<PAGE> 1
Filed Pursuant to Rule 424(B)(5)
Registration Nos. 333-18345 and 333-54009
PROSPECTUS SUPPLEMENT
(To Prospectus issued June 4, 1998)
$225,000,000
Union Pacific Corporation
5.78% NOTES DUE OCTOBER 15, 2001
------------------------
Interest payable on April 15 and October 15
------------------------
UNION PACIFIC CORPORATION MAY NOT REDEEM ANY OF THE NOTES PRIOR TO MATURITY
------------------------
INVESTING IN THE NOTES INVOLVES RISKS. SEE "RECENT DEVELOPMENTS" ON PAGE S-3 OF
THIS PROSPECTUS SUPPLEMENT AND "RISK FACTORS" ON PAGE 3 OF THE ACCOMPANYING
PROSPECTUS.
------------------------
The Company will receive from Morgan Stanley & Co. Incorporated
$225,000,000 aggregate proceeds, before deducting expenses payable by the
Company estimated at $100,000.
Morgan Stanley & Co. Incorporated proposes to offer the notes from time to
time for sale in one or more negotiated transactions, or otherwise, at or
related to then-prevailing market prices. See "UNDERWRITING" in this prospectus
supplement.
------------------------
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved these securities, or determined if this prospectus
supplement or the accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
Morgan Stanley & Co. Incorporated expects to deliver the notes to
purchasers on October 21, 1998.
------------------------
MORGAN STANLEY DEAN WITTER
October 16, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PROSPECTUS SUPPLEMENT PAGE PROSPECTUS PAGE
--------------------- ---- ---------- ----
<S> <C> <C> <C>
The Company.................... S-3 Available Information............................ 2
Recent Developments............ Incorporation of Certain Documents by
S-3 Reference........................................ 2
Use of Proceeds................ S-5 Risk Factors..................................... 3
Capitalization................. S-6 The Company...................................... 5
Selected Financial
Information.................. S-7 Ratio of Earnings to Fixed Charges............... 6
Description of the Notes....... S-8 Use of Proceeds.................................. 7
Underwriting................... S-9 Description of Debt Securities................... 7
Forward-Looking Information.... S-10 Description of Preferred Stock................... 14
Notice to Canadian Residents... S-11 Description of Common Stock...................... 17
Description of Securities Warrants............... 18
Plan of Distribution............................. 19
Legal Opinions................................... 20
Experts.......................................... 20
</TABLE>
------------------
You should rely only on the information contained or incorporated by reference
in this Prospectus Supplement and the accompanying Prospectus. We have not
authorized anyone to provide you with information different from that contained
in this Prospectus Supplement and the accompanying Prospectus. We are offering
to sell the Notes and seeking offers to buy the Notes only in jurisdictions
where offers and sales are permitted. The information contained in this
Prospectus Supplement and the accompanying Prospectus is accurate only as of the
date of this Prospectus Supplement and the date of the accompanying Prospectus,
regardless of the time of delivery of this Prospectus Supplement or any sale of
the Notes. In this Prospectus Supplement and the accompanying Prospectus, the
"Company," "we," "us" and "our" refer to Union Pacific Corporation.
S-2
<PAGE> 3
THE COMPANY
The Company operates through subsidiaries primarily in the areas of rail
transportation and trucking. The Company's rail transportation operations
principally consist of Union Pacific Railroad Company ("UPRR"), and its trucking
operations principally consist of Overnite Transportation Company ("Overnite").
On May 20, 1998, the Company's Board of Directors approved a formal plan to sell
the Company's entire interest in Overnite through an initial public offering.
See "Recent Developments -- Overnite Divestiture."
RECENT DEVELOPMENTS
FINANCIAL RESULTS; IMPACT OF CONGESTION AND SERVICE ISSUES ON RESULTS OF
OPERATIONS
The Company reported a net loss of $419 million ($1.70 per diluted share)
and $481 million ($1.96 per diluted share) for the three and six months ended
June 30, 1998, respectively, compared to net income of $216 million ($0.87 per
diluted share) and $344 million ($1.39 per diluted share) for the corresponding
periods in 1997. This earnings decrease resulted from continued congestion and
service issues at UPRR and a $262 million after-tax loss from discontinued
operations associated with the planned sale of Overnite. See "-- Overnite
Divestiture." For the second quarter of 1998, consolidated operating revenues
decreased $283 million (11%) to $2,362 million, while consolidated operating
revenues decreased $551 million (11%) to $4,690 million for the six months ended
June 30, 1998. This decrease reflects slower system speed and related crew
shortages resulting from the congestion, the impact of the ongoing Asian
financial crisis on export markets and weak grain demand resulting from high
worldwide crop yields. For the second quarter of 1998, consolidated operating
income fell $615 million (131%) to a loss of $145 million, due to the factors
mentioned above. For the six months ended June 30, 1998, consolidated operating
income fell $912 million (115%) to a loss of $121 million. Other income
increased $34 million and $19 million for the three and six months ended June
30, 1998, respectively, primarily reflecting increased real estate sales and a
recovery of funds from insurers related to first quarter 1997 flood damage.
Interest expense increased $31 million and $42 million for the three and six
months ended June 30, 1998, respectively, the result of higher debt levels and
higher interest rates resulting from a recent credit rating downgrade. Income
taxes (excluding the tax impact of discontinued operations) decreased $239
million to an income tax benefit of $111 million for the second quarter of 1998,
and $363 million to an income tax benefit of $159 million for the first six
months of 1998, primarily reflecting a loss before income taxes.
The Company estimates that the cost of UPRR's congestion-related problems
for the three and six months ended June 30, 1998 was approximately $434 million
and $694 million, respectively, after tax, which reflected the combined effects
of lost business, higher costs associated with system congestion, and costs
associated with service recovery efforts, alternate transportation and customer
claims. Congestion-related costs for the second quarter include a $155 million
after-tax charge for the resolution of customer claims. Although progress has
been made in improving service, the Company expects these problems to continue
to have an adverse impact on 1998 results.
OVERNITE DIVESTITURE
On May 20, 1998, the Company's Board of Directors approved a formal plan to
sell the Company's entire interest in Overnite through an initial public
offering (the "Overnite IPO"). As a result, the Company recorded a $262 million
after-tax loss (net of taxes of $198 million) in the second quarter of 1998. On
July 31, 1998, the Company announced that the Overnite IPO had been postponed
due to adverse market conditions.
RAIL SERVICE PROCEEDINGS AND RELATED MATTERS
UPRR was subject to an emergency service order issued by the Surface
Transportation Board of the U.S. Department of Transportation (the "STB") on
October 31, 1997, as an outgrowth of a proceeding initiated by the STB on
October 2, 1997 to investigate rail service problems in the western United
States. On July 31, 1998, the STB terminated the emergency service order. The
STB kept in place the requirement that UPRR
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report certain service data, which UPRR had acknowledged the STB had the
authority to impose under a provision of the Interstate Commerce Act separate
from the emergency service provision. The STB also prescribed, under another
statutory provision separate from the emergency service provision, a 45-day
"wind-down" period during which certain rights that Texas Mexican Railway
Company and The Burlington Northern and Santa Fe Railway Company ("BNSF") had
received under the emergency service order to handle the Company's traffic in
Houston would be continued. The 45-day "wind-down" period expired September 17,
1998.
On March 31, 1998, the STB initiated a proceeding under its continuing
oversight jurisdiction with respect to the merger of Southern Pacific
Transportation Company and its affiliated railroads ("Southern Pacific") and
UPRR, to consider proposals for new remedial conditions to the merger as they
pertain to service in the Houston, Texas area and surrounding coastal areas of
Texas and Louisiana. Various parties have filed applications in this proceeding
seeking the imposition of additional conditions to the merger including, among
other things, the granting of overhead trackage rights on certain of UPRR's
lines in Texas, "neutral switching supervision" on certain of UPRR's branch
lines, the opening to other railroads and switching by a "neutral switching
company" of numerous industries now exclusively served by UPRR in the Houston
area, and the compulsory sale or lease to other carriers of certain of UPRR's
lines and facilities. The Company's response in opposition to the condition
requests was filed on September 18, 1998, and rebuttal in support of the
condition applications is due on October 16, 1998. The Company believes that the
applications are without merit and vigorously opposed them in its September 18
submission. Separately from this proceeding, a shortline railroad, the Arkansas,
Louisiana and Mississippi Railroad ("AL&M"), has filed a request that an
additional condition be imposed on the merger allowing AL&M to interchange
traffic with BNSF. The Company has also opposed this request. There can be no
assurance that the proposals advanced by the parties in the remedial conditions
proceeding, or other condition requests such as the request of AL&M, will not be
approved in some form.
SHAREHOLDER LITIGATION
The Company and certain of its officers and directors are currently
defendants in two purported class actions, which have been consolidated into one
proceeding. The consolidated complaint alleges, among other things, that the
Company violated the federal securities laws by failing to disclose material
facts and making materially false and misleading statements concerning the
service, congestion and safety problems encountered following the Company's
acquisition of Southern Pacific's parent corporation in 1996. These lawsuits
were filed in late 1997 in the United States District Court for the Northern
District of Texas and seek to recover unspecified amounts of damages. The
Company believes that the plaintiffs' claims are without merit and intends to
defend them vigorously. The defendants have moved to dismiss this action, and
the motion has been fully briefed.
In addition to the class action litigation, certain current and former
directors of the Company were named as defendants in a purported derivative
action filed on behalf of the Company in the United States District Court for
the Northern District of Texas in late 1997. The derivative action alleged,
among other things, that the named current and former directors breached their
fiduciary duties to the Company by approving the merger of Southern Pacific into
UPRR. The defendants moved to dismiss the derivative action. In response, the
plaintiffs sought to voluntarily dismiss their claims, and the derivative action
was dismissed, without prejudice, by order of the court dated May 26, 1998.
On September 14, 1998, a different shareholder plaintiff filed a new
purported derivative action on behalf of the Company in the District Court for
Tarrant County, Texas, naming as defendants the Company, UPRR, and the current
and certain former directors of the Company. This new derivative action alleges,
among other things, that the named current and former directors breached their
fiduciary duties to the Company by approving and implementing the Southern
Pacific merger without informing themselves of its impact or ensuring that
adequate controls were put in place and by causing the Company to make
misrepresentations about its service problems to the financial markets and
regulatory authorities. The defendants believe that these claims are without
merit and intend to defend them vigorously.
S-4
<PAGE> 5
RAIL ACCESS AND COMPETITION
Acting pursuant to requests from two members of Congress and responding to
shippers' concerns about railroad service quality, railroad rates and allegedly
inadequate regulatory remedies, the STB on April 17, 1998, following two days of
hearings, issued a decision opening inquiries into certain elements of rail
regulation. The STB noted that no parties to the hearings had shown how
aggressive remedies designed to produce lower rates and enhance competition
would permit the industry to cover system costs and support reinvestment.
Nevertheless, it (a) directed a panel of disinterested economic experts to
recommend appropriate standards to measure railroad revenue adequacy, which is
used to determine whether rates are lawful (this portion of the decision was
subsequently modified to permit, as an alternative, discussions of this issue
between railroad and shipper representatives); (b) initiated a rulemaking
proceeding (which is currently pending) to consider revisions to "competitive
access" regulations in order to address quality of service issues; (c) ordered
interested parties to identify modifications to regulations governing access on
non-service-related grounds; (d) began a rulemaking proceeding (which is
currently pending) to consider eliminating product and geographic competition as
factors to be considered in deciding whether a railroad has market dominance
over rail traffic; (e) ordered large and small railroads to negotiate
arrangements that would address concerns that had been raised by the short-line
and regional rail carriers; and (f) directed the railroads to establish
"formalized dialogue" immediately with large and small shippers and rail labor.
Meetings between railroad and shipper representatives under the supervision of
an administrative law judge on the topics described in clauses (a) and (c) of
the foregoing sentence have failed to produce agreement, while representatives
of the large railroads and smaller railroads have reached agreement on most of
the topics referred to in clause (e). Should the STB or Congress take aggressive
action (e.g., by making purportedly competition-enhancing changes in rate and
route regulation and "access" provisions), the adverse effect on UPRR and other
railroads could be material.
GENERAL
The Company's executive offices are located at 1717 Main Street, Suite
5900, Dallas, Texas 75201-4605, and its telephone number is (214) 743-5600. The
Company will, upon request, provide without charge to each person to whom this
Prospectus Supplement and the Prospectus is delivered a copy of any or all of
the documents incorporated or deemed to be incorporated by reference into this
Prospectus Supplement or the accompanying Prospectus (other than exhibits to
such documents, unless such exhibits are specifically incorporated by reference
into such documents). Written or oral requests should be directed to: Union
Pacific Corporation, 1717 Main Street, Suite 5900, Dallas, Texas 75201-4605,
Attention: Corporate Secretary (telephone 214-743-5600).
USE OF PROCEEDS
The Company will receive $225 million aggregate proceeds from the sale of
the Notes, before deducting expenses payable by the Company estimated at
$100,000. These proceeds will be used by the Company for general corporate
purposes, including repayment of outstanding commercial paper.
S-5
<PAGE> 6
CAPITALIZATION
The following table presents the consolidated capitalization of the Company
(i) as of June 30, 1998, and (ii) as adjusted for the issuance of the Notes and
the use of the net proceeds to repay commercial paper. The information provided
reflects the Company's planned disposition of Overnite. See "Recent
Developments -- Overnite Divestiture." You should read the following table in
conjunction with the Consolidated Financial Statements (and related notes) and
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998, which has been filed with the Securities and
Exchange Commission and is incorporated into this Prospectus Supplement by
reference.
<TABLE>
<CAPTION>
JUNE 30, 1998
---------------------
ACTUAL AS ADJUSTED
------- -----------
(IN MILLIONS)
<S> <C> <C>
Total debt:
Notes offered hereby...................................... $ -- $ 225
Notes, debentures and other............................... 4,425 4,425
Capitalized leases........................................ 1,470 1,470
Equipment obligations..................................... 878 878
Commercial paper, credit facility borrowings and bid
notes.................................................. 952 727
Term floating rate debt................................... 537 537
Mortgage bonds............................................ 175 175
Tax-exempt financings..................................... 168 168
Unamortized discount...................................... (44) (44)
------- -------
Total.................................................. $ 8,561 $ 8,561
Debt due within one year.................................... (162) (162)
------- -------
Total long-term debt........................................ $ 8,399 $ 8,399
Company-obligated mandatorily redeemable Convertible
Preferred Securities...................................... 1,500 1,500
Stockholders' Equity........................................ $ 7,633 $ 7,633
------- -------
Total Capitalization........................................ $17,694 $17,694
======= =======
</TABLE>
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As of October 15, 1998, the Company had credit facilities with various
United States and foreign banks totaling $4.0 billion, which were available to
support commercial paper borrowings and for other purposes. As of such date,
outstanding borrowings under the credit facilities totalled $700 million and the
Company had outstanding approximately $1 million in commercial paper and bid
notes.
S-6
<PAGE> 7
SELECTED FINANCIAL INFORMATION
The financial information for the years ended December 31, 1997, 1996 and
1995 is derived from the Company's audited financial statements and gives effect
to the transaction described in note 1 below. The selected financial information
for the six months ended June 30, 1998 and 1997 is derived from the Company's
unaudited interim financial statements. Interim results, in the opinion of
management, include all adjustments (consisting of normal recurring adjustments)
necessary to present fairly the financial information for such periods; however,
such results are not necessarily indicative of the results which may be expected
for any other interim period or for a full year. You should read the following
data together with the Consolidated Financial Statements (and related notes) and
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997 and the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998, each of which has been filed with the Securities
and Exchange Commission and is incorporated into this Prospectus Supplement by
reference.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31,(1) JUNE 30,(1)
-------------------------------- ----------------
1997 1996 1995 1998 1997
------- ----------- ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Operating Revenues........................ $10,133 $7,825 $6,510 $4,690 $5,241
Operating Expenses........................ 9,000(2) 6,325 5,219 4,811(2) 4,450
------- ------ ------ ------ ------
Operating Income (Loss)................... 1,133(3) 1,500 1,291 (121)(3) 791
Other Income-Net.......................... 126 178 141 76 57
Interest Expense.......................... (603) (499) (448) (337) (295)
------- ------ ------ ------ ------
Income (Loss) Before Income Taxes......... 656 1,179 984 (382) 553
Income Tax (Expense) Benefit.............. (228) (398) (329) 159 (204)
------- ------ ------ ------ ------
Income (Loss) From Continuing
Operations.............................. 428 781 655 (223) 349
Income (Loss) From Discontinued
Operations.............................. 4 122 291 (258) (5)
------- ------ ------ ------ ------
Net Income (Loss)......................... $ 432 $ 903 $ 946 $ (481) $ 344
======= ====== ====== ====== ======
Ratio of Earnings to Fixed Charges(4)..... 1.8 2.8 2.9 $ (404) 2.4
</TABLE>
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(1) Results for the years ended 1997, 1996 and 1995 and for the six months ended
June 30, 1998 and 1997 reflect the Company's planned disposition of
Overnite. Overnite's results have been reported as discontinued operations
for all periods presented.
(2) One-time Southern Pacific merger expenses were $97 million pre-tax ($60
million after-tax) in 1997 and $46 million pre-tax ($29 million after-tax)
in the six months ended June 30, 1998. Merger expenses include severance,
relocation and certain other costs related to UPRR employees affected by the
merger.
(3) Includes an estimated $730 million pre-tax ($455 million after-tax) impact
of rail congestion in 1997 and an estimated $1,120 million pre-tax ($694
million after-tax) impact of rail congestion in the six months ended June
30, 1998.
(4) The ratio of earnings to fixed charges has been computed on a total
enterprise basis. Earnings represent income from continuing operations
before the cumulative effect of accounting changes less equity in
undistributed earnings of unconsolidated affiliates, plus income taxes and
fixed charges. Fixed charges represent interest, amortization of debt
discount and expense and the estimated interest portion of rental charges.
For the six months ended June 30, 1998, the amount in the table represents
the dollar amount by which earnings were insufficient to cover fixed
charges.
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DESCRIPTION OF THE NOTES
The following description of the Notes (referred to in this Prospectus
Supplement as the "Notes" and in the accompanying Prospectus as the "Debt
Securities") supplements, and when inconsistent replaces, the description of the
general terms and provisions of the Debt Securities in the accompanying
Prospectus.
GENERAL
The Notes will be limited to $225 million aggregate principal amount. Each
Note will bear interest at the applicable rate per annum stated on the cover
page of this Prospectus Supplement and interest will accrue from October 21,
1998. Interest on each Note will be payable semiannually on April 15 and October
15 of each year, commencing April 15, 1999, to the person in whose name the Note
is registered, subject to certain exceptions as provided in the Indenture, at
the close of business on the April 1 and October 1 (each a "Record Date"), as
the case may be, immediately preceding such April 15 or October 15. The Notes
will mature on October 15, 2001. Interest on the Notes will be paid on the basis
of a 360-day year consisting of twelve 30-day months.
REDEMPTION
The Notes will not be redeemable prior to maturity.
SINKING FUND
There is no provision for a sinking fund for the Notes.
DEFEASANCE
Under certain circumstances, the Company will be deemed to have discharged
the entire indebtedness on all of the outstanding Notes by defeasance. See
"Description of Debt Notes -- Defeasance of the Indenture and Debt Notes" in the
accompanying Prospectus for a description of the terms of any such defeasance
and the tax consequences thereof.
BOOK-ENTRY SYSTEM
The Notes will be issued in the form of one fully registered global Note
(the "Global Note"). The Global Note will be deposited with, or on behalf of,
The Depository Trust Company ("DTC" or the "Depository") and registered in the
name of the Depository's nominee.
Upon the issuance of the Global Note, the Depository will credit, on its
book-entry registration and transfer system, the respective principal amounts of
the Notes represented by such Global Note to the accounts of institutions that
have accounts with the Depository or its nominee ("Participants"). The
Underwriters, dealers or agents will designate the accounts to be credited.
Ownership of beneficial interests in the Global Note will be shown on, and the
transfer of that ownership will be effected only through, records maintained by
the Depository (with respect to Participants' interests), the Participants and
others such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with Participants, either directly or
indirectly ("indirect participants"). The laws of some states may require that
certain persons take physical delivery in definitive form of Notes which they
own and consequently prohibit such persons from purchasing beneficial interests
in the Global Note from any beneficial owner or otherwise.
So long as the Depository's nominee is the registered owner of the Global
Note, such nominee for all purposes will be considered the sole owner or holder
of the Notes represented by such Global Note for all purposes under the
indenture pursuant to which the Notes are issued (the "Indenture"). Except as
provided below, owners of beneficial interests in the Global Note will not be
entitled to have any of the Notes represented by such Global Note registered in
their names, will not receive or be entitled to receive physical delivery of the
Notes in definitive form and will not be considered the owners or holders of the
Notes under the Indenture. Accordingly, each person owning a beneficial interest
in the Global Note must rely on the procedures of the Depository and, if such
person is not a Participant, on the procedures of the Participant and
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<PAGE> 9
if applicable, the indirect participant, through which such person owns its
interest, to exercise any rights of a holder under the Indenture. The Company
understands that under existing practice, in the event that the Company requests
any action of the holders or a beneficial owner desires to take any action a
holder is entitled to take, the Depository would act upon the instructions of,
or authorize, the Participant to take such an action.
The Company expects that the Depository or its nominee, upon receipt of any
payment of principal or interest, will immediately credit the account of the
Participants with such payments in amounts proportionate to their respective
beneficial interest in the principal amount of the Global Note as shown on the
records of the Depository or its nominee.
If DTC is at any time unwilling, unable or ineligible to continue as
depositary for the Global Note and a successor depositary is not appointed by
the Company within 90 days, the Company will issue certificated Notes in
definitive form in exchange for the Global Note. In addition, the Company may at
any time determine not to have the Notes represented by the Global Note, and, in
such event, will issue certificated Notes in definitive form in exchange for the
Global Note. In either instance, an owner of a beneficial interest in the Global
Note will be entitled to physical delivery of certificated Notes in definitive
form equal in principal amount to such beneficial interest in the Global Note
and to have such certificated Notes registered in its name. Certificated Notes
so issued in definitive form will be issued in denominations and integral
multiples of $1,000 and will be issued in registered form only, without coupons.
See "Description of Debt Notes" in the accompanying Prospectus for
additional information concerning the Debt Notes, the Indenture and the
book-entry system.
UNDERWRITING
Under the terms and subject to the conditions contained in the Terms
Agreement dated October 16, 1998, which incorporates by reference the
Underwriting Agreement filed as an exhibit to the Company's Registration
Statement on Form S-3 (No. 333-18345) (collectively, the "Underwriting
Agreement"), Morgan Stanley & Co. Incorporated, as the underwriter (the
"Underwriter") has agreed to purchase, and the Company has agreed to sell to the
Underwriter, $225,000,000 principal amount of the Notes.
The Underwriting Agreement provides that the obligations of the Underwriter
are subject to certain conditions precedent and that the Underwriter will be
obligated to purchase all the Notes, if any are purchased.
The Underwriter will distribute the Notes from time to time in negotiated
transactions or otherwise at varying prices to be determined at the time of each
sale. In connection with the sale of any Notes, the Underwriter may be deemed to
have received compensation from the Company equal to the difference between the
amount received by the Underwriter from the sale of such Notes and the price at
which the Underwriter purchased such Notes from the Company. In addition, the
Underwriter may sell Notes to or through certain dealers, and dealers may
receive compensation in the form of underwriting discounts, concessions or
commissions from the Underwriter and/or any purchasers of Notes for whom it may
act as agent. Such compensation may be greater than customary commissions. The
Underwriter may also receive compensation from the purchasers of Notes for whom
it may act as agent.
The Company does not intend to apply for listing of the Notes on a national
securities exchange, but has been advised by the Underwriter that it presently
intends to make a market in the Notes as permitted by applicable laws and
regulations. The Underwriter is not obligated, however, to make a market in the
Notes, and any such market making may be discontinued at any time at the sole
discretion of the Underwriter. Accordingly, no assurance can be given as to the
liquidity of, or trading market for, the Notes.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including civil liabilities under the Securities Act of 1933, or
contribute to payments which the Underwriters may be required to make in respect
of such liabilities.
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The Underwriter and its associates and affiliates may engage in other
transactions with, and/or perform services, including investment banking
services, for the Company and its subsidiaries in the ordinary course of
business.
FORWARD-LOOKING INFORMATION
Certain information included in this Prospectus Supplement and the
accompanying Prospectus and other materials filed or to be filed by the Company
with the Securities and Exchange Commission incorporated by reference in this
Prospectus Supplement and the accompanying Prospectus (as well as information
included in oral statements or other written statements made or to be made by
the Company) contain or will contain, forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Such forward-looking
information may include, without limitation, statements that the Company does
not expect that claims, lawsuits, environmental costs, commitments, contingent
liabilities, labor negotiations or other matters will have a material adverse
effect on its consolidated financial condition, results of operations or
liquidity and other similar expressions concerning matters that are not
historical facts, and projections or predictions as to the Company's financial
or operational results. Such forward-looking information is or will be based on
information available at that time, and is or will be subject to risks and
uncertainties that could cause actual results to differ materially from those
expressed in the statements. Important factors that could cause such differences
include, but are not limited to, whether the Company is fully successful in
overcoming its congestion-related problems and implementing its service recovery
plans and other operational and financial initiatives, industry competition and
regulatory developments, natural events such as severe weather, floods and
earthquakes, the effects of adverse general economic conditions, changes in fuel
prices, fuel prices, labor strikes, the impact of year 2000 systems problems and
the ultimate outcome of shipper claims related to congestion, environmental
investigations or proceedings and other types of claims and litigation.
S-10
<PAGE> 11
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Notes in Canada is being made only on a private
placement basis exempt from the requirement that the Company prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of Notes are effected. Accordingly, any resale of the Notes in Canada
must be made in accordance with applicable securities laws which will vary
depending on the relevant jurisdiction, and which may require resales to be made
in accordance with available statutory exemptions or pursuant to a discretionary
exemption granted by the applicable Canadian securities regulatory authority.
Purchasers who are Canadian residents are advised to seek legal advice prior to
any resale of the Notes.
REPRESENTATIONS OF PURCHASERS
Each purchaser of Notes in Canada who receives a purchase confirmation will
be deemed to represent to the Company and the dealer from whom such purchase
confirmation is received that (i) such purchaser is entitled under applicable
provincial securities laws to purchase such Notes without the benefit of a
prospectus qualified under such securities laws, (ii) where required by law,
that such purchaser is purchasing as principal and not as agent, and (iii) such
purchaser has reviewed the text above under "Resale Restrictions."
RIGHTS OF ACTION
The Notes being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer or such persons in Canada
or to enforce a judgment obtained in Canadian courts against the issuer or such
persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of Notes to whom the Securities Act (British Columbia) applies
is advised that such purchaser is required to file with the British Columbia
Securities Commission a report within ten days of the sale of any Notes acquired
by such purchaser pursuant to this offering. Such report must be in the form
attached to British Columbia Securities Commission Blanket Order BOR #95/17, a
copy of which may be obtained from the Company. Only one such report must be
filed in respect of Notes acquired on the same date and under the same
prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of Notes should consult their own legal and tax
advisers with respect to the tax consequences of an investment in the Notes in
their particular circumstances and with respect to the eligibility of the Notes
for investment by the purchaser under relevant Canadian legislation.
S-11
<PAGE> 12
LOGO
$1,450,000,000
DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
SECURITIES WARRANTS
---------------------
Union Pacific Corporation (the "Company") may issue from time to time,
together or separately (i) its debt securities (the "Debt Securities"), which
may be either senior ("Senior Securities") or subordinated ("Subordinated
Securities") and which may be convertible into or exchangeable for shares of
common stock, par value $2.50, of the Company (the "Common Stock"), shares of
preferred stock, no par value, of the Company (the "Preferred Stock"), or other
Debt Securities; (ii) warrants to purchase Debt Securities (the "Debt
Warrants"); (iii) Preferred Stock, which may be convertible into or exchangeable
for shares of Common Stock or shares of Preferred Stock or Debt Securities; (iv)
warrants to purchase shares of Preferred Stock (the "Preferred Stock Warrants")
and (v) Common Stock issuable upon the conversion or exchange of Debt Securities
or Preferred Stock offered hereunder, to the extent such Debt Securities or
Preferred Stock are, by their terms, convertible into or exchangeable for shares
of Common Stock, in amounts, at prices and on terms to be determined by market
conditions at the time of offering. The Debt Warrants and Preferred Stock
Warrants are collectively referred to herein as the "Securities Warrants" and
the Debt Securities, Preferred Stock, Common Stock and Securities Warrants are
collectively referred to herein as the "Offered Securities".
The Offered Securities may be issued in one or more series or issuances and
will be limited to $1,450,000,000 in aggregate public offering price (or its
equivalent, based on the applicable exchange rate, to the extent Debt Securities
are issued for one or more foreign currencies or currency units). The Offered
Securities may be sold for U.S. dollars, or any foreign currency or currencies
or currency units, and the principal of, any premium on, and any interest on,
the Debt Securities may be payable in U.S. dollars, or any foreign currency or
currencies or currency units.
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered are set forth in the accompanying Prospectus
Supplement (the "Prospectus Supplement"), including, where applicable, (i) in
the case of Debt Securities, the specific designation, aggregate principal
amount, authorized denomination, initial offering price, maturity, premium (if
any), interest rate (which may be fixed or floating), time of and method of
calculating the payment of interest, if any, the currency in which principal,
premium, if any, and interest, if any, are payable, any redemption or sinking
fund terms, any terms for the conversion into or exchange for shares of Common
Stock or Preferred Stock or other Debt Securities, terms of subordination of
Subordinated Securities, and other specific terms; (ii) in the case of Preferred
Stock, the specific designation, any dividend, liquidation, redemption, sinking
fund, voting or other rights, time of payment of dividends, any terms for the
conversion into or exchange for shares of Common Stock or shares of Preferred
Stock or Debt Securities, the initial offering price and other specific terms;
and (iii) in the case of Securities Warrants, the duration, initial offering
price, exercise price, detachability thereof and other specific terms. The
Prospectus Supplement will also contain information, where applicable, about
certain United States Federal income tax considerations relating to, and any
listing on a securities exchange of, the Offered Securities covered by the
Prospectus Supplement.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
The Offered Securities will be sold directly, through agents, dealers or
underwriters as designated from time to time, or through a combination of such
methods. If any agents of the Company or any dealers or underwriters are
involved in the sale of the Offered Securities in respect of which this
Prospectus is being delivered, the names of such agents, dealers or underwriters
and any applicable agent's commission, dealer's purchase price or underwriter's
discount will be set forth in or may be calculated from the Prospectus
Supplement. The net proceeds to the Company from such sale will be the purchase
price less such commission in the case of an agent, the purchase price in the
case of a dealer, or the public offering price less such discount in the case of
an underwriter and less, in each case, other attributable issuance expenses. See
"Plan of Distribution".
THE DATE OF THIS PROSPECTUS IS JUNE 4, 1998.
<PAGE> 13
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission") relating to its business, financial position,
results of operations and other matters. Such reports and other information can
be inspected and copied at the Public Reference Section maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549
and at certain of its Regional Offices, located at Northwest Atrium Center
(Suite 1400), 500 West Madison Street, Chicago, Illinois 60661, and Seven World
Trade Center, 13th Floor, New York, New York 10048. Copies of such material can
also be obtained from the Public Reference Section of the Commission at
prescribed rates. Such material can also be inspected at the offices of the New
York Stock Exchange, 20 Broad Street, New York, New York 10005. Such material
may also be accessed electronically by means of the Commission's home page on
the Internet (http://www.sec.gov).
The Company has filed with the Commission a registration statement (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities offered hereby. This
Prospectus does not contain all the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. Reference is made to the Registration Statement
and to the exhibits relating thereto for further information with respect to the
Company and the securities offered hereby.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference herein its Annual Report on
Form 10-K for the fiscal year ended December 31, 1997, its quarterly Report on
form 10-Q for the quarter ended March 31, 1998 and its Current Reports on Form
8-K dated January 23, 1998, February 26, 1998, March 20, 1998, March 25, 1998,
March 31, 1998, April 1, 1998, April 23, 1998 and May 29, 1998 all of which have
been previously filed with the Commission under File No. 1-6075, and the
description of capital stock (including Common Stock) of the Company that is
contained in the registration statement filed under the Exchange Act under File
No. 1-6075, including all amendments or reports filed for the purpose of
updating such description.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and before the
termination of the offering of the Offered Securities offered hereby shall be
deemed incorporated herein by reference, and such documents shall be deemed to
be a part hereof from the date of filing such documents. Any statement contained
herein, in a document incorporated or deemed to be incorporated by reference
herein, or in the accompanying Prospectus Supplement, shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein or in the accompanying Prospectus
Supplement modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the above documents incorporated or deemed to be
incorporated herein by reference (other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference into the documents that
this Prospectus incorporates). Written or oral requests should be directed to:
Union Pacific Corporation, 1717 Main Street, Suite 5900, Dallas, Texas 75201-
4605, Attention: Corporate Secretary (telephone 214-743-5600).
2
<PAGE> 14
RISK FACTORS
Prospective purchasers of the Offered Securities should carefully review
the information contained elsewhere in this Prospectus and should particularly
consider the following matters.
RISK FACTORS RELATING TO THE COMPANY
CONGESTION AND SERVICE ISSUES; IMPACT ON RESULTS OF OPERATIONS
In the third quarter of 1997, congestion began to have a serious adverse
effect on the operations and earnings of Union Pacific Railroad Company
("UPRR"), the Company's principal rail subsidiary. System congestion started in
and around Houston and the coastal areas of Texas and Louisiana (the "Gulf Coast
region") and spread throughout the system as UPRR shifted resources to help
mitigate the problem in the Gulf Coast region. The Company reported a decline in
net income from continuing operations of approximately 41%, from $733 million
for 1996 to $432 million for 1997. Moreover, the Company incurred a net loss of
$152 million ($.62 per diluted share) in the fourth quarter of 1997 (which
included a $40 million after-tax loss recognized in connection with Company's
planned sale of Skyway Freight Systems, Inc. ("Skyway")) and a net loss of $62
million ($.25 per diluted share) in the first quarter of 1998. This decline in
earnings was primarily the result of UPRR's service and congestion problems. The
Company estimates that the combined effects of lost business, higher costs
associated with system congestion, and costs associated with the implementation
of the service recovery plan described below, alternate transportation and
customer claims had a negative effect on net income for 1997 of approximately
$450 million, after tax, and a negative effect on net income for the first
quarter of 1998 of approximately $260 million, after tax. Although progress has
been made in improving service, UPRR expects these problems to have an adverse
impact on 1998 results and on May 28, 1998, the Company announced that it
expected to report a loss from continuing operations in the second quarter.
The Company has adopted certain measures to alleviate the congestion
problems, including the implementation of a Service Recovery Plan (the "Plan")
on October 1, 1997. The Plan focuses on reducing the number of cars on the
system and restoring system velocity, which, in turn, results in more reliable
service to customers. While the Company believes that it will ultimately be
successful in alleviating the congestion-related problems experienced by UPRR
and returning the Company to profitability, there can be no assurance that the
recovery will not be delayed for a substantial period, which would have a
continuing adverse effect on the Company's financial results, or that additional
measures will not be necessary to resolve such problems. The timing of the
Company's return to profitability will be determined by how rapidly it is able
to eliminate congestion and return to normal operations throughout its system.
As a result of recent operating losses at UPRR and in order to fund its capital
program, the Company has incurred substantial incremental debt since December
31, 1997, and has obtained additional financing through a private placement of
$1.5 billion of 6 1/4% preferred securities of Union Pacific Capital Trust, a
statutory business trust sponsored by the Company, which securities are
convertible into common stock of the Company at an initial conversion price of
$68.90.
RAIL SERVICE PROCEEDINGS AND RELATED MATTERS
UPRR is currently subject to an emergency service order issued by the
Surface Transportation Board of the U.S. Department of Transportation (the
"STB") on October 31, 1997, as an outgrowth of a proceeding initiated by the STB
on October 2, 1997 to investigate rail service problems in the western United
States. The original service order, which, among other things, imposed several
temporary measures designed to reduce congestion on UPRR's lines in the Houston
area, was modified and extended by a supplemental order dated December 4, 1997.
On February 25, 1998, the STB, citing the gravity of UPRR's congestion problems
and characterizing them as "not yet close to being resolved," further modified
the emergency service order and extended it until August 2, 1998, the maximum
period allowable under law for the original order. If the congestion problems
persist, the STB may institute a new proceeding upon the expiration of the
emergency service order in light of developments concerning UPRR's operations in
1998.
On March 31, 1998, the STB initiated a proceeding under its continuing
oversight jurisdiction with respect to the merger of Southern Pacific
Transportation Company and its affiliated railroads ("Southern
3
<PAGE> 15
Pacific") and UPRR, to consider proposals for new remedial conditions to the
merger as they pertain to service in the Houston, Texas/Gulf Coast area. The
proceeding was initiated in response to submissions by Texas Mexican Railway
Company ("Tex Mex"), Kansas City Southern Railway Company ("KCS") and the
Greater Houston Partnership ("GHP"), proposing that UPRR be directed to transfer
certain lines and facilities in the Gulf Coast region to other rail carriers,
that a "neutral" switching operation be established in the greater Houston area
and that provisions in the STB's emergency service order that expanded Tex Mex's
right to handle traffic to and from Houston be adopted permanently. The STB's
decision announcing the proceeding established a procedural schedule for the
submission of condition requests and supporting evidence, replies and rebuttal.
Separately from this proceeding, a shortline railroad, the Arkansas, Louisiana
and Mississippi Railroad ("AL&M"), has filed a request that an additional
condition be imposed on the merger allowing the AL&M to interchange traffic with
the Burlington Northern and Santa Fe Railway Company. There can be no assurance
that the proposals advanced by Tex Mex, KCS, GHP or other parties in the
remedial conditions proceeding or other condition requests such as the request
of AL&M, will not be approved in some form.
SHIPPER CLAIMS
Certain customers have submitted claims or stated their intention to submit
claims to UPRR for damages related to the delay of shipments as a result of
congestion problems, and certain customers have filed lawsuits seeking relief
related to such delays. The nature of the damages sought by claimants includes,
but is not limited to, contractual liquidated damages, freight loss or damage,
alternative transportation charges, additional production costs, lost business
and lost profits. In addition, some customers have asserted that they have the
right to cancel contracts as a result of alleged material breaches of such
contracts by UPRR. While the Company does not believe that such claims will have
a material adverse effect on its consolidated financial condition, it is not
possible to determine fully the effects of all asserted and unasserted claims.
The Company expects additional claims by shippers. The Company will continue to
evaluate the adequacy of its reserves for claims and expects to add to such
reserves as appropriate.
SHAREHOLDER LITIGATION
The Company and certain of its officers and directors are currently
defendants in two purported class action securities lawsuits, and certain
current and former directors of the Company are currently defendants in a
purported derivative action filed on behalf of the Company. The class action
suits allege, among other things, that management failed to disclose properly
UPRR's service and safety problems and thereby issued materially false and
misleading statements concerning the Company's acquisition of Southern Pacific's
parent corporation and the safe, efficient operation of UPRR's rail network. The
derivative action alleges, among other things, that the named current and former
directors breached their fiduciary duties to the Company by approving the
acquisitions of the parent corporations of Southern Pacific and CNW (as defined
herein) without ensuring that the Company or UPRR had adequate systems in place
to integrate effectively those companies into the operations of the Company and
UPRR. These lawsuits were filed in late 1997 in the Federal District Court for
the Northern District of Texas and seek to recover unspecified amounts of
damages. The Company believes that these claims are without merit and intends to
defend them vigorously. On May 22, 1998, the plaintiffs in the derivative suit
filed a notice of voluntary dismissal without prejudice.
RAIL ACCESS AND COMPETITION
Acting pursuant to requests from two members of Congress and responding to
shippers' concerns about railroad service quality, railroad rates and allegedly
inadequate regulatory remedies, the STB on April 17, 1998, following two days of
hearings, issued a decision opening inquiries into certain elements of rail
regulation. The STB noted that no parties to the hearings had shown how
aggressive remedies designed to produce lower rates and enhance competition
would permit the industry to cover system costs and support reinvestment.
Nevertheless, it (a) directed a panel of disinterested economic experts to
recommend appropriate standards to measure railroad revenue adequacy, which is
used to determine whether rates are lawful (this portion of the decision was
subsequently modified to permit, as an alternative, discussions of this issue
between railroad and shipper representatives); (b) initiated a rulemaking
proceeding to consider
4
<PAGE> 16
revisions to "competitive access" regulations in order to address quality of
service issues; (c) ordered interested parties to identify modifications to
regulations governing access on non-service-related grounds; (d) began a
proceeding to consider eliminating product and geographic competition as factors
to be considered in deciding whether a railroad has market dominance over rail
traffic; (e) ordered large and small railroads to negotiate arrangements that
would increase the role of short-line rail carriers; and (f) directed the
railroads to establish "formalized dialogue" immediately with large and small
shippers and rail labor. Should the STB or Congress take aggressive action
(e.g., by making purportedly competition-enhancing changes in rate and route
regulation and "access" provisions), the adverse effect on UPRR and other
railroads could be material.
THE COMPANY
The Company, incorporated in Utah in 1969, operates through subsidiaries
primarily in the areas of rail transportation and trucking. The Company's rail
transportation operations principally consist of UPRR, which includes two major
acquisitions since 1995, Southern Pacific and Chicago and North Western Railway
Company and its affiliated railroads ("CNW"). The Company's trucking operations
principally consist of Overnite Transportation Company ("Overnite"). On May 20,
1998, the Company announced that it intends to sell its entire interest in
Overnite through an initial public offering of all of the common stock of
Overnite Corporation, a newly-formed Virginia corporation created for the
purpose of indirectly holding all of the issued and outstanding capital stock of
Overnite (the "Overnite IPO").
Rail Transportation. UPRR is the largest railroad in the United States
(measured in both track miles and freight revenue), operating nearly 35,000
route miles linking Pacific Coast and Gulf Coast ports to the Midwest and
eastern U.S. gateways and providing several north/south corridors to key Mexican
gateways. UPRR serves the western two-thirds of the country and cooperates with
other carriers in the handling of freight to and from the Atlantic seaboard, the
Pacific Coast, the Southeast, the Southwest, Canada and Mexico. Export and
import traffic is moved through Gulf Coast and Pacific Coast ports and across
the Mexican border and, primarily through interline connections, the Canadian
border. Major categories of freight hauled by UPRR are agricultural products,
automotive, chemicals, energy (primarily coal), industrial products and
intermodal.
Beginning in 1995, the Company made significant railroad acquisitions.
- In April 1995, the Company acquired the remaining 71.6% of the
outstanding common stock of CNW's parent corporation not previously owned
by the Company for $1.2 billion.
- In September 1995, the Company acquired 25% of Southern Pacific's parent
corporation, and, in September 1996, it acquired the remaining 75% after
receipt of a decision from the STB approving the Company's acquisition of
Southern Pacific. The aggregate purchase price was $4.1 billion,
comprised of $2.5 billion in the Company's common stock and $1.6 billion
in cash.
- During 1997, UPRR and a consortium of partners were granted a 50-year
concession for the Pacific-North and Chihuahua Pacific rail lines in
Mexico and a 25% stake in the Mexico City Terminal Company at an
aggregate price of $525 million. UPRR holds a 13% ownership share in the
consortium. The consortium assumed operational control of both lines in
February 1998.
Trucking. The Company's other major line of business is truck
transportation. Overnite, a major interstate trucking company specializing in
less-than-truckload shipments, serves all 50 states and portions of Canada and
Mexico through 164 service centers located throughout the United States.
Overnite transports a variety of products, including chemicals, fabricated metal
products, textiles, machinery, electronics and paper products.
As indicated above, the Company has announced that it intends to dispose of
its ownership interest in Overnite. In connection with the Overnite IPO,
Overnite will be reclassified as a discontinued operation, and the Company
expects to recognize a significant after-tax loss in the second quarter of 1998,
which will be accounted for as a loss from discontinued operations.
5
<PAGE> 17
Natural Resources Divestiture. In July 1995, the Company's Board of
Directors approved a formal plan to dispose of its oil, gas and mining business
through an initial public offering (the "Resources IPO") of 17% of the common
stock of Union Pacific Resources Group, Inc. ("Resources"), followed by a
distribution of the Company's remaining interest in Resources to the Company's
stockholders on a tax-free, pro-rata basis (the "Spin-Off"). In October 1995,
Resources completed the Resources IPO, and, after the Company's receipt of a
favorable Internal Revenue Service ruling as to the tax-free nature of the
Spin-Off, the Company completed its divestiture of Resources in October 1996.
Skyway Divestiture. In January 1998, the Company announced its intention
to sell Skyway, a wholly-owned subsidiary engaged in contract logistics and
supply chain management, by the end of the year. In connection with the planned
sale, the Company recognized a $40 million after-tax loss in the fourth quarter
of 1997. In 1997, Skyway had revenues of $152 million and an operating net loss
of $5.5 million.
The Company's executive offices are located at 1717 Main Street, Suite
5900, Dallas, Texas 75201-4605, and its telephone number is (214) 743-5600.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's ratio of earnings to fixed
charges on a historical basis for each of the five years ended December 31, 1997
and for the three months ended March 31, 1998.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31 MARCH 31, 1998(A)
--------------------------------------------------------- -----------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges....................... 1.8 2.7 2.8 2.7 1.8 0.4
</TABLE>
- ---------------
(a) For the three months ended March 31, 1998, fixed charges exceeded earnings
by approximately $116 million.
The ratio of earnings to fixed charges has been computed on a total
enterprise basis. Earnings represent income from continuing operations before
the cumulative effect of accounting changes less equity in undistributed
earnings of unconsolidated affiliates, plus income taxes and fixed charges.
Fixed charges represent interest, amortization of debt discount and expense and
the estimated interest portion of rental charges.
6
<PAGE> 18
USE OF PROCEEDS
Unless otherwise specified in the Prospectus Supplement, the net proceeds
from the sale of the Offered Securities offered hereby will be used for general
corporate purposes, including repayment of borrowings, working capital, capital
expenditures, stock repurchase programs and acquisitions. Additional information
on the use of net proceeds from the sale of the Offered Securities offered
hereby is set forth in the Prospectus Supplement relating to such Offered
Securities.
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities summarizes
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the Debt Securities
and the extent, if any, to which such general provisions may apply to any series
of Debt Securities will be described in the Prospectus Supplement relating to
such series.
The Debt Securities are to be issued under one or more Indentures
(collectively, the "Indenture") between the Company and Citibank, N.A., as
trustee or such other trustee as shall be named in a Prospectus Supplement (the
"Trustee"). The following statements are subject to the detailed provisions of
the Indenture, a copy of which is filed as an exhibit to the Registration
Statement. Wherever any particular provisions of the Indenture or terms defined
therein are referred to, such provisions and terms are incorporated by reference
as a part of the statements made herein and such statements are qualified in
their entirety by such references. References to particular sections of the
Indenture are noted below. Defined terms used herein but not defined herein
shall have the meanings ascribed to them in the Indenture.
GENERAL
The Debt Securities may be either Senior Securities or Subordinated
Securities and will be unsecured, unless the Company shall be required to secure
the Debt Securities as described below under "Covenants--Limitation on Liens."
The Indenture does not limit the amount of Debt Securities which may be issued
thereunder and Debt Securities may be issued thereunder up to the aggregate
principal amount which may be authorized from time to time by the Company.
(Section 301) Debt Securities will be issued from time to time and offered on
terms determined by market conditions at the time of sale.
The Senior Securities will be unsecured and will rank on a parity with all
other unsecured and unsubordinated indebtedness of the Company. The Subordinated
Securities will be unsecured and will be subordinated and junior to all "Senior
Indebtedness" (which for this purpose includes any Senior Securities) to the
extent set forth in the applicable supplemental Indenture and the Prospectus
Supplement relating to such series.
The Debt Securities may be issued in one or more series with the same or
various maturities at par, at a premium or at a discount. Any Debt Securities
bearing no interest or interest at a rate which at the time of issuance is below
market rates will be sold at a discount (which may be substantial) from their
stated principal amount. Federal income tax consequences and other special
considerations applicable to any such substantially discounted Debt Securities
will be described in the Prospectus Supplement relating thereto.
Reference is made to the Prospectus Supplement for the following terms of
the Debt Securities offered hereby: (i) the designation, aggregate principal
amount and authorized denominations of such Debt Securities; (ii) the percentage
of their principal amount at which such Debt Securities will be issued; (iii)
the date or dates on which the Debt Securities will mature; (iv) the rate or
rates (which may be fixed or floating) per annum at which the Debt Securities
will bear interest, if any, or the method of determining such rate or rates; (v)
the date or dates on which any such interest will be payable, the date or dates
on which payment of any such interest will commence and the Regular Record Dates
for such Interest Payment Dates; (vi) whether such Debt Securities are Senior
Securities or Subordinated Securities; (vii) the terms of any mandatory or
optional redemption (including any provisions for any sinking, purchase or other
analogous fund) or repayment option; (viii) the currency, currencies or currency
units for which the Debt Securities may be purchased and the currency,
currencies or currency units in which the principal thereof, any premium
7
<PAGE> 19
thereon and any interest thereon may be payable; (ix) if the currency,
currencies or currency units for which the Debt Securities may be purchased or
in which the principal thereof, any premium thereon and any interest thereon may
be payable is at the election of the Company or the purchaser, the manner in
which such election may be made; (x) if the amount of payments on the Debt
Securities is determined with reference to an index based on one or more
currencies or currency units, changes in the price of one or more securities or
changes in the price of one or more commodities, the manner in which such
amounts may be determined; (xi) the extent to which any of the Debt Securities
will be issuable in temporary or permanent global form, or the manner in which
any interest payable on a temporary or permanent Global Security will be paid;
(xii) the terms and conditions upon which conversion or exchange of the Debt
Securities into or for Common Stock, Preferred Stock or other Debt Securities
will be effected, including the conversion price or exchange ratio, the
conversion or exchange period and any other conversion or exchange provisions;
(xiii) information with respect to book-entry procedures, if any; (xiv) a
discussion of certain Federal income tax, accounting and other special
considerations, procedures and limitations with respect to the Debt Securities;
and (xv) any other specific terms of the Debt Securities not inconsistent with
the Indenture.
If any of the Debt Securities are sold for one or more foreign currencies
or foreign currency units or if the principal of, premium, if any, or any
interest on any series of Debt Securities is payable in one or more foreign
currencies or foreign currency units, the restrictions, elections, Federal
income tax consequences, specific terms and other information with respect to
such issue of Debt Securities and such currencies or currency units will be set
forth in the Prospectus Supplement relating thereto.
Unless otherwise specified in the Prospectus Supplement, the principal of,
any premium on, and any interest on the Debt Securities will be payable, and the
Debt Securities will be transferable, at the Corporate Trust Office of the
Trustee in New York, New York, provided that payment of interest, if any, may be
made at the option of the Company by check mailed on or before the payment date,
first class mail, to the address of the person entitled thereto as it appears on
the registry books of the Company or its agent.
Unless otherwise specified in the Prospectus Supplement, the Debt
Securities will be issued only in fully registered form and in denominations of
$1,000 and any integral multiple thereof. (Sections 301 and 302) No service
charge will be made for any transfer or exchange of any Debt Securities, but the
Company may, except in certain specified cases not involving any transfer,
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. (Section 305)
GLOBAL SECURITIES
The Debt Securities of a series may be issued, in whole or in part, in the
form of one or more Global Securities that will be deposited with, or on behalf
of, a depositary (the "Depositary") identified in the Prospectus Supplement
relating to such series. Global Securities may be issued only in fully
registered form and in either temporary or permanent form. Unless and until it
is exchanged in whole or in part for the individual Debt Securities represented
thereby, a Global Security may not be transferred except as a whole by the
Depositary for such Global Security to a nominee of such Depositary or by a
nominee of such Depositary to such Depositary or another nominee of such
Depositary or by the Depositary or any nominee of such Depositary to a successor
Depositary or any nominee of such successor.
The specific terms of the depositary arrangement with respect to a series
of Debt Securities will be described in the Prospectus Supplement relating to
such series. The Company anticipates that the following provisions will
generally apply to depositary arrangements.
Upon the issuance of a Global Security, the Depositary for such Global
Security or its nominee will credit, on its book entry registration and transfer
system, the respective principal amounts of the individual Debt Securities
represented by such Global Security to the accounts of persons that have
accounts with such Depositary. Such accounts shall be designated by the dealers,
underwriters or agents with respect to such Debt Securities or by the Company if
such Debt Securities are offered and sold directly by the Company. Ownership of
beneficial interests in a Global Security will be limited to persons that have
accounts with the applicable Depositary ("participants") or persons that may
hold interests through participants. Ownership of beneficial interests in such
Global Security will be shown on, and the transfer of that ownership will be
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effected only through, records maintained by the applicable Depositary or its
nominee (with respect to interests of participants) and the records of
participants (with respect to interests of persons other than participants). The
laws of some states require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interests in a Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
Indenture. Except as provided below, owners of beneficial interests in a Global
Security will not be entitled to have any of the individual Debt Securities of
the series represented by such Global Security registered in their names, will
not receive or be entitled to receive physical delivery of any such Debt
Securities of such series in definitive form and will not be considered the
owners or holders thereof under the Indenture governing such Debt Securities.
Payments of principal of, any premium on, and any interest on, individual
Debt Securities represented by a Global Security registered in the name of a
Depositary or its nominee will be made to the Depositary or its nominee, as the
case may be, as the registered owner of the Global Security representing such
Debt Securities. Neither the Company, the Trustee for such Debt Securities, any
Paying Agent, nor the Security Registrar for such Debt Securities will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests of the Global
Security for such Debt Securities or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
The Company expects that the Depositary for a series of Debt Securities or
its nominee, upon receipt of any payment of principal, premium or interest in
respect of a permanent Global Security representing any of such Debt Securities,
immediately will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of such Global Security for such Debt Securities as shown on the records of such
Depositary or its nominee. The Company also expects that payments by
participants to owners of beneficial interests in such Global Security held
through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in "street name". Such payments will be
the responsibility of such participants.
If the Depositary for a series of Debt Securities is at any time unwilling,
unable or ineligible to continue as depositary and a successor depositary is not
appointed by the Company within 90 days, the Company will issue individual Debt
Securities of such series in exchange for the Global Security representing such
series of Debt Securities. In addition, the Company may at any time and in its
sole discretion, subject to any limitations described in the Prospectus
Supplement relating to such Debt Securities, determine not to have any Debt
Securities of a series represented by one or more Global Securities and, in such
event, will issue individual Debt Securities of such series in exchange for the
Global Security or Securities representing such series of Debt Securities.
Further, if the Company so specifies with respect to the Debt Securities of a
series, an owner of a beneficial interest in a Global Security representing Debt
Securities of such series may, on terms acceptable to the Company, the Trustee
and the Depositary for such Global Security, receive individual Debt Securities
of such series in exchange for such beneficial interests, subject to any
limitations described in the Prospectus Supplement relating to such Debt
Securities. In any such instance, an owner of a beneficial interest in a Global
Security will be entitled to physical delivery of individual Debt Securities of
the series represented by such Global Security equal in principal amount to such
beneficial interest and to have such Debt Securities registered in its name.
Individual Debt Securities of such series so issued will be issued in
denominations, unless otherwise specified by the Company, of $1,000 and integral
multiples thereof.
SENIOR SECURITIES
The Senior Securities will be direct, unsecured obligations of the Company,
and will constitute Senior Indebtedness (in each case as defined in the
applicable supplemental Indenture) ranking on a parity with all other unsecured
and unsubordinated indebtedness of the Company.
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SUBORDINATED SECURITIES
The Subordinated Securities will be direct, unsecured obligations of the
Company. The obligations of the Company pursuant to the Subordinated Securities
will be subordinate in right of payment to the extent set forth in the Indenture
and the applicable supplemental Indenture to all Senior Indebtedness (including
all Senior Securities) (in each case as defined in the applicable supplemental
Indenture). Except to the extent otherwise set forth in a Prospectus Supplement,
the Indenture does not contain any restriction on the amount of Senior
Indebtedness which the Company may incur.
The terms of the subordination of a series of Subordinated Securities,
together with the definition of Senior Indebtedness related thereto, will be as
set forth in the applicable supplemental Indenture and the Prospectus Supplement
relating to such series.
The Subordinated Securities will not be subordinated to indebtedness of the
Company which is not Senior Indebtedness, and the creditors of the Company who
do not hold Senior Indebtedness will not benefit from the subordination
provisions described herein. In the event of the bankruptcy or insolvency of the
Company before or after maturity of the Subordinated Securities, such other
creditors would rank pari passu with holders of the Subordinated Securities,
subject, however, to the broad equity powers of the Federal bankruptcy court
pursuant to which such court may, among other things, reclassify the claims of
any series of Subordinated Securities into a class of claims having a different
relative priority with respect to the claims of such other creditors or any
other claims against the Company.
CERTAIN DEFINITIONS
Certain terms defined in Section 101 of the Indenture are summarized below.
"Debt" means indebtedness for money borrowed.
"Domestic Subsidiary" means a Subsidiary incorporated or conducting its
principal operations within the United States or any State thereof.
"Mortgage" means any mortgage, pledge, lien, encumbrance, charge or
security interest of any kind.
"Subsidiary", when used with respect to the Company, means any corporation
of which a majority of the outstanding voting stock is owned, directly or
indirectly, by the Company or by one or more other Subsidiaries, or both.
COVENANTS
The Indenture contains certain covenants, including the limitation on liens
covenant summarized below which will be applicable (unless waived or amended) so
long as any of the Debt Securities are outstanding, unless stated otherwise in
the Prospectus Supplement.
Limitation on Liens. 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 of any Domestic Subsidiary, whether owned on the date of
the Indenture or thereafter acquired, to secure any Debt of the Company or any
other person (other than the Debt Securities), without in any such case making
effective provision whereby all the outstanding Debt Securities shall be
directly secured equally and ratably with such Debt. There will be excluded from
this restriction any Mortgage upon stock or indebtedness of a corporation
existing at the time such corporation becomes a Domestic Subsidiary or at the
time stock or indebtedness of a Domestic Subsidiary is acquired and any
extension, renewal or replacement of any such Mortgage. (Section 1006)
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
The Indenture provides that the Company may not consolidate with or merge
into any other corporation or convey or transfer its properties and assets
substantially as an entirety to any person, unless (i) the successor corporation
shall be a corporation organized and existing under the laws of the United
States or any State thereof or the District of Columbia, and shall expressly
assume by a supplemental indenture the due and
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punctual payment of the principal of, any premium on, and any interest on, all
the outstanding Debt Securities and the performance of every covenant in the
Indenture on the part of the Company to be performed or observed; (ii)
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 (iii) the Company shall have
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 the foregoing provisions relating to such
transaction. (Section 801) In case of any such consolidation, merger, conveyance
or transfer, such successor corporation will succeed to and be substituted for
the Company as obligor on the Debt Securities, with the same effect as if it had
been named in the Indenture as the Company. (Section 802) Other than the
restrictions on Mortgages described above, the Indenture and the Debt Securities
do not contain any covenants or other provisions designed to protect holders of
Debt Securities in the event of a highly leveraged transaction involving the
Company or any Subsidiary.
EVENTS OF DEFAULT; WAIVER AND NOTICE THEREOF; DEBT SECURITIES IN FOREIGN
CURRENCIES
As to any series of Debt Securities, an Event of Default is defined in the
Indenture as (a) default for 30 days in payment of any interest on the Debt
Securities of such series; (b) default in payment of principal of or any premium
on the Debt Securities of such series at maturity; (c) default in payment of any
sinking or purchase fund or analogous obligation, if any, on the Debt Securities
of such series; (d) default by the Company in the performance of any other
covenant or warranty contained in the Indenture for the benefit of such series
which shall not have been remedied for a period of 90 days after notice is given
as specified in the Indenture; and (e) certain events of bankruptcy, insolvency
and reorganization of the Company. (Section 501)
A default under other indebtedness of the Company will not be a default
under the Indenture and a default under one series of Debt Securities will not
necessarily be a default under another series. Any additions, deletions or other
changes to the Events of Default which will be applicable to a series of Debt
Securities will be described in the Prospectus Supplement relating to such
series of Debt Securities.
The Indenture provides that (i) if an Event of Default described in clause
(a), (b), (c) or (d) above (if the Event of Default under clause (d) is with
respect to less than all series of Debt Securities then outstanding) shall have
occurred and be continuing with respect to any series, either the Trustee or the
holders of not less than 25% in aggregate principal amount of the Debt
Securities of such series then outstanding (each such series acting as a
separate class) may declare the principal (or, in the case of Original Issue
Discount Securities, the portion thereof specified in the terms thereof) of all
outstanding Debt Securities of such series and the interest accrued thereon, if
any, to be due and payable immediately and (ii) if an Event of Default described
in clause (d) or (e) above (if the Event of Default under clause (d) is with
respect to all series of Debt Securities then outstanding) shall have occurred
and be continuing, either the Trustee or the holders of at least 25% in
aggregate principal amount of all Debt Securities then outstanding (treated as
one class) may declare the principal (or, in the case of Original Issue Discount
Securities, the portion thereof specified in the terms thereof) of all Debt
Securities then outstanding and the interest accrued thereon, if any, to be due
and payable immediately, but upon certain conditions such declarations may be
annulled and past defaults (except for defaults in the payment of principal of,
any premium on, or any interest on, such Debt Securities and in compliance with
certain covenants) may be waived by the holders of a majority in aggregate
principal amount of the Debt Securities of such series then outstanding.
(Sections 502 and 513)
Under the Indenture the Trustee must give to the holders of each series of
Debt Securities notice of all uncured defaults known to it with respect to such
series within 90 days after such a default occurs (the term default to include
the events specified above without notice or grace periods); provided that,
except in the case of default in the payment of principal of, any premium on, or
any interest on, any of the Debt Securities, or default in the payment of any
sinking or purchase fund installment or analogous obligations, the Trustee shall
be protected in withholding such notice if it in good faith determines that the
withholding of such notice is in the interests of the holders of the Debt
Securities of such series. (Section 602)
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No holder of any Debt Securities of any series may institute any action
under the Indenture unless (a) such holder shall have given the Trustee written
notice of a continuing Event of Default with respect to such series, (b) the
holders of not less than 25% in aggregate principal amount of the Debt
Securities of such series then outstanding shall have requested the Trustee to
institute proceedings in respect of such Event of Default, (c) such holder or
holders shall have offered the Trustee such reasonable indemnity as the Trustee
may require, (d) the Trustee shall have failed to institute an action for 60
days thereafter and (e) no inconsistent direction shall have been given to the
Trustee during such 60-day period by the holders of a majority in aggregate
principal amount of Debt Securities of such series. (Section 507)
The holders of a majority in aggregate principal amount of the Debt
Securities of any series affected and then outstanding will have the right,
subject to certain limitations, 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 such series of Debt
Securities. (Section 512) The Indenture provides that, in case an Event of
Default shall occur and be continuing, the Trustee, in exercising its rights and
powers under the Indenture, will be required to use the degree of care of a
prudent man in the conduct of his own affairs. (Section 601) The Indenture
further provides that the Trustee shall not be required to expend or risk its
own funds or otherwise incur any financial liability in the performance of any
of its duties under the Indenture unless it has reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is reasonably assured to it. (Section 601)
The Company must furnish to the Trustee within 120 days after the end of
each fiscal year a statement signed by one of certain officers of the Company to
the effect that a review of the activities of the Company during such year and
of its performance under the Indenture and the terms of the Debt Securities has
been made, and, to the best of the knowledge of the signatories based on such
review, the Company has complied with all conditions and covenants of the
Indenture or, if the Company is in default, specifying such default. (Section
1004)
If any Debt Securities are denominated in a 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 Debt Securities have taken any
action as herein described, the principal amount of such Debt 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 Debt 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 Indenture. (Section 104)
If any Debt Securities are Original Issue Discount Securities, then for the
purposes of determining whether the holders of the requisite principal amount of
Debt Securities have taken any action herein described, the principal amount of
such Debt Securities shall be deemed to be the portion of such principal amount
that would be due and payable at the time of the taking of such action upon a
declaration of acceleration of maturity thereof. (Section 101)
MODIFICATION OF THE INDENTURE
The Company and the Trustee may, without the consent of the holders of the
Debt Securities (provided in the case of clauses (ii), (iii), (iv) and (vi),
there is no adverse effect on the holders of Debt Securities), enter into
indentures supplemental to the Indenture for, among others, one or more of the
following purposes; (i) to evidence the succession of another corporation to the
Company, and the assumption by such successor of the Company's obligations under
the Indenture and the Debt Securities of any series; (ii) to add covenants of
the Company, or surrender any rights of the Company, for the benefit of the
holders of Debt Securities of any or all series; (iii) to cure any ambiguity,
omission, defect or inconsistency in such Indenture; (iv) to establish the form
or terms of any series of Debt Securities, including any Subordinated
Securities; (v) to evidence and provide for the acceptance of any successor
Trustee with respect to one or more series of Debt Securities or to facilitate
the administration of the trusts thereunder by one or more trustees in
accordance with such Indenture; and (vi) to provide any additional Events of
Default (Section 901).
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With certain exceptions, the Indenture or the rights of the holders of the
Debt Securities may be modified by the Company and the Trustee with the consent
of the holders of a majority in aggregate principal amount of the Debt
Securities of each series affected by such modification then outstanding, but no
such modification may be made without the consent of the holder of each
outstanding Debt Security affected thereby which would (i) change the maturity
of any payment of principal of, or any premium on, or any installment of
interest on any Debt 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 Debt Security or any premium or
interest thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the maturity 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 (ii) reduce the percentage in principal
amount of the outstanding Debt Securities of any series, the consent of whose
holders is required for any such modification, or the consent of whose holders
is required for any waiver of compliance with certain provisions of the
Indenture or certain defaults thereunder and their consequences provided for in
the Indenture, or (iii) modify any of the provisions of certain Sections of the
Indenture, including the provisions summarized in this paragraph, except to
increase any such percentage or to provide that certain other provisions of the
Indenture cannot be modified or waived without the consent of the holder of each
outstanding Debt Security affected thereby. (Section 902)
DEFEASANCE OF THE INDENTURE AND DEBT SECURITIES
If the terms of any series of Debt Securities so provide, the Company will
be deemed to have paid and discharged the entire indebtedness on all the
outstanding Debt Securities of such series by (a) depositing with the Trustee
(i) as trust funds in trust an amount sufficient to pay and discharge the entire
indebtedness on all Debt Securities of such series for principal, premium, if
any, and interest or (ii) as obligations in trust 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 the Debt
Securities are denominated as will, together with the income to accrue thereon
without consideration of any reinvestment thereof, be sufficient to pay and
discharge the entire indebtedness on all such Debt Securities for principal,
premium, if any, and interest and (b) satisfying certain other conditions
precedent specified in the Indenture. (Section 403) In the event of any such
defeasance, holders of such Debt Securities would be able to look only to such
trust fund for payment of principal of, any premium on, and any interest on
their Debt Securities.
Such defeasance is likely to be treated as a taxable exchange by holders of
the relevant Debt Securities for an issue consisting of either obligations of
the trust or a direct interest in the cash and securities held in the trust,
with the result that such holders would be required for tax purposes to
recognize gain or loss as if such obligations or the cash or securities
deposited, as the case may be, had actually been received by them in exchange
for their Debt Securities. In addition, if the holders are treated as the owners
of their proportionate share of the cash or securities held in trust, such
holders would then be required to include in their income for tax purposes any
income, gain or loss attributable thereto even though no cash was actually
received. Thus, such holders might be required to recognize income for tax
purposes in different amounts and at different times than would be recognized in
the absence of defeasance. Prospective investors are urged to consult their own
tax advisors as to the specific consequences of defeasance.
CONCERNING THE TRUSTEE
Citibank, N.A. conducts normal banking relationships with the Company and
certain of its subsidiaries and, in addition, is a participant in various
financial agreements of the Company. Citibank, N.A. acts as trustee under
certain equipment trust agreements of the Company's railroad subsidiaries and
trustee under various indentures in respect of certain securities of the Company
and its subsidiaries.
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DESCRIPTION OF PREFERRED STOCK
The following is a description of certain general terms and provisions of
the Preferred Stock. The particular terms of any series of Preferred Stock will
be described in the applicable Prospectus Supplement. If so indicated in a
Prospectus Supplement, the terms of any such series may differ from the terms
set forth below.
The summary of terms of the Company's Preferred Stock contained in this
Prospectus does not purport to be complete and is subject to, and qualified in
its entirety by, the provisions of the Company's Revised Articles of
Incorporation, and the certificate of amendment relating to each series of the
Preferred Stock (the "Certificate of Amendment") which will be filed as an
exhibit to or incorporated by reference in the Registration Statement of which
this Prospectus is a part at or prior to the time of issuance of such series of
the Preferred Stock.
The Company's Revised Articles of Incorporation authorize the issuance of
20,000,000 shares of Preferred Stock, without par value. No shares of Preferred
Stock are currently outstanding, and no shares are reserved for issuance. The
Company's Board of Directors is authorized to issue Preferred Stock in one or
more series from time to time, with such designations, preferences and relative
participating, optional or other special rights and qualifications, limitations
and restrictions thereof, as may be provided in resolutions adopted by the Board
of Directors. All shares of any one series of Preferred Stock shall be identical
in all respects, except that shares of any one series issued at different times
may differ as to the dates from which dividends thereon may be cumulative. All
series shall rank equally and shall provide for other terms as described in the
applicable Prospectus Supplement.
Preferred Stock of a particular series shall have the dividend,
liquidation, redemption, conversion and voting rights set forth below unless
otherwise provided in the Prospectus Supplement relating to such series.
Reference is made to the Prospectus Supplement relating to a particular series
of Preferred Stock for specific terms, including: (i) the distinctive serial
designation and the number of shares constituting such series; (ii) the dividend
rate or rates, the payment date or dates for dividends and the participating or
other special rights, if any, with respect to dividends; (iii) any redemption,
sinking fund or other analogous provisions applicable to such Preferred Stock;
(iv) the amount or amounts payable upon the shares of Preferred Stock in the
event of voluntary or involuntary liquidation, dissolution or winding up of the
Company prior to any payment or distribution of the assets of the Company to the
holders of any class or classes of stock which are junior in rank to the
Preferred Stock; (v) any terms for the conversion into or exchange for shares of
Common Stock, shares of Preferred Stock or Debt Securities and (vi) any other
specific terms of the Preferred Stock not inconsistent with the Company's
Revised Articles of Incorporation and any applicable Certificate of Amendment.
The term "class or classes of stock which are junior in rank to the Preferred
Stock" means the Common Stock and any other class or classes of stock of the
Company hereafter authorized which shall rank junior to the Preferred Stock as
to dividends or upon liquidation.
DIVIDENDS
Holders of Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds of the Company legally available
therefor, cash dividends payable on such dates in March, June, September and
December of each year and at such rates per share per annum as set forth in the
applicable Prospectus Supplement. The Prospectus Supplement will also indicate
the applicable record dates regarding the payment of dividends. The holders of
Preferred Stock shall be entitled to such cash dividends before any dividends on
any class or classes of stock junior in rank to Preferred Stock shall be
declared or paid or set apart for payment. Whenever dividends shall not have
been so paid or declared or set apart for payment upon all shares of each series
of Preferred Stock, such dividends shall be cumulative and shall be paid, or
declared and set apart for payment, before any dividends can be declared or paid
on any class or classes of stock of the Company junior in rank to the Preferred
Stock. Any such accumulations of dividends on Preferred Stock shall not bear
interest. The foregoing shall not apply to dividends payable in shares of any
class or classes of stock junior in rank to the Preferred Stock.
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CONVERTIBILITY
No series of Preferred Stock will be convertible into, or exchangeable for,
shares of Common Stock, shares of Preferred Stock or any other class or classes
of stock of the Company or Debt Securities except as set forth in the related
Prospectus Supplement.
REDEMPTION AND SINKING FUND
No series of Preferred Stock will be redeemable or receive the benefit of a
sinking, retirement or other analogous fund except as set forth in the related
Prospectus Supplement.
LIQUIDATION RIGHTS
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the Company, holders of any series of Preferred Stock will be entitled to
receive payment of or to have set aside for payment the liquidation amount per
share, if any, specified in the related Prospectus Supplement, in each case
together with any applicable accrued and unpaid dividends, before any
distribution to holders Common Stock. A voluntary sale, lease, exchange or
transfer (for cash, shares of stock, securities or other consideration) of all
or substantially all of the Company's property or assets to, or a consolidation
or merger of the Company with, one or more corporations shall not be deemed to
be a liquidation, dissolution or winding up of the Company for purposes of this
paragraph.
VOTING RIGHTS
Except as provided below, holders of Preferred Stock shall be entitled to
one vote for each share held and shall vote together with the holders of Common
Stock as one class for the election of directors and upon all other matters
which may be voted upon by stockholders of the Company. Holders of Preferred
Stock shall not possess cumulative voting rights in the election of directors.
See "Description of Common Stock -- Voting Rights" for a discussion of such
voting rights.
If dividends on the Preferred Stock shall be in arrears in an aggregate
amount at least equal to six quarterly dividends, then the holders of all series
of Preferred Stock, voting separately as one class, shall be entitled, at the
next annual meeting of the stockholders of the Company or at a special meeting
held in place thereof, or at a special meeting of the holders of the Preferred
Stock called as provided below, to elect two directors of the Company. While the
holders of Preferred Stock are so entitled to elect two directors of the
Company, they shall not be entitled to participate with the Common Stock in the
election of any other directors. Whenever all arrearages in dividends on the
Preferred Stock shall have been paid and dividends thereon for the current
quarterly period shall have been paid or declared and a sum sufficient for the
payment thereof set aside, then the right of the holders of the Preferred Stock
to elect two directors shall cease, provided that such voting rights shall again
vest in the case of any similar future arrearages in dividends.
At any time after the right to vote for two directors shall have so vested
in the Preferred Stock, the Secretary of the Company may, and upon the written
request of the holders of record of 10% or more of the shares of Preferred Stock
then outstanding, shall, call a special meeting of the holders of the Preferred
Stock for the election of the directors to be elected by them, to be held within
30 days after such call and at the place and upon the notice provided by law and
in the Company's bylaws for the holding of meetings of stockholders. The
Secretary shall not be required to call such meeting in the case of any such
request received less than 90 days before the date fixed for any annual meeting
of stockholders of the Company. If any such special meeting shall not be called
by the Secretary within 30 days after receipt of any such request, then the
holders of record of 10% or more of the shares of Preferred Stock then
outstanding may designate in writing one of their number to call such meeting,
and the person so designated may call such meeting to be held at the place and
upon the notice provided above, and for that purpose shall have access to the
stock ledger of the Company. No such special meeting and no adjournment thereof
shall be held on a date later than 30 days before the annual meeting of the
stockholders of the Company or a special meeting held in place thereof next
succeeding the time when the holders of the Preferred Stock become entitled to
elect directors as provided above.
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If any meeting of the Company's stockholders shall be held while holders of
Preferred Stock are entitled to elect two directors as provided above, and if
the holders of at least a majority of the shares of Preferred Stock then
outstanding shall be present or represented by proxy at such meeting or any
adjournment thereof, then, by vote of the holders of at least a majority of the
shares of Preferred Stock present or so represented at such meeting, the then
authorized number of directors of the Company shall be increased by two and at
such meeting the holders of the Preferred Stock shall be entitled to elect the
additional directors so provided for, but no such additional director so elected
shall hold office beyond the annual meeting of the stockholders or a special
meeting held in place thereof next succeeding the time when the holders of the
Preferred Stock become entitled to elect two directors as provided above.
Whenever the holders of the Preferred Stock shall be divested of special voting
power as provided above, the terms of office of all persons elected as directors
by the holders of the Preferred Stock as a class shall forthwith terminate, and
the authorized number of directors of the Company shall be reduced accordingly.
The affirmative vote or consent of 66-2/3% of all shares of Preferred Stock
outstanding shall be required before the Company may (i) create any other class
or classes of stock prior in rank to the Preferred Stock, either as to dividends
or upon liquidation, or increase the number of authorized shares of such class
of stock, or (ii) amend, alter or repeal any provisions of the Company's Revised
Articles of Incorporation or any resolution adopted by the Board of Directors
providing for the issuance of any series of Preferred Stock so as to adversely
affect the preferences, rights or powers of the Preferred Stock. The affirmative
vote or consent of at least a majority of the shares of Preferred Stock at the
time outstanding shall be required for the Company to (i) increase the
authorized number of shares of Preferred Stock, (ii) create or increase the
authorized number of shares of any other class of stock ranking on a parity with
the Preferred Stock either as to dividends or upon liquidation, or (iii) sell,
lease or convey all or substantially all of the property or business of the
Company, or voluntarily liquidate, dissolve or wind up the Company, or merge or
consolidate the Company with any other corporation unless the resulting or
surviving corporation will have after such merger or consolidation no stock
either authorized or outstanding (except such stock of the corporation as may
have been authorized or outstanding immediately preceding such merger or
consolidation, or such stock of the resulting or surviving corporation as may be
issued in exchange therefor) prior in rank either as to dividends or upon
liquidation to the Preferred Stock or the stock of the resulting or surviving
corporation issued in exchange therefor. No consent of the holders of Preferred
Stock shall be required in connection with any mortgaging or other hypothecation
by the Company of all or any part of its property or business.
CERTAIN TRANSACTIONS
The Company's Revised Articles of Incorporation provide that certain
transactions between the Company and a beneficial owner of more than 10% of the
Company's voting stock (which includes Preferred Stock) must either (1) be
approved by a majority of the Company's voting stock other than that held by
such beneficial owner, (2) satisfy certain minimum price and procedural
criteria, or (3) be approved by a majority of the Company's directors who are
not related to such beneficial owner. The transactions covered by these
provisions include mergers, consolidations, sales or dispositions of assets,
adoption of a plan of liquidation or dissolution, or other transactions
increasing the proportionate share of such 10% beneficial owner.
MISCELLANEOUS
The Preferred Stock offered hereby has no preemptive rights, is not liable
for further assessments or calls and will be fully paid and nonassessable upon
issuance. Shares of Preferred Stock which have been issued and reacquired in any
manner by the Company shall resume the status of authorized and unissued shares
of Preferred Stock and shall be available for subsequent issuance. There are no
restrictions on repurchase or redemption of the Preferred Stock while there is
any arrearage in dividends or sinking fund installments except as may be set
forth in the related Prospectus Supplement.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for each series of Preferred Stock will be
described in the related Prospectus Supplement.
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DESCRIPTION OF COMMON STOCK
The following summary does not purport to be complete and is subject in all
respects to the applicable provisions of the Revised Business Corporation Law of
the State of Utah and the Company's Revised Articles of Incorporation. The
Company is presently authorized to issue 500,000,000 shares of Common Stock, par
value $2.50 per share. At April 30, 1998, an aggregate of 247,306,604 shares of
Common Stock were outstanding.
DIVIDENDS
Subject to the rights of holders of any Preferred Stock which may be
issued, the holders of Common Stock are entitled to receive dividends when, as
and if declared by the Board of Directors out of any funds legally available
therefor. The Company may not pay dividends on Common Stock (other than
dividends payable in Common Stock or any other class or classes of stock junior
in rank to the Preferred Stock as to dividends or upon liquidation) unless all
dividends accrued on outstanding Preferred Stock have been paid or declared and
set apart for payment.
VOTING RIGHTS
Holders of Common Stock are entitled to one vote for each share held.
Except as provided in the related Prospectus Supplement, any series of Preferred
Stock will be entitled, with certain exceptions, to vote together with the
holders of Common Stock as one class. See "Description of Preferred
Stock -- Voting Rights." In voting for the election of directors, holders of
Common Stock shall not have the right to accumulate their votes. Notwithstanding
that shareholders shall not be entitled to accumulate votes in the election of
directors, no one of the directors may be removed if the votes of a sufficient
number of shares are cast against removal which, at an election of the class of
directors of which the director is a member (or at an election of the entire
board of directors commencing at the Company's 1999 annual meeting), would have
been sufficient to elect the director if cumulative voting were applicable.
LIQUIDATION RIGHTS
Any Preferred Stock would be senior to the Common Stock as to distributions
upon liquidation, dissolution or winding up of the Company. After distribution
in full of the preferential amounts to be distributed to holders of Preferred
Stock, holders of Common Stock will be entitled to receive all remaining assets
of the Company available for distribution to stockholders in the event of
voluntary or involuntary liquidation.
CERTAIN TRANSACTIONS
The Company's Revised Articles of Incorporation provide for certain voting
rights for the holders of the Company's voting stock (including Common Stock) in
the case of certain transactions between the Company and a beneficial owner of
more than 10% of the Company's voting stock. See "Description of Preferred Stock
- -- Certain Transactions."
MISCELLANEOUS
The Common Stock is not redeemable, has no preemptive or conversion rights
and is not liable for further assessments or calls. All shares of Common Stock
offered hereby will be fully paid and nonassessable.
TRANSFER AGENT AND REGISTRAR
Harris Trust & Savings Bank is the transfer agent and registrar for the
Common Stock. The Common Stock is listed on the New York Stock Exchange.
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DESCRIPTION OF SECURITIES WARRANTS
The Company may issue Securities Warrants for the purchase of Debt
Securities or Preferred Stock. Securities Warrants may be issued independently
or together with any Debt Securities or shares of Preferred Stock offered by any
Prospectus Supplement and may be attached to or separate from such Debt
Securities or shares of Preferred Stock. The Securities Warrants are to be
issued under Warrant Agreements to be entered into between the Company and
Citibank, N.A., as Warrant Agent, or such other bank or trust company as is
named in the Prospectus Supplement relating to the particular issue of
Securities Warrants (the "Warrant Agent"). The Warrant Agent will act solely as
an agent of the Company in connection with the Securities Warrants and will not
assume any obligation or relationship of agency or trust for or with any holders
of Securities Warrants or beneficial owners of Securities Warrants. The
following summaries of certain provisions of the form of Warrant Agreement and
Securities Warrants do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all the provisions of the
applicable Warrant Agreement and the Securities Warrants.
GENERAL
If Securities Warrants are offered, the Prospectus Supplement will describe
the terms of the Securities Warrants, including the following: (i) the offering
price; (ii) the currency, currencies or currency units for which Securities
Warrants may be purchased; (iii) the designation, aggregate principal amount,
currency, currencies or currency units and terms of the Debt Securities
purchasable upon exercise of the Warrants and the price at which such Debt
Securities may be purchased upon such exercise; (iv) the designation, number of
shares and terms of the series of Preferred Stock purchasable upon exercise of
the Securities Warrants to purchase Preferred Stock and the price at which such
shares of Preferred Stock may be purchased upon such exercise; (v) if
applicable, the designation and terms of the Debt Securities or Preferred Stock
with which the Securities Warrants are issued and the number of Securities
Warrants issued with each such Debt Security or share of Preferred Stock; (vi)
if applicable, the date on and after which the Securities Warrants and the
related Debt Securities or Preferred Stock will be separately transferable;
(vii) the date on which the right to exercise the Securities Warrants shall
commence and the date (the "Expiration Date") on which such right shall expire;
(viii) whether the Securities Warrants will be issued in registered or bearer
form; (ix) a discussion of certain Federal income tax, accounting and other
special considerations, procedures and limitations relating to the Securities
Warrants; and (x) any other terms of the Securities Warrants.
Securities Warrants may be exchanged for new Securities Warrants of
different denominations, may (if in registered form) be presented for
registration of transfer, and may be exercised at the corporate trust office of
the Warrant Agent or any other office indicated in the Prospectus Supplement.
Before the exercise of their Securities Warrants, holders of Securities Warrants
will not have any of the rights of holders of the Debt Securities or shares of
Preferred Stock purchasable upon such exercise, including the right to receive
payments of principal of, any premium on, or any interest on, the Debt
Securities purchasable upon such exercise or to enforce the covenants in the
Indenture or to receive payments of dividends, if any, on the Preferred Stock
purchasable upon such exercise or to exercise any applicable right to vote.
EXERCISE OF SECURITIES WARRANTS
Each Securities Warrant will entitle the holder to purchase such principal
amount of Debt Securities or such number of shares of Preferred Stock at such
exercise price as shall in each case be set forth in, or calculable from, the
Prospectus Supplement relating to the Securities Warrant. Securities Warrants
may be exercised at such times as are set forth in the Prospectus Supplement
relating to such Securities Warrants. After the close of business on the
Expiration Date (or such later date to which such Expiration Date may be
extended by the Company), unexercised Securities Warrants will become void.
Subject to any restrictions and additional requirements that may be set
forth in the Prospectus Supplement relating thereto, Securities Warrants may be
exercised by delivery to the Warrant Agent of the certificate evidencing such
Securities Warrants properly completed and duly executed and of payment as
provided in the Prospectus Supplement of the amount required to purchase the
Debt Securities or shares of
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Preferred Stock purchasable upon such exercise. The exercise price will be the
price applicable on the date of payment in full, as set forth in the Prospectus
Supplement relating to the Securities Warrants. Upon receipt of such payment and
the certificate representing the Securities Warrants to be exercised properly
completed and duly executed at the corporate trust office of the Warrant Agent
or any other office indicated in the Prospectus Supplement, the Company will, as
soon as practicable, issue and deliver the Debt Securities or shares of
Preferred Stock purchasable upon such exercise. If fewer than all of the
Securities Warrants represented by such certificate are exercised, a new
certificate will be issued for the remaining amount of Securities Warrants.
PLAN OF DISTRIBUTION
The Company may sell the Offered Securities offered hereby (i) through
underwriters or dealers; (ii) through agents; (iii) directly to purchasers; or
(iv) through a combination of any such methods of sale. Any such underwriter,
dealer or agent may be deemed to be an underwriter within the meaning of the
Securities Act. The Prospectus Supplement relating to the Offered Securities
will set forth their offering terms, including the name or names of any
underwriters, dealers or agents, the purchase price of the Offered Securities
and the proceeds to the Company from such sale, any underwriting discounts,
commissions and other items constituting compensation to underwriters, dealers
or agents, any initial public offering price, any discounts or concessions
allowed or reallowed or paid by underwriters or dealers to other dealers, and
any securities exchanges on which the Offered Securities may be listed.
If underwriters or dealers are used in the sale, the Offered Securities
will be acquired by the underwriters or dealers for their own account and may be
resold from time to time in one or more transactions, at a fixed price or
prices, which may be changed, or at market prices prevailing at the time of
sale, or at prices related to such prevailing market prices, or at negotiated
prices. The Offered Securities may be offered to the public either through
underwriting syndicates represented by one or more managing underwriters or
directly by one or more of such firms. Unless otherwise set forth in the
Prospectus Supplement, the obligations of underwriters or dealers to purchase
the Offered Securities will be subject to certain conditions precedent and the
underwriters or dealers will be obligated to purchase all the Offered Securities
if any are purchased. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid by underwriters or dealers to other
dealers may be changed from time to time.
Offered Securities may be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved in the offer or
sale of the Offered Securities in respect of which this Prospectus is delivered
will be named, and any commissions payable by the Company to such agent will be
set forth, in the Prospectus Supplement. Unless otherwise indicated in the
Prospectus Supplement, any such agent will be acting on a best efforts basis for
the period of its appointment.
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters, dealers or agents to solicit offers by certain specified
institutions to purchase Offered Securities from the Company at the public
offering price set forth in the Prospectus Supplement pursuant to delayed
delivery contracts providing for payment and delivery on a specified date in the
future. Such contracts will be subject to any conditions set forth in the
Prospectus Supplement and the Prospectus Supplement will set forth the
commission payable for solicitation of such contracts. The underwriters and
other persons soliciting such contracts will have no responsibility for the
validity or performance of any such contracts.
Underwriters, dealers and agents may be entitled under agreements entered
into with the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act, or to contribution
by the Company to payments they may be required to make in respect thereof. The
terms and conditions of such indemnification will be described in an applicable
Prospectus Supplement. Underwriters, dealers and agents may be customers of,
engage in transactions with, or perform services for the Company in the ordinary
course of business.
Each series of Offered Securities other than Common Stock will be a new
issue of securities with no established trading market. Any underwriters to whom
Offered Securities are sold by the Company for public offering and sale may make
a market in such Offered Securities, but such underwriters will not be obligated
to do so and may discontinue any market making at any time without notice. No
assurance can be given as to the liquidity of the trading market for any Offered
Securities.
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Any underwriter may engage in stabilizing and syndicate covering
transactions in accordance with Rule 104 under the Exchange Act. Rule 104
permits stabilizing bids to purchase the underlying security so long as the
stabilizing bids to do not exceed a specified maximum. The underwriters may
over-allot Offered Securities, thereby creating a short position in the
underwriters' account. Syndicate covering transactions involve purchases of
Offered Securities in the open market after the distribution has been completed
in order to cover syndicate short positions. Stabilizing and syndicate covering
transactions may cause the price of the Offered Securities to be higher than it
would otherwise be in the absence of such transactions These transactions, if
commenced, may be discontinued at any time.
LEGAL OPINIONS
The validity of the Offered Securities will be passed upon for the Company
by Richard J. Ressler, Esquire, Assistant General Counsel of the Company, and
for the underwriters, dealers or agents, if any, by Cravath, Swaine & Moore,
Worldwide Plaza, 825 Eighth Avenue, New York, N.Y. 10019, unless otherwise
specified in the Prospectus Supplement. Mr. Ressler owns 14,159 shares of Common
Stock, including retention shares granted under the Company's 1993 Stock Option
and Retention Stock Plan, and holds options to purchase 95,818 additional shares
of the Common Stock. Cravath, Swaine & Moore has provided legal services from
time to time to the Company and its affiliates.
EXPERTS
The consolidated financial statements of the Company and its subsidiaries
as of December 31, 1997 and 1996 and for each of the years in the three-year
period ended December 31, 1997, incorporated in this Prospectus by reference
from Company's Annual Report on Form 10-K for the year ended December 31, 1997,
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
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Union Pacific
