SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
January 22, 1996
UNION PACIFIC CORPORATION
(Exact name of registrant as specified in its charter)
Utah 1-6075 13-2626465
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
Martin Tower, Eighth and Eaton Avenues, Bethlehem, PA 18018
(Address of principal executive offices) (zip code)
(610) 861-3200
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
<PAGE>
Item 7. Financial Statements and Exhibits.
(c) Exhibits:
(i) Exhibit 4: Indenture dated as of January 5, 1996,
between Union Pacific Corporation and Chemical Bank,
Trustee.
(ii) Exhibit 23: Consent of KPMG Peat Marwick LLP,
Independent Auditors.
(iii) Exhibit 99.1: Financial Statements of Southern Pacific
Rail Corporation and Subsidiary Companies as of September
30, 1995 and December 31, 1994 and for the nine months ended
September 30, 1995 and 1994 and the three months ended
September 30, 1995 and 1994 as set forth in the Quarterly
Report on Form 10-Q for the quarterly period ended September
30, 1995, of Southern Pacific Rail Corporation.
(iv) Exhibit 99.2: Financial Statements of Southern Pacific
Rail Corporation and Subsidiary Companies as of December 31, 1994
and 1993 and for the three year period ended December 31, 1994
as set forth in the Annual Report on Form 10-K/A for the year
ended December 31, 1994, dated as of November 27, 1995 of
Southern Pacific Rail Corporation.
(v) Exhibit 99.3: Independent Auditors' Report
(vi) Exhibit 99.4: Unaudited Pro Forma Financial Statements of
Union Pacific Corporation and Southern Pacific Rail Corporation
as set forth in Registration Statement on Form S-4 of Union
Pacific Corporation (Registration No. 33-64707) dated as of
December 12, 1995.
(vii) Exhibit 99.5: Press Release
(viii) Exhibit 99.6: Statement Regarding Consolidated Income from
Continuing Operations for the Nine Months Ended September 30, 1995.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City
of Bethlehem, State of Pennsylvania, on January 22, 1996.
UNION PACIFIC CORPORATION
By: /s/ Morris B. Smith
-----------------------------
Name: Morris B. Smith
Title: Vice President and
Controller
<PAGE>
EXHIBIT INDEX
Sequential
Exhibit No. Description of Exhibit Page Number
4 Indenture dated as of January 5, 1996,
between Union Pacific Corporation and
Chemical Bank, Trustee.
23 Consent of KPMG Peat Marwick LLP,
Independent Auditors.
99.1 Financial Statements of Southern Pacific Rail Corporation
and Subsidiary Companies as of September 30, 1995 and
December 31, 1994 and for the nine months ended September
30, 1995 and 1994 and the three months ended September 30,
1995 and 1994 as set forth in the Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1995,
of Southern Pacific Rail Corporation.
99.2 Financial Statements of Southern Pacific Rail
Corporation and Subsidiary Companies as of December
31, 1994 and 1993 and for the three year period ended
December 31, 1994 as set forth in the Annual Report on
Form 10-K/A for the year ended December 31, 1994,
dated as of November 27, 1995 of Southern Pacific Rail
Corporation.
99.3 Independent Auditors' Report
99.4 Unaudited Pro Forma Financial Statements of Union
Pacific Corporation and Southern Pacific Rail
Corporation as set forth in Registration Statement on
Form S-4 of Union Pacific Corporation (Registration
No. 33-64707) dated as of December 12, 1995.
99.5 Press Release
99.6 Statement Regarding Consolidated Income from Continuing
Operations for the Nine Months Ended September 30, 1995.
EXHIBIT 4
UNION PACIFIC CORPORATION
and
CHEMICAL BANK,
Trustee
INDENTURE
Dated as of January 5, 1996
Providing for Issuance of Securities in Series
<PAGE>
TABLE OF CONTENTS
Recitals of the Company............................................ 1
Agreements of the Parties.......................................... 1
ARTICLE ONE
Definitions and Other Provisions of General Application
Section 101. Definitions......................................... 1
Act................................................. 2
Affiliate........................................... 2
Authenticating Agent................................ 2
Board of Directors.................................. 3
Board Resolution.................................... 3
Business Day........................................ 3
Commission.......................................... 3
Company............................................. 3
Company Request, Company Order
and Company Consent............................... 3
Corporate Trust Office.............................. 3
Debt................................................ 3
Defaulted Interest.................................. 3
Depositary.......................................... 4
Domestic Subsidiary................................. 4
Event of Default.................................... 4
Global Security.....................................
Holder.............................................. 4
Indenture, this Indenture........................... 4
Independent......................................... 4
Interest............................................ 5
Interest Payment Date............................... 5
Maturity............................................ 5
Mortgage............................................ 5
Officers' Certificate............................... 5
Opinion of Counsel.................................. 5
Original Issue Discount Security.................... 6
Outstanding......................................... 6
Paying Agent........................................ 7
Person.............................................. 7
Place of Payment.................................... 7
Predecessor Securities.............................. 7
Principal Property.................................. 7
Railroad............................................ 8
Redemption Date..................................... 8
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Redemption Price.................................... 8
Regular Record Date................................. 8
Repayment Date...................................... 8
Repayment Price..................................... 8
Responsible Officer................................. 8
Restricted Subsidiary............................... 9
Security or Securities.............................. 9
Security Register................................... 9
Security Registrar.................................. 9
Securityholder...................................... 9
Special Record Date................................. 9
Stated Maturity..................................... 9
Subsidiary.......................................... 9
Trust Indenture Act or TIA.......................... 10
Trustee............................................. 10
Unrestricted Subsidiary............................. 10
Vice President...................................... 10
Voting Stock........................................ 10
Section 102. Compliance Certificates and
Opinions.......................................... 10
Section 103. Form of Documents Delivered to
Trustee........................................... 11
Section 104. Acts of Securityholders............................. 12
Section 105. Notices, etc., to Trustee and
Company........................................... 13
Section 106. Notices to Securityholders;
Waiver............................................ 14
Section 107. Conflict with Trust
Indenture Act..................................... 15
Section 108. Effect of Headings and Table of
Contents.......................................... 15
Section 109. Successors and Assigns.............................. 15
Section 110. Separability Clause................................. 15
Section 111. Benefits of Indenture............................... 15
Section 112. Governing Law....................................... 15
Section 113. Counterparts........................................ 15
Section 114. Judgment Currency................................... 15
ARTICLE TWO
Security Forms
Section 201. Forms Generally..................................... 16
Section 202. Forms of Securities................................. 17
Section 203. Form of Trustee's Certificate of
Authentication.................................... 17
ii
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Section 204. Securities Issuable in the Form of a
Global Security................................... 18
ARTICLE THREE
The Securities
Section 301. General Title; General Limitations;
Issuable in Series; Terms of
Particular Series................................. 20
Section 302. Denominations....................................... 24
Section 303. Execution, Authentication and
Delivery and Dating............................... 24
Section 304. Temporary Securities................................ 26
Section 305. Registration, Transfer and
Exchange.......................................... 27
Section 306. Mutilated, Destroyed, Lost and
Stolen Securities................................. 28
Section 307. Payment of Interest; Interest
Rights Preserved.................................. 29
Section 308. Persons Deemed Owners............................... 31
Section 309. Cancellation........................................ 31
Section 310. Computation of Interest............................. 32
Section 311. Medium-Term Securities.............................. 32
ARTICLE FOUR
Satisfaction and Discharge
Section 401. Satisfaction and Discharge of
Indenture......................................... 32
Section 402. Application of Trust Money.......................... 34
Section 403. Satisfaction, Discharge and
Defeasance of Securities of
any Series........................................ 34
ARTICLE FIVE
Remedies
Section 501. Events of Default................................... 37
Section 502. Acceleration of Maturity;
Rescission and Annulment.......................... 38
iii
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Section 503. Collection of Indebtedness and
Suits for Enforcement by
Trustee........................................... 40
Section 504. Trustee May File Proofs of Claim.................... 41
Section 505. Trustee May Enforce Claims Without
Possession of Securities.......................... 42
Section 506. Application of Money Collected...................... 43
Section 507. Limitation on Suits................................. 43
Section 508. Unconditional Right of Security-
holders to Receive Principal,
Premium and Interest.............................. 44
Section 509. Restoration of Rights and
Remedies.......................................... 44
Section 510. Rights and Remedies Cumulative...................... 44
Section 511. Delay or Omission not Waiver........................ 45
Section 512. Control by Securityholders.......................... 45
Section 513. Waiver of Past Defaults............................. 45
Section 514. Undertaking for Costs............................... 46
Section 515. Waiver of Stay or Extension Laws.................... 46
ARTICLE SIX
The Trustee
Section 601. Certain Duties and Responsibilities................. 47
Section 602. Notice of Defaults.................................. 48
Section 603. Certain Rights of Trustee........................... 49
Section 604. Not Responsible for Recitals or
Issuance of Securities............................ 50
Section 605. May Hold Securities................................. 50
Section 606. Money Held in Trust................................. 50
Section 607. Compensation and Reimbursement...................... 51
Section 608. Disqualification; Conflicting
Interests......................................... 51
Section 609. Corporate Trustee Required;
Eligibility....................................... 53
Section 610. Resignation and Removal; Appointment
of Successor...................................... 53
Section 611. Acceptance of Appointment by
Successor......................................... 55
Section 612. Merger, Conversion, Consolidation or
Succession to Business............................. 56
Section 613. Preferential Collection of Claims
Against Company.................................... 56
Section 614. Appointment of Authenticating Agent.................. 61
iv
<PAGE>
ARTICLE SEVEN
Securityholders' Lists and Reports by Trustee and Company
Section 701. Company to Furnish Trustee Names
and Addresses of Security-
holders........................................... 64
Section 702. Preservation of Information;
Communications to
Securityholders................................... 64
Section 703. Reports by Trustee.................................. 66
Section 704. Reports by Company.................................. 68
ARTICLE EIGHT
Consolidation, Merger, Conveyance or Transfer
Section 801. Company May Consolidate, etc., only
on Certain Terms.................................. 68
Section 802. Successor Corporation
Substituted....................................... 69
ARTICLE NINE
Supplemental Indentures
Section 901. Supplemental Indentures Without
Consent of Securityholders........................ 70
Section 902. Supplemental Indentures with
Consent of Securityholders........................ 71
Section 903. Execution of Supplemental
Indentures........................................ 72
Section 904. Effect of Supplemental Indentures................... 73
Section 905. Conformity with Trust Indenture
Act............................................... 73
Section 906. Reference in Securities to
Supplemental Indentures........................... 73
ARTICLE TEN
Covenants
Section 1001. Payment of Principal, Premium and
Interest.......................................... 73
Section 1002. Maintenance of Office or Agency..................... 73
v
<PAGE>
Section 1003. Money for Security Payments to Be
Held in Trust..................................... 74
Section 1004. Statement as to Compliance.......................... 76
Section 1005. Corporate Existence................................. 76
Section 1006. Limitation on Liens................................. 76
Section 1007. Limitation on Transfers of Principal
Properties to Unrestricted
Subsidiaries...................................... 79
Section 1008. Waiver of Certain Covenants......................... 79
ARTICLE ELEVEN
Redemption of Securities
Section 1101. Applicability of Article............................ 79
Section 1102. Election to Redeem; Notice
to Trustee........................................ 79
Section 1103. Selection by Trustee of Securities
to Be Redeemed.................................... 80
Section 1104. Notice of Redemption................................ 81
Section 1105. Deposit of Redemption Price......................... 81
Section 1106. Securities Payable on
Redemption Date................................... 82
Section 1107. Securities Redeemed in Part......................... 82
Section 1108. Provisions with Respect to any
Sinking Funds..................................... 82
vi
<PAGE>
THIS INDENTURE between UNION PACIFIC CORPORATION,
a Utah corporation (hereinafter called the "Company")
having its principal office at Eighth and Eaton
Avenues, Bethlehem, Pennsylvania 18018, and CHEMICAL
BANK, a New York corporation, trustee (hereinafter
called the "Trustee"), is made and entered into as of
this 5th day of January, 1996.
Recitals of the Company
The Company has duly authorized the execution and delivery
of this Indenture to provide for the issuance of its debentures,
notes, bonds or other evidences of indebtedness, to be issued in one
or more fully registered series.
All things necessary to make this Indenture a valid
agreement of the Company, in accordance with its terms, have been
done.
Agreements of the Parties
To set forth or to provide for the establishment of the
terms and conditions upon which the Securities are and are to be
authenticated, issued and delivered, and in consideration of the
premises and the purchase of Securities by the Holders thereof, it is
mutually covenanted and agreed as follows, for the equal and
proportionate benefit of all Holders of the Securities or of a series
thereof, as the case may be:
ARTICLE ONE
Definitions and Other Provisions
of General Application
Section 101. Definitions. For all purposes of this Indenture
and of any indenture supplemental hereto, except as otherwise
expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well
as the singular;
<PAGE>
(2) all other terms used herein which are defined in the
Trust Indenture Act or by Commission rule under the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with generally
accepted accounting principles and, except as otherwise herein
expressly provided, the term "generally accepted accounting
principles" with respect to any computation required or permitted
hereunder shall mean such accounting principles as are generally
accepted in the United States of America at the date of such
computation;
(4) all references in this instrument to designated
"Articles", "Sections" and other subdivisions are to the
designated Articles, Sections and other subdivisions of this
instrument as originally executed. The words "herein", "hereof"
and "hereunder" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section
or other subdivision; and
(5) "including" and words of similar import shall be deemed
to be followed by "without limitation".
Certain terms, used principally in Article Six, are defined
in that Article.
"Act", when used with respect to any Securityholder, has
the meaning specified in Section 104.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes
of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" means any Person authorized by the
Trustee to authenticate Securities under Section 614.
<PAGE>
"Board of Directors" means either the board of directors of
the Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been
duly adopted by the Board of Directors and to be in full force and
effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means each day which is neither a Saturday,
Sunday or other day on which banking institutions in the pertinent
Place or Places of Payment are authorized or required by law or
executive order to be closed.
"Commission" means the Securities and Exchange Commission,
as from time to time constituted, created under the Securities
Exchange Act of 1934, or, if at any time after the execution of this
instrument such Commission is not existing and performing the duties
now assigned to it under the Trust Indenture Act, then the body
performing such duties on such date.
"Company" means the Person named as the "Company" in the
first paragraph of this instrument until a successor corporation shall
have become such pursuant to the applicable provisions of this
Indenture, and thereafter "Company" shall mean such successor
corporation.
"Company Request", "Company Order" and "Company Consent"
mean, respectively, a written request, order or consent signed in the
name of the Company by its Chairman of the Board, President or a Vice
President, and by its Treasurer, an Assistant Treasurer, Controller,
an Assistant Controller, Secretary or an Assistant Secretary, and
delivered to the Trustee.
"Corporate Trust Office" means the principal office of the
Trustee in New York, New York at which at any particular time its
corporate trust business shall be principally administered, which
office at the date hereof is located at 450 West 33rd Street, New
York, New York, 10001, attention: Corporate Trust Administration.
"Debt" means indebtedness for money borrowed.
"Defaulted Interest" has the meaning specified in Section
307.
<PAGE>
"Depositary" means, unless otherwise specified by the
Company pursuant to either Section 204 or 301, with respect to
Securities of any series issuable or issued as a Global Security, The
Depository Trust Company, New York, New York, or any successor thereto
registered as a clearing agency under the Securities Exchange Act of
1934, as amended, or other applicable statute or regulation.
"Domestic Subsidiary" means a Subsidiary which is
incorporated or conducting its principal operations within the United
States of America or any State thereof or off the coast of the United
States of America but within an area over which the United States of
America or any State thereof has jurisdiction.
"Event of Default" has the meaning specified in Article
Five.
"Global Security" means with respect to any series of
Securities issued hereunder, a Security which is executed by the
Company and authenticated and delivered by the Trustee to the
Depositary or pursuant to the Depositary's instruction, all in
accordance with this Indenture and an indenture supplemental hereto,
if any, or Board Resolution and pursuant to a Company Request, which
shall be registered in the name of the Depositary or its nominee and
which shall represent, and shall be denominated in an amount equal to
the aggregate principal amount of, all of the Outstanding Securities
of such series or any portion thereof, in either case having the same
terms, including, without limitation, the same original issue date,
date or dates on which principal is due, and interest rate or method
of determining interest.
"Holder", when used with respect to any Security, means a
Securityholder.
"Indenture" or "this Indenture" means this instrument as
originally executed or as it may from time to time be supplemented or
amended by one or more indentures supplemental hereto entered into
pursuant to the applicable provisions hereof and shall include the
terms of particular series of Securities established as contemplated
by Section 301.
"Independent", when used with respect to any specified
Person, means such a Person who (1) is in fact independent, (2) does
not have any direct financial interest
<PAGE>
or any material indirect financial interest in the Company or in any
other obligor upon the Securities or in any Affiliate of the Company
or of such other obligor, and (3) is not connected with the Company or
such other obligor or any Affiliate of the Company or of such other
obligor, as an officer, employee, promoter, underwriter, trustee,
partner, director or person performing similar functions. Whenever it
is herein provided that any Independent Person's opinion or
certificate shall be furnished to the Trustee, such Person shall be
appointed by a Company Order and approved by the Trustee in the
exercise of reasonable care, and such opinion or certificate shall
state that the signer has read this definition and that the signer is
Independent within the meaning hereof.
"Interest", when used with respect to an Original Issue
Discount Security which by its terms bears interest only after
Maturity, means interest payable after Maturity.
"Interest Payment Date", when used with respect to any
series of Securities, means the Stated Maturity of any installment of
interest on those Securities.
"Maturity", when used with respect to any Securities, means
the date on which the principal of any such Security becomes due and
payable as therein or herein provided, whether on a Repayment Date, at
the Stated Maturity or by declaration of acceleration, call for
redemption or otherwise.
"Mortgage" means any mortgage, pledge, lien, encumbrance,
charge or security interest of any kind.
"Officers' Certificate" means a certificate signed by the
Chairman of the Board, the President or a Vice President, and by the
Treasurer, an Assistant Treasurer, the Controller, an Assistant
Controller, the Secretary or an Assistant Secretary of the Company,
and delivered to the Trustee. Wherever this Indenture requires that an
Officers' Certificate be signed also by an engineer or an accountant
or other expert, such engineer, accountant or other expert (except as
otherwise expressly provided in this Indenture) may be in the employ
of the Company, and shall be acceptable to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who
may (except as otherwise expressly provided in this Indenture) be an
employee of or of counsel to the
<PAGE>
Company. Such counsel shall be acceptable to the Trustee, whose
acceptance shall not be unreasonably withheld.
"Original Issue Discount Security" means (i) any Security
which provides for an amount less than the principal amount thereof to
be due and payable upon a declaration of acceleration of the Maturity
thereof, and (ii) any other Security deemed an Original Issue Discount
Security for United States Federal income tax purposes.
"Outstanding", when used with respect to Securities or
Securities of any series, means, as of the date of determination, all
such Securities theretofore authenticated and delivered under this
Indenture, except:
(i) such Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) such Securities for whose payment or redemption money
in the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent in trust for the Holders of such
Securities; provided that, if such Securities are to be redeemed,
notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee has
been made; and
(iii) such Securities in exchange for or in lieu of which
other Securities have been authenticated and delivered pursuant
to this Indenture, or which shall have been paid pursuant to the
terms of Section 306 (except with respect to any such Security as
to which proof satisfactory to the Trustee is presented that such
Security is held by a person in whose hands such Security is a
legal, valid and binding obligation of the Company).
In determining whether the Holders of the requisite principal amount
of such Securities Outstanding have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, (i) the
principal amount of any Original Issue Discount Security that shall be
deemed to be Outstanding shall be the amount of the principal thereof
that would be due and payable as of the date of the taking of such
action upon a declaration of acceleration of the Maturity thereof and
(ii) Securities owned by the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor
shall be disregarded
<PAGE>
and deemed not to be Outstanding. In determining whether the Trustee
shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities
which a Responsible Officer assigned to the corporate trust department
of the Trustee knows to be owned by the Company or any other obligor
upon the Securities or any Affiliate of the Company or such other
obligor shall be so disregarded. Securities so owned which have been
pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right to
act as owner with respect to such Securities and that the pledgee is
not the Company or any other obligor upon the Securities or any
Affiliate of the Company or such other obligor.
"Paying Agent" means any Person authorized by the Company to
pay the principal of (and premium, if any) or interest on any
Securities on behalf of the Company.
"Person" means any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision
thereof.
"Place of Payment" means with respect to any series of
Securities issued hereunder the city or political subdivision so
designated with respect to the series of Securities in question in
accordance with the provisions of Section 301.
"Predecessor Securities" of any particular Security means
every previous Security evidencing all or a portion of the same debt
as that evidenced by such particular Security; and, for the purposes
of this definition, any Security authenticated and delivered under
Section 306 in lieu of a lost, destroyed or stolen Security shall be
deemed to evidence the same debt as the lost, destroyed or stolen
Security.
"Principal Property" means (i) any property owned or leased
by the Company or any Subsidiary, or any interest of the Company or
any Subsidiary in property, located within the United States of
America or any State thereof (including property located off the coast
of the United States of America held pursuant to lease from any
Federal, State or other governmental body) which is considered by the
Company to be capable of producing oil or gas or minerals in
commercial quantities and (ii) any refinery, smelter or
<PAGE>
processing or manufacturing plant owned or leased by the Company or
any Subsidiary and located within the United States of America or any
State thereof, except (a) facilities related thereto employed in
transportation, distribution or marketing or (b) any refinery, smelter
or processing or manufacturing plant, or portion thereof, which in the
opinion of the Board of Directors is not a principal plant in relation
to the activities of the Company and its Restricted Subsidiaries as a
whole.
"Railroad" means Union Pacific Railroad Company, a Utah
corporation, and Missouri Pacific Railroad Company, a Delaware
corporation, and their respective successors and assigns.
"Redemption Date", when used with respect to any Security to
be redeemed, means the date fixed for such redemption by or pursuant
to this Indenture.
"Redemption Price", when used with respect to any Security
to be redeemed, means the price specified in the Security at which it
is to be redeemed pursuant to this Indenture.
"Regular Record Date" for the interest payable on any
Security on any Interest Payment Date means the date specified in such
Security as the Regular Record Date.
"Repayment Date", when used with respect to any Security to
be repaid, means the date fixed for such repayment pursuant to such
Security.
"Repayment Price", when used with respect to any Security to
be repaid, means the price at which it is to be repaid pursuant to
such Security.
"Responsible Officer", when used with respect to the
Trustee, means the chairman or vice-chairman of the board of
directors, the chairman or vice-chairman of the executive committee of
the board of directors, the president, any vice president, the
secretary, any assistant secretary, the treasurer, any assistant
treasurer, the cashier, any assistant cashier, any senior trust
officer or trust officer, the controller and any assistant controller
or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter, any
other officer to whom
<PAGE>
such matter is referred because of his knowledge of and familiarity
with the particular subject.
"Restricted Subsidiary" means any Subsidiary which owns or
leases (as lessor or lessee) a Principal Property but does not include
(i) the Railroad or any other Subsidiary which is principally a common
carrier by rail or truck engaged in interstate or intrastate commerce
and is subject to regulation of such activities by any Federal, State
or other governmental body, or (ii) any Subsidiary the principal
business of which is leasing machinery, equipment, vehicles or other
properties none of which is a Principal Property, or financing
accounts receivable, or engaging in ownership and development of any
real property which is not a Principal Property.
"Security" or "Securities" means any note or notes, bond or
bonds, debenture or debentures, or any other evidences of
indebtedness, as the case may be, of any series authenticated and
delivered from time to time under this Indenture.
"Security Register" shall have the meaning specified in
Section 305.
"Security Registrar" means the Person who keeps the Security
Register specified in Section 305.
"Securityholder" means a Person in whose name a Security is
registered in the Security Register.
"Special Record Date" for the payment of any Defaulted
Interest (as defined in Section 307) means a date fixed by the Trustee
pursuant to Section 307.
"Stated Maturity" when used with respect to any Security or
any installment of principal thereof or interest thereon means the
date specified in such Security as the fixed date on which the
principal of such Security or such installment of principal or
interest is due and payable.
"Subsidiary" of any specified corporation means any
corporation at least a majority of whose outstanding Voting Stock
shall at the time be owned, directly or indirectly, by the specified
corporation or by one or more of its Subsidiaries, or both.
<PAGE>
"Trust Indenture Act" or "TIA" means the Trust Indenture Act
of 1939, as amended by the Trust Indenture Reform Act of 1990, as in
force at the date as of which this instrument was executed except as
provided in Section 905.
"Trustee" means the Person named as the Trustee in the first
paragraph of this instrument until a successor Trustee shall have
become such pursuant to the applicable provisions of this Indenture,
and thereafter "Trustee" shall mean and include each Person who is
then a Trustee hereunder. If at any time there is more than one such
Person, "Trustee" as used with respect to the Securities of any series
shall mean the Trustee with respect to Securities of that series.
"Unrestricted Subsidiary" means any Subsidiary which is not
a Restricted Subsidiary.
"Vice President" when used with respect to the Company or
the Trustee means any vice president, whether or not designated by a
number or a word or words added before or after the title "vice
president", including, without limitation, an assistant vice
president.
"Voting Stock", as applied to the stock of any corporation,
means stock of any class or classes (however designated) having by the
terms thereof ordinary voting power to elect a majority of the members
of the board of directors (or other governing body) of such
corporation other than stock having such power only by reason of the
happening of a contingency.
Section 102. Compliance Certificates and Opinions. Upon any
application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall
furnish to the Trustee an Officers' Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with and an Opinion of
Counsel stating that in the opinion of such Counsel all such
conditions precedent, if any, have been complied with, except that in
the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this
Indenture relating to such particular application or request, no
additional certificate or opinion need be furnished.
<PAGE>
Every certificate or opinion with respect to compliance with
a condition or covenant provided for in this Indenture (except for the
written statement required by Section 1004) shall include
(1) a statement that each individual signing such
certificate or opinion has read such covenant or condition and
the definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such
individual, he has made such examination or investigation as is
necessary to enable him to express an informed opinion as to
whether or not such covenant or condition has been complied with;
and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 103. Form of Documents Delivered to Trustee. In any
case where several matters are required to be certified by, or covered
by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one
such Person, or that they be so certified or covered by only one
document, but one such Person may certify or give an opinion with
respect to some matters and one or more other such Persons as to the
other matters, and any such Person may certify or give an opinion as
to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may
be based, insofar as it relates to legal matters, upon a certificate
or opinion of, or representations by, counsel, unless such officer
knows, or in the exercise of reasonable care should know, that the
certif- icate or opinion or representations with respect to the
matters upon which his certificate or opinion is based are erroneous.
Any such certificate or Opinion of Counsel may be based, insofar as it
relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that
the information with respect to such factual matters is in the
possession of the
<PAGE>
Company, unless such counsel knows, or in the exercise of reasonable
care should know, that the certificate or opinion or representations
with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements,
opinions or other instruments under this Indenture, they may, but need
not, be consolidated and form one instrument.
Section 104. Acts of Securityholders. (a) Any request,
demand, authorization, direction, notice, consent, waiver or other
action provided by this Indenture to be given or taken by
Securityholders or Securityholders of any series may be embodied in
and evidenced by one or more instruments of substantially similar
tenor signed by such Securityholders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee, and, where it is hereby
expressly required, to the Company. If any Securities are denominated
in coin or currency other than that of the United States, then for the
purposes of determining whether the Holders of the requisite principal
amount of Securities have taken any action as herein described, the
principal amount of such Securities shall be deemed to be that amount
of United States dollars that could be obtained for such principal
amount on the basis of the spot rate of exchange into United States
dollars for the currency in which such Securities are denominated (as
evidenced to the Trustee by an Officers' Certificate) as of the date
the taking of such action by the Holders of such requisite principal
amount is evidenced to the Trustee as provided in the immediately
preceding sentence. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred
to as the "Act" of the Securityholders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 601) conclusive in favor of the
Trustee and the Company, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness
to such execution or by the certificate of any notary public or other
officer authorized
<PAGE>
by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the
execution thereof. Where such execution is by an officer of a
corporation or a member of a partnership, on behalf of such
corporation or partnership, such certificate or affidavit shall also
constitute sufficient proof of his authority. The fact and date of the
execution of any such instrument or writing, or the authority of the
person executing the same, may also be proved in any other manner
which the Trustee deems sufficient.
(c) The ownership of Securities shall be proved by the
Security Register.
(d) If the Company shall solicit from the Holders any
request, demand, authorization, direction, notice, consent, waiver or
other action, the Company may, at its option, by Board Resolution, fix
in advance a record date for the determination of Holders entitled to
give such request, demand, authorization, direction, notice, consent,
waiver or other action, but the Company shall have no obligation to do
so. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other action may
be given before or after the record date, but only the Holders of
record at the close of business on the record date shall be deemed to
be Holders for the purposes of determining whether Holders of the
requisite proportion of Securities Outstanding have authorized or
agreed or consented to such request, demand, authorization, direction,
notice, consent, waiver or other action, and for that purpose the
Securities Outstanding shall be computed as of the record date;
provided that no such authorization, agreement or consent by the
Holders on the record date shall be deemed effective unless it shall
become effective pursuant to the provisions of this Indenture not
later than six months after the record date.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Security shall
bind the Holder of every Security issued upon the transfer thereof or
in exchange therefor or in lieu thereof, in respect of anything done
or suffered to be done by the Trustee or the Company in reliance
thereon whether or not notation of such action is made upon such
Security.
Section 105. Notices, etc., to Trustee and Company. Any
request, demand, authorization, direction,
<PAGE>
notice, consent, waiver or Act of Securityholders or other document
provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with,
(1) the Trustee by any Securityholder or by the Company
shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Trustee at its
Corporate Trust Office, or
(2) the Company by the Trustee or by any Securityholder
shall be sufficient for every purpose hereunder (except as
provided in Section 501(4) or, in the case of a request for
repayment, as specified in the Security carrying the right to
repayment) if in writing and mailed, first-class postage prepaid,
to the Company addressed to it at the address of its principal
office specified in the first paragraph of this instrument or at
any other address previously furnished in writing to the Trustee
by the Company.
Section 106. Notices to Securityholders; Waiver. Where this
Indenture or any Security provides for notice to Securityholders of
any event, such notice shall be sufficiently given (unless otherwise
herein or in such Security expressly provided) if in writing and
mailed, first-class postage prepaid, to each Securityholder affected
by such event, at his address as it appears in the Security Register,
not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where
notice to Securityholders is given by mail, neither the failure to
mail such notice, nor any defect in any notice so mailed, to any
particular Securityholder shall affect the sufficiency of such notice
with respect to other Securityholders. Where this Indenture or any
Security provides for notice in any manner, such notice may be waived
in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Securityholders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such waiver.
In case, by reason of the suspension of regular mail service
as a result of a strike, work stoppage or otherwise, it shall be
impractical to mail notice of any event to any Securityholder when
such notice is required to be given pursuant to any provision of this
Indenture, then
<PAGE>
any method of notification as shall be satisfactory to the Trustee and
the Company shall be deemed to be a sufficient giving of such notice.
Section 107. Conflict with Trust Indenture Act. If any
provision hereof limits, qualifies or conflicts with the duties
imposed by any of Sections 310 to 317, inclusive, of the Trust
Indenture Act through the operation of Section 318(c) thereof, such
imposed duties shall control.
Section 108. Effect of Headings and Table of Contents. The
Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
Section 109. Successors and Assigns. All covenants and
agreements in this Indenture by the Company shall bind its successors
and assigns, whether so expressed or not.
Section 110. Separability Clause. In case any provision in
this Indenture or in the Securities shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired
thereby.
Section 111. Benefits of Indenture. Nothing in this
Indenture or in any Securities, express or implied, shall give to any
Person, other than the parties hereto and their successors hereunder,
any Authenticating Agent or Paying Agent, the Security Registrar and
the Holders of Securities (or such of them as may be affected
thereby), any benefit or any legal or equitable right, remedy or claim
under this Indenture.
Section 112. Governing Law. This Indenture shall be
construed in accordance with and governed by the laws of the State of
New York.
Section 113. Counterparts. This instrument may be executed
in any number of counterparts, each of which so executed shall be
deemed to be an original, but all such counterparts shall together
constitute but one and the same instrument.
Section 114. Judgment Currency. The Company agrees, to the
fullest extent that it may effectively do so under applicable law,
that (a) if for the purpose of
<PAGE>
obtaining judgment in any court it is necessary to convert the sum due
in respect of the principal of, or premium or interest, if any, on the
Securities of any series (the "Required Currency") into a currency in
which a judgment will be rendered (the "Judgment Currency"), the rate
of exchange used shall be the rate at which in accordance with normal
banking procedures the Trustee could purchase in the City of New York
the Required Currency with the Judgment Currency on the New York
Banking Day (as defined below) preceding that on which final
unappealable judgment is given and (b) its obligations under this
Indenture to make payments in the Required Currency (i) shall not be
discharged or satisfied by any tender, or any recovery pursuant to any
judgment (whether or not entered in accordance with subsection (a)),
in any currency other than the Required Currency, except to the extent
that such tender or recovery shall result in the actual receipt, by
the payee, of the full amount of the Required Currency expressed to be
payable in respect of such payments, (ii) shall be enforceable as an
alternative or additional cause of action for the purpose of
recovering in the Required Currency the amount, if any, by which such
actual receipt shall fall short of the full amount of the Required
Currency so expressed to be payable and (iii) shall not be affected by
judgment being obtained for any other sum due under this Indenture.
For purposes of the foregoing, "New York Banking Day" means any day
except a Saturday, Sunday or a legal holiday in the City of New York
or a day on which banking institutions in the City of New York are
authorized or required by law or executive order to close.
ARTICLE TWO
Security Forms
Section 201. Forms Generally. The Securities shall have such
appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this Indenture and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon, as may be required to comply with
applicable laws or regulations or with the rules of any securities
exchange, or as may, consistently herewith, be determined by the
officers executing such Securities, as evidenced by their execution of
the Securities. Any portion of the text of any Security may be set
forth on the reverse
<PAGE>
thereof, with an appropriate reference thereto on the face of the
Security.
The definitive Securities shall be printed, lithographed or
engraved or produced by any combination of these methods on steel
engraved borders or may be produced in any other manner, all as
determined by the officers executing such Securities, as evidenced by
their execution of such Securities, subject, with respect to the
Securities of any series, to the rules of any securities exchange on
which such Securities are listed.
Section 202. Forms of Securities. Each Security shall be in
one of the forms approved from time to time by or pursuant to a Board
Resolution, or established in one or more indentures supplemental
hereto. Prior to the delivery of a Security to the Trustee for
authentication in any form approved by or pursuant to a Board
Resolution, the Company shall deliver to the Trustee the Board
Resolution by or pursuant to which such form of Security has been
approved, which Board Resolution shall have attached thereto a true
and correct copy of the form of Security which has been approved
thereby or, if a Board Resolution authorizes a specific officer or
officers to approve a form of Security, a certificate of such officer
or officers approving the form of Security attached thereto. Any form
of Security approved by or pursuant to a Board Resolution must be
acceptable as to form to the Trustee, such acceptance to be evidenced
by the Trustee's authentication of Securities in that form or a
certificate signed by a Responsible Officer of the Trustee and
delivered to the Company.
Section 203. Form of Trustee's Certificate of
Authentication. The form of Trustee's Certificate of Authentication
for any Security issued pursuant to this Indenture shall be
substantially as follows:
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated
therein referred to in the within-mentioned Indenture.
CHEMICAL BANK,
as Trustee,
By:________________________
Authorized Officer
Section 204. Securities Issuable in the Form of a Global
Security. (a) If the Company shall establish pursuant to Sections 202
and 301 that the Securities of a particular series are to be issued in
whole or in part in the form of one or more Global Securities, then
the Company shall execute and the Trustee or its agent shall, in
accordance with Section 303 and the Company Request delivered to the
Trustee or its agent thereunder, authenticate and deliver, such Global
Security or Securities, which (i) shall represent, and shall be
denominated in an amount equal to the aggregate principal amount of,
the Outstanding Securities of such series to be represented by such
Global Security or Securities, or such portion thereof as the Company
shall specify in a Company Request, (ii) shall be registered in the
name of the Depositary for such Global Security or Securities or its
nominee, (iii) shall be delivered by the Trustee or its agent to the
Depositary or pursuant to the Depositary's instruction and (iv) shall
bear a legend substantially to the following effect: "Unless and until
it is exchanged in whole or in part for the individual Securities
represented hereby, this Global Security may not be transferred except
as a whole by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor
Depositary or a nominee of such successor Depositary."
(b) Notwithstanding any other provisions of this Section 204
or of Section 305, and subject to the provisions of paragraph (c)
below, unless the terms of a Global Security expressly permit such
Global Security to be exchanged in whole or in part for individual
Securities, a Global Security may be transferred, in whole but not in
part
<PAGE>
and in the manner provided in Section 305, only to a nominee of the
Depositary for such Global Security, or to the Depositary, or a
successor Depositary for such Global Security selected or approved by
the Company, or to a nominee of such successor Depositary.
(c) (i) If at any time the Depositary for a Global Security
notifies the Company that it is unwilling or unable to continue as
Depositary for such Global Security or if at any time the Depositary
for the Securities for such series ceases to be a clearing agency
registered under the Securities Exchange Act of 1934, as amended, or
other applicable statute or regulation, the Company shall appoint a
successor Depositary with respect to such Global Security. If a
successor Depositary for such Global Security is not appointed by the
Company within 90 days after the Company receives such notice or
becomes aware of such ineligibility, the Company will execute, and the
Trustee or its agent, upon receipt of a Company Request for the
authentication and delivery of individual Securities of such series in
exchange for such Global Security, will authenticate and deliver,
individual Securities of such series of like tenor and terms in an
aggregate principal amount equal to the principal amount of the Global
Security in exchange for such Global Security.
(ii) The Company may at any time and in its sole discretion
determine that the Securities of any series or portion thereof issued
or issuable in the form of one or more Global Securities shall no
longer be represented by such Global Security or Securities. In such
event the Company will execute, and the Trustee, upon receipt of a
Company Request for the authentication and delivery of individual
Securities of such series in exchange in whole or in part for such
Global Security, will authenticate and deliver individual Securities
of such series of like tenor and terms in definitive form in an
aggregate principal amount equal to the principal amount of such
Global Security or Securities representing such series or portion
thereof in exchange for such Global Security or Securities.
(iii) If specified by the Company pursuant to Sections 202
and 301 with respect to Securities issued or issuable in the form of a
Global Security, the Depositary for such Global Security may surrender
such Global Security in exchange in whole or in part for individual
Securities of such series of like tenor and terms in definitive form
on such terms as are acceptable to the Company and such
<PAGE>
Depositary. Thereupon the Company shall execute, and the Trustee or
its agent shall authenticate and deliver, without service charge, (1)
to each Person specified by such Depositary a new Security or
Securities of the same series of like tenor and terms and of any
authorized denomination as requested by such Person in aggregate
principal amount equal to and in exchange for such Person's beneficial
interest in the Global Security; and (2) to such Depositary a new
Global Security of like tenor and terms and in an authorized
denomination equal to the difference, if any, between the principal
amount of the surrendered Global Security and the aggregate principal
amount of Securities delivered to the Holders thereof.
(iv) In any exchange provided for in any of the preceding
three paragraphs, the Company will execute and the Trustee or its
agent will authenticate and deliver individual Securities in
definitive registered form in authorized denominations. Upon the
exchange of the entire principal amount of a Global Security for
individual Securities, such Global Security shall be cancelled by the
Trustee or its agent. Except as provided in the preceding paragraph,
Securities issued in exchange for a Global Security pursuant to this
Section shall be registered in such names and in such authorized
denominations as the Depositary for such Global Security, pursuant to
instructions from its direct or indirect participants or otherwise,
shall instruct the Trustee or the Security Registrar. The Trustee or
the Security Registrar shall deliver such Securities to the Persons in
whose names such Securities are so registered.
ARTICLE THREE
The Securities
Section 301. General Title; General Limitations; Issuable in
Series; Terms of Particular Series. The aggregate principal amount of
Securities which may be authenticated and delivered and Outstanding
under this Indenture is not limited.
The Securities may be issued in one or more series up to an
aggregate principal amount of Securities as from time to time may be
authorized by the Board of Directors. All Securities of each series
under this Indenture shall in all respects be equally and ratably
entitled to the benefits
<PAGE>
hereof with respect to such series without preference, priority or
distinction on account of the actual time of the authentication and
delivery or Stated Maturity of the Securities of such series.
Each series of Securities shall be created either by or
pursuant to a Board Resolution or by or pursuant to an indenture
supplemental hereto. The Securities of each such series may bear such
date or dates, be payable at such place or places, have such Stated
Maturity or Maturities, be issuable at such premium over or discount
from their face value, bear interest at such rate or rates (which may
be fixed or floating), from such date or dates, payable in such
installments and on such dates and at such place or places to the
Holders of Securities registered as such on such Regular Record Dates,
or may bear no interest, and may be redeemable or repayable at such
Redemption Price or Prices or Repayment Price or Prices, as the case
may be, whether at the option of the Holder or otherwise, and upon
such terms, all as shall be provided for in or pursuant to the Board
Resolution or in or pursuant to the supplemental indenture creating
that series. There may also be established in or pursuant to a Board
Resolution or in or pursuant to a supplemental indenture prior to the
issuance of Securities of each such series, provision for:
(1) the exchange or conversion of the Securities of that
series, at the option of the Holders thereof, for or into new
Securities of a different series or other securities or other
property, including shares of capital stock of the Company or any
subsidiary of the Company or securities directly or indirectly
convertible into or exchangeable for any such shares;
(2) a sinking or purchase fund or other analogous
obligation;
(3) if other than U.S. dollars, the currency or currencies
or units based on or related to currencies (including European
Currency Units) in which the Securities of such series shall be
denominated and in which payments of principal of, and any
premium and interest on, such Securities shall or may be payable;
(4) if the principal of (and premium, if any) or interest,
if any, on the Securities of such series are to be payable, at
the election of the Company or a holder thereof, in a currency or
currencies or units based on or related to currencies (including
<PAGE>
European Currency Units) other than that in which the Securities
are stated to be payable, the period or periods within which, and
the terms and conditions upon which, such election may be made;
(5) if the amount of payments of principal of (and premium,
if any) or interest, if any, on the Securities of such series may
be determined with reference to an index based on (i) a currency
or currencies or units based on or related to currencies
(including European Currency Units) other than that in which the
Securities are stated to be payable, (ii) changes in the price of
one or more other securities or groups or indexes of securities
or (iii) changes in the prices of one or more commodities or
groups or indexes of commodities, or any combination of the
foregoing, the manner in which such amounts shall be determined;
(6) if the aggregate principal amount of the Securities of
that series is to be limited, such limitations;
(7) the exchange of Securities of that series, at the option
of the Holders thereof, for other Securities of the same series
of the same aggregate principal amount of a different authorized
kind or different authorized denomination or denominations, or
both;
(8) the appointment by the Trustee of an Authenticating
Agent in one or more places other than the location of the office
of the Trustee with power to act on behalf of the Trustee and
subject to its direction in the authentication and delivery of
the Securities of any one or more series in connection with such
transactions as shall be specified in the provisions of this
Indenture or in or pursuant to the Board Resolution or the
supplemental indenture creating such series;
(9) the portion of the principal amount of Securities of the
series, if other than the total principal amount thereof, which
shall be payable upon declaration of acceleration of the Maturity
thereof pursuant to Section 502 or provable in bankruptcy
pursuant to Section 504;
(10) any Event of Default with respect to the Securities of
such series, if not set forth herein and
<PAGE>
any addition, deletions or other changes to the Events of Default
set forth herein that shall be applicable to the Securities of such
series (including a provision making any Event of Default set forth
herein inapplicable to the Securities of that series);
(11) any covenant solely for the benefit of the Securities
of such series and any additions, deletions or other changes to
the provisions of Article Ten or any definitions relating to such
Article that shall be applicable to the Securities of such series
(including a provision making any Section of such Article
inapplicable to the Securities of such series);
(12) the applicability of Section 403 of this Indenture to
the Securities of such series;
(13) if the Securities of the series shall be issued in
whole or in part in the form of a Global Security or Global
Securities, the terms and conditions, if any, upon which such
Global Security or Global Securities may be exchanged in whole or
in part for other individual Securities; and the Depositary for
such Global Security or Global Securities (if other than the
Depositary specified in Section 101 hereof);
(14) the subordination of the Securities of such series to
any other indebtedness of the Company, including without
limitation, the Securities of any other series; and
(15) any other terms of the series, which shall not be
inconsistent with the provisions of this Indenture,
all upon such terms as may be determined in or pursuant to a Board
Resolution or in or pursuant to a supplemental indenture with respect
to such series. All Securities of the same series shall be
substantially identical in tenor and effect, except as to
denomination.
The form of the Securities of each series shall be
established pursuant to the provisions of this Indenture in or
pursuant to the Board Resolution or in or pursuant to the supplemental
indenture creating such series. The Securities of each series shall be
distinguished from the Securities of each other series in such manner,
reasonably satisfactory to the Trustee, as the Board of Directors may
determine.
<PAGE>
Unless otherwise provided with respect to Securities of a
particular series, the Securities of any series may only be issuable
in registered form, without coupons.
Any terms or provisions in respect of the Securities of any
series issued under this Indenture may be determined pursuant to this
Section by providing in a Board Resolution or supplemental indenture
for the method by which such terms or provisions shall be determined.
Section 302. Denominations. The Securities of each series
shall be issuable in such denominations and currency as shall be
provided in the provisions of this Indenture or in or pursuant to the
Board Resolution or the supplemental indenture creating such series.
In the absence of any such provisions with respect to the Securities
of any series, the Securities of that series shall be issuable only in
fully registered form in denominations of $1,000 and any integral
multiple thereof.
Section 303. Execution, Authentication and Delivery and
Dating. The Securities shall be executed on behalf of the Company by
its Chairman of the Board, its President, one of its Vice Presidents
or its Treasurer under its corporate seal reproduced thereon and
attested by its Secretary or one of its Assistant Secretaries. The
signature of any of these officers on the Securities may be manual or
facsimile.
Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company
shall bind the Company, notwithstanding that such individuals or any
of them have ceased to hold such offices prior to the authentication
and delivery of such Securities or did not hold such offices at the
date of such Securities.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities
executed by the Company to the Trustee for authentication; and the
Trustee shall, upon Company Order, authenticate and deliver such
Securities as in this Indenture provided and not otherwise.
Prior to any such authentication and delivery, the Trustee
shall be entitled to receive, in addition to any Officers' Certificate
and Opinion of Counsel required to be furnished to the Trustee
pursuant to Section 102, and the
<PAGE>
Board Resolution and any certificate relating to the issuance of the
series of Securities required to be furnished pursuant to Section 202,
an Opinion of Counsel stating that:
(1) all instruments furnished to the Trustee conform to the
requirements of the Indenture and constitute sufficient authority
hereunder for the Trustee to authenticate and deliver such
Securities;
(2) the form and terms (or in connection with the issuance
of medium-term Securities under Section 311, the manner of
determining the terms) of such Securities have been established
in conformity with the provisions of this Indenture;
(3) all laws and requirements with respect to the execution
and delivery by the Company of such Securities have been complied
with, the Company has the corporate power to issue such
Securities and such Securities have been duly authorized and
delivered by the Company and, assuming due authentication and
delivery by the Trustee, constitute legal, valid and binding
obligations of the Company enforceable in accordance with their
terms (subject, as to enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium or other laws
and legal principles affecting creditors' rights generally from
time to time in effect and to general equitable principles,
whether applied in an action at law or in equity) and entitled to
the benefits of this Indenture, equally and ratably with all
other Securities, if any, of such series Outstanding;
(4) the Indenture is qualified under the Trust Indenture
Act; and
(5) such other matters as the Trustee may reasonably
request;
and, if the authentication and delivery relates to a new series of
Securities created by an indenture supplemental hereto, also stating
that all laws and requirements with respect to the form and execution
by the Company of the supplemental indenture with respect to that
series of Securities have been complied with, the Company has cor-
porate power to execute and deliver any such supplemental indenture
and has taken all necessary corporate action for those purposes and
any such supplemental indenture has been
<PAGE>
executed and delivered and constitutes the legal, valid and binding
obligation of the Company enforceable in accordance with its terms
(subject, as to enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium or other laws and legal
principles affecting creditors' rights generally from time to time in
effect and to general equitable principles, whether applied in an
action at law or in equity).
The Trustee shall not be required to authenticate such
Securities if the issue thereof will adversely affect the Trustee's
own rights, duties or immunities under the Securities and this
Indenture.
Unless otherwise provided in the form of Security for any
series, all Securities shall be dated the date of their
authentication.
No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there
appears on such Security a certificate of authentication substantially
in the form provided for herein executed by the Trustee by manual
signature of an authorized officer, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that
such Security has been duly authenticated and delivered hereunder.
Section 304. Temporary Securities. Pending the preparation
of definitive Securities of any series, the Company may execute, and,
upon receipt of the documents required by Section 303, together with a
Company Order, the Trustee shall authenticate and deliver, temporary
Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially
of the tenor of the definitive Securities in lieu of which they are
issued and with such appropriate insertions, omissions, substitutions
and other variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the
Company will cause definitive Securities of such series to be prepared
without unreasonable delay. After the preparation of definitive
Securities, the temporary Securities of such series shall be
exchangeable for definitive Securities of such series upon surrender
of the temporary Securities of such series at the office or agency of
the Company in a Place of Payment, without charge to the
<PAGE>
Holder; and upon surrender for cancellation of any one or more
temporary Securities the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like principal amount
of definitive Securities of such series of authorized denominations
and of like tenor and terms. Until so exchanged the temporary
Securities of such series shall in all respects be entitled to the
same benefits under this Indenture as definitive Securities of such
series.
Section 305. Registration, Transfer and Exchange. The
Company shall keep or cause to be kept a register (herein sometimes
referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide
for the registration of Securities, or of Securities of a particular
series, and for transfers of Securities or of Securities of such
series. Any such register shall be in written form or in any other
form capable of being converted into written form within a reasonable
time. At all reasonable times the information contained in such
register or registers shall be available for inspection by the Trustee
at the office or agency to be maintained by the Company as provided in
Section 1002.
Subject to Section 204, upon surrender for transfer of any
Security of any series at the office or agency of the Company in a
Place of Payment, the Company shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Securities of such series of any
authorized denominations, of a like aggregate principal amount and
Stated Maturity and of like tenor and terms.
Subject to Section 204, at the option of the Holder,
Securities of any series may be exchanged for other Securities of such
series of any authorized denominations, of a like aggregate principal
amount and Stated Maturity and of like tenor and terms, upon surrender
of the Securities to be exchanged at such office or agency. Whenever
any Securities are so surrendered for exchange, the Company shall
execute, and the Trustee shall authenticate and deliver, the
Securities which the Securityholder making the exchange is entitled to
receive.
All Securities issued upon any transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing
the same debt, and entitled to the same benefits under this Indenture,
as the Securities surrendered upon such transfer or exchange.
<PAGE>
Every Security presented or surrendered for transfer or
exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in
form satisfactory to the Company and the Security Registrar duly
executed, by the Holder thereof or his attorney duly authorized in
writing.
Unless otherwise provided in the Security to be transferred
or exchanged, no service charge shall be made on any Securityholder
for any transfer or exchange of Securities, but the Company may
(unless otherwise provided in such Security) require payment of a sum
sufficient to cover any tax or other governmental charge that may be
imposed in connection with any transfer or exchange of Securities,
other than exchanges pursuant to Section 304 or 906 not involving any
transfer.
The Company shall not be required (i) to issue, transfer or
exchange any Security of any series during a period beginning at the
opening of business 15 days before the day of the mailing of a notice
of redemption of Securities of such series selected for redemption
under Section 1103 and ending at the close of business on the date of
such mailing, or (ii) to transfer or exchange any Security so selected
for redemption in whole or in part, except for the portion of such
Security not so selected for redemption.
None of the Company, the Trustee, any agent of the Trustee,
any Paying Agent or the Security Registrar will have any
responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests of a
Global Security or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
The Company initially appoints the Trustee to act as
Security Registrar for the Securities on its behalf. The Company may
at any time and from time to time authorize any Person to act as
Security Registrar in place of the Trustee with respect to any series
of Securities issued under this Indenture.
Section 306. Mutilated, Destroyed, Lost and Stolen
Securities. If (i) any mutilated Security is surrendered to the
Trustee, or the Company and the Trustee receive evidence to their
satisfaction of the destruction, loss or theft of any Security, and
(ii) there is delivered to the Company and the Trustee such security
or indemnity as
<PAGE>
may be required by them to save each of them harmless, then, in the
absence of notice to the Company or the Trustee that such Security has
been acquired by a bona fide purchaser, the Company shall execute and
upon its request the Trustee shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Security, a new Security of like tenor, series, Stated Maturity
and principal amount, bearing a number not contemporaneously
Outstanding.
In case any such mutilated, destroyed, lost or stolen
Security has become or is about to become due and payable, the Company
in its discretion may, instead of issuing a new Security, pay such
Security.
Upon the issuance of any new Security under this Section,
the Company may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the
Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu
of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the
destroyed, lost or stolen Security shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture
equally and proportionately with any and all other Securities of the
same series duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with
respect to the replacement or payment of mutilated, destroyed, lost or
stolen Securities.
Section 307. Payment of Interest; Interest Rights Preserved.
Unless otherwise provided with respect to such Security pursuant to
Section 301, interest on any Security which is payable, and is
punctually paid or duly provided for, on any Interest Payment Date
shall be paid to the Person in whose name that Security (or one or
more Predecessor Securities) is registered at the close of business on
the Regular Record Date for such interest.
Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date
(herein called "Defaulted Interest") shall forthwith cease to be
payable to the registered Holder on
<PAGE>
the relevant Regular Record Date by virtue of his having been such
Holder; and, except as hereinafter provided, such Defaulted Interest
may be paid by the Company, at its election in each case, as provided
in Clause (1) or Clause (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names any such Securities (or
their respective Predecessor Securities) are registered at the
close of business on a Special Record Date for the payment of
such Defaulted Interest, which shall be fixed in the following
manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each such
Security and the date of the proposed payment, and at the same
time the Company shall deposit with the Trustee an amount of
money equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of
the proposed payment, such money when deposited to be held in
trust for the benefit of the Persons entitled to such Defaulted
Interest as in this Clause provided. Thereupon the Trustee shall
fix a Special Record Date for the payment of such Defaulted
Interest which shall be not more than 15 nor less than 10 days
prior to the date of the proposed payment and not less than 10
days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company
of such Special Record Date and, in the name and at the expense
of the Company, shall cause notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor to
be mailed, first-class postage prepaid, to the Holder of each
such Security at his address as it appears in the Security
Register, not less than 10 days prior to such Special Record
Date. Notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor having been mailed as
aforesaid, such Defaulted Interest shall be paid to the Persons
in whose names such Securities (or their respective Predecessor
Securities) are registered on such Special Record Date and shall
no longer be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest
in any other lawful manner not inconsistent with the requirements
of any securities exchange on which such Securities may be
listed, and upon such
<PAGE>
notice as may be required by such exchange, if, after notice
given by the Company to the Trustee of the proposed payment
pursuant to this Clause, such manner of payment shall be deemed
practicable by the Trustee.
If any installment of interest the Stated Maturity of which
is on or prior to the Redemption Date for any Security called for
redemption pursuant to Article Eleven is not paid or duly provided for
on or prior to the Redemption Date in accordance with the foregoing
provisions of this Section, such interest shall be payable as part of
the Redemption Price of such Securities.
Subject to the foregoing provisions of this Section, each
Security delivered under this Indenture upon transfer of or in
exchange for or in lieu of any other Security shall carry the rights
to interest accrued and unpaid, and to accrue, which were carried by
such other Security.
Section 308. Persons Deemed Owners. The Company, the Trustee
and any agent of the Company or the Trustee may treat the Person in
whose name any Security is registered in the Security Register as the
owner of such Security for the purpose of receiving payment of
principal of (and premium, if any), and (subject to Section 307)
interest on, such Security and for all other purposes whatsoever,
whether or not such Security be overdue, and neither the Company, the
Trustee nor any agent of the Company or the Trustee shall be affected
by notice to the contrary.
Section 309. Cancellation. All Securities surrendered for
payment, redemption, transfer, conversion or exchange or credit
against a sinking fund shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and, if not already
cancelled, shall be promptly cancelled by it. The Company may at any
time deliver to the Trustee for cancellation any Securities previously
authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Securities so delivered
shall be promptly cancelled by the Trustee. No Security shall be
authenticated in lieu of or in exchange for any Securities cancelled
as provided in this Section, except as expressly permitted by this
Indenture. The Trustee shall dispose of all cancelled Securities in
accordance with its customary procedures and shall deliver a
certificate of such disposition to the Company.
<PAGE>
Section 310. Computation of Interest. Unless otherwise
provided as contemplated in Section 301, interest on the Securities
shall be calculated on the basis of a 360-day year of twelve 30-day
months.
Section 311. Medium-term Securities. Notwithstanding any
contrary provision herein, if all Securities of a series are not to be
originally issued at one time, it shall not be necessary for the
Company to deliver to the Trustee an Officers' Certificate, Board
Resolution, supplemental indenture, Opinion of Counsel or Company
Request otherwise required pursuant to Sections 202, 301 and 303 at or
prior to the time of authentication of each Security of such series if
such documents are delivered to the Trustee or its agent at or prior
to the authentication upon original issuance of the first Security of
such series to be issued; provided that any subsequent request by the
Company to the Trustee to authenticate Securities of such series upon
original issuance shall constitute a representation and warranty by
the Company that as of the date of such request, the statements made
in the Officers' Certificate delivered pursuant to Section 102 shall
be true and correct as if made on such date.
An Officers' Certificate, supplemental indenture or Board
Resolution delivered by the Company to the Trustee in the
circumstances set forth in the preceding paragraph may provide that
Securities which are the subject thereof will be authenticated and
delivered by the Trustee or its agent on original issue from time to
time upon the telephonic or written order of persons designated in
such Officers' Certificate, Board Resolution or supplemental indenture
(any such telephonic instructions to be confirmed promptly in writing
by such persons) and that such persons are authorized to determine,
consistent with such Officers' Certificate, supplemental indenture or
Board Resolution, such terms and conditions of said Securities as are
specified in such Officers' Certificate, supplemental indenture or
Board Resolution.
ARTICLE FOUR
Satisfaction and Discharge
Section 401. Satisfaction and Discharge of Indenture. This
Indenture shall cease to be of further effect with respect to any
series of Securities (except as to any surviving rights of conversion,
transfer or exchange
<PAGE>
of Securities of such series expressly provided for herein or in the
form of Security for such series), and the Trustee, on demand of and
at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture as to such
series, when
(1) either
(A) all Securities of that series theretofore
authenticated and delivered (other than (i) Securities of
such series which have been destroyed, lost or stolen and
which have been replaced or paid as provided in Section 306,
and (ii) Securities of such series for whose payment money
has theretofore been deposited in trust or segregated and
held in trust by the Company and thereafter repaid to the
Company or discharged from such trust, as provided in
Section 1003) have been delivered to the Trustee cancelled
or for cancellation; or
(B) all such Securities of that series not theretofore
delivered to the Trustee cancelled or for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year, or
(iii) are to be called for redemption within one
year under arrangements satisfactory to the Trustee for
the giving of notice of redemption by the Trustee in
the name, and at the expense, of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust funds in
trust for the purpose an amount sufficient to pay and discharge the
entire indebtedness on such Securities not theretofore delivered to
the Trustee cancelled or for cancellation, for principal (and premium,
if any) and interest to the date of such deposit (in the case of
Securities which have become due and payable), or to the Stated
Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company with respect to the Securities
of such series; and
<PAGE>
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that all
conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture with respect to the
Securities of such series have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture with
respect to any series of Securities, the obligations of the Company to
the Trustee with respect to that series under Section 607 shall
survive and the obligations of the Trustee under Sections 402 and
1003 shall survive.
Section 402. Application of Trust Money. All money and
obligations deposited with the Trustee pursuant to Section 401 or
Section 403 and all money received by the Trustee in respect of such
obligations shall be held in trust and applied by it, in accordance
with the provisions of the series of Securities in respect of which it
was deposited and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as its own
Paying Agent) as the Trustee may determine, to the Persons entitled
thereto, of the principal (and premium, if any) and interest for whose
payment such money and obligations have been deposited with or
received by the Trustee; but such money and obligations need not be
segregated from other funds except to the extent required by law.
Section 403. Satisfaction, Discharge and Defeasance of
Securities of any Series. If this Section 403 is specified, as
contemplated by Section 301, to be applicable to Securities of any
series, the Company shall be deemed to have paid and discharged the
entire indebtedness on all the Securities of any such series at the
time outstanding, and the Trustee, at the expense of the Company,
shall execute proper instruments acknowledging satisfaction, discharge
and defeasance of such indebtedness, when
(1) either
(A) with respect to all Securities of such series at
the time outstanding,
(i) the Company has deposited or caused to be
deposited with the Trustee as trust funds in trust for
such purpose an amount sufficient, together with any
obligations
<PAGE>
deposited pursuant to clause (ii) below, to pay and
discharge the entire indebtedness on all such
Securities for principal (and premium, if any) and
interest, on the days on which such principal (and
premium, if any) or interest, as the case may be, is
due and payable in accordance with the terms of this
Indenture and such Securities, to the date of maturity
or date of redemption thereof as contemplated by the
penultimate paragraph of this Section 403, as the case
may be; or
(ii) the Company has deposited or caused to be
deposited with the Trustee as obligations in trust for
such purpose such amount of direct obligations of, or
obligations the principal of and interest on which are
fully guaranteed by, the government which issued the
currency in which such Securities are denominated
(other than such obligations as are redeemable at the
option of the issuer thereof) as will, together with
the income to accrue thereon without consideration of
any reinvestment thereof, be sufficient, in the written
opinion of a firm of nationally recognized independent
public accountants (which may be the Company's
auditors) delivered to the Trustee, together with any
funds deposited pursuant to clause (i) above, to pay
and discharge the entire indebtedness on all such
Securities for principal (and premium, if any) and
interest, on the days on which such principal (and
premium, if any) or interest, as the case may be, is
due and payable in accordance with the terms of this
Indenture and such Securities, to the date of maturity
or date of redemption thereof as contemplated by the
penultimate paragraph of this Section 403, as the case
may be; or
(B) the Company has properly fulfilled such other means
of satisfaction and discharge as is specified, as
contemplated by Section 301, to be applicable to the
Securities of such series;
(2) the Company has paid or caused to be paid all other sums
payable with respect to the Securities of such series at the time
Outstanding;
<PAGE>
(3) such deposit will not result in a breach or violation
of, or constitute a default under, this Indenture or any other
agreement or instrument to which the Company is a party or by
which it is bound;
(4) no Event of Default or event which, after notice or
lapse of time or both, would become an Event of Default shall
have occurred and be continuing on the date of such deposit; and
(5) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the
satisfaction, discharge and defeasance of the entire indebtedness
on all Securities of any such series at the time Outstanding have
been complied with.
Any deposits with the Trustee referred to in Section
403(1)(A) above shall be irrevocable. If any Securities of such series
at the time outstanding are to be redeemed prior to their Stated
Maturity, whether pursuant to any optional redemption provisions or in
accordance with any mandatory sinking fund requirement, the Company
shall make such arrangements as are satisfactory to the Trustee for
the giving of notice of redemption by the Trustee in the name, and at
the expense, of the Company.
Upon the satisfaction of the conditions set forth in this
Section 403 with respect to all the Securities of any series at the
time Outstanding, the terms and conditions of such series, including
the terms and conditions with respect thereto set forth in this
Indenture (except as to any surviving rights of conversion, transfer
or exchange of Securities of such series expressly provided for herein
or in the form of Security for such series), shall no longer be
binding upon, or applicable to, the Company, provided that the Company
shall not be discharged from any payment obligations in respect of
Securities of such series which are deemed not to be Outstanding under
clause (iii) of the definition thereof if such obligations continue to
be valid obligations of the Company under applicable law.
Notwithstanding the satisfaction of the conditions set forth
in this Section 403 with respect to all Securities of any series at
the time Outstanding, the obligations of the Company to the Trustee
with respect to that series under Section 607 and the obligations of
the Trustee with respect to that series under Section 402 and 1003
shall survive.
<PAGE>
ARTICLE FIVE
Remedies
Section 501. Events of Default. "Event of Default", wherever
used herein, means with respect to any series of Securities any one of
the following events (whatever the reason for such Event of Default
and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or
governmental body), unless such event is either inapplicable to a
particular series or it is specifically deleted or modified in the
supplemental indenture creating such series of Securities or in the
form of Security for such series:
(1) default in the payment of any interest upon any Security
of that series when it becomes due and payable, and continuance
of such default for a period of 30 days; or
(2) default in the payment of the principal of (or premium,
if any, on) any Security of that series at its Maturity; or
(3) default in the payment of any sinking or purchase fund
or analogous obligation when the same becomes due by the terms of
the Securities of such series; or
(4) default in the performance, or breach, of any covenant
or warranty of the Company in this Indenture in respect of the
Securities of such series (other than a covenant or warranty in
respect of the Securities of such series a default in the
performance of which or the breach of which is elsewhere in this
Section specifically dealt with), all of such covenants and
warranties in the Indenture which are not expressly stated to be
for the benefit of a particular series of Securities being deemed
in respect of the Securities of all series for this purpose, and
continuance of such default or breach for a period of 90 days
after there has been given, by registered or certified mail, to
the Company by the Trustee or to the Company and the Trustee by
the Holders of at least 25% in principal amount of the
Outstanding Securities of such series, a written notice
specifying such default or breach and
<PAGE>
requiring it to be remedied and stating that such notice is
a "Notice of Default" hereunder; or
(5) the entry of an order for relief against the Company
under the Federal Bankruptcy Code by a court having jurisdiction
in the premises or a decree or order by a court having
jurisdiction in the premises adjudging the Company a bankrupt or
insolvent under any other applicable Federal or State law, or the
entry of a decree or order approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of
or in respect of the Company under the Federal Bankruptcy Code or
any other applicable Federal or State law, or appointing a
receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Company or of any substantial part of
its property, or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order unstayed
and in effect for a period of 60 consecutive days; or
(6) the consent by the Company to the institution of
bankruptcy or insolvency proceedings against it, or the filing by
it of a petition or answer or consent seeking reorganization or
relief under the Federal Bankruptcy Code or any other applicable
Federal or State law, or the consent by it to the filing of any
such petition or to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of
the Company or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or
the admission by it in writing of its inability to pay its debts
generally as they become due, or the taking of corporate action
by the Company in furtherance of any such action; or
(7) any other Event of Default provided in the supplemental
indenture under which such series of Securities is issued or in
the form of Security for such series.
Section 502. Acceleration of Maturity; Rescission and
Annulment. If an Event of Default described in paragraph (1), (2),
(3), (4) or (7) (if the Event of Default under paragraph (4) or (7) is
with respect to less than all series of Securities then Outstanding)
of Section 501 occurs and is continuing with respect to any series,
then and in each and every such case, unless the principal of all the
<PAGE>
Securities of such series shall have already become due and payable,
either the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Securities of such series then Outstanding
hereunder (each such series acting as a separate class), by notice in
writing to the Company (and to the Trustee if given by Holders), may
declare the principal amount (or, if the Securities of such series are
Original Issue Discount Securities, such portion of the principal
amount as may be specified in the terms of that series) of all the
Securities of such series then Outstanding and all accrued interest
thereon to be due and payable immediately, and upon any such
declaration the same shall become and shall be immediately due and
payable, anything in this Indenture or in the Securities of such
series contained to the contrary notwithstanding. If an Event of
Default described in paragraph (4) or (7) (if the Event of Default
under paragraph (4) or (7) is with respect to all series of Securities
then Outstanding), (5) or (6) of Section 501 occurs and is continuing,
then and in each and every such case, unless the principal of all the
Securities shall have already become due and payable, either the
Trustee or the Holders of not less than 25% in aggregate principal
amount of all the Securities then Outstanding hereunder (treated as
one class), by notice in writing to the Company (and to the Trustee if
given by Holders), may declare the principal amount (or, if any
Securities are Original Issue Discount Securities, such portion of the
principal amount as may be specified in the terms thereof) of all the
Securities then Outstanding and all accrued interest thereon to be due
and payable immediately, and upon any such declaration the same shall
become and shall be immediately due and payable, anything in this
Indenture or in the Securities contained to the contrary
notwithstanding.
At any time after such a declaration of acceleration has
been made with respect to the Securities of any series and before a
judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a
majority in principal amount of the Outstanding Securities of such
series, by written notice to the Company and the Trustee, may rescind
and annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue installments of interest on the
Securities of such series,
<PAGE>
(B) the principal of (and premium, if any, on) any
Securities of such series which have become due otherwise
than by such declaration of acceleration, and interest
thereon at the rate or rates prescribed therefor by the
terms of the Securities of such series, to the extent that
payment of such interest is lawful,
(C) interest upon overdue installments of interest at
the rate or rates prescribed therefor by the terms of the
Securities of such series to the extent that payment of such
interest is lawful, and
(D) all sums paid or advanced by the Trustee hereunder
and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel and all
other amounts due the Trustee under Section 607; and
(2) all Events of Default with respect to such series of
Securities, other than the nonpayment of the principal of the
Securities of such series which have become due solely by such
acceleration, have been cured or waived as provided in Section
513.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
Section 503. Collection of Indebtedness and Suits for
Enforcement by Trustee. The Company covenants that if
(1) default is made in the payment of any installment of
interest on any Security of any series when such interest becomes
due and payable, or
(2) default is made in the payment of the principal of (or
premium, if any, on) any Security at the Maturity thereof, or
(3) default is made in the payment of any sinking or
purchase fund or analogous obligation when the same becomes due
by the terms of the Securities of any series,
and any such default continues for any period of grace provided with
respect to the Securities of such series, the
<PAGE>
Company will, upon demand of the Trustee, pay to it, for the benefit
of the Holder of any such Security (or the Holders of any such series
in the case of Clause (3) above), the whole amount then due and
payable on any such Security (or on the Securities of any such series
in the case of Clause (3) above) for principal (and premium, if any)
and interest, with interest, to the extent that payment of such
interest shall be legally enforceable, upon the overdue principal (and
premium, if any) and upon overdue installments of interest, at such
rate or rates as may be prescribed therefor by the terms of any such
Security (or of Securities of any such series in the case of Clause
(3) above); and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including
the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel and all other amounts due the
Trustee under Section 607.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express
trust, may institute a judicial proceeding for the collection of the
sums so due and unpaid, and may prosecute such proceeding to judgment
or final decree, and may enforce the same against the Company or any
other obligor upon the Securities of such series and collect the money
adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon such Securities,
wherever situated.
If an Event of Default with respect to any series of
Securities occurs and is continuing, the Trustee may in its discretion
proceed to protect and enforce its rights and the rights of the
Holders of Securities of such series by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect and
enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of
any power granted herein, or to enforce any other proper remedy.
Section 504. Trustee May File Proofs of Claim. In case of
the pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or
their creditors, the Trustee (irrespective of whether the principal of
the Securities shall then be due and payable as therein expressed or
by declaration or
<PAGE>
otherwise and irrespective of whether the Trustee shall have made any
demand on the Company for the payment of overdue principal or
interest) shall be entitled and empowered, by intervention in such
proceedings or otherwise,
(i) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest owing and unpaid in
respect of the Securities and to file such other papers or
documents as may be necessary and advisable in order to have the
claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel and all other amounts due the
Trustee under Section 607) and of the Securityholders allowed in
such judicial proceeding, and
(ii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the
same;
and any receiver, assignee, trustee, liquidator, sequestrator (or
other similar official) in any such judicial proceeding is hereby
authorized by each Securityholder to make such payment to the Trustee
and in the event that the Trustee shall consent to the making of such
payments directly to the Securityholders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 607.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any
Securityholder any plan or reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim
of any Securityholder in any such proceeding.
Section 505. Trustee May Enforce Claims Without Possession
of Securities. All rights of action and claims under this Indenture or
the Securities of any series may be prosecuted and enforced by the
Trustee without the possession of any of the Securities of such series
or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable compensation,
expenses,
<PAGE>
disbursements and advances of the Trustee, its agent and
counsel, be for the ratable benefit of the Holders of the Securities
of the series in respect of which such judgment has been recovered.
Section 506. Application of Money Collected. Any money
collected by the Trustee with respect to a series of Securities
pursuant to this Article shall be applied in the following order, at
the date or dates fixed by the Trustee and, in case of the
distribution of such money on account of principal (or premium, if
any) or interest, upon presentation of the Securities of such series
and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 607.
SECOND: To the payment of the amounts then due and unpaid
upon the Securities of that series for principal (and premium, if any)
and interest, in respect of which or for the benefit of which such
money has been collected, ratably, without preference or priority of
any kind, according to the amounts due and payable on such Securities
for principal (and premium, if any) and interest, respectively.
Section 507. Limitation on Suits. No Holder of any Security
of any series shall have any right to institute any proceeding,
judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy
hereunder, unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default with respect to
Securities of such series;
(2) the Holders of not less than 25% in principal amount of
the Outstanding Securities of such series shall have made written
request to the Trustee to institute proceedings in respect of
such Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities
to be incurred in compliance with such request;
<PAGE>
(4) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute
any such proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the
Holders of a majority in principal amount of the Outstanding
Securities of such series;
it being understood and intended that no one or more Holders of
Securities of such series shall have any right in any manner whatever
by virtue of, or by availing of, any provision of this Indenture to
affect, disturb or prejudice the rights of any other Holders of
Securities of such series, or to obtain or to seek to obtain priority
or preference over any other such Holders or to enforce any right
under this Indenture, except in the manner herein provided and for the
equal and proportionate benefit of all the Holders of all Securities
of such series.
Section 508. Unconditional Right of Securityholders to
Receive Principal, Premium and Interest. Notwithstanding any other
provisions in this Indenture, the Holder of any Security shall have
the right, which is absolute and unconditional, to receive payment of
the principal of (and premium, if any) and (subject to Section 307)
interest on such Security on the respective Stated Maturities
expressed in such Security (or, in the case of redemption or
repayment, on the Redemption Date or Repayment Date, as the case may
be) and to institute suit for the enforcement of any such payment, and
such right shall not be impaired without the consent of such Holder.
Section 509. Restoration of Rights and Remedies. If the
Trustee or any Securityholder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, then and in every such case
the Company, the Trustee and the Securityholders shall, subject to any
determination in such proceeding, be restored severally and
respectively to their former positions hereunder, and thereafter all
rights and remedies of the Trustee and the Securityholders shall
continue as though no such proceeding had been instituted.
Section 510. Rights and Remedies Cumulative. No right or
remedy herein conferred upon or reserved to the Trustee or to the
Securityholders is intended to be exclusive of any other right or
remedy, and every right and
<PAGE>
remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not
prevent the concurrent assertion or employment of any other
appropriate right or remedy.
Section 511. Delay or Omission Not Waiver. No delay or
omission of the Trustee or of any Holder of any Security to exercise
any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of
Default or an acquiescence therein. Every right and remedy given by
this Article or by law to the Trustee or to the Securityholders may be
exercised from time to time, and as often as may be deemed expedient,
by the Trustee or by the Securityholders, as the case may be.
Section 512. Control by Securityholders. The Holders of a
majority in principal amount of the Outstanding Securities of any
series shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee with respect to
the Securities of such series, provided that
(1) the Trustee shall have the right to decline to follow
any such direction if the Trustee, being advised by counsel,
determines that the action so directed may not lawfully be taken
or would conflict with this Indenture or if the Trustee in good
faith shall, by a Responsible Officer, determine that the
proceedings so directed would involve it in personal liability or
be unjustly prejudicial to the Holders not taking part in such
direction, and
(2) the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction.
Section 513. Waiver of Past Defaults. The Holders of not
less than a majority in principal amount of the Outstanding Securities
of any series may on behalf of the Holders of all the Securities of
such series waive any
<PAGE>
past default hereunder with respect to such series and its
consequences, except a default not theretofore cured
(1) in the payment of the principal of (or premium, if any)
or interest on any Security of such series, or in the payment of
any sinking or purchase fund or analogous obligation with respect
to the Securities of such series, or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of
the Holder of each Outstanding Security of such series.
Upon any such waiver, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other default or impair any right
consequent thereon.
Section 514. Undertaking for Costs. All parties to this
Indenture agree, and each Holder of any Security by his acceptance
thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the Trustee for
any action taken or omitted by it as Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit,
and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in
such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; but the provisions of
this Section shall not apply to any suit instituted by the Trustee, to
any suit instituted by any Securityholder, or group of
Securityholders, holding in the aggregate more than 10% in principal
amount of the Outstanding Securities of any series to which the suit
relates, or to any suit instituted by any Securityholder for the
enforcement of the payment of the principal of (or premium, if any) or
interest on any Security on or after the respective Stated Maturities
expressed in such Security (or, in the case of redemption or
repayment, on or after the Redemption Date or Repayment Date).
Section 515. Waiver of Stay or Extension Laws. The Company
covenants (to the extent that it may lawfully do so) that it will not
at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or
<PAGE>
advantage of, any stay or extension law wherever enacted, now or at
any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it
may lawfully do so) hereby expressly waives all benefit or advantage
of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no
such law had been enacted.
ARTICLE SIX
The Trustee
Section 601. Certain Duties and Responsibilities. (a) Except
during the continuance of an Event of Default with respect to any
series of Securities,
(1) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture with
respect to the Securities of such series, and no implied
covenants or obligations shall be read into this Indenture
against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee
may, with respect to Securities of such series, conclusively
rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of
this Indenture; but in the case of any such certificates or
opinions which by any provision hereof are specifically required
to be furnished to the Trustee, the Trustee shall be under a duty
to examine the same to determine whether or not they conform to
the requirements of this Indenture.
(b) In case an Event of Default with respect to any series
of Securities has occurred and is continuing, the Trustee shall
exercise with respect to the Securities of such series such of the
rights and powers vested in it by this Indenture, and use the same
degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own
affairs.
(c) No provision of this Indenture shall be construed to
relieve the Trustee from liability for its own negligent action, its
own
<PAGE>
negligent failure to act, or its own willful misconduct, except that
(1) this Subsection shall not be construed to limit the
effect of Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it
shall be proved that the Trustee was negligent in ascertaining
the pertinent facts;
(3) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of a majority in
principal amount of the Outstanding Securities of any series
relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred upon the Trustee, under this
Indenture with respect to the Securities of such series; and
(4) no provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or
in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not
reasonably assured to it.
(d) Whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct or affecting the
liability of or affording protection to the Trustee shall be subject
to the provisions of this Section.
Section 602. Notice of Defaults. Within 90 days after the
occurrence of any default hereunder with respect to Securities of any
series, the Trustee shall transmit by mail to all Securityholders of
such series, as their names and addresses appear in the Security
Register, notice of such default hereunder known to the Trustee,
unless such default shall have been cured or waived; provided,
however, that, except in the case of a default in the payment of the
principal of (or premium, if any) or interest on any Security of such
series or in the payment of any sinking or purchase fund installment
or analogous obligation with respect to Securities of such series, the
Trustee shall be protected in withholding such notice if and so long
as the
<PAGE>
board of directors, the executive committee or a trust committee of
directors and/or Responsible Officers of the Trustee in good faith
determine that the withholding of such notice is in the interests of
the Securityholders of such series; and provided, further, that in the
case of any default of the character specified in Section 501(4) with
respect to Securities of such series no such notice to Securityholders
of such series shall be given until at least 90 days after the
occurrence thereof. For the purpose of this Section, the term
"default", with respect to Securities of any series, means any event
which is, or after notice or lapse of time or both would become, an
Event of Default with respect to Securities of such series.
Section 603. Certain Rights of Trustee. Except as otherwise
provided in Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officers'
Certificate;
(d) the Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(e) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Securityholders pursuant to this Indenture,
unless such Securityholders shall have offered to the Trustee
reasonable
<PAGE>
security or indemnity against the costs, expenses and liabilities
which might be incurred by it in compliance with such request or
direction;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investi-
gation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation,
it shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney; and
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder.
Section 604. Not Responsible for Recitals or Issuance of
Securities. The recitals contained herein and in the Securities,
except the certificates of authentication, shall be taken as the
statements of the Company, and the Trustee assumes no responsibility
for their correctness. The Trustee makes no representations as to the
validity or sufficiency of this Indenture or of the Securities. The
Trustee shall not be accountable for the use or application by the
Company of Securities or the proceeds thereof.
Section 605. May Hold Securities. The Trustee, any Paying
Agent, the Security Registrar or any other agent of the Company, in
its individual or any other capacity, may become the owner or pledgee
of Securities and, subject to Sections 608 and 613, may otherwise deal
with the Company with the same rights it would have if it were not
Trustee, Paying Agent, Security Registrar or such other agent.
Section 606. Money Held in Trust. Money held by the Trustee
in trust hereunder need not be segregated from other funds except to
the extent required by law. The Trustee shall be under no liability
for interest on any money received by it hereunder except as otherwise
agreed with the Company.
<PAGE>
Section 607. Compensation and Reimbursement. The Company
agrees
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the
Trustee in accordance with any provision of this Indenture
(including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such
expense, disbursement or advance as may be attributable to its
negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without
negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of this trust,
including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance
of any of its powers or duties hereunder.
As security for the performance of the obligations of the
Company under this Section the Trustee shall have a lien prior to the
Securities upon all property and funds held or collected by the
Trustee as such, except funds held in trust for the payment of
principal of (and premium, if any) or interest on particular
Securities.
Section 608. Disqualification; Conflicting Interests. The
Trustee for the Securities of any series issued hereunder shall be
subject to the provisions of Section 310(b) of the Trust Indenture Act
during the period of time provided for therein. In determining whether
the Trustee has a conflicting interest as defined in Section 310(b) of
the Trust Indenture Act with respect to the Securities of any series,
there shall be excluded for purposes of the conflicting interest
provisions of such Section 310(b) the Securities of every other series
issued under this Indenture and (a) the Indenture dated as of December
27, 1990, between the Company and Chemical Bank, as Trustee; (b) the
Indenture of Trust dated as of June 1, 1983 between Uinta County,
Wyoming and Chemical Bank, as Trustee,
<PAGE>
under which $17,000,000 aggregate principal amount of Floating Rate
Monthly Demand Pollution Control Revenue Bonds (Champlin Petroleum
Company Project) Series 1983 have been issued, the payment of which
Bonds is supported by certain payment obligations of Champlin
Petroleum Company (which is now called Union Pacific Resources
Company) ("Champlin") to Uinta County and assigned by Uinta County to
said Trustee under a Loan Agreement dated as of June 1, 1983 between
Uinta County, Champlin and the Company relating to such Bonds, which
payment obligations have been guaranteed by the Company pursuant to
such Loan Agreement; (c) the Indenture of Trust dated as of June 1,
1983 between Lincoln County, Wyoming and Chemical Bank, as Trustee,
under which $3,100,000 aggregate principal amount of Floating Rate
Monthly Demand Pollution Control Revenue Bonds (Champlin Petroleum
Company Project) Series 1983 have been issued, the payment of which
Bonds is supported by certain payment obligations of Champlin to
Lincoln County and assigned by Lincoln County to said Trustee under a
Loan Agreement dated as of June 1, 1983 between Lincoln County,
Champlin and the Company relating to such Bonds, which payment
obligations have been guaranteed by the Company pursuant to such Loan
Agreement; (d) the Trust Indenture dated as of June 1, 1989 between
the Port of Corpus Christi Authority of Nueces County, Texas (the
"Port") and Chemical Bank, as Trustee, under which $40,000,000
aggregate principal amount of Variable Rate Demand Revenue Refunding
Bonds, Series 1989 (Union Pacific Corporation Project) have been
issued, the payment of which Bonds is supported by certain payment
obligations of the Company to the Port and assigned by the Port to
said Trustee under an Installment Payment and Bond Amortization
Agreement dated as of June 1, 1989 between the Port and the Company;
(e) the Trust Indenture dated as of September 1, 1992 between the Port
and Chemical Bank, as Trustee, under which $16,650,000 aggregate
principal amount of Variable Rate Demand Revenue Refunding Bonds,
Series 1992 (Union Pacific Corporation Project) have been issued, the
payment of which Bonds is supported by certain payment obligations of
the Company to the Port and assigned by the Port to said Trustee under
an Installment Payment and Bond Amortization Agreement dated as of
September 1, 1992 between the Port and the Company; and (f) the
Indenture, Deed of Trust and Security Agreement dated as of July 15,
1983 between United States Trust Company of New York, as Owner
Trustee, and Chemical Bank, as Indenture Trustee, under which 12.05%
Loan Certificates due December 31, 2003 have been issued, the payment
of which Certificates is supported by certain rental obligations of
Champlin to said Owner Trustee and assigned by said Owner Trustee to
said Indenture
<PAGE>
Trustee under a Lease Agreement dated as of July 15, 1983 between
Champlin and said Owner Trustee, as supplemented, which rental
obligations have been guaranteed by the Company pursuant to a
Guarantee Agreement dated as of July 15, 1983 between the Company and
said Owner Trustee and assigned by said Owner Trustee to said
Indenture Trustee. Nothing herein shall prevent the Trustee from
filing with the Commission the application referred to in the second
to last paragraph of Section 310(b) of the Trust Indenture Act.
Section 609. Corporate Trustee Required; Eligibility. There
shall at all times be a Trustee hereunder with respect to each series
of Securities, which shall be a corporation organized and doing
business under the laws of the United States of America or of any
State, 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 such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purposes of this Section, the
combined capital and surplus of such corporation shall be deemed to be
its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Trustee with
respect to any series of Securities shall cease to be eligible in
accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereinafter specified in
this Article.
Section 610. Resignation and Removal; Appointment of
Successor. (a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the successor
Trustee under Section 611.
(b) The Trustee may resign with respect to any series of
Securities at any time by giving written notice thereof to the
Company. If an instrument of acceptance by a successor Trustee shall
not have been delivered to the Trustee within 30 days after the giving
of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor
Trustee.
(c) The Trustee may be removed with respect to any series of
Securities at any time by Act of the Holders of a majority in
principal amount of the Outstanding
<PAGE>
Securities of that series, delivered to the Trustee and to the
Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 310(b) of
the Trust Indenture Act pursuant to Section 608(a) with respect
to any series of Securities after written request therefor by the
Company or by any Securityholder who has been a bona fide Holder
of a Security of that series for at least 6 months, or
(2) the Trustee shall cease to be eligible under Section 609
with respect to any series of Securities and shall fail to resign
after written request therefor by the Company or by any such
Securityholder, or
(3) the Trustee shall become incapable of acting with
respect to any series of Securities, or
(4) the Trustee shall be adjudged a bankrupt or insolvent or
a receiver of the Trustee or of its property shall be appointed
or any public officer shall take charge or control of the Trustee
or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may
remove the Trustee, with respect to the series, or in the case of
Clause (4), with respect to all series, or (ii) subject to Section
514, any Securityholder who has been a bona fide Holder of a Security
of such series for at least 6 months may, on behalf of himself and all
others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee with respect to the series, or, in the case of
Clause (4), with respect to all series.
(e) If the Trustee shall resign, be removed or become
incapable of acting with respect to any series of Securities, or if a
vacancy shall occur in the office of the Trustee with respect to any
series of Securities for any cause, the Company, by a Board
Resolution, shall promptly appoint a successor Trustee for that series
of Securities. If, within one year after such resignation, removal or
incapacity, or the occurrence of such vacancy, a successor Trustee
with respect to such series of Securities shall be appointed by Act of
the Holders of a majority in principal amount of the Outstanding
Securities of such series
<PAGE>
delivered to the Company and the retiring Trustee, the successor
Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee with respect to such series
and supersede the successor Trustee appointed by the Company with
respect to such series. If no successor Trustee with respect to such
series shall have been so appointed by the Company or the
Securityholders of such series and accepted appointment in the manner
hereinafter provided, any Securityholder who has been a bona fide
Holder of a Security of that series for at least 6 months may, on
behalf of himself and all others similarly situated, petition any
court of competent jurisdiction for the appointment of a successor
Trustee with respect to such series.
(f) The Company shall give notice of each resignation and
each removal of the Trustee with respect to any series and each
appointment of a successor Trustee with respect to any series by
mailing written notice of such event by first-class mail, postage
prepaid, to the Holders of Securities of that series as their names
and addresses appear in the Security Register. Each notice shall
include the name of the successor Trustee and the address of its
principal Corporate Trust Office.
Section 611. Acceptance of Appointment by Successor. Every
successor Trustee appointed hereunder shall execute, acknowledge and
deliver to the Company and to the predecessor Trustee an instrument
accepting such appointment, and thereupon the resignation or removal
of the predecessor Trustee shall become effective with respect to any
series as to which it is resigning or being removed as Trustee, and
such successor Trustee, without any further act, deed or conveyance,
shall become vested with all the rights, powers, trusts and duties of
the predecessor Trustee with respect to any such series; but, on
request of the Company or the successor Trustee, such predecessor
Trustee shall, upon payment of its reasonable charges, if any, execute
and deliver an instrument transferring to such successor Trustee all
the rights, powers and trusts of the predecessor Trustee, and shall
duly assign, transfer and deliver to such successor Trustee all
property and money held by such predecessor Trustee hereunder with
respect to all or any such series, subject nevertheless to its lien,
if any, provided for in Section 607. Upon request of any such
successor Trustee, the Company shall execute any and all instruments
for more fully and certainly vesting in and confirming to such
successor Trustee all such rights, powers and trusts.
<PAGE>
In case of the appointment hereunder of a successor Trustee
with respect to the Securities of one or more (but not all) series,
the Company, the predecessor Trustee and each successor Trustee with
respect to the Securities of any applicable series shall execute and
deliver an indenture supplemental hereto which shall contain such
provisions as shall be deemed necessary or desirable to confirm that
all the rights, powers, trusts and duties of the predecessor Trustee
with respect to the Securities of any series as to which the
predecessor Trustee is not being succeeded shall continue to be vested
in the predecessor Trustee, and shall add to or change any of the
provisions of this Indenture as shall be necessary to provide for or
facilitate the administration of the trusts hereunder by
more than one Trustee, it being understood that nothing
herein or in such supplemental indenture shall constitute
such Trustees co-trustees of the same trust and that each
such Trustee shall be Trustee of a trust or trusts hereunder
separate and apart from any trust or trusts hereunder
administered by any other such Trustee.
No successor Trustee with respect to any series of
Securities shall accept its appointment unless at the time of such
acceptance such successor Trustee shall be qualified and eligible with
respect to that series under this Article.
Section 612. Merger, Conversion, Consolidation or Succession
to Business. Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation succeeding to all or
substantially all of the corporate trust business of the Trustee,
shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further
act on the part of any of the parties hereto. In case any Securities
shall have been authenticated, but not delivered, by the Trustee then
in office, any successor by merger, conversion or consolidation to
such authenticating Trustee may adopt such authentication and
deliver the Securities so authenticated with the same effect as if
such successor Trustee had itself authenticated such Securities.
Section 613. Preferential Collection of Claims Against
Company. (a) Subject to Subsection (b) of this Section, if the Trustee
shall be or shall become a creditor, directly or indirectly, secured
or unsecured, of the Company within 3 months prior to a default, as
defined in
<PAGE>
Subsection (c) of this Section, or subsequent to such a default, then,
unless and until such default shall be cured, the Trustee shall set
apart and hold in a special account for the benefit of the Trustee
individually, the Holders of the Securities and the holders of other
indenture securities (as defined in Subsection (c) of this Section):
(1) an amount equal to any and all reductions in the amount
due and owing upon any claim as such creditor in respect of
principal or interest, effected after the beginning of such
3-month period and valid as against the Company and its other
creditors, except any such reduction resulting from the receipt
or disposition of any property described in paragraph (2) of this
Subsection, or from the exercise of any right of set-off which
the Trustee could have exercised if a petition in bankruptcy had
been filed by or against the Company upon the date of such
default; and
(2) all property received by the Trustee in respect of any
claim as such creditor, either as security therefor, or in
satisfaction or composition thereof, or otherwise, after the
beginning of such 3-month period, or an amount equal to the
proceeds of any such property, if disposed of, subject, however,
to the rights, if any, of the Company and its other creditors in
such property or such proceeds.
Nothing herein contained, however, shall affect the right of the
Trustee
(A) to retain for its own account (i) payments made on
account of any such claim by any Person (other than the
Company) who is liable thereon, and (ii) the proceeds of the
bona fide sale of any such claim by the Trustee to a third
person, and (iii) distributions made in cash, securities or
other property in respect of claims filed against the
Company in bankruptcy or receivership or in proceedings for
reorganization pursuant to the Federal Bankruptcy Act or
applicable State law;
(B) to realize, for its own account, upon any property
held by it as security for any such claim, if such property
was so held prior to the beginning of such 3-month period;
<PAGE>
(C) to realize, for its own account, but only to the
extent of the claim hereinafter mentioned, upon any property
held by it as security for any such claim, if such claim was
created after the beginning of such 3-month period and such
property was received as security therefor simultaneously
with the creation thereof, and if the Trustee shall sustain
the burden of proving that at the time such property was so
received the Trustee had no reasonable cause to believe that
a default as defined in Subsection (c) of this Section would
occur within 3 months; or
(D) to receive payment on any claim referred to in
paragraph (B) or (C), against the release of any property
held as security for such claim as provided in paragraph (B)
or (C), as the case may be, to the extent of the fair value
of such property.
For the purposes of paragraphs (B), (C) and (D), property
substituted after the beginning of such 3-month period for property
held as security at the time of such substitution shall, to the extent
of the fair value of the property released, have the same status as
the property released, and, to the extent that any claim referred to
in any of such paragraphs is created in renewal of or in substitution
for or for the purpose of repaying or refunding any pre-existing claim
of the Trustee as such creditor, such claim shall have the same status
as such pre-existing claim.
If the Trustee shall be required to account, the funds and
property held in such special account and the proceeds thereof shall
be apportioned between the Trustee, the Securityholders and the
holders of other indenture securities in such manner that the Trustee,
the Securityholders and the holders of other indenture securities
realize, as a result of payments from such special account and
payments of dividends on claims filed against the Company in
bankruptcy or receivership or in proceedings for reorganization
pursuant to the Federal Bankruptcy Act or applicable State law, the
same percentage of their respective claims, figured before crediting
to the claim of the Trustee anything on account of the receipt by it
from the Company of the funds and property in such special account and
before crediting to the respective claims of the Trustee and the
Securityholders and the holders of other indenture securities
dividends on claims filed against the Company in bankruptcy or
receivership or in proceedings for
<PAGE>
reorganization pursuant to the Federal Bankruptcy Act or applicable
State law, but after crediting thereon receipts on account of the
indebtedness represented by their respective claims from all sources
other than from such dividends and from the funds and property so held
in such special account. As used in this paragraph, with respect to
any claim, the term "dividends" shall include any distribution with
respect to such claim, in bankruptcy or receivership or proceedings
for reorganization pursuant to the Federal Bankruptcy Act or
applicable State law, whether such distribution is made in cash,
securities, or other property, but shall not include any such
distribution with respect to the secured portion, if any, of such
claim. The court in which such bankruptcy, receivership or proceedings
for reorganization is pending shall have jurisdiction (i) to apportion
between the Trustee and the Securityholders and the holders of other
indenture securities in accordance with the provisions of this
paragraph, the funds and property held in such special account and
proceeds thereof, or (ii) in lieu of such apportionment, in whole or
in part, to give to the provisions of this paragraph due consideration
in determining the fairness of the distributions to be made to the
Trustee and the Securityholders and the holders of other indenture
securities with respect to their respective claims, in which event it
shall not be necessary to liquidate or to appraise the value of any
securities or other property held in such special account or as
security for any such claim, or to make a specific allocation of such
distributions as between the secured and unsecured portions of such
claims, or otherwise to apply the provisions of this paragraph as a
mathematical formula.
Any Trustee which has resigned or been removed after the
beginning of such 3-month period shall be subject to the provisions of
this Subsection as though such resignation or removal had not
occurred. If any Trustee has resigned or been removed prior to the
beginning of such 3-month period, it shall be subject to the
provisions of this Subsection if and only if the following conditions
exist:
(i) the receipt of property or reduction of claim,
which would have given rise to the obligation to account, if
such Trustee had continued as Trustee, occurred after the
beginning of such 3-month period; and
<PAGE>
(ii) such receipt of property or reduction of claim
occurred within 3 months after such resignation or removal.
(b) There shall be excluded from the operation of Subsection
(a) of this Section a creditor relationship arising from
(1) the ownership or acquisition of securities issued under
any indenture, or any security or securities having a maturity
of one year or more at the time of acquisition by the Trustee;
(2) advances authorized by a receivership or bankruptcy
court of competent jurisdiction, or by this Indenture, for the
purpose of preserving any property which shall at any time be
subject to the lien of this Indenture or of discharging tax liens
or other prior liens or encumbrances thereon, if notice of such
advances and of the circumstances surrounding the making thereof
is given to the Securityholders at the time and in the manner
provided in this Indenture;
(3) disbursements made in the ordinary course of business in
the capacity of trustee under an indenture, transfer agent,
registrar, custodian, paying agent, fiscal agent or depositary,
or other similar capacity;
(4) an indebtedness created as a result of services rendered
or premises rented; or an indebtedness created as a result of
goods or securities sold in a cash transaction as defined in
Subsection (c) of this Section;
(5) the ownership of stock or of other securities of a
corporation organized under the provisions of Section 25(a) of
the Federal Reserve Act, as amended, which is directly or
indirectly a creditor of the Company; or
(6) the acquisition, ownership, acceptance or negotiation of
any drafts, bills of exchange, acceptances or obligations which
fall within the classification of self liquidating paper as
defined in Subsection (c) of this Section.
<PAGE>
(c) For the purposes of this Section only:
(1) The term "default" means any failure to make payment in
full of the principal of or interest on any of the Securities or
upon the other indenture securities when and as such principal or
interest becomes due and payable.
(2) The term "other indenture securities" means securities
upon which the Company is an obligor outstanding under any other
indenture (i) under which the Trustee is also trustee, (ii) which
contains provisions substantially similar to the provisions of
this Section, and (iii) under which a default exists at the time
of the apportionment of the funds and property held in such
special account.
(3) The term "cash transaction" means any transaction in
which full payment for goods or securities sold is made within
7 days after delivery of the goods or securities in currency or
in checks or other orders drawn upon banks or bankers and payable
upon demand.
(4) The term "self-liquidating paper" means any draft, bill
of exchange, acceptance or obligation which is made, drawn,
negotiated or incurred by the Company for the purpose of
financing the purchase, processing, manufacturing, shipment,
storage or sale of goods, wares or merchandise and which is
secured by documents evidencing title to, possession of, or a
lien upon, the goods, wares or merchandise or the receivables or
proceeds arising from the sale of the goods, wares or merchandise
previously constituting the security, provided the security is
received by the Trustee simultaneously with the creation of the
creditor relationship with the Company arising from the making,
drawing, negotiating or incurring of the draft, bill of exchange,
acceptance or obligation.
(5) The term "Company" means any obligor upon the
Securities.
Section 614. Appointment of Authenticating Agent. At any
time when any of the Securities remain Outstanding the Trustee, with
the approval of the Company, may appoint an Authenticating Agent or
Agents with respect to one or more series of Securities which shall be
authorized to act on behalf of the Trustee to authenticate Securities
of such
<PAGE>
series issued upon exchange, registration of transfer or partial
redemption thereof or pursuant to Section 306, and Securities so
authenticated shall be entitled to the benefits of this Indenture and
shall be valid and obligatory for all purposes as if authenticated by
the Trustee hereunder. Wherever reference is made in this Indenture to
the authentication and delivery of Securities by the Trustee or the
Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee
by an Authenticating Agent and a certificate of authentication
executed on behalf of the Trustee by an Authenticating Agent. Each
Authenticating Agent shall be acceptable to the Company and shall at
all times be a corporation organized and doing business under the laws
of the United States of America, any State thereof or the District of
Columbia, authorized under such laws to act as an Authenticating
Agent, having a combined capital and surplus of not less than
$50,000,000 and, if other than the Company itself, subject to
supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually,
pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section, the
combined capital and surplus of such Authenticating Agent shall be
deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign
immediately in the manner and with the effect specified in this
Section.
Any corporation into which an Authenticating Agent may be
merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to
which such Authenticating Agent shall be a party, or any corporation
succeeding to the corporate agency or corporate trust business of an
Authenticating Agent, shall continue to be an Authenticating Agent,
provided such corporation shall be otherwise eligible under this
Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving
written notice thereof to the Trustee and, if other than the Company,
to the Company. The Trustee may at any time terminate the agency of an
Authenticating Agent by giving written notice thereof to such
Authenticating Agent
<PAGE>
and, if other than the Company, to the Company. Upon receiving such a
notice of resignation or upon such a termination, or in case at any
time such Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, the Trustee, with the
approval of the Company, may appoint a successor Authenticating Agent
which shall be acceptable to the Company and shall mail written notice
of such appointment by first-class mail, postage prepaid, to all
Holders of Securities of the series with respect to which such
Authenticating Agent will serve, as their names and addresses appear
in the Security Register. Any successor Authenticating Agent upon
acceptance of its appointment hereunder shall become vested with all
the rights, powers and duties of its predecessor hereunder, with like
effect as if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent
(other than an Authenticating Agent appointed at the request of the
Company from time to time) reasonable compensation for its services
under this Section, and the Trustee shall be entitled to be reimbursed
for such payments, subject to the provisions of Section 607.
If an appointment with respect to one or more series is made
pursuant to this Section, the Securities of such series may have
endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternate certificate of authentication in the
following form:
This is one of the Securities of the series designated
therein referred to in the within-mentioned Indenture.
CHEMICAL BANK,
as Trustee
By:
As Authenticating Agent
By:
Authorized Officer
<PAGE>
ARTICLE SEVEN
Securityholders' Lists and Reports by
Trustee and Company
Section 701. Company To Furnish Trustee Names and Addresses
of Securityholders. The Company will furnish or cause to be furnished
to the Trustee
(a) semi-annually, not more than 15 days after each Regular
Record Date, in each year in such form as the Trustee may
reasonably require, a list of the names and addresses of the
Holders of Securities of such series as of such date, and
(b) at such other times as the Trustee may request in
writing, within 30 days after the receipt by the Company of any
such request, a list of similar form and content as of a date not
more than 15 days prior to the time such list is furnished,
excluding from any such list names and addresses received by the
Trustee in its capacity as Security Registrar.
Section 702. Preservation of Information; Communications to
Securityholders. (a) The Trustee shall preserve, in as current a form
as is reasonably practicable, the names and addresses of Holders of
Securities contained in the most recent list furnished to the Trustee
as provided in Section 701 and the names and addresses of Holders of
Securities received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as
provided in Section 701 upon receipt of a new list so furnished.
(b) If 3 or more Holders of Securities of any series
(hereinafter referred to as "applicants") apply in writing to the
Trustee, and furnish to the Trustee reasonable proof that each such
applicant has owned a Security of such series for a period of at least
6 months preceding the date of such application, and such application
states that the applicants desire to communicate with other Holders of
Securities of such series or with the Holders of all Securities with
respect to their rights under this Indenture or under such Securities
and is accompanied by a copy of the form of proxy or other
communication which such applicants propose to transmit, then the
Trustee shall,
<PAGE>
within 5 Business Days after the receipt of such application, at its
election, either
(i) afford such applicants access to the information
preserved at the time by the Trustee in accordance with Section
702(a), or
(ii) inform such applicants as to the approximate number of
Holders of Securities of such series or all Securities, as the
case may be, whose names and addresses appear in the information
preserved at the time by the Trustee in accordance with Section
702(a), and as to the approximate cost of mailing to such
Securityholders the form of proxy or other communication, if any,
specified in such application.
If the Trustee shall elect not to afford such applicants
access to such information, the Trustee shall, upon the written
request of such applicants, mail to each Holder of a Security of such
series or to all Securityholders, as the case may be, whose names
and addresses appear in the information preserved at the time by the
Trustee in accordance with Section 702(a), a copy of the form of proxy
or other communication which is specified in such request, with
reasonable promptness after a tender to the Trustee of the material to
be mailed and of payment, or provision for the payment, of the
reasonable expenses of mailing, unless, within 5 days after such
tender, the Trustee shall mail to such applicants and file with the
Commission, together with a copy of the material to be mailed, a
written statement to the effect that, in the opinion of the Trustee,
such mailing would be contrary to the best interests of the Holders of
Securities of such series or all Securityholders, as the case may be,
or would be in violation of applicable law. Such written statement
shall specify the basis of such opinion. If the Commission, after
opportunity for a hearing upon the objections specified in the written
statement so filed, shall enter an order refusing to sustain any of
such objections or if, after the entry of an order sustaining one or
more of such objections, the Commission shall find, after notice and
opportunity for hearing, that all the objections so sustained have
been met and shall enter an order so declaring, the Trustee shall mail
copies of such material to all Securityholders of such series or all
Securityholders, as the case may be, with reasonable promptness after
the entry of such order and the renewal of such tender; otherwise the
Trustee shall be relieved of any obligation or duty to such applicants
respecting their application.
<PAGE>
(c) Every Holder of Securities, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company
nor the Trustee shall be held accountable by reason of the disclosure
of any such information as to the names and addresses of the Holders
of Securities in accordance with Section 702(b), regardless of the
source from which such information was derived, and that the Trustee
shall not be held accountable by reason of mailing any material
pursuant to a request made under Section 702(b).
Section 703. Reports by Trustee. (a) The term "reporting
date" as used in this Section means May 15. Within 60 days after the
reporting date in each year, beginning in 1996, the Trustee shall
transmit by mail to all Securityholders, as their names and addresses
appear in the Security Register, a brief report dated as of such
reporting date with respect to any of the following events which may
have occurred during the 12 months preceding the date of such report
(but if no such event has occurred within such period no report need
be transmitted):
(1) any change to its eligibility under Section 609 and its
qualifications under Section 608;
(2) the creation of or any material change to a relationship
specified in Section 310(b)(1) through Section 310(b)(10) of the
Trust Indenture Act;
(3) the character and amount of any advances (and if the
Trustee elects so to state, the circumstances surrounding the
making thereof) made by the Trustee (as such) which remain unpaid
on the date of such report, and for the reimbursement of which it
claims or may claim a lien or charge, prior to that of Securities
of any series, on any property or funds held or collected by it
as Trustee, except that the Trustee shall not be required (but
may elect) to report such advances if such advances so remaining
unpaid aggregate not more than 1/2 of 1% of the principal amount
of the Securities of such series outstanding on the date of such
report;
(4) any change to the amount, interest rate and maturity
date of all other indebtedness owing by the Company (or by any
other obligor on the Securities) to the Trustee in its individual
capacity, on the date of such report, with a brief description of
any property held as collateral security therefor, except an
<PAGE>
indebtedness based upon a creditor relationship arising in a
manner described in Section 613(b)(2), (3), (4) or (6);
(5) any change to the property and funds, if any, physically
in the possession of the Trustee as such on the date of such
report;
(6) any additional issue of Securities which the Trustee has
not previously reported; and
(7) any action taken by the Trustee in the performance of
its duties hereunder which it has not previously reported and
which in its opinion materially affects the Securities, except
action in respect of a default, notice of which has been or is to
be withheld by the Trustee in accordance with Section 602.
(b) The Trustee shall transmit by mail to all
Securityholders, as their names and addresses appear in the Security
Register, a brief report with respect to the character and amount of
any advances (and if the Trustee elects so to state, the circumstances
surrounding the making thereof) made by the Trustee (as such) since
the date of the last report transmitted pursuant to Subsection (a) of
this Section (or if no such report has yet been so transmitted, since
the date of execution of this instrument) for the reimbursement of
which it claims or may claim a lien or charge, prior to that of the
Securities of any series, on property or funds held or collected by it
as Trustee, and which it has not previously reported pursuant to this
Subsection, except that the Trustee shall not be required (but may
elect) to report such advances if such advances remaining unpaid at
any time aggregate 10% or less of the principal amount of the
Securities Outstanding of such series at such time, such report to be
transmitted within 90 days after such time.
(c) A copy of each such report shall, at the time of such
transmission to Securityholders, be filed by the Trustee with each
stock exchange upon which the Securities are listed, and also with the
Commission. The Company will notify the Trustee when the Securities
are listed on any stock exchange.
<PAGE>
Section 704. Reports by Company. The Company will
(1) file with the Trustee, within 15 days after the Company
is required to file the same with the Commission, copies of the
annual reports and of the information, documents and other
reports (or copies of such portions of any of the foregoing as
the Commission may from time to time by rules and regulations
prescribe) which the Company may be required to file with the
Commission pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934; or, if the Company is not
required to file information, documents or reports pursuant to
either of said Sections, then it will file with the Trustee and
the Commission, in accordance with rules and regulations
prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports
which may be required pursuant to Section 13 of the Securities
Exchange Act of 1934 in respect of a security listed and
registered on a national securities exchange as may be prescribed
from time to time in such rules and regulations;
(2) file with the Trustee and the Commission, in accordance
with rules and regulations prescribed from time to time by the
Commission, such additional information, documents and reports
with respect to compliance by the Company with the conditions and
covenants of this Indenture as may be required from time to time
by such rules and regulations; and
(3) transmit by mail to all Securityholders, as their names
and addresses appear in the Security Register, within 30 days
after the filing thereof with the Trustee, such summaries of any
information, documents and reports required to be filed by the
Company pursuant to paragraphs (1) and (2) of this Section as may
be required by rules and regulations prescribed from time to time
by the Commission.
ARTICLE EIGHT
Consolidation, Merger, Conveyance or Transfer
Section 801. Company May Consolidate, etc., only on Certain
Terms. The Company shall not consolidate with or merge into any other
corporation or convey or transfer its
<PAGE>
properties and assets substantially as an entirety to any Person,
unless:
(1) the corporation formed by such consolidation or into
which the Company is merged or the Person which acquires by
conveyance or transfer the properties and assets of the Company
substantially as an entirety shall be a corporation organized and
existing under the laws of the United States of America or any
State or the District of Columbia, and shall expressly assume, by
an indenture supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, the due and
punctual payment of the principal of (and premium, if any) and
interest on all the Securities and the performance of every
covenant of this Indenture on the part of the Company to be
performed or observed;
(2) immediately after giving effect to such transaction, no
Event of Default, and no event which, after notice or lapse of
time, or both, would become an Event of Default, shall have
happened and be continuing; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that such
consolidation, merger, conveyance or transfer and such
supplemental indenture comply with this Article and that all
conditions precedent herein provided for relating to such
transaction have been complied with.
Section 802. Successor Corporation Substituted. Upon any
consolidation or merger, or any conveyance or transfer of the
properties and assets of the Company substantially as an entirety in
accordance with Section 801, the successor corporation formed by such
consolidation or into which the Company is merged or to which such
conveyance or transfer is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under this
Indenture with the same effect as if such successor corporation had
been named as the Company herein. In the event of any such conveyance
or transfer, the Company as the predecessor corporation may be
dissolved, wound up or liquidated at any time thereafter.
<PAGE>
ARTICLE NINE
Supplemental Indentures
Section 901. Supplemental Indentures Without Consent of
Securityholders. Without the consent of the Holders of any Securities,
the Company, when authorized by a Board Resolution, and the Trustee,
at any time and from time to time, may enter into one or more
indentures supplemental hereto, in form satisfactory to the Trustee,
for any of the following purposes:
(1) to evidence the succession of another corporation to the
Company, and the assumption by any such successor of the
covenants of the Company herein and in the Securities contained;
or
(2) to add to the covenants of the Company, or to surrender
any right or power herein conferred upon the Company, for the
benefit of the Holders of the Securities of any or all series
(and if such covenants or the surrender of such right or power
are to be for the benefit of less than all series of Securities,
stating that such covenants are expressly being included or such
surrenders are expressly being made solely for the benefit of one
or more specified series); or
(3) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other
provision herein, or to make any other provisions with respect to
matters or questions arising under this Indenture; or
(4) to add to this Indenture such provisions as may be
expressly permitted by the TIA, excluding, however, the
provisions referred to in Section 316(a)(2) of the TIA as in
effect at the date as of which this instrument was executed or
any corresponding provision in any similar federal statute
hereafter enacted; or
(5) to establish any form of Security, as provided in
Article Two, and to provide for the issuance of any series of
Securities as provided in Article Three and to set forth the
terms thereof, and/or to add to the rights of the Holders of the
Securities of any series; or
<PAGE>
(6) to evidence and provide for the acceptance of
appointment by another corporation as a successor Trustee
hereunder with respect to one or more series of Securities and to
add to or change any of the provisions of this Indenture as shall
be necessary to provide for or facilitate the administration of
the trusts hereunder by more than one Trustee, pursuant to
Section 611; or
(7) to add any additional Events of Default in respect of
the Securities of any or all series (and if such additional
Events of Default are to be in respect of less than all series of
Securities, stating that such Events of Default are expressly
being included solely for the benefit of one or more specified
series); or
(8) to provide for the issuance of Securities in coupon as
well as fully registered form.
No supplemental indenture for the purposes identified in
Clauses (2), (3), (5) or (7) above may be entered into if to do so
would adversely affect the interest of the Holders of Securities of
any series.
Section 902. Supplemental Indentures with Consent of
Securityholders. With the consent of the Holders of not less than a
majority in principal amount of the Outstanding Securities of each
series affected by such supplemental indenture or indentures, by Act
of said Holders delivered to the Company and the Trustee, the Company,
when authorized by a Board Resolution, and the Trustee may enter into
an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or of modifying in any manner the
rights of the Holders of the Securities of each such series under this
Indenture; provided, however, that no such supplemental indenture
shall, without the consent of the Holder of each Outstanding Security
affected thereby,
(1) change the Maturity of the principal of, or the Stated
Maturity of any premium on, or any installment of interest on,
any Security, or reduce the principal amount thereof or the
interest or any premium thereon, or change the method of
computing the amount of principal thereof or interest thereon on
any date or change any Place of Payment where, or the coin or
currency in which, any Security or any premium or
<PAGE>
interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment on or after the
Maturity or the Stated Maturity, as the case may be, thereof (or,
in the case of redemption or repayment, on or after the
Redemption Date or the Repayment Date, as the case may be); or
(2) reduce the percentage in principal amount of the
Outstanding Securities of any series, the consent of whose
Holders is required for any such supplemental indenture, or the
consent of whose Holders is required for any waiver of compliance
with certain provisions of this Indenture or certain defaults
hereunder and their consequences, provided for in this Indenture;
or
(3) modify any of the provisions of this Section, Section
513 or Section 1008, except to increase any such percentage or to
provide that certain other provisions of this Indenture cannot be
modified or waived without the consent of the Holder of each
Outstanding Security affected thereby.
A supplemental indenture which changes or eliminates any
covenant or other provision of this Indenture which has expressly been
included solely for the benefit of one or more particular series of
Securities, or which modifies the rights of the Holders of Securities
of such series with respect to such covenant or other provision, shall
be deemed not to affect the rights under this Indenture of the Holders
of Securities of any other series.
It shall not be necessary for any Act of Securityholders
under this Section to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such Act shall
approve the substance thereof.
Section 903. Execution of Supplemental Indentures. In
executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be
entitled to receive, and (subject to Section 601) shall be fully
protected in relying upon, an Opinion of Counsel stating that the
execution of such supplemental indenture is authorized or permitted by
this Indenture. The Trustee may, but shall not (except to the extent
required in the case of a supplemental indenture entered into under
Section 901(4) or 901(6)) be obligated to, enter into any such
supplemental
<PAGE>
indenture which affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise.
Section 904. Effect of Supplemental Indentures. Upon the
execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all
purposes; and every Holder of Securities theretofore or thereafter
authenticated and delivered hereunder shall be bound thereby to the
extent provided therein.
Section 905. Conformity with Trust Indenture Act. Every
supplemental indenture executed pursuant to this Article shall conform
to the requirements of the TIA as then in effect.
Section 906. Reference in Securities to Supplemental
Indentures. Securities authenticated and delivered after the execution
of any supplemental indenture pursuant to this Article may, and shall
if required by the Trustee, bear a notation in form approved by the
Trustee as to any matter provided for in such supplemental indenture.
If the Company shall so determine, new Securities so modified as to
conform, in the opinion of the Trustee and the Board of Directors, to
any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
ARTICLE TEN
Covenants
Section 1001. Payment of Principal, Premium and Interest.
With respect to each series of Securities, the Company will duly and
punctually pay the principal of (and premium, if any) and interest on
such Securities in accordance with their terms and this Indenture, and
will duly comply with all the other terms, agreements and conditions
contained in, or made in the Indenture for the benefit of, the
Securities of such series.
Section 1002. Maintenance of Office or Agency. The Company
will maintain an office or agency in each Place of Payment where
Securities may be presented or surrendered for payment, where
Securities may be surrendered for transfer or exchange and where
notices and demands to or
<PAGE>
upon the Company in respect of the Securities and this Indenture may
be served. The Company will give prompt written notice to the Trustee
of the location, and of any change in the location, of such office or
agency. If at any time the Company shall fail to maintain such office
or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be
made or served at the principal Corporate Trust Office of the Trustee,
and the Company hereby appoints the Trustee its agent to receive all
such presentations, surrenders, notices and demands.
Section 1003. Money for Security Payments to be Held in
Trust. If the Company shall at any time act as its own Paying Agent
for any series of Securities, it will, on or before each due date of
the principal of (and premium, if any) or interest on, any of the
Securities of such series, segregate and hold in trust for the benefit
of the Persons entitled thereto a sum sufficient to pay the principal
(and premium, if any) or interest so becoming due until such sums
shall be paid to such Persons or otherwise disposed of as herein
provided, and will promptly notify the Trustee of its action or
failure to act.
Whenever the Company shall have one or more Paying Agents
for any series of Securities, it will, on or prior to each due date of
the principal of (and premium, if any) or interest on, any Securities
of such series, deposit with a Paying Agent a sum sufficient to pay
the principal (and premium, if any) or interest so becoming due, such
sum to be held in trust for the benefit of the Persons entitled to
such principal (and premium, if any) or interest, and (unless such
Paying Agent is the Trustee) the Company will promptly notify the
Trustee of its action or failure so to act.
The Company will cause each Paying Agent other than the
Trustee for any series of Securities to execute and deliver to the
Trustee an instrument in which such Paying Agent shall agree with the
Trustee, subject to the provisions of this Section, that such Paying
Agent will
(1) hold all sums held by it for the payment of principal of
(and premium, if any) or interest on Securities of such series in
trust for the benefit of the Persons entitled thereto until such
sums shall be paid to such Persons or otherwise disposed of as
herein provided;
<PAGE>
(2) give the Trustee notice of any default by the Company
(or any other obligor upon the Securities of such series) in the
making of any such payment of principal (and premium, if any) or
interest on the Securities of such series; and
(3) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the
Trustee all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining
the satisfaction and discharge of this Indenture with respect to any
series of Securities or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent in respect of each and every
series of Securities as to which it seeks to discharge this Indenture
or, if for any other purpose, all sums so held in trust by the Company
in respect of all Securities, such sums to be held by the Trustee upon
the same trusts as those upon which such sums were held by the Company
or such Paying Agent; and, upon such payment by any Paying Agent to
the Trustee, such Paying Agent shall be released from all further
liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of
(and premium, if any) or interest on any Security of any series and
remaining unclaimed for two years after such principal (and premium,
if any) or interest has become due and payable shall be paid to the
Company on Company Request, or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Security shall
thereafter, as an unsecured general creditor, look only to the Company
for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease. The Trustee or such
Paying Agent, before being required to make any such repayment, may at
the expense of the Company mail to the Holders of the Securities as to
which the money to be repaid was held in trust, as their names and
addresses appear in the Security Register, a notice that such moneys
remain unclaimed and that, after a date specified in the notice, which
shall not be less than 30 days from the date on which the notice was
first mailed to the Holders of the Securities as to which the money to
be repaid was held in trust, any unclaimed
<PAGE>
balance of such moneys then remaining will be paid to the Company free
of the trust formerly impressed upon it.
The Company initially authorizes the Trustee to act as
Paying Agent for the Securities on its behalf. The Company may at any
time and from time to time authorize one or more Persons to act as
Paying Agent in addition to or in place of the Trustee with respect to
any series of Securities issued under this Indenture.
Section 1004. Statement as to Compliance. The Company will
deliver to the Trustee, within 120 days after the end of each fiscal
year, a written statement signed by the principal executive officer,
principal financial officer or principal accounting officer of the
Company, stating that
(1) a review of the activities of the Company during such
year and of the Company's performance under this Indenture and
under the terms of the Securities has been made under his
supervision; and
(2) to the best of his knowledge, based on such review, the
Company has complied with all conditions and covenants under this
Indenture through such year, or, if there has been a default in
the fulfillment of any such obligation, specifying each such
default known to him and the nature and status thereof.
Section 1005. Corporate Existence. Subject to Article Eight
the Company will do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence.
Section 1006. Limitation on Liens. (a) The Company will not,
nor will it permit any Subsidiary to, create, assume, incur or suffer
to exist any Mortgage upon any stock or indebtedness, whether owned on
the date of this Indenture or hereafter acquired, of any Domestic
Subsidiary, to secure any Debt of the Company or any other Person
(other than the Securities), without in any such case making effective
provision whereby all of the Securities Outstanding shall be directly
secured equally and ratably with such Debt, excluding, however, from
the operation of the foregoing provisions of this Subsection (a) any
Mortgage upon stock or indebtedness of any corporation existing at the
time such corporation becomes a Domestic Subsidiary, or existing upon
stock or indebtedness of a Domestic Subsidiary at the time of
acquisition of such stock or indebtedness, and any extension, renewal
or replacement (or successive
<PAGE>
extensions, renewals or replacements) in whole or in part of any such
Mortgage; provided, however, that the principal amount of Debt secured
thereby shall not exceed the principal amount of Debt so secured at
the time of such extension, renewal or replacement; and provided
further, that such Mortgage shall be limited to all or such part of
the stock or indebtedness which secured the Mortgage so extended,
renewed or replaced.
(b) The Company will not, nor will it permit any Restricted
Subsidiary to, create, assume, incur or suffer to exist any Mortgage
upon any Principal Property, whether owned or leased on the date of
this Indenture or hereafter acquired, to secure any Debt of the
Company or any other Person (other than the Securities), without in
any such case making effective provision whereby all of the Securities
outstanding shall be directly secured equally and ratably with such
Debt, excluding, however, from the operation of the foregoing
provisions of this Subsection (b):
(i) any Mortgage upon property owned or leased by any
corporation existing at the time such corporation becomes a
Restricted Subsidiary;
(ii) any Mortgage upon property existing at the time of
acquisition thereof or to secure the payment of all or any part
of the purchase price thereof or to secure any Debt incurred
prior to, at the time of or within 180 days after the acquisition
of such property for the purpose of financing all or any part of
the purchase price thereof;
(iii) any Mortgage upon property to secure all or any part
of the cost of exploration, drilling, development, construction,
alteration, repair or improvement of all or any part of such
property, or Debt incurred prior to, at the time of or within 180
days after the completion of such exploration, drilling,
development, construction, alteration, repair or improvement for
the purpose of financing all or any part of such cost;
(iv) any Mortgage securing Debt of a Restricted Subsidiary
owing to the Company or to another Restricted Subsidiary;
(v) any Mortgage existing at the date of this Indenture; and
<PAGE>
(vi) any extension, renewal or replacement (or successive
extensions, renewals or replacements) in whole or in part of any
Mortgage referred to in the foregoing clauses (i) to (v),
inclusive; provided, however, that the principal amount of Debt
secured thereby shall not exceed the principal amount of Debt so
secured at the time of such extension, renewal or replacement;
and provided further, that such Mortgage shall be limited to all
or such part of the property which secured the Mortgage so
extended, renewed or replaced (plus improvements on such
property).
Notwithstanding the foregoing provisions of this Subsection (b), the
Company may, and may permit any Restricted Subsidiary to, create,
assume, incur or suffer to exist any Mortgage upon any Principal
Property which is not excepted by clauses (i) through (vi) above
without equally and ratably securing the Securities, provided that the
aggregate amount of all Debt then outstanding secured by such Mortgage
and all similar Mortgages does not exceed 10% of the total
consolidated stockholders' equity of the Company as shown on the
audited consolidated balance sheet contained in the latest annual
report to stockholders of the Company. For the purpose of this
Subsection (b), the following types of transactions shall not be
deemed to create a Mortgage to secure any Debt:
(i) the sale or other transfer of (A) any oil or gas or
minerals in place for a period of time until, or in an amount
such that, the purchaser will realize therefrom a specified
amount of money (however determined) or a specified amount of
such oil or gas or minerals, or (B) any other interest in
property of the character commonly referred to as a "production
payment"; and
(ii) any Mortgage in favor of the United States of America
or any State thereof, or any other country, or any political
subdivision of any of the foregoing, to secure partial, progress,
advance or other payments pursuant to the provisions of any
contract or statute, or any Mortgage upon property of the Company
or a Restricted Subsidiary intended to be used primarily for the
purpose of or in connection with air or water pollution control,
provided that no such Mortgage shall extend to any other property
of the Company or any Restricted Subsidiary.
<PAGE>
Section 1007. Limitation on Transfers of Principal
Properties to Unrestricted Subsidiaries. The Company will not, nor
will it permit any Restricted Subsidiary to, sell, transfer or
otherwise dispose of any Principal Property to any Unrestricted
Subsidiary other than for cash or other consideration which, in the
opinion of the Board of Directors, constitutes fair value for such
Principal Property.
Section 1008. Waiver of Certain Covenants. The Company may
omit in respect of any series of Securities, in any particular
instance, to comply with any covenant or condition set forth in
Sections 1006 and 1007, if before or after the time for such
compliance the Holders of at least a majority in principal amount of
the Securities at the time Outstanding of such series shall, by Act of
such Securityholders, either waive such compliance in such instance or
generally waive compliance with such covenant or condition, but no
such waiver shall extend to or affect such covenant or condition
except to the extent so expressly waived, and, until such waiver shall
become effective, the obligations of the Company and the duties of the
Trustee in respect of any such covenant or condition shall remain in
full force and effect.
ARTICLE ELEVEN
Redemption of Securities
Section 1101. Applicability of Article. The Company may
reserve the right to redeem and pay before Stated Maturity all or any
part of the Securities of any series, either by optional redemption,
sinking or purchase fund or analogous obligation or otherwise, by
provision therefor in the form of Security for such series established
and approved pursuant to Section 202 and on such terms as are
specified in such form or in the Board Resolution or indenture
supplemental hereto with respect to Securities of such series as
provided in Section 301. Redemption of Securities of any series shall
be made in accordance with the terms of such Securities and, to the
extent that this Article does not conflict with such terms, the
succeeding Sections of this Article.
Section 1102. Election to Redeem; Notice to Trustee. The
election of the Company to redeem any Securities redeemable at the
election of the Company shall be evidenced by, or made pursuant to
authority granted by, a
<PAGE>
Board Resolution. In case of any redemption at the election of the
Company of any Securities of any series, the Company shall, at least
60 days prior to the Redemption Date fixed by the Company (unless a
shorter notice shall be satisfactory to the Trustee), notify the
Trustee of such Redemption Date and of the principal amount of
Securities of such series to be redeemed.
In the case of any redemption of Securities (i) prior to the
expiration of any restriction on such redemption provided in the terms
of such Securities or elsewhere in this Indenture, or (ii) pursuant to
an election of the Company which is subject to a condition specified
in the terms of such Securities, the Company shall furnish the Trustee
with an Officers' Certificate evidencing compliance with such
restriction or condition.
Section 1103. Selection by Trustee of Securities to Be
Redeemed. If less than all the Securities of like tenor and terms of
any series are to be redeemed, the particular Securities to be
redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities of
such series not previously called for redemption, by such method as
the Trustee shall deem fair and appropriate and which may include
provision for the selection for redemption of portions of the
principal of Securities of such series of a denomination larger than
the minimum authorized denomination for Securities of that series.
Unless otherwise provided in the terms of a particular series of
Securities, the portions of the principal of Securities so selected
for partial redemption shall be equal to the minimum authorized
denomination of the Securities of such series, or an integral multiple
thereof, and the principal amount which remains outstanding shall not
be less than the minimum authorized denomination for Securities of
such series. If less than all the Securities of unlike tenor and terms
of a series are to be redeemed, the particular Securities to be
redeemed shall be selected by the Company.
The Trustee shall promptly notify the Company in writing of
the Securities selected for redemption and, in the case of any
Security selected for partial redemption, the principal amount thereof
to be redeemed.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of
Securities shall relate, in the case of any Security redeemed or to be
redeemed only in part, to the
<PAGE>
portion of the principal of such Security which has been or is to be
redeemed.
Section 1104. Notice of Redemption. Notice of redemption
shall be given by first-class mail, postage prepaid, mailed not less
than 30 nor more than 60 days prior to the Redemption Date, to each
holder of Securities to be redeemed, at his address appearing in the
Security Register.
All notices of redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) if less than all Outstanding Securities of any series
are to be redeemed, the identification (and, in the case of
partial redemption, the respective principal amounts) of the
Securities to be redeemed, from the Holder to whom the notice is
given;
(4) that on the Redemption Date the Redemption Price will
become due and payable upon each such Security, and that
interest, if any, thereon shall cease to accrue from and after
said date;
(5) the place where such Securities are to be surrendered
for payment of the Redemption Price, which shall be the office or
agency of the Company in the Place of Payment; and
(6) that the redemption is on account of a sinking or
purchase fund, or other analogous obligation, if that be the
case.
Notice of redemption of Securities to be redeemed at the
election of the Company shall be given by the Company or, at the
Company's request, by the Trustee in the name and at the expense of
the Company.
Section 1105. Deposit of Redemption Price. On or prior to
any Redemption Date, the Company shall deposit with the Trustee or
with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an
amount of money sufficient to pay the Redemption Price of all the
Securities which are to be redeemed on that date.
<PAGE>
Section 1106. Securities Payable on Redemption Date. Notice
of Redemption having been given as aforesaid, the Securities so to be
redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified and from and after such date
(unless the Company shall default in the payment of the Redemption
Price) such Securities shall cease to bear interest. Upon surrender of
such Securities for redemption in accordance with the notice, such
Securities shall be paid by the Company at the Redemption Price.
Installments of interest the Stated Maturity of which is on or prior
to the Redemption Date shall be payable to the Holders of such
Securities registered as such on the relevant Regular Record Dates
according to their terms and the provisions of Section 307.
If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the principal shall, until
paid, bear interest from the Redemption Date at the rate borne by the
Security, or as otherwise provided in such Security.
Section 1107. Securities Redeemed in Part. Any Security
which is to be redeemed only in part shall be surrendered at the
office or agency of the Company in the Place of Payment with respect
to that series (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the
Holder thereof or his attorney duly authorized in writing) and the
Company shall execute and the Trustee shall authenticate and deliver
to the Holder of such Security without service charge, a new Security
or Securities of the same series and Stated Maturity and of like tenor
and terms, of any authorized denomination as requested by such Holder
in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered.
Section 1108. Provisions with Respect to any Sinking Funds.
Unless the form or terms of any series of Securities shall provide
otherwise, in lieu of making all or any part of any mandatory sinking
fund payment with respect to such series of Securities in cash, the
Company may at its option (1) deliver to the Trustee for cancellation
any Securities of such series theretofore acquired by the Company, or
(2) receive credit for any Securities of such series (not previously
so credited) acquired by the Company and theretofore delivered to the
Trustee for cancellation or redeemed by the Company other than through
the mandatory sinking fund, and if it does so then (i) Securities so
<PAGE>
delivered or credited shall be credited at the applicable sinking fund
Redemption Price with respect to Securities of such series, and (ii)
on or before the 60th day next preceding each sinking fund Redemption
Date with respect to such series of Securities, the Company will
deliver to the Trustee (A) an Officers' Certificate specifying the
portions of such sinking fund payment to be satisfied by payment of
cash and by delivery or credit of Securities of such series acquired
by the Company or so redeemed, and (B) such Securities so acquired, to
the extent not previously surrendered. Such Officers' Certificate
shall also state the basis for such credit and that the Securities for
which the Company elects to receive credit have not been previously so
credited and were not redeemed by the Company through operation of the
mandatory sinking fund, if any, provided with respect to such
Securities and shall also state that no Event of Default with respect
to Securities of such series has occurred and is continuing. All
Securities so delivered to the Trustee shall be cancelled by the
Trustee and no Securities shall be authenticated in lieu thereof.
If the sinking fund payment or payments (mandatory or
optional) with respect to any series of Securities made in cash plus
any unused balance of any preceding sinking fund payments with respect
to Securities of such series made in cash shall exceed $50,000 (or a
lesser sum if the Company shall so request), unless otherwise provided
by the terms of such series of Securities, that cash shall be applied
by the Trustee on the sinking fund Redemption Date with respect to
Securities of such series next following the date of such payment to
the redemption of Securities of such series at the applicable sinking
fund Redemption Price with respect to Securities of such series,
together with accrued interest, if any, to the date fixed for
redemption, with the effect provided in Section 1106. The Trustee
shall select, in the manner provided in Section 1103, for redemption
on such sinking fund Redemption Date a sufficient principal amount of
Securities of such series to utilize that cash and shall thereupon
cause notice of redemption of the Securities of such series for the
sinking fund to be given in the manner provided in Section 1104 (and
with the effect provided in Section 1106) for the redemption of
Securities in part at the option of the Company. Any sinking fund
moneys not so applied or allocated by the Trustee to the redemption of
Securities of such series shall be added to the next cash sinking fund
payment with respect to Securities of such series received by the
Trustee and, together with such payment, shall be applied in
accordance with the provisions
<PAGE>
of this Section 1108. Any and all sinking fund moneys with respect to
Securities of any series held by the Trustee at the Maturity of
Securities of such series, and not held for the payment or redemption
of particular Securities of such series, shall be applied by the
Trustee, together with other moneys, if necessary, to be deposited
sufficient for the purpose, to the payment of the principal of the
Securities of such series at Maturity.
On or before each sinking fund Redemption Date provided with
respect to Securities of any series, the Company shall pay to the
Trustee in cash a sum equal to all accrued interest, if any, to the
date fixed for redemption on Securities to be redeemed on such sinking
fund Redemption Date pursuant to this Section 1108.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate seals to
be hereunto affixed and attested, all as of the day and year first
above written.
UNION PACIFIC CORPORATION,
by /s/ Gary M. Stuart
--------------------------
Name: Gary M. Stuart
Title: Vice President and
Treasurer
Attest:
/s/ Thomas E. Whitaker
- ------------------------
Assistant Secretary
CHEMICAL BANK,
by /s/ W. B. Dodge
--------------------------
Name: W. B. Dodge
Title: Vice President
Attest:
/s/ Wanda Eiland
- ------------------------
Trust Officer
EXHIBIT 23
Accounts' Consent
We consent to the incorporation by reference in the registration
statements No. 33-59323 on Form S-3 and No.'s 2-79663, 33-12513, 33-18877,
33-22106, 33-22607, 33-44236, 33-53968, 33-49785, 33-49849, 33-51071,
33-51735, 33-52277 and 33-54811 on Forms S-8 of Union Pacific Corporation
of our report dated February 24, 1995 with respect to the consolidated
balance sheets of Southern Pacific Rail Corporation and Subsidiary
Companies as of December 31, 1994 and 1993, and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for
each of the years in the three year period ended December 31, 1994, which
report appears in the Form 8-K of Union Pacific Corporation dated
January 22, 1996, to which appearance we also consent.
KPMG Peat Marwick LLP
San Francisco, California
January 22, 1996
EXHIBIT 99.1
SOUTHERN PACIFIC RAIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
.............................................. September 30, December 31,
1995 1994
------------ ------------
.............................................. (in millions)
ASSETS
CURRENT ASSETS
Cash and Cash equivalents ..................... $ 136.5 $ 145.6
Short-term investments ........................ - 95.0
Accounts and notes receivable, net of
allowance for doubtful accounts .............. 150.8 178.2
Accounts receivable sales proceeds receivable . 126.4 111.2
Materials and supplies, at cost ............... 74.6 71.8
Other notes receivable ........................ 7.5 7.2
Other current assets .......................... 67.9 63.6
---------- ---------
Total current assets ......................... 563.7 672.6
---------- ---------
REAL ESTATE HELD FOR SALE ...................... 369.1 361.4
---------- ---------
PROPERTY, AT COST
Roadway and structures ........................ 2,368.5 2,204.4
Railroad equipment ............................ 1,470.6 1,013.4
Other property ................................ 315.0 309.0
---------- ---------
Total property ............................... 4,154.1 3,526.8
Less accumulated depreciation and amortization 636.7 597.8
---------- ---------
Property, net ................................ 3,517.4 2,929.0
---------- ---------
OTHER ASSETS AND DEFERRED CHARGES
Notes receivable and other investments ........ 82.7 79.2
Other assets and deferred charges ............. 119.6 109.9
--------- ---------
Total other assets ........................... 202.3 189.1
--------- ---------
Total assets ............................... $ 4,652.5 $ 4,152.1
========= =========
(Continued)
See accompanying notes to consolidated condensed financial statements.
<PAGE>
SOUTHERN PACIFIC RAIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
September 30, December 31,
1995 1994
------------- ------------
(in millions)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts and wages payable.................... $ 151.4 $ 158.0
Accrued payables.............................. 160.2 169.1
Current portion of long term debt............. 57.0 59.5
Redeemable preference shares of a subsidiary.. 1.9 1.9
Other current liabilities..................... 598.6 627.3
----------- -----------
Total current liabilities................... 969.1 1,015.8
----------- -----------
LONG-TERM DEBT................................. 1,654.7 1,089.3
----------- -----------
DEFERRED INCOME TAXES.......................... 224.1 223.4
----------- -----------
OTHER LIABILITIES.............................. 725.8 744.2
----------- -----------
REDEEMABLE PREFERENCE SHARES OF A
SUBSIDIARY.................................... 20.8 20.7
----------- -----------
STOCKHOLDERS' EQUITY
Common stock.................................. 0.2 0.2
Additional paid-in capital.................... 1121.8 1,116.2
Accumulated deficit........................... (64.0) (57.7)
----------- -----------
Total stockholders' equity.................. 1,058.0 1,058.7
----------- -----------
Total liabilities and stockholders' equity.. $ 4,652.5 $ 4,152.1
=========== ===========
See accompanying notes to consolidated condensed financial statements.
<PAGE>
SOUTHERN PACIFIC RAIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Nine Months
Ended Sept. 30, Ended Sept. 30,
--------------- ---------------
1995 1994 1995 1994
---- ---- ---- ----
(in millions, except per share amounts)
OPERATING REVENUES
Railroad .................... $ 773.0 $ 787.6 $ 2,300.1 $ 2,298.6
Other ....................... 23.6 19.7 67.8 63.5
--------- --------- --------- ---------
Total .................... 796.6 807.3 2,367.9 2,362.1
--------- --------- --------- ---------
OPERATING EXPENSES
Railroad ..................... 725.3 691.6 2,137.0 2,034.9
Special charge (Note 5) ...... - - 64.6 -
Other ........................ 23.4 18.6 66.6 60.5
--------- -------- -------- ---------
Total ..................... 748.7 710.2 2,268.2 2,095.4
--------- -------- --------- ---------
OPERATING INCOME ............... 47.9 97.1 99.7 266.7
--------- -------- --------- ---------
OTHER INCOME (EXPENSE)
Gains from sales of property .. 1.3 2.9 16.1 24.4
Real estate rentals, net ...... 4.8 5.6 12.6 17.3
Interest ...................... 2.6 4.7 9.1 10.9
Other income (expense), net ... (17.9) (17.2) (46.8) (44.9)
--------- -------- --------- ---------
Total ....................... (9.2) (4.0) (9.0) 7.7
--------- -------- --------- ---------
INTEREST EXPENSE ................ 35.0 37.7 99.2 115.3
--------- -------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES 3.7 55.4 (8.5) 159.1
--------- -------- --------- ---------
INCOME TAX (BENEFIT)
Current ....................... 0.1 (0.5) 0.1 -
Deferred ...................... 2.4 22.4 (2.3) 62.1
--------- -------- --------- ---------
Total ....................... 2.5 21.9 (2.2) 62.1
--------- -------- --------- ---------
INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING 1.2 33.5 (6.3) 97.0
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR POST-EMPLOYMENT
BENEFITS IN 1994, net of tax . - - - (6.0)
--------- -------- --------- --------
NET INCOME (LOSS) ................ $ 1.2 $ 33.5 $ (6.3) $ 91.0
========= ======== ========= ========
EARNINGS (LOSS) PER SHARE
Net earnings before cumulative
effect of change in
accounting................... $ 0.01 $ 0.22 $ (0.04) $ (0.65)
Cumulative effect of change in
accounting................... $ - - - (0.04)
--------- -------- --------- --------
Net income (loss) ............. $ 0.01 $ 0.22 $ (0.04) $ 0.61
========= ======== ========= ========
See accompanying notes to consolidated condensed financial statements.
<PAGE>
SOUTHERN PACIFIC RAIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
Nine Months Ended September 30, 1995
(Unaudited)
Common Stock
----------------- Additional
Number of Paid-in Accumulated
Shares Amount Capital Deficit Total
--------- ------ ---------- ----------- -----
(in millions)
Balances at December 31,
1994................... 156 $ 0.2 $1,116.2 $ (57.7) $1,058.7
Net loss................. - - - (6.3) (6.3)
Issuance of Common Stock - - 5.6 - 5.6
----- ----- -------- -------- --------
Balances at September 30,
1995................... 156 $ 0.2 $1,121.8 $ (64.0) $1,058.0
===== ===== ======== ======== ========
See accompanying notes to consolidated condensed financial statements.
<PAGE>
SOUTHERN PACIFIC RAIL CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months
Ended September 30,
--------------------
1995 1994
-------- --------
(in millions)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income.(loss)............................. $ (6.3) $ 91.0
------- --------
Adjustments to net income (loss):
Gains from sales of property and real estate. (16.1) (24.4)
Depreciation and amortization................ 116.5 104.7
Deferred income taxes........................ (2.3) 58.2
Special charge............................... 64.6 -
Cumulative effect of change in accounting for
post-employment benefits in 1994........... - 9.8
Other adjustments............................ (101.5) (180.6)
------- --------
Total adjustments...................... 61.2 (32.3)
------- --------
Net cash provided by operating activities... 54.9 58.7
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Property sold and retired..................... 24.7 30.8
Capital expenditures.......................... (270.6) (203.0)
Decrease in short-term investments............ 95.0 -
Change in notes receivable and other
investments, net............................ (8.0) (11.0)
------- --------
Net cash used for investing activities...... (158.9) (183.2)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of debt, net of costs.. 225.0 55.6
Debt and revolver repayment................... (129.2) (349.7)
Proceeds from issuance of stock, net of costs. - 503.6
Redeemable preference shares repayment........ (0.9) (1.3)
------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES.... 94.9 208.2
------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS......... (9.1) 83.7
CASH AND CASH EQUIVALENTS-BEGINNING OF THE PERIOD 145.6 65.4
------- --------
CASH AND CASH EQUIVALENTS-END OF THE PERIOD..... $ 136.5 $ 149.1
========= ========
See accompanying notes to consolidated condensed financial statements.
<PAGE>
SOUTHERN PACIFIC RAIL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 30, 1995
(Unaudited)
(1) OWNERSHIP AND PRINCIPLES OF CONSOLIDATION
Southern Pacific Rail Corporation ("SPRC") is the parent company of
Southern Pacific Transportation Company ("SPT"). SPRC together with its
subsidiaries is referred to as the Company. Railroads owned include SPT and
SPT's subsidiaries, St. Louis Southwestern Railway Company ("SSW"), SPCSL Corp.
("SPCSL") and The Denver and Rio Grande Western Railroad Company ("D&RGW").
These consolidated condensed financial statements should be read in conjunction
with the consolidated financial statements and notes thereto for the year ended
December 31, 1994. In the opinion of management, all adjustments (consisting
of normal, recurring accruals) necessary for a fair presentation of interim
period results have been included. However, these results are not necessarily
indicative of results for a full year.
(2) RECLASSIFICATIONS
Certain of the prior period amounts have been reclassified to conform to
the September 30, 1995 consolidated condensed financial statement presentation.
(3) SUPPLEMENTAL CASH FLOW INFORMATION
Nine Months Ended Sept. 30,
---------------------------
1995 1994
----------- ----------
(in millions)
Cash payments:
Interest..................................... $ 78.6 $ 105.3
Income taxes................................. 1.2 (2.9)
Non-cash transactions:
Capital lease obligations for railroad equipment 465.6 146.2
Issuance of common stock........................ 5.6 0.8
(4) CAPITAL LEASE FINANCING
As of September 30, 1995, $465.6 million of equipment has been received
and included in the capital lease obligations incurred during the first nine
months of 1995. An additional $48.0 million of equipment to be financed under
capital leases (including 28 locomotives and approximately 373 reconditioned
freight cars) is expected to be received by year end.
(5) SPECIAL CHARGE
In June 1995, the Board of Directors approved plans aimed at reducing
future operating costs and increasing productivity which resulted in a $64.6
million pretax charge. Approximately $41 million of the charge is related to
severance payments to be made during the next year for approximately 582
employees (both management and labor), approximately $4 million of the charge
is related to costs associated with terminating certain leased facilities, and
<PAGE>
approximately $20 million is for the expected loss associated with the
sale, lease or abandonment of 600 miles of light density rail lines.
Current liabilities, non-current liabilities and accumulated depreciation
at June 30, 1995 were increased by approximately $28 million, $17 million
and $20 million, respectively, as a result of this charge. As part of the
plans to increase productivity, the Company also approved the relocation
and training of up to 300 employees for which future expected costs of
approximately $8 million will be expensed as incurred under current
accounting principles. As of September 30, 1995, 25 employees have been
terminated and $0.7 million has been charged to the reserve. The Company
continues to evaluate the costs and benefits of the special charge approved
by the Board in June, 1995 as it considers the 1996 business plan.
(6) OTHER
In November 1994, the Burlington Northern Railroad Company ("BN") and
the Atchison, Topeka & Santa Fe Railway Company ("ATSF") filed an
application with the Interstate Commerce Commission ("ICC") for approval of
a proposed merger of the two companies. On April 13, 1995, the Company
entered into an agreement with BN and ATSF to provide trackage and haulage
rights over portions of each other's rail lines, effective upon the
completion of the proposed BN/ATSF merger. On August 23, 1995 the ICC
served a written decision approving the proposed merger. The decision was
effective September 22, 1995, and on that date, the BN/ATSF merger was
consummated.
On March 31, 1995, the Company and Union Pacific Railroad Company
("UPRR") entered into an agreement to settle the outstanding litigation,
which was reported in the Company's Annual Report on Form 10-K for the
period ending December 31, 1994, relating to the compensation SSW would pay
for trackage rights over UPRR lines between Kansas City and St. Louis.
Under the settlement agreement, the Company paid UPRR $30.76 million on
April 3, 1995 and executed a note agreeing to pay UPRR $30.76 million, plus
interest at 7%, on April 3, 1996. As a result of the settlement agreement,
both parties dismissed their claims in the ICC and court proceedings.
(7) PROPOSED MERGER WITH UNION PACIFIC
On August 3, 1995, the Board of Directors of SPRC approved an
agreement providing for the merger of SPRC and UPRR, a wholly-owned
subsidiary of Union Pacific Corporation ("UP"). Under the terms of the
agreement, a subsidiary of UP acquired 25% of the common stock of SPRC at a
price of $25.00 per share pursuant to a tender offer. The shares purchased
in the tender offer are held in a voting trust pending approval of the
merger by the ICC. Following receipt of ICC approval and the satisfaction
of other conditions (including approval by SPRC stockholders), SPRC (and
the UP subsidiary that purchased SPRC stock in the cash tender offer) will
be merged into UPRR. In the SPRC/UPRR merger, each share of SPRC stock
would be converted, at the holder's election (subject to proration), into
the right to receive $25.00 in cash or 0.4065 shares of UP common stock. Of
the shares of SPRC common stock outstanding immediately prior to the merger
(other than the shares previously acquired by UP in the tender offer), 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 two companies
expect to file an application with the ICC on or before December 1, 1995.
(8) COMMITMENTS AND CONTINGENCIES
The Company is subject to Federal, state and local environmental laws
and regulations and is currently participating in the investigation and
remediation of numerous sites. Where the remediation costs can be
reasonably determined, and where such remediation is probable, the Company
has recorded a liability. The Company does not believe that disposition of
environmental matters known to the Company will have a material adverse
effect on the Company's financial condition or liquidity; however, there
can be no assurance that the impact of these matters on its results of
operations for any given reporting period will not be material.
Exhibit 99.2
SOUTHERN PACIFIC RAIL CORPORATION AND SUBSIDIARY COMPANIES
Consolidated Balance Sheets
Assets December 31,
- ------ ---------------------
(in millions) 1994 1993
-------- --------
CURRENT ASSETS
Cash and cash equivalents $ 145.6 $ 65.5
Short-term investments 95.0 --
Accounts and notes receivable, net of
allowance for doubtful accounts of $8.1 in 1994
and $7.2 in 1993 (Note 2) 178.2 122.1
Accounts receivable sales proceeds receivable (Note 2) 111.2 62.7
Materials and supplies at cost 71.8 56.9
Other notes receivable 7.2 2.8
Other current assets 63.6 44.2
-------- --------
TOTAL CURRENT ASSETS 672.6 354.2
-------- --------
REAL ESTATE HELD FOR SALE (Note 3) 361.4 363.4
PROPERTY at cost (Notes 3, 5, 9 and 12)
Roadway and structures 2,204.4 2,103.0
Railroad equipment 1,013.4 702.2
Other property 309.0 287.1
-------- --------
TOTAL PROPERTY 3,526.8 3,092.3
Less accumulated depreciation and amortization 597.8 560.6
-------- --------
Property, net 2,929.0 2,531.7
-------- --------
OTHER ASSETS AND DEFERRED CHARGES
Notes receivable and other investments 79.2 51.0
Other (Note 2) 109.9 133.7
-------- --------
TOTAL OTHER ASSETS 189.1 184.7
-------- --------
TOTAL ASSETS $4,152.1 $3,434.0
======== ========
See accompanying notes to consolidated financial statements. (continued)
<PAGE>
Consolidated Balance Sheets (continued)
Liabilities and Stockholders' Equity December 31,
- ---------------------------------------------------------------------------
(in millions) 1994 1993
- ---------------------------------------------------------------------------
CURRENT LIABILITIES
Accounts and wages payable $ 158.0 $ 125.3
Accrued payables
Taxes 52.8 52.9
Interest 50.0 40.8
Vacation pay 66.3 67.1
Current portion of long-term debt (Note 5) 59.5 66.7
Redeemable preference shares of a subsidiary (Note 7) 1.9 1.8
Other current liabilities (Note 4) 627.3 561.6
- ---------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 1,015.8 916.2
- ---------------------------------------------------------------------------
LONG-TERM DEBT (Note 5) 1,089.3 1,408.3
- ---------------------------------------------------------------------------
DEFFERED INCOME TAXES (Note 6) 223.4 67.6
- ---------------------------------------------------------------------------
OTHER LIABILITIES (Notes 4 and l0) 744.2 708.2
- ---------------------------------------------------------------------------
REDEEMABLE PREFERENCE SHARES OF A SUBSIDIARY (Note 7) 20.7 21.2
- ---------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Notes 6, 9, 10 and 12)
- ---------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock, par value $.001 per share; 300,000,000 shares
authorized; 155,826,120 and 130,783,750 shares issued and
outstanding in 1994 and 1993, respectively (Note 8) 0.2 0.1
Additional paid-in capital (Note 8) 1,116.2 611.9
Accumulated deficit (57.7) (299.5)
- ---------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 1,058.7 312.5
- ---------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,152.1 3,434.0
- ---------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Operations
Year Ended December 31,
- ------------------------------------------------------------------------------------------
(in millions, except per share amounts) 1994 1993 1992
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES
Railroad $ 3,056.4 $ 2,837.7 $ 2,810.3
Other 86.2 80.9 67.7
- ------------------------------------------------------------------------------------------
TOTAL 3,142.6 2,918.6 2,878.0
- ------------------------------------------------------------------------------------------
OPERATING EXPENSES
Railroad
Labor and fringe benefits (Note 10) 1,085.1 1,132.5 1,167.0
Fuel 251.3 252.4 236.9
Materials and supplies 187.3 217.6 244.7
Equipment rental 328.0 331.0 288.0
Depreciation and amortization (Note 3) 139.8 133.2 138.9
Other 723.7 665.4 624.2
- ------------------------------------------------------------------------------------------
TOTAL RAILROAD 2,715.2 2,732.1 2,699.7
Other 81.7 83.3 69.4
- ------------------------------------------------------------------------------------------
TOTAL 2,796.9 2,815.4 2,769.1
- ------------------------------------------------------------------------------------------
OPERATING INCOME 345.7 103.2 108.9
- ------------------------------------------------------------------------------------------
OTHER INCOME
Gains from sales of property and real estate (Note 3) 262.4 25.1 118.7
Real estate and other rentals, net 25.5 20.3 16.6
Interest Income 15.4 7.4 7.1
Other income (expense), net (Note 2) (82.3) (75.2) (52.2)
- ------------------------------------------------------------------------------------------
TOTAL 221.0 (22.4) 90.2
- ------------------------------------------------------------------------------------------
INTEREST EXPENSE (Note 5) 158.2 156.0 143.3
- ------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES 408.5 (75.2) 55.8
- ------------------------------------------------------------------------------------------
INCOME TAX EXPENSE (BENEFIT) (NOTE 6)
Current 3.7 -- 0.1
Deferred 157.0 (30.3) 22.6
- ------------------------------------------------------------------------------------------
TOTAL 160.7 (30.3) 22.7
- ------------------------------------------------------------------------------------------
NET INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING 247.8 (44.9) 33.1
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
FOR POST-EMPLOYMENT BENEFITS IN 1994 AND
POST-RETIREMENT BENEFITS OTHER THAN PENSIONS
IN 1993 (Net of income tax benefits of $3.8
and $64.3, respectively) (Note 10) (6.0) (104.2) --
- ------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 241.8 $ (149.1) $ 33.1
- ------------------------------------------------------------------------------------------
INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS $ 241.8 $ (154.9) $ 24.1
- ------------------------------------------------------------------------------------------
PRIMARY EARNINGS (LOSS) PER SHARE
Net income (loss) before cumulative effect
of change in accounting $ 1.63 $ (0.54) $ 0.34
Cumulative effect of change in accounting $ (0.04) $ (1.11) $ --
- ------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 1.59 $ (1.65) $ 0.34
- ------------------------------------------------------------------------------------------
FULLY DILUTED EARNINGS (LOSS) PER SHARE
Net income (loss) before cumulative effect
of change in accounting $ 1.63 $ (0.46) $ 0.24
Cumulative effect of change in accounting $ (0.04) $ (0.93) $ --
- ------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 1.59 $ (1.39) $ 0.24
- ------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Stockholders' Equity (Deficit)
Years Ended December 31, 1994, 1993 and 1992
- ------------------------------------------------------------------------------------------
Common Stock
------------
Number Additional Common Stock
(in millions, except of Paid-in Accumulated Subject to
per share amounts) Shares Amount Capital Deficit Repurchase Total
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1991 100 $ 0.1 $ 221.2 $ (156.8) $ (165.5) $ (101.0)
Net income -- -- -- 33.1 -- 33.1
Dividends on preferred
stock ($120 per share) -- -- -- (9.0) -- (9.0)
- ------------------------------------------------------------------------------------------
BALANCES AT DECEMBER 31, 1992 100 0.1 221.2 (132.7) (165.5) (76.9)
Net loss -- -- -- (149.1) -- (149.1)
Dividends on preferred stock
($78 per share) -- -- -- (5.8) -- (5.8)
Common stock issued 31 -- 390.7 -- 165.5 556.2
Cancelation of notes receivable
from The Anschutz Corporation -- -- -- (11.9) -- (11.9)
- ------------------------------------------------------------------------------------------
BALANCES AT DECEMBER 31, 1993 131 0.1 611.9 (299.5) -- 312.5
Net income -- -- -- 241.8 -- 241.8
Common stock issued (Note 8) 25 0.1 503.5 -- -- 503.6
Common stock issued to management -- -- 0.8 -- -- 0.8
- ------------------------------------------------------------------------------------------
BALANCES AT DECEMBER 31, 1994 156 $ 0.2 $1,116.2 $ (57.7) $ -- $1,058.7
- ------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Cash Flows
Year Ended December 31,
- ------------------------------------------------------------------------------------------
(in millions) 1994 1993 1992
==========================================================================================
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 241.8 $ (149.1) $ 33.1
- ------------------------------------------------------------------------------------------
Adjustments to net income (loss)
Depreciation and amortization 139.8 133.2 138.9
Deferred income taxes 153.2 (94.6) 22.6
Gains from sales of property and real estate (262.4) (25.1) (118.7)
Cumulative effect of change in accounting for
post-employment benefits in 1994 and
post-retirement benefits in 1993 9.8 168.5 --
Changes in:
Receivables (105.2) (18.4) 60.5
Materials and supplies (14.8) (3.1) 1.2
Income taxes payable/receivable (0.1) (13.9) 1.2
Other current and noncurrent assets 5.3 23.5 10.5
Other current and noncurrent liabilities 60.8 (126.4) (42.0)
- ------------------------------------------------------------------------------------------
TOTAL ADJUSTMENTS (13.6) 43.7 74.2
- ------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES 228.2 (105.4) 107.3
- ------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (300.5) (311.2) (340.7)
Property sold and retired 343.4 53.8 362.4
Increase in short-term investments (Note 1) (95.0) -- --
Change in notes receivable and other investments, net (11.8) (2.9) (23.5)
- ------------------------------------------------------------------------------------------
NET CASH USED FOR INVESTING ACTIVITIES (63.9) (260.3) (1.8)
- ------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of debt, net of costs 55.6 796.6 510.7
Debt and revolver drawdown (repayment), net (641.5) (734.5) (596.6)
Proceeds from issuance of common stock, net of costs 503.6 390.7 --
Redemption of preferred stock -- (75.0) --
Dividends paid -- (5.8) (9.0)
Redeemable preference shares repayment (1.9) (2.1) (2.1)
- ------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES (84.2) 369.9 (97.0)
- ------------------------------------------------------------------------------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 80.1 4.2 8.5
CASH AND CASH EQUIVALENTS--BEGINNING OF
THE PERIOD 65.5 61.3 52.8
- ------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS--END OF PERIOD (Note 1) $ 145.6 $ 65.5 $ 61.3
- ------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Ownership, Principles of Consolidation and Basis of Presentation
Southern Pacific Rail Corporation ("SPRC") is the parent company of the
Southern Pacific Transportation Company ("SPT") and Rio Grande Holding
Company ("RGH"). SPRC together with its subsidiaries is referred to as the
Company. Railroads owned include SPT, St. Louis Southwestern Railway Company
("SSW"), SPCSL Corporation ("SPCSL") and The Denver and Rio Grande Western
Railroad Company ("D&RGW").
The consolidated financial statements are prepared on the purchase accounting
basis and include the accounts of the
Company and its subsidiaries on a consolidated basis. All significant
intercompany balances and transactions have been eliminated in consolidation.
The railroad subsidiaries report their financial position and results of
operations on the historical cost basis, including reports to the Interstate
Commerce Commission ("ICC").
Cash, Cash Equivalents, and Short-Term Investments
For statement of cash flows purposes, the Company considers commercial
paper, municipal securities and certificates of deposit with original
maturities when purchased of three months or less to be cash equivalents.
Short-term investments consist primarily of commercial paper, municipal
securities and certificates of deposit with original maturities beyond
three months and less than twelve months. Such short-term investments are
carried at cost, which approximates fair value due to the short period of
time to maturity. Total cash, cash equivalents and short-term investments
at December 31, 1994 were $240.6 million.
Investments
Investments in affiliated companies (those in which the Company has a
20% to 50% ownership interest) are accounted for by the equity method.
Other investments are stated at cost which does not exceed market.
Real Estate Held for Sale
At the time of the acquisitions of D&RGW and SPT, the Company identified for
sale certain real estate properties that were not essential to its
transportation operations. These properties have been classified as Real
Estate Held for Sale. Real estate properties held for sale are stated at the
lower of cost or amounts expected to be realized upon sale. No properties have
been added to this classification. In order to facilitate disposition of these
properties, the Company may participate in joint ventures or other arrangements
that do not result in immediate sales.
Property Property accounting procedures followed by the Company and
its railroad subsidiaries are prescribed by the ICC. In accordance with the
Company's definition of unit of property, all costs associated with the
installation of rail, ties, ballast and other track improvements are
capitalized. Other costs are capitalized to the extent they increase asset
values or extend useful lives. Retirements are generally recorded using a
systemwide first-in, first-out basis. The cost of property and equipment
(including removal and restoration costs) is depreciated on the straight
line composite group method, generally based on estimated service lives.
Pursuant to ICC regulation, periodic depreciation and cost studies are
required and changes in service life estimates are subject to the review
and approval of the ICC. Gains or losses from disposition of depreciable
railroad operating property are credited or charged to accumulated
depreciation except for significant disposal of property. Certain railroad
properties that are not essential to transportation operations may be sold,
some of which are included in real estate held for sale. Gains or losses
resulting from sales of real estate no longer required for railroad
operations are recognized as other income in the consolidated statement of
operations.
<PAGE>
Revenues
Freight revenues from rail transportation operations are recognized based on
the percentage of completed service method. Other railroad revenues and other
revenues are recognized as earned.
Retiree Welfare Benefits
Prior to January 1, 1993, the Company expensed retiree welfare benefits when
paid. Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Post-retirement
Benefits Other than Pensions" and recorded the estimate of its liability under
Statement No. 106 of $168.5 million, which net of income taxes resulted in a
charge to earnings of $104.2 million (see Note 10). Statement No. 106 requires
that all employers sponsoring a retiree welfare plan use a single actuarial
cost method as is required for pension plan accounting and that they disclose
specific information about their plan in their financial statements.
Post-employment Benefits In November 1992, the Financial Accounting
Standards Board ("FAS") issued Statement No. 112 "Employers' Accounting for
Post-employment Benefits." FAS 112 requires employers to recognize the
obligation to provide benefits to former or inactive employees after
employment but before retirement, if certain conditions are met. Effective
January 1, 1994, the Company adopted FAS 112 and recorded a $9.8 million
pre-tax charge ($6.0 million after tax). The Company's policy continues to
be to fund the cost of post-employment benefits as the benefits are
payable.
Income Taxes
The Company records income taxes using the liability method prescribed by
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." Deferred income taxes are recognized for the tax consequences of
"temporary differences" by applying statutory tax rates applicable to future
years to differences between the financial statement carrying amounts and the
tax bases of existing assets and liabilities.
A change in the tax laws or rates results in adjustment to the
deferred tax liabilities and assets. The effect of such adjustments are
included in income in the period in which the tax laws or rates are
changed.
Earnings Per Share
Earnings per share are determined by dividing net income, after deduction of
preferred stock dividends, by the weighted average number of shares of common
stock outstanding. The weighted average number of shares of common stock
outstanding in the calculation of primary earnings per share excludes the
number of shares of common stock subject to repurchase. These shares are
included in the calculation of fully diluted earnings per share. The following
summarizes the weighted average number of shares used in these calculations:
Shares at Year Ended December 31,
- ----------------------------------------------------------------------------
(in thousands) 1994 1993 1992
- ----------------------------------------------------------------------------
Primary 151,648 93,575 71,250
Fully diluted 151,648 111,544 100,000
Reclassifications
Certain of the amounts previously reported have been reclassified to conform
to the current consolidated financial statement presentation.
<PAGE>
2. Sale of Receivables
Beginning in 1989, the Company began selling certain net receivables (including
interline accounts), without recourse, to Rio Grande Receivables, Inc. ("RGR"),
a subsidiary of SPRC. Also in 1989, RGR began selling the receivables purchased
from the Company, with certain limited recourse provisions, to ABS Commercial
Paper, Inc. ("ABS"), an unaffiliated third party, on a continuing basis for a
period of up to five years subject to certain terms and conditions. The Company
has agreed to service the receivables sold and is paid a fee for such services.
The sale price for the receivables sold is based upon the face amount of the
receivables and is reduced by discounts for expected defaults, servicing costs
and anticipated collection periods. The Company retains a residual interest in
the receivables should actual collections exceed the projected collections upon
which the default discounts are calculated.
ABS finances its purchases by the sale of its commercial paper, secured by
the receivables it purchases, up to a maximum aggregate principal amount of
$300.0 million at any time outstanding. The ability of ABS to sell commercial
paper is supported by certain banks which have agreed to provide liquidity to
ABS on an as-needed basis. The liquidity banks must maintain a P-1 rating or
there would need to be one or more replacement banks or a reduction in the
maximum amount of commercial paper which ABS could issue.
As of December 31, 1994, 1993 and 1992, the Company had sold $454.3
million, $391.7 million and $366.5 million of net outstanding receivables
to ABS, respectively, and had receivables from ABS for receivables sold of
$111.2 million, $62.7 million and $39.7 million, of which $30.0 million
were interest bearing at December 31, 1994, 1993 and 1992 and are included
in other assets. Included in other income (expense), net, is approximately
$(52.5) million in 1994, $(41.8) million in 1993 and $(31.1) million in
1992 of discounts and other expenses associated with the sales of accounts
receivable. The initial term of the agreements expires on October 31, 1995.
The Company is currently in the process of replacing the facility with
another facility prior to the expiration date.
3. Property and Real Estate Held for Sale
The average depreciation rates for the Company's property and equipment for
1994 were approximately 5% for roadway and structures and 3% for equipment,
including locomotives and freight cars.
The Company received cash proceeds from sales and retirements of
real estate and property of $343.4 million, $53.8 million and $362.4
million in 1994, 1993 and 1992, respectively. Gains on sales of
property and real estate on the statements of operations include cash
and other consideration and are reduced by the Company's cost basis in
the properties sold (which were $79 million, $19 million and $102
million in 1994, 1993 and 1992, respectively), and other costs
directly relating to the sales (which totaled an aggregate of $18
million, $9 million and $25 million in 1994, 1993 and 1992,
respectively). The net gain in 1994 was also reduced by a $12 million
write-down associated with reduced fair values of properties held for
sale. The 1994 amount includes proceeds of $235.0 million for the sale
of a transit corridor to the ports of Los Angeles and Long Beach (the
"Alameda Corridor"). The 1992 amount includes $124.0 millon from sales
to the Peninsula Corridor Joint Powers Board ("JPB"), $45.0 million
from sales to Metro Transit of Houston, Texas, $83.0 million from
sales to the Los Angeles County Transportation Commission ("LACTC")
and $36.5 million from the sale/ leaseback of locomotives and freight
cars in June 1992. Costs incurred attributable to the disposition of
environmental matters on properties held for sale are capitalized as
additional cost basis in the property if expected sales proceeds equal
or exceed the current cost basis plus the estimated costs to be
incurred in the future. Otherwise, such costs are charged to expense
or reserves established if the total expected costs are in excess of
expected sales proceeds. Capitalized environmental expenditures in
1994 were $10 million.
<PAGE>
Amounts charged to expense attributable to environmental matters on properties
held for sale were $3 million, $12 million and $18 million in 1994, 1993 and
1992, respectively.
The Company has granted the JPB options to purchase additional rights-of-
way and land within five years after the closing of the sale of the Peninsula
Main Line for $110 million of which approximately $79 million has not
lapsed, been exercised or extinguished. The Company will retain exclusive
freight rights on the sold properties. The net book value of
the rights-of-way and land subject to the JPB options is $9 million.
4. Other Current Liabilities and Other Liabilities
Other current liabilities include the following amounts:
December 31,
- -----------------------------------------------------------------------------
(in millions) 1994 1993
- -----------------------------------------------------------------------------
Reserves for casualty, freight-related
claims and other (current portion) $ 225.4 $ 165.3
Accrued repairs, equipment rentals
and other payables 373.2 350.7
Post-retirement and post-employment
benefit obligations 17.2 20.6
Reserve for employee separation and
relocation (current position) 11.5 25.0
- -----------------------------------------------------------------------------
TOTAL $ 627.3 $ 561.6
- -----------------------------------------------------------------------------
Included in other non-current liabilities are $322.0 million and $329.0
million for casualty and freight-related claims and $-0-million and $35.3
million for employee separation and relocation at December 31, 1994 and 1993,
respectively, in addition to $157.5 million and $148.8 million for post-
retirement and post-employment benefits other than pensions at December 31,
1994 and 1993, respectively.
5. Long-Term Debt
Long-term debt is summarized as follows:
December 31,
- -----------------------------------------------------------------------------
(in millions) 1994 1993
- -----------------------------------------------------------------------------
Equipment obligations (9.125-14.25%;
due 1995 to 2007) $ 324.5 380.4
Mortgage bonds (8.2%; due 1995 to 2001) 34.7 39.6
SPT credit agreement (various; due 1996) --- 125.0
RGH credit facilities (4.688-6.0%;
due 1995 to 1997) --- 117.0
SPT senior secured notes (10.5%; due 1999) --- 290.0
SPRC senior notes (9.375%; due 2005) 375.0 375.0
Other debt (4.0-7.613%; due 1995 to 2018) 93.0 88.1
Capitalized lease obligations (Note 9) 332.6 73.5
- ------------------------------------------------------------------------------
TOTAL 1,159.8 1,488.6
- ------------------------------------------------------------------------------
Less discount recorded in purchase
accounting (11.0) (13.6)
Less current portion (59.5) (66.7)
- ------------------------------------------------------------------------------
TOTAL LONG-TERM $1,089.3 $1,408.3
- ------------------------------------------------------------------------------
<PAGE>
On March 2, 1994, the Company closed an offering of 25,000,000 shares of
common stock for net proceeds of $503.6 million ("the 1994 Offering"). The
proceeds were used to repay the $117 million outstanding under the RGH credit
facilities, to repay the $175 million outstanding under the SPT Credit
Agreement and for general corporate purposes.
In November 1994, the Company entered into a new $300 million three-year
revolving credit agreement to replace its existing $200 million credit
agreement. This agreement contains quarterly financial covenants including
minimum tangible net worth, a maximum funded debt to net worth ratio and a
minimum fixed charge coverage ratio. No borrowings have been made under the
new facility.
In December 1994, the Company entered into a bank agreement permitting the
Company to borrow up to $150 million as a term loan maturing in 1999. The
agreement contains quarterly financial covenants identical to those contained
in the revolving credit agreement. Any borrowing under the facility must be
made by December 27, 1995. No borrowings have been made under this facility.
In December 1994, using proceeds from the sale of the Alameda Corridor
of $235 million, together with other funds on hand, the Company retired the
$290 million outstanding under the SPT Senior Secured Notes. The repayment
was accomplished by placing approximately $297 million of government
securities in a defeasance trust in December 1994. In connection with the
retirement of the Senior Secured Notes, the Company wrote-off in other
expenses $9.4 million of unamortized debt issuance costs and paid a
prepayment premium of $5.8 million and expensed in interest expense $5.2
million attributable to the Company's interest rate swap agreements.
Contractual maturities of long-term debt (including capital lease
obligations) during each of the five years subsequent to 1994 and thereafter
are as follows:
(in millions)
1995 $ 59.5
1996 53.0
1997 53.0
1998 45.6
1999 54.4
thereafter 894.3
---------
TOTAL $ 1,159.8
---------
Management estimates the fair value of the Company's debt at December 31,
1994 and 1993 was approximately $1,128 million and $1,581 million,
respectively, based on interest rates for similar issues and financings.
At December 31, 1994, the Company was a party to interest rate swap
agreements for which it pays a variable rate on an aggregate notional amount
of $100 million, which is used to hedge its fixed interest rate exposure on
certain debt and is accounted for as an adjustment of interest expense over
the life of the debt. The Company receives a fixed rate of interest on the
swap of 4.9% and pays a variable rate based on LIBOR, which was 5.9% at
December 31, 1994. The approximate expense to terminate the swap at December
31, 1994, was $4 million.
A significant portion of railroad equipment and certain railroad property
is subject to liens securing the mortgage bonds, equipment obligations or
other debt.
<PAGE>
6. Income Taxes
The following summarizes income tax expense (benefit) for the years indicated:
Year Ended December 31,
- --------------------------------------------------------------------
(in millions) 1994 1993 1992
- --------------------------------------------------------------------
CURRENT
Federal $ 3.6 $ --- $ ---
State 0.1 --- 0.1
- --------------------------------------------------------------------
TOTAL 3.7 --- 0.1
- --------------------------------------------------------------------
DEFERRED
Federal 133.5 (25.1) 18.9
State 23.5 (5.2) 3.7
- --------------------------------------------------------------------
TOTAL 157.0 (30.3) 22.6
- --------------------------------------------------------------------
DEFERRED TAXES on cumulative
effect of change in accounting for
post-employment benefits in 1994
and post-retirement benefits
other than pensions in 1993
Federal (3.3) (54.6) ---
State (.5) (9.7) ---
- --------------------------------------------------------------------
TOTAL DEFERRED TAXES ON
CUMULATIVE EFFECT (3.8) (64.3) ---
- --------------------------------------------------------------------
TOTAL INCOME TAX
EXPENSE (BENEFIT) $156.9 $(94.6) $22.7
- --------------------------------------------------------------------
Deferred tax expense in 1993 included $1.2 million related to the change
in the Federal tax rate. Total income tax expense (benefit) from continuing
operations differed from the amounts computed by applying the statutory
Federal income tax rate to income before income taxes as a result of the
following:
Year Ended December 31,
- --------------------------------------------------------------------
1994 1993 1992
- --------------------------------------------------------------------
Statutory rate 35.0% (35.0)% 34.0%
State income taxes (net of
Federal income tax benefit) 4.4 (4.5) 4.5
Cumulative effect of Federal
tax rate change (from 34%
to 35%) --- 1.6 ---
Other, net (0.1) (2.4) 2.2
- --------------------------------------------------------------------
EFFECTIVE RATE 39.3% (40.3)% 40.7%
- --------------------------------------------------------------------
<PAGE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are
presented below:
December 31,
- ----------------------------------------------------------------------
(in millions) 1994 1993
DEFERRED TAX ASSETS
Accruals and reserves not deducted
for tax purposes until paid $ 382.2 $ 363.1
Net operating loss carryforwards 565.5 609.3
Capital lease obligations 135.5 29.9
Other 68.2 65.8
- ----------------------------------------------------------------------
TOTAL GROSS DEFERRED TAX ASSETS 1,151.4 1,068.1
- ----------------------------------------------------------------------
DEFERRED TAX LIABILITIES
Differences in depreciation and cost
capitalization methods (including
deferred gains on property) (1,373.6) (1,119.5)
Other (1.2) (16.2)
- ----------------------------------------------------------------------
TOTAL GROSS DEFERRED TAX LIABILITIES (1,374.8) (1,135.7)
- ----------------------------------------------------------------------
NET DEFERRED TAX LIABILITY $ (223.4) $ (67.6)
- ----------------------------------------------------------------------
The Company has analyzed the sources and expected reversal periods of its
deferred tax assets and liabilities. The Company believes that the tax
benefits attributable to deductible temporary differences and operating loss
carryforwards will be realized by the recognition of future taxable amounts
related to taxable temporary differences for which deferred tax liabilities
have been recorded. Accordingly, the Company believes a valuation allowance
for its deferred tax assets is not necessary.
The former parent of SPT has agreed to indemnify SPRC, SPT and its
subsidiaries against any Federal income tax liability that may be imposed
on the Company or its 80%-owned subsidiaries for tax periods ending on or
prior to October 13, 1988 (the "Acquisition Date"). Years prior to 1984 are
closed. SPRC agreed to pay or cause SPT and its subsidiaries to pay to the
former parent any refund of Federal income taxes attributable to the
80%-owned subsidiaries received by SPRC, SPT or its subsidiaries after the
Acquisition Date for any tax period ending on or prior to the Acquisition
Date. Further, the former parent also agreed to indemnify SPRC, SPT and its
subsidiaries, at least in part, for state, local and other taxes in respect
of periods to and including the Acquisition Date, but only to the extent
that such taxes are due or reportable for periods prior to the Acquisition
Date.
The Federal income tax returns for the periods from October 14, 1988
through 1990 have been examined and are currently being considered by the
Appeals Office of the Internal Revenue Services ("IRS") regarding various
unagreed issues. The Company's consolidated Federal income tax returns are
currently being examined for the years 1991 through 1993. Management
believes adequate provision has been made for any potential adverse result.
The IRS's audit of RGH's returns for 1983 and the period ended October
31, 1984, led to the issuance of a Notice of Deficiency in October 1992 for
1980, 1983 and the period ended October 31, 1984. The audit of The Anschutz
<PAGE>
Corporation ("TAC"), of which RGH was a member from November 1, 1984,
through October 13, 1988, also led to the issuance of a Notice of
Deficiency for the 1979 and 1982 years as the result of the disallowance of
net operating loss carryforward ("NOL") and investment tax credit
carrybacks from the July 31, 1985 through July 31, 1987 periods. Both
notices have been petitioned to the United States Tax Court. RGH does not
expect a resolution of these cases in 1995. RGH's taxable periods from July
1, 1987 through October 13, 1988, included in the consolidated returns of
TAC, are currently under IRS audit as part of the TAC audit. However,
management believes adequate reserves have been provided to cover any
anticipated deficiencies for these tax years.
As of December 31, 1994, the Company had approximately $1.4 billion of
NOLs that expire in 2003 through 2008. The NOLs are subject to review and
possible disallowance, in whole or in part, by the IRS upon audit of the
Federal income tax returns of the Company.
Section 382 of the Internal Revenue Code of 1986, as amended, limits a
corporation's utilization of its NOLs when certain changes in the ownership
of the corporation's stock occur within a three-year period. Such a change
has occurred with respect to the Company and therefore the Company will be
permitted to deduct only a portion of its NOLs in each taxable year,
commencing with the year ending December 31, 1994. The Company currently
does not expect, however, that the limitation imposed under Section 382 will
have a material adverse impact on the Company's ability to utilize its NOLs
prior to their expiration. Nevertheless, the limitation could under certain
circumstances delay the Company's utilization of its NOLs and thereby
increase the current portion of the Company's Federal income taxes. Further,
the limitation under certain circumstances could also cause a portion of the
Company's NOLs to expire unutilized.
7. Redeemable Preference Shares
of a Subsidiary
SSW, a 99.9%-owned subsidiary of SPT, originally issued $53.5 million ($48.5
million Series A and $5.0 million Series B) of SSW's non-voting redeemable
preference shares. The current carrying amount on the balance sheets at
December 31, 1994 and 1993 reflects the outstanding balances of the redeemable
preference shares of $44.2 million and $46.0 million, respectively, less
purchase accounting discounts of $21.6 million and $23.0 million respectively.
The Series A shares are subject to mandatory redemption at face value over
a 20-year period commencing in 1991, at which time mandatory dividends shall
be declared and paid over the same period. The overall effective interest
rate since the date of issue is approximately 2.0%. The Series B shares are
subject to mandatory redemption at face value over a 15-year period commencing
in 1989. Mandatory dividends shall be declared and paid over a 10-year period
commencing in 1994. The overall effective interest rate since the date of
issue is approximately 4.9%
Mandatory redemptions and mandatory dividends of Series A and Series B
shares scheduled for payment during each of the five years subsequent to
1994 are $4.2 million per year.
The Series A and Series B shares restrict certain dividend payments by
SSW to its common and preferred shareholders. Under these provisions, at
December 31, 1994, $53.2 million of SSW's historical cost basis retained
income was not restricted. No estimate of the fair value of the preference
shares was made by the Company.
<PAGE>
8. Capital Transactions
On August 17, 1993, the Company closed the initial public offering and sale
of 30,783,750 shares of common stock (the "IPO") and the issuance and sale
of $375.0 million principal amount Senior Notes (the "Debt Offering") for
net proceeds of $757.1 million. The proceeds were used to repay $481.2
million of debt and debt related costs, to purchase $99.1 million of equipment
operated pursuant to operating leases, to redeem the Company's $75.0 million
12% preferred stock and for general corporate purposes. On March 2, 1994,
the Company closed an offering of an additional 25,000,000 shares of common
stock for net proceeds of $503.6 million. The proceeds were used primarily
to repay $292 million of debt and for general corporate purposes.
The Board of Directors of the Company is authorized without further
stockholder action to provide for the issuance from time to time of up to
one million shares of preferred stock, in one or more series. Of such
number of authorized shares, 75,000 shares of preferred stock designated
as 12% cumulative Redeemable Exchangeable preferred stock ("preferred stock")
were issued and outstanding as of December 31, 1992. The preferred stock
ranked senior to the Company's common stock with respect to dividend rights
and rights on liquidation. The preferred stock had a liquidation value of
$1,000 per share and dividends on the preferred stock were cumulative at the
annual rate of $120 per share. On August 17, 1993, as part of the IPO and
the Debt Offering, the preferred stock was redeemed.
Prior to the IPO, the Company was obligated, pursuant to agreements
entered into on October 13, 1988 and September 29, 1990, to repurchase
up to 28,750,000 shares of its common stock from certain investors, at
the election of the investors, if one or more nationally recognized
independent experts determined that the Company was financially capable
of doing so. Those shares were classified as Common Stock Subject to
Repurchase in the accompanying financial statements. The Company's
commitment to repurchase the shares of common stock terminated upon
completion of the IPO.
9. Leases
The Company leases certain freight cars, locomotives, data processing
equipment and other property. Future minimum lease payments under
noncancelable leases as of December 31, 1994, are summarized as follows:
- -----------------------------------------------------------------------
Capital Operating
(in millions) Leases Leases
- -----------------------------------------------------------------------
1995 $ 24.3 $ 152.7
1996 44.5 140.2
1997 40.9 130.3
1998 39.8 121.8
1999 46.7 106.5
Thereafter 503.9 349.4
- -----------------------------------------------------------------------
TOTAL MINIMUM PAYMENTS 700.1 $1,000.9
========
Less amount representing interest
(at rates ranging from 7.2% to 13.1%) (367.5)
- -----------------------------------------------------------------------
Present Value of Minimum
Lease Payments $332.6
- -----------------------------------------------------------------------
<PAGE>
Rental expense for noncancelable operating leases with terms over one
year was $168.7 million, $156.5 million and $117.6 million for the years
ended December 31, 1994, 1993 and 1992, respectively. Contingent rentals
and sublease rentals were not significant. The net book value of equipment
under capital lease is approximately $310 million at December 31, 1994.
In late 1993 and 1994, as part of a program to upgrade its locomotive
fleet, the Company acquired 150 new locomotives, 17 of which were delivered
in the last quarter of 1993 with the balance delivered in 1994.
Additionally, the Company acquired 133 remanufactured locomotives of which
115 were delivered in 1994 and the balance in early 1995. These locomotives
were financed by capital leases (for which the total capitalized lease
obligation in 1994 is approximately $221 million). The Company acquired
through capital lease financing approximately 1,400 freight cars of which
700 were newly manufactured and 700 were remanufactured for which the total
capitalized lease obligation in 1994 was approximately $56 million. The
Company also received approximately 1,600 additional reconditioned freight
cars in 1994 on which it expects to complete capital lease financing in
1995. In addition, the Company acquired 350 used freight cars in 1994 under
operating leases.
The Company has ordered an additional 206 AC-powered locomotives to be
financed by capitalized lease financing that are scheduled to be delivered
during the second and third quarters of 1995. In addition, the Company has
ordered 920 new hopper cars and expects to receive approximately 1,500
reconditioned freight cars in 1995. The Company expects to finance these
acquisitions through capitalized lease financing. The total expected
capitalized lease obligation to be incurred in 1995, including the 1,600
reconditioned freight cars received in 1994 for which financing is to be
arranged in 1995, is approximately $400 million.
In 1984, the Company entered into a long-term lease agreement with the
ports of Los Angeles and Long Beach relating to the Company's Intermodal
Container Transfer Facility (the "Facility"). Under the terms of the lease,
the Company is obligated to make certain future minimum lease payments and
is subject to additional contingent rentals which are based on the annual
volume of container movement at the Facility. The minimum lease payments,
ranging from approximately $3.9 million to $4.5 million for 1995 and 1996,
respectively, are included in the table above. However, for each five-year
period from 1997 through 2036, the amount of the annual minimum lease payments
and contingent rentals will be determined by the ports based on independent
appraisals of the fair rental value of the property and, therefore, no amounts
are included in the above table for such years. The 1994 expense was $7.6
million.
The Company leases operating rights on track owned by other railroads
and shares costs of transportation facilities and operations with other
railroads. These include rights on Union Pacific lines between Kansas City
and St. Louis and on Burlington Northern Railroad Company lines between
Kansas City and Chicago. The Company has the right to terminate its usage
with certain notice periods. Net rent expense for trackage rights was $6.4
million in 1994, $1.9 million in 1993 and $13.0 million in 1992. The 1993
amount includes the benefit of the negotiated settlement of a joint
facility case of approximately $10 million.
The Company pays for the use of transportation equipment owned by
others and receives income from others for the use of its equipment. It
also shares the cost of other transportation facilities with other
railroads. Rental expense and income from equipment and the operation of
joint facilities are included in operating expenses on a net basis. Total
net equipment lease, rent and car hire expense was $328 million, $331
million and $288 million for 1994, 1993 and 1992, respectively.
<PAGE>
10. Employee Benefit and Compensation Plans
Pension Plan The Company is a participating employer under the SPRC
Pension Plan (the "SPRC Pension Plan"). The SPRC Pension Plan is a defined
benefit noncontributory pension plan covering primarily employees not
covered by a collective bargaining agreement. The SPRC Pension Plan is
subject to the provisions of the Employee Retirement Income Security Act of
1974 ("ERISA"). Pension benefits for normal retirement are calculated under
a formula which utilizes average compensation, years of benefit service and
Railroad Retirement and Social Security pay levels. The Company's funding
policy is to contribute each year an amount not less than the minimum
required contribution under ERISA nor greater than the maximum tax
deductible contribution. The assets of the SPRC Pension Plan consist of a
variety of investments including U.S. Government and agency securities,
corporate stocks and bonds and money market funds.
The following summarizes the components of SPRC's net periodic pension
cost under the provisions of Statement of Financial Accounting Standards
No. 87, "Employers' Accounting for Pensions":
Year Ended December 31,
- ---------------------------------------------------------------------
(in millions) 1994 1993 1992
- ---------------------------------------------------------------------
Service Costs--benefits covered
during the year $ 5.1 $ 5.5 $ 4.9
Interest Cost on projected
benefit obligation 29.9 31.2 31.5
Actual (return)/loss on plan assets 0.7 (40.1) (17.6)
Net amortization and deferral (32.0) 7.5 (16.1)
- ---------------------------------------------------------------------
Net Periodic Pension Cost $ 3.7 $ 4.1 $ 2.7
- ---------------------------------------------------------------------
The following summarizes the funded status and amounts recognized
in SPRC's consolidated balance sheets for the SPRC Pension Plan:
December 31,
- ---------------------------------------------------------------------
(in millions) 1994 1993
- ---------------------------------------------------------------------
Actuarial present value of benefit
obligations
Vested benefits $ 335.1 $ 366.0
Non-vested benefits 6.0 7.8
- ---------------------------------------------------------------------
ACCUMULATED BENEFIT OBLIGATION $ 341.1 $ 373.8
- ---------------------------------------------------------------------
Projected benefit obligation $ 376.9 $ 420.8
Fair value of assets in plan 328.3 363.2
- ---------------------------------------------------------------------
Projected benefit obligation in excess
of plan assets (48.6) (57.6)
Unrecognized transition amount (3.9) (4.6)
Unrecognized gain or loss 7.8 20.7
Unrecognized prior service cost 4.3 4.8
- ---------------------------------------------------------------------
NET PENSION LIABILITY INCLUDED
IN SPRC'S BALANCE SHEET $ (40.4) $ (36.7)
- ---------------------------------------------------------------------
<PAGE>
The following summarizes the significant assumptions used in
accounting for the SPRC Pension Plan:
December 31,
- ---------------------------------------------------------------------
1994 1993 1992
- ---------------------------------------------------------------------
Weighted average discount rate 8.5% 7.25% 8.0%
Expected rate of increase in
future compensation levels 6.0% 6.0% 6.0%
Weighted average expected
long-term rate of return
on plan assets 9.0% 9.0% 9.0%
Thrift Plan
SPRC has established a defined contribution plan (the "SPRC Thrift Plan")
as an individual account savings and investment plan primarily for employees
of SPRC who are not subject to a collective bargaining agreement. Eligible
participants may contribute a percentage of their compensation and the Company
also contributes using a formula based on participant contributions.
Post-retirement Benefits Other Than Pensions
The Company sponsors several plans which provide health care and life
insurance benefits to retirees who have met age and service requirements.
The contribution rates that are paid by retirees are adjusted annually to
offset increases in health care costs, if any, and fix the amounts payable
by the Company. The life insurance plans provide life insurance benefits for
certain retirees. The amount of life insurance is dependent upon length of
service, employment dates and several other factors and increases in coverage
beyond certain minimum levels are borne by the employee. Prior to January
1, 1993, the Company's policy was to expense and fund the cost of all retiree
welfare benefits only as the benefits were payable. The Company charged to
expense $24.4 million in 1992 for these benefits.
The Company adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Post-retirement Benefits Other than Pensions,"
effective January 1, 1993. The effect of adopting Statement No. 106 on net
income and the net periodic benefit cost (expense) for 1993 was a charge to
earnings of $168.5 million (less income taxes of $64.3 million). The
Company's policy continues to be to fund the cost of all retiree welfare
benefits only as the benefits are payable. Accordingly, there are no
plan assets.
<PAGE>
<TABLE>
The following table summarizes the plan's accumlated post-
retirement benefit obligation:
<CAPTION>
December 31,
- -------------------------------------------------------------------------------------
Health Life Health Life
Care Insurance Total Care Insurance Total
- -------------------------------------------------------------------------------------
(in millions) 1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Retirees $ 41.1 $ 92.0 $133.1 $ 47.2 $107.7 $154.9
Fully eligible plan
participants 8.6 5.4 14.0 10.9 7.7 18.6
- -------------------------------------------------------------------------------------
ACCUMULATED POST-RETIREMENT
BENEFIT OBLIGATION $ 49.7 $ 97.4 $147.1 $ 58.1 $115.4 $173.5
- -------------------------------------------------------------------------------------
Unrecognized net gain (loss) 13.7 (8.4)
Plan amendment 4.1 4.3
- -------------------------------------------------------------------------------------
ACCRUED POST-RETIREMENT
BENEFIT COST $164.9 $169.4
INCLUDED IN OTHER LIABILITIES
- -------------------------------------------------------------------------------------
</TABLE>
As of December 31, 1994 and 1993, the current portion of accrued
post-retirement benefit cost was approximately $16.3 million and $20.6
million, respectively, and the long-term portion was approximately $148.6
million and $148.8 million, respectively.
The net periodic post-retirement benefit costs for 1994 and 1993
include the following components:
- ------------------------------------------------------
(in millions) 1994 1993
- ------------------------------------------------------
Service cost $ 0.8 $ 0.7
Interest cost 12.0 12.7
Amortization of plan amendment (0.2) --
- ------------------------------------------------------
NET PERIODIC POST-RETIREMENT
BENEFIT COST $ 12.6 $ 13.4
- ------------------------------------------------------
For measurement purposes, the Company has not assumed an annual rate
of increase in the per capita cost of covered benefits for future years
since the Company has limited its future contributions to current levels.
The weighted average discount rate used in determining the benefit
obligation was 8.5%.
Post-employment Benefits
In November 1992, the FAS issued Statement No. 112 "Employers' Accounting
for Post-employment Benefits." FAS 112 requires employers to recognize
the obligation to provide benefits to former or inactive employees after
employment but before retirement, if certain conditions are met. Effective
January 1, 1994, the Company adopted FAS 112 and recorded a $9.8 million
pre-tax charge ($6.0 million after tax). The Company's policy continues
to be to fund the cost of post-employment benefits as the benefits are payable.
<PAGE>
1990-1994 Long-Term Earnings Growth Incentive Plan and Annual Incentive
Compensation Plans
Certain officers of the Company were covered by the 1990-1994
Long-Term Earnings Growth Incentive Plan of the Company. The 1992 and 1993
Annual Incentive Compensation Plans covered all exempt employees of the
Company. Based on the provisions of these plans, no amounts were paid or
charged to expense in 1994, 1993 or 1992.
Equity Incentive Plan
The SPRC Compensation Committee has authorized a grant of stock
bonuses under SPRC's Equity Incentive Plan covering up to 1,555,000 shares
of SPRC common stock, in the aggregate, to 28 key executive employees of
the Company, contingent upon the attainment of certain pre-established
corporate financial and individual performance objectives. A portion of
each stock bonus grant is subject to the achievement of an operating ratio
of 89.5% for 1994, 88.0% for 1995, 85.0% for 1996, or 83.0% for 1997, as
well as individual performance objectives during those same years. If the
required SPRC operating ratio for any year is not achieved, or if the
required individual performance objectives are not achieved, the SPRC
Compensation Committee of the Board of Directors may in its discretion
award a portion of such shares. In 1994, the Company charged to expense
approximately $7.5 million representing the value of approximately 413,000
shares which were awarded in January 1995, pursuant to the Equity Incentive
Plan.
11. Related Parties
The Company has maintained separate accountability for the operating
activities of its principal railroad subsidiaries as to the sharing of
freight revenues and charges for use of railroad equipment and joint
facilities. Interline accounts receivable and payable continue to be
settled through the traditional clearing process between railroads. The
railroads are coordinating and, where appropriate, consolidating the
marketing, administration, transportation and maintenance operations of the
railroads.
Subsidiaries of Anschutz Company perform specific services for the
Company's railroad subsidiaries primarily relating to the purchase and
administration of locomotive fuel and fuel futures contracts and fiber
optic telecommunications. The amount paid by the Company in 1994 for these
transactions was $7.9 million. The Company believes that the terms of these
transactions are comparable to those that could be obtained from
unaffiliated parties.
In 1994, the Company purchased an office building in Denver for
$5.5 million from family trusts in which Mr. Anschutz and certain members
of his family have an interest. The Company obtained an independent
appraisal of the building pursuant to which the fair market value of the
building was determined to be in excess of the purchase price.
12. Commitments and Contingencies
As a holding company, the Company is dependent upon the business
activity and real estate sales of its subsidiaries to meet its consolidated
debt obligations and to make payments to buy-out surplus employees and make
capital expenditures expected to be required by the Company. The various
debt agreements of SPT contain restrictions as to payment of dividends to
the Company. SPT is permitted to make advances or dividends to its parent
in order for certain specified interest and dividends to be paid by its
parent.
<PAGE>
On November 4, 1993, the Company and Integrated Systems Solutions
Corporation ("ISSC"), a subsidiary of IBM, entered into a ten-year
agreement under which ISSC will handle all of the Company's management
information services ("MIS") functions. These include systems operations,
application development and implementation of a disaster recovery plan.
Pursuant to the agreement, the Company is obligated to pay annual base
charges of between $45 million and $50 million (which covers, among other
things, payments for MIS equipment and personnel) over a ten-year period
subject to adjustments for cost of living increases and variations in the
levels of service provided under the agreement.
Inherent in the operations of the transportation and real estate
business is the possibility that there may exist environmental conditions
as a result of current and past operations which might be in violation of
various Federal and state laws relating to the protection of the
environment. In certain instances, the Company has received notices of
asserted violation of such laws and regulations and has taken or plans to
take steps to address the problems cited or to contests the allegations of
violation. The Company has recorded reserves to provide for environmental
costs on certain operating and non-operating properties. Environmental
costs include site remediation and restoration on a site-by-site basis, as
well as costs for initial site surveys and environmental studies of
potentially contaminated sites. The Company has made and will continue to
make substantial expenditures relating to environmental conditions on its
properties, including properties held for sale. In assessing its potential
environmental liabilities, the Company typically causes ongoing
examinations of newly identified sites and evaluations of existing clean-up
efforts to be performed by environmental engineers. These assessments which
usually consider a combination of factors such as the engineering reports,
site visits, area investigations and other steps, are reviewed periodically
by counsel. Due to uncertainties as to various issues such as the required
level of remediation and the extent of participation in clean-up efforts by
others, the Company's total clean-up costs for environmental matters cannot
be predicted with certainty. The Company has accrued reserves for
environmental matters with respect to operating and non-operating
properties not held for sale, as well as certain properties previously
sold, based on the costs estimated to be incurred when such estimated
amounts (or at least a minimum amount) can be reasonably determined based
on information available. During the years ended December 31, 1994, 1993
and 1992 the Company recognized expenses of $17.6 million, $24.2 million
and $27.6 million, respectively, related to environmental matters. At
December 31, 1994 and 1993 the Company had accrued reserves for
environmental contingencies of $65.2 million and $62.3 million,
respectively, which includes $13.4 million and $17.1 million, respectively,
in current liabilities. These reserves relate to estimated liabilities for
operating and non-operating properties not held for sale and certain
properties previously sold and were exclusive of any significant future
recoveries from insurance carriers. It is possible that additional losses
will be incurred, but such amounts cannot be reasonably estimated. The
Company does not believe that the disposition of environmental matters
known to the Company will have a material adverse effect on the Company's
financial condition or liquidity; however, there can be no assurance that
the impact of such matters on its results of operations for any given
reporting period will not be material.
<PAGE>
A substantial portion of the Company's railroad employees are covered
by collective bargaining agreements with national railway labor organizations
that are organized along craft lines. These agreements are generally
negotiated on a multi-employer basis with the railroad industry represented
by a bargaining committee. The culmination of various Presidential and
legislative events in 1992 resulted in the Company negotiating most of its
labor agreements separately. Certain of the wage agreements obtained in 1991,
1992 and 1993 have reduced the effects of inflation on operating costs but
provide for cost of living increases beginning in 1995. A substantial number
of the labor agreements expire and are subject to renegotiation in 1995.
To ensure stability of its fuel costs, the Company has entered into
fuel hedging agreements covering approximately 95% of its estimated 1995
fuel needs at an average purchase price of $.49 per gallon (excluding
handling costs). However, in the event that fuel prices decline below the
average purchase price under the hedging agreements, the Company will not
receive any benefit from these fuel hedging agreements and may in fact pay
more for fuel than it would have paid in the absence of such agreements.
As a condition to its approval of the consolidation of Union Pacific,
Missouri Pacific Railroad Company ("MP") and Western Pacific Railroad
Company in 1982, the ICC awarded SSW trackage rights to operate over the MP
lines between Kansas City and St. Louis. The ICC's initial decision did not
fix the compensation SSW would pay for the trackage rights, which commenced
in January 1983. After a series of hearings, the ICC set forth new
principles to govern the computation of charges. Union Pacific has asserted
a claim for additional amounts due against the Company of approximately $63
million (including interest) as of December 31, 1994, and filed a
collection action in Federal District Court. In early 1995, the court
issued an order finding that the Company owes Union Pacific the amount of
$60.99 million as of January 31, 1995 plus additional accrued amounts
occurring since the date, but allowing the Company to pursue a counterclaim
for losses due to alleged discrimination against the Company's trains using
the joint facility. The Company has not yet decided whether to appeal this
order. Whether or not the Company's position is sustained, the amount owed
Union Pacific will be substantial. Management has made adequate provision
for this matter in current liabilities in its financial statements.
In July 1991, a derailment occurred near Dunsmuir, California. While
certain aspects of the matter have not been resolved and the total amount
of damages and related costs cannot be determined at this time, SPT is
insured against most types of damages and related costs involved with the
Dunsmuir derailment to the extent that they exceed $10 million. As of
December 31, 1994, SPT has paid approximately $46.8 million related to the
Dunsmuir derailment, of which $12.0 million was charged to expense
primarily to cover the $10 million deductible. The balance has been or is
in the process of being collected from insurance carriers. As of December
31, 1994, approximately $31.9 million has been recovered by SPT from
insurers. SPT expects to recover substantially all additional damages and
costs under its insurance policies. As a result, disposition of these
matters is not expected to have a material adverse effect on the Company's
financial condition.
<PAGE>
Although the Company has purchased insurance, the Company has retained
certain risks with respect to losses for third-party liability and property
claims. In addition, various claims, lawsuits and contingent liabilities
are pending against the Company. Management has made provisions for these
matters which it believes to be adequate. The Company does not believe that
the disposition of claims, lawsuits and related matters known to the
Company will have a material adverse effect on the Company's financial
condition or liquidity; however, there can be no assurance that the impact
of such matters on its results of operations for any given reporting period
will not be material.
<PAGE>
13. Supplemental Cash Flow Information
Supplemental cash flow information for the years ended December 31, 1994,
1993 and 1992 is as follows:
December 31,
- -----------------------------------------------------------------------------
(in millions) 1994 1993 1992
- -----------------------------------------------------------------------------
CASH PAYMENTS (REFUNDS)
Interest $130.2 $115.0 $124.5
Income taxes 1.7 (0.5) 1.0
NON-CASH TRANSACTIONS
Sales of real estate for
notes receivable 27.9 -- --
Capital lease obligations
for railroad equipment 265.2 57.0 --
14. QUARTERLY DATA (unaudited)
- -----------------------------------------------------------------------------
First Second Third Fourth
(in millions) Quarter Quarter Quarter Quarter
- -----------------------------------------------------------------------------
1994
Operating revenues $ 748.2 $ 806.6 $ 807.3 $ 780.5
Operating income 62.3 107.4 97.1 78.9
Other income (expense) 1.2 10.5 (4.0) 213.3
Net income (loss)(a) 9.0 48.5 33.5 150.7
Earnings per share:
Primary:
Before effect of change in
accounting $ 0.11 $ 0.31 $ 0.22 $ 0.97(c)
Cumulative effect of change in
accounting (0.05) -- -- --
- -----------------------------------------------------------------------------
TOTAL $ 0.06 $ 0.31 $ 0.22 $ 0.97(c)
- -----------------------------------------------------------------------------
Fully diluted:
Before effect of change in
accounting $ 0.11 $ 0.31 $ 0.22 $ 0.97(c)
Cumulative effect of change in
accounting (0.05) -- -- --
- -----------------------------------------------------------------------------
TOTAL $ 0.06 $ 0.31 $ 0.22 $ 0.97(c)
- ------------------------------------------------------------------------------
1993
Operating revenues $ 676.3 $ 745.7 $ 753.8 $ 742.8
Operating income (loss) 20.9 59.8 0.1 22.4
Other income (expense) 3.1 (4.1) (41.2) 19.8
Net income (loss)(b) (110.7) 10.4 (52.7) 3.9
Earnings per share:
Primary:
Before effect of change in
accounting $ (0.12) $ 0.11 $ (0.54) $ 0.03
Cumulative effect of change in
accounting (1.46) -- -- --
- -----------------------------------------------------------------------------
TOTAL $ (1.58) $ 0.11 $ (0.54) $ 0.03
- -----------------------------------------------------------------------------
Fully diluted:
Before effect of change in
accounting $ (0.09) $ 0.08 $ (0.47) $ 0.03
Cumulative effect of change in
accounting (1.04) -- -- --
- -----------------------------------------------------------------------------
TOTAL $ (1.13) $ 0.08 $ (0.47) $ 0.03
- -----------------------------------------------------------------------------
<PAGE>
(a) First quarter 1994 data includes (c) Fourth quarter 1994 data
an extraordinary charge of includes a gain on the sale of
$6.0 million (net of taxes) for the Alameda Corridor of
the change in accounting for approximately $.83 per share.
post-employment benefits
(FAS 112).
(b) First quarter 1993 data includes
an extraordinary charge of $104.2
million (net of taxes) for the
change in accounting for post-
retirement benefits other than
pensions (FAS 106).
EXHIBIT 99.3
Independent Auditors' Report
The Board of Directors
Southern Pacific Rail Corporation
We have audited the accompanying consolidated balance sheets of
Southern Pacific Rail Corporation and Subsidiary Companies as of
December 31, 1994 and 1993, and the related consolidated statements of
operations, stockholders' equity (deficit), and cash flows for each of
the years in the three year period ended December 31, 1994. These
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express and opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of Southern Pacific Rail Corporation and Subsidiary Companies as of
December 31, 1994 and 1993, and the results of their operations and
their cash flows for each of the years in the three year period ended
December 31, 1994 in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the financial statements, effective
January 1, 1993 the Company changed its methods of accounting for income
taxes and post-retirement benefits other than pensions.
KPMG PEAT MARWICK LLP
San Francisco, California
February 24, 1995
EXHIBIT 99.4
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 IPO and planned
subsequent Spin-Off of Resources and (iv) the acquisition of CNW. The
applicable transactions are reflected in the pro forma combined balance
sheet as if they occurred on September 30, 1995 and in the pro forma
combined statements of income as if they occurred at the beginning of the
period 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 ICC. See "OTHER LEGAL MATTERS; REGULATORY APPROVAL--ICC Approval."
The unaudited pro forma financial statements are based on the
historical consolidated financial statements of UP, restated for the
reclassification of Resources as discontinued operations, 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.
The restated historical UP financial results reflect the operations of
Resources as discontinued operations due to the IPO and Spin-Off. See "THE
COMPANIES--Resources Spin-Off," and "UNAUDITED PRO FORMA FINANCIAL
STATEMENTS OF UP." For a description of the impact on the unaudited pro
forma financial statements if the Spin-Off does not occur, see Note D to
such financial statements.
<PAGE>
<TABLE>
PRO FORMA COMBINED STATEMENT OF INCOME
For the Year Ended December 31, 1994
(In millions)
<CAPTION>
Union Pacific
Southern Corporation/
Historical Pacific Rail Southern
Restated CNW Resources Union Pacific Southern Corporation Pacific Rail
Union Pacific Acquisition Spin-off Corporation Pacific Rail Acquisition Corporation
Corporation Adjustments(L) Adjustments Pro Forma Corporation Adjustments Pro Forma
----------- -------------- ----------- ---------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues............ $6,465 $1,109 $ $7,574 $3,143 $ $10,717
------ ------ ------- ------ ------ ------ -------
Operating Expenses:
Salaries, wages and benefits 2,460 417 2,877 1,085 3,962
Depreciation and
amortization.............. 579 74
43 696 140 82 (A) 918
Equipment and other rents... 622 148 770 328 1,098
Fuel and utilities.......... 480 85 565 251 816
Materials and supplies...... 344 83 427 187 614
Other costs................. 736 82 818 806 1,624
------ ------ ------- ------ ------ ------- -------
Total.................... 5,221 932 6,153 2,797 82 9,032
------ ------ ------- ------ ------ ------- -------
Operating Income.............. 1,244 177 1,421 346 (82) 1,685
------ ------ ------- ------ ------ ------- -------
Gains from sale of property... 67 --- 67 262 (262)(E) 67
Other income, net............. 18 (8) 10 (41) (31)
Interest expense.............. (332) (97) (135)(B)
(85) 94 (I) (420) (158) 7 (G) (706)
Corporate expenses............ (99) --- 12 (H) (87) ---- (87)
------ ------ ------- ------ ------ ------ -----
Income before income taxes.... 898 (13) 106 991 409 (472) 928
Income taxes.................. (330) (52)
49 (40)(C) (373) (161) 179 (C) (355)
------ ------ ------- ------ ------ ------ -----
Income (loss) from continuing
operations.................. $ 568 $ (16) $ 66 $618 $ 248 $(293) $ 573
====== ====== ======= ====== ====== ====== =====
Earnings Per Share:
Income from continuing
operations............... $ 2.76 $3.01 1.63 $2.35
Number of shares used in the
computation of earnings
per share................ 205.6 205.6 151.6 243.7(F)
See Notes to Pro Forma Combined Financial Statements of UP and SP.
</TABLE>
<PAGE>
<TABLE>
PRO FORMA COMBINED STATEMENT OF INCOME
For the Nine Months Ended September 30, 1995
(In millions)
<CAPTION>
Pacific
Southern Corpora-
CNW Union Historical Pacific tion/
Restated Acquisi- Pacific Southern Rail Southern
Union tion Resources Corpora- Pacific Corporation Pacific Rail
Pacific Adjust- Spin-off tion Rail Corp- Acquisiton Corporation
Corporation ments(L) Adjustments Pro Forma oration Adjustments Pro Forma
----------- -------- ----------- --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues ................ $ 5,512 $ 395 $ $ 5,907 $ 2,368 $ $ 8,275
------- ------- ------- ------- ------- ------- -------
Operating Expenses:
Salaries, wages and benefits .... 2,112 151 2,263 837 3,100
Depreciation and amortization ... 469 27
14 510 116 62(A) 688
Equipment and other rents ....... 541 51 592 236 828
Fuel and utilities .............. 414 28 442 195 637
Materials and supplies .......... 277 28 305 138 443
Special charge .................. -- -- -- 65 65
Other costs ..................... 704 28 732 681 1,413
------- ------- ------- ------- ------- ------- -------
Total ........................ 4,517 327 4,844 2,268 62 7,174
------- ------- ------- ------- ------- ------- -------
Operating Income .................. 995 68 1,063 100 (62) 1,101
------- ------- ------- ------- ------- ------- -------
Gains from sale of property ....... 65 -- 65 16 (16)(E) 65
Other income, net ................. 40 (11) 29 (25) 4
Interest expense .................. (328) (33) (101)(B)
(28) 71 (I) (318) (99) 5 (G) (513)
Corporate expenses ................ (80) -- 9 (H) (71) -- -- (71)
------- ------- ------- ------- ------- ------- ------
Income before income taxes ........ 692 (4) 80 768 (8) (174) 586
Income taxes ...................... (252) (17)
16 (30)(C) (283) 2 66(C) (215)
------- ------- ------- ------- ------- ------- ------
Income (loss) from continuing
operations ...................... $ 440 $ (5) $50 $ 485 $ (6) $ (108) $ 371
======= ======= ======= ======= ======= ======= ======
Earnings Per Share:
Income (loss) from continuing
operations .................... $ 2.14 $ 2.36 $(0.04) $ 1.52
Number of shares used in the
computation of earnings
per share ..................... 205.8 205.8 156.1 243.9(F)
</TABLE>
See Notes to Pro Forma Combined Financial Statements of UP and SP.
<PAGE>
<TABLE>
PRO FORMA COMBINED BALANCE SHEET
As of September 30, 1995
(In millions)
<CAPTION>
Union Adjusted
Pacific Union
Corporation/ Pacific
Southern Corporation/
Historical Pacific Southern
Restated Southern Rail Pacific
Union Pacific Corpora- Resources Rail
Pacific Rail tion Spin-off Corporation
Corporation Corporation Adjustments Pro Forma Adjustments Pro Forma
----------- ----------- ----------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents .... $ 91 $ 137 $ $ 228 $ 228
Accounts receivable, net ..... 473 151 624 624
Other current assets ......... 531 276 807 807
-------- -------- -------- -------- -------- ------
Total current assets ...... 1,095 564 1,659 1,659
Real estate held for sale ...... -- 369 540 (G) 909 909
Investments, net ............... 1,405 -- (976)(G) 429 429
Properties, net ................ 13,318 3,517 4,577 (G) 21,412 21,412
Net assets of discontinued
operations (D) ............... 1,983 -- 1,983 (1,983)(D) --
Excess acquisition costs ....... 669 -- 669 669
Other assets ................... 232 203 435 435
-------- -------- ------- -------- -------- --------
Total assets ................. $ 18,702 $ 4,653 $ 4,141 $ 27,496 $(1,983) $ 25,513
======== ======== ======== ======== ======== ========
Liabilities and
Stockholders' Equity
Current liabilities:
Accounts and wages payable ..... $ 440 $ 312 $ $ 752 $ $ 752
Other current liabilities ...... 1,493 600 2,093 2,093
Debt due within one year ....... 624 57 681 681
-------- -------- -------- -------- -------- --------
Total current liabilities ... 2,557 969 3,526 3,526
Debt due after one year ........ 6,546 1,655 1,592 (B)
(976)(G)
75 (G) 8,892 (1,562)(D) 7,330
Deferred income taxes .......... 2,818 224 1,845 (G) 4,887 27 (D) 4,914
Other liabilities .............. 1,267 726 187 (G) 2,180 (71)(D) 2,109
Redeemable preference shares ... -- 21 21 21
Stockholders' equity ........... 5,514 1,058 (1,058)(G)
2,476 (G) 7,990 (377)(D) 7,613
-------- -------- -------- -------- --------- --------
Total liabilities and
stockholders' equity ........ $ 18,702 $ 4,653 $ 4,141 $ 27,496 $ (1,983) $ 25,513
======== ======== ======== ======== =========== ========
</TABLE>
See Notes to Pro Forma Combined Financial Statements of UP and SP.
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(A) The purchase price will be allocated to the assets and
liabilities acquired based on their fair market value. A preliminary
estimate of the initial purchase price allocation (see (G) below)
would result in an annual increase in depreciation expense of $82
million ($51 million after tax). As explained in (G) below, the
allocation of the purchase price based on final determination of fair
market value could be different from the amounts included in the pro
forma financial statements. Nevertheless, management believes the
final impact on its results will not be materially different from the
amounts included in the pro forma statements because the majority of
the purchase price will be allocated to long-lived assets, land used
for transportation purposes and goodwill.
The increase in annual depreciation reflects a $2,867 million
increase in the book value of track, grading and other roadway assets
depreciated over an average of 50 years and a $195 million increase in
the book value of equipment depreciated over an average of 8 years.
The remaining initial purchase price is allocated to the fair value of
land used for transportation purposes and real estate held for sale.
(B) The cash portion of the Offer was, and the cash portion of
the Merger will be, initially funded by UP's currently available
credit facilities of $3.7 billion or other debt securities. See "THE
MERGER--Financing of the Transaction." These borrowings will raise
total debt by $1,592 million and annual interest expense by $135
million, based upon an assumed borrowing rate of 8.5% which is based
on current interest rates. A portion of the actual interest 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 net
interest rate would cause total annual interest to change by $2
million.
Pro forma debt maturities for each of the calendar years in the
period from 1996 through 2000 are as follows ($ in millions:)
1996................................................. $355
1997................................................. 305
1998................................................. 623
1999................................................. 285
2000................................................. 493
(C) Tax-effected pro forma adjustments recorded in the Pro Forma
Combined Statement of Income have been determined using an effective
tax rate of 38%.
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(Continued)
(D) The unaudited historical UP financial results reflect the
operations of Resources as discontinued operations due to the IPO and
Spin-Off. See "THE COMPANIES--Resources Spin-Off." The Spin-Off is
contingent upon, among other things, IRS approval of the tax-free
nature of the Spin-Off. In addition, the Spin-Off will not occur prior
to the earlier of the consummation of the Merger or termination of the
Merger Agreement. Should IRS approval not be obtained and the Spin-Off
not occur, UP's operating revenue, operating income, total assets, and
debt due after one year would have been $6.5 billion, $1.3 billion,
$21.9 billion and $6.6 billion, respectively, as of and for the nine
months ended September 30, 1995, and would have been $7.8 billion,
$1.6 billion, $15.9 billion and $4.1 billion, respectively, as of and
for the year ended December 31, 1994. Historical net income and
stockholders' equity will not be affected by the reclassification of
Resources' operations to discontinued operations. At the completion of
the Spin-Off, UP's equity will decrease $377 million and debt will
decrease $1,562 million. In addition, UP will transfer pension assets
to Resources' newly created pension plan based on the proportionate
pension plan liabilities at the time of the Spin-Off, causing
Resources to receive pension plan assets that will be less than the
amount historically allocated to Resources. This will result in a
reduction in UP's pension liability of approximately $71 million. Both
the historical and anticipated pension accounting and disclosure are
in accordance with generally accepted accounting principles. Total
assets will also decline by $1,983 million due to the Spin-Off. See
discussion under "UNAUDITED PRO FORMA FINANCIAL STATEMENTS OF
RESOURCES." Reported discontinued operations data also include the
effects of the sale of UP's waste management segment at year-end 1994.
(E) In 1994 and the first nine months of 1995, SP recognized
gains on real estate sales of $262 million and $16 million,
respectively. These gains have been eliminated from the Pro Forma
Combined Statements of Income since such gains would not have occurred
due to the write-up of real estate held for sale as part of the
allocation of the purchase price as discussed in (G) below. Future
gains on property sales are also not expected to occur as a result of
the write-up of real estate held for sale to market value as part of
the purchase price allocation.
(F) The number of shares of UP Common Stock outstanding used in
the determination of pro forma earnings per share include the 205.8 million
and 205.6 million weighted average shares of UP Common Stock as of
September 30, 1995 and December 31, 1994, respectively, outstanding plus 38.1
million additional shares of UP Common Stock to be issued in
conjunction with the Merger based upon a conversion ratio of .4065
shares of UP Common Stock for each Share so converted. The number of
shares of UP Common Stock outstanding is calculated on a primary
basis.
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(Continued)
(G) Pursuant to the Merger Agreement, UP acquired the Acquired
Shares representing 25% of the outstanding Shares in the Offering at a
price of $25.00 per Share in cash. The First Step Cash Tender Offer
was completed on September 15, 1995. After ICC approval, UP will
acquire the remaining Shares in the Merger for cash and UP Common
Stock so that 40% of the consideration paid for the Shares, including
the Acquired Shares, is Cash Consideration and 60% is 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 Shares outstanding:
In millions
-----------
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
======
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(Continued)
The Merger will be accounted for as a purchase. The preliminary allocation
of the Pro Forma Purchase Price is as follows:
September
30, 1995
---------
Purchase price....................................... $ 4,068
Pre-Tax Merger costs................................. 187
Equity acquired...................................... (1,058)
------
Unallocated purchase price........................... $ 3,197
=======
Purchase Price Allocation:
Property and equipment............................. $ 4,577
Real estate held for sale.......................... 540
Debt Discount (a).................................. (75)
Deferred income taxes (including deferred taxes
related to Merger costs)......................... (1,845)
------
Total............................................ $ 3,197
=====
________________
(a) Assumed to be amortized over a period of eleven years.
The purchase price allocation includes $187 million of pre-tax Merger
reserves ($116 million after tax). The following is an analysis of the $187
million of Merger reserves ($ in millions):
Termination of employees ................................. $ 94
Relocation of employees .................................. 38
Costs to terminate IBM contract for
computer services ...................................... 15
Other Merger costs ....................................... 40
------
Total .................................................. $187
======
Merger reserves include the costs associated with the termination or
relocation of approximately 1,700 and 1,500 employees, respectively.
The preliminary allocation of the purchase price to assets
acquired is based on an initial fair market valuation analysis for
land and a current replacement cost approach for other assets. Real
estate held for sale values reflect estimates of realizable sales
proceeds. The purchase price included in these Pro Forma Combined
Financial Statements was allocated to assets acquired and liabilities
assumed based on a preliminary review of SP's financial records. A
formal appraisal cannot be completed until after the Merger is
approved, due to, among other things, constraints imposed by the
Interstate Commerce Act, and such an appraisal may result in an
allocation different from that included in these Pro Forma Combined
Financial Statements. Accordingly, the purchase accounting adjustments
reflected in these Pro Forma Combined Financial Statements will change
as additional information becomes available upon consummation of the
Merger.
As a result of the Merger, certain one-time costs will be charged
to operations which are not reflected in the Pro Forma Combined
Statements of Income. Such non-recurring costs and expenses relate to
the elimination of duplicate facilities as well as employee related
payments. To the extent such costs relate to UP facilities or
employees, operating expense will be charged. The amount of such
charges cannot presently be determined.
(H) Represents a reduction in corporate expenses associated with
the IPO and Spin-Off of Resources. The expense reductions include the
impact of reallocating $71 million of pension assets from Resources to
UP, lower costs associated with UP's restricted stock program for
executives and lower personnel costs.
(I) Reflects the repayment of UP's outstanding commercial paper
borrowings for the nine months ended September 30, 1995 and
outstanding commercial paper and notes for the year ended December 31,
1994 with the proceeds of the $1,562 million dividend to UP from
Resources. The commercial paper and notes to be retired had a
historical interest rate of 6% per annum. Since commercial paper rates
are LIBOR based, future fluctuations may occur in the assumed annual
interest rate. A .125% change in the net interest rate would cause
total annual interest savings to change by $2 million. During 1994, UP
had an average of $1.1 billion in commercial paper outstanding and
$500 million in 6% notes maturing through 2004. During 1995, UP had an
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(Continued)
average outstanding commercial paper balance of $1.6 billion and on
September 30, 1995, UP had an outstanding commercial paper balance of
$1.9 billion. UP has recognized the entire dividend from Resources as
cash available to pay debt in the Pro Forma Financial Statements since
Resources has informed UP that it intends to fund the entire dividend
to UP prior to the Spin-Off. Resources also has the financial
capability to make such a payment (see Note (C) to the Unaudited Pro
Forma Financial Statements of Resources).
(J) On March 16, 1995, UP executed a definitive merger agreement
to acquire the remaining 71.6% of CNW's outstanding common stock not
previously owned by UP for $1,170 million. Under this agreement, UP
initiated a cash tender offer on March 23, 1995 for all outstanding
CNW shares at $35 per share, which was completed on April 25, 1995.
The acquisition of CNW has been accounted for as a purchase and CNW's
results have been consolidated into UP effective May 1, 1995. The Pro
Forma Combined Statements of Income have been adjusted to include
CNW's historical results as if the CNW acquisition had occurred as of
January 1 of the periods presented. The CNW historical information
included in the Combined Pro Forma Statements of Income include an
adjustment to operating revenues to eliminate UP's recognition of CNW
equity earnings. Operating revenues have been reduced $21 million for
the year ended December 31, 1994 and $12 million for the nine months
ended September 30, 1995. Other operating cost for CNW and other
income for UP have been reduced to reflect the elimination of
intercompany leasing activity between UP and CNW. These accounts were
reduced $15 million for the year ended December 31, 1994 and $6
million for the nine months ended September 30, 1995. Income before
income taxes and income from continuing operations also reflect the
effects of these intercompany eliminations. (See Note (L) below.)
Restated historical UP information does not include separate financial
information related to the CNW acquisition due to immateriality.
(K) As a result of the revaluation of CNW's assets to fair market
value as part of the allocation of the purchase of CNW, annual
depreciation expense will increase $43 million. In addition, annual
interest 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).
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS - (Continued)
(L) The following shows adjustments made to CNW's historically
reported amounts:
<TABLE>
<CAPTION>
For the Year Ended December 31, 1994 For the Year Ended September 30, 1995
------------------------------------ -------------------------------------
Historical Adjustments Adjusted Historical(1) Adjustments Adjusted
---------- ----------- -------- ------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues .......... $1,130 $ (21)(J) $ 1,109 $ 407 $ (12)(J) $ 395
Operating Expenses .......... 904 (15)(J) 319 (6)(J)
43 (K) 932 14 (K) 327
Operating Income ............ 226 (49) 177 88 (20) 68
Other Income/Expense,
Net ....................... 7 (15)(J) (8) (5) (6)(J) (11)
Interest Expense ............ (97) (85)(K) (182) (33) (28)(K) (61)
Income before Income
Taxes ..................... 136 (149) (13) 50 (54) (4)
Income Taxes ................ (52) 49 (C) (3) (17) 16 (C) (1)
Income from Continuing
Operations ................ 84 (100) (16) 33 (38) (5)
- -----------------
(1) Reflects CNW historical results and pro forma adjustments from January 1,
1995 through April 30, 1995.
</TABLE>
<PAGE>
UNAUDITED RESTATED FINANCIAL STATEMENTS OF UP
As a result of the decision by UP's Board of Directors to exit
its natural resources business, historical financial information of UP
has been restated to present Resources as a discontinued operation on
the unaudited pro forma financial statements of UP and SP which appear
at pages 82 through 88 of this Joint Proxy Statement/Prospectus. The
restated statements of income of UP for the years ended December 31,
1994, 1993 and 1992 and the restated balance sheets of UP at December
31, 1994 and 1993 below reflect the effects of adjustments to
historical financial statements necessary to present Resources as a
discontinued operation.
The unaudited restated 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 UP's Board of Directors made the decision to exit its natural
resources business on the dates indicated, or of future results of
operations or financial position of UP without Resources as one of its
business units. Refer to Note D to the aforementioned unaudited pro
forma financial statements of UP and SP for a description of the
impact of the IPO and Spin-Off on the unaudited pro forma financial
statements.
The unaudited restated financial statements of UP are based on the
historical consolidated financial statements of UP and should be read in
conjunction with (i) such historical financial statements and the notes
thereto, which 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 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.
<PAGE>
<TABLE>
RESTATED STATEMENTS OF INCOME OF UP
For the Years Ended December 31, 1994, 1993 and 1992
<CAPTION>
Year Ended December 31, 1994 Year Ended December 31, 1993 Year Ended December 31, 1992
------------------------------- ---------------------------- ----------------------------
Union Union Union Re-
Pacific Resources Restated Pacific Resources Restated Pacific Resources stated
Historical Adjust- Union Historical Adjust- Union Historical Adjust- Union
Amounts ments Pacific Amounts ments Pacific Amounts ments Pacific
---------- --------- --------- ---------- --------- -------- ---------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(In millions, except per share amounts)
Operating revenues ............ $ 7,798 $(1,333) $ 6,465 $ 7,325 $(1,277) $ 6,048 $7,032 $(1,222) $ 5,810
------- ------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Salaries, wages and benefits.. 2,562 (102) 2,460 2,468 (91) 2,377 2,448 (115) 2,333
Depreciation, depletion and
amortization................ 1,005 (426) 579 918 (358) 560 877 (337) 540
Equipment and other rents..... 646 (24) 622 576 (23) 553 525 (18) 507
Fuel and utilities............ 488 (8) 480 496 11 485 477 (11) 466
Materials and supplies........ 378 (34) 344 367 (38) 329 358 (29) 329
Other costs................... 1,124 (388) 736 1,006 (373) 633 950 (394) 556
------- ------- ------- ------- ------- ------- ------- ------- -------
Total .................... 6,203 (982) 5,221 5,831 (894) 4,937 5,635 (904) 4,731
------- ------- ------- ------- ------- ------- ------- ------- -------
Operating income ............... 1,595 (351) 1,244 1,494 (383) 1,111 1,397 (318) 1,079
Gains from sale of property .... 216 (149) 67 18 -- 18 36 -- 36
Other income, net .............. 43 (25) 18 71 (60) 11 110 (77) 33
Interest expense ............... (336) 4 (332) (315) 3 (312) (355) 11 (344)
Corporate expenses ............. (99) -- (99) (99) -- (99) (90) -- (90)
------- ------- ------- ------- ------- ------- ------- ------- -------
Income before income taxes ..... 1,419 (521) 898 1,169 (440) 729 1,098 (384) 714
Income taxes ................... (461) 131 (330) (455) 137 (318) (370) 112 (258)
------- ------- ------- ------- ------- ------- ------- ------- -------
Income from continuing
operations ................... $ 958 $ (390) $ 568 $ 714 $ (303) $ 411 $ 728 $ (272) $ 456
======= ======= ======= ======= ======= ======= ======= ======= =======
Earnings per share:
Income from continuing
operations................... $4.66 $2.76 $ 3.47 $ 2.00 $3.57 $ 2.24
Number of shares used in the
computation of earnings
per share.................... 205.6 205.6 205.9 205.9 203.9 203.9
</TABLE>
The "Resources Adjustments" columns reclassify the results of
Resources operations for the periods presented to Discontinued Operations
as a result of the July 27, 1995 approval by UP's Board of Directors of a
formal plan to exit its natural resources business.
<PAGE>
<TABLE>
<CAPTION>
RESTATED BALANCE SHEETS OF UP
December 31, 1994 and 1993
December 31, 1994 December 31, 1993
------------------------------------- -----------------------------------------
Union
Union Pacific Restated Pacific
Historical Resources Union Historical Resources Restated
Amounts Adjustments Pacific Amounts Adjustments Union Pacific
------------- ----------- -------- ---------- ----------- -------------
(Millions of dollars)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and temporary investments $ 121 $ (6) $ 115 $ 113 $ (11) $ 102
Accounts receivable, net ..... 648 (252) 396 593 (216) 377
Other current assets ......... 1,053 (215) 838 611 (109) 502
------- ------- ------- ------- ------- -------
Total current assets ..... 1,822 (473) 1,349 1,317 (336) 981
------- ------- ------- ------- ------- -------
Investments, net .............. 662 (5) 657 623 (14) 609
Properties, net ............... 12,271 (2,601) 9,670 11,078 (1,780) 9,298
Net assets of discontinued
operations ................. -- 1,789 1,789 697 1,148 1,845
Excess acquisition costs....... 939 (69) 870 963 (69) 894
Other assets .................. 248 (40) 208 217 (47) 170
------- ------- ------- ------- ------- -------
Total assets ............. $15,942 $(1,399) $14,543 $14,895 $(1,098) $13,797
======= ======= ======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts and wages payable .... $ 686 $ (337) $ 349 $ 688 $ (319) $ 369
Other current liabilities ..... 1,349 (125) 1,224 1,227 (88) 1,139
Debt due within one year ...... 470 (43) 427 115 (33) 82
------- ------- ------- ------- ------- -------
Total current liabilities 2,505 (505) 2,000 2,030 (440) 1,590
------- ------- ------- ------- ------- -------
Debt due after one year ....... 4,090 (38) 4,052 4,068 (45) 4,023
Deferred income taxes ......... 2,856 (458) 2,398 2,678 (296) 2,382
Other liabilities ............. 1,360 (398) 962 1,234 (317) 917
Common stockholders' equity ... 5.131 -- 5,131 4,885 -- 4,885
------- ------- ------- ------- ------- -------
Total liabilities and
stockholders' equity ....... $15,942 $(1,399) $14,543 $14,895 $(1,098) $13,797
======= ======= ======= ======= ======= =======
</TABLE>
The "Resources Adjustments" columns reclassify the results of Resources
financial position at December 31, 1994 and 1993 to Discontinued Operations
as a result of the July 27, 1995 approval by UP's Board of Directors of a
formal plan to exit its natural resources business. Historical net assets of
discontinued operations as of December 31, 1993 relates to UP's waste
management segment which was sold at year-end 1994.
<PAGE>
ANNEX A
GLOSSARY OF CERTAIN DEFINED TERMS
The following terms used in the foregoing Joint Proxy Statement/Prospectus
are defined below:
"Acquired Shares" shall mean the 39,034,471 Shares UP Acquisition
acquired pursuant to the Offer.
"Anschutz/Resources RRA" shall mean the Registration Rights
Agreement, dated as of August 3, 1995, by and among Resources, TAC and
the Foundation.
"Anschutz/Resources Shareholders Agreement" shall mean the
Shareholders Agreement, dated as of August 3, 1995, by and among
Resources and the Anschutz Shareholders.*
"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.
"Anschutz Shareholders Agreement" shall mean the Shareholders
Agreement, dated as of August 3, 1995, by and among UP, UP Acquisition
and the Anschutz Shareholders.*
"Anschutz/UP RRA" shall mean the Registration Rights Agreement,
dated as of August 3, 1995, by and among UP, 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.
"Banks" shall mean Bank of America National Trust and Savings
Association and Citibank, N.A., collectively.
<PAGE>
"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--ICC 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.
- ---------------
*Conformed to reflect certain clarifications set forth
in a Clarification of Anschutz Shareholders Agreement and Anschutz/
Spinco Shareholders Agreement, dated as of August 3, 1995, by and
among Union Pacific Corporation, UP Acquisition Corporation, Union
Pacific Resources Group Inc., The Anschutz Corporation, Anschutz
Foundation and Mr. Philip F. Anschutz, which has been filed as an
exhibit to the Registration Statement.
<PAGE>
"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.
"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.
<PAGE>
"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, 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, UP Acquisition, 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 $1.4 Billion Facility and the $1.1
Billion Facility.
"FASB" shall mean the Financial Accounting Standards Board.
<PAGE>
"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.
"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.
"ICC Application" shall mean the application UP, SP and various
of their affiliates filed with the ICC on November 30, 1995.
"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 the surviving
corporation in the UP Acquisition Merger.
"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.
<PAGE>
"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 and UPRR, pursuant
to which SP will be merged into UPRR.
"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.*
"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.
<PAGE>
"MSLEF" shall mean the Morgan Stanley Leveraged Equity Fund II,
L.P., a Delaware limited partnership.
"MSLEF II" shall mean Morgan Stanley Leveraged Equity Fund II,
Inc.
"MSLEF Shareholder Agreement" shall mean the Shareholder
Agreement dated as of August 3, 1995, by and among UP, UP Acquisition
and MSLEF.
"NASD" shall mean the National Association of Securities Dealers,
Inc.
"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.
"Other Financial Institutions" shall mean one or more financial
institutions (other than the Banks) that are not Affiliates of any
Anschutz Shareholder.
"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--Anschutz Shareholders Agreement--Limitations on
Disposition."
<PAGE>
"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 December 11,
1995.
"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.
- ----------------------
*Conformed to reflect certain clarifications set forth in a
Clarification of Agreement and Plan of Merger, dated as of August 3,
1995, by and among Union Pacific Corporation, UP Acquisition
Corporation, Union Pacific Railroad Company and Southern Pacific Rail
Corporation, which has been filed as an exhibit to the Registration
Statement.
"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.
<PAGE>
"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 January 17, 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.
"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.
<PAGE>
"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.
"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 Merger Agreement.
"Surviving Corporation" shall mean UPRR.
"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 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.
<PAGE>
"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 direct
wholly owned subsidiary of UPRR and an 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 proposed merger between
UPRR and UP Acquisition.
"UP Acquisition/SP RRA" shall mean the Registration Rights
Agreement dated as of August 3, 1995, by and among UP Acquisition and
SP.
"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.
"UP Shareholders Agreement" shall mean the Shareholders Agreement
dated as of August 3, 1995, by and among UP, UP Acquisition and SP.*
"UP Standstill Period" shall mean the period commencing on the
date on which the 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 UP
Shareholders Agreement in accordance with the terms thereof.
<PAGE>
"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--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.
"$1.1 Billion Facility" shall mean UP's $1.1 billion credit
facility with various commercial banks.
- ----------
*Conformed to reflect certain clarifications set forth
in a Clarification of Parent Shareholders Agreement, dated as of
August 3, 1995, by and among Union Pacific Corporation, UP Acquisition
Corporation and Southern Pacific Rail Corporation, which has been
filed as an exhibit to the Registration Statement.
<PAGE>
"$1.4 Billion Facility" shall mean UP's $1.4 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.
"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.
EXHIBIT 99.5
FOR IMMEDIATE RELEASE
Bethlehem, PA, January 18--Union Pacific reported record net income of
$946 million, or $4.60 a share, in 1995, compared to $546 million, or
$2.66 a share in the prior year. Income from continuing operations
increased 9 percent to $619 million in 1995. Income from the
corporation's discontinued operation -- Union Pacific Resources -- was
$327 million, which included $65 million from a contract settlement
with Columbia Gas. This compares to $390 million in 1994, which
included $100 million from the sale of the Wilmington, California,
properties. The 1994 discontinued operations also included a $412
million loss from the sale of Union Pacific's waste management
subsidiary.
Union Pacific Railroad increased earnings 15 percent in 1995 to
$867 million. This included the impact of the Chicago and North
Western (CNW), which was acquired in the second quarter. The
Railroad's total carloadings were up 12 percent, including incremental
loads from the CNW merger. Grain, coal and automotive were strong
performers, while intermodal traffic was soft through most of the
year. The Railroad also achieved a 5 percent improvement in average
revenue per car. Union Pacific's operating ratio increased from 77.9
in 1994 to 78.1 in 1995, largely as the result of the CNW
consolidation. On a pro forma basis, including CNW
<PAGE>
in 1994, the operating ratio would have been flat year-over-year.
Overnite Transportation lost $10 million in 1995, compared with
earnings of $64 million in 1994 (before goodwill of $20 million and
$23 million, respectively). Total traffic volumes were down 4 percent
and prices declined 3 percent in a difficult business environment.
Income from Union Pacific Resources was $327 million (including
the Columbia Gas settlement), compared to $390 million in 1994
(including the Wilmington sale). Earnings reflected only 83 percent of
Resources' income in the fourth quarter as the result of a public
offering of 17 percent of Resources in October. Total hydrocarbon
sales volumes increased 10 percent - on a barrel of oil equivalent
basis - with natural gas and plant liquids up 22 and 15 percent,
respectively, and crude oil down 16 percent. Average gas and plant
liquids realizations were down 21 and 3 percent while crude prices
were up 12 percent.
Union Pacific's fourth quarter income from continuing operations
was $179 million, compared to $148 million in the fourth quarter of
1994. Income from discontinued operations was $115 million in the
fourth quarter of 1995, compared to $108 million in 1994. Income from
the 83 percent-owned Union Pacific Resources was $115 million
(including $65
<PAGE>
million from the Columbia Gas settlement), compared with $87 million
in 1994. The fourth quarter of 1994 also included a $21 million gain
from the corporation's waste management subsidiary. Net income in the
fourth quarter was $294 million, or $1.43 per share, in 1995. This
compares with $256 million, or $1.25 per share, in 1994.
The Railroad earned $231 million in the fourth quarter, including
the CNW, compared to $211 million last year; and Overnite had a loss
of $4 million compared to earnings of $12 million, before goodwill of
$5 million in 1995 and $6 million in 1994.
"With the Resources IPO, the CNW acquisition, our agreement to
acquire the Southern Pacific, and a new management succession plan,
Union Pacific took major strategic steps in 1995 to enhance the
corporation's value to its shareholders," said Drew Lewis, chief
executive officer.
A fourth-quarter and full-year income statement is attached.
<PAGE>
UNION PACIFIC CORPORATION AND SUBSIDIARY COMPANIES
STATEMENT OF CONSOLIDATED INCOME
Period ended December 31
(Dollars in Millions Except Per Share Amounts)
- ------------------------------------------------------------------------------
Fourth Quarter Twelve Months
- -------------------------- ------------------------
Percent Percent
+Increase +Increase
1995 1994 -Decrease 1995 1994 -Decrease
- ------------------------------------------------------------------------------
$1,974 $1,655 + 19 Operating Revenues ....... $ 7,486 $6,492 + 15
1,628 1,342 + 21 Operating Expenses ....... 6,145 5,248 + 17
- ------------------------ -----------------------
346 313 + 11 Operating Income ......... 1,341 1,244 + 8
36 35 + 3 Other Income - Net 141 100 + 41
(122) (92) + 33 Interest Expense ......... (450) (347) + 30
(19) (31) - 39 Corporate Expenses ....... (99) (99) -
- ------------------------ -----------------------
241 225 + 7 Income Before Income Taxes 933 898 + 4
(62) (77) - 19 Income Taxes ............. (314) (330) - 5
- ------------------------ -----------------------
Income From Continuing
179 148 + 21 Operations ............. 619 568 + 9
- ------------------------ -----------------------
Income (Loss) From
Discontinued Operations:
Union Pacific Resources
115 87 + 32 Group Inc. a) .......... 327 390 - 16
- 21 U USPCI, Inc. b) .......... - (412) F
- ------------------------ -----------------------
115 108 + 6 Total ..................... 327 (22) F
- ------------------------ -----------------------
$ 294 $ 256 + 15 Net Income ................ $ 946 $ 546 + 73
======================== =======================
Earnings (Loss) Per Share:
Income From Continuing
$ 0.87 $ 0.72 + 21 Operations ............. $ 3.01 $ 2.76 + 9
- ------------------------ -----------------------
Income (Loss) From
Discontinued Operations:
Union Pacific Resources
0.56 0.42 + 33 Group Inc. a) .......... 1.59 1.90 - 16
- 0.11 U USPCI, Inc. b) ......... - (2.00) F
- ------------------------ -----------------------
0.56 0.53 + 6 Total .................. 1.59 (0.10) F
- ------------------------ -----------------------
$ 1.43 $ 1.25 + 14 Net Income ................ $ 4.60 $ 2.66 + 73
======================== =======================
Average Shares Outstand-
N/A N/A ing (MM) 205.8 205.6 -
- ------------------------ -----------------------
a) In October 1995 the Corporation's natural resources business, Union
Pacific Resources Group Inc. (UPRG), completed an initial public
offering (IPO) for 17.1% of its common stock. The Corporation intends
to distribute to its shareholders the remaining shares of UPRG on a
tax-free basis sometime in 1996. Results of operations for UPRG (which
include only the Corporation's share of UPRG's income after the IPO)
for all periods presented have been reclassified as discontinued
operations.
b) At year-end 1994 the Corporation sold USPCI, Inc. its hazardous waste
subsidiary. Results of operations for all periods presented have been
reclassified as discontinued operations.
January 18, 1996
Exhibit 99.6
Statement Regarding Consolidated Income
from Continuing Operations for the
Nine Months Ended September 30, 1995
The Company previously reported in Item 2 to its Quarterly
Report on Form 10-Q for the nine-month period ended September 30, 1995
that consolidated income from continuing operations for the nine
months ended September 30, 1995 improved $20 million reflecting a $113
million improvement at Union Pacific Railroad Company, partially
offset by certain other items. Such improvement at Union Pacific
Railroad Company should have been reported as $93 million rather than
$113 million; this correction does not affect the reported $20 million
improvement in consolidated income from continuing operations or any
other reported result.
