certificates representing the Shares, and other Company Voting
Securities acquired by Shareholders or their Affiliates after the date of the
Original Anschutz Agreement, and the Company shall place the following legend on
such certificates:
'THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
SHAREHOLDERS AGREEMENT, DATED AS OF AUGUST 3, 1995 AND AMENDED AND RESTATED
AS OF JULY 12, 1996 BY AND AMONG UNION PACIFIC CORPORATION, UNION PACIFIC
RAILROAD COMPANY, PHILIP F. ANSCHUTZ, THE ANSCHUTZ CORPORATION, AND THE
ANSCHUTZ FOUNDATION WHICH, AMONG OTHER THINGS, RESTRICTS THE TRANSFER AND
VOTING THEREOF.'
(c) During the Standstill Period, each certificate representing Parent
Voting Securities the Beneficial Ownership of which is acquired by any
Shareholder shall bear the following legend:
'THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
AGREEMENTS BETWEEN PHILIP F. ANSCHUTZ, THE ANSCHUTZ CORPORATION, ANSCHUTZ
FOUNDATION, UNION PACIFIC CORPORATION AND UNION PACIFIC RAILROAD COMPANY,
COPIES OF WHICH MAY BE OBTAINED FROM UNION PACIFIC CORPORATION WHICH, AMONG
OTHER THINGS, RESTRICT THE TRANSFER AND VOTING THEREOF.'
(d) In connection with any Transfer of Company Voting Securities or Parent
Voting Securities to any Person, other than a Shareholder, an Affiliate of a
Shareholder, any heir, distributee, guardian, administrator, executor, legal
representative or similar successor in interest, or a member of a 'group'
(within the meaning of Section 13(d)(3) of the Exchange Act) in which a
Shareholder or an Affiliate thereof or such other Person is included, pursuant
to, and made in compliance with, Section 6 hereof, and from and after the
termination of the Standstill Period, the Company may and Parent shall, upon
surrender thereto of any certificates representing Company Voting Securities or
Parent Voting Securities, as the case may be, that bear a legend required by
this Section 12, issue and deliver to the record owner of the securities
represented thereby, or to its registered transferee, certificates representing
such securities without such legend.
13. Termination. Except as otherwise provided in this Agreement, this
Agreement shall terminate (a) if the Effective Time or the Alternative Effective
Time, as the case may be, does not occur, upon the termination of the Amended
Merger Agreement, provided, however, that if the Amended Merger Agreement shall
have been terminated pursuant to Section 7.1(d)(ii) thereof, the provisions of
Sections 3 and 4 hereof shall survive the termination of this Agreement for a
period of six months, or (b) if the Effective Time or the Alternative Effective
Time, as the case may be, does occur, on the earliest to occur of (1) the
seventh anniversary of the Effective Time or the Alternative Effective time, as
the case may be, (2) at such time that the Shareholders Beneficially Own, and
continue to Beneficially Own, in the aggregate, less than 4% of the Parent
Voting Securities then outstanding, it being understood, however, that if the
Shareholders at any time Beneficially Own in the aggregate less than 4% of the
Parent Voting Securities then outstanding but, prior to the seventh anniversary
of the Effective Time or the Alternative Effective Time, as the case may be,
subsequently acquire Beneficial Ownership of any Parent Voting Securities
(except pursuant to clauses (A), (B) or (C) of the parenthetical exception to
the first sentence in Section 5(a)(i) hereof or in an Inadvertent Acquisition)
such that immediately following such acquisition Shareholders become Beneficial
Owners in the aggregate of more than 4% of the Parent Voting Securities then
outstanding, the provisions of Sections 5, 6, 9, 11, 12, 13 and 14 of this
Agreement shall be effective and in full force again as if no such termination
had occurred, and (3) if at any time that the Shareholders Beneficially Own in
the aggregate more than 4% of the Parent Voting Securities then outstanding (i)
the Shareholder Designee shall not be elected as a director of Parent as
provided in this Agreement, (ii) if and so long as Mr. Anschutz shall be a
director of Parent, Mr. Anschutz (but not any other Shareholder Designee)
D-14
<PAGE>
shall not be appointed Vice Chairman of the Board of Directors, (iii) subject to
applicable requirements of the New York Stock Exchange or any other security
exchange on which the Parent Common Stock is listed, or if not so listed, under
the rules or regulations of the National Association of Securities Dealers, a
Shareholder Designee who is then a director shall not be appointed as a member
of the Executive, Finance and Corporate Development, and Compensation, Benefits
and Nominating Committees, respectively, of the Board of Directors of Parent (or
committees having similar functions) or (iv) Parent shall have breached its
covenant in Section 7(b) hereof; provided that TAC, for itself and on behalf of
all other Shareholders, may by written notice to Parent irrevocably elect that,
from and after the delivery thereof, the references in this Section 13 and in
Section 7 hereof to '4%' be deleted and replaced by references to '3%.'
Notwithstanding anything to the contrary, any agreements or covenants which by
their terms require action or performance following termination of this
Agreement shall survive such termination.
14. Miscellaneous.
(a) This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof.
(b) Shareholders agree that this Agreement and the respective rights and
obligations of Shareholders hereunder shall attach to any Company Voting
Securities or Parent Voting Securities that may become Beneficially Owned by
Shareholders. The obligations of Shareholders under Sections 5(c), 6 and 12
hereof shall terminate with respect to Company Voting Securities and Parent
Voting Securities that shall cease to be Beneficially Owned by a Shareholder, an
Affiliate thereof or any heir, distributee, guardian, administrator, executor,
legal representative or similar successor in interest, pursuant to a Transfer
thereof to any Person other than a Shareholder, an Affiliate of a Shareholder,
such other Person or a member of a 'group' (within the meaning of Section
13(d)(3) of the Exchange Act) in which a Shareholder, an Affiliate thereof or
such other person is included; provided that such Transfer shall be permitted
by, and made in accordance with Section 2(b) hereof, Section 4(a) hereof or
Section 6 hereof, as the case may be, and such termination shall be effective
upon the Transfer of such securities; such transferees of such securities shall
have no obligations or rights under or with respect to this Agreement and,
except as otherwise provided herein, shall not be deemed to be Shareholders for
any purposes of this Agreement; and thereafter such securities shall not be
subject to Sections 5(c), 6 and 12 hereof for any purpose whatsoever. The
representations, warranties, covenants, obligations and other agreements of
Shareholders made or undertaken in this Agreement are made or undertaken by each
Shareholder with respect to itself alone, severally and not jointly, and, no
Shareholder shall have any responsibility with respect to the representations,
warranties, covenants, obligations and other agreements made or undertaken by
any other Shareholder in this Agreement or any liability with respect to the
breach thereof by any other Shareholder.
(c) Except as otherwise provided in this Agreement, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, and Parent, on the
one hand, and Shareholders, on the other hand, shall indemnify and hold the
other harmless from and against any and all claims, liabilities or obligations
with respect to any brokerage fees, commissions or finders' fees asserted by any
person on the basis of any act or statement alleged to have been made by such
party or its Affiliates.
(d) Except as provided in the Agreement, this Agreement shall not be
assigned by operation of law or otherwise without the prior written consent of
the other party, provided that Parent may assign, in its sole discretion, its
rights and obligations hereunder to any direct or indirect wholly owned
subsidiary of Parent, but no such assignment shall relieve Parent of its
obligations hereunder if such assignee does not perform such obligations.
(e) This Agreement may not be amended, changed, supplemented, or otherwise
modified or terminated, except upon the execution and delivery of a written
agreement executed by each of the parties hereto. The parties may waive
compliance by the other parties hereto with any representation, agreement or
condition otherwise required to be complied with by such other party hereunder,
but any such waiver shall be effective only if in writing executed by the
waiving party.
D-15
<PAGE>
(f) All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly received if given) by hand delivery or telecopy (with a confirmation
copy sent for next day delivery via courier service, such as Federal Express),
or by any courier service, such as Federal Express, providing proof of delivery.
All communications hereunder shall be delivered to the respective parties at the
following addresses:
If to Shareholders:
The Anschutz Corporation
Suite 2400
555 Seventeenth Street
Denver, Colorado 80202
Anschutz Foundation
Suite 2400
555 Seventeenth Street
Denver, Colorado 80202
Philip F. Anschutz
Suite 2400
555 Seventeenth Street
Denver, Colorado 80202
copy to:
and, in either case, with a copy to:
O'Melveny & Myers
153 East 53rd Street
New York, New York 10022
Telephone No.: (212) 326-2000
Telecopy No.: (212) 326-2091
Attention: Drake S. Tempest, Esq.
If to Parent or the Purchaser:
Union Pacific Corporation
Martin Tower
Eighth and Eaton Avenues
Bethlehem, Pennsylvania 18018
Telephone No.: (610) 861-3200
Telecopy No.: (610) 861-3111
Attention: Carl W. von Bernuth
copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Telephone No.: (212) 735-3000
Telecopy No.: (212) 735-2000
Attention: Paul T. Schnell, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(g) Whenever possible, each provision or portion of any provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law but if any provision or portion of any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect under
any applicable law or rule in any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or portion of any
D-16
<PAGE>
provision in such jurisdiction, and this Agreement will be reformed, construed
and enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision or portion of any provision had never been contained herein.
(h) Each of the parties hereto recognizes and acknowledges that a breach by
it of any covenants or agreements contained in this Agreement will cause the
other party to sustain damages for which it would not have an adequate remedy at
law for money damages, and therefore each of the parties hereto agrees that in
the event of any such breach the aggrieved party shall be entitled to the remedy
of specific performance of such covenants and agreements and injunctive and
other equitable relief in addition to any other remedy to which it may be
entitled, at law or in equity.
(i) All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall be cumulative
and not alternative, and the exercise of any thereof by any party shall not
preclude the simultaneous or later exercise of any other such right, power or
remedy by such party. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
(j) This Agreement is not intended to be for the benefit of, and shall not
be enforceable by, any person or entity who or which is not a party hereto.
(k) This Agreement shall be governed and construed in accordance with the
laws of the State of New York, without giving effect to the principles of
conflicts of law thereof.
(l) The representations and warranties made herein shall survive through
the term of this Agreement.
(m) Each party hereby irrevocably submits to the nonexclusive jurisdiction
of the Supreme Court in the State of New York in any action, suit or proceeding
arising in connection with this Agreement, and agrees that any such action, suit
or proceeding may be brought only in such court (and waives any objection based
on forum non conveniens or any other objection to venue therein); provided,
however, that such consent to jurisdiction is solely for the purpose referred to
in this paragraph (m) and shall not be deemed to be a general submission to the
jurisdiction of said Court or in the State of New York other than for such
purposes. Each party hereto hereby waives any right to a trial by jury in
connection with any such action, suit or proceeding.
(n) The descriptive headings used herein are inserted for convenience of
reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
(o) This Agreement may be executed in counterparts, each of which shall be
deemed to be an original, but all of which, taken together, shall constitute one
and the same Agreement.
15. HSR Act Matters. (a) The parties hereto understand and acknowledge
that Parent and the Shareholders have agreed that the condition to the Merger or
the Alternative Merger, as the case may be, set forth in Section 6.2(d) of the
Amended Merger Agreement was not intended by the parties to, and does not,
extend to any waiting period pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the 'HSR Act'), applicable to the
acquisition by the Shareholders of Parent Voting Securities. The Shareholders
further agree that if all waiting periods applicable under the HSR Act to the
acquisition by the Shareholders of Parent Voting Securities pursuant to the
Merger or the Alternative Merger, as the case may be, shall not have expired or
been terminated at the time of the Merger or the Alternative Merger, as the case
may be, the Shareholders will take appropriate action, and Parent will cooperate
with Shareholders, to enable the Merger or the Alternative Merger, as the case
may be, to close without delay and without violation of the HSR Act, including,
for example, by entering into an appropriate escrow agreement or other
arrangement pending divestiture or completion of HSR Act review.
(b) Each of Parent and Spinco agrees to cooperate with the Shareholders in
these matters, including, among other things, by agreeing if necessary to amend
this Agreement and the Amended Anschutz/Spinco Shareholders Agreement, as the
case may be, in the respects required to effect such an arrangement or
divestiture. Subject to the foregoing, each of the parties hereto agrees to use
its best efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable, whether under applicable
laws and regulations
D-17
<PAGE>
or otherwise, to cause all applicable waiting periods under the HSR Act to
expire or terminate with respect to the acquisition by the Shareholders of
Parent Voting Securities pursuant to the Merger or the Alternative Merger, as
the case may be, as promptly as practicable following the initial filing by the
Shareholders of the applicable pre-merger notification forms pursuant to the HSR
Act (the timing of which filing shall be mutually agreed to by Parent and the
Shareholders); provided, however, that none of Parent or Spinco or any of their
affiliates shall be required to take any action that would be materially harmful
to their businesses, assets, operations, financial condition or results of
operations.
16. Effectiveness. The Original Anschutz Agreement shall remain in
effect, and this Agreement shall not be effective (other than the provisions of
Sections 3 and 4 hereof, which are immediately effective) unless and until
the stockholders of the Company have approved the Alternative Merger at the
Alternative Company Special Meeting.
D-18
<PAGE>
IN WITNESS WHEREOF, Parent, UPRR and Shareholders have caused this
Agreement to be duly executed as of the day and year first above written.
UNION PACIFIC CORPORATION
By: /s/ CARL W. VON BERNUTH
-------------------------------
Name: Carl W. von Bernuth
Title: Senior Vice President--Law
UNION PACIFIC RAILROAD COMPANY
By: /s/ CARL W. VON BERNUTH
-------------------------------
Name: Carl W. von Bernuth
Title: Vice President and General
Counsel
No. of Shares: 39,351,928 THE ANSCHUTZ CORPORATION
By: /s/ PHILIP F. ANSCHUTZ
-------------------------------
Name: Philip F. Anschutz
Title: President
No. of Shares: 970,684 ANSCHUTZ FOUNDATION
By: /s/ PHILIP F. ANSCHUTZ
-------------------------------
Name: Philip F. Anschutz
Title: Chairman of the Board
No. of Shares: 39,351,928
[by reason of ownership of TAC]
By: /s/ PHILIP F. ANSCHUTZ
-------------------------------
Philip F. Anschutz
The undersigned agrees to be bound by and comply with the provisions of
Section 12(b) of this Agreement.
SOUTHERN PACIFIC RAIL CORPORATION
By: /s/ JERRY R. DAVIS
-------------------------------
Name: Jerry R. Davis
Title: President and Chief Executive
Officer
D-19
<PAGE>
EXHIBIT A
TO ANSCHUTZ SHAREHOLDERS
AGREEMENT
IRREVOCABLE PROXY
The undersigned hereby revokes any previous proxies and appoints Union
Pacific Corporation ('Parent'), Drew Lewis and Richard K. Davidson, and each of
them, with full power of substitution, as attorney and proxy of the undersigned
to attend any and all meetings of shareholders of Southern Pacific Rail
Corporation, a Delaware corporation (the 'Company') (and any adjournments or
postponements thereof), to vote all shares of Common Stock, $.001 par value, of
the Company that the undersigned is then entitled to vote, and to represent and
otherwise to act for the undersigned in the same manner and with the same effect
as if the undersigned were personally present, with respect to all matters
specified in Section 3(a) of the Shareholders Agreement (the 'Shareholders
Agreement'), dated as of August 3, 1995, as amended and restated as of July 12,
1996, by and among Parent, the undersigned and The Anschutz Corporation, a
Kansas corporation, Anshutz Foundation, a Colorado not-for-profit corporation,
and Mr. Philip F. Anshutz. Capitalized terms used and not defined herein have
the respective meanings ascribed to them in, or as prescribed by, the
Shareholders Agreement.
This proxy shall be deemed to be a proxy coupled with an interest and is
irrevocable during the Voting Period and has been granted pursuant to Section
3(b) of the Shareholders Agreement.
The undersigned authorizes such attorney and proxy to substitute any other
person to act hereunder, to revoke any substitution and to file this proxy and
any substitution or revocation with the Secretary of the Company.
Dated: , 1996
[Shareholder]
By: --------------------------------
Name:
Title:
D-20
<PAGE>
ANNEX E
AMENDED AND RESTATED MSLEF SHAREHOLDER AGREEMENT
AMENDED AND RESTATED AGREEMENT, dated as of July 12, 1996 (this
'Agreement'), by and between Union Pacific Corporation, a Utah corporation
('Parent') and The Morgan Stanley Leveraged Equity Fund II, L.P., a Delaware
limited partnership (the 'Shareholder').
W I T N E S S E T H :
WHEREAS, Parent, UP Acquisition Corporation, a former Delaware corporation
and indirect wholly owned subsidiary of Parent ('Purchaser'), and the
Shareholder entered into the MSLEF Shareholder Agreement, dated as of August 3,
1995 (the 'Original MSLEF Agreement'), and the original parties to the Original
MSLEF Agreement wish to amend and restate such Original MSLEF Agreement in its
entirety;
WHEREAS, Purchaser has merged with and into Union Pacific Railroad Company,
a Utah corporation ('UPRR'), with UPRR as the surviving corporation (the
'Purchaser Merger') and, accordingly, the original parties to the Original MSLEF
Agreement wish to amend and restate the Original MSLEF Agreement in its entirety
to reflect the fact that the Purchaser Merger has occurred and to eliminate
Purchaser as a party thereto;
WHEREAS, simultaneously with the execution of the Original MSLEF Agreement,
Parent, Purchaser, UPRR and Southern Pacific Rail Corporation, a Delaware
corporation (the 'Company'), entered into an Agreement and Plan of Merger (the
'Original Merger Agreement'), pursuant to which, among other things, (i)
Purchaser purchased 39,034,471 shares of common stock, $.001 par value, of the
Company (the 'Company Common Stock') pursuant to a cash tender offer (the
'Offer') and (ii) the Company would be merged with and into UPRR (the 'Merger')
with UPRR as the surviving corporation;
WHEREAS, simultaneously with the execution of this Agreement, Parent, UPRR,
UP Holding Company, Inc., a Utah corporation ('Holding'), Union Pacific Merger
Co., a Delaware corporation ('Mergerco'), and the Company entered into an
Amended and Restated Agreement and Plan of Merger (the 'Amended Merger
Agreement'), pursuant to which the parties thereto wish to permit an alternative
structure to the acquisition of the Company by Parent whereby the Company would
merge with and into either Holding or Mergerco, at the election of Parent (the
'Alternative Merger') subject to completion of certain conditions, with either
Holding or Mergerco, as the case may be, as the surviving corporation.
WHEREAS, as of the date of the Original MSLEF Agreement, Shareholder was
the record and beneficial owner of, and had the sole right to vote and dispose
of, an aggregate of 13,341,580 shares (the 'Shares') of Company Common Stock;
and
WHEREAS, as an inducement and a condition to its entering into the Original
Merger Agreement, the Amended Merger Agreement and the Ancillary Agreements (as
defined in the Amended Merger Agreement), and incurring the obligations set
forth therein, including the Offer and the Merger or the Alternative Merger, as
the case may be, Parent has required that Shareholder agree, and Shareholder has
agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual premises,
representations, warranties, covenants and agreements contained herein and in
the Amended Merger Agreement and the Ancillary Agreements, the parties hereto,
intending to be legally bound hereby, agree as follows:
1. Certain Definitions. Capitalized terms used and not defined herein
have the respective meanings ascribed to them in the Amended Merger Agreement.
In addition, for purposes of this Agreement:
(a) 'Affiliate' shall mean, with respect to any specified Person, any
Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the Person
specified. For purposes of this Agreement, with respect to the Shareholder,
'Affiliate' shall not include the Company and the Persons that directly, or
indirectly through one or more intermediaries, are controlled by the
Company.
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(b) 'Beneficially Own' or 'Beneficial Ownership' with respect to any
securities shall mean having 'beneficial ownership' of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the 'Exchange Act')), including pursuant to any
agreement, arrangement or understanding, whether or not in writing;
provided, however, that securities Beneficially Owned by the Shareholder
shall include only those securities (including, without limitation, the
Shares) with respect to which the Shareholder exercises direct voting and
investment control and shall not include securities (other than those
securities (including, without limitation, the Shares) with respect to
which the Shareholder exercises direct voting and investment control)
Beneficially Owned by any Affiliates of the Shareholder or any other
Persons with whom the Shareholder would constitute a 'group' within the
meaning of Section 13(d) of the Exchange Act and the rules promulgated
thereunder.
(c) 'Company Voting Securities' shall mean any securities of the
Company entitled, or which may be entitled, to vote generally in the
election of directors and any securities convertible into or exercisable or
exchangeable for such securities (whether or not subject to contingencies
with respect to any matter or proposal submitted for the vote or consent of
shareholders of the Company). For purposes of determining the percentage of
Company Voting Securities Beneficially Owned by a Person, securities
Beneficially Owned by any such Person that are convertible, exercisable or
exchangeable for securities entitled to vote shall be deemed to be
converted, exercised or exchanged and shall represent the number of
securities of the Company entitled to vote into which such convertible,
exercisable or exchangeable securities (disregarding for such purposes any
restrictions on conversion, exercise or exchange) are then convertible,
exchangeable or exercisable.
(d) 'including' shall mean including without limitation.
(e) 'Parent Voting Securities' shall mean any securities of Parent
entitled, or which may be entitled, to vote generally in the election of
directors and any securities convertible into or exercisable or
exchangeable for such securities (whether or not subject to contingencies
with respect to any matter or proposal submitted for the vote or consent of
shareholders of Parent). For purposes of this Agreement, Parent Voting
Securities shall not include Company Voting Securities. For purposes of
determining the percentage of Parent Voting Securities Beneficially Owned
by a Person, securities Beneficially Owned by any such Person that are
convertible, exercisable or exchangeable for securities entitled to vote
shall be deemed to be converted, exercised or exchanged and shall represent
the number of securities of Parent entitled to vote into which such
convertible, exercisable or exchangeable securities (disregarding for such
purposes any restrictions on conversion, exercise or exchange) are then
convertible, exchangeable or exercisable.
(f) 'Person' shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
(g) 'Transfer' shall mean, with respect to a security, the sale,
transfer, pledge, hypothecation, encumbrance, assignment or disposition of
such security or the Beneficial Ownership thereof, the offer to make such a
sale, transfer or other disposition, and each agreement, arrangement or
understanding, whether or not in writing, to effect any of the foregoing.
As a verb, 'Transfer' shall have a correlative meaning.
2. Intentionally Omitted.
3. Voting of Company Common Stock; Irrevocable Proxy; No Acquisition of
Additional Company Voting Securities.
(a) Shareholder hereby agrees that during the period commencing on the date
of the Original MSLEF Agreement and continuing until the earlier of (x) the
consummation of the Merger or the Alternative Merger, as the case may be, and
(y) six months following the termination of the Amended Merger Agreement in
accordance with Section 7.1(d)(ii) thereof, and (z) upon the termination of the
Amended Merger Agreement in accordance with any provision of Section 7.1 other
than Section 7.1(d)(ii) (such period being referred to as the 'Voting Period')
at any meeting (whether annual or special, and whether or not an adjourned or
postponed meeting) of the Company's shareholders, however called, or in
connection with any written consent of the Company's shareholders, subject to
the absence of a preliminary or permanent injunction or other final order by any
United States federal court or state court barring such action, Shareholder
shall vote (or cause to be voted) the Shares and
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all other Company Voting Securities that it Beneficially Owns, whether owned on
the date of the Original MSLEF Agreement or thereafter acquired, (i) in favor of
the Merger or the Alternative Merger, as the case may be, the execution and
delivery by the Company of the Original Merger Agreement and the Amended Merger
Agreement and the approval and adoption of the Original Merger Agreement, the
Amended Merger Agreement and the terms thereof and each of the other actions
contemplated by the Original Merger Agreement, the Amended Merger Agreement,
this Agreement and the Ancillary Agreements and any actions required in
furtherance thereof and hereof; (ii) against any action or agreement that would
(A) result in a material breach of any covenant, representation or warranty or
any other obligation or agreement of the Company under the Original Merger
Agreement, the Amended Merger Agreement or any of the Ancillary Agreements to
which it is a party or of the Shareholder under this Agreement or (B) in the
judgment of Parent as communicated in writing to the Shareholder, impede,
interfere with, delay, postpone, or adversely affect the Offer, the Merger or
the Alternative Merger, as the case may be, or the transactions contemplated by
the Original Merger Agreement and the Amended Merger Agreement, this Agreement
and the Ancillary Agreements; and (iii) except as otherwise agreed to in writing
in advance by Parent, against the following actions (other than the Merger or
the Alternative Merger, as the case may be, and the transactions contemplated by
the Original Merger Agreement and the Amended Merger Agreement, this Agreement
and the Ancillary Agreements): (A) any extraordinary corporate transaction, such
as a merger, consolidation or other business combination involving the Company
or any of its subsidiaries; (B) any sale, lease or transfer of a substantial
portion of the assets or business of the Company or its subsidiaries, or
reorganization, restructuring, recapitalization, special dividend, dissolution
or liquidation of the Company or its subsidiaries; or (C) any change in the
present capitalization of the Company including any proposal to sell a
substantial equity interest in the Company or any of its subsidiaries.
Shareholder shall not enter into any agreement, arrangement or understanding
with any Person the effect of which would be inconsistent or violative of the
provisions and agreements contained in this Section 3.
(b) At the request of Parent, Shareholder, in furtherance of the
transactions contemplated hereby and by the Amended Merger Agreement and the
Ancillary Agreements, and in order to secure the performance by Shareholder of
its duties under this Agreement, shall promptly execute and deliver to Parent an
irrevocable proxy, in the form of Exhibit A hereto. Shareholder acknowledges and
agrees that the proxy executed and delivered pursuant to this Section 3(b) shall
be coupled with an interest, shall constitute, among other things, an inducement
for Parent to enter into this Agreement, the Original MSLEF Agreement, the
Original Merger Agreement, the Amended Merger Agreement and the Ancillary
Agreements to which it is a party, shall be irrevocable during the Voting Period
and shall not be terminated by operation of law or upon the occurrence of any
event.
(c) Shareholder agrees that during the period commencing on the date of the
Original MSLEF Agreement and continuing until the earlier of (x) the
consummation of the Merger or the Alternative Merger, as the case may be, and
(y) the termination of the Amended Merger Agreement, Shareholder will not, and
will cause its general partner not to, acquire, offer or propose to acquire, or
agree to acquire, whether by purchase, tender or exchange offer, any Company
Voting Securities.
4. Restrictions on Transfer, Proxies; No Solicitation.
(a) Shareholder shall not, during the Voting Period, directly or
indirectly: (i) except as provided in Section 2 or this Section 4(a), Transfer
to any Person any or all of the Company Voting Securities Beneficially Owned by
the Shareholder; (ii) except as provided in Section 3(b) of this Agreement,
grant any proxies or powers of attorney, deposit any such Company Voting
Securities into a voting trust or enter into a voting agreement, understanding
or arrangement with respect to the Company Voting Securities; or (iii) take any
action that would make any representation or warranty of Shareholder contained
herein untrue or incorrect or would result in a breach by the Shareholder of its
obligations under this Agreement or a breach by the Company of its obligations
under the Amended Merger Agreement or any of the Ancillary Agreements to which
it is a party. Notwithstanding any provisions of this Agreement to the contrary,
Shareholder may Transfer in the aggregate, following the consummation of the
Offer and prior to the Effective Time or the Alternative Effective Time, as the
case may be, a portion of the Shares in the aggregate not greater than 10% of
the Shares Beneficially Owned by the Shareholder immediately following the
consummation of the Offer.
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(b) Shareholder shall not, and shall cause its general partner not to,
directly or indirectly, (i) 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 (as defined in the Amended
Merger Agreement) of the Company or any Affiliate or any inquiry with respect
thereto, or (ii) in the event of an unsolicited written Takeover Proposal for
the Company or any Affiliate of the Company, engage in negotiations or
discussions with, or provide any information or data to, any Person (other than
Parent, any of its Affiliates or representatives) relating to any Takeover
Proposal. Shareholder shall notify Parent orally and in writing of any such
offers, proposals or inquiries relating to the purchase or acquisition by any
Person of the Shares Beneficially Owned by the Shareholder (including, without
limitation, the terms and conditions thereof and the identity of the Person
making it), within 24 hours of the receipt thereof. Shareholder shall, and shall
cause its general partner to, immediately cease and cause to be terminated all
existing activities, discussions and negotiations, if any, with any parties
conducted heretofore with respect to any Takeover Proposal relating to the
Company, other than discussions or negotiations with Parent and its Affiliates.
(c) Shareholder will not, and will cause its general partner not to,
directly or indirectly, make any public comment, statement or communication, or
take any action that would otherwise require any public disclosure by
Shareholder, Parent or any other Person, concerning the Merger, the Alternative
Merger, the Offer, the Spin-off (as described in Section 5.4 of the Amended
Merger Agreement) and the other transactions contemplated by the Amended Merger
Agreement, this Agreement and the Ancillary Agreements, except for any
disclosure (i) concerning the status of Shareholder as a party to such
agreement, the terms thereof, and its beneficial ownership of Shares, required
pursuant to Section 13(d) or Section 16 of the Exchange Act or (ii) required in
the Schedule 14D-9 or the Proxy Statement/Prospectus or the New Proxy
Statement/Prospectus.
(d) Notwithstanding the restrictions set forth in Section 4(b), any Person
who is a director or officer of the Company may exercise his fiduciary duties in
his capacity as a director or officer with respect to the Company, as opposed to
taking action with respect to the direct or indirect ownership of any Shares,
and no such exercise of fiduciary duties shall be deemed to be a breach of, or a
violation of the restrictions set forth in, Section 4(b) and the Shareholder
shall not have any liability hereunder for any such exercise of fiduciary duties
by such Person in his capacity as a director and officer of the Company. Nothing
in this Section 4(d) shall relieve or affect any of the Company's or its
Affiliates' obligations under the Amended Merger Agreement.
5. Representations and Warranties of Shareholder. Shareholder hereby
represents and warrants to Parent as follows:
(a) Shareholder is a limited partnership duly organized and validly
existing under the laws of the State of Delaware. Shareholder has all
necessary power and authority to execute and deliver this Agreement and
perform its obligations hereunder. The execution and delivery by
Shareholder of this Agreement and the performance by Shareholder of its
obligations hereunder have been duly and validly authorized by all required
partnership action, and no other proceedings or actions on the part of
Shareholder are necessary to authorize the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby.
(b) This Agreement has been duly and validly executed and delivered by
Shareholder and constitutes the valid and binding agreement of Shareholder,
enforceable against Shareholder in accordance with its terms except to the
extent (i) such enforcement may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights and (ii) the remedy
of specific performance and injunctive and other forms of equitable relief
may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
(c) As of the date of the Original MSLEF Agreement, Shareholder was
the sole record holder and Beneficial Owner of 13,341,580 Shares, and had
good and marketable title to all of such Shares, free and clear of all
choate liens, claims, options, proxies, voting agreements and perfected
security interests (other than to the extent created by either or both of
the Corporate Matters Agreement (the 'Corporate Matters Agreement') and the
Shareholder Agreement, each dated as of August 1, 1993, among the Company,
TAC, the Shareholder and certain other parties thereto, each of which
Shareholder agrees to terminate as of the Effective Time or the Alternative
Effective Time, as the case may be). The Shares constitute all of the
capital stock of the Company Beneficially Owned by Shareholder, and except
for the Shares, Shareholder
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does not Beneficially Own or have any right to acquire (whether currently,
upon lapse of time, following the satisfaction of any conditions, upon the
occurrence of any event or any combination of the foregoing) any Company
Voting Securities. Shareholder has sole power to vote and to dispose of the
Shares, and sole power to issue instructions with respect to the Shares to
the extent appropriate in respect of the matters set forth in this
Agreement, sole power to demand appraisal rights and sole power to agree to
all of the matters set forth in this Agreement, in each case with respect
to all of the Shares, with no limitations, qualifications or restrictions
on such rights, subject to applicable securities laws and the terms of this
Agreement. Shareholder does not beneficially own or have any right to
acquire (whether currently, upon lapse of time, following the satisfaction
of any conditions, upon the occurrence of any event or any combination of
the foregoing), except pursuant to the Merger or the Alternative Merger, as
the case may be any Parent Voting Securities.
(d) Except for filings, authorizations, consents and approvals as may
be required under, and other applicable requirements of, the ICA, the HSR
Act and the Exchange Act (i) no filing with, and no permit, authorization,
consent or approval of, any state or federal governmental body or authority
is necessary for the execution of this Agreement by Shareholder and the
consummation by Shareholder of the transactions contemplated hereby and
(ii) none of the execution and delivery of this Agreement by Shareholder,
the consummation by Shareholder of the transactions contemplated hereby or
compliance by Shareholder with any of the provisions hereof shall (A)
conflict with or result in any breach of Shareholder's agreement of limited
partnership or any agreement of partnership of the general partner, (B)
result in a violation or breach of, or constitute (with or without notice
or lapse of time or both) a default (or give rise to any third-party right
of termination, cancellation, material modification or acceleration) under
any of the terms, conditions or provisions of any note, loan agreement,
bond, mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind to
which Shareholder is a party or by which Shareholder or any of its
properties or assets (including the Shares) may be bound, or (C) violate
any order, writ, injunction, decree, judgment, statute, rule or regulation
applicable to Shareholder or any of its properties or assets. To the best
knowledge of Shareholder, no litigation is pending or threatened involving
Shareholder or the Company relating in any way to this Agreement, the
Original MSLEF Agreement, the Original Merger Agreement, the Amended Merger
Agreement, the Ancillary Agreements, or any transactions contemplated
hereby or thereby.
(e) Shareholder understands and acknowledges that Parent is entering
into, and causing the Purchaser to enter into the Amended Merger Agreement
and the Ancillary Agreements, and is incurring the obligations set forth
therein, in reliance upon Shareholder's execution and delivery of this
Agreement.
(f) Except for Morgan Stanley & Co. Incorporated, no broker,
investment banker, financial adviser or other person is entitled to any
broker's, finder's, financial adviser's or other similar fee or commission
in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of Shareholder.
(g) Shareholder will make such representations as may reasonably be
requested by Parent, and in such form as may reasonably be requested by
Parent, for use in connection with the request by Parent that the Internal
Revenue Service issue a private letter ruling with respect to the tax
consequences of the Spin-off.
6. Representations and Warranties of Parent. Parent hereby represents and
warrants to Shareholder as follows:
(a) Parent is a corporation duly organized and validly existing under
the laws of the State of Utah, and is in good standing under the laws of
the state of its incorporation. Parent has all necessary corporate power
and authority to execute and deliver this Agreement and perform its
obligations hereunder. The execution and delivery by Parent of this
Agreement and the performance by Parent of its obligations hereunder have
been duly and validly authorized by the Board of Directors of Parent and no
other corporate proceedings on the part of Parent are necessary to
authorize the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby.
(b) This Agreement has been duly and validly executed and delivered by
Parent and constitutes a valid and binding agreement of Parent, enforceable
against Parent in accordance with its terms except to the
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extent (i) such enforcement may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors rights and (ii) the remedy
of specific performance and injunctive and other forms of equitable relief
may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
(c) Except for filings, authorizations, consents and approvals as may
be required under, and other applicable requirements of, the ICA (i), no
filing with, and no permit, authorization, consent or approval of, any
state or federal public body or authority is necessary for the execution of
this Agreement by Parent and the consummation by Parent of the transactions
contemplated hereby and (ii) none of the execution and delivery of this
Agreement by Parent, the consummation by Parent of the transactions
contemplated hereby or compliance by Parent with any of the provisions
hereof shall (A) conflict with or result in any breach of the certificate
of incorporation or by-laws of Parent, (B) result in a violation or breach
of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any third party right of termination,
cancellation, material modification or acceleration) under any of the
terms, conditions or provisions of any note, loan agreement, bond,
mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind to
which Parent is a party or by which Parent or any of its properties or
assets may be bound, or (C) violate any order, writ, injunction, decree,
judgment, statute, rule or regulation applicable to Parent or any of its
properties or assets. To the best knowledge of Parent, no litigation is
pending or threatened involving Parent relating in any way to this
Agreement, the Original MSLEF Agreement, the Original Merger Agreement, the
Amended Merger Agreement, the Ancillary Agreements, or any transactions
contemplated hereby or thereby.
(d) Except for CS First Boston Corporation, no broker, investment
banker, financial adviser or other person is entitled to any broker's,
finder's, financial adviser's or other similar fee or commission in
connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of Parent.
7. Further Assurances.
(a) From time to time, at the other party's request and without further
consideration, each party hereto shall execute and deliver such additional
documents and take all such further lawful action as may be necessary or
desirable to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement.
(b) Shareholder has entered into an amendment to the existing Registration
Rights Agreement, forming Exhibit A to the Corporate Matters Agreement, by and
among the Company and the parties named therein for the purpose of, among other
things, providing the Shareholder with (i) registration rights for the sale of
certain shares of Company Common Stock held by it and (ii) certain financial and
other information related to the Company on an ongoing basis.
8. Stop Transfer; Legend.
(a) Shareholder agrees with and covenants to Parent that Shareholder shall
not request that the Company or Parent, as the case may be, register the
transfer (book-entry or otherwise) of any certificated or uncertificated
interest representing any of the securities of the Company or of Parent, as the
case may be, unless the Shareholder represents to the Company that such transfer
is made in compliance with this Agreement.
(b) Shareholder shall promptly surrender to the Company all certificates
representing the Shares, and other Company Voting Securities acquired by
Shareholder or its Affiliates after the date of the Original MSLEF Agreement,
and the Company shall place the following legend on such certificates:
'THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
SHAREHOLDER AGREEMENT, DATED AS OF AUGUST 3, 1995 AND AMENDED AND RESTATED
AS OF JULY 12, 1996, BY AND BETWEEN UNION PACIFIC CORPORATION AND THE
MORGAN STANLEY LEVERAGED EQUITY FUND II, L.P. WHICH, AMONG OTHER THINGS,
RESTRICTS THE TRANSFER AND VOTING THEREOF.'
9. Termination. Except as otherwise provided in this Agreement, this
Agreement shall terminate at the end of the Voting Period.
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<PAGE>
10. Miscellaneous.
(a) This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof.
(b) Shareholder agrees that this Agreement and the obligations hereunder
shall attach to any Company Voting Securities that may become Beneficially Owned
by Shareholder.
(c) All costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expenses, and Parent, on the one hand, and Shareholder, on the other hand, shall
indemnify and hold the other harmless from and against any and all claims,
liabilities or obligations with respect to any brokerage fees, commissions or
finders' fees asserted by any person on the basis of any act or statement
alleged to have been made by such party or its Affiliates.
(d) Except as provided in the Agreement, this Agreement shall not be
assigned by operation of law or otherwise without the prior written consent of
the other party, provided that Parent may assign, in its sole discretion, its
rights and obligations hereunder to any direct or indirect wholly owned
subsidiary of Parent, but no such assignment shall relieve Parent of its
obligations hereunder if such assignee does not perform such obligations.
(e) This Agreement may not be amended, changed, supplemented, or otherwise
modified or terminated, except upon the execution and delivery of a written
agreement executed by each of the parties hereto. The parties may waive
compliance by the other parties hereto with any representation, agreement or
condition otherwise required to be complied with by such other party hereunder,
but any such waiver shall be effective only if in writing executed by the
waiving party.
(f) All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly received if given) by hand delivery or telecopy (with a confirmation
copy sent for next day delivery via courier service, such as FedEx), or by any
courier service, such as FedEx, providing proof of delivery. All communications
hereunder shall be delivered to the respective parties at the following
addresses:
If to Shareholder:
The Morgan Stanley Leveraged Equity Fund II, L.P.
1221 Avenue of the Americas
New York, New York 10024
Attn: Frank V. Sica
Telephone: (212) 703-7761
Telecopy: (212) 703-6422
copy to:
Morgan Stanley & Co. Incorporated
1221 Avenue of the Americas
New York, New York 10024
Attn: Peter R. Vogelsang, Vice President
Telephone: (212) 703-5792
Telecopy: (212) 703-6422
If to Parent:
Union Pacific Corporation
Martin Tower
Eighth & Eaton Avenue
Bethlehem, Pennsylvania 18018
Attn: Carl W. von Bernuth
Telephone: (610) 861-3200
Telecopy: (610) 861-3111
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<PAGE>
copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: Paul T. Schnell, Esq.
Telephone No.: (212) 735-3000
Telecopy No.: (212) 735-2001
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(g) Whenever possible, each provision or portion of any provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law but if any provision or portion of any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect under
any applicable law or rule in any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or portion of any provision
in such jurisdiction, and this Agreement will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision or portion of any provision had never been contained herein.
(h) Each of the parties hereto recognizes and acknowledges that a breach by
it of any covenants or agreements contained in this Agreement will cause the
other party to sustain damages for which it would not have an adequate remedy at
law for money damages, and therefore each of the parties hereto agrees that in
the event of any such breach the aggrieved party shall be entitled to the remedy
of specific performance of such covenants and agreements and injunctive and
other equitable relief in addition to any other remedy to which it may be
entitled, at law or in equity.
(i) All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall be cumulative
and not alternative, and the exercise of any thereof by any party shall not
preclude the simultaneous or later exercise of any other such right, power or
remedy by such party. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
(j) This Agreement is not intended to be for the benefit of, and shall not
be enforceable by, any person or entity who or which is not a party hereto.
(k) This Agreement shall be governed and construed in accordance with the
laws of the State of New York, without giving effect to the principles of
conflicts of law thereof.
(l) The representations and warranties made herein shall survive through
the term of this Agreement.
(m) Each party hereby irrevocably submits to the non-exclusive original
jurisdiction of the Supreme Court in the State of New York or the Federal
District Court for the Southern District of New York in any action, suit or
proceeding arising in connection with this Agreement, and agrees that any such
action, suit or proceeding may be brought in such court (and waives any
objection based on forum non conveniens or any other objection to venue
therein); provided, however, that such consent to jurisdiction is solely for the
purpose referred to in this paragraph (m) and shall not be deemed to be a
general submission to the jurisdiction of said Courts or in the State of New
York other than for such purposes. Each party hereto hereby waives any right to
a trial by jury in connection with any such action, suit or proceeding.
(n) The descriptive headings used herein are inserted for convenience of
reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
(o) This Agreement may be executed in counterparts, each of which shall be
deemed to be an original, but all of which, taken together, shall constitute one
and the same Agreement.
11. Effectiveness. The Original MSLEF Agreement shall remain in effect,
and this Agreement shall not be effective (other than the provisions of Sections
3 and 4 hereof, which shall be effective immediately), unless and until the
stockholders of the Company have approved the Alternative Merger of the
Alternative Company Special Meeting.
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IN WITNESS WHEREOF, Parent and Shareholder have caused this Agreement to be
duly executed as of the day and year first above written.
UNION PACIFIC CORPORATION
By: /s/ CARL W. VON BERNUTH
-------------------------------
Name: Carl W. von Bernuth
Title: Senior Vice President--Law
THE MORGAN STANLEY LEVERAGED EQUITY
FUND II, L.P.
By:MORGAN STANLEY LEVERAGED EQUITY
FUND II, INC.
By: /s/ FRANK V. SICA
-------------------------------
Name: Frank V. Sica
Title: Vice Chairman
The undersigned agrees to be bound by and comply with the provisions of
Section 8(b) of this Agreement.
SOUTHERN PACIFIC RAIL CORPORATION
By: /s/ JERRY R. DAVIS
-------------------------------
Name: Jerry R. Davis
Title: President and Chief
Executive Officer
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EXHIBIT A
TO MSLEF SHAREHOLDER AGREEMENT
IRREVOCABLE PROXY
The undersigned hereby revokes any previous proxies and appoints Union
Pacific Corporation ('Parent'), Drew Lewis and Richard K. Davidson, and each of
them, with full power of substitution, as attorney and proxy of the undersigned
to attend any and all meetings of shareholders of Southern Pacific Rail
Corporation, a Delaware corporation (the 'Company') (and any adjournments or
postponements thereof), to vote all shares of Common Stock, $.001 par value, of
the Company that the undersigned is then entitled to vote, and to represent and
otherwise to act for the undersigned in the same manner and with the same effect
as if the undersigned were personally present, with respect to all matters
specified in Section 3(a) of the Shareholder Agreement (the 'Shareholder
Agreement'), dated as of August 3, 1995, as amended and restated as of July 12,
1996, by and among Parent, and the undersigned. Capitalized terms used and not
defined herein have the respective meanings ascribed to them in, or as
prescribed by, the Shareholder Agreement.
This proxy shall be deemed to be a proxy coupled with an interest and is
irrevocable during the Voting Period and has been granted pursuant to Section
3(b) of the Shareholder Agreement.
The undersigned authorizes such attorney and proxy to substitute any other
person to act hereunder, to revoke any substitution and to file this proxy and
any substitution or revocation with the Secretary of the Company.
THE MORGAN STANLEY LEVERAGED
EQUITY FUND II, L.P.
By: MORGAN STANLEY LEVERAGED
EQUITY FUND II, INC.
By: --------------------------------
Name:
Title:
Dated: July , 1996
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ANNEX F
AMENDED AND RESTATED PARENT SHAREHOLDERS AGREEMENT
AMENDED AND RESTATED AGREEMENT, dated as of July 12, 1996 (this
'Agreement'), by and among Union Pacific Corporation, a Utah corporation
('Parent'), Union Pacific Merger Co., a Delaware corporation ('Mergerco', and
together with Parent, the 'Shareholders'), and Southern Pacific Rail
Corporation, a Delaware corporation (the 'Company').
W I T N E S S E T H:
WHEREAS, Parent, UP Acquisition Corporation, a former Delaware corporation
and an indirect wholly-owned subsidiary of Parent ('Purchaser') and the Company
entered into the Parent Shareholders Agreement, dated as of August 3, 1995, as
amended (the 'Original Parent Shareholders Agreement');
WHEREAS, Purchaser has merged with and into Union Pacific Railroad Company,
a Utah corporation and an indirect wholly owned subsidiary of Parent ('UPRR'),
with UPRR as the surviving corporation (the 'Purchaser Merger');
WHEREAS, the beneficial interests in the shares of Company Common Stock (as
hereinafter defined) acquired by Purchaser in the Offer (as hereinafter defined)
and formerly held by UPRR are held by Parent and Mergerco;
WHEREAS, the Shareholders and the Company wish to amend and restate the
Original Parent Shareholders Agreement to reflect the fact that the Purchaser
Merger has occurred and that the beneficial interests in the shares of Company
Common Stock are held by Parent and Mergerco;
WHEREAS, simultaneously with the execution of the Original Parent
Shareholder Agreement, Parent, UPRR, Purchaser, and the Company entered into an
Agreement and Plan of Merger (the 'Original Merger Agreement'), pursuant to
which, among other things, (i) Purchaser purchased 39,034,471 shares (the
'Shares') of common stock, $0.001 par value, of the Company (the 'Company Common
Stock') pursuant to a cash tender offer (the 'Offer') and (ii) the Company would
be merged with and into UPRR (the 'Merger') with UPRR as the surviving
corporation;
WHEREAS, Parent, UPRR, UP Holding Company, Inc., a Utah corporation
('Holding'), Mergerco and the Company have entered into an Amended and Restated
Agreement and Plan of Merger, dated as of July 12, 1996 (the 'Amended Merger
Agreement'), in order to permit an alternative structure to the acquisition of
the Company by Parent whereby the Company would merge with and into either
Holding or Mergerco at the election of Parent with Holding or Mergerco, as the
case may be, as the surviving corporation (the 'Alternative Merger');
WHEREAS, as an inducement and a condition to its entering into the Amended
Merger Agreement and incurring the obligations set forth therein, the Company
has required that Shareholders agree, and Shareholders have agreed, to enter
into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual premises,
representations, warranties, covenants and agreements contained herein and in
the Amended Merger Agreement, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Certain Definitions. Capitalized terms used and not defined herein
have the respective meanings ascribed to them in the Amended Merger Agreement.
In addition, for purposes of this Agreement:
(a) 'Affiliate' shall mean, with respect to any specified Person, any
Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the Person
specified. For purposes of this Agreement, with respect to any Shareholder,
'Affiliate' shall not include the Company and the Persons that directly, or
indirectly through one or more intermediaries, are controlled by the
Company.
(b) 'Beneficially Own' or 'Beneficial Ownership' with respect to any
securities shall mean having 'beneficial ownership' of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the 'Exchange Act')), including pursuant to any
agreement, arrangement or understanding, whether or not in writing. Without
duplicative counting of the same securities by the same holder, securities
Beneficially Owned by a Person shall include securities Beneficially Owned
by all Affiliates of such Person and all other Persons with whom such
Person would constitute a 'group' within the meaning of Section 13(d) of
the Exchange Act and the rules promulgated thereunder.
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(c) 'Company Voting Securities' shall mean any securities of the
Company entitled, or which may be entitled, to vote (whether or not
entitled to vote generally in the election of directors) and any securities
convertible into or exercisable or exchangeable for such securities
(whether or not subject to contingencies with respect to any matter or
proposal submitted for the vote or consent of shareholders of the Company).
For purposes of determining the percentage of Company Voting Securities
Beneficially Owned by a Person, securities Beneficially Owned by any such
Person that are convertible, exercisable or exchangeable for securities
entitled to vote shall be deemed to be converted, exercised or exchanged
and shall represent the number of securities of the Company entitled to
vote into which such convertible, exercisable or exchangeable securities
(disregarding for such purposes any restrictions on conversion, exercise or
exchange) are then convertible, exchangeable or exercisable.
(d) 'Current Market Price' shall mean, as applied to any class of
stock on any date, the average of the daily 'Closing Prices' (as
hereinafter defined) for the 20 consecutive trading days immediately prior
to the date in question. The term 'Closing Price' on any day shall mean the
last sales price, regular way, per share of such stock on such day, or if
no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted
to trading on the New York Stock Exchange or, if shares of such stock are
not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities exchange
on which the shares of such stock are listed or admitted to trading, or, if
the shares of such stock are not listed or admitted to trading on any
national securities exchange on the NASDAQ National Market System or, if
the shares of such stock are not quoted on the NASDAQ National Market
System, the average of the high bid and low asked prices in the
over-the-counter market as reported by the National Association of
Securities Dealers Inc.'s Automated Quotation System.
(e) 'including' shall mean including without limitation.
(f) 'Person' shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
(g) 'Transfer' shall mean, with respect to a security, the sale,
transfer, pledge, hypothecation, encumbrance, assignment or disposition of
such security or the Beneficial Ownership thereof, the offer to make such a
sale, transfer or other disposition, and each option, agreement,
arrangement or understanding, whether or not in writing, to effect any of
the foregoing. As a verb, 'Transfer' shall have a correlative meaning.
(h) 'Trustee' shall mean the trustee of the Voting Trust.
(i) 'Voting Trust' shall mean the Voting Trust into which Shares
acquired by the Purchaser are to be deposited as described in Section 1.8
of the Amended Merger Agreement.
2. Voting of Company Common Stock; Irrevocable Proxy.
(a) Shareholders hereby agree that during the period commencing on the date
of the Original Parent Shareholders Agreement and continuing until the earlier
of (x) the consummation of the Merger or the Alternative Merger, as the case may
be, and (y) the termination of the Amended Merger Agreement in accordance with
Article VII thereof, at any meeting (whether annual or special, and whether or
not an adjourned or postponed meeting) of the Company's shareholders, however
called, or in connection with any written consent of the Company's shareholders,
subject to the absence of a preliminary or permanent injunction or other final
order by any United States federal court or state court barring such action,
Shareholders shall vote (or cause to be voted) the Shares purchased pursuant to
the Offer and all other Company Voting Securities that they Beneficially Own,
whether owned on the date hereof or hereafter acquired, (i) in favor of the
Merger or the Alternative Merger, as the case may be, the execution and delivery
by the Company of the Amended Merger Agreement and the approval and adoption of
the Amended Merger Agreement and the terms thereof and each of the other actions
contemplated by the Amended Merger Agreement, this Agreement and the Ancillary
Agreements and any actions required in furtherance thereof and hereof; (ii) with
respect to the election or removal of directors, in the same proportion as all
Company Voting Securities that are not Beneficially Owned by Shareholders that
vote with respect to such matter ('Voted Non-Shareholder Securities') have been
voted with respect to such matter; (iii) with respect to any other proposed
merger, business combination, or similar transaction (including, without
limitation, any consolidation, sale of all or substantially all the assets,
recapitalization, liquidation or winding up or other Specified Company
Transaction) involving the Company (other than the transactions contemplated by
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the Amended Merger Agreement), as the Shareholders may determine, in their sole
discretion; and (iv) unless either (A) one of the transactions described in
clause (iii) above has been proposed or (B) the matter being proposed would
impose on Shareholders limitations not imposed on other shareholders of the
Company, on the enjoyment of any of Shareholders and their Affiliates of the
legal rights generally enjoyed by shareholders of the Company, with respect to
all matters submitted to a vote of the Company's stockholders not specified in
(i), (ii) or (iii) above, in the same proportion as all Voted Non-Shareholder
Securities have been voted with respect to such matter. Shareholders shall not
enter into any agreement or understanding with any Person the effect of which
would be inconsistent or violative of the provisions and agreements contained in
this Section 2.
(b) Shareholders (or the Trustee, if the Shares are held in the Voting
Trust), in furtherance of the transactions contemplated hereby and by the
Amended Merger Agreement and the Ancillary Agreements, and in order to secure
the performance by Shareholders of their duties under this Agreement, shall
following consummation of the Offer execute and deliver to the Company an
irrevocable proxy, in the form of Exhibit A hereto. Shareholders acknowledge and
agree that the proxy executed and delivered pursuant to this Section 2(b) shall
be coupled with an interest, shall constitute, among other things, an inducement
for the Company to enter into this Agreement, the Amended Merger Agreement and
the Ancillary Agreements to which it is a party, shall be irrevocable until the
earlier of the Alternative Company Special Meeting or the termination of the
Amended Merger Agreement in accordance with its terms and shall not be
terminated by operation of law or upon the occurrence of any event.
3. Restrictions on Transfer, Proxies; Pledges. (a) Shareholders shall
not, during the period commencing on the date of the Original Parent
Shareholders Agreement and continuing until the first to occur of (x) the
consummation of the Merger or the Alternative Merger, as the case may be, or (y)
the termination of the Amended Merger Agreement in accordance with Article VII
thereof, directly or indirectly: (i) Transfer (including but not limited to the
Transfer by Parent of any securities of Purchaser or any Affiliate of Parent
controlling Purchaser) to any Person (other than to the Voting Trust) any or all
of the Company Voting Securities (or any interest therein) which it may
hereafter acquire in the Offer or otherwise; (ii) except as provided in Sections
2(b) and 4(b) of this Agreement and except for the Voting Trust, grant any
proxies or powers of attorney, deposit any Company Voting Securities into a
voting trust or enter into a voting agreement, understanding or arrangement with
respect to the Company Voting Securities; (iii) take any action that would make
any representation or warranty of Shareholders contained herein untrue or
incorrect or would result in a breach by Shareholders of their respective
obligations under this Agreement or would result in a breach by Shareholders of
their respective obligations under the Amended Merger Agreement or any of the
Ancillary Agreements to which it is a party; or (iv) take any action covered by
Section 4(a)(ii), (iv), (vi) and (viii) hereof, provided, however, in the event
a bona fide proposal for a Specified Company Transaction is made by any Person
(other than the Shareholders and their Affiliates) only the restrictions set
forth in Section 4(a)(viii) shall be applicable.
(b) Following termination of the Amended Merger Agreement in accordance
with its terms, Shareholders may effect one or more pledges of Company Voting
Securities or grants of security interests therein, to one or more banks or
other financial institutions that are not Affiliates of any Shareholder as
security for the payment of bona fide full recourse indebtedness owed by Parent
or UPRR to such banks or financial institutions. Except as set forth in the
proviso below, such banks and financial institutions shall not incur any
obligations under this Agreement with respect to such Company Voting Securities
or shall be restricted from exercising any right of enforcement or foreclosure
with respect to any related security interest or lien; provided, however, that
it shall be a condition to any such pledge that the pledgee shall agree to be
bound by the provisions of Sections 4(b) and 5 of this Agreement, except that
following an event of default or foreclosure, the pledgee shall be permitted to
sell, subject only to the right of first refusal set forth in Section 5(b)
hereof, (x) an unlimited number of Voting Company Securities to any Person that
is not, and does not control, a Class I Railroad and (y) up to 4% of the then
outstanding shares of Company Voting Securities to a Class I Railroad.
4. Standstill and Related Provisions.
(a) Subject to the final paragraph of this Subsection 4(a), in the event
that the Amended Merger Agreement is terminated in accordance with Article VII
thereof other than Section 7.1(d)(ii) thereof, but only in such event,
Shareholders agree that for a period commencing on the date of such termination
and continuing until the termination of this Agreement in accordance with the
terms of Section 12 hereof (any such period being hereafter referred to as the
'Standstill Period'), without the prior written consent of the Board of
Directors of the Company (the 'Board') specifically expressed in a resolution
adopted by a majority of the directors of the
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Company, Shareholders will not, and Shareholders will cause each of their
respective Affiliates not to, directly or indirectly, alone or in concert with
others:
(i) acquire, offer or propose to acquire, or agree to acquire (except,
in any case, by way of (A) stock dividends or other distributions or rights
offerings made available to holders of any shares of Company Common Stock
generally, share-splits, reclassifications, recapitalizations,
reorganizations and any other similar action taken by Company, and (B) the
conversion, exercise or exchange of Company Voting Securities in accordance
with the terms thereof, provided, that any such securities shall be subject
to the provisions hereof), directly or indirectly, whether by purchase,
tender or exchange offer, through the acquisition of control of another
Person, by joining a partnership, limited partnership, syndicate or other
'group' (within the meaning of Section 13(d)(3) of the Exchange Act) (other
than groups consisting solely of Shareholders and their Affiliates, all of
which are or, prior to the formation of such group, become parties to this
Agreement) or otherwise, any Company Voting Securities; provided, however,
that if, solely as a result of the issuance by the Company of additional
Company Voting Securities, Shareholders and their Affiliates Beneficially
Own less than the amount of shares of Company Voting Securities
Beneficially Owned immediately following the consummation of the Offer (the
'Ownership Limit'), Shareholders may purchase or acquire additional Company
Voting Securities to bring their Beneficial Ownership up to the greater of
5.5% and the percentage of outstanding Company Voting Securities
Beneficially Owned by the Shareholders immediately prior to such issuance
by the Company; provided, further, if as a result of Transfers of Company
Voting Securities, Shareholders Beneficially Own less than 5.5% of the then
outstanding Company Voting Securities, Shareholders may purchase or acquire
additional Company Voting Securities to bring their Beneficial Ownership up
to, but not in excess of, 5.5% of the then outstanding shares of Company
Voting Securities. In addition, in the event that a Shareholder or an
Affiliate thereof inadvertently and without knowledge indirectly acquires
Beneficial Ownership of not more than one-quarter of one percent of the
Company Voting Securities in excess of the amount permitted to be owned by
the Shareholders pursuant to this Section 5(a) pursuant to a transaction by
which a Person (that was not then an Affiliate of a Shareholder before the
consummation of such transaction) owning Company Voting Securities becomes
an Affiliate of such Shareholder, then all Company Voting Securities so
acquired shall thereupon become subject to this Agreement and such
Shareholder shall be deemed not to have breached this Agreement provided
that such Shareholder, within 120 days thereafter, causes a number of such
Company Voting Securities in excess of the amount permitted to be so owned
(or, at the election of such Shareholder, an equal number of the other
Company Voting Securities that are Beneficially Owned by a Shareholder) to
be Transferred, in a transaction subject to Section 5 hereof, to a
transferee that is not a Shareholder, an Affiliate thereof or a member of a
'group' in which a Shareholder or an Affiliate is included (or, if Parent
or its assignee shall exercise any purchase rights under Section 5(b)
hereof, to the Company or its assignee);
(ii) make, or in any way participate, directly or indirectly, in any
'solicitation' (as such term is used in the proxy rules of the Securities
and Exchange Commission as in effect on the date hereof) of proxies or
consents (whether or not relating to the election or removal of directors),
seek to advise, encourage or influence any Person with respect to the
voting of any Company Voting Securities, initiate, propose or otherwise
'solicit' (as such term is used in the proxy rules of the Securities and
Exchange Commission as in effect on the date hereof) shareholders of the
Company for the approval of shareholder proposals, whether made pursuant to
Rule 14a-8 of the Exchange Act or otherwise, or induce or attempt to induce
any other Person to initiate any such shareholder proposal or otherwise
communicate with the Parent's shareholders or others pursuant to Rule
14a-1(2)(iv) under the Exchange Act or otherwise;
(iii) seek, propose, or make any statement with respect to, any
merger, consolidation, business combination, tender or exchange offer, sale
or purchase of assets, sale or purchase of securities, dissolution,
liquidation, reorganization, restructuring, recapitalization, change in
capitalization, change in corporate structure or business or similar
transaction involving the Company or its subsidiaries (any of the foregoing
being referred to herein as a 'Specified Company Transaction'); provided
that the foregoing shall not prevent voting in accordance with Section 4(b)
hereof (but shall prevent any public comment, statement or communication,
and any action that would otherwise require any public disclosure by
Shareholders, the Company or any other Person, concerning such voting);
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(iv) form, join or in any way participate in a 'group' (within the
meaning of Section 13(d)(3) of the Exchange Act) with respect to any
Company Voting Securities, other than groups consisting solely of
Shareholders and their Affiliates;
(v) except for the Voting Trust, deposit any Company Voting Securities
in any voting trust or subject any Company Voting Securities to any
arrangement or agreement with respect to the voting of any Company Voting
Securities, other than this Agreement;
(vi) call or seek to have called any meeting of the stockholders of
the Company or execute any written consent with respect to the Company or
Company Voting Securities;
(vii) otherwise act, alone or in concert with others, to control or
seek to control or influence or seek to influence the management, Board of
Directors or policies of the Company;
(viii) seek, alone or in concert with others, representation on the
Board of Directors of the Company, or seek the removal of any member of
such Board or a change in the composition or size of such Board;
(ix) make any publicly disclosed proposal, comment, statement or
communication (including, without limitation, any request to amend, waive
or terminate any provision of this Agreement other than Section 4(a)), or
make any proposal, comment, statement or communication (including, without
limitation, any request to amend, waive or terminate any provision of this
Agreement other than Section 4(a)) in a manner that would require any
public disclosure by Shareholders or any other Person, or enter into any
discussion with any Person (other than directors and officers of the
Company), regarding any of the foregoing;
(x) make or disclose any request to amend, waive or terminate any
provision of Section 4(a) of this Agreement; or
(xi) have any discussions or communications, or enter into any
arrangements, understandings or agreements (whether written or oral) with,
or advise, finance, assist or encourage, any other Person in connection
with any of the foregoing, or take any action inconsistent with the
foregoing, or make any investment in or enter into any arrangement with,
any other Person that engages, or offers or proposes to engage, in any of
the foregoing.
The restrictions set forth in this Section 4(a) shall not prevent
Shareholders from (A) performing their obligations and exercising their rights
under this Agreement, including, without limitation, (x) Transferring any
Company Voting Securities in accordance with Sections 3 and 5 hereof or to the
Voting Trust, and (y) voting in accordance with Sections 2(a) and 4(b) hereof
and granting a proxy to the Company in accordance with Section 2(b) hereof; (B)
communicating in a non-public manner with any other Shareholder or their
Affiliates; and (C) complying with the requirements of Sections 13(d) and 16(a)
of the Exchange Act and the rules and regulations thereunder, in each case, as
from time to time in effect, or any successor provisions or rules with respect
thereto, or any other applicable law, rule, regulation, judgment, decree,
ruling, order, award, injunction, or other official action of any agency,
bureau, commission, court, department, official, political subdivision, tribunal
or other instrumentality of any government (whether federal, state, county or
local, domestic or foreign).
(b) Subject to the receipt of proper notice and the absence of a
preliminary or permanent injunction or other final order by any United States
federal court or state court barring such action, Shareholders agree that during
any Standstill Period Shareholders will, and will cause their Affiliates to, (i)
be present, in person or represented by proxy, at all annual and special
meetings of shareholders of the Company so that all Company Common Stock
Beneficially Owned by Shareholders and their Affiliates and then entitled to
vote may be counted for the purposes of determining the presence of a quorum at
such meetings; and (ii) with respect to the election or removal of directors, in
the same proportion as all Voted Non-Shareholder Securities have been voted with
respect to such matter; and (iii) with respect to any proposed merger, business
combination, or similar transaction (including, without limitation, any
consolidation, sale of all or substantially all the assets, recapitalization,
liquidation or winding up or other Specified Company Transaction) involving the
Company, as the Shareholders may determine, in their sole discretion; and (iv)
unless the matter being proposed would impose on Shareholders limitations, not
imposed on other shareholders of the Company, on the enjoyment of any of
Shareholders and their Affiliates of the legal rights generally enjoyed by
shareholders of the Company with respect to all matters submitted to a vote of
the Company's stockholders not specified in (ii) or (iii) above, in the same
proportion as all Voted Non-Shareholder Securities have been voted with respect
to such matter.
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5. Limitations on Disposition. (a) Shareholders agree that during the
Standstill Period they will not, and will cause their Affiliates not to,
directly or indirectly, without the prior written consent of the Board of
Directors of the Company specifically expressed in a resolution adopted by a
majority of the directors of the Company, Transfer to any Person any Company
Voting Securities (including but not limited to the Transfer of any securities
of an Affiliate which is the record holder or Beneficial Owner of Parent Voting
Securities, if, as the result of such Transfer, such Person would cease to be an
Affiliate of a Shareholder), if, to the knowledge of the Shareholders or any of
their Affiliates, after due inquiry which is reasonable in the circumstances
(and which shall include, with respect to the Transfer of 1% or more of the
Company Voting Securities then outstanding in one transaction, or a series of
related transactions, specific inquiry with respect to the identity of the
acquiror of such Company Voting Securities and the number of Company Voting
Securities that, immediately following such transaction or transactions, would
be Beneficially Owned by such acquiror, together with its Affiliates and any
members of a 'group' (within the meaning of Section 13(d)(3) of the Exchange
Act) of which such acquiror is a member), immediately following such transaction
the acquiror of such Company Voting Securities, together with its Affiliates and
any members of such a group, would Beneficially Own in the aggregate 6% (or 4%
in the event that the purchaser is or controls a Class I Railroad) or more of
the Company Voting Securities then outstanding; provided that, without the prior
written consent of the Board of Directors of the Company, (i) Shareholders and
their Affiliates may Transfer any number of Company Voting Securities to any
other Shareholder or any Affiliate of a Shareholder, provided that (A) such
transferee, if not then a Shareholder, shall become a party to this Agreement
and agree in writing to perform and comply with all of the obligations of such
transferor Shareholder under this Agreement, and thereupon such transferee shall
be deemed to be a Shareholder party hereto for all purposes of this Agreement,
and (B) if the transferee is not prior thereto a Shareholder, the transferor
shall remain liable for such transferee's performance of and compliance with the
obligations of the transferor under this Agreement, (ii) Shareholders and their
Affiliates may Transfer Company Voting Securities in a tender offer, merger, or
other similar business combination transaction approved by the Board of
Directors of the Company, and (iii) Shareholders may pledge their Parent Voting
Securities as provided in Section 3(b) hereof and the pledgee may Transfer such
Company Voting Securities as contemplated by the proviso in Section 3(b).
(b) During the Standstill Period, if to the knowledge of the Shareholders
after making due inquiry which is reasonable under the circumstances,
immediately following the Transfer of any Company Voting Securities the acquiror
thereof, together with its Affiliates and any members of a 'group' (within the
meaning of Section 13(d)(3) of the Exchange Act), would Beneficially Own in the
aggregate 2% or more of the outstanding Parent Voting Securities (a '2% Sale'),
Shareholders shall, prior to effecting any such Transfer, offer the Company a
right of first refusal to purchase the shares proposed to be Transferred on the
following terms. Shareholders shall provide the Company with written notice (the
'2% Sale Notice') of any proposed 2% Sale, which 2% Sale Notice shall contain
the identity of the purchaser, the number of shares of Company Voting Securities
proposed to be Transferred to such purchaser, the purchase price for such shares
and the form of consideration payable for such shares. The 2% Sale Notice shall
also contain an irrevocable offer to sell the shares subject to such 2% Sale
Notice to the Company for cash at a price equal to the price contained in such
2% Sale Notice. The Company shall have the right and option, by written notice
delivered to such Shareholder (the 'Purchase Notice') within 15 days of receipt
of the 2% Sale Notice, to accept such offer as to all, but not less than all, of
the Company Voting Securities subject to such 2% Sale Notice. The Company shall
have the right to assign to any Person such right to purchase the Company Voting
Securities subject to the 2% Sale Notice. In the event the Company (or its
assignee) elects to purchase the Company Voting Securities subject to the 2%
Sale Notice, the closing of the purchase of the Company Voting Securities shall
occur at the principal office of the Company (or its assignee) on or before the
30th day following such Shareholder's receipt of the Purchase Notice. In the
event the Company does not elect to purchase the shares subject to the 2% Sale
Notice, such Shareholder shall be free, for a period of 30 days following the
receipt of notice from Parent of its election not to purchase such Company
Voting Securities or, in the absence of any such notice, for a period of 30 days
following the 15th day after receipt by the Company of the 2% Sale Notice, to
sell the Company Voting Securities subject to the 2% Sale Notice in accordance
with the terms of, and to the person identified in, the 2% Sale Notice. If such
sale is not effected within such 30 day period such Company Voting Securities
shall remain subject to the provisions of this Agreement. Notwithstanding the
foregoing, the right of first refusal set forth in this Subsection (b) shall not
apply to the Transfer by Shareholders of Company Voting Securities (i) made in
an underwritten public offering pursuant to an effective registration statement
under the Securities Act, or (ii) made in a transaction permitted
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pursuant to, and made in compliance with, clauses (i) or (iii) of the proviso to
Section 5(a) hereof, or (iii) made in a tender offer, merger or other similar
business combination transaction approved by the Board of Directors of the
Company. Any proposed sale by Shareholders of Company Voting Securities shall be
subject to the restrictions on sales to an acquiror which would Beneficially Own
6% (or 4%, in the event that the purchaser is or controls a Class I Railroad) or
more of the outstanding Company Voting Securities, as set forth in Section 5(a)
hereof, whether or not the Company exercises its right of first refusal and
consummates the purchase of Parent Voting Securities. If the Company (or its
assignee) exercises its right to purchase any Company Voting Securities but
fails to complete the purchase thereof for any reason other than the failure of
such Shareholder to perform its obligations hereunder with respect to such
purchase, then, on the 30th day following such Shareholder's receipt of the
Purchase Notice, such Company Voting Securities shall cease to be subject to
Sections 4(b), 5 and 11 hereof for any purpose whatsoever. If the purchase price
described in any 2% Sale Notice is not solely made up of cash or marketable
securities, the 2% Sale Notice shall include a good faith estimate of the cash
equivalent of such other consideration, and the consideration payable by the
Company or its assignee (if the Company elects to purchase (or to have assignee
purchase) the Company Voting Securities described in the 2% Sale Notice) in
place of such other consideration shall be cash equal to the amount of such
estimate; provided, however, that if the Company in good faith disagrees with
such estimate and states a different good faith estimate in the Purchase Notice,
and if the Company and such Shareholder cannot agree on the cash equivalent of
such other (i.e., other than cash or marketable securities) consideration, such
cash equivalent shall be determined by a reputable investment banking firm
without material connections with either party. Such investment banking firm
shall be selected by both parties or, if they shall be unable to agree, by an
arbitrator appointed by the American Arbitration Association. The fees and
expenses of any such investment banking firm and/or arbitrator shall be shared
equally by the Company and such Shareholder, unless otherwise determined by such
firm or arbitrator. In the event of such differing estimates by the Company and
such Shareholder, periods of time which would otherwise run under this Section
5(b) from the date of such Shareholder's receipt of the Purchase Notice shall
run instead from the date on which the parties agree on such cash equivalent or,
in the absence of such agreement, the date on which such cash equivalent is
determined by such investment banking firm. If the purchase price described in
any 2% Sale Notice shall include marketable securities, the purchase price
payable by the Company (or its designee) shall include, to the extent marketable
securities were included as a portion of the consideration provided for in the
2% Sale Notice, an amount in cash determined by reference to the Current Market
Price of such securities on the day the Purchase Notice is received by such
Shareholder.
(c) Not later than the tenth day following the end of any calendar month
during the Standstill Period in which one or more dispositions of Company Voting
Securities by Shareholders or any of their Affiliates shall have occurred, the
relevant Shareholder shall give written notice to the Company of all such
dispositions. Such notice shall state the date upon which each such disposition
was effected, the price and other terms of each such disposition, the number and
type of the Company Voting Securities involved in each such disposition, the
means by which each such disposition was effected and, to the extent known, the
identity of the Persons acquiring such Company Voting Securities.
(d) In connection with any proposed privately negotiated sale by any
Shareholders of Company Voting Securities representing in excess of 3.9% of the
then outstanding Company Voting Securities, the Company will cooperate with and
permit the proposed purchaser to conduct a due diligence review that is
reasonable under the circumstances of the Company and its Subsidiaries and their
respective business and operations, including, without limitation, reasonable
access during normal business hours to their executive officers and, if
reasonable under the circumstances, their properties, subject to execution by
such purchaser of a customary confidentiality agreement; provided that the
Company shall not be required to permit more than two such due diligence reviews
in any twelve-month period.
(e) Notwithstanding any provision to the contrary contained in this
Agreement, and without being subject to any of the restrictions set forth in
this Agreement, Shareholders and their Affiliates may (i) transfer or
distribute, by means of dividend, exchange offer or other distribution, any
shares of Company Voting Securities to Parent's shareholders and (ii) transfer
or dispose of the Company Voting Securities in connection with an underwritten
public offering of debt or equity securities of Parent which are convertible or
exchangeable into Company Voting Securities, it being agreed that the Company
shall fully cooperate with Parent in connection with any such disposition,
including by filing any necessary registration statement with the Securities and
Exchange Commission and entering into a customary underwriting agreement, if
necessary.
F-7
<PAGE>
6. Limitation on Company Action. Without the prior written consent of
Shareholders, the Company shall not take or recommend to its shareholders any
action which would impose limitations, not imposed on other shareholders of
Parent, on the enjoyment by any of the Shareholders and their Affiliates of the
legal rights generally enjoyed by shareholders of the Company, other than those
imposed by the terms of this Agreement, the Amended Merger Agreement, and the
Ancillary Agreements; provided, however, that the foregoing shall not prevent
the Company from implementing or adopting a Shareholder Rights Plan or issuing a
similar security which has a 'trigger' threshold of not less than two percentage
points greater than the percentage of outstanding shares of Company Common Stock
then Beneficially Owned by the Shareholders.
7. Access to Information. The Company shall (and shall cause each of its
subsidiaries to) afford to the officers, employees, accountants, counsel,
financing sources and other representatives of Shareholders, access, during
normal business hours, during the term of this Agreement, to all of its and its
subsidiaries' properties, books, contracts, commitments and records and, during
such period, the Company shall (and shall cause each of its subsidiaries to)
furnish promptly to Shareholders (a) a copy of each report, schedule,
registration statement and other document filed or received by it during such
period pursuant to the requirements of federal securities laws and (b) all other
information concerning its business, properties and personnel as Shareholders
may reasonably request; provided, however, that access to certain Company
information may require the entry of a protective order by the Surface
Transportation Board (the 'STB'), after which date full access will be granted
to such information consistent with this paragraph and subject to the terms of
such order. Unless otherwise required by law, Shareholders will hold any such
information which is nonpublic in confidence in accordance with the provisions
of the existing confidentiality agreement between the Company and Parent,
subject to the requirements of applicable law.
8. Representations and Warranties of Shareholders. Shareholders hereby
represent and warrant to the Company that:
(a) Parent is a corporation duly organized and validly existing under
the laws of the State of Utah and is in good standing under the laws of the
State of Utah. Shareholders have all necessary corporate power and
authority to execute and deliver and perform their obligations hereunder.
The execution and delivery by the Shareholders of and the performance by
the Shareholders of their obligations hereunder have been duly and validly
authorized by the Boards of Directors of the Shareholders and by the
stockholders of UPRR and Mergerco, and no other corporate proceedings on
the part of any Shareholder are necessary to authorize the execution,
delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby.
(b) This Agreement has been duly and validly executed and delivered by
Shareholders and constitutes the valid and binding agreement of
Shareholders, enforceable against Shareholders in accordance with its terms
except to the extent (i) such enforcement may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors rights and (ii)
the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
(c) Except for filings, authorizations, consents and approvals as may
be required under, and other applicable requirements of, the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the 'HSR Act') with
respect to the acquisition of Company Voting Securities in the Offer or the
Merger or the Alternative Merger, if applicable, the Exchange Act and the
ICA, (i) no filing with, and no permit, authorization, consent or approval
of, any state or federal governmental body or authority is necessary for
the execution of this Agreement by Shareholders and the consummation by
Shareholders of the transactions contemplated hereby and (ii) none of the
execution and delivery of this Agreement by Shareholders, the consummation
by Shareholders of the transactions contemplated hereby or compliance by
Shareholders with any of the provisions hereof shall (A) conflict with or
result in any breach of the certificate of incorporation of any
Shareholder, (B) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any
third party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any note,
loan agreement, bond, mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other instrument or obligation of
any kind to which any Shareholder is a party or by which any Shareholder or
any of its properties or assets may be bound, or (C) violate any order,
writ, injunction, decree, judgment, statute, rule or regulation applicable
to any Shareholder or any of their respective properties or assets. To the
best
F-8
<PAGE>
knowledge of Shareholders, no litigation is pending or threatened involving
Shareholders or the Company relating in any way to this Agreement, the
Original Parent Shareholders Agreement, the Amended Merger Agreement, the
Ancillary Agreements, or any transactions contemplated hereby or thereby.
(d) Shareholders understand and acknowledge that the Company is
entering into the Amended Merger Agreement and is incurring the obligations
set forth therein, in reliance upon Shareholders' execution and delivery of
this Agreement.
(e) Except for CS First Boston Corporation, no broker, investment
banker, financial adviser or other person is entitled to any broker's,
finder's, financial adviser's or other similar fee or commission in
connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of Shareholders.
9. Representations and Warranties of the Company. The Company hereby
represents and warrants to Shareholders that:
(a) The Company is a corporation duly organized and validly existing
under the laws of the State of Delaware, and is in good standing under the
laws of the state of its incorporation. The Company has all necessary
corporate power and authority to execute and deliver this Agreement and
perform its obligations hereunder. The execution and delivery by the
Company of this Agreement and the performance by the Company of its
obligations hereunder have been duly and validly authorized by the Board of
Directors of the Company and no other corporate proceedings on the part of
the Company are necessary to authorize the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby.
(b) This Agreement has been duly and validly executed and delivered by
the Company and constitutes a valid and binding agreement of the Company,
enforceable against it in accordance with its terms except to the extent
(i) such enforcement may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors rights and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
(c) Except for filings, authorizations, consents and approvals as may
be required under, and other applicable requirements of, the ICA, (i) no
filing with, and no permit, authorization, consent or approval of, any
state or federal public body or authority is necessary for the execution of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby and (ii) none of the execution and
delivery of this Agreement by the Company, the consummation by the Company
contemplated hereby or compliance by the Company with any of the provisions
hereof shall (A) conflict with or result in any breach of the certificate
of incorporation or by-laws of the Company, (B) result in a violation or
breach of, or constitute (with or without notice or lapse of time or both)
a default (or give rise to any third party right of termination,
cancellation, material modification or acceleration) under any of the
terms, conditions or provisions of any note, loan agreement, bond,
mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind to
which the Company is a party or by which the Company or any of its
properties or assets may be bound, or (C) violate any order, writ,
injunction, decree, judgment, statute, rule or regulation applicable to the
Company or any of its properties or assets. To the best knowledge of the
Company, no litigation is pending or threatened involving the Company or
Shareholders relating in any way to this Agreement, the Original Parent
Shareholders Agreement, the Amended Merger Agreement, the Ancillary
Agreements, or any transactions contemplated hereby or thereby.
(d) Except for Morgan Stanley & Co. Incorporated, no broker,
investment banker, financial adviser or other person is entitled to any
broker's, finder's, financial adviser's or other similar fee or commission
in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of the Company.
10. Further Assurances. From time to time, at the other party's request
and without further consideration, each party hereto shall execute and deliver
such additional documents and take all such further lawful action as may be
necessary or desirable to consummate and make effective, in the most expeditious
manner practicable, the transactions contemplated by this Agreement.
F-9
<PAGE>
11. Stop Transfer; Legend.
(a) Shareholders agree with and covenant to the Company that Shareholders
shall not request that the Company register the transfer (book-entry or
otherwise) of any certificated or uncertificated interest representing any of
the securities of the Company as the case may be, unless such transfer is made
in compliance with this Agreement.
(b) Shareholders shall promptly surrender to the Company all certificates
representing Company Voting Securities hereafter acquired by Shareholders or
their Affiliates after the date hereof pursuant to the Offer or otherwise, and
instruct the Company to place the following legend on such certificates:
'THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
AMENDED AND RESTATED SHAREHOLDERS AGREEMENT, DATED AS OF JULY 12, 1996,
BY AND AMONG SOUTHERN PACIFIC RAIL CORPORATION, UNION PACIFIC
CORPORATION, AND UNION PACIFIC MERGER CO. WHICH, AMONG OTHER THINGS,
RESTRICTS THE TRANSFER AND VOTING THEREOF.'
(c) Each certificate representing Company Voting Securities the Beneficial
Ownership of which is acquired by Shareholders during the term of this Agreement
shall bear the following legend:
'THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN AGREEMENTS BETWEEN UNION PACIFIC CORPORATION, UNION PACIFIC
MERGER CO. AND SOUTHERN PACIFIC RAIL CORPORATION, COPIES OF WHICH MAY BE
OBTAINED FROM SOUTHERN PACIFIC RAIL CORPORATION WHICH, AMONG OTHER
THINGS, RESTRICT THE TRANSFER AND VOTING THEREOF.'
(d) In connection with any Transfer of Company Voting Securities to any
Person, other than a Shareholder or an Affiliate of a Shareholder, pursuant to,
and made in compliance with, Section 5 hereof, and from and after the
termination of the Standstill Period, the Company shall, upon surrender thereto
of any certificates representing Company Voting Securities, as the case may be,
that bear a legend required by this Section 11, issue and deliver to the record
owner of the securities represented thereby, or to its registered transferee,
certificates representing such securities without such legend.
12. Termination. Except as otherwise provided in this Agreement, this
Agreement shall terminate (i) if the Effective Time or the Alternative Effective
Time, as the case may be, does occur, on the Effective Time or the Alternative
Effective Time, as the case may be, or (ii) if the Effective Time or the
Alternative Effective Time, as the case may be, does not occur, at such time
that Shareholders Beneficially Own, and continues to Beneficially Own, in the
aggregate less than 4% of the Company Voting Securities then outstanding, it
being understood that if, under the circumstances of this clause (ii), the
Shareholders Beneficially Own less than 4% of the Company Voting Securities then
outstanding but prior to the seventh anniversary of the date of this Agreement,
subsequently become Beneficial Owners of more than 4% of the Company Voting
Securities then outstanding, the provisions of Sections 4, 5, 6, 7, 10, 11, 12,
13 and 14 of this Agreement shall become effective and in full force again as if
no such termination had occurred.
13. Voting Trust. The parties hereto acknowledge and agree that the
Trustee shall be entitled to exercise any and all rights, and shall be subject
to any and all obligations, of Shareholders under this Agreement (as if a
Shareholder party hereto) it being understood that Section 4(a) shall not be
applicable to the Trustee or the Voting Trust (other than the provisions
incorporated by reference into Section 3(a)).
14. Miscellaneous.
(a) This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof.
(b) Shareholders agree that this Agreement and the obligations hereunder
shall attach to any Company Voting Securities that may become Beneficially Owned
by Shareholders. The obligations of Shareholders under Sections 4(b), 5 and 11
hereof shall terminate with respect to Company Voting Securities that shall
cease to be Beneficially Owned by a Shareholder, an Affiliate thereof or any
heir, distributee, guardian, administrator, executor, legal representative or
similar successor in interest, pursuant to a Transfer thereof to any Person
other than a Shareholder, an Affiliate of a Shareholder, such other Person or a
member of a 'group' (within the meaning of Section 13(d)(3) of the Exchange Act)
in which a Shareholder, an Affiliate thereof or such other person is included;
provided that such Transfer shall be permitted by, and made in accordance with
Section 3(b) hereof, or Section 5 hereof, as the case may be, and such
termination shall be effective upon the Transfer of such securities; such
transferees of such securities shall have no obligations or rights under or with
respect to this Agreement and, except as
F-10
<PAGE>
otherwise provided herein, shall not be deemed to be Shareholders for any
purposes of this Agreement; and thereafter such securities shall not be subject
to Sections 4(b), 5 and 11 hereof for any purpose whatsoever.
(c) Except as otherwise provided in this Agreement, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, and each of
Shareholders, on the one hand, and the Company, on the other hand, shall
indemnify and hold the other harmless from and against any and all claims,
liabilities or obligations with respect to any brokerage fees, commissions or
finders' fees asserted by any person on the basis of any act or statement
alleged to have been made by such party or its Affiliates.
(d) Except as provided in the Agreement, this Agreement shall not be
assigned by operation of law or otherwise without the prior written consent of
the other party, provided that the Company may assign, in its sole discretion,
its rights and obligations hereunder to any direct or indirect wholly owned
subsidiary of the Company, but no such assignment shall relieve the Company of
its obligations hereunder if such assignee does not perform such obligations.
(e) This Agreement may not be amended, changed, supplemented, or otherwise
modified or terminated, except upon the execution and delivery of a written
agreement executed by each of the parties hereto. The parties may waive
compliance by the other parties hereto with any representation, agreement or
condition otherwise required to be complied with by such other party hereunder,
but any such waiver shall be effective only if in writing executed by the
waiving party.
(f) All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly received if given) by hand delivery or telecopy (with a confirmation
copy sent for next day delivery via courier service, such as Federal Express),
or by any courier service, such as Federal Express, providing proof of delivery.
All communications hereunder shall be delivered to the respective parties at the
following addresses:
If to the Company:
Southern Pacific Rail Corporation
Southern Pacific Building
One Market Plaza
San Francisco, California
Attention: Cannon Y. Harvey, Esq.
Telephone No.: (415) 541-1200
Telecopy No.: (415) 541-1881
copy to:
Holme Roberts & Owen LLC
1700 Lincoln
Suite 4100 Denver, Colorado 80203
Attn: Joseph W. Morrisey, Jr., Esq.
Telephone No.: (303) 861-7000
Telecopy No.: (303) 866-0200
and
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attn: Peter D. Lyons, Esq.
Telephone No.: (212) 848-4000
Telecopy No.: (212) 848-7179
If to Shareholders:
Union Pacific Corporation
Martin Tower
Eighth & Eaton Avenues
Bethlehem, Pennsylvania 18018
Attention: Carl W. von Bernuth, Esq.
Telephone No.: (610) 861-3200
Telecopy No.: (610) 861-3111
F-11
<PAGE>
copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: Paul T. Schnell, Esq.
Telephone No.: (212) 735-3000
Telecopy No.: (212) 735-2000
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(g) Whenever possible, each provision or portion of any provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law but if any provision or portion of any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect under
any applicable law or rule in any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or portion of any provision
in such jurisdiction, and this Agreement will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision or portion of any provision had never been contained herein.
(h) Each of the parties hereto recognizes and acknowledges that a breach by
it of any covenants or agreements contained in this Agreement will cause the
other party to sustain damages for which it would not have an adequate remedy at
law for money damages, and therefore each of the parties hereto agrees that in
the event of any such breach the aggrieved party shall be entitled to the remedy
of specific performance of such covenants and agreements and injunctive and
other equitable relief in addition to any other remedy to which it may be
entitled, at law or in equity.
(i) All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall be cumulative
and not alternative, and the exercise of any thereof by any party shall not
preclude the simultaneous or later exercise of any other such right, power or
remedy by such party. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
(j) This Agreement is not intended to be for the benefit of, and shall not
be enforceable by, any person or entity who or which is not a party hereto.
(k) This Agreement shall be governed and construed in accordance with the
laws of the State of New York, without giving effect to the principles of
conflicts of law thereof.
(l) The representations and warranties made herein shall survive through
the term of this Agreement.
(m) Each party hereby irrevocably submits to the nonexclusive jurisdiction
of the Supreme Court in the State of New York in any action, suit or proceeding
arising in connection with this Agreement, and agrees that any such action, suit
or proceeding shall be brought only in such court (and waives any objection
based on forum non conveniens or any other objection to venue therein);
provided, however, that such consent to jurisdiction is solely for the purpose
referred to in this paragraph (m) and shall not be deemed to be a general
submission to the jurisdiction of said Court or in the State of New York other
than for such purposes. Each party hereto hereby waives any right to a trial by
jury in connection with any such action, suit or proceeding.
(n) The descriptive headings used herein are inserted for convenience of
reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
(o) This Agreement may be executed in counterparts, each of which shall be
deemed to be an original, but all of which, taken together, shall constitute one
and the same Agreement.
15. Effectiveness of Agreement. The Original Parent Shareholders
Agreement shall remain in effect, and this Agreement shall not be effective
(other than the provisions of Sections 2 and 3 hereof, which shall be effective
immediately), unless and until the stockholders of the Company have approved the
Alternative Merger at the Alternative Company Special Meeting.
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<PAGE>
IN WITNESS WHEREOF, Shareholders and the Company have caused this Agreement
to be duly executed as of the day and year first above written.
UNION PACIFIC CORPORATION
By: /s/ CARL W. VON BERNUTH
-------------------------------
Name: Carl W. von Bernuth
Title: Senior Vice President--Law
UNION PACIFIC MERGER CO.
By: /s/ CARL W. VON BERNUTH
-------------------------------
Name: Carl W. von Bernuth
Title: Vice President
SOUTHERN PACIFIC RAIL CORPORATION
By: /s/ JERRY R. DAVIS
-------------------------------
Name: Jerry R. Davis
Title: President and Chief
Executive Officer
F-13
<PAGE>
EXHIBIT A
TO PARENT SHAREHOLDERS AGREEMENT
IRREVOCABLE PROXY
The undersigned hereby revokes any previous proxies and appoints Southern
Pacific Rail Corporation, a Delaware corporation (the 'Company'), _____________
and _____________, and each of them, with full power of substitution, as
attorney and proxy of the undersigned to attend any and all meetings of
shareholders of the Company (and any adjournments or postponements thereof), to
vote all shares of Common Stock, $.001 par value, of the Company that the
undersigned is entitled to vote, and to represent and otherwise to act for the
undersigned in the same manner and with the same effect as if the undersigned
were personally present, with respect to all matters specified in Section 2(a)
of the Amended and Restated Shareholders Agreement (the 'Shareholders
Agreement') dated as of July 12, 1996, by and among Union Pacific Corporation,
Union Pacific Merger Co. and Southern Pacific Rail Corporation. Capitalized
terms used and not defined herein have the respective meanings ascribed to them
in, or as prescribed by, the Shareholders Agreement.
This proxy shall be deemed to be a proxy coupled with an interest and is
irrevocable until the earlier to occur of the special meeting of the Company's
shareholders to consider and vote upon the Alternative Merger and the
termination of the Amended Merger Agreement in accordance with its terms, and
has been granted pursuant to Section 2(b) of the Amended Shareholders Agreement.
The undersigned authorizes such attorney and proxy to substitute any other
person to act hereunder, to revoke any substitution and to file this proxy and
any substitution or revocation with the Secretary of the Company.
UNION PACIFIC CORPORATION
By: __________________________________
Name:
Title:
Dated: July , 1996
UNION PACIFIC MERGER CO.
By: __________________________________
Name:
Title:
F-14
<PAGE>
ANNEX G
AMENDED AND RESTATED ANSCHUTZ/SPINCO SHAREHOLDERS AGREEMENT
AMENDED AND RESTATED AGREEMENT, dated as of July 12, 1996 (this
'Agreement'), by and among Union Pacific Resources Group Inc., a corporation
('Spinco') and an indirect wholly owned subsidiary of Union Pacific Corporation,
a Utah corporation ('Parent'), The Anschutz Corporation, a Kansas corporation
('TAC'), Anschutz Foundation, a Colorado not-for-profit corporation (the
'Foundation'), and Mr. Philip F. Anschutz ('Mr. Anschutz' and, collectively with
TAC and the Foundation, the 'Shareholders').
W I T N E S S E T H:
WHEREAS, Spinco, Parent, TAC, the Foundation and Mr. Anschutz entered into
an agreement, dated as of August 3, 1995, as amended (the 'Original
Anschutz/Spinco Agreement'), and the parties to the Original Anschutz/Spinco
Agreement wish to amend and restate such Original Anschutz/Spinco Agreement in
its entirety;
WHEREAS, simultaneously with the execution of the Original Anschutz/Spinco
Agreement, Parent, Union Pacific Railroad Company, a Utah corporation and an
indirect wholly owned subsidiary of Parent ('UPRR'), UP Acquisition Corporation,
a former Delaware corporation and a direct wholly owned subsidiary of UPRR
('Purchaser'), and Southern Pacific Rail Corporation, a Delaware corporation
(the 'Company'), entered into an Agreement and Plan of Merger (the 'Original
Merger Agreement'), pursuant to which (i) Purchaser purchased 39,034,471 shares
of common stock, $.001 par value, of the Company (the 'Company Common Stock')
pursuant to a cash tender offer (the 'Offer') and (ii) the Company would be
merged with and into UPRR with UPRR as the surviving corporation (the 'Merger');
WHEREAS, Purchaser has merged with and into UPRR, with UPRR as the
surviving corporation (the 'Purchaser Merger');
WHEREAS, Parent, UPRR, UP Holding Company, Inc., a Utah corporation
('Holding'), Union Pacific Merger Co., a Delaware corporation ('Mergerco'), and
the Company have entered into an Amended and Restated Agreement and Plan of
Merger, dated as of July 12, 1996 (the 'Amended Merger Agreement'), in order to
permit an alternative structure to the acquisition of the Company by Parent
whereby the Company would merge with and into either Holding or Mergerco at the
election of Parent, with Holding or Mergerco, as the case may be, as the
surviving corporation (the 'Alternative Merger');
WHEREAS, pursuant to the Merger, or the Alternative Merger, as the case may
be, the Shareholders will receive shares of Common Stock, par value $2.50 per
share, of Parent;
WHEREAS, Spinco effected an initial public offering of approximately 17.25%
(not including employee shares or employee options) of, and Parent intends to
distribute to its shareholders as a pro rata dividend (the 'Spin-off') the
remainder of, the shares of capital stock of Spinco;
WHEREAS, the Shareholders, as a result of the Merger or the Alternative
Merger, as the case may be, and the Spin-off, may beneficially own certain
shares of capital stock of Spinco (the 'Spinco Shares'); and
WHEREAS, as an inducement and a condition to Parent and UPRR entering into
the Amended Merger Agreement and incurring the obligations set forth therein,
Parent has required that the Shareholders agree, and the Shareholders have
agreed, to enter into this Shareholders' Agreement, pursuant to which, among
other things, the Shareholders have agreed to abide by certain agreements
relating to the Spinco Shares.
NOW, THEREFORE, in consideration of the foregoing and the mutual premises,
representations, warranties, covenants and agreements contained herein and in
the Amended Merger Agreement and the Ancillary Agreements, the parties hereto,
intending to be legally bound hereby, agree as follows:
1. Certain Definitions. Capitalized terms used and not defined herein
have the respective meanings ascribed to them in the Amended Merger Agreement.
In addition, for purposes of this Agreement:
(a) 'Affiliate' shall mean, with respect to any specified Person, any
Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the Person
specified. For purposes of this Agreement, with respect to any Shareholder,
'Affiliate' shall not
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include Spinco and the Persons that directly, or indirectly through one or
more intermediaries, are controlled by Spinco.
(b) 'Beneficially Own' or 'Beneficial Ownership' with respect to any
securities shall mean having 'beneficial ownership' of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the 'Exchange Act')), including pursuant to any
agreement, arrangement or understanding, whether or not in writing. Without
duplicative counting of the same securities by the same holder, securities
Beneficially Owned by a Person shall include securities Beneficially Owned
by all Affiliates of such Person and all other Persons with whom such
Person would constitute a 'group' within the meaning of Section 13(d) of
the Exchange Act and the rules promulgated thereunder.
(c) 'Company Voting Securities' shall mean any securities of the
Company entitled, or which may be entitled, to vote generally in the
election of directors and any securities convertible into or exercisable or
exchangeable for such securities (whether or not subject to contingencies
with respect to any matter or proposal submitted for the vote or consent of
shareholders of the Company). For purposes of determining the percentage of
Company Voting Securities Beneficially Owned by a Person, securities
Beneficially Owned by any such Person that are convertible, exercisable or
exchangeable for securities entitled to vote shall be deemed to be
converted, exercised or exchanged and shall represent the number of
securities of the Company entitled to vote into which such convertible,
exercisable or exchangeable securities (disregarding for such purposes any
restrictions on conversion, exercise or exchange) are then convertible,
exchangeable or exercisable.
(d) 'Spinco Voting Securities' shall mean any securities of Spinco
entitled, or which may be entitled, to vote generally in the election of
directors and any securities convertible into or exercisable or
exchangeable for such securities (whether or not subject to contingencies
with respect to any matter or proposal submitted for the vote or consent of
shareholders of Spinco). For purposes of this Agreement, Spinco Voting
Securities shall not include Parent Voting Securities or Company Voting
Securities. For purposes of determining the percentage of Spinco Voting
Securities Beneficially Owned by a Person, securities Beneficially Owned by
any such Person that are convertible, exercisable or exchangeable for
securities entitled to vote shall be deemed to be converted, exercised or
exchanged and shall represent the number of securities of Spinco entitled
to vote into which such convertible, exercisable or exchangeable securities
(disregarding for such purposes any restrictions on conversion, exercise or
exchange) are then convertible, exchangeable or exercisable.
(e) 'Current Market Price' shall mean, as applied to any class of
stock on any date, the average of the daily 'Closing Prices' (as
hereinafter defined) for the 20 consecutive trading days immediately prior
to the date in question. The term 'Closing Price' on any day shall mean the
last sales price, regular way, per share of such stock on such day, or if
no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted
to trading on the New York Stock Exchange or, if shares of such stock are
not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities exchange
on which the shares of such stock are listed or admitted to trading, or, if
the shares of such stock are not listed or admitted to trading on any
national securities exchange on the NASDAQ National Market System or, if
the shares of such stock are not quoted on the NASDAQ National Market
System, the average of the high bid and low asked prices in the
over-the-counter market as reported by the National Association of
Securities Dealers Inc.'s Automated Quotation System.
(f) 'including' shall mean including without limitation.
(g) 'Parent Voting Securities' shall mean any securities of Parent
entitled, or which may be entitled, to vote generally in the election of
directors and any securities convertible into or exercisable or
exchangeable for such securities (whether or not subject to contingencies
with respect to any matter or proposal submitted for the vote or consent of
shareholders of Parent). For purposes of this Agreement, Parent Voting
Securities shall not include Company Voting Securities. For purposes of
determining the percentage of Parent Voting Securities Beneficially Owned
by a Person, securities Beneficially Owned by
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any such Person that are convertible, exercisable or exchangeable for
securities entitled to vote shall be deemed to be converted, exercised or
exchanged and shall represent the number of securities of Parent entitled
to vote into which such convertible, exercisable or exchangeable securities
(disregarding for such purposes any restrictions on conversion, exercise or
exchange) are then convertible, exchangeable or exercisable.
(h) 'Person' shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
(i) 'Transfer' shall mean, with respect to a security, the sale,
transfer, pledge, hypothecation, encumbrance, assignment or disposition of
such security or the Beneficial Ownership thereof, the offer to make such a
sale, transfer or other disposition, and each agreement, arrangement or
understanding, whether or not in writing, to effect any of the foregoing.
As a verb, 'Transfer' shall have a correlative meaning.
2. Effectiveness. The Original Anschutz/Spinco Agreement shall remain in
effect, and this Agreement shall not be effective, unless and until the
stockholders of the Company have approved the Alternative Merger at the
Alternative Company Special Meeting. Thereafter, this Agreement (other than
Sections 3, 4, 5, 9, 10, 11 and 14, which shall be effective immediately
following such approval) shall become effective only upon consummation of the
Spin-off and this Agreement shall terminate and be void and of no further force
or effect if the Amended Merger Agreement is terminated in accordance with
Article VII thereof.
3. Pledge. TAC has advised Parent that shares of Company Common Stock
Beneficially Owned by TAC are or may be pledged to Bank of America National
Trust and Savings Association or Citibank, N.A., respectively (collectively, the
'Banks') pursuant to pledge agreements (substantially in the forms reviewed by
Parent, collectively, the 'Existing Pledge Agreements') to secure indebtedness
borrowed from the Banks. TAC represents and warrants that the Existing Pledge
Agreements do not or, before indebtedness borrowed therefrom is secured by any
such shares, will not prevent, limit or interfere with TAC's compliance with, or
performance of its obligations under, this Agreement, absent a default under the
applicable Existing Pledge Agreements. TAC represents and warrants that it is
not in default under the Existing Pledge Agreements. Before Spinco Voting
Securities shall be pledged to secure indebtedness owed under an Existing Pledge
Agreement, TAC shall deliver to Parent a letter from Bank of America National
Trust and Savings Association or Citibank, N.A., as the case may be,
acknowledging this Agreement and agreeing that, notwithstanding any default
under the Existing Pledge Agreement, TAC shall have the right to exercise all
voting rights with respect to the Company Common Stock or Spinco Voting
Securities pledged thereunder. Shareholders may hereafter effect one or more
pledges of Company Voting Securities or Spinco Voting Securities, or grants of
security interests therein, to one or more financial institutions (other than
the Banks) that are not Affiliates of any Shareholder (collectively, 'Other
Financial Institutions') as security for the payment of bona fide indebtedness
owed by one or more of the Shareholders or their Affiliates to such financial
institutions. Except as set forth in the proviso below, neither the Bank nor any
financial institution which after the date of the Original Anschutz/Spinco
Agreement becomes a pledgee of Company Voting Securities or Spinco Voting
Securities shall incur any obligations under the Original Anschutz/Spinco
Agreement or this Agreement with respect to such Company Voting Securities or
Spinco Voting Securities or shall be restricted from exercising any right of
enforcement or foreclosure with respect to any related security interest or
lien; provided, however, that it shall be a condition to any such pledge to any
Other Financial Institution that the pledgee shall agree that TAC shall have the
right to exercise all voting rights with respect to the Company Voting
Securities or Spinco Voting Securities pledged thereunder and no such pledge
shall prevent, limit or interfere with Shareholders' compliance with, or
performance of their obligations under, this Agreement, absent a default under
such pledge agreement.
4. Public Comments; Fiduciary Duties.
(a) During the Standstill Period (as defined below), Shareholders will not,
and will cause their Affiliates not to, directly or indirectly, make any public
comment, statement or communication, or take any action that would otherwise
require any public disclosure by Shareholders, Parent, Spinco or any other
Person, concerning the Merger, the Alternative Merger, the Spin-off (as
described in Section 5.4 of the Amended Merger Agreement) and the other
transactions contemplated by the Amended Merger Agreement, this Agreement and
the Ancillary Agreements, except for any disclosure (i) concerning the status of
Shareholders as parties to such agreements the
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terms thereof, and their beneficial ownership of Shares required pursuant to
Section 13(d) of the Exchange Act or (ii) required in the Schedule 14D-9 or the
Proxy Statement/Prospectus.
(b) It is hereby acknowledged that any Person who is a director or officer
of the Company may exercise his fiduciary duties in his capacity as a director
or officer with respect to the Company, as opposed to taking action with respect
to the direct or indirect ownership of any Shares, and no such exercise of
fiduciary duties shall be deemed to be a breach of, or a violation of the
restrictions set forth in, this Agreement and none of the Shareholders shall
have any liability hereunder for any such exercise of fiduciary duties by such
Person in his capacity as a director and officer of the Company. Nothing in this
Section 4(b) shall relieve or affect any of the Company's or its Affiliates'
obligations under the Amended Merger Agreement.
5. Standstill and Related Provisions.
(a) Subject to the paragraph at the end of this Subsection 5(a),
Shareholders agree that for a period commencing on the date of the Original
Anschutz/Spinco Agreement and terminating on the seventh anniversary of the
Effective Time or the Alternative Effective Time, as the case may be, or, if
earlier, the termination of this Agreement in accordance with the terms of
Section 13 hereof (the 'Standstill Period'), without the prior written consent
of the Board of Directors of Spinco (the 'Board') specifically expressed in a
resolution adopted by a majority of the directors of Spinco, Shareholders will
not, and Shareholders will cause each of their respective Affiliates not to,
directly or indirectly, alone or in concert with others:
(i) acquire, offer or propose to acquire, or agree to acquire (except,
in any case, by way of (A) following consummation of the Spin-off, stock
dividends or other distributions or rights offerings made available to
holders of any shares of common stock of Spinco ('Spinco Common Stock')
generally, share-splits, reclassifications, recapitalizations,
reorganizations and any other similar action taken by Spinco, (B) following
consummation of the Spin-off, the conversion, exercise or exchange of
Spinco Voting Securities in accordance with the terms thereof, (C) the
issuance and delivery of Spinco Voting Securities pursuant to the Spin-off
and (D) following consummation of the Merger or the Alternative Merger, as
the case may be, the acquisition of not more than such number of Spinco
Common Stock as may be received as a dividend on not more than 131,723
shares of Parent Common Stock received by Learjet Inc. in the Merger or the
Alternative Merger, as the case may be, and subject to the Airplane
Purchase Agreement dated as of May 5, 1994 between TAC and Learjet Inc. (as
amended from time to time, the 'Airplane Purchase Agreement'), provided,
that any such securities shall be subject to the provisions hereof),
directly or indirectly, whether by purchase, tender or exchange offer,
through the acquisition of control of another Person, by joining a
partnership, limited partnership, syndicate or other 'group' (within the
meaning of Section 13(d)(3) of the Exchange Act) (other than groups
consisting solely of Shareholders and their Affiliates, all of which are
or, prior to the formation of such group, become, parties to this
Agreement) or otherwise, any Spinco Voting Securities; provided, however,
that if Spinco shall issue additional Spinco Voting Securities following
consummation of the Spin-off, Shareholders and their Affiliates may
purchase or acquire additional Spinco Voting Securities to bring their
Beneficial Ownership up to the greater of 5.5% and the percentage of
outstanding Spinco Voting Securities Beneficially Owned by the Shareholders
immediately prior to such issuance by Spinco; provided, further, without
limiting the immediately preceding proviso, if as a result of Transfers of
Spinco Voting Securities, Shareholders Beneficially Own less than 5.5% of
the then outstanding shares of Spinco Voting Securities, Shareholders may
purchase or acquire additional Spinco Voting Securities to bring their
Beneficial Ownership up to, but not in excess of, 5.5% of the then
outstanding shares of Spinco Voting Securities. In addition, in the event
that a Shareholder or an Affiliate thereof inadvertently and without
knowledge (an 'Inadvertent Acquisition') indirectly acquires Beneficial
Ownership of not more than one-quarter of one percent of the Spinco Voting
Securities in excess of the amount permitted to be owned by the
Shareholders pursuant to this Section 5(a) pursuant to a transaction by
which a Person (that was not then an Affiliate of a Shareholder before the
consummation of such transaction) owning Spinco Voting Securities becomes
an Affiliate of such Shareholder, then all Spinco Voting Securities so
acquired shall thereupon become subject to this Agreement and such
Shareholder shall be deemed not to have breached this Agreement provided
that such Shareholder, within 120 days thereafter, causes a number of such
Spinco Voting Securities in excess of the amount permitted to be so owned
(or, at the election of such Shareholder, an equal number of the other
Spinco Voting Securities
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that are Beneficially Owned by a Shareholder) to be Transferred, in a
transaction subject to Section 6 hereof, to a transferee that is not a
Shareholder, an Affiliate thereof or a member of a 'group' in which a
Shareholder or an Affiliate is included (or, if Spinco or its assignee
shall exercise any purchase rights under Section 6(b) hereof, to Spinco or
its assignee);
(ii) make, or in any way participate, directly or indirectly, in any
'solicitation' (as such term is used in the proxy rules of the Securities
and Exchange Commission as in effect on the date hereof) of proxies or
consents (whether or not relating to the election or removal of directors),
seek to advise, encourage or influence any Person with respect to the
voting of any Spinco Voting Securities, initiate, propose or otherwise
'solicit' (as such term is used in the proxy rules of the Securities and
Exchange Commission as in effect on the date hereof) shareholders of Spinco
for the approval of shareholder proposals, whether made pursuant to Rule
14a-8 of the Exchange Act or otherwise, or induce or attempt to induce any
other Person to initiate any such shareholder proposal or otherwise
communicate with the Spinco's shareholders or others pursuant to Rule
14a-1(2)(iv) under the Exchange Act or otherwise;
(iii) seek, propose, or make any statement with respect to, any
merger, consolidation, business combination, tender or exchange offer, sale
or purchase of assets, sale or purchase of securities, dissolution,
liquidation, reorganization, restructuring, recapitalization, change in
capitalization, change in corporate structure or business or similar
transaction involving Spinco or its subsidiaries (any of the foregoing
being referred to herein as a 'Specified Spinco Transaction'); provided
that the foregoing shall not prevent (A) voting in accordance with Section
5(c) hereof (but shall prevent any public comment, statement or
communication, and any action that would otherwise require any public
disclosure by Shareholders, Spinco or any other Person, concerning such
voting) or (B) the Shareholder Designee (as defined in Section 7 hereof)
from exercising his fiduciary duties in his capacity as a director by
participating in any Board deliberations or vote of the Board of Directors
of Spinco with respect to a Specified Spinco Transaction;
(iv) form, join or in any way participate in a 'group' (within the
meaning of Section 13(d)(3) of the Exchange Act) with respect to any Spinco
Voting Securities, other than groups consisting solely of Shareholders and
their Affiliates;
(v) deposit any Spinco Voting Securities in any voting trust or
subject any Spinco Voting Securities to any arrangement or agreement with
respect to the voting of any Spinco Voting Securities except as set forth
in this Agreement;
(vi) call or seek to have called any meeting of the stockholders of
Spinco or execute any written consent with respect to Spinco or Spinco
Voting Securities; provided that the foregoing shall not prevent the
Shareholder Designee from exercising his fiduciary duties in his capacity
as a director by participating in any Board deliberations or vote of the
Board of Directors of Spinco with respect to the calling of any annual
meeting of shareholders of Spinco;
(vii) otherwise act, alone or in concert with others, to control or
seek to control or influence or seek to influence the management, Board of
Directors or policies of Spinco (except to the extent the actions by a
Shareholder Designee relating to Spinco's Board of Directors in the
exercise of his fiduciary duties in his capacity as a director may be
viewed as influencing or seeking to influence the management, Board of
Directors or policies of Spinco);
(viii) seek, alone or in concert with others, representation on the
Board of Directors of Spinco (except as provided in Section 7 of this
Agreement), or seek the removal of any member of such Board or a change in
the composition or size of such Board;
(ix) make any publicly disclosed proposal, comment, statement or
communication (including, without limitation, any request to amend, waive
or terminate any provision of this Agreement other than Section 5(a)), or
make any proposal, comment, statement or communication (including, without
limitation, any request to amend, waive or terminate any provision of this
Agreement other than Section 5(a)) in a manner that would require any
public disclosure by Shareholders, Spinco or any other Person, or enter
into any discussion with any Person (other than directors and officers of
Spinco), regarding any of the foregoing;
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(x) make or disclose any request to amend, waive or terminate any
provision of Section 5(a) of this Agreement; or
(xi) have any discussions or communications, or enter into any
arrangements, understandings or agreements (whether written or oral) with,
or advise, finance, assist or encourage, any other Person in connection
with any of the foregoing, or take any action inconsistent with the
foregoing, or make any investment in or enter into any arrangement with,
any other Person that engages, or offers or proposes to engage, in any of
the foregoing.
The restrictions set forth in this Section 5(a) shall not prevent
Shareholders from (A) performing their obligations and exercising their rights
under this Agreement, including, without limitation, (w) Transferring any
Company Voting Securities or Spinco Voting Securities in accordance with
Sections 3, 4 and 6 hereof, (x) selecting the Shareholder Designee, (y) serving
in the positions described in or resigning from such positions as described in
Section 7(a) hereof, and (z) voting in accordance with Section 5(c) hereof; (B)
communicating in a non-public manner with any other Shareholder or their
Affiliates; and (C) complying with the requirements of Sections 13(d) and 16(a)
of the Exchange Act and the rules and regulations thereunder, in each case, as
from time to time in effect, or any successor provisions or rules with respect
thereto, or any other applicable law, rule, regulation, judgment, decree,
ruling, order, award, injunction, or other official action of any agency,
bureau, commission, court, department, official, political subdivision, tribunal
or other instrumentality of any government (whether federal, state, county or
local, domestic or foreign).
(b) Shareholders agree that during the period commencing on the date of the
Original Anschutz/Spinco Agreement and continuing until the earlier of (x) the
consummation of the Merger or the Alternative Merger, as the case may be, and
(y) the termination of the Amended Merger Agreement, Shareholders will not, and
Shareholders will cause each of their respective Affiliates not to, directly or
indirectly, alone or in concert with others, acquire, offer or propose to
acquire, or agree to acquire, whether by purchase, tender or exchange offer,
though the acquisition of control of another Person, by joining a partnership,
limited partnership, syndicate or other 'group' or otherwise, any Company Voting
Securities (except pursuant to the Airplane Purchase Agreement and by way of
stock dividends or other distributions or rights offerings made available to
holders of any shares of Company Common Stock generally, stock-splits,
reclassifications, recapitalizations, reorganizations and any other similar
action taken by Company).
(c) Subject to the receipt of proper notice and the absence of a
preliminary or permanent injunction or other final order by any United States
federal court or state court barring such action, Shareholders agree that during
the Standstill Period Shareholders will, and will cause their Affiliates to, (i)
be present, in person or represented by proxy, at all annual and special
meetings of shareholders of Spinco so that all Spinco Common Stock Beneficially
Owned by Shareholders and their Affiliates and then entitled to vote may be
counted for the purposes of determining the presence of a quorum at such
meetings, and (ii) vote in accordance with the recommendation of the Board of
Directors of Spinco in the election of directors and as directed by the Persons
acting as Proxies in respect of proxies solicited by the Board of Directors of
Spinco with respect to the election of directors (including the manner in which
such Spinco Common Stock shall be cumulated). On all other matters presented for
a vote of shareholders of Spinco, Shareholders may vote in their discretion.
6. Limitations on Disposition.
(a) Shareholders agree that during the Standstill Period they will not, and
will cause their Affiliates not to, directly or indirectly, without the prior
written consent of the Board of Directors of Spinco specifically expressed in a
resolution adopted by a majority of the directors of Spinco, Transfer to any
Person any Spinco Voting Securities (including but not limited to the Transfer
of any securities of an Affiliate which is the record holder or Beneficial Owner
of Spinco Voting Securities if, as the result of such Transfer, such Person
would cease to be an Affiliate of a Shareholder), if, to the knowledge of the
Shareholders or any of their Affiliates, after due inquiry which is reasonable
in the circumstances (and which shall include, with respect to the Transfer of
1% or more of the Spinco Voting Securities then outstanding in one transaction,
or a series of related transactions, specific inquiry with respect to the
identity of the acquiror of such Spinco Voting Securities and the number of
Spinco Voting Securities that, immediately following such transaction or
transactions, would be Beneficially Owned by such acquiror, together with its
Affiliates and any members of a 'group' (within the meaning of
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Section 13(d)(3) of the Exchange Act) of which such acquiror is a member),
immediately following such transaction the acquiror of such Spinco Voting
Securities, together with its Affiliates and any members of such a group, would
Beneficially Own in the aggregate 4% or more of the Spinco Voting Securities
then outstanding; provided that, without the prior written consent of the Board
of Directors of Spinco, (i) Shareholders and their Affiliates may Transfer any
number of Spinco Voting Securities to any other Shareholder, any Affiliate of a
Shareholder or to any heirs, distributees, guardians, administrators, executors,
legal representatives or similar successors in interest of any Shareholder,
provided that (A) such transferee, if not then a Shareholder, shall become a
party to this Agreement and agree in writing to perform and comply with all of
the obligations of such transferor Shareholder under this Agreement, and
thereupon such transferee shall be deemed to be a Shareholder party hereto for
all purposes of this Agreement, and (B) if the transferee is not prior thereto a
Shareholder, the transferor shall remain liable for such transferee's
performance of and compliance with the obligations of the transferor under this
Agreement, (ii) Shareholders and their Affiliates may Transfer Spinco Voting
Securities in a tender offer, merger, or other similar business combination
transaction approved by the Board of Directors of Spinco, and (iii) Shareholders
may pledge their Spinco Voting Securities as provided in Section 3 hereof and
the pledgee may Transfer such Spinco Voting Securities in connection with the
enforcement or foreclosure of any related security interest or lien following a
default.
(b) During the Standstill Period, if to the knowledge of the Shareholders
after making due inquiry which is reasonable under the circumstances,
immediately following the Transfer of any Spinco Voting Securities the acquiror
thereof, together with its Affiliates and any members of a 'group' (within the
meaning of Section 13(d)(3) of the Exchange Act), would Beneficially Own in the
aggregate 2% or more of the outstanding Spinco Voting Securities (a '2% Sale'),
Shareholders shall, prior to effecting any such Transfer, offer Spinco a right
of first refusal to purchase the shares proposed to be Transferred on the
following terms. Shareholders shall provide Spinco with written notice (the '2%
Sale Notice') of any proposed 2% Sale, which 2% Sale Notice shall contain the
identity of the purchaser, the number of shares of Spinco Voting Securities
proposed to be Transferred to such purchaser, the purchase price for such shares
and the form of consideration payable for such shares. The 2% Sale Notice shall
also contain an irrevocable offer to sell the shares subject to such 2% Sale
Notice to Spinco for cash at a price equal to the price contained in such 2%
Sale Notice. Spinco shall have the right and option, by written notice delivered
to such Shareholder (the 'Purchase Notice') within 15 days of receipt of the 2%
Sale Notice, to accept such offer as to all, but not less than all, of the
Spinco Voting Securities subject to such 2% Sale Notice. Spinco shall have the
right to assign to any Person such right to purchase the shares subject to the
2% Sale Notice. In the event Spinco (or its assignee) elects to purchase the
shares subject to the 2% Sale Notice, the closing of the purchase of the Spinco
Voting Securities shall occur at the principal office of Spinco (or its
assignee) on or before the 30th day following such Shareholder's receipt of the
Purchase Notice. In the event Spinco does not elect to purchase the shares
subject to the 2% Sale Notice, such Shareholder shall be free, for a period of
30 days following the receipt of notice from Spinco of its election not to
purchase such shares or, in the absence of any such notice, for a period of 30
days following the 15th day after receipt by Spinco of the 2% Sale Notice, to
sell the shares subject to the 2% Sale Notice in accordance with the terms of,
and to the person identified in, the 2% Sale Notice. If such sale is not
effected within such 30 day period such shares shall remain subject to the
provisions of this Agreement. Notwithstanding the foregoing, the right of first
refusal set forth in this Subsection (b) shall not apply to the sale by
Shareholders of Spinco Voting Securities (i) made in an underwritten public
offering pursuant to an effective registration statement under the Securities
Act, or (ii) made in a transaction permitted pursuant to, and made in compliance
with, clauses (i) or (iii) of the proviso to Section 6(a) hereof, or (iii) made
in a tender offer, merger or other similar business combination transaction
approved by the Board of Directors of Spinco. Any proposed sale by Shareholders
of Spinco Voting Securities shall be subject to the restrictions on sales to an
acquiror which would Beneficially Own 4% or more of the outstanding Spinco
Voting Securities, as set forth in Section 6(a) hereof, whether or not Spinco
exercises its right of first refusal and consummates the purchase of Spinco
Voting Securities. If Spinco (or its assignee) exercises its right to purchase
any Spinco Voting Securities but fails to complete the purchase thereof for any
reason other than the failure of such Shareholder to perform its obligations
hereunder with respect to such purchase, then, on the 30th day following such
Shareholder's receipt of the Purchase Notice, such Spinco Voting Securities
shall cease to be subject to Sections 5(c), 6 and 12 hereof for any purpose
whatsoever. If the purchase price described in any 2% Sale Notice is not solely
made up of cash or marketable securities, the 2% Sale Notice shall include a
good faith estimate of the cash equivalent of such other consideration, and the
consideration payable by Spinco or
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its assignee (if Spinco elects to purchase (or to have assignee purchase) the
Spinco Voting Securities described in the 2% Sale Notice) in place of such other
consideration shall be cash equal to the amount of such estimate; provided,
however, that if Spinco in good faith disagrees with such estimate and states a
different good faith estimate in the Purchase Notice, and if Spinco and such
Shareholder cannot agree on the cash equivalent of such other (i.e., other than
cash or marketable securities) consideration, such cash equivalent shall be
determined by a reputable investment banking firm without material connections
with either party. Such investment banking firm shall be selected by both
parties or, if they shall be unable to agree, by an arbitrator appointed by the
American Arbitration Association. The fees and expenses of any such investment
banking firm and/or arbitrator shall be shared equally by Spinco and such
Shareholder, unless otherwise determined by such firm or arbitrator. In the
event of such differing estimates by Spinco and such Shareholder, periods of
time which would otherwise run under this Section 6(b) from the date of such
Shareholder's receipt of the Purchase Notice shall run instead from the date on
which the parties agree on such cash equivalent or, in the absence of such
agreement, the date on which such cash equivalent is determined by such
investment banking firm. If the purchase price described in any 2% Sale Notice
shall include marketable securities, the purchase price payable by Spinco (or
its designee) shall include, to the extent marketable securities were included
as a portion of the consideration provided for in the 2% Sale Notice, an amount
in cash determined by reference to the Current Market Price of such securities
on the day the Purchase Notice is received by such Shareholder.
(c) Not later than the tenth day following the end of any calendar month
during the Standstill Period in which one or more dispositions of Spinco Voting
Securities by Shareholders or any of their Affiliates shall have occurred, the
relevant Shareholder shall give written notice to Spinco of all such
dispositions. Such notice shall state the date upon which each such disposition
was effected, the price and other terms of each such disposition, the number and
type of Spinco Voting Securities involved in each such disposition, the means by
which each such disposition was effected and, to the extent known, the identity
of the Persons acquiring such Spinco Voting Securities.
(d) In connection with any proposed privately negotiated sale by any
Shareholders of Spinco Voting Securities representing in excess of 3.9% of the
then outstanding Spinco Voting Securities, Spinco will cooperate with and permit
the proposed purchaser to conduct a due diligence review reasonable under the
circumstances of Spinco and its Subsidiaries and their respective business and
operations, including, without limitation, reasonable access during normal
business hours to their executive officers, and, if reasonable under the
circumstances, their properties, subject to execution by such purchaser of a
customary confidentiality agreement; provided that Spinco shall not be required
to permit more than two such due diligence reviews in any twelve-month period.
7. Spinco Covenants.
(a) On or prior to the consummation of the Spin-off, the Board of Directors
of Spinco will take all action necessary to elect a designee of TAC who is not
an Affiliate of, does not have any business relationship with, any of the
Shareholders or their Affiliates, and is reasonably acceptable to the Board of
Directors of Spinco (the 'Shareholder Designee') as a director of Spinco's Board
of Directors. In the event that the Shareholder Designee shall resign, become
disabled or be removed as a member of Spinco's Board of Directors (except in
circumstances, other than Section 7(a)(vi) hereof, in which the Shareholder
Designee was required (including if requested by Spinco) to resign as a director
pursuant to the terms of this Agreement) TAC shall have the right to select a
new Shareholder Designee. Shareholders acknowledge that as a condition precedent
to the appointment of the Shareholder Designee to Spinco's Board of Directors,
the Shareholder Designee shall enter into an agreement (the 'SD Agreement'), in
form and substance satisfactory to Spinco and its counsel, to the effect that:
(i) the Shareholder Designee agrees that he will not provide,
disclose, or otherwise make available, directly or indirectly, any
confidential or non-public information relating to Spinco or its
subsidiaries, including competitively sensitive information, to the
Shareholders, or their Affiliates or Representatives;
(ii) the Shareholder Designee will not voluntarily receive, directly
or indirectly, any confidential or non-public information relating to any
business, company or entity affiliated with any of the Shareholders which
competes in any way with, or is a potential competitor of, Spinco (a
'Competing Business'), and, in the event the Shareholder Designee
involuntarily receives, or receives on an unsolicited basis, such
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<PAGE>
confidential or non-public information, the Shareholder Designee agrees to
report to Spinco the fact that the Shareholder Designee received such
information;
(iii) in connection with actions taken as a director of Spinco, the
Shareholder Designee will not take into account or consider the impact or
effect of such actions on the Shareholders (other than in their capacity as
shareholders of Spinco), their Affiliates or on any Competing Business;
(iv) the Shareholder Designee will not serve as an officer, director
or employee of, or become a shareholder, partner or equity investor in, any
Competing Business so long as such Shareholder Designee serves as a
director of Spinco;
(v) none of the Shareholder Designee, any family member of the
Shareholder Designee or any person controlled by the Shareholder Designee
will have any business relationship with, enter into any arrangements or
understandings relating to such business relationship with, or receive any
compensation, gifts or other forms of consideration from, the Shareholders
or their Affiliates so long as the Shareholder Designee is a director of
Spinco; and
(vi) the Shareholder Designee, if requested by Spinco (A) will
immediately resign as a director of Spinco in the event that the Federal
Trade Commission (the 'FTC') shall institute, commence, or threaten any
action, proceeding or inquiry relating to the Shareholder Designee's
position as a director of Spinco, provided, that in the event of one or
more resignations pursuant to this clause (A), the Shareholders shall have
the right in each such event to designate a new Shareholder Designee in
accordance with the terms hereof; (B) will resign as a director of Spinco
not later than the next annual meeting of Shareholders of Spinco in the
event that the Shareholders and their Affiliates Beneficially Own less than
4% of Spinco's Voting Securities then outstanding, provided, however that
this Agreement shall continue in full force and effect until the date of
such resignation and (C) will immediately resign if the Shareholders
violate or breach any of the material terms or provisions of this
Agreement. Notwithstanding any resignation pursuant to clause (C) of the
preceding sentence, all of the provisions of this Agreement other than this
Section 7 shall continue in full force and effect.
So long as Shareholders and their Affiliates continue to Beneficially Own
in excess of 4% of the Spinco Voting Securities then outstanding and so long as
this Agreement shall not have been terminated, Spinco shall include the
Shareholder Designee in the Board of Directors' slate of nominees for election
as directors at Spinco's annual meeting of shareholders and shall recommend that
the Shareholder Designee be elected as a director of Spinco.
So long as a Shareholder Designee serves as a member of the Board of
Directors of Spinco, Spinco agrees that the Shareholder Designee shall serve
(subject to the applicable requirements of the FTC, the New York Stock Exchange
or any other security exchange on which the Spinco Common Stock is listed, or if
not so listed, under the rules or regulations of the National Association of
Securities Dealers) as a member of the Executive, Finance and Corporate
Development, and Compensation Benefits and Nominating Committees of the Board
(or the three committees having similar functions). Except as otherwise provided
in this Section 7, upon the termination of this Agreement, if requested by
Spinco, the Shareholder Designee shall resign as a director of Spinco's Board of
Directors.
(b) In the event that any Shareholder Designee shall cease to be a member
of the Board of Directors by reason of death, disability or resignation (except
in circumstances in which TAC shall not have the right under the first paragraph
of Section 7(a) hereof to select a new Shareholder Designee), Spinco shall
replace such Shareholder Designee with another Shareholder Designee at the next
meeting of the Board of Directors.
(c) The Shareholder Designee, upon nomination or appointment as a director
of Spinco, shall agree in writing to comply with the obligations of the
Shareholders under Section 5(a) hereof and the obligation of such Shareholder
Designee under this Section 7(c).
(d) Without the prior written consent of Shareholders, Spinco shall not
take or recommend to its shareholders any action which would impose limitations,
not imposed on other Shareholders of Spinco, on the enjoyment by any of
Shareholders and their Affiliates of the legal rights generally enjoyed by
shareholders of
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<PAGE>
Spinco, other than those imposed by the terms of this Agreement, the Amended
Merger Agreement and the Ancillary Agreements; provided, however, that the
foregoing shall not prevent Spinco from implementing or adopting a Shareholder
Rights Plan or issuing a similar security which has a 'trigger' threshold of not
less than the greater of 10% of the outstanding shares of Spinco Common Stock or
the amount then Beneficially Owned by Shareholders not in violation of this
Agreement.
8. Intentionally Omitted
9. Representations and Warranties of Shareholders. Shareholders hereby
represent and warrant to Spinco that:
(a) TAC is a corporation duly organized and validly existing under the
laws of the State of Kansas and is in good standing under the laws of the
State of Kansas. The Foundation is a not-for-profit corporation duly
organized and validly existing under the laws of the State of Colorado.
Shareholders have all necessary power and authority to execute and deliver
this Agreement and perform their obligations hereunder. The execution and
delivery by TAC and the Foundation of this Agreement and the performance by
TAC and the Foundation of their obligations hereunder have been duly and
validly authorized by the Board of Directors of TAC and the Foundation, and
by the sole stockholder of TAC, and no other proceedings or actions on the
part of any Shareholder are necessary to authorize the execution, delivery
or performance of this Agreement or the consummation of the transactions
contemplated hereby.
(b) This Agreement has been duly and validly executed and delivered by
Shareholders and constitutes the valid and binding agreement of
Shareholders, enforceable against Shareholders in accordance with its terms
except to the extent (i) such enforcement may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors rights and (ii)
the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
(c) Each Shareholder is the sole record holder and Beneficial Owner of
the number of shares of Company Common Stock ('Company Shares') listed
opposite such Shareholder's name on the signature page hereof, and, except
as provided in Section 3 hereof and to the extent created by either or both
of the Corporate Matters Agreement and the Registration Rights Agreement,
each dated as of August 1, 1993 by and among the Company, The Morgan
Stanley Leveraged Equity Fund II, L.P., a Delaware limited partnership, TAC
and certain other parties thereto, each of which the Shareholders agree to
terminate as of the Effective Time or the Alternative Effective Time, as
the case may be, has good and marketable title to all of such Company
Shares, free and clear of all liens, claims, options, proxies, voting
agreements, security interests, charges and encumbrances. The Company
Shares constitute all of the capital stock of the Company Beneficially
Owned by Shareholders, and except for the Company Shares, neither
Shareholders nor any of their Affiliates Beneficially Owns or has any right
to acquire (whether currently, upon lapse of time, following the
satisfaction of any conditions, upon the occurrence of any event or any
combination of the foregoing) any Company Voting Securities, except that
TAC has the right to acquire up to 520,188 (less any amount subsequently
sold by Learjet Inc. or its assignee) shares of Company Common Stock
pursuant to the Airplane Purchase Agreement. Except as provided in Section
3 hereof and in this Section 9(c), each Shareholder has sole power to vote
and to dispose of the Company Shares Beneficially Owned by such
Shareholder, and sole power to issue instructions with respect to such
Company Shares to the extent appropriate in respect of the matters set
forth in this Agreement, sole power to demand appraisal rights and sole
power to agree to all of the matters set forth in this Agreement, in each
case with respect to all of such Company Shares, with no limitations,
qualifications or restrictions on such rights, subject to applicable
securities laws and the terms of this Agreement. Shareholders do not
beneficially own or have any right to acquire (whether currently, upon
lapse of time, following the satisfaction of any conditions, upon the
occurrence of any event or any combination of the foregoing), except
pursuant to the Merger, or the Alternative Merger, as the case may be, any
Parent Voting Securities.
(d) Except for filings, authorizations, consents and approvals as may
be required under, and other applicable requirements of, the ICA, the
Securities Exchange Act of 1934, each as amended, (i) no filing with, and
no permit, authorization, consent or approval of, any state or federal
governmental body or
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<PAGE>
authority is necessary for the execution of this Agreement by Shareholders
and the consummation by Shareholders of the transactions contemplated
hereby and (ii) none of the execution and delivery of this Agreement by
Shareholders, the consummation by Shareholders of the transactions
contemplated hereby or compliance by Shareholders with any of the
provisions hereof shall (A) conflict with or result in any breach of the
certificate or incorporation or by-laws or other organizational documents
of TAC or the Foundation, (B) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or
give rise to any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or
provisions of any note, loan agreement, bond, mortgage, indenture, license,
contract, commitment, arrangement, understanding, agreement or other
instrument or obligation of any kind to which any Shareholder is a party or
by which any Shareholder or any of its properties or assets (including the
Company Shares) may be bound, or (C) violate any order, writ, injunction,
decree, judgment, statute, rule or regulation applicable to any Shareholder
or any of its properties or assets. To the best knowledge of Shareholders,
no litigation is pending or threatened involving Shareholders or the
Company relating in any way to this Agreement, the Original Anschutz/Spinco
Agreement, the Amended Merger Agreement, the Ancillary Agreements, or any
transactions contemplated hereby or thereby.
(e) Shareholders understand and acknowledge that Parent is entering
into, and causing the Purchaser to enter into, the Amended Merger Agreement
and the Ancillary Agreements, and is incurring the obligations set forth
therein, in reliance upon Shareholders' execution and delivery of this
Agreement.
(f) Except for Morgan Stanley & Co. Incorporated, no broker,
investment banker, financial adviser or other person is entitled to any
broker's, finder's, financial adviser's or other similar fee or commission
in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of Shareholders.
(g) Shareholders have no plan or intention, and as of the Effective
Time or the Alternative Effective Time, as the case may be, will have no
plan or intention to sell, exchange or otherwise dispose of any of the
shares of Parent Voting Securities that they receive in the Merger or the
Alternative Merger, as the case may be.
(h) Shareholders have no plan or intention and, as of the effective
date of the Spin-off, will have no plan or intention, to sell, exchange or
otherwise dispose of any of the Spinco Shares that they receive in such
Spin-off (including by inter vivos gift).
(i) Shareholders will make such representations as may reasonably be
requested by Parent (provided such representations are true at the time
given), and in such form as may reasonably be requested by Parent, for use
in connection with the request by Parent that the Internal Revenue Service
issue a private letter ruling with respect to the tax consequences of the
Spin-off, including the representation made in Section 9(h) hereof.
10. Representations and Warranties of Spinco. Spinco hereby represents
and warrants to the Shareholders that:
(a) Spinco is a corporation duly organized and validly existing under
the laws of the State of Utah, and is in good standing under the laws of
the state of its incorporation. Spinco has all necessary corporate power
and authority to execute and deliver this Agreement and perform its
obligations hereunder. The execution and delivery by Spinco of this
Agreement and the performance by Spinco of its obligations hereunder have
been duly and validly authorized by the Board of Directors of Spinco and no
other corporate proceedings on the part of Spinco are necessary to
authorize the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby.
(b) This Agreement has been duly and validly executed and delivered by
Spinco and constitutes a valid and binding agreement of Spinco, enforceable
against Spinco in accordance with its terms except to the extent (i) such
enforcement may be limited by applicable bankruptcy, insolvency or similar
laws affecting creditors rights and (ii) the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
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<PAGE>
(c) Except for filings, authorizations, consents and approvals as may
be required under, and other applicable requirements of, the ICA, (i) no
filing with, and no permit, authorization, consent or approval of, any
state or federal public body or authority is necessary for the execution of
this Agreement by Spinco and the consummation by Spinco of the transactions
contemplated hereby and (ii) none of the execution and delivery of this
Agreement by Spinco, the consummation by Spinco of the transactions
contemplated hereby or compliance by Spinco with any of the provisions
hereof shall (A) conflict with or result in any breach of the certificate
of incorporation or by-laws of Spinco, (B) result in a violation or breach
of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any third party right of termination,
cancellation, material modification or acceleration) under any of the
terms, conditions or provisions of any note, loan agreement, bond,
mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind to
which Spinco is a party or by which Spinco or any of its properties or
assets may be bound, or (C) violate any order, writ, injunction, decree,
judgment, statute, rule or regulation applicable to Spinco or any of its
properties or assets. To the best knowledge of Spinco, no litigation is
pending or threatened involving Spinco relating in any way to this
Agreement, the Original Anschutz/Spinco Agreement, the Amended Merger
Agreement, the Ancillary Agreements or any transactions contemplated hereby
or thereby.
(d) Except for CS First Boston Corporation, no broker, investment
banker, financial adviser or other person is entitled to any broker's,
finder's, financial adviser's or other similar fee or commission in
connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of Spinco.
11. Further Assurances. From time to time, at the other party's request
and without further consideration, each party hereto shall execute and deliver
such additional documents and take all such further lawful action as may be
necessary or desirable to consummate and make effective, in the most expeditious
manner practicable, the transactions contemplated by this Agreement.
12. Stop Transfer; Legend.
(a) Shareholders agree with and covenant to Spinco that Shareholders shall
not request that Spinco register the transfer (book-entry or otherwise) of any
certificated or uncertificated interest representing any of the securities of
Spinco unless such transfer is made in compliance with this Agreement.
(b) During the Standstill Period, Shareholders shall promptly surrender to
Spinco all certificates representing the Spinco Shares, and other Spinco Voting
Securities acquired by Shareholders or their Affiliates after the date hereof,
and Spinco shall place the following legend on such certificates:
'THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
SHAREHOLDERS AGREEMENT, DATED AS OF AUGUST 3, 1995 AND AMENDED AND RESTATED
AS OF JULY 12, 1996, BY AND AMONG UNION PACIFIC RESOURCES GROUP INC., THE
ANSCHUTZ CORPORATION, ANSCHUTZ FOUNDATION AND MR. PHILIP F. ANSCHUTZ WHICH,
AMONG OTHER THINGS, RESTRICTS THE TRANSFER AND VOTING THEREOF.'
(c) In connection with any Transfer of Spinco Voting Securities to any
Person, other than a Shareholder, an Affiliate of a Shareholder, any heir,
distributee, guardian, administrator, executor, legal representative or similar
successor in interest, or a member of a 'group' (within the meaning of Section
13(d)(3) of the Exchange Act) in which a Shareholder or an Affiliate thereof or
such other Person is included, pursuant to, and made in compliance with, Section
6 hereof, and from and after the termination of the Standstill Period, Spinco
shall, upon surrender thereto of any certificates representing Spinco Voting
Securities that bear a legend required by this Section 12, issue and deliver to
the record owner of the securities represented thereby, or to its registered
transferee, certificates representing such securities without such legend.
13. Termination. Except as otherwise provided in this Agreement, this
Agreement shall terminate on the earliest to occur of (1) the seventh
anniversary of the Effective Time or the Alternative Effective Time, as the case
may be, (2) following consummation of the Spin-off, at such time that the
Shareholders Beneficially Own, and continue to Beneficially Own, in the
aggregate, less than 4% of the Spinco Voting Securities then outstanding, it
being understood, however, that if the Shareholders at any time Beneficially Own
in the aggregate
G-12
<PAGE>
less than 4% of the Spinco Voting Securities then outstanding but, prior to the
seventh anniversary of the Effective Time or the Alternative Effective Time, as
the case may be, subsequently acquire Beneficial Ownership of any Spinco Voting
Securities (except pursuant to clauses (A), (B) or (C) of the parenthetical
exception to the first sentence in Section 5(a)(i) hereof or in an Inadvertent
Acquisition) if immediately following such acquisition Shareholders become
Beneficial Owners in the aggregate of more than 4% of the Spinco Voting
Securities then outstanding, the provisions of Sections 5, 6, 9, 11, 12, 13 and
14 of this Agreement shall be effective and in full force again as if no such
termination had occurred and (3) if at any time that the Shareholders
Beneficially Own in the aggregate more than 4% of the Spinco Voting Securities
then outstanding (i) the Shareholder Designee shall not be elected as a director
of Spinco (other than as a result of a resignation or non-election referred to
in Section 7(a)(vi)(A) or 7(a)(vi)(C) hereof), (ii) subject to applicable
requirements of the FTC, the New York Stock Exchange or any other security
exchange on which the Spinco Common Stock is listed, or if not so listed, under
the rules or regulations of the National Association of Securities Dealers, the
Shareholder Designee who is then a director shall not be appointed as a member
of the Executive, Finance and Corporate Development, and Compensation, Benefits
and Nominating Committees, respectively, of the Board of Directors of Spinco (or
committees having similar functions) or (iii) Spinco shall have breached its
covenant in Section 7(b) hereof; provided that TAC, for itself and on behalf of
all other Shareholders, may by written notice to Spinco irrevocably elect that,
from and after the delivery thereof, the references in this Section 13 and in
Section 7 hereof to '4%' be deleted and replaced by references to '3%'.
Notwithstanding anything herein to the contrary, any agreements or covenants
contained herein which by their terms require action or performance following
termination of this Agreement shall survive such termination.
14. Miscellaneous.
(a) This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof.
(b) Shareholders agree that this Agreement and the respective rights and
obligations of Shareholders hereunder shall attach to any Spinco Voting
Securities that may become Beneficially Owned by Shareholders. The obligations
of Shareholders under Sections 5(c), 6 and 12 hereof shall terminate with
respect to Spinco Voting Securities that shall cease to be Beneficially Owned by
a Shareholder, an Affiliate thereof or any heir, distributee, guardian,
administrator, executor, legal representative or similar successor in interest,
pursuant to a Transfer thereof to any Person other than a Shareholder, an
Affiliate of a Shareholder, such other Person or a member of a 'group' (within
the meaning of Section 13(d)(3) of the Exchange Act) in which a Shareholder, an
Affiliate thereof or such other person is included; provided that such Transfer
shall be permitted by, and made in accordance with Section 3 hereof or Section 6
hereof, as the case may be, and such termination shall be effective upon the
Transfer of such securities; such transferees of such securities shall have no
obligations or rights under or with respect to this Agreement and, except as
otherwise provided herein, shall not be deemed to be Shareholders for any
purposes of this Agreement; and thereafter such securities shall not be subject
to Sections 5(c), 6 and 12 hereof for any purpose whatsoever. The
representations, warranties, covenants, obligations and other agreements of
Shareholders made or undertaken in this Agreement are made or undertaken by each
Shareholder with respect to itself alone, severally and not jointly, and, no
Shareholder shall have any responsibility with respect to the representations,
warranties, covenants, obligations and other agreements made or undertaken by
any other Shareholder in this Agreement or any liability with respect to the
breach thereof by any other Shareholder.
(c) Except as otherwise provided in this Agreement, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, and each of Spinco,
on the one hand, and Shareholders, on the other hand, shall indemnify and hold
the other harmless from and against any and all claims, liabilities or
obligations with respect to any brokerage fees, commissions or finders' fees
asserted by any person on the basis of any act or statement alleged to have been
made by such party or its Affiliates.
(d) Except as provided in the Agreement, this Agreement shall not be
assigned by operation of law or otherwise without the prior written consent of
the other party, provided that Spinco may assign, in its sole discretion, its
rights and obligations hereunder to any direct or indirect wholly owned
subsidiary of Spinco no
G-13
<PAGE>
such assignment shall relieve Spinco of its obligations hereunder if such
assignee does not perform such obligations.
(e) This Agreement may not be amended, changed, supplemented, or otherwise
modified or terminated, except upon the execution and delivery of a written
agreement executed by each of the parties hereto. The parties may waive
compliance by the other parties hereto with any representation, agreement or
condition otherwise required to be complied with by such other party hereunder,
but any such waiver shall be effective only if in writing executed by the
waiving party.
(f) All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly received if given) by hand delivery or telecopy (with a confirmation
copy sent for next day delivery via courier service, such as FedEx), or by any
courier service, such as FedEx, providing proof of delivery. All communications
hereunder shall be delivered to the respective parties at the following
addresses:
If to Shareholders:
The Anschutz Corporation
Suite 2400
555 Seventeenth Street
Denver, Colorado 80202
Anschutz Foundation
Suite 2400
555 Seventeenth Street
Denver, Colorado 80202
Philip F. Anschutz
Suite 2400
555 Seventeenth Street
Denver, Colorado 80202
and, in either case, with a copy to:
O'Melveny & Myers
153 East 53rd Street
New York, New York 10022
Telephone No.: (212) 326-2000
Telecopy No.: (212) 326-2091
Attention: Drake S. Tempest, Esq.
If to Spinco:
Union Pacific Resources Group Inc.
P.O. Box 7, 801 Cherry Street
Fort Worth, Texas 76101
Telephone No.: (817) 877-6000
Telecopy No.: (817) 877-7522
Attention: Joseph A. LaSala, Esq.
copy to:
Skadden, Arps, Slate,
Meagher & Flom
919 Third Avenue
New York, New York 10022
Telephone No.: (212) 735-3000
Telecopy No.: (212) 735-2000
Attention: Paul T. Schnell, Esq.
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<PAGE>
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(g) Whenever possible, each provision or portion of any provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law but if any provision or portion of any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect under
any applicable law or rule in any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or portion of any provision
in such jurisdiction, and this Agreement will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision or portion of any provision had never been contained herein.
(h) Each of the parties hereto recognizes and acknowledges that a breach by
it of any covenants or agreements contained in this Agreement will cause the
other party to sustain damages for which it would not have an adequate remedy at
law for money damages, and therefore each of the parties hereto agrees that in
the event of any such breach the aggrieved party shall be entitled to the remedy
of specific performance of such covenants and agreements and injunctive and
other equitable relief in addition to any other remedy to which it may be
entitled, at law or in equity.
(i) All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall be cumulative
and not alternative, and the exercise of any thereof by any party shall not
preclude the simultaneous or later exercise of any other such right, power or
remedy by such party. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
(j) This Agreement is not intended to be for the benefit of, and shall not
be enforceable by, any person or entity who or which is not a party hereto.
(k) This Agreement shall be governed and construed in accordance with the
laws of the State of New York, without giving effect to the principles of
conflicts of law thereof.
(l) The representations and warranties made herein shall survive through
the term of this Agreement.
(m) Each party hereby irrevocably submits to the nonexclusive jurisdiction
of the Supreme Court in the State of New York in any action, suit or proceeding
arising in connection with this Agreement, and agrees that any such action, suit
or proceeding may be brought in such court (and waives any objection based on
forum non conveniens or any other objection to venue therein); provided,
however, that such consent to jurisdiction is solely for the purpose referred to
in this paragraph (m) and shall not be deemed to be a general submission to the
jurisdiction of said Court or in the State of New York other than for such
purposes. Each party hereto hereby waives any right to a trial by jury in
connection with any such action, suit or proceeding.
(n) The descriptive headings used herein are inserted for convenience of
reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
(o) This Agreement may be executed in counterparts, each of which shall be
deemed to be an original, but all of which, taken together, shall constitute one
and the same Agreement.
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<PAGE>
IN WITNESS WHEREOF, Spinco and Shareholders have caused this Agreement to
be duly executed as of the day and year first above written.
<TABLE>
<S> <C>
UNION PACIFIC RESOURCES GROUP INC.
By: /s/ V. RICHARD EALES
----------------------------
Name: V. Richard Eales
Title: Executive Vice
President and
Chief Finance Officer
No. of Shares: 39,351,928 THE ANSCHUTZ CORPORATION
By: /s/ PHILIP F. ANSCHUTZ
----------------------------
Name: Philip F. Anschutz
Title: President
No. of Shares: 970,684 ANSCHUTZ FOUNDATION
By: /s/ PHILIP F. ANSCHUTZ
----------------------------
Name: Philip F. Anschutz
Title: Chairman of the Board
No. of Shares: 39,351,928 /s/ PHILIP F. ANSCHUTZ
----------------------------
[by reason of ownership Philip F. Anschutz
of TAC]
</TABLE>
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<PAGE>
ANNEX H
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT, dated as of July 12,
1996 (this 'Agreement'), among Union Pacific Corporation, a Utah corporation
('Parent'), The Anschutz Corporation, a Kansas corporation ('TAC'), and Anschutz
Foundation, a Colorado not-for-profit corporation (the 'Foundation' and,
together with TAC, the 'Holders').
W I T N E S S E T H:
WHEREAS, Parent, TAC, and the Foundation entered into a Registration Rights
Agreement, dated as of August 3, 1995 (the 'Original Registration Rights
Agreement'), and the original parties to the Original Registration Rights
Agreement wish to amend and restate such Original Registration Rights Agreement
in its entirety;
WHEREAS, simultaneously with the execution of the Original Registration
Rights Agreement, Parent, Union Pacific Railroad Company, a Utah corporation and
an indirect wholly owned subsidiary of Parent ('UPRR'), UP Acquisition
Corporation, a former Delaware corporation and a direct wholly owned subsidiary
of UPRR ('Purchaser'), and Southern Pacific Rail Corporation, a Delaware
corporation (the 'Company'), entered into an Agreement and Plan of Merger (the
'Original Merger Agreement'), pursuant to which, among other things, (i)
Purchaser purchased up to 39,034,471 shares of common stock, $.001 par value, of
the Company pursuant to a cash tender offer (the 'Offer') and (ii) the Company
would be merged with and into UPRR (the 'Merger') with UPRR as the surviving
corporation;
WHEREAS, Purchaser has merged with and into UPRR, with UPRR as the
surviving corporation (the 'Purchaser Merger');
WHEREAS, Parent, UPRR, UP Holding Company, Inc., a Delaware corporation
('Holding'), and Union Pacific Merger Co., a Delaware corporation ('Mergerco'),
and the Company entered into an Amended and Restated Agreement and Plan of
Merger, dated as of July 12, 1996 (the 'Amended Merger Agreement'), in order to
permit an alternative structure to the acquisition of the Company by Parent
pursuant to which the Company would merge with and into either Holding or
Mergerco at the election of Parent, with Holding or Mergerco, as the case may
be, as the surviving corporation (the 'Alternative Merger');
WHEREAS, the Holders and Parent wish to amend and restate the Original
Registration Rights Agreement to reflect the Amended Merger Agreement;
WHEREAS, pursuant to the Merger or the Alternative Merger, as the case may
be, the Holders will receive shares of Common Stock, par value $2.50 per share,
of Parent ('Parent Common Stock'); and
WHEREAS, as an inducement and a condition to their entering into the
Amended Shareholders Agreement and voting for the Merger, or the Alternative
Merger, as the case may be, the Holders have required that Parent agree, and
Parent has agreed, to enter into this Agreement providing, among other things,
for the registration under the Securities Act of 1933, as amended (the
'Securities Act'), of shares of Parent Common Stock to be disposed of by the
Holders;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
representations, warranties, covenants and agreements contained herein and in
the Amended Shareholders Agreement, the parties hereto, intending to be legally
bound hereby, agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. Capitalized terms used and not defined herein
have the respective meanings ascribed to them in the Amended Merger Agreement.
In addition, for purposes of this Agreement:
(a) 'Affiliate' shall mean, with respect to any specified Person, any
Person that, directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the
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Person specified. For the purposes of this definition, 'control'
(including, with correlative meanings, the term 'controlled by' and 'under
common control with'), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
the ownership of voting securities, by contract or otherwise.
(b) 'Commission' shall mean the Securities and Exchange Commission.
(c) 'Demand Registration' shall mean a Demand Registration as defined
in Section 2.1.
(d) 'Person' shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
(e) 'Piggy-Back Registration' shall mean a Piggy-Back Registration as
defined in Section 2.2.
(f) 'Registrable Securities' shall mean the Parent Common Stock
received by the Holders pursuant to the Merger or the Alternative Merger,
as the case may be, until (i) a registration statement covering such
security has been declared effective by the Commission and it has been
disposed of pursuant to such effective registration statement, (ii) it has
been sold under circumstances in which all of the applicable conditions of
Rules 145 and 144 or Rule 144A (or any similar provisions then in force)
under the Securities Act are met, or (iii) it has been otherwise
transferred and Parent has delivered a new certificate or other evidence of
ownership for it not bearing a restrictive legend and it may be resold
without subsequent registration under the Securities Act.
(g) 'Selling Holder' means a Holder who is selling Registrable
Securities pursuant to a registration statement under the Securities Act.
(h) 'Termination Date' means the seventh anniversary of the Closing
Date (as defined in the Amended Merger Agreement).
(i) 'Underwriter' means a securities dealer which purchases any
Registrable Securities as principal and not as part of such dealer's
market-making activities.
ARTICLE II
REGISTRATION RIGHTS
SECTION 2.1 Demand Registrations. (a) Request for Registration. Any
Holder may make, at any time or from time to time after the Closing Date,
subject to the terms herein and until and including the Termination Date of this
Agreement, a written request for registration under the Securities Act of all or
part of the Registrable Securities then held by such Holder (a 'Demand
Registration'); provided, that Parent shall not be obligated to effect more than
three Demand Registrations for the Holders in total pursuant to this Agreement.
Such request will specify the number of Registrable Securities proposed to be
sold by the Holder(s) and will also specify the intended method of disposition
thereof. Parent will give written notice of such registration request to all the
Holders of the Registrable Securities and, subject to Section 2.3, include in
such registration all such Registrable Securities with respect to which Parent
has received written requests for inclusion therein within 20 business days
after receipt by the Holders of Parent's notice. Each request will also specify
the number of Registrable Securities to be registered and the intended
disposition thereof.
(b) Effective Registration. A Demand Registration will not count as a
Demand Registration unless and until it has become effective.
(c) Underwriting of Demand Registrations. At the election of the Holders,
the offering of such Registrable Securities pursuant to such Demand Registration
shall be in the form of an underwritten offering. The Holder requesting the
Demand Registration (with the consent of Parent, not to be unreasonably
withheld) shall select the book-running managing Underwriter in connection with
such offering and any additional investment bankers and managers to be used in
connection with the offering. To the extent 10% or more of the Registrable
Securities so requested to be registered in a Demand Registration are excluded
from the offering in accordance with Section 2.3, there shall be provided one
additional Demand Registration under Section 2.1(a).
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SECTION 2.2 Piggy-Back Registration. If Parent proposes to file a
registration statement under the Securities Act with respect to an offering by
Parent for its own account or for the account of any of its respective
securityholders of any class of equity security (other than a registration
statement on Form S-4 or S-8 (or any substitute form that may be adopted by the
Commission) or filed in connection with an exchange offer or offering of
securities solely to Parent's existing securityholders or a registration
statement filed by Parent to comply with its obligations under Demand
Registrations pursuant to Section 2.1 hereof), then Parent shall give written
notice of such proposed filing to the Holders of Registrable Securities as soon
as practicable (but in no event less than 10 days before the anticipated filing
date), and such notice shall offer such Holders the opportunity to register such
number of shares of Registrable Securities as each such Holder may request (a
'Piggy-Back Registration'). Parent shall use its best efforts to cause the
managing Underwriter or Underwriters of a proposed underwritten offering to
permit the Registrable Securities requested to be included in a Piggy-Back
Registration to be included on the same terms and conditions as any similar
securities of Parent included therein.
SECTION 2.3 Reduction of Offering. Notwithstanding anything contained in
this Agreement, if the managing Underwriter or Underwriters of an offering
described in Section 2.1 or 2.2 delivers a written opinion to the Holders of the
Registrable Securities to be included in such offering that the success of the
offering would be materially and adversely affected by inclusion of all the
Registrable Securities requested to be included either because of (a) the size
of the offering that the Holders, Parent and such other persons intend to make
or (b) the kind of securities that the Holders, Parent and any other persons or
entities intend to include in such offering, then (A) in the event that the size
of the offering is the basis of such Underwriter's opinion, the amount of
securities to be offered for the accounts of Holders shall be reduced to the
extent necessary to reduce the total amount of securities to be included in such
offering to the amount recommended by such managing Underwriter or Underwriters
and Parent will include in the registration the maximum number of securities
which it is so advised can be sold without such adverse effect, allocated, on a
pro rata basis within each following order of priority, as follows:
(i) FIRST, any securities proposed to be registered by Holder(s)
exercising a Demand Registration right pursuant to this Agreement or any
securities proposed to be included in such Demand Registration by other
Holder(s) as contemplated by Section 2.1(a);
(ii) SECOND, any securities proposed to be registered by Parent for
its own account; and
(iii) THIRD, any other securities proposed to be registered for the
account of the Holders in a Piggy-Back Registration or any securities
proposed to be registered by another holder(s) pursuant to a registration
rights agreement entered into between such other holder(s) and Parent who
are exercising 'piggy-back' registration rights;
and (B) in the event that the kind of securities to be offered is the basis of
such Underwriter's opinion, (x) the Registrable Securities to be included in
such offering shall be reduced as described in clause (A) above or (y) if the
actions described in the immediately preceding clause (x) would, in the judgment
of the managing Underwriter, be insufficient to eliminate substantially the
material and adverse effect that inclusion of the Registration Securities
requested to be included would have on such offering, such Registrable
Securities will be excluded from such offering.
ARTICLE III
REGISTRATION PROCEDURES
SECTION 3.1 Filings; Information. Whenever the Holders have requested
that any Registrable Securities be registered pursuant to Section 2.1 hereof,
Parent will use its best efforts to effect the registration and facilitate the
sale of such Registrable Securities in accordance with the intended method of
disposition thereof as promptly as practicable, and in connection with any such
request:
(a) Parent will as expeditiously as possible prepare and file with the
Commission a registration statement on any form for which Parent then
qualifies or which counsel for Parent shall deem appropriate and which form
shall be available for the sale of the Registrable Securities to be
registered thereunder in accordance with the intended method of
distribution thereof, and use its best efforts to cause such filed
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registration statement to become and remain effective for a period of not
less than 180 days (90 days in the case of a fully underwritten offering
other than pursuant to Rule 415 under the Securities Act); provided that if
Parent shall furnish to the Holders making a request pursuant to Section
2.1 a certificate signed by either its Chairman or President stating that
in his good faith judgment it would be significantly disadvantageous to
Parent or its shareholders for such a registration statement to be filed as
expeditiously as possible, Parent shall have a period of not more than 90
days within which to file such registration statement measured from the
date of receipt of the request in accordance with Section 2.1.
(b) Parent will, if requested, prior to filing a registration
statement or prospectus or any amendment or supplement thereto, furnish and
allow a reasonable time for review and comment to each Selling Holder and
each Underwriter, if any, of the Registrable Securities covered by such
registration statement copies of such registration statement as proposed to
be filed, and thereafter furnish to such Selling Holder and Underwriter, if
any, such number of copies of such registration statement, each amendment
and supplement thereto (in each case including all exhibits thereto and
documents incorporated by reference therein), the prospectus included in
such registration statement (including each preliminary prospectus) and
such other documents as such Selling Holder or Underwriter may reasonably
request in order to facilitate the disposition of the Registrable
Securities owned by such Selling Holder.
(c) After the filing of the registration statement, Parent will
promptly notify each Selling Holder of Registrable Securities covered by
such registration statement of any stop order issued or threatened by the
Commission and take all reasonable actions required to prevent the entry of
such stop order or to remove it if entered.
(d) Parent will use its best efforts to (i) register or qualify the
Registrable Securities under such other securities or blue sky laws of such
jurisdictions in the United States as any Selling Holder reasonably (in
light of such Selling Holder's intended plan of distribution) requests and
(ii) cause such Registrable Securities to be registered with or approved by
such other governmental agencies or authorities as may be necessary by
virtue of the business and operations of Parent and do any and all other
acts and things that may be reasonably necessary or advisable to enable
such Selling Holder to consummate the disposition of the Registrable
Securities owned by such Selling Holder; provided that Parent will not be
required to (A) qualify generally to do business in any jurisdiction where
it would not otherwise be required to qualify but for this paragraph (d),
(B) subject itself to taxation in any such jurisdiction, (C) consent to
general service of process in any such jurisdiction or (D) consent to any
material restrictions on the conduct of its business or any restrictions on
payments to any stockholders of Parent; and provided further that the
Holders will not be required to take any action pursuant to this paragraph
(d).
(e) Parent will promptly notify each Selling Holder of such
Registrable Securities, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the occurrence of an
event requiring the preparation of a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading and promptly make available to each Selling Holder any such
supplement or amendment.
(f) Parent and each Selling Holder will enter into customary
agreements (including an underwriting agreement in customary form
containing customary representations, warranties, covenants, opinions,
certificates, cross-indemnification and contribution provisions) and take
such other actions as are reasonably required in order to expedite or
facilitate the disposition of such Registrable Securities.
(g) Parent will make available for inspection by any Selling Holder of
such Registrable Securities, any Underwriter participating in any
disposition pursuant to such registration statement and any attorney,
accountant or other professional retained by any such Selling Holder or
Underwriter (collectively, the 'Inspectors'), all financial and other
records, pertinent corporate documents and properties of Parent
(collectively, the 'Records') as shall be reasonably necessary to conduct
due diligence, and cause Parent's officers, directors and employees to
supply all information reasonably requested by any Inspectors in connection
with such registration statement. The Selling Holders shall cause such
Records which Parent determines, in good faith, to be confidential and
which Parent notifies the Inspectors are confidential to be
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kept confidential by the Inspectors and not used for any purpose other than
such registration of Registrable Securities, and the Selling Holders shall
cause the Inspectors not to disclose the Records unless (i) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission
in such registration statement or (ii) the release of such Records is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction. Information obtained by any Selling Holder hereunder as a
result of such inspections shall be deemed confidential and shall be kept
confidential by the Selling Holders and may not be used by any Selling
Holder for any purpose other than such registration of Registrable
Securities. Each Selling Holder will, upon learning that disclosure of such
Records is sought in a court of competent jurisdiction, give notice to
Parent and allow Parent, at its expense, to undertake appropriate action to
prevent disclosure of the Records deemed confidential.
(h) Parent will furnish to each Selling Holder and to each
Underwriter, if any, a signed counterpart, addressed to such Selling Holder
or Underwriter, of (i) an opinion or opinions of counsel to Parent and (ii)
a comfort letter or comfort letters from Parent's independent public
accountants, each in customary form and covering such matters of the type
customarily covered by opinions or comfort letters, as the case may be, as
the Holders of a majority of the Registrable Securities included in such
offering or the managing Underwriter therefor reasonably requests.
(i) Parent will otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to
its securityholders, as soon as reasonably practicable, an earnings
statement covering a period of 12 months, beginning within three months
after the effective date of the registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities
Act.
(j) Parent will use its best efforts to cause all such Registrable
Securities to be listed on each securities exchange on which similar
securities issued by Parent are then listed.
Each Selling Holder of Registrable Securities agrees to promptly furnish in
writing to Parent such information regarding the distribution of the Registrable
Securities as Parent may from time to time reasonably request and such other
information as may be legally required in connection with such registration.
Upon receipt of any notice from Parent of the happening of any event of the
kind described in Section 3.1(e) hereof, each Selling Holder will forthwith
discontinue disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until such Selling Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 3.1(e) hereof, and, if so directed by Parent, such Selling Holder will
deliver to Parent all copies, other than permanent file copies then in such
Selling Holder's possession, of the most recent prospectus covering such
Registrable Securities at the time of receipt of such notice. In the event
Parent shall give such notice, Parent shall extend the period during which such
registration statement shall be maintained effective (including the period
referred to in Section 3.1(a) hereof) by the number of days during the period
from and including the date of the giving of notice pursuant to Section 3.1(e)
hereof to the date when Parent shall make available to the Selling Holders of
Registrable Securities covered by such registration statement a prospectus
supplemented or amended to conform with the requirements of Section 3.1(e)
hereof.
The procedures set forth in this Section 3.1 shall apply to Piggy-Back
Registrations pursuant to Section 2.2.
SECTION 3.2 Registration Expenses. In connection with any registration
statement required to be filed hereunder, Parent shall pay the following
Registration expenses incurred in connection with the registration hereunder
(the 'Registration Expenses'): (i) all registration and filing fees, (ii) fees
and expenses of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the Registrable Securities), (iii) printing expenses, (iv)
internal expenses (including without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), (v) the fees
and expenses incurred in connection with the listing of the Registrable
Securities, and (vi) reasonable fees and disbursements of counsel for Parent and
customary fees and expenses for independent certified public accountants
retained by Parent (including the expenses of any comfort letters or costs
associated with the delivery by independent certified public accountants of a
comfort letter or comfort letters requested pursuant to Section 3.1(h) hereof).
Parent shall have no obligation to pay any underwriting fees, discounts,
commissions or
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expenses attributable to the sale of Registrable Securities, including, without
limitation, the fees and expenses of any Underwriters and such Underwriters'
counsel, or any out-of-pocket expenses of the Holders (or the agents who manage
their accounts), including, without limitation, the fees and expenses of any
counsel retained by the Holders. Such Holders' fees, discounts, commissions and
expenses shall be paid promptly by the Holders.
ARTICLE IV
INDEMNIFICATION AND CONTRIBUTION
SECTION 4.1 Indemnification by Parent. Parent agrees to indemnify and
hold harmless each Selling Holder of Registrable Securities, its officers,
directors and agents, and each Person, if any, who controls such Selling Holder
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act from and against any and all losses, claims, damages, liabilities
and expenses (including reasonable costs of investigation) caused by any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus relating to the Registrable Securities or
in any amendment or supplement thereto or in any preliminary prospectus, or
caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
expenses are caused by any such untrue statement or omission or alleged untrue
statement or omission based upon information furnished in writing to Parent by
such Selling Holder or on such Selling Holder's behalf expressly for the use
therein; provided, that with respect to any untrue statement or omission or
alleged untrue statement or omission made in any preliminary prospectus, the
indemnity agreement contained in this paragraph shall not apply to the extent
that any such loss, claim, damage, liability or expense results from the fact
that a current copy of the prospectus was not sent or given to the person
asserting any such loss, claim, damage, liability or expense at or prior to the
written confirmation of the sale of the Registrable Securities concerned to such
person if it is determined that it was the responsibility of such Selling Holder
to provide such person with a current copy of the prospectus and such current
copy of the prospectus would have cured the defect giving rise to such loss,
claim, damage, liability or expense. Parent also agrees to indemnify any
Underwriters of the Registrable Securities, their officers and directors and
each person who controls such underwriters on substantially the same basis as
that of the indemnification of the Selling Holders provided in this Section 4.1.
SECTION 4.2 Indemnification by Holders of Registrable Securities. Each
Selling Holder agrees, severally but not jointly, to indemnify and hold harmless
Parent, its officers, directors and agents and each Person, if any, who controls
Parent within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act to the same extent as the foregoing indemnity from Parent
to such Selling Holder, but only with respect to information furnished in
writing by such Selling Holder or on such Selling Holder's behalf expressly for
use in any registration statement or prospectus relating to the Registrable
Securities, or any amendment or supplement thereto, or any preliminary
prospectus; and provided that the liability of each Selling Holder under the
foregoing indemnity shall be limited to an amount equal to the public offering
price of the Registrable Securities sold by such Selling Holder, less the
applicable underwriting discounts and commissions. Each Selling Holder also
agrees to indemnify and hold harmless Underwriters of the Registrable
Securities, their officers and directors and each person who controls such
Underwriters on substantially the same basis as that of the indemnification of
Parent provided in this Section 4.2.
SECTION 4.3 Conduct of Indemnification Proceeding. If any action or
proceeding (including any governmental investigation) shall be instituted
involving any person in respect of which indemnity may be sought pursuant to
Section 4.1 or 4.2, such person (an 'Indemnified Party') shall promptly notify
the person against whom such indemnity may be sought (an 'Indemnifying Party')
in writing and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Party, and shall assume the payment of all expenses. Such Indemnified Party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party unless (a) the Indemnifying
Party and the Indemnified Party shall have mutually agreed to the retention of
such counsel or (b) the named parties to any such action or proceeding
(including any impleaded parties) include both such Indemnified Party and the
Indemnifying Party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing
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interests between them. It is understood that the Indemnifying Party shall not,
in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) at any time for all such Indemnified Parties, and
that all such fees and expenses shall be reimbursed as they are incurred. In the
case of any such separate firm for the Indemnified Parties, such firm shall be
designated in writing by the Indemnified Parties and shall, in the case of a
Demand Registration, be reasonably satisfactory to the Indemnifying Party. The
Indemnifying Party shall not be liable for any settlement of any such action or
proceeding effected without its written consent, but if settled with its written
consent, or if there be a final judgment for the plaintiff in any such action or
proceeding, the Indemnifying Party shall indemnify and hold harmless such
Indemnified Parties from and against any loss or liability (to the extent stated
above) by reason of such settlement or judgment. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending or threatened proceeding in respect of with any
Indemnified Party is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability arising out
of such proceeding.
SECTION 4.4 Contribution. If the indemnification provided for in this
Article IV is unavailable to the Indemnified Parties in respect of any losses,
claims, damages or liabilities referred to herein, then each such Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such losses,
claims, damages or liabilities (a) as between Parent and the Selling Holders on
the one hand and the Underwriters on the other, in such proportion as is
appropriate to reflect the relative benefits received by Parent and the Selling
Holders on the one hand and the Underwriters on the other from the offering of
the securities, or if such allocation is not permitted by applicable law, in
such proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of Parent and the Selling Holders on the one hand and of
the Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations and (b) as between Parent on the one
hand and each Selling Holder on the other, in such proportion as is appropriate
to reflect the relative fault of Parent and of each Selling Holder in connection
with such statements or omissions, as well as any other relevant equitable
considerations. The relative benefits received by Parent and the Selling Holders
on the one hand and the Underwriters on the other shall be deemed to be in the
same proportion as the total proceeds from the offering (net of underwriting
discounts and commissions but before deducting expenses) received by Parent and
the Selling Holders bear to the total underwriting discounts and commissions
received by the Underwriters, in each case as set forth in the table on the
cover page of the prospectus. The relative fault of Parent and the Selling
Holders on the one hand and of the Underwriters on the other shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by Parent and the Selling Holders
or by the Underwriters. The relative fault of Parent on the one hand and of each
Selling Holder on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by such party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
Parent and the Selling Holders agree that it would not be just and
equitable if contribution pursuant to this Section 4.4 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitation set forth above,
any legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 4.4, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and no Selling Holder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities of such Selling Holder were offered to the
public exceeds the amount of any damages which such
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Selling Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
ARTICLE V
EFFECTIVENESS
SECTION 5.1 Effectiveness. The Original Registration Rights Agreement
shall remain in effect, and this Agreement shall not be effective, unless and
until the stockholders of the Company have approved the Alternative Merger at
the Alternative Company Special Meeting. Thereafter, this Agreement shall become
effective only upon the consummation of the Merger or the Alternative Merger, as
the case may be, and shall terminate and be void and of no force or effect if
the Amended Merger Agreement is terminated in accordance with Article VII
thereof.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 Participation in Underwritten Registrations. No Person may
participate in any underwritten registration hereunder unless such Person (a)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements and these
Registration Rights.
SECTION 6.2 Merger, Consolidation, Exchange, Recapitalization, etc. In
the event, directly or indirectly, (a) Parent shall merge with and into, or
consolidate with, or consummate a share exchange with, any other person, or (b)
any person shall merge with and into, or consolidate with, Parent and Parent
shall be the surviving corporation of such merger or consolidation and, in
connection with such merger or consolidation, all or part of the Registrable
Securities shall be changed into or exchanged for stock or other securities of
any person, or (c) any capital stock or other securities are issued in respect
of, in exchange for, or in substitution of, any Parent equity securities by
reason of any reorganization, recapitalization, reclassification, merger,
consolidation, spin-off, partial or complete liquidation, stock dividend,
split-up, split-off, sale of assets, distribution to stockholders or combination
of the shares of Parent equity securities or any Parent's capital structure,
then, in each such case, appropriate adjustments shall be made so as to fairly
and equitably preserve, as far as practicable, the original rights and
obligations of the parties hereto under this Registration Rights Agreement.
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SECTION 6.3 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed) or sent by an overnight courier service, such as FedEx, to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Parent, to:
Union Pacific Corporation
Martin Towers
Eighth & Eaton Avenues
Bethlehem, Pennsylvania 18018
Attention: Carl W. von Bernuth, Esq.
Telephone No.: (610) 861-3200
Telecopy No.: (610) 861-3111
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: Paul T. Schnell, Esq.
Telephone No.: (212) 735-3000
Telecopy No.: (212) 735-2000
and
(b) if to the Holders to:
The Anschutz Corporation
Anschutz Foundation
Suite 2400
555 Seventeenth Street
Denver, Colorado 80202
Attention: Philip F. Anschutz
Telephone No.: (303) 298-1000
Telecopy No.: (303) 298-8881
with a copy to:
O'Melveny & Myers
153 East 53rd Street
New York, New York 10022
Attention: Drake S. Tempest, Esq.
Telephone No.: (212) 326-2000
Telecopy No.: (212) 326-2091
SECTION 6.4 No Waivers; Remedies. No failure or delay by any party in
exercising any right, power or privilege under this Agreement shall operate as a
waiver of the right, power or privilege. A single or partial exercise of any
right, power or privilege shall not preclude any other or further exercise of
the right, power or privilege or the exercise of any other right, power or
privilege. The rights and remedies provided in this Agreement shall be
cumulative and not exclusive of any rights or remedies provided by law.
SECTION 6.5 Amendments, etc. No amendment, modification, termination or
waiver of any provision of this Agreement, and no consent to any departure by a
party to this Agreement from any provision of this Agreement, shall be effective
unless it shall be in writing and signed and delivered by the other party to
this Agreement, and then it shall be effective only in the specific instance and
for the specific purpose for which it is given.
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SECTION 6.6 Assignment. The provisions of this Agreement shall not be
assignable and any transfer of Registrable Securities shall not transfer any
rights under this Agreement to the transferee; provided, however, that (a)
either Holder shall have the right to assign its rights under this Agreement to
any Person who or which (i) acquires at least 20% of the Parent Common Stock
then Beneficially Owned by such Holder, (ii) would then be eligible to report
its ownership of Parent Common Stock (assuming ownership by such Person of a
sufficient number of shares of Parent Common Stock to require such reporting) on
a Schedule 13G, (iii) shall have agreed in writing (which agreement shall be
addressed, and shall be reasonably satisfactory in form and substance, to
Parent) to be bound by and comply with this Agreement with the same force and
effect as if all references herein to the Holders were references to such Person
and (iv) is reasonably acceptable to Parent, and (b) without the consent of
Parent, but subject to clauses (i) and (iii) of subsection (a) above, either
Holder shall have the right to assign its rights under this Agreement to (x) any
financial institution to which such Holder has, in accordance with Section 2(b)
of the Shareholders Agreement, pledged shares of Parent Common Stock, provided
that such assignment shall not be effective until following a default by Holder
under such pledge, or (y) any Affiliate of Mr. Philip F. Anschutz (it being
understood and agreed that any such rights transferred to any such Affiliate
shall terminate if such Affiliate ceases to be an Affiliate of Mr. Philip F.
Anschutz).
SECTION 6.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the principles of conflicts of laws thereof. All rights and
obligations of Parent and Holders shall be in addition to and not in limitation
of those provided by applicable law.
SECTION 6.8 Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if all signatures were on the same instrument.
SECTION 6.9 Severability of Provisions. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of the prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of the provision in any other
jurisdiction.
SECTION 6.10 Headings and References. Section headings in this Agreement
are included for the convenience of reference only and do not constitute a part
of this Agreement for any other purpose. Reference to parties and sections in
this Agreement are references to the parties to or the sections of this
Agreement, as the case may be, unless the context shall require otherwise.
SECTION 6.11 Entire Agreement. This Agreement embodies the entire
agreement and understanding of the respective parties with respect to the
Holders' registration rights and supersedes all prior agreements or
understandings with respect to such rights.
SECTION 6.12 Survival. Except as otherwise specifically provided in this
Agreement, each representation, warranty or covenant of each party to this
Agreement contained in or made pursuant to this Agreement shall survive and
remain in full force and effect, notwithstanding any investigation or notice to
the contrary or any waiver by any other party of a related condition precedent
to the performance by the other party of an obligation under this Agreement.
SECTION 6.13 Non-Exclusive Jurisdiction. Each party hereto (a) agrees
that any action, suit or proceeding (collectively, an 'Action') with respect to
this Agreement may be brought in the courts of the United States of America for
the Southern District of New York, (b) accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction of those courts and
(c) irrevocably waives any objection, including, without limitation, any
objection to the laying of venue or based on the grounds of FORUM NON
CONVENIENS, which it may now or hereafter have to the bringing of any Action in
those jurisdictions.
SECTION 6.14 Waiver of Jury Trial. Each party waives any right to a trial
by jury in any Action to enforce or defend any right under this Agreement or any
amendment, instrument, document or agreement delivered, or which in the future
may be delivered, in connection with this Agreement and agrees that any Action
shall be tried before a court and not before a jury.
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SECTION 6.15 Specific Performance. Each of the parties hereto recognizes
and acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
SECTION 6.16 No Inconsistent Agreements. Parent is not as of the date
hereof subject to any agreement with respect to the registration under the
Securities Act of any securities of Parent or otherwise, and prior to the
Termination Date shall not enter into any such agreement that is inconsistent
with the provisions of this Agreement, including, without limitation, the order
of priority by which the total amount of securities of Parent to be included in
any offering subject to Article II hereof shall be reduced pursuant to Section
2.3 hereof.
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IN WITNESS WHEREOF, Parent and the Holders have caused this Agreement to be
duly executed as of the date first above written.
UNION PACIFIC CORPORATION
By: /s/ CARL W. VON BERNUTH
--------------------------------------
NAME: Carl W. von Bernuth
Title: Senior Vice President--Law
THE ANSCHUTZ CORPORATION
By: /s/ PHILIP F. ANSCHUTZ
--------------------------------------
NAME: Philip F. Anschutz
Title: President
ANSCHUTZ FOUNDATION
By: /s/ PHILIP F. ANSCHUTZ
--------------------------------------
NAME: Philip F. Anschutz
Title: Chairman of the Board
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ANNEX I
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
AMENDED REGISTRATION RIGHTS AGREEMENT (this 'Agreement'), dated as of July
12, 1996, by and among Union Pacific Resources Group Inc., a Utah corporation
('Spinco'), The Anschutz Corporation, a Kansas corporation ('TAC'), and Anschutz
Foundation, a Colorado not-for-profit corporation (the 'Foundation' and,
together with TAC, the 'Holders').
W I T N E S S E T H :
WHEREAS, Spinco, TAC, and the Foundation entered into a Registration Rights
Agreement, dated as of August 3, 1995 (the 'Original Registration Rights
Agreement'), and the original parties to the Original Registration Rights
Agreement wish to amend and restate such Original Registration Rights Agreement
in its entirety;
WHEREAS, simultaneously with the execution of the Original Registration
Rights Agreement, Union Pacific Corporation, a Utah Corporation ('Parent'),
Union Pacific Railroad Company, a Utah corporation and an indirect wholly owned
subsidiary of Parent ('UPRR'), UP Acquisition Corporation, a former Delaware
corporation and a direct wholly owned subsidiary of UPRR ('Purchaser'), and
Southern Pacific Rail Corporation, a Delaware corporation (the 'Company'),
entered into an Agreement and Plan of Merger (the 'Original Merger Agreement'),
pursuant to which, among other things, (i) Purchaser purchased 39,034,471 shares
of common stock, $.001 par value, of the Company ('Company Common Stock')
pursuant to a cash tender offer (the 'Offer') and (ii) the Company would be
merged with and into UPRR (the 'Merger');
WHEREAS, Purchaser has merged with and into UPRR, with UPRR as the
surviving corporation (the 'Purchaser Merger');
WHEREAS, Parent, UPRR, UP Holding Company, Inc., a Utah corporation
('Holding'), Union Pacific Merger Co., a Delaware corporation ('Mergerco'), and
the Company entered into an Amended and Restated Agreement and Plan of Merger,
dated as of July 12, 1996 (the 'Amended Merger Agreement'), in order to permit
an alternative structure to the acquisition of the Company by Parent pursuant to
which the Company would merge with and into either Holding or Mergerco at the
election of Parent, with Holding or Mergerco, as the case may be, as the
surviving corporation (the 'Alternative Merger');
WHEREAS, Spinco effected an initial public offering of approximately 17.25%
(not including employee shares or employee options) of, and Parent intends to
distribute to its shareholders as a pro rata dividend (the 'Spin-off') the
remainder of, the shares of capital stock of Spinco;
WHEREAS, the Holders, as a result of the Merger or the Alternative Merger,
as the case may be, and the Spin-off, may beneficially own certain shares of
capital stock of Spinco (the 'Spinco Shares');
WHEREAS, Spinco and the Holders are simultaneously herewith entering into
an Amended and Restated Shareholders Agreement (the 'Amended Shareholders
Agreement'), pursuant to which, among other things, the Holders have agreed to
abide by certain agreements relating to the Spinco Shares; and
WHEREAS, the Holders and Parent wish to amend and restate the Original
Registration Rights Agreement to reflect the Amended Merger Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
representations, warranties, covenants and agreements contained herein and in
the Amended Shareholders Agreement, the parties hereto, intending to be legally
bound hereby, agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. Capitalized terms used and not defined herein
have the respective meanings ascribed to them in the Amended Merger Agreement.
In addition, for purposes of this Agreement:
(a) 'Affiliate' shall mean, with respect to any specified Person, any
Person that, directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the
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Person specified. For the purposes of this definition, 'control'
(including, with correlative meanings, the term 'controlled by' and 'under
common control with'), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
the ownership of voting securities, by contract or otherwise.
(b) 'Commission' shall mean the Securities and Exchange Commission.
(c) 'Demand Registration' shall mean a Demand Registration as defined
in Section 2.1.
(d) 'Person' shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
(e) 'Piggy-Back Registration' shall mean a Piggy-Back Registration as
defined in Section 2.2.
(f) 'Registrable Securities' shall mean any Spinco Shares received by
the Holders pursuant to the Spin-off until (i) a registration statement
covering such security has been declared effective by the Commission and it
has been disposed of pursuant to such effective registration statement,
(ii) it has been sold under circumstances in which all of the applicable
conditions of Rules 145 and 144 or Rule 144A (or any similar provisions
then in force) under the Securities Act are met, or (iii) it has been
otherwise transferred and Spinco has delivered a new certificate or other
evidence of ownership for it not bearing a restrictive legend and it may be
resold without subsequent registration under the Securities Act.
(g) 'Selling Holder' means a Holder who is selling Registrable
Securities pursuant to a registration statement under the Securities Act.
(h) 'Termination Date' means the seventh anniversary of the date on
which the Spin-off is consummated.
(i) 'Underwriter' means a securities dealer which purchases any
Registrable Securities as principal and not as part of such dealer's
market-making activities.
ARTICLE II
REGISTRATION RIGHTS
SECTION 2.1. Demand Registrations. (a) Request for Registration. Any
Holder may make, at any time or from time to time after the date on which the
Spin-off is consummated, subject to the terms herein and until and including the
Termination Date of this Agreement, a written request for registration under the
Securities Act of all or part of the Registrable Securities then held by such
Holder (a 'Demand Registration'); provided, that Spinco shall not be obligated
to effect more than three Demand Registrations for the Holders in total pursuant
to this Agreement. Such request will specify the number of Registrable
Securities proposed to be sold by the Holder(s) and will also specify the
intended method of disposition thereof. Spinco will give written notice of such
registration request to all the Holders of the Registrable Securities and,
subject to Section 2.3, include in such registration all such Registrable
Securities with respect to which Spinco has received written requests for
inclusion therein within 20 business days after receipt by the Holders of
Spinco's notice. Each request will also specify the number of Registrable
Securities to be registered and the intended disposition thereof.
(b) Effective Registration. A Demand Registration will not count as a
Demand Registration unless and until it has become effective.
(c) Underwriting of Demand Registrations. At the election of the Holders,
the offering of such Registrable Securities pursuant to such Demand Registration
shall be in the form of an underwritten offering. The Holder requesting the
Demand Registration (with the consent of Spinco, not to be unreasonably
withheld) shall select the book-running managing Underwriter in connection with
such offering and any additional investment bankers and managers to be used in
connection with the offering. To the extent 10% or more of the Registrable
Securities so requested to be registered in a Demand Registration are excluded
from the offering in accordance with Section 2.3, there shall be provided one
additional Demand Registration under Section 2.1(a).
SECTION 2.2. Piggy-Back Registration. If Spinco proposes to file a
registration statement under the Securities Act with respect to an offering by
Spinco for its own account or for the account of any of its respective
securityholders of any class of equity security (other than a registration
statement on Form S-4 or S-8 (or any substitute form that may be adopted by the
Commission) or filed in connection with an exchange offer or offering
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of securities solely to Spinco's existing securityholders or a registration
statement filed by Spinco to comply with its obligations under Demand
Registrations pursuant to Section 2.1 hereof), then Spinco shall give written
notice of such proposed filing to the Holders of Registrable Securities as soon
as practicable (but in no event less than 10 days before the anticipated filing
date), and such notice shall offer such Holders the opportunity to register such
number of shares of Registrable Securities as each such Holder may request (a
'Piggy-Back Registration'). Spinco shall use its best efforts to cause the
managing Underwriter or Underwriters of a proposed underwritten offering to
permit the Registrable Securities requested to be included in a Piggy-Back
Registration to be included on the same terms and conditions as any similar
securities of Spinco included therein.
SECTION 2.3. Reduction of Offering. Notwithstanding anything contained in
this Agreement, if the managing Underwriter or Underwriters of an offering
described in Section 2.1 or 2.2 delivers a written opinion to the Holders of the
Registrable Securities to be included in such offering that the success of the
offering would be materially and adversely affected by inclusion of all the
Registrable Securities requested to be included either because of (a) the size
of the offering that the Holders, Spinco and such other persons intend to make
or (b) the kind of securities that the Holders, Spinco and any other persons or
entities intend to include in such offering, then (A) in the event that the size
of the offering is the basis of such Underwriter's opinion, the amount of
securities to be offered for the accounts of Holders shall be reduced to the
extent necessary to reduce the total amount of securities to be included in such
offering to the amount recommended by such managing Underwriter or Underwriters
and Spinco will include in the registration the maximum number of securities
which it is so advised can be sold without such adverse effect, allocated, on a
pro-rata basis within each following order of priority, as follows:
(i) FIRST, any securities proposed to be registered by Holder(s)
exercising a Demand Registration right pursuant to this Agreement or any
securities proposed to be included in such Demand Registration by other
Holder(s) as contemplated by Section 2.1(a);
(ii) SECOND, any securities proposed to be registered by Spinco for
its own account; and
(iii) THIRD, any other securities proposed to be registered for the
account of the Holders in a Piggy-Back Registration or any securities
proposed to be registered by another holder(s) pursuant to a registration
rights agreement entered into between such other holder(s) and Spinco who
are exercising 'piggy-back' registration rights;
and (B) in the event that the kind of securities to be offered is the basis of
such Underwriter's opinion, (x) the Registrable Securities to be included in
such offering shall be reduced as described in clause (A) above or (y) if the
actions described in the immediately preceding clause (x) would, in the judgment
of the managing Underwriter, be insufficient to eliminate substantially the
material and adverse effect that inclusion of the Registration Securities
requested to be included would have on such offering, such Registrable
Securities will be excluded from such offering.
ARTICLE III
REGISTRATION PROCEDURES
SECTION 3.1. Filings; Information. Whenever the Holders have requested
that any Registrable Securities be registered pursuant to Section 2.1 hereof,
Spinco will use its best efforts to effect the registration and facilitate the
sale of such Registrable Securities in accordance with the intended method of
disposition thereof as promptly as practicable, and in connection with any such
request:
(a) Spinco will as expeditiously as possible prepare and file with the
Commission a registration statement on any form for which Spinco then
qualifies or which counsel for Spinco shall deem appropriate and which form
shall be available for the sale of the Registrable Securities to be
registered thereunder in accordance with the intended method of
distribution thereof, and use its best efforts to cause such filed
registration statement to become and remain effective for a period of not
less than 180 days (90 days in the case of a fully underwritten offering
other than pursuant to Rule 415 under the Securities Act); provided that if
Spinco shall furnish to the Holders making a request pursuant to Section
2.1 a certificate signed by either its Chairman or President stating that
in his good faith judgment it would be significantly disadvantageous to
Spinco or its shareholders for such a registration statement to be filed as
expeditiously as possible, Spinco
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shall have a period of not more than 90 days within which to file such
registration statement measured from the date of receipt of the request in
accordance with Section 2.1.
(b) Spinco will, if requested, prior to filing a registration
statement or prospectus or any amendment or supplement thereto, furnish and
allow a reasonable time for review and comment to each Selling Holder and
each Underwriter, if any, of the Registrable Securities covered by such
registration statement copies of such registration statement as proposed to
be filed, and thereafter furnish to such Selling Holder and Underwriter, if
any, such number of copies of such registration statement, each amendment
and supplement thereto (in each case including all exhibits thereto and
documents incorporated by reference therein), the prospectus included in
such registration statement (including each preliminary prospectus) and
such other documents as such Selling Holder or Underwriter may reasonably
request in order to facilitate the disposition of the Registrable
Securities owned by such Selling Holder.
(c) After the filing of the registration statement, Spinco will
promptly notify each Selling Holder of Registrable Securities covered by
such registration statement of any stop order issued or threatened by the
Commission and take all reasonable actions required to prevent the entry of
such stop order or to remove it if entered.
(d) Spinco will use its best efforts to (i) register or qualify the
Registrable Securities under such other securities or blue sky laws of such
jurisdictions in the United States as any Selling Holder reasonably (in
light of such Selling Holder's intended plan of distribution) requests and
(ii) cause such Registrable Securities to be registered with or approved by
such other governmental agencies or authorities as may be necessary by
virtue of the business and operations of Spinco and do any and all other
acts and things that may be reasonably necessary or advisable to enable
such Selling Holder to consummate the disposition of the Registrable
Securities owned by such Selling Holder; provided that Spinco will not be
required to (A) qualify generally to do business in any jurisdiction where
it would not otherwise be required to qualify but for this paragraph (d),
(B) subject itself to taxation in any such jurisdiction, (C) consent to
general service of process in any such jurisdiction or (D) consent to any
material restrictions on the conduct of its business or any restrictions on
payments to any stockholders of Spinco; and provided further that the
Holders will not be required to take any action pursuant to this paragraph
(d).
(e) Spinco will promptly notify each Selling Holder of such
Registrable Securities, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the occurrence of an
event requiring the preparation of a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading and promptly make available to each Selling Holder any such
supplement or amendment.
(f) Spinco and each Selling Holder will enter into customary
agreements (including an underwriting agreement in customary form
containing customary representations, warranties, covenants, opinions,
certificates, cross-indemnification and contribution provisions) and take
such other actions as are reasonably required in order to expedite or
facilitate the disposition of such Registrable Securities.
(g) Spinco will make available for inspection by any Selling Holder of
such Registrable Securities, any Underwriter participating in any
disposition pursuant to such registration statement and any attorney,
accountant or other professional retained by any such Selling Holder or
Underwriter (collectively, the 'Inspectors'), all financial and other
records, pertinent corporate documents and properties of Spinco
(collectively, the 'Records') as shall be reasonably necessary to conduct
due diligence, and cause Spinco's officers, directors and employees to
supply all information reasonably requested by any Inspectors in connection
with such registration statement. The Selling Holders shall cause such
Records which Spinco determines, in good faith, to be confidential and
which Spinco notifies the Inspectors are confidential to be kept
confidential by the Inspectors and not used for any purpose other than such
registration of Registrable Securities, and the Selling Holders shall cause
the Inspectors not to disclose the Records unless (i) the disclosure of
such Records is necessary to avoid or correct a misstatement or omission in
such registration statement or (ii) the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction. Information obtained by any Selling Holder hereunder as a
result of such inspections shall be deemed confidential and shall be kept
confidential by the Selling Holders and may not be used by
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any Selling Holder for any purpose other than such registration of
Registrable Securities. Each Selling Holder will, upon learning that
disclosure of such Records is sought in a court of competent jurisdiction,
give notice to Spinco and allow Spinco, at its expense, to undertake
appropriate action to prevent disclosure of the Records deemed
confidential.
(h) Spinco will furnish to each Selling Holder and to each
Underwriter, if any, a signed counterpart, addressed to such Selling Holder
or Underwriter, of (i) an opinion or opinions of counsel to Spinco and (ii)
a comfort letter or comfort letters from Spinco's independent public
accountants, each in customary form and covering such matters of the type
customarily covered by opinions or comfort letters, as the case may be, as
the Holders of a majority of the Registrable Securities included in such
offering or the managing Underwriter therefor reasonably requests.
(i) Spinco will otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to
its security-holders, as soon as reasonably practicable, an earnings
statement covering a period of 12 months, beginning within three months
after the effective date of the registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities
Act.
(j) Spinco will use its best efforts to cause all such Registrable
Securities to be listed on each securities exchange on which similar
securities issued by Spinco are then listed.
Each Selling Holder of Registrable Securities agrees to promptly furnish in
writing to Spinco such information regarding the distribution of the Registrable
Securities as Spinco may from time to time reasonably request and such other
information as may be legally required in connection with such registration.
Upon receipt of any notice from Spinco of the happening of any event of the
kind described in Section 3.1(e) hereof, each Selling Holder will forthwith
discontinue disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until such Selling Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 3.1(e) hereof, and, if so directed by Spinco, such Selling Holder will
deliver to Spinco all copies, other than permanent file copies then in such
Selling Holder's possession, of the most recent prospectus covering such
Registrable Securities at the time of receipt of such notice. In the event
Spinco shall give such notice, Spinco shall extend the period during which such
registration statement shall be maintained effective (including the period
referred to in Section 3.1(a) hereof) by the number of days during the period
from and including the date of the giving of notice pursuant to Section 3.1(e)
hereof to the date when Spinco shall make available to the Selling Holders of
Registrable Securities covered by such registration statement a prospectus
supplemented or amended to conform with the requirements of Section 3.1(e)
hereof.
The procedures set forth in this Section 3.1 shall apply to Piggy-Back
Registrations pursuant to Section 2.2.
SECTION 3.2. Registration Expenses. In connection with any registration
statement required to be filed hereunder, Spinco shall pay the following
Registration expenses incurred in connection with the registration hereunder
(the 'Registration Expenses'): (i) all registration and filing fees, (ii) fees
and expenses of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the Registrable Securities), (iii) printing expenses, (iv)
internal expenses (including without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), (v) the fees
and expenses incurred in connection with the listing of the Registrable
Securities, and (vi) reasonable fees and disbursements of counsel for Spinco and
customary fees and expenses for independent certified public accountants
retained by Spinco (including the expenses of any comfort letters or costs
associated with the delivery by independent certified public accountants of a
comfort letter or comfort letters requested pursuant to Section 3.1(h) hereof).
Spinco shall have no obligation to pay any underwriting fees, discounts,
commissions or expenses attributable to the sale of Registrable Securities,
including, without limitation, the fees and expenses of any Underwriters and
such Underwriters' counsel, or any out-of-pocket expenses of the Holders (or the
agents who manage their accounts), including, without limitation, the fees and
expenses of any counsel retained by the Holders. Such Holders' fees, discounts,
commissions and expenses shall be paid promptly by the Holders.
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ARTICLE IV
INDEMNIFICATION AND CONTRIBUTION
SECTION 4.1. Indemnification by Spinco. Spinco agrees to indemnify and
hold harmless each Selling Holder of Registrable Securities, its officers,
directors and agents, and each Person, if any, who controls such Selling Holder
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act from and against any and all losses, claims, damages, liabilities
and expenses (including reasonable costs of investigation) caused by any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus relating to the Registrable Securities or
in any amendment or supplement thereto or in any preliminary prospectus, or
caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
expenses are caused by any such untrue statement or omission or alleged untrue
statement or omission based upon information furnished in writing to Spinco by
such Selling Holder or on such Selling Holder's behalf expressly for the use
therein; provided, that with respect to any untrue statement or omission or
alleged untrue statement or omission made in any preliminary prospectus, the
indemnity agreement contained in this paragraph shall not apply to the extent
that any such loss, claim, damage, liability or expense results from the fact
that a current copy of the prospectus was not sent or given to the person
asserting any such loss, claim, damage, liability or expense at or prior to the
written confirmation of the sale of the Registrable Securities concerned to such
person if it is determined that it was the responsibility of such Selling Holder
to provide such person with a current copy of the prospectus and such current
copy of the prospectus would have cured the defect giving rise to such loss,
claim, damage, liability or expense. Spinco also agrees to indemnify any
Underwriters of the Registrable Securities, their officers and directors and
each person who controls such underwriters on substantially the same basis as
that of the indemnification of the Selling Holders provided in this Section 4.1.
SECTION 4.2. Indemnification by Holders of Registrable Securities. Each
Selling Holder agrees, severally but not jointly, to indemnify and hold harmless
Spinco, its officers, directors and agents and each Person, if any, who controls
Spinco within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act to the same extent as the foregoing indemnity from Spinco
to such Selling Holder, but only with respect to information furnished in
writing by such Selling Holder or on such Selling Holder's behalf expressly for
use in any registration statement or prospectus relating to the Registrable
Securities, or any amendment or supplement thereto, or any preliminary
prospectus; and provided that the liability of each Selling Holder under the
foregoing indemnity shall be limited to an amount equal to the public offering
price of the Registrable Securities sold by such Selling Holder, less the
applicable underwriting discounts and commissions. Each Selling Holder also
agrees to indemnify and hold harmless Underwriters of the Registrable
Securities, their officers and directors and each person who controls such
Underwriters on substantially the same basis as that of the indemnification of
Spinco provided in this Section 4.2.
SECTION 4.3. Conduct of Indemnification Proceeding. If any action or
proceeding (including any governmental investigation) shall be instituted
involving any person in respect of which indemnity may be sought pursuant to
Section 4.1 or 4.2, such person (an 'Indemnified Party') shall promptly notify
the person against whom such indemnity may be sought (an 'Indemnifying Party')
in writing and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Party, and shall assume the payment of all expenses. Such Indemnified Party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party unless (a) the Indemnifying
Party and the Indemnified Party shall have mutually agreed to the retention of
such counsel or (b) the named parties to any such action or proceeding
(including any impleaded parties) include both such Indemnified Party and the
Indemnifying Party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them. It
is understood that the Indemnifying Party shall not, in connection with any one
such action or proceeding or separate but substantially similar or related
actions or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) at
any time for all such Indemnified Parties, and that all such fees and expenses
shall be reimbursed as they are incurred. In the case of any such separate firm
for the Indemnified Parties, such firm shall be designated in writing by the
Indemnified
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Parties and shall, in the case of a Demand Registration, be reasonably
satisfactory to the Indemnifying Party. The Indemnifying Party shall not be
liable for any settlement of any such action or proceeding effected without its
written consent, but if settled with its written consent, or if there be a final
judgment for the plaintiff in any such action or proceeding, the Indemnifying
Party shall indemnify and hold harmless such Indemnified Parties from and
against any loss or liability (to the extent stated above) by reason of such
settlement or judgment. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending or
threatened proceeding in respect of with any Indemnified Party is or could have
been a party and indemnity could have been sought hereunder by such Indemnified
Party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability arising out of such proceeding.
SECTION 4.4. Contribution. If the indemnification provided for in this
Article IV is unavailable to the Indemnified Parties in respect of any losses,
claims, damages or liabilities referred to herein, then each such Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such losses,
claims, damages or liabilities (a) as between Spinco and the Selling Holders on
the one hand and the Underwriters on the other, in such proportion as is
appropriate to reflect the relative benefits received by Spinco and the Selling
Holders on the one hand and the Underwriters on the other from the offering of
the securities, or if such allocation is not permitted by applicable law, in
such proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of Spinco and the Selling Holders on the one hand and of
the Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations and (b) as between Spinco on the one
hand and each Selling Holder on the other, in such proportion as is appropriate
to reflect the relative fault of Spinco and of each Selling Holder in connection
with such statements or omissions, as well as any other relevant equitable
considerations. The relative benefits received by Spinco and the Selling Holders
on the one hand and the Underwriters on the other shall be deemed to be in the
same proportion as the total proceeds from the offering (net of underwriting
discounts and commissions but before deducting expenses) received by Spinco and
the Selling Holders bear to the total underwriting discounts and commissions
received by the Underwriters, in each case as set forth in the table on the
cover page of the prospectus. The relative fault of Spinco and the Selling
Holders on the one hand and of the Underwriters on the other shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by Spinco and the Selling Holders
or by the Underwriters. The relative fault of Spinco on the one hand and of each
Selling Holder on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by such party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
Spinco and the Selling Holders agree that it would not be just and
equitable if contribution pursuant to this Section 4.4 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitation set forth above,
any legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 4.4, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and no Selling Holder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities of such Selling Holder were offered to the
public exceeds the amount of any damages which such Selling Holder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
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ARTICLE V
EFFECTIVENESS
SECTION 5.1. Effectiveness. The Original Registration Rights Agreement
shall remain in effect, and this Agreement shall not be effective, unless and
until the stockholders of the Company have approved the Alternative Merger at
the Alternative Company Special Meeting. Thereafter, this Agreement shall become
effective only upon the consummation of the Merger or the Alternative Merger, as
the case may be, and shall terminate and be void and of no force or effect if
the Amended Merger Agreement is terminated in accordance with its terms.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Participation in Underwritten Registrations. No Person may
participate in any underwritten registration hereunder unless such Person (a)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements and these
Registration Rights.
SECTION 6.2. Merger, Consolidation, Exchange, Recapitalization etc. In
the event, directly or indirectly, (a) Spinco shall merge with and into, or
consolidate with, or consummate a share exchange with, any other person, or (b)
any person shall merge with and into, or consolidate, Spinco and Spinco shall be
the surviving corporation of such merger or consolidation and, in connection
with such merger or consolidation, all or part of the Registrable Securities
shall be changed into or exchanged for stock or other securities of any person,
or (c) any capital stock or other securities are issued in respect of, in
exchange for, or in substitution of, any Spinco equity securities by reason of
any reorganization, recapitalization, reclassification, merger, consolidation,
spin-off, partial or complete liquidation, stock dividend, split-up, split-off,
sale of assets, distribution to stockholders or combination of the shares of
Spinco equity securities or any Spinco's capital structure, then, in each such
case, appropriate adjustments shall be made so as to fairly and equitably
preserve, as far as practicable, the original rights and obligations of the
parties hereto under this Registration Rights Agreement.
SECTION 6.3. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or sent by an overnight courier service, such as
FedEx, to the parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
(a) if to Spinco, to:
Union Pacific Resources Group Inc.
P.O. Box 7
801 Cherry Street
Fort Worth, Texas 76101
Attention: Joseph LaSala, Esq.
Telephone No.: (817) 877-6000
Telecopy No.: (817) 877-7522
with a copy to:
Skadden, Arps, Slate, Meagher, & Flom
919 Third Avenue
New York, New York 10022
Attention: Paul T. Schnell, Esq.
Telephone No.: (212) 735-3000
Telecopy No.: (212) 735-2000
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and
(b) if to the Holders, to:
The Anschutz Corporation
Anschutz Foundation
Suite 2400
555 Seventeenth Street
Denver, Colorado 80202
Attention: Philip F. Anschutz
Telephone No.: (303) 298-1000
Telecopy No.: (303) 298-8881
with a copy to:
O'Melveny & Myers
153 East 53rd Street
New York, New York 10022
Attention: Drake S. Tempest, Esq.
Telephone No.: (212) 326-2000
Telecopy No.: (212) 326-2091
SECTION 6.4. No Waivers; Remedies. No failure or delay by any party in
exercising any right, power or privilege under this Agreement shall operate as a
waiver of the right, power or privilege. A single or partial exercise of any
right, power or privilege shall not preclude any other or further exercise of
the right, power or privilege or the exercise of any other right, power or
privilege. The rights and remedies provided in this Agreement shall be
cumulative and not exclusive of any rights or remedies provided by law.
SECTION 6.5. Amendments, etc. No amendment, modification, termination or
waiver of any provision of this Agreement, and no consent to any departure by a
party to this Agreement from any provision of this Agreement, shall be effective
unless it shall be in writing and signed and delivered by the other party to
this Agreement, and then it shall be effective only in the specific instance and
for the specific purpose for which it is given.
SECTION 6.6. Assignment. The provisions of this Agreement shall not be
assignable and any transfer of Registrable Securities shall not transfer any
rights under this Agreement to the transferee; provided, however, that (a)
either Holder shall have the right to assign its rights under this Agreement to
any Person who or which (i) acquires at least 20% of the Spinco Shares then
Beneficially Owned by such Holder, (ii) would then be eligible to report its
ownership of Spinco Shares (assuming ownership by such Person of a sufficient
number of Spinco Shares to require such reporting) on a Schedule 13G, (iii)
shall have agreed in writing (which agreement shall be addressed, and shall be
reasonably satisfactory in form and substance, to Spinco) to be bound by and
comply with this Agreement with the same force and effect as if all references
herein to the Holder were references to such Person, and (iv) is reasonably
acceptable to Spinco, and (b) without the consent of Spinco, but subject to
clauses (i) and (iii) of subsection (a) above, either Holder shall have the
right to assign its rights under this Agreement to (x) any financial institution
to which such Holder has, in accordance with Section 3 of the Shareholders
Agreement, pledged Spinco Shares, provided that such assignment shall not be
effective until following a default by Holder under such pledge, or (y) any
Affiliate of Mr. Philip F. Anschutz (it being understood and agreed that any
such rights transferred to any such Affiliate shall terminate if such Affiliate
ceases to be an Affiliate of Mr. Philip F. Anschutz).
SECTION 6.7. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the principles of conflicts of laws thereof. All rights and
obligations of Spinco and Holders shall be in addition to and not in limitation
of those provided by applicable law.
SECTION 6.8. Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if all signatures were on the same instrument.
SECTION 6.9. Severability of Provisions. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of the prohibition or
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unenforceability without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of the provision in any other
jurisdiction.
SECTION 6.10. Headings and References. Section headings in this Agreement
are included for the convenience of reference only and do not constitute a part
of this Agreement for any other purpose. Reference to parties and sections in
this Agreement are references to the parties to or the sections of this
Agreement, as the case may be, unless the context shall require otherwise.
SECTION 6.11. Entire Agreement. This Agreement embodies the entire
agreement and understanding of the respective parties with respect to the
Holders' registration rights and supersedes all prior agreements or
understandings with respect to such rights.
SECTION 6.12. Survival. Except as otherwise specifically provided in this
Agreement, each representation, warranty or covenant of each party to this
Agreement contained in or made pursuant to this Agreement shall survive and
remain in full force and effect, notwithstanding any investigation or notice to
the contrary or any waiver by any other party of a related condition precedent
to the performance by the other party of an obligation under this Agreement.
SECTION 6.13. Non-Exclusive Jurisdiction. Each party hereto (a) agrees
that any action, suit or proceeding (collectively, an 'Action') with respect to
this Agreement may be brought in the courts of the United States of America for
the Southern District of New York, (b) accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction of those courts and
(c) irrevocably waives any objection, including, without limitation, any
objection to the laying of venue or based on the grounds of FORUM NON
CONVENIENS, which it may now or hereafter have to the bringing of any Action in
those jurisdictions.
SECTION 6.14. Waiver of Jury Trial. Each party waives any right to a
trial by jury in any Action to enforce or defend any right under this Agreement
or any amendment, instrument, document or agreement delivered, or which in the
future may be delivered, in connection with this Agreement and agrees that any
Action shall be tried before a court and not before a jury.
SECTION 6.15. Specific Performance. Each of the parties hereto recognizes
and acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
SECTION 6.16. No Inconsistent Agreements. Spinco is not as of the date
hereof subject to any agreement with respect to the registration under the
Securities Act of any securities of Spinco or otherwise, and prior to the
Termination Date shall not enter into any such agreement that is inconsistent
with the provisions of this Agreement, including, without limitation, the order
of priority by which the total amount of securities of Spinco to be included in
any offering subject to Article II hereof shall be reduced pursuant to Section
2.3 hereof.
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IN WITNESS WHEREOF, Spinco and the Holders have caused this Agreement to be
duly executed as of the date first above written.
UNION PACIFIC RESOURCES GROUP INC.
By: /s/ V. RICHARD EALES
-------------------------------
Name: V. Richard Eales
Title: Executive Vice President
and Chief Executive Officer
THE ANSCHUTZ CORPORATION
By: /s/ PHILIP F. ANSCHUTZ
-------------------------------
Name: Philip F. Anschutz
Title: President
ANSCHUTZ FOUNDATION
By: /s/ PHILIP F. ANSCHUTZ
-------------------------------
Name: Philip F. Anschutz
Title: Chairman of the Board
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ANNEX J
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT, (this 'Agreement'),
dated as of July 12, 1996, among Union Pacific Corporation, a Utah corporation
('Parent'), UP Holding Company, Inc., a Utah corporation ('Holding'), Union
Pacific Merger Co., a Delaware corporation ('Mergerco' and collectively with
Parent and Mergerco and any of their successors and permitted assigns hereunder,
the 'Holders'), and Southern Pacific Rail Corporation, a Delaware corporation
(the 'Company').
W I T N E S S E T H:
WHEREAS, UP Acquisition Corporation, a former Delaware corporation and
indirect wholly owned subsidiary of Parent ('Sub'), and the Company entered into
a Registration Rights Agreement, dated as of August 3, 1995 (the 'Original
Registration Rights Agreement');
WHEREAS, Sub has merged with and into Union Pacific Railroad Company, a
Utah corporation and an indirect wholly-owned subsidiary of Parent ('UPRR'),
with UPRR as the surviving corporation (the 'Sub Merger');
WHEREAS, the beneficial interests in the shares of Company Common Stock (as
hereinafter defined) acquired by Sub in the Offer (as hereinafter defined) and
formerly held by UPRR are held by Parent and Mergerco;
WHEREAS, the Holders and the Company wish to amend and restate the Original
Registration Rights Agreement in its entirety to reflect the fact that the Sub
Merger occurred and that the beneficial interest in the shares of Company Common
Stock are now owned by Parent and Mergerco;
WHEREAS, simultaneously with the execution of the Original Registration
Rights Agreement, Parent, Sub, UPRR, and the Company entered into an Agreement
and Plan of Merger (the 'Original Merger Agreement'), pursuant to which, among
other things, (i) Sub purchased 39,034,471 shares of common stock, $.001 par
value, of the Company ('Company Common Stock') pursuant to a cash tender offer
(the 'Offer') and (ii) the Company would be merged with and into UPRR (the
'Merger') with UPRR as the surviving corporation;
WHEREAS, Parent, UPRR, Holding, Mergerco and the Company entered into an
Amended and Restated Agreement and Plan of Merger, dated as of July 12, 1996
(the 'Amended Merger Agreement'), in order to permit an alternative structure to
the acquisition of the Company by Parent pursuant to which the Company would
merge with and into either Holding or Mergerco at the election of Parent, with
Holding or Mergerco, as the case may be, as the surviving corporation (the
'Alternative Merger');
WHEREAS, the Company and Sub simultaneously with the execution of the
Original Registration Rights Agreement entered into a Shareholders Agreement
(the 'Shareholders Agreement'), pursuant to which, among other things, Sub has
agreed to vote its shares of Company Common Stock in favor of the Merger and to
abide by certain agreements relating to the shares of Company Common Stock to be
purchased in the Offer;
WHEREAS, Parent, Mergerco and the Company simultaneously with the execution
of this Agreement have entered into an amended and restated shareholders
agreement (the 'Amended Shareholders Agreement') pursuant to which, among other
things, Parent and Mergerco have agreed to vote their respective shares of
Company Common Stock in favor of the Merger or the Alternative Merger, as the
case may be, and to abide by certain agreements relating to the shares of
Company Common Stock purchased in the Offer; and
WHEREAS, as an inducement and a condition to its entering into the Amended
Shareholders Agreement and the Amended Merger Agreement, the Holders have
required that the Company agree, and the Company has agreed, to enter into this
Agreement providing, among other things, for the registration under the
Securities Act of 1933, as amended (the 'Securities Act'), of shares of Company
Common Stock to be disposed of by the Holders;
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NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
representations, warranties, covenants and agreements contained herein and in
the Amended Shareholders Agreement and the Amended Merger Agreement, the parties
hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. Capitalized terms used and not defined herein
have the respective meanings ascribed to them in the Amended Merger Agreement.
In addition, for purposes of this Agreement:
(a) 'Affiliate' shall mean, with respect to any specified Person, any
Person that, directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the Person
specified. For the purposes of this definition, 'control' (including, with
correlative meanings, the term 'controlled by' and 'under common control
with'), as used with respect to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of
voting securities, by contract or otherwise.
(b) 'Commission' shall mean the Securities and Exchange Commission.
(c) 'Demand Registration' shall mean a Demand Registration as defined
in Section 2.1.
(d) 'Person' shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
(e) 'Piggy-Back Registration' shall mean a Piggy-Back Registration as
defined in Section 2.2.
(f) 'Registrable Securities' shall mean the Company Common Stock
purchased by Sub pursuant to the Offer until (i) a registration statement
covering such security has been declared effective by the Commission and it
has been disposed of pursuant to such effective registration statement,
(ii) it has been sold under circumstances in which all of the applicable
conditions of Rules 145 and 144 or Rule 144A (or any similar provisions
then in force) under the Securities Act are met, or (iii) it has been
otherwise transferred and the Company has delivered a new certificate or
other evidence of ownership for it not bearing a restrictive legend and it
may be resold without subsequent registration under the Securities Act.
(g) 'Selling Holder' means a Holder who is selling Registrable
Securities pursuant to a registration statement under the Securities Act.
(h) 'Termination Date' means the seventh anniversary of the date on
which Sub accepted shares of Company Common Stock for payment pursuant to
the Offer.
(i) 'Underwriter' means a securities dealer which purchases any
Registrable Securities as principal and not as part of such dealer's
market-making activities.
ARTICLE II
REGISTRATION RIGHTS
SECTION 2.1. Demand Registrations. (a) Request for Registration. Any
Holder may make, at any time or from time to time, subject to the terms herein
and until and including the Termination Date of this Agreement, a written
request for registration under the Securities Act of all or part of the
Registrable Securities then held by such Holder (a 'Demand Registration');
provided, that the Company shall not be obligated to effect more than six Demand
Registrations for the Holders in total pursuant to this Agreement. Such request
will specify the number of Registrable Securities proposed to be sold by the
Holder(s) and will also specify the intended method of disposition thereof. The
Company will give written notice of such registration request to all the Holders
of the Registrable Securities and, subject to Section 2.3, include in such
registration all such Registrable Securities with respect to which the Company
has received written requests for inclusion therein within 20 business days
after receipt by the Holders of the Company's notice. Each request will also
specify the number of Registrable Securities to be registered and the intended
disposition thereof.
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(b) Effective Registration. A Demand Registration will not count as a
Demand Registration unless and until it has become effective.
(c) Underwriting of Demand Registrations. At the election of the
Holders, the offering of such Registrable Securities pursuant to such
Demand Registration shall be in the form of an underwritten offering. The
Holder requesting the Demand Registration (with the consent of the Company,
not to be unreasonably withheld) shall select the book-running managing
Underwriter in connection with such offering and any additional investment
bankers and managers to be used in connection with the offering. To the
extent 10% or more of the Registrable Securities so requested to be
registered in a Demand Registration are excluded from the offering in
accordance with Section 2.3, there shall be provided one additional Demand
Registration under Section 2.1(a).
SECTION 2.2. Piggy-Back Registration. If the Company proposes to file a
registration statement under the Securities Act with respect to an offering by
the Company for its own account or for the account of any of its respective
securityholders of any class of equity security (other than a registration
statement on Form S-4 or S-8 (or any substitute form that may be adopted by the
Commission) or filed in connection with an exchange offer or offering of
securities solely to the Company's existing securityholders or a registration
statement filed by the Company to comply with its obligations under Demand
Registrations pursuant to Section 2.1 hereof), then the Company shall give
written notice of such proposed filing to the Holders of Registrable Securities
as soon as practicable (but in no event less than 10 days before the anticipated
filing date), and such notice shall offer such Holders the opportunity to
register such number of shares of Registrable Securities as each such Holder may
request (a 'Piggy-Back Registration'). The Company shall use its best efforts to
cause the managing Underwriter or Underwriters of a proposed underwritten
offering to permit the Registrable Securities requested to be included in a
Piggy-Back Registration to be included on the same terms and conditions as any
similar securities of the Company included therein.
SECTION 2.3. Reduction of Offering. Notwithstanding anything contained in
this Agreement, if the managing Underwriter or Underwriters of an offering
described in Section 2.1 or 2.2 delivers a written opinion to the Holders of the
Registrable Securities to be included in such offering that the success of the
offering would be materially and adversely affected by inclusion of all the
Registrable Securities requested to be included either because of (a) the size
of the offering that the Holders, Parent and such other persons intend to make
or (b) the kind of securities that the Holders, Parent and any other persons or
entities intend to include in such offering, then (A) in the event that the size
of the offering is the basis of such Underwriter's opinion, the amount of
securities to be offered for the accounts of Holders shall be reduced to the
extent necessary to reduce the total amount of securities to be included in such
offering to the amount recommended by such managing Underwriter or Underwriters
and the Company will include in the registration the maximum number of
securities which it is so advised can be sold without such adverse effect,
allocated, on a pro-rata basis within each following order of priority, as
follows:
(i) FIRST, any securities proposed to be registered by Holder(s)
exercising a Demand Registration right pursuant to this Agreement or any
securities proposed to be included in such Demand Registration by other
Holder(s) as contemplated by Section 2.1(a);
(ii) SECOND, any securities proposed to be registered by the Company
for its own account; and
(iii) THIRD, any other securities proposed to be registered for the
account of the Holders in a Piggy-Back Registration or any securities
proposed to be registered by another holder(s) pursuant to a registration
rights agreement entered into between such other holder(s) and the Company
who are exercising 'piggy-back' registration rights;
and (B) in the event that the kind of securities to be offered is the basis
of such Underwriter's opinion, (x) the Registrable Securities to be
included in such offering shall be reduced as described in clause (A) above
or (y) if the actions described in the immediately preceding clause (x)
would, in the judgment of the managing Underwriter, be insufficient to
eliminate substantially the material and adverse effect that inclusion of
the Registration Securities requested to be included would have on such
offering, such Registrable Securities will be excluded from such offering.
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ARTICLE III
REGISTRATION PROCEDURES
SECTION 3.1 Filings; Information. Whenever the Holders have requested
that any Registrable Securities be registered pursuant to Section 2.1 hereof,
the Company will use its best efforts to effect the registration and facilitate
the sale of such Registrable Securities in accordance with the intended method
of disposition thereof as promptly as practicable, and in connection with any
such request:
(a) The Company will as expeditiously as possible prepare and file
with the Commission a registration statement on any form for which the
Company then qualifies or which counsel for the Company shall deem
appropriate and which form shall be available for the sale of the
Registrable Securities to be registered thereunder in accordance with the
intended method of distribution thereof, and use its best efforts to cause
such filed registration statement to become and remain effective for a
period of not less than 180 days (90 days in the case of a fully
underwritten offering other than pursuant to Rule 415 under the Securities
Act); provided that if the Company shall furnish to the Holders making a
request pursuant to Section 2.1 a certificate signed by either its Chairman
or President stating that in his good faith judgment it would be
significantly disadvantageous to the Company or its shareholders for such a
registration statement to be filed as expeditiously as possible, the
Company shall have a period of not more than 90 days within which to file
such registration statement measured from the date of receipt of the
request in accordance with Section 2.1.
(b) The Company will, if requested, prior to filing a registration
statement or prospectus or any amendment or supplement thereto, furnish and
allow a reasonable time for review and comment to each Selling Holder and
each Underwriter, if any, of the Registrable Securities covered by such
registration statement copies of such registration statement as proposed to
be filed, and thereafter furnish to such Selling Holder and Underwriter, if
any, such number of copies of such registration statement, each amendment
and supplement thereto (in each case including all exhibits thereto and
documents incorporated by reference therein), the prospectus included in
such registration statement (including each preliminary prospectus) and
such other documents as such Selling Holder or Underwriter may reasonably
request in order to facilitate the disposition of the Registrable
Securities owned by such Selling Holder.
(c) After the filing of the registration statement, the Company will
promptly notify each Selling Holder of Registrable Securities covered by
such registration statement of any stop order issued or threatened by the
Commission and take all reasonable actions required to prevent the entry of
such stop order or to remove it if entered.
(d) The Company will use its best efforts to (i) register or qualify
the Registrable Securities under such other securities or blue sky laws of
such jurisdictions in the United States as any Selling Holder reasonably
(in light of such Selling Holder's intended plan of distribution) requests
and (ii) cause such Registrable Securities to be registered with or
approved by such other governmental agencies or authorities as may be
necessary by virtue of the business and operations of the Company and do
any and all other acts and things that may be reasonably necessary or
advisable to enable such Selling Holder to consummate the disposition of
the Registrable Securities owned by such Selling Holder; provided that the
Company will not be required to (A) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for
this paragraph (d), (B) subject itself to taxation in any such
jurisdiction, (C) consent to general service of process in any such
jurisdiction or (D) consent to any material restrictions on the conduct of
its business or any restrictions on payments to any stockholders of the
Company; and provided further that the Holders will not be required to take
any action pursuant to this paragraph (d).
(e) The Company will promptly notify each Selling Holder of such
Registrable Securities, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the occurrence of an
event requiring the preparation of a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading and promptly make available to each Selling Holder any such
supplement or amendment.
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(f) The Company and each Selling Holder will enter into customary
agreements (including an underwriting agreement in customary form
containing customary representations, warranties, covenants, opinions,
certificates, cross-indemnification and contribution provisions) and take
such other actions as are reasonably required in order to expedite or
facilitate the disposition of such Registrable Securities.
(g) The Company will make available for inspection by any Selling
Holder of such Registrable Securities, any Underwriter participating in any
disposition pursuant to such registration statement and any attorney,
accountant or other professional retained by any such Selling Holder or
Underwriter (collectively, the 'Inspectors'), all financial and other
records, pertinent corporate documents and properties of the Company
(collectively, the 'Records') as shall be reasonably necessary to conduct
due diligence, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any Inspectors in connection
with such registration statement. The Selling Holders shall cause such
Records which the Company determines, in good faith, to be confidential and
which the Company notifies the Inspectors are confidential to be kept
confidential by the Inspectors and not used for any purpose other than such
registration of Registrable Securities, and the Selling Holders shall cause
the Inspectors not to disclose the Records unless (i) the disclosure of
such Records is necessary to avoid or correct a misstatement or omission in
such registration statement or (ii) the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction. Information obtained by any Selling Holder hereunder as a
result of such inspections shall be deemed confidential and shall be kept
confidential by the Selling Holders and may not be used by any Selling
Holder for any purpose other than such registration of Registrable
Securities. Each Selling Holder will, upon learning that disclosure of such
Records is sought in a court of competent jurisdiction, give notice to the
Company and allow the Company, at its expense, to undertake appropriate
action to prevent disclosure of the Records deemed confidential.
(h) The Company will furnish to each Selling Holder and to each
Underwriter, if any, a signed counterpart, addressed to such Selling Holder
or Underwriter, of (i) an opinion or opinions of counsel to the Company and
(ii) a comfort letter or comfort letters from the Company's independent
public accountants, each in customary form and covering such matters of the
type customarily covered by opinions or comfort letters, as the case may
be, as the Holders of a majority of the Registrable Securities included in
such offering or the managing Underwriter therefor reasonably requests.
(i) The Company will otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to
its security-holders, as soon as reasonably practicable, an earnings
statement covering a period of 12 months, beginning within three months
after the effective date of the registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities
Act.
(j) The Company will use its best efforts to cause all such
Registrable Securities to be listed on each securities exchange on which
similar securities issued by the Company are then listed.
Each Selling Holder of Registrable Securities agrees to promptly furnish in
writing to the Company such information regarding the distribution of the
Registrable Securities as the Company may from time to time reasonably request
and such other information as may be legally required in connection with such
registration.
Upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 3.1(e) hereof, each Selling Holder will
forthwith discontinue disposition of Registrable Securities pursuant to the
registration statement covering such Registrable Securities until such Selling
Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3.1(e) hereof, and, if so directed by the Company, such
Selling Holder will deliver to the Company all copies, other than permanent file
copies then in such Selling Holder's possession, of the most recent prospectus
covering such Registrable Securities at the time of receipt of such notice. In
the event the Company shall give such notice, the Company shall extend the
period during which such registration statement shall be maintained effective
(including the period referred to in Section 3.1(a) hereof) by the number of
days during the period from and including the date of the giving of notice
pursuant to Section 3.1(e) hereof to the date when the Company shall make
available to the Selling Holders of Registrable Securities covered by such
registration statement a prospectus supplemented or amended to conform with the
requirements of Section 3.1(e) hereof.
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The procedures set forth in this Section 3.1 shall apply to Piggy-Back
Registrations pursuant to Section 2.2.
SECTION 3.2. Registration Expenses. In connection with any registration
statement required to be filed hereunder, the Company shall pay the following
Registration expenses incurred in connection with the registration hereunder
(the 'Registration Expenses'): (i) all registration and filing fees, (ii) fees
and expenses of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the Registrable Securities), (iii) printing expenses, (iv)
internal expenses (including without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), (v) the fees
and expenses incurred in connection with the listing of the Registrable
Securities, and (vi) reasonable fees and disbursements of counsel for the
Company and customary fees and expenses for independent certified public
accountants retained by the Company (including the expenses of any comfort
letters or costs associated with the delivery by independent certified public
accountants of a comfort letter or comfort letters requested pursuant to Section
3.1(h) hereof). The Company shall have no obligation to pay any underwriting
fees, discounts, commissions or expenses attributable to the sale of Registrable
Securities, including, without limitation, the fees and expenses of any
Underwriters and such Underwriters' counsel, or any out-of-pocket expenses of
the Holders (or the agents who manage their accounts), including, without
limitation, the fees and expenses of any counsel retained by the Holders. Such
Holders' fees, discounts, commissions and expenses shall be paid promptly by the
Holders.
ARTICLE IV
INDEMNIFICATION AND CONTRIBUTION
SECTION 4.1. Indemnification by the Company. The Company agrees to
indemnify and hold harmless each Selling Holder of Registrable Securities, its
officers, directors and agents, and each Person, if any, who controls such
Selling Holder within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act from and against any and all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation) caused by
any untrue statement or alleged untrue statement of a material fact contained in
any registration statement or prospectus relating to the Registrable Securities
or in any amendment or supplement thereto or in any preliminary prospectus, or
caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
expenses are caused by any such untrue statement or omission or alleged untrue
statement or omission based upon information furnished in writing to the Company
by such Selling Holder or on such Selling Holder's behalf expressly for the use
therein; provided, that with respect to any untrue statement or omission or
alleged untrue statement or omission made in any preliminary prospectus, the
indemnity agreement contained in this paragraph shall not apply to the extent
that any such loss, claim, damage, liability or expense results from the fact
that a current copy of the prospectus was not sent or given to the person
asserting any such loss, claim, damage, liability or expense at or prior to the
written confirmation of the sale of the Registrable Securities concerned to such
person if it is determined that it was the responsibility of such Selling Holder
to provide such person with a current copy of the prospectus and such current
copy of the prospectus would have cured the defect giving rise to such loss,
claim, damage, liability or expense. The Company also agrees to indemnify any
Underwriters of the Registrable Securities, their officers and directors and
each person who controls such underwriters on substantially the same basis as
that of the indemnification of the Selling Holders provided in this Section 4.1.
SECTION 4.2. Indemnification by Holders of Registrable Securities. Each
Selling Holder agrees, severally but not jointly, to indemnify and hold harmless
the Company, its officers, directors and agents and each Person, if any, who
controls the Company within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act to the same extent as the foregoing
indemnity from the Company to such Selling Holder, but only with respect to
information furnished in writing by such Selling Holder or on such Selling
Holder's behalf expressly for use in any registration statement or prospectus
relating to the Registrable Securities, or any amendment or supplement thereto,
or any preliminary prospectus; and provided that the liability of each Selling
Holder under the foregoing indemnity shall be limited to an amount equal to the
public offering price of the Registrable Securities sold by such Selling Holder,
less the applicable underwriting discounts and commissions. Each Selling Holder
also agrees to indemnify and hold harmless Underwriters of the Registrable
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Securities, their officers and directors and each person who controls such
Underwriters on substantially the same basis as that of the indemnification of
the Company provided in this Section 4.2.
SECTION 4.3. Conduct of Indemnification Proceeding. If any action or
proceeding (including any governmental investigation) shall be instituted
involving any person in respect of which indemnity may be sought pursuant to
Section 4.1 or 4.2, such person (an 'Indemnified Party') shall promptly notify
the person against whom such indemnity may be sought (an 'Indemnifying Party')
in writing and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Party, and shall assume the payment of all expenses. Such Indemnified Party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party unless (a) the Indemnifying
Party and the Indemnified Party shall have mutually agreed to the retention of
such counsel or (b) the named parties to any such action or proceeding
(including any impleaded parties) include both such Indemnified Party and the
Indemnifying Party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them. It
is understood that the Indemnifying Party shall not, in connection with any one
such action or proceeding or separate but substantially similar or related
actions or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) at
any time for all such Indemnified Parties, and that all such fees and expenses
shall be reimbursed as they are incurred. In the case of any such separate firm
for the Indemnified Parties, such firm shall be designated in writing by the
Indemnified Parties and shall, in the case of a Demand Registration, be
reasonably satisfactory to the Indemnifying Party. The Indemnifying Party shall
not be liable for any settlement of any such action or proceeding effected
without its written consent, but if settled with its written consent, or if
there be a final judgment for the plaintiff in any such action or proceeding,
the Indemnifying Party shall indemnify and hold harmless such Indemnified
Parties from and against any loss or liability (to the extent stated above) by
reason of such settlement or judgment. No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any settlement of any
pending or threatened proceeding in respect of with any Indemnified Party is or
could have been a party and indemnity could have been sought hereunder by such
Indemnified Party, unless such settlement includes an unconditional release of
such Indemnified Party from all liability arising out of such proceeding.
SECTION 4.4. Contribution. If the indemnification provided for in this
Article IV is unavailable to the Indemnified Parties in respect of any losses,
claims, damages or liabilities referred to herein, then each such Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such losses,
claims, damages or liabilities (a) as between the Company and the Selling
Holders on the one hand and the Underwriters on the other, in such proportion as
is appropriate to reflect the relative benefits received by the Company and the
Selling Holders on the one hand and the Underwriters on the other from the
offering of the securities, or if such allocation is not permitted by applicable
law, in such proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of the Company and the Selling Holders on
the one hand and of the Underwriters on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations and (b) as
between the Company on the one hand and each Selling Holder on the other, in
such proportion as is appropriate to reflect the relative fault of the Company
and of each Selling Holder in connection with such statements or omissions, as
well as any other relevant equitable considerations. The relative benefits
received by the Company and the Selling Holders on the one hand and the
Underwriters on the other shall be deemed to be in the same proportion as the
total proceeds from the offering (net of underwriting discounts and commissions
but before deducting expenses) received by the Company and the Selling Holders
bear to the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page of the
prospectus. The relative fault of the Company and the Selling Holders on the one
hand and of the Underwriters on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company and the Selling Holders or by the
Underwriters. The relative fault of the Company on the one hand and of each
Selling Holder on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by such party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
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The Company and the Selling Holders agree that it would not be just and
equitable if contribution pursuant to this Section 4.4 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitation set forth above,
any legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 4.4, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and no Selling Holder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities of such Selling Holder were offered to the
public exceeds the amount of any damages which such Selling Holder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
ARTICLE V
SECTION 5.1. Effectiveness. The Original Registration Rights Agreement
shall remain in effect, and this Agreement shall not be effective, unless and
until the stockholders of the Company have approved the Alternative Merger at
the Alternative Company Special Meeting.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Participation in Underwritten Registrations. No Person may
participate in any underwritten registration hereunder unless such Person (a)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements and these
Registration Rights.
SECTION 6.2. Merger, Consolidation, Exchange, Recapitalization etc. In
the event, directly or indirectly, (a) the Company shall merge with and into, or
consolidate with, or consummate a share exchange with, any other person, or (b)
any person shall merge with and into, or consolidate, the Company and the
Company shall be the surviving corporation of such merger or consolidation and,
in connection with such merger or consolidation, all or part of the Registrable
Securities shall be changed into or exchanged for stock or other securities of
any person, or (c) any capital stock or other securities are issued in respect
of, in exchange for, or in substitution of, any Company equity securities by
reason of any reorganization, recapitalization, reclassification, merger,
consolidation, spin-off, partial or complete liquidation, stock dividend,
split-up, split-off, sale of assets, distribution to stockholders or combination
of the shares of the Company equity securities or any other alteration of the
Company's capital structure, then, in each such case, appropriate adjustments
shall be made so as to fairly and equitably preserve, as far as practicable, the
original rights and obligations of the parties hereto under this Registration
Rights Agreement.
SECTION 6.3. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or sent by an overnight courier service, such as
FedEx, to the parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
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(a) if to the Holders, to:
Union Pacific Corporation
Martin Tower
Eighth & Eaton Avenues
Bethlehem, Pennsylvania 18018
Attention: Carl W. von Bernuth, Esq.
Telephone No.: (610) 861-3200
Telecopy No.: (610) 861-3111
with a copy to:
Skadden, Arps, Slate, Meagher, & Flom
919 Third Avenue
New York, New York 10022
Attention: Paul T. Schnell, Esq.
Telephone No.: (212) 735-3000
Telecopy No.: (212) 735-2000
and
(b) if to the Company to:
Southern Pacific Rail Corporation
Southern Pacific Building
One Market Plaza
San Francisco, California 94015
Attention: Cannon Y. Harvey, Esq.
Telephone No.: (415) 541-1000
Telecopy No.: (415) 541-1881
with a copy to:
Holme Roberts & Owen LLC
1700 Lincoln
Suite 4100
Denver, Colorado 80203
Attention: Joseph W. Morrisey, Jr., Esq.
Telephone No.: (303) 861-7000
Telecopy No.: (303) 866-0200
and
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: Peter D. Lyons, Esq.
Telephone No.: (212) 848-4000
Telecopy No.: (212) 848-7179
SECTION 6.4. No Waivers; Remedies. No failure or delay by any party in
exercising any right, power or privilege under this Agreement shall operate as a
waiver of the right, power or privilege. A single or partial exercise of any
right, power or privilege shall not preclude any other or further exercise of
the right, power or privilege or the exercise of any other right, power or
privilege. The rights and remedies provided in this Agreement shall be
cumulative and not exclusive of any rights or remedies provided by law.
SECTION 6.5. Amendments, etc. No amendment, modification, termination or
waiver of any provision of this Agreement, and no consent to any departure by a
party to this Agreement from any provision of this Agreement, shall be effective
unless it shall be in writing and signed and delivered by the other party to
this
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Agreement, and then it shall be effective only in the specific instance and for
the specific purpose for which it is given.
SECTION 6.6. Assignment. The provisions of this Agreement shall not be
assignable and any transfer of Registrable Securities shall not transfer any
rights under this Agreement to the transferee; provided, however, that (a) a
Holder shall have the right to assign its rights under this Agreement to any
Person who or which (i) acquires at least 20% of the Company Common Stock
purchased by Sub in the Offer, (ii) would be eligible to report its ownership of
the Company Common Stock (assuming ownership by such Person of a sufficient
number of shares of the Company Common Stock to require such reporting) on a
Schedule 13G, (iii) shall have agreed in writing (which agreement shall be
addressed, and shall be reasonably satisfactory in form and substance, to the
Company) to be bound by and comply with this Agreement with the same force and
effect as if all references herein to the Holder were references to such Person,
and (iv) is reasonably acceptable to the Company, and (b) without the consent of
the Company, but subject to clauses (i) and (iii) of subsection (a) above, the
Holder shall have the right to assign its rights under this Agreement to (x) any
financial institution to which such Holder has, in accordance with Section 3(b)
of the Shareholders Agreement, pledged shares of the Company Common Stock,
provided that such assignment shall not be effective until following a default
by Holder under such pledge, (y) any Affiliate of the Holder or Parent (it being
understood and agreed that any such rights transferred to any such Affiliate
shall terminate if such Affiliate ceases to be an Affiliate of the Holder or
Parent) or (z) the Trustee under the Voting Trust (as such terms are defined in
the Merger Agreement).
SECTION 6.7. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the principles of conflicts of laws thereof. All rights and
obligations of the Company and Holders shall be in addition to and not in
limitation of those provided by applicable law.
SECTION 6.8. Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if all signatures were on the same instrument.
SECTION 6.9. Severability of Provisions. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of the prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of the provision in any other
jurisdiction.
SECTION 6.10. Headings and References. Section headings in this Agreement
are included for the convenience of reference only and do not constitute a part
of this Agreement for any other purpose. Reference to parties and sections in
this Agreement are references to the parties to or the sections of this
Agreement, as the case may be, unless the context shall require otherwise.
SECTION 6.11. Entire Agreement. This Agreement embodies the entire
agreement and understanding of the respective parties with respect to the
Holders' registration rights and supersedes all prior agreements or
understandings with respect to such rights.
SECTION 6.12. Survival. Except as otherwise specifically provided in this
Agreement, each representation, warranty or covenant of each party to this
Agreement contained in or made pursuant to this Agreement shall survive and
remain in full force and effect, notwithstanding any investigation or notice to
the contrary or any waiver by any other party of a related condition precedent
to the performance by the other party of an obligation under this Agreement.
SECTION 6.13. Non-Exclusive Jurisdiction. Each party hereto (a) agrees
that any action, suit or proceeding (collectively, an 'Action') with respect to
this Agreement may be brought in the courts of the United States of America for
the Southern District of New York, (b) accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction of those courts and
(c) irrevocably waives any objection, including, without limitation, any
objection to the laying of venue or based on the grounds of FORUM NON
CONVENIENS, which it may now or hereafter have to the bringing of any Action in
those jurisdictions.
SECTION 6.14. Waiver of Jury Trial. Each party waives any right to a
trial by jury in any Action to enforce or defend any right under this Agreement
or any amendment, instrument, document or agreement
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delivered, or which in the future may be delivered, in connection with this
Agreement and agrees that any Action shall be tried before a court and not
before a jury.
SECTION 6.15. Specific Performance. Each of the parties hereto recognizes
and acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
SECTION 6.16. No Inconsistent Agreements. The Company is not as of the
date hereof subject to any agreement with respect to the registration under the
Securities Act of any securities of the Company or otherwise, and prior to the
Termination Date shall not enter into any such agreement that is inconsistent
with the provisions of this Agreement, including, without limitation, the order
of priority by which the total amount of securities of the Company to be
included in any offering subject to Article II shall be reduced pursuant to
Section 2.3.
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IN WITNESS WHEREOF, the Company and the Holders have caused this Agreement
to be duly executed as of the date first above written.
SOUTHERN PACIFIC RAIL CORPORATION
By: /s/ JERRY R. DAVIS
---------------------------
Name: Jerry R. Davis
Title: President and
Chief Executive Officer
UNION PACIFIC CORPORATION
By: /s/ CARL W. VON BERNUTH
---------------------------
Name: Carl W. von Bernuth
Title: Senior Vice President--Law
UP HOLDING COMPANY, INC.
By: /s/ CARL W. VON BERNUTH
---------------------------
Name: Carl W. von Bernuth
Title: Vice President
UNION PACIFIC MERGER CO.
By: /s/ CARL W. VON BERNUTH
---------------------------
Name: Carl W. von Bernuth
Title: Vice President
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ANNEX K
THIS VOTING TRUST AGREEMENT, dated as of August 3, 1995, by and among UNION
PACIFIC CORPORATION, a Utah corporation ('Parent'), UP ACQUISITION CORPORATION,
a Delaware corporation and an indirect wholly-owned subsidiary of Parent (the
'Purchaser'), and SOUTHWEST BANK OF ST. LOUIS, a Missouri banking corporation
(the 'Trustee'),
W I T N E S S E T H:
WHEREAS, the Purchaser has agreed to commence a tender offer (the 'Tender
Offer') to acquire up to 39,034,471 shares of common stock, $0.001 par value
('Common Stock'), of Southern Pacific Rail Corporation, a Delaware corporation
(the 'Company');
WHEREAS, the Purchaser intends, simultaneously with the acceptance for
payment of such tendered shares pursuant to the Tender Offer, to deposit such
shares of Common Stock in an independent, irrevocable voting trust, pursuant to
the rules of the Interstate Commerce Commission (the 'ICC'), in order to avoid
any allegation or assertion that Parent or the Purchaser is controlling or has
the power to control the Company prior to the receipt of approval by the ICC of
the merger (the 'Merger') of the Company with and into Union Pacific Railroad
Company ('UPRR') pursuant to the Agreement and Plan of Merger dated as of August
3, 1995 by and among Parent, UPRR, the Purchaser and the Company, as it may be
amended from time to time (the 'Merger Agreement') (a copy of which is attached
hereto as Exhibit A);
WHEREAS, Parent, Purchaser and the Company have entered into a Shareholders
Agreement dated as of August 3, 1995 (the 'Shareholders Agreement') (a copy of
which is attached hereto as Exhibit B), with respect to the Common Stock and any
other voting securities of the Company that are or come to be beneficially owned
by Parent, Purchaser or any of their affiliates during the term of the
Shareholders Agreement;
WHEREAS, neither the Trustee nor any of its affiliates has any officers or
board members in common or any direct or indirect business arrangements or
dealings (as described in Paragraph 9 hereof) with Parent or the Purchaser or
any of their affiliates; and
WHEREAS, the Trustee is willing to act as voting trustee pursuant to the
terms of this Trust Agreement and the rules of the ICC,
NOW THEREFORE, the Parties hereto agree as follows:
1. Parent and the Purchaser hereby appoint Southwest Bank of St. Louis as
Trustee hereunder, and Southwest Bank of St. Louis hereby accepts said
appointment and agrees to act as Trustee under this Trust Agreement as provided
herein.
2. Parent and the Purchaser agree that, prior to acceptance of the tendered
shares of Common Stock pursuant to the Tender Offer, (i) the Purchaser will
direct the depositary for the Tender Offer to transfer to the Trustee any shares
accepted for payment pursuant to the Tender Offer, and (ii) Parent and the
Purchaser will transfer or cause to be transferred to the Trustee all
certificates representing shares of Common Stock owned as of the date hereof by
Parent, the Purchaser or any affiliate of either of them. Parent and the
Purchaser also agree that immediately upon receipt, acquisition or purchase by
either of them or by any of their affiliates of any additional shares of Common
Stock, or any other voting securities of the Company, they will transfer or
cause to be transferred to the Trustee the certificate or certificates
representing such additional shares. All such certificates shall be duly
endorsed or accompanied by proper instruments duly executed for transfer thereof
to the Trustee, and shall be exchanged for one or more Voting Trust Certificates
substantially in the form attached hereto as Exhibit C (the 'Trust
Certificates'), with the blanks therein appropriately filled. All shares of
Common Stock and other voting securities of the Company at any time delivered to
the Trustee hereunder are hereinafter called the 'Company Trust Stock.' The
Trustee shall present to the Company all certificates representing Company Trust
Stock for surrender and cancellation and for the issuance and delivery to the
Trustee of new certificates (the 'Trust Stock') registered in the name of the
Trustee or its nominee.
3. The Trustee shall be present, in person or represented by proxy, at all
annual and special meetings of shareholders of the Company so that all Trust
Stock may be counted for the purposes of determining the presence of a quorum at
such meetings. The Trustee shall be entitled and it shall be its duty to
exercise any and all voting
K-1
<PAGE>
rights in respect of the Trust Stock either in person or by proxy or consent, as
hereinafter provided, unless otherwise directed by an order of the ICC or a
court of competent jurisdiction. Parent and Purchaser agree, and the Trustee
acknowledges, that the Trustee shall not participate in or interfere with the
management of the Company and shall take no other actions with respect to the
Company except in accordance with the terms hereof and the terms of the
Shareholders Agreement. The Trustee shall vote all shares of the Trust Stock to
approve and effect the Merger, and in favor of any proposal necessary to
effectuate Parent's acquisition of the Company pursuant to the Merger Agreement.
For so long as the Merger Agreement is in effect, the Trustee shall vote all
shares of Trust Stock against any other proposed merger, business combination or
similar transaction (including, without limitation, any consolidation, sale of
all or substantially all the assets, reorganization, recapitalization,
liquidation or winding up of or by the Company) involving the Company, but not
involving Parent or one of its subsidiaries or affiliates, other than in
connection with a disposition pursuant to Paragraph 8. The Trustee shall vote
all shares of Trust Stock in favor of any proposal or action necessary or
desirable to dispose of Trust Stock in accordance with Paragraph 8 hereof.
Except as otherwise expressly provided in the three immediately preceding
sentences, the Trustee shall vote all shares of Trust Stock with respect to all
matters, including without limitation the election or removal of directors,
voted on by the shareholders of the Company (whether at a regular or special
meeting or pursuant to a unanimous written consent) in the same proportion as
all shares of Common Stock (other than Trust Stock) are voted with respect to
such matters. In exercising its voting rights in accordance with this Paragraph
3, the Trustee shall take such actions at all annual, special or other meetings
of stockholders of the Company or in connection with any action by consent in
lieu of a meeting.
4. This Trust Agreement and the nomination of the Trustee during the term
of the trust shall be irrevocable by Parent and the Purchaser and their
affiliates and shall terminate only in accordance with the provisions of
Paragraphs 8 and 14 hereof.
5. Except as provided in Paragraph 3, the Trustee shall not exercise the
voting powers of the Trust Stock in any way so as to create any dependence or
intercorporate relationship between (i) Parent, the Purchaser and their
affiliates, on the one hand, and (ii) the Company or its affiliates, on the
other hand. The term 'affiliate' or 'affiliates' wherever used in this Trust
Agreement shall have the meaning specified in Section 11343(c) of Title 49 of
the United States Code, as amended. The Trustee shall not, without the prior
approval of the ICC, vote the Trust Stock to elect any officer, director,
nominee or representative of Parent, the Purchaser or any affiliate of either of
them as an officer or director of the Company or of any affiliate of the
Company. The Trustee shall be kept informed respecting the business operations
of the Company by means of the financial statements and other public disclosure
documents periodically filed by the Company and affiliates of the Company with
the Securities and Exchange Commission (the 'SEC') and the ICC, and by means of
information respecting the Company contained in such statements and other
documents filed by Parent with the SEC and the ICC, copies of which shall be
promptly furnished to the Trustee by the Company or Parent, as the case may be,
and the Trustee shall be fully protected in relying upon such information. The
Trustee shall not be liable for any mistakes of fact or law or any error of
judgment, or for any act or omission, except as a result of the Trustee's
willful misconduct or gross negligence.
6. All Trust Certificates shall be transferable on the books of the Trustee
by the registered holder upon the surrender thereof properly assigned, in
accordance with rules from time to time established for the purpose by the
Trustee. Until so transferred, the Trustee may treat the registered holder as
owner for all purposes. Each transferee of a Trust Certificate issued hereunder
shall, by his acceptance thereof, assent to and become a party to this Trust
Agreement, and shall assume all attendant rights and obligations.
7. Pending the termination of this Trust as hereinafter provided, the
Trustee shall, immediately following the receipt of each cash dividend or cash
distribution as may be declared and paid upon the Trust Stock, pay the same over
to or as directed by the Purchaser or to or as directed by the holder of Trust
Certificates hereunder as then known to the Trustee. The Trustee shall receive
and hold dividends and distributions other than cash upon the same terms and
conditions as the Trust Stock and shall issue Trust Certificates representing
any new or additional securities that may be paid as dividends upon the Trust
Stock or distributed to the registered holders of Trust Certificates in
proportion to their respective interests.
8. (a) This Trust is accepted by the Trustee subject to the right hereby
reserved in Parent at any time to sell or make any other disposition of the
whole or any part of the Trust Stock in accordance with the terms of the
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<PAGE>
Shareholders Agreement, whether or not an event described in subparagraph (b)
below has occurred. The Trustee shall take all actions reasonably requested by
Parent with respect to (including, without limitation, exercising all voting
rights in respect of Trust Stock in favor of any proposal or action necessary or
desirable to effect, or consistent with the effectuation of) any proposed sale
or other disposition of the whole or any part of the Trust Stock by the
Purchaser or Parent, including, without limitation, in connection with the
exercise by Parent of any rights under the Merger Agreement, the Registration
Rights Agreement dated as of August 3, 1995 between the Purchaser and the
Company (the 'Registration Rights Agreement') (a copy of which is attached
hereto as Exhibit D), and the Shareholders Agreement to cause Trust Stock to be
offered and sold pursuant to a registration statement under the Securities Act
of 1933 (an 'Offering') or distributed to shareholders of Parent (the
'Distribution'). The Trustee shall at any time upon the receipt of a direction
from Parent, signed by its President or one of its Vice Presidents and under its
corporate seal designating the person or entity to whom Parent has directly or
indirectly sold or otherwise disposed of the whole or any part of the Trust
Stock and certifying that such disposition will be in compliance with all
applicable requirements of the Shareholders Agreement and that such person or
entity is not an affiliate of Parent and has all necessary regulatory authority,
if any, to purchase the Trust Stock (upon which certification the Trustee shall
be entitled to rely), immediately transfer to the person or entity therein named
all of the Trustee's right, title and interest in such amount of the Trust Stock
as may be set forth in said direction. If the foregoing direction shall specify
all of the Trust Stock, then following transfer of the Trustee's right, title
and interest therein, and in the event of a sale thereof, upon delivery to or
upon the order of the Purchaser of the proceeds of such sale, this Trust shall
cease and come to an end. If the foregoing direction is as to only a part of the
Trust Stock, then this Trust shall cease as to said part upon such transfer, and
receipt of proceeds in the event of sale, but shall remain in full force and
effect as to the remaining part of the Trust Stock, provided, however, that upon
the receipt of a written opinion of counsel for Parent, a copy of which is
submitted to the ICC, stating that the transfer of voting rights in all the
remaining Trust Stock to the Purchaser would not give Parent or the Purchaser
control of the Company within the meaning of 49 U.S.C. Section11343, and absent
any contrary direction of the ICC, this Trust shall cease and come to an end and
all Trust Stock and other property then held by the Trustee shall be distributed
to or upon the order of the Purchaser or the holder or holders of Trust
Certificates. In the event of a sale of Trust Stock by the Purchaser, the
Trustee shall, to the extent the consideration therefor is payable to or
controllable by the Trustee, promptly pay, or cause to be paid, upon the order
of the Purchaser the net proceeds of such sale to the registered holders of the
Trust Certificates in proportion to their respective interests. It is the
intention of this paragraph that no violations of 49 U.S.C. Section11343 will
result from a termination of this Trust.
(b) In the event the ICC by final order shall (i) approve or exempt the
acquisition of control of the Company by the Purchaser, Parent or any of their
affiliates or (ii) approve or exempt a merger between the Company and UPRR,
Parent or any of their affiliates, then immediately upon the direction of Parent
and the delivery of a certified copy of such order of the ICC or other
governmental authority with respect thereof, or, in the event that Subtitle IV
of Title 49 of the United States Code, or other controlling law, is amended to
allow the Purchaser, UPRR, Parent or their affiliates to acquire control of the
Company without obtaining ICC or other governmental approval, upon delivery of
an opinion of independent counsel selected by the Trustee that no order of the
ICC or other governmental authority is required, the Trustee shall either (i)
transfer to or upon the order of the Purchaser, Parent or the holder or holders
of Trust Certificates hereunder as then known to the Trustee, its right, title
and interest in and to all of the Trust Stock then held by it in accordance with
the terms, conditions and agreements of this Trust Agreement and not theretofore
transferred by it as provided in subparagraph (a) hereof, or (ii) if shareholder
approval has not previously been obtained, vote the Trust Stock with respect to
any such merger between the Company and UPRR, Parent or any affiliate of either
as directed by the holder or holders of the Trust Certificates, and upon any
such transfer or merger this Trust shall cease and come to an end.
(c) In the event that the Merger Agreement terminates in accordance with
its terms or the condition set forth in Section 6.2(c) of the Merger Agreement
is not satisfied and is not waived by Parent and the Purchaser, Parent shall use
its best efforts, consistent with its rights under and subject to the terms of
the Shareholders Agreement and the Registration Rights Agreement, to sell the
Trust Stock to one or more eligible purchasers, to sell or distribute the Trust
Stock in one Offering or Distribution, or otherwise to dispose of the Trust
Stock, during a period of two years after such order becomes final after
judicial review or failure to appeal or such extension of that period as the ICC
shall approve. Such disposition shall be subject to any jurisdiction of the ICC
to oversee Parent's divestiture of Trust Stock. At all times, the Trustee shall
continue to perform its duties under this Trust
K-3
<PAGE>
Agreement and, should Parent be unsuccessful in its efforts to sell or
distribute the Trust Stock during the period referred to, the Trustee, subject
to the terms of the Shareholders Agreement, shall as soon as practicable sell
the Trust Stock for cash to one or more eligible purchasers in such manner and
for such price as the Trustee in its discretion shall deem reasonable after
consultation with Parent. (An 'eligible purchaser' hereunder shall be a person
or entity that is not affiliated with Parent and which has all necessary
regulatory authority, if any, to purchase the Trust Stock.) Parent agrees to
cooperate with the Trustee in effecting such disposition and the Trustee agrees
to act in accordance with any direction made by Parent as to any specific terms
or method of disposition, to the extent not inconsistent with the requirements
of the terms of any ICC or court order. The proceeds of the sale shall be
distributed to or upon the order of Parent or, on a pro rata basis, to the
holder or holders of the Trust Certificates hereunder as then known to the
Trustee. The Trustee may, in its reasonable discretion, require the surrender to
it of the Trust Certificates hereunder before paying to the holder his share of
the proceeds. Upon disposition of the Trust Stock pursuant to this paragraph
8(c), this Trust shall cease and come to an end.
(d) Unless sooner terminated pursuant to any other provision herein
contained, this Trust Agreement shall terminate on August 3, 2000, and may be
extended by the parties hereto, so long as no violation of 49 U.S.C.
Section11343 will result from such termination or extension. All Trust Stock and
any other property held by the Trustee hereunder upon such termination shall be
distributed to or upon the order of the Purchaser or the holder or holders of
Trust Certificates hereunder as then known to the Trustee. The Trustee may, in
its reasonable discretion, require the surrender to it of the Trust Certificates
hereunder before the release or transfer of the stock interests evidenced
thereby.
(e) The Trustee shall promptly inform the ICC of any transfer or
disposition of Trust Stock pursuant to this Paragraph 8.
(f) The Trustee shall, upon direction by Parent, take all actions that are
necessary, appropriate or desirable to permit a registration statement for the
Trust Stock under the Securities Act of 1933, as amended, and/or an information
statement for the Trust Stock under the Securities Exchange Act of 1934, as
amended, and, in either case, a registration statement, information statement,
exchange offer or other documents under any other applicable securities laws, to
be filed and to become effective in connection with any disposition of the Trust
Stock permitted by the Shareholders Agreement. To the extent that registration
is required under the Securities Act of 1933, as amended, the Securities
Exchange Act of 1934, as amended, or any other applicable securities laws in
respect of any distribution of Trust Stock as contemplated herein, the Purchaser
or Parent shall reimburse the Trustee for any expenses incurred by it and
indemnify and hold the Trustee harmless from and against any loss, liability,
cost or expense related thereto or arising therefrom.
(g) Except as provided in this Paragraph 8, the Trustee shall not dispose
of, or in any way encumber, the Trust Stock.
(h) Notwithstanding the foregoing, if the ICC issues a declaratory order
that the termination of the Trust will not cause Parent, the Purchaser or their
affiliates to have control of the Company, the Trustee shall transfer to or upon
the order of the Purchaser, Parent or the holder or holders of Trust
Certificates hereunder as then known to the Trustee, its right, title and
interest in and to all of the Trust Stock then held by it in accordance with the
terms, conditions and agreements of this Trust Agreement and not theretofore
transferred by it as provided in subparagraph (a) hereof, and this Trust shall
cease and come to an end.
9. Neither the Trustee nor any affiliate of the Trustee may have (i) any
officers, or members of their respective boards of directors, in common with the
Purchaser, Parent, or any affiliate of either, or (ii) any direct or indirect
business arrangements or dealings, financial or otherwise, with the Purchaser,
Parent or any affiliate of either, other than dealings pertaining to
establishment and carrying out of this voting trust. Mere investment in the
stock or securities of the Purchaser or Parent or any affiliate of either by the
Trustee, short of obtaining a controlling interest, will not be considered a
proscribed business arrangement or dealing, but in no event shall any such
investment by the Trustee in voting securities of the Purchaser, Parent or their
affiliates exceed 5 percent of their outstanding voting securities and in no
event shall the Trustee hold a proportion of such voting securities so
substantial as to permit the Trustee in any way to control or direct the affairs
of the Purchaser, Parent or their affiliates. Neither the Purchaser, Parent nor
their affiliates shall purchase the stock or securities of the Trustee or any
affiliate of the Trustee.
K-4
<PAGE>
10. The Trustee shall be entitled to receive reasonable and customary
compensation for all services rendered by it as Trustee under the terms hereof
and said compensation to the Trustee, together with all counsel fees, taxes, or
other expenses reasonably incurred hereunder, shall be promptly paid by the
Purchaser or Parent, who shall be jointly and severally liable for the same.
11. The Trustee may at any time or from time to time appoint an agent or
agents and may delegate to such agent or agents the performance of any
administrative duty of the Trustee and be entitled to reimbursement for the fees
and expenses of such agents.
12. The Trustee shall not be answerable for the default or misconduct of
any agent or attorney appointed by it in pursuance hereof if such agent or
attorney shall have been selected with reasonable care. The duties and
responsibilities of the Trustee shall be limited to those expressly set forth in
this Trust Agreement. The Trustee shall be fully protected by acting in reliance
upon any notice, advice, direction or other document or signature believed by
the Trustee to be genuine. The Trustee shall not be responsible for the
sufficiency or accuracy of the form, execution, validity or genuineness of the
Trust Stock, or of any other documents, or of any endorsement thereon, or for
any lack of endorsement thereon, or for any description therein, nor shall the
Trustee be responsible or liable in any respect on account of the identity,
authority or rights of the persons executing or delivering or purporting to
execute or deliver any such Trust Stock or other document or endorsement or this
Trust Agreement, except for the execution and delivery of this Trust Agreement
by this Trustee. The Purchaser and Parent agree that they will at all times
jointly and severally protect, indemnify and save harmless the Trustee from any
loss, damages, liability, cost or expense of any kind or character whatsoever in
connection with this Trust except those, if any, resulting from the gross
negligence or willful misconduct of the Trustee, and will at all times
themselves undertake, assume full responsibility for, and pay on a current
bases, but at least quarterly, all cost and expense of any suit or litigation of
any character, whether or not involving a third party, including any proceedings
before the ICC, with respect to the Trust Stock or this Trust Agreement, and if
the Trustee shall be made a party thereto, or be the subject of any
investigation or proceeding (whether formal or informal), the Purchaser or
Parent will pay all costs, damages and expenses, including reasonable counsel
fees, to which the Trustee may be subject by reason thereof; provided, however,
that the Purchaser and Parent shall not be responsible for the cost and expense
of any suit that the Trustee shall settle without first obtaining Parent's
written consent. The indemnification obligations of the Purchaser and Parent
shall survive any termination of this Trust Agreement or the removal,
resignation or other replacement of the Trustee. The Trustee may consult with
counsel selected by it and the opinion of such counsel shall be full and
complete authorization and protection in respect of any action taken or omitted
or suffered by the Trustee hereunder in good faith and in accordance with such
opinion.
13. To the extent requested to do so by the Purchaser or any registered
holder of a Trust Certificate, the Trustee shall furnish to the party making
such request full information with respect to (i) all property theretofore
delivered to it as Trustee, (ii) all Property then held by it as Trustee, and
(iii) all action theretofore taken by it as Trustee.
14. The Trustee, or any trustee hereafter appointed, may at any time resign
by giving sixty days' written notice of resignation to Parent and the ICC.
Parent shall at least fifteen days prior to the effective date of such notice
appoint a successor trustee which shall (i) satisfy the requirements of
Paragraph 9 hereof and (ii) be a corporation organized and doing business under
the laws of the United States or of any State thereof and authorized under such
laws to exercise corporate trust powers, having a combined capital and surplus
of at least $50,000,000 and subject to supervision or examination by federal or
state authority. If no successor trustee shall have been appointed and shall
have accepted appointment at least fifteen days prior to the effective date of
such notice of resignation, the resigning Trustee may petition any authority or
court of competent jurisdiction for the appointment of a successor trustee. Upon
written assumption by the successor trustee of the Trustee's powers and duties
hereunder, a copy of the assumption shall be delivered by the Trustee to Parent
and the ICC and all registered holders of Trust Certificates shall be notified
of such assumption, whereupon the Trustee shall be discharged of its powers and
duties hereunder and the successor trustee shall become vested therewith. In the
event of any material violation by the Trustee of the terms and conditions of
this Trust Agreement, the Trustee shall become disqualified from acting as
trustee hereunder as soon as a successor trustee shall have been selected in the
manner provided by this paragraph.
K-5
<PAGE>
15. Subject to the terms of the Shareholders Agreement, this Trust
Agreement may from time to time be modified or amended by agreement executed by
the Trustee, the Purchaser, Parent and all registered holders of the Trust
Certificates (i) pursuant to an order of the ICC, (ii) with the prior approval
of the ICC, (iii) in order to comply with any order of the ICC or (iv) upon
receipt of an opinion of counsel satisfactory to the Trustee and the holders of
Trust Certificates that an order of the ICC approving such modification or
amendment is not required and that the amendment is consistent with the
regulations of the ICC regarding voting trusts.
16. The provisions of this Trust Agreement and of the rights and
obligations of the parties hereunder shall be governed by the laws of the State
of Delaware, except that to the extent any provision hereof may be found
inconsistent with the Interstate Commerce Act or regulations promulgated
thereunder by the ICC, such Act and regulations shall control and such provision
hereof shall be given effect only to the extent permitted by such Act and
regulations. In the event that the ICC shall, at any time hereafter by final
order, find that compliance with law requires any other or different action by
the Trustee than is provided herein, the Trustee shall act in accordance with
such final order instead of the provisions of this Trust Agreement.
17. This Trust Agreement is executed in duplicate, each of which shall
constitute an original, and one of which shall be retained by Parent and the
other shall be held by the Trustee.
18. A copy of this Agreement and any amendments or modifications thereto
shall be filed with the ICC by the Purchaser.
19. This Trust Agreement shall be binding upon the successors and assigns
to the parties hereto, including without limitation successors to the Purchaser
and Parent by merger, consolidation or otherwise.
20. The term 'ICC' includes any successor agency or governmental department
that is authorized to carry out the responsibilities now carried out by the ICC
with respect to voting trusts and control of common carriers.
21. (a) Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by U.S. mail, certified mail,
return receipt requested or by Federal Express, Express Mail, or similar
overnight delivery or courier service or delivered (in person or by telecopy)
against receipt to the party to whom it is to be given at the address of such
party set forth below (or to such other address as the party shall have given
notice of) with a copy to each of the other parties hereto:
<TABLE>
<S> <C>
To the Trustee: Southwest Bank of St. Louis
2301 South Kingshighway
St. Louis, Missouri 63110
Attention: Linn H. Bealke
Vice Chairman
To Parent: Union Pacific Corporation
Eighth and Eaton Avenues
Bethlehem, Pennsylvania 18018
Attention: Carl W. von Bernuth, Esq.
Senior Vice President
To the Purchaser: UP Acquisition Corporation
c/o Union Pacific Corporation
Eighth and Eaton Avenues
Bethlehem, Pennsylvania 18018
Attention: Carl W. von Bernuth, Esq.
Vice President
</TABLE>
(b) Unless otherwise specifically provided herein, any notice to or
communication with the holders of the Trust Certificates hereunder shall be
deemed to be sufficiently given or made if enclosed in postpaid envelopes
(regular not registered mail) addressed to such holders at their respective
addresses appearing on the Trustee's transfer books, and deposited in any post
office or post office box. The addresses of the holders of Trust Certificates,
as shown on the Trustee's transfer books, shall in all cases be deemed to be the
addresses of Trust Certificate holders for all purposes under this Trust
Agreement, without regard to what other or different
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<PAGE>
addresses the Trustee may have for any Trust Certificate holder on any other
books or records of the Trustee. Every notice so given of mailing shall be the
date such notice is deemed given for all purposes.
22. Each of the parties hereto acknowledges and agrees that in the event of
any breach of this Agreement, each non-breaching party would be irreparably and
immediately harmed and could not be made whole by monetary damages. It is
accordingly agreed that the parties hereto (a) will waive, in any action for
specific performance, the defense of adequacy of a remedy at law and (b) shall
be entitled, in addition to any other remedy to which they may be entitled at
law or in equity, to compel specific performance of this Agreement in any action
instituted in any state or federal court sitting in Wilmington, Delaware. Each
party hereto consents to personal jurisdiction in any such action brought in any
state or federal court sitting in Wilmington, Delaware.
IN WITNESS WHEREOF, Union Pacific Corporation and UP Acquisition
Corporation have caused this Trust Agreement to be executed by their Treasurers
and their corporate seals to be affixed, attested by their Secretaries, and
Southwest Bank of St. Louis has caused this Trust Agreement to be executed by
one of its duly authorized corporate officers and its corporate seal to be
affixed, attested to by its Corporate Secretary or one of its Assistant
Corporate Secretaries, the day and year first above written.
<TABLE>
<S> <C>
Attest: UNION PACIFIC CORPORATION
/s/ T. Whitaker By /s/ Gary M. Stuart
- --------------------------- ---------------------------
Secretary Treasurer
Attest: UP ACQUISITION CORPORATION
/s/ Carl W. von Bernuth By /s/ Gary M. Stuart
- --------------------------- ---------------------------
Secretary Treasurer
Attest: SOUTHWEST BANK OF ST. LOUIS
/s/ Carol B. Doleny By /s/ Linn H. Bealke
- --------------------------- ---------------------------
</TABLE>
K-7
<PAGE>
EXHIBIT C
TO VOTING TRUST AGREEMENT
NO. SHARES
VOTING TRUST CERTIFICATE
FOR
COMMON STOCK,
$0.001 PAR VALUE
OF
SOUTHERN PACIFIC RAIL CORPORATION
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS IS TO CERTIFY that will be entitled, on the
surrender of this Certificate, to receive on the termination of the Voting Trust
Agreement hereinafter referred to, or otherwise as provided in Paragraph 7 of
said Voting Trust Agreement, a certificate or certificates for shares of
the Common Stock, $0.001 par value, of Southern Pacific Rail Corporation, a
Delaware corporation (the 'Company'). This Certificate is issued pursuant to,
and the rights of the holder hereof are subject to and limited by, the terms of
a Voting Trust Agreement, dated as of August 3, 1995, executed by Union Pacific
Corporation, a Utah corporation, UP Acquisition Corporation, a Delaware
corporation, and Southwest Bank of St. Louis, as Voting Trustee, a copy of which
Voting Trust Agreement is on file in the registered office of said corporation
at The Corporation Trust Co., 100 West Tenth Street, Wilmington, Delaware 19801,
and open to inspection of any stockholder of the Company and the holder hereof.
The Voting Trust Agreement, unless earlier terminated (or extended) pursuant to
the terms thereof, will terminate on August 3, 2000, so long as no violation of
49 U.S.C. Section 11343 will result from such termination.
The holder of this Certificate shall be entitled to the benefits of said
Voting Trust Agreement, including the right to receive payment equal to the cash
dividends, if any, paid by the Company with respect to the number of shares
represented by this Certificate.
This Certificate shall be transferable only on the books of the undersigned
Voting Trustee or any successor, to be kept by it, on surrender hereof by the
registered holder in person or by attorney duly authorized in accordance with
the provisions of said Voting Trust Agreement, and until so transferred, the
Voting Trustee may treat the registered holder as the owner of this Voting Trust
Certificate for all purposes whatsoever, unaffected by any notice to the
contrary.
By accepting this Certificate, the holder hereof assents to all the
provisions of, and becomes a party to, said Voting Trust Agreement.
IN WITNESS WHEREOF, the Voting Trustee has caused this Certificate to be
signed by its officer duly authorized.
By ___________________________________
Authorized Officer
Dated:
K-8
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
UP is a Utah corporation. The UBCA generally provides that a corporation
may indemnify an individual made a party to a proceeding because he is or was a
director, officer, employee, fiduciary or agent of the corporation, against any
liability incurred in the proceeding if (i) the individual's conduct was in good
faith, (ii) the individual reasonably believed that his conduct was in, or not
opposed to, the corporation's best interests, and (iii) in the case of a
criminal proceeding he had no reasonable cause to believe his conduct was
unlawful; provided, however, that (x) in the case of an action by or in the
right of the corporation, indemnification is limited to reasonable expenses
incurred in connection with the proceeding and (y) the corporation may not,
unless authorized by a court of competent jurisdiction, indemnify an individual
(A) in connection with a proceeding by or in the right of the corporation in
which the individual was adjudged liable to the corporation, or (B) in
connection with any other proceeding in which the individual is adjudged liable
on the basis that he derived an improper personal benefit. In a judicial
proceeding under the foregoing clause (y), in order to authorize indemnification
the court must determine that the individual is fairly and reasonably entitled
to indemnification in view of all the relevant circumstances. A director or
officer is entitled to mandatory indemnification if he was successful, on the
merits or otherwise, in the defense of any proceeding, or in the defense of any
claim, issue or matter in the proceeding, against the reasonable expenses
incurred by him in connection with the proceeding or claim with respect to which
he was successful. A corporation may also indemnify and advance expenses to an
officer, employee, fiduciary or agent to a greater extent if not inconsistent
with public policy and if provided for by the articles of incorporation,
by-laws, general or specific action of its board of directors or contract.
The UP Articles of Incorporation provide that, to the fullest extent that
the UBCA permits the limitation or elimination of the liability of directors, no
UP director shall be liable to UP or its stockholders for monetary damages for
breach of fiduciary duty as a director. The UP By-laws provide for
indemnification, to the fullest extent permitted by law, to any person made or
threatened to be made a party to any action, suit or proceeding, whether
criminal, civil, administrative or investigative, by reason of the fact that
such person is or was a director, officer or employee of UP or serves or served
at the request of UP any other enterprise as a director, officer or employee.
The term 'other enterprise' includes any corporation, partnership, joint
venture, trust or employee benefit plan. The term 'service at the request of UP'
shall include service as a director, officer or employee of UP which imposes
duties on, or involves services by, such director, officer or employee with
respect to an employee benefit plan, its participants or beneficiaries.
Any indemnification under the UP By-laws (unless ordered by a court) shall
be made by UP only as authorized in the specific case upon a determination that
indemnification of the director, officer or employee is proper in the
circumstances because such person has met the applicable standard of conduct
required by law. Such determination shall be made (i) by the UP Board by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (ii) if such a quorum is not obtainable, or even
if obtainable, if a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (iii) by the shareholders of UP.
Pursuant to the terms of the Amended Merger Agreement, UP has agreed that
at all times after the Effective Time, it will indemnify, or will cause the
Surviving Corporation or the Alternative Surviving Corporation, as the case may
be, and its subsidiaries to indemnify, each person who is, or has been prior to
the date of the Amended Merger Agreement, an employee, agent, director or
officer of SP or of any of SP's subsidiaries, successors and assigns
(individually, an 'Indemnified Party' and collectively, the 'Indemnified
Parties') to the same extent and in the same manner as is now provided in the
respective charters or by-laws of SP and its subsidiaries or otherwise in effect
on the date of the Original Merger Agreement, with respect to any claim,
liability, loss, damage, cost or expense (whenever asserted or claimed)
('Indemnified Liability') based in whole or in part on, or arising in whole or
in part out of, any matter existing or occurring at or prior to the Effective
Time. The Amended Merger Agreement also provides that UP will, and will cause
the Surviving Corporation or the Alternative Surviving Corporation, as the case
may be, to, maintain in effect for not less than six years after consummation of
the Merger the current policies of directors' and officers' liability insurance
maintained by SP
II-1
<PAGE>
and its subsidiaries on the date of the Original Merger Agreement (provided that
UP may substitute therefor policies having at least the same coverage and
containing terms and conditions which are no less advantageous to the persons
currently covered by such policies as insured) with respect to matters existing
or occurring at or prior to the Effective Time; provided, however, that if the
aggregate annual premiums for such insurance at any time during such period will
exceed 200% of the per annum rate of premium currently paid by SP and its
subsidiaries for such insurance on the date of the Amended Merger Agreement,
then UP will cause the Surviving Corporation or the Alternative Surviving
Corporation, as the case may be, to, and the Surviving Corporation or the
Alternative Surviving Corporation, as the case may be, will, provide the maximum
coverage that will then be available at an annual premium equal to 200% of such
rate, and UP, in addition to the indemnification provided above, will indemnify
the Indemnified Parties for the balance of such insurance coverage on the same
terms and conditions as though UP were the insurer under those policies. In the
event any Indemnified Party becomes involved in any capacity in any action,
proceeding or investigation based on, or arising from, in whole or in part, any
matter, including the transactions contemplated by the Amended Merger Agreement,
existing or occurring at or prior to the Effective Time, then, to the extent
permitted by law, UP will, or will cause the Surviving Corporation or the
Alternative Surviving Corporation, as the case may be, to, periodically advance
to such Indemnified Party its legal and other expenses (including the cost of
any investigation and preparation incurred in connection therewith), subject to
the provision by such Indemnified Party of an undertaking to reimburse the
amounts so advanced in the event of a final determination by a court of
competent jurisdiction that such Indemnified Party is not entitled thereto.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The exhibits to this Registration Statement are listed in the Exhibit
Index hereto and are incorporated herein by reference.
ITEM 22. UNDERTAKINGS.
UP (hereinafter the 'Registrant') hereby undertakes as follows:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the 'Calculation of Registration Fee' table in the
effective Registration Statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the registration statement is on Form S-3 or Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the Resistration
Statement;
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof;
II-2
<PAGE>
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering;
(4) that for purposes of determining any liability under the
Securities Act, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Exchange Act) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof;
(5) that prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form;
(6) that every prospectus (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to this Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof;
(7) insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referred to in Item 20
above, or otherwise, the Registrant has been advised that in the opinion of
the Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer or
controlling persons of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue;
(8) to respond to requests for information that is incorporated by
reference in the Registration Statement pursuant to Item 4, 10(b), 11 or 13
of Form S-4, within one business day of receipt of such request and to send
the incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed subsequent to
the effective date of this Registration Statement through the date of
responding to the request; and
(9) to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the Registration Statement when
it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Post-Effective Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Bethlehem, State of Pennsylvania, on July 16, 1996.
UNION PACIFIC CORPORATION
By: /s/ L. WHITE MATTHEWS, III
----------------------------------
L. White Matthews, III
Executive Vice President -- Finance
Pursuant to the requirement of the Securities Act of 1933, this
Post-Effective Amendment No. 2 to the Registration Statement has been signed by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------- -------------------
<S> <C> <C>
* Chairman and July 16, 1996
- ------------------------------------------ Chief Executive Officer
Drew Lewis (Principal Executive Officer)
/s/ L. WHITE MATTHEWS, III Director and Executive July 16, 1996
- ------------------------------------------ Vice President-Finance
L. White Matthews, III (Principal Financial and
Accounting Officer)
* Director July 16, 1996
- ------------------------------------------
Richard J. Mahoney
Director July 16, 1996
- ------------------------------------------
Jack L. Messman
* Director, President and July 16, 1996
- ------------------------------------------ Chief Operating Officer
Richard K. Davidson
* Director July 16, 1996
- ------------------------------------------
Robert P. Bauman
* Director July 16, 1996
- ------------------------------------------
Richard B. Cheney
* Director July 16, 1996
- ------------------------------------------
E. Virgil Conway
* Director July 16, 1996
- ------------------------------------------
Spencer F. Eccles
* Director July 16, 1996
- ------------------------------------------
Elbridge T. Gerry, Jr.
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C> <C>
* Director July 16, 1996
- ------------------------------------------
William H. Gray, III
* Director July 16, 1996
- ------------------------------------------
Judith Richards Hope
* Director July 16, 1996
- ------------------------------------------
John R. Meyer
* Director July 16, 1996
- ------------------------------------------
Thomas A. Reynolds, Jr.
* Director July 16, 1996
- ------------------------------------------
James D. Robinson, III
* Director July 16, 1996
- ------------------------------------------
Robert W. Roth
* Director July 16, 1996
- ------------------------------------------
Richard S. Simmons
*By: /s/ THOMAS E. WHITAKER
-------------------------------------
Thomas E. Whitaker
Attorney-in-Fact
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT
- ------- --------
<S> <C> <C>
2.1* -- Agreement and Plan of Merger ('Original Agreement and Plan of Merger'), by and among UP, UP
Acquisition, UPRR and SP, dated as of August 3, 1995 (incorporated by reference to Annex B to the
original Joint Proxy Statement/Prospectus filed with the Commission on December 12, 1995 (the
'Original Joint Proxy Statement/Prospectus')). The Registrant will furnish supplementally a copy of
all omitted schedules to Exhibit 2.1 upon the request of the Commission.
2.2 -- Amended and Restated Agreement and Plan of Merger, by and among UP, UPRR, UP Holding Company, Inc.,
Union Pacific Merger Co. and SP (incorporated by reference to Annex B to the Joint Proxy
Statement/Prospectus included herein). The Registrant will furnish supplementally a copy of all
omitted schedules to Exhibit 2.2 upon the request of the Commission.
5.1* -- Opinion of Parsons Behle & Latimer.
8.1* -- Filing opinion of Skadden, Arps, Slate, Meagher & Flom regarding tax matters.
8.2* -- Opinion of Shearman & Sterling regarding tax matters.
8.3* -- Opinion of Skadden, Arps, Slate, Meagher & Flom regarding tax matters.
9.1 -- Voting Trust Agreement (incorporated by reference to Annex K to the Joint Proxy Statement
/Prospectus included herein).
10.1* -- Anschutz Shareholders Agreement (incorporated by reference to Annex D to the Original Joint Proxy
Statement/Prospectus).
10.2* -- MSLEF Shareholder Agreement (incorporated by reference to Annex E to the Original Joint Proxy
Statement/Prospectus).
10.3* -- UP Shareholders Agreement (incorporated by reference to Annex F to the Original Joint Proxy
Statement/Prospectus).
10.4* -- Anschutz/Resources Shareholders Agreement (incorporated by reference to Annex G to the Original
Joint Proxy Statement/Prospectus).
10.5* -- Anschutz/UP Registration Rights Agreement (incorporated by reference to Annex H to the Original
Joint Proxy Statement/Prospectus).
10.6* -- Anschutz/Resources Registration Rights Agreement (incorporated by reference to Annex I to the
Original Joint Proxy Statement/Prospectus).
10.7* -- UP Acquisition/SP Registration Rights Agreement (incorporated by reference to Annex J to the
Original Joint Proxy Statement/Prospectus).
10.8* -- Clarification of Anschutz Shareholders Agreement and Anschutz/Spinco Shareholders Agreement.
10.9* -- Clarification of Parent Shareholders Agreement.
10.10* -- Clarification of Original Agreement and Plan of Merger.
10.11* -- Agreement, dated September 25, 1995, between UP and SP, on the one hand, and BNSF, on the other
hand.
10.12* -- Supplemental Agreement, dated November 18, 1995, between UP and SP, on the one hand, and BNSF, on
the other hand.
10.13 -- Amended and Restated Anschutz Shareholders Agreement (incorporated by reference to Annex D to the
Joint Proxy Statement/Prospectus included herein).
10.14 -- Amended and Restated MSLEF Shareholder Agreement (incorporated by reference to Annex E to the Joint
Proxy Statement/Prospectus included herein).
10.15 -- Amended and Restated UP Shareholders Agreement (incorporated by reference to Annex F to the Joint
Proxy Statement/Prospectus included herein).
10.16 -- Amended and Restated Anschutz/Resources Shareholders Agreement (incorporated by reference to Annex
G to the Joint Proxy Statement/Prospectus included herein).
10.17 -- Amended and Restated Anschutz/UP Registration Rights Agreement (incorporated by reference to Annex
H to the Joint Proxy Statement/Prospectus included herein).
10.18 -- Amended and Restated Anschutz/Resources Registration Rights Agreement (incorporated by reference to
Annex I to the Joint Proxy Statement/Prospectus included herein).
10.19 -- Amended and Restated UP Acquisition/SP Registration Rights Agreement (incorporated by reference to
Annex J to the Joint Proxy Statement/Prospectus included herein).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT
- ------- --------
<S> <C> <C>
10.20* -- Revolving Credit Agreement, dated as of April 4, 1996, among Union Pacific Corporation, the Banks
named therein, Citicorp Securities, Inc., Chase Securities Inc., Citibank, N.A. and Chemical Bank.
21.1* -- Subsidiaries of the Registrant.
23.1* -- Consent of Deloitte & Touche LLP. (Incorporated by reference to Exhibit 23 of the Registrant's
Annual Report in Form 10-K for the year ended December 31, 1995)
23.2* -- Consent of KPMG Peat Marwick LLP.
23.3* -- Consent of Parsons Behle & Latimer (included in Exhibit 5.1).
23.4* -- Consents of Skadden, Arps, Slate, Meagher & Flom (included in Exhibits 8.1 and 8.3).
23.5* -- Consent of Shearman & Sterling (included in Exhibit 8.2).
23.6* -- Consent of Morgan Stanley & Co. Incorporated.
24.1* -- Powers of Attorney.
99.1 -- Form of Proxy to be used in connection with the Special Meeting of Stockholders of SP.
99.2 -- Form of Election/Letter of Transmittal.
99.3 -- Form of Notice of Guaranteed Delivery.
99.4* -- Irrevocable Proxies granted by the Anschutz Shareholders.
99.5* -- Irrevocable Proxy granted by MSLEF.
99.6 -- Letter, dated July 16, 1996, from President and Chief Executive Officer of SP to SP stockholders.
99.7 -- Notice of Special Meeting of Stockholders, dated July 16, 1996.
99.8* -- Report of Deloitte & Touche LLP.
99.9* -- Reports of KPMG Peat Marwick LLP.
</TABLE>
- ------------------
* Previously filed.
<PAGE>
SOUTHERN PACIFIC RAIL CORPORATION
COMMON STOCK
PROXY
FOR THE SPECIAL MEETING OF STOCKHOLDERS--AUGUST 16, 1996
The undersigned hereby appoints P.F. Anschutz, J.R. Davis and R.F. Starzel,
and each of them, Proxies, with power of substitution to vote, as designated
below, all the shares of Common Stock of Southern Pacific Rail Corporation held
of record by the undersigned on July 15, 1996, at a Special Meeting of
Stockholders to be held at the Mandarin Oriental Hotel, 222 Sansome Street, San
Francisco, California, on August 16, 1996, at 10 a.m., local time, or any
adjournments or postponements thereof.
In their discretion, the Proxies are authorized to vote upon such other
matters that are presented for action at the Special Meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR ITEM 1. SIGN EXACTLY AS NAME APPEARS BELOW. WHEN SHARES ARE HELD BY
JOINT TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE, OR GUARDIAN, GIVE FULL TITLE AS SUCH. IF A CORPORATION,
SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
Receipt of the Notice of Special Meeting of Stockholders and the related
Joint Proxy Statement/Prospectus is acknowledged.
(Continued and to be dated and signed on reverse side.)
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1.
1. Approval and adoption of the Amended and Restated Agreement and Plan of
Merger, dated as of July 12, 1996, by and among Southern Pacific Rail
Corporation, Union Pacific Corporation, Union Pacific Railroad Company UP
Holding Company, Inc., and Union Pacific Merger Co. and the transactions
contemplated thereby, as fully described in the Joint Proxy
Statement/Prospectus relating thereto.
PLEASE MARK YOUR VOTE AS
INDICATED IN THE EXAMPLE /x/
FOR AGAINST ABSTAIN
/ / / / / /
Please mark, sign, date and return
the proxy card promptly using the
enclosed envelope.
Please sign here exactly as your
name(s) appear(s) to the left.
Dated ______________________ , 1996
___________________________________
(Signature)
___________________________________
(Signature if held jointly)
___________________________________
(Title or Authority)
<PAGE>
FORM OF ELECTION/LETTER OF TRANSMITTAL
TO ACCOMPANY CERTIFICATE FOR SHARES OF
COMMON STOCK
OF
SOUTHERN PACIFIC RAIL CORPORATION
WHEN SUBMITTED PURSUANT TO AN ELECTION
IN CONNECTION WITH THE PROPOSED
MERGER OF SOUTHERN PACIFIC RAIL CORPORATION WITH
A WHOLLY OWNED SUBSIDIARY OF
UNION PACIFIC CORPORATION
This Form of Election/Letter of Transmittal is to be completed by
stockholders of Southern Pacific Rail Corporation ('Southern Pacific') either if
stock certificates (the 'Share Certificates') for shares of common stock ('SP
Common Stock' or 'Shares'), par value $0.001 per share, of Southern Pacific are
to be forwarded herewith or if delivery of Shares are to be made by book entry
transfer to the Exchange Agent's account at The Depository Trust Company or the
Philadelphia Depository Trust Company (each, a 'Book-Entry Transfer Facility'
and collectively, the 'Book-Entry Transfer Facilities') pursuant to book entry
transfer procedures, or if or a guarantee of delivery of such Share
Certificates, and all other required documents, are to be delivered to the
Exchange Agent by 5:00 p.m., New York City time, on September 9, 1996, unless
extended, in order to effect an Election (as defined) in connection with the
proposed merger of Southern Pacific with and into a wholly owned subsidiary of
Union Pacific Corporation.
The Exchange Agent is:
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Hand:
Receive Window By Overnight Courier: By Mail:
77 Water Street, 77 Water Street, Wall Street Station
5th Floor 4th Floor P.O. Box 1023
New York, NY 10005 New York, NY 10005 New York, NY 10268-1023
By Facsimile:
(212) 701-7636
(212) 701-7640
Confirm by telephone:
(212) 701-7624
</TABLE>
------------------
DELIVERY OF THIS FORM OF ELECTION/LETTER OF TRANSMITTAL TO AN ADDRESS OTHER
THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OR TELEX
TRANSMISSION OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
YOU MUST SIGN THIS FORM OF ELECTION/LETTER OF TRANSMITTAL WHERE INDICATED BELOW
AND COMPLETE THE SUBSTITUTE FORM W-9 PROVIDED BELOW.
The instructions accompanying this FORM OF ELECTION/LETTER OF TRANSMITTAL
should be read carefully before this Form of Election/Letter of Transmittal is
completed.
THE DEADLINE FOR SUBMITTING THIS FORM OF ELECTION/LETTER OF TRANSMITTAL,
TOGETHER WITH YOUR SHARE CERTIFICATES, IS 5:00 P.M., NEW YORK CITY TIME,
ON SEPTEMBER 9, 1996, UNLESS EXTENDED.
Southern Pacific stockholders whose Share Certificates are not immediately
available or who cannot deliver their Share Certificates and all other documents
required hereby to the Exchange Agent prior to 5:00 p.m., New York City time, on
September 9, 1996, unless extended, (the 'Election Deadline') and who wish to
make an Election must do so pursuant to the guaranteed delivery procedure
described below. See Instruction A2.
SOUTHERN PACIFIC STOCKHOLDERS MAY CHOOSE TO MAKE A STOCK ELECTION AND/OR A
CASH ELECTION WITH RESPECT TO ALL OR ANY PORTION OF THE SHARES HELD BY SUCH
HOLDER.
/ / CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
EXCHANGE AGENT'S ACCOUNT AT ONE OF THE BOOK-ENTRY FACILITIES AND COMPLETE
THE FOLLOWING:
Name of Electing Institution:_______________________________________________
Check Box of Applicable Book-Entry Transfer Facility:
/ / The Depository Trust Company / / Philadelphia Depository Trust Company
Account Number__________________ Transaction Code Number______________
<PAGE>
<TABLE>
<CAPTION>
TYPE OF ELECTION (SEE INSTRUCTIONS B1, B2 AND B3)
CERTIFICATES ENCLOSED (ATTACH SEPARATE SIGNED LIST IF NECESSARY)
TOTAL NUMBER CASH ELECTION STOCK ELECTION
OF SHARES
NAME(S) AND ADDRESS(ES) OF CERTIFICATE REPRESENTED BY (NUMBER OF (NUMBER OF
REGISTERED HOLDER(S) NUMBER CERTIFICATE SHARES) SHARES)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
TOTAL SHARES
-------------- -------------- -------------- --------------
</TABLE>
For each Share converted into cash, the holder will receive a cash payment
of $25.00. For each share of SP Common Stock converted into shares of
Common Stock of Union Pacific Corporation ('UP Common Stock'), the holder
will receive .4065 shares of UP Common Stock. No fractional shares of UP
Common Stock will be issued and cash in lieu thereof will be distributed.
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE INSTRUCTIONS SET FORTH
IN THIS FORM OF ELECTION/LETTER OF TRANSMITTAL CAREFULLY.
Ladies and Gentlemen:
In connection with the merger (the 'Merger') of Southern Pacific with and
into a wholly owned subsidiary of Union Pacific Corporation ('Union Pacific'),
the undersigned hereby submits the Share Certificates evidencing shares of SP
Common Stock listed above, or hereby transfers ownership of such Share
Certificates on the account books maintained by a Book-Entry Transfer Facility,
and elects, subject to the limitations set forth below, to have each share of SP
Common Stock represented by such Share Certificates converted into (i) .4065
shares of common stock, par value $2.50 per share (the 'UP Common Stock'), of
Union Pacific (the 'Stock Consideration'), (ii) $25.00 in cash, without interest
thereon (the 'Cash Consideration') or (iii) a combination thereof. It is
understood that the following election is subject to (i) the terms, conditions
and limitations set forth in the Joint Proxy Statement/Prospectus dated July 16,
1996 relating to the Merger (the 'Joint Proxy Statement/Prospectus'), receipt of
which is hereby acknowledged by the undersigned, (ii) the terms of the Amended
and Restated Agreement and Plan of Merger, dated as of July 12, 1996, (the
'Merger Agreement'), attached as Annex B to the Joint Proxy Statement/Prospectus
and (iii) the accompanying instructions. Union Pacific's acceptance of Shares
delivered pursuant to this Form of Election/Letter of Transmittal will
constitute a binding agreement between the undersigned and Union Pacific upon
the terms and subject to the conditions of (i), (ii) and (iii) listed above.
ALTHOUGH THERE CAN BE NO ASSURANCE THAT A HOLDER OF SHARES WILL RECEIVE THE
CONSIDERATION THAT HE OR SHE ELECTS AS TO ALL OF HIS OR HER SHARES, A HOLDER OF
SHARES HAVING A PREFERENCE AS TO THE FORM OF CONSIDERATION TO BE RECEIVED FOR
HIS OR HER SHARES SHOULD MAKE AN ELECTION, BECAUSE SHARES AS TO WHICH AN
ELECTION HAS BEEN MADE WILL BE GIVEN PRIORITY IN ALLOCATING SUCH CONSIDERATION
OVER SHARES AS TO WHICH NO ELECTION IS RECEIVED. NONE OF UNION PACIFIC, SOUTHERN
PACIFIC, THE SOUTHERN PACIFIC BOARD OF DIRECTORS OR THE UNION PACIFIC BOARD OF
DIRECTORS MAKES ANY RECOMMENDATION AS TO WHETHER STOCKHOLDERS SHOULD ELECT TO
RECEIVE THE CASH CONSIDERATION OR THE STOCK CONSIDERATION IN THE MERGER. EACH
STOCKHOLDER MUST MAKE HIS OR HER OWN DECISION WITH RESPECT TO SUCH ELECTION. IF
A STOCKHOLDER MAKES NO ELECTION, HE OR SHE WILL RECEIVE THE CASH CONSIDERATION
AND/OR THE STOCK CONSIDERATION IN THE MERGER AS DESCRIBED IN THE JOINT PROXY
STATEMENT/PROSPECTUS.
Failure of a holder of Shares to complete properly and to return this Form
of Election/Letter of Transmittal together with his or her Share Certificates,
or with an appropriate guarantee of delivery of Share Certificates, to the
Exchange Agent by the Election Deadline, or a holder of Shares who cannot
complete the procedure for delivery by book-entry transfer on a timely basis,
and who fails to comply with the election procedures described in the Joint
Proxy Statement/Prospectus and this Form of Election/Letter of Transmittal
(including the instructions hereto) will cause such holder's Shares to be
converted into the right to receive the Stock Consideration and/or the Cash
Consideration without regard to the preference of such holder of Shares.
The undersigned authorizes and instructs you, as Exchange Agent, to deliver
the Share Certificates listed above and to receive on behalf of the undersigned,
in exchange for the Shares represented thereby, any check for the cash or any
certificate for the shares of UP Common Stock issuable in the Merger. If
certificates are not delivered herewith, there is furnished a guarantee of
delivery of such Share Certificates from an Eligible Institution (as defined).
The undersigned represents and warrants that the undersigned has full power
and authority to surrender the Share Certificate(s) surrendered herewith or
covered by a guarantee of delivery, free and clear of any liens, claims, charges
or encumbrances whatsoever. The undersigned understands and acknowledges that
the method of delivery of the Share Certificate(s) and all other required
documents is at the option and risk of the undersigned and that the risk of loss
of such Share Certificate(s) shall pass only after the Exchange Agent has
actually received the Share Certificate(s). All questions as to the validity,
form and eligibility of any Election and surrender of Share Certificates
hereunder shall be determined by Union Pacific (which may delegate power in
whole or in part to the Exchange Agent), and such determination shall be final
and binding. The undersigned, upon request, shall execute and deliver all
additional documents deemed by the Exchange Agent or Union Pacific to be
necessary or desirable to complete the sale, assignment, transfer, cancellation
and retirement of the Shares delivered herewith. No authority herein conferred
or agreed to be conferred shall be affected by, and all such authority shall
survive, the death or incapacity of the undersigned. All obligations of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned.
The undersigned understands that the purpose of the election procedure is
to permit holders of Shares to express their preferences for the type of
consideration they wish to receive in the Merger, provided that a number of
Shares, together with the 39,034,471 Shares acquired by UP Acquisition
Corporation ('Acquired Shares') at a price of $25.00 per Share, net to the
seller in cash, pursuant to its tender offer (the 'Offer') dated August 9, 1995,
as nearly as practicable equal to 40% of the outstanding Shares, shall be
converted into the right to receive the Cash Consideration, and a number of
Shares as nearly as practicable equal to 60% of the outstanding Shares, be
converted into the right to receive the Stock Consideration. Subject to the
proration and the limitations described below, the Exchange Agent will honor the
Stock Elections and Cash Elections made by holders of Shares when it issues
shares of UP Common Stock and the Cash Consideration after the Effective Time
(as defined in the Joint Proxy Statement/Prospectus).
The undersigned understands that in lieu of any fractional share of UP
Common Stock, Union Pacific will pay to each former stockholder of Southern
Pacific who otherwise would be entitled to receive a fractional share of UP
Common Stock an amount in cash determined by multiplying (i) the Average UP
Share Price (as defined in the Merger Agreement) on the date on which the
Effective Time occurs by (ii) the fractional interest in a share of UP Common
Stock to which such holder would otherwise be entitled.
<PAGE>
Unless otherwise indicated in the box entitled 'Special Payment
Instructions,' please issue any check and register any certificate for shares of
UP Common Stock in the name of the registered holder(s) of the Shares appearing
above under 'Type of Election.' Similarly, unless otherwise indicated in the box
entitled 'Special Delivery Instructions,' please mail any check and any
certificate for shares of UP Common Stock to the registered holder(s) of the
Shares at the address(es) of the registered holder(s) appearing above under
'Type of Election.' In the event that the boxes entitled 'Special Payment
Instructions' and 'Special Delivery Instructions' are both completed, please
issue any check and any certificate for shares of UP Common Stock in the name(s)
of, and mail such check and such certificate to, the person(s) so indicated.
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS A1 AND C3)
To be completed ONLY if the check is to be made payable to, or the
certificates for shares of UP Common Stock are to be registered in, the name of
someone other than the undersigned.
Name: __________________________________________________________________________
(PLEASE PRINT)
Address: _______________________________________________________________________
________________________________________________________________________________
(ZIP CODE)
________________________________________________________________________________
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS A1 AND C3)
To be completed ONLY if the check or the certificates for shares of UP
Common Stock are to be mailed to someone other than the undersigned or to the
undersigned at an address other than that shown under 'Type of Election.'
Mail check and/or certificates to:
Name: __________________________________________________________________________
(PLEASE PRINT)
Address: _______________________________________________________________________
________________________________________________________________________________
(ZIP CODE)
SIGNATURE
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SIGN HERE:
___________________________________________________ Name(s):________________________________________
(PLEASE PRINT)
___________________________________________________
SIGNATURE(S) OF OWNER(S) Name(s):________________________________________
________________________________________
(AREA CODE AND TELEPHONE NUMBER)
________________________________________
Must be signed by registered owner(s) exactly as name(s) (PAYEE TAXPAYER IDENTIFICATION OR
appear(s) on stock certificate(s) or by person(s) SOCIAL SECURITY NUMBER)
authorized to become registered holder(s) by certificates
and documents transmitted herewith. If signature is by Dated: ________________________________________
attorney, executor, administrator, trustee or guardian or
others acting in a fiduciary capacity, set forth full
title and see Instruction C2.
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SIGNATURE GUARANTEE
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If you have filled out the Special Payment Instructions Name of
above, you must have your signatures guaranteed. (See Guarantor _______________________________________
Instructions A1 and C3.)
Signature(s)
Date __________________________________________________ Guaranteed: _____________________________________
(AUTHORIZED SIGNATURE REQUIRED)
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<PAGE>
IMPORTANT TAX INFORMATION
In order to ensure compliance with federal income tax requirements, each
holder of Shares is requested to provide the Exchange Agent with his correct
Taxpayer Identification Number and to certify whether he or she is subject to
backup federal income tax withholding by completing and signing the Substitute
Form W-9 below. (See Instruction C6 and accompanying Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9.)
PAYOR: HARRIS TRUST COMPANY OF NEW YORK
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SUBSTITUTE PART I -- PLEASE PROVIDE
FORM W-9 YOUR TIN IN THE BOX AT RIGHT ________________________________
AND CERTIFY BY SIGNING AND Social Security Number
DATING BELOW.
OR
DEPARTMENT OF THE TREASURY ________________________________
INTERNAL REVENUE SERVICE Employer Identification Number
(If awaiting TIN write
'Applied For')
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PAYER'S REQUEST FOR
TAXPAYER IDENTIFICATION
NUMBER (TIN)
PART II -- For Payees Exempt From Backup Withholding, see the enclosed
Guidelines and complete as instructed therein.
Certification -- Under penalties of perjury, I certify that:
(l) 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 thereafter will be withheld until I
provide a number), and
(2) I am not subject to backup withholding either because I have not been
notified by 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: ___________ , 199
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE MERGER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE>
INSTRUCTIONS
A. FORM OF ELECTION/LETTER OF TRANSMITTAL
1. Guarantee of Signatures. Except as otherwise provided below, all
signatures on this Form of Election/Letter of Transmittal must be guaranteed by
a firm which is a bank, broker, dealer, credit union, savings association, or
other entity that is a member in good standing of the Securities Transfer
Agent's Medallion Program (each, an 'Eligible Institution'). No signature
guarantee is required on this Form of Election/Letter of Transmittal if (a) this
Form of Election/Letter of Transmittal is signed by the registered holder(s)
(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) of Shares delivered herewith, unless such holder(s) has
completed either the box entitled 'Special Delivery Instructions' or the box
entitled 'Special Payment Instructions' on the reverse hereof. If a Share
Certificate is registered in the name of a person other than the signer of this
Form of Election/Letter of Transmittal, or if checks or certificates are to be
payable to the order of or registered in the name of 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(s) on the Share Certificate, with the signature(s)
on such Share Certificate or stock powers guaranteed as described above. See
Instruction C2.
2. Delivery of Form of Election/Letter of Transmittal and Share
Certificates. This Form of Election/Letter of Transmittal is to be used either
if Share Certificates are to be forwarded herewith, if Shares are to delivered
by book-entry transfer pursuant to book-entry transfer procedures or if delivery
of Shares is to be guaranteed. Share Certificates evidencing all delivered
Shares, or confirmation of a book-entry transfer of such Shares, if such
procedure is available, into the Exchange Agent's account at one of the
Book-Entry Transfer Facilities pursuant to book-entry transfer procedures
together with a properly completed and duly executed Form of Election/Letter of
Transmittal (or facsimile thereof) with any required signature guarantees (or,
in the case of a book-entry transfer, an Agent's Message, as defined below) and
any other documents required by this Form of Election/Letter of Transmittal,
must be received by the Exchange Agent at its address set forth on the reverse
hereof prior to the Election Deadline. If Share Certificates are forwarded to
the Exchange Agent in multiple deliveries, a properly completed and duly
executed Form of Election/Letter of Transmittal must accompany each such
delivery. Southern Pacific stockholders whose Share Certificates are not
immediately available and who cannot deliver their Share Certificates and all
other required documents to the Exchange Agent prior to the Election Deadline or
who cannot complete the procedure for delivery by book-entry transfer on a
timely basis may deliver their Shares pursuant to the guaranteed delivery
procedure. Pursuant to such procedure: (i) such delivery 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 herewith, must
be received by the Exchange Agent prior to the Election Deadline; and (iii) in
the case of a guarantee of Shares, the Share Certificates, in proper form for
transfer, or a confirmation of a book-entry transfer of such Shares, if such
procedure is available, into the Exchange Agent's account at one of the
Book-Entry Transfer Facilities, together with a properly completed and duly
executed Form of Election/Letter of Transmittal (or manually signed facsimile
thereof) with any required signature guarantees (or, in the case of a book-entry
transfer, an Agent's Message), and any other documents required by this Form of
Election/Letter of Transmittal, must be received by the Exchange Agent within
three 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 Exchange
Agent 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 delivering the Shares, that
such participant has received and agrees to be bound by the terms of this Form
of Election/Letter of Transmittal and that Union Pacific may enforce such
agreement against the participant.
Record holders of Shares who are nominees only may submit a separate Form
of Election/Letter of Transmittal for each beneficial owner for whom such record
holder is a nominee; provided, however, that at the request of the Exchange
Agent, such record holder shall certify to the satisfaction of the Exchange
Agent that such record holder holds such SP Common Stock as nominee for the
beneficial owner thereof. Each beneficial owner for which a Form of
Election/Letter of Transmittal is submitted will be treated as a separate holder
of SP Common Stock.
Southern Pacific stockholders whose Forms of Election/Letters of
Transmittal and Share Certificates, or appropriate Notices of Guaranteed
Delivery, are not received prior to the Election Deadline or who cannot complete
the procedure for delivery by book-entry transfer on a timely basis will not be
entitled to specify their preference(s) and may receive either shares of UP
Common Stock, cash or a combination thereof in the Merger.
THE METHOD OF DELIVERY OF THIS FORM OF ELECTION/LETTER OF TRANSMITTAL,
SHARE CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF
THE STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY
RECEIVED BY THE EXCHANGE AGENT. 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.
3. Inadequate Space. If the space provided herein under 'Type of Election'
is inadequate, the Share Certificate numbers, the number of Shares evidenced by
such Share Certificates and the number of Shares delivered should be listed on a
separate schedule and attached hereto.
4. Change or Revocation of Election. Any holder of Share Certificates may,
at any time prior to the Election Deadline, change his or her Election by
submitting to the Exchange Agent a properly completed and signed revised Form of
Election/Letter of Transmittal and all required additional documents, provided
that the Exchange Agent receives such revised Form of Election/Letter of
Transmittal and other necessary documents prior to the Election Deadline. Any
holder of Shares may, at any time prior to the Election Deadline, revoke his or
her prior valid Election by written notice received by the Exchange Agent prior
to the Election Deadline or by written withdrawal prior to the Election Deadline
of his or her Share Certificates (or of the Notice of Guaranteed Delivery of
such certificates) previously deposited with the Exchange Agent.
5. Automatic Revocations of Elections. All Elections will be revoked
automatically if the Exchange Agent is notified in writing by Union Pacific or
UPRR that the Merger Agreement has been terminated, and Share Certificates will
be promptly returned to the persons who have submitted them.
B. ELECTION AND ALLOCATION PROCEDURES
1. Elections. By completing the appropriate box above and completing this
Form of Election/Letter of Transmittal in accordance with the instructions
hereto, a Southern Pacific stockholder will be permitted to make a Stock
Election and/or a Cash Election (each, an 'Election') with respect to all or any
portion of the Shares held by such holder. The aggregate number of Shares to be
converted into the right to receive UP Common Stock pursuant to the Merger will
be equal as nearly as practicable to 60% of all outstanding Shares immediately
prior to the Effective Time; and the number of Shares to be converted into the
right to receive the Cash Consideration pursuant to the Merger, together with
the Acquired Shares, will be equal as nearly as practicable to 40% of all
outstanding Shares immediately prior to the Effective Time.
<PAGE>
Each Southern Pacific stockholder should consult his or her own financial
advisor and tax advisor as to the specific consequences of the Merger and
Election to such stockholder.
No alternative, conditional or contingent Elections will be accepted.
2. Stock Elections and Allocations. If Stock Elections are received for a
number of Shares that is 60% or less of the outstanding Shares immediately prior
to the Effective Time, each Share covered by a Stock Election will be converted
in the Merger into the right to receive .4065 of a share of UP Common Stock (the
'Conversion Fraction').
If Stock Elections are received for more than 60% of the outstanding
Shares, each Share as to which an Election is not in effect at the Election
Deadline (other than Acquired Shares) (a 'Non-Electing Share') and each Share
for which a Cash Election has been received will be converted into the right to
receive the Cash Consideration in the Merger, and the Shares for which Stock
Elections have been received will be converted into UP Common Stock and the
right to receive the Cash Consideration in the following manner: (1) The
Exchange Agent will distribute with respect to Shares as to which a Stock
Election has been made the Stock Consideration with respect to a fraction of
such Shares, the numerator of which fraction shall be 60% of the number of
outstanding Shares and the denominator of which shall be the aggregate number of
Shares covered by Stock Elections; and (2) Shares covered by a Stock Election
and not fully converted into the right to receive UP Common Stock as set forth
in clause (1) above will be converted in the Merger into the right to receive
the Cash Consideration for each Share so converted.
3. Cash Elections and Allocations. If the number of Acquired Shares and
Shares for which Cash Elections are received in the aggregate is 40% or less of
the outstanding Shares immediately prior to the Effective Time, each Share
covered by a Cash Election will be converted in the Merger into the right to
receive the Cash Consideration.
If the number of Acquired Shares and Shares for which Cash Elections are
received in the aggregate is more than 40% of the outstanding Shares, each
Non-Electing Share and each Share for which a Stock Election has been received
will be converted in the Merger into the Stock Consideration, and the Shares for
which Cash Elections have been received will be converted into the right to
receive the Cash Consideration and the Stock Consideration in the following
manner: (1) The Exchange Agent will distribute with respect to Shares as to
which a Cash Election has been made the Cash Consideration with respect to a
fraction of such Shares, the numerator of which fraction will be 40% of the
number of outstanding Shares minus the number of Acquired Shares and the
denominator of which will be the aggregate number of Shares covered by Cash
Elections; and (2) Shares covered by a Cash Election and not fully converted
into the right to receive the Cash Consideration as set forth in clause (1)
above will be converted in the Merger into the Stock Consideration for each
Share so converted.
4. Treatment of Non-Electing Shares in Certain Circumstances. If Stock
Elections are received for less than 60% of the outstanding Shares and Cash
Elections, together with the Acquired Shares, are received for less than 40% of
the outstanding Shares, the Exchange Agent will distribute with respect to each
Non-Electing Share, the Cash Consideration with respect to a fraction of such
Non-Electing Share, where such fraction is calculated in a manner that will
result in the sum of (i) the number of Shares converted into cash pursuant to
this paragraph, (ii) the number of Shares for which Cash Elections have been
received and (iii) the number of Acquired Shares being as close as practicable
to 40% of the outstanding Shares immediately prior to the Effective Time. Each
Non-Electing Share not converted into the right to receive the Cash
Consideration as set forth in the preceding sentence will be converted in the
Merger into the right to receive the Stock Consideration.
Election Deadline. The Election Deadline for submitting this Form of
Election/Letter of Transmittal to the Exchange Agent is 5:00 p.m., New York City
time, on September 9, 1996, unless extended. Union Pacific may extend the
Election Deadline to a later date so long as such later date is no later than
the date on which the Merger is consummated. If the Election Deadline is
extended, Union Pacific will announce such extension in a news release delivered
to the Dow Jones New Service.
Failure of a holder of Shares to complete properly and to return this Form
of Election/Letter of Transmittal together with his or her Share Certificates,
or with an appropriate guarantee of delivery of Share Certificates, to the
Exchange Agent by the Election Deadline, or a holder of Shares who cannot
complete the procedure for delivery by book-entry transfer on a timely basis,
and who fails to comply with the election procedures described in the Joint
Proxy Statement/Prospectus and this Form of Election/Letter of Transmittal
(including the instructions hereto) will cause each of such holder's Shares to
be treated as a 'Non-Electing Share' in the Merger and converted into the right
to receive the Stock Consideration and/or the Cash Consideration without regard
to the preference of such holder of Shares.
* * *
A more complete description of the election and allocation procedures is
set forth in the Joint Proxy Statement/Prospectus under 'The Merger--Election
Procedures.' All Elections are subject to compliance with the election
procedures provided for in the Merger Agreement. In connection with making any
Election, a Southern Pacific stockholder should read carefully, among other
matters, the description and statement of the information contained in the Joint
Proxy Statement/Prospectus under 'The Merger--Certain Federal Income Tax
Consequences.'
C. RECEIPT OF MERGER CONSIDERATION, SIGNATURES, SPECIAL INSTRUCTIONS, TAXES AND
ADDITIONAL COPIES
1. Receipt of Merger Consideration. As soon as practicable after the
Effective Time, checks and certificates representing shares of UP Common Stock
will be distributed to those holders who are entitled thereto and who have
surrendered their Share Certificates to the Exchange Agent for cancellation.
2. Signatures on Form of Election/Letter of Transmittal; Stock Powers and
Endorsements. If this Form of Election/Letter of Transmittal is signed by the
registered holder(s) of the Shares delivered herewith, the signature(s) must
correspond with the name(s) as written on the face of the Share Certificates
evidencing such Shares without alteration, enlargement or any other change
whatsoever.
If any Share delivered herewith is owned of record by two or more persons,
all such persons must sign this Form of Election/Letter of Transmittal.
If any of the Shares delivered herewith are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Forms of Election/Letters of Transmittal as there are different
registrations of such Shares.
If this Form of Election/Letter of Transmittal is signed by the registered
holder(s) of the Shares delivered herewith, no endorsements of Share
Certificates or separate stock powers are required, unless checks or
certificates evidencing shares of UP Common Stock are to be payable to the order
of, or registered in, the name of a person other than the registered holder(s),
in which case, the Share Certificate(s) evidencing the Shares delivered herewith
must be endorsed or accompanied by appropriate stock powers, in either case
signed exactly as the name(s) of the registered holder(s) appear(s) on such
Share Certificate(s). Signatures on such Share Certificate(s) and stock powers
must be guaranteed by an Eligible Institution.
If this Form of Election/Letter of Transmittal is signed by a person other
than the registered holder(s) of the Shares delivered herewith, the Share
Certificate(s) evidencing the Shares delivered herewith must be endorsed or
accompanied by
<PAGE>
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signatures on such
Share Certificate(s) and stock powers must be guaranteed by an Eligible
Institution.
If this Form of Election/Letter of Transmittal or any Share Certificate or
stock power is 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 Union Pacific of such person's authority so to
act must be submitted.
3. Special Payment and Delivery Instructions. If any check or certificates
evidencing shares of UP Common Stock are to be payable to the order of, or
registered in the name of, a person other than the person(s) signing this Form
of Election/Letter of Transmittal or if such checks or such certificates are to
be sent to someone other than the person(s) signing this Form of Election/Letter
of Transmittal or to the person(s) signing this Form of Election/Letter of
Transmittal but at an address other than that shown in the box entitled 'Type of
Election,' the appropriate boxes on this Form of Election/Letter of Transmittal
must be completed.
4. Stock Transfer Taxes. Union Pacific will bear the liability for any
state stock transfer taxes applicable to the issuance and delivery of checks and
certificates in connection with the Merger, provided, however, that if any such
check or certificate is to be issued in a name other than that in which the
Share Certificates surrendered in exchange therefor are registered, it shall be
a condition of such exchange that the person requesting such exchange shall pay
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, to the
Exchange Agent or satisfactory evidence of the payment of such taxes, or
exemption therefrom, shall be submitted to the Exchange Agent before any such
check or certificate is issued.
EXCEPT AS PROVIDED IN THIS INSTRUCTION C4, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE SHARE CERTIFICATES EVIDENCING THE
SHARES DELIVERED HEREWITH.
5. Requests for Assistance or Additional Copies. Requests for assistance
may be directed to the Exchange Agent at its respective address or telephone
number set forth above. Additional copies of the Joint Proxy
Statement/Prospectus, this Form of Election/Letter of Transmittal, and the
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 may be obtained from the Exchange Agent or from brokers, dealers,
commercial banks or trust companies.
6. Substitute Form W-9. Under the federal income tax law, a stockholder
who delivers Shares is required by law to provide the Exchange Agent (as payer)
with such stockholder's correct Taxpayer Identification Number ('TIN') on
Substitute Form W-9 above. If such stockholder is an individual, the TIN is such
stockholder's social security number. If the Exchange Agent 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 of Cash Consideration that are
made to such stockholder with respect to Shares purchased pursuant to the Merger
may be subject to backup withholding of 31%. 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, such individual must submit a
statement, signed under penalties of perjury, attesting to such individual's
exempt status. Forms of such statements can be obtained from the Exchange Agent.
See the enclosed Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9 for additional instructions. If backup withholding
applies with respect to a stockholder, the Exchange Agent is required to
withhold 31% of any payments made to such 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.
To prevent backup withholding on payments of Cash Consideration that are
made to a stockholder with respect to Shares delivered herewith, the stockholder
is required to notify the Exchange Agent of such stockholder's correct TIN by
completing the form below certifying (a) that the TIN provided on Substitute
Form W-9 is correct (or that such stockholder is awaiting a TIN) and (b) that
(i) such stockholder has not been notified by the Internal Revenue Service that
such stockholder is subject to backup withholding as a result of a failure to
report all interest or dividends or (ii) the Internal Revenue Service has
notified such stockholder that such stockholder is no longer subject to backup
withholding.
The stockholder is required to give the Exchange Agent the social security
number or employer identification number of the record holder of the Shares
tendered hereby. 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 guidance on
which number to report. If the stockholder has not been issued a TIN and has
applied for a number or intends to apply for a number in the near future, the
stockholder 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 Exchange Agent is not provided with a TIN within 60 days, the
Exchange Agent will withhold 31% of all payments of Cash Consideration to such
stockholder until a TIN is provided to the Exchange Agent.
7. Lost, Destroyed or Stolen Share Certificates. If any Share
Certificate(s) representing Shares has been lost, destroyed or stolen, the
Southern Pacific stockholder should promptly notify Chase Mellon Shareholder
Services L.L.C., the transfer agent for Southern Pacific, at 1-800-356-2017. The
Southern Pacific stockholder will then be instructed as to the steps that must
be taken in order to replace the Share Certificate(s). This Form of
Election/Letter of Transmittal and related documents cannot be processed until
the procedures for replacing lost or destroyed Share Certificates have been
followed.
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
SHARES OF COMMON STOCK
OF
SOUTHERN PACIFIC RAIL CORPORATION
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
As set forth in the Form of Election/Letter of Transmittal, this form, or
one substantially equivalent hereto, must be used to effectuate an Election if
certificates for shares of the common stock, par value $.001 per share ('SP
Common Stock' or the 'Shares'), of Southern Pacific Rail Corporation, a Delaware
corporation ('SP'), are not immediately available or if the procedure for
book-entry transfer cannot be completed on a timely basis or time will not
permit certificates representing Shares covered by the Form of Election/Letter
of Transmittal to reach the Exchange Agent on or prior to the Election Date (as
defined in the Form of Election/Letter of Transmittal). Such form must be
delivered (the method of delivery is at the option and risk of the stockholder)
to Harris Trust Company of New York (the 'Exchange Agent'). See the Instructions
to the Form of Election/Letter of Transmittal.
The Exchange Agent is:
HARRIS TRUST COMPANY OF NEW YORK
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By Hand: By Overnight Courier: By Mail:
Receive Window 77 Water Street, Wall Street Station
77 Water Street, 4th Floor P.O. Box 1023
5th Floor New York, NY 10005 New York, NY 10268-1023
New York, NY 10005
By Facsimile:
(212) 701-7636
(212) 701-7640
Confirm by telephone:
(212) 701-7624
</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 THE
FORM OF ELECTION/LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN
'ELIGIBLE INSTITUTION' (AS DEFINED UNDER THE INSTRUCTIONS THERETO), SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE FORM OF ELECTION/LETTER OF TRANSMITTAL.
<PAGE>
GUARANTEE OF DELIVERY
(TO BE USED ONLY IF CERTIFICATES ARE NOT SURRENDERED WITH
THE FORM OF ELECTION/LETTER OF TRANSMITTAL)
A FORM OF ELECTION/LETTER OF TRANSMITTAL, PROPERLY COMPLETED AND SIGNED, MUST BE
SUBMITTED ALONG WITH THIS GUARANTEE OF DELIVERY IN ORDER TO MAKE AN EFFECTIVE
ELECTION. SUBMISSION OF THIS GUARANTEE OF DELIVERY ALONE, WITHOUT A PROPERLY
COMPLETED AND SIGNED FORM OF ELECTION/LETTER OF TRANSMITTAL, DOES NOT CONSTITUTE
AN EFFECTIVE ELECTION AND WILL NOT PRESERVE THE HOLDER'S RIGHT TO MAKE AN
ELECTION.
<TABLE>
<S> <C>
The undersigned is a member of a national ___________________________________________________
securities exchange; or a member of the National (Firm-Please Print)
Association of Securities Dealers, Inc.; or ___________________________________________________
otherwise is an Eligible Institution; and (Authorized Signature)
guarantees to deliver to the Exchange Agent the ___________________________________________________
certificates for Shares of SP Common Stock to
which the Form of Election/Letter of Transmittal ___________________________________________________
relates, duly endorsed in blank or otherwise in
form acceptable for transfer on the books of SP, ___________________________________________________
no later than 5:00 P.M., New York City time, prior (Address)
to the third NYSE trading day after the Election ___________________________________________________
Deadline. (Area Code and Telephone Number)
</TABLE>
SP's common stockholders who are Eligible Institutions and who cannot deliver
the certificates for their SP Common Stock to the Exchange Agent prior to the
Election Deadline or who cannot complete the procedure for book-entry transfer
on a timely basis and who wish to make an Election (as defined in the Form of
Election/Letter of Transmittal) may guarantee the delivery of their shares of SP
Common Stock pursuant to the guaranteed delivery procedure. Delivery of the Form
of Election/Letter of Transmittal to a Book-Entry Transfer Facility (as defined
in the Form of Election/Letter of Transmittal) does not constitute delivery to
the Exchange Agent.
Number of Shares Covered
by this Guarantee of Delivery ___________________
/ / CHECK HERE IF SHARES OF SP COMMON STOCK ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH ONE OF THE
BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE FOLLOWING:
Name of Electing Institution: __________________________________________________
Check Box of Applicable Book-Entry Transfer Facility:
The Depository Trust Company / /
Philadelphia Depository Trust Company / /
Account Number: ________________________________________________________________
Transaction Code Number: _______________________________________________________
NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS FORM. SHARE CERTIFICATES
SHOULD ONLY BE SENT WITH YOUR FORM OF ELECTION/LETTER OF TRANSMITTAL.
<PAGE>
[SOUTHERN PACIFIC RAIL CORPORATION LETTERHEAD]
July 16, 1996
Dear Stockholder:
Enclosed is a Notice of a Special Meeting of Stockholders of Southern
Pacific Rail Corporation ('SP') and a related Joint Proxy Statement/Prospectus.
As you know, the stockholders of SP previously approved the proposed merger
of SP and Union Pacific Corporation ('UP'). The purpose of the Special Meeting
is for SP stockholders to vote upon a proposed amendment to the Merger Agreement
that will permit an alternative structure to be used to complete the merger.
Under the alternative structure, SP could be merged into any one of three
wholly owned subsidiaries of UP.
The reason for the alternative structure is to maximize UP's flexibility
after the Merger in achieving additional service improvements and operating
efficiencies, while maintaining the same tax consequences to SP stockholders
described in the Joint Proxy Statement/Prospectus dated December 12, 1995
previously delivered to SP stockholders.
The amendment to the Merger Agreement will have no substantive impact on SP
stockholders. Except for the UP subsidiary with which SP could be merged (and
conforming technical changes to the Merger Agreement), ALL ASPECTS OF THE
MERGER, INCLUDING THE UP COMMON STOCK AND CASH TO BE RECEIVED BY SP
STOCKHOLDERS, AND THE INCOME TAX CONSEQUENCES OF THE MERGER TO SP STOCKHOLDERS
REMAIN THE SAME AS DESCRIBED IN THE PREVIOUS JOINT PROXY STATEMENT/PROSPECTUS.
In the merger, each share of SP common stock will be converted, in
accordance with the election to be filed by each SP stockholder, into the right
to receive (i) $25.00 in cash, without interest thereon, (ii) .4065 shares of UP
common stock, or (iii) a combination thereof, subject to proration and the
limitations described in the enclosed Joint Proxy Statement/Prospectus.
At a voting conference held on July 3, 1996, the Surface Transportation
Board ('STB'), the successor to the Interstate Commerce Commission, approved the
Merger subject to the imposition of certain conditions. For a description of the
STB's decision and such conditions, see the section captioned 'Other Legal
Matters; Regulatory Approval--STB Approval' in the enclosed Joint Proxy
Statement/Prospectus. Consummation of the Merger remains subject to issuance of
a final written order by the STB, which is expected by August 12, 1996. Upon
issuance of that order, the Merger would be permitted to close 30 days later.
Therefore, the Special Meeting will not delay the Merger.
The enclosed Joint Proxy Statement/Prospectus describes the amendment and
the alternative structure and updates certain financial and other information
that was contained in the previous Joint Proxy Statement/ Prospectus. EXCEPT FOR
THE DESCRIPTION OF THE AMENDMENT, THE ALTERNATIVE STRUCTURE AND THIS UPDATE, THE
ENCLOSED JOINT PROXY STATEMENT/PROSPECTUS IS THE SAME AS THE PREVIOUS JOINT
PROXY STATEMENT/PROSPECTUS.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AMENDMENT TO THE
MERGER AGREEMENT AND RECOMMENDS THAT YOU VOTE TO APPROVE AND ADOPT THE AMENDMENT
TO THE MERGER AGREEMENT.
The Anschutz Corporation, Anschutz Foundation, Morgan Stanley Leveraged
Equity Fund II, L.P., and UP, which together hold approximately 56.1% of the
outstanding shares of SP, will vote all of their shares in favor of the
amendment to the Merger Agreement. AS A RESULT, A VOTE APPROVING THE AMENDMENT
TO THE MERGER AGREEMENT IS ASSURED.
Enclosed with this Joint Proxy Statement/Prospectus is a Form of Election
which stockholders of SP should use to express their preference for the type of
consideration they wish to receive in the Merger. Please note that the deadline
for submitting the Form of Election is September 9, 1996.
Very truly yours,
/s/ JERRY R. DAVIS
JERRY R. DAVIS
President and
Chief Executive Officer
<PAGE>
SOUTHERN PACIFIC RAIL CORPORATION
SOUTHERN PACIFIC BUILDING
ONE MARKET PLAZA
SAN FRANCISCO, CALIFORNIA 94105
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 16, 1996
------------------------
A Special Meeting of the stockholders of Southern Pacific Rail Corporation,
a Delaware corporation ('SP'), will be held at the Mandarin Oriental Hotel, 222
Sansome Street, San Francisco, California, on August 16, 1996 at 10 a.m., local
time, for the purpose of considering and voting upon the following:
1. The approval and adoption of an Amended and Restated Agreement and
Plan of Merger, dated as of July 12, 1996 (the 'Amended Merger Agreement'),
by and among SP, Union Pacific Corporation, a Utah corporation ('UP'),
Union Pacific Railroad Company, a Utah corporation and a wholly owned
subsidiary of UP ('UPRR'), UP Holding Company, Inc., a Utah corporation and
a wholly owned subsidiary of UP ('Holding'), and Union Pacific Merger Co.,
a Delaware corporation and a wholly owned subsidiary of UP ('Mergerco'), a
copy of which is set forth as Annex B to the attached Joint Proxy
Statement/Prospectus. The Amended Merger Agreement amends and restates the
Agreement and Plan of Merger, dated as of August 3, 1995, as amended (the
'Original Merger Agreement'), by and among SP, UP, UPRR and UP Acquisition
Corporation, a former Delaware corporation and indirect wholly owned
subsidiary of UP, that was approved and adopted by the SP stockholders at a
special meeting of SP stockholders on January 17, 1996, pursuant to which
SP would be merged into UPRR. Pursuant to the Amended Merger Agreement,
among other things, (i) SP will be merged with and into UPRR, with UPRR as
the surviving corporation, as provided in the Original Merger Agreement,
or, in the alternative, SP will be merged with and into either Holding or
Mergerco, with Holding or Mergerco as the surviving corporation (such
alternative mergers hereinafter referred to as the 'Merger'), and (ii) as
also provided in the Original Merger Agreement, each share of SP common
stock, par value $.001 per share (the 'Common Stock' or the 'Shares'), will
be converted into the right to receive, in accordance with the election to
be filed by each stockholder, (a) $25.00 per Share in cash, without
interest thereon, (b) .4065 shares of Union Pacific common stock, par value
$2.50 per share, or (c) a combination thereof, all as more fully set forth
in the Amended Merger Agreement and described in the attached Joint Proxy
Statement/Prospectus.
2. Such other matters as may properly come before the Special Meeting
or any adjournments or postponements thereof.
Only stockholders of record at the close of business on July 15, 1996 will
be entitled to notice of, and to vote at, the Special Meeting.
The Board of Directors has unanimously determined that the terms of the
Merger are fair to, and in the best interests of, SP and its stockholders and
has unanimously approved the Amended Merger Agreement and the transactions
contemplated thereby and recommends approval and adoption thereof by the
stockholders of SP.
Whether or not you expect to attend the Special Meeting, you are urged to
complete, sign and date the enclosed proxy card and mail it promptly in the
accompanying postage prepaid envelope. If you later desire to revoke your proxy,
you may do so at any time before the stockholder vote is taken by giving written
notice of revocation to the Secretary of SP, by submitting a later dated proxy,
or by voting in person at the Special Meeting.
By Order of the Board of Directors
/s/ T. F. O'Donnell
T. F. O'Donnell
Secretary
