<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
ILLINOIS CENTRAL CORPORATION
(EXACT NAME OF SUBJECT COMPANY)
CANADIAN NATIONAL RAILWAY COMPANY
BLACKHAWK MERGER SUB, INC.
(BIDDERS)
------------------------
COMMON STOCK, $0.001 PAR VALUE
(TITLE OF CLASS OF SECURITIES)
------------------------
896215100
(CUSIP Number of Class of Securities)
------------------------
JEAN PIERRE OUELLET
CANADIAN NATIONAL RAILWAY COMPANY
935 DE LA GAUCHETIERE ST. WEST
MONTREAL, QUEBEC, CANADA
H3B 2M9
(514) 399-6569
(Name, Address and Telephone Number of Persons Authorized to Receive Notices
and Communications on Behalf of Person(s) Filing Statement)
------------------------
<TABLE>
<S> <C>
WITH COPIES TO:
WINTHROP B. CONRAD, JR., ESQ. JOHN G. FINLEY, ESQ.
DAVID W. FERGUSON, ESQ. ALLAN SCHWARTZ, ESQ.
DAVIS POLK & WARDWELL SIMPSON, THACHER & BARTLETT
450 LEXINGTON AVENUE 425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10017
(212) 450-4000 (212) 455-2000
</TABLE>
CALCULATION OF FILING FEE
- --------------------------------------------------------------------------------
<TABLE>
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- --------------------------------------------------------------------------------
TRANSACTION VALUATION* AMOUNT OF FILING FEE**
- ----------------------------------------------------------------------------------------------
$1,796,018,679 $359,204
- ----------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
* Calculated by multiplying $39.00, the per share tender offer price, by
46,051,761, the number of shares of Common Stock sought in the Offer.
** Calculated as 1/50 of 1% of the transaction value.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: _________________
Filing Party: ________________________
Form or Registration No.: __________ Date Filed: _________________________
================================================================================
<PAGE> 2
CUSIP NO. 896215100
<TABLE>
<C> <S> <C>
1. NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS OF ABOVE PERSONS
CANADIAN NATIONAL RAILWAY COMPANY
- -----------------------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [
]
(b) [X]
- -----------------------------------------------------------------------------------------------
3. SEC USE ONLY
- -----------------------------------------------------------------------------------------------
4. SOURCE OF FUNDS
BK, WC
- -----------------------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) OR 2(f) [ ]
- -----------------------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
CANADA
- -----------------------------------------------------------------------------------------------
7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
NONE.
- -----------------------------------------------------------------------------------------------
8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7)
EXCLUDES CERTAIN SHARES [ ]
- -----------------------------------------------------------------------------------------------
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
0%
- -----------------------------------------------------------------------------------------------
10. TYPE OF REPORTING PERSON
CO, HC
</TABLE>
2
<PAGE> 3
CUSIP NO. 896215100
<TABLE>
<C> <S> <C>
1. NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS OF ABOVE PERSONS
BLACKHAWK MERGER SUB, INC.
- -----------------------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [
]
(b) [X]
- -----------------------------------------------------------------------------------------------
3. SEC USE ONLY
- -----------------------------------------------------------------------------------------------
4. SOURCE OF FUNDS
AF
- -----------------------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) OR 2(f) [ ]
- -----------------------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- -----------------------------------------------------------------------------------------------
7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
NONE.
- -----------------------------------------------------------------------------------------------
8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7)
EXCLUDES CERTAIN SHARES [ ]
- -----------------------------------------------------------------------------------------------
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
0%
- -----------------------------------------------------------------------------------------------
10. TYPE OF REPORTING PERSON
CO
</TABLE>
3
<PAGE> 4
This Tender Offer Statement on Schedule 14D-1 filed by Canadian National
Railway Company ("Parent"), a Canadian corporation, and Blackhawk Merger Sub,
Inc. ("Purchaser"), a Delaware corporation and an indirect wholly owned
subsidiary of Parent, relates to the offer by Purchaser to purchase 46,051,761
of the issued and outstanding shares of Common Stock $0.001 par value (the
shares subject to the Offer, as well as all other shares of such Common Stock
hereinafter referred to as the "Shares"), of Illinois Central Corporation, a
Delaware corporation (the "Company"), at $39.00 per Share, net to the seller in
cash, upon the terms and subject to the conditions set forth in the Offer to
Purchase dated February 13, 1998 (the "Offer to Purchase") and in the related
Letter of Transmittal (which together constitute the "Offer"), copies of which
are attached hereto as Exhibits (a)(1) and (a)(2), respectively.
ITEM 1. SECURITY AND SUBJECT COMPANY
(a) The name of the subject company is Illinois Central Corporation (the
"Company"), a Delaware corporation, which has its principal executive offices at
455 North Cityfront Plaza Drive, Chicago, Illinois 60611-5504.
(b) The exact title of the class of equity securities and amount being
sought are 46,051,761 shares of Common Stock, $0.001 par value, of the Company.
As of February 10, 1998, there were 61,402,347 Shares issued and outstanding and
approximately 25,000 holders of record. The information set forth under
"Introduction" in the Offer to Purchase is incorporated herein by reference.
(c) The information concerning the principal market in which the Shares are
traded and certain high and low sales prices for the Shares in such principal
market is set forth in "Price Range of Shares; Dividends" of the Offer to
Purchase and is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND
(a)-(d) and (g) This Statement is filed by Parent and Purchaser. The
information set forth under "Introduction", "Certain Information Concerning
Purchaser and Parent" and Schedule I of the Offer to Purchase is incorporated
herein by reference.
(e) and (f) During the last five years, neither Parent nor Purchaser nor,
to the best knowledge of Parent and Purchaser, any of the persons listed in
Schedule I to the Offer to Purchase has been (i) convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting activities
subject to, federal or state securities laws or finding any violation of such
laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY
(a)-(b) The information set forth under "Certain Information Concerning the
Company", "Certain Information Concerning Purchaser and Parent", "Background of
the Offer; Past Contacts, Transactions or Negotiations with the Company",
"Purpose of the Offer and Merger; Plans for the Company" and "The Merger
Agreement; Other Agreements" in the Offer to Purchase is incorporated herein by
reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
(a)-(b) The information set forth under "Introduction", "Source and Amount
of Funds" of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
4
<PAGE> 5
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER
(a)-(e) The information set forth under "Introduction", "Background of the
Offer; Past Contacts, Transactions or Negotiations with the Company", "Purpose
of the Offer and Merger; Plans for the Company", "The Merger Agreement; Other
Agreements", "Dividends and Distributions", of the Offer to Purchase is
incorporated herein by reference.
(f) and (g) The information set forth under "Introduction" and "Effect of
the Offer on the Market for Shares; Exchange Listing and Exchange Act
Registration; Margin Regulations" of the Offer to Purchase is incorporated
herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY
The information set forth under "Introduction", "Certain Information
Concerning Purchaser and Parent" and "Merger Agreement; Other Agreements" of the
Offer to Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES
The information set forth under "Introduction", "Certain Information
Concerning Purchaser and Parent", "Background of the Offer; Past Contacts,
Transactions or Negotiations with the Company", and "The Merger Agreement; Other
Agreements" of the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The information set forth under "Introduction" and "Fees and Expenses" of
the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS
Parent's Consolidated Financial Statements and related Notes thereto
included in Parent's Form 40-F for the fiscal year ended December 31, 1996 and
the information set forth under "Certain Information Concerning Purchaser and
Parent" are incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION
(a) Not applicable.
(b) and (c) The information set forth under "Introduction", "Terms of the
Offer; Proration; Expiration Date", and "Certain Legal Matters; Regulatory
Approvals" of the Offer to Purchase is incorporated herein by reference.
(d) The information set forth under "Effect of the Offer on the Market for
Shares; Exchange Listing and Exchange Act Registration; Margin Regulations" of
the Offer to Purchase is incorporated herein by reference.
(e) The information set forth under "Certain Legal Matters; Regulatory
Approvals" of the Offer to Purchase is incorporated herein by reference.
(f) The information set forth in the Offer to Purchase and the related
Letter of Transmittal and the Agreement and Plan of Merger, dated as of February
10, 1998, among Parent, Purchaser and the Company, copies of which are attached
hereto as Exhibits (a)(1), (a)(2) and (c)(1), is incorporated herein by
reference.
5
<PAGE> 6
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
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(a)(1) Offer to Purchase dated February 13, 1998.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form
W-9.
(a)(7) Summary Advertisement as published in The Wall Street Journal on February 13,
1998.
(a)(8) Text of Press Release issued by Parent and the Company on February 10, 1998.
(a)(9) Text of Press Release issued by Parent on February 13, 1998.
(b)(1) Commitment Letter (including the related term sheet), dated February 9, 1998,
from Goldman Sachs Canada Credit Partners Co., Goldman Sachs Credit Partners L.P.
and Bank of Montreal, as Lead Lenders.
(c)(1) Agreement and Plan of Merger dated as of February 10, 1998 among Parent,
Purchaser and the Company.
(c)(2) Investment Commitment Agreement dated as of February 10, 1998 between Parent and
Gilbert H. Lamphere.
(c)(3) Investment Commitment Agreement dated as of February 10, 1998 between Parent and
Alexander P. Lynch.
(c)(4) Confidentiality Agreement, dated March 13, 1997, between Parent and the Company.
(d) Not applicable.
(e) Not applicable.
(e) Not applicable.
</TABLE>
6
<PAGE> 7
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
February 13, 1998
CANADIAN NATIONAL RAILWAY COMPANY
By: /s/ Jean Pierre Ouellet
Name: Jean Pierre Ouellet
Title: Chief Legal Officer and
Corporate Secretary
BLACKHAWK MERGER SUB, INC.
By: /s/ Jean Pierre Ouellet
Name: Jean Pierre Ouellet
Title: President and Treasurer
7
<PAGE> 8
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO.
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<C> <S>
(a)(1) Offer to Purchase dated February 13, 1998.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9.
(a)(7) Summary Advertisement as published in The Wall Street Journal on February 13,
1998.
(a)(8) Text of Press Release issued by Parent and the Company on February 10, 1998.
(a)(9) Text of Press Release issued by Parent on February 13, 1998.
(b)(1) Commitment Letter (including the related term sheet), dated February 9, 1998,
from Goldman Sachs Canada Credit Partners Co., Goldman Sachs Credit Partners
L.P. and Bank of Montreal, as Lead Lenders.
(c)(1) Agreement and Plan of Merger dated as of February 10, 1998 among Parent,
Purchaser and the Company.
(c)(2) Investment Commitment Agreement dated as of February 10, 1998 between Parent
and Gilbert H. Lamphere.
(c)(3) Investment Commitment Agreement dated as of February 10, 1998 between Parent
and Alexander P. Lynch.
(c)(4) Confidentiality Agreement, dated March 13, 1997, between Parent and the
Company.
</TABLE>
8
<PAGE> 1
OFFER TO PURCHASE FOR CASH
46,051,761 SHARES OF COMMON STOCK
OF
ILLINOIS CENTRAL CORPORATION
AT
$39.00 NET PER SHARE
BY
BLACKHAWK MERGER SUB, INC.
A WHOLLY OWNED SUBSIDIARY OF
CANADIAN NATIONAL RAILWAY COMPANY
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, MARCH 13, 1998, UNLESS THE OFFER IS EXTENDED.
---------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED IN ACCORDANCE WITH THE TERMS OF THE OFFER PRIOR TO THE EXPIRATION DATE
OF THE OFFER AND NOT WITHDRAWN A NUMBER OF SHARES OF COMMON STOCK, PAR VALUE
$0.001 PER SHARE (THE SHARES SUBJECT TO THE OFFER, AS WELL AS ALL OTHER SHARES
OF COMMON STOCK HEREINAFTER REFERRED TO AS THE "SHARES") OF ILLINOIS CENTRAL
CORPORATION (THE "COMPANY") WHICH, TOGETHER WITH THE SHARES THEN OWNED BY
PARENT, REPRESENTS AT LEAST 50.1% OF THE OUTSTANDING SHARES ON A FULLY DILUTED
BASIS (THE "MINIMUM CONDITION"), AND (2) THE RECEIPT BY CANADIAN NATIONAL
RAILWAY COMPANY ("PARENT"), PRIOR TO THE EXPIRATION OF THE OFFER, OF A FAVORABLE
INFORMAL ADVISORY OPINION FROM THE STAFF OF THE UNITED STATES SURFACE
TRANSPORTATION BOARD (THE "STB") TO THE EFFECT THAT THE PROPOSED USE OF THE
VOTING TRUST (AS DEFINED HEREIN) WILL PRECLUDE UNLAWFUL CONTROL OF THE COMPANY
BY PARENT.
THE BOARD OF DIRECTORS OF THE COMPANY, BY UNANIMOUS VOTE, HAS APPROVED THE
MERGER AGREEMENT DATED AS OF FEBRUARY 10, 1998 AMONG PARENT, PURCHASER AND THE
COMPANY (THE "MERGER AGREEMENT") AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE OFFER AND THE MERGER, AND HAS DETERMINED THAT THE OFFER AND THE
MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE HOLDERS OF SHARES AND
RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT TO THE OFFER.
---------------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should either (1) complete and sign the Letter of Transmittal or a
manually signed facsimile thereof in accordance with the instructions in the
Letter of Transmittal, have such stockholder's signature thereon guaranteed if
required by Instruction 1 of the Letter of Transmittal and mail or deliver the
Letter of Transmittal or such facsimile with the certificate(s) and any other
required documents to Harris Trust Company of New York (the "Depositary") (at
the Depositary's address set forth on the back cover of this Offer to Purchase)
or follow the procedure for book-entry tender of Shares set forth in Section 3
or (2) request such stockholder's broker, dealer, commercial bank, trust company
or other nominee to effect the tender for such stockholder. Stockholders having
Shares registered in the name of a broker, dealer, commercial bank, trust
company or other nominee must contact such broker, dealer, commercial bank,
trust company or other nominee if they desire to tender Shares so registered.
A stockholder who desires to tender Shares and whose certificates for such
Shares are not immediately available, or who cannot comply with the procedure
for book-entry transfer on a timely basis, or who cannot deliver all required
documents to the Depositary prior to the expiration of the Offer, may tender
such Shares by following the procedures for guaranteed delivery set forth in
Section 3.
Questions or requests for assistance may be directed to MacKenzie Partners,
Inc. (the "Information Agent") or Goldman, Sachs & Co. and Schroder & Co. Inc.
(sometimes referred to herein as the "Dealer Managers") at their respective
addresses and telephone numbers set forth on the back cover of this Offer to
Purchase. Requests for additional copies of this Offer to Purchase and the
related Letter of Transmittal may be directed to the Information Agent or to
brokers, dealers, commercial banks or trust companies.
THE DEALER MANAGERS FOR THE OFFER ARE:
GOLDMAN, SACHS & CO. SCHRODER & CO. INC.
The date of this Offer to Purchase is February 13, 1998.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C> <C>
INTRODUCTION............................................................................. 1
1. Terms of the Offer; Proration; Expiration Date.................................. 4
2. Acceptance for Payment and Payment for Shares................................... 5
3. Procedure for Tendering Shares.................................................. 6
4. Withdrawal Rights............................................................... 9
5. Certain Income Tax Consequences................................................. 9
6. Price Range of Shares; Dividends................................................ 10
7. Effect of the Offer on the Market for Shares; Exchange Listing and Exchange Act
Registration; Margin Regulations................................................ 11
8. Certain Information Concerning the Company...................................... 12
9. Certain Information Concerning Purchaser and Parent............................. 14
10. Source and Amount of Funds...................................................... 17
11. Background of the Offer; Past Contacts, Transactions or Negotiations with
the Company..................................................................... 18
12. Purpose of the Offer and Merger; Plans for the Company.......................... 21
13. The Merger Agreement; Other Agreements.......................................... 22
14. Dividends and Distributions..................................................... 37
15. Extension of Tender Period; Termination; Amendment.............................. 37
16. Certain Conditions of the Offer................................................. 38
17. Certain Legal Matters; Regulatory Approvals..................................... 39
18. Fees and Expenses............................................................... 43
19. Miscellaneous................................................................... 44
Schedule I Directors and Executive Officers of Parent and Purchaser.....................
Annex A Canadian/U.S. GAAP Financial Information for 1995, 1996 and 1997.
</TABLE>
i
<PAGE> 3
To the Holders of Common Stock
of Illinois Central Corporation:
INTRODUCTION
Blackhawk Merger Sub, Inc. ("Purchaser"), a Delaware corporation and an
indirect wholly-owned subsidiary of Canadian National Railway Company ("Parent"
or "CN"), a Canadian corporation, hereby offers to purchase an aggregate of
46,051,761 shares of Common Stock, $0.001 par value (the shares subject to the
Offer, as well as all other shares of such Common Stock being hereinafter
referred to as the "Shares"), of Illinois Central Corporation, a Delaware
corporation (the "Company" or "IC"), at $39.00 per Share, net to the seller in
cash, upon the terms and subject to the conditions set forth in this Offer to
Purchase and in the related Letter of Transmittal (which together constitute the
"Offer").
Upon the terms and subject to the conditions of the Offer, if more than
46,051,761 Shares are validly tendered and not withdrawn prior to the Expiration
Date, Purchaser will accept for payment and pay for only 46,051,761 Shares on a
pro rata basis (with appropriate adjustments to avoid purchase of fractional
Shares) based on the number of Shares properly tendered by each stockholder
prior to or on the Expiration Date and not withdrawn. See Section 1.
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes with respect to the purchase of Shares by
Purchaser pursuant to the Offer. Parent or Purchaser will pay all charges and
expenses of Goldman, Sachs & Co. and Schroder & Co. Inc. (the "Dealer
Managers"), Harris Trust Company of New York (the "Depositary") and MacKenzie
Partners, Inc. (the "Information Agent") incurred in connection with the Offer.
See Section 17.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED IN ACCORDANCE WITH THE TERMS OF THE OFFER PRIOR TO THE EXPIRATION DATE
OF THE OFFER AND NOT WITHDRAWN A NUMBER OF SHARES WHICH, TOGETHER WITH THE
SHARES THEN OWNED BY PARENT, REPRESENTS AT LEAST 50.1% OF THE OUTSTANDING SHARES
ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION") AND (2) THE RECEIPT BY
PARENT, PRIOR TO THE EXPIRATION DATE OF THE OFFER, OF A FAVORABLE INFORMAL
ADVISORY OPINION FROM THE STAFF OF THE UNITED STATES SURFACE TRANSPORTATION
BOARD (THE "STB") TO THE EFFECT THAT THE PROPOSED USE OF THE VOTING TRUST (AS
DEFINED HEREIN) WILL PRECLUDE UNLAWFUL CONTROL OF THE COMPANY BY PARENT.
In addition, the Offer is subject to certain other conditions which are
described in Section 16. Subject to the terms of the Merger Agreement, Purchaser
reserves the right to waive any or all of the conditions to the Offer and to
extend the Offer if any of the conditions to the Offer are not satisfied. Under
certain other conditions more fully described in Section 13, Parent will, at the
request of the Company, be obligated to cause Purchaser to extend the Offer for
up to twenty business days.
THE BOARD OF DIRECTORS OF THE COMPANY, BY UNANIMOUS VOTE, HAS APPROVED THE
AGREEMENT AND PLAN OF MERGER DATED AS OF FEBRUARY 10, 1998 AMONG PARENT,
PURCHASER AND THE COMPANY (THE "MERGER AGREEMENT") AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER (AS DEFINED BELOW), AND
HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST
INTERESTS OF, THE HOLDERS OF SHARES AND RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
THE COMPANY HAS ADVISED PURCHASER THAT EACH OF LEHMAN BROTHERS INC.
("LEHMAN BROTHERS") AND THE BEACON GROUP CAPITAL SERVICES LLC ("BEACON"), HAS
DELIVERED TO THE BOARD OF DIRECTORS OF THE COMPANY WRITTEN OPINIONS THAT, AS OF
THE DATE OF THE MERGER AGREEMENT, THE CONSIDERATION TO BE RECEIVED IN THE OFFER
AND THE MERGER, TAKEN TOGETHER, IS FAIR TO THE HOLDERS OF SHARES FROM A
FINANCIAL POINT OF VIEW. A COPY OF EACH SUCH OPINION IS CONTAINED IN THE
COMPANY'S SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 (THE "SCHEDULE
14D-9"), WHICH IS BEING MAILED TO STOCKHOLDERS OF THE COMPANY HEREWITH. SUCH
STOCKHOLDERS ARE URGED TO READ THE OPINION IN ITS ENTIRETY FOR A DESCRIPTION OF
THE ASSUMPTIONS MADE BY, FACTORS CONSIDERED BY, PROCEDURES FOLLOWED BY, AND
CERTAIN INFORMATION CONCERNING, LEHMAN BROTHERS AND BEACON.
<PAGE> 4
The purpose of the Offer is for Parent, through Purchaser, to acquire a
majority equity interest in the Company as the first step in a business
combination of Parent and the Company. The Offer is being made pursuant to the
terms of the Merger Agreement which provides that, among other things, following
completion of the Offer and the satisfaction or waiver of certain conditions and
in accordance with the relevant provisions of the General Corporation Law of the
State of Delaware (the "DGCL"), Purchaser will be merged with and into the
Company (the "Merger"). Following consummation of the Merger, the Company will
continue as the surviving corporation (the "Surviving Corporation") and will
become an indirect wholly-owned subsidiary of Parent. As more fully described in
Section 13, at the effective time of the Merger (the "Effective Time"), (i) if
Purchaser shall have purchased, pursuant to the Offer, an aggregate of
46,051,761 Shares, each Share outstanding immediately prior to the Effective
Time (other than those Shares held by the Company as treasury stock or owned by
Parent or any subsidiary of Parent) shall be converted into the right to receive
that number of duly authorized, validly issued, fully paid and nonassessable
shares, without par value, of Parent ("Parent Common Stock") equal to the
fraction (the "Exchange Ratio") obtained by dividing $39.00 by the Parent
Average Closing Price (as defined in Section 13); and (ii) if Purchaser shall
have purchased an aggregate of less than 46,051,761 Shares pursuant to the
Offer, each Share outstanding immediately prior to the Effective Time (other
than those Shares held by the Company as treasury stock or owned by Parent or
any subsidiary of Parent) shall be converted into the right to receive: (a) a
number of shares of Parent Common Stock equal to the fraction obtained by
dividing $39.00 by the Parent Average Closing Price, multiplied by the Stock
Proration Factor (as defined in Section 13); and (b) cash in an amount equal to
the product of 1 minus the Stock Proration Factor, multiplied by $39.00.
THE OFFER DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY PARENT COMMON STOCK. SUCH AN OFFER MAY BE MADE ONLY PURSUANT TO A
PROSPECTUS IN COMPLIANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT").
In connection with the Offer and the Merger, Parent entered into binding
agreements (the "Investment Commitment Agreements") with two directors of the
Company, Messrs. Gilbert H. Lamphere and Alexander P. Lynch, with respect to the
Shares owned by such persons, pursuant to which Messrs. Lamphere and Lynch have
each agreed (i) to permit all options to purchase Shares then owned by them to
be converted into options to purchase shares of Parent Common Stock in
accordance with the terms of the Merger Agreement, (ii) that at any meeting of
stockholders of the Company held to adopt the Merger Agreement, they will vote
all of their Shares in favor of such action and (iii) (in the case of Mr.
Lamphere only) that, within 90 days of the Effective Time he will have acquired
at least 98,150 shares of Parent Common Stock pursuant to the Merger or open
market purchases; provided that he will not be obligated to invest an aggregate
amount in excess of $5,300,000 of proceeds from the Offer and/or the Merger. See
Section 13.
Under Delaware law, the approval of the Company's Board and the affirmative
vote of the holders of a majority of the outstanding Shares is required to adopt
the Merger Agreement and the transactions contemplated thereby, including the
Merger. If the Minimum Condition is satisfied, Purchaser will have sufficient
voting power to cause (through the Voting Trustee) the adoption of the Merger
Agreement and the transactions contemplated thereby without the affirmative vote
of any other stockholder.
The Merger Agreement may be terminated by either Parent or the Company at
any time prior to the Effective Time if, during any five consecutive trading day
period during the period from the commencement of the Offer until the business
day prior to the expiration of the Offer, the average closing price of the
Parent Common Stock on the NYSE is less than $38.00. See Section 13.
If the Minimum Condition has not been satisfied prior to the scheduled
expiration of the Offer (as such Offer may have been extended), Purchaser shall
have the right at its option to extend the Offer for a period of up to twenty
business days. If, at the scheduled expiration of the Offer (as such date may
have been extended by Purchaser as contemplated by the preceding sentence), the
Minimum Condition has not been satisfied, then (unless the parties otherwise
agree) at Parent's election either (i) Purchaser shall amend the terms of the
Offer by increasing the number of shares sought in the Offer to all of the
outstanding Shares, subject to certain conditions described in
2
<PAGE> 5
Section 13, or (ii) Purchaser shall terminate the Offer and Purchaser and the
Company shall proceed with the Merger, in accordance with the Merger Agreement.
See Section 13.
In accordance with the United States Supreme Court decision, Schwabacher v.
United States, 334 U.S. 182 (1948), stockholders of the Company will not have
any appraisal or like rights under state law, unless the STB or a court of
competent jurisdiction determines that state-law appraisal rights are available
to holders of Shares. Parent considers it unlikely that the STB or a court will
determine that state law appraisal rights are available to holders of Shares.
Parent and the Company intend to seek a determination of the STB that the terms
of the Merger are just and reasonable. It is the understanding of Parent and the
Company that upon the issuance of such a determination, dissenters' rights under
state law will be prempted. Stockholders of the Company will have an opportunity
to participate in this STB proceeding.
Simultaneously with the purchase of Shares pursuant to the Offer, the
Shares purchased will be deposited in an independent, irrevocable voting trust
(the "Voting Trust") in accordance with the terms and conditions of a proposed
voting trust agreement (the "Voting Trust Agreement"). See Section 13.
Based on the information supplied by the Company, as of December 31, 1997,
61,402,347 Shares were issued and outstanding and employee and director stock
options to purchase an aggregate of 2,564,502 Shares were outstanding.
**ALL DOLLAR AMOUNTS CONTAINED HEREIN ARE IN U.S. DOLLARS UNLESS OTHERWISE
INDICATED.**
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
3
<PAGE> 6
1. TERMS OF THE OFFER; PRORATION; EXPIRATION DATE.
Upon the terms and subject to the conditions set forth in the Offer,
Purchaser will accept for payment and pay for an aggregate of 46,051,761 Shares
that are validly tendered by the Expiration Date, as hereinafter defined, and
not withdrawn as provided in Section 4. The term "Expiration Date" shall mean
12:00 Midnight, New York City time, on Friday, March 13, 1998, unless and until
Purchaser, in its sole discretion (but subject to the terms and conditions of
the Merger Agreement), shall have extended the period during which the Offer is
open, in which event the term "Expiration Date" shall mean the latest time and
date at which the Offer, as so extended by Purchaser, shall expire.
Upon the terms and subject to the conditions of the Offer, if more than
46,051,761 Shares are validly tendered and not withdrawn prior to the Expiration
Date, Purchaser will accept for payment and pay for only 46,051,761 Shares on a
pro rata basis (with appropriate adjustments to avoid purchase of fractional
Shares) based on the number of Shares properly tendered by each stockholder
prior to or on the Expiration Date and not withdrawn. In the event that
proration of tendered Shares is required, because of the difficulty of
determining the precise number of Shares properly tendered and not withdrawn
(due in part to the guaranteed delivery procedures described in Section 3),
Purchaser does not expect that it will be able to announce the final results of
such proration or pay for any Shares until at least seven New York Stock
Exchange, Inc. ("NYSE") trading days after the Expiration Date. Preliminary
results of proration will be announced by press release as promptly as
practicable after the Expiration Date. Stockholders may obtain such preliminary
information from the Information Agent and may be able to obtain such
information from their broker.
The Offer is subject to certain conditions set forth in Section 16,
including satisfaction of the Minimum Condition, the expiration or termination
of the waiting period (if any) applicable to Purchaser's acquisition of Shares
pursuant to the Offer (the "Acquisition") under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the receipt by Parent,
prior to the expiration of the Offer, of a favorable informal advisory opinion
from the staff of the STB to the effect that the proposed use of the Voting
Trust will preclude unlawful control of the Company by Parent. If any such
condition is not satisfied, then, except as provided in the next paragraph,
Purchaser may terminate the Offer and return all tendered Shares to tendering
stockholders, extend the Offer and, subject to withdrawal rights as set forth in
Section 4, retain all such Shares until the expiration of the Offer as so
extended, waive such condition and, subject to any requirement to extend the
period of time during which the Offer is open, purchase all Shares validly
tendered by the Expiration Date and not withdrawn or delay acceptance of payment
for Shares, subject to applicable law, until satisfaction or waiver of the
conditions to the Offer.
Purchaser expressly reserves the right to waive any of the conditions to
the Offer, to extend the Offer if any conditions to the Offer are not satisfied
and to make any change in the terms or conditions of the Offer. However, except
as provided in the Merger Agreement, Purchaser will not make any waiver or
change to the Offer which (i) increases the number of Shares sought in the
Offer, (ii) changes the form of consideration to be paid or decreases the price
per Share, (iii) waives the Minimum Condition, (iv) waives the conditions set
forth in paragraph (a), (b) or (e) of Section 16, (v) waives the condition
relating to the expiration of the waiting period (if any) under the HSR Act or
the receipt of a favorable informal advisory opinion from the STB staff, (vi) is
adverse to the holders of Shares or modifies any of the conditions to the Offer
or (vii) imposes any conditions to the Offer in addition to those set forth in
Section 16. If the Offer shall not have been consummated by its scheduled
expiration due to the failure to satisfy (i) any of the conditions to the Offer
set forth in paragraph (a) or (b) of Section 16, (ii) the condition to the Offer
relating to the expiration of the waiting period under the HSR Act or (iii) the
condition relating to the receipt of the favorable informal advisory opinion
from the STB staff, Parent will, at the request of the Company, be obligated to
cause Purchaser to extend the Offer for up to twenty business days. During any
such
4
<PAGE> 7
extension, all Shares previously tendered and not withdrawn will remain subject
to the Offer, subject to the rights of a tendering stockholder to withdraw such
stockholder's Shares. See Section 4.
The Company has provided Purchaser with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. This Offer to Purchase, the related Letter of Transmittal and other
relevant materials will be mailed to record holders of Shares whose names appear
on the Company's stockholder list and will be furnished, for subsequent
transmittal, to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the stockholder
list or, if applicable, who are listed as participants in a clearing agency's
security position listing.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment) Purchaser will accept for payment, and will pay for, an aggregate
of 46,051,761 Shares which are validly tendered prior to the Expiration Date
(and not properly withdrawn in accordance with Section 4) after the later to
occur of (i) the Expiration Date and (ii) the satisfaction or waiver of the
conditions set forth in Section 16. In addition, Purchaser reserves the right,
in its sole discretion and subject to applicable law, to delay the acceptance
for payment of, or subject to applicable rules of the SEC, payment for, Shares
in order to comply in whole or in part with any applicable law.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (A) the
certificates evidencing such Shares (the "Share Certificates") or timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such
Shares into the Depositary's account at The Depository Trust Company or the
Philadelphia Depository Trust Company (each, a "Book-Entry Transfer Facility"
and, collectively, the "Book-Entry Transfer Facilities") pursuant to the
procedures set forth in Section 3; (B) the Letter of Transmittal (or a manually
signed facsimile thereof), properly completed and duly executed, with any
required signature guarantees or, in the case of a book-entry transfer, an
Agent's Message (as defined below) in lieu of the Letter of Transmittal and (C)
any other documents required under the Letter of Transmittal.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares which are the subject of such book-entry
confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that Purchaser may enforce such agreement
against such participant.
For purposes of the Offer, Purchaser shall be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not properly
withdrawn if and when Purchaser gives oral or written notice to the Depositary
of Purchaser's acceptance of such Shares for payment. Payment for Shares
accepted pursuant to the Offer will be made by deposit of the purchase price
with the Depositary, which will act as agent for tendering stockholders for the
purpose of receiving payments from Purchaser and transmitting payments to such
tendering stockholders. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE
CONSIDERATION PAID FOR SHARES PURSUANT TO THE OFFER, REGARDLESS OF ANY DELAY IN
MAKING SUCH PAYMENT.
Upon the deposit of funds with the Depositary for the purpose of making
payments to tendering stockholders, Purchaser's obligation to make such payment
shall be satisfied and tendering stockholders must thereafter look solely to the
Depositary for payment of amounts owed to them by reason of the acceptance for
payment of Shares pursuant to the Offer. Purchaser will pay any stock transfer
tax incident to the transfer to it of validly tendered Shares, except as
otherwise provided in
5
<PAGE> 8
Instruction 6 of the Letter of Transmittal, as well as any charges and expenses
of the Depositary and the Information Agent.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer (including proration due to tenders of
more than 46,051,761 Shares), or if Share Certificates are submitted evidencing
more Shares than are tendered, Share Certificates evidencing unpurchased Shares
will be returned, without expense to the tendering stockholder (or, in the case
of Shares tendered by book-entry transfer into the Depositary's account at a
Book-Entry Transfer Facility pursuant to the procedure set forth in Section 3,
such Shares will be credited to an account maintained at such Book-Entry
Transfer Facility), as promptly as practicable following the expiration or
termination of the Offer.
If, prior to the Expiration Date, Purchaser increases the consideration to
be paid per Share pursuant to the Offer, Purchaser will pay such increased
consideration for all such Shares purchased pursuant to the Offer, whether or
not such Shares were tendered prior to such increase in consideration. Purchaser
reserves the right to transfer or assign, in whole at any time or in part from
time to time, to one or more of its affiliates the right to purchase Shares
tendered pursuant to the Offer, but any such transfer or assignment will not
relieve Purchaser of its obligations under the Offer or prejudice the rights of
tendering stockholders to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer.
3. PROCEDURE FOR TENDERING SHARES.
In order for a holder of Shares to tender validly Shares pursuant to the
Offer, the related Letter of Transmittal (or a manually signed facsimile
thereof), properly completed and duly executed, together with any required
signature guarantees (or, in the case of a book-entry transfer, an Agent's
Message in lieu of the Letter of Transmittal) and any other documents required
by the Letter of Transmittal, must be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase and either (i)
the Share Certificates evidencing tendered Shares must be received by the
Depositary at such address or such Shares must be tendered pursuant to the
procedure for book-entry transfer described below and a Book-Entry Confirmation
must be received by the Depositary (including an Agent's Message if the
tendering stockholder has not delivered a Letter of Transmittal), in each case
prior to the Expiration Date, or (ii) the tendering stockholder must comply with
the guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Book-Entry Transfer
The Depositary will establish accounts with respect to the Shares at the
Book-Entry Transfer Facilities for purposes of the Offer within two business
days after the date of this Offer to Purchase. Any financial institution that is
a participant in the system of any Book-Entry Transfer Facility may make a
book-entry delivery of Shares by causing such Book-Entry Transfer Facility to
transfer such Shares into the Depositary's account at such Book-Entry Transfer
Facility in accordance with such Book-Entry Transfer Facility's procedures for
such transfer. However, although delivery of Shares may be effected through
book-entry transfer at a Book-Entry Transfer Facility, either the Letter of
Transmittal (or a manually signed facsimile thereof), properly completed and
duly executed, together with any required signature guarantees, or an Agent's
Message in lieu of the Letter of Transmittal, and any other required documents,
must, in any case, be received by the Depositary at
6
<PAGE> 9
one of its addresses set forth on the back cover of this Offer to Purchase prior
to the Expiration Date, or the tendering stockholder must comply with the
guaranteed delivery procedures described below. DELIVERY OF DOCUMENTS TO A
BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Signature Guarantees
Signatures on all Letters of Transmittal must be guaranteed by a firm which
is a member of the Medallion Signature Guarantee Program, or by any other
"eligible guarantor institution", as such term is defined in Rule 17Ad-15 under
the Securities and Exchange Act of 1934 (the "Exchange Act") (each of the
foregoing referred to as an "Eligible Institution"), except in cases where
Shares are tendered (i) by a registered holder of Shares who has not completed
either the box entitled "Special Payment Instructions" or the box entitled
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. If a Share Certificate is registered in the
name of a person other than the signer of the Letter of Transmittal, or if
payment is to be made, or a Share Certificate not accepted for payment or not
tendered is to be returned, to a person other than the registered holder(s),
then the Share Certificate must be endorsed or accompanied by appropriate stock
powers, in either case signed exactly as the name(s) of the registered holder(s)
appear on the Share Certificate, with the signature(s) on such Share Certificate
or stock powers guaranteed by an Eligible Institution. See Instructions 1 and 5
of the Letter of Transmittal.
Guaranteed Delivery
If a stockholder desires to tender Shares pursuant to the Offer and the
Share Certificates evidencing such stockholder's Shares are not immediately
available or such stockholder cannot deliver the Share Certificates and all
other required documents to the Depositary prior to the Expiration Date, or such
stockholder cannot complete the procedure for delivery by book-entry transfer on
a timely basis, such Shares may nevertheless be tendered; provided that all the
following conditions are satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser, is received
prior to the Expiration Date by the Depositary (as provided below); and
(iii) the Share Certificates (or a Book-Entry Confirmation) evidencing
all tendered Shares, in proper form for transfer, in each case together
with the Letter of Transmittal (or a manually signed facsimile thereof),
properly completed and duly executed, with any required signature
guarantees, or, in the case of a Book-Entry Transfer, an Agent's Message
and any other documents required by the Letter of Transmittal are received
by the Depositary within three NYSE trading days after the date of
execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, telex, facsimile transmission or mail to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in such
Notice of Guaranteed Delivery made available by Purchaser.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of the
Share Certificates evidencing such Shares, or a Book-Entry Confirmation of the
delivery of such Shares, and the Letter of Transmittal (or a manually signed
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or, in the case of a Book-Entry Transfer, an Agent's
Message and any other documents required by the Letter of Transmittal.
7
<PAGE> 10
Determination of Validity
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of Shares will be determined
by Purchaser in its sole discretion, which determination shall be final and
binding on all parties. Purchaser reserves the absolute right to reject any and
all tenders determined by it not to be in proper form or the acceptance for
payment of which may, in the opinion of its counsel, be unlawful. Subject to the
terms of the Merger Agreement, Purchaser also reserves the absolute right to
waive any condition of the Offer or any defect or irregularity in the tender of
any Shares of any particular stockholder, whether or not similar defects or
irregularities are waived in the case of other stockholders. No tender of Shares
will be deemed to have been validly made until all defects and irregularities
have been cured or waived. None of Purchaser, Parent, the Dealer Managers, the
Depositary, the Information Agent or any other person will be under any duty to
give notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification. Purchaser's interpretation
of the terms and conditions of the Offer (including the related Letter of
Transmittal and the instructions thereto) will be final and binding.
Other Requirements
By executing the Letter of Transmittal as set forth above, a tendering
stockholder irrevocably appoints designees of Purchaser as such stockholder's
proxies, each with full power of substitution, in the manner set forth in the
Letter of Transmittal, to the full extent of such stockholder's rights with
respect to the Shares tendered by such stockholder and accepted for payment by
Purchaser (and with respect to any and all other Shares or other securities
issued or issuable in respect of such Shares on or after the date of the Merger
Agreement). All such proxies shall be considered coupled with an interest in the
tendered Shares. Such appointment will be effective if, when, and only to the
extent that, Purchaser accepts such Shares for payment pursuant to the Offer.
Upon such acceptance for payment, all prior proxies given by such stockholder
with respect to such Shares (and such other Shares and securities) will be
revoked without further action, and no subsequent proxies may be given nor any
subsequent written consent executed by such stockholder (and, if given or
executed, will not be deemed to be effective) with respect thereto. The
designees of Purchaser will, with respect to the Shares for which the
appointment is effective, be empowered (subject to the Voting Trust so long as
it shall be in effect with respect to the Shares) to exercise all voting and
other rights of such stockholder as they in their sole discretion may deem
proper at any annual or special meeting of the Company's stockholders or any
adjournment or postponement thereof, by written consent in lieu of any such
meeting or otherwise. Purchaser reserves the right to require that, in order for
Shares to be deemed validly tendered, immediately upon Purchaser's payment for
such Shares, Purchaser must be able to exercise full voting rights with respect
to such Shares (subject to the Voting Trust).
The acceptance for payment by Purchaser of Shares pursuant to any of the
procedures described above will constitute a binding agreement between the
tendering stockholder and Purchaser upon the terms and subject to the conditions
of the Offer.
TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT TO
CERTAIN STOCKHOLDERS OF THE PURCHASE PRICE OF SHARES PURCHASED PURSUANT TO THE
OFFER, EACH SUCH STOCKHOLDER MUST PROVIDE THE DEPOSITARY WITH SUCH STOCKHOLDER'S
CORRECT TAXPAYER IDENTIFICATION NUMBER OR SOCIAL SECURITY NUMBER OR CERTIFY THAT
SUCH STOCKHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY
COMPLETING THE SUBSTITUTE FORM W-9 IN THE LETTER OF TRANSMITTAL. IF BACKUP
WITHHOLDING APPLIES WITH RESPECT TO A STOCKHOLDER, THE DEPOSITARY IS REQUIRED TO
WITHHOLD 31% OF ANY PAYMENTS MADE TO SUCH STOCKHOLDER. SEE INSTRUCTION 9 OF THE
LETTER OF TRANSMITTAL.
8
<PAGE> 11
4. WITHDRAWAL RIGHTS.
Tenders of Shares made pursuant to the Offer are irrevocable except that
such Shares may be withdrawn at any time prior to the Expiration Date and,
unless theretofore accepted for payment by Purchaser pursuant to the Offer, may
also be withdrawn at any time after April 13, 1998. If Purchaser extends the
Offer, is delayed in its acceptance for payment of Shares or is unable to accept
Shares for payment pursuant to the Offer for any reason, then, without prejudice
to Purchaser's rights under the Offer, the Depositary may, nevertheless, on
behalf of Purchaser, retain tendered Shares, and such Shares may not be
withdrawn except to the extent that tendering stockholders are entitled to
withdrawal rights as described herein.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover page of this Offer to Purchase.
Any such notice of withdrawal must specify the name of the person who tendered
the Shares to be withdrawn, the number of Shares to be withdrawn and the name of
the registered holder of such Shares, if different from that of the person who
tendered such Shares. If Share Certificates evidencing Shares to be withdrawn
have been delivered or otherwise identified to the Depositary, then, prior to
the physical release of such Share Certificates, the serial numbers shown on
such Share Certificates must be submitted to the Depositary and the signature(s)
on the notice of withdrawal must be guaranteed by an Eligible Institution,
unless such Shares have been tendered for the account of an Eligible
Institution. If Shares have been tendered pursuant to the procedure for
book-entry transfer as set forth in Section 3, any notice of withdrawal must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Shares.
All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by Purchaser, in its sole
discretion, which determination shall be final and binding. None of Purchaser,
Parent, the Dealer Managers, the Depositary, the Information Agent or any other
person will be under any duty to give notification of any defect or irregularity
in any notice of withdrawal or incur any liability for failure to give any such
notification.
Any Shares properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered at any time prior to the Expiration Date by following one of the
procedures described in Section 3.
5. CERTAIN INCOME TAX CONSEQUENCES.
The receipt of cash pursuant to the Offer will be a taxable transaction for
Federal income tax purposes under the Internal Revenue Code of 1986, as amended
(the "Code"), and is likely to be a taxable transaction under applicable state,
local or foreign income tax laws. Generally, for Federal income tax purposes, a
tendering stockholder will recognize gain or loss equal to the difference
between the amount of cash received by the stockholder pursuant to the Offer and
the aggregate tax basis in the relevant Shares. It is expected that an exchange
of Shares for the Stock Consideration (as defined in Section 13) and cash, if
any, pursuant to the Merger Agreement will also be a taxable transaction for
U.S. federal income tax purposes. In general, an exchanging stockholder will
recognize gain or loss equal to the difference between the sum of the fair
market value, determined as of the time of such exchange, of the Stock
Consideration and cash, if any, received and the aggregate tax basis in the
relevant Shares. Gain or loss will be calculated separately for each block of
Shares sold or exchanged pursuant to the Offer and the Merger.
If Shares are held by a stockholder as capital assets, gain or loss
recognized by the stockholder will be capital gain or loss, which will be
long-term capital gain or loss if the stockholder's holding period for the
Shares exceeds one year. Under present law, long-term capital gains recognized
by an individual stockholder will generally be taxed at a maximum Federal
marginal tax rate of 28% (or, in the case of certain gains on capital assets
held by an individual stockholder for more than 18 months, 20%), and long-term
capital gains recognized by a corporate stockholder will be taxed at a maximum
Federal marginal tax rate of 35%.
9
<PAGE> 12
Unless an exemption applies, the Depositary will be required to withhold
31% of any cash payments to which a stockholder or other payee is entitled
pursuant to the Offer, unless the stockholder or other payee provides his or her
tax identification number (social security number or employer identification
number) and certifies that such number is correct. Each stockholder and, if
applicable, each other payee is required to complete and sign the Form W-9 that
will be included as part of the transmittal letter sent to stockholders of the
Company by Purchaser to avoid backup withholding, unless an applicable exemption
exists and is proved in a manner satisfactory to Parent and the Depositary.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE WITH RESPECT TO SHARES
RECEIVED PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS
COMPENSATION OR WITH RESPECT TO HOLDERS OF SHARES THAT ARE SUBJECT TO SPECIAL
TAX TREATMENT UNDER THE CODE, SUCH AS NON-U.S. PERSONS, LIFE INSURANCE
COMPANIES, TAX-EXEMPT ORGANIZATIONS, AND FINANCIAL INSTITUTIONS, AND MAY NOT
APPLY TO A HOLDER OF SHARES IN LIGHT OF INDIVIDUAL CIRCUMSTANCES, INCLUDING
HOLDERS HOLDING SHARES AS PART OF A STRADDLE, A CONVERSION TRANSACTION, A
HEDGING TRANSACTION OR OTHER SIMILAR TRANSACTION. STOCKHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO
THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME
AND OTHER TAX LAWS) OF THE OFFER AND THE MERGER.
The foregoing discussion is based upon the provisions of the Code,
applicable Treasury regulations thereunder, Internal Revenue Service rulings and
judicial decisions, as in effect as of the date of this Offer to Purchase. There
can be no assurance that future legislative, administrative or judicial changes
or interpretations will not affect the accuracy of the statements or conclusions
set forth herein. Any such change could apply retroactively and could affect the
accuracy of such discussion. No rulings have been or will be sought from the
Internal Revenue Service concerning the tax consequences of the Offer and the
Merger.
No information is provided herein with respect to the tax consequences, if
any, of the Offer and the Merger under applicable foreign, state or local income
tax or other tax laws.
Each stockholder of the Company is urged to consult such stockholder's own
tax advisor as to the specific tax consequences to such stockholder of the Offer
and the Merger under U.S. federal, state, local or any other applicable tax
laws.
6. PRICE RANGE OF SHARES; DIVIDENDS.
According to the Company's Annual Report on Form 10-K (the "Company Form
10-K") for the year ended December 31, 1996 , the NYSE is the principal market
on which the Shares are traded (under the symbol IC). The following table sets
forth, for the quarters indicated, the high and low sales prices per Share as
reported on the NYSE Composite Tape and the cash dividends paid per Share, as
reported in the Company Form 10-K for periods in 1995 and 1996, and thereafter
as reported in published financial sources (which takes into account the 3-for-2
split with respect to the Shares in March 1996):
10
<PAGE> 13
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS
------ ------ ---------
<S> <C> <C> <C> <C>
1996: First Quarter........................................ $28.75 $23.67 $0.19
Second Quarter....................................... 30.75 27.00 0.20
Third Quarter........................................ 31.88 26.88 0.20
Fourth Quarter....................................... 34.38 29.50 0.20
1997: First Quarter........................................ 36.13 30.50 0.23
Second Quarter....................................... 37.63 30.88 0.23
Third Quarter........................................ 37.25 33.25 0.23
Fourth Quarter....................................... 39.00 32.44 0.23
1998: First Quarter
(through February 12, 1998).......................... 38.75 31.13 0.23
</TABLE>
On February 10, 1998, the last full day of trading prior to the
announcement of the execution of the Merger Agreement and of Purchaser's
intention to commence the Offer, the reported closing sales price per Share on
the NYSE Composite Tape was $35.69. On February 12, 1998, the last full day of
trading prior to the date of this Offer, the reported closing sales price per
Share on the NYSE Composite Tape was $38.75.
STOCKHOLDERS ARE ENCOURAGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
7. EFFECT OF THE OFFER ON THE MARKET FOR SHARES; EXCHANGE LISTING AND EXCHANGE
ACT REGISTRATION; MARGIN REGULATIONS.
The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and could reduce the number of
holders of Shares, which could adversely affect the liquidity and market value
of the remaining Shares held by the public. Following completion of the Offer,
at least a majority and up to 75% of the outstanding Shares will be owned by
Purchaser.
Purchaser does not anticipate that the Shares would be subject to delisting
by the NYSE as a result of completion of the Offer. According to the NYSE's
published guidelines, the NYSE would consider delisting the Shares if, among
other things, the number of record holders of at least 100 Shares should fall
below 1,200, the number of publicly held Shares (exclusive of holdings of
officers, directors and their families and other concentrated holdings of 10% or
more ("NYSE Excluded Holdings")) should fall below 600,000 or the aggregate
market value of publicly held Shares (exclusive of NYSE Excluded Holdings)
should fall below $5,000,000. If, as a result of the purchase of Shares pursuant
to the Offer or otherwise, the Shares no longer meet the requirements of the
NYSE for continued listing and the listing of the Shares is discontinued, the
market for the Shares could be adversely affected.
If the NYSE were to delist the Shares, it is possible that the Shares would
continue to trade on another securities exchange or in the over-the-counter
market and that price or other quotations would be reported by such exchange or
through the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") or other sources. The extent of the public market therefor and
the availability of such quotations would depend, however, upon such factors as
the number of stockholders and/or the aggregate market value of such securities
remaining at such time, the interest in maintaining a market in the Shares on
the part of securities firms, the possible termination of registration under the
Exchange Act as described below and other factors. Purchaser cannot predict
whether the reduction in the number of Shares that might otherwise trade
publicly would have an adverse or beneficial effect on the market price for or
marketability of the Shares or whether it would cause future market prices to be
greater or less than the Offer price.
The Shares are currently registered under the Exchange Act. Purchaser does
not anticipate that such registration will be subject to termination as a result
of completion of the Offer. Such
11
<PAGE> 14
registration may be terminated upon application by the Company to the SEC if the
Shares are not listed on a national securities exchange and there are fewer than
300 record holders of the Shares pursuant to Section 12(g)(4) of the Exchange
Act. The termination of registration of the Shares under the Exchange Act would
substantially reduce the information required to be furnished by the Company to
holders of Shares and to the SEC and would make certain provisions of the
Exchange Act, such as the short-swing profit recovery provision of Section
16(b), the requirement of furnishing a proxy statement in connection with
stockholders' meetings pursuant to Section 14(a), and the requirements of Rule
13e-3 under the Exchange Act with respect to "going private" transactions, no
longer applicable to the Shares. In addition, "affiliates" of the Company and
persons holding "restricted securities" of the Company may be deprived of the
ability to dispose of such securities pursuant to Rule 144 promulgated under the
Securities Act.
If registration of the Shares under the Exchange Act were terminated, the
Shares would no longer be eligible for NASDAQ reporting.
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
The information concerning the Company contained herein has been taken from
or is based upon reports and other documents on file with the SEC or otherwise
publicly available. Although neither Purchaser nor Parent has any knowledge that
would indicate that any statements contained herein based upon such reports and
documents are untrue, neither Purchaser nor Parent takes any responsibility for
the accuracy or completeness of the information contained in such reports and
other documents or for any failure by the Company to disclose events that may
have occurred and may affect the significance or accuracy of any such
information but that are unknown to Purchaser.
The Company is a Delaware corporation with its principal executive offices
located at 455 North Cityfront Plaza Drive, Chicago, Illinois 60611-5504.
The Company, through its wholly-owned subsidiary, Illinois Central Railroad
Company ("ICRR") traces its origins to 1851, when ICRR was incorporated as the
nation's first land grant railroad. On June 13, 1996, the Company acquired in a
purchase transaction CCP Holdings, Inc. (CCPH). ICRR and CCPH are principally
engaged in the rail freight transportation business. ICRR operates a 2,600 mile
system between Chicago and the Gulf of Mexico, primarily transporting chemicals,
grain and milled grain, coal, paper, and intermodal commodities while CCPH and
one of its subsidiaries, Cedar River Railroad ("CRR"), operates approximately
850 miles of track from Chicago to Omaha, with connecting lines to Cedar Rapids
and Sioux City. CRR runs from Waterloo, Iowa to Albert Lea, Minnesota. In
addition to ICRR and CCPH, the Company's other wholly-owned subsidiary, IC
Financial Services Corporation ("IC Financial"), was formed to finance through
various special purpose companies the acquisition of locomotives and freight
cars which are leased to ICRR. IC Financial also functions as the investment
vehicle by which non-rail related activities are conducted.
The Company is subject to the informational filing requirements of the
Exchange Act and, in accordance therewith, is required to file periodic reports,
proxy statements and other information with the SEC relating to its business,
financial condition and other matters. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, and at the SEC's regional offices located at Seven World Trade Center,
Suite 1300, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Information regarding the public
reference facilities may be obtained from the SEC by telephoning 1-800-SEC-0330.
The Company's filings are also available to the public on the SEC Internet site
(http://www.sec.gov). Copies of such materials may also be obtained by mail from
the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates. Certain reports and other information concerning
the Company may also be inspected at the offices of the NYSE, 20 Broad Street,
New York, New York 10005.
12
<PAGE> 15
Financial Information
The following selected consolidated financial data relating to the Company
and its subsidiaries has been taken or derived from the audited financial
statements contained in the Company Form 10-K for 1996 and the condensed
unaudited financial statements released by the Company on January 20, 1998. More
comprehensive financial information is included in such report and such other
documents filed by the Company with the SEC, and the financial data set forth
below is qualified in its entirety by reference to such report and such other
documents, including the financial information (and any related notes) contained
therein. Such reports and other documents may be examined and copies may be
obtained from the offices of the SEC in the manner set forth above.
ILLINOIS CENTRAL CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1995 1996 1997
-------- -------- --------------
(UNAUDITED)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues......................................... $ 645.3 $ 657.5 $ 699.8
Operating expenses............................... 414.8 416.3 435.9
------ ------ ------
Operating income................................. $ 230.5 $ 241.2 $ 263.9
====== ====== ======
Net income....................................... $ 118.4 $ 136.6 $ 150.2
====== ====== ======
Net income per share (basic)..................... $ 1.89 $ 2.22 $ 2.45
====== ====== ======
BALANCE SHEET DATA:
Current and other assets......................... $ 162.8 $ 287.3 $ 239.5
Net properties................................... 1,274.7 1,624.1 1,768.8
------ ------ ------
Total assets..................................... $1,437.5 $1,911.4 $2,008.3
====== ====== ======
Current and other liabilities.................... $ 337.6 $ 365.6 $ 384.1
Long-term debt................................... 383.6 633.7 572.2
Deferred income taxes............................ 246.2 356.6 409.2
Stockholders' equity............................. 470.1 555.5 642.8
------ ------ ------
Total liabilities and stockholders' equity....... $1,437.5 $1,911.4 $2,008.3
====== ====== ======
</TABLE>
Certain Projected Financial Information
In the course of its discussions with Parent described in Section 11, the
Company provided Parent and its financial advisors with certain business and
financial information which Parent believes was not and is not publicly
available. Such information included, among other things, certain financial
projections (the "Company Projections") prepared by management of the Company as
a long-range plan. The Company Projections do not take into account any of the
potential effects of the transactions contemplated by the Offer and the Merger.
The Company does not as a matter of course publicly disclose internal
projections as to future revenues, earnings or financial condition. The Company
Projections disclose, among other things, the following:
13
<PAGE> 16
<TABLE>
<CAPTION>
BUDGET PLAN FY PLAN FY PLAN FY PLAN FY
FY 1998 1999 2000 2001 2002
------- ------- ------- ------- -------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Operating revenue....................... $ 800.7 $ 865.1 $ 910.5 $ 954.4 $ 991.4
Operating expense....................... 487.7 515.7 537.3 554.7 573.0
------- ------- ------- ------- -------
- - - - -
Operating income 313.0 349.4 373.2 399.7 418.4
Other income............................ 1.5 1.7 1.7 1.7 1.7
Net interest expense.................... (38.5) (33.0) (25.7) (19.0) (9.0)
------- ------- ------- ------- -------
- - - - -
Income before taxes..................... 276.0 318.1 349.2 382.4 411.1
Tax provision........................... (104.9) (121.8) (135.1) (148.0) (159.1)
------- ------- ------- ------- -------
- - - - -
Net income.............................. $ 171.1 $ 196.3 $ 214.1 $ 234.4 $ 252.0
======== ======== ======== ======== ========
Operating Ratio......................... 60.9% 59.6% 59.0% 58.1% 57.8%
Basic shares............................ 61.4 61.4 61.4 61.4 61.4
Net income per share (basic)............ $2.79 $3.20 $3.49 $3.82 $4.10
</TABLE>
THE COMPANY PROJECTIONS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE
OR COMPLIANCE WITH PUBLISHED GUIDELINES OF THE SEC OR THE GUIDELINES ESTABLISHED
BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS. THE PROJECTIONS ARE
INCLUDED IN THIS OFFER TO PURCHASE ONLY BECAUSE SUCH INFORMATION WAS PROVIDED TO
PARENT. NONE OF PARENT, PURCHASER OR ANY PARTY TO WHOM THE PROJECTIONS WERE
PROVIDED GIVES ANY ASSURANCES AS TO THE ACCURACY OF SUCH INFORMATION. WHILE
PRESENTED WITH NUMERICAL SPECIFICITY, THESE PROJECTIONS ARE BASED UPON A VARIETY
OF ASSUMPTIONS RELATING TO THE BUSINESSES OF THE COMPANY WHICH MAY NOT BE
REALIZED AND ARE SUBJECT TO SIGNIFICANT UNCERTAINTIES AND CONTINGENCIES, MANY OF
WHICH ARE BEYOND THE CONTROL OF THE COMPANY. THERE CAN BE NO ASSURANCE THAT THE
PROJECTIONS WILL BE REALIZED, AND ACTUAL RESULTS MAY DIFFER MATERIALLY FROM
THOSE SHOWN. THE PROJECTIONS HAVE NOT BEEN EXAMINED FOR COMPLIANCE BY THE
COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS. FOR THESE REASONS, AS WELL AS THE
BASES ON WHICH SUCH PROJECTIONS WERE COMPILED, THE INCLUSION OF SUCH PROJECTIONS
HEREIN SHOULD NOT BE REGARDED AS AN INDICATION THAT PARENT, PURCHASER OR ANY
OTHER PARTY WHO RECEIVED SUCH INFORMATION CONSIDERS IT AN ACCURATE PREDICTION OF
FUTURE EVENTS.
9. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT.
Purchaser
Purchaser is a Delaware corporation incorporated on February 3, 1998 and to
date has engaged in no activities other than those undertaken in connection with
the Offer and the Merger. Purchaser is an indirect wholly-owned subsidiary of
Parent. Purchaser is currently a wholly-owned subsidiary of Grand Trunk
Corporation, a wholly-owned subsidiary of Parent. The principal executive
offices of Purchaser are located at 935 de La Gauchetiere Street West, Montreal,
Quebec H3B 2M9.
Until immediately prior to the time that Purchaser purchases Shares
pursuant to the Offer, it is not anticipated that Purchaser will have any
significant assets or liabilities or engage in activities other than those
incident to its formation and capitalization and the transactions contemplated
by the Offer and the Merger. Because Purchaser is newly formed and has minimal
assets and capitalization, no meaningful financial information regarding
Purchaser is available.
14
<PAGE> 17
Parent
Parent is a Canadian corporation, incorporated in 1922 under a Special Act
of the Parliament of Canada (the "Special Act"). In 1955, the Special Act was
replaced by the Canadian National Railways Act, as amended. Parent's continuance
under the Canada Business Corporations Act was authorized by the CN
Commercialization Act. Such continuance was effected by Certificate of
Continuance dated August 24, 1995. On November 9, 1995, Parent filed Articles of
Amendment in order to subdivide the outstanding shares of Parent Common Stock.
The Articles of Continuance of Parent contain certain material limitations on
accumulation of shares of Parent Common Stock including without limitation a
provision that no person (including his or her associates) may own or control,
directly or indirectly, more than 15% of the outstanding voting shares of
Parent. If this 15% threshold is exceeded, the holder of such shares may not
exercise the voting rights attached to the shares. As of November 28, 1995,
Parent ceased to be a Crown corporation.
Parent operates the larger of Canada's two principal railroads and is the
sixth largest railroad in North America based on its 1997 annual revenues. Its
mainline rail network extends from Halifax to the major British Columbia ports,
and its feeder lines serve principally eastern Canada and the grain-producing
regions of western Canada. Parent's network connects to the strategically
important Chicago gateway in the east through Grand Trunk Western Railroad
Incorporated ("GTW"), one of its indirect wholly-owned subsidiaries,
incorporated in Delaware, and in the west through a haulage agreement linking
Chicago to Parent's lines at Duluth. Parent operates as a private sector freight
railroad with no other significant line of business. As of December 31, 1997,
Parent's rail network, including internal shortlines, consisted of approximately
14,550 route miles in eight Canadian provinces and approximately 750 route miles
of track in six U.S. states. The principal executive offices of Parent are
located at 935 de La Gauchetiere Street West, Montreal, Quebec H3B 2M9.
The name, citizenship, business address, principal occupation or employment
and five-year employment history for each of the directors and executive
officers of Purchaser and Parent and certain other information are set forth in
Schedule I hereto.
Except as set forth in this Offer to Purchase, none of Parent or Purchaser
or, to the best knowledge of Parent or Purchaser, any of the persons listed in
Schedule I hereto has any contract, arrangement, understanding or relationship
with any other person with respect to any securities of the Company, including,
without limitation, any contract, arrangement, understanding or relationship
concerning the transfer or the voting of any securities of the Company, joint
ventures, loan or option arrangements, puts or calls, guaranties of loans,
guaranties against loss or the giving or withholding of proxies. Except as set
forth in this Offer to Purchase, none of Parent or Purchaser or, to the best
knowledge of Parent or Purchaser, any of the persons listed in Schedule I hereto
has had any transactions with the Company, or any of its executive officers,
directors or affiliates that would require reporting under the rules of the SEC.
The following selected consolidated financial data relating to Parent and
its subsidiaries has been taken or derived from the audited consolidated
financial statements of Parent contained in the Parent Annual Report on Form
40-F for the fiscal year ended December 31, 1996 and the condensed unaudited
financial statements released by Parent on January 21, 1998. The 1995 and 1996
financial data differs from amounts previously reported to reflect the change in
accounting for income taxes adopted by Parent in the fourth quarter of 1997 and
certain reclassifications. More comprehensive financial information is included
in such Form 40-F and such other documents filed by Parent with the SEC, and the
financial data set forth below is qualified in its entirety by reference to such
report and other documents including the financial information (including any
related notes) contained therein. Such reports and other documents may be
examined and copies may be obtained from the offices of the SEC in the manner
set forth above in Section 8.
15
<PAGE> 18
CANADIAN NATIONAL RAILWAY COMPANY
SELECTED CONSOLIDATED FINANCIAL DATA
(IN MILLIONS OF CDN$, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1995 1996 1997
---------- ---------- -----------
(RESTATED) (RESTATED) (UNAUDITED)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
CANADIAN GAAP(1)
Revenues............................................. $ 3,954 $3,995 $ 4,352
Operating expenses excluding special charges......... 3,514 3,385 3,545
Special charges...................................... 1,453 381 --
------ ------ ------
Operating income (loss).............................. $ (1,013) $ 229 $ 807
====== ====== ======
Income (loss) from continuing operations............. $ (1,092) $ 836 $ 421
====== ====== ======
Basic per share data:
Income (loss) from continuing operations............. $ (13.57) $ 9.85 $ 4.95
====== ====== ======
U.S. GAAP(2)
Revenues............................................. $ 3,912 $3,956 $ 4,322
Operating expenses excluding special charges......... 3,487 3,368 3,395
Special charges...................................... 1,415 365 --
------ ------ ------
Operating (loss) income.............................. $ (990) $ 223 $ 927
====== ====== ======
Income (loss) from continuing operations............. $ (1,017) $ 848 $ 469
====== ====== ======
Basic per share data:
Income (loss) from continuing operations............. $ (12.64) $ 9.99 $ 5.51
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
AS AT DECEMBER 31,
---------------------------------------
1995 1996 1997
---------- ---------- -----------
(RESTATED) (RESTATED) (UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
CANADIAN GAAP(1)
Current and other assets............................. $ 1,398 $1,971 $ 1,953
Net properties including land........................ 4,650 4,869 5,122
------ ------ ------
Total assets......................................... $ 6,048 $6,840 $ 7,075
====== ====== ======
Current and other liabilities........................ $ 2,429 $2,253 $ 2,018
Long-term debt....................................... 1,313 1,499 1,640
Shareholders' equity:................................ 2,306 3,088 3,417
------ ------ ------
Total liabilities and shareholders' equity........... $ 6,048 $6,840 $ 7,075
====== ====== ======
U.S. GAAP(2)
Current and other assets............................. $ 1,292 $1,931 $ 1,696
Net properties including land........................ 4,611 4,830 6,302
------ ------ ------
Total assets......................................... $ 5,903 $6,761 $ 7,999
====== ====== ======
Current and other liabilities........................ $ 2,376 $2,260 $ 2,361
Long-term debt....................................... 1,284 1,469 1,628
Shareholders' equity:................................ 2,243 3,032 4,010
------ ------ ------
Total liabilities and shareholders' equity........... $ 5,903 $6,761 $ 7,999
====== ====== ======
</TABLE>
16
<PAGE> 19
CANADIAN NATIONAL RAILWAY COMPANY
SELECTED CONSOLIDATED FINANCIAL DATA
(IN MILLIONS OF CDN$, EXCEPT PER SHARE DATA)
- ---------------
(1) In the fourth quarter of 1997, CN adopted retroactively new Canadian
accounting principles for income taxes which resulted in a tax recovery of
Cdn $708 million in 1996. There was no effect on the reported comparative
figures for 1995.
(2) CN's consolidated financial statements, from which the data is derived, are
prepared on the basis of Canadian Generally Accepted Accounting Principles
("GAAP"), which are different in some respects from U.S. GAAP, principally
in the treatment of track replacement costs, foreign exchange, pension
costs, loss on extinguishment of long-term debt, stock based compensation,
joint ventures and reorganization of shareholders' equity. See Annex A --
Canadian/U.S. GAAP Financial Information.
(3) Certain figures previously reported for 1995 and 1996 have been reclassified
to conform with the basis of presentation adopted in 1997.
10. SOURCE AND AMOUNT OF FUNDS.
The total amount of funds required by Purchaser to consummate the Offer and
the Merger and to pay related fees and expenses is estimated to be approximately
$1.8 billion. Purchaser plans to obtain the necessary funds either through
capital contributions or advances made directly or indirectly by Parent, by
borrowing under the Credit Facilities referred to below or both. Parent has
received a letter (the "Commitment Letter") dated February 9, 1998 from Goldman
Sachs Canada Credit Partners Co. ("Goldman Canada"), Goldman Sachs Credit
Partners L.P. ("Goldman Credit LP") and Bank of Montreal ("BMO" and, together
with Goldman Canada and Goldman Credit LP, the "Lead Lenders") pursuant to which
the Lead Lenders have severally committed to provide senior credit facilities
(the "Credit Facilities") in an aggregate principal amount of up to $1.8 billion
in the following respective percentages: Goldman Canada and Goldman Credit LP:
50% and BMO: 50%. All or a portion of the Credit Facilities may be syndicated
either prior to or after the date of the first borrowing thereunder (the "Credit
Facilities Closing Date"). A copy of the Commitment Letter is filed as an
exhibit to the Schedule 14D-1 and incorporated herein by reference, and the
following summary of the Credit Facilities is qualified in its entirety by
reference thereto.
The borrowers under the Credit Facilities will be Parent and a U.S.
subsidiary of Parent (the "U.S. Borrower" and, together with Parent, the
"Borrowers"). The Credit Facilities will consist of an $800 million term loan
facility (the "Term Facility") and a $1 billion revolving credit facility (the
"Revolving Facility"). Unless otherwise allocated by the Lead Lenders with the
consent of Parent prior to the Credit Facilities Closing Date, 50% of the amount
of each Credit Facility will be available to each of Parent and the U.S.
Borrower. At the option of Parent, a portion of the Revolving Facility to be
determined may be funded in Canadian Dollars. In addition, up to $200 million of
the Revolving Facility will be available for letters of credit. Proceeds of
borrowings under the Credit Facilities may be used to finance the Offer and the
Merger, to pay related fees and expenses and, in the case of the Revolving
Facility only, for general corporate purposes, including working capital
purposes and commercial paper backstop.
Borrowings under the Credit Facilities will mature, one year in the case of
the Term Facility, or five years in the case of the Revolving Facility, from the
Credit Facilities Closing Date, and will bear interest at a rate per annum equal
to, at the option of the Borrowers, (i) the Eurodollar Rate plus a margin (the
"Applicable Margin"), initially expected to be 0.275%, which will vary based on
certain factors, including Parent's unsecured long term senior debt rating, (ii)
the Base Rate and (iii) in the case of Revolving Facility borrowings in Canadian
Dollars only, the Canadian Bankers Acceptance Rate plus the Applicable Margin;
provided that during any period when more than 50% of the Credit Facilities are
drawn, the Applicable Margin shall be increased by 0.05%. The Credit Facilities
will also
17
<PAGE> 20
provide for a facility fee payable on the aggregate amount of the Revolving
Facility (whether drawn or undrawn) and the aggregate outstanding principal
amount of the loans under the Term Facility at a rate per annum that is
initially expected to be 0.125% and that will vary based on certain factors,
including Parent's unsecured long term senior debt rating. The Credit Facilities
will contain certain negative covenants applicable to Parent and its
subsidiaries, including, without limitation, restrictions on liens and mergers
and acquisitions and the following financial covenants: maximum debt to total
capitalization, minimum net worth and, solely if Parent's unsecured long term
senior debt rating remains below a certain threshold, minimum fixed charge
coverage.
Borrowings under the Credit Facilities on the Credit Facilities Closing
Date are subject to the satisfaction or waiver of certain conditions, including,
without limitation: (i) the execution and delivery of definitive documentation
with respect to the Credit Facilities, in form and substance reasonably
satisfactory to the Lead Lenders, (ii) all conditions to the Offer having been
satisfied without waiver or amendment, (iii) receipt of all necessary
governmental and shareholder approvals (other than STB approval), and all
material third-party approvals and (iv) repayment in full of indebtedness
outstanding under existing revolving credit facilities of Parent and its
subsidiaries and termination of commitments thereunder. All borrowings and
issuances of letters of credit under the Credit Facilities, including borrowings
on the Credit Facilities Closing Date, are subject to the satisfaction or waiver
of certain conditions, including, without limitation: (i) the accuracy of
representations and warranties, (ii) the absence of any default or event of
default under the Credit Facilities and (iii) the nonoccurrence of any material
adverse change.
Amounts outstanding under the Credit Facilities will be guaranteed by all
present and future material subsidiaries of Parent and by the other Borrower;
provided that the Company and its subsidiaries will not be required to provide
any such guarantees until permitted by law to do so. The terms of the Credit
Facilities will provide that, while the Voting Trust is in effect, net proceeds
generated from sales of Shares or from asset sales by the Company and its
subsidiaries (subject to certain exceptions) and received by the Parent and its
subsidiaries (other than any subsidiaries held through the Voting Trust) are to
be applied first, to repay outstandings under the Term Facility and second to
repay outstandings under the Revolving Facility and to reduce commitments
thereunder, unless, in the case of the Revolving Facility, at the time of
receipt of such proceeds Parent's unsecured long term senior debt rating is
above a certain threshold and the commitments under the Revolving Facility do
not exceed $700 million.
Pursuant to the Commitment Letter, Parent has agreed to pay certain fees to
the Lead Lenders, to reimburse the Lead Lenders for certain expenses and to
provide certain indemnities, as is customary for commitments of the type
described herein.
Parent anticipates that the loans made to Parent and its subsidiaries under
the Credit Facilities will be repaid from a variety of sources, including,
without limitation, funds generated internally by Parent and its subsidiaries
(including, following the Merger, funds generated by the Company and its
subsidiaries), bank refinancings and the public or private sale of debt or
equity securities. No final decisions have been made concerning the sources and
methods Parent and its subsidiaries will employ to repay such indebtedness. Such
decisions will be made and may be modified by Parent based on prevailing market
conditions and such other factors as Parent may deem appropriate.
11. BACKGROUND OF THE OFFER; PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH
THE COMPANY.
As Parent has previously disclosed, Parent's long-term strategy has been
and continues to be to seek strategic alliances with key United States rail
carriers.
In February 1997, Mr. Gilbert H. Lamphere, the Chairman of the Company, and
Mr. Paul M. Tellier, the President and Chief Executive Officer of Parent, began
discussions concerning Parent's potential interest in pursuing a possible
business combination or other alliance between the Company and Parent.
Consistent with Parent's long-term strategy, Mr. Tellier indicated to Mr.
Lamphere that Parent would be interested in pursuing discussions with the
Company.
18
<PAGE> 21
In March 1997, Mr. Tellier and Mr. Michael J. Sabia, the Executive Vice
President and Chief Financial Officer of Parent, met in Chicago with Mr.
Lamphere, Mr. E. Hunter Harrison, the President and Chief Executive Officer of
the Company, and Mr. Alexander P. Lynch, a director of the Company. The parties
discussed recent developments in the North American railroad industry, including
trends and opportunities with respect to the consolidation of the railroad
industry in the United States. At this meeting the parties reviewed the ongoing
development of their joint terminal facility in Chicago as well as their
respective strategic plans and objectives. The parties agreed to continue their
review of the potential benefits of various forms of business combinations
between them.
The parties rapidly concluded that to make a meaningful assessment of these
benefits, they would need to exchange confidential information. On March 13,
1997, Parent and the Company entered into a joint confidentiality and standstill
agreement (the "Confidentiality Agreement").
During late March and April 1997, senior officers and advisors of Parent
had a number of meetings and telephone conversations with senior officers of the
Company and its financial advisor to discuss the merits of a potential strategic
transaction. Detailed business reviews were undertaken by both companies and
their advisors.
In May 1997, senior management of Parent reviewed with the Strategic
Planning Committee of Parent's Board of Directors, the evolution of the railroad
industry in North America and the general outlines of a possible business
combination with the Company. The Strategic Planning Committee concluded that it
did not desire to pursue a business combination with the Company at that time,
although it did not rule out such a transaction in the future. Parent so advised
the Company.
In July 1997, representatives of Parent inquired whether the Company would
have any interest in resuming discussions regarding a possible business
combination, and received a favorable response. Although no discussions were
held at that time, during the late summer and fall of 1997 Parent continued to
analyze the potential benefits of such a business combination. In November 1997,
Mr. Tellier telephoned Mr. Lamphere to advise that, based on various
circumstances, the Company was not prepared to pursue a transaction at that
time, although Mr. Tellier stated that the issue could be re-examined later as
such circumstances evolved. Neither party sent a formal notice terminating
discussions pursuant to the Confidentiality Agreement.
Discussions and meetings concerning a possible transaction resumed in
December 1997 following a meeting among Mr. Sabia and Mr. Jean Pierre Ouellet,
the Chief Legal Officer of Parent, and Messrs. Lamphere and Lynch. The parties
agreed to renew discussions of a possible strategic transaction in January 1998.
On January 6, 1998, Mr. Tellier and Mr. Lamphere met in Montreal to
establish a basis for continuing discussions to seek to reach an agreement
concerning a business combination and for proceeding with a due diligence
review. Following the January 6, 1998 meeting, due diligence was commenced by
both parties and their respective advisors. In addition, during early to
mid-January there were various discussions between senior officers and advisors
of Parent and senior officers, directors and advisors of the Company concerning
the structure and terms of the transaction.
On January 20, 1998, Parent informed the Company that it wished to pursue a
transaction that included a cash tender offer for at least a majority of the
Company's common stock, with some portion of the consideration in the back-end
merger consisting of Parent Common Stock. There were several discussions between
the parties with respect to the structure of the proposed transaction, the
implications of the cash tender offer and the willingness of Parent to provide a
collar arrangement to protect the value of the Parent Common Stock to be issued
in a back-end merger.
On January 22, 1998, the Board of Directors of the Company met and reviewed
with the Company's management and financial and legal advisors the status and
possible terms of the transaction as well as the status of negotiations.
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Following a number of discussions between the parties, on January 27, 1998,
at a meeting in New York, representatives of Parent expressed their willingness
to have Parent provide value protection within a specified range on the shares
of Parent Common Stock that would be issued in the Merger depending on the
number of shares of Parent Common Stock to be issued in the Merger. On January
28, 1998, the parties agreed that the aggregate stock consideration would not
exceed 25% of the aggregate consideration to be paid in the transaction.
During late January and early February 1998 meetings were held among the
senior officers and financial and legal advisors of both companies to negotiate
the terms of the Merger Agreement and the related documentation.
On February 5, 1998, the Wall Street Journal and The Globe and Mail, a
national daily Canadian newspaper, both reported that Parent and the Company
were conducting discussions with respect to a business combination that would
pay the Company's stockholders 75% cash and 25% stock with a value in the high
$30s per Share. Parent and the Company each issued releases confirming the
accuracy of these reports.
On February 6 and 7, 1998, Mr. Tellier and Mr. Lamphere met in Montreal to
discuss various outstanding issues. Intensive discussions regarding the Merger
Agreement and related agreements continued among the parties and their advisors
through February 10, 1998.
The Company's Board of Directors held a special meeting on February 8,
1998, when presentations from senior management of the Company and the Company's
financial and legal advisors were made regarding a possible transaction between
the Company and Parent.
At a special meeting held on February 10, 1998, the Board of Directors of
Parent reviewed the transaction and, following presentations by senior officers
and financial and legal advisors of Parent, unanimously approved the terms and
conditions of the Merger Agreement and the related documentation.
The Board of Directors of the Company, at a special meeting held on
February 10, 1998, unanimously approved the terms and conditions of the Merger
Agreement and the related documentation.
On February 10, 1998, the parties executed the Merger Agreement and
publicly announced the strategic combination.
Certain Operating Relationships
The Company and GTW are parties to a terminal services agreement dated
February 21, 1996 (the "Terminal Services Agreement") whereby Parent and GTW
have use of a new intermodal terminal in Chicago built by the Company. The new
terminal has higher through-put and expansion capabilities than the facility
previously used by Parent. Under the Terminal Services Agreement, the Company
also performs certain services for GTW at the new intermodal terminal in
connection with GTW's Container-on-Flat-Car and Trailer-on-Flat-Car business in
Chicago.
Under a certain trackage agreement, GTW has been granted trackage rights to
move its traffic over certain rail properties of the Company for a fee computed
per car-mile. GTW and ICRR also have a detour agreement that permits either
railroad to use the other's tracks in certain emergencies, for a fee computed on
a train-mile basis. GTW and ICRR are also parties to certain agreements
governing interchange of railcars between them in the Chicago area, and under
which ICRR performs certain switching, classification, and other services with
respect to cars interchanged to or from GTW in Chicago. GTW and ICRR are parties
to a multilateral car pooling agreement, under which each railroad member of the
pool has use of refrigerator cars contributed to the pool by itself and other
pool members, and have an agreement setting compensation for use by GTW of ICRR
intermodal equipment. In 1997, approximately $8.3 million was paid under the
Terminal Services Agreement for rent and locomotive fuel and servicing. None of
the payments made with respect to
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any other transaction exceeded one percent of the Company's consolidated
revenues in each such period.
Except as set forth in this Offer to Purchase, there have been no contacts,
negotiations or transactions between Parent or Purchaser, or their respective
subsidiaries, or, to the best knowledge of Parent or Purchaser, any of the
persons listed in Schedule I hereto, on the one hand, and the Company or its
executive officers, directors or affiliates, on the other hand, concerning a
merger, consolidation or acquisition, tender offer or other acquisition of
securities, election of directors, or a sale or other transfer of a material
amount of assets.
12. PURPOSE OF THE OFFER AND MERGER; PLANS FOR THE COMPANY.
The purpose of the Offer is for Parent, through Purchaser, to acquire a
majority equity interest in the Company as a first step in consummating a
business combination between Parent and the Company. The purpose of the Merger
is for Parent to acquire all Shares not purchased pursuant to the Offer and
thereby accomplish the business combination of Parent and the Company.
Under Delaware law, the approval of the Company's Board and the affirmative
vote of the holders of a majority of the outstanding Shares is required to adopt
the Merger Agreement and the transactions contemplated thereby, including the
Merger. The Board of Directors of the Company has unanimously approved and
adopted the Merger Agreement and the transactions contemplated thereby (subject
to directors' fiduciary duties), and the only remaining required corporate
action of the Company is the approval and adoption of the Merger Agreement and
the transactions contemplated thereby by the affirmative vote of the holders of
a majority of the Shares. Accordingly, if the Minimum Condition is satisfied,
Purchaser will have sufficient voting power to cause (through the Voting
Trustee) the adoption of the Merger Agreement and the transactions contemplated
thereby without the affirmative vote of any other stockholder.
Plans for the Company
Upon consummation of the Merger, the combination of Parent and the Company
will create the fifth largest railway in North America, based on 1997 annual
revenues of Cdn$5.3 billion (U.S.$3.7 billion) The Surviving Corporation will
have approximately 18,700 route miles in Canada and the United States and 24,600
employees.
The Merger is expected to yield new single-line service routes between
North-South markets that are expected to result in more frequent and reliable
service. Parent and the Company note that the combined strengths of the
companies would include a seamless North-South network from all major markets in
Canada through Chicago and Detroit to the Gulf of Mexico, positioning the
Surviving Corporation along a trade corridor which had 1997 annual rail revenues
of over $5 billion; the ability to capitalize on the liberalization of trade
among Canada, the United States and Mexico; and expedited, more reliable and
more efficient single line service that will free up assets, increase rail car
availability and reduce switching between the two railways.
Effective upon consummation of the Offer, and subject to the rules,
regulations and practices of the STB, the Company shall have taken all action
necessary to cause an individual, who shall be identified as a suitable
candidate by Parent prior to the consummation of the Offer and who shall be
independent of Parent and reasonably satisfactory to the Board of Directors of
the Company, to be appointed to the Board of Directors of the Company
immediately following the resignations of Messrs. Gilbert H. Lamphere and
Alexander P. Lynch from the Board of Directors of the Company.
Effective upon consummation of the Offer, Parent shall have taken all
action necessary to appoint E. Hunter Harrison to the position of Chief
Operating Officer of Parent and to cause Messrs. Gilbert H. Lamphere and
Alexander P. Lynch to be elected to serve on its Board of Directors. In
addition, either Mr. Lamphere or Mr. Lynch will have the right (and Parent will
take all necessary action to cause Mr. Lamphere or Mr. Lynch) to be appointed to
serve on the Strategic
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Planning Committee, the Audit and Finance Committee, the Human Resources
Committee and the Corporate Governance Committee of such Board of Directors, it
being understood that no more than one of such individuals will have the right
to be appointed to any one of such committees, and such individuals shall be
entitled to determine on which such committees they elect to be appointed.
Except as noted in this Offer to Purchase, neither Parent nor Purchaser has
any present plans or proposals that would result in an extraordinary corporate
transaction, such as a reorganization, liquidation, relocation of operations, or
sale or transfer of assets, involving the Company or any of its subsidiaries, or
any material changes in the Company's corporate structure or business.
13. THE MERGER AGREEMENT; OTHER AGREEMENTS.
THE MERGER AGREEMENT
THE FOLLOWING IS A SUMMARY OF CERTAIN PROVISIONS OF THE MERGER AGREEMENT.
THE SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT
WHICH IS FILED AS AN EXHIBIT TO THE SCHEDULE 14D-1. TERMS NOT OTHERWISE DEFINED
HEREIN OR IN THE FOLLOWING SUMMARY SHALL HAVE THE MEANINGS SET FORTH IN THE
MERGER AGREEMENT. STOCKHOLDERS ARE URGED TO READ THE MERGER AGREEMENT IN ITS
ENTIRETY.
The Offer. The Merger Agreement provides for the commencement of the Offer
as promptly as reasonably practicable, but in no event later than five business
days after the public announcement of the terms of the Merger Agreement. The
Merger Agreement also provides that the obligation of Purchaser to accept for
payment and pay for Shares tendered pursuant to the Offer is subject to the
satisfaction or waiver of the Minimum Condition and certain other conditions
that are described in Section 16. Pursuant to the Merger Agreement, Purchaser
reserves the right to waive any or all of the conditions to the Offer, to extend
the Offer if any conditions to the Offer are not satisfied and to make any
change in the terms or conditions of the Offer. However, other than as provided
below in "Alternative Transaction Structures", Purchaser has agreed in the
Merger Agreement that, without the prior written consent of the Company,
Purchaser will not make any waiver or change to the Offer which (i) increases or
decreases the number of Shares sought in the Offer, (ii) changes the form of
consideration to be paid or decreases the price per Share, (iii) waives the
Minimum Condition, (iv) waives the conditions set forth in paragraphs (a), (b)
or (e) of Section 16, (v) waives the condition relating to the expiration of the
waiting period (if any) under the HSR Act or the receipt of a favorable informal
advisory opinion from the STB, (vi) is adverse to the holders of Shares or
modifies any of the conditions to the Offer or (vii) imposes any conditions to
the Offer in addition to those set forth in Section 16. Parent has agreed in the
Merger Agreement that if the Offer shall not have been consummated by its
scheduled expiration due to the failure to satisfy (i) any of the conditions to
the Offer set forth in paragraphs (a) or (b) of Section 16, (ii) the condition
to the Offer relating to expiration of the waiting period under the HSR Act or
(iii) the condition relating to the receipt of the favorable informal advisory
opinion from the STB staff, Parent will, at the request of the Company, cause
Purchaser to extend the Offer for a period of up to twenty business days.
The Merger Agreement also provides that, subject to the terms and
conditions of the Offer (including, without limitation, the Minimum Condition)
and the terms of the Merger Agreement, Parent shall provide or cause to be
provided the funds to Purchaser and Purchaser shall accept for payment and pay
for, as promptly as practicable after the Expiration Date, all Shares validly
tendered and not withdrawn pursuant to the Offer that Purchaser is obligated to
purchase. Simultaneous with the purchase of Shares pursuant to the Offer, the
Shares will be deposited in the Voting Trust in accordance with the terms and
conditions of the Voting Trust Agreement described below.
Alternative Transaction Structures. Notwithstanding anything to the
contrary set forth thereunder, the Merger Agreement provides that if the Minimum
Condition has not been satisfied prior to the scheduled expiration of the Offer
(as such Offer may have been extended pursuant to the
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<PAGE> 25
Merger Agreement), Purchaser has the right at its option to extend the Offer for
a period of up to twenty business days. If, at the scheduled expiration of the
Offer (as such date may have been extended by Purchaser as contemplated by the
preceding sentence), the Minimum Condition has not been satisfied, then (unless
the parties otherwise agree) at Parent's election either (a) Purchaser shall
amend the terms of the Offer by increasing the number of Shares sought in the
Offer to all of the outstanding Shares, subject to the conditions set forth
above in "The Offer", in which event the Merger Agreement shall be modified to
provide that (i) each Share outstanding immediately prior to the Effective Time
(other than those Shares held by the Company as treasury stock or owned by
Parent or any subsidiary of Parent) shall be converted into the right to receive
an amount of cash equal to $39.00, (ii) the date on which the Merger Agreement
may be terminated by Parent or the Company if the Offer has not then been
consummated shall be extended by the same number of business days as the number
of business days by which Purchaser has extended the Offer as contemplated by
this clause (a), (iii) references to the Investment Commitment Agreements shall
be deleted, (iv) if the conditions set forth in Section 253 of the DGCL are
satisfied, and subject to the terms of the Voting Trust Agreement, Parent shall
cause the trustee of the Voting Trust to effect the Merger pursuant to Section
253 of the DGCL and Parent, Purchaser and the Company will use all reasonable
best efforts to satisfy the requirements of Section 253 of the DGCL and (v)
certain other provisions of the Merger Agreement shall be modified to reflect
such amendment to the terms of the Offer, or (b) Purchaser shall terminate the
Offer and Purchaser and the Company shall proceed with the Merger, in accordance
with the Merger Agreement, in which event the terms and conditions of the Merger
Agreement shall be modified to provide that (i) references to the Offer in the
Merger Agreement shall be deleted, (ii) the appointments of Messrs. Lamphere and
Lynch to the Board of Directors of Parent and Mr. E. Hunter Harrison to the
position of Chief Operating Officer of Parent shall take effect at the Effective
Time and not at consummation of the Offer and (iii) certain other provisions of
the Merger Agreement, primarily the provisions relating to termination and the
conditions to the obligations of the Parent, Purchaser and the Company to
consummate the Merger, shall be modified to reflect the fact that the Offer has
been terminated.
The Merger. The Merger Agreement provides that as soon as practicable
after all conditions to the Merger set forth therein have been satisfied or, to
the extent permitted thereunder, waived, Purchaser will be merged with and into
the Company in accordance with the DGCL. As a result of the Merger, the separate
corporate existence of Purchaser will cease and the Company will continue as the
Surviving Corporation and will become an indirect wholly-owned subsidiary of
Parent. From and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises and be subject to all
of the restrictions, disabilities and duties of the Company and Purchaser, all
as provided under the DGCL.
Conversion of Shares. The Merger Agreement provides that, except as
provided above in "Alternative Transactions", at the Effective Time, (i) each
Share held by the Company as treasury stock or owned of record or beneficially
by Parent or any subsidiary of Parent immediately prior to the Effective Time
(including the Shares held in the Voting Trust) shall be canceled, and no
payment shall be made with respect thereto; (ii) each share of common stock of
Purchaser outstanding immediately prior to the Effective Time shall be converted
into and become one share of common stock of the Surviving Corporation and shall
constitute the only outstanding shares of capital stock of the Surviving
Corporation and each such share shall be deposited in the Voting Trust; and
(iii) if Purchaser shall have purchased, pursuant to the Offer, an aggregate of
46,051,761 Shares, each Share outstanding immediately prior to the Effective
Time shall, except as otherwise provided, be converted into the right to receive
that number of duly authorized, validly issued, fully paid and nonassessable
shares of Parent Common Stock equal to the fraction obtained by dividing $39.00
by the Parent Average Closing Price (the "Stock Consideration"). "Parent Average
Closing Price" is defined in the Merger Agreement as the average closing price
of the Parent Common Stock on the NYSE for the twenty trading day period ending
on the second trading day prior to the date of the Effective Time; provided that
if such average closing price is less than $43.00 then the Parent
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<PAGE> 26
Average Closing Price shall be $43.00 and if such average closing price is
greater than $64.50 then the Parent Average Closing Price shall be $64.50. If
Purchaser shall have purchased, pursuant to the Offer, an aggregate of less than
46,051,761 Shares, each Share outstanding immediately prior to the Effective
Time shall be converted into the right to receive (A) a number of shares of
Parent Common Stock equal to the fraction obtained by dividing $39.00 by the
Parent Average Closing Price, multiplied by (2) the Stock Proration Factor; and
(B) cash in an amount equal to the product of (1) 1 minus the Stock Proration
Factor (the "Reciprocal Stock Proration Factor"), multiplied by (2) $39.00. The
"Stock Proration Factor" is defined in the Merger Agreement as a fraction, of
which the numerator shall be the Stock Number and the denominator shall be the
total number of Shares outstanding as of the Effective Time, minus the number of
Shares purchased by Purchaser pursuant to the Offer. The "Stock Number" shall be
15,350,586, plus any Shares issued after the date of the Merger Agreement in
accordance with the Merger Agreement.
The Merger Agreement provides that if prior to the Effective Time, Parent
or the Company (as the case may be) should, (after obtaining the consent of the
other party) split, combine or otherwise reclassify the Parent Common Stock or
the Shares, or pay a stock dividend or other stock distribution in Parent Common
Stock or Shares, or otherwise change the Parent Common Stock or Shares into any
other securities, or make any other such stock dividend or distribution in
capital stock of Parent or the Company in respect of Parent Common Stock or
Shares, respectively, then the Stock Consideration will be appropriately
adjusted to reflect such split, combination, dividend or other distribution or
change.
In lieu of any fractional share of Parent Common Stock, Parent will pay to
each former stockholder of the Company who would otherwise be entitled to
receive such a fractional share an amount in cash determined by multiplying the
average closing price of Parent Common Stock on the NYSE for the five trading
day period prior to the Effective Time (the "Parent Average Price") by the
fraction of a share of Parent Common Stock to which such stockholder would
otherwise have been entitled.
No Appraisal Rights. The Merger Agreement states that in accordance with
Schwabacher v. United States, 334 U.S. 182 (1948), stockholders of the Company
shall not have any appraisal or like rights; provided, however, that if the STB
or a court of competent jurisdiction determines that appraisal rights are
available to holders of Shares, then such holders shall be provided with
appraisal rights in accordance with the DGCL to the extent required under the
DGCL. The Company has agreed to give Parent prompt notice of any demands
received by the Company for appraisal of Shares and the right to participate in
all negotiations and proceedings with respect to such demands. Except with the
prior written consent of Parent, the Company has agreed not to make any payment
with respect to, or settle or offer to settle, any such demands or as otherwise
required by applicable law.
Stock Options. To the extent permitted under the rules, regulations and
practices of the STB and consistent with the application of applicable Canadian
securities laws and the rules and regulations of relevant stock exchanges, the
Board of Directors of Parent and the Company shall adopt such resolutions or
take such other actions as may be required to adjust the terms of each
outstanding employee or director stock option to purchase Shares granted under
any employee or director stock option or compensation plan or arrangement
("Options"), as necessary to provide that, at the Effective Time each Option
outstanding immediately prior to the Effective Time shall be:
(i) if Purchaser shall have purchased, pursuant to the Offer, an
aggregate of 46,051,761 shares, amended and converted into options ("Parent
Options") to acquire, on the same terms and conditions as were applicable
under such Options (except that such Parent Options shall (other than as
provided in "Treatment of the Company Employees and Directors" below) be
fully vested), a number of shares of Parent Common Stock determined by
multiplying the number of Shares subject to such Option by the Exchange
Ratio, rounded up to the nearest whole share of Parent Common Stock, at a
price per share equal to (y) the aggregate exercise price for the
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Shares subject to such Option, divided by, (z) the number of shares of
Parent Common Stock subject to such Parent Option;
(ii) if Purchaser shall have purchased, pursuant to the Offer, an
aggregate of less that 46,051,761 Shares, amended and converted into:
Parent Options to acquire, on the same terms and conditions as were
applicable under such Options (except that such Parent Options shall (other
than as provided in "Treatment of the Company Employees and Directors"
below) be fully vested), a number of shares of Parent Common Stock
determined by multiplying the number of Shares subject to such Option by
the Exchange Ratio and the Stock Proration Factor, rounded up to the
nearest whole share of Parent Common Stock, at a price per share equal to
(x) the aggregate exercise price for the Shares subject to such Option,
multiplied by (y) the Stock Proration Factor, and divided by, (z) the
number of shares of Parent Common Stock subject to such parent Option, and
an additional Parent Option to purchase a number of shares of Parent Common
Stock determined as follows: the Reciprocal Stock Proration Factor,
multiplied by the number of Shares subject to such Option, multiplied by
$39.00, and divided by the Parent Average Price, rounded up to the nearest
whole share of Parent Common Stock, at a price per share equal to (a) the
aggregate exercise price for the Shares subject to such Option, multiplied
by (b) the Reciprocal Stock Proration Factor, and divided by (c) the number
of shares of Parent Common Stock subject to such Parent Option; or
(iii) in the event that Parent elects to tender for all of the Shares,
amended and converted into a Parent Option to purchase a number of shares
of Parent Common Stock determined as follows: (1) the number of Shares
subject to such Option, multiplied by (2) $39.00, and divided by (3) the
Parent Average Price, rounded, if necessary, up to the nearest whole shares
of Parent Common Stock, at a price per share equal to (a) the aggregate
exercise price for the Shares subject to such Option, divided by (b) the
number of shares of Parent Common Stock subject to such Parent Option.
The Surviving Corporation. The Merger Agreement provides that the
certificate of incorporation and bylaws of the Company shall be amended as set
forth in Exhibits B and C to the Merger Agreement, respectively, and as so
amended shall be the certificate of incorporation and bylaws of the Surviving
Corporation, respectively. The Merger Agreement also provides that except as set
forth therein, the directors of the Company as of the Effective Time shall be
the directors of the Surviving Corporation until the earlier of their
resignation or removal or until they otherwise cease to be directors of the
Surviving Corporation and the officers of the Company as of the Effective Time
shall be the officers of the Surviving Corporation until the earlier of their
resignation or removal or until they otherwise cease to be officers of the
Surviving Corporation. Effective upon consummation of the Offer, the Company
anticipates appointing Mr. John D. McPherson as the Chief Executive Officer and
a director of the Company.
Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to Parent with respect to, among
other things, its existence and power, qualification, corporate and governmental
authorization, non-contravention, subsidiaries, capital structure, public
filings, financial statements, employee benefit plans, compliance with laws,
absence of undisclosed material liabilities, absence of certain changes, absence
of litigation, labor matters, taxes, finder's fees, takeover statutes, rights
plans, environmental compliance, and receipt of financial advisors' written
opinions. In the Merger Agreement, Parent and Purchaser have made customary
representations and warranties to the Company with respect to, among other
things, their existence and power, qualification, corporate and governmental
authorization, non-contravention, subsidiaries, capital structure, public
filings, financial statements, employee benefit plans, compliance with laws,
absence of undisclosed material liabilities, absence of certain changes, absence
of litigation, labor matters, taxes, finder's fees, environmental compliance,
sufficiency of funds, and ownership of Company Common Stock.
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Covenants. The Merger Agreement contains various customary covenants of
the parties thereto. A description of these covenants follows:
Conduct of Business. Except as otherwise expressly set forth in the Merger
Agreement, during the period from the date of the Merger Agreement through the
date of STB approval or exemption of the Merger (the "Control Date"), the
Company shall, and shall cause each of its subsidiaries to, carry on their
respective businesses in the ordinary course consistent with past practice and
in compliance in all material respects with all applicable laws and regulations
and, to the extent consistent therewith, shall use their reasonable best efforts
to preserve intact their current business organizations, use their reasonable
best efforts to keep available the services of their current officers and of
their key employees as a group and use their reasonable best efforts to preserve
their relationships with those persons having business dealings with them. The
Company, in conducting its business and operations, shall have due regard for
the interests of the holders of the Trust Certificates, as investors in the
Company, determined without reference to such holders' interests in railroads
other than the Company or its subsidiaries. Except as set forth in the Merger
Agreement or as set forth in a disclosure schedule thereto or as required to
implement the Rights Plan (as defined below) in accordance with and subject to
clause (ii) hereof, without limiting the generality of the foregoing, from the
date of the Merger Agreement through the Control Date, the Company has agreed
that it will not, and will not permit any of its subsidiaries to (without the
prior written consent of Parent): (i) other than dividends and distributions
(including liquidating distributions) by a direct or indirect wholly-owned
subsidiary of the Company to its parent and other than regular quarterly cash
dividends of $0.23 per share with respect to the Shares, (x) declare, set aside
or pay any dividends on, or make any other distributions in respect of, any of
its capital stock (except as contemplated by clause (ii) below), (y) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, or (z) purchase, redeem, retire or otherwise
acquire any shares of its capital stock or the capital stock of any of its
subsidiaries or any other securities thereof or any rights, warrants or options
to acquire any such shares or other securities; provided that, following the
Effective Time, subject to applicable legal restrictions and financial covenants
contained in instruments relating to outstanding indebtedness, the Company will
not decrease the aggregate amount of dividends and other distributions in
respect of its outstanding capital stock from the level paid immediately prior
to the Merger; (ii) issue, deliver, sell, pledge or otherwise encumber any
Company Securities or any Subsidiary Securities or any securities convertible
into, or any rights, warrants or options to acquire, any such Company Securities
or any Subsidiary Securities, in each case, other than (x) pursuant to the
exercise of existing stock options, (y) grants of stock options and other
stock-based employee benefits prior to the Effective Time in the ordinary course
of business consistent with past practice and issuances pursuant thereto or (z)
securities issued by a direct or indirect wholly-owned subsidiary of the Company
to the Company or a direct or indirect wholly-owned subsidiary of the Company;
provided that if any Person shall have announced an Acquisition Proposal, the
Company will have the right, prior to the consummation of the Offer, to
implement a shareholder rights plan (the "Rights Plan"), but only so long as
such rights plan contains provisions reasonably satisfactory in form and
substance to Parent to exempt the Merger Agreement and the transactions to be
effected pursuant to the Merger Agreement from the plan and to assure that the
Merger Agreement and the transactions to be effected pursuant to the Merger
Agreement will not trigger such rights plan; (iii) adopt, propose or agree to
any amendment to its (or any of its subsidiary's) certificate of incorporation,
by-laws or other comparable organizational documents; (iv) (A) without the prior
written consent of Parent, sell, lease, license, mortgage or otherwise encumber,
voluntarily subject to any Lien or otherwise dispose of any rail lines or rights
of way, it being understood that nothing contained in this clause (A) shall
prevent either the sale or disposition of rail stock in the ordinary course of
business or the movement of such rail stock within the Company's rail system;
provided, that if the Company requests in writing that it be permitted to engage
in a transaction that requires Parent's consent under this clause (A) and Parent
does not respond within 20 days of receipt of such request, the
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Company shall be permitted to engage in such transaction; and provided further,
that this clause (A) shall not apply with respect to any transaction entered
into prior to the date of the Merger Agreement; or (B) sell, lease, license,
mortgage or otherwise encumber, voluntarily subject to any Lien or otherwise
dispose of any of its properties or assets (excluding rail lines or rights of
way), other than (x) leases or licenses or railroad equipment and property in
the ordinary course of business consistent with past practice or (y)
transactions in the ordinary course of business consistent with past practice
and not exceeding in the aggregate $30,000,000 on an annual basis; (v) make or
agree to make any acquisition (including through a leasing arrangement) (other
than of inventory and rolling stock in the ordinary course of business) or
capital expenditure in excess of $50,000,000 in the aggregate annually except as
specified on a schedule to the Merger Agreement or pursuant to agreements and
commitments entered into prior to the date of the Merger Agreement and
previously made available to Parent; (vi) incur any indebtedness for borrowed
money or guarantee any such indebtedness other than intercompany indebtedness
except for (i) borrowings under existing credit facilities, replacements
therefor and refinancings thereof or (ii) other borrowings in the ordinary
course of business consistent with past practice; provided that aggregate
borrowings under clauses (i) and (ii) do not exceed $200,000,000; (vii) except
for loans, advances, capital contributions or investments (x) specified on a
schedule to the Merger Agreement or (y) made in the ordinary course of business
consistent with past practice and not exceeding $15,000,000 on an annual basis,
make any loans, advances or capital contributions to, or investments in, any
other Person (other than, in the case of the Company, to the Company or any of
its subsidiaries or, in the case of the Railroad Subsidiaries, to a Railroad
Subsidiary or any subsidiary of a Railroad Subsidiary, as the case may be);
(viii) except for elections that are required by law or are consistent with past
practice, make any tax election; (ix) other than payments with respect to
judgments, pay, discharge, settle or satisfy any material claims, liabilities or
obligations (whether absolute, accrued, asserted or unasserted, contingent or
otherwise) other than the payment, discharge, settlement or satisfaction of
claims, liabilities or obligations (A) in the ordinary course of business
consistent with past practice or in accordance with their terms, (B) reflected
or reserved against in, or contemplated by, the most recent consolidated
financial statements (or the notes thereto) of the Company filed with the SEC
prior to the Effective Time or (C) incurred since the date of such financial
statements in the ordinary course of business consistent with past practice and
with the Merger Agreement; provided that with respect to clause (C) none of such
payments, discharges, settlements or satisfaction shall in any event exceed
$15,000,000; (x) except (i) as otherwise provided in a schedule to the Merger
Agreement or (ii) in the ordinary course of business consistent with past
practice (it being understood that the taking by the Company or any of its
subsidiaries of any of the actions described in this paragraph (x) with respect
to a contract involving annual payments of more than $10,000,000 shall not be in
the ordinary course of business), enter into any contract or agreement involving
annual payments of more than $5,000,000, modify or amend in any material respect
or terminate any such contract or agreement to which the Company or any of its
subsidiaries is a party, or waive, release or assign any rights or claims under
any contract or agreement that are significant to such contract or agreement;
provided that in entering into contracts in the ordinary course of business,
each of the Company and its subsidiaries shall act entirely in its own interest
as an independent enterprise; (xi) make any material change to its accounting
methods, principles or practices, except as may be required by United States
generally accepted accounting principles; (xii) except (a) for arrangements
entered into in the ordinary course of business consistent with past practice,
(b) as contemplated by the Merger Agreement or (c) as required by applicable
law, enter into, adopt or materially amend or change the funding or accrual
practices of any bonus, profit sharing, compensation, severance, termination,
stock option, stock appreciation right, restricted stock, performance unit,
pension, retirement, deferred compensation, employment, severance or other
employee benefit agreements, trusts, plans, funds or other arrangements of or
for the benefit or welfare of any employee of the Company or any of its
subsidiaries (or any other Person for whom either the Company or any of its
subsidiaries will have liability), or (except for normal increases in the
ordinary course of business that are consistent with past practices) materially
increase in any manner the compensation or
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fringe benefits of any employee of the Company or any of its subsidiaries (or
any other Person for whom the Company or any of its subsidiaries will have
liability) or pay any material benefit not required by any existing plan and
arrangement (including the granting of stock options, stock appreciation rights,
shares of restricted stock or performance units) or enter into any contract,
agreement, commitment or arrangement to do any of the foregoing; (xiii) enter
into any agreement containing any provision or covenant (x) limiting in any
respect the ability to compete with any Person which would bind the Company or
any of its subsidiaries or any successor or (y) granting any concessions or
rights to any railroad or other Person with respect to the use of any rail
lines, yards or other fixed railroad property of the Company or its subsidiaries
(whether through divestiture of lines, the grant of trackage or haulage rights
or otherwise) in each case other than in the ordinary course of business
consistent with past practice; or (xiv) authorize or commit or agree to take any
of the foregoing actions.
Pursuant to the Merger Agreement, from the date of the Merger Agreement
until the Effective Time, Parent and its subsidiaries shall conduct their
business in the ordinary course consistent with past practice and shall use
their commercially reasonable efforts to preserve intact their business
organizations and relationships with third parties and to keep available the
services of their present officers and employees. Without limiting the
generality of the foregoing, from the date of the Merger Agreement until the
Effective Time: (a) Parent will not adopt or propose any change in its articles
of incorporation or bylaws; (b) Parent will not, and will not permit any
subsidiary to take any action that would make any representation and warranty of
Parent under the Merger Agreement inaccurate in any material respect at, or as
of any time prior to, the Effective Time; (c) prior to the Effective Time, other
than regular quarterly cash dividends not to exceed Cdn $0.265 per share with
respect to Parent Common Stock, Parent will not (x) declare, set aside or pay
any dividends on, or make any other distributions in respect of, any of its
capital stock or (y) split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares in its capital stock; (d) Parent will not, and
will not permit any subsidiary of Parent to, sell, lease, license, mortgage or
subject to Lien or otherwise dispose of any of its properties or assets, other
than transactions in the ordinary course of business, including dispositions
that are part of Parent's rationalization plan or transactions not exceeding in
the aggregate $200,000,000; (e) except as set forth on a schedule to the Merger
Agreement, Parent will not, and will not permit any subsidiary of Parent to,
enter into any contract or arrangement or otherwise take any action that could
reasonably be expected to materially delay or otherwise interfere with the
consummation of the Offer or Merger; and (f) Parent will not, and will not
permit any subsidiary to, agree or commit to do any of the foregoing.
Other Offers. The Company agrees (i) that neither the Company nor any
Company subsidiary shall, and it shall direct and use its reasonable best
efforts to cause its officers, directors, employees, agents and representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it or any Company subsidiary) not to, initiate, solicit or
encourage, directly or indirectly, any inquiries or the making or implementation
of any proposal or offer (including, without limitation, any proposal or offer
to its stockholders) or any indication of interest, with respect to a merger,
acquisition, consolidation or similar transaction involving, or any purchase of
all or any significant portion of the assets or any equity securities of, the
Company or any Company Subsidiary, (any such proposal or offer being hereinafter
referred to as an "Acquisition Proposal"), or engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any Person, relating to an Acquisition Proposal, or afford
access to the properties, books or records of the Company or any Company
subsidiary to any Person that may be considering making or has made or has
stated an intention to make, an Acquisition Proposal, or release any third party
from any obligations under any existing standstill agreement or arrangement, or
enter into any agreement with respect to an Acquisition Proposal; (ii) that it
will immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing; and (iii) that it will notify Parent (including in such
notification the identity of the third party making
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inquiries or proposals, requesting information or access or seeking to initiate
or continue negotiations or discussions, as the case may be) with reasonable
promptness (but in no event later than 24 hours thereafter) if any such
inquiries or proposals are received by, any such information or access is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with, it. Notwithstanding the foregoing, the Company or
its Board of Directors may (x) take any action required to comply with Rule
14e-2(a) promulgated under the Exchange Act with regard to an Acquisition
Proposal or, prior to the earlier of (A) consummation of the Offer or (B) the
adoption of the Merger Agreement by the stockholders of the Company, (y) take
any action as contemplated under clause (e) of "Termination", below or (z)
directly or indirectly, furnish non-public information and access to, and may
participate in discussions and negotiations with, any Person in response to an
unsolicited bona fide Acquisition Proposal, if the Board of Directors of the
Company has concluded in good faith, based on the advice of outside counsel,
that such action is reasonably necessary for the Board of Directors to act in a
manner consistent with its fiduciary duties under applicable law; except that
(with respect to clauses (y) and (z) hereof) prior to furnishing non-public
information and access to, or participating in discussions or negotiations with,
such Person, the Company receives from such Person an executed confidentiality
and standstill agreement with terms not in the aggregate less favorable to the
Company than those contained in the Confidentiality Agreement (it being
understood that the Company may enter into a confidentiality agreement without a
standstill provision or with a standstill provision less favorable to the
Company provided that it waives or similarly modifies the standstill provision
in the Confidentiality Agreement); provided further, that at least 48 hours
prior to the entry into or announcement of an intention to enter into a
definitive agreement with respect to an Acquisition Proposal, the Company shall
have provided written notice to Parent advising Parent of its intention to enter
into a definitive agreement with respect to an Acquisition Proposal and
specifying the material terms and conditions of such Acquisition Proposal.
Within such 48 hour period, Parent may propose an improved transaction.
Registration Rights. The Company shall, at Parent's request, at any time
and from time to time within three years after the termination of the Merger
Agreement, as expeditiously as possible prepare and file up to three
registration statements under the Securities Act if such registration is
necessary in order to permit the sale or other disposition of any or all
securities that have been deposited in the Voting Trust by Parent, in accordance
with the intended method of sale or other disposition stated by Parent,
including a "shelf" registration statement under Rule 415 under the Securities
Act or any successor provision; and the Company shall use its reasonable best
efforts to qualify such securities under any applicable state securities laws.
Parent agrees to use reasonable efforts to cause, and to cause any underwriters
of any sale or other disposition to cause, any sale or other disposition
pursuant to such registration statement to be effected on a widely distributed
basis. The Company shall use reasonable efforts to cause each such registration
statement to become effective, to obtain all consents or waivers of other
parties which are required therefore, and to keep such registration statement
effective for such period not in excess of 180 calendar days from the day such
registration statement first becomes effective as may be reasonably necessary to
effect such sale or other disposition. The obligations of the Company thereunder
to file a registration statement and to maintain its effectiveness may be
suspended for one or more periods of time not exceeding 60 calendar days in the
aggregate with respect to any registration statement if the Board of Directors
of the Company shall have determined that the filing of such registration
statement or the maintenance of its effectiveness would require disclosure of
nonpublic information that would materially and adversely affect the Company.
Any registration statement prepared and filed under this provision, and any sale
covered thereby, shall be shared equally by the Company and Parent except for
underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Parent's counsel related thereto. Parent shall provide all
information reasonably requested by the Company for inclusion in any
registration statement to be filed hereunder. If, during the time periods
referred to in the first sentence of this paragraph, the Company effects a
registration under the Securities Act of the Company's securities for its own
account or for any other of its stockholders (other than on form S-4 or form
S-8, or any successor form), it shall allow Parent the right to
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participate in such registration, and such participation shall not affect the
obligation of the Company to effect demand registration statements for Parent
under this section; provided that, if the managing underwriters of such offering
advise the Company in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number which can be
sold in such offering, the Company shall include the securities requested to be
included therein by Parent pro rata with the securities intended to be included
therein by the Company. In connection with any registration pursuant
contemplated by this paragraph, the Company and Parent shall provide each other
and any underwriter of the offering with customary representations, warranties,
covenants, indemnification, and contribution in connection with such
registration. This provision applies also to the Company's Railroad
Subsidiaries.
Antitakeover Statutes. Subject to the fiduciary duties of the Board of
Directors of the Company under applicable law, if any takeover statute is or may
become applicable to the transactions contemplated hereby, the Company and its
Board of Directors shall use all reasonable efforts to grant such approvals and
to take such actions as are necessary so that the transactions contemplated by
the Merger Agreement may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to eliminate or minimize the effects of
any takeover statute on any of the transactions contemplated by the Merger
Agreement.
Director and Officer Liability. The Merger Agreement provides that Parent
shall cause the Surviving Corporation, for a period of six years after the
Control Date, (i) to maintain in effect in its certificate of incorporation and
by-laws the current provisions regarding the elimination of liability of
directors and indemnification of and advancement of expenses to officers,
directors, employees and agents currently contained in the certificate of
incorporation and by-laws of the Company and (ii) to maintain the existing
indemnification agreements covering such directors and officers of the Company;
provided that such indemnification agreements shall be subject to any limitation
imposed from time to time under applicable law. For six years after the Control
Date, the Merger Agreement provides that Parent will cause the Surviving
Corporation to maintain the officers' and directors' liability insurance in
respect of acts or omissions occurring prior to the Control Date covering each
such Person currently covered by the Company's officers' and directors'
liability insurance or a substitute policy on terms with respect to coverage and
amount no less favorable than those of such policy in effect on the date of the
Merger Agreement, provided that, in satisfying such obligation, Parent shall not
be obligated to cause the Surviving Corporation to pay premiums in excess of
200% of the amount per annum the Company paid in its last full fiscal year;
provided, further, that if the annual premiums of such insurance coverage exceed
such amount, the Surviving Corporation shall be obligated to obtain a policy
with the greatest coverage available for a cost not exceeding such amount.
Listing. Parent shall use all reasonable best efforts to cause the shares
of Parent Common Stock to be issued in the Merger to be approved for listing on
the NYSE, Toronto Stock Exchange and the other national securities exchanges on
which the Parent Common Stock is traded, subject, in each case, to official
notice of issuance, prior to the Effective Time.
Reasonable Best Efforts. Pursuant to the terms and conditions of the
Merger Agreement, each party to the Merger Agreement will use its reasonable
best efforts to take, or cause to be taken, all actions and to do, or cause to
be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate the transactions contemplated by the Merger Agreement.
STB Approval. Pursuant to the Merger Agreement, Parent on the one hand and
the Company on the other shall, and each shall cause its subsidiaries to,
subject to the following sentences, cooperate with one another to prepare and
present to the STB, as soon as practicable, all filings and other presentations
in connection with seeking any STB approval, exemption or other authorization
necessary to consummate the transactions contemplated by the Merger Agreement,
prosecute such filings and other presentations with diligence, diligently oppose
any objections to, appeals from or petitions to reconsider or reopen any such
STB approval by Persons not party to the Merger
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Agreement, and take all such further action as in the reasonable judgment of
Parent and the Company may facilitate obtaining a final order or orders of the
STB approving such transactions consistent with the Merger Agreement and the
transactions contemplated therein. Subject to consultations with the Company and
after giving good faith consideration to the views of the Company, Parent shall
have final authority over the development, presentation and conduct of the STB
case, including over decisions as to whether to agree to or acquiesce in
conditions. The Company shall take no regulatory or legal action in connection
with the STB without Parent's consent.
Public Announcements. The Merger Agreement provides that Parent and the
Company will consult with each other before issuing any press release or making
any public statement with respect to the Merger Agreement and the transactions
contemplated thereby and, except as may be required by applicable law or any
listing agreement with any national securities exchange, will not issue any such
press release or make any such public statement prior to such consultation.
Dividends. The Merger Agreement provides that after the date of the Merger
Agreement, each of Parent and the Company shall coordinate with the other the
payment of dividends with respect to the shares of Parent Common Stock and the
Shares and the record dates and payment dates relating thereto, it being the
intention of the parties thereto that holders of shares of Parent Common Stock
and Shares shall not receive two dividends, or fail to receive one dividend, for
any single calendar quarter with respect to their Parent Common Stock and/or
Shares or any shares of Parent Common Stock that any such holder receives in
exchange for Shares in connection with the Merger.
Auditors' Letters. The Merger Agreement provides that the Company and
Parent each shall use all reasonable best efforts to cause to be delivered to
the other party and such other party's directors a letter of its independent
auditors, dated the date on which the Form F-4 (described below)shall become
effective, and addressed to the other party and such other party's directors, in
form and substance customary for "comfort" letters delivered by independent
public accountants in connection with registration statements similar to the
Form F-4.
Treatment of Company Employees and Directors. In addition to continuing
existing compensation and benefits programs for Company employees, Parent and
the Company have agreed that a bonus pool of $5 million will be created by the
Company to provide bonuses aimed at retaining key employees of the Company after
the Merger. As a result of the transactions contemplated by the Merger
Agreement, a number of executive officers of the Company who are covered by
existing Employment Security Agreements will be entitled to receive between two
and three years of severance benefits (depending on job grade) if, within two
years, their employment is terminated by the Company without cause or they
resign with good reason. Under the Merger Agreement Parent and the Company have
agreed to take measures to amend the Employment Security Agreements so that the
covered executives will be entitled to additional gross-up payments to reimburse
them for any "golden parachute" excise taxes imposed following a termination of
their employment in these circumstances. The Merger Agreement also provides that
the Company's Director Retirement Plan will be terminated as of the Control Date
and the directors will be paid the benefits they have accrued thereunder,
subject to their right to elect to defer those payments.
Treatment of Company Stock Options and Restricted Stock Awards. Prior to
the Offer all outstanding employee and director stock options and restricted
stock awards to purchase Shares granted under any employee or director stock
option or compensation plan or arrangement of the Company (except certain
director options) will become fully exercisable. Parent and the Company have
agreed to develop a procedure to permit the holders of options to exercise such
options and tender the underlying Shares in the Offer. Any employee or director
options which are not exercised prior to the Merger will be converted into
Parent Options as described in "Stock Options" above.
Preparation of the Form F-4; Proxy Statement; Stockholders' Meeting. The
Merger Agreement provides that as soon as practicable following the date of the
Merger Agreement, the Company and Parent shall prepare and file with the SEC the
Form F-4 pursuant to the Securities Act, which will
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include the Company's proxy or information statement. Parent will make all
necessary filings with Canadian securities authorities and relevant Canadian
stock exchanges with respect to the Parent Common Stock to be issued in
connection with the Merger. Each of the Company and Parent shall use its
reasonable best efforts to have the Form F-4 declared effective under the
Securities Act as promptly as practicable after such filing. The Company will
use its reasonable best efforts to cause the Company proxy statement or
information statement to be mailed to its stockholders as promptly as
practicable after consummation of the Offer and effectiveness of the Form F-4
under the Securities Act. Parent shall also take any action (other than
qualifying to do business in any jurisdiction in which it is not now so
qualified or filing a general consent to service of process) required to be
taken under any applicable state securities laws in connection with the issuance
of Parent Common Stock pursuant to the Merger Agreement and the Company shall
furnish all information concerning the Company and the holders of the Shares as
may be reasonably requested in connection with any such action. No filing of, or
amendment or supplement to, the Form F-4 or the proxy or information statement
will be made by a party without providing the other party the opportunity to
review and comment thereon. Parent will advise the Company, promptly after it
receives notice thereof, of the time when the Form F-4 has become effective or
any supplement or amendment has been filed, the issuance of any stop order, the
suspension of the qualification of the Parent Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or any
request by the SEC for additional information. If at any time prior to the
Effective Time any information relating to the Company or Parent, or any of
their respective Affiliates, officers or directors, should be discovered by the
Company or Parent which should be set forth in an amendment or supplement to the
Form F-4 or the Company proxy or information statement so that any of such
documents would not include any misstatement of a material fact or omit to state
any material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the party which
discovers such information shall promptly notify the other parties hereto and an
appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law, disseminated to
the stockholders of the Company and if applicable, Parent.
Upon consummation of the Offer and the effectiveness of the Form F-4, the
parties understand that, pursuant to the Voting Trust Agreement, the trustee of
the Voting Trust will effect the approval of the stockholders of the Company of
the Merger Agreement by taking action by written consent of the stockholders of
the Company in lieu of calling a meeting of stockholders pursuant to, and in
accordance with, the requirements set forth in Section 228 of the DGCL or, if a
meeting of stockholders of the Company is required, to vote the Shares held in
the Voting Trust in favor of the adoption of the Merger Agreement at such
meeting.
Conditions of the Offer. See Section 16.
Conditions to the Merger. Under the Merger Agreement, the respective
obligations of the parties to consummate the Merger at the Effective Time are
subject to the satisfaction of the following conditions: (a) if required by the
DGCL, the Merger Agreement shall have been adopted by the stockholders of the
Company at a meeting of the Company stockholders (or by taking action by written
consent in lieu of such a meeting) in accordance with the DGCL; (b) the waiting
period under the HSR Act (if any) relating to the Merger shall have expired; and
(c) no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Merger.
Termination. The Merger Agreement provides that it may be terminated and
the Merger may be abandoned at any time prior to the Effective Time
(notwithstanding any adoption of the Merger Agreement by the Company's
stockholders):
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(a) by mutual written consent of the Company and Parent;
(b) by either the Company or Parent, if any law or regulation makes
consummation of the Merger illegal or otherwise prohibited or if any
judgment, injunction, order or decree enjoining Parent or the Company
from consummating the Merger is entered and such judgment, injunction,
order or decree shall become final and nonappealable;
(c) by either the Company or Parent, if (i) the Offer shall have expired
or been terminated and Purchaser shall not have purchased Shares
pursuant to the Offer or (ii) Purchaser shall not have purchased Shares
pursuant to the Offer prior to May 29, 1998; provided, however, that the
right to terminate the Merger Agreement pursuant to this provision shall
not be available to any party whose failure to perform any of its
obligations under the Merger Agreement (including Purchaser's failure to
purchase the Shares pursuant to the terms and conditions of the Offer)
results in the failure of the Offer to be consummated; provided further
that this clause (c) shall not apply if Purchaser shall have elected to
terminate the Offer and proceed with the Merger (see "Alternative
Transaction Structures");
(d) by Parent, prior to the earlier of (x) the consummation of the Offer
(if the Offer is consummated) or (y) the adoption of the Merger
Agreement by the Company stockholders, if (i) the Board of Directors of
the Company shall withdraw, modify or change its recommendation of the
Merger Agreement, the Merger or the Offer in a manner adverse to Parent,
it being understood and agreed that a communication by the Board of
Directors of the Company to the Company's stockholders pursuant to Rule
14d-9(e)(3) of the Exchange Act (or any similar communication to
stockholders of the Company in connection with the amendment of a tender
or exchange offer) shall not be deemed to constitute a withdrawal,
modification or change of its recommendation of the Merger Agreement,
the Merger or the Offer; (ii) the Board of Directors of the Company
shall approve or recommend an Acquisition Proposal; or (iii) the Company
shall have entered into, or shall have publicly announced its intention
to enter into, a definitive agreement with respect to an Acquisition
Proposal (it being understood and agreed that the delivery of written
notice of the Company's intention to enter into a definitive agreement
with respect to an Acquisition Proposal (see "Other Offers") and any
subsequent public announcement of such intention shall not entitle
Parent to terminate the Merger Agreement pursuant to this clause (d)
unless the Company enters into a definitive agreement with respect to
such Acquisition Proposal);
(e) by the Company, prior to the earlier of (x) the consummation of the
Offer or (y) the adoption of the Merger Agreement by the stockholders of
the Company, if the Board of Directors of the Company shall have entered
into or shall have publicly announced its intention to enter into, a
definitive agreement with respect to an Acquisition Proposal, if the
Board of Directors concludes in good faith, based on the advice of
outside counsel, that such action is reasonably necessary in order for
the Board of Directors to act in a manner consistent with the Board's
fiduciary duties under applicable law; provided, that the right to
terminate the Merger Agreement under this provision shall not be
available to the Company unless (x) the Company has complied in all
material respects with certain obligations under the Merger Agreement
(see "Other Offers"), and (y) concurrently with such termination, the
Company enters into a definitive agreement to effect the Acquisition
Proposal and pays Parent a break-up fee (see "Break-up Fee", below);
(f) by Parent, prior to the earlier of (x) consummation of the Offer (if
the Offer is consummated) or (y) the adoption of the Merger Agreement by
the stockholders of the Company, if any person or group (as defined in
Section 13(d)(3) of the Exchange Act) (other than Parent, any of its
subsidiaries, or an Affiliate thereof) shall have become the beneficial
owner (as defined under Rule 13d-3 promulgated under the Exchange Act)
of at least 40% of the outstanding Shares;
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(g) by the Company, prior to the earlier of (x) consummation of the Offer
or (y) the adoption of the Agreement by the stockholders of the Company,
if Parent or Purchaser shall have breached or failed to perform in any
material respect any of its representations, warranties, covenants or
other agreements contained in the Merger Agreement, which breach or
failure to perform (i) would give rise to the failure of the conditions
of the Merger and (ii) either is not reasonably capable of being cured
or, if it is reasonably capable of being cured, has not been cured
within the earlier of (x) 10 days after giving of written notice to
Parent of such breach or (y) the Expiration Date (provided that the
Company shall not have the right to terminate the Merger Agreement if
the Company is then in breach of its representations, warranties,
covenants or other agreements contained in the Merger Agreement);
(h) by Parent, prior to the earlier of (x) consummation of the Offer (if
the Offer is consummated) or (y) the adoption of the Agreement by the
stockholders of the Company, if the Company shall have breached or
failed to perform in any material respect any of its representations,
warranties, covenants or other agreements contained in the Merger
Agreement, which breach or failure to perform (i) would give rise to the
failure of the conditions of the Merger and (ii) either is not
reasonably capable of being cured or, if it is reasonably capable of
being cured, has not been cured within the earlier of (x) 10 days after
giving of written notice to the Company of such breach or (y) the
Expiration Date (provided that Parent shall not have the right to
terminate the Merger Agreement if Parent (or Purchaser) is then in
breach of its representations, warranties, covenants or other agreements
contained in the Merger Agreement); or
(i) by either the Company or Parent if, during any five consecutive
trading day period during the period from the commencement of the Offer
until the business day prior to the expiration of the Offer the average
closing price of the Parent Common Stock on the NYSE is less than
$38.00; provided that any exercise of the right to terminate pursuant to
this paragraph with respect to any five consecutive trading day period
shall only be effective if notice of such termination is given to the
other party prior to the earlier of (i) 72 hours after the close of
trading on the fifth such consecutive day and (ii) the expiration date
of the Offer.
Fees and Expenses. Except as set forth in the next paragraph, all fees and
expenses incurred in connection with the Offer, the Merger, the Merger
Agreement, and the transactions contemplated by the Merger Agreement shall be
paid by the party incurring such fees or expenses, whether or not the Merger is
consummated.
Break-up Fee. The Company agrees to pay Parent a fee in immediately
available funds equal to $72,000,000: (i) concurrently with the termination of
the Merger Agreement if it shall be terminated pursuant to paragraph (d), (e),
(f) or (h) (with respect to a breach of certain obligations under the Merger
Agreement, see "Other Offers") above under "Termination"; or (ii) within two
business days of the execution of a definitive agreement with respect to any
Acquisition Proposal if the Company enters into such a definitive agreement
within 15 months after the termination of the Merger Agreement pursuant to
paragraph (c) under "Termination", above and an Acquisition Proposal was
publicly announced prior to the termination of the Merger Agreement pursuant to
paragraph (c).
Amendments and Waivers. The Merger Agreement provides that before or after
its adoption by the stockholders of the Company, any provision of the Merger
Agreement may be amended or waived prior to the Control Date if, and only if,
such amendment or waiver is in writing and signed, in the case of an amendment,
by the parties thereto or in the case of a waiver, by the party against whom the
waiver is to be effective; provided that after the adoption of the Merger
Agreement by the stockholders of the Company, there shall not be made any
amendment that by law requires further approval by stockholders of the Company
without the further approval of such stockholders and, provided, further,
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that no such amendment of the Merger Agreement, the Voting Trust Agreement or
any other agreement entered into in connection with the Merger Agreement shall
be effected after the closing of the Offer and prior to the Control Date unless
there are then in office two or more Continuing Directors and such amendment is
approved by a majority of such Continuing Directors, it being understood and
agreed that the Company and its Board of Directors shall use reasonable best
efforts to ensure that, at all times prior to the Control Date, at least two
Continuing Directors remain in office. Following consummation of the Offer and
prior to the Control Date, any amendment to the certificate of incorporation or
by-laws of the Company or to the Merger Agreement or to the Voting Trust
Agreement, any termination of the Merger Agreement by the Company or by the
Company and Parent under paragraph (a) under "Termination" above, any waiver of
any of the Company's rights under the Merger Agreement (including certain
waivers or consents required in connection with the Voting Trust) and any other
consent or action by the Board of Directors of the Company thereunder, shall not
be effected unless there are then in office two or more Continuing Directors and
such approval is approved by a majority of such Continuing Directors, it being
understood and agreed that the Company and its Board of Directors shall use
commercially reasonable best efforts to ensure that, at all times prior to the
Control Date, at least two Continuing Directors remain in office.
CONFIDENTIALITY AGREEMENT
On March 13, 1997, Parent and the Company entered into an Agreement for
Non-disclosure of Proprietary Information and Standstill (the "Confidentiality
Agreement") under which the Company and Parent agreed to provide certain
confidential information relating to their respective operations to each other.
Pursuant to the Confidentiality Agreement, Parent agreed that Parent and its
representatives would hold non-public information received from the Company
under the Confidentiality Agreement in confidence, except to the extent that
disclosure is required to evaluate a possible business combination as specified
in the Confidentiality Agreement. A copy of the Confidentiality Agreement is
filed as an exhibit to the Schedule 14D-1 and incorporated herein by reference,
and the foregoing summary of the Confidentiality Agreement is qualified in its
entirety by reference thereto.
INVESTMENT COMMITMENT AGREEMENTS
In connection with the Offer and the Merger, Mr. Gilbert H. Lamphere, the
Company's Chairman of the Board of Directors, and Mr. Alexander P. Lynch (a
Director of the Company) have both entered into an Investment Commitment
Agreement pursuant to which Messrs. Lamphere and Lynch have each agreed (i) to
permit all options to purchase Shares then owned by them to be amended and
converted into options to purchase shares of Parent Common Stock in accordance
with the terms of the Merger Agreement, (ii) that at any meeting of stockholders
of the Company held to adopt the Merger Agreement, they will vote all of their
Shares in favor of such action and (iii) (in the case of Mr. Lamphere only)
that, within 90 days of the Effective Time (provided that such period shall be
extended for any period during which he is precluded from purchasing shares of
Parent Common Stock pursuant to applicable law), he will have acquired at least
98,150 shares of Parent Common Stock pursuant to the Merger or pursuant to open
market purchases, provided that Mr. Lamphere will not be obligated to invest an
aggregate amount in excess of $5,300,000 of proceeds from the Offer and/or the
Merger (for this purpose (x) any shares of Parent Common Stock issued to Mr.
Lamphere pursuant to the Merger shall be deemed to represent an investment in an
amount equal to the product of the number of shares of Parent Common Stock so
received and the average closing trading price per share of Parent Common Stock
on the NYSE for the 5 trading days immediately following the date of receipt and
(y) any acquisitions of shares of Parent Common Stock by trusts for the
descendants of Mr. Lamphere shall ratably decrease Mr. Lamphere's required
investment in Parent Common Stock).
Each Investment Commitment Agreement will automatically terminate, without
action by either party thereto, upon the termination of the Merger Agreement in
accordance with its terms or, if
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Purchaser has elected to amend the terms of the Offer to an offer for all of the
outstanding Shares (see "Alternative Transaction Structures").
VOTING TRUST AGREEMENT
Pursuant to the Voting Trust Agreement to be entered into by and among
Parent, Purchaser and a voting trustee that is expected to be a banking
corporation (the "Trustee"), the Trustee will agree to act as trustee in respect
of the Voting Trust. In such capacity, the Trustee will vote all Shares acquired
by Purchaser in the Offer or otherwise approve the Merger, in favor of any
proposal necessary to effectuate Parent's acquisition of the Company pursuant to
the Merger Agreement, and, so long as the Merger Agreement is in effect (subject
to certain exceptions), against any other proposed merger, business combination
or similar transaction involving the Company. On other matters (including the
election or removal of directors), the Trustee generally will vote the Shares in
the Trustee's sole discretion unless a holder of a Trust Certificate with the
prior written approval of the STB directs the Trustee as to any such vote.
Pending the termination of the Voting Trust, the Trustee will pay over to
Purchaser all cash dividends and cash distributions paid on the Trust Stock.
The Voting Trust Agreement will provide that the Trustee shall take all
actions reasonably requested by Parent with respect to any proposed sale or
other disposition of the whole or any part of the Trust Stock by Parent subject
to all necessary regulatory approvals, if any.
The Voting Trust Agreement also will provide that, in the event the STB
approves or exempts the Merger or a similar transaction, or in the event that
the law is amended to allow Purchaser, Parent or their affiliates to acquire
control of the Company without obtaining STB or other governmental approval (and
upon delivery of an opinion of independent counsel that no order of the STB or
other governmental authority is required), the Trustee will either transfer the
Trust Stock to Purchaser, or if shareholder approval has not previously been
obtained, vote the Trust Stock in favor of the Merger.
It is anticipated that the Voting Trust Agreement will provide that, in the
event that the STB does not approve Parent's acquisition of control of the
Company, Parent will use its best efforts to sell the Trust Stock in the manner
described above during the succeeding two-year period. Any such disposition
shall be subject to any jurisdiction of the STB to oversee Parent's divestiture
of Trust Stock. In connection with such an event, the Trustee would continue to
perform its duties under the Voting Trust Agreement and, if Parent fails to so
sell or distribute the Trust Stock, the Trustee will as soon as practicable sell
the Trust Stock for cash to one or more eligible purchasers in the manner
described above for such price as the Trustee in its discretion shall deem
reasonable after consultation with Parent. An "eligible purchaser" is a person
or entity not affiliated with Parent and that has all necessary regulatory
authority, if any, to purchase the Trust Stock. Pursuant to the Voting Trust
Agreement, Parent will agree to cooperate with the Trustee in so disposing of
the Trust Stock and the Trustee has agreed to act in accordance with any
direction made by Parent as to any specific terms or method of disposition, to
the extent not inconsistent with any of the terms of the Voting Trust Agreement
and with the requirements of the terms of any STB or court order. The proceeds
of the sale would be distributed to Parent or its affiliates.
The Voting Trust Agreement provides that the Trustee shall receive
reasonable and customary compensation and indemnification from Parent and
Purchaser.
Pursuant to the Merger Agreement, the Voting Trust Agreement may not be
modified or amended without the prior written approval of the Company unless
such modification or amendment is not inconsistent with the Merger Agreement and
is not adverse to the Company and its stockholders and would not reasonably be
expected to have an adverse effect on receipt of a favorable informal advisory
opinion from the staff of the STB to the effect that the proposed use of the
Voting Trust will preclude unlawful control of the Company by Parent.
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Upon execution of the Voting Trust Agreement, Parent will request the staff
of the STB to render an informal written opinion that the use of the Voting
Trust is consistent with the policies of the STB. See Section 16.
14. DIVIDENDS AND DISTRIBUTIONS.
If, on or after the date of the Merger Agreement, the Company should (i)
split, combine or otherwise change the Shares or its capitalization, (ii) issue
or sell any additional securities of the Company or otherwise cause an increase
in the number of outstanding securities of the Company or (iii) acquire
currently outstanding Shares or otherwise cause a reduction in the number of
outstanding Shares, then, without prejudice to Purchaser's rights under Sections
1 and 16, Purchaser, in its sole discretion, may make such adjustments as it
deems appropriate in the purchase price and other terms of the Offer and the
Merger, including, without limitation, the amount and type of securities offered
to be purchased.
If, on or after the date of the Merger Agreement, the Company should
declare or pay any dividend on the Shares, other than regular quarterly
dividends, or make any distribution (including, without limitation, the issuance
of additional Shares pursuant to a stock dividend or stock split, the issuance
of other securities or the issuance of rights for the purchase of any
securities) with respect to the Shares that is payable or distributable to
shareholders of record on a date prior to the transfer to the name of Purchaser
or its nominee or transferee on the Company's stock transfer records of the
Shares purchased pursuant to the Offer, then, without prejudice to Purchaser's
rights under Sections 1 and 16, (i) the purchase price per Share payable by
Purchaser pursuant to the Offer will be reduced by the amount of any such cash
dividend or cash distribution and (ii) any such non-cash dividend, distribution
or right to be received by the tendering shareholders will be received and held
by such tendering shareholders for the account of Purchaser and will be required
to be promptly remitted and transferred by each such tendering shareholder to
the Depositary for the account of Purchaser, accompanied by appropriate
documentation of transfer. Pending such remittance and subject to applicable
law, Purchaser will be entitled to all rights and privileges as owner of any
such non-cash dividend, distribution or right and may withhold the entire
purchase price or deduct from the purchase price the amount of value thereof, as
determined by Purchaser in its sole discretion.
The Company has agreed in the Merger Agreement that it will not pay any
dividends, other than regular quarterly dividends, on its capital stock,
including the Shares, prior to the Effective Time without the consent of Parent.
The Company has also agreed that, without the consent of Parent, it will not (a)
take certain actions that would change the number of shares of its capital stock
outstanding or result in the reclassification of any of its capital stock, or
(b) purchase, retire or otherwise acquire any shares of its capital stock, or
(c) issue, pledge or otherwise encumber its capital stock or any securities
convertible into or representing the right to acquire its capital stock, with
certain exceptions set forth in the Merger Agreement. See Section 13.
15. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT.
Purchaser expressly reserves the right to extend the period of time during
which the Offer is open if any conditions to the Offer are not satisfied by
giving oral or written notice of such extension to the Depositary and by making
a public announcement of such extension or to amend the Offer in any respect by
making a public announcement of such amendment. There can be no assurance that
Purchaser will exercise its right to extend or amend the Offer. For a
description of each of the parties' right to extend the period of time during
which the Offer is open and to amend or delay the Offer see Sections 1 and 16.
If Purchaser increases by more than 2% of the outstanding Shares or
decreases the percentage of Shares being sought or increases or decreases the
consideration to be paid for Shares pursuant to the Offer and the Offer is
scheduled to expire at any time before the expiration of a period of 10 business
days from, and including, the date that notice of such increase or decrease is
first published, sent or given in the manner specified below, the Offer will be
extended until the expiration
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of such period of 10 business days. If Purchaser makes a material change in the
terms of the Offer (other than a change in price or percentage of securities
sought) or in the information concerning the Offer, or waives a material
condition of the Offer, Purchaser will extend the Offer, if required by
applicable law, for a period sufficient to allow holders of Shares to consider
the amended terms of the Offer. In a published release, the SEC has stated that
in its view an offer must remain open for a minimum period of time following a
material change in the terms of such offer and that the waiver of a condition
such as the Minimum Condition is a material change in the terms of an offer. The
release states that an offer should remain open for a minimum of five business
days from the date the material change is first published, sent or given to
securityholders, and that if material changes are made with respect to
information that approaches the significance of price and share levels, a
minimum of 10 business days may be required to allow adequate dissemination and
investor response. The term "business day" shall mean any day other than
Saturday, Sunday or a federal holiday and shall consist of the time period from
12:01 A.M. through 12:00 Midnight, New York City time.
Purchaser also reserves the right, in its sole discretion, in the event any
of the conditions specified in Section 16 shall not have been satisfied and so
long as Shares have not theretofore been accepted for payment, to delay (except
as otherwise required by applicable law) acceptance for payment of or payment
for Shares or to terminate the Offer and not accept for payment or pay for
Shares.
If Purchaser extends the period of time during which the Offer is open, is
delayed in accepting for payment or paying for Shares or is unable to accept for
payment or pay for Shares pursuant to the Offer for any reason, then, without
prejudice to Purchaser's rights under the Offer, the Depositary may, on behalf
of Purchaser, retain all Shares tendered, and such Shares may not be withdrawn
except as otherwise provided in Section 4. The reservation by Purchaser of the
right to delay acceptance for payment of or payment for Shares is subject to
applicable law, which requires that Purchaser pay the consideration offered or
return the Shares deposited by or on behalf of holders of Shares promptly after
the termination or withdrawal of the Offer.
Any extension, termination or amendment of the Offer will be followed as
promptly as practicable by a public announcement thereof. Without limiting the
manner in which Purchaser may choose to make any public announcement, Purchaser
will have no obligation (except as otherwise required by applicable law) to
publish, advertise or otherwise communicate any such public announcement other
than by making a release to the Dow Jones News Service. In the case of an
extension of the Offer, Purchaser will make a public announcement of such
extension no later than 9:00 A.M., New York City time, on the next business day
after the previously scheduled Expiration Date.
16. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the Offer, Parent and Purchaser
shall not be required to accept for payment or pay for any Shares, and may
terminate the Offer, if (i) by the expiration of the Offer less than 50.1% of
the outstanding Shares (on a fully diluted basis) have been tendered pursuant to
the Offer and not withdrawn, (ii) the applicable waiting period (if any) under
the HSR Act shall not have expired or been terminated, (iii) the staff of the
STB shall not have given Parent a favorable informal advisory opinion to the
effect that the proposed use of the Voting Trust will preclude unlawful control
of the Company by Parent or (iv) at any time on or after February 10, 1998, and
prior to the acceptance for payment of Shares, any of the following conditions
exist:
(a) there shall be instituted or pending any action or proceeding by any
government or governmental authority or agency, domestic or foreign, (i)
challenging or seeking to make illegal, to delay materially or otherwise
directly or indirectly to restrain or prohibit the making of the Offer,
challenging or seeking to make illegal the Voting Trust, the acceptance for
payment of or payment for some of or all the Shares by Parent or the
consummation by Parent of the Merger, seeking to
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obtain material damages or otherwise directly or indirectly relating to the
transactions contemplated by the Offer or the Merger (including the Voting
Trust), (ii) except for the Voting Trust, seeking to restrain or prohibit
Parent's ownership or operation (or that of its respective subsidiaries or
affiliates) of all or any material portion of the business or assets of the
Company and its subsidiaries, taken as a whole, or of Parent and its
subsidiaries, taken as a whole, or to compel Parent or any of its subsidiaries
or Affiliates to dispose of or hold separate all or any material portion of the
business or assets of the Company and its subsidiaries, taken as a whole, or of
Parent and its subsidiaries, taken as a whole, (iii) except for the Voting
Trust, seeking to impose or confirm material limitations on the ability of
Parent or any of its subsidiaries or Affiliates effectively to exercise full
rights of ownership of the Shares, including, without limitation, the right to
vote any Shares acquired or owned by Parent or any of its subsidiaries or
Affiliates on all matters properly presented to the stockholders of the Company,
or (iv) seeking to require divestiture by Parent or any of its subsidiaries or
Affiliates of any such Shares; or
(b) there shall be any action taken, or any statute, rule, regulation,
injunction, order or decree proposed, enacted, enforced, promulgated, issued or
deemed applicable to the Offer or the Merger (including the Voting Trust), by
any court, government or governmental authority or agency, domestic or foreign
(other than (i) the application of the waiting period provisions of the HSR Act
to the Offer or the Merger and (ii) the waiting period prior to receipt of STB
approval or exemption with respect to the exercise of control by Parent over the
Railroad Subsidiaries), that would reasonably be likely, directly or indirectly,
to result in any of the consequences referred to in clauses (i) through (iv) of
paragraph (a) above; or
(c) any change shall have occurred or been threatened (or any development
shall have occurred or been threatened involving a prospective change) in the
business, assets, liabilities, financial condition, capitalization, operations
or results of operations of the Company or any of its subsidiaries that would
reasonably be expected to have a Material Adverse Effect with respect to the
Company; or
(d) the Company shall have breached or failed to perform in any material
respect any of its covenants or agreements under the Merger Agreement, or any of
the representations and warranties of the Company set forth in the Merger
Agreement shall not be true in any material respect when made or at any time
prior to consummation of the Offer as if made at and as of such time (unless
such representation or warranty is made only as of a specific date), except
where the failure of such representations and warranties to be so true and
correct (without giving effect to any limitation as to "materiality or "material
adverse effect") does not have, and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect; or
(e) the Merger Agreement shall have been terminated in accordance with its
terms;
which, in the sole judgment of Parent in any such case, and regardless of the
circumstances (including any action or omission by Parent) giving rise to any
such condition, makes it inadvisable to proceed with such acceptance for payment
or payment.
17. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS.
General
Based on its examination of publicly available information filed by the
Company with the SEC and other publicly available information concerning the
Company, Purchaser is not aware of any governmental license or regulatory permit
that appears to be material to the Company's business that might be adversely
affected by Purchaser's acquisition of Shares as contemplated herein or, except
as set forth below, of any approval or other action by any government or
governmental administrative or regulatory authority or agency, domestic or
foreign, that would be required for the acquisition or ownership of Shares by
Purchaser as contemplated herein. Should any such approval or other action be
required, Purchaser currently contemplates that, except as described below
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under "State Takeover Statutes", such approval or other action will be sought.
Except as described under "Antitrust" there is, however, no current intent to
delay the purchase of Shares tendered pursuant to the Offer pending the outcome
of any such matter. There can be no assurance that any such approval or other
action, if needed, would be obtained or would be obtained without substantial
conditions or that if such approvals were not obtained or such other actions
were not taken adverse consequences might not result to the Company's business
or certain parts of the Company's business might not have to be disposed of, any
of which could cause Purchaser to elect to terminate the Offer without the
purchase of Shares thereunder. Purchaser's obligation under the Offer to accept
for payment and pay for Shares is subject to certain conditions. See Section 16.
State Takeover Statutes
A number of states have adopted laws which purport, to varying degrees, to
apply to attempts to acquire corporations that are incorporated in, or which
have substantial assets, shareholders, principal executive offices or principal
places of business or whose business operations otherwise have substantial
economic effects in, such states. The Company, directly or through subsidiaries,
conducts business in a number of states throughout the United States, some of
which have enacted such laws. Except as described herein, Purchaser does not
know whether any of these laws will, by their terms, apply to the Offer or any
merger or other business combination between Purchaser or any of its affiliates
and the Company and has not complied with any such laws. To the extent that
certain provisions of these laws purport to apply to the Offer or any such
merger or other business combination, Purchaser believes that there are
reasonable bases for contesting such laws.
In 1982, in Edgar v. MITE Corp., the Supreme Court of the United States
invalidated on constitutional grounds the Illinois Business Takeover Statute
which, as a matter of state securities law, made takeovers of corporations
meeting certain requirements more difficult. However, in 1987 in CTS Corp. v.
Dynamics Corp. of America, the Supreme Court held that the State of Indiana
could, as a matter of corporate law, constitutionally disqualify a potential
acquiror from voting shares of a target corporation without the prior approval
of the remaining shareholders where, among other things, the corporation is
incorporated in, and has a substantial number of shareholders in, the state.
Subsequently, in TLX Acquisition Corp. v. Telex Corp., a Federal District Court
in Oklahoma ruled that the Oklahoma statutes were unconstitutional insofar as
they apply to corporations incorporated outside Oklahoma in that they would
subject such corporations to inconsistent regulations. Similarly, in Tyson
Foods, Inc. v. McReynolds, a Federal District Court in Tennessee ruled that four
Tennessee takeover statutes were unconstitutional as applied to corporations
incorporated outside Tennessee. This decision was affirmed by the United States
Court of Appeals for the Sixth Circuit. In December 1988, a Federal District
Court in Florida held in Grand Metropolitan PLC v. Butterworth, that the
provisions of the Florida Affiliated Transactions Act and the Florida Control
Share Acquisition Act were unconstitutional as applied to corporations
incorporated outside of Florida.
If any government official or third party should seek to apply any state
takeover law to the Offer or any merger or other business combination between
Purchaser or any of its affiliates and the Company, Purchaser will take such
action as then appears desirable, which action may include challenging the
applicability or validity of such statute in appropriate court proceedings. In
the event it is asserted that one or more state takeover statutes is applicable
to the Offer or any such merger or other business combination and an appropriate
court does not determine that it is inapplicable or invalid as applied to the
Offer or any such merger or other business combination, Purchaser might be
required to file certain information with, or to receive approvals from, the
relevant state authorities or holders of Shares, and Purchaser might be unable
to accept for payment or pay for Shares tendered pursuant to the Offer, or be
delayed in continuing or consummating the Offer or any such merger or other
business combination. In such case, Purchaser may not be obligated to accept for
payment or pay for any tendered Shares. See Section 16.
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Antitrust
Under the HSR Act and the rules that have been promulgated thereunder by
the Federal Trade Commission (the "FTC"), certain acquisition transactions may
not be consummated unless certain information has been furnished to the
Antitrust Division of the Department of Justice (the "Antitrust Division") and
the FTC and certain waiting period requirements have been satisfied. The notice
and waiting period requirements of the HSR Act should not apply to the Offer and
the Merger to the extent that the Offer and the Merger are subject to approval
by the STB, provided that information and documentary material filed with the
STB in connection with the seeking of STB approval of the Merger are
contemporaneously filed with the Antitrust Division and the FTC. Parent intends
to comply with these contemporaneous filing requirements and therefore believes
that the notice and waiting period requirements should not apply to the Offer
and the Merger. Parent and Purchaser will request the Premerger Notification
Office of the FTC to confirm this understanding. If the notice and waiting
period requirements of the HSR Act do apply to the Offer and the Merger, Parent,
Purchaser and the Company will take all necessary action to comply with those
requirements.
STB Matters; The Voting Trust
Certain activities of subsidiaries of the Company are regulated by the STB.
Provisions of subtitle IV, title 49 of the United States Code require approval
of, or the granting of an exemption from approval by, the STB for the
acquisition of control of two or more carriers subject to the jurisdiction of
the STB ("Carriers") by a person that is not a Carrier and for the acquisition
or control of a Carrier by a person that is not a Carrier but that controls any
number of Carriers. STB approval or exemption is required for, among other
things, Parent's acquisition of control of the Company. Parent and Purchaser
intend, simultaneous with the acquisition of Shares pursuant to the Offer, to
deposit the Shares pursuant to the Offer in the Voting Trust and, subsequently
to deposit the stock of the Surviving Company (the "Trust Stock") in order to
ensure that Parent and its affiliates do not acquire and directly or indirectly
exercise control over the Company and its affiliates prior to obtaining
necessary STB approval or exemption. STB approval of Parent's acquisition of
control of the Company is not a condition to the Offer or the Merger. The Offer
is conditioned upon the issuance by the STB staff of an informal, nonbinding
opinion that the use of the Voting Trust is consistent with the policies of the
STB against unauthorized acquisitions of control of a Carrier. Parent will
request the staff of the STB to issue such an opinion. Under STB regulations
that have been in effect since 1979, the STB staff has the power to issue such
opinions. The proposed Voting Trust Agreement is modeled closely upon voting
trust agreements that have been approved by the STB. However, there can be no
assurance that the STB will not seek changes in, or request public comment
regarding, the Voting Trust Agreement.
It is possible that the Department of Justice or railroad competitors of
Parent and the Company, or others, may argue that Purchaser should not be
permitted to use the voting trust mechanism to acquire Shares prior to final STB
approval of acquisition of control of the Company. Purchaser believes it is
unlikely that such arguments would prevail, but there can be no assurance in
this regard, nor can there be any assurance that if such arguments are made,
there will not be a delay in obtaining a favorable STB staff opinion regarding
the Voting Trust Agreement.
Pursuant to the terms of the Voting Trust Agreement, it is expected that
the Trustee would hold such Shares until (i) the receipt of STB approval or (ii)
the Shares or Trust Stock is disposed of. The Voting Trust Agreement that has
been submitted to the staff of the STB for approval provides that Trustee will
have sole power to vote the Shares in the Trust, will vote those Shares in favor
of the Merger and, so long as the Merger Agreement is in effect, against any
other acquisition transaction, will generally vote the Shares or the Trust Stock
in favor of any permitted disposition of the Shares or the Trust Stock and, on
all other matters, will vote the Shares or the Trust Stock in the Trustee's
discretion unless a holder of a Trust Certificate with the prior written
approval of the STB directs the Trustee as to any such vote. The Voting Trust
Agreement contains other terms and conditions designed to ensure that neither
Purchaser nor Parent will control the Company during the
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pendency of the STB proceedings. In addition, the Voting Trust Agreement
provides that Parent or its affiliates will be entitled to receive any cash
dividend paid by the Company.
STB Matters; Acquisition of Control
Set forth below is information relating to the approval by STB of the
acquisition of control over the Company by Parent and Purchaser. As soon as
practicable after the execution of the Merger Agreement, Parent and the Company
and their railroad affiliates plan to file an application (the "STB
Application") seeking approval of the STB for the acquisition of control over
the Company and its affiliates by Parent and its affiliates. Under applicable
law and regulations, the STB will hold a public hearing on such application,
unless it determines that a public hearing is not necessary in the public
interest. In ruling on the STB application, it is expected that the STB will
consider at least the following: (a) the effect of the proposed control
transaction on the adequacy of transportation to the public; (b) the effect on
the public interest of including, or failing to include, other rail carriers in
the area involved in the proposed transaction; (c) the total fixed charges that
result from the proposed transaction; (d) the interest of rail carrier employees
affected by the proposed transaction; and (e) whether the proposed transaction
would have an adverse effect on competition among rail carriers in the affected
region or in the national rail system. The STB has the authority to impose
conditions on its approval of a control transaction to alleviate competitive or
other concerns. If such conditions are imposed, Parent can elect to consummate
the control transaction subject to the conditions or can elect not to do so and
instead sell or otherwise effect the disposition of the Trust Stock. There is no
assurance that STB approval will be obtained or obtained on terms acceptable to
Parent.
Three of the five factors listed above are, in Parent's view, unlikely to
affect whether the STB application is approved by the STB. As to factor (b) --
inclusion of other carriers -- the STB disfavors this remedy, it has rarely been
requested, and Parent believes it is unlikely to be requested by any railroad in
a Parent/Company proceeding. As to factor (c) -- effect on fixed charges -- the
capital structure of the resulting company will be sufficiently strong that this
factor is unlikely, in Parent's view, to be given weight by the STB in deciding
whether to approve a combination of the Company and Parent. As to factor (d) --
the interest of affected carrier employees -- the STB has adopted a standard set
of labor protective conditions -- known as the New York Dock conditions -- which
it imposes in rail merger and control transactions, and Parent expects that
those conditions would be imposed upon a merger of Purchaser and the Company and
that this would not affect approval of the transaction.
The remaining two factors -- factor (a) -- effect on the adequacy of
transportation -- and factor (e) effect on rail competition -- are reflected in
the public interest balancing test that the STB applies in reviewing railroad
consolidations like the proposed combination of the rail systems of Parent and
the Company. On the one hand, the STB considers the public benefits of the
transaction in terms of better service to shippers, efficiencies, cost savings
and the like. On the other hand, the STB considers any public harms from the
transaction. The principal harm of concern to the STB (and the principal issue
that is likely to be raised by parties either opposing the approval of a
combination of Parent and the Company or seeking the imposition of conditions
thereto) is reduction in competition. In applying the public interest balancing
test, the STB is guided by Congress' intent to encourage mergers,
consolidations, and joint use of facilities that tend to rationalize and improve
the Nation's rail system.
In light of the policies of the STB expressed in its 1996 decision relating
to the combination of the Union Pacific and Southern Pacific Railroads, Parent
is willing to provide competitive access to another railroad in those
situations, if any, where Parent and the Company now are considered to be the
only rail competitors. Parent is not aware of any such situation. Such access
may take the form of a grant of trackage rights over rail properties, or other
forms, any of which could diminish the value to Parent of its rail properties.
The STB may impose such arrangements, as conditions to its approval of the
combination, and may require other arrangements regarding rail competition or
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other aspects of the public interest, which could be more burdensome, also as
conditions to its approval of the combination.
Parent and the Company intend to present to the STB their case that the
acquisition of control of the Company by Parent satisfies the public interest
balancing test. First, Parent and the Company will seek to show that a
combination of the Company and Parent has significant public benefits. Second,
Parent and the Company will seek to show that a combination of the Company and
Parent will have no significant adverse effect on rail competition and indeed
will strengthen such competition. While Parent and the Company will seek to
present a highly persuasive case, there can be no assurance that the STB
application will not be denied, or will not be granted subject to conditions
that are so onerous that the combination is not consummated.
Under existing law, the STB is required to enter a final order with respect
to the STB application within approximately 15 months after such application is
accepted. However, the STB is permitted to process such cases more quickly and
the applicants will request a shorter schedule. Under existing law, other
railroads and other interested parties may seek to intervene to oppose the STB
Application or to seek protective conditions in the event approval by the STB is
granted. In addition, any appeals from the STB final order might not be resolved
for a substantial period of time after the entry of such order by the STB.
Pending receipt of STB approval, it is expected that the business and
operations of the Company will be conducted in the usual and ordinary course,
and the Company's employees and management will continue in their present
positions except as set forth in Section 12.
Certain Litigation
The Company has advised Parent that, on February 11, 1998, an alleged owner
of Shares filed a "Class Action Complaint" entitled Jay Spinner against Illinois
Central Corp. et al. in the Court of Chancery of the State of Delaware against
the Company and members of its Board of Directors arising out of the Company's
announcement that it has reached an agreement to be acquired by Parent. Although
the body of the complaint purports to list Parent as a defendant, Parent is not
listed as a defendant in the caption of the complaint. The complaint alleges,
inter alia, that the individual defendants breached fiduciary duties allegedly
owed to public holders of Shares by, among other things, not adequately
evaluating the value of the Company or the terms of the transactions
contemplated by the Offer before approving its terms. The plaintiff brings the
action on behalf of a purported class of all holders of Shares (except the
defendants and any person, firm, trust, corporation or other entity related to
or affiliated with any of the defendants) and their successors in interest, who
are or will be threatened with injury allegedly arising from defendants' actions
as alleged in the complaint. The plaintiff alleges that he and members of the
purported class will suffer damage if they receive the Offer consideration,
which the complaint characterizes as unfair and inadequate. The plaintiff has
demanded judgment: (1) declaring, inter alia, that the action is a proper class
action, (2) enjoining or rescinding the transactions contemplated by the Offer,
and (3) requiring the Board of Directors of the Company to place the Company up
for auction and/or conducting a market check.
18. FEES AND EXPENSES.
Goldman, Sachs & Co. ("Goldman Sachs") and Schroder & Co. Inc.
("Schroders") are acting as Dealer Managers in connection with the Offer and
serving as financial advisor to Parent and Purchaser in connection with the
proposed acquisition of the Company. In consideration of Goldman Sachs acting in
such capacities, Parent has agreed to pay Goldman Sachs as follows: (i) if at
least 50% of the outstanding Shares or the assets (based on the book value
thereof) of the Company are acquired by Parent in one or more transactions,
Goldman Sachs will be entitled to receive a fee equal to $9 million, (ii) if
less than 50% but at least 5% of the outstanding Shares or the assets (based on
the book value thereof) of the Company are acquired by Parent in one or more
43
<PAGE> 46
transactions, Goldman Sachs will be entitled to receive a mutually agreeable fee
of not less than $4 million and (iii) if less than 5% of the outstanding Shares
or the assets (based on the book value thereof) of the Company are acquired by
Parent in one or more transactions, Goldman Sachs will be entitled to receive a
mutually agreeable fee. In the event that the Merger Agreement is terminated,
Goldman Sachs will be entitled to a transaction fee of 10% of any termination
fee payable to Parent. In addition, Parent and Purchaser have agreed to
reimburse Goldman Sachs for all reasonable out-of-pocket expenses incurred,
including reasonable fees of its counsel, and to indemnify Goldman Sachs against
certain liabilities and expenses in connection with the Offer, including certain
liabilities under the federal securities law. Goldman Sachs have from time to
time, and continue to, render various investment banking services to Parent and
its affiliates, for which they are paid customary fees.
As compensation for Schroders' services, Parent has agreed to pay Schroders
(i) a retainer fee of $100,000 per month, up to a maximum of five months; (ii)
an opinion fee of $500,000 if applicable; (iii) a transaction fee of $6 million
less any fee paid pursuant to clauses (i) and (ii) above, payable on closing of
the Merger; and (iv) 5% of the aggregate of any "break-up fee" less any amounts
paid under clauses (i), (ii) and (iii) above upon receipt of such fee by Parent
or Purchaser. Parent has also agreed to reimburse Schroders for certain
reasonable out-of-pocket expenses incurred with the Offer including fees and
expenses of counsel and to indemnify Schroders against certain liabilities in
connection with the Offer including liabilities under the federal securities
laws. Schroders has rendered various investment banking and advisory services to
Parent in the past for which it has received customary compensation.
Purchaser has retained MacKenzie Partners, Inc. to act as the Information
Agent in connection with the Offer. The Information Agent may contact holders of
Shares by mail, telephone, telex, telegraph and personal interviews and may
request brokers, dealers and other nominee shareholders to forward materials
relating to the Offer to beneficial owners of Shares. The Information Agent will
receive reasonable and customary compensation for its services, will be
reimbursed for certain reasonable out-of-pocket expenses and will be indemnified
against certain liabilities in connection therewith, including certain
liabilities under the federal securities laws.
In addition, Harris Trust Company of New York has been retained as the
Depositary. The Depositary has not been retained to make solicitations or
recommendations in its role as Depositary. The Depositary will receive
reasonable and customary compensation for its services, will be reimbursed for
certain reasonable out-of-pocket expenses and will be indemnified against
certain liabilities and expenses in connection therewith, including certain
liabilities under the federal securities laws.
Except as set forth above, Purchaser will not pay any fees or commissions
to any broker or dealer or any other person for soliciting tenders of Shares
pursuant to the Offer. Brokers, dealers, commercial banks and trust companies
will, upon request, be reimbursed by Purchaser for reasonable and necessary
costs and expenses incurred by them in forwarding materials to their customers.
19. MISCELLANEOUS.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of such
jurisdiction. Purchaser is not aware of any jurisdiction in the United States in
which the making of the Offer or the tender of Shares in connection therewith
would not be in compliance with the laws of such jurisdiction. To the extent
Purchaser becomes aware of any state law that would limit the class of offerees
in the Offer, subject to the terms of the Merger Agreement, Purchaser will amend
the Offer and, depending on the timing of such amendment, if any, will extend
the Offer to provide adequate dissemination of such information to holders of
Shares prior to the expiration of the Offer. In any jurisdiction the securities,
blue sky or other laws of which
44
<PAGE> 47
require the Offer to be made by a licensed broker or dealer, the Offer is being
made on behalf of Purchaser by the Dealer Managers or one or more registered
brokers or dealers licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PARENT OR PURCHASER NOT CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE RELATED LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Purchaser has filed with the SEC a Tender Offer Statement on Schedule
14D-1, together with exhibits, pursuant to Rule 14d-3 of the General Rules and
Regulations under the Exchange Act, furnishing certain additional information
with respect to the Offer. The Schedule 14D-1 and any amendments thereto,
including exhibits, may be examined at and copies may be obtained from the
offices of the SEC in the manner set forth in Section 8 of this Offer to
Purchase (except that such information will not be available at the regional
offices of the SEC).
February 13, 1998 BLACKHAWK MERGER SUB, INC.
45
<PAGE> 48
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
PARENT AND PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT.
The following table sets forth (i) the name, current business or residence
address and present principal occupation or employment, (ii) material
occupations, positions, offices or employments and business addresses thereof
for the past five years and (iii) information as to beneficial ownership of
Shares of each director and executive officer of Parent. Except for Messrs.
Armellino and Davies who are citizens of the United States, each of Parent's
directors and executive officers is a citizen of Canada. Except as otherwise
indicated, the business address of each director and executive officer of Parent
is 935 de La Gauchetiere Street West, Montreal, Quebec H3B 2M6. Directors are
indicated with an asterisk. None of the persons listed below hold any Shares.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
MATERIAL POSITIONS HELD DURING THE PAST FIVE
NAME, CITIZENSHIP AND CURRENT BUSINESS YEARS AND
ADDRESS BUSINESS ADDRESSES THEREOF(1)
- -------------------------------------------- -------------------------------------------------
<S> <C> <C>
* MICHAEL R. ARMELLINO.................... Limited Partner, The Goldman Sachs Group, L.P.
The Goldman Sachs Group, L.P. (investment bankers)
85 Broad Street, 2nd Floor
New York, NY 10004 USA
* PURDY CRAWFORD.......................... Chairman, Imasco Limited
Imasco Limited (consumer goods and services company)
Royal Bank Plaza
200 Bay Street North Tower
Suite 2000
Toronto, Ontario
Canada M5J 2J2
* J.V. RAYMOND CYR........................ Chairman, Telesat Canada & SSIG Group Inc.
Telesat Canada & SSIG Group Inc. (telecommunication companies)
1000 de La Gauchetiere Street West
Suite 1100
Montreal, Quebec
Canada H3B 4Y8
GERALD K. DAVIES........................ Executive Vice-President, Marketing of Parent
ROBERT F. DOLAN......................... Senior Vice-President, Corporate Services of
Parent
KEITH L. HELLER......................... Senior Vice-President, Line Operations of Parent
* JAMES K. GRAY........................... Chairman and Chief Executive Officer,
Canadian Hunter Exploration Ltd. Canadian Hunter Exploration Ltd.
605 5 Avenue, S.W. (natural gas company)
Suite 2800
Calgary, Alberta
Canada T2P 3H5
</TABLE>
1
<PAGE> 49
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
MATERIAL POSITIONS HELD DURING THE PAST FIVE
NAME, CITIZENSHIP AND CURRENT BUSINESS YEARS AND
ADDRESS BUSINESS ADDRESSES THEREOF(1)
- -------------------------------------------- -------------------------------------------------
<S> <C> <C>
* V. MAUREEN KEMPSTON DARKES.............. President and General Manager,
General Motors of Canada Limited General Motors of Canada Limited
1908 Colonel Sam Drive (automobile company)
Oshawa, Ontario
Canada L1H 8P7
* RICHARD H. KROFT........................ President and Chief Executive Officer,
Tryton Investment Company Limited Tryton Investment Company Limited
305 Broadway Avenue (private holding company)
Suite 720
Winnipeg, Manitoba
Canada R3C 3J7
* DENIS LOSIER............................ President and Chief Executive Officer,
Assumption Life Assumption Life
770 Main Street (life insurance company)
Moncton, New Brunswick
Canada E1C 8L1
* THE HON. EDWARD C. LUMLEY............... Vice-Chairman, Nesbitt Burns Inc.
Nesbitt Burns Inc. (investment bankers)
First Canada Place, 4th Floor
Toronto, Ontario
Canada M5X 1H3
JACK T. MCBAIN.......................... Executive Vice-President, Operations of Parent.
* DAVID G.A. MCLEAN....................... Chairman of the Board of Parent,
Canadian National Railway Chairman and Chief Executive Officer, The McLean
935 de La Gauchetiere Street West Group
17th Floor (real estate investment company)
Montreal, Quebec
Canada H3B 2M9
* DR. EDWARD P. NEUFELD................... Economist
1523 Ballyclare Drive
Mississauga, Ontario
Canada L5C 1J4
JEAN PIERRE OUELLET..................... Chief Legal Officer and Corporate Secretary of
Parent
* ROBERT PACE............................. President and Chief Executive Officer,
The Pace Group The Pace Group
15 Purcell's Cove Road (private holding company)
Halifax, Nova Scotia
Canada B3N 1R2
* CEDRIC E. RITCHIE....................... Corporate Director and Former Chairman and
Bank of Nova Scotia Chief Executive Officer, Bank of Nova Scotia
Scotia Plaza (a chartered bank)
44 King Street West, Suite 3005
Toronto, Ontario
Canada M5H 1H1
</TABLE>
2
<PAGE> 50
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
MATERIAL POSITIONS HELD DURING THE PAST FIVE
NAME, CITIZENSHIP AND CURRENT BUSINESS YEARS AND
ADDRESS BUSINESS ADDRESSES THEREOF(1)
- -------------------------------------------- -------------------------------------------------
<S> <C> <C>
MICHAEL J. SABIA........................ Executive Vice-President and Chief Financial
Officer of Parent
PAUL M. TELLIER......................... President and Chief Executive Officer of Parent
</TABLE>
- ---------------
(1) Michael R. Armellino was Chairman, and Chief Executive Officer of Goldman
Sachs Asset Management prior to January 1995; Purdy Crawford was Chairman
and Chief Executive Officer of Imasco Limited prior to May 1995; J.V.
Raymond Cyr was Chairman of Bell Canada between April 1993 and March 1996
and Chairman of BCE Inc. between April 1992 and April 1993; Gerald K.
Davies was Vice-President, Marketing of Burlington Northern Railroad
between September 1991 and November 1993; Robert F. Dolan was Senior
Vice-President, Corporate Resources of John Labatt Ltd. from January 1994
to January 1996 and prior thereto, Vice-President, Human Resources of John
Labatt Ltd.; Keith L. Heller was Senior Vice-President, CN East, from
August 1995 to April 1997, CN Chief of Transportation between October 1993
and August 1995 and Assistant Vice-President, Ores, Minerals and Metals
between August 1992 and October 1993; V. Maureen Kempston Darkes was
Vice-President, Corporate Affairs and General Counsel of General Motors of
Canada Limited prior to July 1994; Denis Losier was Minister of Economic
Development and Tourism (New Brunswick) prior to August 1994; Dr. Edward P.
Neufeld was Executive Vice-President, Economic and Corporate Affairs of the
Royal Bank of Canada prior to June 1994; Jean Pierre Ouellet was a senior
partner at Stikeman, Elliott prior to August 1996; Cedric E. Ritchie was
Chairman of the Board of Bank of Nova Scotia until 1995 and Chairman and
Chief Executive Officer of said bank until 1993; Michael J. Sabia was
Senior Vice-President, Corporate Development of Parent between March 1993
and December 1995, prior thereto, Deputy Secretary to the Cabinet (Plans)
of the Privy Council Office (Canada).
2. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER.
The following table sets forth (i) the name, current business or residence
address and present principal occupation or employment and (ii) material
occupations, positions, offices or employments and business addresses thereof
for the past five years. The director and executive officers of Purchaser are
citizens of Canada and Mrs. Catellier is also a citizen of the United States.
The business address of the sole director and the executive officers of
Purchaser is 935 de La Gauchetiere Street West, Montreal, Quebec H3B 2M6.
Neither of the persons listed below holds any Shares.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
MATERIAL POSITIONS HELD DURING THE PAST FIVE
NAME, CITIZENSHIP AND CURRENT BUSINESS YEARS AND
ADDRESS BUSINESS ADDRESSES THEREOF
- ------------------------------------------ -------------------------------------------------
<S> <C>
JEAN PIERRE OUELLET....................... Sole director, President and Treasurer;
Chief Legal Officer and Corporate Secretary of
Parent
BRIGITTE K. CATELLIER..................... Secretary; Senior General Counsel and Associate
Secretary of Parent. Before joining Parent in
September 1997, partner at Ogilvy Renault in
Montreal, Quebec.
</TABLE>
3
<PAGE> 51
ANNEX A
CANADIAN/U.S. GAAP FINANCIAL INFORMATION
CANADIAN NATIONAL RAILWAY COMPANY
STATEMENT OF INCOME DATA
<TABLE>
<CAPTION>
U.S.
CDN./U.S. GAAP GAAP
ADJUSTMENTS -------
CDN. GAAP -----------------------
------------------------------------
AS RECLASS. AND AS (NOTE 2)
REPORTED ACCOUNTING RESTATED OTHER CAPITALIZATION
-------- CHANGE -------- ----- --------------
------------
(NOTE 1)
IN MILLIONS OF $ CDN
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
Total revenues......................... $ 4,098 $ (144) $ 3,954 $(42) $ 3,912
Operating expenses excluding special
charges.............................. 3,658 (144) 3,514 (27) 3,487
Special charges........................ 1,453 1,453 (38) 1,415
------- ---- ------- ---- -----
Operating income (loss)................ (1,013) -- (1,013) 23 (990)
Interest expense....................... (198) (198) 4 (194)
Other income........................... 100 100 48 148
Income tax (expense) recovery from
continuing operations................ 19 19 19
------- ---- ------- ---- -----
(Loss) from continuing operations...... (1,092) (1,092) 75 (1,017)
Extraordinary item..................... (38) (38)
Discontinued operations................ 7 7 7
------- ---- ------- ---- -----
Net (loss)............................. $ (1,085) $-- $(1,085) $ 37 $(1,048)
======= ==== ======= ==== =====
YEAR ENDED DECEMBER 31, 1996
Total revenues......................... $ 4,159 $ (164) $ 3,995 $(39) $ 3,956
Operating expenses excluding special
charges.............................. 3,549 (164) 3,385 (17) 3,368
Special charges........................ 381 381 (16) 365
------- ---- ------- ---- -----
Operating income (loss)................ 229 -- 229 (6) 223
Interest expense....................... (114) (114) 1 (113)
Other income........................... 20 7 27 17 44
Income tax (expense) recovery from
continuing operations................ (11) 705 694 694
------- ---- ------- ---- -----
Income from continuing operations...... 124 712 836 12 848
Extraordinary item..................... (16) (16)
Discontinued operations................ 18 (4) 14 14
------- ---- ------- ---- -----
Net income............................. $ 142 $ 708 $ 850 $ (4) $ 846
======= ==== ======= ==== =====
YEAR ENDED DECEMBER 31, 1997
Total revenues......................... $ 4,352 $-- $ 4,352 $(30) $-- $ 4,322
Total operating expenses............... 3,545 3,545 (11) (139) 3,395
------- ---- ------- ---- ----- -----
Operating income (loss)................ 807 807 (19) 139 927
Interest expense....................... (118) (118) 1 (117)
Other income........................... 57 57 (33) 24
Income tax (expense) recovery from
continuing operations................ (325) (325) 22 (62) (365)
------- ---- ------- ---- ----- -----
Income from continuing operations...... 421 421 (29) 77 469
Discontinued operations................ (18) (18) (18)
Cumulative effect of accounting
change............................... 589 589
------- ---- ------- ---- ----- -----
Net income............................. $ 403 $-- $ 403 $(29) $ 666 $ 1,040
======= ==== ======= ==== ===== =====
</TABLE>
A-1
<PAGE> 52
CANADIAN/U.S. GAAP FINANCIAL INFORMATION
CANADIAN NATIONAL RAILWAY COMPANY
BALANCE SHEET DATA
<TABLE>
<CAPTION>
U.S.
GAAP
CDN./U.S. GAAP ---------
CDN GAAP ADJUSTMENTS
-------------------------------------- --------------------------
RECLASS. AND
AS ACCOUNTING AS (NOTE 2)
REPORTED CHANGE RESTATED OTHER CAPITALIZATION
-------- -------------- -------- -------- --------------
(NOTE 1)
IN MILLIONS OF $CDN.
<S> <C> <C> <C> <C> <C> <C>
AS AT DECEMBER 31, 1995
ASSETS
Current and other assets.............. $1,524 $ (126) $1,398 $ (106) $-- $ 1,292
Net properties including land......... 4,650 4,650 (39) 4,611
------- ---- ----- ---- ----- -----
Total Assets.......................... $6,174 $ (126) $6,048 $ (145) $-- $ 5,903
======= ==== ===== ==== ===== =====
LIABILITIES AND SHAREHOLDERS' EQUITY
Current and other liabilities......... $2,555 $ (126) $2,429 $ (53) $-- $ 2,376
Long-term debt........................ 1,313 1,313 (29) 1,284
Shareholders' equity.................. 2,306 2,306 (63) 2,243
------- ---- ----- ---- ----- -----
Total liabilities and shareholders'
equity.............................. $6,174 $ (126) $6,048 $ (145) $-- $ 5,903
======= ==== ===== ==== ===== =====
AS AT DECEMBER 31, 1996
ASSETS
Current and other assets.............. $1,367 $ 604 $1,971 $ (40) $-- $ 1,931
Net properties including land......... 4,869 4,869 (39) 4,830
------- ---- ----- ---- ----- -----
Total Assets.......................... $6,236 $ 604 $6,840 $ (79) $-- $ 6,761
======= ==== ===== ==== ===== =====
LIABILITIES AND SHAREHOLDERS' EQUITY
Current and other liabilities......... $2,357 $ (104) $2,253 $ 7 $-- $ 2,260
Long-term debt........................ 1,499 1,499 (30) 1,469
Shareholders' equity.................. 2,380 708 3,088 (56) 3,032
------- ---- ----- ---- ----- -----
Total liabilities and shareholders'
equity.............................. $6,236 $ 604 $6,840 $ (79) $-- $ 6,761
======= ==== ===== ==== ===== =====
AS AT DECEMBER 31, 1997
ASSETS
Current and other assets.............. $1,953 $-- $1,953 $ (93) $ (164) $ 1,696
Net properties including land......... 5,122 5,122 (18) 1,199 6,303
------- ---- ----- ---- ----- -----
Total Assets.......................... $7,075 $-- $7,075 $ (111) $1,035 $ 7,999
======= ==== ===== ==== ===== =====
LIABILITIES AND SHAREHOLDERS' EQUITY
Current and other liabilities......... $2,018 $-- $2,018 $ (4) $-- $ 2,014
Long-term debt........................ 1,640 1,640 (12) 1,628
Deferred income taxes................. (22) 369 347
Shareholders' equity.................. 3,417 3,417 (73) 666 4,010
------- ---- ----- ---- ----- -----
Total liabilities and shareholders'
equity.............................. $7,075 $-- $7,075 $ (111) $1,035 $ 7,999
======= ==== ===== ==== ===== =====
</TABLE>
A-2
<PAGE> 53
CANADIAN/U.S. GAAP FINANCIAL INFORMATION
CANADIAN NATIONAL RAILWAY COMPANY
NOTES TO STATEMENT OF INCOME AND BALANCE SHEET DATA
1. RECLASSIFICATIONS AND ACCOUNTING CHANGE
In the fourth quarter of 1997, CN adopted the new recommendations of the
Canadian Institute of Chartered Accountants (CICA) for the accounting for income
taxes. The new recommendations require the use of the asset and liability method
to account for income taxes. Canadian GAAP requires the retroactive application
of the adoption of new accounting principles; therefore, the 1996 financial
statements reflect the recognition of previously unrecognized tax benefits. This
change had the effect of increasing 1996 net income and current and other assets
by Cdn$708 million. Prior to 1996, CN did not believe that it was more likely
than not that the then existing tax benefits would be realized and thus no tax
benefits were recognized in the 1995 financial statements. The new method of
accounting for income taxes is similar, in all material respects, to the method
required by U.S. GAAP under Statement of Financial Accounting Standards 109.
In addition, certain figures previously reported for 1995 and 1996 have
been reclassified to conform with the basis of presentation adopted in 1997.
2. CANADIAN/US GAAP ADJUSTMENTS
(a) Canadian GAAP differs from US GAAP principally in the treatment of
track replacement costs, foreign exchange, pension costs, loss or extinguishment
of long-term debt, stock-based compensation, joint ventures and reorganization
of shareholders' equity. The Canadian/US GAAP adjustments (excluding
capitalization of track replacement costs) reflect the effect of the respective
years' results and the cumulative effect of such adjustments to CN's financial
position.
(b) In the fourth quarter of 1997, CN changed its accounting policy for
track replacement costs for US GAAP. The cumulative effect of this accounting
change for prior years amounts to Cdn$589 million and is comprised of
capitalization of track replacement costs, write down for impairment of
properties, accumulated depreciation and income tax effect.
A-3
<PAGE> 54
Manually signed facsimile copies of the Letter of Transmittal will be accepted.
The Letter of Transmittal and certificates for Shares and any other required
documents should be sent to the Depositary at one of the addresses set forth
below:
The Depositary for the Offer is:
HARRIS TRUST COMPANY OF NEW YORK
(For Information (212) 701-7694)
<TABLE>
<S> <C>
BY MAIL: BY HAND/OVERNIGHT DELIVERY:
Wall Street Station Receive Window
P.O. Box 1023 Wall Street Plaza
New York, NY 10268-1023 88 Pine Street, 19th Floor
New York, NY 10005
</TABLE>
BY FACSIMILE:
(212) 701-7636
(212) 701-7637
Confirm by Telephone:
(212) 701-7694
Questions or requests for assistance or additional copies of this Offer to
Purchase and the related Letter of Transmittal may be directed to the
Information Agent or the Dealer Managers at their respective addresses and
telephone numbers set forth below. Stockholders may also contact their broker,
dealer, commercial bank or trust company for assistance concerning the Offer.
The Information Agent for the Offer is:
LOGO
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
CALL TOLL FREE (800) 322-2885
The Dealer Managers for the Offer are:
GOLDMAN, SACHS & CO.
85 Broad Street
New York, New York 10004
(212) 902-1000 (Call Collect)
(800) 323-5678 (Toll Free)
SCHRODER & CO. INC.
The Equitable Center
787 Seventh Avenue
New York, New York 10019-6016
(212) 492-6000 (Call Collect)
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
ILLINOIS CENTRAL CORPORATION
PURSUANT TO THE OFFER TO PURCHASE DATED FEBRUARY 13, 1998
OF
BLACKHAWK MERGER SUB, INC.
A WHOLLY OWNED SUBSIDIARY OF
CANADIAN NATIONAL RAILWAY COMPANY
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, MARCH 13, 1998, UNLESS THE OFFER
IS EXTENDED.
The Depositary for the Offer is:
HARRIS TRUST COMPANY OF NEW YORK
By Mail:
Wall Street Station
P.O. Box 1023
New York, New York 10268-1023
By Hand/Overnight Delivery:
Receive Window
Wall Street Plaza
88 Pine Street, 19th Floor
New York, New York 10005
By Facsimile:
(212) 701-7636
(212) 701-7637
Confirm by Telephone:
(212) 701-7694
------------------------
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE WILL NOT
CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used either if certificates for Shares
(as defined below) are to be forwarded herewith or if delivery of Shares is to
be made by book-entry transfer to the Depositary's account at The Depository
Trust Company ("DTC") or the Philadelphia Depository Trust Company ("PDTC")
(each a "Book-Entry Transfer Facility" and collectively, the "Book-Entry
Transfer Facilities") pursuant to the book-entry transfer procedure described
under "The Tender Offer--Procedure for Tendering Shares" in the Offer to
Purchase (as defined below). DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER
FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES
NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Stockholders whose certificates evidencing Shares (the "Share
Certificates") are not immediately available or who cannot deliver their Share
Certificates and all other documents required hereby to the Depositary prior to
the Expiration Date (as defined under "The Tender Offer--Terms of the Offer;
Proration; Expiration Date" in the Offer to Purchase) or who cannot complete the
procedure for delivery by book entry transfer on a timely basis and who wish to
tender their Shares must do so pursuant to the guaranteed delivery procedure
described under "The Tender Offer--Procedure for Tendering Shares" in the Offer
to Purchase. See Instruction 2.
---------------------
<PAGE> 2
DESCRIPTION OF SHARES TENDERED
<TABLE>
<CAPTION>
=======================================================================================================
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARES TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST IF NECESSARY)
-----------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES NUMBER
CERTIFICATE REPRESENTED BY OF SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C> <C> <C>
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
TOTAL SHARES
- -------------------------------------------------------------------------------------------------------
* Need not be completed by stockholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares represented by any certificates
delivered to the Depositary are being tendered. See Instruction 4.
-----------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution
Check box of applicable Book-Entry Transfer Facility:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Account No. at
Transaction Code No.
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s)
Date of Execution of Notice of Guaranteed Delivery
Name of Institution which Guaranteed Delivery
If delivery is by book-entry transfer, check box of applicable Book-Entry
Transfer Facility:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Account No. at
Transaction Code No.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
<PAGE> 3
Ladies and Gentlemen:
The undersigned hereby tenders to Blackhawk Merger Sub, Inc. ("Purchaser"),
a Delaware corporation and an indirect wholly owned subsidiary of Canadian
National Railway Company ("Parent"), a Canadian corporation, the above-described
shares of Common Stock, par value $0.001 (the shares subject to the Offer, as
well as all other shares of such Common Stock hereinafter referred to as the
"Shares"), of Illinois Central Corporation, a Delaware corporation (the
"Company"), upon the terms and subject to the conditions set forth in
Purchaser's Offer to Purchase dated February 13, 1998 (the "Offer to Purchase")
and this Letter of Transmittal (which together constitute the "Offer"), receipt
of which is hereby acknowledged. Purchaser reserves the right to transfer or
assign, in whole at any time or in part from time to time, to one or more of its
affiliates the right to purchase Shares tendered pursuant to the Offer, but any
such transfer or assignment will not relieve Purchaser of its obligations under
the Offer or prejudice the rights of tendering stockholders to receive payment
for Shares validly tendered and accepted for payment pursuant to the Offer.
Upon the terms of the Offer, subject to, and effective upon, acceptance for
payment of, and payment for, Shares tendered herewith in accordance with the
terms of the Offer, the undersigned hereby sells, assigns and transfers to, or
upon the order of, Purchaser all right, title and interest in and to all Shares
that are being tendered hereby and all dividends, distributions (including,
without limitation, distributions of additional Shares) and rights declared,
paid or distributed in respect of such Shares on or after February 13, 1998
(collectively, "Distributions") and irrevocably constitutes and appoints the
Depositary the true and lawful agent and attorney-in-fact of the undersigned
with respect to such Shares and all Distributions, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to (i) deliver Share Certificates evidencing such
Shares and all Distributions, or transfer ownership of such Shares and all
Distributions on the account books maintained by a Book-Entry Transfer Facility,
together, in either case, with all accompanying evidences of transfer and
authenticity, to or upon the order of Purchaser, (ii) present such Shares and
all Distributions for transfer on the books of the Company and (iii) receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Shares and all Distributions, all in accordance with the terms of the Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer Shares tendered
hereby and all Distributions, that when such Shares are accepted for payment by
Purchaser, Purchaser will acquire good, marketable and unencumbered title
thereto and to all Distributions, free and clear of all liens, restrictions,
charges and encumbrances, and that none of such Shares and Distributions will be
subject to any adverse claim. The undersigned will, upon request, execute any
additional documents deemed by the Depositary or Purchaser to be necessary or
desirable to complete the sale, assignment and transfer of Shares tendered
hereby and all Distributions.
In addition, the undersigned shall remit and transfer promptly to the
Depositary for the account of Purchaser all Distributions in respect of Shares
tendered hereby, accompanied by appropriate documentation of transfer, and
pending such remittance and transfer or appropriate assurance thereof, Purchaser
shall be entitled to all rights and privileges as owner of each such
Distribution and may withhold the entire purchase price of Shares tendered
hereby, or deduct from such purchase price, the amount or value of such
Distribution as determined by Purchaser in its sole discretion.
All authority conferred or agreed to be conferred pursuant to this Letter
of Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
The undersigned hereby irrevocably appoints Michael J. Sabia and Jean
Pierre Ouellet, and each of them, as the attorneys and proxies of the
undersigned, each with full power of substitution, to vote in such manner as
each such attorney and proxy or his substitute shall, in his sole discretion,
<PAGE> 4
deem proper and otherwise act (by written consent or otherwise) with respect to
all Shares tendered hereby which have been accepted for payment by Purchaser
prior to the time of such vote or other action and all Shares and other
securities issued in Distributions in respect of such Shares, which the
undersigned is entitled to vote at any meeting of stockholders of the Company
(whether annual or special and whether or not an adjourned or postponed meeting)
or consent in lieu of any such meeting or otherwise. This proxy and power of
attorney is coupled with an interest in the Shares tendered hereby, is
irrevocable and is granted in consideration of, and is effective upon, the
acceptance for payment of such Shares by Purchaser in accordance with other
terms of the Offer. Such acceptance for payment shall revoke all other proxies
and powers of attorney granted by the undersigned at any time with respect to
such Shares (and all Shares and other securities issued in Distributions in
respect of such Shares), and no subsequent proxy or power of attorney shall be
given or written consent executed (and if given or executed, shall not be
effective) by the undersigned with respect thereto. The undersigned understands
that, in order for Shares to be deemed validly tendered, immediately upon
Purchaser's acceptance of such Shares for payment, Purchaser must be able to
exercise full voting and other rights with respect to such Shares, including,
without limitation, voting at any meeting of the Company's stockholders then
scheduled.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in the Offer to Purchase under "The Tender
Offer--Procedure for Tendering Shares" and in the instructions hereto will
constitute the undersigned's acceptance of the terms and conditions of the
Offer. Purchaser's acceptance of such Shares for payment will constitute a
binding agreement between the undersigned and Purchaser upon the terms and
subject to the conditions of the Offer.
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions", please issue the check for the purchase price of all Shares
purchased, and return all Share Certificates evidencing Shares not purchased or
not tendered in the name(s) of the registered holder(s) appearing above under
"Description of Shares Tendered". Similarly, unless otherwise indicated in the
box entitled "Special Delivery Instructions", please mail the check for the
purchase price of all Shares purchased and all Share Certificates evidencing
Shares not tendered or not purchased (and accompanying documents, as
appropriate) to the address(es) of the registered holder(s) appearing above
under "Description of Shares Tendered". In the event that the box(es) entitled
"Special Payment Instructions" and/or "Special Delivery Instructions" are
completed, please issue the check for the purchase price of all Shares purchased
and return all Share Certificates evidencing Shares not purchased or not
tendered in the name(s) of, and/or mail such check and Share Certificates to,
the person(s) so indicated. Unless otherwise indicated herein in the box
entitled "Special Payment Instructions", please credit any Shares tendered
hereby and delivered by book-entry transfer, but which are not purchased by
crediting the account at the Book-Entry Transfer Facility designated above. The
undersigned recognizes that Purchaser has no obligation, pursuant to the Special
Payment Instructions, to transfer any Shares from the name of the registered
holder(s) thereof if Purchaser does not purchase any Shares tendered hereby.
<PAGE> 5
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares or Share
Certificates evidencing Shares not tendered or not purchased to be issued in the
name of someone other than the undersigned, or if Shares tendered hereby and
delivered by book-entry transfer are to be returned by credit to an account at
one of the Book-Entry Transfer Facilities other than that designated above.
Mail [ ] Check
[ ] Share Certificate(s) to:
Name
(Please Print)
Address
- ------------------------------------------------------
Zip Code
- ------------------------------------------------------
Taxpayer Identification or Social Security Number
(See Substitute W-9 on reverse side)
[ ] Credit Shares delivered by book-entry
transfer and not purchased to the account
set forth below:
Check appropriate box:
[ ] DTC [ ] PDTC
Account number:
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 7)
To be completed ONLY if the check for the purchase price of Shares
purchased or Share Certificates evidencing Shares not tendered or not purchased
are to be mailed to someone other than the undersigned, or to the undersigned at
an address other than that shown under "Description of Shares Tendered".
Mail [ ] Check
[ ] Share Certificate(s) to:
Name
(Please Print)
Address
- ------------------------------------------------------
Zip Code
- ------------------------------------------------------
Taxpayer Identification or Social Security Number
(See Substitute W-9 on reverse side)
<PAGE> 6
SIGN HERE
(Please complete Substitute Form W-9 on reverse)
- ------------------------------------------------------------
Signature(s) of Owner(s)
Dated , 1998
(Must be signed by registered holder(s) exactly as name(s) appear(s) on Share
Certificates or on a security position listing by a person(s) authorized to
become registered holder(s) by certificates and documents transmitted herewith.
If signature is by a trustee, executor, administrator, guardian, attorney-
in-fact, officer of a corporation or other person acting in a fiduciary or
representative capacity, please provide the following information and see
Instruction 5).
Name(s)
(Please Print)
Capacity (full title)
Address
(Include Zip Code)
Area Code and
Telephone Number
(See Substitute W-9 on reverse side)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED; SEE INSTRUCTIONS 1 AND 5)
Name of Firm
Authorized Signature
Dated , 1998.
For use by financial institutions only.
Financial institutions: place medallion
guarantee in space below.
<PAGE> 7
<TABLE>
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
PAYOR: HARRIS TRUST COMPANY OF NEW YORK
- -----------------------------------------------------------------------------------------------------------------------------------
Part 1 -- TAXPAYER IDENTIFICATION NO. -- Social Security Number
FOR ALL ACCOUNTS
Enter your taxpayer identification number OR
in the appropriate box. For most Employer Identification Number
individuals and sole proprietors, this is (If awaiting TIN, write
your social security number. For other "Applied For")
entities, it is your Employer Identifica-
SUBSTITUTE tion Number. If you do not have a number,
FORM W-9 see How to Obtain a TIN in the enclosed
Guidelines.
Note: If the account is in more than one
name, see the chart on page 2 of the
enclosed Guidelinesto determine what
number to enter.
-----------------------------------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
PAYER'S REQUEST FOR Part II -- Exempt from Backup Withholding(SEE ENCLOSED Guidelines)
TAXPAYER IDENTIFICATION NO.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Certification-Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me), and either (a)
I have mailed or delivered an application to receive a taxpayer
identification number to the appropriate Internal Revenue Service Center
or Social Security Administration Office or (b) I intend to mail or
deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number within sixty (60) days, 31% of
all reportable payments made to me thereafter will be withheld until I
provide a number;
(2) I am not subject to backup withholding either because (a) I am exempt
from backup withholding, or (b) I have not been notified by the Internal
Revenue Service ("IRS") that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or (c) the IRS
has notified me that I am no longer subject to backup withholding; and
(3) Any other information provided on this form is true, correct and
complete.
You must cross item (2) above if you have been notified by the IRS that you
are currently subject to backup withholding because of underreporting
interest or dividends on your tax return and you have not received a notice
from the IRS advising you that backup withholding has terminated.
- --------------------------------------------------------------------------------
SIGNATURE DATE 199 ___
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. All signatures on this Letter of Transmittal must
be guaranteed by a firm which is a member of the Medallion Signature Guarantee
Program, or by any other "eligible guarantor institution", as such term is
defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934,
as amended (each of the foregoing being referred to as an "Eligible
Institution"), unless (i) this Letter of Transmittal is signed by the registered
holder(s) of the Shares (which term, for purposes of this document, shall
include any participant in a Book-Entry Transfer Facility whose name appears on
a security position listing as the owner of Shares) tendered hereby and such
holder(s) has (have) completed neither the box entitled "Special Payment
Instructions" nor the box entitled "Special Delivery Instructions" on the
reverse hereof or (ii) such Shares are tendered for the account of an Eligible
Institution. See Instruction 5.
2. Delivery of Letter of Transmittal and Share Certificates. This Letter of
Transmittal is to be used either if Share Certificates are to be forwarded
herewith or if Shares are to be delivered by book-entry transfer pursuant to the
procedure set forth under "The Tender Offer--Procedure for Tendering Shares" in
the Offer to Purchase. Share Certificates evidencing all physically tendered
Shares, or a confirmation of a book-entry transfer into the Depositary's account
at a Book-Entry Transfer Facility of all Shares delivered by book-entry transfer
as well as a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile thereof) and any other documents required by this
Letter of Transmittal, or an Agent's Message in the case of a book-entry
transfer, must be received by the Depositary at one of its addresses set forth
herein prior to the Expiration Date (as defined in "The Tender Offer--Terms of
the Offer; Proration; Expiration Date" in the Offer to Purchase). If Share
Certificates are forwarded to the Depositary in multiple deliveries, a properly
completed and duly executed Letter of Transmittal must accompany each such
delivery. Stockholders whose Share Certificates are not immediately available,
who cannot deliver their Share Certificates and all other required documents to
the Depositary prior to the Expiration Date or who cannot complete the procedure
for delivery by book-entry transfer on a timely basis may tender their Shares
pursuant to the guaranteed delivery procedure described in under "The Tender
Offer--Procedure for Tendering Shares" in the Offer to Purchase. Pursuant to
such procedure: (i) such tender must be made by or through an Eligible
Institution; (ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by Purchaser, must be
received by the Depositary prior to the Expiration Date; and (iii) the Share
Certificates evidencing all physically delivered Shares in proper form for
transfer by delivery, or a confirmation of a book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility of all Shares delivered
by book-entry transfer, in each case together with a Letter of Transmittal (or a
manually signed facsimile thereof), properly completed and duly executed, with
any required signature guarantees, and any other documents required by this
Letter of Transmittal, or an Agent's Message in the case of a book-entry
transfer, must be received by the Depositary within three New York Stock
Exchange, Inc. trading days after the date of execution of such Notice of
Guaranteed Delivery, all as described under "The Tender Offer--Procedure for
Tendering Shares" in the Offer to Purchase.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY
TRANSFER FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER.
SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY.
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. By execution of this Letter of Transmittal
(or a manually signed facsimile hereof), all
<PAGE> 9
tendering stockholders waive any right to receive any notice of the acceptance
of their Shares for payment.
3. Inadequate Space. If the space provided herein under "Description of Shares
Tendered" is inadequate, the Share Certificate numbers, the number of Shares
evidenced by such Share Certificates and the number of Shares tendered should be
listed on a separate schedule and attached hereto.
4. Partial Tenders (not applicable to stockholders who tender by book-entry
transfer). If fewer than all the Shares evidenced by any Share Certificate
delivered to the Depositary herewith are to be tendered hereby, fill in the
number of Shares which are to be tendered in the box entitled "Number of Shares
Tendered". In such cases, new Share Certificate(s) evidencing the remainder of
the Shares that were evidenced by the Share Certificates delivered to the
Depositary herewith will be sent to the person(s) signing this Letter of
Transmittal, unless otherwise provided in the box entitled "Special Delivery
Instructions" on the reverse hereof, as soon as practicable after the expiration
or termination of the Offer. All Shares evidenced by Share Certificates
delivered to the Depositary will be deemed to have been tendered unless
otherwise indicated.
5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If this
Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the Share Certificates evidencing such Shares without alteration,
enlargement or any other change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of such
Shares.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Share Certificates or separate stock
powers are required, unless payment is to be made to, or Share Certificates
evidencing Shares not tendered or not purchased are to be issued in the name of,
a person other than the registered holder(s), in which case, the Share
Certificate(s) evidencing the Shares tendered hereby must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) on such Share Certificate(s).
Signatures on such Share Certificate(s) and stock powers must be guaranteed by
an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signatures on such
Share Certificate(s) and stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Share Certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to Purchaser of such person's authority so to act must be
submitted.
6. Stock Transfer Taxes. Except as otherwise provided in this Instruction 6,
Purchaser will pay all stock transfer taxes with respect to the sale and
transfer of any Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price of any Shares purchased is to be made to, or Share
Certificate(s) evidencing Shares not tendered or not purchased are to be issued
in the name of, a person other than the registered holder(s), the amount of any
stock transfer taxes (whether imposed on the registered holder(s), such other
person or otherwise) payable on account of the transfer to such other person
will be deducted from the purchase price of such Shares purchased, unless
evidence satisfactory to Purchaser of the payment of such taxes, or exemption
therefrom, is submitted.
<PAGE> 10
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE SHARE CERTIFICATES EVIDENCING THE
SHARES TENDERED HEREBY.
7. Special Payment and Delivery Instructions. If a check for the purchase
price of any Shares tendered hereby is to be issued, or Share Certificate(s)
evidencing Shares not tendered or not purchased are to be issued, in the name of
a person other than the person(s) signing this Letter of Transmittal or if such
check or any such Share Certificate is to be sent to someone other than the
person(s) signing this Letter of Transmittal or to the person(s) signing this
Letter of Transmittal but at an address other than that shown in the box
entitled "Description of Shares Tendered" on the reverse hereof, the appropriate
boxes on the reverse of this Letter of Transmittal must be completed.
Stockholders delivering Shares tendered hereby by book-entry transfer may
request that Shares not purchased be credited to such account maintained at a
Book-Entry Transfer Facility as such stockholder may designate in the box
entitled "Special Payment Instructions" on the reverse hereof. If no such
instructions are given, all such Shares not purchased will be returned by
crediting the account at the Book-Entry Transfer Facility designated on the
reverse hereof as the account from which such Shares were delivered.
8. Questions and Requests for Assistance or Additional Copies. Questions and
requests for assistance may be directed to the Information Agent or the Dealer
Managers at their respective addresses or telephone numbers set forth below.
Additional copies of the Offer to Purchase, this Letter of Transmittal and the
Notice of Guaranteed Delivery may be obtained from the Information Agent, the
Dealer Managers or from brokers, dealers, commercial banks or trust companies.
9. Substitute Form W-9. Each tendering stockholder is required to provide the
Depositary with a correct Taxpayer Identification Number ("TIN") on the
Substitute Form W-9 which is provided above, and to certify, under penalty of
perjury, that such number is correct and that such stockholder is not subject to
backup withholding of federal income tax. If a tendering stockholder has been
notified by the Internal Revenue Service that such stockholder is subject to
backup withholding, such stockholder must cross out item (2) of the
Certification box of the Substitute Form W-9, unless such stockholder has since
been notified by the Internal Revenue Service that such stockholder is no longer
subject to backup withholding. Failure to provide the information on the
Substitute Form W-9 may subject the tendering stockholder to 31% federal income
tax withholding on the payment of the purchase price of all Shares purchased
from such stockholder. If the tendering stockholder has not been issued a TIN
and has applied for one or intends to apply for one in the near future, such
stockholder should write "Applied For" in the space provided for the TIN in Part
I of the Substitute Form W-9, and sign and date the Substitute Form W-9. If
"Applied For" is written in Part I and the Depositary is not provided with a TIN
within 60 days, the Depositary will withhold 31% on all payments of the purchase
price to such stockholder until a TIN is provided to the Depositary.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED FACSIMILE
HEREOF) PROPERLY COMPLETED AND DULY EXECUTED (TOGETHER WITH ANY REQUIRED
SIGNATURE GUARANTEES AND SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY
TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A PROPERLY COMPLETED AND DULY
EXECUTED NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR
TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE).
<PAGE> 11
IMPORTANT TAX INFORMATION
Under the federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required by law to provide the Depositary (as payer)
with such stockholder's correct Taxpayer Identification Number ("TIN") on
Substitute Form W-9 below. If such stockholder is an individual, the TIN is such
stockholder's social security number. If the Depositary is not provided with the
correct TIN, the stockholder may be subject to a $50 penalty imposed by the
Internal Revenue Service, and payments that are made to such stockholder with
respect to Shares purchased pursuant to the Offer may be subject to backup
withholding of 31%. If a stockholder makes a false statement that results in no
imposition of backup withholding, and there is no reasonable basis for such
statement, a $500 penalty may also be imposed by the Internal Revenue Service.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such individual must submit a statement, signed under penalties of
perjury, attesting to such individual's exempt status. Forms of such statements
can be obtained from the Depositary. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions. A stockholder should consult his or her advisor as to
such stockholder's qualification for exemption from backup withholding and the
procedure for obtaining such exemption.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained from the Internal Revenue Service, provided
that certain documentation requirements are satisfied.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of such stockholder's correct TIN by
completing the form below certifying that the TIN provided on Substitute Form
W-9 is correct (or that such stockholder is awaiting a TIN), and that (i) such
stockholder has not been notified by the Internal Revenue Service that he is
subject to backup withholding as a result of a failure to report all interest or
dividends or (ii) the Internal Revenue Service has notified such stockholder
that such stockholder is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Shares
tendered hereby. If the Shares are held in more than one name or are not in the
name of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional guidance on
which number to report. If the tendering stockholder has not been issued a TIN
and has applied for a number or intends to apply for a number in the near
future, the stockholder should write "Applied For" in the space provided for the
TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For" is
written in Part I and the Depositary is not provided with a TIN within 60 days,
the Depositary will withhold 31% of all payments of the purchase price to such
stockholder until a TIN is provided to the Depositary.
Stockholders should contact the Information Agent, the Dealer Managers or
their broker, dealer, commercial bank or trust company for assistance concerning
the Offer. Additional copies of the Offer to Purchase, this Letter of
Transmittal and other related materials may also be obtained from the
Information Agent or the Dealer Managers.
<PAGE> 12
The Information Agent for the Offer is:
LOGO
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
CALL TOLL FREE (800) 322-2885
The Dealer Managers for the Offer are:
GOLDMAN, SACHS & CO.
85 Broad Street
New York, New York 10004
(212) 902-1000 (Call Collect)
(800) 323-5678 (Toll Free)
SCHRODER & CO. INC.
The Equitable Center
787 Seventh Avenue
New York, New York 10019-6016
(212) 492-6000 (Call Collect)
February 13, 1998
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
ILLINOIS CENTRAL CORPORATION
PURSUANT TO THE OFFER TO PURCHASE DATED FEBRUARY 13, 1998
OF
BLACKHAWK MERGER SUB, INC.
A WHOLLY OWNED SUBSIDIARY OF
CANADIAN NATIONAL RAILWAY COMPANY
(Not to be used for signature guarantees)
This Notice of Guaranteed Delivery, or one substantially in the form
hereof, must be used to accept the Offer (as defined below) (i) if certificates
("Share Certificates") evidencing shares of Common Stock, par value $0.001 per
share, of Illinois Central Corporation, a Delaware corporation (the "Company"),
are not immediately available, (ii) if Share Certificates and all other required
documents cannot be delivered to Harris Trust Company of New York, as Depositary
(the "Depositary"), prior to the Expiration Date (as defined under "The Tender
Offer--Terms of the Offer; Proration; Expiration Date" in the Offer to Purchase
(as defined below)) or (iii) if the procedure for delivery by book-entry
transfer cannot be completed on a timely basis. This Notice of Guaranteed
Delivery may be delivered by hand or mail or transmitted by facsimile
transmission to the Depositary. See "The Tender Offer--Procedure for Tendering
Shares" in the Offer to Purchase.
The Depositary for the Offer is:
HARRIS TRUST COMPANY OF NEW YORK
By Mail:
Wall Street Station
P.O. Box 1023
New York, New York 10268-1023
By Hand/Overnight Delivery:
Receive Window
Wall Street Plaza
88 Pine Street, 19th Floor
New York, New York 10005
By Facsimile:
(212) 701-7636
(212) 701-7637
Confirm by Telephone:
(212) 701-7694
------------------------
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to Blackhawk Merger Sub, Inc. ("Purchaser"),
a Delaware corporation and an indirect wholly owned subsidiary of Canadian
National Railway Company ("Parent"), a Canadian corporation, upon the terms and
subject to the conditions set forth in the Offer to Purchase dated February 13,
1998 (the "Offer to Purchase") and the related Letter of Transmittal (which
together constitute the "Offer"), receipt of which is hereby acknowledged,
shares of Common Stock, $0.001 par value (the shares subject to the
Offer, as well as all other shares of such Common Stock hereinafter referred to
as the "Shares"), of the Company, pursuant to the guaranteed delivery procedure
set forth under "The Tender Offer--Procedure for Tendering Shares" of the Offer
to Purchase.
<TABLE>
<S> <C>
Certificate Nos. (if available): SIGN HERE
- -------------------------------------------- --------------------------------------------
- -------------------------------------------- (Signature(s) of Holder(s))
Please check one box if Shares will be Dated:
delivered by book-entry transfer: Name(s) of Holder(s):
[ ] The Depository Trust Company --------------------------------------------
[ ] The Philadelphia Depository Company Please type or print
--------------------------------------------
Account No. Address of Company
--------------------------------------------
Zip Code
--------------------------------------------
Area Code and Telephone Number
</TABLE>
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or the National Association of Securities Dealers, Inc., or
a commercial bank or trust company having an office or correspondent in the
United States, guarantees (a) that the above named person(s) "own(s)" the Shares
tendered hereby within the meaning of Rule 14e-4 under the Securities Exchange
Act of 1934, as amended, (b) that such tender of Shares complies with Rule 14e-4
and (c) to deliver to the Depositary the Shares tendered hereby, or a
confirmation of a book-entry transfer into the Depositary's account at the
Book-Entry Transfer Facility, together with a properly completed and duly
executed Letter(s) of Transmittal (or a manually signed facsimile(s) thereof) or
an Agent's Message (as defined in the Offer to Purchase) in the case of a
book-entry delivery and any other required documents, all within three New York
Stock Exchange, Inc. trading days of the date hereof. A "trading day" is any day
on which the New York Stock Exchange, Inc. is open for business.
- ---------------------------------------------------------
Name of Firm
- ---------------------------------------------------------
Address
- ---------------------------------------------------------
Zip Code
- ---------------------------------------------------------
Area Code and Telephone Number
- ---------------------------------------------------------
Authorized Signature
- ---------------------------------------------------------
Title
Name:
Please type or print
Dated:
DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE.
SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE> 1
<TABLE>
<S> <C>
GOLDMAN, SACHS & CO. SCHRODER & CO. INC.
85 Broad Street The Equitable Center
New York, New York 10004 787 Seventh Avenue
(212) 902-1000 (Call Collect) New York, New York 10019-6016
(800) 323-5678 (Toll Free) (212) 492-6000 (Call Collect)
</TABLE>
OFFER TO PURCHASE FOR CASH
46,051,761 SHARES OF COMMON STOCK
OF
ILLINOIS CENTRAL CORPORATION
AT
$39.00 NET PER SHARE
BY
BLACKHAWK MERGER SUB, INC.
A WHOLLY OWNED SUBSIDIARY OF
CANADIAN NATIONAL RAILWAY COMPANY
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, MARCH 13, 1998, UNLESS THE OFFER
IS EXTENDED.
February 13, 1998
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Blackhawk Merger Sub, Inc. ("Purchaser"), a
Delaware corporation and an indirect wholly owned subsidiary of Canadian
National Railway Company ("Parent"), a Canadian corporation, to act as Dealer
Managers in connection with Purchaser's offer to purchase an aggregate of
46,051,761 shares of Common Stock, $0.001 par value (the shares subject to the
Offer, as well as all other shares of such Common Stock hereinafter called the
"Shares"), of Illinois Central Corporation, a Delaware corporation (the
"Company"), at $39.00 per Share, net to the seller in cash, upon the terms and
subject to the conditions set forth in Purchaser's Offer to Purchase, dated
February 13, 1998 (the "Offer to Purchase"), and in the related Letter of
Transmittal (which together constitute the "Offer") enclosed herewith. Please
furnish copies of the enclosed materials to those of your clients for whose
accounts you hold Shares registered in your name or in the name of your nominee.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED IN ACCORDANCE WITH THE TERMS OF THE OFFER PRIOR TO THE EXPIRATION DATE
OF THE OFFER AND NOT WITHDRAWN A NUMBER OF SHARES WHICH, TOGETHER WITH THE
SHARES THEN OWNED BY PARENT, REPRESENTS AT LEAST 50.1% OF THE OUTSTANDING SHARES
ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION") AND (2) THE RECEIPT BY
PARENT, PRIOR TO THE EXPIRATION DATE OF THE OFFER, OF A FAVORABLE INFORMAL
ADVISORY OPINION FROM THE STAFF OF THE UNITED STATES SURFACE TRANSPORTATION
BOARD (THE "STB") TO THE EFFECT THAT THE PROPOSED USE OF THE VOTING TRUST (AS
DEFINED IN THE OFFER TO PURCHASE) WILL PRECLUDE UNLAWFUL CONTROL OF THE COMPANY
BY PARENT.
<PAGE> 2
Enclosed for your information and use are copies of the following
documents:
1. Offer to Purchase, dated February 13, 1998;
2. Letter of Transmittal to be used by holders of Shares in accepting the
Offer and tendering Shares;
3. Notice of Guaranteed Delivery to be used to accept the Offer if the
Shares and all other required documents are not immediately available or
cannot be delivered to Harris Trust Company of New York (the
"Depositary") by the Expiration Date (as defined in the Offer to
Purchase) or if the procedure for book-entry transfer cannot be
completed by the Expiration Date;
4. A printed form of letter which may be sent to your clients for whose
accounts you hold Shares registered in your name or in the name of your
nominee, with space provided for obtaining such clients' instructions
with regard to the Offer;
5. A letter to stockholders of the Company from E. Hunter Harison,
President of the Company, together with a Solicitation/Recommendation
Statement on Schedule 14D-9 filed with the Securities and Exchange
Commission by the Company and mailed to stockholders of the Company,
recommending that the Company's stockholders accept the Offer and tender
their Shares pursuant to the Offer;
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. Return envelope addressed to the Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER, PRORATION PERIOD AND
WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY,
MARCH 13, 1998, UNLESS THE OFFER IS EXTENDED.
In all cases, payment for Shares accepted for payment pursuant to the terms
and subject to the conditions of the Offer (including, if the Offer is extended
or amended, the terms and conditions of any such extension or amendment) will be
made only after timely receipt by the Depositary of certificates evidencing such
Shares (or a confirmation of a book-entry transfer of such Shares into the
Depositary's account at one of the Book-Entry Transfer Facilities (as defined in
the Offer to Purchase)), a Letter of Transmittal (or a manually signed facsimile
thereof) properly completed and duly executed and any other required documents.
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents prior to the expiration
of the Offer, a tender may be effected by following the guaranteed delivery
procedure described under "The Tender Offer--Procedure for Tendering Shares" in
the Offer to Purchase.
None of Purchaser, Parent nor any officer, director, stockholder, agent or
other representative of Purchaser or Parent will pay any fees or commissions to
any broker, dealer or other person (other than to the Dealer Managers, the
Depositary and the Information Agent as described in the Offer) in connection
with the solicitation of tenders of Shares pursuant to the Offer. However,
Purchaser will, upon request, reimburse you for customary mailing and handling
expenses incurred by you in forwarding any of the enclosed materials to your
clients. Purchaser will pay or cause to be paid any stock transfer taxes payable
with respect to the transfer of Shares to it, except as otherwise provided in
Instruction 6 of the Letter of Transmittal.
2
<PAGE> 3
Any inquiries you may have with respect to the Offer should be addressed
to, and additional copies of the enclosed materials may be obtained from,
MacKenzie Partners, Inc. (the "Information Agent") or the undersigned at their
respective addresses and telephone numbers set forth on the back cover page of
the Offer to Purchase and the related Letter of Transmittal.
Very truly yours,
GOLDMAN, SACHS & CO. SCHRODER & CO. INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON AN AGENT OF PARENT, PURCHASER, THE COMPANY, ANY AFFILIATE OF
THE COMPANY, THE DEALER MANAGERS, THE INFORMATION AGENT OR THE DEPOSITARY, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON
BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS
ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN.
3
<PAGE> 1
OFFER TO PURCHASE FOR CASH
46,051,761 SHARES OF COMMON STOCK
OF
ILLINOIS CENTRAL CORPORATION
AT
$39.00 NET PER SHARE
BY
BLACKHAWK MERGER SUB, INC.
A WHOLLY OWNED SUBSIDIARY OF
CANADIAN NATIONAL RAILWAY COMPANY
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, MARCH 13, 1998, UNLESS THE OFFER
IS EXTENDED.
February 13, 1998
To Our Clients:
Enclosed for your consideration are an Offer to Purchase, dated February
13, 1998 (the "Offer to Purchase"), and a related Letter of Transmittal in
connection with the offer by Blackhawk Merger Sub, Inc. ("Purchaser"), a
Delaware corporation and an indirect wholly owned subsidiary of Canadian
National Railway Company ("Parent"), a Canadian corporation, to purchase an
aggregate of 46,051,761 shares of Common Stock, $0.001 par value (the shares
subject to the Offer, as well as all other shares of such Common Stock
hereinafter referred to as the "Shares") of Illinois Central Corporation, a
Delaware corporation (the "Company"), at $39.00 per Share, net to the seller in
cash, upon the terms and subject to the conditions set forth in the Offer to
Purchase and in the related Letter of Transmittal (which together constitute the
"Offer"). We are the holder of record of Shares held by us for your account.
A TENDER OF SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND
PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR
YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR
YOUR ACCOUNT.
We request instructions as to whether you wish to have us tender on your
behalf any or all of the Shares held by us for your account, upon the terms and
subject to the conditions set forth in the Offer.
Your attention is invited to the following:
1. The tender price is $39.00 per Share, net to you in cash, without
interest thereon, upon the terms and subject to the conditions set forth
in the Offer.
2. The Offer is being made for an aggregate of 46,051,761 Shares.
3. The Board of Directors of the Company, by unanimous vote, has approved
the Agreement and Plan of Merger dated as of February 10, 1998 among
Parent, Purchaser and the Company (the "Merger Agreement") and the
transactions contemplated thereby, including the Offer and the Merger,
and has determined that the Offer and the Merger are fair to, and in the
best interests of, the holders of Shares and recommends that the
Company's stockholders accept the Offer and tender their Shares pursuant
to the Offer.
<PAGE> 2
4. THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, MARCH 13, 1998, UNLESS THE
OFFER IS EXTENDED.
5. The Offer is conditioned upon, among other things, (1) there being
validly tendered in accordance with the terms of the Offer prior to the
expiration date of the Offer and not withdrawn a number of Shares which,
together with the Shares then owned by Parent, represents at least 50.1%
of the outstanding Shares on a fully diluted basis (the "Minimum
Condition") and (2) the receipt by Parent, prior to the expiration date
of the Offer, of a favorable informal advisory opinion from the staff of
the United States Surface Transportation Board to the effect that the
proposed use of the Voting Trust (as defined in the Offer to Purchase)
will preclude unlawful control of the Company by Parent.
6. You will not be obligated to pay brokerage fees or commissions or,
except as otherwise provided in Instruction 6 of the Letter of
Transmittal, stock transfer taxes with respect to the purchase of Shares
by Purchaser pursuant to the Offer.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the instruction form contained
in this letter. An envelope in which to return your instructions to us is
enclosed. If you authorize the tender of your Shares, all such Shares will be
tendered unless otherwise specified in your instructions. YOUR INSTRUCTIONS
SHOULD BE FORWARDED TO US AS SOON AS POSSIBLE SO THAT WE WILL HAVE AMPLE TIME TO
PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE
OFFER.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and is being made to all holders of Shares. Purchaser is not aware
of any state where the making of the Offer is prohibited by administrative or
judicial action pursuant to any valid state statute. If Purchaser becomes aware
of any valid state statute prohibiting the making of the Offer or the acceptance
of Shares pursuant thereto, Purchaser will make a good faith effort to comply
with such state statute. If, after such good faith effort, Purchaser cannot
comply with such state statute, the Offer will not be made to (nor will tenders
be accepted from or on behalf of) the holders of Shares in such state. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made on
behalf of Purchaser by Goldman, Sachs & Co. and Schroder & Co. Inc, the Dealer
Managers, or one or more registered brokers or dealers licensed under the laws
of such jurisdiction.
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
46,051,761 SHARES OF COMMON STOCK
OF
ILLINOIS CENTRAL CORPORATION
BY
BLACKHAWK MERGER SUB, INC.
A WHOLLY OWNED SUBSIDIARY OF
CANADIAN NATIONAL RAILWAY COMPANY
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated February 13, 1998, and the related Letter of
Transmittal (which together constitute the "Offer") in connection with the Offer
by Blackhawk Merger Sub, Inc., a Delaware corporation and an indirect wholly
owned subsidiary of Canadian National Railway Company, a Canadian corporation,
to purchase an aggregate of 46,051,761 shares of Common Stock, $0.001 par value
(the shares subject to the Offer, as well as all other shares of Common Stock
hereinafter referred to as the "Shares"), of Illinois Central Corporation, a
Delaware corporation.
This will instruct you to tender the number of Shares indicated below (or,
if no number is indicated below, all Shares) that are held by you for the
account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer to Purchase and the related Letter of Transmittal.
Dated: , 1998
Number of Shares to be Tendered:*
__________ Shares
SIGN HERE
- ------------------------------------------------------
Signature(s)
- ------------------------------------------------------
- ------------------------------------------------------
Please type or print name(s):
- ------------------------------------------------------
- ------------------------------------------------------
Please type or print address(es):
- ------------------------------------------------------
- ------------------------------------------------------
Area Code and Telephone Number(s)
- ------------------------------------------------------
Taxpayer Identification or Social Security Number(s)
- ---------------
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. -- Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e. 00-0000000. The table below will help determine the number
to give the payer.
<TABLE>
<S> <C> <C>
------------------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE SOCIAL SE-
CURITY NUMBER OF --
- --------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if com-
bined funds, any one of
the individual(s)(1)
3. Husband and wife (joint The actual owner of the
account) account or, if joint
funds, either per-
son(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Account in the name of The ward, minor, or
guardian or committee for incompetent person(3)
a designated ward, minor,
or incompetent person
6. a. The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also trus-
tee) The actual owner(1)
b. So-called trust
account that is not a
legal or valid trust
under State law
- --------------------------------------------------------
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION NUMBER
OF --
- --------------------------------------------------------
7. Sole proprietorship ac- The owner(4)
count
8. A valid trust, estate, or The legal entity (Do
pension trust not furnish the identi-
fying number of the
personal representa-
tive or trustee unless
the legal entity itself
is not designated in
the account title.)(5)
9. Corporate account The corporation
10. Religious, charitable, or The organization
educational organization
account or an
association, club or
other tax-exempt
organization
11. Partnership account held The partnership
in the name of the busi-
ness
12. A broker or registered The broker or nominee
nominee
13. Account with the Depart- The public entity
ment of Agriculture in
the name of a public
entity (such as a State
or local government,
school district, or
prison) that receives
agricultural program
payments
</TABLE>
==================================================================
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has a Social Security number, that
person's number must be furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner. If the owner does not have an employer
identification number, furnish the owner's Social Security number.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number or Form W-7. Application
for International Taxpayer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
To complete Substitute Form W-9, if you do not have a taxpayer identification
number, write "Applied For" in the space for the taxpayer identification number
in Part 1, sign and date the Form, and give it to the requester. Generally, you
will then have 60 days to obtain a taxpayer identification number and furnish it
to the requester. If the requester does not receive your taxpayer identification
number within 60 days, backup withholding, if applicable, will begin and will
continue until you furnish your taxpayer identification number to the requester.
PAYEE EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- - A corporation.
- - A financial institution.
- - An organization exempt from tax under section 501(a), or an individual
retirement plan, or a custodial account under section 403(b)(7) if the account
satisfies the requirements of section 401(f)(2).
- - The United States, or any agency or instrumentality thereof.
- - A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- - A foreign government, a political subdivision of a foreign government, or
agency or instrumentality thereof.
- - An international organization or any agency, or instrumentality thereof.
- - A dealer in securities or commodities registered in the U.S., the District of
Columbia or a possession of the U.S.
- - A real estate investment trust.
- - A common trust fund operated by a bank under section 584(a).
- - An exempt charitable remained trust, or a non-exempt trust described in
section 4947(a) (1).
- - An entity registered at all times under the Investment Company Act of 1940.
- - A foreign central bank of issue.
Payment of dividends and patronage dividends not generally subject to backup
withholding include the following:
- - Payment to nonresident aliens subject to withholding under section 1441.
- - Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- - Payments of patronage dividends where the amount received is not paid in
money.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- - Payments of interest on obligations issued by individuals.
NOTE: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and you have
not provided your correct taxpayer identification number to the payer.
- - Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- - Payments described in section 6049(b)(5) to non-resident aliens.
- - Payments on tax-free covenant bonds under section 1451.
- - Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" IN PART II OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments, other than interest, dividends, and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6042, 6044, 6045, 6049, 6050A and 6050N.
PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. The IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividends, and certain other payments to a payee who does not furnish
a taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. -- If you fail to
include a portion of an includible payment for interest, dividends, or patronage
dividends in gross income, such failure will be subject to a penalty of 20% on
any portion of an under-payment attributable to that failure unless it is shown
that you acted with reasonable cause and in good faith.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE> 1
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase, dated
February 13, 1998, and the related Letter of Transmittal, and is being made
to all holders of Shares. The Offer is not being made to (nor will tenders
be accepted from or on behalf of) holders of Shares in any jurisdiction
in which the making of the Offer or acceptance thereof would not be in
compliance with the laws of such jurisdiction. In those
jurisdictions whose laws require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed to be made
on behalf of Purchaser, if at all, only by Goldman, Sachs & Co.
and Schroder & Co. Inc. as dealer managers or one or more
registered brokers or dealers licensed under the laws of, and
representing the stockholders residing in, such
jurisdiction.
NOTICE OF OFFER
TO PURCHASE FOR CASH
46,051,761 SHARES OF COMMON STOCK
OF
ILLINOIS CENTRAL CORPORATION
AT
$39.00 NET PER SHARE
BY
BLACKHAWK MERGER SUB, INC.
A WHOLLY OWNED SUBSIDIARY OF
CANADIAN NATIONAL RAILWAY COMPANY
Blackhawk Merger Sub, Inc. ("Purchaser"), a Delaware corporation and an
indirect wholly owned subsidiary of Canadian National Railway Company
("Parent"), a Canadian corporation, is offering to purchase an aggregate of
46,051,761 shares of Common Stock, $0.001 par value (the shares subject to the
Offer, as well as all other shares of Common Stock hereinafter referred to as
the "Shares"), of Illinois Central Corporation (the "Company"), a Delaware
corporation, at $39.00 per Share, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated February 13,
1998 (the "Offer to Purchase"), and in the related Letter of Transmittal (which
together constitute the "Offer").
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, MARCH 13, 1998, UNLESS THE OFFER IS EXTENDED.
Upon the terms and subject to the conditions of the Offer, if more than
46,051,761 Shares are validly tendered and not withdrawn prior to the Expiration
Date (as defined in the Offer to Purchase), Purchaser will accept for payment
and pay for only 46,051,761 Shares on a pro rata basis (with appropriate
adjustments to avoid purchase of fractional Shares) based on the number of
Shares properly tendered by each stockholder prior to or at the Expiration Date
and not withdrawn. In the event that proration of tendered Shares is required,
because of the difficulty of determining the precise number of Shares properly
tendered and not withdrawn (due in part to the
<PAGE> 2
guaranteed delivery procedures described in Section 3 of the Offer to Purchase),
the Purchaser does not expect that it will be able to announce the final results
of such proration or pay for any Shares until at least seven New York Stock
Exchange, Inc. trading days after the Expiration Date. Preliminary results of
proration will be announced by press release as promptly as practicable after
the Expiration Date. Stockholders may obtain such preliminary information from
the Information Agent and may be able to obtain such information from their
broker.
The purpose of the Offer is for Parent, through Purchaser, to acquire a
majority equity interest in the Company as the first step in a business
combination of Parent and the Company. The Offer is being made pursuant to the
terms of the Agreement and Plan of Merger dated as of February 10, 1998 (the
"Merger Agreement"), which provides that, among other things, following
completion of the Offer and the satisfaction or waiver of certain conditions and
in accordance with the relevant provisions of the General Corporation Law of the
State of Delaware, Purchaser will be merged with and into the Company (the
"Merger"). Following consummation of the Merger, the Company will continue as
the surviving corporation and will become an indirect wholly owned subsidiary of
Parent. As more fully described in Section 13 of the Offer to Purchase, at the
effective time of the Merger (the "Effective Time"), (i) if Purchaser shall have
purchased, pursuant to the Offer, an aggregate of 46,051,761 Shares, each Share
outstanding immediately prior to the Effective Time (other than those Shares
held by the Company as treasury stock or owned by Parent or any subsidiary of
Parent) shall be converted into the right to receive the number of duly
authorized, validly issued, fully paid and nonassessable shares, without par
value, of Parent ("Parent Common Stock") equal to the fraction obtained by
dividing $39.00 by the Parent Average Closing Price (as defined in Section 13 of
the Offer to Purchase); and (ii) if Purchaser shall have purchased an aggregate
of less than 46,051,761 Shares pursuant to the Offer, each Share outstanding
immediately prior to the Effective Time (other than those Shares held by the
Company as treasury stock or owned by Parent or any subsidiary of Parent) shall
be converted into the right to receive: (a) a number of shares of Parent Common
Stock equal to the fraction obtained by dividing $39.00 by the Parent Average
Closing Price, multiplied by the Stock Proration Factor (as defined in Section
13 of the Offer to Purchase); and (b) cash in an amount equal to the product of
1 minus the Stock Proration Factor, multiplied by $39.00.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED IN ACCORDANCE WITH THE TERMS OF THE OFFER PRIOR TO THE EXPIRATION DATE
OF THE OFFER AND NOT WITHDRAWN A NUMBER OF SHARES WHICH REPRESENTS AT LEAST
50.1% OF THE OUTSTANDING SHARES ON A FULLY DILUTED BASIS (THE "MINIMUM
CONDITION") AND (2) THE RECEIPT BY PARENT, PRIOR TO THE EXPIRATION OF THE OFFER,
OF A FAVORABLE INFORMAL ADVISORY OPINION FROM THE STAFF OF THE UNITED STATES
SURFACE TRANSPORTATION BOARD TO THE EFFECT THAT THE PROPOSED USE OF A VOTING
TRUST (AS DEFINED IN THE OFFER TO PURCHASE) WILL PRECLUDE UNLAWFUL CONTROL OF
THE COMPANY BY PARENT.
The Offer is subject to certain other conditions which are described in
Section 16 of the Offer to Purchase. Subject to the terms of the Merger
Agreement, Purchaser reserves the right to waive any or all of the conditions to
the Offer and to extend the Offer if any of the conditions to the Offer are not
satisfied.
THE BOARD OF DIRECTORS OF THE COMPANY, BY UNANIMOUS VOTE, HAS APPROVED THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER
AND THE MERGER, AND HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO,
AND IN THE BEST INTERESTS OF, THE HOLDERS OF SHARES AND RECOMMENDS THAT THE
COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE
OFFER.
Simultaneously with the purchase of Shares pursuant to the Offer, the
Shares purchased will be deposited in the Voting Trust in accordance with the
terms and conditions of a proposed voting trust agreement.
If the Minimum Condition has not been satisfied prior to the scheduled
expiration of the Offer (as such Offer may have been extended), Purchaser shall
have the right at its option to extend the Offer for a period of up to twenty
business days. If, at the scheduled expiration of the Offer (as such date may
have been extended by Purchaser as contemplated by the preceding sentence), the
<PAGE> 3
Minimum Condition has not been satisfied, then (unless the parties otherwise
agree) at Parent's election either (i) Purchaser shall amend the terms of the
Offer by increasing the number of shares sought in the Offer to all of the
outstanding Shares, subject to certain conditions described in Section 13 of the
Offer to Purchase, in which event the Merger Agreement shall be modified as
provided in the Merger Agreement, or (ii) Purchaser shall terminate the Offer
and Purchaser and the Company shall proceed with the Merger in accordance with
the Merger Agreement in which event the terms and conditions of the Merger
Agreement shall be modified as provided in the Merger Agreement.
For purposes of the Offer, Purchaser shall be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not properly
withdrawn as, if and when Purchaser gives oral or written notice to Harris Trust
Company of New York (the "Depositary") of Purchaser's acceptance of such Shares
for payment pursuant to the Offer. Upon the terms and subject to the conditions
of the Offer, payment for Shares accepted for payment pursuant to the Offer will
be made by deposit of the purchase price with the Depositary, which will act as
agent for tendering stockholders for the purpose of receiving payments from
Purchaser and transmitting payments to such tendering stockholders. Under no
circumstances will interest be paid on the consideration paid for Shares
pursuant to the Offer, regardless of any delay in making such payment. In all
cases, payment for Shares tendered and accepted for payment pursuant to the
Offer will be made only after timely receipt by the Depositary of (A) the
certificates evidencing such Shares (the "Share Certificates") or timely
confirmation of book-entry transfer of such Shares into the Depositary's account
at a Book-Entry Transfer Facility (as defined in the Offer to Purchase), (B) the
Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, with any required signature guarantees or, in the case of a book-entry
transfer, an Agent's Message (as defined in the Offer to Purchase) and (C) any
other documents required under the Letter of Transmittal.
Tenders of Shares made pursuant to the Offer are irrevocable except that
such Shares may be withdrawn at any time prior to the Expiration Date and,
unless theretofore accepted for payment by Purchaser pursuant to the Offer, may
also be withdrawn at any time after April 13, 1998. If Purchaser extends the
Offer, is delayed in its acceptance for payment of Shares or is unable to accept
Shares for payment pursuant to the Offer for any reason, then, without prejudice
to Purchaser's rights under the Offer, the Depositary may, nevertheless, on
behalf of Purchaser, retain tendered Shares, and such Shares may not be
withdrawn except to the extent that tendering stockholders are entitled to
withdrawal rights as described in Section 4 of the Offer to Purchase. For a
withdrawal to be effective, a written, telegraphic or facsimile transmission
notice of withdrawal must be timely received by the Depositary at one of its
addresses set forth on the back cover page of the Offer to Purchase. Any such
notice of withdrawal must specify the name of the person who tendered the Shares
to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder of such Shares, if different from that of the person who
tendered such Shares. If Share Certificates evidencing Shares to be withdrawn
have been delivered or otherwise identified to the Depositary, then, prior to
the physical release of such Share Certificates, the serial numbers shown on
such Share Certificates must be submitted to the Depositary and the signature(s)
on the notice of withdrawal must be guaranteed by an Eligible Institution (as
defined in the Offer to Purchase), unless such Shares have been tendered for the
account of an Eligible Institution. If Shares have been tendered pursuant to the
procedure for book-entry transfer as set forth in Section 3 of the Offer to
Purchase, any notice of withdrawal must specify the name and number of the
account at the Book-Entry Transfer Facility to be credited with the withdrawn
Shares. Any Shares properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
retendered at any time prior to the Expiration Date by following one of the
procedures described in Section 3 of the Offer to Purchase. All questions as to
the form and validity (including time of receipt) of any notice of withdrawal
will be determined by Purchaser, in its sole discretion, whose determination
shall be final and binding.
<PAGE> 4
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
Securities Exchange Act of 1934, as amended, is contained in the Offer to
Purchase and is incorporated herein by reference.
The Company has provided Purchaser with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. The Offer to Purchase, the related Letter of Transmittal and other
relevant materials will be mailed to record holders of Shares whose names appear
on the Company's stockholder list and will be furnished, for subsequent
transmittal to brokers, dealers, commercial banks, trust companies, and similar
persons whose names, or the names of whose nominees, appear on the stockholder
list or, if applicable, who are listed as participants in a clearing agency's
security position listing.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
Requests for assistance or copies of the Offer to Purchase and the related
Letter of Transmittal may be directed to the Dealer Managers or the Information
Agent as set forth below, and copies will be furnished promptly at Parent's
expense.
The Information Agent for the Offer is:
MacKenzie Partners, Inc
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
Call Toll Free (800) 322-2885
The Dealer Managers for the Offer are:
GOLDMAN, SACHS & CO.
85 Broad Street
New York, New York 10004
(212) 902-1000 (Call Collect)
(800) 323-5678 (Toll Free)
SCHRODER & CO. INC.
The Equitable Center
787 Seventh Avenue
New York, New York 10019-6016
(212) 492-6000 (Call Collect)
February 13, 1998
<PAGE> 1
FOR IMMEDIATE RELEASE
CANADIAN NATIONAL TO ACQUIRE ILLINOIS CENTRAL
IN STRATEGIC COMBINATION VALUED AT US$3 BILLION(1)
CN Forges Integrated North American Rail Network
MONTREAL AND CHICAGO - February 10, 1998 - Canadian National Railway Company
("CN") (NYSE: CNI, TSE/ME: CNR) and Illinois Central Corporation ("IC") (NYSE:
IC) announced today that the companies have entered into a definitive merger
agreement under which CN will acquire all of the common stock of IC for a
combination of cash and stock valued at US$39.00 per IC share. IC has
approximately 61.4 million shares outstanding, giving the transaction a total
equity value of approximately US$2.4 billion. Upon completion of the merger, CN
will also assume IC's net debt of approximately US$560 million.
Under the terms of the agreement, which has been unanimously approved by both
companies' Boards of Directors, CN will promptly commence a cash tender offer
for approximately 46.1 million shares of IC common stock, representing
approximately 75 percent of the outstanding IC common stock at a price of
US$39.00 per IC share. This represents a premium of 17.8 percent over the
US$33.12 average closing price of IC stock for the 30-calendar day period ended
February 9, 1998. The tender offer is subject to a minimum tender condition of
50.1 percent of the fully diluted IC common shares being validly tendered and
not withdrawn. The tender offer will be subject to receipt of informal STB staff
approval of a required voting trust agreement and the satisfaction of other
customary conditions. The shares purchased in the tender offer will be placed in
the voting trust.
Following completion of the tender offer, CN will consummate a second-step
merger in which the remaining IC shares will be exchanged for cash and CN shares
at a value equal to the same cash price paid in the tender offer, subject to
certain collar arrangements. The CN shares will be issued in the merger with
respect to 25 percent of the IC common stock. The merger is subject to, among
other things, approval by IC shareholders and other customary conditions. After
the merger, all of IC's stock will be held in the voting trust. Neither the
acquisition of the IC shares pursuant to the tender offer nor the merger will be
subject to STB approval of the combination. The transaction will be accounted
for as a purchase and will be taxable to IC shareholders. Final regulatory
approval is expected in early 1999.
(1) Redacted.
1
<PAGE> 2
David McLean will remain Chairman of the Board of Canadian National and Paul M.
Tellier will remain President and Chief Executive Officer of CN. E. Hunter
Harrison, President and Chief Executive Officer of Illinois Central, will become
Chief Operating Officer of CN effective upon completion of the tender offer. Two
IC directors, Gilbert H. Lamphere, Chairman of the Board of Illinois Central,
and Alexander P. Lynch, will join the CN Board of Directors, which will expand
to 15 members. Messrs. Harrison, Lamphere and Lynch have each agreed to make a
significant equity investment in CN. Furthermore, it is anticipated that the IC
employee stock options outstanding at the time of the merger will be converted
into an equal value of CN employee stock options.
Canadian National, Canada's largest and only transcontinental railway, has made
significant strides since it was privatized in 1995 and posted record earnings
in 1996 and 1997. CN's reported revenue rose 15 percent between 1992 and 1997.
Revenue in 1997 was CDN$4.4 billion (US$3.0 billion). CN's operating ratio
improved by approximately 16 points over this period to 78.6 percent (U.S. GAAP)
in 1997. CN reaches the key U.S. cities of Detroit and Chicago. Illinois
Central, with 1997 revenues of approximately $700 million, has operations
extending from the rail hub of Chicago, south to the Gulf of Mexico, and west
through Iowa. Based upon its 62.3 percent operating ratio, IC is the most
efficient U.S. Class I railroad. Operating ratio (operating expenses as a
percentage of revenues) is the freight railroad industry's standard efficiency
measure.
With headquarters in Montreal, Canadian National after the merger will be the
fifth largest railway in North America based on 1997 annual revenues of CDN$5.3
billion (US$3.7 billion). CN will have approximately 18,700 route miles in
Canada and the U.S. and 24,600 employees.
2
<PAGE> 3
The combined strengths of CN and IC include:
- -- A seamless North-South network from all major markets in Canada through
Chicago and Detroit to the Gulf of Mexico, positioning CN along a rapidly
growing trade corridor which had 1997 annual rail revenues of over $5
billion;
- -- The ability to capitalize on the liberalization of trade among Canada, the
United States and Mexico, which is growing annually at double-digit rates;
- -- A broader array of rail service options in key North-South traffic lanes;
- -- Expedited, more reliable and more efficient single line service that will
free up assets, increase rail car availability and reduce switching between
the two railways;
- -- Enhanced competition at all points served by the combined rail network
including new port options for shippers;
- -- Improved opportunities for diverting traffic from highways between
Southwest Ontario, the Midwest and beyond by improving CN's intermodal
network;
- -- Reduced reliance on truck-laden interstate highways; and
- -- Integration of the best safety practices of both companies throughout the
Canadian and U.S. transportation systems.
"Employees will benefit from being part of a stronger company in a consolidating
industry. We are delighted to welcome IC's talented employees into the CN
family. We look forward to having Hunter Harrison join CN as soon as possible,"
concluded Mr. Tellier.
It is anticipated that the combined company's operating efficiency will improve
as a result of:
- -- Precision train schedules which will increase yard and line capacity;
- -- Lower car cycle times, which will reduce rolling stock requirements and
increase car availability; and
- -- Savings from improved asset utilization.
3
<PAGE> 4
Mr. Harrison added, "Our management teams share a similar philosophy for growth,
customer service and the bottom line. In fact, over the last several years, CN
and IC have already worked successfully together to improve service. This
head-start will enable the combined company to quickly realize additional
service improvements.
"The management of the combined railroad is committed to keeping in place
significant levels of employee share ownership and incentive plans based on
industry-leading service and efficiency. We believe this will help keep the
focus on exceptional performance long after the immediate benefits of combining
have been achieved," added Mr. Harrison.
Mr. Tellier concluded, "We are delivering on CN's promised turnaround strategy
and focusing on our customers, shareholders and employees. CN is now positioned
to thrive in the North American railroad industry of the 21 st century."
The number of shares to be received per IC share in the second step merger will
be equal to $39.00 divided by the average closing price of the CN common stock
on the NYSE for a 20-day trading period ending two business days prior to the
effective date of the merger, provided that, for purposes of the calculation,
such average price will not be greater than $64.50 or less than $43.00 (the
collar).
Goldman, Sachs & Co. and Schroders plc acted as financial advisors to CN. The
Beacon Group acted as financial advisor to IC and Lehman Brothers Inc. provided
a fairness opinion to IC. Goldman Sachs Credit Partners L.P. and Bank of
Montreal have fully underwritten and will act as Arrangers of US$1.8 billion of
senior credit facilities to support the transaction. Davis Polk & Wardwell acted
as legal advisor to CN and Harkins Cunningham provided regulatory counsel to CN.
Simpson Thacher & Bartlett acted as legal advisor to IC and Oppenheimer Wolff &
Donnelly provided regulatory counsel to IC.
Illinois Central Corporation is a holding company whose principal subsidiaries
are the Illinois Central (ICRR), which operates a 2,600-mile freight railroad
from Chicago south to the Gulf of Mexico, and the Chicago Central (CCP), which
operates an 850-mile system from Chicago west through Iowa. IC was incorporated
in 1851 and its efficient North-South configuration is known as the "Main Line
of Mid-America."
Canadian National is Canada's largest and North America's sixth largest freight
railroad. CN's network serves all of Canada, including the key ports of
Vancouver, Montreal, and Halifax, as well as Chicago and Detroit, with
connections to all points in North America. In 1992, the Company launched a
revitalization plan, investing in the industry's most advanced management
information system and opening the St. Clair Tunnel, which established the
fastest route between Eastern Canada and the U.S. heartland. Since privatization
in 1995, CN has delivered steadily improving financial performance and customer
service since its initial public offering.
For background information and maps concerning this transaction, additional
information about CN and web links to the IC, visit the World Wide Web at
www.cn.ca.
4
<PAGE> 5
This press release contains forward-looking statements regarding future events
and the future performance of CN that involve risks and uncertainties that could
cause actual results to differ materially. Those risks and uncertainties
include, but are not limited to, customer demand, industry competition and
regulatory developments, natural events such as severe weather, floods and
earthquakes, the effects of adverse economic conditions affecting the Company's
shippers, changes in fuel prices, and the ultimate outcome of shipper claims,
environmental investigations or proceedings and other types of claims and
litigations. We refer you to the documents that CN files from time to time with
the Securities and Exchange Commission, such as the Company's Form 10-K, Form
10-Q, and Form 8-K reports, which contain additional important factors that
could cause its results to differ from its current expectations and the
forward-looking statements contained in this press release.
# # #
For Canadian National: For Illinois Central:
Investors Media Ann Thoma
Robert Noorigian Mark Hallman (312) 755-7591
(514) 399-0052 (514) 399-6630
After 2/11: (416) 217-6390
Joele Frank / Judy Wilkinson George Sard / Judy Brennan
Abernathy MacGregor Frank Sard Verbinnen & Co.
(212) 371-5999 (212) 687-8080
5
<PAGE> 1
CANADIAN NATIONAL COMMENCES US$39 PER SHARE TENDER OFFER
FOR 75% OF ILLINOIS CENTRAL SHARES
MONTREAL-February 13, 1998 - Canadian National Railway Company ("CN")
(NYSE: CNI, TSE/ME: CNR) announced today that it has commenced a cash tender
offer for 46,051,761 shares of Illinois Central Corporation ("IC") (NYSE: IC)
common stock, representing approximately 75 percent of the outstanding IC common
stock, at a price of US$39.00 per IC share. The tender offer is scheduled to
expire at midnight, New York City time, on Friday, March 13, 1998, unless
extended.
The tender offer is subject to a minimum tender condition of 50.1 percent
of the fully diluted IC common shares being validly tendered and not withdrawn.
The tender offer will be subject to receipt of informal United States Surface
Transportation Board (STB) staff approval of a required voting trust agreement
and the satisfaction of other customary conditions. The shares purchased in the
tender offer will be placed in the voting trust. The acquisition of the IC
shares pursuant to the tender offer will not be subject to STB approval of the
combination. The complete terms and conditions of the tender offer are set forth
in the offering documents being filed today with the United States Securities
and Exchange Commission.
Following completion of the tender offer, CN will consummate a second-step
merger in which the remaining IC shares will be exchanged for cash and CN shares
with a value equal to the same cash price paid in the tender offer, subject to
certain collar arrangements. The CN shares will be issued in the merger with
respect to 25 percent of the IC common stock.
As previously announced, CN and IC have entered into a definitive merger
agreement under which CN will acquire all of the common stock of IC for a
combination of cash and stock valued at US$39.00 per IC share. IC has
approximately 61.4 million shares outstanding, giving the transaction a total
equity value of approximately US$2.4 billion.
Goldman, Sachs & Co. and Schroder and Co. Inc. are acting as Dealer
Managers for the offer and MacKenzie Partners, Inc. is acting as Information
Agent.
# # #
Investors Media Abernathy MacGregor Frank
Robert Noorigian Mark Hallman Joel Frank / Judy Wilkinson
(514) 399-0052 (416) 217-6390 (212) 371-5999
<PAGE> 1
EXECUTION
GOLDMAN SACHS CANADA GOLDMAN SACHS BANK OF MONTREAL
CREDIT PARTNERS CO. CREDIT PARTNERS L.P. 129, RUE ST-JACQUES
SUITE 1201 85 BROAD STREET 12TH FLOOR
150 KING STREET W. NEW YORK, NEW YORK MONTREAL, QUEBEC
TORONTO, ONTARIO 10004 H2Y 1L6
CANADA M5H IJ9
PERSONAL & CONFIDENTIAL
February 9, 1998
Canadian National Railway Company
935 de La Gauchetiere West, 3rd Floor
Montreal, Quebec
H3B 2M9
Attention: Michael J. Sabia
Executive Vice President and Chief Financial Officer
Re: $1.8 Billion Senior Credit Facilities
Ladies and Gentlemen:
You have advised us that Canadian National Railway Company (the ``Company'')
intends to acquire (the ``Acquisition'') the outstanding capital stock of
Illinois Central Corporation, a Delaware corporation (``Target''), through a
tender offer (the ``Tender Offer'') by Company Merger Sub, Inc., a newly
formed, wholly-owned Subsidiary (``Merger Sub'') of the Company, for up to 75%
of the shares of Target (the ``Shares''), followed by a merger of Merger Sub
with and into Target (the ``Merger'') in which Target will be the surviving
corporation and in which any Shares not purchased in the Tender Offer will be
cancelled in exchange for cash and/or stock consideration. We understand that
the Tender Offer will be conditioned on, among other things, the tender and
purchase of at least 50.1% of the Shares (the ``Minimum Shares'') on a fully
diluted basis and that a merger agreement (the ``Merger Agreement'') will be
entered into between the Company and Target providing for the Merger. Upon the
consummation of the Merger, Target will be a wholly-owned subsidiary of the
Company (subject to a voting trust arrangement established to comply with
applicable law).
You have also advised us that you propose to finance the cash consideration to
be paid in connection with the Acquisition and related fees and expenses, to
refinance certain existing indebtedness and to finance the Company's ongoing
working capital and general corporate requirements with senior credit facilities
of up to US$1.8 billion (the ``Senior Facilities''), together with other
available cash at the Company.
NY1-568162 EXECUTION
<PAGE> 2
Canadian National Railway Company
February 9, 1998
Page 2
Subject to the terms and conditions contained in this letter and the attached
Annex A and Annex B (collectively, the ``Commitment Letter''), Goldman Sachs
Canada Credit Partners Co. (``GSCCP'') and Goldman Sachs Credit Partners L.P.
(``GSCP'') are pleased to confirm their commitment to provide 50% of the entire
$1.8 billion of Senior Facilities, and Bank of Montreal (``BMO''; together with
GSCP and GSCCP, the ``Lead Lenders'') is pleased to confirm its commitment to
provide 50% of the entire $1.8 billion of Senior Facilities. GSCP is pleased to
confirm its commitment to act as Advisor and Syndication Agent and as an
Arranger in connection with the Senior Facilities. BMO is pleased to confirm
its commitment to act as Administrative Agent and as an Arranger in connection
with the Senior Facilities. Co-Documentation Agents will be determined by the
Company in consultation with the Lead Lenders. Our agreement with respect to
certain fees payable to the Lead Lenders and certain other matters is set forth
in a separate letter (the ``Fee Letter'') of even date herewith.
Each Lead Lender's commitment is subject, in its discretion, to the following
conditions: (i) there shall not have been, since September 30, 1997, any
material adverse change in or effect on, either individually or in the
aggregate, the condition, operations, properties, business or results of
operations of the Company and its subsidiaries, taken as a whole, which
adversely affects or could reasonably be expected to adversely affect the
ability of the Company and its subsidiaries, taken as a whole, to perform any of
their obligations under the Senior Facilities, and (ii) there shall not have
been, since September 30, 1997, any material adverse change in or effect on,
either individually or in the aggregate, the condition, operations, properties,
business or results of operations of Target and its subsidiaries, taken as a
whole, which adversely affects or could reasonably be expected to adversely
affect the ability of Target and its subsidiaries, taken as a whole, to perform
any of their obligations under the Senior Facilities. Each Lead Lender's
commitment is also subject, in its discretion, to the satisfactory negotiation,
execution and delivery of appropriate loan documents relating to the Senior
Facilities, including, without limitation, a credit agreement, guaranties,
opinions of counsel and other related definitive documents (collectively, the
``Loan Documents'') to be based upon and substantially consistent with the terms
set forth in this Commitment Letter.
In the event that information, conditions or events come to our attention after
the date hereof that (i) relate to the Company or Target or their respective
subsidiaries, (ii) are inconsistent with the written information previously
disclosed by you to the Lead Lenders in connection with the Senior Facilities
and (iii) would reasonably be expected to result in a material adverse change in
or effect on, either individually or in the aggregate, the condition,
operations, properties, business or results of operations of the Company, Target
and their respective subsidiaries, taken as a whole, which change or effect
adversely affects or could reasonably be expected to adversely affect the
ability of the Company, Target and their respective subsidiaries, taken as a
whole, to perform any of their obligations under the Senior Facilities, or in
the event any of the conditions set forth in the Loan Documents are not
satisfied, we may, in our sole discretion, suggest alternative financing amounts
or structures that ensure adequate protection for the Lead Lenders and the
Lenders (as defined in the attached Annex B) or decline to participate in the
proposed financing.
NY1-568162 EXECUTION
<PAGE> 3
Canadian National Railway Company
February 9, 1998
Page 3
The terms of this Commitment Letter are intended as an outline of certain of the
material terms of the Senior Facilities, but do not include all of the terms,
conditions, covenants, representations, warranties, default clauses and other
provisions that will be contained in the Loan Documents. The Loan Documents
shall include, in addition, provisions that are customary or typical for
financings of this type and other provisions that the Lead Lenders may
reasonably determine to be appropriate in the context of the proposed
transactions.
The Lead Lenders intend and reserve the right to syndicate the Senior Facilities
to the Lenders. The Lead Lenders will select the Lenders in consultation with
the Company. The Lead Lenders will lead the syndication of the Senior
Facilities, including determining the timing of all offers to potential Lenders,
the acceptance of commitments, the amounts offered, allocations of final
commitments, any titles of agent or similar designations awarded to Lenders
(other than the titles of Documentation Agent and Co-Documentation Agent, which
will be determined by the Company in consultation with the Lead Lenders) and the
compensation provided to each Lender from the amounts to be paid to the Lead
Lenders pursuant to the terms of this Commitment Letter and the Fee Letter.
You agree to cooperate and to use commercially reasonable efforts to cause
Target to cooperate with the Lead Lenders in connection with (i) the preparation
of an information package regarding the business and operations and prospects of
each of the Company and Target and their respective subsidiaries, such
cooperation to include, without limitation, the delivery of all information
prepared by or on behalf of the Company, Target and their respective
subsidiaries and relating to the transactions contemplated hereunder that is
deemed reasonably necessary by the Lead Lenders to complete the syndication of
the Senior Facilities, (ii) the presentation of such information package in
meetings and other communications with prospective Lenders in connection with
the syndication of the Senior Facilities and (iii) facilitating assignments of
the Senior Facilities to additional Lenders. You acknowledge that the Lead
Lenders will be using and relying upon the information contained in such
information package and presentation without independent verification thereof.
In addition, you represent and covenant that, to your best knowledge (i) all
information, other than the Projections (as defined below) provided by you to
the Lenders in connection with the transactions contemplated hereunder, taken as
a whole, is and will be complete and correct in all material respects and does
not and will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements contained therein not
misleading as of the date provided by you and (ii) all financial projections
concerning the Company or the Target provided by you to the Lenders in
connection with the transaction contemplated hereunder (the ``Projections'')
have been or will be prepared in good faith based upon reasonable assumptions.
NY1-568162 EXECUTION
<PAGE> 4
Canadian National Railway Company
February 9, 1998
Page 4
You agree to the provisions with respect to our indemnity and other matters set
forth in Annex A.
You also agree to reimburse us periodically for our reasonable out-of-pocket
expenses, including reasonable and customary syndication costs and expenses and
the reasonable fees and disbursements of our attorneys and any other consultants
or advisors that we retain, plus any sales, use or similar taxes (including
additions to such taxes, if any) arising in connection with any matter referred
to in this Commitment Letter or the Fee Letter (in each case, whether incurred
before or after the date hereof and whether or not the Senior Facilities are
funded or the Acquisition is consummated).
Please note that this Commitment Letter, the Fee Letter and any written or oral
advice provided by any of the Lead Lenders in connection with this arrangement
is exclusively for the information of the Company and its attorneys and advisors
and may not be disclosed to any third party or circulated or referred to
publicly without our prior written consent, except that (x) the Commitment
Letter and the Fee Letter, any of the terms thereof and any such advice may be
disclosed as, and solely to the extent, required by law, (y) the Commitment
Letter and, in the case of clause (2) of this clause (x), the Fee Letter may be
disclosed (1) to Target and its advisors in connection with the Acquisition so
long as Target and its advisors agree to keep the Commitment Letter and the
terms thereof confidential and (2) to your advisors and (z) after your
acceptance of this letter and the execution by the Company and Target of the
Merger Agreement, you or the Target may make public disclosure of the existence,
amount and other material terms (excluding, except to the extent required by
law, the terms of any fees and other matters set forth in the Fee Letter) and
conditions of our commitment hereunder.
As you know, each of the Lead Lenders and their respective affiliates may from
time to time effect transactions, for their respective accounts or the accounts
of customers, and hold positions in loans or options on loans of the Company,
Target and other companies that may be the subject of this arrangement. In
addition, Goldman, Sachs & Co. is a full service securities firm and as such may
from time to time effect transactions, for its own account or the account of
customers, and hold positions in securities or options on securities of the
Company, Target and other companies that may be the subject of this arrangement.
In addition, the Lead Lenders may employ the services of their respective
affiliates in providing certain services hereunder (including assigning certain
of such Lead Lender's obligations hereunder to its affiliates) and may exchange
with such affiliates information concerning the Company, Target and other
companies that may be the subject of this arrangement, and such affiliates shall
be entitled to the benefits afforded to the Lead Lenders hereunder.
With respect to the transactions contemplated hereby, each of GSCP and its
affiliates and BMO acknowledges that it has separately entered into
confidentiality agreements with you and agree to be bound by the respective
terms of such agreements.
Each Lead Lender's commitment hereunder shall terminate (i) on February 13,
1998, unless the Merger Agreement shall have been entered into on or prior to
such date, or (ii) on March 31, 1998, unless the closing of the Senior
Facilities, on the terms and subject to the conditions contained herein, shall
have been consummated on or prior to such date.
[Balance of page intentionally left blank]
NY1-568162 EXECUTION
<PAGE> 5
Canadian National Railway Company
February 9, 1998
Page 5
Please confirm that the foregoing is in accordance with your understanding by
signing and returning to GSCP, on behalf of the Lead Lenders, a copy of this
Commitment Letter and the Fee Letter, on or before the close of business on
February 9, 1998, whereupon this Commitment Letter and the Fee Letter shall
become binding agreements among us. If not signed and returned as described in
the preceding sentence by such date, this offer will terminate on such date. We
look forward to working with you on this assignment.
Very truly yours,
GOLDMAN SACHS CANADA CREDIT
PARTNERS CO.
By:____________________________________________________
Authorized Signatory
GOLDMAN SACHS CREDIT PARTNERS L.P.
By:_____________________________________________________
Authorized Signatory
BANK OF MONTREAL
By:_____________________________________________________
Authorized Signing Officer
ACCEPTED AS OF THE DATE ABOVE:
CANADIAN NATIONAL RAILWAY COMPANY
By:___________________________________________
Name:
Title:
NY1-568162 EXECUTION
<PAGE> 6
ANNEX A
In the event that any or all of the Lead Lenders become involved in any capacity
in any action, proceeding or investigation brought by or against any person,
including, without limitation, stockholders of the Company or Target, in
connection with or as a result of either this arrangement or any matter referred
to in this Commitment Letter or the Fee Letter (together, the ``Letters''), the
Company periodically will reimburse such Lead Lender or Lenders, as the case may
be, for its reasonable legal and other expenses (including the cost of any
investigation and preparation) incurred in connection therewith. The Company
also will indemnify and hold each Lead Lender harmless against any and all
losses, claims, damages or liabilities to any such person in connection with or
as a result of either this arrangement or any matter referred to in the Letters,
except to the extent that any such loss, claim, damage or liability results from
the gross negligence or bad faith of such Lead Lender in performing the services
that are the subject of the Letters. If for any reason the foregoing
indemnification is unavailable to any Lead Lender, or insufficient to hold it
harmless, then the Company shall contribute to the amount paid or payable by
such Lead Lender as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect the relative economic interests of the
Company and its stockholders on the one hand and such Lead Lender on the other
hand, in the matters contemplated by the Letters as well as the relative fault
of the Company and such Lead Lender with respect to such loss, claim, damage or
liability and any other relevant equitable considerations. The reimbursement,
indemnity and contribution obligations of the Company under this paragraph shall
be in addition to any liability which the Company may otherwise have, shall
extend upon the same terms and conditions to any affiliate of each Lead Lender,
and the partners, directors, agents, employees and controlling persons (if any),
as the case may be, of each Lead Lender, and any such affiliate, and shall be
binding upon and inure to the benefit of any successors, assigns, heirs and
personal representatives of the Company, each Lead Lender, any such affiliate
and any such person. The Company also agrees that none of the Lead Lenders or
any of their respective affiliates, partners, directors, agents, employees or
controlling persons shall have any liability to the Company, any person
asserting claims on behalf of or in right of the Company or any other person in
connection with or as a result of either this arrangement or any matter referred
to in the Letters except to the extent that any losses, claims, damages,
liabilities or expenses incurred by the Company result from the gross negligence
or bad faith of such Lead Lender in performing the services that are the subject
of the Letters. Prior to entering into any agreement or arrangement with
respect to, or effecting, any proposed sale, exchange, dividend or other
distribution or liquidation of all or a significant portion of its assets in one
or a series of transactions or any significant recapitalization or
reclassification of its outstanding securities that does not directly or
indirectly provide for the assumption of the obligations of the Company set
forth in this Annex A, the Company will notify each Lead Lender in writing
thereof (if not so previously notified) and, if requested by the Lead Lenders,
shall arrange in connection therewith alternative means of providing for the
obligations of the Company set forth in this paragraph, including the assumption
of such obligations by another party, insurance, surety bonds or the creation of
an escrow, in each case in an amount and upon terms and conditions satisfactory
to the Lead Lenders. Any right to trial by jury with respect to any action or
proceeding arising in connection with or as a result of either this arrangement
or any matter referred to in the Letters is hereby waived by the parties hereto.
The Company agrees that any suit or proceeding arising out of either this
arrangement or any matter referred to in the Letters may be brought in the U.S.
District Court for the Southern District of New York or, if that court does not
have subject matter jurisdiction, in any state court located in the City of New
York, and the Company agrees to submit to the jurisdiction of, and to venue in,
such courts. The provisions of this Annex A shall survive any termination of
the arrangement provided by the Letters, and this Commitment Letter shall be
governed by and construed in accordance with the laws of the State of New York
without regard to principles of conflicts of laws.
NY1-568162 Annex A-1 EXECUTION
<PAGE> 7
ANNEX B
Summary of Terms and Conditions of the Senior Facilities
This Summary of Terms and Conditions outlines certain terms of the Senior
Facilities referred to in the Commitment Letter, of which this Annex B is a
part. Certain capitalized terms used herein are defined in the Commitment
Letter and shall have the same meaning when used herein.
Borrowers: Canadian National Railway Company (the ``Company'') with
respect to 50% of each of the Senior Facilities, and Grand
Trunk Corporation or another U.S. subsidiary of the Company
(``U.S. Borrower''; each of the Company and U.S. Borrower is
referred to herein as a ``Borrower'' and collectively as the
``Borrowers'') with respect to the remaining 50% of each of
the Senior Facilities; provided, however, that the
percentages of the Senior Facilities to be borrowed by each
Borrower may be reallocated by the Lead Lenders with the
consent of the Company.
Guarantors: Amounts borrowed under Senior Facilities by each Borrower
shall be guaranteed by the other Borrower, and each of the
Company's material subsidiaries (i.e., subsidiaries with a
tangible net worth of 2% or more of the consolidated
tangible net worth of the Company and its subsidiaries),
whether now existing or hereafter formed, shall guaranty
(collectively, such guarantees are referred to herein as the
``Guaranties'') all obligations under the Senior Facilities;
provided that the Target and its subsidiaries shall not be
obligated to provide Guaranties until permitted to do so
under applicable law.
Arranger, Advisor Goldman Sachs Credit Partners L.P. and/or its designated
and Syndication affiliates.
Agent:
Arranger and Bank of Montreal (``BMO'').
Administrative
Agent:
NY1-568162 Annex B-1 EXECUTION
<PAGE> 8
Lenders: The Lead Lenders and/or other banks and financial
institutions (the ``Lenders'') selected by the Lead Lenders
in consultation with, and with the consent of, the Company,
such consent not to be unrea- sonably withheld; provided
that the Lenders shall be banks or financial institutions
the payments of interest and fees to which are not subject
to withholding taxes in Canada or the U.S., as the case may
be.
Amount of Senior US$1.8 billion senior loan (the ``Senior Facilities'')
Facilities: to include:
(i) US$800 million senior term loans (the ``Term Loan'');
(ii) US$1 billion senior revolving credit facility
(the ``Revolving Facility'').
At the option of the Company, all or any portion of the
Revolving Facility available to the Company may be funded
in Canadian Dollars.
Availability: Term Loan: One drawing may be made under the Term Loan
on the Closing Date.
Revolving Facility: Amounts available under the Revolving
Facility may be borrowed on and after the Closing Date until
the maturity date of the Revolving Facility.
Purpose/Use of Term Loan: To finance the Acquisition, to refinance
Proceeds: certain existing indebtedness and to pay fees and
expenses associated therewith.
Revolving Facility: To finance the Acquisition, to refinance
certain existing indebtedness and to pay fees and expenses
associated therewith, and for the working capital and general
corporate needs (including, without limitation, commercial
paper ``backstop'') of the Borrowers and their respective
subsidiaries.
Maturity: Term Loan: 1 year from the Closing Date
Revolving Facility: 5 years from the Closing Date
NY1-168162 Annex B-2 EXECUTION
<PAGE> 9
Closing Date: The date on or before March 31, 1998 on which the initial
borrowings under the Senior Facilities are made.
Amortization: None.
Letters of At the Borrowers' option, up to US$200 million of the
Credit: Revolving Facility (consisting of up to US$100 million
(whether such letters of credit are denominated in U.S. or
Canadian Dollars) under the portion of the Revolving
Facility available to the Company and up to US$100 million
under the portion of the Revolving Facility available to
the U.S. Borrower) will be made available for the issuance
of letters of credit (``Letters of Credit'').
Interest Rate: All loans outstanding under the Senior Facilities shall
bear interest, at the Borrowers' option, as follows:
With respect to the Term Loan:
A. at the Base Rate; or
B. at the Eurodollar Rate plus the Applicable
Margin per annum.
With respect to loans outstanding under the Revolving
Facility:
A. at the Base Rate;
B. at the Eurodollar Rate plus the Applicable
Margin per annum; or
C. in the case of loans that are funded in Canadian
Dollars, at the Canadian Bankers Acceptance Rate
plus the Applicable Margin per annum.
The Applicable Margin (and the Facility Fee, as described
below) shall be determined based upon the Company's long
term senior unsecured debt ratings from time to time as
established by Standard & Poor's Corporation (the ``S&P
Rating'') and Moody's Investors Service, Inc.
(the ``Moody's Rating'') as set forth below:
NY1-168162 Annex B-3 EXECUTION
<PAGE> 10
<TABLE>
<CAPTION>
Level Rating Applicable Facility
Margin Fee
<S> <C> <C> <C> <C>
1 A- or A3 or higher .195% .080%
2 BBB+ or Baa1 .250% .100%
3 BBB or Baa2 .275% .125%
4 BBB- or Baa3 .300% .150%
5 BB+ or Ba1 .475% .200%
6 BB or Ba2 or lower .675% .250%
</TABLE>
; provided that, at any time more than 50% of the Senior
Facilities have been drawn, the A pplicable Margin, as
determined above, shall be increa sed by .05%.
With respect to the determination of the Applicable Margin
(and the Facility Fee) pursuant to the S&P Rating and Moody's
Rating set forth above, if the S&P Rating and Moody's Rating
are not in the same Level, then (x) in the event that there
is no more than one level of difference between the Ratings,
the level shall be the higher of the S&P Rating and the
Moody's Rating and (y) in the event there is more than one
Level of difference between the S&P Rating and the Moody's
Rating, the Applicable Margin and the Facility Fee shall be
the average of the Applicable Margins and Facility Fees,
respectively, based upon the two Levels.
With respect to any loans made under the Revolving Facility
after the Closing Date, a competitive bid rate pricing option
shall be made available under customary terms and conditions.
For so long as any of the Senior Facilities are outstanding,
the Borrowers shall pay to the Administrative Agent for the
account of each Lender quarterly in arrears a Facility Fee
(determined on the basis of the applicable Level as set forth
above) calculated on each Lender's pro rata share of the
outstanding amount of the Senior Facilities and any unfunded
commitments thereunder in effect from time to time. The
Facility Fee shall accrue from the Closing Date.
As used herein, (x) the terms ``Base Rate'', ``Canadian
Bankers Acceptance Rate'' and ``Eurodollar Rate'' shall have
the meanings that are customary and appropriate for
financings of this type. Interest on any overdue amounts
under the Senior Facilities shall accrue at a rate equal to
the Base Rate plus an additional two percentage points
(2.00%) per annum and shall be payable on demand.
NY1-168162 Annex B-4 EXECUTION
<PAGE> 11
Interest Monthly for loans bearing interest with reference to the Base
Payments: Rate; on the last day of selected interest periods (which
shall be one, two, three and six months; except that, prior to
the earlier of 60 days after the Closing Date and completion
of primary syndication of the Senior Facilities, only interest
periods of one month may be selected) for loans bearing
interest with reference to the Eurodollar Rate (and at the end
of every three months, in the case of interest periods of
longer than three months); and upon prepayment, in each case
payable in arrears and computed on the basis of a 360-day year
with respect to loans bearing interest at a rate determined by
reference to the Eurodollar Rate and a 365-day year with
respect to loans bearing interest at a rate determined by
reference to the Base Rate or the Canadian Bankers Acceptance
Rate.
Letter of The fronting fee payable to BMO, as the issuing Lender, and the
Credit Fees: other fees payable by the Borrowers with respect to each Letter
of Credit shall be specified in the Loan Documents.
Underwriting As specified in the separate Fee Letter dated as of the date
Fees: hereof.
Voluntary The commitments under the Revolving Facility may be permanently
Commitment reduced by the Borrowers from time to time in whole or in part
Reductions without premium or penalty. The Senior Facilities may be
and prepaid in whole or in part without premium or penalty;
Prepayments: provided that if loans bearing interest with reference to the
Eurodollar Rate are prepaid on a day other than the last day
of the related interest period, any ``broken funding'' costs
in connection with such prepayment shall be paid by the
Borrowers.
Mandatory In the event the capital stock or any of the assets of Target
Prepayments: or any of its subsidiaries are sold (other than asset sales or
network rationalizations in the ordinary course of business)
at any time the Voting Trust (as hereinafter defined) is
effective, the Company shall immediately apply the net
proceeds thereof actually received by the Company and its
subsidiaries (other than subsidiaries held through the Voting
Trust) to repay the Senior Facilities.
NY1-168162 Annex B-5 EXECUTION
<PAGE> 12
Any such mandatory prepayments shall be applied without
penalty or premium (except for breakage costs, if any), to
repay, first, the Term Loans and second, outstanding loans
under the Revolving Facility (with corresponding commitment
reductions); provided, however, that such prepayment of loans
under the Revolving Facility shall not be required if (i) the
Company's S&P Rating is BBB or higher or its Moody's Rating
is Baa2 or higher and (ii) the commitments under the
Revolving Facility do not exceed US$700 million. Any such
mandatory prepayments of the Term Loans or the Revolving
Facility shall be applied pro rata to the loans to each
Borrower under the applicable Senior Facility.
Representations Customary and appropriate including, without limitation due
and Warranties: organization and authorization, execution, delivery and
enforce ability of the Loan Documents, financial condition,
no material adverse change, title to properties, litigation,
payment of taxes, compliance with laws, environmental and
pension matters, consents and approvals and full disclosure.
Covenants: Customary and appropriate affirmative and negative covenants,
including, without limitation, financial covenants related to
minimum fixed charge coverage (provided that such financial
covenant shall not apply so long as the Company's S&P Rating
is BBB+ or higher or its Moody's Rating is Baa1 or higher), a
maximum ratio of total debt to total capitalization and a
minimum tangible net worth requirement (such financial
covenants to be structured in a manner appropriate for
credits of this nature). Other covenants will include,
without limitation, limitations on liens, investments,
mergers and acquisitions, and sales of assets, including
exceptions and baskets to be mutually agreed upon.
Events of Default: Customary and appropriate including, without limitation,
failure to make payments when due or within an applicable
grace period, defaults under other indebtedness in excess of
specified amounts to be agreed upon, noncompliance with
covenants (with grace periods where appropriate), breaches of
representations and warranties, bankruptcy, judgments in
excess of specified amounts, invalidity of Guaranties, and
``changes of control'' (to be defined in a mutually agreed
upon manner).
NY1-568162 Annex B-6 EXECUTION
<PAGE> 13
Conditions 1. Satisfactory Documentation. The definitive documentation
Precedent evidencing the Senior Facilities shall be prepared by
to Initial counsel to the Arranger and shall be in form and
Borrowings: substance reasonably satisfactory to the Arranger
and the Lenders.
2. Acquisition Structure and Documentation. The structure
utilized to consummate the Acquisition (including, without
limitation, the Voting Trust) and the definitive
documentation relating thereto (the ``Definitive
Acquisition Documents'') and the terms and conditions
thereof shall be in form and substance reasonably
satisfactory to the Lead Lenders (it being understood
that such structure shall be satisfactory in form and
substance to Lead Lenders if substantially as set forth
in the draft merger agreement delivered to Lead Lenders
most recently prior to their execution of this
Commitment Letter), and the Definitive Acquisition
Documents shall be in full force and effect in all
material respects.
3. Consummation of Tender Offer. Merger Sub shall have
acquired not less than the Minimum Shares pursuant to the
Tender Offer, and all other aspects of the Tender Offer
shall have been consummated pursuant to the Definitive
Acquisition Documents, no provision of which shall have
been amended, supplemented, waived or otherwise
modified in any material respect without the prior
written consent of the Agents.
4. Discharge of Existing Debt and Liens. Concurrently with
or prior to the borrowing under the Senior Facilities,
to the extent necessary to permit the consummation of
the Acquisition and the borrowings contemplated under
the Senior Facilities, pre-existing indebtedness of the
Company and its subsidiaries under their existing
revolving credit agreements shall have been repaid.
5. Existing Debt of Target. Concurrently with or prior to the
borrowing under the Senior Facilities, the terms of any
material pre-existing indebtedness of Target and its
subsidiaries shall have been modified or waived or such
indebtedness shall have been repaid, in each case to the
extent necessary to permit the consummation of the
Acquisition and the borrowings contemplated under the
Senior Facilities.
NY1-168162 Annex B-7 EXECUTION
<PAGE> 14
6. Environmental Matters. The Lenders shall have received
information in form, scope and substance reasonably
satisfactory to the Lead Lenders concerning any
environmental liabilities.
7. No Material Adverse Change. Since September 30, 1997,
there shall not have been (x) any material adverse change
in or effect on, either individually or in the aggregate,
the condition, operations, properties, business or results
of operations of the Company and its subsidiaries, taken as
a whole, or of Target and its subsidiaries, taken as a
whole, which adversely affects or could reasonably be
expected to adversely affect the ability of the Company and
its subsidiaries, taken as a whole, or of Target and its
subsidiaries, taken as a whole, to perform any of their
obligations under the Senior Facilities or (y) any
information submitted to Arranger or Administrative Agent
that proves to have been inaccurate, incomplete or
misleading in any material respect. No information,
condition or event shall have occurred or come to the
attention of the Lenders after the date of execution of the
Commitment Letter that (i) relates to the Company or Target
or their respective subsidiaries, (ii) is inconsistent with
the written information previously disclosed to the Lead
Lenders in connection with the Senior Facilities and (iii)
would reasonably be expected to result in a material
adverse change in or effect on, either individually or in
the aggregate, the condition, operations, properties,
business or results of operations of the Company, Target
and their respective subsidiaries, taken as a whole, which
change or effect adversely affects or could reasonably be
expected to adversely affect the ability of the Company,
Target and their respective subsidiaries, taken as a whole,
to perform any of their obligations under the Senior
Facilities.
8. Financial Statements. The Lenders shall have received
(x) the audited financial statements for the Company and
its subsidiaries and the audited financial statements (or,
if audited financial statements are unavailable, unaudited
financial statements) for Target and its subsidiaries, in
each case for the year ending December 31, 1997, (y) a pro
forma balance sheet prepared in accordance with U.S. GAAP
for the Company and its subsidiaries giving effect to the
Acquisition and (z) financial projections for Company and
its subsidiaries after giving effect to the Acquisition for
a period of not less than five years following the Closing
Date.
NY1-168162 Annex B-8 EXECUTION
<PAGE> 15
9. Consents and Approvals. All necessary governmental and
shareholder approvals and all material third party approvals
required in connection with the Senior Facilities and the
Acquisition (other than approval of the Acquisition from the
STB) shall have been obtained and remain in effect, and all
applicable waiting periods shall have expired without any
action being taken by any applicable authority. Without
limiting the generality of the foregoing, the Company shall
have received an informal non-binding opinion of the federal
Surface Transportation Board (the ``STB'') that any voting
trust established in connection with the Acquisition (the
``Voting Trust'') meets the requirements of the STB and
shall have filed with the STB a copy of any such voting
trust and a copy of any Schedule 13D filed with the
Securities and Exchange Commission in connection with the
Acquisition.
10. Payments of Amounts Due. All costs, fees, expenses
(including, without limitation, reasonable legal fees and
expenses and recording taxes and fees) and other
compensation contemplated hereby payable to the Arranger,
Syndication Agent, the Administrative Agent,
Co-Documentation Agents or the Lenders shall have been
paid to the extent incurred prior to the Closing Date
and invoiced at least one business day prior to the
Closing Date.
11. Customary Closing Documents. All documents required to be
delivered under the definitive financing documents,
including customary legal opinions, corporate records and
documents from public officials and officers' certificates,
shall have been delivered.
Conditions Prior written notice of borrowing, the accuracy of
to All representations and warranties, and the absence of any default or
Borrowings: potential event of default.
Assignments The Lenders may assign all or, in an amount of not less than
and US$10 million, any portion of their share of the Senior
Participa- Facilities to affiliates or one or more banks, financial
tions: institutions or other entities that are eligible assignees (to be
described in the Loan Documents) which are acceptable to the
Borrowers and the Administrative Agent, such consent not to be
unreasonably withheld, and upon such assignment, such affiliate,
bank, financial institution or entity shall become a Lender for
all purposes of the loan documentation; provided that assignments
made to affiliates of Lenders and other Lenders shall not be
subject to the US$10 million minimum assignment requirement.
The Lenders will have the right to sell participations, subject
to customary limitations on voting rights, in their share of the
Senior Facilities.
NY1-168162 Annex B-9 EXECUTION
<PAGE> 16
Requisite Lenders holding 51% of total commitments or exposure under
Lenders: the Senior Facilities, except that (x) any amendment which
would disproportionately affect the obligation of any obligor
to make payment of the loans under the Revolving Facility or
the Term Loan shall not be effective without the approval of
holders of 51% of such class of holders and (y) any amendment
with respect to certain matters relating to the interest
rates, maturity and the definition of Requisite Lenders,
Requisite Lenders will be defined as Lenders holding 100% of
total commitments or exposure under the Senior Facilities.
Taxes, Reserve All payments are to be made free and clear of any taxes
Requirements and (other than taxes on overall net income and franchise taxes
Indemnities: imposed in lieu thereof), imposts, assessments, withholdings
or other deductions whatsoever.
The Borrowers will indemnify the Lenders against breakage
costs and all increased costs of capital resulting from
reserve requirements or otherwise imposed, in each case
subject to customary increased costs, capital adequacy and
similar provisions to the extent not taken into account in the
calculation of the Base Rate or the Eurodollar Rate.
Indemnity: The Borrowers will provide standard indemnification for the
Arranger, Syndication Agent, Administrative Agent,
Co-Documentation Agents and Lenders with an exception for
gross negligence or wilful misconduct.
Governing Law The Borrowers and each Guarantor will submit to the
and Jurisdiction: non-exclusive jurisdiction and venue of the federal and state
courts of the State of New York and shall waive any right to
trial by jury. New York law shall govern the Loan Documents.
The foregoing is intended to summarize certain basic terms of the Senior
Facilities. It is not intended to be a definitive list of all of the
requirements of the Lenders in connection with the Senior Facilities.
NY1-168162 Annex B-10 EXECUTION
<PAGE> 1
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER
dated as of
February 10, 1998
among
CANADIAN NATIONAL RAILWAY COMPANY
BLACKHAWK MERGER SUB, INC.
AND
ILLINOIS CENTRAL CORPORATION
<PAGE> 2
TABLE OF CONTENTS(1)
PAGE
<TABLE>
<S> <C>
SECTION 1.01. The Offer........................... 2
SECTION 1.02. IC Action........................... 3
SECTION 1.03. Voting Trust........................ 4
SECTION 1.04. Alternative Transaction Structures.. 5
SECTION 2.01. The Merger.......................... 6
SECTION 2.02. Conversion of Shares................ 6
SECTION 2.03. The Exchange Agent.................. 8
SECTION 2.04. Surrender and Payment............... 8
SECTION 2.05. No Appraisal Rights................. 10
SECTION 2.06. Fractional Shares................... 10
SECTION 2.07. Stock Options....................... 10
SECTION 2.08. Withholding Rights.................. 12
SECTION 3.01. Certificate of Incorporation........ 12
SECTION 3.02. Bylaws.............................. 12
SECTION 3.03. Directors and Officers.............. 13
SECTION 4.01. Corporate Existence and Power....... 14
SECTION 4.02. Corporate Authorization............. 14
SECTION 4.03. Governmental Authorization.......... 14
SECTION 4.04. Non-Contravention................... 15
SECTION 4.05. Capitalization...................... 15
SECTION 4.06. Subsidiaries........................ 16
SECTION 4.07. SEC Filings......................... 16
SECTION 4.08. Financial Statements................ 17
</TABLE>
(1)The Table of Contents is not a part of this Agreement.
<PAGE> 3
SECTION 4.09. Disclosure Documents................. 17
SECTION 4.10. Absence of Certain Changes........... 18
SECTION 4.11. No Undisclosed Material Liabilities.. 19
SECTION 4.12. Litigation........................... 20
SECTION 4.13. Taxes................................ 20
SECTION 4.14. Employee Benefit Plans............... 20
SECTION 4.15. Labor Matters........................ 22
SECTION 4.16. Takeover Statutes; Rights Plans...... 23
SECTION 4.17. Compliance with Laws................. 23
SECTION 4.18. Finders' Fees........................ 23
SECTION 4.19. Environmental Matters................ 23
SECTION 4.20. Opinion of Financial Advisor......... 25
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF CN AND MERGER SUBSIDIARY
SECTION 5.01. Corporate Existence and Power........ 26
SECTION 5.02. Corporate Authorization...............26
SECTION 5.03. Governmental Authorization............26
SECTION 5.04. Non-Contravention.....................26
SECTION 5.05. Capitalization........................27
SECTION 5.06. Subsidiaries..........................27
SECTION 5.07. SEC Filings...........................28
SECTION 5.08. Financial Statements..................29
SECTION 5.09. Disclosure Documents..................29
SECTION 5.10. Absence of Certain Changes............30
SECTION 5.11. No Undisclosed Material Liabilities...31
SECTION 5.12. Litigation............................31
SECTION 5.13. Taxes.................................31
SECTION 5.14. Employee Benefit Plans................32
SECTION 5.15. Compliance with Laws..................32
SECTION 5.16. Finders' Fees.........................33
SECTION 5.17. Environmental Matters.................33
SECTION 5.18. Ownership of IC Common Stock..........33
SECTION 5.19. Sufficiency of Funds..................33
SECTION 5.20. Labor Matters.........................33
ARTICLE 6
COVENANTS OF IC
SECTION 6.01. Conduct of IC.........................34
SECTION 6.02. Access to Information.................38
<PAGE> 4
SECTION 6.03. Other Offers............................39
SECTION 6.04. Notices of Certain Events...............40
SECTION 6.05. Registration Rights.....................40
SECTION 6.06. Antitakeover Statutes...................41
ARTICLE 7
COVENANTS OF CN
SECTION 7.01. Conduct of CN...........................42
SECTION 7.02. Access to Information...................43
SECTION 7.03. Notices of Certain Events...............43
SECTION 7.04. Obligations of Merger Subsidiary........43
SECTION 7.05. Voting of Shares........................44
SECTION 7.06. Director and Officer Liability..........44
SECTION 7.07. Stock Exchange Listing..................44
ARTICLE 8
COVENANTS OF CN AND IC
SECTION 8.01. Reasonable Best Efforts..................45
SECTION 8.02. STB Approval.............................45
SECTION 8.03. Certain Filings..........................45
SECTION 8.04. Public Announcements.....................46
SECTION 8.05. Dividends................................46
SECTION 8.06. Auditors' Letters........................46
SECTION 8.07. Treatment of IC Employees and Directors..46
SECTION 9.01. Preparation of the.......................50
Form F-4; Proxy or Information
Statement; Action by Written Consent
SECTION 9.02. Fees and Expenses........................51
SECTION 9.03. Further Assurances.......................52
ARTICLE 10
CONDITIONS TO THE MERGER
SECTION 10.01. Conditions to the Obligations of Each Party to
the Merger....................................52
SECTION 10.02. Additional Condition to the Obligations of IC......52
ARTICLE 11
TERMINATION
<PAGE> 5
SECTION 11.01. Termination............................ 53
SECTION 11.02. Effect of Termination.................. 55
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. Notices................................ 56
SECTION 12.02. Definitions............................ 57
SECTION 12.03. Survival............................... 60
SECTION 12.04. Amendments; No Waivers; Continuing
Directors........................... 61
SECTION 12.05. Successors and Assigns................. 61
SECTION 12.06. Governing Law.......................... 62
SECTION 12.07. Counterparts; Effectiveness............ 62
SECTION 12.08. Entire Agreement; No Third Party
Beneficiaries....................... 62
SECTION 12.09. Submission to Jurisdiction; Waivers.... 63
SECTION 12.10. Enforcement............................ 63
SECTION 12.11. Guarantee of Merger Subsidiary......... 63
SECTION 12.12. Disclosure Schedules................... 63
<TABLE>
<S> <C>
EXHIBIT A Form of Voting Trust Agreement
EXHIBIT B Certificate of Incorporation of Surviving Corporation
EXHIBIT C Bylaws of Surviving Corporation
EXHIBIT D Terms and Conditions of Alternate Merger
</TABLE>
<PAGE> 6
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "AGREEMENT") dated as of February 10,
1998 among Canadian National Railway Company, a Canadian corporation ("CN"),
Blackhawk Merger Sub, Inc., a Delaware corporation and an indirect wholly-owned
subsidiary of CN ("MERGER SUBSIDIARY") and Illinois Central Corporation, a
Delaware corporation ("IC").
The parties hereto agree as follows:
WHEREAS, IC operates a rail freight transportation business through
Illinois Central Railroad Company, an Illinois corporation and a wholly-owned
subsidiary of IC, CCP Holdings, Inc., a Delaware corporation and a wholly-owned
subsidiary of IC, and IC Financial Services Corporation, a Delaware corporation
and a wholly-owned subsidiary of IC (Illinois Central Railroad Company, CCP
Holdings, Inc. and IC Financial Services Corporation collectively, the
"RAILROAD SUBSIDIARIES");
WHEREAS, the Board of Directors of IC (at a meeting duly called and held),
has unanimously determined that this Agreement and the transactions
contemplated hereby, including the Offer and the Merger (as hereinafter
defined) are fair to, and in the best interests of, the holders of shares of
Blackhawk Common Stock (as hereinafter defined) and recommended acceptance of
the Offer and adoption of this Agreement by the stockholders of IC;
WHEREAS, the respective Boards of Directors of Merger Subsidiary and CN
have approved, and deem it advisable and in the best interests of their
respective stockholders to consummate, the business combination contemplated
hereby upon the terms and subject to the conditions set forth herein;
WHEREAS, it is intended that, except as provided in Section 1.04, the
business combination contemplated hereby be accomplished by having Merger
Subsidiary commence a cash tender offer for an aggregate of 46,051,761
outstanding shares of common stock, par value $0.001 per share, of IC ("IC
COMMON STOCK"), representing 75% of the currently outstanding shares of IC
Common Stock, to be followed by a merger of Merger Subsidiary with and into IC,
upon the terms and subject to the conditions set forth herein;
WHEREAS, on the date hereof, Messrs. Gilbert H. Lamphere and Alexander P.
Lynch have entered into binding agreements with CN (the "INVESTMENT COMMITMENT
AGREEMENTS") with respect to the shares of IC Common Stock and options to
purchase shares of IC Common Stock owned by them, pursuant to which they agree
(i) to consent to (or vote their shares of IC Common Stock in favor of) the
<PAGE> 7
adoption of this Agreement, (ii) to roll over 100% of their options into
options to purchase shares of CN Common Stock (as hereinafter defined) and
(iii), in the case of Mr. Lamphere, to invest a certain portion of the proceeds
received in the Merger in shares of CN Common Stock (as hereinafter defined)
within 90 days of the Effective Time (as hereinafter defined);
WHEREAS, IC, Merger Subsidiary and CN desire to make certain
representations, warranties, covenants and agreements in connection with the
transactions contemplated hereby and also to prescribe various conditions to
the transactions contemplated hereby;
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties, intending to
be legally bound, agree as follows:
ARTICLE 1
THE OFFER
SECTION 1.01. The Offer. (a) Provided that this Agreement shall not have
been terminated and nothing shall have occurred that would result in a failure
to satisfy any of the conditions set forth in Annex I hereto, Merger Subsidiary
shall, as promptly as practicable after the date hereof, but in no event later
than five business days following the public announcement of the terms of this
Agreement, commence an offer (the "OFFER") to purchase an aggregate of
46,051,761 outstanding shares of IC Common Stock at a price of $39.00 per
share, net to the seller in cash. The Offer shall be subject to the condition
that there shall be validly tendered in accordance with the terms of the Offer
prior to the expiration date of the Offer and not withdrawn a number of shares
which, together with the shares then owned by CN, represents at least 50.1% of
the outstanding shares of IC Common Stock on a fully diluted basis (the
"MINIMUM CONDITION") and to the other conditions set forth in Annex I hereto.
Merger Subsidiary reserves the right to waive any of the conditions to the
Offer, to extend the Offer if any conditions to this Offer are not satisfied
and to make any change in the terms or conditions of the Offer; provided that,
except as provided in Section 1.04, no waiver or change may be made without the
prior written consent of IC which (i) increases or decreases the number of
shares of IC Common Stock sought in the Offer, (ii) changes the form of
consideration to be paid or decreases the price per share, (iii) waives the
Minimum Condition, (iv) waives the conditions set forth in paragraph (a), (b)
or (e) of Annex I hereto, (v) waives the condition relating to the expiration
of the waiting period (if any) under the Hart-Scott Rodino Antitrust
Improvements
2
<PAGE> 8
Act of 1976 (the "HSR ACT") or the receipt of a favorable informal advisory
opinion from the STB, (vi) is adverse to the holders of IC Common Stock or
modifies any of the conditions to the Offer or (vii) imposes any conditions to
the Offer in addition to those set forth in Annex I. CN agrees that, if the
Offer shall not have been consummated at the scheduled expiration thereof due
to the failure to satisfy (i) any of the conditions to the Offer set forth in
clauses (a) or (b) of Annex I, (ii) the condition to the Offer relating to
expiration of the waiting period under the HSR Act or (iii) the condition
relating to the receipt of the favorable informal advisory opinion from the STB
staff, CN will, at the request of IC, cause Merger Subsidiary to extend the
Offer for a period of up to twenty business days.
(b) Subject to the terms and conditions of the Offer (including, without
limitation, the Minimum Condition) and the terms of this Agreement, CN shall
provide the funds to Merger Subsidiary and Merger Subsidiary shall pay, as
promptly as practicable after the expiration of the Offer, for all shares of IC
Common Stock properly tendered and not withdrawn pursuant to the Offer that
Merger Subsidiary is obligated to purchase.
(c) As soon as practicable on the date of commencement of the Offer, CN
and Merger Subsidiary shall file with the Securities and Exchange Commission
(the "SEC") a Tender Offer Statement on Schedule 14D-1 with respect to the
Offer which will contain the offer to purchase and form of the related letter
of transmittal (together with any supplements or amendments thereto,
collectively the "OFFER DOCUMENTS"). CN and IC each agrees promptly to correct
any information provided by it for use in the Offer Documents if and to the
extent that it shall have become false or misleading in any material respect.
CN agrees to take all steps necessary to cause the Offer Documents as so
corrected to be filed with the SEC and to be disseminated to holders of IC
Common Stock, in each case as and to the extent required by applicable federal
securities laws. IC and its counsel shall be given an opportunity to review and
comment on the Schedule 14D-1 prior to its being filed with the SEC.
SECTION 1.02. IC Action. (a) IC hereby consents to the Offer and
represents that its Board of Directors, at a meeting duly called and held, has
unanimously (i) determined that this Agreement and the transactions
contemplated hereby, including the Offer and the Merger (as defined in Section
2.01), are fair to, advisable and in the best interests of IC's stockholders,
(ii) approved this Agreement and the transactions contemplated hereby,
including the Offer and the Merger, in accordance with the requirements of the
General Corporation Law of the State of Delaware (the "DELAWARE LAW"), and
(iii) resolved to recommend acceptance of the Offer and adoption of this
Agreement by its stockholders; provided, however, that prior to the earlier of
(x) the consummation of the Offer or (y) the adoption of this Agreement by the
3
<PAGE> 9
stockholders of IC, the Board of Directors of IC may modify, withdraw or change
such recommendation to the extent that the Board of Directors concludes in good
faith, based on the advice of outside counsel, that such action is reasonably
necessary in order for the Board of Directors to act in a manner consistent
with the Board's fiduciary duties under applicable law. IC further represents
that Lehman Brothers Inc. and The Beacon Group Capital Services LLC have
delivered to IC's Board of Directors their written opinions that the
consideration to be received in the Offer and the Merger taken together is fair
to the holders of shares of IC Common Stock from a financial point of view. To
the knowledge of IC, all of the directors and executive officers of IC intend
either to tender their shares of IC Common Stock pursuant to the Offer or to
consent to or vote in favor of the adoption of the Agreement.
(b) As soon as practicable after the Offer is commenced IC will file with
the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (the
"SCHEDULE 14D-9") which shall reflect the recommendations of IC's Board of
Directors referred to above; provided, however, that prior to the earlier of
(x) the consummation of the Offer or (y) the adoption of this Agreement by the
stockholders of IC, the Board of Directors of IC may modify, withdraw or change
such recommendation to the extent that the Board of Directors concludes in good
faith, based on the advice of outside counsel, that such action is reasonably
necessary in order for the Board of Directors act in a manner consistent with
the Board's fiduciary duties under applicable law. IC and CN each agree
promptly to correct any information provided by it for use in the Schedule
14D-9 if and to the extent that such information shall have become false or
misleading in any material respect. IC agrees to take all steps necessary to
cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be
disseminated to holders of shares of IC Common Stock, in each case as and to
the extent required by applicable federal securities laws. CN and its counsel
shall be given an opportunity to review and comment on the Schedule 14D-9 prior
to its being filed with the SEC.
SECTION 1.03. Voting Trust. The parties agree that, (i) simultaneously
with the purchase by CN, Merger Subsidiary or their Affiliates of shares of IC
Common Stock pursuant to the Offer or otherwise, such shares shall be deposited
in an irrevocable voting trust (the "VOTING TRUST") in accordance with the
terms and conditions of a voting trust agreement (the "VOTING TRUST AGREEMENT")
substantially in the form attached hereto as Exhibit A and (ii) upon
consummation of the Merger, all outstanding shares of the Surviving Corporation
shall be deposited in the Voting Trust. Subject to applicable law and to the
rules, regulations and practices of the United States Surface Transportation
Board (the "STB"), the Voting Trust Agreement may be modified or amended at any
time by CN in its sole discretion; provided that (i) prior to the Effective
Time, the Voting Trust Agreement may not be modified or amended without the
prior written
4
<PAGE> 10
approval of IC unless such modification or amendment is not inconsistent with
this Agreement and is not adverse to IC or its stockholders and would not
reasonably be expected to have an adverse effect on receipt of a favorable
informal advisory opinion from the STB and (ii) prior to or after the Effective
Time, the Voting Trust Agreement may not be modified or amended without the
prior written approval of IC if such modification or amendment would reasonably
be expected to increase the liability exposure of the Board of Directors of the
Surviving Corporation under applicable law. No power of CN or Merger
Subsidiary provided for in the Voting Trust Agreement may be exercised in a
manner which violates this Agreement. CN, in consultation with IC, shall use
its best efforts to take, or cause to be taken, all actions necessary, proper
or advisable to obtain a favorable informal advisory opinion from the STB
staff. In furtherance and not in limitation of the foregoing, CN and IC agreed
that: (i) CN shall make any filings required by the STB with respect to the
Voting Trust and IC shall make any filings required by CN; (ii) CN shall
consult with IC in connection with any discussions or proceedings initiated by
CN with the STB with respect to the Voting Trust; provided that IC shall not
initiate any such discussions or proceedings without CN's prior written
consent; and (iii) CN with IC's consent, shall change or modify the terms of
the Voting Trust Agreement to the extent required by the STB as a condition to
the issuance of such advisory opinion, so long as the required changes or
modifications do not, in the aggregate, materially affect CN's rights
thereunder. Any trustee of the Voting Trust appointed by CN and Merger
Subsidiary pursuant to the Voting Trust Agreement shall be reasonably
satisfactory to the Board of Directors of IC.
SECTION 1.04. Alternative Transaction Structures. Notwithstanding
anything to the contrary set forth in this Agreement, if the Minimum Condition
has not been satisfied prior to the scheduled expiration of the Offer (as such
Offer may have been extended pursuant to Section 1.01(a) hereof), Merger
Subsidiary shall have the right at its option to extend the Offer for a period
of up to twenty business days. If, at the scheduled expiration of the Offer
(as such date may have been extended by Merger Subsidiary as contemplated by
the preceding sentence), the Minimum Condition has not been satisfied, then
(unless the parties otherwise agree) at CN's election either (i) Merger
Subsidiary shall amend the terms of the Offer by increasing the number of
shares sought in the Offer to all of the outstanding shares of IC Common Stock,
subject to the conditions set forth in Section 1.01, in which event the
Agreement shall be modified as provided in Part I of Exhibit D, or (ii)
Subsidiary shall terminate the Offer and Merger Subsidiary and IC shall proceed
with the Merger, in accordance with this Agreement in which event the terms and
conditions of the Merger Agreement shall be modified as provided in Part II of
Exhibit D.
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<PAGE> 11
ARTICLE 2
THE MERGER
SECTION 2.01. The Merger. (a) At the Effective Time, Merger Subsidiary
shall be merged (the "MERGER") with and into IC in accordance with the Delaware
Law, whereupon the separate existence of Merger Subsidiary shall cease, and IC
shall be the surviving corporation (the "SURVIVING CORPORATION").
(b) As soon as practicable after satisfaction or, to the extent permitted
hereunder, waiver of all conditions to the Merger, IC and Merger Subsidiary
will file a certificate of merger with the Secretary of State of the State of
Delaware and make all other filings or recordings required by Delaware Law in
connection with the Merger. The Merger shall become effective at such time as
the certificate of merger is duly filed with the Secretary of State of the
State of Delaware or at such later time as the parties hereto shall agree and
as is specified in the certificate of merger (the "EFFECTIVE TIME").
(c) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises and be subject to all
of the restrictions, disabilities and duties of IC and Merger Subsidiary, all
as provided under Delaware Law.
SECTION 2.02. Conversion of Shares. Subject to Section 1.04, at the
Effective Time:
(a) each share of IC Common Stock held by IC as treasury stock or owned of
record or beneficially by CN or any Subsidiary of CN immediately prior to the
Effective Time (including the shares of IC Common Stock held in the Voting
Trust) shall be canceled, and no payment shall be made with respect thereto.
(b) each share of common stock of Merger Subsidiary outstanding
immediately prior to the Effective Time shall be converted into and become one
share of common stock of the Surviving Corporation and shall constitute the
only outstanding shares of capital stock of the Surviving Corporation and each
such share shall be deposited in the Voting Trust;
(c) if Merger Subsidiary shall have purchased, pursuant to the Offer, an
aggregate of 46,051,761 shares of IC Common Stock, each share of IC Common
Stock outstanding immediately prior to the Effective Time shall, except as
provided in Section 2.02(a), be converted into the right to receive that number
of duly authorized, validly issued, fully paid and nonassessable shares,
without par
6
<PAGE> 12
value, of CN ("CN COMMON STOCK") equal to the fraction (the "EXCHANGE RATIO")
obtained by dividing $39.00 by the CN Average Closing Price (the "STOCK
CONSIDERATION"). For purposes of this Agreement, "CN AVERAGE CLOSING PRICE"
means the average closing price of the CN Common Stock on the New York Stock
Exchange, Inc. (the "NYSE") for the twenty trading day period ending on the
second trading day prior to the date of the Effective Time; provided that if
such average closing price is less than $43.00 then the CN Average Closing
Price shall be $43.00 and if such average closing price is greater than $64.50
then the CN Average Closing Price shall be $64.50.
(d) if Merger Subsidiary shall have purchased, pursuant to the Offer, an
aggregate of less than 46,051,761 shares of IC Common Stock, each share of IC
Common Stock outstanding immediately prior to the Effective Time shall, except
as provided in Section 2.02(a), be converted into the right to receive:
(A) a number of shares of CN Common Stock (1) equal to the fraction
obtained by dividing $39.00 by the CN Average Closing Price,
multiplied by (2) the Stock Proration Factor (as defined below); and
(B) cash in an amount equal to the product of (1) 1 minus the Stock
Proration Factor, multiplied by (2) $39.00.
The consideration provided for in this Section 2.02, together with the
consideration provided for in Section 2.06 hereof, and, if applicable, the
consideration provided for in Exhibit D, is referred to herein as the "MERGER
CONSIDERATION".
For purposes of this Agreement, the "STOCK PRORATION FACTOR" shall be a
fraction, of which (A) the numerator shall be the Stock Number and (B) the
denominator shall be the total number of shares of IC Common Stock outstanding
as of the Effective Time, minus the number of shares purchased by Merger
Subsidiary pursuant to the Offer. The "STOCK NUMBER" shall be 15,350,586, plus
any shares of IC Common Stock issued after the date of this Agreement in
accordance with this Agreement.
If prior to the Effective Time, CN or IC (as the case may be) should,
(after obtaining the consent required by Section 7.01(c) or Section 6.01(i)
hereof) split, combine or otherwise reclassify the CN Common Stock or the IC
Common Stock, or pay a stock dividend or other stock distribution in CN Common
Stock or IC Common Stock, or otherwise change the CN Common Stock or IC Common
Stock into any other securities, or make any other such stock dividend or
distribution in capital stock of CN or IC in respect of the CN Common Stock or
7
<PAGE> 13
the IC Common Stock, respectively, then the Stock Consideration will be
appropriately adjusted to reflect such split, combination, dividend or other
distribution or change.
SECTION 2.03. The Exchange Agent. Prior to the mailing of the IC proxy or
information statement, Merger Subsidiary shall appoint an agent (the "EXCHANGE
AGENT") for the purpose of exchanging certificates formerly representing shares
of IC Common Stock for the Merger Consideration. The Exchange Agent shall also
make all computations as to the allocation and the proration contemplated by
Section 2.02, and any such computation shall be conclusive and binding on the
holders of shares of IC Common Stock.
SECTION 2.04. Surrender and Payment. (a) As soon as reasonably
practicable as of or after the Effective Time, CN shall deposit with the
Exchange Agent, for the benefit of the holders of shares of IC Common Stock,
for exchange in accordance with this Article 2, the Merger Consideration.
Promptly after the Effective Time, CN will send, or will cause the Exchange
Agent to send, to each holder of shares of IC Common Stock at the Effective
Time a letter of transmittal for use in such exchange (which shall specify that
the delivery shall be effected, and risk of loss and title shall pass, only
upon proper delivery of the certificates representing such shares to the
Exchange Agent).
(b) Each holder of shares of IC Common Stock that have been converted into
a right to receive the Merger Consideration, upon surrender to the Exchange
Agent of a certificate or certificates formerly representing such shares,
together with a properly completed letter of transmittal covering such shares,
will be entitled to receive the Merger Consideration payable in respect of such
shares. Until so surrendered, each such certificate shall, after the Effective
Time, represent for all purposes, only the right to receive such Merger
Consideration. No interest will be paid or will accrue on any cash payable as
Merger Consideration, in lieu of any fractional shares of CN Common Stock or
otherwise payable pursuant to this Article 2.
(c) If any portion of the Merger Consideration is to be paid to a Person
other than the registered holder of the shares of IC Common Stock formerly
represented by the certificate or certificates surrendered in exchange
therefor, it shall be a condition to such payment that the certificate or
certificates so surrendered shall be properly endorsed or otherwise be in
proper form for transfer and that the Person requesting such payment shall pay
to the Exchange Agent any transfer or other taxes required as a result of such
payment to a Person other than the registered holder of such shares or
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not payable.
8
<PAGE> 14
(d) After the Effective Time, there shall be no further registration of
transfers of shares of IC Common Stock. If, after the Effective Time,
certificates formerly representing shares of IC Common Stock are presented to
the Surviving Corporation, they shall be canceled and exchanged for the
consideration provided for, and in accordance with the procedures set forth, in
this Article 2. The Surviving Corporation shall be obligated to pay any
dividends or make any other distributions with a record date prior to the
Effective Time which may have been declared or made by IC on such shares of IC
Common Stock in accordance with the terms of this Agreement on or prior to the
Effective Time and which remain unpaid at the Effective Time.
(e) Any portion of the Merger Consideration made available to the Exchange
Agent pursuant to Section 2.04(a) that remains unclaimed by the holders of
shares of IC Common Stock six months after the Effective Time shall be returned
to CN, upon demand, and any such holder who has not exchanged his shares of IC
Common Stock for the Merger Consideration in accordance with this Section prior
to that time shall thereafter look only to CN for payment of the Merger
Consideration in respect of his shares. Notwithstanding the foregoing, CN shall
not be liable to any holder of shares of IC Common Stock for any amount paid to
a public official pursuant to applicable escheat or similar abandoned property
laws. Any amounts remaining unclaimed by holders of shares of IC Common Stock
two years after the Effective Time (or such earlier date immediately prior to
such time as such amounts would otherwise escheat to or become property of any
governmental entity) shall, to the extent permitted by applicable law, become
the property of CN free and clear of any claims or interest of any Person
previously entitled thereto.
(f) No dividends or other distributions with respect to any CN Common
Stock with a record date after the Effective Time shall be paid to the holder
of any unsurrendered certificate for shares of IC Common Stock with respect to
the shares of CN Common Stock represented thereby (if any) and no cash payment
in lieu of fractional shares shall be paid to any such holder pursuant to
Section 2.06 until the surrender of such certificate in accordance with this
Article 2. Subject to the effect of applicable laws, following surrender of
any such certificate, there shall be paid to the holder of the certificate
representing whole shares of any CN Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender the amount of cash payable
in lieu of a fractional share of CN Common Stock to which such holder is
entitled pursuant to Section 2.06 and the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of CN Common Stock and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to such
9
<PAGE> 15
surrender and with a payment date subsequent to such surrender payable with
respect to such whole shares of CN Common Stock.
SECTION 2.05. No Appraisal Rights. In accordance with Schwabacher v.
United States, 334 U.S. 182 (1948), stockholders of IC shall not have any
appraisal or like rights; provided, however, that if the STB or a court of
competent jurisdiction determines that appraisal rights are available to
holders of shares of IC's capital stock, then such holders shall be provided
with appraisal rights in accordance with Delaware Law to the extent required
under Delaware Law. IC shall give CN prompt notice of any demands received by
IC for appraisal of shares of IC Common Stock, and CN shall have the right to
participate in all negotiations and proceedings with respect to such demands.
IC shall not, except with the prior written consent of CN, make any payment
with respect to, or settle or offer to settle, any such demands or as otherwise
required by applicable law.
SECTION 2.06. Fractional Shares. (a) No certificates or scrip
representing fractional shares of CN Common Stock shall be issued upon the
surrender for exchange of certificates representing shares of IC Common Stock,
and such fractional share interests will not entitle the owner thereof to vote
or to any rights of a stockholder of CN.
(b) Notwithstanding any other provision of this Agreement, each holder of
shares of IC Common Stock who pursuant to the Merger would otherwise have been
entitled to receive a fraction of a share of CN Common Stock (after taking into
account all shares of IC Common Stock delivered by such holder) shall receive,
in lieu thereof, an amount in cash determined by multiplying the average
closing price of the CN Common Stock on the NYSE for the five trading day
period prior to the Effective Time (the "CN AVERAGE PRICE") by the fraction of
a share of CN Common Stock to which such holder would otherwise have been
entitled.
SECTION 2.07. Stock Options. (a) To the extent permitted under the rules,
regulations and practices of the STB and consistent with the application of
applicable Canadian securities laws and the rules and regulations of relevant
stock exchanges, the Board of Directors of CN and IC shall adopt such
resolutions or take such other actions as may be required to adjust the terms
of each outstanding employee or director stock option to purchase shares of IC
Common Stock granted under any employee or director stock option or
compensation plan or arrangement ("IC OPTIONS") as necessary to provide that at
the Effective Time each IC Option outstanding immediately prior to the
Effective Time shall be:
(i) if Section 2.02(c) is applicable, amended and converted into
options ("CN OPTIONS") to acquire, on the same terms and conditions as
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were applicable under such IC Options (except that such CN Options shall
(other than as provided in Section 8.07(a)) be fully vested), a number of
shares of CN Common Stock determined by multiplying the number of shares
of IC Common Stock subject to such IC Option by the Exchange Ratio,
rounded, if necessary, up to the nearest whole share of CN Common Stock,
at a price per share equal to (y) the aggregate exercise price for the
shares of IC Common Stock subject to such IC Option, divided by, (z) the
number of shares of CN Common Stock subject to such CN Option;
(ii) if Section 2.02(d) is applicable, amended and converted into:
(A) CN Options to acquire, on the same terms and conditions as were
applicable under such IC Options (except that such CN Options shall (other
than as provided in Section 8.07(a)) be fully vested), a number of shares
of CN Common Stock determined by multiplying the number of shares of IC
Common Stock subject to such IC Option by the Exchange Ratio and the Stock
Proration Factor, rounded, if necessary, up to the nearest whole share of
CN Common Stock, at a price per share equal to (x) the aggregate exercise
price for the shares of IC Common Stock subject to such IC Option,
multiplied by (y) the Stock Proration Factor, and divided by, (z) the
number of shares of CN Common Stock subject to such CN Option, and (B) an
additional CN Option to purchase a number of shares of CN Common Stock
determined as follows: (1) 1 minus the Stock Proration Factor (the
"RECIPROCAL STOCK PRORATION FACTOR"), multiplied by (2) the number of
shares of IC Common Stock subject to such IC Option, multiplied by (3)
$39.00, and divided by (4) the CN Average Price, rounded, if necessary, up
to the nearest whole share of CN Common Stock, at a price per share equal
to (a) the aggregate exercise price for the shares of IC Common Stock
subject to such IC Option, multiplied by (b) Reciprocal Stock Proration
Factor, and divided by (c) the number of shares of CN Common Stock subject
to such CN Option; or
(iii) in the event that CN elects to tender for all of IC's shares
pursuant to Section 1.04, amended and converted into a CN Option to
purchase a number of shares of CN Common Stock determined as follows: (1)
the number of shares of IC Common Stock subject to such IC Option,
multiplied by (2) $39.00, and divided by (3) the CN Average Price,
rounded, if necessary, up to the nearest whole shares of CN Common Stock,
at a price per share equal to (a) the aggregate exercise price for the
shares of IC Common Stock subject to such IC Option, divided by (b) the
number of shares of CN Common Stock subject to such CN Option.
(b) If and to the extent the Board of Directors of CN is not permitted, in
the opinion of CN's counsel, to take the actions described in paragraph (a)
hereof,
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then at or immediately prior to the Effective Time, IC shall take action so
that the holder of each IC Option then outstanding shall receive cash equal to:
(1) the number of shares of IC Common Stock subject to such IC Option,
multiplied by (20 $39.00, minus (3) the aggregate exercise price for the shares
of IC Common Stock subject to such IC Option.
(c) CN shall take all corporate actions necessary to reserve for issuance
such number of shares of CN Common Stock as will be necessary to satisfy
exercises in full of all CN Options after the Effective Time. With respect to
such shares of CN Common Stock issuable upon exercise of the CN Options and the
resale of such shares of CN Common Stock issuable upon exercise of the CN
Options and the resale of such shares of CN Common Stock by Affiliates of CN
(subject to any limitations under applicable law) CN shall (i) as soon as
practicable after the Effective Time file with the SEC a Registration Statement
on Form S-8 and use its reasonable best efforts to have such registration
statement become and remain continuously effective under the Securities Act of
1933, as amended (the "SECURITIES ACT") and (ii) file with the NYSE, the
Toronto Stock Exchange, the Montreal Exchange and other national exchanges on
which the CN Common Stock is traded a listing application and use its
reasonable best efforts to have such shares admitted to trading thereon upon
exercises of CN Options.
SECTION 2.08. Withholding Rights. CN shall be entitled to deduct and
withhold from the consideration otherwise payable to any Person pursuant to
this Article 2 such amounts as it is required to deduct and withhold in respect
of such payment under any provision of federal, state, local or foreign tax
law. To the extent that amounts are so withheld by CN, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the shares of IC Common Stock in respect of which such deduction and
withholding was made by CN, as the case may be.
ARTICLE 3
THE SURVIVING CORPORATION
SECTION 3.01. Certificate of Incorporation. The certificate of
incorporation of IC shall be amended in the Merger to read in its entirety as
set forth on Exhibit B hereto and as so amended shall be the certificate of
incorporation of the Surviving Corporation until amended in accordance with
applicable law.
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SECTION 3.02. Bylaws. The bylaws of IC shall be amended in the Merger to
read in their entirety as set forth on Exhibit C hereto and as so amended shall
be the by-laws of the Surviving Corporation until amended in accordance with
applicable law.
SECTION 3.03. Directors and Officers. (a) Except as set forth herein, the
directors of IC as of the Effective Time shall be the directors of the
Surviving Corporation until the earlier of their resignation or removal or
until they otherwise cease to be directors of the Surviving Corporation and the
officers of IC as of the Effective Time shall be the officers of the Surviving
Corporation until the earlier of their resignation or removal or until they
otherwise cease to be officers of the Surviving Corporation. Promptly
following consummation of the Offer, IC anticipates appointing John D.
McPherson as the Chief Executive Officer and a director of IC.
(b) Effective upon consummation of the Offer, and subject to the rules,
regulations and practices of the STB, IC shall have taken all action necessary
to cause an individual, who shall be identified as a suitable candidate by CN
prior to the consummation of the Offer and who shall be independent of CN and
reasonably satisfactory to the Board of Directors of IC, to be appointed to the
Board of Directors of IC immediately following the resignations of Gilbert H.
Lamphere and Alexander P. Lynch from the IC Board of Directors. IC's
obligations to appoint such individual to the Board of Directors shall be
subject to the rules, regulations and practices of the STB.
(c) Effective upon consummation of the Offer, CN shall have taken all
action necessary to appoint Mr. E. Hunter Harrison to the position of Chief
Operating Officer of CN.
(d) Effective upon consummation of the Offer, CN shall have taken all
necessary action to cause Messrs. Gilbert H. Lamphere and Alexander P. Lynch to
be elected to serve on the Board of Directors of CN. In addition, either Mr.
Lamphere or Mr. Lynch will have the right (and CN will take all necessary
action to cause Mr. Lamphere or Mr. Lynch) to be appointed to serve on the
Strategic Planning Committee, the Audit and Finance Committee, the Human
Resources Committee and the Corporate Governance Committee of such Board of
Directors, it being understood that no more than one of such individuals will
have the right to be appointed to any one of such committees, and such
individuals shall be entitled to determine on which of such committees they
elect to be appointed.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF IC
Except as set forth in the IC disclosure schedules delivered by IC to CN
at or prior to the execution of this Agreement and referenced therein by
Section number, IC represents and warrants to CN that:
SECTION 4.01. Corporate Existence and Power. IC is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted. IC is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where the failure to be
so qualified would not, individually or in the aggregate, have a Material
Adverse Effect. IC has heretofore delivered to CN true and complete copies of
IC's restated certificate of incorporation and bylaws as currently in effect.
SECTION 4.02. Corporate Authorization. The execution, delivery and
performance by IC of this Agreement and the consummation by IC of the
transactions contemplated hereby are within IC's corporate powers and, except
for any required approval by IC's stockholders in connection with the
consummation of the Merger, have been duly authorized by all necessary
corporate action. The affirmative vote of a majority of the outstanding shares
of IC Common Stock is the only vote of any class or series of IC's capital
stock necessary to adopt the Agreement. This Agreement constitutes a valid and
binding agreement of IC.
SECTION 4.03. Governmental Authorization. The execution, delivery and
performance by IC of this Agreement and the consummation by IC of the
transactions contemplated by this Agreement require no action by or in respect
of, or filing with, any governmental body, agency, official or authority the
failure to make which would have a Material Adverse Effect other than (a) the
filing of a certificate of merger in accordance with Delaware Law; (b)
compliance with any applicable requirements of the HSR Act; (c) compliance with
any applicable requirements of the STB related to the Voting Trust or approval
or exemption of the Merger; (d) compliance with any applicable requirements of
the Securities Exchange Act of 1934 and the rules and regulations promulgated
thereunder (the "EXCHANGE ACT"), the Securities Act and any foreign or state
securities or Blue Sky laws; and (e) approvals of relevant stock exchanges and
such filings, authorizations, orders and approvals required under Canadian or
other foreign laws.
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SECTION 4.04. Non-Contravention. The execution, delivery and performance
by IC of this Agreement and the consummation by IC of the transactions
contemplated hereby do not and will not (a) contravene or conflict with the
restated certificate of incorporation or bylaws of IC, (b) assuming compliance
with the matters referred to in Section 4.03, contravene or conflict with or
constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to IC or any IC
Subsidiary, (c) (x) give rise to a right on the part of any Person to require
repayment by IC or any IC Subsidiary under any agreement, contract or other
instrument binding upon IC or any IC Subsidiary or (y) constitute a default
under or give rise to a right of termination, cancellation or acceleration of
any right or obligation of IC or any IC Subsidiary or to a loss of any benefit
to which IC or any IC Subsidiary is entitled under any provision of any
agreement, contract or other instrument binding upon IC or any IC Subsidiary or
any license, franchise, permit or other similar authorization held by IC or any
IC Subsidiary, or (d) result in the creation or imposition of any Lien on any
asset of IC or any IC Subsidiary except, in the case of clauses (b), (c) and
(d), for such matters as would not, individually or in the aggregate, have a
Material Adverse Effect or materially impair the ability of IC to consummate
the transactions contemplated by this Agreement. For purposes of this
Agreement, "LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
SECTION 4.05. Capitalization. The authorized capital stock of IC consists
of 100,000,000 shares of IC Common Stock and 5,000,000 shares of preferred
stock, $.01 par value per share. As of December 31, 1997, (i) 61,402,347
shares of IC Common Stock were issued and outstanding, (ii) 3,220,609 shares
were held by IC in its treasury and (iii) employee and director stock options
to purchase an aggregate of 2,564,502 shares were outstanding (of which options
to purchase an aggregate of 1,190,641 shares were exercisable). All
outstanding shares of capital stock of IC have been duly authorized and validly
issued and are fully paid and nonassessable. Except as contemplated by this
Agreement or as set forth in this Section and except for changes since December
31, 1997 resulting from the exercise of employee stock options outstanding on
such date, there are outstanding (a) no shares of capital stock or other voting
securities of IC, (b) no securities of IC convertible into or exchangeable for
shares of capital stock or voting securities of IC, and (c) no options or other
rights to acquire from IC, and no obligation of IC to issue, any capital stock,
voting securities or securities convertible into or exchangeable for capital
stock or voting securities of IC (the items in clauses 4.05(a), 4.05(b) and
4.05(c) being referred to collectively as the "IC SECURITIES"). There are no
outstanding obligations of IC or any Subsidiary to repurchase, redeem or
otherwise acquire any IC Securities.
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SECTION 4.06. Subsidiaries. (a) Each IC Subsidiary is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted and is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary, except for those jurisdictions where
failure to be so qualified would not, individually or in the aggregate, have a
Material Adverse Effect. Except as set forth in Schedule 4.06, all IC
Subsidiaries and their respective jurisdictions of incorporation are identified
in IC's annual report on Form 10-K for the fiscal year ended December 31, 1996
(the "IC 10-K").
(b) All of the outstanding capital stock of, or other ownership interests
in, each IC Subsidiary, is owned by IC, directly or indirectly, free and clear
of any Lien and free of any other limitation or restriction (including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests). There are no outstanding (i) securities of
IC or any IC Subsidiary convertible into or exchangeable for shares of capital
stock or other voting securities or ownership interests in any IC Subsidiary,
or (ii) options or other rights to acquire from IC or any IC Subsidiary, and no
other obligation of IC or any IC Subsidiary to issue, any capital stock, voting
securities or other ownership interests in, or any securities convertible into
or exchangeable for any capital stock, voting securities or ownership interests
in, any IC Subsidiary (the items in clauses 4.06(b)(i) and 4.06(b)(ii) being
referred to collectively as the "IC SUBSIDIARY SECURITIES"). There are no
outstanding obligations of IC or any IC Subsidiary to repurchase, redeem or
otherwise acquire any outstanding IC Subsidiary Securities.
SECTION 4.07. SEC Filings. (a) IC has delivered to CN (i) IC's annual
reports on Form 10-K for its fiscal years ended December 31, 1995 and 1996,
(ii) its quarterly reports on Form 10-Q for its fiscal quarters ended after
December 31, 1996, (iii) its proxy or information statements relating to
meetings of, or actions taken without a meeting by, the stockholders of IC held
since December 31, 1996, and (iv) all of its other reports, statements,
schedules and registration statements filed with the SEC since December 31,
1996 (the documents referred to in this Section 4.07(a) being referred to
collectively as the "IC SEC FILINGS"). IC's quarterly report on Form 10-Q for
the fiscal quarter ended September 30, 1997 is referred to herein as the "IC
10-Q".
(b) As of its filing date, each IC SEC Filing complied as to form in all
material respects with the Securities Act and the Exchange Act.
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(c) As of its filing date, each IC SEC Filing filed pursuant to the
Exchange Act did not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
(d) Each such registration statement, as amended or supplemented, if
applicable, filed pursuant to the Securities Act as of the date such statement
or amendment became effective did not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading.
SECTION 4.08. Financial Statements. Except as set forth in Schedule 4.08,
the audited consolidated financial statements and unaudited consolidated
interim financial statements of IC included in the IC SEC Filings fairly
present, in all material respects, in conformity with United States generally
accepted accounting principles applied on a consistent basis (except as may be
indicated in the notes thereto), the consolidated financial position of IC and
its consolidated Subsidiaries as of the dates thereof and their consolidated
results of operations and changes in financial position for the periods then
ended (subject to normal year-end adjustments in the case of any unaudited
interim financial statements). For purposes of this Agreement, "IC BALANCE
SHEET" means the consolidated balance sheet of IC as of September 30, 1997 set
forth in the IC 10-Q and "IC BALANCE SHEET DATE" means September 30, 1997.
SECTION 4.09. Disclosure Documents. (a) Each document required to be
filed by IC with the SEC in connection with the transactions contemplated by
this Agreement (the "IC DISCLOSURE DOCUMENTS"), including, without limitation,
the Schedule 14D-9 and any amendments or supplements thereto will, when filed,
comply as to form in all material respects with the applicable requirements of
the Exchange Act. The representations and warranties contained in this Section
4.09 will not apply to statements or omissions included in the IC Disclosure
Documents based upon information furnished to IC in writing by Merger
Subsidiary or CN specifically for use therein.
(b) The information with respect to IC or any IC Subsidiary that IC
furnishes to CN in writing specifically for use in the CN Disclosure Documents
(as defined in Section 5.09) will not, at the time of the filing thereof and,
at the time of any distribution thereof (or with respect to the IC proxy or
information statement, at the time of the taking of action by written consent
by the trustee of the Voting Trust in connection with the Merger), contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
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SECTION 4.10. Absence of Certain Changes. Since the IC Balance Sheet
Date and prior to the date of this Agreement, except as set forth in Schedule
4.10, IC and the IC Subsidiaries have conducted their business in the ordinary
course consistent with past practice and there has not been:
(a) any event, occurrence or development of a state of circumstances
or facts which has had or would reasonably be expected to have a Material
Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of IC Common Stock (other
than quarterly cash dividends on IC Common Stock not in excess of $0.23
per share per quarter and having customary record and payment dates), or
any repurchase, redemption or other acquisition by IC or any IC Subsidiary
of any outstanding shares of capital stock or other securities of, or
other ownership interests in, IC or any IC Subsidiary;
(c) any amendment of any term of any outstanding security of IC or
any IC Subsidiary;
(d) other than borrowings under existing credit facilities,
replacements therefor and refinancings thereof, any incurrence, assumption
or guarantee by IC or any IC Subsidiary of any indebtedness for borrowed
money, other than (i) intercompany indebtedness or (ii) indebtedness in
the ordinary course of business on terms consistent with past practice not
exceeding an aggregate principal amount of $50,000,000;
(e) any creation or assumption by IC or any IC Subsidiary of any Lien
securing indebtedness on any material asset, other than (i) Liens securing
intercompany indebtedness or (ii) Liens in the ordinary course of business
consistent with past practice not exceeding $25,000,000;
(f) any making of any loan, advance or capital contributions to or
investment in any Person other than loans, advances or capital
contributions to or investments in wholly-owned Subsidiaries made in the
ordinary course of business consistent with past practice and not
exceeding $50,000,000;
(g) any transaction or commitment involving the acquisition or
disposition of assets (other than inventory) other than (i) capital
expenditures specified on Schedule 4.10(g), (ii) in the ordinary course of
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business in accordance with past practice or (iii) any such acquisition or
disposition not in excess of $20,000,000;
(h) any material change in any method of accounting or accounting
practice by IC or any IC Subsidiary, except for any such change required
by reason of a concurrent change in United States generally accepted
accounting principles; or
(i) other than in the ordinary course of business consistent with
past practice, any (i) material grant of any severance or termination pay
to (x) any employee of IC or any IC Subsidiary or (y) any director or
officer of IC or any IC Subsidiary, (ii) material increase in benefits
payable under any existing severance or termination pay policies or
employment agreements, (iii) except as set forth on Schedule 4.10,
entering into of any material employment, deferred compensation or other
similar agreement (or any amendment to any such existing agreement) with
any director or officer of IC or any IC Subsidiary, (iv) establishment,
adoption or material amendment (except as required by applicable law) of
any material collective bargaining, bonus, profit sharing, thrift,
pension, retirement, deferred compensation, compensation, stock option,
restricted stock or other benefit plan or arrangement covering any
director, officer or employee of IC or any IC Subsidiary other than in the
ordinary course of business consistent with past practice, or (v) material
increase in compensation, bonus or other benefits payable to directors or
officers.
SECTION 4.11. No Undisclosed Material Liabilities. There are no
liabilities of IC or any IC Subsidiary of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, of a nature
required by United States generally accepted accounting principles to be
reflected, reserved for or disclosed in the consolidated financial statements
of IC and its consolidated Subsidiaries, other than:
(a) liabilities disclosed or provided for in the IC Balance Sheet or
the IC SEC Filings prior to the date hereof;
(b) other liabilities (including liabilities incurred in the ordinary
course of business consistent with past practice since the IC Balance
Sheet Date), which would not, individually or in the aggregate, have a
Material Adverse Effect; and
(c) liabilities under this Agreement.
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SECTION 4.12. Litigation. Except as set forth on Schedule 4.12 and
except as set forth in the IC SEC Filings prior to the date hereof, there is no
action, suit, investigation or proceeding (or any basis therefor) pending
against, or to the knowledge of IC threatened against or affecting, IC or any
IC Subsidiary or any of their respective properties before any court or
arbitrator or any governmental body, agency or official which, individually or
in the aggregate, would reasonably be expected to have a Material Adverse
Effect or which, as of the date of this Agreement, is reasonably expected to
prevent, enjoin, alter or materially delay the Offer or the Merger or any of
the other transactions contemplated hereby.
SECTION 4.13. Taxes. Except as reflected in the IC Balance Sheet and the
notes thereto, as reflected in Schedule 4.13, and except for such matters that,
individually or in the aggregate, are not reasonably likely to have a Material
Adverse Effect with respect to IC, (i) all United States federal, state, local
and foreign tax returns required to be filed by IC or any IC Subsidiary have
been timely filed or requests for extensions have been timely filed and any
such extension shall have been granted and not expired, and all such filed
returns are complete and accurate in all material respects; (ii) IC and each IC
Subsidiary have paid, or have made adequate provision or have set up an
adequate accrual or reserve for the payment of all taxes, interest, additions
and penalties owing by IC or any IC Subsidiary; (iii) there is no outstanding
audit examination, deficiency or refund litigation with respect to any taxes
owed by IC or any IC Subsidiary; (iv) all taxes, interest, additions, and
penalties due with respect to completed and settled examinations or concluded
litigation have been paid in full or have been recorded as a liability on IC
Balance Sheet; (v) neither IC nor any IC Subsidiary is a party to any tax
sharing or similar agreement pursuant to which IC or any IC Subsidiary has
indemnified another party with respect to taxes; and (vi) neither IC nor any IC
Subsidiary has waived any applicable statute of limitations with respect to any
taxes.
SECTION 4.14. Employee Benefit Plans. (a) Schedule 4.14 identifies each
material Employee Plan. IC has furnished to CN copies of the material Employee
Plans (and, if applicable, related trust agreements) and all amendments thereto
and written interpretations thereof together with the most recent annual report
(Form 5500 including, if applicable, Schedule B thereto) and the most recent
actuarial valuation report prepared in connection with any Employee Plan and,
if applicable, the Internal Revenue Service determination letters. No Employee
Plan is a Title IV Plan.
(b) As of the IC Balance Sheet Date, the aggregate unfunded liability of
IC and any IC Subsidiary in respect of all Employee Plans or Benefit
Arrangements described under Sections 4(b)(5) or 401(a)(1) of ERISA, computed
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using reasonable actuarial assumptions and determined as if all benefits under
such plans were vested and payable as of such date, did not exceed $17,500,000.
(c) No transaction prohibited by Section 406 of ERISA or Section 4975 of
the Code has occurred with respect to any employee benefit plan or arrangement
which is covered by Part 4, Title I of ERISA, which transaction has or will
cause IC or any IC Subsidiary to incur any liability under ERISA, the Code or
otherwise which would reasonably be expected to result in a Material Adverse
Effect, excluding transactions effected pursuant to and in compliance with a
statutory or administrative exemption. Neither IC nor any ERISA Affiliate of
IC has (i) except where the failure thereof would not reasonably be expected to
result in a Material Adverse Effect, engaged in, or is a successor or parent
corporation to an entity that has engaged in, a transaction described in
Sections 4069 or 4212(c) of ERISA or (ii) incurred, or reasonably expects to
incur prior to the Effective Time, (A) any liability under Title IV of ERISA
arising in connection with the termination of, or a complete or partial
withdrawal from, any plan covered or previously covered by Title IV of ERISA or
(B) any liability under Section 4971 of the Code that in either case could
become a liability of IC or any IC Subsidiary or CN or any of its ERISA
Affiliates after the Effective Time which would reasonably be expected to have
a Material Adverse Effect.
(d) Each Employee Plan that is intended to be qualified under Section
401(a) of the Code has received a favorable determination, and, to IC's
knowledge, nothing has occurred since that determination that would adversely
affect such determination in a manner which would reasonably be expected to
have a Material Adverse Effect. Each Employee Plan has been maintained in
compliance with its terms and with the requirements prescribed by any and all
applicable statutes, orders, rules and regulations, including but not limited
to ERISA and the Code, except to the extent that failure to so comply would not
reasonably be expected to have a Material Adverse Effect.
(e) Schedule 4.14 identifies each material Benefit Arrangement. IC has
furnished to CN copies or descriptions of each material Benefit Arrangement
(and, if applicable, related trust agreements) and all amendments thereto and
written interpretations thereof. Each Benefit Arrangement has been maintained
in compliance with its terms and with the requirements prescribed by any and
all applicable statutes, orders, rules and regulations and has been maintained
in good standing with applicable regulatory authorities, except to the extent
that failure to so comply would not reasonably be expected to have a Material
Adverse Effect.
(f) Except as set forth on Schedule 4.14 and except as provided in this
Agreement, there is no contract, plan or arrangement (written or otherwise)
covering any employee or former employee of IC or any IC Subsidiary that,
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individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to the terms of Section 280G of the Code, to
the extent that such payments would reasonable be expected to have a Material
Adverse Effect.
(g) Except as set forth on Schedule 4.14 and except as provided in this
Agreement, no employee or former employee of IC or any IC Subsidiary will become
entitled to any bonus, retirement, severance, job security or similar benefit or
enhanced such benefit (including acceleration of vesting or exercise of an
incentive award) as a result of the transactions contemplated hereby, to the
extent that such benefits would reasonably be expected to have a Material
Adverse Effect.
SECTION 4.15. Labor Matters. IC and the IC Subsidiaries are in
compliance with all currently applicable legislation in the various
jurisdictions where they operate, with respect to terms and conditions of
employment of their workforce, including legislation governing unionized labor,
and wages and laws, and are not engaged in any unfair labor practice, failure to
comply with which or engagement in which, as the case may be, would reasonably
be expected to have a Material Adverse Effect. Except as disclosed in Schedule
4.15, (i) neither IC nor any IC Subsidiary is a party, or is otherwise subject,
to any collective bargaining agreement or other labor union contract applicable
to its employees, (ii) there are no material activities or proceedings by a
labor union or representative thereof to organize any employees of IC or any IC
Subsidiary outside of the ordinary course of business, (iii) there are no
pending negotiations between IC or any IC Subsidiary and any labor union or
representative thereof regarding any proposed material changes to any existing
national collective bargaining agreement, (iv) there are no pending, and IC and
the IC Subsidiaries have not experienced since September 30, 1997, any labor
disputes, lockouts, strikes, slowdowns, work stoppages, or threats thereof which
would reasonably be expected to have a Material Adverse Effect, (v) IC and the
IC Subsidiaries are not in default and have not breached in any material respect
the terms of any applicable collective bargaining or other labor union contract,
and there are no material grievances outstanding against IC, any IC Subsidiary
or their employees under any such agreement or contract which would reasonably
be expected to have a Material Adverse Effect, (vi) there is no unfair labor
practice complaint pending, or to the knowledge of IC threatened, against IC or
any IC Subsidiary before the National Labor Relations Board or any other
investigation, charge, prosecution, suit or other proceeding before any court or
arbitrator or any governmental body, agency or official relating to the
employees of IC or any IC Subsidiary or the representation thereof which would
reasonably be expected to have a Material Adverse Effect, (vii) there are no
claims or actions pending, or to the knowledge of IC threatened, between IC and
any IC Subsidiary and any of their employees or
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labor organizations representing or seeking to represent such employees which
would reasonably be expected to have a Material Adverse Effect and (viii) to
the knowledge of IC, there are no facts or circumstances involving any employee
that would form the basis of, or give rise to, any cause of action, including,
without limitation, unlawful termination based on discrimination of any kind
that would reasonably be expected to result in a Material Adverse Effect.
SECTION 4.16. Takeover Statutes; Rights Plans. No "fair price",
"moratorium", "control share acquisition" or other similar antitakeover statute
or regulation enacted under state or federal laws in the United States (with
the exception of Section 203 of the Delaware Law) applicable to IC or any IC
Subsidiary is applicable to the Merger or the other transactions contemplated
hereby. As of the date of this Agreement, IC does not have any shareholder
rights plan or similar antitakeover device in effect. The action of the Board
of Directors of IC in approving the Merger, this Agreement and the Voting Trust
is sufficient to render inapplicable to the Merger and this Agreement and the
Voting Trust (and the transactions provided for herein and therein) the
restrictions on "business combinations" (as defined in Section 203 of the
Delaware Law) set forth in Section 203 of the Delaware Law.
SECTION 4.17. Compliance with Laws. Except as set forth in IC SEC
Filings prior to the date hereof, neither IC nor any IC Subsidiary is in
violation of, or has violated, any applicable provisions of any laws, statutes,
ordinances or regulations, except for such matters as would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
SECTION 4.18. Finders' Fees. Except for Lehman Brothers Inc. and The
Beacon Group Capital Services LLC, copies of whose engagement agreements have
been provided to CN, there is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act on behalf, of
IC or any IC Subsidiary who might be entitled to any fee or commission from CN
or any of its Affiliates upon consummation of the transactions contemplated by
this Agreement.
SECTION 4.19. Environmental Matters. (a) Except as set forth in IC SEC
Filings prior to the date hereof, and except as would not, individually or in
the aggregate, have a Material Adverse Effect:
(i) no written notice, notification, demand, complaint, penalty,
request for information, citation, summons or order has been received, no
complaint has been filed, no penalty has been assessed and no action,
claim, suit, legal proceeding or, to the knowledge of IC, investigation or
review is pending, or to the knowledge of IC, threatened by any
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governmental entity or other Person with respect to any matters relating
to IC or any IC Subsidiary and relating to or arising out of any
Environmental Law;
(ii) to the knowledge of IC there are no liabilities of or relating
to IC or any IC Subsidiary of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, arising under
or relating to any Environmental Law, and there are no facts, conditions,
situations or set of circumstances which would reasonably be expected to
result in or be the basis for any such liability;
(iii) except as set forth in Schedule 4.19, no property now or, to
the knowledge of IC, previously, owned, leased or operated by IC or any IC
Subsidiary or, to the knowledge of IC, any property to which IC or any IC
Subsidiary has, directly or indirectly, transported or arranged for the
transportation of any Hazardous Substances is listed or, to the knowledge
of IC, proposed for listing, on the National Priorities List promulgated
pursuant to CERCLA, on CERCLIS (as defined in CERCLA) or on any similar
federal, state or foreign list of sites requiring investigation or
clean-up; and
(iv) IC and IC Subsidiaries are in compliance with all Environmental
Laws and have obtained and are in compliance with all IC Environmental
Permits; such IC Environmental Permits are valid and in full force and
effect and will not be terminated or impaired or become terminable, in
whole or in part, as a result of the transactions contemplated hereby.
(b) There has been no material written report regarding any environmental
investigation, study, audit, test, review or other analysis conducted of which
IC has knowledge in relation to the current or prior business of IC or any IC
Subsidiary or any property or facility now or previously owned, leased or
operated by IC or any IC Subsidiary which has not either been made available to
CN prior to the date hereof or (with respect to any such report over which IC
does not have control or custody) disclosed on Schedule 4.19.
(c) Neither IC nor any IC Subsidiary owns, leases or operates or has
owned, leased or operated any property or has conducted any operations in New
Jersey or Connecticut that would result in the New Jersey Industrial Site
Recovery Act or the Connecticut Transfer Act being applicable to the
transactions contemplated by this Agreement.
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(d) For purposes of this Section and, to the extent applicable therein,
Section 5.17 hereof, the following terms shall have the meanings set forth
below:
"ENVIRONMENTAL LAWS" means any applicable federal, state, local,
provincial or foreign law (including, without limitation, common law), treaty,
judicial decision, regulation, rule, judgment, order, decree, injunction,
permit, or legally binding governmental restriction or requirement, or any
legally binding agreement with any governmental authority or other third party,
relating to human health and safety (as relating to the environment), the
environment or, as impacting human health or the environment, to pollutants,
contaminants, wastes or chemicals or any toxic, radioactive, ignitable,
corrosive, reactive or otherwise hazardous substances, wastes or materials.
"IC ENVIRONMENTAL PERMITS" means all permits, licenses, franchises,
certificates, approvals and other similar authorizations of governmental
authorities required by Environmental Laws regarding the business of IC or any
IC Subsidiary as currently conducted.
"HAZARDOUS SUBSTANCES" means, in each case as regulated under any
Environmental Law, any pollutant, contaminant, waste or chemical or any toxic,
radioactive, ignitable, corrosive, reactive or otherwise hazardous substance,
waste or material, or any substance, waste or material having any constituent
elements displaying any of the foregoing characteristics, including, without
limitation, petroleum, its derivatives, by-products and other hydrocarbons, and
any substance, waste or material regulated under any Environmental Law.
SECTION 4.20. Opinion of Financial Advisor. IC's Board of Directors has
received the opinions of Lehman Brothers Inc. and The Beacon Group Capital
Services LLC, financial advisors to IC, to the effect that, as of the date of
this Agreement, the consideration to be received in the Offer and the Merger,
taken together, is fair to IC's stockholders from a financial point of view,
and such opinions have not been withdrawn.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF CN AND MERGER SUBSIDIARY
Except as set forth in the CN disclosure schedules delivered by CN to IC
at or prior to the execution of this Agreement and referenced therein by
Section number, CN and Merger Subsidiary represent and warrant to IC that:
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SECTION 5.01. Corporate Existence and Power. Each of CN and Merger
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of continuance or incorporation, and
has all corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted. Each
of CN and Merger Subsidiary is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where the failure to be
so qualified would not, individually or in the aggregate, have a Material
Adverse Effect. CN has heretofore delivered to IC true and complete copies of
the certificate of incorporation and bylaws of CN and Merger Subsidiary as
currently in effect. From the date of its incorporation, Merger Subsidiary will
not engage in any activities other than in connection with, or as contemplated
by, this Agreement.
SECTION 5.02. Corporate Authorization. The execution, delivery and
performance by CN and Merger Subsidiary of this Agreement and the consummation
by CN and Merger Subsidiary of the transactions contemplated hereby are within
the corporate powers of CN and Merger Subsidiary and have been duly authorized
by all necessary corporate action. This Agreement constitutes a valid and
binding agreement of each of CN and Merger Subsidiary.
SECTION 5.03. Governmental Authorization. The execution, delivery and
performance by CN and Merger Subsidiary of this Agreement and the consummation
by CN and Merger Subsidiary of the transactions contemplated by this Agreement
require no action by or in respect of, or filing with, any governmental body,
agency, official or authority the failure to make which would have a Material
Adverse Effect other than (a) the filing of a certificate of merger in
accordance with Delaware Law; (b) compliance with any applicable requirements of
the HSR Act; (c) compliance with any applicable requirements of the STB relating
to the Voting Trust or approval or exemption of the Merger; (d) compliance with
any applicable requirements of the Exchange Act, the Securities Act and any
foreign or state securities or Blue Sky laws; (e) approvals of relevant stock
exchanges and (f) such filings, authorizations, orders and approvals required
under Canadian or other foreign laws.
SECTION 5.04. Non-Contravention. The execution, delivery and performance
by CN and Merger Subsidiary of this Agreement and the consummation by CN and
Merger Subsidiary of the transactions contemplated hereby do not and will not
(a) contravene or conflict with the certificate of incorporation or bylaws of
CN and Merger Subsidiary, (b) assuming compliance with the matters referred to
in Section 5.03, contravene or conflict with or
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constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to CN or any CN
Subsidiary, (c) constitute a default under or give rise to a right of
termination, cancellation or acceleration of any right or obligation of CN or
any CN Subsidiary or to a loss of any benefit to which CN or any CN Subsidiary
is entitled under any provision of any agreement, contract or other instrument
binding upon CN or any CN Subsidiary or any license, franchise, permit or other
similar authorization held by CN or any CN Subsidiary, or (d) result in the
creation or imposition of any Lien on any asset of CN or any CN Subsidiary
except, in the case of clauses (b), (c) and (d), for such matters as would not,
individually or in the aggregate, have a Material Adverse Effect or materially
impair the ability of CN to consummate the transactions contemplated by this
Agreement.
SECTION 5.05. Capitalization. The authorized capital stock of CN consists
of (i) an unlimited number of shares of CN Common Stock, (ii) an unlimited
number of shares of Class A Preferred Stock of CN ("CN CLASS A PREFERRED STOCK")
and (iii) an unlimited number of shares of Class B Preferred Stock of CN ("CN
CLASS B PREFERRED STOCK"). As of the close of business on February 3, 1998,
85,602,013 shares of CN Common Stock were issued and outstanding and employee
stock options to purchase an aggregate of 1,797,074 shares of CN Common Stock
(of which options to purchase an aggregate of 538,266 shares of CN Common Stock
were exercisable) were outstanding. No shares of either CN Class A Preferred
Stock or CN Class B Preferred Stock were outstanding as of such date. All
outstanding shares of capital stock of CN have been duly authorized and validly
issued and are fully paid and nonassessable. Except as set forth in this Section
and except for changes since February 3, 1998 resulting from the exercise of
employee stock options outstanding on such date, there are outstanding (a) no
shares of capital stock or other voting securities of, (b) no securities of
convertible into or exchangeable for shares of capital stock or voting
securities of, and (c) no options or other rights to acquire from, and no
obligation of to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of (the
items in clauses 5.05(a), 5.05(b) and 5.05(c) being referred to collectively as
the "CN SECURITIES"). There are no outstanding obligations of CN or any CN
Subsidiary to repurchase, redeem or otherwise acquire any CN Securities.
SECTION 5.06. Subsidiaries. (a) All principal CN Subsidiaries (the
"PRINCIPAL CN SUBSIDIARIES") and their respective jurisdictions of incorporation
are identified in CN's annual information form, dated May 12, 1997 (filed with
the SEC under Form 40-F dated May 16, 1997) (the "CN 40-F"). Each Principal CN
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, has all corporate
powers and all material governmental licenses, authorizations, consents and
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approvals required to carry on its business as now conducted and is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned or leased by it or
the nature of its activities makes such qualification necessary, except for
those jurisdictions where failure to be so qualified would not, individually or
in the aggregate, have a Material Adverse Effect.
(b) All of the outstanding capital stock of, or other ownership interests
in, each Principal CN Subsidiary, is owned by CN, directly or indirectly, free
and clear of any Lien and free of any other limitation or restriction
(including any restriction on the right to vote, sell or otherwise dispose of
such capital stock or other ownership interests). There are no outstanding (i)
securities of CN or any Principal CN Subsidiary convertible into or
exchangeable for shares of capital stock or other voting securities or
ownership interests in any Principal CN Subsidiary, and (ii) options or other
rights to acquire from CN or any Principal CN Subsidiary, and no other
obligation of CN or any Principal CN Subsidiary to issue, any capital stock,
voting securities or other ownership interests in, or any securities
convertible into or exchangeable for any capital stock, voting securities or
ownership interests in, any Subsidiary (the items in clauses 5.06(b)(i) and
5.06(b)(ii) being referred to collectively as the "PRINCIPAL CN SUBSIDIARY
SECURITIES"). There are no outstanding obligations of CN or any Principal CN
Subsidiary to repurchase, redeem or otherwise acquire any outstanding Principal
CN Subsidiary Securities.
SECTION 5.07. SEC Filings. (a) CN has delivered to IC (i) the CN 40-F,
(ii) its quarterly reviews (filed with the SEC under Form 6-K) for its fiscal
quarters ended after May 12, 1997, (iii) its proxy or information statements
relating to meetings of, or actions taken without a meeting by, the stockholders
of CN held since May 12, 1997, (iv) all of its other reports, statements,
schedules and registration statements filed with the SEC since May 12, 1997 and
(v) all of its filings made with the Ontario Securities Commission since May 12,
1997 (the documents referred to in this Section 5.07 being referred to
collectively as the "CN SEC FILINGS"). CN's quarterly review on Form 6-K for
its fiscal quarter ended September 30, 1997, is referred to herein as the "CN
6-K".
(b) As of its filing date, each CN SEC Filing complied as to form in all
material respects with the applicable requirements of the Securities Act, the
Securities Act (Ontario) and the Exchange Act.
(c) As of its filing date, each CN SEC Filing filed pursuant to the
Exchange Act did not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
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(d) Each such registration statement, as amended or supplemented, if
applicable, filed pursuant to the Securities Act, the Exchange Act and the
Securities Act (Ontario) as of the date such statement or amendment became
effective did not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading.
SECTION 5.08. Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of CN
included in the CN SEC Filings fairly present, in all material respects, in
conformity with Canadian generally accepted accounting principles applied on a
consistent basis (except as may be indicated in the notes thereto), the
consolidated financial position of CN and its consolidated Subsidiaries as of
the dates thereof and their consolidated results of operations and changes in
financial position for the periods then ended (subject to normal year-end
adjustments in the case of any unaudited interim financial statements). For
purposes of this Agreement, "CN BALANCE SHEET" means the consolidated balance
sheet of CN as of September 30, 1997, set forth in the CN 6-K and "CN BALANCE
SHEET DATE" means September 30, 1997.
SECTION 5.09. Disclosure Documents. (a) Each document required to be
filed by CN with the SEC in connection with the transactions contemplated by
this Agreement (the "CN DISCLOSURE DOCUMENTS"), including, without limitation,
the Offer Documents and the registration statement on Form F-4 (the "FORM F-4")
to be filed with the SEC pursuant to the Securities Act in connection with the
issuance of CN Common Stock in the Merger, in each case together with any
amendments or supplements thereto will, when filed, comply as to form in all
material respects with the applicable requirements of applicable Canadian
securities laws, the Securities Act or the Exchange Act, as the case may be. The
representations and warranties contained in this Section 5.09(a) will not apply
to statements or omissions included in the CN Disclosure Documents based upon
information furnished to CN in writing by IC specifically for use therein.
(b) At the time the Form F-4 becomes effective under the Securities Act,
the Form F-4 will not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. At the time of the filing of any CN Disclosure Document other than
the Form F-4 and at the time of any distribution thereof, such CN Disclosure
Document will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
The representations
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and warranties contained in this Section 5.09(b) will not apply to statements
or omissions included in the CN Disclosure Documents based upon information
furnished to CN in writing by IC specifically for use therein.
(c) The information with respect to CN or any CN Subsidiary that CN
furnishes to IC in writing specifically for use in the IC Disclosure Documents
(as defined in Section 4.09) will not, at the time of the filing thereof, at
the time of any distribution thereof (or with respect to the IC proxy or
information statement, at the time of the IC stockholder action by written
consent in connection with the Merger), contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
SECTION 5.10. Absence of Certain Changes. Other than the establishment of
a wholly-owned real estate Subsidiary, the transfer of CN's beneficial interest
in certain real estate assets of CN to such Subsidiary and other arrangements
between CN and such Subsidiary relating thereto (the "REAL ESTATE
REORGANIZATION") since the CN Balance Sheet Date, CN and the CN Subsidiaries
have conducted their business in the ordinary course consistent with past
practice and there has not been:
(a) any event, occurrence or development of a state of circumstances
or facts which has had or would reasonably be expected to have a Material
Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of CN
(other than dividends in accordance with past practice, as adjusted to
reflect the dividend policy of the current Board of Directors of CN), or
any repurchase, redemption or other acquisition by the CN or any CN
Subsidiary of any outstanding shares of capital stock or other securities
of, or other ownership interests in, CN or any CN Subsidiary;
(c) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of CN or any CN
Subsidiary which, individually or in the aggregate, has had or would
reasonably be expected to have a Material Adverse Effect;
(d) as of the date of this Agreement, other than borrowings under
existing credit facilities, replacements therefor and refinancings thereof
and borrowings required to finance the transactions contemplated hereby,
any incurrence, assumption or guarantee by CN or any CN Subsidiary of
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any indebtedness for borrowed money, other than intercompany indebtedness
and indebtedness in the ordinary course of business on terms consistent
with past practice and not exceeding an aggregate principal amount of
$200,000,000; or
(e) except as set forth on Schedule 5.10(e), any transaction or
commitment involving the acquisition or disposition of assets (other than
inventory) in the ordinary course of business in accordance with past
practice and any such acquisition or disposition not in excess of
$100,000,000.
SECTION 5.11. No Undisclosed Material Liabilities. There are no
liabilities of CN or any CN Subsidiary of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise of a nature
required by Canadian generally accepted accounting principles to be reflected,
reserved for or disclosed in the consolidated financial statements of CN and
its consolidated Subsidiaries, other than:
(a) liabilities disclosed or provided for in the CN Balance Sheet or
the CN SEC Filings prior to the date hereof;
(b) other liabilities (including liabilities incurred in the ordinary
course of business consistent with past practice since the CN Balance
Sheet Date or liabilities arising pursuant to the Real Estate
Reorganization), which would not, individually or in the aggregate, have a
Material Adverse Effect; and
(c) liabilities under this Agreement.
SECTION 5.12. Litigation. Except as set forth in the CN SEC Filings
prior to the date hereof, there is no action, suit, investigation or proceeding
(or any basis therefor) pending against, or to the knowledge of CN threatened
against or affecting, CN or any CN Subsidiary or any of their respective
properties before any court or arbitrator or any governmental body, agency or
official which, individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect or which, as of the date of this Agreement,
is reasonably expected to prevent, enjoin, alter or materially delay the Offer
or the Merger or any of the other transactions contemplated hereby.
SECTION 5.13. Taxes. Except as reflected in the CN Balance Sheet and the
notes thereto, as reflected in Schedule 5.13, and except for such matters that,
individually or in the aggregate, are not reasonably likely to have a Material
Adverse Effect with respect to CN; (i) all federal, Canadian provincial, state,
local
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and foreign tax returns required to be filed by CN or any CN Subsidiary have
been timely filed or requests for extensions have been timely filed and any
such extensions shall have been granted and not expired, and all such filed
returns are complete and accurate in all material respects; (ii) CN and each CN
Subsidiary have paid, or have made adequate provision or set up an adequate
accrual or reserve for the payment of all taxes, interest, additions and
penalties owing by CN or any CN Subsidiary; (iii) there is no outstanding audit
examination, deficiency or refund litigation with respect to any taxes owed by
CN or any CN Subsidiary; (iv) all taxes, interest, additions, and penalties due
with respect to completed and settled examinations or concluded litigation have
been paid in full or have been recorded as a liability on the CN Balance Sheet;
(v) neither CN nor any CN Subsidiary is a party to any tax sharing or similar
agreement pursuant to which CN or any CN Subsidiary has indemnified another
party with respect to taxes (other than any liability of CN to its wholly-owned
real estate Subsidiary or of such Subsidiary to CN as a consequence of the Real
Estate Reorganization); and (vi) neither CN nor any CN Subsidiary has waived
any applicable statute of limitations with respect to any taxes.
SECTION 5.14. Employee Benefit Plans. (a) CN undertakes to make
available to IC copies of the material Employee Plans (other than Multiemployer
Plans) (and, if applicable, related trust agreements) and all amendments
thereto and written interpretations thereof together with the most recent
annual report (Form 5500 including, if applicable, Schedule B thereto).
(b) Each Employee Plan has been maintained in substantial compliance with
its terms and with the requirements prescribed by any and all applicable
statutes, orders, rules and regulations, including but not limited to ERISA and
the Code, except to the extent that failure to so comply would not reasonably
be expected to have a Material Adverse Effect.
(c) CN undertakes to make available to IC copies or descriptions of each
material Benefit Arrangement (and, if applicable, related trust agreements) and
all amendments thereto and written interpretations thereof. Each Benefit
Arrangement has been maintained in compliance with its terms and with the
requirements prescribed by any and all applicable statutes, orders, rules and
regulations and has been maintained in good standing with applicable regulatory
authorities, except to the extent that failure to do so would not reasonably be
expected to have a Material Adverse Effect.
SECTION 5.15. Compliance with Laws. Except as set forth in the CN SEC
Filings prior to the date hereof, neither CN nor any CN Subsidiary is in
violation of, or has violated, any applicable provisions of any laws, statutes,
ordinances or
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regulations except for such matters as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
SECTION 5.16. Finders' Fees. Except for Goldman, Sachs & Co. and
Schroder & Co. Inc., copies of whose engagement agreements have been provided
to IC, there is no investment banker, broker, finder or other intermediary
which has been retained by or is authorized to act on behalf, of CN or any CN
Subsidiary who might be entitled to any fee or commission from IC or any of its
Affiliates upon consummation of the transactions contemplated by this
Agreement.
SECTION 5.17. Environmental Matters. Except as set forth in the CN SEC
Filings prior to the date hereof there are no liabilities of, or relating to,
CN or any CN Subsidiary of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, arising under or relating to
any Environmental Law that, individually or in the aggregate, have had or
could reasonably be expected to have a Material Adverse Effect on CN.
SECTION 5.18. Ownership of IC Common Stock. As of the date of this
Agreement, CN and its Affiliates do not own (directly or indirectly,
beneficially or of record) any shares of IC Common Stock and neither CN nor any
of its Affiliates own any rights to acquire any shares of IC Common Stock,
except pursuant to this Agreement.
SECTION 5.19. Sufficiency of Funds. CN has received commitments from
third party lenders pursuant to commitment letters (none of which has been
withdrawn) the proceeds of which, together with funds of CN, will enable CN to
provide Merger Subsidiary with sufficient funds to consummate the Offer, the
Merger and the transactions contemplated hereby in accordance with the terms of
this Agreement.
SECTION 5.20. Labor Matters. CN and the CN Subsidiaries are in
compliance with all currently applicable legislation in the various
jurisdictions where they operate, with respect to terms and conditions of
employment of their workforce, including legislation governing unionized labor,
and wages and laws, and are not engaged in any unfair labor practice, failure
to comply with which or engagement in which, as the case may be, would
reasonably be expected to have a Material Adverse Effect. Except as disclosed
in Schedule 5.20, (i) neither CN nor any CN Subsidiary is a party, or is
otherwise subject, to any collective bargaining agreement or other labor union
contract applicable to its employees, (ii) there are no material activities or
proceedings by a labor union or representative thereof to organize any
employees of CN or any CN Subsidiary outside of the ordinary course of
business, (iii) there are no pending negotiations between CN or any CN
Subsidiary and any labor union or representative thereof regarding any proposed
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material changes to any existing national collective bargaining agreement, (iv)
there are no pending, and CN and the CN Subsidiaries have not experienced since
May 12, 1997, any labor disputes, lockouts, strikes, slowdowns, work stoppages,
or threats thereof which would reasonably be expected to have a Material
Adverse Effect, (v) CN and the CN Subsidiaries are not in default and have not
breached in any material respect the terms of any applicable collective
bargaining or other labor union contract, and there are no material grievances
outstanding against CN, any CN Subsidiary or their employees under any such
agreement or contract which would reasonably be expected to have a Material
Adverse Effect, (vi) there is no unfair labor practice complaint pending, or to
the knowledge of CN threatened, against CN or any CN Subsidiary before the
National Labor Relations Board or the Canada Labor Relations Board or any other
investigation, charge, prosecution, suit or other proceeding before any court
or arbitrator or any governmental body, agency or official relating to the
employees of CN or any CN Subsidiary or the representation thereof which would
reasonably be expected to have a Material Adverse Effect, (vii) there are no
claims or actions pending, or to the knowledge of CN threatened, between CN and
any CN Subsidiary and any of their employees or labor organizations
representing or seeking to represent such employees which would reasonably be
expected to have a Material Adverse Effect and (viii) to the knowledge of CN,
there are no facts or circumstances involving any employee that would form the
basis of, or give rise to, any cause of action, including, without limitation,
unlawful termination based on discrimination of any kind that could reasonably
be expected to result in a Material Adverse Effect.
ARTICLE 6
COVENANTS OF IC
IC agrees that:
SECTION 6.01. Conduct of IC. Except as otherwise expressly set forth in
this Agreement, during the period from the date of this Agreement through the
Control Date, IC shall, and shall cause each of its Subsidiaries to, carry on
their respective businesses in the ordinary course consistent with past practice
and in compliance in all material respects with all applicable laws and
regulations and, to the extent consistent therewith, shall use their reasonable
best efforts to preserve intact their current business organizations, use their
reasonable best efforts to keep available the services of their current officers
and of their key employees as a group and use their reasonable best efforts to
preserve their relationships with those Persons having business dealings with
them. IC, in conducting its business and operations, shall have due regard for
the interests of the holders of the Trust Certificates (as defined in the Voting
Trust Agreement), as investors in IC,
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determined without reference to such holders' interests in railroads other than
the IC or its Subsidiaries. Except as otherwise expressly set forth in this
Agreement, as set forth in Schedule 6.01 or as required to implement the Rights
Plan (as hereinafter defined) in accordance with and subject to clause (ii)
hereof, without limiting the generality of the foregoing during the period from
the date of this Agreement through the Control Date, IC shall not, and shall
not permit any of its Subsidiaries to (without the prior written consent of
CN):
(i) other than dividends and distributions (including liquidating
distributions) by a direct or indirect wholly-owned Subsidiary of IC
(including the Railroad Subsidiaries) to its parent and other than regular
quarterly cash dividends of $0.23 per share with respect to IC's Common
Stock, (x) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock (except as
contemplated by clause (ii) below), (y) split, combine or reclassify any
of its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, or (z) purchase, redeem, retire or otherwise acquire any
shares of its capital stock or the capital stock of any Subsidiaries or
any other securities thereof or any rights, warrants or options to acquire
any such shares or other securities; provided that, following the
Effective Time, subject to applicable legal restrictions and financial
covenants contained in instruments relating to outstanding indebtedness,
IC shall not decrease the aggregate amount of dividends and other
distributions in respect of its outstanding capital stock from the level
paid immediately prior to the Merger;
(ii) issue, deliver, sell, pledge or otherwise encumber any IC
Securities or any IC Subsidiary Securities or any securities convertible
into, or any rights, warrants or options to acquire, any such IC
Securities or any IC Subsidiary Securities, in each case other than (x)
pursuant to the exercise of existing stock options, (y) grants of stock
options and other stock-based employee benefits prior to the Effective
Time in the ordinary course of business consistent with past practice and
issuances pursuant thereto or (z) securities issued by a direct or
indirect wholly-owned Subsidiary of IC to IC or a direct or indirect
wholly-owned Subsidiary of IC; provided, that if any Person shall have
announced an Acquisition Proposal, IC shall have the right, prior to the
consummation of the Offer, to implement, modify, amend or redeem a
shareholder rights plan (the "RIGHTS PLAN"), but only so long as such
rights plan contains provisions reasonably satisfactory in form and
substance to CN to exempt this Agreement and the transactions to be
effected pursuant to this Agreement
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from the plan and to assure that this Agreement and the transactions to be
effected pursuant to this Agreement will not trigger such rights plan;
(iii) adopt, propose or agree to any amendment to its (or any
Subsidiary's) certificate of incorporation, by-laws or other comparable
organizational documents;
(iv) (A) without the prior written consent of CN, sell, lease,
license, mortgage or otherwise encumber, voluntarily subject to any Lien
or otherwise dispose of any rail lines or rights of way, it being
understood that nothing contained in this clause (A) shall prevent either
the sale or disposition of rail stock in the ordinary course of business
or the movement of such rail stock within the IC system; provided, that if
IC requests in writing that it be permitted to engage in a transaction
that requires CN's consent under this clause (A) and CN does not respond
within 20 days of receipt of such request, IC shall be permitted to engage
in such transaction; and provided, further, that this clause (A) shall not
apply with respect to any transaction entered into prior to the date of
this Agreement;
(B) sell, lease, license, mortgage or otherwise encumber, voluntarily
subject to any Lien or otherwise dispose of any of its properties or assets
(excluding rail lines or rights of way), other than (x) leases or licenses
of railroad equipment and property in the ordinary course of business
consistent with past practice or (y) transactions in the ordinary course of
business consistent with past practice and not exceeding in the aggregate
$30,000,000 on an annual basis;
(v) make or agree to make any acquisition (including through a leasing
arrangement) (other than of inventory and rolling stock in the ordinary
course of business) or capital expenditure in excess of $50,000,000 in the
aggregate on an annual basis, except for acquisitions or capital
expenditures specified on Schedule 6.01(v) or pursuant to agreements and
commitments entered into prior to the date of this Agreement and previously
made available to CN;
(vi) incur any indebtedness for borrowed money or guarantee any such
indebtedness other than intercompany indebtedness except for (i)
borrowings under existing credit facilities, replacements therefor and
refinancings thereof or (ii) other borrowings in the ordinary course of
business consistent with past practice, provided that aggregate borrowings
under clauses (i) and (ii) do not exceed $200,000,000;
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(vii) except for loans, advances, capital contributions or
investments (x) specified on Schedule 6.01(vii) or (y) made in the
ordinary course of business consistent with past practice and not
exceeding $15,000,000 on an annual basis, make any loans, advances or
capital contributions to, or investments in, any other Person (other than,
in the case of IC, to IC or any Subsidiary or, in the case of the Railroad
Subsidiaries, to a Railroad Subsidiary or any Subsidiary of a Railroad
Subsidiary, as the case may be);
(viii) except for elections that are required by law or are
consistent with past practice, make any tax election;
(ix) other than payments with respect to any judgments, pay,
discharge, settle or satisfy any material claims, liabilities or
obligations (whether absolute, accrued, asserted or unasserted, contingent
or otherwise) other than the payment, discharge, settlement or
satisfaction of claims, liabilities or obligations (A) in the ordinary
course of business consistent with past practice or in accordance with
their terms, (B) reflected or reserved against in, or contemplated by, the
most recent consolidated financial statements (or the notes thereto) of IC
filed with the SEC prior to the Effective Time or (C) incurred since the
date of such financial statements in the ordinary course of business
consistent with past practice and with this Agreement; provided that, with
respect to clause (C), none of such payments, discharges, settlements or
satisfaction shall in any event exceed $15,000,000;
(x) except (i) as otherwise provided in this Section 6.01 or (ii) in
the ordinary course of business consistent with past practice (it being
understood that the taking by IC or any of its Subsidiaries of any of the
actions described in this paragraph (x) with respect to a contract
involving annual payments of more than $10,000,000 shall not be in the
ordinary course of business), enter into any contract or agreement
involving annual payments of more than $5,000,000, modify or amend in any
material respect or terminate any such contract or agreement to which IC
or any of its Subsidiaries is a party, or waive, release or assign any
rights or claims under any such contract or agreement that are significant
to such contract or agreement; provided that in entering into contracts in
the ordinary course of business, each of IC and its Subsidiaries shall act
entirely in its own interest as an independent enterprise;
(xi) make any material change to its accounting methods, principles
or practices, except as may be required by United States generally
accepted accounting principles;
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(xii) except (i) for arrangements entered into in the ordinary course
of business consistent with past practice, (ii) as contemplated by Section
8.07 of this Agreement or (iii) as required by applicable law, enter
into, adopt or materially amend or change the funding or accrual practices
of any bonus, profit sharing, compensation, severance, termination, stock
option, stock appreciation right, restricted stock, performance unit,
pension, retirement, deferred compensation, employment, severance or other
employee benefit agreements, trusts, plans, funds or other arrangements of
or for the benefit or welfare of any employee of IC or any of its
Subsidiaries (or any other Person for whom either IC or any of its
Subsidiaries will have liability), or (except for normal increases in the
ordinary course of business that are consistent with past practices)
materially increase in any manner the compensation or fringe benefits of
any employee of IC or any IC Subsidiary (or any other Person for whom IC
or any IC Subsidiary will have liability) or pay any material benefit not
required by any existing plan and arrangement (including the granting of
stock options, stock appreciation rights, shares of restricted stock or
performance units) or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing;
(xiii) enter into any agreement containing any provision or covenant
(x) limiting in any material respect the ability to compete with any
Person which would bind IC or any IC Subsidiary or any successor or (y)
granting any concessions or rights to any railroad or other Person with
respect to the use of any rail lines, yards of other fixed railroad
property of IC or its Subsidiaries (whether through divestiture of lines,
the grant of trackage or haulage rights or otherwise) in each case other
than in the ordinary course of business consistent with past practice; or
(xiv) authorize or commit or agree to take any of the foregoing
actions.
SECTION 6.02. Access to Information. From the date hereof through the
Control Date, IC and its Subsidiaries will give CN, its counsel, financial
advisors, auditors and other authorized representatives full access to the
offices, properties, books and records of IC and its Subsidiaries, will furnish
to CN, its counsel, financial advisors, auditors and other authorized
representatives such financial and operating data and other information as such
Persons may reasonably request and will instruct the employees, counsel and
financial advisors of IC and its Subsidiaries to cooperate with CN in its
investigation of the business of IC and its Subsidiaries, as the case may be;
provided that no investigation pursuant to this Section shall affect any
representation or warranty given by IC to CN hereunder;
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and provided further, that access to certain information of IC and its
Subsidiaries may require the entry of a protective order by the STB, after
which date full access shall be granted to such information consistent with
this paragraph and subject to the terms of such order. IC shall hold and shall
cause its officers, employees, accountants, counsel, financial advisers and
other representatives and Affiliates to hold, any nonpublic information in
accordance with the terms of that certain confidentiality and standstill
agreement (the "CONFIDENTIALITY AGREEMENT") dated March 13, 1997, between CN
and IC.
SECTION 6.03. Other Offers. (a) IC agrees (i) that neither IC nor any IC
Subsidiary shall, and it shall direct and use its reasonable best efforts to
cause its officers, directors, employees, agents and representatives (including,
without limitation, any investment banker, attorney or accountant retained by it
or any IC Subsidiary) not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any proposal or
offer (including, without limitation, any proposal or offer to its stockholders)
or any indication of interest, with respect to a merger, acquisition,
consolidation or similar transaction involving, or any purchase of all or any
significant portion of the assets or equity securities of, IC or any IC
Subsidiary (any such proposal or offer being hereinafter referred to as an
"ACQUISITION PROPOSAL"), or engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
Person, relating to an Acquisition Proposal, or afford access to the properties,
books or records of IC or any IC Subsidiary to any Person that may be
considering making or has made or has stated an intention to make, an
Acquisition Proposal, or release any third party from any obligations under any
existing standstill agreement or arrangement, or enter into any agreement with
respect to an Acquisition Proposal; (ii) that it will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any of the foregoing; and (iii)
that it will notify CN (including in such notification the identity of the third
party making inquiries or proposals, requesting information or access or seeking
to initiate or continue negotiations or discussions, as the case may be) with
reasonable promptness (but in no event later than 24 hours thereafter) if any
such inquiries or proposals are received by, any such information or access is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with, it. Notwithstanding the foregoing, IC or its Board
of Directors may (x) take any action required to comply with Rule 14e-2(a)
promulgated under the Exchange Act with regard to an Acquisition Proposal or,
prior to the earlier of (A) consummation of the Offer or (B) the adoption of
this Agreement by the stockholders of IC, (y) take any action as contemplated by
Section 11.01(e) or (z) directly or indirectly, furnish non-public information
and access to, and may participate in discussions and negotiations with, any
Person in response to an unsolicited bona fide Acquisition Proposal, if the
Board of Directors of IC has
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concluded in good faith, based on the advice of outside counsel, that such
action is reasonably necessary for the Board of Directors to act in a manner
consistent with its fiduciary duties under applicable law; except that (with
respect to clauses (y) and (z) hereof) prior to furnishing non-public
information and access to, or participating in discussions or negotiations
with, such Person, IC receives from such Person an executed confidentiality and
standstill agreement with terms not in the aggregate less favorable to IC than
those contained in the Confidentiality Agreement (it being understood that IC
may enter into a confidentiality agreement without a standstill provision or
with a standstill provision less favorable to IC provided that it waives or
similarly modifies the standstill provision in the Confidentiality Agreement);
provided further, that at least 48 hours prior to the entry into or
announcement of an intention to enter into a definitive agreement with respect
to an Acquisition Proposal, IC shall have provided written notice to CN
advising CN of its intention to enter into a definitive agreement with respect
to an Acquisition Proposal and specifying the material terms and conditions of
such Acquisition Proposal. Within such 48 hour period, CN may propose an
improved transaction.
SECTION 6.04. Notices of Certain Events. IC shall promptly notify CN of:
(a) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement; and
(c) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge threatened against, relating to
or involving or otherwise affecting IC or any IC Subsidiary which, if
pending on the date of this Agreement, would have been required to have
been disclosed pursuant to Section 4.12 or which relate to the
consummation of the transactions contemplated by this Agreement.
SECTION 6.05. Registration Rights. IC shall, if requested by CN at any
time and from time to time within three years after the termination of this
Agreement, as expeditiously as possible prepare and file up to three
registration statements under the Securities Act if such registration is
necessary in order to permit the sale or other disposition of any or all
securities that have been deposited in the Voting Trust by CN, in accordance
with the intended method of sale or other disposition stated by CN, including a
"shelf" registration statement under Rule 415 under the Securities Act or any
successor provision; and IC shall
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use its reasonable best efforts to qualify such securities under any applicable
state securities laws. CN agrees to use reasonable efforts to cause, and to
cause any underwriters of any sale or other disposition to cause, any sale or
other disposition pursuant to such registration statement to be effected on a
widely distributed basis. IC shall use reasonable efforts to cause each such
registration statement to become effective, to obtain all consents or waivers
of other parties which are required therefore, and to keep such registration
statement effective for such period not in excess of 180 calendar days from the
day such registration statement first becomes effective as may be reasonably
necessary to effect such sale or other disposition. The obligations of IC
hereunder to file a registration statement and to maintain its effectiveness
may be suspended for one or more periods of time not exceeding 60 calendar days
in the aggregate with respect to any registration statement if the Board of
Directors of IC shall have determined that the filing of such registration
statement or the maintenance of its effectiveness would require disclosure of
nonpublic information that would materially and adversely affect IC. Any
registration statement prepared and filed under this Section, and any sale
covered thereby, shall be shared equally by IC and CN except for underwriting
discounts or commission, brokers' fees and the fees and disbursements of CN's
counsel related thereto. CN shall provide all information reasonably requested
by IC for inclusion in any registration statement to be filed hereunder. If,
during the time periods referred to in the first sentence of this Section, IC
effects a registration under the Securities Act of IC's securities for its own
account or for any other of its stockholders (other than on form S-4 or form
S-8, or any successor form), it shall allow CN the right to participate in such
registration, and such participation shall not affect the obligation of IC to
effect demand registration statements for CN under this Section; provided that,
if the managing underwriters of such offering advise IC in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering, IC shall
include the securities requested to be included therein by CN pro rata with the
securities intended to be included therein by IC. In connection with any
registration pursuant to this Section, IC and CN shall provide each other and
any underwriter of the offering with customary representations, warranties,
covenants, indemnification, and contribution in connection with such
registration. For purposes of this Section 6.05, the term "IC" shall include
any Railroad Subsidiary.
SECTION 6.06. Antitakeover Statutes. Subject to the fiduciary duties of
the Board of Directors of IC under applicable law, if any takeover statute is or
may become applicable to the transactions contemplated hereby, IC and the
members of its Board of Directors shall use all reasonable efforts to grant such
approvals and to take such actions as are necessary so that the transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated hereby and otherwise act to eliminate or minimize the
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effects of any takeover statute on any of the transactions contemplated by this
Agreement.
ARTICLE 7
COVENANTS OF CN
CN agrees that:
SECTION 7.01. Conduct of CN. From the date hereof until the Effective
Time, CN and the CN Subsidiaries shall conduct their business in the ordinary
course consistent with past practice and shall use their commercially reasonable
efforts to preserve intact their business organizations and relationships with
third parties and to keep available the services of their present officers and
employees. Without limiting the generality of the foregoing, from the date
hereof until the Effective Time:
(a) CN will not adopt or propose any change in its articles of
incorporation or bylaws;
(b) CN will not take, and will not permit any CN Subsidiary to take,
any action that would make any representation and warranty of CN hereunder
inaccurate in any material respect at, or as of any time prior to, the
Effective Time;
(c) prior to the Effective Time, other than regular quarterly cash
dividends not to exceed Cdn $0.265 per share with respect to CN Common
Stock, CN will not (x) declare, set aside or pay any dividends on, or make
any other distributions in respect of, any of its capital stock or (y)
split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of
or in substitution for shares in its capital stock;
(d) CN will not, and will not permit any CN Subsidiary to, sell,
lease, license, mortgage or subject to Lien or otherwise dispose of any of
its properties or assets, other than transactions in the ordinary course
of business, including dispositions that are part of CN's rationalization
plan or transactions not exceeding in the aggregate $200,000,000.
(e) except as set forth on Schedule 7.01, CN will not, and will not
permit any CN Subsidiary to, enter into an contract or arrangement or
otherwise take any action that could reasonably be expected to materially
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delay or otherwise interfere with the consummation of the Offer or Merger;
and
(f) CN will not, and will not permit any CN Subsidiary to, agree or
commit to do any of the foregoing.
SECTION 7.02. Access to Information. Subject to the Confidentiality
Agreement, from the date hereof until the Effective Time, CN will give IC, its
counsel, financial advisors, auditors and other authorized representatives full
access to the offices, properties, books and records of CN and the CN
Subsidiaries, will furnish to IC, its counsel, financial advisors, auditors and
other authorized representatives such financial and operating data and other
information as such Persons may reasonably request and will instruct CN's
employees, counsel and financial advisors to cooperate with IC in its
investigation of the business of CN and the CN Subsidiaries; provided that no
investigation pursuant to this Section shall affect any representation or
warranty given by CN to IC hereunder; and provided further, that access to
certain CN information may require the entry of a protective order by the STB,
after which date full access shall be granted to such information consistent
with this paragraph and subject to the terms of such order. CN shall hold and
shall cause its officers, employees, accountants, counsel, financial advisers
and other representatives and Affiliates to hold, any nonpublic information in
accordance with the terms of the Confidentiality Agreement.
SECTION 7.03. Notices of Certain Events. CN shall promptly notify IC of:
(a) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement; and
(c) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge threatened against, relating to
or involving or otherwise affecting CN or any CN Subsidiary which, if
pending on the date of this Agreement, would have been required to have
been disclosed pursuant to Section 5.12 or which relate to the
consummation of the transactions contemplated by this Agreement.
SECTION 7.04. Obligations of Merger Subsidiary. CN will take all action
necessary to cause Merger Subsidiary to perform its obligations under this
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Agreement and to consummate the Merger on the terms and conditions set forth in
this Agreement.
SECTION 7.05. Voting of Shares. If the Offer is consummated, then,
subject to the terms of the Voting Trust Agreement, CN shall cause the trustee
of the Voting Trust to effect the approval of the stockholders of IC of the
Agreement by taking action by written consent of such stockholders in lieu of
calling a meeting of stockholders pursuant to, and in accordance with, the
requirements set forth in Section 228 of Delaware Law or, if a meeting of IC
stockholders is required, to vote the shares of IC Common Stock held in the
Voting Trust in favor of the adoption of this Agreement at such meeting.
SECTION 7.06. Director and Officer Liability. (a) CN shall cause the
Surviving Corporation, for a period of six years after the Control Date, (i) to
maintain in effect in its certificate of incorporation and by-laws the current
provisions regarding the elimination of liability of directors and
indemnification of and advancement of expenses to officers, directors, employees
and agents currently contained in the certificate of incorporation and by-laws
of IC and (ii) to maintain the existing indemnification agreements covering such
directors and officers of IC, copies of which have been provided to CN prior to
the date of this Agreement; provided that such indemnification agreements shall
be subject to any limitation imposed from time to time under applicable law.
For six years after the Control Date, CN will cause the Surviving Corporation to
maintain the officers' and directors' liability insurance in respect of acts or
omissions occurring prior to the Control Date covering each such Person
currently covered by IC's officers' and directors' liability insurance or a
substitute policy on terms with respect to coverage and amount no less favorable
than those of such policy in effect on the date hereof, provided that, in
satisfying its obligation under this Section, CN shall not be obligated to cause
the Surviving Corporation to pay premiums in excess of 200% of the amount per
annum IC paid in its last full fiscal year, which amount has been disclosed to
CN; provided, further, that if the annual premiums of such insurance coverage
exceed such amount, the Surviving Corporation shall be obligated to obtain a
policy with the greatest coverage available for a cost not exceeding such
amount. If the Surviving Corporation or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers or conveys all or substantially all of its properties and assets
to any person, then, and in each such case, to the extent necessary, proper
provision shall be made so that the successors and assigns of the Surviving
Corporation assume the obligations set forth in this Section 7.06.
SECTION 7.07. Stock Exchange Listing. CN shall use all reasonable best
efforts to cause the shares of CN Common Stock to be issued in the Merger to be
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approved for listing on the NYSE, the Toronto Stock Exchange and the other
national securities exchanges on which the CN Common Stock is traded, subject,
in each case, to official notice of issuance, prior to the Effective Time.
ARTICLE 8
COVENANTS OF CN AND IC
CN and IC agree that:
SECTION 8.01. Reasonable Best Efforts. Subject to the terms and
conditions of this Agreement, each party will use its reasonable best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement.
SECTION 8.02. STB Approval. CN, on the one hand and IC on the other
shall, and each shall cause its Subsidiaries to, subject to the following
sentences, (i) cooperate with one another to prepare and present to the STB, as
soon as practicable, all filings and other presentations in connection with
seeking any STB approval, exemption or other authorization necessary to
consummate the transactions contemplated by this Agreement (including, without
limitation, the matters contemplated by Sections 6.02 and 7.02 hereof), (ii)
prosecute such filings and other presentations with diligence, (iii) diligently
oppose any objections to, appeals from or petitions to reconsider or reopen any
such STB approval by Persons not party to this Agreement, and (iv) take all such
further action as in the reasonable judgment of CN and IC may facilitate
obtaining a final order or orders of the STB approving such transactions
consistent with this Agreement and the transactions contemplated herein. Without
in any way limiting CN's obligations under Section 1.03 and 8.01 and subject to
consultations with IC and, after giving good faith consideration to the views of
IC, CN shall have final authority over the development, presentation and conduct
of the STB case, including over decisions as to whether to agree to or acquiesce
in conditions. IC shall take no regulatory or legal action in connection with
the STB without CN's consent.
SECTION 8.03. Certain Filings. CN and IC shall cooperate with one another
(except with respect to the STB, which is covered by Section 8.02), in
determining whether any action by or in respect of, or filing with, any
governmental body, agency or official, or authority is required, or any actions,
consents, approvals or waivers are required to be obtained from parties to any
material contracts, in connection with the consummation of the transactions
contemplated by this Agreement and (except with respect to the STB, which is
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covered by Section 8.02), in seeking any such actions, consents, approvals or
waivers or making any such filings, furnishing information required in
connection therewith and seeking timely to obtain any such actions, consents,
approvals or waivers.
SECTION 8.04. Public Announcements. CN and IC will consult with each
other before issuing any press release or making any public statement with
respect to this Agreement and the transactions contemplated hereby and, except
as may be required by applicable law or any listing agreement with any national
securities exchange, will not issue any such press release or make any such
public statement prior to such consultation.
SECTION 8.05. Dividends. After the date of this Agreement, each of CN and
IC shall coordinate with the other the payment of dividends with respect to the
shares of CN Common Stock and IC Common Stock and the record dates and payment
dates relating thereto, it being the intention of the parties hereto that
holders of shares of CN Common Stock and IC Common Stock shall not receive two
dividends, or fail to receive one dividend, for any single calendar quarter with
respect to their CN Common Stock and/or IC Common Stock or any shares of CN
Common Stock that any such holder receives in exchange for such shares of IC
Common Stock in connection with the Merger.
SECTION 8.06. Auditors' Letters. IC and CN each shall use all reasonable
best efforts to cause to be delivered to the other party and such other party's
directors a letter of its independent auditors, dated the date on which the Form
F-4 shall become effective, and addressed to the other party and such other
party's directors, in form and substance customary for "comfort" letters
delivered by independent public accountants in connection with registration
statements similar to the Form F-4.
SECTION 8.07. Treatment of IC Employees and Directors.
(a) Outstanding Options/Restricted Stock Awards. Prior to the purchase by
CN, Merger Subsidiary or their Affiliates, of shares of IC pursuant to the
Offer or otherwise (the "TAKEDOWN"), IC shall take all action necessary to
cause each outstanding IC Option (excluding the Unvested 2000 Options (as
defined below)) and outstanding restricted stock award granted prior to the
date of this Agreement or pursuant to Section 8.07(b), to be immediately vested
and, in the case of options, fully exercisable, prior to the Takedown (it being
understood that IC and CN shall develop a mechanism to permit any such
accelerated option or stock award to be exercisable (or transferrable, as the
case may be) prior to the Takedown so as to enable the holder to tender the
underlying option shares and restricted stock in order to receive the Offer
Price pursuant to the Offer, subject to
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applicable proration. For purposes of this Agreement, the "UNVESTED 2000
OPTIONS" shall mean, for each IC director, the number of IC Options granted
pursuant to the IC Directors Incentive 2000 Option Plan multiplied by (i) the
number of complete months between the Takedown and April 30, 2001, and divided
by (ii) 62. In addition, prior to the Effective Time, IC shall amend the IC
Options held by IC's directors (excluding the Unvested 2000 Options) to provide
that in the event of a termination of service of the director on or about the
Control Date (or, in the case of the Transferring Directors, the Takedown),
such options shall not expire prior to the expiration of their 10 year term.
(b) Pending Option Grants. The Compensation Committee of the IC Board of
Directors in the ordinary course has authorized, pursuant to the 1990 Long-Term
Incentive Plan (the "LTIP") (and the Executive and Management Incentive
Compensation Programs), the grant of options (the "1998 OPTIONS") to purchase
IC Common Stock pursuant to targets achieved for the year ended December 31,
1997. Such grants shall be made in March 1998 in accordance with IC's usual
procedures except that the market price of IC Common Stock utilized in
calculating the IC 1997 Total Shareholder Return, which is used in determining
the number of options to be granted, shall be the Offer Price. The exercise
price of each 1998 Option shall be equal to fair market value on the date of
grant and the other terms and conditions of each 1998 Option (including,
without limitation, vesting and duration) shall be consistent with the terms
applicable to ordinary employee options granted under the LTIP in March 1997.
(c) 1998 Annual Bonuses. The aggregate target bonus amount of all bonuses
granted to all employees under the IC Performance Compensation Program and
Executive Performance Compensation Program (the "PERFORMANCE PROGRAMS") (and
any and all additional cash incentive programs covering such employees) in
respect of 1998 (the "1998 BONUSES") shall not exceed $8,000,000. The 1998
Bonuses shall be awarded in accordance with past practice, and the target
amount, payment terms and other terms applicable to each such 1998 Bonus shall
be consistent with the practice relating to the 1997 annual bonuses awarded by
IC under the Performance Programs. IC shall determine, and to the extent
necessary, modify and implement, the performance objectives relating to the
measurement of the actual bonus payments to each individual under the 1998
Bonuses. Any such modifications shall be subject to prior approval by CN,
which approval shall not be unreasonably withheld.
(d) Retention Bonus. IC shall adopt a retention bonus program for its
executives (other than E. Hunter Harrison) under which cash amounts ("RETENTION
BONUSES") established by IC, after consultation with CN, would be payable in
two equal installments, the first of which would be paid on the earlier of (i)
the Control Date or (ii) April 1, 1999, and the second of which would be
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payable on January 3, 2000. A retention bonus pool shall be created for such
awards, the size of which pool shall be agreed to in good faith by CN and IC
within 30 days following the Takedown, it being intended that the pool be not
less than $5 million. The recipient, amount and other terms of each Retention
Bonus shall be determined by cooperation and agreement between IC and CN and
shall be subject to prior approval of each of IC and CN.
(e) Amendments to IC Employment Security Agreements. IC has entered into
Employment Security Agreements with certain of its executive employees
("COVERED EMPLOYEES") prior to the date hereof (the "SECURITY AGREEMENTS").
Before the Effective Time, IC shall use its reasonable best efforts to amend
the Security Agreements so that: (i) if it is determined, following a Covered
Employee's termination of employment as described in Section 1 of the Security
Agreements, that the aggregate amount of all "parachute payments" (within the
meaning of Section 280G(b)(2) of the Code) paid or payable to such Covered
Employee is greater than one hundred and five percent (105%) of the amount
equal to 2.99 times the Covered Employee's applicable "base amount" (within the
meaning of Section 280G(b)(3) of the Code) then IC shall pay to the Covered
Employee an additional payment (the "GROSS-UP PAYMENT") such that, after
payment by the Covered Employee of all excise taxes imposed under Section 4999
of the Code ("EXCISE TAXES") (and all interest and penalties imposed and all
taxes and excise taxes imposed on the Gross-Up Payment) the Covered Employee
would retain an amount of the Gross-Up Payment equal to the Excise Taxes
imposed upon the payments and (ii) the definition of Good Reason in Section
2(b) of each Security Agreement would exclude a change in the Covered
Employee's status, responsibilities, authorities or duties due solely to a
change in the status of IC from a publicly traded company to a privately held
Subsidiary of CN.
(f) Director Retirement Plan. Effective as of the Control Date, IC shall
terminate the Director Retirement Plan and make the payments set forth in
Schedule 8.07.
(g) Director Deferred Compensation Plan. CN shall, prior to the Takedown,
assume all of IC's liabilities pursuant to its Director Deferred Compensation
Plan with respect to the Transferring Directors. In addition, CN shall honor
any elections the Transferring Directors have made with respect to their
account balances under the plan, except that any payments due upon "retirement
from the board" shall be due and payable at retirement from CN's Board of
Directors, not IC's Board of Directors.
(h) Employee Benefit Levels. During the period from the Effective Time
until the end of the twenty-fourth month following the Effective Time, CN shall
maintain or cause the Surviving Corporation to maintain salary and target
annual
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bonus levels at no less than such levels in effect immediately prior to the
Takedown, and maintain employee long term incentive, pension and welfare plans
for the benefit of employees and former employees of IC or its Subsidiaries,
which are comparable, in the aggregate, to those in effect immediately prior to
the Takedown.
(i) Pre-Existing Conditions; Credit for Deductibles; and Past Service
Credit. CN shall, or shall cause the Surviving Corporation to, (i) waive all
limitations as to preexisting conditions, exclusions and waiting periods with
respect to participation and coverage requirements applicable to the employees
of the Surviving Corporation under any welfare plan in which such employees may
be eligible to participate after the Control Date (except to the extent that
such conditions, exclusions or waiting periods would apply under IC's then
existing plans absent any change in such welfare plan coverage), (ii) provide
each employee of the Surviving Corporation with credit for any co-payments and
deductibles paid prior to the Control Date in satisfying any applicable
deductible or out-of-pocket requirements under any welfare plans that such
employees are eligible to participate in after the Control Date, and (iii)
provide each employee of the Surviving Corporation with credit for all service
with IC and its affiliates under each employee benefit plan, program, or
arrangement of CN or its affiliates in which such employees are eligible to
participate; provided, however, that in no event shall the employees be
entitled to any credit to the extent that it would result in a duplication of
benefits with respect to the same period of services.
ARTICLE 9
ADDITIONAL AGREEMENTS
SECTION 9.01. Preparation of the Form F-4; Proxy or Information Statement;
Action by Written Consent. (a) As soon as practicable following the date of
this Agreement, IC and CN shall prepare and file with the SEC the Form F-4
pursuant to the Securities Act, which will include the IC proxy or information
statement. CN will make all necessary filings with Canadian securities
authorities and relevant Canadian stock exchanges with respect to the CN Common
Stock to be issued in connection with the Merger. Each of IC and CN shall use
its reasonable best efforts to have the Form F-4 declared effective under the
Securities Act as promptly as practicable after such filing. IC will use its
reasonable best efforts to cause the IC proxy statement or information statement
to be mailed to its stockholders as promptly as practicable after consummation
of the Offer and effectiveness of the Form F-4 under the Securities Act. CN
shall also take any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified or filing a general consent to
service of process)
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<PAGE> 55
required to be taken under any applicable state securities laws in connection
with the issuance of CN Common Stock pursuant to this Agreement and IC shall
furnish all information concerning IC and the holders of IC Common Stock as may
be reasonably requested in connection with any such action. No filing of, or
amendment or supplement to, the Form F-4 or the proxy or information statement
will be made by a party without providing the other party the opportunity to
review and comment thereon. CN will advise IC, promptly after it receives
notice thereof, of the time when the Form F-4 has become effective or any
supplement or amendment has been filed, the issuance of any stop order, the
suspension of the qualification of the CN Common Stock issuable in connection
with the Merger for offering or sale in any jurisdiction, or any request by the
SEC for additional information. If at any time prior to the Effective Time any
information relating to IC or CN, or any of their respective Affiliates,
officers or directors, should be discovered by IC or CN which should be set
forth in an amendment or supplement to the Form F-4 or the IC proxy or
information statement so that any of such documents would not include any
misstatement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, the party which discovers such information shall
promptly notify the other parties hereto and an appropriate amendment or
supplement describing such information shall be promptly filed with the SEC
and, to the extent required by law, disseminated to the stockholders of IC and
if applicable, the CN.
(b) Upon consummation of the Offer and the effectiveness of the Form F-4
and subject to compliance with applicable rules of the NYSE, the parties
understand that, pursuant to the Voting Trust Agreement, the trustee of the
Voting Trust will effect the approval of the stockholders of IC of the
Agreement by taking action by written consent of the stockholders of IC in lieu
of calling a meeting of stockholders pursuant to, and in accordance with, the
requirements set forth in Section 228 of Delaware Law.
SECTION 9.02. Fees and Expenses. (a) Except as set forth in this Section
9.02, all fees and expenses incurred in connection with the Offer, the Merger,
this Agreement, and the transactions contemplated by this Agreement shall be
paid by the party incurring such fees or expenses, whether or not the Merger is
consummated.
(b) IC agrees to pay CN a fee in immediately available funds equal to
$72,000,000 in the following circumstances and at the following times only:
(i) concurrently with the termination of this Agreement if this
Agreement shall be terminated pursuant to Sections 11.01(d), 11.01(e),
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<PAGE> 56
11.01(f) or 11.01(h) (with respect to a breach of the covenants and
agreements set forth in Section 6.03); or
(ii) within two business days of the execution of a definitive
agreement with respect to any Acquisition Proposal if IC enters into such
a definitive agreement within 15 months after the termination of this
Agreement pursuant to Section 11.01(c), and an Acquisition Proposal was
publicly announced prior to the termination of this Agreement pursuant to
Section 11.01(c).
SECTION 9.03. Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of IC or Merger Subsidiary, any
deeds, bills of sale, assignments or assurances and to take and do, in the name
and on behalf of IC or Merger Subsidiary, any other actions and things to vest,
perfect or confirm of record or otherwise in the Surviving Corporation any and
all right, title and interest in, to and under any of the rights, properties or
assets of IC or Merger Subsidiary acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger.
ARTICLE 10
CONDITIONS TO THE MERGER
SECTION 10.01. Conditions to the Obligations of Each Party to the Merger.
The obligations of IC, CN and Merger Subsidiary to consummate the Merger are
subject to the satisfaction of the following conditions:
(a) if required by Delaware Law, this Agreement shall have been adopted
by the stockholders of IC at a meeting of the IC stockholders (or by taking
action by written consent in lieu of such a meeting) in accordance with such
Law; provided that the right to terminate this Agreement pursuant to this
Section shall only be available to CN if it has complied with its obligations
in Section 7.05;
(b) the waiting period under the HSR Act (if any) relating to the Merger
shall have expired; and
(c) no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Merger.
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SECTION 10.02. Additional Condition to the Obligations of IC. The
obligations of IC to consummate the Merger are subject to the satisfaction of
the additional condition that the shares of CN Common Stock to be issued in the
Merger shall have been approved for listing on the NYSE, subject to official
notice of issuance.
ARTICLE 11
TERMINATION
SECTION 11.01. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time (notwithstanding
any adoption of this Agreement by the stockholders of IC):
(a) by mutual written consent of IC and CN;
(b) by either IC or CN, if there shall be any law or regulation that
makes consummation of the Merger illegal or otherwise prohibited or if any
judgment, injunction, order or decree enjoining CN or IC from consummating
the Merger is entered and such judgment, injunction, order or decree shall
become final and nonappealable;
(c) by IC or CN, if (i) the Offer shall have expired or been
terminated and Merger Subsidiary shall not have purchased shares of IC
Common Stock pursuant to the Offer or (ii) Merger Subsidiary shall not
have purchased shares of IC Common Stock pursuant to the Offer prior to
May 29, 1998; provided, however, that the right to terminate this
Agreement pursuant to this Section 11.01(c) shall not be available to any
party whose failure to perform any of its obligations under this Agreement
(including Merger Subsidiary's failure to purchase shares of IC Common
Stock pursuant to the terms and conditions of the Offer) results in the
failure of the Offer to be consummated; and provided further that this
clause (c) shall not apply if Merger Subsidiary shall have elected to
terminate the Offer and proceed with the Merger in accordance with Section
1.04;
(d) by CN, prior to the earlier of (x) the consummation of the Offer
(if the Offer is consummated) or (y) the adoption of this Agreement by the
stockholders of IC, if (i) the Board of Directors of IC shall withdraw,
modify or change its recommendation of this Agreement, the Merger or the
Offer in a manner adverse to CN, it being understood and agreed that a
communication by the Board of Directors of IC to the
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stockholders of IC pursuant to Rule 14d-9(e)(3) of the Exchange Act (or
any similar communication to stockholders of IC in connection with the
amendment of a tender or exchange offer) shall not be deemed to constitute
a withdrawal, modification or change of its recommendation of this
Agreement, the Merger or the Offer; (ii) the Board of Directors of IC
shall approve or recommend an Acquisition Proposal; or (iii) IC shall have
entered into, or shall have publicly announced its intention to enter
into, a definitive agreement with respect to an Acquisition Proposal (it
being understood and agreed that the delivery of written notice of IC's
intention to enter into a definitive agreement with respect to an
Acquisition Proposal pursuant to Section 6.03 and any subsequent public
announcement of such intention shall not entitle CN to terminate this
Agreement pursuant to this paragraph (d) unless IC enters into a
definitive agreement with respect to such Acquisition Proposal);
(e) by IC, prior to the earlier of (x) the consummation of the Offer
or (y) the adoption of this Agreement by the stockholders of IC, if the
Board of Directors of IC shall have entered into or shall have publicly
announced its intention to enter into, a definitive agreement with respect
to an Acquisition Proposal, if the Board of Directors concludes in good
faith, based on the advice of outside counsel, that such action is
reasonably necessary in order for the Board of Directors to act in a
manner consistent with the Board's fiduciary duties under applicable law;
provided, that the right to terminate this Agreement pursuant to this
Section 11.01(e) shall not be available to IC unless (x) IC has complied
in all material respects with its obligations in Section 6.03 of this
Agreement and (y) concurrently with such termination, IC enters into a
definitive agreement to effect the Acquisition Proposal referred to herein
and complies with its obligations under Section 9.02(b);
(f) by CN, prior to the earlier of (x) consummation of the Offer (if
the Offer is consummated) or (y) the adoption of this Agreement by the
stockholders of IC, if any person or group (as defined in Section 13(d)(3)
of the Exchange Act) (other than CN, any CN Subsidiary, or an Affiliate
thereof) shall have become the beneficial owner (as defined under Rule
13d-3 promulgated under the Exchange Act) of at least 40% of the
outstanding shares of IC Common Stock;
(g) by IC, prior to the earlier of (x) consummation of the Offer or
(y) the adoption of this Agreement by the stockholders of IC, if CN or
Merger Subsidiary shall have breached or failed to perform in any material
respect any of its representations, warranties, covenants or other
agreements contained in this Agreement, which breach or failure to
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perform (i) would give rise to the failure of the conditions set forth in
Article 10 and (ii) either is not reasonably capable of being cured or, if
it is reasonably capable of being cured, has not been cured within the
earlier of (x) 10 days after giving of written notice to CN of such breach
or (y) the expiration of the Offer (if applicable) (provided that IC shall
not have the right to terminate the Agreement if IC is then in breach of
its representations, warranties, covenants or other agreements contained
in this Agreement);
(h) by CN, prior to the earlier of (x) consummation of the Offer (if
the Offer is consummated) or (y) the adoption of this Agreement by the
stockholders of IC, if IC shall have breached or failed to perform in any
material respect any of its representations, warranties, covenants or
other agreements contained in this Agreement, which breach or failure to
perform (i) would give rise to the failure of the conditions set forth in
Article 10 and (ii) either is not reasonably capable of being cured or, if
it is reasonably capable of being cured, has not been cured within the
earlier of (x) 10 days after giving of written notice to IC of such breach
or (y) the expiration of the Offer (if applicable) (provided that CN shall
not have the right to terminate the Agreement if CN (or Merger Subsidiary)
is then in breach of its representations, warranties, covenants or other
agreements contained in this Agreement); and
(i) by CN or IC if, during any five consecutive trading day period
during the period from the commencement of the Offer until the business
day prior to the expiration of the Offer the average closing price of the
CN Common Stock on the NYSE is less than $38.00; provided that any
exercise of the right to terminate pursuant to this Section 11.01(i) with
respect to any five consecutive trading day period shall only be effective
if notice of such termination is given to the other party prior to the
earlier of (i) 72 hours after the close of trading on the fifth such
consecutive day and (ii) the expiration date of the Offer.
The party desiring to terminate this Agreement shall give written notice
of such termination to the other party in accordance with Section 12.01.
SECTION 11.02. Effect of Termination. If this Agreement is terminated
pursuant to Section 11.01, this Agreement shall become void and of no effect
with no liability on the part of any party hereto, except that (i) the
agreements contained in Sections 4.18, 5.16, 9.02, 11.02 and 12.03 and (ii) the
prohibition regarding a waiver or change of the condition in paragraph (e) of
Annex 1 that is set forth in Section 1.01(a)(iv) shall survive the termination
hereof.
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ARTICLE 12
MISCELLANEOUS
SECTION 12.01. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including telecopy or similar writing)
and shall be given,
if to CN or Merger Subsidiary, to:
Jean Pierre Ouellet, Esq.
Canadian National Railway Company
935, rue de la Gauchetiere Ouest
Montreal, (Quebec) Canada
Telecopy: (514) 399-3779
with a copies to:
Winthrop B. Conrad, Jr., Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopy: (212) 450-4800
if to IC, to:
Ronald A. Lane, Esq.
Illinois Central Corporation
455 North Cityfront Plaza Drive
Chicago, Illinois 60611-5504
Telecopy: (312) 755-7669
with a copy to:
John G. Finley, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Telecopy: (212) 455-2502
or such other address or telecopy number as such party may hereafter specify
for the purpose by notice to the other parties hereto. Each such notice,
request or other communication shall be effective (a) if given by telecopy,
when such telecopy is transmitted to the telecopy number specified in this
Section and the
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appropriate telecopy confirmation is received or (b) if given by any other
means, when delivered at the address specified in this Section.
SECTION 12.02. Definitions. (a) For purposes of this Agreement:
"AFFILIATE" means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with such
Person.
"BENEFIT ARRANGEMENT" means any employment, severance or similar contract
or arrangement (whether or not written) or any plan, policy, fund, program or
contract or arrangement (whether or not written) providing for compensation,
bonus, profit-sharing, stock option, or other stock related rights or other
forms of incentive or deferred compensation, vacation benefits, insurance
coverage (including any self-insured arrangements), health or medical benefits,
disability benefits, workers' compensation, supplemental unemployment benefits,
severance benefits and post-employment or retirement benefits (including
compensation, pension, health, medical or life insurance or other benefits)
that (i) is not an Employee Plan, (ii) is entered into, maintained,
administered or contributed to, by IC or any of its ERISA Affiliates or by CN
or any of its ERISA Affiliates, as applicable and (iii) covers any employee or
former employee of IC or any IC Subsidiary or of CN or any CN Subsidiary, as
applicable.
"CONTINUING DIRECTORS" means the directors of IC then in office who are
neither designated or employed by or otherwise affiliated with CN nor are
employees of IC.
"CONTROL DATE" means the date on which CN is lawfully permitted to assume
control over IC's railroad operations pursuant to STB approval or exemption.
"EMPLOYEE PLAN" means any "employee benefit plan", as defined in Section
3(3) of ERISA, that (i) is subject to any provision of ERISA, (ii) is
maintained, administered or contributed to by IC or any of its ERISA
Affiliates, or by CN or any of its ERISA Affiliates, as applicable and (iii)
covers any employee or former employee of IC or any IC Subsidiary or of CN or
any CN Subsidiary, as applicable.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and the rules and regulations promulgated thereunder.
"ERISA AFFILIATE" of any entity means any other entity which, together
with such entity, would be treated as a single employer under Section 414 of
the Code.
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"MATERIAL ADVERSE EFFECT" means, with respect to either CN or IC, a
material adverse effect on the condition (financial or otherwise), business,
assets or results of operations of such Person and its Subsidiaries, taken as a
whole, other than, with respect to any representation or warranty made (or
deemed to be made) by such Person, as a result of changes in conditions,
including economic, regulatory or political developments, applicable to the
United States or Canadian railway industry generally.
"MULTIEMPLOYER PLAN" means a multiemployer plan, as defined in Section
3(37) of ERISA, which is subject to Section 4022A of ERISA.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERSON" means an individual, a corporation, a limited liability company,
a partnership, an association, a trust or any other entity or organization,
including, without limitation, a government or political subdivision or any
agency or instrumentality thereof.
"SUBSIDIARY", when used with respect to any Person means any other Person,
whether incorporated or unincorporated, of which securities or other ownership
interests having ordinary power to elect a majority of the board of directors
or other persons performing similar functions are directly or indirectly owned
or controlled by such Person or by any one or more of its Subsidiaries.
"TITLE IV PLAN" means an Employee Plan subject to Title IV of ERISA other
than any Multiemployer Plan.
(b) Each of the following definitions appears on the page set forth
opposite the definition:
<TABLE>
<CAPTION>
<S> <C>
Agreement................................................................. 1
Acquisition Proposal...................................................... 39
Affiliate................................................................. 57
Benefit Arrangement....................................................... 57
IC........................................................................ 1
IC 10-K................................................................... 16
IC 10-Q................................................................... 16
IC Balance Sheet.......................................................... 17
IC Balance Sheet Date..................................................... 17
IC Common Stock........................................................... 1
IC Disclosure Documents................................................... 17
IC Environmental Permits.................................................. 25
IC Options................................................................ 10
</TABLE>
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<PAGE> 63
<TABLE>
<CAPTION>
<S> <C>
IC SEC Filings............................................................ 16
IC Securities............................................................. 15
IC Subsidiary Securities.................................................. 16
CN........................................................................ 1
CN 6-K.................................................................... 28
CN 40-F................................................................... 27
CN Average Closing Price.................................................. 7
CN Average Price.......................................................... 10
CN Balance Sheet.......................................................... 29
CN Balance Sheet Date..................................................... 29
CN Class A Preferred Stock................................................ 27
CN Class B Preferred Stock................................................ 27
CN Common Stock........................................................... 7
CN Disclosure Documents................................................... 29
CN Options................................................................ 10
CN SEC Filings............................................................ 28
CN Securities............................................................. 27
CN Subsidiary Securities.................................................. 28
Code...................................................................... 10
Confidentiality Agreement................................................. 39
Control Date.............................................................. 57
Covered Employees......................................................... 48
Delaware Law.............................................................. 3
Effective Time............................................................ 6
Employee Plan............................................................. 57
Environmental Laws........................................................ 25
ERISA..................................................................... 57
ERISA Affiliate........................................................... 57
Excess Shares............................................................. 10
Exchange Act.............................................................. 14
Exchange Agent............................................................ 8
Exchange Ratio............................................................ 7
Excise Taxes.............................................................. 48
Form F-4.................................................................. 29
Gross-Up Payment.......................................................... 48
Hazardous Substances...................................................... 25
HSR Act................................................................... 3
Investment Commitment Agreements.......................................... 1
LTIP...................................................................... 47
Lien...................................................................... 15
Material Adverse Effect................................................... 58
Merger.................................................................... 6
Merger Consideration...................................................... 7
Merger Subsidiary......................................................... 1
</TABLE>
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<PAGE> 64
<TABLE>
<CAPTION>
<S> <C>
Minimum Condition......................................................... 2
Multiemployer Plan........................................................ 58
1998 Bonuses.............................................................. 47
1998 Options.............................................................. 47
NYSE...................................................................... 7
Offer..................................................................... 2
Offer Documents........................................................... 3
Options................................................................... 10
PBGC...................................................................... 58
Performance Programs...................................................... 47
Person.................................................................... 58
Principal CN Subsidiary................................................... 27
Railroad Subsidiaries................................................ Recitals
Real Estate Reorganization................................................ 30
Reciprocal Stock Proration Factor......................................... 11
Retention Bonuses......................................................... 47
Rights Plan............................................................... 35
Schedule 14D-9............................................................ 4
SEC....................................................................... 3
Securities Act............................................................ 12
Security Agreements....................................................... 48
Service Agent............................................................. 63
STB....................................................................... 4
Stock Number.............................................................. 7
Stock Proration Factor.................................................... 7
Subsidiary................................................................ 58
Surviving Corporation..................................................... 6
Takedown.................................................................. 46
Title IV Plan............................................................. 58
Unvested 2000 Options..................................................... 47
Voting Trust.............................................................. 4
Voting Trust Agreement.................................................... 4
</TABLE>
SECTION 12.03. Survival. Subject to Section 11.02, the representations
and warranties and agreements contained herein and in any certificate or other
writing delivered pursuant hereto shall terminate at the Effective Time or upon
the termination of this Agreement, except that the covenants and agreements of
IC contained in Sections 6.01 and 6.02 and the covenants and agreements of CN
contained in Sections 7.06, 8.01, 8.02, 8.03, 8.07 and 9.03 shall survive the
Effective Time and shall remain in full force and effect in accordance with
their terms.
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SECTION 12.04. Amendments; No Waivers; Continuing Directors. (a) Before
or after adoption of this Agreement by the stockholders of IC, any provision of
this Agreement may be amended or waived prior to the Control Date if, and only
if, such amendment or waiver is in writing and signed, in the case of an
amendment, by the parties hereto or in the case of a waiver, by the party
against whom the waiver is to be effective; provided that after the adoption of
this Agreement by the stockholders of IC, there shall not be made any amendment
that by law requires further approval by the stockholders of IC without the
further approval of such stockholders and, provided, further, that no such
amendment of this Agreement, the Voting Trust Agreement or any other agreement
entered into in connection with this Agreement shall be effected after the
closing of the Offer and prior to the Control Date unless there are then in
office two or more Continuing Directors and such amendment is approved by a
majority of such Continuing Directors, it being understood and agreed that IC
and the Board of Directors of IC shall use reasonable best efforts to ensure
that, at all times prior to the Control Date, at least two Continuing Directors
remain in office.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
(c) Following consummation of the Offer and prior to the Control Date, any
amendment to the certificate of incorporation or by-laws of IC or to this
Agreement or to the Voting Trust Agreement, any termination by IC or by IC and
CN pursuant to Section 11.01(a) of this Agreement, any waiver of any of IC's
rights hereunder (including any waiver or consent required under Section 1.03
hereof), and any other consent or action by the Board of Directors of IC
hereunder, shall not be effected unless there are then in office two or more
Continuing Directors and such approval is approved by a majority of such
Continuing Directors, it being understood and agreed that IC and the Board of
Directors of IC shall use commercially reasonable best efforts to ensure that,
at all times prior to the Control Date, at least two Continuing Directors
remain in office.
SECTION 12.05. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto except that Merger Subsidiary
may transfer or assign, in whole or from time to time in part, to one or more of
its Affiliates, the right to purchase shares of IC Common Stock pursuant to the
Offer but any such transfer or assignment will not relieve Merger Subsidiary of
its
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obligations under the Offer or prejudice the rights of tendering stockholders
to receive payment for shares validly tendered and accepted for payment
pursuant to the Offer.
SECTION 12.06. Governing Law. This Agreement shall be construed in
accordance with and governed by the law of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 12.07. Counterparts; Effectiveness. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
SECTION 12.08. Entire Agreement; No Third Party Beneficiaries. (a) This
Agreement and the agreements referred to herein constitute the entire agreement
and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof, other than the
Confidentiality Agreement, which shall survive the execution and delivery of
this Agreement.
(b) This Agreement shall be binding upon and inure solely to the benefit
of each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other Person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement, other than
Section 7.06 (which is intended to be for the benefit of the Persons covered
thereby and may be enforced by such Persons), it being understood and agreed
that (i) if any such Person shall institute and prevail in any proceedings
against CN in respect of a breach by CN of its covenants and agreements
contained in Section 7.06 hereof, CN shall pay the reasonable expenses of such
Person (including attorney's fees) incurred in connection with such proceeding
to the fullest extent authorized by applicable law and (ii) if any such Person
shall institute any proceedings against CN in respect of a breach by CN of its
covenants and agreements contained in Section 7.06 hereof where the
circumstances underlying the claim for indemnification arose during the period
from the date hereof through the Control Date, CN shall be obligated to advance
to such Person the reasonable expenses of such Person (including attorney's
fees) incurred in connection with such proceeding as such expenses are incurred
subject to the obligation of such Person to reimburse such expenses to the CN
if such Person does not prevail in such proceedings.
61
<PAGE> 67
SECTION 12.09. Submission to Jurisdiction; Waivers. Each of the parties
hereto irrevocably agrees that any legal action or proceeding with respect to
this Agreement or for recognition and enforcement of any judgment in respect
hereof brought by the other party hereto or its successors or assigns shall be
brought and determined in any federal court located in the State of Delaware or
the Chancery or other Courts of the State of Delaware, and each of the parties
hereto hereby irrevocably submits with regard to any such action or proceeding
for itself and in respect to its property, generally and unconditionally, to the
exclusive jurisdiction of the aforesaid courts. Each of the parties hereto
hereby irrevocably waives, and agrees not to assert, by way of motion, as a
defense, counterclaim or otherwise, in any action or proceeding with respect to
this Agreement, (a) the defense of sovereign immunity, (b) any claim that it is
not personally subject to the jurisdiction of the above-named courts for any
reason other than the failure to serve process in accordance with this Section
12.09, (c) that it or its property is exempt or immune from jurisdiction of any
such court or from any legal process commenced in such courts (whether through
service of notice, attachment prior to judgment, attachment in aid of execution
of judgment, execution of judgment or otherwise), and (d) to the fullest extent
permitted by applicable law, that (i) the suit, action or proceeding in any such
court is brought in an inconvenient forum, (ii) the venue of such suit, action
or proceeding is improper or (iii) this Agreement, or the subject matter hereof,
may not be enforced in or by such courts. Each of the parties hereto further
covenants and agrees that each such party shall maintain a duly appointed agent
for the service of summonses and other legal processes in the State of Delaware
(a "SERVICE AGENT"), unless such party is organized under the laws of the State
of Delaware or qualified to do business in the State of Delaware, and will
notify the other parties hereto of the name and address of such Service Agent.
SECTION 12.10. Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms. It is accordingly agreed
that the parties shall be entitled to specific performance of the terms hereof,
this being in addition to any other remedy to which they are entitled at law or
in equity.
SECTION 12.11. Guarantee of Merger Subsidiary. CN unconditionally and
irrevocably guarantees the performance by Merger Subsidiary of its obligations
set forth in this Agreement.
SECTION 12.12. Disclosure Schedules. IC and CN agree that, for purposes
of the representations and warranties of such parties in this Agreement, any
item disclosed in a Schedule shall be deemed to be disclosed in all other
Schedules in which the disclosure of such item would be considered responsive.
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<PAGE> 68
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
Canadian National Railway Company
By: /s/ PAUL TELLIER
--------------------------------
Name: Paul Tellier
Title: President and
Chief Executive Officer
Blackhawk Merger Sub, Inc.
By: JEAN PIERRE OUELLET
--------------------------------
Name: Jean Pierre Ouellet
Title: President and Director
Illinois Central Corporation
By: GILBERT H. LAMPHERE
--------------------------------
Name: Gilbert H. Lamphere
Title: Chairman
<PAGE> 69
ANNEX I
Notwithstanding any other provision of the Offer, CN and Merger Subsidiary
shall not be required to accept for payment or pay for any shares of IC Common
Stock, and may terminate the Offer, if (i) by the expiration of the Offer less
than 50.1% of the outstanding shares of IC Common Stock (on a fully diluted
basis) have been tendered pursuant to the Offer and not withdrawn, (ii) the
applicable waiting period (if any) under the HSR Act shall not have expired or
been terminated, (iii) the staff of the STB shall not have given CN a favorable
informal advisory opinion to the effect that the proposed use of the Voting
Trust will preclude unlawful control of IC by CN or (iv) at any time on or
after February 10, 1998, and prior to the acceptance for payment of shares, any
of the following conditions exist:
(a) there shall be instituted or pending any action or proceeding by any
government or governmental authority or agency, domestic or foreign, before any
court or governmental authority or agency, domestic or foreign, (i) challenging
or seeking to make illegal, to delay materially or otherwise directly or
indirectly to restrain or prohibit the making of the Offer, challenging or
seeking to make illegal the Voting Trust, the acceptance for payment of or
payment for some of or all the shares of IC Common Stock by CN or the
consummation of the Merger, seeking to obtain material damages or otherwise
directly or indirectly relating to the transactions contemplated by the Offer
or the Merger (including the Voting Trust), (ii) except for the Voting Trust,
seeking to restrain or prohibit CN's ownership or operation (or that of its
respective Subsidiaries or Affiliates) of all or any material portion of the
business or assets of IC and its Subsidiaries, taken as a whole, or of CN and
its Subsidiaries, taken as a whole, or to compel CN or any of its Subsidiaries
or Affiliates to dispose of or hold separate all or any material portion of the
business or assets of IC and its Subsidiaries, taken as a whole, or of CN and
its Subsidiaries, taken as a whole, (iii) except for the Voting Trust, seeking
to impose or confirm material limitations on the ability of CN or any of its
Subsidiaries or Affiliates effectively to exercise full rights of ownership of
the IC Common Stock , including, without limitation, the right to vote any
shares of such stock acquired or owned by CN or any of its Subsidiaries or
Affiliates on all matters properly presented to the stockholders of IC, or (iv)
seeking to require divestiture by CN or any of its Subsidiaries or Affiliates
of any such shares; or
(b) there shall be any action taken, or any statute, rule, regulation,
injunction, order or decree proposed, enacted, enforced, promulgated, issued or
deemed applicable to the Offer or the Merger (including the Voting Trust), by
any court, government or governmental authority or agency, domestic or foreign
(other than (i) the application of the waiting period provisions of the HSR Act
to
<PAGE> 70
the Offer or the Merger and (ii) the waiting period prior to receipt of STB
approval or exemption with respect to the exercise of control by CN over the
Railroad Subsidiaries), would reasonably be likely, directly or indirectly, to
result in any of the consequences referred to in clauses (i) through (iv) of
paragraph (a) above; or
(c) any change shall have occurred or been threatened (or any development
shall have occurred or been threatened involving a prospective change) in the
business, assets, liabilities, financial condition, capitalization, operations
or results of operations of IC or any of its Subsidiaries that would reasonably
be expected to have a Material Adverse Effect with respect to IC, or
(d) IC shall have breached or failed to perform in any material respect
any of its covenants or agreements under the Merger Agreement, or any of the
representations and warranties of IC set forth in the Merger Agreement shall
not be true in any material respect when made or at any time prior to
consummation of the Offer as if made at and as of such time (unless such
representation or warranty is made only as of a specific date), except where
the failure of such representations and warranties to be so true and correct
(without giving effect to any limitation as to "materiality or "material
adverse effect") does not have, and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect; or
(e) the Merger Agreement shall have been terminated in accordance with its
terms;
which, in the sole judgment of CN in any such case, and regardless of the
circumstances (including any action or omission by CN) giving rise to any such
condition, makes it inadvisable to proceed with such acceptance for payment or
payment.
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<PAGE> 71
EXHIBIT A
[Form of Voting Trust Agreement]
<PAGE> 72
EXHIBIT A
THIS VOTING TRUST AGREEMENT, dated as of [_________ ___], 1998, by and
among Canadian National Railway Company, a Canadian corporation ("PARENT"),
Blackhawk Merger Sub, Inc. a Delaware corporation and an indirect wholly owned
subsidiary of Parent ("MERGER SUBSIDIARY") and [______________], a
[____________] [corporation] (the "TRUSTEE"),
W I T N E S S E T H:
WHEREAS, it is intended that Merger Subsidiary will commence and complete a
cash tender offer (the "OFFER") for up to an aggregate of [ ] outstanding
shares of common stock ("SHARES") of Illinois Central Corporation, a Delaware
corporation (the "COMPANY") to be followed by a merger of Merger Subsidiary with
and into the Company (the "MERGER") pursuant to, and upon the terms and
conditions set forth in, the Agreement and Plan of Merger dated as of February
10, 1998 among the Company, Parent and Merger Subsidiary, as it may be amended
from time to time (the "MERGER AGREEMENT") (a copy of which is attached hereto
as Exhibit A);
WHEREAS, it is intended that the consummation of the Merger will occur
prior to any issuance by the Surface Transportation Board (the "STB") of any
required approval for, or exemption of, Parent's control of the Company;
WHEREAS, Parent and Merger Subsidiary intend, simultaneously with the
acquisition of the Shares of the Company pursuant to the Offer and pursuant to
the Merger (the corporation surviving the Merger also referred to herein as the
"COMPANY"), to cause the deposit of such shares in an independent, irrevocable
voting trust, pursuant to the rules of the STB, in order to avoid any allegation
or assertion that Parent or any of its affiliates is controlling or has the
power to control the Company prior to the receipt of any required STB approval
or exemption;
WHEREAS, neither the Trustee nor any of its affiliates has any officers or
board members in common or any direct or indirect business arrangements or
dealings (as described in Paragraph 9 hereof) with Parent or any of its
affiliates; and
<PAGE> 73
WHEREAS, the Trustee is willing to act as voting trustee pursuant to the
terms of this Trust Agreement and the rules of the STB,
NOW, THEREFORE, the parties hereto agree as follows:
1. Parent and Merger Subsidiary hereby appoint [________________] as
Trustee hereunder, and [_____________] hereby accepts said appointment and
agrees to act as Trustee under this Trust Agreement as provided herein.
2. Parent and Merger Subsidiary agree that, prior to acceptance of any
tendered Shares pursuant to the Offer, Merger Subsidiary will direct the
depositary for the offer to transfer to the Trustee any Shares accepted for
payment pursuant to the Offer. Parent and Merger Subsidiary also agree that
immediately upon receipt, acquisition or purchase by either of them or by any of
their affiliates of any additional Shares, or any other voting securities of the
Company, it will transfer or cause to be transferred to the Trustee the
certificate or certificates representing such additional Shares or other
securities. Parent also agrees that, simultaneously with the effectiveness of
the Merger, Parent will cause the transfer to the Trustee of the certificate or
certificates representing 100 percent of the issued and outstanding shares of
the Company, as the corporation surviving the Merger. All such certificates
shall be duly endorsed or accompanied by proper instruments duly executed for
transfer thereof to the Trustee, and shall be exchanged for one or more Voting
Trust Certificates substantially in the form attached hereto as Attachment A
(the "TRUST CERTIFICATES"), with the blanks therein appropriately filled. All
Shares at any time delivered to the Trustee hereunder are hereinafter called the
"COMPANY TRUST STOCK." The Trustee shall present to the Company all
certificates representing Company Trust Stock for surrender and cancellation and
for the issuance and delivery to the Trustee of new certificates (the "TRUST
STOCK") registered in the name of the Trustee or its nominee.
3. The Trustee shall be present, in person or represented by proxy, at
all annual and special meetings of shareholders of the Company so that all Trust
Stock may be counted for the purposes of determining the presence of a quorum at
such meetings. The Trustee shall be entitled and it shall be its duty to
exercise any and all voting rights in respect of the Trust Stock either in
person or by proxy or consent, as hereinafter provided, unless otherwise
directed by an order of the STB or a court of competent jurisdiction. Parent
and Merger Subsidiary agree, and the Trustee acknowledges, that the Trustee
shall not participate in or interfere with the management of the Company and
shall take no other actions with respect to the Company except in accordance
with the terms hereof. The Trustee shall exercise all voting rights in respect
of the Trust Stock in favor of any proposal or action necessary or desirable to
effect, or consistent with the effectuation of, the
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<PAGE> 74
acquisition of the Company by Parent and Merger Subsidiary pursuant to the
Merger Agreement and, without limiting the generality of the foregoing, if there
shall be with respect to the Board of Directors of the Company an "ELECTION
CONTEST" as defined in the Proxy Rules of the Securities and Exchange Commission
(the "SEC"), in which one slate of nominees shall support the effectuation of
the Merger and another oppose it, in favor of the slate supporting the
effectuation of the Merger. In addition, for so long as the Merger Agreement is
in effect, the Trustee shall vote all shares of Trust Stock to cause any other
proposed merger, business combination or similar transaction (including, without
limitation, any consolidation, sale of all or substantially all the assets,
reorganization, recapitalization, liquidation or winding up of or by the
Company) involving the Company, but not involving Parent or one of its
affiliates (other than in connection with a disposition pursuant to paragraph
8), not to be effected. The Trustee shall vote all shares of Trust Stock in
favor of any proposal or action necessary or desirable to dispose of Trust Stock
in accordance with Paragraph 8 hereof. Except as otherwise expressly provided
in the three immediately preceding sentences, the Trustee shall vote all shares
of Trust Stock with respect to all matters, including, without limitation, the
election or removal of directors, voted on by the shareholders of the Company
(whether at a regular or special meeting or pursuant to a unanimous written
consent) in the Trustee's sole discretion, having due regard for the interests
of the holders of the Trust Certificates as investors in the Company, determined
without reference to such holders' interests in railroads other than the Company
or its subsidiaries; provided that the Trustee shall not vote the Trust Stock in
favor of taking or doing any act which would violate any provision of the Merger
Agreement or impede the Company's performance thereunder or which if taken or
done prior to the consummation of the Merger would have been a violation of the
Merger Agreement. Notwithstanding the foregoing provisions of this Paragraph 3
or any other provision of this Agreement, the registered holder of a Trust
Certificate may at any time -- but only with the prior written approval of the
STB -- instruct the Trustee in writing to vote the Trust Stock represented by
such Trust Certificate in any manner, in which case the Trustee shall vote such
shares in accordance with such instructions. In exercising its voting rights in
accordance with this Paragraph 3, the Trustee shall take such actions at all
annual, special or other meetings of stockholders of the Company or in
connection with any action by consent in lieu of a meeting.
4. This Trust Agreement and the nomination of the Trustee during the
term of the trust shall be irrevocable by Parent and its affiliates and shall
terminate only in accordance with the provisions of Paragraphs 8 and 14 hereof.
5. Subject to Paragraph 3, the Trustee shall not exercise the voting
powers of the Trust Stock in any way so as to create any dependence or
<PAGE> 75
intercorporate relationship between (i) Parent and its affiliates, on the one
hand, and (ii) the Company or its affiliates, on the other hand. The term
"AFFILIATE" or "AFFILIATES" wherever used in this Trust Agreement shall have the
meaning specified in Section 11323(c) of Title 49 of the United States Code, as
amended. The Trustee shall not, without the prior approval of the STB, vote the
Trust Stock to elect any officer, director, nominee or representative of Parent
or any of its affiliates as an officer or director of the Company or of any
affiliate of the Company. The Trustee shall be kept informed respecting the
business operations of the Company by means of the financial statements and
other public disclosure documents periodically filed by the Company and
affiliates of the Company with the SEC and with the STB, and by means of
information respecting the Company contained in such statements and other
documents filed by Parent with the SEC and the STB, copies of which shall be
promptly furnished to the Trustee by the Company or Parent, as the case may be,
and the Trustee shall be fully protected in relying upon such information. The
Trustee shall not be liable for any mistakes of fact or law or any error of
judgment, or for any act or omission, except as a result of the Trustee's
willful misconduct or gross negligence.
6. All Trust Certificates shall be transferable on the books of the Trustee
by the registered holder upon the surrender thereof properly assigned, in
accordance with rules from time to time established for the purpose by the
Trustee. Until so transferred, the Trustee may treat the registered holder as
owner for all purposes. Each transferee of a Trust Certificate issued hereunder
shall, by his acceptance thereof, assent to and become a party to this Trust
Agreement, and shall assume all attendant rights and obligations.
7. Pending the termination of this Trust as hereinafter provided, the
Trustee shall, immediately following the receipt of each cash dividend or cash
distribution as may be declared and paid upon the Trust Stock, pay the same over
to or as directed by the registered holder(s) of Trust Certificates hereunder as
then known to the Trustee. The Trustee shall receive and hold dividends and
distributions other than cash upon the same terms and conditions as the Trust
Stock and shall issue Trust Certificates representing any new or additional
securities that may be paid as dividends upon the Trust Stock or otherwise
distributed upon the Trust Stock to the registered holder(s) of Trust
Certificates in proportion to their respective interests.
8. (a) This Trust is accepted by the Trustee subject to the right
hereby reserved in Parent at any time to sell or make any other disposition of
the whole or any part of the Trust Stock, whether or not an event described in
subparagraph (b) below has occurred. The Trustee shall take all actions
reasonably requested by Parent with respect to (including, without limitation,
exercising all voting rights in respect of Trust Stock in favor of any proposal
or action necessary or desirable to
<PAGE> 76
effect, or consistent with the effectuation of) any proposed sale or other
disposition of the whole or any part of the Trust Stock by Parent. The Trustee
shall at any time upon the receipt of a direction from Parent signed by its
President or one of its Vice Presidents and under its corporate seal designating
the person or entity to whom Parent has directly or indirectly sold or otherwise
disposed of the whole or any part of the Trust Stock and certifying that such
person or entity is not an affiliate of Parent and has all necessary regulatory
authority, if any be required, to purchase the Trust Stock (upon which
certification the Trustee shall be entitled to rely), immediately transfer to
the person or entity therein named all the Trustee's right, title and interest
in such amount of the Trust Stock as may be set forth in said direction. If the
foregoing direction shall specify all of the Trust Stock, then following
transfer of the Trustee's right, title and interest therein, and in the event of
a sale thereof, upon delivery to or upon the order of the registered holder(s)
of the Trust Certificates of the proceeds of such sale, this Trust shall cease
and come to an end. If the foregoing direction is as to only a part of the
Trust Stock, then this Trust shall cease as to said part upon such transfer,
and distribution of the net proceeds therefrom in the event of sale, but shall
remain in full force and effect as to the remaining part of the Trust Stock.
In the event of a direct or indirect sale of Trust Stock by Parent, the Trustee
shall, to the extent the consideration therefor is payable to or controllable by
the Trustee, promptly pay, or cause to be paid upon the order of Parent the net
proceeds of such sale on a pro rata basis to the registered holder(s) of the
Trust Certificates. It is the intention of this paragraph that no violations of
49 U.S.C. section 11323 will result from a termination of this Trust.
(b) In the event the STB Approval (as defined below) shall have been
granted, then immediately upon the direction of Parent and the delivery of a
certified copy of such order of the STB or other governmental authority with
respect thereof, or, in the event that Subtitle IV of Title 49 of the United
States Code, or other controlling law, is amended to allow Parent or its
affiliates to acquire control of the Company without obtaining STB or other
governmental approval, upon delivery of an opinion of independent counsel
selected by the Trustee that no order of the STB or other governmental authority
is required, the Trustee shall either (i) transfer to or upon the order of the
registered holder(s) of Trust Certificates hereunder as then known to the
Trustee, its right, title and interest in and to all of the Trust Stock then
held by it in accordance with the terms, conditions and agreements of this Trust
Agreement and not theretofore transferred by it as provided in subparagraph (a)
hereof, or (ii) if shareholder approval of the Merger has not previously been
obtained, vote the Trust Stock with respect to the Merger or any other merger
between the Company and Merger Subsidiary or any other affiliate of Parent as
directed by the registered holder(s) of the Trust Certificates; and
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<PAGE> 77
upon any such transfer or merger this Trust shall cease and come to an end.
(c) In the event that there shall have been an STB Denial (as defined
below), Parent shall use its best efforts to sell the Trust Stock to one or more
eligible purchasers, or otherwise to dispose of the Trust Stock, during a period
of two years after such STB Denial or such extension of that period as the STB
shall approve. Any such disposition shall be subject to any jurisdiction of the
STB to oversee Parent's divestiture of Trust Stock. At all times, the Trustee
shall continue to perform its duties under this Trust Agreement and, should
Parent be unsuccessful in its efforts to sell or distribute the Trust Stock
during the period referred to, the Trustee shall as soon as practicable sell the
Trust Stock for cash to one or more eligible purchasers in such manner and for
such price as the Trustee in its discretion shall deem reasonable after
consultation with the Parent. (An "ELIGIBLE PURCHASER" hereunder shall be a
person or entity that is not affiliated with the Parent and which has all
necessary regulatory authority, if any be required, to purchase the Trust
Stock.) Parent agrees to cooperate with the Trustee in effecting such
disposition, and the Trustee agrees to act in accordance with any direction made
by Parent as to any specific terms or method of disposition, to the extent not
inconsistent with the requirements of the terms of any STB or court order. The
proceeds of the sale shall be distributed on a pro rata basis to or upon the
order of the registered holder(s) of the Trust Certificates hereunder as then
known to the Trustee. The Trustee may, in its reasonable discretion, require
the surrender to it of the Trust Certificates hereunder before paying to the
holder his share of the proceeds. Upon disposition of the Trust Stock pursuant
to this Paragraph 8(c), this Trust shall cease and come to an end.
(d) Unless sooner terminated pursuant to any other provision herein
contained, this Trust Agreement shall terminate on ______________ ___, [2003],
and may be extended by the parties hereto, so long as no violation of 49 U.S.C.
section 11323 will result from such termination or extension. All Trust Stock
and any other property held by the Trustee hereunder upon such termination shall
be distributed on a pro rata basis to or upon the order of the registered
holder(s) of Trust Certificates hereunder as then known to the Trustee. The
Trustee may, in its reasonable discretion, require the surrender to it of the
Trust Certificates hereunder before the release or transfer of the stock
interests evidenced thereby.
(e) The Trustee shall promptly inform the STB of any transfer or
disposition of Trust Stock pursuant to this Paragraph 8.
(f) Except as provided in this Paragraph 8, the Trustee shall not dispose
of, or in any way encumber, the Trust Stock.
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<PAGE> 78
(g) Notwithstanding the foregoing, if the STB issues a declaratory order
that the termination of the Trust will not cause Parent or its affiliates to
have control of the Company, the Trustee shall transfer on a pro rata basis to
or upon the order of the registered holder(s) of Trust Certificates hereunder as
then known to the Trustee, its right, title and interest in and to all of the
Trust Stock then held by it in accordance with the terms and conditions of this
Trust Agreement and not theretofore transferred by it as provided in
subparagraph (a) hereof, and this Trust shall cease and come to an end. The
Trustee may, in its reasonable discretion, require the surrender to it of the
Trust Certificates hereunder before the release or transfer of the stock
interests evidenced thereby.
(h) As used in this Paragraph 8, the terms "STB APPROVAL" and "STB DENIAL"
shall have the following meanings:
"STB APPROVAL" means the issuance by the STB of a decision, which decision
shall become effective and which decision shall not have been stayed or
enjoined, that (A) constitutes a final agency action approving, exempting or
otherwise authorizing the acquisition of control over the Company's railroad
operations by Parent and its affiliates, without the imposition of conditions
that Parent, by written notice to the Trustee, has deemed to be unacceptable,
and (B) does not require any change in the consideration paid or to be paid
pursuant to the Merger Agreement or other material provisions thereof, unless
Parent, by written notice to the Trustee, has determined any such change to be
acceptable to Parent.
"STB DENIAL" means (i) STB Approval shall not have been obtained by
December 31, [2000] or (ii) the STB shall have, by an order which shall have
become final and no longer subject to review by the courts, refused to approve
the control referred to in clause (A) of the definition of STB Approval.
9. Neither the Trustee nor any affiliate of the Trustee may have (i) any
officers, or members of their respective boards or directors, in common with
Parent or any of its affiliates, or (ii) any direct or indirect business
arrangements or dealings, financial or otherwise, with Parent or any of its
affiliates, other than dealings pertaining to establishment and carrying out of
this Trust. Mere investment in the stock or securities of Parent or any of its
affiliates by the Trustee, short of obtaining a controlling interest, will not
be considered a proscribed business arrangement or dealing, but in no event
shall any such investment by the Trustee in voting securities of Parent or its
affiliates exceed 5 percent of their outstanding voting securities; and in no
event shall the Trustee hold a proportion of such voting securities so
substantial as to permit the Trustee in any way to control or direct the affairs
of Parent or its affiliates. Neither Parent nor its affiliates shall purchase
the stock or securities of the Trustee or any affiliate of the Trustee.
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<PAGE> 79
10. The Trustee shall be entitled to receive reasonable and customary
compensation for all services rendered by it as Trustee under the terms hereof,
and said compensation to the Trustee, together with all counsel fees, taxes, or
other expenses reasonably incurred hereunder, shall be promptly paid by Parent.
11. The Trustee may at any time or from time to time appoint an agent or
agents and may delegate to such agent or agents the performance of any
administrative duty of the Trustee and be entitled to reimbursement for the fees
and expenses of such agents.
12. The Trustee shall not be answerable for the default or misconduct of
any agent or attorney appointed by it in pursuance hereof if such agent or
attorney shall have been selected with reasonable care. The duties and
responsibilities of the Trustee shall be limited to those expressly set forth
in this Trust Agreement. The Trustee shall be fully protected by acting in
reliance upon any notice, advice, direction or other document or signature
believed by the Trustee to be genuine. The Trustee shall not be responsible for
the sufficiency or accuracy of the form, execution, validity or genuineness of
the Trust Stock, or of any other documents, or of any endorsement thereon, or
for any lack of endorsement thereon, or for any description therein, nor shall
the Trustee be responsible or liable in any respect on account of the identity,
authority or rights of the persons executing or delivering or purporting to
execute or deliver any such Trust Stock or other document or endorsement or this
Trust Agreement, except for the execution and delivery of this Trust Agreement
by this Trustee. The Parent agrees that it will at all times protect, indemnify
and save harmless the Trustee from any loss, damages, liability, cost or expense
of any kind or character whatsoever in connection with this Trust, except those,
if any, resulting from the gross negligence or willful misconduct of the
Trustee, and will at all times undertake, assume full responsibility for, and
pay on a current basis, but at least quarterly, all cost and expense of any suit
or litigation of any character, whether or not involving a third party,
including any proceedings before the STB, with respect to the Trust Stock or
this Trust Agreement, and if the Trustee shall be made a party thereto, or be
the subject of any investigation or proceeding (whether formal or informal), the
Parent will pay all costs, damages and expenses, including reasonable counsel
fees, to which the Trustee may be subject by reason thereof; provided, however,
that Parent shall not be responsible for the cost and expense of any suit that
the Trustee shall settle without first obtaining Parent's written consent. The
indemnification obligations of Parent shall survive any termination of this
Trust Agreement or the removal, resignation or other replacement of the Trustee.
The Trustee may consult with counsel selected by it and the opinion of such
counsel shall be full and complete authorization and protection in respect of
any action
8
<PAGE> 80
taken or omitted or suffered by the Trustee hereunder in good faith and in
accordance with such opinion.
13. To the extent requested to do so by Parent, Merger Subsidiary or
any registered holder of a Trust Certificate, the Trustee shall furnish to the
party making such request full information with respect to (i) all property
theretofore delivered to it as Trustee, (ii) all property then held by it as
Trustee, and (iii) all action theretofore taken by it as Trustee.
14. The Trustee, or any trustee hereafter appointed, may at any time
resign by giving sixty days' written notice of resignation to Parent, Merger
Subsidiary and the STB. Parent shall at least fifteen days prior to the
effective date of such notice appoint a successor trustee which shall (i)
satisfy the requirements of Paragraph 9 hereof and (ii) be a corporation
organized and doing business under the laws of the United States or of any State
thereof and authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least $50,000,000 and subject to
supervision or examination by federal or state authority. If no successor
trustee shall have been appointed and shall have accepted appointment at least
fifteen days prior to the effective date of such notice of resignation, the
resigning Trustee may petition any authority or court of competent jurisdiction
for the appointment of a successor trustee. Upon written assumption by the
successor trustee of the Trustee=s powers and duties hereunder a copy of the
assumption shall be delivered by the Trustee to Parent and to Merger Subsidiary,
and the STB and all registered holders of Trust Certificates shall be notified
of such assumption, whereupon the Trustee shall be discharged of its powers and
duties hereunder and the successor trustee shall become vested therewith. In
the event of any material violation by the Trustee of the terms and conditions
of this Trust Agreement, the Trustee shall become disqualified from acting as
trustee hereunder as soon as a successor trustee shall have been selected in the
manner provided by this paragraph.
15. This Trust Agreement may from time to time be modified or amended
by agreement executed by the Trustee, Parent, (prior to the Merger) Merger
Subsidiary and the registered holder(s) of the Trust Certificates (i) pursuant
to an order of the STB, (ii) with the prior approval of the STB, (iii) in order
to comply with any order of the STB, or (iv) upon receipt of an opinion of
counsel satisfactory to the Trustee and the registered holder(s) of Trust
Certificates that an order of the STB approving such modification or amendment
is not required and that the amendment is authorized under the Merger Agreement
and is consistent with the regulations of the STB regarding voting trusts.
16. The provisions of this Trust Agreement and the rights and
obligations of the parties hereunder shall be governed by the laws of the State
of
<PAGE> 81
Delaware, except that, to the extent any provision hereof may be found
inconsistent with the ICC Termination Act of 1995 or regulation promulgated
thereunder by the STB, such Act and regulations shall control and such provision
hereof shall be given effect only to the extent permitted by such Act and
regulations. In the event that the STB shall, at any time hereafter by final
order, find that compliance with law requires any other or different action by
the Trustee than is provided herein, the Trustee shall act in accordance with
such final order instead of the provisions of this Trust Agreement.
17. This Trust Agreement is executed in three counterparts, each of
which shall constitute an original, and one of which shall be retained by
Parent, one by Merger Subsidiary, and the other by the Trustee.
18. A copy of this Agreement and any amendments or modifications
thereto shall be filed with the STB by Parent.
19. This Trust Agreement shall be binding upon the successors and
assigns to the parties hereto, including without limitation successors to Parent
by merger, consolidation or otherwise.
20. For purposes of this Trust Agreement, the term "SURFACE
TRANSPORTATION BOARD" or "STB", includes any successor agency or governmental
department that is authorized to carry out the responsibilities now carried out
by the STB with respect to voting trusts and control of common carriers.
21. (a) Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by U.S. mail, certified
mail, return receipt requested or by Federal Express, Express Mail, or similar
overnight delivery or courier service or delivered (in person or by telecopy)
against receipt to the party to whom it is to be given at the address of such
party set forth below (or to such other address as the party shall have given
notice of):
To the Trustee: [______________________]
[Address]
Attention: [Title]
To Parent and (prior to the Merger)
Merger Subsidiary: Canadian National Railway
Company
[Address]
Attention: [Title]
<PAGE> 82
(b) Unless otherwise specifically provided herein, any notice to or
communication with the registered holder(s) of the Trust Certificates hereunder
shall be deemed to be sufficiently given or made if enclosed in postpaid
envelopes (regular not registered mail) addressed to such holders at their
respective addresses appearing on the Trustee's transfer books, and deposited in
any post office or post office box. The addresses of the holders of Trust
Certificates, as shown on the Trustee's transfer books, shall in all cases be
deemed to be the addresses of Trust Certificate holders for all purposes under
this Trust Agreement, without regard to what other or different addresses the
Trustee may have for any Trust Certificate holder on any other books or records
of the Trustee. Every notice so given of mailing shall be the date such notice
is deemed given for all purposes.
22. Each of the parties hereto acknowledges and agrees that in the
event of any breach of this Agreement, the non-breaching party would be
irreparably and immediately harmed and could not be made whole by monetary
damages. It is accordingly agreed that the parties hereto (a) will waive, in
any action for specific performance, the defense of adequacy of a remedy at law
and (b) shall be entitled, in addition to any other remedy to which they may be
entitled at law or in equity, to compel specific performance of this Agreement
in any action instituted in any state or federal court sitting in Wilmington,
Delaware. Each party hereto consents to personal jurisdiction in any such
action brought in any state or federal court sitting in Wilmington, Delaware.
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<PAGE> 83
IN WITNESS WHEREOF, Canadian National Railway Company and Blackhawk Merger
Sub, Inc. have caused this Trust Agreement to be executed by their [ ]
and [ ], respectively, and their corporate seals to be affixed, attested
by their [ ] and [ ], respectively, and [ ] has caused this
Trust Agreement to be executed by one of its duly authorized corporate officers
and its corporate seal to be affixed, attested to by its Corporate Secretary or
one of its Assistant Corporate Secretaries, the day and year first above
written.
<TABLE>
<S> <C>
Attest: Canadian National Railway Company
By
- --------------------------- -------------------------------
(Title)
Attest: Blackhawk Merger Sub, Inc.
By
- --------------------------- -------------------------------
(Title)
Attest: [Trustee]
By
- ---------------------------- -------------------------------
(Title)
</TABLE>
12
<PAGE> 84
ATTACHMENT A
TO VOTING TRUST AGREEMENT
No. Shares
VOTING TRUST CERTIFICATE
for
COMMON STOCK
$0.001 PER SHARE PAR VALUE
of
BLACKHAWK MERGER SUB, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS IS TO CERTIFY that will be entitled, on the surrender
of this Certificate, to receive on the termination of the Voting Trust Agreement
hereinafter referred to, or otherwise as provided in Paragraph 7 of said Voting
Trust Agreement, (i) a certificate or certificates, as the case may be, for
[______] shares of the Common Stock, $0.001 per share par value, of Blackhawk
Merger Sub, Inc., a Delaware corporation (the "COMPANY"). This Certificate is
issued pursuant to, and the rights of the holder hereof are subject to and
limited by, the terms of a Voting Trust Agreement, dated as of __________ ___,
1997, executed by Canadian National Railway Company, a Canadian corporation,
Merger Subsidiary, a Delaware corporation and [__________________], as Voting
Trustee, a copy of which Voting Trust Agreement is on file in the registered
office of Merger Subsidiary at [The Corporation Trust Co., 100 West Tenth
Street, Wilmington, Delaware 19801], and open to inspection of any stockholder
of the Company and the holder hereof. The Voting Trust Agreement, unless
earlier terminated (or extended) pursuant to the terms thereof, will terminate
on _________ ___, [2002], so long as no violation of 49 U.S.C. section 11323
will result from such termination.
The holder of this Certificate shall be entitled to the benefits of said
Voting Trust Agreement, including the right to receive payment equal to the cash
dividends, if any, paid by the Company with respect to the number of shares
represented by this Certificate.
<PAGE> 85
This Certificate shall be transferable only on the books of the undersigned
Voting Trustee or any successor, to be kept by it, on surrender hereof by the
registered holder in person or by attorney duly authorized in accordance with
the provisions of said Voting Trust Agreement, and until so transferred, the
Voting Trustee may treat the registered holder as the owner of this Voting Trust
Certificate for all purposes whatsoever, unaffected by any notice to the
contrary.
By accepting this Certificate, the holder hereof assents to all the
provisions of, and becomes a party to, said Voting Trust Agreement.
IN WITNESS WHEREOF, the Voting Trustee has caused this Certificate to be
signed by its officer duly authorized.
Dated:
By_________________________________
Authorized Officer
<PAGE> 86
[FORM OF BACK OF VOTING TRUST CERTIFICATE]
FOR VALUE RECEIVED ___________________________________________ hereby sells,
assigns, and transfers unto _________________________________ the within Voting
Trust Certificate and all rights and interests represented thereby, and does
hereby irrevocably constitute and appoint ________________________ Attorney to
transfer said Voting Trust Certificate on the books of the within mentioned
Voting Trust Certificate on the books of the within mentioned Voting Trustee,
with full power of substitution in the premises.
_______________________________
Dated:
In the Presence of:
_________________________________
15
<PAGE> 87
EXHIBIT B
[Certificate of Incorporation of Surviving Corporation]
<PAGE> 88
EXHIBIT B
RESTATED
CERTIFICATE OF INCORPORATION
OF
ILLINOIS CENTRAL CORPORATION
(AS AMENDED THROUGH ______ __, 1998)
ARTICLE ONE
NAME. The name of the Corporation is Illinois Central Corporation.
ARTICLE TWO
REGISTERED AGENT. The address of its registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington,
County of New Castle, Delaware 19801. The name of its registered agent at such
address is The Corporation Trust Company.
ARTICLE THREE
PURPOSE. The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may now or hereafter be organized under the
General Corporation Law of the State of Delaware.
ARTICLE FOUR
A. SHARES. The total number of shares of stock which the Corporation
shall have authority to issue is 100 shares of common stock and the par value
of each share is $1.00, amounting in the aggregate to $100.
B. POWERS, PREFERENCES AND RIGHTS OF COMMON STOCK. The powers,
preferences and rights of the shares of common stock and the qualifications,
limitations or restrictions thereof, are set forth below.
1. Dividends. The holders of outstanding shares of common stock
shall be entitled to share equally and ratably with all other holders of
shares of common stock then outstanding in any dividends or
distributions declared on outstanding shares of common stock, when, as
and if any such dividends or distributions are declared by the
Corporation's Board of Directors from funds legally available therefor.
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<PAGE> 89
2. Liquidation, etc. The holders of outstanding shares of common
stock shall be entitled to share equally and ratably with all other
holders of shares of common stock then outstanding in the assets of the
Corporation to be distributed among the holders of shares of the common
stock upon any liquidation or winding up of the Corporation, whether
voluntary or involuntary; and
3. Voting Rights. Each holder of common stock shall be entitled to
vote for the election and removal of the directors of the Corporation
and on all other matters on which stockholders are entitled to vote
under the General Law of the State of Delaware and shall have one vote
for each share of common stock held of record.
ARTICLE FIVE
The Board of directors shall have the power to adopt, amend or repeal the
by-laws of the Corporation.
ARTICLE SIX
ELECTION OF DIRECTORS. A. The number of directors of the corporation
shall be fixed by, or in the manner provided in, the by-laws but shall not be
less than three nor more than ten. The directors shall be elected at the
annual meeting of the stockholders, except as provided in Paragraph B herein,
and each director so elected shall serve until his successor has been duly
elected and qualified, unless he shall cease to serve by reason of death,
resignation or other cause.
B. Newly created directorships resulting from any increase in the number
of directors or any vacancies in the Board of Directors resulting from death,
resignation or other cause may be filled only by a majority vote of the
directors then in office, though less than a quorum, or a sole remaining
director. Any director so chosen shall hold office until his successor is
elected and qualified, or until his earlier death, resignation or removal.
ARTICLE SEVEN
LIABILITY AND INDEMNIFICATION OF DIRECTORS.
A. 1. A director of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith
2
<PAGE> 90
or which involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the General Corporation Law of the State of Delaware, or
(iv) for any transaction under which a director derived an improper personal
benefit.
2. If the General Corporation Law of the State of Delaware is hereafter
amended to further eliminate or limit the liability of a director of a
corporation, then a director of the Corporation, in addition to the
circumstances set forth herein, shall not be liable to the fullest extent
permitted by the General Corporation Law of the State of Delaware as so amended.
B. 1. Each person who was or is a party or is threatened to be made a
party to, or is involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that such person is or was a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, shall be
indemnified and held harmless by the Corporation to the fullest extent permitted
by applicable law. The right to indemnification conferred in this Article Seven
shall also include the right to be paid by the Corporation the expenses incurred
in connection with any such proceeding in advance of its final disposition to
the fullest extent authorized by applicable law. The right to indemnification
conferred in this Article Seven shall be a contract right.
2. The Corporation shall determine the right of any person to receive
indemnification as provided hereunder in accordance with the provisions of
applicable law.
3. The Corporation may purchase and maintain insurance, at its expense, to
protect itself and any person who is or was a director, officer, employee or
agent of the Corporation or who is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any expense,
liability or loss incurred by such person in any such capacity, whether or not
the Corporation would have the power to indemnify such person against such
expense, liability or loss under applicable law.
C. The rights and authority conferred in this Article Seven shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, provision of this Restated Certificate of Incorporation or
the by-laws of the Corporation, agreement, vote of stockholders or disinterested
directors or otherwise.
D. Neither the amendment nor repeal of this Article Seven, nor the adoption
of any provision of this Restated Certificate of Incorporation or the
3
<PAGE> 91
by-laws of the Corporation or of any statute inconsistent with this Article
Seven, shall eliminate or reduce the effect of this Article Seven in respect of
any acts or omissions occurring prior to such amendment, repeal or adoption of
an inconsistent provision.
ARTICLE EIGHT
RESERVED RIGHTS. The corporation reserves the right to further amend this
Restated Certificate of Incorporation in any manner permitted by the General
Corporation Law of the State of Delaware, as amended from time to time, and all
rights and powers conferred herein on stockholders, directors and officers, if
any, are subject to this reserved power.
4
<PAGE> 92
EXHIBIT C
[Bylaws of Surviving Corporation]
<PAGE> 93
EXHIBIT C
Amended and Restated By-Laws
of
ILLINOIS CENTRAL CORPORATION
As Amended and Restated ________ __, 1998
ARTICLE 1
OFFICES
SECTION 1.01. Registered Office in Delaware. The registered office of
Illinois Central Corporation (hereinafter called the "Corporation") in the
State of Delaware shall be in the City of Wilmington, County of New Castle,
and the registered agent in charge thereof shall be The Corporation Trust
Company.
SECTION 1.02. Other Offices. The Corporation may have such other offices
in such places, either within or without the State of Delaware, as the Board
of Directors may from time to time determine or the business of the Corporation
may require.
ARTICLE 2
MEETINGS OF STOCKHOLDERS; STOCKHOLDERS' CONSENT IN LIEU OF MEETING
SECTION 2.01. Annual Meeting. The annual meeting of stockholders for the
election of directors and for the transaction of suchother business as may
properly come before the meeting shall be held at such place within or without
the State of Delaware, and at such date and hour, as shall be designated by
the Board of Directors.
SECTION 2.02. Special Meetings. A special meeting of stockholders, for
any purpose or purposes, may be called at any time by any member of the Board
of Directors or by the President of the Corporation. Any such meeting shall
be held at such place within or without the State of Delaware, and at such
date and hour, as shall be designated in the notice of such meeting.
SECTION 2.03. Notice of Meetings. Unless waived in writing by the
stockholder of record or unless such stockholder is represented thereat in
person or by proxy, each stockholder of record shall be given written notice of
each
5
<PAGE> 94
meeting of stockholders, which notice shall state the place, date and hour of
the meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. Such notice shall be given at least ten days
before the date fixed for such meeting.
SECTION 2.04. Quorum. At each meeting of stockholders, the holders of
record of a majority of the issued and outstanding stock of the Corporation
entitled to vote at such meeting, present in person or by proxy, shall
constitute a quorum for the transaction of business, except where otherwise
provided by law, the Certificate of Incorporation or these By-Laws. In the
absence of a quorum, any officer entitled to preside at, or act as secretary
of, such meeting shall have the power to adjourn the meeting from time to time
until a quorum shall be constituted. At any such adjourned meeting at which a
quorum shall be present any business may be transacted which might have been
transacted at the meeting as originally called, but only those stockholders
entitled to vote at the meeting as originally noticed shall be entitled to vote
at any adjournment or adjournments thereof.
SECTION 2.05. Voting. Except as otherwise provided in the Certificate of
Incorporation, at every meeting of stockholders each holder of record of the
issued and outstanding stock of the Corporation entitled to vote thereat shall
be entitled to one vote, in person or by proxy, for each share of stock held by
such stockholder. Shares of capital stock of the Corporation belonging to the
Corporation directly or indirectly shall not be voted directly or indirectly.
At all meetings of stockholders, a quorum being present, all matters shall be
decided by majority vote of the shares of stock entitled to vote thereat,
except as otherwise required by the laws of the State of Delaware. Unless
demanded by a stockholder of the Corporation present in person or by proxy at
any meeting of stockholders and entitled to vote thereat or so directed by the
chairman of the meeting or required by the laws of the State of Delaware, the
vote thereat on any question need not be by ballot. On a vote by ballot, each
ballot shall be signed by the stockholder voting, or in his name by his proxy,
if there be such proxy, and shall state the number of shares voted by him and
the number of votes to which each share is entitled.
SECTION 2.06. Stockholders' Consent in Lieu of Meeting SECTION 2.06.
Stockholders' Consent in Lieu of Meeting. Any corporate action requiring a vote
of stockholders may be taken without a meeting, without prior notice and without
a vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Such writing or writings shall be filed with the minutes of stockholders'
meetings and prompt notice of the taking of any such action without a meeting by
6
<PAGE> 95
less than unanimous written consent shall be given to those stockholders who
have not so consented in writing.
ARTICLE 3
BOARD OF DIRECTORS
SECTION 3.01. General Powers. The property, business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors.
SECTION 3.02. Number and Term of Holding Office. The number of directors
which shall constitute the whole Board of Directors shall be such number not
fewer than one nor more than ten as shall from time to time be fixed by the
Board of Directors or the stockholders. Each of the directors of the Corporation
shall hold office until the annual meeting next after his election and until his
successor shall be elected and shall qualify or until his earlier death or
resignation or removal in the manner hereinafter provided.
SECTION 3.03. Organization and Order of Business. At each meeting of the
Board of Directors, any director chosen by a majority of the directors present
thereat shall act as chairman of the meeting and preside thereat. The Secretary
of the Corporation or, in the case of his absence, any person whom the chairman
shall appoint, shall act as secretary of such meeting and keep the minutes
thereof.
SECTION 3.04. Resignations. Any director may resign at any time by giving
written notice of his resignation to the President or the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein or, if the time when it shall become effective shall not be specified
therein, then it shall take effect when accepted by action of the Board of
Directors. Except as aforesaid, the acceptance of such resignation shall not be
necessary to make it effective.
SECTION 3.05. Removal of Directors. Any director may be removed, either
with or without cause, at any time by vote of a majority in interest of the
stockholders of the Corporation.
SECTION 3.06. Vacancies. Any vacancy in the Board of Directors, arising
from death, resignation, removal, an increase in the number of directors or any
other cause, may be filled either by a majority vote of the remaining directors,
although less than a quorum, or by the stockholders of the Corporation at the
next annual meeting or any special meeting called for the purpose.
SECTION 3.07. Place of Meeting. The Board of Directors may hold its
meetings at such place or places within or without the State of Delaware as the
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<PAGE> 96
Board may from time to time by resolution determine or as shall be designated
in the respective notices or waivers of notice thereof.
SECTION 3.08. Meetings.
(a) Annual Meetings. As soon as practicable after each annual election of
directors, the Board of Directors shall meet for the purpose of organization
and the transaction of other business.
(b) Other Meetings. Other meetings of the Board of Directors shall be
held at such times and places as the Board shall from time to time determine or
upon call by the President of the Corporation.
SECTION 3.09. Notice of Meetings. The Secretary of the Corporation shall
give notice to each director of each meeting, including the time and place of
such meeting. Notice of each such meeting shall be mailed to each director,
addressed to him at his residence or usual place of business, at least three
days before the day on which such meeting is to be held, or shall be sent to him
by telegraph, cable, wireless or other form of recorded communication or be
delivered personally or by telephone not later than the day before the day on
which such meeting is to be held. Notice of any meeting shall not be required to
be given to any director who shall attend such meeting. A written waiver of
notice, signed by the person entitled thereto, whether before or after the time
stated therein, shall be deemed equivalent to adequate notice.
SECTION 3.10. Quorum and Manner of Acting. Except as provided by law,
the Certificate of Incorporation or these By-Laws, a majority of the directors
then in office shall be necessary at any meeting of the Board of Directors in
order to constitute a quorum for the transaction of business at such meeting,
and the vote of a majority of those directors present at any such meeting at
which a quorum is present shall be necessary for the passage of any resolution
or act of the Board. In the absence of a quorum for any such meeting, a
majority of the directors present thereat may adjourn such meeting from time to
time until a quorum shall be present thereat. Notice of any adjourned meeting
need not be given.
SECTION 3.11. Action by Consent. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting if a written consent thereto is signed by all
members of the Board or of such committee, as the case may be, and such written
consent is filed with the minutes of the proceedings of the Board or such
committee.
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<PAGE> 97
SECTION 3.12. Meetings by Telephone, Etc. Members of the Board of
Directors, or of any committee thereof, may participate in a meeting of the
Board, or of such committee, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
Section shall constitute presence in person at such meeting.
SECTION 3.13. Compensation. Each director, in consideration of his
serving as such, shall be entitled to receive from the Corporation such amount
per annum or such fees for attendance at meetings of the Board of Directors or
of any committee thereof, or both, as the Board shall from time to time
determine. The Board may likewise provide that the Corporation shall reimburse
each director or member of a committee for any expenses incurred by him on
account of his attendance at any such meeting. Nothing contained in this Section
shall be construed to preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor.
SECTION 3.14. Committees. The Board of Directors, by resolution passed by
a majority of the whole Board, may designate members of the Board to constitute
one or more committees, which shall in each case consist of such number of
directors, not fewer than two, and shall have and may exercise such powers as
the Board may by resolution determine and specify in the respective resolutions
appointing them. A majority of all the members of any such committee may fix its
rules of procedure, determine its action and fix the time and place, whether
within or without the State of Delaware, of its meetings and specify what notice
thereof, if any, shall be given, unless the Board shall otherwise by resolution
provide. The Board shall have power to change the members of any such committee
at any time, to fill vacancies therein and to discharge any such committee,
either with or without cause, at any time.
ARTICLE 4
OFFICERS
SECTION 4.01. Number. The officers of the Corporation shall be a
President, one or more Vice Presidents, a Treasurer and a Secretary. Each such
officer shall be elected by the Board of Directors at its initial organization
meeting and thereafter at its annual meeting and shall hold office until the
next succeeding annual meeting of the Board and until his successor is elected
or until his earlier death or resignation or removal in the manner hereinafter
provided.
The Board may elect or appoint such other officers of the Corporation
(including one or more Assistant Treasurers and one or more Assistant
Secretaries) as it deems necessary who shall have such authority and shall
perform
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<PAGE> 98
such duties as the Board may prescribe. If additional officers are elected or
appointed during the year, each of them shall hold office until the next annual
meeting of the Board at which officers are regularly elected or appointed and
until his successor is elected or appointed or until his earlier death or
resignation or removal in the manner hereinafter provided.
A vacancy in any office may be filled for the unexpired portion of the
term in the same manner as provided for election or appointment to such office.
All officers and agents elected or appointed by the Board shall be subject
to removal at any time by the Board with or without cause.
Any officer may resign at any time by giving written notice to the
President or the Secretary of the Corporation, and such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, it shall take effect when accepted by
action of the Board. Except as aforesaid, the acceptance of such resignation
shall not be necessary to make it effective.
SECTION 4.02. The President. The President of the Corporation, subject to
the direction of the Board of Directors, shall be the chief executive officer of
the Corporation, shall have general charge of the business and affairs of the
Corporation, shall have the direction of all other officers, agents and
employees and may assign such duties to the other officers of the Corporation as
he deems appropriate.
SECTION 4.03. Vice Presidents. Each Vice President shall have such powers
and perform such duties as the President or the Board may from time to time
prescribe and shall perform such other duties as may be prescribed by these
By-Laws. At the request of the President, or in case of his absence or inability
to act, any of the Vice Presidents shall perform the duties of the President
and, when so acting, shall have all the powers of, and be subject to all the
restrictions upon, the President.
SECTION 4.04. Treasurer. The Treasurer of the Corporation shall have
charge and custody of and be responsible for all funds and securities of the
Corporation and its books of account.
SECTION 4.05. Secretary. The Secretary of the Corporation shall keep the
records of all meetings of the stockholders and the Board of Directors. He shall
affix the seal of the Corporation to all deeds, contracts, bonds or other
instruments requiring the corporate seal when the same shall have been signed on
behalf of the Corporation by a duly authorized officer and shall be the
custodian of all
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<PAGE> 99
contracts, deeds, documents and all other indicia of title to properties owned
by the Corporation and of its other corporate records.
ARTICLE 5
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
SECTION 5.01. Execution of Documents. Any member of the Board of
Directors and any officer, employee or agent of the Corporation designated by
the Board of Directors shall have power to execute and deliver deeds, contracts,
mortgages, bonds, debentures, checks, drafts and other orders for the payment of
money and other documents for and in the name of the Corporation, and the Board
of Directors may authorize any such officer, employee or agent to delegate such
power (including authority to redelegate) by written instrument to other
officers, employees or agents of the Corporation.
SECTION 5.02. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
or otherwise as the Board of Directors or the President or any other officer of
the Corporation to whom power in that respect shall have been delegated by the
Board shall select.
ARTICLE 6
BOOKS AND RECORDS
The books and records of the Corporation may be kept at such places within
or without the State of Delaware as the Board of Directors may from time to
time determine.
ARTICLE 7
SEAL
The Board shall provide a corporate seal, which shall be in the form of a
circle and shall bear the full name of the Corporation and the word "Delaware"
and figures representing the year of its incorporation.
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<PAGE> 100
ARTICLE 8
INDEMNIFICATION
To the extent permitted by Section 145 of the General Corporation Law of
the State of Delaware, as now in effect and as from time to time amended, or
any successor provisions thereto, the Corporation shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative and whether or not such action is an action by
or in the right of the Corporation to procure a judgment in its favor, by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
ARTICLE 9
SHARES AND THEIR TRANSFER
SECTION 9.01. Certificates of Stock. Every owner of stock of the
Corporation shall be entitled to have a certificate certifying the number of
shares owned by him or it in the Corporation, which shall otherwise be in such
form as the Board of Directors shall prescribe. Each such certificate shall be
signed by the President or a Vice President and the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of the Corporation. In case
any officer or officers who shall have signed any such certificate or
certificates shall cease to be such officer or officers of the Corporation,
whether because of death, resignation, removal or otherwise, before such
certificate or certificates shall have been delivered by the Corporation, such
certificate or certificates may nevertheless be adopted by the Corporation and
be issued and delivered as though the person or persons who signed such
certificate had not ceased to be such officer or officers of the Corporation.
SECTION 9.02. Record. A record shall be kept of the name of the person,
firm or corporation owning the stock represented by each certificate for stock
of the Corporation issued, the number of shares represented by each such
certificate, and the date thereof, and, in the case of cancellation, the date of
cancellation. The person in whose name shares of stock stand on the books of the
Corporation shall be deemed the owner thereof for all purposes as regards the
corporation.
SECTION 9.03. Transfer of Stock. Transfers of shares of the'stock of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary of the corporation, and on the
surrender of the certificate or certificates for such shares properly endorsed.
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SECTION 9.04. Lost, Destroyed or Mutilated Certificate. In case of the
alleged loss or destruction or the mutilation of a certificate representing
stock of the Corporation, a new certificate may be issued in place thereof, in
the manner and upon such terms as the Board of Directors may prescribe.
ARTICLE 10
AMENDMENTS
These By-Laws, or any of them, may be altered, amended or repealed, or
new By-Laws may be made, by the stockholders entitled to vote thereon at any
annual or special meeting thereof or by the board of directors.
13
<PAGE> 102
EXHIBIT D
Terms and Conditions of the Merger
PART I--CHANGES TO CONVERT TO ALL CASH TRANSACTION
In addition to the provisions included in this Agreement that contemplate
the conversion to an Offer for all of the issued and outstanding shares of IC
Common Stock pursuant to Section 1.04, the parties to this Agreement agree that
the Agreement shall be modified in the following manner.
(a) References to 46,051,761 in the recitals and in Section 1.01 shall be
changed to the number representing all of the issued and outstanding shares of
IC Common Stock at the date this Agreement is so modified.
(b) References to "75% of the currently outstanding shares of IC Common
Stock" in the recitals shall be changed to "all of the currently issued and
outstanding shares of IC Common Stock".
(c) Sections 2.02(c) and 2.02(d) shall be deleted and shall be replaced by
a new Section 2.02(c), which shall read in full as set forth below:
"(c) Each share of IC Common Stock outstanding immediately prior to
the Effective Time shall, except as provided in Section 2.02(a), be
converted into the right to receive an amount of cash equal to $39.00 (the
"Merger Consideration")."
(d) Section 2.06 shall be deleted.
(e) References to the "Form F-4" in Section 5.09 shall be deleted.
(f) Sections 8.05 and 8.06 shall be deleted.
(g) References to the "Form F-4" in Section 9.01 shall be deleted and the
following sentence shall be added as the first sentence of Section 9.01:
"If the conditions set forth in Section 253 of the Delaware Law are
satisfied and subject to the terms of the Voting Trust Agreement, CN shall
cause the trustee of the Voting Trust to effect the Merger pursuant to
Section 253 of Delaware Law and the parties to this Agreement agree to use
all reasonable best efforts to satisfy the requirements of Section 253 of
Delaware Law."
(h) Section 7.07 shall be deleted.
<PAGE> 103
(i) Section 10.02 shall be deleted.
(j) The May 29, 1998 date set forth in Section 11.02(c) shall be extended
by the same number of business days as the number of business days by which
Merger Subsidiary has extended the Offer in connection with the amendment of
the Offer contemplated by Section 1.04(i).
(k) References to the Investment Commitment Agreements shall be deleted.
PART II--CHANGES TO CONVERT TO ONE-STEP MERGER TRANSACTION
In addition to the provisions included in this Agreement that contemplate
the conversion to a one-step Merger pursuant to Section 1.04, the parties to
this Agreement agree that the Agreement shall be modified in the following
manner:
(a) Section 1.01 shall be deleted (except for defined terms used in the
deleted provisions that are used in other sections of the Agreement).
(b) References to the Offer in Section 1.02(a) shall be deleted, and
Section 1.02(b) shall be deleted.
(c) Section 2.02(c) shall be deleted.
(d) Section 2.02(d) shall be modified to delete the words "if Merger
Subsidiary shall have purchased, pursuant to the Offer an aggregate of less
than 46,051,761 shares of IC Common Stock," in the first sentence of such
section.
(e) Sections 3.03(b), (c) and (d) shall be modified to provide that the
appointments set forth therein will not be made until the Effective Time.
(f) Section 7.05 shall be deleted.
(g) Article 10 shall be deleted in its entirety and replaced with the
following:
"ARTICLE 10
"CONDITIONS TO THE MERGER
"SECTION 10.01 Conditions to the Obligations of Each Party. The obligations of
the parties to consummate the Merger are subject to the satisfaction of the
following conditions:
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<PAGE> 104
"(a) this Agreement shall have been adopted by the stockholders of IC
in accordance with Delaware Law;
"(b) any applicable waiting period under the HSR Act relating to the
Merger shall have expired;
"(c) the Form F-4 shall have been declared effective under the 1933
Act and no stop order suspending the effectiveness of the Form F-4 shall
be in effect and no proceeding for such purpose shall be pending or
threatened by the SEC;
"(d) there shall not have been instituted or be pending any action or
proceeding by any government or governmental authority or agency, domestic
or foreign, before any court or governmental authority or agency, domestic
or foreign, (i) challenging or seeking to make illegal the Voting Trust or
the consummation of the Merger, seeking to obtain material damages or
otherwise directly or indirectly relating to the transactions contemplated
by the Merger (including the Voting Trust), (ii) except for the Voting
Trust, seeking to restrain or prohibit CN's ownership or operation (or
that of its respective Subsidiaries or Affiliates) of all or any material
portion of the business or assets of IC and its Subsidiaries, taken as a
whole, or of CN and its Subsidiaries, taken as a whole, or to compel CN or
any of its Subsidiaries or Affiliates to dispose of or hold separate all
or any material portion of the business or assets of IC and its
Subsidiaries, taken as a whole, or of CN and its Subsidiaries, taken as a
whole, (iii) except for the Voting Trust, seeking to impose or confirm
material limitations on the ability of CN or any of its Subsidiaries or
Affiliates effectively to exercise full rights of ownership of the IC
Common Stock, including, without limitation, the right to vote any shares
of such stock acquired or owned by CN or any of its Subsidiaries or
Affiliates on all matters properly presented to the stockholders of IC, or
(iv) seeking to require divestiture by CN or any of its Subsidiaries or
Affiliates of any such shares;
"(e) there shall not have been any action taken, or any statute,
rule, regulation, injunction, order or decree proposed, enacted, enforced,
promulgated, issued or deemed applicable to the Merger (including the
Voting Trust), by any court, government or governmental authority or
agency, domestic or foreign (other than (i) the application of the waiting
period provisions of the HSR Act to the Merger and (ii) the waiting period
prior to receipt of STB approval or exemption with respect to the exercise
of control by CN over the Railroad Subsidiaries), that would reasonably be
3
<PAGE> 105
likely, directly or indirectly, to result in any of the consequences
referred to in clauses (i) through (iv) of paragraph (d) above; and
"(f) the staff of the STB shall have given a favorable informal
advisory option to the effect that the proposed use of the voting trust
will preclude control of the Railroad Subsidiaries.
"SECTION 10.02. Conditions to the Obligations of Merger Subsidiary. The
obligations of Merger Subsidiary to consummate the Merger are subject to the
satisfaction of the following further conditions:
"(a) no change shall have occurred or been threatened (and no
development shall have occurred or been threatened involving a prospective
change) in the business, assets, liabilities, financial condition,
capitalization, operations or results of operations of IC or any of its
Subsidiaries that would reasonably be expected to have a Material Adverse
Effect with respect to IC;
"(b) IC shall not have breached or failed to perform in any material
respect any of its covenants or agreements under this Agreement, and each
of the representations and warranties of IC set forth in this Agreement
shall be true in all material respects when made and as of the Effective
Time as if made at and as of such time (unless such representation or
warranty is made only as of a specific date), except where the failure of
such representations and warranties to be so true and correct (without
giving effect to any limitation as to "materiality" or "material adverse
effect") does not have, and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect; and
"(c) the staff of the STB shall have given CN a favorable informal
advisory opinion to the effect that the proposed use of the Voting Trust
will preclude unlawful control of IC by CN.
"SECTION 10.03. Conditions to the Obligations of IC. The obligations of IC to
consummate the Merger are subject to the satisfaction of the following further
conditions:
"(a) CN shall have performed in all material respects all of the
respective obligations hereunder required to be performed at or prior to
the Effective Time, the representations and warranties of CN and contained
in this Agreement and in any certificate or other writing delivered by CN
or pursuant hereto shall be true in all material respects at and as of the
Effective Time as if made at and as of such time; and
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<PAGE> 106
"(b) The shares of CN Common Stock to be issued in the Merger (if any)
shall have been approved for listing on the NYSE, subject to official
notice of issuance."
(h) A new paragraph (j) shall be added to Section 11.01, which shall read
as follows:
"(j) by either CN or IC if either (i) at the meeting of the
stockholders of IC held to consider adoption of the Agreement, such
stockholders shall fail to adopt the Agreement or (ii) this Agreement
shall not have been adopted by the stockholders of IC in accordance
with the Delaware Law by October 30, 1998."
(i) A new clause (iii) shall be added to Section 9.02(b), which shall read
as follows:
"(iii) within two days of the execution of a definitive agreement with
respect to any Acquisition Proposal if IC enters into such a
definitive agreement within 15 months after the termination of this
Agreement pursuant to Section 11.01(j) and an Acquisition Proposal was
publicly announced prior to the date of such termination."
(j) Annex I shall be deleted.
The parties agree that any cross-references, section references or
designations or schedule designations shall be deemed to be modified to reflect
the modifications set forth in this Exhibit D. The parties shall use their
reasonable best efforts in good faith to make any further modifications to this
Agreement that are necessary or appropriate to reflect a Section 1.04 election.
5
<PAGE> 1
CONFORMED COPY
INVESTMENT COMMITMENT AGREEMENT dated February 10, 1998 between Gilbert H.
Lamphere (the "STOCKHOLDER") and Canadian National Railway Company, a
corporation organized under the laws of Canada (the "COMPANY").
WHEREAS, the Company intends to acquire Illinois Central Corporation ("IC"), a
Delaware company, pursuant to an agreement and plan of merger (the "MERGER
AGREEMENT") dated as of the date hereof.
WHEREAS, the Stockholder is the beneficial owner of certain shares of common
stock, par value $0.001 per share, of IC ("IC COMMON STOCK") and certain options
to purchase shares of IC Common Stock as of the date hereof.
WHEREAS, for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged and, intending to be legally bound, the parties
hereto agree as follows:
ARTICLE 1
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
SECTION 1.01. BINDING AGREEMENT. The Stockholder has full legal power and
authority to enter into this Agreement and to perform its obligations hereunder.
This Agreement constitutes a valid and binding agreement of the Stockholder,
enforceable in accordance with its terms.
SECTION 1.02. NON-CONTRAVENTION. The execution, delivery and performance
by the Stockholder of this Agreement and the consummation by the Stockholder of
the transactions contemplated hereby do not and will not (a) contravene or
conflict with or constitute a violation of any provision of any law, regulation,
judgment, injunction, order or decree binding upon or applicable to the
Stockholder or (b) constitute a default under any provision of any agreement,
contract or other instrument binding upon the Stockholder.
<PAGE> 2
ARTICLE 2
ROLLOVER AND REINVESTMENT OF PROCEEDS
SECTION 2.1. AGREEMENT TO ROLL OVER OPTIONS. The Stockholder agrees,
subject to applicable law, that at the Effective Time (as defined in the Merger
Agreement) he will permit all options ("OPTIONS") to purchase shares of IC
Common Stock then owned by him to be amended and converted into options to
purchase shares of common stock, no par value, of the Company ("CN COMMON
STOCK") in accordance with the terms of Section 2.07 of the Merger Agreement.
SECTION 2.2. REINVESTMENT OF PROCEEDS. The Stockholder agrees that, within
90 days of the Effective Time (provided that such period shall be extended for
any period during which he is precluded from purchasing shares of CN Common
Stock pursuant to applicable law), he will have acquired at least 98,150 shares
of CN Common Stock pursuant to the Merger or pursuant to open market purchases,
provided that the Stockholder shall not be obligated to invest an aggregate
amount in excess of $5,300,000 of proceeds from the Offer and/or the Merger (as
such terms are defined in the Merger Agreement). For purposes of this Section
2.02, any shares of CN Common Stock issued to the Stockholder pursuant to the
Merger shall be deemed to represent an investment in an amount equal to the
product of the number of shares of CN Common Stock so received and the average
closing trading price per share of CN Common Stock on the NYSE for the 5 trading
days immediately following the date of receipt.
SECTION 2.03. TRUSTS. Any acquisitions of shares of CN Common Stock by
trusts for the descendants of Stockholder shall ratably decrease Stockholder's
obligations with respect to the acquisition of shares pursuant to Section 2.02.
ARTICLE 3
VOTING OF SHARES
SECTION 3.1. THE IC STOCKHOLDERS' MEETING. The Stockholder agrees that at
any meeting of stockholders of IC held to adopt the Merger Agreement for which
proxies are solicited, he will vote all of his shares in favor of such action.
<PAGE> 3
ARTICLE 4
MISCELLANEOUS
SECTION 4.1. TERMIRMINATION OF THE AGREEMENT. This Agreement shall
automatically terminate, without action by either party, upon the termination of
the Merger Agreement in accordance with its terms or, if the Company has elected
to amend the terms of the Offer to be an all-cash offer in accordance with
Section 1.04 of the Merger Agreement.
SECTION 4.2. NOTICES. All notices, requests and other communications to
any party hereunder shall be in writing (including telecopy or similar writing)
and shall be given, if to the Stockholder, to:
Gilbert H. Lamphere
c/o Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Telecopy: 212-455-2502
with copies to:
Ronald A. Lane, Esq.
Illinois Central Corporation
455 North Cityfront Plaza Drive
Chicago, Illinois 60611-5504
Telecopy: (312) 755-7669
John G. Finley, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Telecopy: (212) 455-2502
Jean Pierre Ouellet, Esq.
Canadian National Railway Company
935, rue de la Gauchetiere Ouest
Montreal, (Quebec) Canada
Telecopy: (514) 399-3779
3
<PAGE> 4
Winthrop B. Conrad, Jr., Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopy: (212) 450-4800
or such other addresses or telecopy number as such party may hereafter specify
for the purpose by notice to the other parties hereto. Each such notice, request
or other communication shall be effective (a) if given by telecopy, when such
telecopy is transmitted to the telecopy number specified in this Section and the
appropriate telecopy confirmation is received or (b) if given by any other
means, when delivered at the address specified in this Section.
SECTION 4.03. AMENDMENTS; NO WAIVERS, (a) Any provision of this Agreement
may be amended or waived if, and only if, such amendment or waiver is in writing
and signed, in the case of an amendment, by the parties hereto or in the case of
a waiver, by the party against whom the waiver is to be effective.
SECTION 4.04. GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the law of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 4.05. COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
SECTION 4.06. ENTIRE AGREEMENT. This Agreement and the agreements referred
to herein constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
Canadian National Railway Company
By: /s/ Paul Tellier
----------------------------------
Name: Paul Tellier
Title: President and CEO
Gilbert H. Lamphere
By: /s/ Gilbert H. Lamphere
----------------------------------
<PAGE> 1
CONFORMED COPY
INVESTMENT COMMITMENT AGREEMENT dated February 10, 1998 between Alexander P.
Lynch (the "STOCKHOLDER") and Canadian National Railway Company, a corporation
organized under the laws of Canada (the "COMPANY").
WHEREAS, the Company intends to acquire Illinois Central Corporation ("IC"),
a Delaware company, pursuant to an agreement and plan of merger (the "MERGER
AGREEMENT") dated as of the date hereof.
WHEREAS, the Stockholder is the beneficial owner of certain options to
purchase shares of common stock, par value $0.001 per share, of IC ("IC
COMMON STOCK").
WHEREAS, for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged and, intending to be legally bound, the parties
hereto agree as follows:
ARTICLE 1
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
SECTION 1.01. BINDING AGREEMENT. The Stockholder has full legal power and
authority to enter into this Agreement and to perform its obligations hereunder.
This Agreement constitutes a valid and binding agreement of the Stockholder,
enforceable in accordance with its terms.
SECTION 1.02. NON-CONTRAVENTION. The execution, delivery and performance
by the Stockholder of this Agreement and the consummation by the Stockholder of
the transactions contemplated hereby do not and will not (a) contravene or
conflict with or constitute a violation of any provision of any law, regulation,
judgment, injunction, order or decree binding upon or applicable to the
Stockholder or (b) constitute a default under any provision of any agreement,
contract or other instrument binding upon the Stockholder.
<PAGE> 2
ARTICLE 2
ROLLOVER OF OPTIONS
SECTION 2.01. AGREEMENT TO ROLL OVER OPTIONS. The Stockholder agrees,
subject to applicable law, that at the Effective Time (as defined in the Merger
Agreement) he will permit all options ("OPTIONS") to purchase shares of IC
Common Stock then owned by him to be amended and converted into options to
purchase shares of common stock, no par value, of the Company ("CN COMMON
STOCK") in accordance with the terms of Section 2.07 of the Merger Agreement.
The obligations of Stockholder set forth in this Section 2.01 shall terminate
if the closing trading price per share of CN Common Stock on the NYSE at any
time after the date of this Agreement exceeds levels anticipated by the parties.
ARTICLE 3
VOTING OF SHARES
SECTION 3.01. THE IC STOCKHOLDERS' MEETING. The Stockholder agrees that at
any meeting of stockholders of IC held to adopt the Merger Agreement for which
proxies are solicited, he will vote all of his shares in favor of such action.
ARTICLE 4
MISCELLANEOUS
SECTION 4.01. TERMINATION OF THE AGREEMENT. This Agreement shall
automatically terminate, without action by either party, upon the termination of
the Merger Agreement in accordance with its terms or, if the Company has elected
to amend the terms of the Offer to be an all-cash offer in accordance with
Section 1.04 of the Merger Agreement.
2
<PAGE> 3
SECTION 4.2. NOTICES. All notices, requests and other communications
to any party hereunder shall be in writing (including telecopy or similar
writing) and shall be given, if to the Stockholder, to:
Alexander P. Lynch
c/o Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Telecopy: 212-455-2502
with copies to:
Ronald A. Lane, Esq.
Illinois Central Corporation
455 North Cityfront Plaza Drive
Chicago, Illinois 60611-5504
Telecopy: (312) 755-7669
John G. Finley, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Telecopy: (212) 455-2502
Jean Pierre Ouellet, Esq.
Canadian National Railway Company
935, rue de la Gauchetiere Ouest
Montreal, (Quebec) Canada
Telecopy: (514) 399-3779
Winthrop B. Conrad, Jr., Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopy: (212) 450-4800
or such other addresses or telecopy number as such party may hereafter specify
for the purpose by notice to the other parties hereto. Each such notice, request
or other communication shall be effective (a) if given by telecopy, when such
telecopy is transmitted to the telecopy number specified in this Section and the
appropriate telecopy confirmation is received or (b) if given by any other
means, when delivered at the address specified in this Section.
3
<PAGE> 4
SECTION 4.3. AMENDMENTS; NO WAIVERS. (a) Any provision of this Agreement
may be amended or waived if, and only if, such amendment or waiver is in writing
and signed, in the case of an amendment, by the parties hereto or in the case of
a waiver, by the party against whom the waiver is to be effective.
SECTION 4.4. GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the law of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 4.5. COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
SECTION 4.6. ENTIRE AGREEMENT. This Agreement and the
agreements referred to herein constitute the entire agreement and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof.
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
Canadian National Railway Company
By: ____________________________
Name:
Title:
Alexander P. Lynch
By: ____________________________
<PAGE> 1
AGREEMENT FOR NON-DISCLOSURE
OF PROPRIETARY INFORMATION AND STANDSTILL
This Agreement, made as of this 13th day of March, 1997, by and between
CANADIAN NATIONAL RAILWAY COMPANY, with a principal place of business located at
935 de La Gauchetiere St. W., Montreal, Province of Quebec, Canada, and ILLINOIS
CENTRAL CORP., with a principal place of business located at 455 North Cityfront
Plaza Drive, Chicago, State of Illinois, is to assure the protection and
preservation of the confidential and proprietary nature of information to be
disclosed or made available under this Agreement, and shall be governed by and
enforceable under, the laws of the State of New York.
RECITALS
WHEREAS, the parties hereto (each referred to herein as a "Party") are
giving consideration to a possible transaction, including a possible business
combination, joint venture or other possible arrangement involving the parties
(a "Business Arrangement") and in connection therewith it is expected that each
Party furnish to the other Party certain Proprietary Information (as defined
below);
AND WHEREAS, each Party desires to assure the confidential and proprietary
status of the Proprietary Information which may be disclosed hereunder;
AND WHEREAS, the parties also desire that any Proprietary Information that
is disclosed pursuant to the terms of this Agreement to the other Party or, as
permitted hereunder, to its directors, officers, employees, affiliates,
representatives (including financial advisors, attorneys and accountants) or
agents (collectively, "Representatives"), be used only for the purposes of
evaluating a possible Business Arrangement;
AGREEMENT
NOW, THEREFORE, in consideration of the premises, and other good and
valuable consideration, the receipt and legal sufficiency of which is hereby
acknowledged; the parties agree as follows:
1. The Party receiving Proprietary Information (the "Recipient") and its
Representatives will protect all Proprietary Information received under this
Agreement from any disclosure to third parties or the use of such Proprietary
Information beyond that allowed under this Agreement, in each case, in
accordance with this Agreement, and will not engage in such disclosure or use
without the prior express written permission of the Party disclosing such
information (the "Disclosing Party").
2. Proprietary Information which may be supplied and is protected under
this Agreement includes, but is not limited to: all business plans,
specifications, reports, manuals, data books, computer programs, techniques,
employment arrangements, and all other business practices or information of a
private nature on any media whatsoever, and any derivatives of the foregoing,
including, without limitation, any notes, analyses, compilations, studies,
memoranda or other documents prepared by the Recipient, or its Representatives,
which contain, reflect or are based on, in whole or in part, such proprietary
information (collectively, "Proprietary Information"). Such Proprietary
Information includes data transferred in the form of, but not limited to, oral,
written, graphic or computer media including telephone, and meeting
conversations, as well as all analyses, compilations, forecasts, studies or
other documents which include any Proprietary Information. The term "Proprietary
Information" does not include confidential information which (i) becomes
generally available to the public other than as a result of a disclosure by
Disclosing Party or Disclosing Party's Representatives, (ii) was available to
Recipient on a non-confidential basis prior to its disclosure to Recipient by
Disclosing Party or its Representatives, (iii) is independently developed by the
Recipient or its Representatives without the use of any Proprietary Information
of the Disclosing Party, or (iv) becomes available to Recipient on a
non-confidential basis from a source other than Disclosing Party or its
Representatives, provided that such source, to Recipient's knowledge, is not
bound by a confidentiality agreement with Disclosing Party or its
Representatives, or is otherwise prohibited from transmitting the information to
Recipient by a contractual, legal, or fiduciary obligation. In the event that
Recipient or its Representatives are requested or required (by oral questions,
interrogatories, requests for information or
<PAGE> 2
documents in legal proceedings, subpoena, civil investigation demand or other
similar process) or required by the rules of any relevant stock exchange or
other relevant regulatory authority to disclose any Proprietary Information,
Recipient or its Representatives shall provide the Disclosing Party with prompt
notice of any such request or requirement so that the Disclosing Party may seek
a protective order or other appropriate remedy and/or waive compliance with the
provisions of this Agreement. If, in the absence of a protective order or other
remedy or the receipt of a waiver by the Disclosing Party, the Recipient or its
Representatives are nonetheless, in the opinion of counsel, required to disclose
Proprietary Information, the Recipient or its Representatives may, without
liability hereunder, disclose only that portion of the Proprietary Information
which in the opinion of counsel is legally required to be disclosed; provided
that the Recipient or its Representatives attempt to preserve the
confidentiality of the Proprietary Information, including, without limitation,
by cooperating with the Disclosing Party to obtain an appropriate protective
order or other reliable assurance that confidential treatment will be accorded
the Proprietary Information.
3. Recipient agrees to keep confidential or protect such Proprietary
Information as it would its own confidential and proprietary information at the
highest level of proprietary material. Disclosure of such Proprietary
Information shall be restricted to those Representatives of Recipient who (i)
have a need to know the information for the purpose of evaluating a possible
Business Arrangement between the parties and (ii) are informed by the Disclosing
Party of the confidential and proprietary nature of the Proprietary Information.
The Disclosing Party will cause its Representatives to observe the terms of this
Agreement and the Disclosing Party will be responsible for any breach of this
Agreement by any of its Representatives.
4. All Proprietary Information, including all applicable intellectual
property rights residing in the Proprietary Information (including without
limitation, patents, copyrights, industrial designs, trademarks and trade
secrets), unless otherwise specified in writing by Disclosing Party, are and
shall remain the exclusive property of Disclosing Party, including any and all
reproductions in any form of said Proprietary Information. All such Proprietary
Information (whether prepared by the Recipient or its Representatives on its
behalf) shall be returned or destroyed, at the election of Disclosing Party or
upon request of Disclosing Party provided, however, that all notes, analyses,
conditions, studies, interpretations, memoranda or other documents, to the
extent that they contain, reflect or are based upon the Proprietary Information,
may be destroyed (rather than delivered); provided further that Board or Board
Committee minutes need neither be delivered nor destroyed. Upon the request of
Disclosing Party, Recipient shall execute a certificate of destruction of such
Proprietary Information when destroyed by Recipient, whether intentionally or
accidentally, and transmit the same to Disclosing Party.
5. Proprietary Information supplied under this Agreement shall only be
reproduced when legitimately required for Recipient's purposes and in conformity
with the provisions hereof.
6. Recipient hereby agrees that it will not use the Proprietary
Information for any reason or purpose other than to evaluate a possible Business
Arrangement with the Disclosing Party and that the use of the Proprietary
Information supplied hereunder shall be limited to Recipient's activities in
connection therewith. For greater certainty nothing contained in this Agreement
will be construed as granting or conferring upon the Recipient or its
Representatives, any rights by license or otherwise, for any invention,
discovery or improvement made, conceived or acquired, prior to or after the date
of this Agreement based in whole, or in part, upon Proprietary Information
provided to the Recipient or its Representatives hereunder.
7. Neither Party, nor any of their respective Representatives will,
without the prior written consent of the other Party, disclose to any person the
fact that the Proprietary Information exists or has been made available, that
such Party is considering a proposed Business Arrangement with the other Party,
or that discussions or negotiations are taking or have taken place concerning a
proposed Business Arrangement or any term condition or other fact relating to a
proposed Business Arrangement or such discussions or negotiations, including,
without limitation, the status thereof, except if it has received legal advice
that such disclosure is reasonably required under then existing circumstances
pursuant to any securities or similar laws of any relevant state or country, or
rules of any relevant stock exchange or other relevant authority of whatever
nature; provided, however, that each Party agrees to use reasonable best efforts
to consult with the other before issuing an announcement or a public statement.
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8. In the event that Recipient violates this Agreement or Disclosing
Party has reasonable cause to feel that its Proprietary Information is in danger
of being disclosed or misused, either Party may at any time, in addition to all
other recourse under law, terminate this Agreement and demand and be entitled to
the return from Recipient of all Proprietary Information in all existing forms.
9. It is further understood and agreed that money damages may not be a
sufficient remedy for any breach of this Agreement by Recipient and that
Disclosing Party shall be entitled to equitable relief, including injunctions
and orders for specific performance, as a remedy for any such breach or
threatened breach. Such remedy shall not be deemed to be the exclusive remedy
for breach of this Agreement but shall be in addition to all other remedies
available at law or equity to Disclosing Party.
10. Neither Party, nor any of their Representatives or controlling persons
within the meaning of Section 20 of the Securities Exchange Act of 1934, as
amended, makes any express or implied representation or warranty as to the
accuracy or completeness of the Proprietary Information disclosed hereunder, and
each Party agrees that no such person will have any liability relating to the
Proprietary Information or for any errors therein or omissions therefrom. Each
Party further agrees that neither Party shall be entitled to rely on the
accuracy or completeness of the Proprietary Information and that each Party will
be entitled to rely solely on such representations and warranties as may be
included in any definitive agreement with respect to any agreement that may be
entered into between the parties hereafter, subject to such limitations and
restrictions as may be contained therein.
11. Each Party agrees that until the expiry of eighteen (18) months from
the date of this Agreement, each Party or its parent and affiliated companies
(herein, collectively a "Party"), will not, and each Party will direct its
parent and affiliated companies not to, except with the prior written consent of
the other Party (i) purchase, acquire, obtain or hold (or offer or agree to
purchase, acquire, obtain or hold) beneficial ownership of any of the securities
of the other Party; (ii) make, or in any way participate in any solicitation of
proxies to vote, or seek to advise or influence any person with respect to the
voting of any of the other Party's securities; (iii) enter into, or agree to
enter into or seek or propose any merger, consolidation, business combination,
tender or exchange offer, sale or purchase of assets or securities, dissolution,
liquidation, restructuring, recapitalization or similar transaction involving
the other Party; (iv) act, alone or together with any person, to control or
influence the management or the Board of Directors or other Party; or (v)
advise, encourage, or assist any person in the acquisition of beneficial
ownership of any of the other Party's securities or control of the other Party
or a significant portion of its significant assets; provided, however, that such
restrictions (or the restrictions set forth in the next sentence) shall
terminate in the event that a third party publicly commences a tender or
exchange offer, or otherwise proposes a merger or business combination
transaction, in respect of the other Party and such other Party has (a) exempted
such transaction for purposes of Section 203 of the Delaware General Corporation
Law, or (b) publicly announced or publicly confirmed that it is engaged in
negotiations in connection with such proposed transaction; provided, further,
any such termination shall not relieve the parties of any obligations hereunder
with respect to the Proprietary Information. Each Party also agrees during such
eighteen (18) month period not to (i) request the other Party or its
Representatives, directly or indirectly, to amend or waive any provisions of
this paragraph (including this sentence) or (ii) take any initiative in respect
of the other Party which would, upon the advice of counsel, reasonably require
the other Party to make a public announcement regarding the possibility of such
Party acquiring, with or without others, control of the other Party whether by
means of business combination or otherwise. For purposes of this Section 11,
Party shall include its parent and affiliated companies.
12. If, at any time during the period prior to the time that either Party
notifies the other of its decision not to proceed with any Business Arrangement,
either Party is approached by, or commences discussions with, any third party
concerning its or their participation in a transaction involving the other's
securities or a significant portion of its assets or its significant businesses,
the contacted Party will promptly inform the other of the nature of such contact
and the parties thereto.
13. This Agreement shall supersede all prior oral and written agreements,
communications and documents between the parties with respect to the subject
matter hereof and no modification to this Agreement shall be effective unless
approved in writing by both parties. A waiver of any term of this
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Agreement shall, to be effective, be evidenced in writing by the waiving Party.
Each Party agrees that, unless and until a definitive agreement between each of
the Parties with respect to a Business Arrangement has been executed and
delivered, neither of us will be under any legal obligation of any kind
whatsoever with respect to any such transaction by the Party's Representatives
except, in the case of this Agreement, for the matters specifically agreed to
herein. For purposes of this Agreement, the term "definitive agreement" shall
not include an executed letter of intent or any other preliminary written
agreement unless and to the extent it expressly states that it is to be legally
binding. The agreement set forth in this paragraph may be modified or waived
only by a separate writing by each of us expressly so modifying or waiving such
agreement.
14. Nothing in this Agreement shall grant to either Party the right to make
commitments of any kind for or on behalf of the other Party.
15. The provisions of this Agreement pertaining to Proprietary Information
disclosed under this Agreement shall continue and survive for a period of three
(3) years after the termination of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CANADIAN NATIONAL RAILWAY COMPANY
BY: /s/ Jean Pierre Ouellet
ITS: Chief Legal Officer & Corporate
Secretary
ILLINOIS CENTRAL CORP.
BY:
ITS:
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