<PAGE>
[FILING RESUBMITTED DUE TO TECHNICAL ERROR IN INITIAL SUBMISSION-DOCUMENTS
CONTAIN NO CHANGES]
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- - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT
(PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
----------------
SANTA FE PACIFIC CORPORATION
(NAME OF SUBJECT COMPANY)
BURLINGTON NORTHERN INC.
(BIDDER)
COMMON STOCK, $1.00 PAR VALUE PER SHARE
(TITLE OF CLASS OF SECURITIES)
802183 1 03
(CUSIP NUMBER OF CLASS OF SECURITIES)
EDMUND W. BURKE, ESQ.
EXECUTIVE VICE PRESIDENT, LAW AND SECRETARY
BURLINGTON NORTHERN INC.
3800 CONTINENTAL PLAZA
777 MAIN STREET
FORT WORTH, TEXAS 76102-5384
(817) 333-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
----------------
COPIES TO:
DAVID L. CAPLAN, ESQ.
DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 450-4000
CALCULATION OF FILING FEE
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<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE
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<S> <C>
$500,000,000 $100,000
</TABLE>
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* Assumes purchase of 25,000,000 shares at $20.00 per share.
[_] 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: Not Filing Party: Not applicable.
applicable.
Form or Registration No.: Not Date Filed: Not applicable.
Applicable.
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<PAGE>
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Santa Fe Pacific Corporation, a
Delaware corporation (the "Company"), which has its principal executive offices
at 1700 East Golf Road, Schaumburg, Illinois, 60173 (telephone number (708)
995-6000).
(b) This schedule relates to the offer by Burlington Northern Inc., a
Delaware corporation (the "Bidder"), to purchase up to 25,000,000 outstanding
shares of Common Stock, par value $1.00 per share (the "Shares"), of the
Company at $20.00 per Share, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase dated December 23,
1994 (the "Offer to Purchase") and the related Letter of Transmittal, copies of
which are attached hereto as Exhibits (a)(1) and (a)(2), respectively. At
November 30, 1994, there were outstanding 187,741,494 Shares and employee stock
options to purchase 15,056,883 Shares. The information set forth in the
"Introduction" section of the Offer to Purchase is incorporated herein by
reference.
(c) The information set forth in the "The Tender Offer--6. Price Range of SFP
Common Stock; Dividends" section of the Offer to Purchase is incorporated
herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d), (g) This Statement is being filed by the Bidder. The information
set forth in the "The Tender Offer--8. Certain Information Concerning BNI"
section of, and Schedule II to, the Offer to Purchase is incorporated herein by
reference.
(e)-(f) Except as otherwise provided in the "The Tender Offer--15. Certain
Legal Matters; Regulatory Approvals" section of the Offer to Purchase, which
section is incorporated herein by reference, neither Bidder, nor, to the best
knowledge of Bidder, any of the persons listed in Schedule II to the Offer to
Purchase, has during the last five years (i) been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) been
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 of final order enjoying future violations of, or prohibiting
activities subject to , federal or state securities laws or finding any
violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in the "Introduction," "The Tender Offer--
9. Background of the Merger and the Offer" and "--10. Purpose of the Offer; The
Merger Agreement" sections of the Offer to Purchase is incorporated herein by
reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in the "The Tender Offer--12. Source and
Amount of Funds" section of the Offer to Purchase is incorporated herein by
reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the "Introduction," "Recommendation of
SFP Board of Directors," "The Tender Offer--9. Background of the Merger and the
Offer" and "--10. Purpose of the Offer; The Merger Agreement" sections of the
Offer to Purchase is incorporated herein by reference.
(f)-(g) The information set forth in the "The Tender Offer--15. Certain
Effects of the Offer" section of the Offer to Purchase is incorporated herein
by reference.
1
<PAGE>
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in Schedule III to 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 in the "Introduction," "The Tender Offer--9.
Background of the Merger and the Offer" "--10. Purpose of the Offer; The Merger
Agreement" and "--18. Certain Additional Information; Miscellaneous," as well
as, "Appendix A--The Agreement and Plan of Merger" of the Offer to Purchase is
incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the "The Tender Offer--16. Fees and Expenses"
section of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in the "The Tender Offer--8. Certain Information
Concerning BNI" section of the Offer to Purchase is incorporated herein by
reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in the "The Tender Offer--10. Purpose of the
Offer; The Merger Agreement" section of the Offer to Purchase is incorporated
herein by reference.
(b)-(c) The information set forth in the "The Tender Offer--15. Certain Legal
Matters; Regulatory Approvals" section of the Offer to Purchase is incorporated
herein by reference.
(d) The information set forth in the "The Tender Offer--11. Certain Effects
of the Offer" section of the Offer to Purchase is incorporated herein by
reference.
(e) The information set forth in the "The Tender Offer--15. Certain Legal
Matters; Regulatory Approvals" section of the Offer to Purchase is incorporated
herein by reference.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal is incorporated herein by reference in its entirety.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Form of Offer to Purchase dated December 23, 1994.
(a)(2) Form of Letter of Transmittal, together with the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form
W-9.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of letter to brokers, dealers, commercial banks, trust compa-
nies and other nominees.
(a)(5) Form of letter to clients for use by brokers, dealers, commercial
banks, trust companies and other nominees.
2
<PAGE>
(a)(6) Form of summary advertisement dated December 23, 1994.
(a)(7) Text of press release dated December 23, 1994.
(b) Commitment Letter and Term Sheet of Bidder dated December 22,
1994.
(c) Letter Agreement dated June 29, 1994 from Mr. Gerald Grinstein to
Mr. Robert D. Krebs (agreed to and accepted by Mr. Krebs).
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
3
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
/s/ David C. Anderson
By _____________________________________
Name:David C. Anderson
Title: Executive Vice President,
Chief Financial Officer and
Chief Accounting Officer.
Dated: December 23, 1994
4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION PAGE
- - ----------- ----------- ------------
<S> <C> <C>
(a)(1) Form of Offer to Purchase dated December 23, 1994.
(a)(2) Form of Letter of Transmittal, together with the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of letter to brokers, dealers, commercial banks, trust companies
and other nominees.
(a)(5) Form of letter to clients for use by brokers, dealers, commercial banks,
trust companies and other nominees.
(a)(6) Form of summary advertisement dated December 23, 1994.
(a)(7) Text of press release dated December 23, 1994.
(b) Commitment Letter and Term Sheet of Bidder dated December 22, 1994.
(c) Letter Agreement dated June 29, 1994 from Mr. Gerald Grinstein to Mr.
Robert D. Krebs (agreed to and accepted by Mr. Krebs).
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
</TABLE>
<PAGE>
OFFER TO PURCHASE FOR CASH
UP TO 63,000,000 SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
SANTA FE PACIFIC CORPORATION
AT
$20.00 NET PER SHARE
BY
BURLINGTON NORTHERN INC.
AND
SANTA FE PACIFIC CORPORATION
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, JANUARY 30, 1995, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) AT LEAST 63,000,000
SHARES OF SANTA FE PACIFIC CORPORATION COMMON STOCK BEING VALIDLY TENDERED AND
NOT WITHDRAWN BEFORE THE EXPIRATION OF THE OFFER (THE "MINIMUM CONDITION"),
(2) SANTA FE PACIFIC CORPORATION ("SANTA FE") AND BURLINGTON NORTHERN INC.
("BURLINGTON NORTHERN") HAVING OBTAINED SUFFICIENT FINANCING ON TERMS
SATISFACTORY TO THEM TO PURCHASE 63,000,000 SHARES PURSUANT TO THE OFFER AND
(3) APPROVAL OF THE MERGER REFERRED TO BELOW BY THE STOCKHOLDERS OF SANTA FE
AND BURLINGTON NORTHERN. SANTA FE AND BURLINGTON NORTHERN DO NOT INTEND TO
WAIVE THE MINIMUM CONDITION. THE OFFER IS NOT CONDITIONED ON RECEIPT OF
INTERSTATE COMMERCE COMMISSION APPROVAL OF THE MERGER. SEE "THE TENDER OFFER--
14. CONDITIONS OF THE OFFER."
THE OFFER IS BEING MADE IN CONNECTION WITH THE AGREEMENT AND PLAN OF MERGER
BETWEEN BURLINGTON NORTHERN AND SANTA FE, AS AMENDED, PURSUANT TO WHICH SANTA
FE WILL MERGE WITH BURLINGTON NORTHERN (THE "MERGER"). THE BOARD OF DIRECTORS
OF SANTA FE HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER AND RECOMMENDS
THAT THOSE SANTA FE STOCKHOLDERS WHO WISH TO RECEIVE CASH FOR A PORTION OF
THEIR SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES. THE OFFER IS BEING
EFFECTED TO FACILITATE THE MERGER. SEE "RECOMMENDATION OF SFP BOARD OF
DIRECTORS."
--------------
IMPORTANT
Any stockholder desiring to tender shares of Santa Fe Common Stock, par
value $1.00 per share (the "SFP Common Stock," including the associated
preferred share purchase rights) should either (1) complete and sign the
Letter of Transmittal (or facsimile thereof) in accordance with the
instructions in the Letter of Transmittal and deliver it with the
certificate(s) representing tendered shares of SFP Common Stock and all other
required documents to the Depositary or tender such shares of SFP Common Stock
pursuant to the procedures for book-entry transfer set forth in Section 3 or
(2) request his or her broker, dealer, commercial bank, trust company or other
nominee to effect the transaction for him or her. A stockholder having shares
of SFP Common Stock registered in the name of a broker, dealer, commercial
bank, trust company or other nominee must contact such person if he or she
desires to tender such shares of SFP Common Stock.
Any stockholder who desires to tender shares of SFP Common Stock and whose
certificates representing such shares of SFP Common Stock are not immediately
available or who cannot comply with the procedures for book-entry transfer on
a timely basis may tender such shares of SFP Common Stock pursuant to the
guaranteed delivery procedure set forth in Section 3.
Questions and requests for assistance or additional copies of this Offer to
Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to any of the Information Agents or either of the Dealer Managers
at their respective addresses and telephone numbers set forth on the back
cover of this Offer to Purchase. Additional copies of this Offer to Purchase,
the Letter of Transmittal and the Notice of Guaranteed Delivery may also be
obtained from brokers, dealers, commercial banks or trust companies.
--------------
The Dealer Managers for the Offer are:
GOLDMAN, SACHS & CO. LAZARD FRERES & CO.
--------------
The date of this Offer to Purchase is December 23, 1994.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
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INTRODUCTION ....................................................... 1
RECOMMENDATION OF SFP BOARD OF DIRECTORS............................ 2
THE TENDER OFFER ................................................... 3
1. Number of Shares; Proration................................ 3
2. Acceptance for Payment and Payment......................... 4
3. Procedure for Tendering SFP Common Stock................... 5
4. Withdrawal Rights.......................................... 7
Federal Income Tax Consequences of the Offer to Tendering
5. Stockholders............................................... 8
6. Price Range of SFP Common Stock; Dividends................. 10
7. Certain Information Concerning SFP......................... 11
8. Certain Information Concerning BNI......................... 22
9. Background of the Merger and the Offer..................... 26
10. Purpose of the Offer; The Merger Agreement................. 43
11. Certain Effects of the Offer............................... 53
12. Source and Amount of Funds................................. 53
13. Extension of Tender Period; Termination; Amendment......... 59
14. Conditions of the Offer.................................... 60
15. Certain Legal Matters; Regulatory Approvals................ 62
16. Fees and Expenses.......................................... 69
17. Interests of Certain Persons in the Offer and the Merger... 70
18. Certain Additional Information; Miscellaneous.............. 73
Schedule I--Directors and Executive Officers of SFP................. I-1
Schedule II--Directors and Executive Officers of BNI................ II-1
Schedule III--Transactions in SFP Common Stock...................... III-1
Appendix A--Agreement and Plan of Merger............................ A-1
Appendix B--Opinion of Goldman, Sachs & Co. ........................ B-1
</TABLE>
(i)
<PAGE>
To the Holders of Common Stock of
Santa Fe Pacific Corporation:
INTRODUCTION
Burlington Northern Inc., a Delaware corporation ("BNI"), and Santa Fe
Pacific Corporation, a Delaware corporation ("SFP" and, together with BNI, the
"Purchasers"), hereby severally offer to purchase up to 63,000,000 of the
outstanding shares of SFP Common Stock in the aggregate (including the
associated preferred share purchase rights (the "SFP Rights") issued pursuant
to the Rights Agreement dated as of November 28, 1994, between SFP and First
Chicago Trust Company of New York, as Rights Agent (the "SFP Rights
Agreement")) at a price of $20.00 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 collectively constitute the
"Offer"). No separate consideration will be paid for the SFP Rights. Under the
terms of this Offer, SFP will be severally obligated to purchase up to
38,000,000 shares of SFP Common Stock accepted for payment under the Offer and
BNI will be severally obligated to purchase up to 25,000,000 shares of SFP
Common Stock accepted for payment under the Offer. The obligation to purchase
shares of SFP Common Stock accepted for payment under the Offer will be
allocated between SFP and BNI in the manner set forth in "The Tender Offer--1.
Number of Shares; Proration". Unless the context otherwise requires, all
references to shares of SFP Common Stock shall include the associated SFP
Rights.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) AT LEAST 63,000,000
SHARES OF SFP COMMON STOCK BEING VALIDLY TENDERED AND NOT WITHDRAWN BEFORE THE
EXPIRATION OF THE OFFER (THE "MINIMUM CONDITION"), (2) SFP AND BNI HAVING
OBTAINED SUFFICIENT FINANCING ON TERMS SATISFACTORY TO THEM TO PURCHASE
63,000,000 SHARES PURSUANT TO THE OFFER AND (3) APPROVAL OF THE MERGER REFERRED
TO BELOW BY THE STOCKHOLDERS OF SFP AND BNI. THE PURCHASERS DO NOT INTEND TO
WAIVE THE MINIMUM CONDITION. THE OFFER IS NOT CONDITIONED ON INTERSTATE
COMMERCE COMMISSION ("ICC") APPROVAL OF THE MERGER. SEE "THE TENDER OFFER--14.
CONDITIONS OF THE OFFER."
THE BOARD OF DIRECTORS OF SFP HAS UNANIMOUSLY APPROVED THE OFFER AND THE
MERGER AND RECOMMENDS THAT THOSE SFP STOCKHOLDERS WHO WISH TO RECEIVE CASH FOR
A PORTION OF THEIR SHARES OF SFP COMMON STOCK ACCEPT THE OFFER. SEE
"RECOMMENDATION OF SFP BOARD OF DIRECTORS."
The Offer is being made pursuant to an Agreement and Plan of Merger dated as
of June 29, 1994, as amended by the Amendment thereto dated as of October 26,
1994 and Amendment No. 2 thereto dated as of December 18, 1994 (such Merger
Agreement prior to such Amendments, the "Original Merger Agreement," and, as so
amended, the "Merger Agreement") between SFP and BNI. Pursuant to the Merger
Agreement, and on the terms and subject to the conditions set forth therein,
SFP will merge with BNI, with BNI to be the surviving corporation in such
Merger, and each outstanding share of SFP Common Stock will be converted into
the right to receive 0.40 shares of BNI common stock, no par value per share
(the "BNI Common Stock"). See "The Tender Offer--10. Purpose of the Offer; The
Merger Agreement." A copy of the Merger Agreement is attached as Appendix A. As
of December 21, 1994, 0.40 of a share of BNI Common Stock had a value of
$19.35, based on the closing market price of BNI Common Stock as reported in
The Wall Street Journal.
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, transfer taxes on the purchase of SFP Common Stock pursuant to the
Offer. The Purchasers will pay all fees and expenses of Goldman, Sachs & Co.
("Goldman Sachs") and Lazard Freres & Co. ("Lazard" and, together with Goldman
Sachs, the "Dealer Managers"), First Chicago Trust Company of New York (the
"Depositary") and D.F. King & Co., Inc., MacKenzie Partners, Inc. and Kissel-
Blake Inc. (the "Information Agents") incurred in connection with the Offer.
As of November 30, 1994, there were outstanding 187,741,494 shares of SFP
Common Stock and employee stock options ("Options") to purchase 15,056,883
shares of SFP Common Stock.
The purpose of the Offer is to acquire shares of SFP Common Stock and to
facilitate the Merger, which the Board of Directors of SFP believes is in the
best interest of SFP stockholders. The Offer also provides an opportunity to
existing stockholders of SFP to sell shares of SFP Common Stock at a premium
over recent trading prices. See "The Tender Offer--6. Price Range of SFP Common
Stock; Dividends."
<PAGE>
All information herein concerning BNI has been furnished by BNI, and all
information herein concerning SFP has been furnished by SFP. BNI has
represented and warranted to SFP, and SFP has represented and warranted to BNI,
that the particular information so furnished is true and complete.
The Offer does not constitute a solicitation of proxies for any meeting of
SFP's stockholders. Such solicitation by SFP will be made only pursuant to
separate proxy materials complying with the requirements of Section 14(a) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In
addition, this Offer is neither an offer to sell nor a solicitation of offers
to buy any securities which may be issued in the Merger. The issuance of such
securities would have to be registered under the Securities Act of 1933, as
amended (the "Securities Act"), and such securities would be offered only by
means of a prospectus complying with the requirements of the Securities Act.
SFP expects to distribute a joint proxy statement/prospectus with respect to
the Merger shortly.
IN ORDER TO VOTE FOR THE MERGER, AN SFP STOCKHOLDER IS REQUIRED TO SUBMIT A
PROXY OR VOTE IN PERSON AT THE SFP STOCKHOLDER MEETING SCHEDULED FOR JANUARY
27, 1995, OR ANY POSTPONEMENT OR ADJOURNMENT THEREOF.
Stockholders are urged to read this Offer to Purchase and the related Letter
of Transmittal carefully before deciding whether to tender their shares of SFP
Common Stock.
RECOMMENDATION OF SFP BOARD OF DIRECTORS
The Board of Directors of SFP has unanimously approved the Offer and the
Merger and recommends that those SFP stockholders who wish to receive cash for
a portion of their shares of SFP Common Stock accept the Offer. The Offer is
being effected to facilitate the Merger. The SFP Board believes that a business
combination of SFP and BNI is in the best long-term interests of SFP and its
stockholders. The Offer allows stockholders who wish to do so to receive cash,
at a premium over recent trading prices for SFP Common Stock, without waiting
for ICC approval of the Merger. At the same time, the revised transaction
structure allows SFP stockholders to participate in the ownership of the
combined company. The SFP Board believes that a BNI-SFP combination is an
excellent strategic fit, presents substantial long-term benefits and is likely
to receive ICC approval. The SFP Board has also concluded that the revised
Merger Agreement is superior to the UPC Offer (as defined below), especially on
a long-term basis. See "The Tender Offer--6. Price Range of SFP Common Stock;
Dividends" and "--9. Background of the Merger and the Offer."
2
<PAGE>
THE TENDER OFFER
1. NUMBER OF SHARES; PRORATION.
Upon the terms and subject to the conditions set forth in the Offer
(including, if the Offer is extended or amended, the terms and conditions of
such extension or amendment), up to 63,000,000 shares of SFP Common Stock in
the aggregate (together with the associated SFP Rights) that are validly
tendered prior to the Expiration Date (as hereinafter defined) and not
withdrawn will be purchased pursuant to the Offer at a price of $20.00 per
share, net to the seller in cash, with SFP severally obligated to purchase up
to 38,000,000 shares of SFP Common Stock, and BNI severally obligated to
purchase up to 25,000,000 shares of SFP Common Stock pursuant to the Offer. Of
the shares of SFP Common Stock tendered by an SFP stockholder and accepted for
payment under the Offer, SFP will be severally obligated to purchase 0.60317 of
such shares of SFP Common Stock and BNI will be severally obligated to purchase
0.39683 of such shares of SFP Common Stock. The term "Expiration Date" shall
mean 12:00 Midnight, New York City time, on Monday, January 30, 1995, unless
the Purchasers, in their sole discretion, shall have extended the period of
time for which the Offer is open, in which event the term "Expiration Date"
shall mean the latest time and date at which the Offer, as so extended by the
Purchasers, shall expire.
For a description of the Purchasers' right to extend the period of time
during which the Offer is open and to amend, delay or terminate the Offer, see
"--13. Extension of Tender Period; Termination; Amendment."
If more than 63,000,000 shares of SFP Common Stock are validly tendered by
the Expiration Date and not withdrawn, the Purchasers will, upon the terms and
subject to the conditions of the Offer, purchase 63,000,000 shares of SFP
Common Stock on a pro rata basis (with adjustments to avoid purchases of
fractional shares of SFP Common Stock) based on the number of shares of SFP
Common Stock validly tendered by the Expiration Date and not withdrawn.
In the event that proration of tendered shares of SFP Common Stock is
required, because of the difficulty of determining the number of shares of SFP
Common Stock validly tendered and not withdrawn, the Purchasers do not expect
to be able to announce the final results of such proration until approximately
seven New York Stock Exchange, Inc. ("NYSE") trading days after the Expiration
Date. Preliminary results of such proration will be announced by press release
as promptly as practicable after such date. Holders of shares of SFP Common
Stock may obtain such preliminary information from the Dealer Managers or
Information Agents and may be able to obtain such information from their
brokers.
Pursuant to the Merger Agreement, SFP and BNI have agreed to disseminate the
Offer to holders of shares of SFP Common Stock. This Offer to Purchase and the
related Letter of Transmittal will be mailed to record holders of shares of SFP
Common Stock and will be furnished to brokers, banks 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 for subsequent transmittal to beneficial owners of shares of
SFP Common Stock.
On November 28, 1994, the Board of Directors of SFP declared a dividend
distribution of one SFP Right for each outstanding share of SFP Common Stock to
stockholders of record at the close of business on December 9, 1994. Except as
described below, each SFP Right, when exercisable, entitles the registered
holder thereof to purchase, subject to adjustment, from SFP one one-hundredth
of a share of Series A Junior Participating Preferred Stock, par value $1.00
per share, at an exercise price of $50.00 per one one-hundredth share or, in
the event that any person becomes the beneficial owner of 10% or more of the
outstanding shares of SFP Common Stock, SFP Common Stock having a value equal
to two times the exercise price of the SFP Right. The SFP Rights of such 10%
stockholder become void. The SFP Rights will expire at the earliest of (i)
December 9, 2004, (ii) the redemption of the SFP Rights by SFP and (iii) the
time immediately prior to the effectiveness of the merger of SFP with and into
BNI pursuant to the Merger Agreement. The SFP Rights are not currently
exercisable and trade together with the SFP Common Stock associated therewith.
The SFP Rights do not apply to any acquisition of shares of SFP Common Stock by
BNI pursuant to the terms of the Merger Agreement and, consequently, the SFP
Rights will not become exercisable or separately tradeable,
3
<PAGE>
and the consequences described above of becoming a 10% stockholder will not
occur, as a result of the consummation of the Offer. Absent circumstances
causing the SFP Rights to become exercisable or separately tradeable prior to
the Offer, the tender of any shares of SFP Common Stock pursuant to the Offer
will include the tender of the associated SFP Rights. No separate consideration
will be paid for such SFP Rights. Upon the purchase of shares of SFP Common
Stock by the Purchasers pursuant to the Offer, the sellers of the shares of SFP
Common Stock so purchased will no longer own the SFP Rights associated with
such shares of SFP Common Stock.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of such extension or
amendment), each Purchaser will accept for payment and pay for its respective
portion of the shares of SFP Common Stock validly tendered by the Expiration
Date and not withdrawn as soon as practicable after the later of (i) the
Expiration Date and (ii) the satisfaction or waiver of the conditions set forth
under "--14. Conditions of the Offer," subject to possible delay in the event
of proration. In addition, the Purchasers reserve the right, in their sole
discretion and subject to applicable law, to delay the acceptance for payment
or payment for shares of SFP Common Stock in order to comply in whole or in
part with any applicable law. For a description of the Purchasers' right to
terminate the Offer and not accept for payment or pay for shares of SFP Common
Stock or to delay acceptance for payment or payment for shares of SFP Common
Stock, see "--13. Extension of Tender Period; Termination; Amendment."
For purposes of the Offer, the Purchasers shall be deemed to have accepted
for payment and thereby purchased tendered shares of SFP Common Stock if, as
and when the Purchasers give oral or written notice to the Depositary of their
acceptance of such shares of SFP Common Stock for payment pursuant to the
Offer. Payment for shares of SFP Common Stock accepted for payment pursuant to
the Offer will be made by deposit of the portion of the purchase price to be
paid by it with the Depositary by each Purchaser, which Depositary will act as
agent for the tendering stockholders for the purpose of receiving payments from
the Purchasers and transmitting such payments to tendering stockholders. Under
no circumstances will interest be paid by the Purchasers on the consideration
paid for shares of SFP Common Stock pursuant to the Offer, regardless of any
delay in making such payment. Each Purchaser will pay all stock transfer taxes,
if any, payable on the transfer of shares of SFP Common Stock purchased by it
pursuant to the Offer, except as set forth in Instruction 6 of the Letter of
Transmittal.
In all cases, payment for shares of SFP Common Stock accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of certificates for such shares of SFP Common Stock (or of a confirmation of a
book-entry transfer of such shares of SFP Common Stock into the Depositary's
account at one of the Book-Entry Transfer Facilities (as defined in "--3.
Procedure for Tendering SFP Common Stock"), a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantees and any other required documents. For a description of the
procedure for tendering shares of SFP Common Stock pursuant to the Offer, see
"--3. Procedure for Tendering SFP Common Stock." Accordingly, payment may be
made to tendering stockholders at different times if delivery of the shares of
SFP Common Stock and other required documents occurs at different times.
If the Purchasers increase the consideration to be paid for shares of SFP
Common Stock pursuant to the Offer, the Purchasers will pay such increased
consideration for all shares of SFP Common Stock purchased pursuant to the
Offer.
Each Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to one or more of its affiliates the right to purchase
shares of SFP Common Stock tendered pursuant to the Offer, but any such
transfer or assignment will not relieve such Purchaser of its several
obligations under the Offer or prejudice the rights of tendering stockholders
to receive payment for shares of SFP Common Stock validly tendered and accepted
for payment.
4
<PAGE>
If any tendered shares of SFP Common Stock are not purchased pursuant to the
Offer for any reason (including proration), or if certificates are submitted
for more shares of SFP Common Stock than are tendered, certificates for such
unpurchased or untendered shares of SFP Common Stock will be returned (or, in
the case of shares of SFP Common Stock tendered by book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility pursuant to the Offer,
see "--3. Procedure for Tendering SFP Common Stock," such shares of SFP Common
Stock will be credited to an account maintained at such Book-Entry Transfer
Facility), without expense to the tendering stockholder, as promptly as
practicable following the expiration or termination of the Offer.
3. PROCEDURE FOR TENDERING SFP COMMON STOCK.
Proper Tender of Shares. To tender shares of SFP Common Stock pursuant to the
Offer, either (a) a properly completed and duly executed Letter of Transmittal
(or facsimile thereof) 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) certificates
for the shares of SFP Common Stock to be tendered must be received by the
Depositary at one of such addresses or (ii) shares of SFP Common Stock must be
delivered pursuant to the procedures for book-entry transfer described below
(and a confirmation of such delivery received by the Depositary including an
Agent's Message if the tendering stockholder has not delivered a Letter of
Transmittal), in each case by the Expiration Date, or (b) the guaranteed
delivery procedure described below must be complied with. The term "Agent's
Message" means a message, transmitted by a Book-Entry Transfer Facility (as
hereinafter defined) to and received by the Depositary and forming a part of a
book-entry confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgement from the participant in such Book-Entry
Transfer Facility tendering the shares of SFP Common Stock which are the
subject of such book-entry confirmation, that such participant has received and
agrees to be bound by the Letter of Transmittal and that the Purchasers may
enforce such agreement against such participant.
Book-Entry Delivery. The Depositary will establish an account with respect to
the shares of SFP Common Stock at The Depository Trust Company, Midwest
Securities Trust Company and Philadelphia Depository Trust Company
(collectively referred to as the "Book-Entry Transfer Facilities") for purposes
of the Offer within two business days after the date of this Offer to Purchase,
and any financial institution that is a participant in the system of any Book-
Entry Transfer Facility may make delivery of shares of SFP Common Stock by
causing such Book-Entry Transfer Facility to transfer such shares of SFP Common
Stock into the Depositary's account in accordance with the procedures of such
Book-Entry Transfer Facility. However, although delivery of shares of SFP
Common Stock may be effected through book-entry transfer, the Letter of
Transmittal (or facsimile thereof) properly completed and duly executed
together with any required signature guarantees or an Agent's Message and any
other required documents must, in any case, be received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase by
the Expiration Date, or the guaranteed delivery procedure described below must
be complied with. Delivery of the Letter of Transmittal and any other required
documents to a Book-Entry Transfer Facility does not constitute delivery to the
Depositary.
Signature Guarantee. Except as otherwise provided below, all signatures on a
Letter of Transmittal must be guaranteed by a financial institution (including
most banks, savings and loan associations and brokerage houses) which is a
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Program or the Stock Exchanges Medallion
Program (an "Eligible Institution"). Signatures on a Letter of Transmittal need
not be guaranteed (a) if the Letter of Transmittal is signed by the registered
holder of the shares of SFP Common Stock tendered therewith and such holder has
not completed the box entitled "Special Payment Instructions" on the Letter of
Transmittal or (b) if such shares of SFP Common Stock are tendered for the
account of an Eligible Institution. See Instructions 1 and 5 of the Letter of
Transmittal. If the certificates are registered in the name of a person other
than the signer of the Letter of Transmittal or if payment is to be made or
certificates for shares of SFP Common Stock not accepted for payment or not
tendered are to be returned to a person other than the registered holder, then
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<PAGE>
the tendered certificates must be endorsed or accompanied by appropriate stock
powers, in either case signed exactly as the name or names of the registered
owner or owners appears on the certificates, with the signatures on the
certificates or stock powers guaranteed as described above. See Instructions 1
and 5 to the Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender shares of SFP Common
Stock pursuant to the Offer and cannot deliver such shares of SFP Common Stock
and all other required documents to the Depositary by the Expiration Date, or
such stockholder cannot complete the procedure for delivery by book-entry
transfer on a timely basis, such shares of SFP Common Stock may nevertheless be
tendered if all of the following conditions are met:
(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 the Purchasers is received by the
Depositary (as provided below) by the Expiration Date; and
(iii) the certificates for such tendered shares of SFP Common Stock (or a
confirmation of a book-entry transfer of such shares of SFP Common Stock
into the Depositary's account at one of the Book-Entry Transfer
Facilities), together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) with any required signature guarantee or
an Agent's Message and any other documents required by the Letter of
Transmittal, are received by the Depositary within five trading days on the
NYSE after the date of execution of the 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.
THE METHOD OF DELIVERY OF SHARES OF SFP COMMON STOCK AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING THROUGH BOOK-ENTRY TRANSFER FACILITIES, 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 CERTIFICATES FOR SHARES OF SFP
COMMON STOCK ARE SENT BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, IS RECOMMENDED.
Back-up Federal Tax Withholding. To prevent back-up federal income tax
withholding on payments made to certain stockholders with respect to the
purchase price of shares of SFP Common Stock purchased pursuant to the Offer,
each such stockholder must provide the Depositary with his correct taxpayer
identification number and certify that he is not subject to back-up federal
income tax withholding by completing the Substitute Form W-9 included in the
Letter of Transmittal. See Instruction 8 of the Letter of Transmittal.
Appointment As Proxy After Acceptance for Payment. A TENDER OF SHARES OF SFP
COMMON STOCK DOES NOT CONSTITUTE A VOTE, OR THE APPOINTMENT OF A PROXY, IN
CONNECTION WITH THE MERGER. IN ORDER TO VOTE FOR THE MERGER, AN SFP STOCKHOLDER
IS REQUIRED TO SUBMIT A PROXY OR VOTE IN PERSON AT THE SFP STOCKHOLDER MEETING
SCHEDULED FOR JANUARY 27, 1995, OR ANY POSTPONEMENT OR ADJOURNMENT THEREOF. By
executing a Letter of Transmittal, a tendering stockholder irrevocably appoints
designees of the Purchasers as such stockholder's proxies in the manner set
forth in the Letter of Transmittal to the full extent of such stockholder's
rights with respect to the shares of SFP Common Stock tendered by such
stockholder and accepted for payment by the Purchasers (and any and all other
shares of SFP Common Stock or other securities issued or issuable in respect of
such SFP Common Stock on or after the date of this Offer to Purchase. All such
proxies shall be irrevocable and coupled with an interest in the tendered
shares of SFP Common Stock. Such appointment is effective only upon the
acceptance for payment of such shares of SFP Common Stock by the Purchasers.
Upon such acceptance for payment, all
6
<PAGE>
prior proxies and consents granted by such stockholder with respect to such
shares of SFP Common Stock and other securities will, without further action,
be revoked, and no subsequent proxies may be given nor subsequent written
consents executed by such stockholder (and, if given or executed, will not be
deemed to be effective). Such designees of the Purchasers will be empowered to
exercise all voting and other rights of such stockholder as they, in their sole
discretion, may deem proper at any annual, special or adjourned meeting of
SFP's stockholders, by written consent or otherwise. The Purchasers reserve the
right to require that, in order for shares of SFP Common Stock to be validly
tendered, immediately upon the Purchasers' acceptance for payment of such
shares of SFP Common Stock, the Purchasers are able to exercise full voting
rights with respect to such shares of SFP Common Stock and other securities
(including voting at any meeting of stockholders then scheduled or acting by
written consent without a meeting).
Tender Constitutes An Agreement. The tender of shares of SFP Common Stock
pursuant to any one of the procedures described above will constitute an
agreement between the tendering stockholder and the Purchasers upon the terms
and subject to the conditions of the Offer.
It is a violation of Rule 14e-4 under the Exchange Act for a person, directly
or indirectly, to tender shares of SFP Common Stock for his own account unless
the person so tendering (i) has a net long position equal to or greater than
the number of (x) shares of SFP Common Stock tendered or (y) other securities
immediately convertible into, or exercisable or exchangeable for, the number of
shares of SFP Common Stock tendered and will acquire such shares of SFP Common
Stock for tender by conversion, exercise or exchange of such other securities
and (ii) will cause such shares of SFP Common Stock to be delivered in
accordance with the terms of the Offer. Rule 14e-4 provides a similar
restriction applicable to the tender or guarantee of a tender on behalf of
another person. The tender of shares of SFP Common Stock pursuant to any one of
the procedures described above will constitute the tendering stockholder's
representation and warranty that (i) such stockholder has a net long position
in the shares of SFP Common Stock being tendered within the meaning of Rule
14e-4 under the Exchange Act and (ii) the tender of such shares of SFP Common
Stock complies with Rule 14e-4.
Determination of Validity; Rejection of Shares; Waiver of Defects; No
Obligation to Give Notice of Defects. All questions as to the form of documents
and the validity, eligibility (including time of receipt) and acceptance for
payment of any tender of shares of SFP Common Stock will be determined by the
Purchasers, in their sole discretion, which determination shall be final and
binding. The Purchasers reserve the absolute right to reject any or all tenders
of shares of SFP Common Stock determined by them not to be in proper form or
the acceptance for payment of or payment for which may, in the opinion of the
Purchasers' counsel, be unlawful. The Purchasers also reserve the absolute
right to waive any defect or irregularity in any tender of shares of SFP Common
Stock. The Purchasers' interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the Instructions thereto) will be
final and binding. None of the Purchasers, the Dealer Managers, the Depositary,
the Information Agents or any other person will be under any duty to give
notification of any defect or irregularity in tenders or incur any liability
for failure to give any such notification.
4. WITHDRAWAL RIGHTS.
Tenders of shares of SFP Common Stock made pursuant to the Offer may be
withdrawn at any time prior to the Expiration Date. Thereafter, such tenders
are irrevocable, except that they may be withdrawn after February 20, 1995
unless theretofore accepted for payment as provided in this Offer to Purchase.
If the Purchasers extend the period of time during which the Offer is open, are
delayed in accepting for payment or paying for shares of SFP Common Stock or
are unable to accept for payment or pay for shares of SFP Common Stock pursuant
to the Offer for any reason, then, without prejudice to the Purchasers' rights
under the Offer, the Depositary may, on behalf of the Purchasers, retain all
shares of SFP Common Stock tendered, and such shares of SFP Common Stock may
not be withdrawn except as otherwise provided in this Section 4.
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<PAGE>
To be effective, a written, telegraphic, telex or facsimile transmission
notice of withdrawal must be timely received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase and must
specify the name of the person who tendered the shares of SFP Common Stock to
be withdrawn and the number of shares of SFP Common Stock to be withdrawn and
the name of the registered holder of shares of SFP Common Stock, if different
from that of the person who tendered such shares of SFP Common Stock. If the
shares of SFP Common Stock to be withdrawn have been delivered or otherwise
identified to the Depositary, a signed notice of withdrawal with (except in the
case of shares of SFP Common Stock tendered by an Eligible Institution)
signatures guaranteed by an Eligible Institution must be submitted prior to the
release of such shares of SFP Common Stock. In addition, such notice must
specify, in the case of shares of SFP Common Stock tendered by delivery of
certificates, the name of the registered holder (if different from that of the
tendering stockholder) and the serial numbers shown on the particular
certificates evidencing the shares of SFP Common Stock to be withdrawn or, in
the case of shares of SFP Common Stock tendered by book-entry transfer, the
name and number of the account at one of the Book-Entry Transfer Facilities to
be credited with the withdrawn shares of SFP Common Stock.
Withdrawals may not be rescinded, and shares of SFP Common Stock withdrawn
will thereafter be deemed not validly tendered for purposes of the Offer.
However, withdrawn shares of SFP Common Stock may be retendered by again
following one of the procedures described under "--3. Procedure for Tendering
SFP Common Stock" at any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by the Purchasers, in their sole
discretion, which determination shall be final and binding. None of the
Purchasers, the Dealer Managers, the Depositary, the Information Agents 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.
5. FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER TO TENDERING STOCKHOLDERS.
The following summary is a general discussion of certain of the United States
federal income tax consequences of the Offer to U.S. stockholders of SFP. The
summary does not address the treatment of certain special status taxpayers such
as financial institutions, broker-dealers, life insurance companies, tax-exempt
organizations, investment companies, foreign taxpayers, and persons who acquire
SFP stock pursuant to stock options or plans. This summary is based upon laws,
regulations, rulings and decisions now in effect, all of which are subject to
change. No rulings as to any of the matters discussed in this summary have been
requested or received from the Internal Revenue Service ("IRS").
For purposes of this summary, a U.S. stockholder is any stockholder that is
(i) a citizen or resident of the United States, (ii) a corporation or
partnership created or organized in the United States or under the laws of the
United States or any state thereof or (iii) an estate or trust whose income is
includible in gross income for U.S. federal income tax purposes regardless of
source.
Purchases by BNI. The receipt of cash from BNI for SFP Common Stock sold to
BNI pursuant to the Offer should be a taxable sale for U.S. federal income tax
purposes (and may also be taxable under applicable state, local and other
income tax laws). Assuming this is the case, in general, for federal income tax
purposes, a stockholder will recognize gain or loss equal to the difference
between its tax basis in the SFP Common Stock sold to BNI pursuant to the Offer
and the amount of cash received in exchange therefor. Such gain or loss
generally will be capital gain or loss if the SFP Common Stock was held as
capital assets and will be long-term capital gain or loss if, on the date of
sale, the SFP Common Stock was held for more than one year.
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<PAGE>
Purchases by SFP. The receipt of cash from SFP for SFP Common Stock sold to
SFP pursuant to the Offer should be a taxable redemption for U.S. federal
income tax purposes (and may also be taxable under applicable state, local or
other income tax laws). Assuming this is the case, the material tax
consequences are as follows. The federal income tax treatment of a redemption
to a stockholder depends on the particular facts relating to such stockholder
at the time of redemption. Under Section 302 of the Internal Revenue Code of
1986, as amended (the "Code"), if the redemption (i) is "not essentially
equivalent to a dividend" with respect to a stockholder, (ii) results in a
"substantially disproportionate" redemption with respect to a stockholder, or
(iii) results in a "complete termination" of all of such stockholder's equity
interest in SFP, then the receipt of cash by such stockholder will be treated
as an exchange of SFP Common Stock on which gain or loss will be recognized and
taxed in substantially the same manner as the sale or exchange of such stock
(as discussed above). In applying the Section 302 tests to a stockholder,
related transactions, including purchases by BNI pursuant to the Offer, will be
taken into account. In addition, attribution rules, pursuant to which SFP
Common Stock owned by certain family members and certain related entities will
be treated as owned by such stockholder, will apply to determine stock
ownership. The redemption will be "substantially disproportionate" with respect
to a stockholder if (i) the percentage of the then outstanding SFP Common Stock
owned by the stockholder immediately after the purchase of SFP Common Stock
pursuant to the Offer is less than (ii) 80 percent of the outstanding SFP
Common Stock owned by such stockholder immediately before the purchase of SFP
Common Stock pursuant to the Offer. If the redemption from a stockholder fails
to satisfy the "substantially disproportionate" test, such stockholder may
nonetheless satisfy the "not essentially equivalent to a dividend" test. A
distribution to a stockholder will be "not essentially equivalent to a
dividend" if it results in a "meaningful reduction" in the stockholder's stock
interest in SFP. A stockholder whose relative stock interest in SFP is minimal
and who exercises no control over corporate affairs, and whose proportionate
interest in SFP is reduced as a result of a purchase for cash of SFP Common
Stock pursuant to the Offer, should satisfy the "not essentially equivalent to
a dividend" test described above.
If none of the Section 302 tests described above is satisfied in respect of
the redemption of SFP Common Stock from a stockholder (i) the distribution will
be treated as a dividend to the extent of the stockholder's allocable portion
of the current and accumulated earnings and profits (as determined for federal
income tax purposes) of SFP and (ii) if the redemption proceeds exceed the
stockholder's allocable portion of SFP's current and accumulated earnings and
profits, the excess will be treated first as a nontaxable recovery of the
stockholder's basis in its SFP Common Stock, with any remaining excess treated
as gain from the sale or exchange of such stock. To the extent the distribution
is taxable as a dividend to a corporate stockholder, (i) it will be eligible
for a dividend received deduction (subject to applicable limitations) and (ii)
it may be subject to the "extraordinary dividend" provisions of the Code.
Gain or loss must be determined separately for each block of SFP Common Stock
(i.e., SFP Common Stock acquired at the same cost in a single transaction) that
is (i) sold to BNI or (ii) sold to SFP and treated as exchanged pursuant to
Code Section 302. A stockholder may be able to specifically designate
(generally through its broker) which blocks of SFP Common Stock are tendered
pursuant to the Offer (if less than all of such stockholder's SFP Common Stock
is tendered) and the order in which blocks are sold (in case the stockholder is
prorated pursuant to the Offer). Each stockholder is urged to contact its tax
advisor with respect to the mechanics and desirability of such designation.
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<PAGE>
Integration of Transactions. It is possible that the IRS might assert that
the Offer should be integrated with the Merger or, if applicable, the
Alternative Merger (as defined below). If so integrated, the federal income tax
consequences to a stockholder may be, depending on such stockholders particular
circumstances, less favorable than the federal income tax consequences
described above. In reporting the transactions to the IRS, SFP will not treat
the purchases pursuant to the Offer as integrated with the Merger or, if
applicable, the Alternative Merger. However, integration would not cause the
receipt of stock contemplated by the Merger Agreement to become taxable. Each
stockholder is urged to consult its tax advisor with respect to the tax
consequences to the stockholder that would arise if the Offer were integrated
with the Merger or, if applicable, the Alternative Merger.
Information Reporting and Backup Withholding. For information regarding
backup withholding in respect of U.S. Holders, see Instruction 8 of the Letter
of Transmittal.
THE U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION ONLY. SFP STOCKHOLDERS ARE URGED TO CONSULT WITH THEIR TAX
ADVISORS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM (INCLUDING THE
APPLICATION AND EFFECT OF STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS) OF
THE OFFER.
6. PRICE RANGE OF SFP COMMON STOCK; DIVIDENDS.
The SFP Common Stock is listed and traded on the NYSE, the Chicago Stock
Exchange (the "CSE") and the Pacific Stock Exchange (the "PSE"). The following
table sets forth the high and low closing prices per share of SFP Common Stock
as reported in The Wall Street Journal for the periods indicated. SFP effected
the distribution of its former subsidiary, Santa Fe Pacific Gold Corporation
("SFP Gold"), on September 30, 1994.
<TABLE>
<CAPTION>
SFP COMMON
STOCK
------------------
HIGH LOW
------- -------
<S> <C> <C>
1992
First Quarter.................................... $13 7/8 $11 1/4
Second Quarter................................... 13 3/8 11 3/8
Third Quarter.................................... 12 3/4 11
Fourth Quarter................................... 13 7/8 11 1/4
1993
First Quarter.................................... 15 3/8 12 7/8
Second Quarter................................... 18 3/8 14 3/4
Third Quarter.................................... 18 7/8 17
Fourth Quarter................................... 22 1/4 18 1/2
1994
First Quarter.................................... 26 1/8 22 3/8
Second Quarter................................... 24 1/4 20
Third Quarter.................................... 23 18 1/2
Fourth Quarter through December 16, 1994......... 16 7/8 12 5/8
</TABLE>
The closing price of the SFP Common Stock on December 16, 1994, the last full
trading day preceding public announcement of the Offer, was $16.875 per share
of SFP Common Stock. The last reported closing price of SFP Common Stock on
December 21, 1994 was $17.25 per share. The Offer price represents a premium of
18.5% and 15.9%, respectively, over each of such prices. SFP Common Stock
traded both on a "Regular Way" and an "Ex-Distribution" (i.e., giving effect to
the Gold Spinoff) basis from September 6 through September 30, 1994.
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<PAGE>
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR SFP COMMON
STOCK
SFP paid annual cash dividends of ten cents ($.10) per share of SFP Common
Stock for each of the years ending December 31, 1992 and 1993. On October 25,
1994, SFP announced that SFP's Board had declared an annual dividend of ten
cents ($.10) per share of SFP Common Stock, payable December 1, 1994, to
stockholders of record at the close of business on November 16, 1994. SFP
currently does not plan to pay dividends for the foreseeable future if the
Offer is consummated.
7. CERTAIN INFORMATION CONCERNING SFP.
Santa Fe Pacific Corporation
SFP was incorporated in the State of Delaware in 1983. A holding company, SFP
owns subsidiaries engaged in two businesses: Rail, consisting principally of
The Atchison, Topeka and Santa Fe Railway Company ("SFP Rail" or "ATSF"), a
major Class I railroad operating in 12 midwestern, western and southwestern
states; and Pipeline, reflecting SFP's interest in a refined petroleum products
pipeline system operating in six western and southwestern states. Prior to the
consummation of the Gold Spinoff (as defined below) on September 30, 1994, SFP
was also engaged in the exploration for and development of gold properties and
the mining and processing of gold ores through SFP Gold and its subsidiaries.
One of the nation's major freight railroads, SFP Rail operated as of December
31, 1993 approximately 8,500 route miles of track extending from Chicago to the
Gulf of Mexico and the West Coast and operated related facilities in twelve
midwestern, western and southwestern states. Major markets served directly by
SFP Rail include Albuquerque, Chicago, Dallas, Denver, Houston, Kansas City,
Los Angeles, Phoenix, the San Francisco Bay area and the United States/Mexico
crossings of El Paso and San Diego.
In serving the midwestern, western and southwestern regions of the country,
SFP Rail transports a broad range of commodities derived from manufacturing,
agricultural and natural resource industries. Intermodal transportation
constitutes the single largest source of freight revenues for SFP Rail, which
also transports, among other things, chemicals and petroleum, coal, vehicles
and parts, whole grain, minerals and ores, forest products, consumer products,
grain products and primary metals.
Santa Fe Pacific Pipelines, Inc. ("SFP Pipelines"), an indirect, wholly owned
subsidiary of SFP, serves as the general partner of Santa Fe Pacific Pipeline
Partners, L.P. (the "Partnership"), a publicly traded Delaware master limited
partnership formed in 1988 to acquire and operate the refined petroleum
products pipeline business of SFP. SFP Pipelines owns a two percent interest in
the Partnership as the Partnership's general partner and approximately 42
percent as limited partner. The Partnership is one of the largest independent
pipeline common carriers of refined petroleum products in the United States,
and the largest in the western United States, in terms of product deliveries,
barrel miles, and pipeline mileage, with approximately 3,300 miles of pipeline
and 14 truck loading terminals serving six states.
SFP Gold is engaged in the exploration for and the development of gold
properties and the mining and processing of gold ores. On June 23, 1994, SFP
Gold effected an initial public offering of 19.2 million shares of common stock
or approximately 14.6% of its outstanding shares at a price of $14.00 per
share. On June 29, 1994, the SFP Board declared a special dividend to holders
of SFP Common Stock as of September 12, 1994, consisting of a pro-rata
distribution of its interests in SFP Gold (the "Gold Spinoff"). The
distribution became effective September 30, 1994.
The principal executive offices of SFP are located at 1700 East Golf Road,
Schaumburg, Illinois 60173. SFP's telephone number is (708) 995-6000.
Financial Information
The Selected Historical And Pro Forma Financial Data and the Unaudited Pro
Forma Financial Statements which follow have been derived from and should be
read in conjunction with the audited financial
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<PAGE>
statements contained in SFP's Annual Report on Form 10-K for the year ended
December 31, 1993, Current Report on Form 8-K/A dated August 3, 1994 and filed
on October 5, 1994 and the unaudited financial statements contained in its
Quarterly Reports on Form 10-Q for the fiscal quarters ended in 1994 and 1993,
in each case as amended when applicable. More comprehensive financial
information is included in such Reports and other documents filed with the
Securities and Exchange Commission (the "Commission"), and the financial data
set forth below is qualified in its entirety by reference to such Reports and
other documents and all of the financial statements and related notes contained
therein. Such Reports and other documents are hereby incorporated by reference
and may be examined and copies may be obtained from the offices of the
Commission in the manner set forth below.
SFP is subject to the informational requirements of the Exchange Act, and in
accordance therewith files reports, proxy statements and other information with
the Commission. The reports, proxy statements and other information filed by
SFP with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and should be available at the Commission's Regional
Offices at 7 World Trade Center, Thirteenth Floor, New York, New York 10048 and
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material may also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, material filed by SFP may be inspected at the offices of
the NYSE, 20 Broad Street, New York, New York 10005 and also at the offices of
the CSE, 440 South LaSalle Street, One Financial Place, Chicago, Illinois 60605
and the PSE, 301 Pine Street, San Francisco, California 94104.
12
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA FOR SANTA FE PACIFIC
CORPORATION
The following table sets forth selected historical financial data for the
years ended December 31, 1993 and 1992, and the nine months ended September 30,
1994 and 1993, as well as selected unaudited pro forma financial information
for the year ended December 31, 1993 and for the nine months ended September
30, 1994. The Income Statement Data and Per Share Data for the nine months
ended September 30, 1994 and 1993 and the Balance Sheet Data at September 30,
1994 include, in the opinion of SFP's management, all adjustments necessary to
present fairly the information for such periods. Such adjustments consist only
of normal recurring adjustments. The results for certain periods for which
selected financial data is provided includes the impact of various special
items. The affected periods, together with a description of the nature and
financial impact of such special items, are set forth after the table. Per
share amounts are net of tax. The unaudited selected pro forma financial data
(i) gives effect to the SFP tender offer for 38 million shares of SFP Common
Stock at $20 per share pursuant to the Offer and the related borrowings and
debt repayments (the "SFP Recapitalization") as if they occurred on September
30, 1994 and December 31, 1993 for Balance Sheet Data and as of January 1, 1993
for Income Statement Data and Per Share Data and the Ratio of Earnings to Fixed
Charges and (ii) should be read in conjunction with the Unaudited Pro Forma
Financial Statements included elsewhere in this document. The data presented is
not necessarily indicative of results to be expected in the future.
13
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA FOR SANTA FE PACIFIC
CORPORATION
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------------------- ---------------------------
AT OR FOR AT OR FOR
NINE AT OR FOR NINE AT OR FOR
MONTHS ENDED YEAR ENDED MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
-------------- -------------- ------------- ------------
1994 1993 1993 1992 1994 1993
------ ------ ------ ------ ------------- ------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues.............. $1,970 $1,778 $2,409 $2,252 $1,970 $2,409
Income from continuing
operations........... 153 124 177 21 118 132
Income from
discontinued
operations, net of
tax.................. 23 148 162 42 23 162
Extraordinary
items/cumulative
effect of changes in
accounting methods... -- -- -- (168) (22)(b) (22)(b)
Net income (loss)..... 176 272 339 (105) 119 272
PER SHARE DATA
Income from continuing
operations........... $ .81 $ .67 $ .95 $ .11 $ .77 $ .88
Income from
discontinued
operations, net of
tax.................. .12 .79 .86 .23 .15 1.08
Extraordinary
items/cumulative
effect of changes in
accounting methods... -- -- -- (.91) (.15)(b) (.15)(b)
Net income (loss)..... .93 1.46 1.81 (.57) .77 1.81
Book value............ 6.46 (a) 6.83 5.11 2.78 3.21
BALANCE SHEET DATA
Working capital
deficit.............. $ (533) (a) $ (397) $ (454) $ (533) $ (397)
Total assets.......... 5,316 (a) 5,374 4,946 5,343 5,401
Total debt, including
current portion...... 1,082 (a) 1,176 1,307 1,925 2,019
Stockholders' equity.. 1,208 (a) 1,268 929 414 474
RATIO OF EARNINGS TO
FIXED CHARGES.......... 3.1 3.0 3.0 1.2 2.1 2.1
</TABLE>
- - --------
(a)Not required.
(b)Represents extraordinary charge, net of tax, on early retirement of debt.
14
<PAGE>
INCOME STATEMENT AND PER SHARE DATA
HISTORICAL NINE MONTHS ENDED SEPTEMBER 30,
1994
--Income from continuing operations includes pre-tax gains of $24 million
related to the sale of an investment and $29 million resulting from a
change in eligibility requirements for postretirement medical benefits.
The after-tax effect of the gains increased net income by $31 million,
or $.17 per common share.
1993
--Income from continuing operations includes a pre-tax gain of $145
million related to the sale of rail lines in southern California and a
$28 million increase in income tax expense related to the retroactive
impact from the date of enactment of the increase in corporate federal
income tax rate by 1 percent. The net effect of the above items was to
increase net income by $57 million, or $.31 per common share.
Discontinued operations includes an after-tax gain of $108 million, or
$.58 per common share, related to the exchange of mineral assets.
HISTORICAL YEAR ENDED DECEMBER 31,
1993
--Income from continuing operations includes the gain on sale of
California lines and the increase in income tax expense discussed above.
Discontinued operations in 1993 includes the after-tax gain discussed
above.
1992
--Income from continuing operations includes a pre-tax gain of $205
million for the sale of rail lines in southern California and a pre-tax
special charge of $320 million related to a new labor agreement,
operations centralization and environmental accruals. The net effect of
the above items was to decrease net income by $73 million, or $.39 per
common share.
Net income includes a noncash reduction of $163 million, or $.88 per
common share, related to the cumulative effect of adopting SFAS No.'s
106 and 112, and a $5 million, or $.03 per common share reduction for an
extraordinary charge on the early retirement of debt.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges has been computed on a consolidated
basis. Earnings represent income from continuing operations before income taxes
less equity in undistributed earnings of unconsolidated affiliates, plus fixed
charges. Fixed charges represent interest costs, amortization of debt discount
and issue costs, and the estimated interest portion of rental charges.
Excluding the 1993 gain on the sale of southern California lines, the
historical ratios for the nine months ended September 30, 1993 and the year
ended December 31, 1993 would have been 1.9 and 2.2, respectively, and the pro
forma ratio for the year ended December 31, 1993 would have been 1.5. Excluding
the 1992 gain on the sale of rail lines in southern California and the SFP Rail
special charge the ratio for the year ended December 31, 1992 would have been
1.8.
15
<PAGE>
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The unaudited pro forma financial statements have been prepared to give
effect to the SFP tender offer for 38 million shares of SFP Common Stock at $20
per share and the related borrowings and debt repayments. The SFP
Recapitalization is reflected in the pro forma balance sheet as if it occurred
on December 31, 1993 and September 30, 1994 and in the statements of operations
as if it occurred on January 1, 1993.
The unaudited pro forma financial statements are prepared for illustrative
purposes only and are not necessarily indicative of the financial position or
results of operations that might have occurred had the applicable transaction
actually taken place on the dates indicated, or of future results of operations
or financial position. Consummation of the tender offer for SFP Common Stock is
conditioned upon, among other things, approval of the Merger by both SFP and
BNI stockholders.
16
<PAGE>
PRO FORMA SFP RECAPITALIZED BALANCE SHEET
AS OF SEPTEMBER 30, 1994
UNAUDITED
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
SANTA FE SANTA FE
PACIFIC SFP PACIFIC
CORPORATION RECAPITALIZATION CORPORATION
HISTORICAL ADJUSTMENTS RECAPITALIZED
----------- ---------------- -------------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents......... $ 17 $-- $ 17
Accounts receivable, net.......... 98 -- 98
Other current assets.............. 246 -- 246
------ ---- ------
Total current assets............ 361 -- 361
Property and equipment, net......... 4,684 -- 4,684
Other assets........................ 271 27 (R.1) 298
------ ---- ------
Total assets.................... $5,316 $ 27 $5,343
====== ==== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable.................. $ 253 $-- $ 253
Other current liabilities......... 449 -- 449
Current portion of long-term debt
and commercial paper............. 192 -- 192
------ ---- ------
Total current liabilities....... 894 -- 894
Long-term debt...................... 890 843 (R.2) 1,733
Deferred income taxes............... 1,167 (19)(R.3) 1,148
Other liabilities................... 1,157 (3)(R.4) 1,154
------ ---- ------
Total liabilities............... 4,108 821 4,929
------ ---- ------
Stockholders' equity
Common stock...................... 190 -- 190
Paid-in capital................... 842 15 (R.4) 857
Retained earnings................. 263 (49)(R.4) 214
Treasury stock.................... (87) (760)(R.4) (847)
------ ---- ------
Total stockholders' equity...... 1,208 (794) 414
------ ---- ------
Total liabilities and stock-
holders' equity.............. $5,316 $ 27 $5,343
====== ==== ======
</TABLE>
(See accompanying Notes to Pro Forma SFP Recapitalized Financial Statements)
17
<PAGE>
PRO FORMA SFP RECAPITALIZED BALANCE SHEET
AS OF DECEMBER 31, 1993
UNAUDITED
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
SANTA FE SANTA FE
PACIFIC SFP PACIFIC
CORPORATION RECAPITALIZATION CORPORATION
HISTORICAL ADJUSTMENTS RECAPITALIZED
----------- ---------------- -------------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents......... $ 71 $ -- $ 71
Accounts receivable, net.......... 96 -- 96
Other current assets.............. 291 -- 291
------ ----- ------
Total current assets............ 458 -- 458
Properties and equipment, net....... 4,360 -- 4,360
Other assets........................ 556 27 (R.1) 583
------ ----- ------
Total assets.................... $5,374 $ 27 $5,401
====== ===== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable.................. $ 241 $ -- $ 241
Other current liabilities......... 429 -- 429
Current portion of long-term debt
and commercial paper............. 185 -- 185
------ ----- ------
Total current liabilities....... 855 -- 855
Long-term debt...................... 991 843 (R.2) 1,834
Deferred income taxes............... 1,116 (19)(R.3) 1,097
Other liabilities................... 1,144 (3)(R.4) 1,141
------ ----- ------
Total liabilities............... 4,106 821 4,927
------ ----- ------
Stockholders' equity
Common stock...................... 190 -- 190
Paid-in capital................... 870 15 (R.4) 885
Retained earnings................. 340 (49)(R.4) 291
Treasury stock.................... (132) (760)(R.4) (892)
------ ----- ------
Total stockholders' equity...... 1,268 (794) 474
------ ----- ------
Total liabilities and stock-
holders' equity.............. $5,374 $ 27 $5,401
====== ===== ======
</TABLE>
(See accompanying Notes to Pro Forma SFP Recapitalized Financial Statements)
18
<PAGE>
PRO FORMA SFP RECAPITALIZED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1994
UNAUDITED
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SANTA FE SANTA FE
PACIFIC SFP PACIFIC
CORPORATION RECAPITALIZATION CORPORATION
HISTORICAL ADJUSTMENTS RECAPITALIZED
----------- ---------------- -------------
<S> <C> <C> <C>
Revenues......................... $ 1,970 $-- $ 1,970
Operating expenses
Compensation and benefits...... 625 -- 625
Fuel........................... 183 -- 183
Materials...................... 92 -- 92
Equipment rents................ 185 -- 185
Purchased services............. 282 -- 282
Depreciation................... 150 -- 150
Other.......................... 147 -- 147
------- ---- -------
Total operating expenses..... 1,664 -- 1,664
------- ---- -------
Operating income................. 306 -- 306
Interest expense................. 90 57 (R.5) 147
Other income (expense), net...... 49 -- 49
------- ---- -------
Income before income taxes....... 265 (57) 208
Income tax expense............... 112 (22)(R.6) 90
------- ---- -------
Income from continuing opera-
tions........................... $ 153 $(35) $ 118
======= ==== =======
Earnings per common share
Income from continuing opera-
tions......................... $ .81 $ .77(R.7)
======= =======
Number of shares used in computa-
tion of earnings per common
share (in thousands)............ 189,700 152,400(R.7)
</TABLE>
(See accompanying Notes to Pro Forma SFP Recapitalized Financial Statements)
19
<PAGE>
PRO FORMA SFP RECAPITALIZED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1993
UNAUDITED
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SANTA FE SANTA FE
PACIFIC SFP PACIFIC
CORPORATION RECAPITALIZATION CORPORATION
HISTORICAL ADJUSTMENTS RECAPITALIZED
----------- ---------------- -------------
<S> <C> <C> <C>
Revenues........................ $ 2,409 $ -- $ 2,409
Operating expenses
Compensation and benefits..... 800 800
Fuel.......................... 239 -- 239
Materials..................... 128 -- 128
Equipment rents............... 229 -- 229
Purchased services............ 322 -- 322
Depreciation.................. 188 -- 188
Other......................... 185 -- 185
------- ----- -------
Total operating expenses.... 2,091 -- 2,091
------- ----- -------
Operating income................ 318 -- 318
Interest expense................ 133 73 (R.5) 206
Gain on sale of California
lines.......................... 145 -- 145
Other income (expense), net..... 24 -- 24
------- ----- -------
Income before income taxes...... 354 (73) 281
Income tax expense.............. 177 (28)(R.6) 149
------- ----- -------
Income from continuing
operations..................... $ 177 $ (45) $ 132
======= ===== =======
Earnings per common share
Income from continuing
operations................... $ .95 $ .88(R.7)
======= =======
Number of shares used in
computation of earnings per
common share (in thousands).... 187,200 149,900(R.7)
</TABLE>
(See accompanying Notes to Pro Forma SFP Recapitalized Financial Statements)
20
<PAGE>
NOTES TO PRO FORMA SFP RECAPITALIZED FINANCIAL STATEMENTS
The SFP Recapitalization plan reflected in the pro forma financial statements
includes borrowing $1,075 million of $1,560 million in available bank
commitments at an assumed average interest rate of 9 percent (see "Source and
Amount of Funds" for further discussion) with the proceeds principally used for
(i) financing the repurchase of 38 million shares of its outstanding common
stock at a price of $20 per share or $760 million in total, (ii) the early
retirement of $200 million of outstanding senior indebtedness, and (iii)
repayment of short-term borrowings and payment of refinancing transaction
costs.
Additionally, SFP will incur Merger transaction costs, including the
accelerated vesting of restricted stock and certain other transaction costs
upon stockholder approval of the Merger.
R.1 OTHER ASSETS
Represents estimated debt issuance costs to be paid in connection with the
SFP Recapitalization, net of debt issue costs expensed in conjunction with the
retirement of debt.
R.2 LONG-TERM DEBT
Reflects the $1,075 million SFP Recapitalization borrowing less (i) the early
retirement of outstanding senior debt of $200 million and (ii) the repayment of
$32 million short-term borrowings which were outstanding at September 30, 1994.
R.3 DEFERRED INCOME TAXES
Deferred income taxes have been reduced for the tax benefit of the costs of
retiring debt and the accelerated vesting of SFP's restricted stock described
in R.4. below at a rate of 39 percent.
R.4 STOCKHOLDERS' EQUITY
Stockholders' equity has been adjusted to reflect: (i) the purchase of 38
million shares of SFP Common Stock and (ii) costs, net of taxes and costs
accrued, associated with the SFP Recapitalization and the Merger including
expenses for early retirement of debt, accelerated vesting of restricted stock,
and estimated legal, investment banking and other transactions costs. Costs of
early retirement of debt will be expensed as an extraordinary charge. Costs for
the accelerated vesting of restricted stock will be expensed in the period that
restrictions lapse. Merger transaction costs will be expensed in the period
incurred.
R.5 INTEREST EXPENSE
Reflects the estimated net increase in interest expense associated with debt
borrowings/repayments discussed in R.2. above.
R.6 INCOME TAX EXPENSE
Income tax expense reflects the effect of pro forma adjustments at an
estimated rate of 39 percent.
R.7 EARNINGS PER COMMON SHARE
SFP weighted average shares outstanding have been reduced for SFP's cash
tender offer, net of restricted stock which will vest upon stockholder approval
of the Merger. SFP historical earnings per common share have been reduced to
reflect a decrease in income from continuing operations due to additional
interest expense discussed in R.5. above.
21
<PAGE>
8. CERTAIN INFORMATION CONCERNING BNI
Burlington Northern Inc.
BNI was incorporated in the State of Delaware in 1981 as part of a holding
company reorganization. BNI and its majority-owned subsidiaries are primarily
engaged in the rail transportation business. BNI's principal subsidiary is
Burlington Northern Railroad Company ("BN Railroad"). BN Leasing Corporation, a
wholly owned subsidiary of BNI, was formed in 1989 to acquire railroad rolling
stock and other equipment necessary for the transportation and other business
affairs of BNI.
BN Railroad operates the largest railroad system in the United States based
on miles of road and second main track, with approximately 24,500 total miles
at December 31, 1993. The principal cities served include Chicago, Minneapolis-
St. Paul, Fargo-Moorhead, Billings, Spokane, Seattle, Portland, St. Louis,
Kansas City, Des Moines, Omaha, Lincoln, Cheyenne, Denver, Fort Worth, Dallas,
Houston, Galveston, Tulsa, Wichita, Springfield (Missouri), Memphis,
Birmingham, Mobile and Pensacola.
The transportation of coal is BN Railroad's largest single source of
revenues, accounting for approximately one-third of the total. Based on
carloadings and tons hauled, BN Railroad is the largest transporter of western
low-sulfur coal in the United States. Based on the same criteria, BN Railroad
is also the largest rail transporter of grain in North America. Other
significant aspects of BN Railroad's business include intermodal transportation
and the transportation of forest products, chemicals, consumer products,
minerals processors, iron and steel, vehicles and machinery and aluminum,
nonferrous metals and ores.
The principal executive offices of BNI are located at 3800 Continental Plaza,
777 Main Street, Fort Worth, Texas 76102-5384. BNI's telephone number is (817)
333-2000.
Financial Information
SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth selected historical financial data of BNI for
each of the last two years and selected unaudited historical financial data for
the nine months ended September 30, 1994 and 1993. The selected historical
financial data of BNI have been derived from and should be read in conjunction
with the audited financial statements contained in its Annual Report on Form
10-K for the year ended December 31, 1993 and the unaudited financial
statements contained in its Quarterly Reports on Form 10-Q for the fiscal
quarters ended in 1994 and 1993, in each case as amended when applicable. More
comprehensive financial information is included in such Reports and other
documents filed with the Commission, and the financial data set forth below is
qualified in its entirety by reference to such Reports and other documents and
all of the financial statements and related notes contained therein. Such
Reports and other documents are hereby incorporated by reference and may be
examined and copies may be obtained from the offices of the Commission in the
manner set forth below.
BNI is subject to the informational requirements of the Exchange Act, and in
accordance therewith files reports, proxy statements and other information with
the Commission. The reports, proxy statements and other information filed by
BNI with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and should be available at the Commission's Regional
Offices at 7 World Trade Center, Thirteenth Floor, New York, New York 10048 and
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material may also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, material filed by BNI may be inspected at the offices of
the NYSE, 20 Broad Street, New York, New York 10005 and also at the offices of
the CSE, 440 South LaSalle Street, One Financial Place, Chicago, Illinois 60605
and the PSE, 301 Pine Street, San Francisco, California 94104.
22
<PAGE>
The Income Statement Data and Per Share Data for the nine months ended
September 30, 1994 and 1993 and the Balance Sheet Data at September 30, 1994
include, in the opinion of BNI's management, all adjustments necessary to
present fairly the information for such periods. Such adjustments consist only
of normal recurring adjustments. The results for certain periods for which
selected historical financial data are provided include the impact of various
special items. The affected periods, together with a description of the nature
and financial impact of such special items, are set forth after the table. Per
share amounts are net of tax. The historical data presented is not necessarily
indicative of results to be expected in the future.
23
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA FOR BURLINGTON NORTHERN INC.
<TABLE>
<CAPTION>
AT OR FOR
NINE MONTHS AT OR FOR
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
------------------------ -----------------------
1994 1993 1993 1992
----------- ----------- ----------- -----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues.................. $ 3,651 $ 3,453 $ 4,699 $ 4,630
Income before extraordi-
nary items and cumulative
effect of changes in ac-
counting methods......... 284 178 296 299
Extraordinary
items/cumulative effect
of changes in accounting
methods.................. (10) -- -- (21)
Net income................ 274 178 296 278
PER SHARE DATA
Income before extraordi-
nary items and cumulative
effect of changes in ac-
counting methods......... $ 2.97 $ 1.81 $ 3.06 $ 3.35
Extraordinary
items/cumulative effect
of changes in accounting
methods.................. (.11) -- -- (.24)
Net income................ 2.86 1.81 3.06 3.11
Book value................ 19.85 (a) 17.73 15.61
Cash dividends declared... .90 .90 1.20 1.20
BALANCE SHEET DATA
Total assets.............. $ 7,536 (a) $ 7,045 $ 6,563
Total debt, including cur-
rent portion and commer-
cial paper............... 1,791 (a) 1,737 1,567
Redeemable preferred
stock.................... -- (a) -- 9
Stockholders' equity...... 2,116 (a) 1,919 1,728
</TABLE>
- - --------
(a) Not required.
NINE MONTHS ENDED SEPTEMBER 30,
1994
--BNI adopted Statement of Financial Accounting Standards (SFAS) No. 112,
"Employers' Accounting for Postemployment Benefits." The cumulative
effect, net of $7 million income tax benefit, of this change in
accounting attributable to years prior to 1994, at the time of adoption,
was to decrease income by $10 million, or $.11 per common share.
1993
--Results include the effects of the Omnibus Budget Reconciliation Act of
1993 (the "Act") which was signed into law on August 10, 1993. The Act
increased the corporate federal income tax rate by 1 percent, effective
January 1, 1993, which reduced net income by $29 million, or $.32 per
common share, through the date of enactment.
YEAR ENDED DECEMBER 31,
1993
--Results include the effects of the Act as discussed above.
1992
--Results include a settlement agreement relating to the reimbursement of
attorneys' fees and costs incurred by BNI in conjunction with litigation
filed by Energy Transportation Systems, Inc. ("ETSI"), and others, and
reimbursement of a portion of the amount paid in prior years by BNI in
settlement of that action. Under the terms of the settlement, BNI
received approximately $50 million, before $3 million in legal fees, for
a net amount of $47 million. The after-tax effect of the settlement
increased net income by $31 million, or $.35 per common share.
24
<PAGE>
BNI received notification that an Appeals Division settlement of the
Internal Revenue Service audits for the years 1981 through 1985 had been
approved by the Joint Committee on Taxation. This action settled all
unagreed issues for those years. The tax effect of the settlement was
included in the 1992 tax provision and resulted in an increase in net
income of $17 million, or $.19 per common share.
Results reflect the cumulative effect of the change in accounting method
for revenue recognition and the cumulative effect of the implementation
of the accounting standard for postretirement benefits (SFAS No. 106).
The cumulative effect of the change in accounting method for revenue
recognition decreased 1992 net income by $11 million, or $.13 per common
share. The cumulative effect of the change in accounting method for
postretirement benefits decreased 1992 net income by $10 million, or
$.11 per common share. Neither change had an effect on cash flows.
25
<PAGE>
9. BACKGROUND OF THE MERGER AND THE OFFER
The possibility of a business combination between BNI and SFP was first
discussed on July 16, 1993 in a meeting between Mr. Gerald Grinstein, Chairman
and Chief Executive Officer of BNI, and Mr. Robert D. Krebs, Chairman,
President and Chief Executive Officer of SFP. Following that meeting, senior
members of management of both companies, together with their legal and
financial advisors, undertook to examine, on a preliminary basis, a possible
transaction. On the basis of that investigation, both companies concluded that
a BNI-SFP merger presented significant strategic and financial opportunities.
The two companies then agreed to investigate further a possible stock merger
transaction, executed a confidentiality agreement on or about July 28, 1993 and
exchanged confidential information.
From August through November 1993, each company undertook a detailed due
diligence investigation of the other. Beginning in October 1993,
representatives of BNI and SFP, and their financial and legal advisors, met on
a number of occasions and held numerous additional discussions to attempt to
negotiate the terms of a merger transaction, including the terms of a merger
agreement. A number of difficult issues were raised during the course of these
discussions. Of particular importance were the parties' views as to an
appropriate exchange ratio.
At meetings during this period, each of the SFP Board and BNI Board
separately received information about a possible BNI-SFP merger, discussed the
possibility of such a merger and was briefed by its management on the merger
negotiations.
On November 29, 1993, BNI and SFP separately concluded that they could not
reach an agreement on an exchange ratio. In addition, BNI had concerns with
respect to certain tax issues and several matters relating to the planned Gold
Spinoff. Thereafter, each company independently decided to discontinue merger
negotiations.
On January 31, 1994, Mr. Grinstein and Mr. Krebs met to discuss the
possibility of resuming merger negotiations, but reached no conclusion as to
whether to do so.
On or about February 15, 1994, CS First Boston informed representatives of
BNI and SFP that Kansas City Southern Industries, Inc. ("KCSI") intended to
explore strategic transactions involving its wholly owned railroad subsidiary,
The Kansas City Southern Railway Company and related transportation businesses
("KCSR").
During the period January 1994 through June 1994, the SFP Board was kept
informed of and discussed the possibility of resuming merger negotiations with
BNI. At its May 24, 1994 board meeting, SFP management reported to the SFP
Board on both the status of the potential BNI transaction and a possible KCSR
transaction, and stated its view that, although each of these potential
transactions would have advantages, a BNI transaction would be superior for SFP
and its stockholders.
On several occasions in June 1994, representatives of BNI and SFP discussed
whether to resume merger negotiations in light of, among other things, the fact
that KCSI had informed potential bidders that it would establish in the near
future a deadline for bids to acquire KCSR and that the KCSI Board would meet,
and might select the winning bidder for KCSR, on June 30, 1994.
On June 24, 1994, the SFP Board, in light of the fact that merger
negotiations with BNI had not resumed, authorized SFP management to make a bid
for KCSR. That bid was communicated to KCSI on June 24, 1994.
On June 24, 1994, the BNI Board authorized BNI management to make a bid for
KCSR. That bid was communicated to KCSI on June 24, 1994. At that meeting and
following presentations from BNI's management and financial and legal advisors,
the Board of Directors of BNI also authorized management, together with its
financial and legal advisors, to attempt to negotiate a merger agreement with
SFP. The Board
26
<PAGE>
noted that, among other things, some of its prior concerns had been alleviated
by SFP's progress in effecting the Gold Spinoff.
On June 24, 1994, after the SFP Board had met, a representative of BNI
informed a representative of SFP that BNI was interested in resuming merger
negotiations with SFP. From shortly after that time through June 29, 1994,
representatives of BNI, SFP and their financial and legal advisors resumed
negotiations, which resulted in a definitive merger agreement, subject to BNI
and SFP Board approval.
On June 29, 1994, the Boards of Directors of SFP and BNI each met separately
to consider a BNI-SFP merger. Each Board separately received presentations from
its management and financial and legal advisors about a BNI-SFP merger.
Lazard rendered to the BNI Board of Directors its written opinion dated June
29, 1994, that, based upon and subject to various considerations set forth in
the opinion and such other factors as it deemed relevant, on June 29, 1994, the
exchange ratio of 0.27 shares of BNI Common Stock per share of SFP Common Stock
(the "Original Exchange Ratio") was fair to the holders of BNI Common Stock
from a financial point of view.
Goldman Sachs delivered its oral opinion to the SFP Board of Directors on
June 29, 1994 that, as of the date of such opinion, the Original Exchange Ratio
was fair to the holders of SFP Common Stock. That opinion was subsequently
confirmed in writing. See the full text of the opinion of Goldman Sachs dated
the date of the Joint Proxy Statement/Prospectus dated October 12, 1994
(attached as Appendix D to such Joint Proxy Statement/Prospectus dated October
12, 1994), which sets forth certain assumptions made by Goldman Sachs,
including the assumption that under the foregoing circumstances Goldman Sachs,
in analyzing the Original Exchange Ratio, need not take into account the
consideration which might be received under the UPC Proposal (as defined
below).
Each Board then resumed the discussions in which it had engaged at earlier
meetings about whether to pursue such a merger. Following these discussions,
each Board approved the terms of the agreement negotiated by their respective
managements and advisors and the Merger Agreement was executed and delivered
promptly after receipt of such approval. Upon approval of the Merger, each of
the SFP and the BNI Boards authorized SFP management and BNI management,
respectively, to withdraw their bids for KCSR. The KCSR bids were withdrawn
shortly thereafter.
On October 5, 1994, Mr. Drew Lewis, the Chairman and Chief Executive Officer
of Union Pacific Corporation ("UPC"), called Mr. Robert D. Krebs, the Chairman,
President and Chief Executive Officer of SFP, and stated that UPC wished to
acquire SFP and that Mr. Lewis wanted to meet with Mr. Krebs. Mr. Lewis further
stated that he was going to call Mr. Gerald Grinstein, the Chairman and Chief
Executive Officer of BNI, to request a meeting with him as well. Mr. Krebs told
Mr. Lewis that SFP was already a party to a merger agreement, that it was
unlikely that the ICC would permit a merger between SFP and UPC, and that
therefore there was no reason to have a meeting. Mr. Lewis replied that UPC
intended to make public a proposal if no meeting occurred and urged that a
meeting be held. The two men then agreed that Mr. Krebs would consult his
counsel. After doing so, Mr. Krebs called Mr. Lewis back and agreed to a
meeting. During the conversations, Mr. Lewis told Mr. Krebs that UPC had looked
at Southern Pacific and at SFP, and had decided that SFP was the company to
break up. Mr. Lewis also stated that UPC would offer concessions to BNI to
persuade it to acquiesce to UPC's proposal.
Mr. Lewis then called Mr. Grinstein, stated that UPC wanted to acquire SFP
and asked to see Mr. Grinstein. Mr. Grinstein declined to see Mr. Lewis.
Mr. Lewis, Mr. Richard Davidson, President of UPC, Mr. Krebs, and Mr. Robert
A. Helman, SFP's counsel, had a meeting in the late afternoon of October 5. At
the meeting, Mr. Helman stated that SFP is subject to a binding merger
agreement and that it is unlikely that a UPC-SFP combination would be approved
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by the ICC. Mr. Helman also stated that UPC had misled SFP because, earlier in
1994, when Mr. Krebs returned an unsolicited telephone call from Mr. Lewis, Mr.
Lewis had stated that if SFP made its deal with BNI, UPC would not oppose it.
Mr. Lewis denied having made that statement, contending that what he had
stated was that UPC would not oppose a BNI-SFP merger subject to an evaluation
of its merits. Mr. Lewis then placed a written proposal (the "UPC Proposal") on
Mr. Krebs' desk and, as Mr. Lewis was leaving, stated that Mr. Krebs was making
a mistake, that UPC would offer more -- $20 per share -- than the amount
provided for in the UPC Proposal, and that UPC would consider using a voting
trust for the proposed transaction. Mr. Lewis and Mr. Davidson then left SFP's
headquarters, where the meeting had taken place.
In the UPC Proposal, UPC proposed to acquire SFP in a tax-free merger in
which SFP stockholders would have received, for each share of SFP Common Stock,
0.344 of a share of UPC common stock.
The transaction contemplated in the UPC Proposal was subject to ICC approval,
the termination of the BNI-SFP merger agreement, execution of a definitive
agreement and the approval of the Board of Directors and the stockholders of
SFP. The UPC Proposal was also conditioned upon the satisfactory completion of
a due diligence review of SFP. UPC offered to facilitate an SFP due diligence
review of UPC.
The UPC Proposal stated that UPC was prepared to grant conditions to Southern
Pacific, BNI or other railroads, including access to points that would
otherwise change from two serving railroads to one, rights to handle service-
sensitive business moving between California, Chicago and the Midwest, and
access to the Kansas and Oklahoma grain markets. The UPC Proposal further
stated that UPC envisions that certain members of the SFP Board would be
invited to serve on UPC's Board. The UPC Proposal further stated that UPC was
prepared to immediately commence negotiation of a definitive merger agreement
containing mutually agreeable terms and conditions.
The SFP Board met to consider the UPC Proposal on October 5 and October 6,
1994. At those meetings, counsel for SFP explained that SFP's directors did not
have the right to terminate the Original Merger Agreement in response to the
UPC Proposal but did have the right, to the extent required by their fiduciary
duties under applicable law if so advised by outside counsel, (i) to engage in
negotiations or provide any confidential information or data to UPC relating to
the UPC Proposal and (ii) to withdraw, modify or amend their recommendation
that SFP's stockholders approve the Original Merger Agreement and the BNI-SFP
merger.
Mr. Krebs reminded the SFP Board of his description at prior Board meetings
of two telephone calls he had had with Mr. Lewis earlier in the year. The
first, on June 7, 1994, occurred when Mr. Krebs returned Mr. Lewis' unsolicited
telephone call made on June 6. Mr. Lewis stated on June 7 that if SFP made its
deal
with BNI, UPC would not oppose it and, in fact, would welcome it because UPC
liked good competitors. Mr. Lewis went on to say that UPC also would not object
if SFP entered into a transaction to acquire Kansas City Southern Railway
Company. The second telephone call was shortly after the BNI-SFP merger
agreement was announced on June 29, 1994. Mr. Krebs called Mr. Lewis as a
courtesy, and Mr. Lewis stated that he had seen the press release and that UPC
would study the matter.
After discussions at both meetings and consultation with its financial and
legal advisors, the SFP Board unanimously decided to reject the UPC Proposal
and reaffirm its recommendation to SFP's stockholders that they approve the
Original Merger Agreement and the BNI-SFP merger. In reaching its decision, the
SFP Board considered the following factors:
1. Likelihood of ICC Approval. The SFP Board concluded that it is unlikely
that a UPC-SFP combination would receive ICC approval. The SFP Board based its
conclusion in part on its own knowledge, and the view of management, that the
extensive market overlaps between the two railroad systems and the dominant
position of UPC would make such a combination anticompetitive. The SFP Board
also based its conclusion
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in part on advice of counsel that, given the anticompetitive effects of a UPC-
SFP combination, the ICC was unlikely to approve such a combination absent
concessions by UPC that would make the transaction untenable and the ICC might
well not approve it regardless of any concessions made by UPC. The SFP Board
noted that in the past it had, as part of management's strategic reviews with
the SFP Board, discussed the possibility of a UPC-SFP combination, but had not
pursued this idea because of the improbability of obtaining ICC approval, given
the adverse effect on competition that such a combination would have.
2. Perception of UPC Proposal. The SFP Board perceived the UPC Proposal as
apparently designed to prevent the consummation of the BNI-SFP merger and the
creation of a strong competitor to UPC. The SFP Board based this perception on
its conclusion that ICC approval of a UPC-SFP combination is unlikely and on
the timing of the UPC Proposal. The SFP Board also took account of the
inconsistency between UPC's present position and Mr. Lewis' earlier statement
to Mr. Krebs that UPC would not oppose a BNI-SFP merger.
3. Opinion of Financial Advisor. Goldman Sachs advised the SFP Board that
under the circumstances described to the SFP Board by SFP's management and
counsel, Goldman Sachs reaffirmed its opinion with respect to the Original
Exchange Ratio contemplated by the BNI-SFP merger.
4. Binding Agreement. The SFP Board noted that SFP had no right to terminate
the Original Merger Agreement and that it was important to avoid breaches of
the Original Merger Agreement, particularly in light of the SFP Board's belief
that consummation of the BNI-SFP merger is in the best interest of SFP's
stockholders because (1) the BNI-SFP merger has significant benefits for SFP
stockholders and (2) if the Original Merger Agreement were terminated and if
the UPC Proposal could not be consummated, SFP would be left without a
strategic combination which is required to protect and enhance shareholder
value.
The SFP Board also discussed the significance of Mr. Lewis' remarks to Mr.
Krebs regarding the possibility of UPC offering a $20 per share price and
establishing a voting trust. The SFP Board noted that Mr. Lewis' statements
were inconsistent with the UPC Proposal and UPC's press release, which was
issued after Mr. Lewis met with Mr. Krebs. However, the SFP Board decided,
after being advised by outside counsel that its fiduciary duties under
applicable law required such a step, that SFP should communicate to UPC that,
if UPC were to make a proposal at a fair price and with an adequate provision
for a voting trust that would substantially eliminate the regulatory risk for
SFP stockholders, the SFP Board would consider that proposal in light of its
fiduciary duties.
On October 6, 1994, this information, along with the SFP Board's decision to
reject the UPC Proposal, was sent to UPC in a letter from Mr. Krebs to Mr.
Lewis and in a press release issued by SFP. BNI was made aware of, and did not
object to, the contents of the letter and press release before they were sent
or issued.
On October 11, 1994, in a letter addressed to Mr. Krebs, UPC expressed its
dissatisfaction with the SFP Board's prompt rejection of the UPC Proposal. It
emphasized the possible benefits to be attained in accepting the UPC Proposal,
asked the SFP Board to consider UPC's analysis of ICC matters, and urged Mr.
Krebs, along with his advisors, to meet with UPC representatives. UPC concluded
its letter by stating that the proposed purchase price was considered by UPC to
be a "fair price" but that UPC would be prepared to receive information from
SFP that might justify a greater consideration. The SFP Board considered the
October 11 letter, and decided to reaffirm its prior position but requested UPC
to provide SFP with UPC's analysis of ICC matters.
On October 11, 1994, in a letter to Mr. Lewis, Mr. Krebs communicated (i) the
SFP Board's decision to reject the previously made proposal by UPC to acquire
SFP and to reaffirm its recommendation to SFP's stockholders that they approve
the Original Merger Agreement and the Merger contemplated thereby and (ii) the
SFP Board's request that UPC provide SFP with UPC's analysis of ICC matters.
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On October 12, 1994, SFP and BNI commenced solicitation of proxies from
their respective stockholders for approval of the Original Merger Agreement.
On October 13, 1994, UPC announced that it would solicit proxies in
opposition to approval of the Original Merger Agreement.
On October 17, 1994, Mr. Lewis sent Mr. Krebs a fourteen page memorandum
prepared by UPC's Vice President of Strategic Planning (the "UPC Memorandum")
dated October 17, 1994, which Mr. Lewis described as a "summary analysis of
the case regarding our merger proposal that we would expect to present to the
Interstate Commerce Commission." The UPC Memorandum described alleged benefits
that would be created by a UPC-SFP merger, acknowledged that such a merger
would have anticompetitive effects, and proposed to deal with these effects
through certain conditions that UPC "might" accept. Mr. Krebs directed SFP's
management, lawyers and other advisors to study the UPC Memorandum in order to
advise the SFP Board whether the UPC Memorandum provided any basis for the SFP
Board to change its position with respect to a possible UPC-SFP merger.
At a meeting on October 20, 1994, the Board of Directors of BNI met to
consider whether any action should be taken with respect to the Original
Merger Agreement and the transactions contemplated thereby. The BNI Board
received presentations from its management and legal advisors concerning
various recent developments as well as a presentation from Lazard analyzing
the possibility of increasing the Original Exchange Ratio. In connection with
its presentation, Lazard considered, among other things, the impact of the
anticipated increase in operating income of the merged entity set forth in the
application filed by BNI and SFP with the ICC in connection with the Merger
(the "ICC Application"), as well as the fact that the proposed merger with SFP
would be accounted for under the "pooling of interests" method of accounting
rather than, as had been expected on June 29, 1994, the "purchase" method of
accounting.
On October 24, 1994, Mr. Grinstein spoke with Mr. Krebs concerning the
possibility of increasing the exchange ratio included in the Original Merger
Agreement.
Also on October 24, 1994, UPC sent Mr. Krebs another set of materials (the
"UPC Panel Statement"), in which five experts retained by UPC offered their
views in support of UPC's position with respect to various issues regarding
ICC approval of a UPC-SFP combination.
The SFP Board met on October 25, 1994. At the meeting, Mr. Krebs advised the
SFP Board of his telephone call with Mr. Grinstein the previous day, and
Goldman Sachs provided the SFP Board with an analysis of the effects of an
increase in the original exchange ratio to various levels, including an
increase to 0.34. The SFP Board discussed the possibility of entering into an
amended merger agreement with BNI.
The SFP Board also received at the meeting oral and written presentations as
to whether the UPC Memorandum or the UPC Panel Statement warranted a change in
the SFP Board's position with respect to a possible UPC-SFP merger. These
presentations examined the likelihood of ICC approval of a BNI-SFP merger and
a UPC-SFP merger. The Board heard from SFP's management, its lawyers and Mr.
Paul Lamboley, a former ICC Commissioner, and was provided with a written
statement prepared by Mr. Barry C. Harris, a Principal and Senior Vice-
President of Economists Incorporated, a Washington, D.C.-based consulting
firm. Mr. Harris served as Deputy Assistant Attorney General and Chief
Economist in the Antitrust Division of the United States Department of Justice
("DOJ") from October 1992 until mid-January 1993 and testified on behalf of
the DOJ against the proposed merger between SFP and Southern Pacific Company
("Southern Pacific"). Both Mr. Lamboley and Mr. Harris have been retained by
SFP to serve as expert advisors to the SFP Board. In particular, Mr. Lamboley
has been retained by SFP to advise and assist it in connection with the
pending Delaware litigation arising out of the proposed BNI-SFP merger and
related matters concerning the likelihood of ICC approval of a UPC-SFP
combination.
Mr. Lamboley provided the SFP Board with an overview on merger cases since
the late 1970's before the ICC, outlined the statutory criteria and analytical
approach the ICC typically uses in reviewing proposed
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railroad mergers and described how the ICC would most likely review a UPC-SFP
merger proposal, focusing on competitive impact. He opined that it is unlikely
that the ICC would approve the UPC-SFP merger, as proposed, absent imposition
of substantial conditions to ameliorate the significant competitive concerns,
which conditions could make the transaction untenable. He noted, however, that
the ICC will generally not use its conditioning authority to substantially
restructure a transaction beyond the scope proposed. Because a detailed
analysis of the corridors and commodities would be needed to determine the
competitive impact and the level of conditions necessary, the proceedings
would be protracted--likely to require the full 31-month statutory period--
with the outcome uncertain. (The SFP Board was aware that the ICC had at that
time adopted a schedule for the BNI-SFP application that would have resulted
in a final decision in the first quarter of 1996.) Mr. Lamboley characterized
the UPC-SFP merger proposal as being largely parallel, with potentially
significant anticompetitive effects, observing that the ICC had rejected a
parallel merger (SFP-Southern Pacific) involving similar markets. Mr. Lamboley
opined that the DOJ, as it did in the SFP-Southern Pacific case, would likely
actively oppose the UPC-SFP combination because of its substantial competitive
impact and, although not binding, antitrust principles would provide guidance
for ICC evaluation of competition. Mr. Lamboley stated that, in his view, the
benefits claimed by UPC for the proposed combination were on balance unlikely
to overcome the combination's competitive effects, distinguishing private
benefits from public benefits. By way of contrast, Mr. Lamboley stated that in
his view the BNI-SFP merger could provide significant public benefits and thus
was more likely to receive ICC approval without imposition of substantial
conditions.
In his written statement, Mr. Harris opined, based on his professional
knowledge and experience and his review of Mr. Lewis' October 5, 1994 letter
proposal, the UPC Memorandum and other publicly available information, that
the DOJ would subject a UPC-SFP combination to intense scrutiny and very
likely would vigorously oppose such a combination. Mr. Harris noted that,
while a complete DOJ analysis would include a review of confidential traffic
data, the DOJ likely would have serious concerns about competitive problems,
including diminished competition in the important Midwest-California corridor,
the Midwest-Texas corridor and U.S.-Mexico traffic, likely to result from such
a combination. Mr. Harris also opined that the DOJ likely would conclude that
the conditions that UPC indicated in the UPC Memorandum that UPC might accept
would be inadequate to address the competitive problems raised by a UPC-SFP
combination. In addition, Mr. Harris stated his view that, from an economic
perspective, there were serious questions regarding the benefits that UPC
asserted in the UPC Memorandum would result from such a combination and that
the DOJ was unlikely to be persuaded by those asserted benefits. Mr. Harris
did not discuss the likelihood of ICC approval of a BNI-SFP merger. Except as
stated in this paragraph and the immediately preceding paragraph, neither Mr.
Lamboley nor Mr. Harris made any assumptions or qualifications in providing
their advice to the SFP Board.
The SFP Board questioned SFP's management, its lawyers and Mr. Lamboley
about their presentations and discussed the issues raised, but took no action
with respect to these issues at the October 25 meeting.
At a meeting on October 26, 1994, the Board of Directors of BNI, by
unanimous vote, determined that it would be fair to and in the best interests
of BNI and its stockholders to increase the exchange ratio from 0.27 shares of
BNI Common Stock per share of SFP Common Stock to 0.34 shares of BNI Common
Stock per share of SFP Common Stock (the "Revised Exchange Ratio") and
approved the amendment to the Original Merger Agreement implementing such
increase. In reaching this determination, the BNI Board of Directors
considered, among other things, reports from BNI management and BNI's legal
and financial advisors updating the Board on recent developments; the fact
that the Merger would be accounted for under the "pooling of interests" method
of accounting rather than, as had been expected on June 29, 1994, the
"purchase" method of accounting; the financial data, including the anticipated
increase in operating income, set forth in the ICC Application; and a
presentation by Lazard, BNI's financial advisor, as to the proposed increase
in the exchange ratio and the Merger. At that meeting Lazard rendered to the
BNI Board of Directors its oral opinion that, based upon and subject to
various considerations and such other factors as it deemed relevant, on
October 26, 1994, the Revised Exchange Ratio was fair to the holders of BNI
Common Stock from a financial point of view. That opinion was subsequently
confirmed in writing.
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After the October 26 BNI Board of Directors meeting, Mr. Grinstein called Mr.
Krebs and advised him that the BNI Board was willing to amend the Original
Merger Agreement to provide for an exchange ratio of 0.34.
On October 26, after the BNI Board meeting, the SFP Board held a meeting. Mr.
Krebs advised the SFP Board of Mr. Grinstein's telephone call earlier in the
day, and the SFP Board took up the question of whether to enter into an amended
Merger Agreement on the terms proposed by BNI. The SFP Board decided to do so
for a number of reasons, some of which were discussed at the October 26 meeting
and some of which were discussed at the October 25 meeting. The SFP Board noted
that, based on closing stock prices on October 25, 1994, the market price of
0.34 of a share of BNI Common Stock was slightly more than the market price of
0.344 (the exchange ratio set forth in the UPC Proposal) of a share of UPC
common stock.
The SFP Board also noted that the UPC Proposal was not legally binding
because it was subject to a due diligence investigation and the negotiation and
execution of a merger agreement. Thus, SFP's stockholders could have no
assurance that UPC would, in fact, offer 0.344 shares of UPC common stock if
the BNI transaction were rejected and the Original Merger Agreement were
terminated. The SFP Board considered the risk of UPC not proceeding with its
proposal if the Original Merger Agreement with BNI were terminated to be
substantial because of the SFP Board's perception that the UPC Proposal was
apparently designed to prevent the consummation of the BNI-SFP merger and the
creation of a strong competitor to UPC. If the Original Merger Agreement were
terminated and no agreement with UPC were reached, the price of SFP Common
Stock might well drop significantly and SFP would be left without a strategic
combination which is required to protect and enhance stockholder value.
The SFP Board also took account of the substantial long-term benefits that
might accrue to SFP's stockholders from a merger. The SFP Board concluded, in
part on the basis of the presentations of SFP's management, its lawyers and Mr.
Lamboley, that the long-term benefits from a BNI-SFP merger were likely to be
realized because that merger was likely to receive ICC approval while any long-
term benefits from a UPC-SFP merger were uncertain and unlikely to be realized
because the UPC Proposal, as further described in the UPC Memorandum, was
unlikely to receive ICC approval.
In reaching its conclusion about the likelihood of ICC approval of either
transaction, the SFP Board considered the following factors:
BNI-SFP MERGER
1. Benefits. A BNI-SFP combination would create substantial benefits for
shippers and the public, as well as for SFP's stockholders. The combination
would create an integrated rail network capable of reaching most of the key
domestic and export gateways in the western United States, thereby giving
shippers substantially increased opportunities for efficient single-line
service to numerous important markets. The combination would also introduce new
competition in service to shippers needing to reach multiple points (including
all major West Coast and many Gulf Coast ports). Reduced operating and overhead
costs of a consolidated BN Railroad-SFP Rail would result in more efficient
service. Given the predominantly end-to-end nature of the merger (i.e., very
little overlap), these benefits would be created without significant adverse
effects on competition.
2. Risks. Although the SFP Board believes that it is likely that the ICC will
approve a BNI-SFP merger, there is a risk that the ICC might find that the
benefits to the public and the applicants from a BNI-SFP merger were outweighed
by the potential harm to the public produced by such a merger, particularly any
reduction in rail competition, harm to essential rail services or other factors
deemed detrimental to the public interest. Opponents of the transaction may
raise a number of challenges to the proposal, including allegations of
diminution in competition, claims of harm to essential rail services,
criticisms of the scale of the benefits claimed by SFP and BNI, complaints
about the fairness of the exchange ratio to the stockholders
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of the two companies, concerns about the effect of the transaction on affected
employees of the two companies and similar points. For example, there are some
limited areas where the BN Railroad and SFP Rail systems do overlap--such as in
Amarillo and Lubbock, Texas--and it is probable that objections will be raised
during the ICC proceeding about the reduction in rail competition in those
areas. SFP and BNI have advised the ICC of their willingness to negotiate
ameliorative arrangements to address any such reductions in competition.
UPC-SFP MERGER
1. Adverse Effect on Competition. Because the UPC and SFP rail systems are
substantially parallel and SFP Rail and the railroad subsidiaries of UPC ("UP
Rail") are currently major competitors on many routes, a UPC-SFP combination
would have a substantial anticompetitive effect. It would significantly reduce
competition by combining the dominant carrier in the West (UP Rail) with its
major competitor (SFP Rail) in the very important Chicago-California and Kansas
City-California routes and leave the combined UP Rail-SFP Rail as an even more
dominant competitor on those routes. In light of the coverage of both SFP Rail
and UP Rail-SFP Rail in Kansas, and their common connections with major
regional carriers, a UP Rail-SFP Rail combination would present significant
competitive impacts on Kansas grain shippers. Wheat and feed grains moving from
Southern Colorado to either California or the Gulf of Mexico would present
another competitive issue. There would also be a competitive issue raised by a
reduction in the number of carriers serving the ports of Houston and Los
Angeles/Long Beach. A UP Rail-SFP Rail merger would also eliminate competition
between SFP Rail service to Mexico through El Paso and UP Rail service to
Mexico through Laredo; UP Rail's overwhelming post-merger share of all U.S.
traffic to Mexico would cause competitive concerns.
A UPC-SFP merger would create major competitive problems with respect to
specific commodities as well. Precise market share data by corridors are not
readily available, but the combined share of western railroad movements handled
by UP Rail and SFP Rail in major categories would be substantial and more than
70% in the important Midwest-Southern California intermodal domestic flow. On a
combined basis, UP Rail and SFP Rail would originate more than 70% of
automotive movements in the West. Eliminating competition between UP Rail and
SFP Rail would end a fierce rivalry. In 1990, for example, UP Rail succeeded in
underbidding SFP Rail on a contract (valued in the tens of millions of dollars)
to carry all Ford traffic from Kansas City to California.
2. Inadequate Conditions. Only three out of the fourteen pages in the UPC
Memorandum discussed the competition issues that a UPC-SFP combination would
raise. The UPC Memorandum proposed to deal with these issues with certain
conditions that UPC "might" accept. SFP's management, its lawyers and Mr.
Lamboley noted that UPC had not identified and proposed specific solutions for
all of the significant competition problems that a UPC-SFP merger would create.
SFP's management, its lawyers and Mr. Lamboley concluded that, even where UPC
had suggested conditions, they were unlikely to be sufficient. For example, as
to the most severe competitive problem--reduced competition among railroads
serving the routes between California and the Upper Midwest and a combined UP
Rail-SFP Rail's dominant position on those routes--UPC proposed only that it
might accept a grant to Southern Pacific, the other carrier that currently does
compete in the California-Upper Midwest corridor, of trackage rights or other
conditions. SFP's management, its lawyers and Mr. Lamboley doubted the value of
conditions that would only benefit a carrier already serving the routes in
question, concluding that such conditions were unlikely to be sufficient to
compensate for a substantial diminution in competition on one of the nation's
most important railroad routes.
SFP's management, its lawyers and Mr. Lamboley also noted that UPC had made
no commitment to accept the conditions it had proposed. They also advised the
SFP Board that there is no precedent for the extent of conditions that would
address the various competitive issues and level of concentration that would
arise in a UPC-SFP combination and that, even on the dubious assumption that
complex conditions could be crafted to solve all the competitive problems in
such a combination, such conditions would not necessarily lead to approval
because the ICC might be concerned about whether such conditions would work and
whether the agency could adequately supervise them. Such conditions would also
be economically costly, potentially depressing the value of the UPC stock that
SFP's stockholders would receive in a merger. SFP's
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management, its lawyers and Mr. Lamboley also advised the SFP Board that
opponents of the transaction might argue that the history of conditions
demonstrates that such conditions have often been found ineffective in
providing long-term competitive alternatives. The conditions granted the
Milwaukee Road in the Northern Lines case, the trackage rights granted Southern
Pacific between Kansas City and St. Louis in the MP-UPC, and the long-term
validity of the so-called "DT&I conditions" granted in many early mergers have
all been criticized as ineffective.
SFP's management, its lawyers and Mr. Lamboley noted that the authors of the
UPC Panel Statement assumed that UPC would agree to sufficient conditions to
permit a UPC-SFP merger to be approved and that it was unwise for SFP or its
stockholders to make such an assumption. They also noted that, while some of
the authors of the UPC Panel Statement stated that UPC could make a "strong" or
"credible" case for ICC approval of a UPC-SFP merger, none of them, despite
their retention by UPC, stated that such approval was likely.
3. Benefits. SFP's management, its lawyers and Mr. Lamboley concluded that
the service benefits described in the UPC Memorandum were unlikely to be
persuasive to the ICC because many of them would be achievable only at the
expense of a substantial reduction in competition. SFP's management, its
lawyers and Mr. Lamboley also concluded that many of the benefits claimed by
UPC were overstated. For example, what UPC describes as new single-line service
is often, in reality, nothing more than a different route between an origin and
a destination that UP Rail already serves. Many of the service improvements
claimed by UPC appear based on a misunderstanding of SFP Rail's current
operations. For intermodal traffic, SFP Rail already has frequent departures
between Chicago and California, approximately every four hours--the same
frequency UPC proposes; SFP Rail already offers service between Chicago and
Northern California every six hours; and with respect to automotive traffic,
SFP Rail already offers solid unit trains to California.
4. Timing. SFP's management, its lawyers and Mr. Lamboley indicated that a
UPC-SFP merger application would be highly contested and would be likely to
require the full 31 months permitted by statute to resolve. This would result
in a schedule that was substantially longer than the ICC schedule for the BNI-
SFP application, which at the time called for a ruling in the first quarter of
1996. Because of this timing difference, SFP and its stockholders would be
faced with a significantly longer period of uncertainty while ICC approval was
being sought under an agreement with UPC than they would under the BNI Merger
Agreement.
At the October 26 meeting, Goldman Sachs gave the SFP Board an oral opinion
to the effect that, as of October 26, based on various considerations and
assumptions, including the circumstances described to the SFP Board by SFP's
management, its lawyers and Mr. Lamboley, the Revised Exchange Ratio was fair
to SFP's stockholders. That opinion was subsequently confirmed in writing. See
the full text of the Opinion of Goldman Sachs dated the date of the
Supplemental Joint Proxy Statement/Prospectus dated October 28, 1994 (attached
as Appendix C to such Supplemental Joint Proxy Statement/Prospectus dated
October 28, 1994), which sets forth certain assumptions made by Goldman Sachs,
including the assumption that under the foregoing circumstances Goldman Sachs,
in analyzing the Revised Exchange Ratio, need not take into account the
consideration which might be received under the UPC Proposal.
The SFP Board voted unanimously to approve the amended Merger Agreement. The
Amendment to the Original Merger Agreement was executed and delivered promptly
by BNI and SFP after such approval. The SFP Board also authorized Mr. Krebs to
communicate to UPC that the UPC Memorandum and the UPC Panel Statement did not
change the SFP Board's views. Mr. Krebs did so promptly.
On October 30, 1994, UPC announced that it was revising the UPC Proposal to
provide for an exchange ratio of 0.407 of a share of UPC common stock for each
share of SFP Common Stock outstanding.
On November 8, 1994, UPC announced that, subject to the approval of the staff
of the ICC, it would establish a voting trust to acquire SFP and would commence
a partial cash tender offer for SFP Common
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Stock. A voting trust would permit SFP's stockholders to receive the
consideration UPC was offering them without the need to wait for the ICC to
decide whether to approve a UPC-SFP combination.
On November 9, 1994, UP Acquisition Corporation, a Utah corporation ("UP
Acquisition"), a wholly owned subsidiary of UPC, commenced a tender offer (the
"UP Tender Offer") for 115,903,127 shares of SFP Common Stock, or such greater
number of shares as equals 57.1% of the shares of SFP Common Stock outstanding
on a fully diluted basis, at $17.50 per share, net to the tendering shareholder
in cash upon the terms and subject to the conditions set forth in the Offer to
Purchase dated November 9, 1994 (the "UP Offer to Purchase").
According to the UP Tender Offer, UP Acquisition proposed to acquire the
remaining shares of SFP Common Stock in a "back-end" merger in which the
holders of each remaining share of SFP Common Stock would receive 0.354 of a
share of UPC common stock. As of December 21, 1994, 0.354 of a share of UPC
common stock had a value of $16.46 based on the closing market price of UPC
common stock on that date as reported in The Wall Street Journal. At the same
time, UPC stated that it would still be willing to pursue its earlier proposal
to acquire SFP in a tax-free, all stock merger transaction with an exchange
ratio of 0.407 of a share of UPC common stock for each share of SFP Common
Stock, but with no provision for a voting trust. As of December 21, 1994, 0.407
of a share of UPC common stock had a value of $18.93 based on the closing
market price of UPC common stock as reported in The Wall Street Journal.
On November 11, 1994, SFP requested that BNI consider restructuring the
Merger in response to UPC's announcement that it would establish a voting
trust. BNI did not make a substantive response to this request.
On November 14, 1994, Alleghany Corporation, the holder of approximately 7%
of SFP Common Stock, sent a letter to SFP in which it indicated that it would
be interested in providing equity financing for a recapitalization of SFP
designed to permit SFP to remain as an independent company. Alleghany stated,
by way of illustration, that such a recapitalization might be financed through
SFP borrowings and a purchase by Alleghany of up to $300 million of convertible
preferred stock of SFP.
Also on November 14, SFP and BNI each postponed its respective stockholders
meeting to vote on the Merger Agreement to December 2, 1994.
On November 22, 1994, SFP's Board of Directors recommended that SFP
stockholders not tender their shares to UPC at that time, noting that the
Board's recommendation was subject to change as events unfolded that would
clarify whether a transaction with UPC was in their best interest. SFP noted
that (i) the UP Tender Offer was subject to the condition that the staff of the
ICC issue an informal, non-binding opinion, acceptable to UPC, that the use of
the voting trust submitted by UPC was consistent with applicable ICC policies
and (ii) it was unclear as of November 22 whether or when such a favorable ICC
staff opinion would be issued or whether the ICC might prevent UPC from using a
voting trust. SFP also pointed out that the transaction proposed in the UP
Offer to Purchase was taxable, whereas the transaction contemplated by the BNI-
SFP Merger Agreement is tax-free, that SFP believed that UPC should improve the
financial terms of its latest proposal, and that the UPC proposal was subject
to a number of other conditions which suggested that the proposal was too
uncertain to be considered a firm alternative to the BNI-SFP Merger Agreement
at that time.
On November 28, 1994, UPC announced that it had received an informal non-
binding opinion from the staff of the ICC that UPC's proposed voting trust was
consistent with applicable ICC policies. Also on November 28, SFP's Board of
Directors adopted a Shareholder Rights Plan and authorized SFP's
management to meet with UPC in order to clarify and improve UPC's offer. Both
of these events were announced on November 29, 1994. Also on November 29, SFP
and BNI each postponed its respective stockholders meeting to vote on the
Merger Agreement to December 16, 1994.
On December 1, 1994, SFP announced that its Board of Directors continued to
recommend that stockholders not tender their shares into the UP Tender Offer at
that time. SFP noted that, while UPC had
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received an opinion from ICC staff with respect to a voting trust, there were
other areas of concern with the UPC offer, including SFP's belief that UPC
should improve the financial terms of its offer and the fact that the UP Tender
Offer was still subject to a number of conditions. SFP also noted that it had
agreed to meet with UPC to help determine what course of action was in the best
interest of SFP's stockholders.
Beginning on December 1, 1994, counsel for SFP and counsel for UPC discussed
the non-financial terms of a possible merger agreement between SFP and UPC.
Between December 2, 1994 and December 8, 1994, representatives of UPC and its
counsel, advisors and consultants (collectively, the "UPC Group") were given
access to various financial, legal and other information relating to SFP. After
appropriate provisions had been agreed to limiting UPC's access to certain
commercially sensitive information, UPC's counsel, advisors and consultants
were allowed to review certain additional information on December 3, 1994.
Certain members of the UPC Group were invited to SFP's offices in Schaumburg,
Illinois on December 4, 1994, where representatives of SFP presented certain
financial information regarding SFP and representatives of UPC presented
certain financial information regarding UPC. The UPC Group was also given the
opportunity to request additional information.
Between December 1 and December 17, 1994, representatives of SFP repeatedly
suggested to representatives of UPC that UPC should act promptly to make an
improved offer to acquire SFP if UPC was willing to do so. SFP's
representatives did not insist that an improved UPC offer have any specific
value, but when they were asked by UPC's representatives for guidance, SFP's
representatives told UPC's representatives that they should consider the $20
per share figure that Drew Lewis had mentioned to Robert Krebs on October 5,
1994.
On December 2, 1994, SFP asked BNI to consider revising the Merger Agreement
to provide for a higher exchange ratio combined with tender offers by BNI and
SFP for SFP Common Stock and open market repurchases by SFP of its own common
stock after the tender offer and prior to consummation of the Merger, in each
case contingent on stockholder approval of the Merger. SFP advised BNI that,
based on discussions with some of SFP's large stockholders, such a revision
might draw the support of those stockholders. BNI made no substantive response
to this request.
On December 7, 1994, UPC announced that it had extended the UP Tender Offer
to December 23, 1994.
On December 13, 1994, representatives of BNI informed representatives of SFP
that BNI might be willing, subject to BNI Board Approval, to combine an
increase in the exchange ratio for the Merger with a tender offer by both BNI
and SFP for SFP Common Stock and possible repurchases by SFP of its common
stock in the open market after the tender offer and prior to consummation of
the Merger, in each case contingent on stockholder approval of the Merger.
Representatives of BNI advised SFP that any such revision would also be
conditioned upon payment of a break-up fee to BNI under certain circumstances.
Representatives of BNI and representatives of SFP then discussed the possible
terms such a transaction might include. Both companies recognized that pooling
of interests accounting treatment of the Merger would no longer be possible
under this revised structure.
On or about December 14, 1994, SFP and BNI each postponed its respective
stockholders meeting to vote on the Merger Agreement to January 27, 1995, and
changed the record date for that meeting to December 27, 1994. Also on December
14, representatives of BNI and representatives of SFP continued the discussions
they had conducted the previous day.
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Also on December 14, Mr. Lewis sent the following letter to Mr. Krebs:
December 14, 1994
Mr. Robert D. Krebs
Chairman, President and CEO
Santa Fe Pacific Corporation
1700 East Golf Road
Schaumburg, IL 60173
Dear Rob:
I am writing to advise you, as requested by your advisors, of our
position concerning our merger proposal.
Our response at this stage is a function of Santa Fe's having pursued
a flawed sale process. Your advisors have repeatedly demanded that we
improve our proposal while refusing to establish any procedures for
considering competing proposals on a fair and equal basis. In fact,
your advisors have frequently told us you will not negotiate with Union
Pacific unless we agree to pay at least $20 per Santa Fe share. This
position is clearly inconsistent with your negotiating and recommending
several transactions with Burlington Northern at prices well below $20.
We believe our current proposal is an extremely attractive one and in
the best interests of Santa Fe and its shareholders and customers.
Despite this, you have continued to pursue a process that favors any
result other than a transaction with Union Pacific. We are prepared to
continue discussions with you, but we urge you to establish a fair and
open sale process.
Sincerely,
/s/ Drew
DL/ss
On December 15, 1994, Mr. Krebs sent the following letter to Mr. Lewis:
December 15, 1994
Mr. Drew Lewis, Chairman
Union Pacific Corporation
Martin Tower
Eighth and Eaton Avenues
Bethlehem, Pennsylvania 18018
Dear Drew:
This is in response to your letter dated December 14, 1994 concerning
the process that Santa Fe is currently pursuing. Your letter assumes
that Santa Fe is conducting an auction. In fact, however, the Board of
Santa Fe has never put the company up for sale. Instead, subject to
shareholder approval, the Board agreed to a strategic combination with
the Burlington Northern, which is designed to achieve significant long-
term growth for Santa Fe's shareholders far beyond
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the current value of the Burlington Northern stock that is to be
exchanged in the merger. After that agreement was announced, Union
Pacific made an unsolicited merger proposal to Santa Fe.
As you know, under our contract with Burlington Northern, Santa Fe
could not provide confidential information to or negotiate with any
other potential merger partner unless the Board was advised by counsel
that it had a fiduciary duty to do so. After Union Pacific improved its
offer and obtained the ICC staff's approval of its proposed voting
trust, we were advised by our counsel that we did have a fiduciary duty
to provide information and to negotiate with Union Pacific. In the past
two weeks, we have made available to Union Pacific all of the
information that was given to Burlington Northern, and more. In fact at
a meeting in our office on December 4, 1994, your Executive Vice
President-Finance, L. White Matthews III, told a group of our senior
officers that the amount of information Union Pacific had received from
Santa Fe was more than they "dreamed" of obtaining. In addition, we
have negotiated in good faith the terms of Union Pacific's proposed
merger agreement and tender offer.
Throughout our discussions over the past two weeks we have
continually emphasized the need for Union Pacific to improve its offer
as soon as possible. We have also been negotiating with Burlington
Northern with a view toward improving the existing merger agreement. In
all of these discussions, our goal has been to achieve the best result
for our shareholders, taking into account both short-term and long-term
objectives.
I believe that we have done everything we can to enable Union Pacific
to improve its offer, and, as our financial advisors have been telling
your financial advisors for many days, we hope you will do so promptly.
The process we have followed is designed to promote the best interests
of our shareholders.
Sincerely,
/s/ Rob
Also on December 15, UPC announced that it was extending the UPC Tender Offer
to January 19, 1995.
At a meeting on December 15, 1994, the Board of Directors of BNI, by
unanimous vote, determined that it would be fair to and in the best interests
of BNI and its stockholders to effect the Offer and to increase the exchange
ratio from 0.34 of BNI Common Stock per share of SFP Common Stock to 0.40 share
of BNI Common Stock per share of SFP Common Stock (the "Exchange Ratio"), and
the Board approved the proposed terms of Amendment No. 2 to the Original Merger
Agreement and the transactions contemplated thereby, including possible
repurchases by SFP of SFP Common Stock in the open market. In reaching these
determinations, the BNI Board of Directors considered, among other things,
reports from BNI management and BNI's legal and financial advisors updating the
Board on recent developments; the financial impact of SFP's willingness to
incur substantial leverage in order to repurchase a significant percentage of
the shares of outstanding SFP Common Stock; and a presentation of Lazard, BNI's
financial advisor, as to the financial aspects of the Offer and the proposed
increase in the Exchange Ratio. At that meeting Lazard rendered to the BNI
Board of Directors its oral opinion that, based upon and subject to various
considerations and such other factors as it deemed relevant, on December 15,
1994, the Exchange Ratio, together with the consideration to be paid by BNI
pursuant to the Offer, was fair to the holders of BNI Common Stock from a
financial point of view.
In connection with its approval of Amendment No. 2 to the Original Merger
Agreement, the BNI Board instructed BNI's management to request that SFP use
its best efforts to obtain written commitments from certain of SFP's large
stockholders to support the revised Merger and indicated that its approval of
Amendment No. 2 was conditioned on the receipt of a $50 to $75 million break-up
fee and expense reimbursement. BNI's representatives then communicated the BNI
Board's decisions to representatives of SFP.
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Also on December 15, BNI announced that its Board of Directors had approved
BNI's continued discussions with SFP concerning possible revisions to the
Merger Agreement.
Also on December 15, the SFP Board met and heard a presentation from SFP's
management and financial and legal advisors about BNI's proposal. The SFP Board
authorized its representatives to negotiate with BNI's representatives to
attempt to reach a definitive agreement that would be presented to the SFP
Board for its approval.
Beginning on December 16, 1994, representatives of SFP and BNI met to discuss
whether a definitive agreement could be reached. In addition, representatives
of SFP had discussions with some of SFP's large stockholders to determine
whether or under what circumstances they would make written commitments to
support the revised Merger.
Also on December 16, 1994, Mr. Lewis sent Mr. Krebs the following letter:
December 16, 1994
Mr. Robert D. Krebs
Chairman, President and CEO
Santa Fe Pacific Corporation
1700 East Golf Road
Schaumburg, IL 60173
Dear Rob:
I have read your December 15 letter, and can only conclude that you
have not been kept fully apprised of the actions of your management and
advisors.
Your characterization of Santa Fe's process for considering bids, or
lack of such a process, is inaccurate and distorted. Most importantly,
you have not, as you assert, done everything you can to enable Union
Pacific to revise its proposal. On the contrary, Santa Fe has pursued a
process that favors any outcome other than a transaction with Union
Pacific.
We are extremely disappointed with the flawed and biased sale process
being pursued by Santa Fe. Our financial advisor, CS First Boston,
expressed our concerns to your financial advisor, Goldman Sachs, on
December 14. On December 15, before you sent me your letter, our
counsel expressed these concerns in a letter to your counsel, a copy of
which is enclosed.
And now, in light of your letter, I will tell you directly of our
concerns.
Here are the facts:
1. Your advisors have said you will not even consider a proposal
from us at less than $20 per share, although you negotiated and
recommended several transactions with Burlington Northern at prices
well below $20 per share. Your insistence on such a high minimum
price as a condition to a transaction with Union Pacific discourages
any transaction with Union Pacific while you pursue a variety of
alternative transactions with Burlington Northern at a lower value
level.
2. Santa Fe has refused to establish any procedures that would
permit us to compete on an equal basis with Burlington Northern.
While you obviously have continued to engage in serious, substantive
negotiations with Burlington Northern, you have simply sought
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"clarifications" from us while repeatedly asking us to improve what
for many weeks has been the most attractive proposal on the table.
You are using Union Pacific as a stalking horse for an improved
Burlington Northern bid. Based on your agreement with Burlington
Northern, we must assume that Santa Fe is using information obtained
in its discussions with Union Pacific to assist Burlington Northern
in its efforts to improve its bid.
3. Santa Fe has discussed alternative acquisition structures with
Burlington Northern, but, despite our stated willingness to consider
alternative structures and revisions to our current proposal, you
have not given us any indication of what alternative structures
would be acceptable to Santa Fe.
4. Santa Fe, in its recent Schedule 14D-9 filing, stated that our
proposal "is subject to a number of conditions that are of concern
to [Santa Fe]." But, the fact is, Union Pacific's proposal contains
fewer conditions, and provides greater certainty for your
shareholders, than the transaction you willingly agreed to with
Burlington Northern.
5. Santa Fe's Board of Directors unilaterally adopted a "poison
pill" rights plan that specifically exempts Burlington Northern but
is applicable to our proposal.
6. Santa Fe has stood silently by while Burlington Northern, your
preferred suitor, has tried unsuccessfully to block ICC approval of
our voting trust. This is the voting trust that you specifically
asked us to establish more than two months ago and that provides
speed and certainty for your shareholders.
7. Santa Fe apparently never asked its financial advisor to
express its opinion as to the fairness of our proposal, but, as you
know, Santa Fe previously requested and received a fairness opinion
on the Burlington Northern merger which, at the time, based on the
then current market price, valued Santa Fe shares at approximately
$13.50.
This listing is by no means exhaustive but is illustrative of the
flawed and biased sale process undertaken by Santa Fe. In light of
this, the assertion that Santa Fe's goal has been to achieve the best
results for its shareholders rings hollow.
Let me be very clear. By your actions you have put Santa Fe up for
sale and Union Pacific is a very interested buyer. We want to acquire
Santa Fe by competing on an equal basis with Burlington Northern and
any other potential bidders. If Santa Fe establishes a fair and open
process, we would be eager to participate, and would be willing to
consider and discuss revisions to our proposal.
Santa Fe has stated that it is considering alternative structures. If
you and your Board truly desire a fair process, it is incumbent upon
you to inform us promptly of each alternative under consideration, to
state the minimum bidding level (if any) applicable to all interested
parties, and to give us the opportunity to consider and respond to each
alternative. In addition, you should instruct your management and
advisors to establish immediately a fair and unbiased sale process. If
you would like our specific suggestions concerning establishing a fair
process, our advisors would be pleased to provide them.
Santa Fe has not necessarily received Union Pacific's best proposal.
I await your response.
Sincerely,
/s/Drew
DL/ss
On December 17, 1994, the negotiations between the BNI and SFP
representatives continued, with no agreement being reached.
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Also on December 17, Mr. Krebs sent Mr. Lewis the following letter:
Mr. Drew Lewis
Chairman
Union Pacific Corporation
Martin Tower
8th & Eaton Avenues
Bethlehem, PA 18018
Dear Drew:
I am not sure that continuing to trade letters on "process" issues
serves any useful function. However, let me briefly reiterate Santa
Fe's position. Contrary to the statement in your December 16 letter,
the Santa Fe board has not put the company up for sale, and it is not
conducting an auction. We entered into a contract for a strategic
combination with Burlington Northern -- a combination that promises
significant long-term growth. We are now negotiating with Burlington
Northern in order to improve that agreement.
At the same time, however, we have provided Union Pacific with all of
the information about Santa Fe it needs in order to make its best
alternative proposal. If you are willing and able to improve your
proposal, I suggest that you do so without delay.
Sincerely,
/s/Rob
On December 18, 1994, the BNI and SFP representatives reached an agreement on
the terms of the revised Merger Agreement. Because they could not agree on the
terms and conditions governing open market stock repurchases by SFP after the
tender offer and prior to consummation of the Merger and could not obtain
binding commitments from certain large SFP stockholders to support the
transaction, both of these concepts were dropped. SFP's representatives
attempted to eliminate the break-up fee, but were advised that such a fee was
an absolute prerequisite to BNI's willingness to enter into a revised Merger
Agreement. However, SFP's representatives succeeded in reducing the amount of
the break-up fee from $75 million to $50 million plus reimbursement of expenses
up to $10 million and limiting the circumstances under which it would be paid
to those involving a new competing offer or an acquisition of more than 50
percent of the outstanding shares of SFP Common Stock.
Later on December 18, the SFP Board met to consider whether to approve the
revised Merger Agreement. After hearing presentations from SFP's management and
financial and legal advisors, including the oral opinion of Goldman Sachs that
as of the date thereof, and based upon and subject to the various
considerations and assumptions set forth therein, the aggregate cash and stock
consideration to be received by all of SFP's stockholders pursuant to the Offer
and Merger, considered as a unitary transaction (the "Aggregate
Consideration"), is fair to such holders, the Board determined, by unanimous
vote, to approve the revised Merger Agreement. In doing so, the Board noted the
continuing validity of its prior conclusions that a BNI-SFP combination was an
excellent strategic fit, presented substantial long-term benefits and was
likely to receive ICC approval. The Board also noted that the Offer allows
stockholders who wish to do so to receive cash without waiting for ICC
approval. At the same time, the revised transaction structure allows
shareholders to participate in the ownership of the combined company. The Board
also concluded that the revised Merger Agreement was superior to the UPC Offer,
especially on a long-term basis. In addition, while the Board was reluctant to
grant BNI a break-up fee, it decided to do so because BNI had made it clear
that a break-up fee was necessary in order to induce BNI to enter into the
revised Merger Agreement. Shortly after the SFP Board meeting, BNI and SFP
entered into the revised Merger Agreement.
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The full text of the opinion of Goldman Sachs dated December 23, 1994, which
sets forth assumptions made, matters considered and limits on the review
undertaken, is attached hereto as Appendix B to this Offer to Purchase and is
incorporated herein by reference. Such opinion states that SFP has been advised
that there are significant legal uncertainties relating to whether or under
what circumstances regulatory authorities would permit a combination of SFP and
UPC and that Goldman Sachs has assumed with the consent of the SFP Board of
Directors that the advice was correct. The opinion further states that the
effect upon the common stock of UPC resulting from the failure to consummate
the combination of SFP and UPC or from the conditions which UPC may be required
to accept in order to consummate such a combination is uncertain and that such
uncertainties concerning the UPC Proposal limits Goldman Sachs' ability to
compare the aggregate consideration to be received pursuant to the UPC Proposal
with the Aggregate Consideration to be received pursuant to the Offer and the
Merger. Stockholders of SFP are urged to, and should, read such opinion in its
entirety.
Also on December 18, Mr. Lewis sent Mr. Krebs the following letter:
December 18, 1994
Mr. Robert Krebs
Chairman, President and CEO
Santa Fe Pacific Corporation
1700 East Golf Road
Schaumburg, IL 60173
Dear Rob:
I understand that you sent a letter to my office Saturday.
We continue to be troubled by Santa Fe's refusal to address in any
way our concerns about your process for considering acquisition
proposals.
As we have repeatedly stated, and said to your advisors yesterday, we
want to be in a position to make an improved proposal. We see no reason
why you cannot address our concerns, and hope you will give
consideration the specific suggestions made by our advisors.
Sincerely,
/s/Drew
On December 20, 1994, Mr. Lewis sent Mr. Krebs the following letter:
December 20, 1994
Mr. Robert D. Krebs
Chairman, President and CEO
Santa Fe Pacific Corporation
1700 East Golf Road
Schaumburg, IL 60173
Dear Rob:
The recent actions of Santa Fe are but a continuation of Santa Fe's
ongoing efforts to pursue its sale to Burlington Northern, and to
prevent a transaction with Union Pacific, at all costs.
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We object to Santa Fe's grant of "lock-ups" to Burlington Northern to
deter competing bids, and to Santa Fe's repeated refusal to address our
objections to its flawed sales process.
With regard to Santa Fe's efforts to deter competing bids, we note
with interest that a Burlington Northern representative, who would
speak only on the condition of anonymity, was quoted today in the press
as stating: "This is a carefully crafted plan designed to accomplish
the merger and to make it prohibitively expensive for UP to top."
As we have announced, we will be reviewing our options concerning our
acquisition proposal.
Sincerely,
/s/ Drew
10. PURPOSE OF THE OFFER; THE MERGER AGREEMENT
Purpose of the Offer
The purpose of the Offer is to acquire 63,000,000 shares of SFP Common Stock
and to facilitate the Merger, which the Board of Directors of SFP believes is
in the best interest of SFP stockholders. The Offer also provides an
opportunity to existing stockholders of SFP to sell SFP Common Stock at a
premium over recent trading prices. See "--6. Price Range of SFP Common Stock;
Dividends."
The Merger Agreement
The following is a brief summary of certain provisions of the Merger
Agreement, a copy of which is attached as Appendix A to this Offer to Purchase
and is incorporated herein by reference. This summary does not purport to be
complete and is qualified in its entirety by reference to the Merger Agreement.
ALL STOCKHOLDERS OF BNI AND SFP ARE URGED TO READ THE MERGER AGREEMENT IN ITS
ENTIRETY. Capitalized terms not defined herein have the meanings set forth in
the Merger Agreement.
THE MERGER
The Merger Agreement provides that, following its approval and adoption by
the stockholders of each of BNI and SFP, consummation of the Offer, receipt of
all necessary material regulatory approvals, including ICC approval, and the
satisfaction or waiver of the other conditions to the Merger, SFP will be
merged with and into BNI, and the separate existence of SFP will cease with BNI
continuing as the surviving corporation.
After satisfaction or waiver of the conditions to the Merger, the parties
will file with the Secretary of State of the State of Delaware a duly executed
certificate of merger, and the Merger will become effective upon the filing and
acceptance thereof or at such time thereafter as is provided in the certificate
of merger (the "Effective Time").
Upon consummation of the Merger, each share of SFP Common Stock outstanding
immediately prior to the Effective Time (other than shares of SFP Common Stock
owned by SFP as treasury stock or owned by BNI or any Subsidiary of BNI
immediately prior to the Effective Time, all of which will be canceled) will be
converted into 0.40 shares of BNI Common Stock, and will cease to be
outstanding.
If any holder of shares of SFP Common Stock would be entitled to receive a
number of shares of BNI Common Stock that includes a fraction, then, in lieu of
a fractional share, such holder will be entitled to receive a cash payment
representing such holder's proportionate interest in the net proceeds from the
sale by the Exchange Agent in one or more transactions (made at such times, in
such manner and on such terms as the Exchange Agent will determine in its
reasonable discretion) on behalf of all holders of the aggregate of
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fractional shares of BNI Common Stock which would otherwise have been issued.
The sale of such aggregate of fractional shares of BNI Common Stock by the
Exchange Agent will be executed on the NYSE through one or more member firms of
the NYSE and will be executed in round lots to the extent possible.
At the Effective Time, BNI will deposit with the Exchange Agent certificates
representing the aggregate Merger Consideration to be paid in respect of shares
of SFP Common Stock. Promptly after the Effective Time, BNI will send, or will
cause the Exchange Agent to send, to each holder of record of SFP Common Stock
a letter of transmittal to be used in forwarding his or her certificates
evidencing such shares of SFP Common Stock to the Exchange Agent for surrender
and exchange for certificates evidencing the Merger Consideration to which he
or she has become entitled and, if applicable, cash in lieu of a fractional
share of BNI Common Stock. Such letter of transmittal will specify that the
delivery shall be effected, and the risk of loss and title shall pass, only
upon proper delivery to the Exchange Agent of the certificates representing
such holder's shares of SFP Common Stock. Upon surrender to the Exchange Agent
of a certificate or certificates representing a holder's shares of SFP Common
Stock, such holder will be entitled to receive the Merger Consideration in
respect thereof.
Any portion of the Merger Consideration deposited with the Exchange Agent and
any portion of the net proceeds from the sale of the aggregate of fractional
shares by the Exchange Agent that remains unclaimed for a period of twelve
months after the Effective Time by the stockholders of SFP will, upon demand,
be returned to BNI, and any such holder who has not exchanged shares of SFP
Common Stock for the Merger Consideration after such period will thereafter
only look to BNI for such holder's claim for BNI Common Stock, any cash in lieu
of fractional shares of BNI Common Stock and any dividends or distributions in
respect of BNI Common Stock, subject to any amount paid to a public official
pursuant to applicable abandoned property laws.
After the Effective Time, each certificate evidencing shares of SFP Common
Stock, until so surrendered and exchanged, will be deemed, for all purposes, to
evidence only the right to receive the Merger Consideration which the holder of
such certificate is entitled to receive and the right to receive any cash
payment in lieu of a fractional share of BNI Common Stock. The holder of such
unexchanged certificate will not be entitled to receive any dividends or other
distributions with respect to the BNI Common stock constituting part of the
Merger Consideration until such certificate is surrendered. Upon such
surrender, there shall be paid, without interest, to the person in whose name
the certificates representing the BNI Common Stock into which such shares of
SFP Common Stock were converted are registered, (1) all dividends and other
distributions in respect of BNI Common Stock that are payable on a date
subsequent to, and the record date for which occurs after, the Effective Time
and (2) all dividends or other distributions in respect of shares of SFP Common
Stock that are payable on a date subsequent to, and the record date for which
occurs before, the Effective Time.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains customary representations and warranties of SFP
relating, with respect to SFP and its Subsidiaries, to, among other things, (a)
organization, standing and similar corporate matters; (b) government
authorization; (c) capital structure; (d) the authorization, execution,
delivery, performance and enforceability of the Merger Agreement and related
matters; (e) the non-contravention of the Merger Agreement and related
transactions with (i) SFP and its Subsidiaries' certificates of incorporation
or by-laws or (ii) law, regulation, judgment, injunction, order or decree
applicable to SFP or any of its Subsidiaries; (f) the compliance as to form of
the documents filed by SFP and its Subsidiaries with the Commission in
connection with the Offer, the Merger Agreement and related transactions and
the accuracy of information contained therein and the absence of undisclosed
liabilities; (g) the accuracy of information supplied by SFP in connection with
the Offer and the joint proxy statement/prospectus for the Merger (the "Joint
Proxy Statement/Prospectus"); (h) the absence of any material adverse effect,
whether existing or prospective, on the financial condition, business or
properties of SFP and its Subsidiaries taken as a whole or on the ability of
SFP to perform its obligations under the Merger Agreement (a "Material Adverse
Effect"), since the date of
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the most recent audited financial statements of SFP filed with the Commission;
(i) the absence of pending or threatened litigation which could reasonably be
expected to have a Material Adverse Effect on SFP; (j) benefit plans and other
matters relating to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"); (k) the filing of tax returns and payment of taxes; (l) the
inapplicability of any antitakeover statute or regulation enacted under state
or Federal laws; (m) the absence of Environmental Liabilities that would
reasonably be expected to have a Material Adverse Effect on SFP; (n) brokers'
fees and expenses; and (o) that no benefits will be received by SFP's
stockholders pursuant to the SFP Rights Agreement as a result of the execution
of the Merger Agreement, the commencement or consummation of the Offer or the
consummation of the Merger. In addition, SFP has made representations and
warranties in regard to the Gold Spinoff (SFP's equity interest in SFP Gold was
distributed to SFP's stockholders on September 30, 1994 (the "Gold Spinoff")
and receipt of a private letter ruling from the Internal Revenue Service (the
"IRS") with respect to the Gold Spinoff.
The Merger Agreement also contains customary representations and warranties
of BNI with respect to BNI and its Subsidiaries substantially identical, where
applicable, to those of SFP set forth above.
COVENANTS
Conduct of Business Pending the Merger
The Merger Agreement contains certain reciprocal restrictions on the conduct
of the respective businesses of SFP and BNI from the date of the Merger
Agreement to the Effective Time. Each of SFP and BNI has agreed that, during
such period, except as permitted by the Merger Agreement, each of SFP, BNI and
their respective Subsidiaries shall conduct their businesses in the ordinary
course of business consistent with past practice and shall use their reasonable
best efforts to preserve intact their business organizations and relationships
with third parties and (a) will not adopt or propose any change to their
respective certificates of incorporation or bylaws, except that BNI will adopt
an amendment to its certificate of incorporation authorizing the issuance of
additional shares of Junior Class A Preferred Stock in connection with the
issuance of BNI Rights to former holders of SFP Common Stock; (b) except for
the Offer, the Merger and, in the case of SFP, the Gold Spinoff, will not (i)
adopt a plan of liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization or (ii) make any acquisition of any
business or other assets by means of merger, consolidation or otherwise other
than in the ordinary course of business and other than such acquisitions that
are Customary Actions (as defined below); (c) will not sell, lease, license or
otherwise dispose of any material assets or property except (i) pursuant to
existing contracts or commitments, (ii) in the ordinary course of business,
(iii) for any such transaction that is a Customary Action and (iv) in the case
of SFP, the Gold Spinoff; (d) will not declare, set aside or pay any dividend
or make any other distribution with respect to any shares of capital stock
other than (i) aggregate cash dividends, in the case of SFP, not in excess of
$0.10, $0.18, $0.20 and $0.22 per share of SFP Common Stock in 1994, 1995, 1996
and 1997, respectively, and, in the case of BNI, not in excess of $1.20, $1.32,
$1.48 and $1.64 per share of BNI Common Stock in 1994, 1995, 1996 and 1997,
respectively, and (ii) in the case of SFP, the Gold Spinoff; (e) will not
authorize or propose the issuance, delivery or sale of capital stock or voting
debt or any securities convertible into or exchangeable for, or any rights,
warrants or options to acquire any capital stock or voting debt except as
otherwise permitted in the Merger Agreement; (f) will not incur any
indebtedness for borrowed money or guarantee any such indebtedness except
borrowings in the ordinary course of business consistent with past practice,
borrowings that are Customary Actions or as otherwise permitted in the Merger
Agreement and except, (i) in the case of SFP, borrowings not to exceed $1.75
billion in the aggregate under credit facilities in form and substance
reasonably satisfactory to BNI to finance the Offer, to refinance SFP's
currently outstanding 12.65% Senior Notes due October 1, 2000, 8 3/8% Notes due
November 1, 2001 and 8 5/8% Notes due November 1, 2004, to pay penalties,
premiums and make-whole payments required in connection with such refinancing
and for working capital and other corporate purposes and (ii) in the case
of BNI, borrowings not to exceed $500 million in the aggregate under credit
facilities in form and substance reasonably satisfactory to SFP to finance the
Offer; (g) will not make any loans, advances or capital contributions to, or
investments in, any other Person except in the ordinary course of business
consistent
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with past practice or in transactions that are Customary Actions; (h) (i)
except for any of the actions that are taken in the ordinary course of business
consistent in magnitude and character with past practice and with the terms of
severance or termination arrangements in effect or pending on the date of the
Merger Agreement with respect to individuals with comparable positions or
responsibilities, and except for any of such actions which, in the aggregate,
are not material, will not grant any severance or termination pay to, or enter
into any termination or severance arrangement with, any of their respective
directors, executive officers or employees and (ii) except for any of the
actions that are taken in the ordinary course of business consistent
in magnitude and character with past practice, and except for any of such
actions which in the aggregate are not material, will not establish, adopt,
enter into, amend or take action to accelerate any rights or benefits under, or
grant awards under, (A) any plan or arrangement providing for options, stock,
performance awards or other forms of incentive or deferred compensation or (B)
any collective bargaining, bonus, profit sharing, thrift, compensation,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any of their respective directors, executive
officers or employees. For purposes of the Merger Agreement, an action will be
considered a "Customary Action" where such action occurs in the ordinary course
of a Person's business and where the taking of such action is generally
recognized as being customary and prudent for other major enterprises in such
Person's line of business.
Stockholder Meetings
Each of SFP and BNI shall cause a special meeting of their stockholders to be
called as soon as reasonably practicable after the date of the Merger Agreement
to vote on the approval and adoption of the Merger Agreement and the Merger,
with the Boards of Directors of SFP and BNI to recommend such approval and
adoption; provided that prior to such special meetings, such recommendation may
be withdrawn, modified or amended as necessary in accordance with fiduciary
duties under applicable law following receipt of a Takeover Proposal. The term
"Takeover Proposal," when used in connection with BNI or SFP, means any tender
or exchange offer, proposal for a merger, consolidation or other business
combination involving BNI or SFP or any Subsidiary of BNI or SFP, any proposal
or offer to acquire in any manner a substantial equity interest in, or a
substantial portion of the assets of BNI or SFP or any Subsidiary of BNI or
SFP, or any proposal or offer with respect to any recapitalization or
restructuring with respect to BNI or SFP or any Subsidiary of BNI or SFP, or
any transaction similar to any of the foregoing other than pursuant to the
Merger.
Access to Information
Subject to any confidentiality agreements or other confidentiality
obligations binding upon SFP, BNI or any of their respective Subsidiaries, from
the date of the Merger Agreement until the Effective Time, SFP and BNI will
give each other, their counsel, financial advisors, auditors and other
authorized representatives full access to their offices, properties, books and
records, will furnish such financial and operating data and other information
as such Persons may reasonably request and will instruct employees, counsel and
financial advisors to cooperate with an investigation of their respective
businesses; provided that no investigation pursuant to the Merger Agreement
shall affect any representation or warranty given by SFP or BNI and provided
further that access to certain information will require compliance with the
protective order entered by the ICC on July 15, 1994; full access will be
granted to such information consistent with the Merger Agreement and subject to
the terms of such order.
Notice of Certain Events
SFP and BNI shall promptly notify each other of (i) 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 the Merger
Agreement; (ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by the Merger Agreement
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including, with respect to SFP, the Gold Spinoff and the merger of SFP
Properties, Inc. with and into SFP (the "Liquidation"); and (iii) any actions,
suits, claims, investigations or proceedings commenced or, to the best of their
knowledge threatened against, relating to or involving or otherwise affecting
SFP, BNI or any of their respective Subsidiaries which, if pending on the date
of the Merger Agreement, would have been required to have been disclosed or
which relate to the consummation of the transactions contemplated by the Merger
Agreement.
Tax Matters
From the date of the Merger Agreement until the Effective Time, SFP, BNI and
their respective Subsidiaries will (i) file all significant tax returns,
statements, reports and forms (collectively, the "Post-Signing Returns")
required to be filed with any taxing authority in accordance with all
applicable laws; (ii) timely pay all taxes shown as due and payable on the
Post-Signing Returns that are so filed and as of the time of filing and, in
addition, the Post-Signing Returns will correctly reflect the facts regarding
their income, business, assets, operations, activities and status in all
material respects; (iii) make provision for all taxes payable for which no
Post-Signing Return has yet been filed; and (iv) promptly notify each other of
any action, suit, proceeding, investigation, audit or claim pending against or
with respect to either party or any of their Subsidiaries in respect of any tax
where there is a reasonable possibility of a determination or decision against
either party which would reasonably be expected to have a significant adverse
effect on tax liabilities or other tax attributes.
No Solicitations
SFP and BNI will not, and SFP and BNI will use their reasonable best efforts
to ensure that their officers, directors, employees or other agents do not,
directly or indirectly: initiate, solicit or encourage, or take any action to
facilitate the making of, any offer or proposal which constitutes or is
reasonably likely to lead to any Takeover Proposal of either party, or, in the
event of an unsolicited Takeover Proposal of either party, except to the extent
required by their fiduciary duties under applicable law if so advised by
outside counsel, engage in negotiations or provide any confidential information
or data to any Person relating to any such Takeover Proposal. SFP and BNI shall
notify each other orally and in writing of any such inquiries, offers or
proposals (including, without limitation, the terms and conditions of any such
proposal and the identity of the Person making it), within 48 hours of the
receipt thereof and shall give each other five days' advance notice of any
agreement to be entered into with or any information to be supplied to any
Person making such inquiry, offer or proposal.
Additional SFP Covenants
SFP (i) shall, at least forty days prior to the Closing Date, deliver to BNI
a letter identifying all Persons who are, at the time of the special meeting of
SFP stockholders, deemed to be "affiliates" of SFP for purposes of Rule 145
under the Securities Act and SFP shall use its best efforts to cause each such
Person to deliver an affiliate letter agreement in a form attached to the
Merger Agreement at least thirty days prior to the Closing Date, (ii) will not,
and will not permit any of its Subsidiaries (other than SFP Gold and its
Subsidiaries) to, enter into or undertake any transaction, arrangement or
agreement with SFP Gold or its Subsidiaries except for (x) transactions,
arrangements or agreements that have been entered into on or prior to the date
of the Merger Agreement which have been provided to BNI on or prior to such
date, (y) the allocation to employees of SFP Gold of their share of the SFP
employee benefit plans in accordance with applicable law or (z) such other
transactions, arrangements or agreements that are consented to by BNI (such
consent not to be unreasonably withheld), provided that without limiting the
generality of the foregoing, in no event may SFP or any of its Subsidiaries pay
any dividend, or make any distribution, to holders of SFP Common Stock directly
or indirectly in connection with the Gold Spinoff, except for the distribution
of SFP Gold common stock pursuant to the Gold Spinoff and (iii) grants to BNI
the registration rights described below under "--Registration Rights."
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Additional BNI Covenants
BNI shall indemnify and hold harmless each person who is, or has been at any
time prior to the date of the Merger Agreement, or who becomes prior to the
Effective Time, an officer or director of SFP, in respect of acts or omissions
occurring prior to the Effective Time (the "Indemnified Parties") (including
but not limited to the transactions contemplated by the Merger Agreement) to
the extent provided under SFP's certificate of incorporation, bylaws and (A)
indemnity agreements between SFP and any of its officers or directors
("Indemnity Agreements") in effect on the date of the Merger Agreement or (B)
Indemnity Agreements that may be entered into by SFP from and after the date of
the Merger Agreement and prior to the Effective Time so long as such agreements
shall contain terms and provisions substantially similar to Indemnity
Agreements in effect as of the date of the Merger Agreement; provided that such
indemnification shall be subject to any limitation imposed from time to time
under applicable law. For six years after the Effective Time, BNI shall
provide, if available, officers' and directors' liability insurance in respect
of acts or omissions occurring prior to the Effective Time, including but not
limited to the transactions contemplated by the Merger Agreement, covering each
such Person currently covered by SFP's officers' and directors' liability
insurance policy, or who becomes covered by such policy prior to the Effective
Time, 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 its obligation, BNI shall not be obligated to pay premiums in excess
of 200% of the amount per annum SFP paid in its last full fiscal year, which
amount has been disclosed to BNI but provided further that BNI shall
nevertheless be obligated to provide such coverage as may be obtained for such
amount.
Joint Covenants of SFP and BNI
In addition to the aforementioned reciprocal and individual covenants, SFP
and BNI have agreed to (a) use their reasonable best efforts 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, (b) take all such actions as are necessary to (i) cooperate with
each other to prepare and present to the ICC as soon as practicable all filings
and other presentations in connection with seeking any ICC approval, exemption
or other authorization necessary to consummate the transactions contemplated by
the Merger Agreement, (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 ICC approval by persons not party to the
Merger Agreement, and (iv) take all such further action as reasonably may be
necessary to obtain a final order or orders of the ICC approving such
transactions consistent with the Merger Agreement, (c) promptly prepare and
file with the Commission, using their reasonable best efforts to have cleared
by the Commission and thereafter mail to their stockholders as promptly as
practicable the respective Proxy Statements and all other proxy materials for
the respective stockholder meetings, and use their reasonable best efforts to
obtain the necessary approvals by their stockholders of the Merger Agreement
and the transactions contemplated thereby (provided that, prior to the
respective stockholder meetings, the respective Boards of Directors'
recommendations may be withdrawn, modified or amended to the extent that, as a
result of the commencement or receipt of a Takeover Proposal relating to SFP or
BNI, the respective Boards of Directors deem it necessary to do so in the
exercise of their fiduciary obligations to their respective stockholders after
being so advised by counsel), and will otherwise comply with all legal
requirements applicable to such meeting and make all other filings or
recordings required under applicable Delaware law in connection with the Merger
and, in the case of BNI, prepare and file with the Commission the registration
statement on Form S-4 and take any action required to be taken under any
applicable state Blue Sky law in connection with the issuance of BNI Common
Stock, (d) consult with each other before issuing any press release with
respect to the Merger Agreement and the transactions contemplated thereby, (e)
authorize the officers and directors of the Surviving Corporation to execute
and deliver, in the name and on behalf of SFP, any deeds, bills of sale,
assignments or assurances and to take or do 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 properties or assets of SFP acquired
or to be acquired by the Surviving Corporation, (f) grant such approvals and
take such actions as
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are necessary so that the transactions contemplated by the Merger Agreement may
be consummated as promptly as practicable and otherwise act to eliminate or
minimize the effects of any Takeover Statute, (g) coordinate and cooperate (i)
with respect to the timing of their respective stockholder meetings to use
their reasonable best efforts to hold such meetings on the same day, (ii) in
connection with the preparation of each document required to be filed with the
Commission in connection with the transactions contemplated by the Merger
Agreement (the "Disclosure Documents"), (iii) in determining whether any action
by or in respect of, or filing with, any governmental body, agency, official or
authority is required, or any actions, consents, approvals or waivers are
required to be obtained from parties to any material contracts, and (iv) in
seeking any such actions, consents, approvals or waivers or making any such
filings, furnishing information required in connection therewith or with their
respective Disclosure Documents and timely seeking to obtain any such actions,
consents, approvals or waivers, and (h) from September 30, 1995 to the
Effective Time, pay all dividends declared by SFP and BNI to their respective
stockholders on a quarterly basis, with identical record and payment dates, in
amounts not exceeding the amounts set forth in the Merger Agreement.
REGISTRATION RIGHTS
Pursuant to the terms of the Merger Agreement, in the event that the Merger
Agreement is terminated for any reason after the consummation of the Offer, BNI
will be able to require SFP to file up to two registration statements
registering the shares of SFP Common Stock purchased by BNI pursuant to the
Offer. In addition, the Merger Agreement will also entitle BNI to include such
shares of SFP Common Stock in any public offering of shares of SFP Common Stock
by SFP (other than pursuant to a registration statement on Form S-4 or Form S-8
of the Securities Act, and subject to certain limitations on the number of
shares included in such registration, as determined by the underwriters of such
offering, if any). Once effective, these registration rights continue
indefinitely until their exercise. Subject to certain limitations, SFP is
obligated to bear all costs of any registration, other than underwriting fees,
discounts or commissions, attorneys' fees and any out-of-pocket expenses of
BNI, if any.
THE OFFER
The Merger Agreement severally obligates each of SFP and BNI to commence the
Offer, on the terms and subject to the conditions contained in the Offer.
The Merger Agreement requires, as soon as practicable on the date of
commencement of the Offer, (a) SFP to file an Issuer Tender Offer Statement on
Schedule 13E-4 with respect to the Offer and a Solicitation/Recommendation
Statement on Schedule 14D-9 which shall reflect the recommendations of the
SFP's Board of Directors with respect to the Offer, and (b) BNI to file a
Tender Offer Statement on Schedule 14D-1 with respect to the Offer. SFP and BNI
also agreed to take all steps necessary to cause the offer to purchase and form
of the related letter of transmittal to be disseminated to holders of shares of
SFP Common Stock as and to the extent required by applicable federal securities
laws.
CONDITIONS TO THE CONSUMMATION OF THE MERGER
Each party's obligation to effect the Merger is subject to the satisfaction
or waiver of various conditions (except that the condition set forth in clause
(g) below may not be waived) which include the following:
(a) the Merger Agreement shall have been adopted by the requisite vote of
stockholders of SFP and BNI;
(b) the waiting period (and any extension thereof) applicable to the
Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended ("HSR Act"), shall have expired;
(c) no court, arbitrator or governmental body or agency or official shall
have issued any order, and there shall not be any statute, rule or
regulation restraining or prohibiting the consummation of the
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Merger or the operation of the businesses of SFP, BNI and their respective
Subsidiaries after the Effective Time;
(d) all actions by or in respect of or filings with any governmental
body, agency, official, or authority required to permit the consummation of
the Merger shall have been obtained, but excluding any consent, approval,
clearance or confirmation, the failure to obtain which could not reasonably
be expected to have a Material Adverse Effect on the Surviving Corporation
after the Effective Time;
(e) the ICC shall have issued a decision (which decision shall not have
been stayed or enjoined) that (A) constitutes a final order approving,
exempting or otherwise authorizing consummation of the Merger and all other
transactions contemplated by the Merger Agreement (as may require ICC
authorization) and (B) does not (i) require the inclusion of any other rail
carriers or material rail properties, (ii) change the Exchange Ratio or
(iii) impose any other terms or conditions that significantly and adversely
affect the economic benefit of the transactions contemplated by the Merger
Agreement;
(f) SFP and BNI shall have obtained an opinion of nationally recognized
tax counsel to the effect that the Merger will be tax-free to BNI, SFP and
their respective stockholders for federal income tax purposes;
(g) SFP and BNI shall have purchased shares of SFP Common Stock pursuant
to the Offer;
(h) each of SFP and BNI shall have performed in all material respects all
of their obligations required to be performed at or prior to the Effective
Time, and the representations and warranties of SFP and BNI shall have been
accurate in all material respects both when made and at and as of the
Effective Time except as otherwise provided in the Merger Agreement; and
(i) all other statutory requirements for the valid consummation by SFP
and BNI of the transactions contemplated by the Merger Agreement shall have
been fulfilled.
In addition to the aforementioned reciprocal conditions to the consummation
of the Merger, SFP's obligation to consummate the Merger is subject to the
satisfaction or waiver of the following additional conditions:
(a) the BNI Common Stock required to be issued pursuant to the Merger
Agreement shall have been approved for listing on the NYSE, subject to
official notice of issuance; and
(b) the Gold Spinoff and the Liquidation shall have been consummated.
TERMINATION
Notwithstanding any approval of the Merger Agreement by the stockholders of
BNI or SFP, the Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time (a) by mutual written consent
of BNI and SFP; (b) by either BNI or SFP (i) if the Merger shall not have been
consummated by December 31, 1997; (ii) if any judgment, injunction, order or
decree enjoining BNI or SFP from consummating the Merger is entered and such
judgment, injunction order or decree shall become final and nonappealable; or
(iii) if the approvals of the stockholders of BNI or SFP contemplated by the
Merger Agreement shall not have been obtained by reason of the failure to
obtain the required vote at a duly held meeting of stockholders or of any
adjournment thereof; (c) by BNI, if the Gold Spinoff has not occurred by
December 31, 1994; (d) by BNI, if any Person, entity or "group" (as defined in
Section 13(d)(3) of the Exchange Act) other than BNI acquires beneficial
ownership of fifty percent or more of the outstanding SFP Common Stock; (e) by
BNI, if, prior to the SFP stockholder meeting, the board of directors of SFP
shall have withdrawn, modified or changed in a manner adverse to BNI its
approval or recommendation of the Merger Agreement or the Merger; (f) by BNI,
upon a breach of any representation, warranty, covenant or agreement of SFP, or
if any representation or warranty of SFP shall become untrue, in either case
such that certain conditions would be incapable of being satisfied by December
31, 1997 (or such later date extended), provided that a willful breach shall be
deemed to cause such conditions to be incapable of being satisfied by
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such date; (g) by SFP, if any Person, entity or group acquires beneficial
ownership of fifty percent or more of the outstanding BNI Common Stock; (h) by
SFP, if, prior to the BNI stockholder meeting, the Board of Directors of BNI
shall have withdrawn, modified or changed in a manner adverse to SFP its
approval or recommendation of the Merger Agreement or the Merger; (i) by SFP,
upon a breach of any representation, warranty, covenant or agreement of BNI, or
if any representation or warranty of BNI shall become untrue, in either case
such that certain conditions would be incapable of being satisfied by December
31, 1997 (or as otherwise extended), provided that a willful breach shall be
deemed to cause such conditions to be incapable of being satisfied by such
date; (j) by SFP, upon payment to BNI of the fee described under "Expenses"
below, if prior to the purchase of shares of SFP Common Stock pursuant to the
Offer, (i) the board of directors of SFP shall have withdrawn or modified in a
manner adverse to BNI its approval or recommendation of the Offer, the Merger
Agreement or the Merger in order to permit SFP to execute a definitive
agreement in connection with a Takeover Proposal or in order to approve another
tender offer for shares of SFP Common Stock, in either case, as determined by
the board of directors of SFP, on terms more favorable to SFP's stockholders
than the transactions contemplated hereby, or (ii) the board of directors of
SFP shall have recommended any other Takeover Proposal; or (k) by either BNI or
SFP, if the Offer is terminated and SFP and BNI shall not have purchased shares
of SFP Common Stock pursuant to the Offer.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties and agreements contained in the Merger
Agreement shall not survive the Effective Time or the termination of the Merger
Agreement, except that certain agreements set forth in the Merger Agreement
will survive a termination of the Merger Agreement.
AMENDMENTS; NO WAIVERS
Any provision of the Merger Agreement may be amended or waived prior to the
Effective Time if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by SFP and BNI 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 SFP, no such
amendment or waiver shall, without the further approval of such stockholders,
alter or change (i) the amount or kind of consideration to be received in
exchange for any shares of capital stock of SFP, (ii) any term of the
certificate of incorporation of the Surviving Corporation or (iii) any of the
terms or conditions of the Merger Agreement if such alteration or change would
adversely affect the holders of any shares of capital stock of SFP.
ALTERNATIVE TRANSACTION STRUCTURE
In the Merger Agreement, BNI and SFP have agreed that, upon notice to the
other party, either BNI or SFP may elect to effect the Merger through the use
of a holding company structure (the "Alternative Merger") as set forth below.
In order to permit the Alternative Merger, a newly-formed holding company, BNSF
Corporation ("Holdings") was incorporated in Delaware on December 16, 1994.
Holdings is jointly owned by BNI and SFP and has not engaged in any activity
since its formation other than activities related to the Merger Agreement. BNI
and SFP have included the option of effecting the Alternative Merger in order
to ensure that the transactions contemplated by the Merger Agreement qualify as
tax-free transactions for United States federal income tax purposes.
In the event either BNI or SFP elects to effect the Alternative Merger, prior
to the consummation of the Alternative Merger BNI and SFP will cause Holdings
to form two new wholly owned subsidiaries ("BNI Merger Sub" and "SFP Merger
Sub") under Delaware law and Holdings will become party to the Merger
Agreement, assume all the obligations of BNI thereunder with respect to
consummating the Merger and make certain representations and warranties to each
of BNI and SFP. Upon the effectiveness of the Alternative Merger, (i) BNI
Merger Sub will be merged with and into BNI, with BNI being the surviving
corporation, and (ii) SFP Merger Sub will be merged with and into SFP, with SFP
being the surviving corporation. In the Alternative Merger, (i) each
outstanding share of BNI Common Stock (other than BNI Common Stock held
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by BNI as treasury stock or owned by BNI, SFP or any Subsidiary of either of
them) will be converted into one newly-issued share of the common stock, $1.00
par value, of Holdings ("Holdings Common Stock"), (ii) each outstanding share
of SFP Common Stock (other than SFP Common Stock held by SFP as treasury stock
or owned by SFP, BNI or any Subsidiary of either of them) will be converted
into 0.40 newly-issued share of Holdings Common Stock, and (iii) each
outstanding share of BNI Common Stock or SFP Common Stock then held as treasury
stock by either of BNI or SFP, as the case may be, or owned by BNI and SFP
(other than shares of SFP Common Stock owned by BNI, which shall remain
outstanding) will be canceled.
No fractional shares of Holdings Common Stock will be issued in the
Alternative Merger, but in lieu thereof, any holder of SFP Common Stock that
would otherwise be entitled to such fractional share will instead receive a
cash payment representing such holder's proportionate interest in the net
proceeds received from the sale by the Exchange Agent who shall be appointed in
the same manner as in the Merger and who shall effect such sales as described
under "--The Merger." In addition, each outstanding option to purchase either
BNI Common Stock or SFP Common Stock will be canceled and substituted with an
equivalent option to purchase Holdings Common Stock.
In the event either BNI or SFP shall elect to effect the Alternative Merger,
an additional condition to the consummation of the Alternative Merger is that
the shares of Holdings Common Stock to be issued in the Alternative Merger be
listed on the NYSE. The Merger Agreement provides that all other conditions to
closing, covenants of BNI and SFP and other provisions (with the exception of
the mechanics of the Merger) will remain in full force and effect in the event
of the Alternative Merger. BNI and SFP have also agreed that any other
appropriate adjustments necessary to the Merger Agreement to reflect the
Alternative Merger shall be made in the event either elects to effect the
Alternative Merger, with a view to ensuring that BNI, SFP and their respective
stockholders are placed in a position that is as close as possible to the
position they would have been in pursuant to the Merger.
EXPENSES
Except as stated below or otherwise agreed in writing by SFP and BNI, each
party shall bear its own expenses, including the fees and expenses of any
attorneys, accountants, investment bankers, brokers, finders or other
intermediaries or other Persons engaged by it, incurred in connection with the
Merger Agreement and the transactions contemplated thereby.
SFP has agreed that if the Merger Agreement shall be terminated due to (a)
the acquisition of any Person, entity or "group" other than BNI of more than
50% or more of the outstanding SFP Common Stock, (b) the approvals of the
stockholders of SFP and BNI having not have been obtained, (c) the Board of
Directors of SFP, prior to the meeting of stockholders of SFP, having
withdrawn, modified or changed in a manner adverse to BNI, its approval or
recommendation of the Merger Agreement or the Merger, (d) the board of
directors of SFP having withdrawn or modified in a manner adverse to BNI its
approval or recommendation of the Offer, the Merger Agreement or the Merger in
order to permit SFP to execute a definitive agreement in connection with a
Takeover Proposal or in order to approve another tender offer for shares of SFP
Common Stock or the board of directors of SFP shall have recommended any other
Takeover Proposal, or (e) if the Offer is terminated and SFP and BNI shall not
have purchased shares of SFP Common Stock pursuant to the Offer, then it will
pay BNI an amount equal to $50,000,000 plus all out-of-pocket expenses, not to
exceed $10,000,000 incurred by BNI in connection with the Merger Agreement, the
Offer and all related transactions, by wire transfer of immediately available
funds promptly, but in no event later than two business days, after such
termination; provided, that no such payment will be required if the Merger
Agreement is terminated pursuant to clause (b), (c) or (e) above unless, after
December 18, 1994, a new Takeover Proposal involving SFP has been announced or
made (it being understood that any modification of UPC's Takeover Proposal in
existence on December 18, 1994 shall be deemed a new Takeover Proposal). SFP
has also agreed that if the Merger Agreement shall be terminated pursuant to
clause (b), (c) or (e) above and no payment is required by it in the manner
contemplated above, it will reimburse BNI for all out-of-pocket expenses
incurred by BNI in connection with the Merger Agreement, the Merger, the Offer
and
52
<PAGE>
all related transactions. Such payment shall be made by wire transfer of
immediately available funds promptly, but in no event later than two business
days, after receipt by SFP from BNI of documentation of such expenses.
GOVERNING LAW
The Merger Agreement shall be construed in accordance with and governed by
the law of the State of Delaware (without regard to principles of conflict of
laws).
JURISDICTION
Any suit, action or proceeding seeking to enforce any provision of, or based
on any matter arising out of or in connection with, the Merger Agreement or the
transactions contemplated thereby may be brought against any of the parties in
the United States District Court for the District of Delaware or any state
court sitting in the City of Wilmington, Delaware, and each of the parties has
consented to the exclusive jurisdiction of such courts (and of the appropriate
appellate courts) in any such suit, action or proceeding and has waived any
objection to venue laid therein. Process in any such suit, action or proceeding
may be served on any party anywhere in the world, whether within or without the
State of Delaware.
LETTER AGREEMENT
Pursuant to a letter agreement between BNI and SFP, Gerald Grinstein,
Chairman and Chief Executive Officer of BNI, is to become Chairman of the
merged entity, and Robert D. Krebs, Chairman, President and Chief Executive
Officer of SFP, is to become President and Chief Executive Officer of the
merged entity. Other senior officers of the merged entity will be selected by
the merged entity's board of directors based upon, among other things, the
recommendations of Mr. Grinstein and Mr. Krebs.
11. CERTAIN EFFECTS OF THE OFFER.
As of November 30, 1994, SFP had issued and outstanding 187,741,494 shares of
SFP Common Stock and options to purchase 15,056,883 shares of SFP Common Stock.
The 63,000,000 shares of SFP Common Stock that Purchasers are offering to
purchase pursuant to the Offer represents approximately 33.6% of the SFP Common
Stock outstanding as of that date. The Purchasers do not believe that the
purchase of shares of SFP Common Stock pursuant to the Offer will result in
delisting of the shares of SFP Common Stock on the NYSE or termination of
registration of the SFP Common Stock under the Exchange Act.
Shares of SFP Common Stock are currently "margin securities" under the rules
of the Federal Reserve Board. This has the effect, among other things, of
allowing brokers to extend credit on the collateral of SFP Common Stock. The
Purchasers believe that following the purchase of shares of SFP Common Stock
pursuant to the Offer, SFP Common Stock will continue to constitute margin
securities for purposes of the Federal Reserve Board's margin regulations.
SFP currently intends to treat shares of SFP Common Stock purchased by it
pursuant to the Offer as treasury shares.
12. SOURCE AND AMOUNT OF FUNDS.
SFP. The total amount of funds required by SFP to purchase 38 million shares
of the common stock outstanding pursuant to the Offer is estimated to be
approximately $760 million. In addition, SFP may require $400 million for the
repayment of existing debt ($200 million of which was issued during the fourth
quarter of 1994), approximately $75 million for the payment of fees, expenses
and prepayment premium, approximately $75 million in anticipation of 1995
financing requirements and $250 million of liquidity for working capital and
other corporate cash needs. SFP anticipates that the Offer, the repayment of
existing debt, and the provision of working capital will be funded by bank
financing.
53
<PAGE>
SFP has received a commitment letter and attached term sheet (collectively,
the "SFP Commitment Letter") dated December 22, 1994 from J.P. Morgan
Securities Inc., as Arranger, Chase Securities, Inc., Chemical Securities Inc.,
Goldman Sachs and Union Bank of Switzerland ("UBS"), as Co-Arrangers, Morgan
Guaranty Trust Company of New York, The Chase Manhattan Bank (National
Association), Chemical Bank, Pearl Street L.P. and UBS, as Arranging Agents,
and Morgan Guaranty Trust Company of New York, as Administrative Agent,
pursuant to which the Arranging Agents have agreed, subject to certain terms
and conditions set forth in the SFP Commitment Letter, to provide SFP with up
to an aggregate of $1.56 billion in financing (the "Bank Financing").
The SFP Commitment Letter provides for three facilities (the "Credit
Facilities"): (i) a term loan facility (the "Term Loan Facility") of up to $1
billion; (ii) a $250 million revolving credit facility (the "Tranche A
Revolving Credit Facility"); and (iii) a $310 million revolving facility (the
"Tranche B Revolving Credit Facility" and, together with the Tranche A
Revolving Credit Facility, the "Revolving Credit Facilities"). The proceeds of
the Term Loan Facility and the Tranche B Revolving Credit Facility are to be
used to purchase SFP Common Stock pursuant to the Offer, to repay existing
debt, to pay prepayment premiums, fees and expenses, and for working capital
and other general corporate purposes. The proceeds of the Tranche A Revolving
Credit Facility are to be used for working capital and other general corporate
purposes.
Loans under the Term Loan Facility will mature on June 30, 2001 and will be
subject to semi-annual amortization commencing on December 31, 1996 in the
following amounts:
<TABLE>
<CAPTION>
INSTALLMENT PRINCIPAL AMOUNT
----------- ----------------
<S> <C>
12/31/96 $ 50,000,000
06/30/97 50,000,000
12/31/97 50,000,000
06/30/98 50,000,000
12/31/98 50,000,000
06/30/99 75,000,000
12/31/99 75,000,000
06/30/00 100,000,000
12/31/00 100,000,000
06/30/01 400,000,000
</TABLE>
Loans under the Tranche A Revolving Credit Facility will mature on December
31, 1999. Loans under the Tranche B Revolving Credit Facility will mature on
the earliest of (a) December 31, 1997, (b) six months after a final decision
(either approval or disapproval) by the ICC in respect of the Merger and
(c) six months after termination of the Merger Agreement.
All loans under the Credit Facilities will bear interest at a rate per annum,
at SFP's option, of either: (a) the higher of (i) the prime rate of interest
publicly announced from time to time by Morgan Guaranty Trust Company of New
York and (ii) the federal funds rate plus 0.5% (such higher rate, the "Base
Rate"), in each case plus the Applicable Margin (determined based on the
pricing grid set forth below); or (b) the Eurodollar rate established by
certain reference banks (the "Eurodollar Rate") for each applicable interest
period plus the Applicable Margin (determined based on the pricing grid set
forth below).
54
<PAGE>
SFP will also be required to pay a facility fee (the "Facility Fee") under
each of the Credit Facilities. The Applicable Margins and the Facility Fees
will be at the rates per annum set forth in the following Pricing Grids:
PRICING GRID--TERM LOAN FACILITY
<TABLE>
<CAPTION>
IF SFP'S IF SFP'S IF SFP'S IF SFP'S IF SFP'S
PRICING RATIO PRICING RATIO PRICING RATIO PRICING RATIO PRICING RATIO
IS AT LEAST IS AT LEAST IS AT LEAST IS AT LEAST IS AT LEAST IF SFP'S
.42 .38 .34 .30 .26 PRICING RATIO
OR HIGHER AND BELOW .42 AND BELOW .38 AND BELOW .34 AND BELOW .30 IS BELOW .26
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Facility Fee............ .20% .25% .30% .30% .375% .50%
Eurodollar Rate+........ .40% .625% .825% 1.075% 1.25% 1.50%
Base Rate+.............. 0% 0% 0% 0% .25% .50%
</TABLE>
PRICING GRID--REVOLVING CREDIT FACILITIES
<TABLE>
<CAPTION>
IF SFP'S IF SFP'S IF SFP'S IF SFP'S IF SFP'S
PRICING RATIO PRICING RATIO PRICING RATIO PRICING RATIO PRICING RATIO
IS AT LEAST IS AT LEAST IS AT LEAST IS AT LEAST IS AT LEAST IF SFP'S
.42 .38 .34 .30 .26 PRICING RATIO
OR HIGHER AND BELOW .42 AND BELOW .38 AND BELOW .34 AND BELOW .30 IS BELOW .26
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Facility Fee............ .20% .25% .30% .30% .375% .50%
Eurodollar Rate+........ .40% .50% .70% .95% 1.125% 1.25%
Base Rate+.............. 0% 0% 0% 0% .125% .25%
</TABLE>
- - --------
The Pricing Ratio, for purposes of the grid above, is defined as the quotient
obtained by dividing consolidated EBITDA of SFP for the latest four quarters by
the remainder of consolidated total borrowed funds of SFP less consolidated
cash of SFP.
The Facility Fees set forth above will be increased by .25% until SFP Rail
has unconditionally guaranteed payment of the Credit Facilities.
If SFP's senior, unsecured, non-credit-enhanced public debt has a rating
(implied or actual) from Moody's Investors Services, Inc. of at least Baa3 or
from Standard & Poor's Rating Group of at least BBB-, SFP may request the
Administrative Agent to solicit competitive bids from the lenders for loans
("Bid Loans") bearing interest at a margin over LIBOR or an absolute rate, for
specific interest periods. SFP will have the right to accept or reject bids in
its discretion.
The Credit Facilities will be secured by a pledge of the capital stock of SFP
Rail. If at the time of the Merger BNI's senior, unsecured non-credit-enhanced
public debt has a rating from Moody's Investors Service, Inc. of at least Baa3
and from Standard & Poor's Ratings Group of at least BBB- and neither such
rating agency has announced that such ratings have been placed on review with
negative implications, such pledge will be released simultaneously with the
Merger.
SFP may voluntarily repay any loans (other than Bid Loans) under the Credit
Facilities (except that Eurodollar Loans may be prepaid only on the last day of
the applicable interest period). SFP will be required to make prepayments of
loans under the Term Loan Facility under certain circumstances out of (i) SFP's
available cash flow, (ii) net proceeds of assets sold outside the ordinary
course of business and (iii) net proceeds of any issuance of debt or equity.
The commitments of the Arranging Agents under the SFP Commitment Letter will
terminate on January 25, 1995 unless definitive financing agreements and
related documentation have been completed on or before such date. The
commitments may be terminated if (i) the terms of the Offer or the Merger are
changed in any respect reasonably determined by the Arranging Agents to be
material, (ii) any information submitted to the Arranger, the Co-Arrangers or
the Arranging Agents is inaccurate, incomplete or misleading in any respect
reasonably determined by the Arranging Agents to be material, (iii) any change
occurs, or any additional information is disclosed to or discovered by the
Arranger, the Co-Arrangers or the Arranging Agents, which the Arranging Agents
deem materially adverse in respect of SFP's or BNI's financial position,
55
<PAGE>
results of operations or business, or prospective financial position, results
of operations or business, or (iv) any fees payable in connection with the
Credit Facilities are not paid when due. The commitments also are subject to
the condition that there shall not have occurred any change in or disruption of
financial or capital market conditions that could materially and adversely
affect the satisfactory syndication of the Credit Facilities.
The effectiveness of the Credit Facilities is subject to conditions customary
for financings of this type, including but not limited to: (i) the Merger
Agreement being in full force and effect without any waivers, amendments or
other modifications that would adversely affect the interests of the lenders
under the Credit Facilities, unless the Arranging Agents have consented
thereto, (ii) absence of default or event of default; (iii) accuracy of
representations and warranties; (iv) no material adverse change; (v) no
material litigation; (vi) negotiation and execution of satisfactory financing
documentation; (vii) corporate resolutions; certificate of incorporation; by-
laws; good standing certificates; (viii) satisfactory legal opinions; (ix)
receipt of all required regulatory approvals; (x) a solvency opinion; and (xi)
delivery of the SFP Rail Stock. The making of the initial loan will be further
conditioned upon (a) the shareholders of SFP and BNI having approved the Merger
and (b) the termination of SFP's $200,000,000 Credit Agreement, dated as of
June 15, 1994, and repayment of all amounts outstanding thereunder.
The credit agreement for the Credit Facilities will contain representations
and warranties, covenants and events of default which are customary for similar
financings. The covenants will include without limitation: (i) negative pledge
at all levels (including subsidiary stock and assets, but excluding liens in
connection with equipment debt and other customary exceptions); (ii)
limitations on other debt of SFP and its subsidiaries; (iii) minimum tangible
net worth beginning at a level to be determined and increasing by a percentage
(to be determined) of net income (and further adjusted, in a manner to be
agreed upon, at the time of the Merger); (iv) limitation on indebtedness
calculated using a ratio (to be determined) of (a) EBITDA (latest four
quarters) to (b) total borrowed funds (excluding SFP's existing receivables
financing); (v) fixed charge coverage ratio (to be determined); and (vi) limits
on restricted payments (e.g., dividends and share repurchases). If no default
exists, restricted payments will be permitted in amounts not exceeding a
percentage (to be determined) of excess cash flow above certain threshold
amounts to be determined. The events of default will include without
limitation: (i) a change of control of SFP (other than the Merger) or BNI; (ii)
failure of SFP to continue to own 100% of the capital stock of SFP Rail; and
(iii) consummation of the Merger if such consummation would result in a
material adverse change with respect to SFP or the surviving corporation of the
Merger.
SFP has agreed to pay the Arranger, the Co-Arrangers, the Arranging Agents
and the Administrative Agent certain fees which are customary for similar types
of financings.
The foregoing description of the SFP Commitment Letter is qualified in its
entirety by reference to the text thereof filed as exhibits to the Schedule
13E-4, copies of which may be obtained from the offices of the Commission in
the manner set forth in "--7. Certain Information Concerning SFP" (except that
such information will not be available at the regional offices of the
Commission).
It is anticipated that the indebtedness incurred by SFP through borrowings
under the Credit Facilities will be repaid from funds generated internally by
SFP and its subsidiaries (including, after the Merger, if consummated, funds
generated by BNI) and from other sources which may include the proceeds of the
private or public sale of debt or equity securities. No final decisions have
been made concerning the method SFP will employ to repay such indebtedness.
Such decisions will be made based on SFP's review from time to time of the
advisability of particular actions, as well as on prevailing interest rates and
financial and other economic conditions.
BNI. The total amount of funds required by BNI to purchase 25 million shares
of SFP Common Stock outstanding pursuant to the Offer is estimated to be
approximately $500 million. In addition, BNI estimates that it will require $2
million for the payment of related fees and expenses. BNI anticipates that the
Offer will be funded by bank financing and that the payment of related fees and
expenses will be funded by funds generated internally by BNI and its
subsidiaries and/or from other sources.
56
<PAGE>
In connection with the Offer, BNI has received a commitment letter (the
"Commitment Letter") and attached term sheet (the "Term Sheet") dated December
22, 1994 executed by Chemical Securities Inc. ("CSI"), Chemical Bank
("Chemical") and Texas Commerce Bank National Association ("TCB"), pursuant to
which Chemical and TCB have agreed, subject to certain terms and conditions set
forth in the Commitment Letter and Term Sheet, to provide BNI with up to an
aggregate of $500 million in financing. CSI will serve as adviser and arranger
for the Tender Offer Facility (as defined below).
The Commitment Letter and Term Sheet provide that a $500 million senior
unsecured credit facility (the "Tender Offer Facility") incorporating the
following two borrowing options will be made available to BNI in connection
with the consummation of the Offer to be used to provide funds for the purchase
of SFP Common Stock pursuant to the Offer: (i) a revolving credit option to be
provided on a committed basis and (ii) a competitive advance option to be
provided on an uncommitted competitive advance basis through an auction
mechanism.
The loans under the Tender Offer Facility will mature on the fifth
anniversary of the date of execution of a definitive credit agreement.
The loans under the Tender Offer Facility will bear interest at a rate per
annum equal to: (a) the highest of (i) the rate of interest publicly announced
by TCB as its prime rate in effect at its principal office in New York City,
(ii) the federal funds rate from time to time plus 0.5%, and (iii) a rate based
on the secondary market rate for three-month certificates of deposit as
reported as being in effect by the Federal Reserve Board (adjusted for
statutory reserve requirements and assessment rates payable to the Federal
Deposit Insurance Corporation) plus 1.0%; or (b) the rate (adjusted for
statutory reserve requirements) at which Eurodollar deposits for one, two,
three, or six months are offered by certain reference banks to prime banks in
the London interbank market in the approximate amount of such reference banks'
share of the relevant borrowing (the "LIBOR Rate"), plus the Applicable Spread,
the calculation of which is based upon the ratings from Moody's Investors
Services Inc. and Standard & Poor's Rating Group given to BNI's senior,
unsecured, non-credit enhanced long-term debt (the "Senior Unsecured Debt
Ratings").
A facility fee (the "Facility Fee") will accrue and be payable to the lenders
under the Tender Offer Facility (the "Lenders") on the aggregate amount of the
Tender Offer Facility (whether drawn or undrawn). A utilization fee (the
"Utilization Fee") will accrue on the outstanding borrowings under the Tender
Offer Facility at 50% of the applicable rate set forth in the Pricing Grid
below on each day on which such outstanding borrowings exceed 33 1/3% of the
aggregate commitments under the Tender Offer Facility and at the full rate set
forth in the Pricing Grid on each day on which outstanding borrowings exceed 66
2/3% of the aggregate commitments under the Tender Offer Facility. The rate at
which the Facility Fee and Utilization Fee accrue is calculated based upon the
Senior Unsecured Debt Ratings set forth in the Pricing Grid below.
The Applicable Spread, Facility Fee and Utilization Fee shall be as set forth
in the following Pricing Grid:
PRICING GRID
<TABLE>
<CAPTION>
APPLICABLE FACILITY UTILIZATION
RATINGS* SPREAD FEE FEE
-------- ---------- -------- -----------
<S> <C> <C> <C>
BBB/Baa2 or above......... .250% .150% .100%
BBB-/Baa3................. .275% .200% .150%
BB+/Ba1 or below.......... .475% .250% .150%
</TABLE>
- - --------
* In the event of a split rating the Facility Fee, the Utilization Fee and the
Applicable Spread will be based upon the lower rating. In the event a rating
shall not be available from either rating agency, such rating agency shall be
deemed to have assigned its lowest rating.
57
<PAGE>
All or a portion of the outstanding loans will be prepayable by BNI at any
time, and commitments may be terminated, in whole or in part, in minimum
amounts of $5,000,000 at BNI's option (subject to reimbursement of redeployment
costs in the case of loans based on the LIBOR Rate if such prepayment occurs
other than at the end of an applicable interest period).
The obligations of Chemical and TCB under the Commitment Letter and Term
Sheet are subject to: (i) there not occurring or becoming known to TCB and
Chemical any material adverse change in the business, condition (financial or
otherwise) or prospects of BNI, (ii) TCB's and Chemical's completion of their
due diligence investigation of the transactions contemplated by the Commitment
Letter and Term Sheet and of the business, condition (financial and otherwise)
and prospects of BNI and their satisfaction with the results of such
investigation and with the terms of the Merger Agreement, the Offer, the Merger
and the financial, accounting and tax consequences of the foregoing, (iii)
there not being other credit facilities or issues of debt securities of BNI
being offered, placed or arranged which in the good faith judgment of CSI would
be likely materially to interfere with the syndication of the Tender Offer
Facility, (iv) there not having occurred any material adverse change in or
disruption of financial, banking or capital market conditions that in CSI's
judgment would adversely affect the syndication of the Tender Offer Facility,
it being understood that the inability of CSI to syndicate the Tender Offer
Facility shall not, in and of itself, be deemed to be an indication that such a
material adverse change or disruption shall have occurred and (v) the
negotiation, execution and delivery of definitive documentation with respect to
the Tender Offer Facility satisfactory to TCB, Chemical and their counsel. In
addition, the obligations of all Lenders to make loans under the Tender Offer
Facility are subject to conditions customary for financings of this type, and
others required by TCB, as administrative agent (the "Administrative Agent"),
including without limitation: (i) the Lenders being satisfied with the terms
and conditions of the Offer and the Merger and all agreements to be entered
into in connection therewith (including the Merger Agreement); (ii) the Board
of Directors of both SFP and BNI and the shareholders of both SFP and BNI
having approved the Merger Agreement and, in the case of such boards of
directors, the Offer having been approved in accordance with applicable law and
the charter and by-laws of BNI and SFP; (iii) there being no litigation or
administrative proceedings or other legal or regulatory developments, actual or
threatened (other than the Interstate Commerce Commission proceeding currently
pending in respect of the Merger) which, in the reasonable judgment or the
Lenders, would (a) be likely to affect materially and adversely the business,
assets, condition (financial or otherwise) or prospects of BNI, or the ability
of BNI to perform its obligations under the credit agreement under the Tender
Offer Facility, (b) be materially inconsistent with the assumptions underlying
the projections provided to the Lenders or (c) prevent or impose burdensome
conditions on the transactions contemplated by the Commitment Letter and Term
Sheet which could materially and adversely affect the creditworthiness of BNI;
(iv) all necessary waivers and consents in respect of any indebtedness of BNI
having been obtained; (v) the conditions to the acceptance of shares in the
Offer having been satisfied, and BNI having accepted for purchase shares
representing 25 million of the outstanding shares of SFP Common Stock of SFP in
accordance with applicable law and the terms of the Offer and without any
waiver, amendments and other modifications not having the consent of the
Lenders and which could materially and adversely affect the rights or interests
of the Lenders; (vi) BNI having delivered to the Lenders a certificate to the
effect that it is aware of no material impediment, and has no reason to believe
that there will be a material impediment, to the completion of the Merger
substantially on the terms contemplated by the Merger Agreement and the proxy
materials and without the imposition of burdensome conditions; (vii) borrowing
certificates; (viii) legal opinions satisfactory to the Lenders; (ix) accuracy
of representations and warranties; (x) absence of defaults, prepayment events
or creation of liens under debt instruments or other agreements; (xi) evidence
of authority; and (xii) compliance with applicable laws and regulations
(including Hart-Scott-Rodino Antitrust Improvement Act, Federal Reserve margin
regulation and laws and regulations applicable to carriers).
The credit agreement relating to the Tender Offer Facility will contain
customary representations and warranties, and others required by the
Administrative Agent, including without limitation: (i) organization and
powers; (ii) authorization and enforceability; (iii) absence of default or
event of default; (iv) government approvals; (v) absence of material adverse
change; (vi) financial statements (including pro forma financial
58
<PAGE>
statements); (vii) compliance with applicable laws and regulations (including
Hart-Scott-Rodino Antitrust Improvements Act, Federal Reserve margin
regulations and laws and regulations applicable to carriers); (viii)
inapplicability of the Investment Company Act of 1940 and the Public Utility
Holding Company Act of 1935; (ix) payment of taxes; (x) ERISA; (xi) absence of
material litigation; and (xii) other customary representations and warranties
relating to the Offer and the Merger Agreement.
The credit agreement relating to the Tender Offer Facility will contain
covenants which are customary for financings of this type, and others required
by the Administrative Agent, including without limitation, (i) corporate
existence and rights; (ii) compliance with laws (including ERISA and laws
regulating carriers); (iii) performance of obligations; (iv) maintenance of
properties in good repair; (v) maintenance of appropriate and adequate
insurance; (vi) inspection of books and properties; (vii) payment of taxes and
other liabilities; (viii) notice of defaults; (ix) litigation and other adverse
actions; (x) delivery of financial statements, compliance certificates and
other information; (xi) litigation and other notices; (xii) ERISA matters;
(xiii) limitations on liens, indebtedness, sales of assets, mergers and
consolidations, and sales of account receivables; (xiv) minimum tangible net
worth of at least $1.7 billion; and (xv) debt not to exceed the lesser of 140%
of tangible net worth and $3 billion until completion of the Merger, and $5
billion thereafter.
The credit agreement relating to the Tender Offer Facility will contain
events of default which are customary for financings of this type, and others
required by the Administrative Agent, including without limitation, (i)
nonpayment of principal or interest; (ii) violation of covenants; (iii)
material breach of representations or warranties; (iv) cross default to other
indebtedness of BNI and its subsidiaries; (v) bankruptcy; (vi) material
judgments; (vii) ERISA; and (viii) change of control of BNI.
Funds under the Tender Offer Facility will be available (subject to
satisfaction of the conditions described above) following the commencement of
the Offer and the receipt of all necessary shareholder approvals in connection
with the consummation of the Merger and after the execution of a definitive
credit agreement and prior to the fifth anniversary thereof.
BNI has agreed to pay the Administrative Agent and Chemical, as agent for the
competitive advance option, certain fees which are customary for similar types
of financings.
The foregoing descriptions of the Commitment Letter and Term Sheet are
qualified in their entirety by reference to the text thereof filed as exhibits
to Schedule 14D-1, copies of which may be obtained from the offices of the
Commission in the manner set forth in "--8. Certain Information Concerning BNI"
(except that such information will not be available at the regional offices of
the Commission).
It is anticipated that the indebtedness incurred by BNI through borrowings
under the Tender Offer Facility or any alternative financing obtained will be
repaid from funds generated internally by BNI and its subsidiaries and/or from
other sources which may include the proceeds of the private or public sale of
debt or equity securities. No final decisions have been made concerning the
method BNI will employ to repay such indebtedness. Such decisions will be made
based on BNI's review from time to time of the advisability of particular
actions, as well as on prevailing interest rates and financial and other
economic conditions.
13. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT
The Purchasers reserve the right, at any time or from time to time, in their
sole discretion and regardless of whether or not any of the conditions
specified under "--14. Conditions of the Offer" shall have been satisfied, (i)
to extend the period of time during which the Offer is open and thereby delay
acceptance for payment of, and the payment for, any shares of SFP Common Stock
by giving oral or written notice of such extension to the Depositary and by
making a public announcement of such extension or (ii) to amend the Offer in
any respect by making a public announcement of such amendment. However, no
extension of or amendment to the Offer may be made without the consent of each
of BNI and SFP. There can be no assurance that the Purchasers will exercise
their right to extend or amend the Offer.
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If the Purchasers decrease the number of shares of SFP Common Stock being
sought or increase or decrease the consideration to be paid for any shares of
SFP Common Stock 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 of such period of 10 business days. If the
Purchasers make 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 waive a material condition of the Offer, the
Purchasers will extend the Offer, if required by applicable law, for a period
sufficient to allow stockholders to consider the amended terms of the Offer. In
a published release, the Commission 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 ten
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. The Purchasers do not intend
to waive the Minimum Condition.
The Purchasers also reserve the right, in their sole discretion, in the event
any of the conditions specified under "--14. Conditions of the Offer" shall not
have been satisfied and so long as shares of SFP Common Stock have not
theretofore been accepted for payment, to delay (except as otherwise required
by applicable law) acceptance for payment of or payment for shares of SFP
Common Stock or to terminate the Offer and not accept for payment or pay for
shares of SFP Common Stock.
If the Purchasers extend the period of time during which the Offer is open,
are delayed in accepting for payment or paying for shares of SFP Common Stock
or are unable to accept for payment or pay for shares of SFP Common Stock
pursuant to the Offer for any reason, then, without prejudice to the
Purchasers' rights under the Offer, the Depositary may, on behalf of the
Purchasers, retain all shares of SFP Common Stock tendered, and such shares of
SFP Common Stock may not be withdrawn except as otherwise provided under "--4.
Withdrawal Rights." The reservation by the Purchasers of the right to delay
acceptance for payment of or payment for shares of SFP Common Stock is subject
to applicable law, which requires that the Purchasers pay the consideration
offered or return the shares of SFP Common Stock deposited by or on behalf of
stockholders 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 the Purchasers may choose to make any public announcement, the
Purchasers 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, the Purchasers 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.
14. CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer and without prejudice to the
Purchasers' other rights under the Offer, neither Purchaser shall be required
to accept for payment or pay for any SFP Common Stock, and may terminate or
amend its obligations to purchase shares of SFP Common Stock under the Offer as
provided in under "--13. Extension of Tender Period; Termination; Amendment",
if, among other things, prior to the acceptance for payment of any SFP Common
Stock (i) the Minimum Condition shall not have been satisfied, (ii) the Merger
Agreement shall not have been adopted by the stockholders of SFP and BNI in
accordance with the General Corporation Law of the State of Delaware ("Delaware
Law"), (iii) the applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR
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Act") shall not have expired or been terminated, (iv) BNI (in the case of SFP)
and SFP (in the case of BNI) shall not have accepted (or shall not concurrently
accept) shares of SFP Common Stock for payment under the Offer or (v) at any
time on or after the date of this Offer to Purchase and prior to the acceptance
for payment of shares of SFP Common Stock under the Offer any of the following
conditions exist:
(a) any court, arbitrator or governmental body, agency or official shall
have issued any order, or there shall be any statute, rule or regulation,
restraining or prohibiting the consummation of the Offer or the Merger or
the effective operation of the business of BNI, SFP and their respective
Subsidiaries (as defined in the Merger Agreement) after the consummation of
the Offer; or
(b) any actions by or in respect of or filings with any governmental
body, agency, official, or authority required to permit the consummation of
the Offer (other than with respect to the HSR Act) or the Merger (other
than ICC approval) shall not have been obtained, but excluding any consent,
approval, clearance or confirmation the failure to obtain which could not
reasonably be expected to have a Material Adverse Effect (as defined in the
Merger Agreement) on the Surviving Corporation (as defined in the Merger
Agreement) after the Effective Time; or
(c) SFP (in the case of BNI) or BNI (in the case of SFP) shall have
failed to perform in any material respect any of its respective obligations
under the Merger Agreement required to be performed by it at or prior to
the consummation of the Offer, or the representations and warranties of SFP
(in the case of BNI) or BNI (in the case of SFP) shall not have been
accurate in all material respects both when made and at and as of any time
prior to the consummation of the Offer as if made at and as of such time,
except for the representations and warranties of SFP and BNI in Sections
3.5(a) and 4.5(a), respectively, of the Merger Agreement, which shall be
accurate in all respects when made and at and as of any time prior to the
consummation of the Offer as if made at and as of that time; or
(d) the Merger Agreement shall have been terminated in accordance with
its terms; or
(e) (i) SFP shall not be satisfied, in its sole discretion, that it has
obtained sufficient financing to enable it to satisfy its obligations under
the Offer and to refinance SFP's currently outstanding 12.65% Senior Notes
due October 1, 2000, 8 3/8% Notes due November 1, 2001 and 8 5/8% Notes due
November 1, 2004, to pay penalties, premiums and make-whole payments
required in connection with such financing and for working capital and
other corporate purposes, or (ii) BNI shall not be satisfied, in its sole
discretion, that it has obtained sufficient financing to enable it to
satisfy its obligations under the Offer.
which, in the sole judgment of SFP or BNI in any such case, and regardless of
the circumstances (including any action or omission by SFP or BNI) giving rise
to any such condition, makes it inadvisable to proceed with such acceptance for
payment or payment; provided that the Minimum Condition may be waived only with
the consent of each of BNI and SFP.
Each of SFP and BNI has agreed to use its reasonable best efforts to ensure
that condition (e) listed above is satisfied no later than December 31, 1994.
The foregoing conditions are for the sole benefit of each Purchaser and may
be asserted by either Purchaser in its sole discretion regardless of the
circumstances (including any action or omission by either Purchaser) giving
rise to any such conditions or may be waived by each Purchaser (as to itself
only) in their sole discretion in whole at any time or in part from time to
time, except that the Minimum Condition may be waived only with the consent of
each of BNI and SFP. The failure by a Purchaser at any time to exercise its
rights under any of the foregoing conditions shall not be deemed a waiver of
any such right; the waiver of any such right with respect to particular facts
and circumstances shall not be deemed a waiver with respect to any other facts
and circumstances, and each such right shall be deemed an ongoing right which
may be asserted at any time or from time to time. Any determination by a
Purchaser concerning the events described in this Section will be final and
binding upon all parties. The Purchasers do not intend to waive the Minimum
Condition.
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15. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS
(a) General
Except as described below the Purchasers are not aware of any governmental
license or regulatory permit that appears to be material to SFP's business that
might be adversely affected by the Purchasers' acquisition of SFP Common Stock
as contemplated herein or 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 of
SFP Common Stock by the Purchasers as contemplated herein. Should any such
approval or other action be required, it is currently contemplated that such
approvals or actions would be sought. Except as described under "Antitrust,"
there is, however, no current intent to delay the purchase of SFP Common Stock
tendered pursuant to the Offer pending the outcome of any such matter. The
Purchasers are unable to predict whether they may determine that they are
required to delay the acceptance for payment of or payment for SFP Common Stock
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 SFP's business or certain parts of SFP's
business might not have to be disposed of, any of which could cause the
Purchasers to elect to terminate the Offer without the purchase of SFP Common
Stock thereunder. The Purchasers' obligation under the Offer to accept for
payment and pay for SFP Common Stock is subject to certain conditions. See "--
14. Conditions of the Offer."
(b) 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 purchase of
SFP Common Stock by BNI pursuant to the Offer and the consummation of the
Merger are subject to such requirements.
Pursuant to the requirements of the HSR Act, BNI will file a Notification and
Report Form with respect to the Offer with the Antitrust Division and the FTC
promptly. As a result, it is expected that the scheduled expiration of the
waiting period applicable to the purchase of SFP Common Stock pursuant to the
Offer will be on or about January 10, 1995. However, prior to such time, the
Antitrust Division or the FTC may extend the waiting period by requesting
additional information or documentary material relevant to the Offer from the
Purchasers. If such a request is made, the waiting period will be extended
until 11:59 P.M., New York City time, on the tenth day after substantial
compliance by the Purchasers with such request. Thereafter, such waiting period
can be extended only by court order.
A request is being made pursuant to the HSR Act for early termination of the
waiting period applicable to the Offer. There can be no assurance, however,
that the 15-day HSR Act waiting period will be terminated early. SFP Common
Stock will not be accepted for payment or paid for pursuant to the Offer until
the expiration or earlier termination of the applicable waiting period under
the HSR Act. See "--14. Conditions of the Offer." Any extension of the waiting
period will not give rise to any withdrawal rights not otherwise provided for
by applicable law. See "--4. Withdrawal Rights." If the Purchasers' acquisition
of SFP Common Stock is delayed pursuant to a request by the Antitrust Division
or the FTC for additional information or documentary material pursuant to the
HSR Act, the Offer may, but need not, be extended.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the acquisition of SFP Common Stock
by the Purchasers pursuant to the Offer. At any time before or after the
consummation of any such transactions, the Antitrust Division or the FTC could
take such action under the antitrust laws as it deems necessary or desirable in
the public interest, including seeking to enjoin the purchase of SFP Common
Stock pursuant to the Offer or seeking divestiture of SFP
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Common Stock so acquired or divestiture of substantial assets of the Purchasers
or SFP. Private parties may also bring legal actions under the antitrust laws.
The Purchasers do not believe that the consummation of the Offer will result in
a violation of any applicable antitrust laws. However, there can be no
assurance that a challenge to the Offer on antitrust grounds will not be made,
or if such a challenge is made, what the result will be. See "--14. Conditions
of the Offer" for certain conditions to the Offer, including conditions with
respect to litigation and certain governmental actions.
(c) Certain Pending Litigation
Numerous complaints have been filed arising out of SFP's and BNI's proposed
participation in the Merger. On June 30, 1994, shortly after announcement of
the proposed merger, two purported stockholder class action suits were filed in
the Court of Chancery of the State of Delaware (Miller v. Santa Fe Pacific
Corporation, C.A. No. 13587; Cosentino v. Santa Fe Pacific Corporation, C.A.
No. 13588). On July 1, 1994, two additional purported stockholder class action
suits were filed in the Court of Chancery of the State of Delaware (Fielding v.
Santa Fe Pacific Corporation, C.A. No. 13591; Wadsworth v. Santa Fe Pacific
Corporation, C.A. No. 13597).
The actions name as defendants SFP, the individual members of the SFP Board
of Directors and BNI. In general, the actions variously allege that SFP's
directors breached their fiduciary duties to the stockholders by agreeing to
the proposed merger for allegedly "grossly inadequate" consideration in light
of recent operating results of SFP, recent trading prices of SFP's common stock
and other alleged factors, by allegedly failing to take all necessary steps to
ensure that stockholders will receive the maximum value realizable for their
shares (including allegedly failing to actively pursue the acquisition of SFP
by other companies or conducting an adequate "market check") and by allegedly
failing to disclose to stockholders the full extent of the future earnings
potential of SFP, as well as the current value of its assets. The Miller and
Fielding cases further allege that the proposed merger is unfairly timed and
structured and, if consummated, would allegedly unfairly deprive the
stockholders of standing to pursue certain pending stockholder derivative
litigation. Plaintiffs also have alleged that BNI is responsible for aiding and
abetting the alleged breach of fiduciary duty committed by the SFP Board. The
actions seek certification of a class action on behalf of SFP's stockholders.
In addition, the actions seek injunctive relief against consummation of the
Merger and, in the event that the Merger is consummated, the rescission of the
Merger, an award of compensatory or rescissory damages and other damages,
including court costs and attorneys' fees, an accounting by defendants of all
profits realized by them as a result of the Merger and various other forms of
relief.
On October 6, 1994, shortly after UPC issued a press release in which it
announced the UPC Proposal, plaintiffs in the four lawsuits described above
filed in the Court of Chancery of the State of Delaware a Consolidated Amended
Complaint. (Miller v. Santa Fe Pacific Corporation, C.A. No. 13587). In their
Consolidated Amended Complaint, plaintiffs repeat the allegations contained in
their earlier lawsuits and further allege that, in light of the UPC Proposal,
SFP's directors have breached their fiduciary duties by failing to fully inform
themselves about available alternatives to the Merger with BNI, including the
alternative of a merger transaction with UPC, and by failing to fully inform
themselves about the value of SFP. The Consolidated Amended Complaint seeks the
same relief sought in plaintiffs' earlier lawsuits and, in addition, requests
that SFP's directors be ordered to explore alternative transactions and to
negotiate in good faith with all interested persons, including UPC.
Also on October 6, 1994, UPC filed in the Court of Chancery of the State of
Delaware a lawsuit against SFP, SFP's directors and BNI (Union Pacific
Corporation v. Santa Fe Pacific Corporation, C.A. No. 13778). In its Complaint,
UPC alleges that SFP's management purportedly rejected the UPC Proposal "out-
of-hand" without regard to the facts of the UPC Proposal, and that SFP's
directors have breached their fiduciary duties by purportedly refusing to
negotiate with UPC regarding the UPC Proposal. UPC seeks injunctive relief
mandating SFP to negotiate with UPC regarding the UPC Proposal, a declaration
that UPC has not tortiously interfered with defendants' contractual or other
legal rights, an injunction against defendants from bringing or maintaining any
action against UPC alleging that UPC has tortiously interfered with defendants'
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contractual or other legal rights, a declaration that the Merger Agreement with
BNI permits SFP to terminate the Merger Agreement in order to accept the UPC
Proposal or, in the alternative, that the Merger Agreement with BNI is invalid
and unenforceable for failing to include such a provision, and an award of
UPC's costs in bringing its lawsuit, including reasonable attorneys' fees.
Also, on October 6, 1994, five additional purported Stockholder class action
suits relating to SFP's proposed participation in the Merger with BNI were
filed in the Court of Chancery of the State Delaware (Weiss v. Santa Fe Pacific
Corporation, C.A. No. 13779; Lifshitz v. Krebs, C.A. No. 13780; Stein v. Santa
Fe Pacific Corporation, C.A. No. 13782; Lewis v. Santa Fe Pacific Corporation,
C.A. No. 13783; Abramson v. Lindig, C.A. No. 13784). On October 7, 1994, three
more purported Stockholder class action suits relating to SFP's proposed
participation in the Merger with BNI were filed in the Court of Chancery of the
State of Delaware (Graulich v. Santa Fe Pacific Corporation, C.A. No. 13786;
Anderson v. Santa Fe Pacific Corporation, C.A. No. 13787; Green v. Santa Fe
Pacific Corporation, C.A. No. 13788). All of these lawsuits name as defendants
SFP and the individual members of the SFP Board of Directors; the Lifshitz case
further names BNI as a defendant. In general, these actions variously allege
that, in light of SFP's recent operating results and the UPC merger proposal,
SFP's directors have breached their fiduciary duties to Stockholders by
purportedly not taking the necessary steps to ensure that SFP's stockholders
will receive "maximum value" for their shares of SFP Common Stock, including
purportedly refusing to negotiate with UPC or to "seriously consider" the UPC
merger proposal and failing to announce any active auction or open bidding
procedures. The actions generally seek relief that is materially identical to
the relief sought in the Miller case, and in addition seek entry of an order
requiring SFP's directors to immediately undertake an evaluation of SFP's worth
as a merger/acquisition candidate and to establish a process designed to obtain
the highest possible price for SFP, including taking steps to "effectively
expose" SFP to the marketplace in an effort to create an "active auction" in
SFP. The Weiss case further seeks entry of an order enjoining SFP's directors
from implementing any poison pill or other device designed to thwart UPC's
merger proposal or any other person's proposal to acquire SFP.
The Anderson lawsuit was subsequently withdrawn. On October 14, 1994, the
Chancery Court entered an order consolidating the remaining eleven purported
stockholder class action suits under the heading In Re Santa Fe Pacific
Corporation Shareholder Litigation, C.A. No. 13587.
Also on October 14, 1994, plaintiffs in the consolidated case filed a
Consolidated and Amended Complaint, which supersedes the previously filed
stockholder complaints. The Consolidated and Amended Complaint generally
repeats the allegations of, and requests the same relief as, the plaintiffs'
earlier complaints and, in addition, alleges that SFP's directors have breached
their fiduciary duties by approving and recommending to SFP stockholders the
BNI-SFP merger, by failing to fully inform themselves about, or to provide
information to, possible alternative merger candidates such as UPC, and by
issuing the Original Joint Proxy Statement/Prospectus, which purportedly fails
to disclose all material information relevant to SFP stockholders'
consideration of the proposed BNI-SFP merger, including failure to disclose
that SFP's directors purportedly have an implied right to terminate the
Original Merger Agreement as a result of the allegedly superior UPC Proposal,
failure to disclose the facts considered by SFP's directors in allegedly
determining that the UPC Proposal does not represent a fair price, failure to
disclose sufficient facts relating to, and the relative risks of obtaining, ICC
approval of a BNI-SFP merger and a UPC-SFP merger to enable SFP stockholders to
weigh and compare the likelihood of obtaining ICC approval of those
transactions, failure to disclose the substance of negotiations in late June
1994 between BNI and SFP leading to the Original Merger Agreement, failure to
disclose advice provided to SFP's directors regarding the background of
negotiations between BNI and SFP that had occurred since 1993 and the
significance of the advice to the directors' approval of the Original Merger
Agreement, failure to disclose facts regarding the SFP directors' consideration
of a possible combination transaction with Kansas City Southern Industries,
Inc. ("KCSI"), including the anticipated terms and potential value and benefits
to SFP of such a transaction and the reasons why SFP concluded that the BNI
transaction was superior and withdrew its bid submitted to KCSI in late June
1994, and failure to disclose that SFP did not provide any confidential
information to UPC in response
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to an October 11, 1994 letter from Drew Lewis, UPC's Chairman and CEO, to Mr.
Krebs. The Consolidated and Amended Complaint seeks, in addition to the relief
requested in the prior stockholder complaints, an order requiring SFP to
provide access to information concerning SFP or the Merger to any bona fide
bidder, including UPC.
On October 18, 1994, the Chancery Court entered an order denying two motions,
one filed by UPC and one filed by the stockholder plaintiffs, seeking the
establishment of an expedited schedule that would have included a preliminary
injunction hearing prior to the scheduled November 18, 1994 meeting of SFP
stockholders. The Chancery Court concluded that an expedited schedule was
unnecessary because, if plaintiffs prevailed on their claims, it could
subsequently enter appropriate relief after SFP stockholder approval but before
consummation of the Merger.
On October 19, 1994, UPC filed an Amended and Supplemental Complaint. In
addition to repeating the allegations and requested relief of UPC's earlier
Complaint, the Amended and Supplemental Complaint adds James A. Shattuck as an
additional plaintiff, alleges that SFP has made purportedly false and
misleading statements in the Original Joint Proxy Statement/Prospectus and
elsewhere regarding the UPC Proposal and the BNI-SFP merger, including
statements denying the SFP's directors have the purported right to terminate
the Original Merger Agreement in order to enter into a merger agreement with
UPC based upon the UPC Proposal and denying that the Original Merger Agreement
is allegedly void for failing to include such a right, statements failing to
disclose the purportedly preclusive effect of the Original Merger Agreement on
the SFP directors' consideration of other combination proposals, including the
UPC Proposal, statements allegedly suggesting that the UPC Proposal does not
represent a fair price, and statements allegedly misrepresenting UPC's
objectives in proposing a UPC-SFP merger and the likelihood of obtaining ICC
approval of such a merger. The Amended and Supplemental Complaint seeks, in
addition to the relief requested in UPC's original Complaint, further
declaratory and injunctive relief consisting of a declaration that the Original
Joint Proxy Statement/Prospectus is false and misleading, an injunction
preventing SFP from making any further allegedly materially false and
misleading statements regarding the UPC Proposal or the BNI-SFP merger and an
injunction against the November 18, 1994 SFP stockholder meeting.
On October 26, 1994, BNI moved pursuant to Delaware Chancery Court Rule
12(b)(6) to dismiss the Consolidated and Amended Complaint against BNI on the
grounds that the Complaint fails to state a claim against it upon which relief
can be granted.
On October 26, 1994, SFP and the SFP directors filed their answer to the
Amended and Supplemental Complaint of UPC and requested that the court dismiss
UPC's complaint with prejudice.
On November 2, 1994, BNI moved pursuant to Chancery Court Rule 12(b)(6) to
dismiss the First Amended and Supplemental Complaint filed by UPC and James
Shattuck on the grounds that the Complaint fails to state a claim against BNI
upon which relief can be granted.
On November 3, 1994, SFP and the SFP directors filed their answer to the
shareholder plaintiffs' Consolidated and Amended Complaint and requested that
the Court dismiss the Consolidated and Amended Complaint with prejudice.
On November 21, 1994, SFP and the SFP directors filed a motion to stay
discovery on the UPC action pending resolution of a case-dispositive motion to
be filed by SFP and the SFP Directors seeking dismissal of UPC's complaint.
On November 4, 1994, a purported stockholder class action suit relating to
the proposed Merger was filed in the Chancery Division of the Circuit Court of
Cook County of the State of Illinois (Rubin v. Santa Fe Pacific Corporation,
No. 94 CH 10022). The action names as defendants SFP and the individual members
of SFP's Board of Directors. The action alleges that SFP's directors breached
their fiduciary duties to stockholders by rejecting UPC's October 30, 1994
revised merger proposal, which incorporated a revised
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proposed exchange ratio of 0.407 shares of UPC common stock for each share of
SFP's Common Stock, and that, as a result, SFP's stockholders have been
deprived of the increase in the market value of their SFP Common Stock that
allegedly would have occurred if SFP's directors had accepted UPC's October 30,
1994 proposal. The action seeks certification of a class action on behalf of
SFP's stockholders, an injunction preventing SFP and SFP's directors from
taking any further action towards accepting the Merger, an award of unspecified
general and special damages, appointment of a trustee to supervise the
requested relief, establishment of a common fund on behalf of the class and an
award of court costs, reasonable attorneys' fees and any other relief deemed
appropriate by the Court. On December 12, 1994, SFP and the SFP directors filed
a motion to dismiss the Rubin case on the ground that the consolidated
shareholder action previously filed in the Delaware court is a prior pending
action between the same parties for the same cause. The motion to dismiss the
Rubin case is currently pending before the Illinois court.
Defendants believe that all of the lawsuits are meritless and intend to
oppose them vigorously.
(d) Recent Developments Related to UPC's Voting Trust Proposal
Under the terms of UPC's November 8, 1994 tender offer, promptly upon the
purchase of at least a majority of the outstanding shares of SFP Common Stock,
UPC would place the shares into an independent voting trust. The voting trust
mechanism was designed to insulate UPC from obtaining control of SFP Rail
without ICC approval, which would constitute a violation of the Interstate
Commerce Act. UPC's tender offer was conditioned upon, among other things, the
issuance of a non-binding, informal opinion from the staff of the ICC
indicating that the use of the particular voting trust proposed by UPC would be
consistent with ICC policies governing the use of voting trusts.
On November 10, 1994, UPC, Union Pacific Railroad Company and Missouri
Pacific Railroad Company (collectively, "Union Pacific") submitted a proposed
voting trust agreement designating the Southwest Bank of St. Louis as the
trustee to the ICC for review and an informal staff opinion. In an accompanying
letter, Union Pacific argued that its proposed acquisition of SFP Common Stock
and the placement of that stock in a voting trust would not constitute
unauthorized control of SFP in violation of the Interstate Commerce Act. In
response to Union Pacific's submission, the ICC instituted Finance Docket No.
32619 (Union Pacific Corporation, et al. -- Request for Informal Opinion --
Voting Trust Agreement).
On November 16, 1994, BN Railroad filed a petition in Finance Docket No.
32619 requesting that the ICC institute an investigation into Union Pacific's
proposed voting trust arrangement. In that petition, BN Railroad argued that
UPC's proposal to hold SFP and SFP Rail in a voting trust during the pendency
of an ICC proceeding on the acquisition of SFP Rail raised serious issues
affecting the public interest, including whether UPC's placing of SFP Rail in a
voting trust would constitute a form of unlawful negative control by inhibiting
SFP Rail from competing effectively against UPC's railroad subsidiaries.
Additional petitions and letters requesting the ICC to investigate Union
Pacific's voting trust were filed by the Colorado Department of Transportation
("CODOT") on November 17, 1994, the Kansas City Southern Railway Company
("KCSR") on November 21, 1994, and the Allied Rail Unions (the "Unions") on
November 23, 1994. Other comments in support of the petitions and letters
calling for the ICC to investigate Union Pacific's voting trust proposal were
filed by interested persons and numerous state and municipal officials. Union
Pacific submitted an amended proposed voting trust agreement for Commission
review and an informal, non-binding staff opinion on November 17, 1994. Union
Pacific stated that the amended proposal addressed concerns that petitioning
parties had raised about its original voting trust proposal.
By initial decision served November 28, 1994, Chairman McDonald of the ICC
denied the requests to investigate the Union Pacific voting trust that had been
filed by BN Railroad, CODOT, KCSR, and the Unions. The decision stated that
"[a]t this time, the Commission will not depart from its usual procedures which
provide an informal staff review of voting trust agreements." On the same day,
the Secretary of the Commission released a letter to counsel for Union Pacific
setting forth the staff's informal, non-binding
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opinion that the proposed voting trust would effectively insulate Union Pacific
from any violation of the ICA as a result of its acquisition of SFP Common
Stock.
On December 1, 1994, BN Railroad appealed the Chairman's initial decision to
the full Commission and requested that the Commission withdraw the staff's
informal opinion letter. In light of UPC's December 8, 1994 tender offer
deadline, BN Railroad requested that the Commission act on its appeal and
request for withdrawal of the informal staff opinion letter on or before
December 5, 1994. Appeals were also filed by the Unions and KCSR.
On December 6, 1994, the ICC denied the requests of BN Railroad and the other
parties for withdrawal of the Secretary's informal opinion letter. That
decision did not resolve the pending appeals from the Chairman's initial
decision refusing to institute an investigation into the proposed voting trust.
Although the decision did not address the merits of BN Railroad's appeal, the
Commission did state that it would issue a decision disposing of the pending
appeals shortly. One Commissioner added a separate comment, stating that while
he agreed with the Commission's decision not to withdraw the Secretary's
informal opinion letter, in hindsight he believed it would have been a better
course for the full Commission to have reviewed the proposed voting trust
agreement.
On December 7, 1994, the day before UPC's tender offer was originally to
expire, BN Railroad filed a petition to review the ICC's December 6, 1994
decision refusing to withdraw the informal staff opinion in the United States
Court of Appeals for the Third Circuit (Burlington Northern Railroad Company v.
Interstate Commerce Commission and United States, No. 94-3669). At the same
time, BN Railroad filed an emergency petition under the All Writs Act seeking
an injunction against UPC and UP Acquisition forbidding them from placing
shares of any SFP Common Stock shares in the voting trust (Burlington Northern
Railroad Company v. Union Pacific Corporation; UP Acquisition Corporation, No.
94-3670). BN Railroad argued that the injunction was needed to preserve the
Court's appellate jurisdiction to review the ICC decision. BN Railroad
contended that it was likely to prevail on the merits of its claim that the
voting trust would constitute unlawful control by inflicting competitive injury
on SFP Rail during the pendency of the trust. BN Railroad also contended that
it would be irreparably injured in the absence of an injunction because it
would lose the opportunity to merge with a competitively vigorous SFP Rail if
SPF Rail were placed in a voting trust.
On the morning of December 7, 1994, shortly after BN Railroad filed the Third
Circuit actions, counsel for BN Railroad in those actions was notified that UPC
had extended the expiration for its tender offer from midnight December 8, 1994
to midnight December 16, 1994. BN Railroad immediately notified the Court that,
in light of this subsequent development, BN Railroad was modifying its request
that the Court issue an injunction against UPC and UP Acquisition on or before
December 8, 1994 to on or before December 23, 1994. By order communicated to
the parties by telephone, the Court ordered UPC and UP Acquisition to file a
response to BN Railroad's emergency petition on December 12, 1994, with BN
Railroad to file a reply to UPC's response on December 14, 1994.
On December 12, 1994, UPC filed a response to BN Railroad's action in No. 94-
3670. Also on that date, the ICC filed a response in No. 94-3669 which stated
that the ICC would issue a decision disposing of the merits of the BN Railroad
and other appeals pending at the ICC on or before December 23, 1994. Also on
December 12, 1994, the American Train Dispatchers Division/BLE filed a motion
to intervene in No. 94-3669, a petition under the All Writs Act for an order
requiring the ICC to comply with and enforce the Interstate Commerce Act
(American Train Dispatchers Division/BLE et al. v. Interstate Commerce
Commission, No. 94-3679), and a petition under the All Writs Act for an order
requiring UPC to refrain from acting in violation of the Interstate Commerce
Act (American Train Dispatchers Division/BLE et al. v. Union Pacific
Corporation and UP Acquisition Corporation, No. 94-3680).
On December 14, 1994, BN Railroad filed its reply to UPC's response in
No. 94-3670. On the same date, UPC filed a motion to intervene in No. 94-3679.
By telephone communication from the clerk's office, the Court indicated that it
was scheduling oral argument for the actions on December 21, 1994 at 11:30 a.m.
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in Philadelphia, Pennsylvania. Subsequently, on December 16, 1994, the ICC
filed a memorandum in No. 94-3679 stating that it would issue its opinion
addressing the appeals pending at the Commission on or before December 20,
1994, and that the ICC would notify the Court and all parties by facsimile as
soon as its decision is available.
On December 19, 1994, counsel for BN Railroad in the Third Circuit actions
was notified that UPC had extended the expiration for its tender offer from
midnight December 23, 1994 to midnight January 19, 1995. BN Railroad
immediately notified the Court that, in light of this further development, BN
Railroad was now requesting that the Court issue an injunction against UPC and
UP Acquisition on or before January 19, 1995. By order communicated to the
parties by telephone, the Court postponed oral argument from December 21, 1994
to a later date.
On December 20, 1994, the ICC issued a decision denying the appeals of BN
Railroad and others from the Chairman's initial decision and approving the
Union Pacific voting trust subject to a modification of one its terms. One
Commissioner dissented, stating that he would have initiated an investigation
of the proposed voting trust and solicited public comments on an expedited
basis. The same day the ICC filed a motion with the Third Circuit to dismiss
the appeals of BN Railroad and others from the December 6, 1994 decision
refusing to withdraw the Secretary's informal opinion letter.
On December 21, 1994, BN Railroad filed a petition to review the ICC's
December 20, 1994 decision in the United States Court of Appeals for the Third
Circuit (Burlington Northern Railroad v. Interstate Commerce Commission and
United States, No. 94-3705). The same day BN Railroad filed a petition with the
ICC requesting a stay of the December 20, 1994 decision pending judicial review
and a temporary cease and desist order to prohibit implementation of the UPC
voting trust pending judicial review.
(e) ICC Approvals
ICC approval is not required to acquire shares of SFP Common Stock pursuant
to the Offer. However, the approval of the ICC must be obtained to consummate
the Merger. ICC approval of the Merger is not a condition to the Offer.
Under the Interstate Commerce Act, the ICC is required to approve the Merger
if it finds that the Merger is consistent with the public interest. In making
that determination, the ICC must consider at least the following factors:
(A) the effect of the proposed 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 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.
BNI and SFP filed their application for ICC approval of the proposed Merger
on October 13, 1994. The ICC is required to enter a final order with respect to
the Merger within 31 months after the filing of the application. BNI and SFP
requested the ICC to decide the case on an expedited basis. On October 5, 1994
the ICC served an order establishing a schedule that would result in a final
ICC decision within 535 days from the filing of the application. Thereafter, in
response to requests by several parties to the merger proceeding, the ICC on
December 5, 1994 issued an order holding the procedural schedule in abeyance
until such time as an SFP stockholder vote on the Merger occurs. The December 5
order further stated that upon approval of the proposed BNI/SFP Merger by SFP
stockholders, it would immediately issue a new schedule
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requiring the first comments, originally due on December 27, 1994, to be filed
30 days from the service date of the new schedule and adjusting other schedule
dates accordingly. Notwithstanding these scheduling orders, there can be no
assurance that the ICC will issue a decision any sooner than the 31-month
period permitted the ICC by law.
Interested parties, including other railroads, shippers and state and federal
agencies and BNI or SFP stockholders may seek to participate in the ICC
proceeding on the Merger, consistent with applicable ICC rules, regulations,
decisions and orders, and may participate to support, oppose, or seek to have
conditions imposed on the transaction or, in the case of other railroads, to be
included in the Merger. An ICC approval order exempts the parties from Federal,
state and local law, including laws governing contract rights, as necessary to
permit them to carry out the transaction.
An ICC approval order may be appealed by certain persons to a United States
Court of Appeals and the effectiveness of the order could be stayed by the ICC
or by the appellate court while such an appeal is pending. Any appeals from the
ICC order might not be resolved for a substantial period of time after the
entry of the order by the ICC. ICC approval is not automatically stayed if a
party seeks judicial review of the decision; however, it is possible that the
approval could be stayed by the ICC or a reviewing court. If the approval is
stayed, consummation of the Merger would be delayed. Consummation of the
Merger, which will occur after Stockholder approval, receipt of required
regulatory approvals and satisfaction or waiver of all of the other conditions
set forth in the Merger Agreement, may not occur for two or more years in the
future.
Either BNI or SFP may terminate the Agreement if the ICC disapproves the
Merger, changes the Exchange Ratio, requires the inclusion of other rail
carriers or properties, or imposes other terms and conditions, including, but
not limited to, employee protective conditions other than those which are now
currently standard, or, in the reasonable opinion of either BNI or SFP,
significantly and adversely affect the economic benefits of the Merger.
16. FEES AND EXPENSES
Lazard is acting as financial advisor to BNI in connection with the Merger
and related matters and is acting as a Dealer Manager in connection with the
Offer. In consideration of Lazard's services in connection with the Merger, BNI
has agreed to pay Lazard fees as follows: (i) $1.5 million upon public
announcement of the Original Merger Agreement, which has been paid; (ii) an
additional fee of $1.0 million upon commencement of the Offer; (iii) an
additional fee of $0.75 million upon the closing of the Offer; (iv) an
additional fee of $3.0 million upon receipt of the approvals of both BNI's and
SFP's stockholders; and (v) an additional fee of $2.75 million upon
consummation of the Merger. In addition, BNI has agreed to reimburse Lazard for
its out-of-pocket expenses and to indemnify Lazard and its affiliates, and
their respective partners, directors, officers, employees, agents and
controlling persons against certain expenses and liabilities, including
liabilities under the Federal securities law.
Goldman Sachs is acting as financial advisor to SFP and is acting as one of
the Dealer Managers in connection with the Offer. Pursuant to a letter
agreement dated October 21, 1993 (the "Engagement Letter"), the Company engaged
Goldman Sachs to act as its financial advisor in connection with the possible
merger with, or sale of stock or assets to, BNI. On November 22, 1994, the
Engagement Letter was revised to provide that Goldman Sachs will act as SFP's
financial advisor with respect to any acquisition proposal which UPC has made
or may make or any purchase of stock or assets by UPC. Pursuant to the terms of
the Engagement Letter as so amended, if a merger with, or sale of stock or
assets to, BNI or UPC is accomplished in one or a series of transactions, SFP
will pay Goldman Sachs upon consummation of such transaction or transactions a
transaction fee of 0.45% of the aggregate consideration paid in such
transaction or series of transactions with a maximum transaction fee of $12.5
million. As part of this fee, SFP will pay Goldman Sachs $5 million upon
stockholder approval of any such transaction (which will be credited towards
the total transaction fee). SFP has agreed to reimburse Goldman Sachs for its
reasonable out-of-pocket expenses, including attorney's fees, and to indemnify
Goldman Sachs against certain liabilities, including certain liabilities under
the Federal
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securities laws. Goldman Sachs is a full service securities firm and in the
course of its normal trading activities may from time to time effect
transactions and hold positions in the securities of SFP, BNI and/or UPC for
its own account and for the account of customers. As of December 16, 1994,
Goldman Sachs held for its own account a net short position in SFP Common
Stock, BNI Common Stock and UPC Common Stock of 142,510 shares, 61,450 shares
and 111,787 shares, respectively, and held $34,500,000 principal amount of
SFP's 8 5/8% Notes due November 1, 2004 and $6,085,000 principal amount of
UPC's 6 1/8% Notes due 2004.
Goldman Sachs and one of its affiliates also have committed to participate as
Co-Arranger and Arranging Agent, respectively, on SFP's Bank Financing as
described in "--12. Source and Amount of Funds" above.
The Purchasers have retained D.F. King & Co., Inc., McKenzie Partners, Inc.
and Kissel-Blake Inc. to act as the Information Agents and First Chicago Trust
Company of New York to act as the Depositary in connection with the Offer. The
Information Agents may contact holders of SFP Common Stock by mail, telephone,
telex, telegraph and personal interviews and may request brokers, dealers and
other nominee stockholders to forward materials relating to the Offer to
beneficial owners. Each of the Information Agents and the Depositary will
receive reasonable and customary compensation for their respective services,
will be reimbursed for certain out-of-pocket expenses and will be indemnified
against certain liabilities in connection therewith, including certain
liabilities under the federal securities laws.
The Purchasers will not pay any fees or commissions to any broker or dealer
or any other person (other than the Dealer Managers, the Information Agents and
the Depositary) for soliciting tenders of SFP Common Stock pursuant to the
Offer. Brokers, dealers, commercial banks and trust companies will, upon
request, be reimbursed by the Purchasers for reasonable and necessary costs and
expenses incurred by them in forwarding materials to their customers.
17. INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THE MERGER
Directors and Officers of the Merged Entity
The Merger Agreement provides that two-thirds of the initial members of the
board of directors of the merged company will be designated by BNI, and one-
third of the members of the board will be designated by SFP. Further, the
parties have agreed that Mr. Gerald Grinstein, Chairman and Chief Executive
Officer of BNI, will serve as Chairman of the merged company and Mr. Robert D.
Krebs, Chairman, President and Chief Executive Officer of SFP, will serve as
President and Chief Executive Officer of the merged company. Other senior
officers of the merged entity will be selected by the merged entity's board of
directors based upon, among other things, the recommendations of Mr. Grinstein
and Mr. Krebs.
SFP Directors and Officers Generally. Officers and directors of SFP owning
SFP Common Stock will receive the same consideration in the Merger as other SFP
stockholders. In the Merger Agreement, BNI has agreed that it will indemnify
and hold harmless each person who is, or has been at any time prior to the date
of the Merger Agreement, or who becomes prior to the Effective Time, an officer
or director of SFP, in respect of acts or omissions occurring prior to the
Effective Time (the "Indemnified Parties") (including but not limited to the
transactions contemplated by the Merger Agreement) to the extent provided under
SFP's certificate of incorporation, bylaws and (A) indemnity agreements between
SFP and any of its officers or directors ("Indemnity Agreements") in effect on
the date of the Merger Agreement or (B) indemnity agreements that may be
entered into by SFP from and after the date of the Merger Agreement and prior
to the Effective Time so long as such agreements shall contain terms and
provisions substantially similar to Indemnity Agreements in effect as of the
date of the Merger Agreement; provided that such indemnification shall be
subject to any limitation imposed from time to time under applicable law. For
six years after the Effective Time, BNI will provide, if available, officers'
and directors' liability insurance in respect of acts or omissions occurring
prior to the Effective Time, including but not limited to the transactions
contemplated by the Merger Agreement, covering each such officer or director
currently covered by SFP's officers' and directors' liability insurance policy,
or who become covered by such policy prior to the Effective Time, on
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terms with respect to coverage and amount no less favorable than those of such
policy in effect of the date of the Merger Agreement, provided that, in
satisfying such obligation, BNI will not be obligated to pay premiums in excess
of 200% of the amount per annum SFP paid in 1993, but provided further that BNI
will nevertheless be obligated to provide such coverage as may be obtained for
such amount.
Severance Agreements. SFP has entered into thirty-one severance agreements,
including individual executive severance agreements with each of Carol
Beerbaum, Russell Hagberg, Thomas Hund, Steven Marlier, Donald McInnes, Jeffrey
Moreland, Marsha Morgan, Patrick Ottensmeyer, Denis Springer, Daniel Westerbeck
and Catherine Westphal. Such individuals are not eligible for duplicate salary
replacement benefits under both the individual agreements and The Atchison,
Topeka and Santa Fe Railway Company Severance Program (the "ATSF Severance
Program") discussed below. Stockholder approval of the Merger will constitute a
"change in control" for purposes of the individual agreements. The agreements
generally provide that if the executive's employment is terminated (for any
reason other than disability, death or termination by SFP for cause) or if the
executive terminates his or her employment as the result of certain specified
actions taken by SFP or its successors, after a change in control and prior to
the expiration of the agreement, the executive will be entitled to certain
severance benefits. The agreements will expire on the latest of (a) 36 months
after the change in control, (b) the effective date of ICC approval of the
Merger or, if later, the first anniversary of the consummation of the Merger
(or if SFP determines that it will not consummate the Merger, the date of that
determination), or (c) the date on which the ICC determines that it will not
approve the Merger.
The maximum severance benefits to which the executives will be entitled under
the individual agreements (assuming the conditions described in the preceding
paragraph are met) are: (i) payment of full base salary through the date of
termination, all amounts otherwise due the executive under the terms of any SFP
compensation plan and, at the executive's election, a lump sum payment of
amounts deferred (and earnings thereon) under the Santa Fe Pacific Supplemental
Retirement and Savings Plan (or any similar plan), (ii) severance payments
equal to, as elected by the executive, the sum of (A) 200% of the executive's
annual salary or the amount of salary replacement payments the executive would
otherwise receive under the ATSF Severance Program, and (B) 200% of the maximum
incentive award payable to the executive under the Annual Incentive
Compensation Plan of SFP (or its affiliates) for the year in which the
executive's employment terminates, and in either case, if the executive
terminates for certain specified reasons, an additional payment necessary to
provide such benefits on an after-tax basis, (iii) payment of outstanding
performance awards, calculated as though all relevant performance goals have
been met, (iv) a cash payment in settlement of all outstanding stock options,
which options will be canceled, (v) payment of all legal fees incurred by the
executive as a result of his or her termination, (iv) continuing life,
disability, accident and group health insurance benefits for a period of 24
months after termination of employment, and (vii) payment of outplacement
services for a period of twelve months following termination.
Certain limitations apply to the amount of benefits payable under the
agreements. In particular, exercisability of options and rights shall not be
accelerated and no payment or benefit shall be accelerated under agreements to
the extent that such acceleration of exercisability, payment or benefit, when
aggregated with other payments or benefits to the affected individual, would
result in "excess parachute payments" equal to or greater than three times the
"base amount" (as defined in section 280G of the Code). The term "excess
parachute payments" for purposes of the agreements means "parachute payments"
(as defined in section 280G of the Code) other than (i) health and life
insurance benefits, and (ii) payments attributable to any award, benefit or
other compensation plan or program based upon the number of full or fractional
months of any restricted period relating thereto which has elapsed prior to the
date of the change in control. In addition, payments or benefits under the
agreements shall be reduced to the extent necessary so that no portion thereof
shall be subject to the excise tax imposed by section 4999 of the Code, but
only if, by reason of such reduction, the executive's net after-tax benefits
(as defined under the SFP Long Term Incentive Stock Plan (the "Incentive
Plan")) shall exceed the net after-tax benefit if such reduction were not made.
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SFP Pipelines has entered into an individual executive severance agreement
with Mr. Toole. Mr. Toole is not eligible for duplicate salary replacement
benefits under both the individual agreement and the Santa Fe Pacific
Pipelines, Inc. Severance Program (the "Pipelines Severance Program").
Stockholder approval of the Merger will constitute a "change in control" for
purposes of Mr. Toole's agreement. That agreement generally provides for the
same benefits as the individual severance agreements previously described. Mr.
Toole's agreement, however, will expire 24 months after the change in control.
In addition, the maximum severance payments payable to Mr. Toole under his
agreement are equal to, as elected by the executive, the sum of (A) two times
his annual salary or the amount of salary replacement payments the executive
would otherwise receive under the Pipelines Severance Program, (B) the maximum
incentive award payable to the executive under the Annual Incentive
Compensation Plan of SFP Pipelines for the year in which Mr. Toole's employment
terminates and (C) a cash payment attributable to the cash out of Partnership
phantom units.
The Pipelines Severance Program must remain in effect for a period of at
least 24 months following a change in control. Stockholder approval of the
Merger will constitute a "change in control" for purposes of the Pipelines
Severance Program. The executive officers of SFP other than Mr. Toole are not
eligible for benefits under the Pipelines Severance Program. Mr. Toole,
however, may elect salary replacement benefits under the Pipelines Severance
Program in lieu of those provided under his individual severance agreement. The
applicable benefits under the Pipelines Severance Program are generally the
same as those provided under the ATSF Severance Program.
If payments under the individual agreements are triggered following a change
in control, the estimated amounts (based on current compensation levels and
assuming terminations occurring during 1994) payable to SFP's five most highly
compensated executive officers (including Mr. Krebs, who does not have an
individual severance agreement) are as follows: Mr. Springer, $1,681,170; Mr.
McInnes, $1,244,662; Mr. Marlier, $914,483; and Mr. Hagberg, $1,517,895. The
estimated amounts (based on current compensation levels) payable to SFP's other
executive officers in such circumstances range from $255,495 to $1,245,017, and
the aggregate amount that would be paid to all of SFP's executive officers in
such circumstances would be approximately $11,612,640. In addition, each SFP
executive officer would receive non-cash and non-stock benefits of
approximately $42,000. As of November 30, 1994, there are thirteen SFP
executive officers. The foregoing information (i) includes certain bonus
payments to be made in respect of restricted stock (calculated without giving
effect to the limitations relating to section 280G of the Code described above
and (ii) does not include the value of stock options or restricted stock
discussed below.
SFP and its subsidiaries maintain the ATSF Severance Program for all full-
time salaried employees, including Mr. Krebs, who are terminated by their
respective companies other than for cause as defined in the severance programs.
A participant is generally entitled to an amount up to one year's pay based
upon a participant's age, length of service and current salary, or in certain
circumstances, supplemental payments provided that the aggregate does not
exceed two years' pay. The ATSF Severance Program further provides that in the
event of a change in control (which is similar to the definition used in the
individual agreements), the program will be maintained for a 24-month period.
Benefits under the ATSF Severance Program will not be paid if a participant
received payments under individual agreements. Upon a covered termination
occurring in 1994, Mr. Krebs would be entitled to a cash payment of
approximately $760,000 and non-cash benefits with a value of approximately
$42,000.
SFP executives who have individual severance agreements with SFP may elect to
receive salary replacement payments under the ATSF Severance Program instead of
the severance payments provided by their individual severance agreements. The
amounts payable under the ATSF Severance Program are less than the amounts
payable under the individual severance agreements. The applicable salary
replacement benefits under the ATSF Severance Program generally are based on
the executive's benefit under the SFP Retirement Plan (as defined below).
Because Mr. Krebs does not have an individual severance agreement, his only
source of severance payments would be the ATSF Severance Program.
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If the Santa Fe Pacific Retirement Plan (the "SFP Retirement Plan") is
terminated within three years following a "change in control," any assets
remaining after satisfaction of all benefit liabilities to participants will be
applied (to the extent permitted under applicable law) to the payment of
retiree medical and life insurance benefits payable to participants and their
beneficiaries. Any assets still remaining would be used to increase the
retirement benefits payable to participants and their beneficiaries (to the
extent permitted under applicable law). For purposes of the SFP Retirement
Plan, stockholder approval of the Merger will not constitute a change in
control. A subsequent change in the composition of the Board of Directors as a
result of the Merger (as discussed above), however, may constitute a "change in
control" for purposes of the plan.
SPF Stock Options and Other Stock-Based Awards. Stockholder approval of the
Merger by the SFP stockholders will constitute a "change in control"
accelerating the vesting of or lapse of restrictions, restricted periods and
performance periods applicable to most outstanding stock options, restricted
stock awards, stock appreciation rights, performance units, performance shares
and limited stock appreciation rights under the Incentive Plan and the SFP
Incentive Stock Compensation Plan (collectively, the "Stock Plans").
Acceleration of awards under the Stock Plans are subject to the same
limitations relating to section 280G of the Code as apply with respect to
payments under the severance agreements.
The following indicates the number of shares of restricted stock awarded to
SFP's five most highly compensated executive officers, and the approximate
value thereof (determined using a stock price of $16.75 per SFP share as of
November 30, 1994) with respect to which vesting will be accelerated upon
stockholder approval of the Merger: Mr. Krebs, 36,920 ($618,410), Mr. Springer,
13,841 ($231,837), Mr. Marlier, 10,222 ($171,219), Mr. McInnes, 10,619
($177,868), and Mr. Hagberg, 10,829 ($181,386). The aggregate number of shares
awarded to all of SFP's executive officers which will vest upon stockholder
approval of the Merger is 137,666 shares, which have an aggregate value of
approximately $2,305,908 (determined based on a stock price of $16.75 per SFP
share as of November 30, 1994). With respect to executive officers, no other
benefits under the stock plans will be accelerated upon stockholder approval of
the Merger (other than stock options which are discussed below).
Assuming that the Merger is approved by SFP stockholders in the first quarter
of 1995, that total amount of compensation expense that would be charged to
operations in the first quarter of 1995 due to accelerated vesting of unearned
compensation relating to restricted stock will be approximately $10 million,
based upon the stock price at November 30, 1994.
The following indicates the number of options granted to the five most highly
compensated executive officers, and the approximate value thereof (assuming a
stock price of $16.75 per share as of November 30, 1994), which are unvested as
of November 30, 1994 and which would vest upon SFP stockholder approval of the
Merger: Mr. Krebs, 574,073 ($3,145,563), Mr. Springer, 86,370 ($589,907), Mr.
Marlier, 103,644 ($556,914), Mr. McInnes, 103,644 ($556,914), and Mr. Hagberg,
70,932 ($481,289). The aggregate number of options granted to all SFP executive
officers which are unvested as of November 30, 1994 is 1,245,176 and the
aggregate value of such options (assuming a stock price of $16.75 per share as
of November 30, 1994) is approximately $7,349,095.
The foregoing information reflects the adjustments for the Gold Spinoff. The
adjustments include revisions to both the option exercise price and the number
of shares subject to the options.
18. CERTAIN ADDITIONAL INFORMATION; MISCELLANEOUS.
Certain Additional Information
The name, business address, principal occupation or employment, five year
employment history and citizenship of each director and executive officer of
SFP and BNI and certain other information are set forth in Schedule I and
Schedule II, respectively.
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Schedule III hereto sets forth transactions in SFP Common Stock effected
during the past 60 days by SFP and BNI. Except as set forth in this Offer to
Purchase and Schedule III hereto, none of SFP or BNI, or, to the best knowledge
of SFP or BNI, as the case may be, any of the persons listed in Schedule I or
Schedule II hereto, or any associate or majority-owned subsidiary of such
persons, beneficially owns any equity security of SFP, and none of SFP or BNI,
to the best knowledge of SFP or BNI, as the case may be, any of the other
persons referred to above, or any of the respective directors, executive
officers or subsidiaries of any of the foregoing, has effected any transaction
in any equity security of SFP during the past 60 days.
Except as set forth in this Offer to Purchase, none of SFP or BNI, or, to the
best knowledge of SFP or BNI, as the case may be, any of the persons listed in
Schedule I or Schedule II hereto has any contract, arrangement, understanding
or relationship with any other person with respect to any securities of SFP,
including, without limitation, any contract, arrangement, understanding or
relationship concerning the transfer or the voting of any securities of SFP,
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 SFP or BNI, or, to the best
knowledge of SFP or BNI, as the case may be, any of the persons listed in
Schedule I or Schedule II hereto has had any transactions with SFP, or any of
its executive officers, directors or affiliates that would require reporting
under the rules of the Commission.
Except as set forth in this Offer to Purchase, there have been no contracts,
negotiations or transactions between SFP or BNI, or their respective
subsidiaries, or, to the best knowledge of SFP or BNI, as the case may be, any
of the persons listed in Schedule I and Schedule II hereto, on the one hand,
and SFP or its executive officers, directors or affiliates, on the other hand,
concerning a merger, consolidation or acquisition, tender offer or other
acquisition or securities, election of directors, or a sale or other transfer
of a material amount of assets.
Miscellaneous
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of shares of SFP Common Stock in any jurisdiction in which
the making of the Offer or acceptance thereof would not be in compliance with
the laws of such jurisdiction. However, the Purchasers may, in their
discretion, take such action as it may deem necessary to make the Offer in any
such jurisdiction and extend the Offer to holders of shares of SFP Common Stock
in such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASERS NOT CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
SFP has filed with the Commission an Issuer Tender Offer Statement on
Schedule 13E-4 pursuant to Rule 13e-4 under the Exchange Act and a Tender Offer
Solicitation/Recommendation Statement on Schedule 14D-9 pursuant to Section
14(d)(4) under the Exchange Act, each containing certain additional information
with respect to the Offer. BNI has filed with the Commission a Tender Offer
Statement on Schedule 14D-1 pursuant to Rule 14d-1 under the Exchange Act
containing certain additional information with respect to the Offer. Such
Schedules and any amendments thereto, including exhibits, may be examined and
copies may be obtained from the principal office of the Commission and the NYSE
in the manner set forth in "--7. Certain Information Concerning SFP" and "--8.
Certain Information Concerning BNI." Information required to be disseminated to
stockholders pursuant to Rule 14d-9 under the Exchange Act is included in this
Offer to Purchase.
Santa Fe Pacific Corporation
Burlington Northern Inc.
December 23, 1994
74
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF SFP
Set forth below are the name, business address and present principal
occupation or employment, and material occupations, positions, offices or
employments for the past five years of each director and executive officer of
SFP. Except as otherwise noted, the business address of each such person is
1700 East Golf Road, Schaumburg, IL 60173-5860, and such person is a United
States citizen. In addition, except as otherwise noted, each executive officer
of SFP has been employed by SFP in the positions listed below during the last
five years. This information has been taken from and is based upon reports and
other documents on file with the Commission or otherwise publicly available.
EXECUTIVE OFFICERS OF THE REGISTRANT
Listed below are the names, ages and positions of all directors and executive
officers of SFP and their business experience during the past five years.
Unless otherwise indicated, each director and executive officer listed below
has served in his or her present occupation for at least five years.
DIRECTORS:
<TABLE>
<CAPTION>
FIRST
ELECTED A
NAME, AGE AND BUSINESS EXPERIENCE DIRECTOR
- - --------------------------------- ---------
<S> <C>
Robert D. Krebs, 52.................................................. 1983
Chairman, President and Chief Executive Officer of SFP since June
1988. Also a director of Phelps Dodge Corporation, Northern Trust
Corporation, Santa Fe Pacific Gold Corporation, Santa Fe Pacific
Pipelines, Inc., The Atchison, Topeka and Santa Fe Railway Company,
Catellus Development Corporation, and Santa Fe Energy Resources,
Inc. Mr. Krebs is Chairman of the Executive Committee of the Board.
Joseph F. Alibrandi, 66.............................................. 1982
Chairman and Chief Executive Officer
Whittaker Corporation
10880 Wilshire Boulevard
Los Angeles, CA 90024-4163
Chairman, Chief Executive Officer and a director of Whittaker
Corporation (an aerospace company) since December 1985, and Chairman
and a director of BioWhittaker Inc. (a biotechnology company) since
October 1991; also Chief Executive Officer of BioWhittaker Inc. from
October 1991 to September 1992. Also a director of Catellus
Development Corporation, BankAmerica Corporation, and Jacobs
Engineering Group Inc. Mr. Alibrandi is Chairman of the Compensation
and Benefits Committee and serves on the Audit Committee of the
Board.
George Deukmejian, 66................................................ 1991
Sidley & Austin
The Gas Company Tower
40th Floor
555 West Fifth Street
Los Angeles, CA 90013-1010
Partner of Sidley & Austin (law firm) since January 1991. Formerly,
Governor of the State of California from 1983 until January 1991.
Also a director of Qual-Med, Inc. Mr. Deukmejian serves on the Audit
Committee and the Committee on Directors of the Board.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST
ELECTED A
NAME, AGE AND BUSINESS EXPERIENCE DIRECTOR
- - --------------------------------- ---------
<S> <C>
Bill M. Lindig, 58................................................... 1993
President and Chief Operating Officer
SYSCO Corporation
1390 Enclave Parkway
Houston, TX 77077-2099
President and Chief Operating Officer since November 1985 and a
director of SYSCO Corporation (marketer and distributor of
foodservice products). Mr. Lindig serves on the Compensation and
Benefits Committee and the Committee on Directors of the Board.
Michael A. Morphy, 62................................................ 1972
115 W. California Boulevard
#403
Pasadena, CA 91105
Retired Chairman of the Board and Chief Executive Officer of
California Portland Cement Company (cement manufacturer). Mr. Morphy
has served as President of MorMarketing (marketing of employee
benefit concepts) since June 1985. Also a director of Cyprus Amax
Minerals Company. First Interstate Bank of California, and Santa Fe
Energy Resources, Inc. Mr. Morphy serves on the Compensation and
Benefits and the Audit Committees of the Board.
Roy S. Roberts, 55................................................... 1993(2)
Vice President, General Motors Corporation
General Manager, GMC Truck Division
Mail Code 3108-11
31 East Judson Street
Pontiac, MI 48342-2230
Vice President since October 1992 of General Motors Corporation
(manufacturer of motor vehicles) and General Manager, GMC Truck
Division. Previously, Manufacturing Manager of General Motors
Corporation's North American Operations Flint Automotive Division
from 1992 and Manufacturing Manager of its Cadillac Motor Car
Division from 1990 to 1992. From 1989 to 1990, Vice President and
General Manager, Truck Operations for Navistar International
Corporation (manufacturer of trucks). Mr. Roberts serves on the
Executive Committee and the Compensation and Benefits Committee of
the Board.
John S. Runnells II, 70.............................................. 1975
Runnells-Pierce Ranch
Route 1, Box 32
Bay City, TX 77414-9502
Owner and Operator, Runnells-Pierce Ranch in Bay City, Texas
(ranching). Mr. Runnells serves on the Committee on Directors and
the Audit Committee of the Board.
Jean Head Sisco, 69.................................................. 1975
Partner
Sisco Associates
1250 24th St., N.W., Suite 350
Washington, D.C. 20037
Partner, Sisco Associates (management consultants). Also a director
of Chesapeake & Potomac Telephone Company, Chiquita Brands
International, K-Tron International, Inc., McArthur/Glen Realty
Corp., The Neiman Marcus Group, Inc., Textron Inc., and Washington
Mutual Investors Fund. Mrs. Sisco serves on the Committee on
Directors and the Compensation and Benefits Committee of the Board.
</TABLE>
I-2
<PAGE>
<TABLE>
<CAPTION>
FIRST
ELECTED A
NAME, AGE AND BUSINESS EXPERIENCE DIRECTOR
- - --------------------------------- ---------
<S> <C>
Edward F. Swift, 71.................................................. 1973
Three First National Plaza
Suite 1400
70 West Madison Street
Chicago, IL 60602
Consultant to Lehman Brothers, Inc. (investment banker and broker-
dealer) since December 1989, and prior to that advisory director of
Shearson Lehman Hutton, Inc. from January 1988. Also a director of
Illinois Tool Works, Inc. Mr. Swift is Chairman of the Committee on
Directors of the Board and serves on the Executive and Audit
Committees of the Board.
Robert H. West, 56................................................... 1980
Chairman of the Board
Butler Manufacturing Company, Inc.
BMA Tower
31st and Southwest TrafficWay
Kansas City, MO 64108
Chairman of the Board and a director Butler Manufacturing Company
(manufacturer of systems and components for non-residential
structures) since May 1986. Also a director of Commerce Bancshares,
Inc. and Kansas City Power & Light Company. Mr. West is Chairman of
the Audit Committee and serves on the Executive and the Compensation
and Benefits Committees of the Board.
</TABLE>
I-3
<PAGE>
EXECUTIVE OFFICERS (OTHER THAN ROBERT D. KREBS):
PRESENT PRINCIPAL OCCUPATION OR
NAME EMPLOYMENT AND FIVE YEAR EMPLOYMENT HISTORY
---- -------------------------------------------
Carol R. Beerbaum, 50........ Vice President--Human Resources of SFP and SFP
Rail since June 1992. Formerly, Senior Vice
President, Human Resources, PHH Homequity, Inc.
(relocation and real estate management
services) from May 1990, and Vice President,
Human Resources of PHH Homequity, Inc. from
January 1987.
Russell E. Hagberg, 44....... Senior Vice President and Chief of Staff of SFP
Rail since January 1994. Prior to that, Vice
President--Transportation of Santa Fe Railway
from June 1991, Vice President--Human Resources
of SFP from June 1990, and Vice President--
Human Resources and Administration of Santa Fe
Railway from March 1989.
Thomas N. Hund, 40........... Vice President and Controller of SFP and SFP
Rail since July 1990. Formerly, Assistant Vice
President and Controller of Santa Fe Railway
from August 1989.
Steven F. Marlier, 49........ Senior Vice President and Chief Marketing
Officer of SFP Rail since January 1994. Prior
to that, Senior Vice President--Carload
Business Unit of Santa Fe Railway since January
1992. Formerly, Regional Manager/General
Manager, IBM Corporation (computers and data
processing).
Donald G. McInnes, 54........ Senior Vice President and Chief Operating
Officer of SFP Rail since January 1994. Prior
to that, Senior Vice President--Intermodal
Business Unit of SFP Rail since January 1992,
Vice President--Intermodal of SFP Rail from
July 1989, Vice President--Administration of
SFP Rail from January 1989, and General Manager
of Eastern Region of Santa Fe Railway from July
1987.
Jeffrey R. Moreland, 50...... Vice President--Law and General Counsel of SFP
and SFP Rail since October 1994. Prior to that
Vice President--Law and General Counsel of SFP
Rail since June 1989. Prior to that, General
Counsel of SFP from April 1988.
Marsha K. Morgan, 47......... Corporate Secretary of SFP and SFP Rail since
December 1990. Prior to that, Treasurer from
March 1988, and Assistant Treasurer from 1983.
Patrick J. Ottensmeyer, 37... Vice President--Finance of SFP and SFP Rail
since September 1993. Previously, held a senior
credit position with First Empire State
Corporation (banking) from September 1992, was
Senior Vice President of Security Pacific
National Bank (banking) (which merged with Bank
of America National Trust and Savings
Association (banking) in April 1992) from
October 1989, and held other positions with
Security Pacific National Bank from 1984.
I-4
<PAGE>
PRESENT PRINCIPAL OCCUPATION OR
NAME EMPLOYMENT AND FIVE YEAR EMPLOYMENT HISTORY
---- -------------------------------------------
Denis E. Springer, 48....... Senior Vice President and Chief Financial
Officer of SFP and SFP Rail since September
1993. Prior to that, Senior Vice President,
Treasurer and Chief Financial Officer of SFP and
SFP Rail from January 1992, Vice President,
Treasurer and Chief Financial Officer from SFP
and SFP Rail from January 1991, Vice President--
Finance of SFP from April 1988.
Irvin Toole, Jr., 53.... 888 Chairman, President and Chief Executive Officer,
South Figueroa Los Angeles, SFP Pipelines and SFP Pipeline Holdings, Inc.
CA 90017 since September 1991. Formerly, Senior Vice
President, Treasurer and Chief Financial
Officer, SFP Pipelines from December 1988.
Daniel J. Westerbeck, 50.... Vice President and Tax Counsel SFP and SFP Rail
since April 1988.
Catherine A. Westphal, 46... Vice President--Corporate Communications SFP and
SFP Rail since January 1994. Prior to that,
Assistant Vice President--Public Relations SFP
and SFP Rail from January 1992, Director--Public
Relations SFP and SFP Rail from January 1991,
and Manager--Public Affairs at SFP Rail from
January 1989.
I-5
<PAGE>
SCHEDULE II
DIRECTORS AND EXECUTIVE OFFICERS OF BNI
Set forth below are the name, business address and present principal
occupation or employment, and material occupations, positions, offices or
employments for the past five years of each director and executive officer of
BNI. Except as otherwise noted, the business address of each such person is
Burlington Northern Inc., 3800 Continental Plaza, 777 Main Street, Fort Worth,
TX 76102 and such person is a United States citizen. In addition, except as
otherwise noted, each executive officer of BNI has been employed by BNI in the
positions listed below during the last five years. This information has been
taken from and is based upon reports and other documents on file with the
Commission or otherwise publicly available.
DIRECTORS:
SERVED
AS A
DIRECTOR
NAME SINCE BUSINESS EXPERIENCE
---- -------- -------------------
Gerald Grinstein, 62.....1985 Chairman and Chief Executive Officer,
Burlington Northern Inc., Chairman and Chief
Executive Officer, Burlington Northern Railroad
Company, Fort Worth, Texas -- Transportation.
Since July, 1991, Mr. Grinstein's principal
occupation has been as shown above. From
October, 1990 to July, 1991, Mr. Grinstein was
Chairman, President and Chief Executive Officer
and from January, 1989 to October, 1990, he was
President and Chief Executive Officer of
Burlington Northern Inc. From May, 1989 to
July, 1991, Mr. Grinstein was Chairman,
President and Chief Executive Officer and from
February, 1989 to May, 1989, he was President
and Chief Executive Officer of Burlington
Northern Railroad Company. From May, 1988 until
December, 1988 Mr. Grinstein was Vice Chairman
of the Board of Burlington Resources Inc. From
April, 1987 until December, 1988, Mr. Grinstein
was Vice Chairman of the Board of Burlington
Northern Inc. Director of Delta Air Lines,
Inc., Seafirst Corporation, Browning-Ferris
Industries, Inc. and Sundstrand Corporation.
Jack S. Blanton, 66......1989 Chairman and Chief Executive Officer, Houston
President and Chief Endowment, Inc., Houston, Texas -- Private
Executive Officer Eddy Charitable Foundation. Since December, 1990,
Refining Company 700 Mr. Blanton's principal occupation has been as
Louisiana Street Suite 3920 shown above. From 1983 until March, 1988, Mr.
Houston, TX 77002 Blanton's principal occupation was Chairman and
Chief Executive Officer of Scurlock Oil
Company. From December, 1986 to present, Mr.
Blanton has been President and Chief Executive
Officer of Eddy Refining Company. Director of
Ashland Oil, Inc., Baker Hughes Incorporated,
Southwestern Bell Corporation and Pogo
Producing Company. Member--Compensation and
Nominating Committee and Finance Committee.
Daniel P. Davison, 69... 1979 Consultant, New York, New York--Consultant.
Director and Consultant U.S. Since January, 1994, Mr. Davison's principal
Trust Corporation 114 West occupation has been as shown above. From
47th Street 15th Floor New January, 1990 until December, 1993, Mr. Davison
York, NY 10036 served as Chairman of Christie Manson and Woods
International, Inc. From May, 1986 until
January, 1990, Mr. Davison served as Chairman
of the Board and Chief Executive Officer of
U.S. Trust Corporation. Director of U.S. Trust
Corporation, The Atlantic Companies and
Christie's International plc. Chairman--Finance
Committee. Member--Compensation and Nominating
Committee.
<PAGE>
Daniel J. Evans, 68..... 1991 Chairman, Daniel J. Evans Associates, Seattle,
Chairman Daniel J. Evans Washington --Consultant. Since July, 1989, Mr.
Associates 1111 Third Avenue Evans' principal occupation has been as shown
Suite 3400 Seattle, WA 98101 above. From February, 1989 to May, 1989, Mr.
Evans participated as a Fellow at the Institute
of Politics, John F. Kennedy School of
Government, Harvard University. From September,
1983 to January, 1989, Mr. Evans served as
United States Senator for the State of
Washington. Director of McCaw Cellular
Communications, Puget Sound Power and Light
Company, Tera Computer Company, Heart
Technology, Flow International, Inc. and
Washington Mutual Savings Bank. Member --
Compensation and Nominating Committee and Audit
Committee.
Barbara C. Jordan, 58....1991 Professor, The Lyndon B. Johnson School of
Professor The Lyndon B. Public Affairs, University of Texas at Austin,
Johnson School of Public Austin, Texas -- Education. For over five
Affairs 2315 Red River 3.107 years, Ms. Jordan's principal occupation has
University of Texas at been as shown above. Director of The Mead
Austin University Station Corporation, Federal Home Mortgage Loan
Austin, TX 78713 Corporation and Northrop Corporation Inc.
Member -- Finance Committee.
Ben F. Love, 69......... 1990 Investor. Since December, 1989, Mr. Love's
Director and Consultant principal occupation has been as shown above.
Texas Commerce Bancshares, For five years prior to December, 1989, Mr.
Inc. 600 Travis 18th Floor Love was Chairman and Chief Executive Officer
Texas Commerce Tower of Texas Commerce Bancshares, Inc. Director of
Houston, TX 77002 Eli Lilly and Company, Mitchell Energy &
Development Corp. and El Paso Natural Gas
Company. Chairman -- Compensation and
Nominating Committee. Member -- Finance
Committee. Additionally, Mr. Love served as a
director of Burlington Northern Inc. from 1986
through 1988.
Arnold R. Weber, 64..... 1986 President, Northwestern University, Evanston,
President Northwestern Illinois --Education. Since February, 1985, Mr.
University 633 Clark Street Weber's principal occupation has been as shown
Evanston, Il 60608 above. For five years prior to February, 1985,
Mr. Weber was President of the University of
Colorado. Director of PepsiCo, Inc., Inland
Steel Company, Tribune Co. and Aon Corporation.
Chairman -- Audit Committee.
Edward E. Whitacre, Jr., 52.. Chairman of the Board and Chief Executive
1993 Officer, Southwestern Bell Corporation, San
Chairman and Chief Executive Antonio, Texas -- Telecommunications. Since
Officer Southwestern Bell January, 1990, Mr. Whitacre's principal
Corp. 175 E. Houston Suite occupation has been as shown above. From
1300 San Antonio, TX 78205 October, 1988 to December, 1989, Mr. Whitacre
was President and Chief Operating Officer of
Southwestern Bell Corporation. Director of
Anheuser-Busch Companies, Inc., Emerson
Electric Co. and The May Department Stores
Company. Member -- Audit Committee and Finance
Committee.
II- 2
<PAGE>
Michael B. Yanney, 60... 1989 Chairman and Chief Executive Officer, American
Chairman and Chief Executive First Companies, Omaha, Nebraska -- Finance.
Officer America First For over five years, Mr. Yanney's principal
Companies 1004 Farnam Street occupation has been as shown above. Director of
Suite 400 Omaha, NE 68102 Forest Oil Corporation and MFS Communications,
Inc. Member -- Compensation and Nominating
Committee.
EXECUTIVE OFFICERS:
PRESENT PRINCIPAL OCCUPATION OR
NAME EMPLOYMENT AND FIVE YEAR EMPLOYMENT HISTORY
---- -------------------------------------------
Gerald Grinstein, 62......... Chairman and Chief Executive Officer,
Burlington Northern Inc., July 1991 to Present.
Chairman and Chief Executive Officer,
Burlington Northern Railroad Company, July 1991
to Present.
Chairman, President and Chief Executive
Officer, October 1990 to July 1991, Burlington
Northern Inc.; Chairman, President and Chief
Executive Officer, February 1990 to July 1991,
Burlington Northern Railroad Company; President
and Chief Executive Officer, January 1989 to
October 1990, Burlington Northern Inc.; Chief
Operating Officer, February 1989 to February
1990, Burlington Northern Railroad Company. Mr.
Grinstein is a Director of Delta Air Lines,
Inc., Browning Ferris Industries, Inc.,
Seafirst Corporation and Sunstrand Corporation.
David C. Anderson, 53........ Executive Vice President, Chief Financial
Officer and Chief Accounting Officer,
Burlington Northern Inc., October 1991 to
Present.
Executive Vice President, Chief Financial
Officer, Burlington Northern Railroad Company,
October 1991 to Present.
Senior Vice President and Chief Financial
Officer, July 1983 to September 1991, Federal
Express Corporation. Mr. Anderson is a Director
of Concord EFS, Inc.
John Q. Anderson, 43......... Executive Vice President, Marketing and Sales,
Burlington Northern Railroad Company, February
1990 to Present.
Principal, January 1982 to January 1990,
McKinsey & Company, Inc.
Douglas J. Babb, 42.......... Vice President and General Counsel, Burlington
Northern Railroad Company, December 1986 to
Present.
Edmund W. Burke, 46.......... Executive Vice President, Law and Secretary,
Burlington Northern Inc., August 1989 to
Present.
Executive Vice President, Law and Government
Affairs, Burlington Northern Railroad Company,
February 1990 to Present.
Executive Vice President, Law and Government
Affairs and Secretary, September 1989 to
February 1990, Burlington Northern Railroad
Company; Senior Vice President, Law and
Secretary, January 1989 to July 1989,
Burlington Northern Inc.
II-3
<PAGE>
Mark S. Cane, 39............. Vice President, Intermodal, Burlington Northern
Railroad Company, September 1992 to Present.
Vice President, Equipment Management, March
1991 to September 1992; Vice President, Service
Design, December 1989 to March 1991; Assistant
Vice President, Marketing Resources, May 1988
to December 1989, Burlington Northern Railroad
Company.
John T. Chain, Jr., 60....... Executive Vice President, Safety and Corporate
Support, Burlington Northern Railroad Company,
March 1993 to Present.
Executive Vice President, Operations, February
1991 to February 1993, Burlington Northern
Railroad Company. Commander in Chief of the
Strategic Air Command, June 1986 to January
1991. Mr. Chain is a Director of Kemper
Corporation, Northrop Corporation and R.J.R.
Nabisco.
James B. Dagnon, 55.......... Executive Vice President, Employee Relations,
Burlington Northern Inc., January 1992 to
Present.
Executive Vice President, Employee Relations,
Burlington Northern Railroad Company, January
1992 to Present.
Senior Vice President, Human Resources, August
1991 to January 1992; Senior Vice President,
Labor Relations, June 1987 to August 1991,
Burlington Northern Railroad Company.
Donald W. Henderson, 56...... Vice President, Network Operations, June 1994
to Present.
General Manager Central Corridor Operations,
May 1993 to June 1994; General Manager Southern
Corridor Operations, August 1992 to May 1993;
Vice President Technology, Engineering &
Maintenance, February 1987 to August 1992,
Burlington Northern Railroad Company.
David L. Hull, 47............ Vice President, Revenue Management, Burlington
Northern Railroad Company, April 1992 to
Present.
Vice President, Financial Planning, December
1989 to April 1992, Burlington Northern
Railroad Company.
Francis T. Kelly, 47......... Securities and Finance Counsel, Burlington
Northern Railroad Company, November 1989 to
Present.
Richard L. Lewis, 54......... Vice President, Corporate Development,
Burlington Northern Railroad Company, February
1993 to Present.
Vice President, Strategic Planning, February
1991 to January 1993; Vice President, Freight
Equipment and Strategic Planning, January 1989
to January 1991, Burlington Northern Railroad
Company.
II-4
<PAGE>
Robert F. McKenney, 41....... Senior Vice President and Treasurer, Burlington
Northern Inc., October 1991 to Present.
Senior Vice President and Treasurer, Burlington
Northern Railroad Company, October 1991 to
Present.
Senior Vice President, Treasurer, Acting Chief
Financial Officer and Acting Chief Accounting
Officer, April 1991 to October 1991, Burlington
Northern Inc.; Senior Vice President, Treasurer
and Acting Chief Financial Officer, April 1991
to October 1991, Burlington Northern Railroad
Company; Vice President and Treasurer, October
1989 to April 1991, Burlington Northern Inc.
and Burlington Northern Railroad Company.
Ronald A. Rittenmeyer, 47.... Executive Vice President, Merchandise Business,
Burlington Northern Railroad Company, June 1994
to Present.
Vice President, Operations, December 1989 to
May 1994, Frito-Lay Unit of PepsiCo, Inc.
Herbert D. Robinson, 42...... Vice President, Network Design, Burlington
Northern Railroad Company, June 1994 to
Present.
Vice President Network Planning and Control,
September 1992 to June 1994; Assistant Vice
President Network Planning, December 1990 to
September 1992; General Manager, September 1988
to December 1990, Burlington Northern Railroad
Company.
Richard A. Russack, 56....... Vice President, Communications, Burlington
Northern Railroad Company, October 1991 to
Present.
Managing Director, October 1989 to September
1991, Ogilvy, Adams & Rinehart, Inc.
Don S. Snyder, 46............ Vice President, Controller and Chief Accounting
Officer, Burlington Northern Railroad Company,
April 1990 to Present.
Vice President, Controller, December 1987 to
March 1990, Burlington Northern Railroad
Company.
Gregory T. Swienton, 45...... Executive Vice President, Intermodal Business,
Burlington Northern Railroad Company, June 1994
to Present.
Executive Director--Europe & Africa (Brussels),
January 1991 to June 1994. DHL Worldwide
Express, Regional Managing Director--
Continental Europe (Brussels), January 1988 to
December 1990.
Philip F. Weaver, 54......... Vice President, Agricultural Commodities,
Burlington Northern Railroad Company, July 1990
to Present.
Acting Assistant Vice President, Marketing
Resources, December 1989 to July 1990;
Assistant Vice President Agricultural Products,
August 1987 to July 1990, Burlington Northern
Railroad Company.
II-5
<PAGE>
SCHEDULE III
TRANSACTIONS IN SFP COMMON STOCK
During the past sixty calendar days and forty business days, no transaction
in the SFP Common Stock has been effected by SFP or BNI or, to the best of
SFP's knowledge (with respect to itself) or BNI's knowledge (with respect to
itself), by any executive officer, director, affiliate or subsidiary of SFP or
BNI except for regular on-going acquisitions through payroll deduction
occurring in SFP's 401(k) retirement plan, the SFP dividend reinvestment plan
and option exercises by two executive officers. On October 25, 1994, Mr. Daniel
Westerbeck delivered 7,018 shares of SFP Common Stock with a fair market value
of $14.25 per share in payment of the option exercise price of $9.92 per share
of SFP Common Stock and for which he received 10,082 shares of SFP Common
Stock. On October 27, 1994, Mr. Steven Marlier exercised an outstanding option
to purchase 6,082 shares of SFP Common Stock at $9.92 per share.
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF
JUNE 29, 1994,
AS AMENDED AS OF OCTOBER 26, 1994
AND AS OF DECEMBER 18, 1994,
BETWEEN
BURLINGTON NORTHERN INC.
AND
SANTA FE PACIFIC CORPORATION
<PAGE>
TABLE OF CONTENTS(/1/)
PAGE
ARTICLE I
THE MERGER
1.1.The Merger........................................................... A-1
1.2.Conversion of Shares................................................. A-1
1.3.Surrender and Payment................................................ A-2
1.4.Stock Options........................................................ A-3
1.5.Adjustments.......................................................... A-3
1.6.Closing.............................................................. A-3
1.7.Fractional Shares.................................................... A-4
1.8.Alternative Transaction Structure ................................... A-4
ARTICLE II
CERTAIN MATTERS RELATING TO BNI
AND THE SURVIVING CORPORATION
2.1.Directors of the Surviving Corporation............................... A-7
2.2.Certificate of Incorporation and Bylaws of the Surviving Corporation.. A-7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SFP
3.1.Corporate Existence and Power........................................ A-7
3.2.Corporate Authorization.............................................. A-8
3.3.Governmental Authorization........................................... A-8
3.4.Non-Contravention.................................................... A-8
3.5.Capitalization....................................................... A-8
3.6.Material Subsidiaries................................................ A-9
3.7.SEC Filings.......................................................... A-9
3.8.Financial Statements................................................. A-10
3.9.Disclosure Documents................................................. A-10
3.10. Information Supplied............................................... A-11
3.11.No Material Adverse Changes......................................... A-11
3.12.Undisclosed Material Liabilities.................................... A-11
3.13.Litigation.......................................................... A-11
3.14.Taxes............................................................... A-12
3.15. ERISA.............................................................. A-12
3.16. Finders' Fees...................................................... A-14
3.17. Environmental Matters.............................................. A-14
3.18. Takeover Statutes.................................................. A-14
3.19. Compliance With Laws.............................................. A-14
- - --------
(/1/)The Table of Contents is not a part of this Agreement.
i
<PAGE>
3.20. Spinoff Dividend................................................... A-14
3.21. Private Letter Ruling.............................................. A-15
3.22. Excess Loss Accounts............................................... A-15
3.23. SFP Rights Agreement............................................... A-15
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BNI
4.1. Corporate Existence and Power....................................... A-15
4.2. Corporate Authorization............................................. A-15
4.3. Governmental Authorization.......................................... A-15
4.4. Non-Contravention................................................... A-15
4.5. Capitalization...................................................... A-16
4.6. Material Subsidiaries............................................... A-16
4.7. SEC Filings......................................................... A-17
4.8. Financial Statements................................................ A-17
4.9. Disclosure Documents................................................ A-17
4.10. Information Supplied............................................... A-18
4.11. No Material Adverse Changes........................................ A-18
4.12. Undisclosed Material Liabilities................................... A-18
4.13. Litigation......................................................... A-19
4.14. Taxes.............................................................. A-19
4.15. ERISA.............................................................. A-19
4.16. Finders' Fees...................................................... A-21
4.17. Environmental Matters.............................................. A-21
4.18. Takeover Statutes.................................................. A-21
4.19. Compliance with Laws............................................... A-21
4.20. BNI Rights Agreement............................................... A-21
ARTICLE V
COVENANTS OF SFP
5.1. Conduct of SFP...................................................... A-22
5.2. Stockholder Meeting................................................. A-23
5.3. Access to Information............................................... A-23
5.4. Notices of Certain Events........................................... A-23
5.5. Tax Matters......................................................... A-24
5.6. Rule 145 Affiliates................................................. A-24
5.7. The Spinoff......................................................... A-24
5.8. No Solicitations.................................................... A-24
5.9. Registration Rights................................................. A-25
ARTICLE VI
COVENANTS OF BNI
6.1. Conduct of BNI...................................................... A-25
6.2. Stockholder Meeting................................................. A-26
6.3. Access to Information............................................... A-26
6.4. Notices of Certain Events........................................... A-27
6.5. Tax Matters......................................................... A-27
ii
<PAGE>
6.6. Director and Officer Liability...................................... A-27
6.7. No Solicitations.................................................... A-28
ARTICLE VII
COVENANTS OF BNI AND SFP
7.1. Reasonable Best Efforts............................................. A-28
7.2. ICC Approval........................................................ A-28
7.3. Certain Filings; Proxy Materials.................................... A-28
7.4. Public Announcements................................................ A-29
7.5. Further Assurances.................................................. A-29
7.6. Antitakeover Statutes............................................... A-29
7.7. Cooperation......................................................... A-29
7.8. Dividends........................................................... A-29
ARTICLE VIII
THE OFFER
8.1 The Offer............................................................ A-30
8.2. Action by SFP and BNI............................................... A-30
ARTICLE IX
CONDITIONS TO THE MERGER
9.1. Conditions to the Obligations of Each Party......................... A-31
9.2. Conditions to the Obligations of BNI................................ A-31
9.3. Conditions to the Obligations of SFP................................ A-32
ARTICLE X
TERMINATION
10.1. Termination......................................................... A-32
10.2. Effect of Termination............................................... A-33
ARTICLE XI
MISCELLANEOUS
11.1. Notices............................................................. A-33
11.2. Entire Agreement; Survival of Representations and Warranties......... A-34
11.3. Amendments; No Waivers.............................................. A-34
11.4. Expenses............................................................ A-34
11.5. Successors and Assigns.............................................. A-35
11.6. Governing Law....................................................... A-35
11.7. Jurisdiction........................................................ A-35
11.8. Counterparts; Effectiveness......................................... A-35
ANNEX I Conditions to the Offer
ANNEX II Registration Rights
iii
<PAGE>
TABLE OF DEFINITIONS
<TABLE>
<CAPTION>
TERM SECTION
- - ---- --------
<S> <C>
1933 Act............................................................... 1.4(c)
1933 Act Affiliates.................................................... 5.6
6- 1/4% Convertible Preferred Stock.................................... 4.5(a)
Agreement.............................................................. Recitals
Acquiring Person....................................................... 4.20
Balance Sheet Date..................................................... 3.8
BNI.................................................................... Recitals
BNI Balance Sheet...................................................... 4.8
BNI Benefit Arrangements............................................... 4.16(e)
BNI Common Stock....................................................... 1.2(a)
BNI Disclosure Documents............................................... 4.9
BNI Employee Plans..................................................... 4.15(a)
BNI Form 10-K.......................................................... 4.7(a)
BNI Form 10-Q.......................................................... 4.7(a)
BNI Material Subsidiary................................................ 4.6(a)
BNI Offer Documents.................................................... 8.1(d)
BNI Option............................................................. 1.4(a)
BNI Pension Plans...................................................... 4.15(b)
BNI Post-Signing Returns............................................... 6.5
BNI Proxy Statement.................................................... 4.9
BNI Returns............................................................ 4.14
BNI Rights Agreement................................................... 4.20
BNI Securities......................................................... 4.5(a)
BNI Stockholder Meeting................................................ 6.2
BNI Subsidiary Securities.............................................. 4.6(b)
BNI Voting Debt........................................................ 4.5(b)
Class A Preferred Stock................................................ 4.5(a)
Closing................................................................ 1.6
Closing Date........................................................... 1.6
Code................................................................... Recitals
Common Shares Trust.................................................... 1.7
Confidentiality Agreement.............................................. 11.2
Customary Action....................................................... 5.1
Distribution Date...................................................... 4.20
DGCL................................................................... 3.18
Effective Time......................................................... 1.1(b)
Environmental Laws..................................................... 3.17(b)
Environmental Liabilities.............................................. 3.17(b)
ERISA.................................................................. 3.15(a)
ERISA Affiliate........................................................ 3.15(a)
Excess Shares.......................................................... 1.7
Exchange Act........................................................... 1.2(d)
Exchange Agent......................................................... 1.3(a)
Exchange Ratio......................................................... 1.2(a)
Form 10................................................................ 3.9(b)
Form S-1............................................................... 3.9(b)
Form S-4............................................................... 7.3(a)
Hazardous Substances................................................... 3.17(b)
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
TERM SECTION
- - ---- --------
<S> <C>
HSR Act................................................................ 3.3
ICC.................................................................... 3.3
Indemnified Parties.................................................... 6.6
Indemnity Agreements................................................... 6.6
Lien................................................................... 3.4
Liquidation............................................................ 3.21
Material............................................................... 6.1(h)
Material Adverse Effect................................................ 3.1
Merger................................................................. 1.1(a)
Merger Consideration................................................... 1.2(b)
Multiemployer Plan..................................................... 3.16(b)
NYSE................................................................... 1.4(c)
Offer.................................................................. 8.1(a)
PBGC................................................................... 3.16(b)
Person................................................................. 1.2(d)
Private Letter Ruling.................................................. 3.21
Properties............................................................. 3.21
Schedule 14D-9......................................................... 8.2(b)
SEC.................................................................... 1.4(c)
SFP.................................................................... Recitals
SFP Balance Sheet...................................................... 3.8
SFP Common Stock....................................................... 1.2(a)
SFP Disclosure Documents............................................... 3.9(a)
SFP Employee Plans..................................................... 3.15(a)
SFP Form 10-K.......................................................... 3.7(a)
SFP Form 10-Q.......................................................... 3.7(a)
SFP Material Subsidiary................................................ 3.6(a)
SFP Offer Documents.................................................... 8.1(c)
SFP Pension Plans...................................................... 3.15(b)
SFP Post-Signing Returns............................................... 5.5
SFP Preferred Stock.................................................... 3.5(a)
SFP Proxy Statement.................................................... 3.9(a)
SFP Properties......................................................... 5.2
SFP Returns............................................................ 3.14(i)
SFP Rights Agreement................................................... 3.23
SFP Securities......................................................... 3.5(a)
SFP Stock Option....................................................... 1.4(a)
SFP Stockholder Meeting................................................ 5.2
SFP Subsidiary Securities.............................................. 3.6(b)
SFP Voting Debt........................................................ 3.5(b)
Share.................................................................. 1.2(a)
Shares................................................................. 1.2(a)
Spinoff................................................................ Recitals
Spinoff Company........................................................ Recitals
Spinoff Dividend....................................................... Recitals
Spinoff Registration Documents......................................... 3.9(b)
Stock Acquisition Date................................................. 4.20
Subsidiary............................................................. 1.2(c)
Surviving Corporation.................................................. 1.1(a)
Takeover Proposal...................................................... 5.8
Takeover Statute....................................................... 3.18
</TABLE>
v
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of June 29, 1994 as amended as of
October 26, 1994 and as of December 18, 1994 (this "Agreement") between
Burlington Northern Inc., a Delaware corporation ("BNI"), and Santa Fe Pacific
Corporation, a Delaware corporation ("SFP").
WHEREAS, the respective Boards of Directors of BNI and SFP have determined
that it is in the best interests of their respective stockholders to consummate
the merger provided for herein;
WHEREAS, the respective Boards of Directors of BNI and SFP have determined
that this Agreement is in the best interests of BNI or SFP, as the case may be,
and its respective stockholders and have duly approved this Agreement and
authorized its execution and delivery;
WHEREAS, the respective Boards of Directors of BNI and SFP have received the
opinions of Lazard Freres & Co. and Goldman, Sachs & Co., respectively, that
the Exchange Ratio (as defined in Section 1.2(a)(i)) is fair to their
respective stockholders from a financial point of view;
WHEREAS, BNI has been informed that (a) as a result of an initial public
offering of shares of common stock of SFP Gold Corporation (the "Spinoff
Company"), SFP presently owns approximately 85% of the outstanding capital
stock of the Spinoff Company, (b) the Board of Directors of SFP has declared,
pursuant to resolutions substantially in the form provided to BNI prior to the
date hereof, a dividend (the "Spinoff Dividend") of the stock of the Spinoff
Company owned by SFP, to be issued on September 30, 1994 to SFP shareholders of
record as of September 12, 1994 (the issuance of the Spinoff Dividend shall be
referred to as the "Spinoff"), and (c) SFP has received a private letter ruling
from the Internal Revenue Service to the effect that the Spinoff qualifies as a
tax-free distribution within the meaning of Section 355 of the Internal Revenue
Code of 1986, as amended (the "Code"); and
WHEREAS, it is the intention of the parties to this Agreement that for
Federal income tax purposes the Merger shall qualify as a "reorganization"
within the meaning of Section 368 of the Code.
NOW, THEREFORE, in consideration of the premises and of the representations,
warranties, covenants and agreements set forth herein, the parties hereto
hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. The Merger. (a) At the Effective Time (as defined in Section
1.1(b)), SFP shall be merged with and into BNI in accordance with Delaware Law
(the "Merger"), whereupon the separate existence of SFP shall cease, and BNI
shall be the surviving corporation (the "Surviving Corporation").
(b) 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 is specified in the certificate of merger (the "Effective
Time"); such filing shall be made as soon as practicable after the Closing, as
defined in Section 1.6 of this Agreement.
(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 SFP and BNI, all as provided
under Delaware Law.
SECTION 1.2. Conversion of Shares. (a) At the Effective Time:
(i) each share (a "Share" and, collectively, the "Shares") of SFP common
stock, par value $1.00 per share (the "SFP Common Stock"), outstanding
immediately prior to the Effective Time shall, except
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as otherwise provided in Section 1.2(a)(ii) below, be converted into 0.40
shares of the common stock, no par value (the "BNI Common Stock"), of BNI
(0.40 being defined herein as the "Exchange Ratio"); and
(ii) each Share held by SFP as treasury stock or owned by BNI or any
Subsidiary (as defined in Section 1.2(c)) of BNI immediately prior to the
Effective Time shall be canceled, and no payment shall be made with
respect thereto.
(b) The BNI Common Stock (accompanied by rights issued pursuant to the BNI
Rights Agreement (as defined in Section 4.20)) to be received as consideration
pursuant to the Merger by each holder of Shares is referred to herein as the
"Merger Consideration".
(c) For purposes of this Agreement, the word "Subsidiary" when used with
respect to any Person means any corporation or other organization, whether
incorporated or unincorporated, of which (i) at least a majority of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such Person or by any one or more of its
Subsidiaries or (ii) such Person or any other Subsidiary of such Person is a
general partner, it being understood that representations and warranties of a
Person concerning any former Subsidiary of such Person shall be deemed to
relate only to the periods during which such former Subsidiary was a Subsidiary
of such Person.
(d) For purposes of this Agreement, the word "Person" means an individual, a
corporation, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or any agency or
instrumentality thereof, or any affiliate (as that term is defined in the
Securities Exchange Act of 1934 and the rules and regulations promulgated
thereunder (the "Exchange Act")) of any of the foregoing.
SECTION 1.3. Surrender and Payment. (a) Prior to the Effective Time, BNI
shall appoint an agent reasonably satisfactory to SFP (the "Exchange Agent")
for the purpose of exchanging certificates representing Shares as provided in
Section 1.2(a)(i). At the Effective Time, BNI will deposit with the Exchange
Agent certificates representing the aggregate Merger Consideration to be paid
in respect of the Shares. Promptly after the Effective Time, BNI will send, or
will cause the Exchange Agent to send, to each holder of Shares 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 Shares to the
Exchange Agent).
(b) Each holder of Shares that have been converted into a right to receive
the Merger Consideration, upon surrender to the Exchange Agent of a certificate
or certificates 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.
(c) If any portion of the Merger Consideration is to be paid to a Person
other than the registered holder of the Shares 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.
(d) After the Effective Time, there shall be no further registration of
transfers of Shares. If, after the Effective Time, certificates representing
Shares are presented to the Surviving Corporation, they shall be
A-2
<PAGE>
canceled and exchanged for the Merger Consideration in accordance with the
procedures set forth in this Article I.
(e) Any portion of the Merger Consideration deposited with the Exchange Agent
pursuant to Section 1.3(a), and any portion of the Common Shares Trust (as
defined in Section 1.7) that remains unclaimed by the holders of Shares twelve
months after the Effective Time shall be returned to BNI, upon demand, and any
such holder who has not exchanged his Shares for the Merger Consideration in
accordance with this Article I prior to that time shall thereafter look only to
BNI for his claim for BNI Common Stock, any cash in lieu of fractional shares
of BNI Common Stock and any dividends or distributions with respect to BNI
Common Stock. Notwithstanding the foregoing, BNI shall not be liable to any
holder of Shares for any amount paid to a public official pursuant to
applicable abandoned property laws.
(f) No dividends or other distributions with respect to the BNI Common Stock
constituting part of the Merger Consideration shall be paid to the holder of
any unsurrendered certificates representing Shares until such certificates are
surrendered as provided in this Section 1.3. Upon such surrender, there shall
be paid, without interest, to the person in whose name the certificates
representing the BNI Common Stock into which such Shares were converted are
registered, (1) all dividends and other distributions in respect of BNI Common
Stock that are payable on a date subsequent to, and the record date for which
occurs after, the Effective Time and (2) all dividends or other distributions
in respect of Shares that are payable on a date subsequent to, and the record
date for which occurs before, the Effective Time.
SECTION 1.4. Stock Options. (a) At the Effective Time, each outstanding
option to purchase shares of SFP Common Stock (a "SFP Stock Option") granted
under any employee stock option or compensation plan or arrangement of SFP
shall be canceled and substituted with an option (a "BNI Option") to acquire
BNI Common Stock. Such cancellation and substitution shall comply in all
respects with, and shall be performed in accordance with, the methodology
prescribed by the provisions of Section 424(a) of the Code and the regulations
thereunder, and each BNI Option shall provide the option holder with rights and
benefits that are no less favorable to him than were provided under the SFP
Stock Option for which it was substituted.
(b) At or as soon as practicable after the Effective Time, BNI shall issue to
each holder of an SFP Stock Option which is cancelled pursuant to Section
1.4(a) an agreement that accurately reflects the terms of the BNI Option
substituted therefor as contemplated by Section 1.4(a).
(c) BNI shall take all corporate actions necessary to reserve for issuance
such number of shares of BNI Common Stock as will be necessary to satisfy
exercises in full of all BNI Options after the Effective Time. With respect to
such BNI Common Stock, BNI shall (i) as soon as practicable after the Effective
Time file with the Securities and Exchange Commission ("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 "1933 Act") and (ii) file with the New
York Stock Exchange, Inc. (the "NYSE") a listing application and use its
reasonable best efforts to have such shares admitted to trading thereon upon
exercises of BNI Options. BNI shall also use its reasonable best efforts to
ensure that all incentive stock options within the meaning of the Code continue
to qualify as such at all times after the Effective Time.
SECTION 1.5. Adjustments. If, prior to the Effective Time, BNI or SFP (as the
case may be) should split or combine the BNI Common Stock or the SFP Common
Stock, or pay a stock dividend or other stock distribution in BNI Common Stock
or SFP Common Stock, or otherwise change the BNI Common Stock or SFP Common
Stock into any other securities, or make any other dividend or distribution in
respect of the BNI Common Stock or the SFP Common Stock (other than the
Spinoff, stock options permitted or contemplated by this Agreement, and normal
dividends as the same may be adjusted from time to time in accordance with this
Agreement), then the Exchange Ratio will be appropriately adjusted to reflect
such split, combination, dividend or other distribution or change.
SECTION 1.6. Closing. The closing of the Merger (the "Closing") shall take
place (i) at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New
York, New York, at 10:00 A.M. on the second business
A-3
<PAGE>
day after all the conditions set forth in Article IX (other than those that are
waived by the party or parties for whose benefit such conditions exist) are
satisfied or (ii) at such other place and/or time and/or on such other date as
the parties may agree. The date upon which the Closing shall occur is herein
called the "Closing Date".
SECTION 1.7. Fractional Shares. No certificates or scrip representing
fractional shares of BNI Common Stock will be issued in the Merger, but in lieu
thereof each holder of Shares otherwise entitled to a fractional share of BNI
Common Stock will be entitled to receive, from the Exchange Agent in accordance
with the provisions of this Section 1.7, a cash payment in lieu of such
fractional shares of BNI Common Stock representing such holder's proportionate
interest in the net proceeds from the sale by the Exchange Agent in one or more
transactions (which sale transactions shall be made at such times, in such
manner and on such terms as the Exchange Agent shall determine in its
reasonable discretion) on behalf of all such holders of the aggregate of the
fractional shares of BNI Common Stock which would otherwise have been issued
(the "Excess Shares"). The sale of the Excess Shares by the Exchange Agent
shall be executed on the NYSE through one or more member firms of the NYSE and
shall be executed in round lots to the extent practicable. Until the net
proceeds of such sale or sales have been distributed to the holders of Shares,
the Exchange Agent will hold such proceeds in trust (the "Common Shares Trust")
for the holders of the Shares. BNI shall pay all commissions, transfer taxes
and other out-of-pocket transaction costs, including the expenses and
compensation of the Exchange Agent, incurred in connection with this sale of
the Excess Shares. The Exchange Agent shall determine the portion of the Common
Shares Trust to which each holder of Shares shall be entitled, if any, by
multiplying the amount of the aggregate net proceeds comprising the Common
Shares Trust by a fraction the numerator of which is the amount of the
fractional BNI Common Stock Interest to which such holder of Shares is entitled
and the denominator of which is the aggregate amount of fractional share
interests to which all holders of Shares are entitled. As soon as practicable
after the determination of the amount of cash, if any, to be paid to holders of
Shares in lieu of any fractional shares of BNI Common Stock, the Exchange Agent
shall make available such amounts to such holders of Shares without interest.
SECTION 1.8. Alternative Transaction Structure. (a) At any time prior to the
Effective Time, either BNI or SFP, in its sole discretion, may notify the other
party (the "Alternative Merger Notice") that it has determined to restructure
the transaction in the manner contemplated by this Section 1.8. Upon delivery
of the Alternative Merger Notice in the manner set forth in Section 11.1 hereof
(the "Alternative Election"), the Merger contemplated by Section 1.1 of this
Agreement shall be restructured in the manner set forth in this Section 1.8. In
such event, all references to the term "Merger" in this Agreement shall be
deemed references to the transactions contemplated by this Section 1.8, all
references to the term "Surviving Corporation" shall be deemed references to
BNSF Corporation, a Delaware corporation ("BNSF"), all references to the term
"Effective Time" in this Agreement shall be deemed references to the time at
which the certificates of merger are duly filed with the Secretary of State of
the State of Delaware (or at such later time as is specified in the certificate
of merger) with respect to the Merger as restructured in the manner
contemplated by this Section 1.8 and Sections 1.2(a), 1.2(b), 1.4 and 1.7 shall
no longer be of any force or effect and the provisions of this Section 1.8
shall govern the terms of the Merger. Prior to the Effective Time, BNSF will be
controlled equally by BNI and SFP. The Merger, restructured as contemplated by
this Section 1.8, is sometimes referred to as the "Alternative Merger".
(b) Prior to the Effective Time, BNSF will be controlled equally by BNI and
SFP. Prior to the Effective Time of the Alternative Merger, BNI and SFP will
cause BNSF to incorporate two wholly owned subsidiaries as Delaware
corporations ("BNI Merger Sub" and "SFP Merger Sub"). At the Effective Time of
the Alternative Merger, (i) BNI Merger Sub will be merged with and into BNI in
accordance with Delaware Law, whereupon the separate existence of BNI Merger
Sub shall cease, and BNI shall be the surviving corporation, and (ii) SFP
Merger Sub will be merged with and into SFP in accordance with Delaware Law,
whereupon the separate existence of SFP Merger Sub shall cease, and SFP shall
be the surviving corporation.
A-4
<PAGE>
(c) At the Effective Time of the Alternative Merger, (i) each share of SFP
Common Stock outstanding immediately prior to such Effective Time shall, except
as otherwise provided in Section 1.8(d) below, be converted into 0.40 shares of
the common stock of BNSF, no par value (the "BNSF Common Stock"), and (ii) each
share of BNI Common Stock outstanding immediately prior to such Effective Time
shall, except as otherwise provided in Section 1.8(d) below, be converted into
1.0 share of BNSF Common Stock.
(d) Each share of BNI Common Stock or SFP Common Stock (other than the SFP
Common Stock owned by BNI, which shall remain outstanding) held by either of
BNI or SFP as treasury stock or owned by BNI, SFP or any Subsidiary of either
of them immediately prior to the Effective Time of the Alternative Merger shall
be cancelled and no payments shall be made with respect thereto.
(e) The BNSF Common Stock to be received as consideration in the Alternative
Merger by holders of BNI Common Stock or SFP Common Stock is referred to herein
as the "Merger Consideration".
(f) (i) At the Effective Time of the Alternative Merger, each outstanding
option to purchase shares of SFP Common Stock (a "SFP Stock Option") or BNI
Common Stock (or "BNI Stock Option") granted under any employee stock option or
compensation plan or arrangement of SFP or BNI, as the case may be, shall be
cancelled and substituted with an option (a "BNSF Option") to acquire BNSF
Common Stock. Such cancellation and substitution shall comply in all respects
with, and shall be performed in accordance with, the methodology prescribed by
the provisions of Section 424(a) of the Code and the regulations thereunder,
and each BNSF Option shall provide the option holder with rights and benefits
that are no less favorable to him than were provided under the SFP Stock Option
or BNI Stock Option for which it was substituted.
(ii) At or as soon as possible after the Effective Time of the Alternative
Merger, BNSF shall issue to each holder of an SFP Stock Option or BNI Stock
Option which is cancelled pursuant to Section 1.8(f)(i) an agreement that
accurately reflects the terms of the BNSF Option substituted therefor as
contemplated by Section 1.8(f)(i).
(iii) BNSF shall take all corporate actions necessary to reserve such number
of shares of BNSF Common Stock as will be necessary to satisfy exercises in
full of all BNSF Options after the Effective Time. With respect to such BNSF
Common Stock, BNSF shall (i) as soon as practicable after the Effective Time of
the Alternative Merger 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 1933 Act and (ii) file with the
NYSE a listing application and use its reasonable best efforts to have such
shares admitted to trading thereon upon exercises of BNSF Options. BNSF shall
also use its reasonable best efforts to ensure that all incentive stock options
within the meaning of the Code continue to qualify as such at all times after
such Effective Time.
(g) No certificates or scrip representing fractional shares of BNSF Common
Stock will be issued in the Alternative Merger, but in lieu thereof each holder
of SFP Common Stock otherwise entitled to a fractional share of BNSF Common
Stock will be entitled to receive, from the Exchange Agent in accordance with
the provisions of this Section 1.8 , a cash payment in lieu of such fractional
shares of BNSF Common Stock which would otherwise have been issued (the "Excess
Shares"). The sale of the Excess Shares by the Exchange Agent shall be executed
on the NYSE through one or more member firms of the NYSE and shall be executed
in round lots to the extent practicable. Until the net proceeds of such sale or
sales have been distributed to the holders of SFP Common Stock, the Exchange
Agent will hold such proceeds in trust (the "Common Shares Trust") for the
holders of the SFP Common Stock. BNSF shall pay all commissions, transfer taxes
and other out-of-pocket transaction costs, including the expenses and
compensation of the Exchange Agent, incurred in connection with this sale of
the Excess Shares. The Exchange Agent shall determine the portion of the Common
Shares Trust to which each holder of SFP Common Stock shall be entitled, if
any, by multiplying the amount of the aggregate net proceeds comprising the
Common Shares Trust by a fraction the numerator of which is the amount of the
fractional BNSF Common Stock interest to which such holder of SFP Common Stock
is entitled and the denominator of which is the aggregate amount of fractional
share
A-5
<PAGE>
interests to which such holder of SFP Common Stock is entitled. As soon as
practicable after the determination of the amount of cash, if any, to be paid
to holders of SFP Common Stock in lieu of any fractional shares of BNSF Common
Stock, the Exchange Agent shall make available such amounts to such holders of
SFP Common Stock without interest.
(h) Immediately prior to the Effective Time of the Alternative Merger, BNSF
will become a party to this Agreement, assume all obligations of BNI hereunder
in its capacity as the Surviving Corporation and make the following
representations and warranties to each of BNI and SFP:
(i) Corporate Existence and Power. At the Effective Time, BNSF will be a
corporation duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation and will have all corporate
powers and all material governmental licenses, authorizations, consents and
approvals required to carry on the businesses of BNI and SFP as such
business are now conducted. At the Effective Time, BNSF will be duly
qualified to do business as a foreign corporation and will be 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 on BNSF.
(ii) Corporate Authorization. At the Effective Time, the execution,
delivery and performance by BNSF of this Agreement and the consummation by
BNSF of the transactions contemplated hereby will be within the corporate
powers of BNSF and will have duly authorized by all necessary corporate
action on the part of BNSF. At the Effective Time, this Agreement will
constitute a valid and binding agreement of BNSF.
(iii) Governmental Authorization. At the Effective Time, the execution,
delivery and performance by BNSF of this Agreement and the consummation of
the Merger by BNSF will require no action by or in respect of, or filing
with, any governmental body, agency, official or authority other than (i)
the filing of a certificate of merger in accordance with Delaware Law; (ii)
compliance with any applicable requirements of the Exchange Act; (iii)
compliance with the applicable requirements of the 1933 Act; (iv)
compliance with any applicable foreign or state securities or Blue Sky
laws; (v) immaterial actions or filings relating to ordinary operational
matters; and (vi) actions that have theretofore been taken or filings that
have theretofore been made.
(iv) Non-Contravention. At the Effective Time, the execution, delivery
and performance by BNSF of this Agreement and the consummation by BNSF of
the transactions contemplated hereby will not (except, in the case of
clauses (B), (C) and (D) of this Section 1.8(h)(iv), for any such matters
that singly or in the aggregate have not had, and would not reasonably by
expected to have, a Material Adverse Effect on BNSF (A) contravene or
conflict with the certificate of incorporation or bylaws of BNSF, (B)
assuming compliance with the matters referred to in Section 1.8(h)(iii),
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 BNSF or any Subsidiary of BNSF, (C) constitute a default
under or give rise to any right of termination, cancellation or
acceleration of any right or obligation of BNSF or any of its Subsidiaries
or to a loss of any benefit to which BNSF or any of its Subsidiaries is
entitled under any agreement, contract or other instrument binding upon
BNSF or any of its Subsidiaries or any license, franchise, permit or other
similar authorization held by BNSF or any of its Subsidiaries or (D) result
in the creation or imposition of any Lien on any asset of BNSF or any
Subsidiary of BNSF.
(i) Prior to the Effective Time of the Alternative Merger, BNI and SFP shall
ensure that BNSF, BNI Merger Sub and SFP Merger Sub take no actions and
undertake no operations except as may be necessary in connection with the
consummation of the Merger and the transactions contemplated hereby.
(j) At the time of the Alternative Election, and without any further action
on the part of either SFP or BNI, this Agreement shall be deemed to have been
amended as follows:
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(i) The phrase "BNSF," will be added (x) between the phrase "operation of
the business of" and the phrase "BNI, SFP and their" in Section 9.1(iii)
and (y) between the phrase "impose on" and "BNI, SFP or any" in clause (3)
of Section 9.1(v).
(ii) A new Section 9.2(iii) and 9.3(v) will be added as follows:
BNSF shall have performed in all material respects all of its obligations
hereunder required to be performed by it at or prior to the Effective Time,
and the representations and warranties of BNSF shall have been accurate in
all material respects at and as of the Effective Time.
(iii) Section 9.3(ii) shall be amended to read in its entirety as
follows:
(iv) the BNSF Common Stock required to be issued hereunder shall have
been approved for listing on the NYSE, subject to official notice of
issuance.
(k) BNI and SFP agree that in the event of the Alternative Election, any
other appropriate adjustments shall be made to the other terms and conditions
of this Agreement to reflect the transactions contemplated by this Section 1.8
with a view to ensuring that the parties hereto and their stockholders are
placed in a position that is as close as possible to the position they would
have been in but for such restructuring.
ARTICLE II
CERTAIN MATTERS RELATING TO BNI
AND THE SURVIVING CORPORATION
SECTION 2.1. Directors of the Surviving Corporation. The board of directors
of the Surviving Corporation will be constituted as follows: two-thirds of the
directors will be designated by BNI, and one-third of the directors will be
designated by SFP.
SECTION 2.2. Certificate of Incorporation and Bylaws of the Surviving
Corporation. (a) The certificate of incorporation of BNI in effect at the
Effective Time shall be the certificate of incorporation of the Surviving
Corporation until amended in accordance with applicable law.
(b) The bylaws of BNI in effect at the Effective Time shall be the bylaws of
the Surviving Corporation until amended in accordance with applicable law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SFP
SFP represents and warrants to BNI that, except as disclosed in Schedule III
hereto:
SECTION 3.1. Corporate Existence and Power. SFP 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. SFP 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 on SFP. SFP has heretofore delivered to BNI true and complete
copies of SFP's certificate of incorporation and bylaws as currently in effect.
For purposes of this Agreement, a "Material Adverse Effect" means, with respect
to any Person, a material adverse effect, whether existing or prospective, on
the financial condition, business or properties of such Person and its
Subsidiaries taken as a whole or on the ability of such Person to perform its
obligations hereunder. For purposes of this Agreement, any reference to any
event, change or effect being "material" with respect to any Person means an
event, change or effect, whether existing or prospective, which is material
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in relation to the financial condition, business or properties of such Person
and its Subsidiaries taken as a whole or on the ability of such Person to
perform its obligations hereunder.
SECTION 3.2. Corporate Authorization. The execution, delivery and performance
by SFP of this Agreement and the consummation by SFP of the transactions
contemplated hereby are within SFP's corporate powers and, except as set forth
in the next sentence, have been duly authorized by all necessary corporate
action. The affirmative vote of the holders of a majority of the outstanding
shares of SFP Common Stock entitled to vote thereon is the only vote of any
class or series of SFP capital stock necessary to approve this Agreement and
the transactions contemplated hereby. This Agreement constitutes a valid and
binding agreement of SFP.
SECTION 3.3. Governmental Authorization. The execution, delivery and
performance by SFP of this Agreement and the consummation of the Offer and the
Merger by SFP require no action by or in respect of, or filing with, any
governmental body, agency, official or authority other than (i) the filing of a
certificate of merger in accordance with Delaware Law; (ii) compliance with any
applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976 (the "HSR Act"); (iii) compliance with any applicable requirements
relating to approval of the Merger by the Interstate Commerce Commission (the
"ICC"); (iv) compliance with any applicable requirements of the Exchange Act;
(v) compliance with any applicable requirements of the 1933 Act; (vi)
compliance with any applicable foreign or state securities or Blue Sky Laws;
and (vii) immaterial actions or filings relating to ordinary operational
matters.
SECTION 3.4. Non-Contravention. The execution, delivery and performance by
SFP of this Agreement and the consummation by SFP of the transactions
contemplated hereby do not and will not (except in the case of clauses (ii),
(iii) and (iv) of this Section 3.4, for any such matters that singly or in the
aggregate have not had, and would not reasonably be expected to have, a
Material Adverse Effect on SFP) (i) contravene or conflict with the certificate
of incorporation or bylaws of SFP, (ii) assuming compliance with the matters
referred to in Section 3.3. 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 SFP or any of its Subsidiaries, (iii)
constitute a default under or give rise to a right of termination, cancellation
or acceleration of any right or obligation of SFP or any of its Subsidiaries or
to a loss of any benefit to which SFP or any of its Subsidiaries is entitled
under any provision of any agreement, contract or other instrument binding upon
SFP or any of its Subsidiaries or any license, franchise, permit or other
similar authorization held by SFP or any of its Subsidiaries, or (iv) result in
the creation or imposition of any Lien on any asset of SFP or any of its
Subsidiaries. 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 3.5. Capitalization. (a) The authorized capital stock of SFP consists
of six hundred million (600,000,000) shares of SFP Common Stock and two hundred
million (200,000,000) shares of preferred stock, $1.00 par value per share
("SFP Preferred Stock"). As of May 31, 1994, there were outstanding (i)
186,391,459 shares of SFP Common Stock and 3,629,728 shares were held in
treasury, (ii) no shares of SFP Preferred Stock and (iii) employee stock
options to purchase an aggregate of 9,953,575 Shares (of which options to
purchase an aggregate of 7,004,884 Shares were exercisable). As of May 31,
1994, a total of 12,000,000 shares of SFP Common Stock were approved for awards
under the SFP Long-Term Incentive Stock Plan, of which 5,281,405 remain
available for grant. All outstanding shares of capital stock of SFP have been
duly authorized and validly issued and are fully paid and nonassessable. Except
as set forth in this Section or as contemplated by Section 5.1 and except for
the exercise of employee stock options outstanding on May 31, 1994 or issued
since that date in accordance with Section 5.1, there are outstanding (x) no
shares of capital stock or other voting securities of SFP, (y) no securities of
SFP or any of its Subsidiaries convertible into or exchangeable for shares of
capital stock or voting securities of SFP and (z) no options or other rights to
acquire from SFP or any of its Subsidiaries, and no obligation of SFP or any of
its Subsidiaries to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of SFP
(the items in clauses (x), (y) and (z) being referred to collectively as the
"SFP Securities").
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There are no outstanding obligations of SFP or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any SFP Securities, except for the
Offer.
(b) As of the date hereof, there are no outstanding bonds, debentures, notes
or other indebtedness of SFP having the right to vote (or convertible into or
exercisable for SFP Securities having the right to vote) on any matters upon
which holders of SFP Common Stock may vote (collectively, "SFP Voting Debt").
SECTION 3.6. Material Subsidiaries. (a) Each Subsidiary of SFP as of the date
of this Agreement is identified on Schedule 3.6(a). For purposes of this
Agreement, the term "SFP Material Subsidiary" means each Subsidiary of SFP
identified as material on Schedule 3.6(a). Each SFP Material Subsidiary is
either (i) a corporation that is 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 on
SFP, or (ii) a partnership that is duly formed and in good standing under the
laws of its jurisdiction of formation and has all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted and is duly qualified to do business 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 on
SFP.
(b) Except as set forth in the SFP Form 10-K (as defined in Section 3.7), all
of the outstanding capital stock of, or other ownership interests in, each SFP
Subsidiary is owned by SFP, 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). Other than the Variable Rate Exchangeable Debentures Due
2010 issued by SFP Pipeline Holdings, Inc. and those obligations identified on
Schedule 3.6(b), there are no outstanding (i) securities of SFP or any of its
Subsidiaries convertible into or exchangeable for shares of capital stock or
other voting securities or ownership interests in any Subsidiary of SFP, or
(ii) options or other rights to acquire from SFP or any of its Subsidiaries,
and no other obligation of SFP or any of its Subsidiaries 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 SFP Subsidiary (the capital stock of each
Subsidiary of SFP, together with the items in clauses (i) and (ii), being
referred to collectively as the "SFP Subsidiary Securities"). There are no
outstanding obligations of SFP or any Subsidiary of SFP to repurchase, redeem
or otherwise acquire any outstanding SFP Subsidiary Securities.
SECTION 3.7. SEC Filings. (a) SFP has delivered to BNI (i) its annual reports
on Form 10-K for its fiscal years ended December 31, 1989, December 31, 1990,
December 31, 1991, December 31, 1992, and December 31, 1993 (this latest Form
10-K being referred to herein as the "SFP Form 10-K"), (ii) its quarterly
report on Form 10-Q for its fiscal quarter ending March 31, 1994 (this Form 10-
Q being referred to herein as the "SFP Form 10-Q"), (iii) its proxy statements
(as defined in Regulation 14A issued pursuant to the Exchange Act) relating to
meetings of the stockholders of SFP held since January 1, 1989, (iv) its report
on Form 8-K dated June 25, 1993, as amended, and (v) all other reports,
statements, schedules and registration statements filed by SFP and its
Subsidiaries with the SEC since January 1, 1989 and through the date of this
Agreement, but including only such pre-effective amendments to such
registration statements as contain material information not fully reflected in
any subsequent amendment to such registration statements (or to any prospectus
included therein) delivered to BNI pursuant to this Section 3.7.
(b) As of its filing date, each such report or statement, as supplemented or
amended, if applicable, filed pursuant to the Exchange Act did not contain any
untrue statement of a material fact or omit to state any
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material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
(c) Each such registration statement, as supplemented or amended, if
applicable, filed pursuant to the 1933 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 3.8. Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of SFP
included in the SFP Form 10-K and the SFP Form 10-Q fairly present, in
conformity with generally accepted accounting principles applied on a
consistent basis (except as may be indicated in the notes thereto), the
consolidated financial position of SFP and its consolidated Subsidiaries as of
the dates thereof, their consolidated results of operations and cash flows for
the periods then ended (subject to normal year-end adjustments in the case of
the unaudited consolidated interim financial statements) and, in the case of
the SFP Form 10-K, stockholders' equity. For purposes of this Agreement, "SFP
Balance Sheet" means the Consolidated Balance Sheet of SFP as of December 31,
1993 set forth in the SFP Form 10-K, and "Balance Sheet Date" means December
31, 1993.
SECTION 3.9. Disclosure Documents. (a) Each document required to be filed by
SFP with the SEC in connection with the transactions contemplated by this
Agreement (the "SFP Disclosure Documents"), including, without limitation, (i)
the SFP Offer Documents to be filed with the SEC in connection with the Offer
and (ii) the definitive proxy statement of SFP (the "SFP Proxy Statement") to
be filed with the SEC in connection with the Merger, 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. At the time the
offer to purchase and form of related letter of transmittal contained in the
SFP Offer Documents or any amendment or supplement thereto are first mailed to
stockholders of SFP and at the time of consummation of the Offer, the SFP Offer
Documents, as supplemented or amended, if applicable, will not contain any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading. At the time the SFP Proxy Statement
or any amendment or supplement thereto is first mailed to stockholders of SFP
and at the time such stockholders vote on adoption of this Agreement, the SFP
Proxy Statement, as supplemented or amended, if applicable, 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 light of the
circumstances under which they were made, not misleading. At the time of the
filing of any SFP Disclosure Document other than the SFP Offer Documents and
the SFP Proxy Statement and at the time of any distribution thereof, such SFP
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 light of the circumstances under which they were made, not
misleading. The representations and warranties contained in this Section 3.9(a)
will not apply to statements or omissions included in SFP Disclosure Documents
based upon information furnished to SFP in writing by BNI specifically for use
therein.
(b) The registration statements on Form S-1 (the "Form S-1") and the
registration statement on Form 10 (the "Form 10") filed by SFP in connection
with the Spinoff, and any amendments or supplements thereto, or other
appropriate filings made to register the stock of the Spinoff Company under the
1933 Act or the Exchange Act, as amended and supplemented (the "Spinoff
Registration Documents"), when they became effective, complied as to form in
all material respects with the applicable requirements of the 1933 Act and the
Exchange Act. At the time of the effectiveness and at the time that the sale of
securities pursuant to the Spinoff Registration Documents was consummated, the
Spinoff Registration Documents 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 light of the circumstances under which they were
made, not misleading. The representations and warranties contained in this
Section 3.9(b) shall not apply to statements or omissions included in the
Spinoff Registration Documents based upon information furnished to SFP in
writing by BNI specifically for use therein.
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SECTION 3.10. Information Supplied. The information supplied or to be
supplied by SFP for inclusion or incorporation by reference in (i) the BNI
Offer Documents or any amendment or supplement thereto will not, at the time
the offer to purchase and form of related letter of transmittal contained in
the BNI Offer Documents or any amendment or supplement thereto are first mailed
to stockholders of SFP and at the time of the consummation of the Offer,
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 light of the
circumstances under which they were made, not misleading, (ii) the BNI Proxy
Statement or any amendment or supplement thereto will not, at the time the BNI
Proxy Statement is first mailed to stockholders of BNI and at the time such
stockholders vote on adoption of this Agreement, 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 light of the circumstances under which
they were made, not misleading, (iii) any BNI Disclosure Document (other than
the BNI Offer Documents and the BNI Proxy Statement) will not, at the time of
effectiveness of such BNI Disclosure Document and at the time of any
distribution thereof 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 light of the circumstances under which they were made, not misleading, and
(iv) the Form S-4 (as defined in Section 7.3(a)) will not, at the time the Form
S-4 becomes effective under the 1933 Act and at the Effective Time, 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 light of the circumstances
under which they were made, not misleading.
SECTION 3.11. No Material Adverse Changes. Except as contemplated by this
Agreement or as publicly disclosed prior to the date of this Agreement, and
except as set forth in Schedule 3.11, since the Balance Sheet Date, SFP and the
SFP Material 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 reasonably could be expected to have a Material
Adverse Effect on SFP (other than as a result of (i) changes in conditions,
including economic or political developments, applicable to the railroad
industry generally and (ii) the Spinoff); or
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of SFP capital stock (other than
(x) aggregate cash dividends on the Shares not in excess of $0.10 per Share
in 1994, $0.18 per Share in 1995, $0.20 per Share in 1996 and $0.22 per
Share in 1997, in each case having record and payment dates determined in
accordance with Section 7.8 and (y) the Spinoff).
SECTION 3.12. Undisclosed Material Liabilities. Except for (i) liabilities
reflected in the SEC Reports listed in Section 3.7 and (ii) liabilities
incurred in the ordinary course of business of SFP and its Subsidiaries
consistent with past practice subsequent to the Balance Sheet Date, SFP and its
Subsidiaries have no liabilities that are material to SFP and there is no
existing condition or set of circumstances which would reasonably be expected
to result in such a liability; provided, however, that this representation does
not cover, and shall not be deemed to be breached as a result of, any such
liability that results primarily from a Customary Action (as defined in Section
5.1 below).
SECTION 3.13. Litigation. Except as set forth in the SFP Form 10-K or the SFP
Form 10-Q, and except as set forth in the Joint Proxy Statement/Prospectus of
SFP and BNI dated October 12, 1994 and the Supplemental Joint Proxy
Statement/Prospectus thereto dated October 28, 1994, (i) there is no action,
suit, investigation or proceeding (or any basis therefor) pending against, or
to the knowledge of SFP threatened against or affecting, SFP or any of its
Subsidiaries or any of their respective properties before any court or
arbitrator or any governmental body, agency or official where there is a
reasonable probability of a determination adverse to SFP or any of its
Subsidiaries which could reasonably be expected to have a Material Adverse
Effect on SFP and (ii) as of the date of this Agreement, there is no such
action, suit, investigation or proceeding which in any manner challenges or
seeks to prevent, enjoin, alter or materially delay the Merger, the Spinoff or
any of the other transactions contemplated hereby.
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SECTION 3.14. Taxes. Except as set forth in the SFP Balance Sheet (including
the notes thereto) or on Schedule 3.14, (i) all material tax returns,
statements, reports and forms (collectively, the "SFP Returns") required to be
filed with any taxing authority as of the date hereof by, or with respect to,
SFP and its Subsidiaries have been filed in accordance with all applicable
laws; (ii) SFP and its Subsidiaries have timely paid all taxes shown as due and
payable on the SFP Returns that have been so filed and as of the time of filing
the SFP Returns correctly reflected the facts regarding the income, business,
assets, operations, activities and the status of SFP and its Subsidiaries in
all material respects; (iii) SFP and its Subsidiaries have made provision for
all material taxes payable by SFP and its Subsidiaries for which no Return has
yet been filed or in respect of which a final determination has been made; (iv)
the charges, accruals and reserves for taxes with respect to SFP and its
Subsidiaries reflected in the SFP Balance Sheet are adequate under generally
accepted accounting principles to cover the tax liabilities accruing through
the date thereof; and (v) as of the date of this Agreement, there is no action,
suit, proceeding, investigation, audit or claim now proposed or pending against
or with respect to SFP or any of its Subsidiaries in respect of any tax where
there is a reasonable possibility of a determination or decision against SFP or
any of its Subsidiaries which would reasonably be expected to have a Material
Adverse Effect on SFP.
SECTION 3.15. ERISA. (a) Schedule III identifies (i) each "employee benefit
plan", as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974 ("ERISA") (other than multiemployer plans (as defined in Section
3(37) of ERISA)), and (ii) each employment, severance or other similar
contract, arrangement or policy and each retirement or deferred compensation
plan, stock plan, incentive compensation plan, vacation pay, severance pay,
bonus or benefit arrangement, insurance (including self-insured arrangements)
or hospitalization program, workers' compensation program, disability program,
supplemental unemployment program or fringe benefit arrangement, whether
maintained pursuant to contract or informal understanding, which does not
constitute an "employee benefit plan" (as defined in Section 3(3) of ERISA),
which, in the case of items described in both clauses (i) and (ii), is
maintained, administered or contributed to by SFP or any of its ERISA
Affiliates (as defined below), and covers any employee or former employee of
SFP or any of its Subsidiaries or with respect to which SFP or any of its ERISA
Affiliates has any liability (collectively, the "SFP Employee Plans"). True and
correct copies of each of the SFP Employee Plans, all amendments thereto, any
written interpretations thereof distributed to employees, and all contracts
relating thereto or the funding thereof, including, without limitation, all
trust agreements, insurance contracts, administration contracts, investment
management agreements, subscription and participation agreements, recordkeeping
agreements and summary plan descriptions, all as currently in effect, have been
furnished or made available to BNI. SFP has supplied or made available to BNI
an accurate description of any SFP Employee Plan that is not in written form.
To the extent applicable, true and correct copies of the three most recent
annual reports (Form 5500 including, if applicable, Schedule B thereto)
prepared in connection with any SFP Employee Plan and the most recent actuarial
valuation report prepared in connection with any such plan have been furnished
or made available to BNI. For purposes of this Agreement, "ERISA Affiliate" of
any Person means any other Person which, together with such Person, would be
treated as a single employer under Section 414 of the Code. SFP has made
available to BNI with complete age, salary, service and related data as of the
most recent practical date for employees and former employees of SFP and any of
its Subsidiaries covered under the SFP Employee Plans.
(b) The only SFP Employee Plans that are subject to Title IV of ERISA (the
"SFP Pension Plans") are identified in the list of such plans provided or made
available to BNI by SFP in accordance with Section 3.15(a). As of the most
recent valuation date of each SFP Pension Plan, the present value of all
benefits accrued under each SFP Pension Plan determined on a termination basis
using the assumptions established by the Pension Benefit Guaranty Corporation
(the "PBGC") as in effect on such date was exceeded by the fair market value of
the assets of such SFP Pension Plan (excluding for these purposes any accrued
but unpaid contributions). No "accumulated funding deficiency", as defined in
Section 412 of the Code, has been incurred with respect to any SFP Pension
Plan, whether or not waived. SFP knows of no "reportable event", within the
meaning of Section 4043 of ERISA and the regulations promulgated thereunder,
and no event described in Section 4041 (other than a standard termination),
4042, 4062 or 4063 of ERISA has occurred in connection
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with any SFP Pension Plan, other than a "reportable event" that will not have a
Material Adverse Effect on SFP. No condition exists and no event has occurred
that could constitute grounds for termination of or the appointment of a
trustee to administer any SFP Pension Plan under Section 4042 of ERISA and, to
SFP's knowledge, neither SFP nor any of its ERISA Affiliates has engaged in, or
is a successor or parent corporation to an entity that has engaged in, a
transaction for which SFP or any of its ERISA Affiliates would have liability
under Section 4069 or 4212(c) of ERISA. To SFP's knowledge, nothing done or
omitted to be done and no transaction or holding of any asset under or in
connection with any SFP Employee Plan has or will make SFP or any of its ERISA
Affiliates or any officer or director of SFP or any of its ERISA Affiliates
subject to any liability under Title I or Section 4071 of ERISA or liable for
any tax pursuant to Section 4975 or Chapters 43, 47, or 68 of the Code that
could have a Material Adverse Effect.
(c) Each SFP Employee Plan which is intended to be qualified under Section
401(a) of the Code is so qualified and has been so qualified during the period
from its adoption to date, and each trust forming a part thereof is exempt from
tax pursuant to Section 501(a) of the Code. SFP has furnished or made available
to BNI copies of the most recent Internal Revenue Service determination letters
with respect to each such SFP Employee Plan. Each SFP Employee Plan has been
maintained in substantial compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations, including
but not limited to ERISA and the Code, which are applicable to such SFP
Employee Plan.
(d) None of the payments contemplated by the contracts, plans or arrangements
covering any employee or former employee of SFP or any of its ERISA Affiliates
and arising solely as a result of the transactions contemplated hereby would,
in the aggregate, constitute excess parachute payments as defined in Section
280G of the Code (without regard to subsection (b)(4) thereof).
(e) Except for obligations arising pursuant to any collective bargaining
agreements, no condition exists that would prevent SFP or any of its
Subsidiaries from amending or terminating any SFP Employee Plan providing
health or medical benefits in respect of any active or former employees of SFP
and its Subsidiaries.
(f) There has been no amendment to, written interpretation or announcement
(whether or not written) by SFP or any of its ERISA Affiliates relating to, or
change in employee participation or coverage under, any SFP Employee Plan which
would increase materially the expense of maintaining such SFP Employee Plan
above the level of the expense incurred in respect thereof for the fiscal year
ended on the Balance Sheet Date.
(g) To the extent applicable, each SFP Employee Plan which constitutes a
"group health plan" (as defined in Section 607(1) of ERISA or Section
4980B(g)(2) of the Code), including any plans of current or former affiliates
which must be taken into account under Sections 4980B and 414(t) of the Code or
Section 601 of ERISA, has been operated in substantial compliance with
applicable law, including the group health plan continuation coverage
requirements of Section 4980B of the Code and Section 601 of ERISA.
(h) There are no actions, suits or claims (other than routine claims for
benefits) pending or, to SFP's knowledge, threatened involving any SFP Employee
Plan or the assets thereof and no facts exist with could give rise to any such
actions, suits or claims (other than routine claims for benefits).
(i) SFP has provided or will promptly provide BNI with a list of each
employee pension benefit plan (as defined in Section 3(2) of ERISA) which is a
multiemployer plan with respect to which SFP or any of its ERISA Affiliates may
have any liability (including any liability attributable to a current or former
member of SFP's or any of its ERISA Affiliates' "controlled group" (as defined
in Section 4001(a)(14) of ERISA)) and the maximum amount of such liability
(determined as if a complete withdrawal occurred with respect to each such plan
immediately after the Effective Time). With respect to each such plan, (i) all
contributions have been made as required by the terms of the plans, the terms
of any collective bargaining agreements and applicable law, (ii) neither SFP
nor any of its ERISA Affiliates has withdrawn, partially withdrawn or received
any notice of any claim or demand for withdrawal liability or partial
withdrawal liability that would
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have a Material Adverse Effect, and (iii) neither SFP nor any of its ERISA
Affiliates has received any notice that any such plan is in reorganization,
that increased contributions may be required to avoid a reduction in plan
benefits or the imposition of any excise tax, that any such plan is or has been
funded at a rate less than that required under Section 412 of the Code or that
any plan is or may become insolvent.
(j) As of the Balance Sheet Date, the Expected Postretirement Benefit
Obligation (as defined in Statement of Financial Accounting Standards No. 106)
in respect of postretirement health and medical benefits for current and former
employees of SFP or any of its Subsidiaries calculated by SFP's actuary using
reasonable actuarial assumptions was $291,200,000.
SECTION 3.16. Finders' Fees. Except for Goldman, Sachs & Co., a copy of whose
engagement agreement has been or will be provided to BNI, there is no
investment banker, broker, finder or other intermediary which has been retained
by or is authorized to act on behalf of SFP or any of its Subsidiaries who
might be entitled to any fee or commission from BNI or any of its affiliates
upon consummation of the transactions contemplated by this Agreement.
SECTION 3.17. Environmental Matters. (a) Except as set forth in the SFP Form
10-K or otherwise previously disclosed in writing by SFP to BNI, there are no
Environmental Liabilities (as defined below) of SFP that, individually or in
the aggregate, have had or would reasonably be expected to have a Material
Adverse Effect on SFP.
(b) As used in this Agreement, "Environmental Laws" means any and all
federal, state, local and foreign statutes, laws, judicial decisions,
regulations, ordinances, rules, judgments, orders, decrees, codes, plans,
injunctions, permits, concessions, grants, franchises, licenses, agreements and
governmental restrictions, whether now or hereafter in effect, relating to
human health, the environment or to emissions, discharges or releases of
pollutants, contaminants, Hazardous Substances or wastes into the environment,
including without limitation ambient air, surface water, ground water or land,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants,
contaminants, Hazardous Substances or wastes or the clean-up or other
remediation thereof. "Environmental Liabilities" with respect to any Person
means any and all liabilities of or relating to such Person or any of its
Subsidiaries (including any entity which is, in whole or in part, a predecessor
of such Person or any of its Subsidiaries), whether vested or unvested,
contingent or fixed, actual or potential, known or unknown, which (i) arise
under or relate to matters covered by Environmental Laws and (ii) relate to
actions occurring or conditions existing on or prior to the Closing Date.
"Hazardous Substances" means any toxic, radioactive, caustic or otherwise
hazardous substance, including petroleum, its derivatives, by-products and
other hydrocarbons, or any substance having any constituent elements displaying
any of the foregoing characteristics, including, without limitation, any
substance regulated under Environmental Laws.
SECTION 3.18. Takeover Statutes. No "fair price", "moratorium", "control
share acquisition" or other similar antitakeover statute or regulation enacted
under state or federal laws in the United States (each a "Takeover Statute"),
including, without limitation, Section 203 of the Delaware General Corporation
Law (the "DGCL"), applicable to SFP or any of its Subsidiaries is applicable to
the Merger or the other transactions contemplated hereby.
SECTION 3.19. Compliance With Laws. Except as publicly disclosed, and except
for any matter that would not reasonably be expected to have a Material Adverse
Effect on SFP, neither SFP nor any of its Subsidiaries is in violation of, or
has violated, any applicable provisions of any laws, statutes, ordinances or
regulations.
SECTION 3.20. Spinoff Dividend. The board of directors of SFP has declared
the Spinoff Dividend, and the Liquidation of Properties (as those terms are
defined in Section 3.21 below) has occurred prior to the date of this Agreement
in conformity with the Private Letter Ruling (as defined below).
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SECTION 3.21. Private Letter Ruling. SFP has received from the Internal
Revenue Service a valid and effective private letter ruling dated February 16,
1994 (and supplemented on May 18, 1994) (the "Private Letter Ruling") to the
effect that (i) the Spinoff qualifies as a tax-free distribution under Section
355 of the Code and (ii) the merger of SFP Properties, Inc. ("Properties") with
and into SFP (the "Liquidation") will be treated as a distribution by
Properties to SFP in complete liquidation of Properties within the meaning of
Section 322 of the Code. A copy of the Private Letter Ruling has been provided
to BNI.
SECTION 3.22. Excess Loss Accounts. The income that will be recognized, for
federal income tax purposes, upon the Spinoff arising from excess loss accounts
in the stock of the Spinoff Company and its subsidiaries will be approximately
$30 million.
SECTION 3.23. SFP Rights Agreement. Under the Rights Agreement between SFP
and First Chicago Trust Company of New York as Rights Agent, dated as of
November 28, 1994 (the "SFP Rights Agreement"), BNI will not become an
"Acquiring Person", no "Shares Acquisition Date" or "Distribution Date" (as
such terms are defined in the SFP Rights Agreement) will occur, and SFP's
shareholders will not be entitled to receive any benefits under the SFP Rights
Agreement as a result of the approval, execution or delivery of this Agreement,
the commencement or consummation of the Offer or the consummation of the
Merger.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BNI
BNI represents and warrants to SFP that, except as disclosed in Schedule IV
hereto:
SECTION 4.1. Corporate Existence and Power. BNI is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted. BNI 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 on BNI. BNI has heretofore delivered to SFP true and
complete copies of the certificates of incorporation and bylaws of BNI as
currently in effect.
SECTION 4.2. Corporate Authorization. The execution, delivery and performance
by BNI of this Agreement and the consummation by BNI of the transactions
contemplated hereby are within the corporate powers of BNI and, except as set
forth in the next sentence, have been duly authorized by all necessary
corporate action. The affirmative vote of the holders of a majority of the
outstanding shares of BNI Common Stock entitled to vote thereon is the only
vote of any class or series of BNI capital stock necessary to approve this
Agreement and the transactions contemplated hereby. This Agreement constitutes
a valid and binding agreement of BNI.
SECTION 4.3. Governmental Authorization. The execution, delivery and
performance by BNI of this Agreement and the consummation of the Offer and the
Merger by BNI require no action by or in respect of, or filing with, any
governmental body, agency, official or authority other than (i) the filing of a
certificate of merger in accordance with Delaware Law; (ii) compliance with any
applicable requirements of the HSR Act; (iii) compliance with any applicable
requirements relating to approval of the Merger by the ICC; (iv) compliance
with any applicable requirements of the Exchange Act; (v) compliance with the
applicable requirements of the 1933 Act; (vi) compliance with any applicable
foreign or state securities or Blue Sky laws; and (vii) immaterial actions or
filings relating to ordinary operational matters.
SECTION 4.4. Non-Contravention. The execution, delivery and performance by
BNI of this Agreement and the consummation by BNI of the transactions
contemplated hereby do not and will not
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(except, in the case of clauses (ii), (iii) and (iv) of this Section 4.4, for
any such matters that singly or in the aggregate have not had, and would not
reasonably be expected to have, a Material Adverse Effect on BNI) (i)
contravene or conflict with the certificate of incorporation or bylaws of BNI,
(ii) assuming compliance with the matters referred to in Section 4.3,
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 BNI or any Subsidiary of BNI, (iii) constitute a default under or
give rise to any right of termination, cancellation or acceleration of any
right or obligation of BNI or any of its Subsidiaries or to a loss of any
benefit to which BNI or any of its Subsidiaries is entitled under any
agreement, contract or other instrument binding upon BNI or any of its
Subsidiaries or any license, franchise, permit or other similar authorization
held by BNI or any of its Subsidiaries, or (iv) result in the creation or
imposition of any Lien on any asset of BNI or any Subsidiary of BNI.
SECTION 4.5. Capitalization. (a) The authorized capital stock of BNI consists
of three hundred million (300,000,000) shares of BNI Common Stock and twenty-
five million (25,000,000) shares of No Par Value Preferred Stock, including six
million nine hundred thousand (6,900,000) shares of 6 1/4% Cumulative
Convertible Preferred Stock, Series A No Par Value ("6 1/4% Convertible
Preferred Stock") and fifty million (50,000,000) shares of Class A Preferred
Stock, No Par Value ("Class A Preferred Stock"). As of May 31, 1994 there were
outstanding (i) 89,208,870 shares of BNI Common Stock (including 7,800 shares
issued after May 31, 1994 with effect prior to such date), 15,104,280 shares
were reserved for issuance pursuant to stock option plans, 303,532 shares were
reserved for issuance pursuant to "restricted stock" plans and 94,572 shares
were held in the treasury, (ii) six million nine hundred thousand (6,900,000)
shares of 6 1/4% Convertible Preferred Stock, (iii) no shares of Class A
Preferred Stock, and (iv) employee stock options to purchase an aggregate of
4,170,536 shares of BNI Common Stock (of which options to purchase an aggregate
of 2,925,611 shares were exercisable). All outstanding shares of capital stock
of BNI have been duly authorized and validly issued and are fully paid and
nonassessable. Except as set forth in this Section or as contemplated by
Section 6.1, except for the exercise of employee stock options outstanding on
May 31, 1994 or issued since that date in accordance with Section 6.1 and
except for changes since that date resulting from the conversion of shares of
the 6 1/4% Convertible Preferred Stock, there are outstanding (x) no shares of
capital stock or other voting securities of BNI, (y) no securities of BNI or
any of its Subsidiaries convertible into or exchangeable for shares of capital
stock or voting securities of BNI and (z) no options or other rights to acquire
from BNI or any of its Subsidiaries, and no obligation of BNI or any of its
Subsidiaries to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of BNI
(the items in clauses (x), (y) and (z) being referred to collectively as the
"BNI Securities"). There are no outstanding obligations of BNI or any
Subsidiary of BNI to repurchase, redeem or otherwise acquire any BNI
Securities.
(b) As of the date hereof, there are no outstanding bonds, debentures, notes
or other indebtedness of BNI having the right to vote (or convertible into or
exercisable for BNI Securities having the right to vote) on any matters on
which holders of BNI Common Stock may vote (collectively, "BNI Voting Debt").
SECTION 4.6. Material Subsidiaries. (a) Each Subsidiary of BNI is identified
on Schedule 4.6(a). For purposes of this Agreement, the term "BNI Material
Subsidiary" means each Subsidiary of BNI identified as material on Schedule
4.6(a). Each BNI Material Subsidiary is either (i) a corporation that is 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 on BNI, or (ii) a partnership that is duly formed and
in good standing under the laws of its jurisdiction of formation and has all
material governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted and is duly qualified to do business
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
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for those jurisdictions where failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect on BNI.
(b) Except as set forth in the BNI Form 10-K (as defined in Section 4.7(a)),
all of the outstanding capital stock of, or other ownership interests in, each
BNI Subsidiary, is owned by BNI, 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). Other than those obligations identified on Schedule
4.6(b), there are no outstanding (i) securities of BNI or any of its
Subsidiaries convertible into or exchangeable for shares of capital stock or
other voting securities or ownership interests in any Subsidiary of BNI, and
(ii) options or other rights to acquire from BNI or any of its Subsidiaries,
and no other obligation of BNI or any of its Subsidiaries 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 of BNI (the capital stock of each
Subsidiary of BNI, together with the items in clauses (i) and (ii), being
referred to collectively as the "BNI Subsidiary Securities"). There are no
outstanding obligations of BNI or any Subsidiary of BNI to repurchase, redeem
or otherwise acquire any outstanding BNI Subsidiary Securities.
SECTION 4.7. SEC Filings. (a) BNI has delivered to SFP (i) the annual reports
on Form 10-K for its fiscal years ended December 31, 1989, December 31, 1990,
December 31, 1991, December 31, 1992, and December 31, 1993 (this latest form
10-K being referred to herein as the "BNI Form 10-K"), (ii) its quarterly
report on Form 10-Q for its fiscal quarter ending March 31, 1994 (this Form 10-
Q being referred to herein as the "BNI Form 10-Q"), (iii) its proxy statements
(as defined in Regulation 14A issued pursuant to the Exchange Act) relating to
meetings of the stockholders of BNI held since January 1, 1989, and (iv) all
other reports, statements, schedules and registration statements filed by BNI
and its Subsidiaries with the SEC since January 1, 1989 and through the date of
this Agreement, but including only such pre-effective amendments and such
registration statements as contain material information not fully reflected in
any subsequent amendments to such registration statements (or any prospectus
included therein) delivered to SFP pursuant to this Section 4.7.
(b) As of its filing date, each such report or statement, as supplemented or
amended, if applicable, 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 light of the
circumstances under which they were made, not misleading.
(c) Each such registration statement, as supplemented or amended, if
applicable, filed pursuant to the 1933 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 4.8. Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of BNI
included in the BNI Form 10-K and the BNI Form 10-Q fairly present, in
conformity with generally accepted accounting principles applied on a
consistent basis (except as may be indicated in the notes thereto), the
consolidated financial position of BNI and its consolidated Subsidiaries as of
the dates thereof, their consolidated results of operations and cash flows for
the periods then ended (subject to normal year-end adjustments in the case of
the unaudited consolidated interim financial statements) and, in the case of
the BNI Form 10-K, stockholders' equity. For purposes of this Agreement, "BNI
Balance Sheet" means the Consolidated Balance Sheet of BNI as of the Balance
Sheet Date set forth in the BNI Form 10-K.
SECTION 4.9. Disclosure Documents. Each document required to be filed by BNI
with the SEC in connection with the transactions contemplated by this Agreement
(the "BNI Disclosure Documents"), including, without limitation, (i) the BNI
Offer Documents to be filed with the SEC in connection with the Offer and (ii)
the definitive proxy statement of BNI (the "BNI Proxy Statement") to be filed
with the SEC in
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connection with the Merger, 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. At the time the offer to purchase and form of
related letter of transmittal contained in the BNI Offer Documents or any
amendment or supplement thereto are first mailed to stockholders of SFP and at
the time of consummation of the Offer, the BNI Offer Documents, as supplemented
or amended, if applicable, will not contain any untrue statement of a material
fact or omit to state any material fact necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. At the time the BNI Proxy Statement or any amendment or supplement
thereto is first mailed to stockholders of BNI and at the time such
stockholders vote on adoption of this Agreement, the BNI Proxy Statement, as
supplemented or amended, if applicable, 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 light of the circumstances under which
they were made, not misleading. At the time of the filing of any BNI Disclosure
Document other than the BNI Offer Documents and the BNI Proxy Statement and at
the time of any distribution thereof, such BNI 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 light of the
circumstances under which they were made, not misleading. The representations
and warranties contained in this Section 4.9 will not apply to statements or
omissions included in BNI Disclosure Documents based upon information furnished
to BNI in writing by SFP specifically for use therein.
SECTION 4.10. Information Supplied. The information supplied or to be
supplied by BNI for inclusion or incorporation by reference in (i) the SFP
Offer Documents or any amendment or supplement thereto will not, at the time
the offer to purchase and form of related letter of transmittal contained in
the SFP Offer Documents or any amendment or supplement thereto are first mailed
to stockholders of SFP and at the time of the consummation of the Offer,
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 light of the
circumstances under which they were made, not misleading, (ii) the SFP Proxy
Statement or any amendment or supplement thereto will not, at the time the SFP
Proxy Statement is first mailed to stockholders of SFP and at the time such
stockholders vote on adoption of this Agreement, 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 light of the circumstances under which
they were made, not misleading and (iii) any SFP Disclosure Document (other
than the SFP Offer Documents and the SFP Proxy Statement) will not, at the time
of effectiveness of such SFP Disclosure Document and at the time of any
distribution thereof 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 light of the circumstances under which they were made, not misleading.
SECTION 4.11. No Material Adverse Changes. Except as contemplated by this
Agreement or as publicly disclosed prior to the date of this Agreement, and
except as set forth in Schedule 4.11, since the Balance Sheet Date, BNI and the
BNI Material 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 reasonably could be expected to have a Material
Adverse Effect on BNI (other than as a result of changes in conditions,
including economic or political developments, applicable to the railroad
industry generally); or
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of BNI Common Stock (other than
aggregate cash dividends not in excess of $1.20 per share in 1994, $1.32
per share in 1995, $1.48 per share in 1996, and $1.64 per share in 1997, in
each case having record and payment dates determined in accordance with
Section 7.8).
SECTION 4.12. Undisclosed Material Liabilities. Except for (i) liabilities
reflected in the SEC Reports listed in Section 4.7 and (ii) liabilities
incurred in the ordinary course of business of BNI and its Subsidiaries
subsequent to the Balance Sheet Date, BNI and its Subsidiaries have no
liabilities that are material to BNI and there is no existing condition or set
of circumstances which could reasonably be expected
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to result in such a liability; provided, however, that this representation does
not cover, and shall not be deemed to be breached as a result of, any such
liability that primarily results from a Customary Action (as defined in Section
5.1 below).
SECTION 4.13. Litigation. Except as set forth in the BNI Form 10-K or the BNI
Form 10-Q, and except as set forth in the Joint Proxy Statement/Prospectus of
SFP and BNI dated October 12, 1994 and the Supplemental Joint Proxy
Statement/Prospectus thereto dated October 28, 1994, (i) there is no action,
suit, investigation or proceeding (or any basis therefor) pending against, or
to the knowledge of BNI threatened against or affecting, BNI or any of its
Subsidiaries or any of their respective properties before any court or
arbitrator or any governmental body, agency or official where there is a
reasonable probability of a determination adverse to BNI or any of its
Subsidiaries which could reasonably be expected to have a Material Adverse
Effect on BNI and (ii) as of the date of this Agreement, there is no such
action, suit, investigation or proceeding which in any manner challenges or
seeks to prevent, enjoin, alter or materially delay the Merger or any of the
other transactions contemplated hereby.
SECTION 4.14. Taxes. Except as set forth in the BNI Balance Sheet(including
the notes thereto) or on Schedule 4.14, (i) all material tax returns,
statements, reports and forms (collectively, the "BNI Returns") required to be
filed with any taxing authority as of the date hereof by, or with respect to,
BNI and its Subsidiaries have been filed in accordance with all applicable
laws; (ii) BNI and its Subsidiaries have timely paid all taxes shown as due and
payable on the BNI Returns that have been so filed and as of the time of filing
the BNI Returns correctly reflected the facts regarding the income, business,
assets, operations, activities and the status of BNI and its Subsidiaries in
all material respects; (iii) BNI and its Subsidiaries have made provision for
all material taxes payable by BNI and its Subsidiaries for which no Return has
yet been filed or in respect of which a final determination has been made; (iv)
the charges, accruals and reserves for taxes with respect to BNI and its
Subsidiaries reflected on the BNI Balance Sheet are adequate under generally
accepted accounting principles to cover the tax liabilities accruing through
the date thereof; and (v) as of the date of this Agreement there is no action,
suit, proceeding, investigation, audit or claim now proposed or pending against
or with respect to BNI or any of its Subsidiaries in respect of any tax where
there is a reasonable possibility of a determination or decision against BNI or
any of its Subsidiaries which would reasonably be expected to have a Material
Adverse Effect on BNI.
SECTION 4.15. ERISA. (a) Schedule IV identifies (i) each "employee benefit
plan", as defined in Section 3(3) of ERISA (other than multiemployer plans (as
defined in Section 3(37) of ERISA)), and (ii) each employment, severance or
other similar contract, arrangement or policy and each retirement or deferred
compensation plan, stock plan, incentive compensation plan, vacation pay,
severance pay, bonus or benefit arrangement, insurance (including self-insured
arrangements) or hospitalization program, workers' compensation program,
disability program, supplemental unemployment program or fringe benefit
arrangement, whether maintained pursuant to contract or informal understanding,
which does not constitute an "employee benefit plan" (as defined in Section
3(3) of ERISA), which, in the case, of items described in both clauses (i) and
(ii) is maintained, administered or contributed to by BNI or any of its ERISA
Affiliates and covers any employee or former employee of BNI or any of its
Subsidiaries or with respect to which BNI or any of its ERISA Affiliates has
any liability (collectively, the "BNI Employee Plans"). True and correct copies
of each of the BNI Employee Plans, all amendments thereto, any written
interpretations thereof distributed to employees, and all contracts relating
thereto or the funding thereof, including, without limitation, all trust
agreements, insurance contracts, administration contracts, investment
management agreements, subscription and participation agreements, recordkeeping
agreements and summary plan descriptions, all as currently in effect, have been
furnished or made available to SFP. BNI has supplied or made available to SFP
an accurate description of any BNI Employee Plan that is not in written form.
To the extent applicable, true and correct copies of the three most recent
annual reports (Form 5500 including, if applicable, Schedule B thereto)
prepared in connection with any BNI Employee Plan and the most recent actuarial
valuation report prepared in connection with any such plan have been furnished
or made available to SFP. BNI has made available to SFP complete age, salary,
service and related data as of the most recent
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practical date for employees and former employees of BNI and any of its
Subsidiaries covered under the BNI Employee Plans.
(b) The only BNI Employee Plans that are subject to Title IV of ERISA (the
"BNI Pension Plans") are identified in the list of such Plans provided or made
available to SFP by BNI in accordance with Section 4.15(a). As of the most
recent valuation date of each BNI Pension Plan, the present value of all
benefits accrued under each BNI Pension Plan, determined on a termination basis
using the assumptions established by the PBGC as in effect on such date was
exceeded by the fair market value of the assets of such BNI Pension Plan,
(excluding for these purposes any accrued but unpaid contributions). No
"accumulated funding deficiency", as defined in Section 412 of the Code, has
been incurred with respect to any BNI Pension Plan, whether or not waived. BNI
knows of no "reportable event", within the meaning of Section 4043 of ERISA and
the regulations promulgated thereunder, and no event described in Sections 4041
(other than a standard termination), 4042, 4062 or 4063 of ERISA has occurred
in connection with any BNI Pension Plan, other than a "reportable event" that
will not have a Material Adverse Effect on BNI. No condition exists and no
event has occurred that could constitute grounds for termination of or the
appointment of a trustee to administer any BNI Pension Plan under Section 4042
of ERISA and, to BNI's knowledge, neither BNI nor any of its ERISA Affiliates
has engaged in, or is a successor parent corporation to an entity that has
engaged in, a transaction for which BNI or any of its ERISA Affiliates would
have liability under Sections 4069 or 4212(c) of ERISA. To BNI's knowledge
nothing done or omitted to be done and no transaction or holding of any asset
under or in connection with any BNI Employee Plan has or will make BNI or any
of its ERISA Affiliates, any officer or director of BNI or any of its ERISA
Affiliates subject to any liability under Title I or Section 4071 of ERISA or
liable for any tax pursuant to Section 4975 or Chapters 43, 47 or 68 of the
Code that could have a Material Adverse Effect.
(c) Each BNI Employee Plan which is intended to be qualified under Section
401(a) of the Code is so qualified and has been so qualified during the period
from its adoption to date, and each trust forming a part thereof is exempt from
tax pursuant to Section 501(a) of the Code. BNI has furnished or made available
to SFP copies of the most recent Internal Revenue Service determination letters
with respect to each such BNI Employee Plan. Each BNI Employee Plan has been
maintained in substantial compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations, including
but not limited to ERISA and the Code, which are applicable to such BNI Plan.
(d) None of the payments contemplated by the contracts, plans or arrangements
covering any employee or former employee of BNI or any of its ERISA Affiliates
and arising solely as a result of the transactions contemplated hereby would,
in the aggregate, constitute excess parachute payments as defined in Section
280G of the Code (without regard to subsection (b)(4) thereof).
(e) Except for obligations arising pursuant to any collective bargaining
agreements, no condition exists that would prevent BNI or any of its
Subsidiaries from amending or terminating any BNI Employee Plan providing
health or medical benefits in respect of any active or former employees of BNI
and its Subsidiaries.
(f) There has been no amendment to, written interpretation or announcement
(whether or not written) by BNI or any of its ERISA Affiliates relating to, or
change in employee participation or coverage under, any BNI Employee Plan which
would increase materially the expense of maintaining such BNI Employee Plan
above the level of the expense incurred in respect thereof for the fiscal year
ended on the Balance Sheet Date.
(g) To the extent applicable, each BNI Employee Plan which constitutes a
"group health plan" (as defined in Section 607(1) of ERISA or Section
4980B(g)(2) of the Code), including any plans of current or former affiliates
which must be taken into account under Sections 4980B and 414(t) of the Code or
Section 601 of ERISA, has been operated in substantial compliance with
applicable law, including the group health plan continuation coverage
requirements of Section 4980B of the Code and Section 601 of ERISA.
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(h) There are no actions, suits or claims (other than routine claims for
benefits) pending or, to BNI's knowledge, threatened involving any BNI Employee
Plan or the assets thereof and no facts exist which could give rise to any such
actions, suits or claims (other than routine claims for benefits).
(i) BNI has provided or will promptly provide SFP with a list of each
employee pension benefit plan (as defined in Section 3(2) of ERISA) which is a
multiemployer plan with respect to which BNI or any of its ERISA Affiliates may
have any liability (including any liability attributable to a current or former
member of BNI's or any of its ERISA Affiliates' "controlled group" (as defined
in Section 4001(a)(14) of ERISA)) and the maximum amount of such liability
(determined as if a complete withdrawal occurred with respect to each such plan
immediately after the Effective Time). With respect to each such plan, (i) all
contributions have been made as required by the terms of the plans, the terms
of any collective bargaining agreements and applicable law, (ii) neither BNI
nor any of its ERISA Affiliates has withdrawn, partially withdrawn or received
any notice of any claim or demand for withdrawal liability or partial
withdrawal liability that would have a Material Adverse Effect, and (iii)
neither BNI nor any of its ERISA Affiliates has received any notice that any
such plan is in reorganization, that increased contributions may be required to
avoid a reduction in plan benefits or the imposition of any excise tax, that
any such plan is or has been funded at a rate less than that required under
Section 412 of the Code or that any plan is or may become insolvent.
(j) As of the Balance Sheet Date, the Expected Postretirement Benefit
Obligation (as defined in Statement of Financial Accounting Standards No. 106)
in respect of postretirement life, health and medical insurance benefits for
current and former employees of BNI or any of its Subsidiaries calculated by
BNI's actuary using reasonable actuarial assumptions was $17,000,000.
SECTION 4.16. Finders' Fees. Except for Lazard Freres & Co., a copy of whose
engagement agreement has been or will be provided to SFP and whose fees will be
paid by BNI, there is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act on behalf of
BNI, the Surviving Corporation or any Subsidiary of BNI who might be entitled
to any fee or commission from BNI, the Surviving Corporation or any Subsidiary
of BNI upon consummation of the transactions contemplated by this Agreement.
SECTION 4.17. Environmental Matters. Except as set forth in the BNI Form 10-K
or otherwise previously disclosed in writing by BNI to SFP, there are no
Environmental Liabilities of BNI that, individually or in the aggregate, have
had or would reasonably be expected to have a Material Adverse Effect on BNI.
SECTION 4.18. Takeover Statutes. No Takeover Statute, including, without
limitation, Section 203 of the DGCL, applicable to BNI or any of its
Subsidiaries is applicable to the Merger or the other transactions contemplated
hereby.
SECTION 4.19. Compliance with Laws. Except as publicly disclosed, and except
for any matter that would not reasonably be expected to have a Material Adverse
Effect on BNI, neither BNI nor any of its Subsidiaries is in violation of, or
has violated, any applicable provisions of any laws, statutes, ordinances or
regulations.
SECTION 4.20. BNI Rights Agreement. Under the Rights Agreement between BNI
and The First National Bank of Boston, dated as of July 14, 1986 (the "BNI
Rights Agreement"), SFP will not become an "Acquiring Person", no "Stock
Acquisition Date" or "Distribution Date" (as such terms are defined in the BNI
Rights Agreement) will occur, and BNI's shareholders will not be entitled to
receive any benefits under the BNI Rights Agreement as a result of the
approval, execution or delivery of this Agreement or the consummation of the
Merger.
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ARTICLE V
COVENANTS OF SFP
SFP agrees that:
SECTION 5.1. Conduct of SFP. From the date hereof until the Effective Time,
except as provided in Schedule V, SFP and the SFP Material Subsidiaries shall
conduct their business in the ordinary course of business consistent with past
practice and shall use their reasonable best efforts to preserve intact their
business organizations and relationships with third parties; provided that
nothing in this Section shall be deemed to prevent SFP and its Subsidiaries
from undertaking any action necessary, proper or advisable to effectuate the
Spinoff and all related transactions in accordance with and subject to the
conditions set forth in this Agreement; and provided further that nothing in
this Section shall be deemed to prevent SFP and its Subsidiaries from taking
any action referred to in clauses (b)(ii), (c), (f) or (g) of this Section 5.1
where the taking of such action is not consistent with the past practices of
SFP and its Subsidiaries if, but only if, such action is a Customary Action.
For purposes of this Agreement, an action shall be considered a "Customary
Action" where such action occurs in the ordinary course of the relevant
Person's business and where the taking of such action is generally recognized
as being customary and prudent for other major enterprises in such Person's
line of business. Without limiting the generality of the foregoing, from the
date hereof until the Effective Time:
(a) SFP will not adopt or propose any change in its certificate of
incorporation or bylaws;
(b) Except for the Offer, the Merger and the Spinoff, SFP will not, and
will not permit any Subsidiary of SFP, (i) to adopt a plan of complete or
partial liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization or (ii) make any acquisition of
any business or other assets, whether by means of merger, consolidation or
otherwise, other than in the ordinary course of business consistent with
past practices and other than acquisitions that are Customary Actions;
(c) SFP will not, and will not permit any Subsidiary of SFP to, sell,
lease, license or otherwise dispose of any material assets or property
except (i) the Spinoff, (ii) pursuant to existing contracts or commitments,
(iii) in the ordinary course of business consistent with past practice and
(iv) any such sale, lease, license or other disposition that is a Customary
Action;
(d) SFP will not, and will not permit any Subsidiary of SFP to, declare,
set aside, or pay any dividend or make any other distribution with respect
to any shares of SFP capital stock other than (i) cash dividends on SFP
Common Stock not in excess of the amounts set forth in Section 3.11(b) and
having record and payment dates determined as set forth in Section 7.8, and
(ii) the Spinoff;
(e) Except (i) as expressly permitted by this Section 5.1, Section 5.7 or
(ii) pursuant to existing contracts or commitments, SFP will not, and will
not permit any Subsidiary of SFP to, issue, deliver or sell, or authorize
or propose the issuance, delivery or sale of, any SFP Securities, any SFP
Voting Debt, any SFP Subsidiary Securities or any securities convertible
into or exchangeable for, or any rights, warrants or options to acquire,
any SFP Securities, SFP Voting Debt or SFP Subsidiary Securities;
(f) Except for (i) borrowings under existing credit facilities,
replacements therefor and refinancings thereof, (ii) borrowings not to
exceed $1.75 billion in the aggregate under credit facilities in form and
substance reasonably satisfactory to BNI to finance the Offer, to refinance
SFP's currently outstanding 12.65% Senior Notes due October 1, 2000, 8 3/8%
Notes due November 1, 2001 and 8 5/8% Notes due November 1, 2004, to pay
penalties, premiums and make-whole payments required in connection with
such refinancing and for working capital and other corporate purposes,
(iii) borrowings in the ordinary course of business consistent with past
practice or (iv) borrowings that are Customary Actions, SFP will not, and
will not permit any Subsidiary of SFP to, incur any indebtedness for
borrowed money or guarantee any such indebtedness;
(g) Except for loans, advances, capital contributions or investments made
in the ordinary course of business consistent with past practice and except
for loans, advances, capital contributions or investments
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that are Customary Actions, SFP will not, and will not permit any
Subsidiary of SFP to, make any loans, advances or capital contributions to,
or investments in, any other Person (other than to SFP or any Subsidiary of
SFP);
(h) (i) Except for any of the actions referred to in this clause (i) that
is taken in the ordinary course of business consistent in magnitude and
character with past practice and with the terms of severance or termination
arrangements in effect or pending on the date hereof with respect to
individuals with comparable positions or responsibilities, and except for
any of such actions which, in the aggregate, are not material, as
hereinafter defined, SFP will not, and will not permit any of its
Subsidiaries to, grant any severance or termination pay to, or enter into
any termination or severance arrangement with, any of its directors,
executive officers or employees and (ii) except for any of the actions
referred to in this clause (ii) that is taken in the ordinary course of
business consistent in aggregate in magnitude and character with past
practice, and except for any of such actions which in the aggregate are not
material, as hereinafter defined, SFP will not, and will not permit any of
its Subsidiaries to, establish, adopt, enter into, amend or take action to
accelerate any rights or benefits under, or grant awards under, (A) any
plan or arrangement providing for options, stock, performance awards or
other forms of incentive or deferred compensation or (B) any collective
bargaining, bonus, profit sharing, thrift, compensation, restricted stock,
pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement for
the benefit of any of its directors, executive officers or employees. For
purposes of this subsection (h), "material" shall mean material in relation
to the overall compensation costs of SFP and its Subsidiaries.
(i) SFP will not, and will not permit any Subsidiary of SFP to, agree or
commit to do any of the actions prohibited by Sections 5.1(a) through
5.1(h).
SECTION 5.2. Stockholder Meeting. SFP shall cause a special meeting of its
stockholders (the "SFP Stockholder Meeting") to be duly called and held as soon
as reasonably practicable after the date of this Agreement for the purpose of
voting on the approval and adoption of this Agreement and the Merger. The board
of directors of SFP shall recommend approval and adoption of this Agreement and
the Merger by its stockholders; provided, however, that prior to the SFP
Stockholder Meeting such recommendation may be withdrawn, modified or amended
to the extent that, as a result of the commencement or receipt of a Takeover
Proposal (as defined in Section 5.8) relating to SFP, the board of directors of
SFP deems it necessary to do so in the exercise of its fiduciary obligations to
SFP stockholders after being so advised by counsel.
SECTION 5.3. Access to Information. Subject to any confidentiality agreements
or other confidentiality obligations binding upon SFP or any of its
Subsidiaries, from the date hereof until the Effective Time, SFP will give BNI,
its counsel, financial advisors, auditors and other authorized representatives
full access to the offices, properties, books and records of SFP and its
Subsidiaries, will furnish to BNI, 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
SFP's employees, counsel and financial advisors to cooperate with BNI in its
investigation of the business of SFP and its Subsidiaries; provided that no
investigation pursuant to this Section shall affect any representation or
warranty given by SFP to BNI hereunder; and provided further that access to
certain information will require the entry of a protective order by the ICC,
after which date full access will be granted to such information consistent
with this paragraph and subject to the terms of such order.
SECTION 5.4. Notices of Certain Events. SFP shall promptly notify BNI of:
(i) 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;
(ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement including, without limitation, the Spinoff
and the Liquidation; and
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(iii) any actions, suits, claims, investigations or proceedings commenced
or, to the best of its knowledge threatened against, relating to or
involving or otherwise affecting SFP or any Subsidiary of SFP which, if
pending on the date of this Agreement, would have been required to have
been disclosed pursuant to Section 3.13 or which relate to the consummation
of the transactions contemplated by this Agreement.
SECTION 5.5. Tax Matters. From the date hereof until the Effective Time, (i)
SFP and its Subsidiaries will file all significant tax returns, statements,
reports and forms (collectively, the "SFP Post-Signing Returns") required to be
filed with any taxing authority in accordance with all applicable laws; (ii)
SFP and its Subsidiaries will timely pay all taxes shown as due and payable on
the SFP Post-Signing Returns that are so filed and as of the time of filing,
the SFP Post-Signing Returns will correctly reflect the facts regarding the
income, business, assets, operations activities and the status of SFP and its
Subsidiaries in all material respects; (iii) SFP and its Subsidiaries will make
provision for all taxes payable by SFP and its Subsidiaries for which no SFP
Post-Signing Return is due prior to the Effective Time; and (iv) SFP and its
Subsidiaries will promptly notify BNI of any action, suit, proceeding,
investigation, audit or claim pending against or with respect to SFP or any of
its Subsidiaries in respect of any tax where there is a reasonable possibility
of a determination or decision against SFP which would reasonably be expected
to have a significant adverse effect on SFP's tax liabilities or other tax
attributes.
SECTION 5.6. Rule 145 Affiliates. At least 40 days prior to the Closing Date,
SFP shall deliver to BNI a letter identifying all persons who are, at the time
of the meeting of SFP Stockholders Meeting, deemed to be "affiliates" of SFP
for purposes of Rule 145 under the 1933 Act (the "1933 Act Affiliates"). SFP
shall use its reasonable best efforts to cause each Person who is identified as
a possible 1933 Act Affiliate to deliver to BNI at least 30 days prior to the
Closing Date an agreement substantially in the form of Exhibit A to this
Agreement.
SECTION 5.7. The Spinoff. SFP will not, and will not permit any of its
Subsidiaries (other than the Spinoff Company and its Subsidiaries) to, enter
into or undertake any transaction, arrangement or agreement with the Spinoff
Company or its Subsidiaries except for (i) transactions, arrangements or
agreements that have been entered into on or prior to the date of this
Agreement which have been provided to BNI on or prior to the date hereof, (ii)
the allocation to employees of the Spinoff Company of their share of the SFP
employee benefit plans in accordance with applicable law or (iii) such other
transactions, arrangements or agreements that are consented to by BNI (such
consent not to be unreasonably withheld). Without limiting the generality of
the foregoing, in no event may SFP or any of its Subsidiaries pay any dividend,
or make any distribution, to holders of SFP Common Stock directly or indirectly
in connection with the Spinoff, except for the Spinoff Dividend. Nothing in
this Section 5.7 shall prevent SFP or the Spinoff Company from taking actions
(including, but not limited to filings with and no-action requests of the SEC,
communications with shareholders, and the liquidation of subsidiaries of the
Spinoff Company) reasonably necessary to effectuate the Spinoff. It shall not
be a breach of this Agreement for SFP to pay any taxes arising from excess loss
accounts (not materially greater than the amount represented in Section 3.22)
in the stock of the Spinoff Company or its subsidiaries. SFP will use its
reasonable best efforts to ensure that the conditions specified in the Private
Letter Ruling are satisfied.
SECTION 5.8. No Solicitations. SFP will not, and SFP will use its reasonable
best efforts to ensure that its officers, directors, employees or other agents
of SFP do not, directly or indirectly: initiate, solicit or encourage, or take
any action to facilitate the making of, any offer or proposal which constitutes
or is reasonably likely to lead to any Takeover Proposal of SFP, or, in the
event of an unsolicited Takeover Proposal of SFP, except to the extent required
by their fiduciary duties under applicable law if so advised by outside
counsel, engage in negotiations or provide any confidential information or data
to any Person relating to any such Takeover Proposal. SFP shall notify BNI
orally and in writing of any such inquiries, offers or proposals (including,
without limitation, the terms and conditions of any such proposal and the
identity of the person making it), within 48 hours of the receipt thereof and
shall give BNI five days' advance notice of any agreement to be entered into
with or any information to be supplied to any Person making such
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inquiry, offer or proposal. SFP shall immediately cease and cause to be
terminated all existing discussions and negotiations, if any, with any parties
conducted heretofore with respect to any Takeover Proposal of SFP. As used in
this Agreement, "Takeover Proposal" when used in connection with any Person
shall mean any tender or exchange offer involving such Person, any proposal for
a merger, consolidation or other business combination involving such Person or
any Subsidiary of such Person, any proposal or offer to acquire in any manner a
substantial equity interest in, or a substantial portion of the assets of, such
Person or any Subsidiary of such Person, any proposal or offer with respect to
any recapitalization or restructuring with respect to such Person or any
Subsidiary of such Person or any proposal or offer with respect to any other
transaction similar to any of the foregoing with respect to such Person or any
Subsidiary of such Person other than pursuant to the transactions to be
effected pursuant to this Agreement.
SECTION 5.9. Registration Rights. SFP hereby grants BNI the registration and
other rights set forth in Annex II hereto, which rights shall become effective
without any action by any Person in the event that this Agreement is terminated
for any reason after consummation of the Offer.
ARTICLE VI
COVENANTS OF BNI
BNI AGREES THAT:
SECTION 6.1. Conduct of BNI. From the date hereof until the Effective Time,
except as provided in Schedule VI, BNI and the BNI Material Subsidiaries shall
conduct their business in the ordinary course of business consistent with past
practice and shall use their reasonable best efforts to preserve intact their
business organizations and relationships with third parties; provided that
nothing in this Section shall be deemed to prevent BNI and its Subsidiaries
from taking any action referred to in clauses (b)(ii), (c), (f) or (g) of this
Section 6.1 where the taking of such action is not consistent with the past
practices of BNI and its Subsidiaries if, but only if, such action is a
Customary Action. Without limiting the generality of the foregoing, from the
date hereof until the Effective Time:
(a) BNI will not adopt or propose any change in its certificate of
incorporation or bylaws, except for an amendment to its certificate of
incorporation authorizing the issuance of additional shares of Class A
Preferred Stock in connection with the issuance of Rights to former holders
of SFP Common Stock upon consummation of the Merger;
(b) Except for the Offer and the Merger, BNI will not, and will not
permit any Subsidiary of BNI, (i) to adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization or (ii) make any acquisition, by
means of merger, consolidation or otherwise, other than in the ordinary
course of business consistent with past practices and other than
acquisitions that are Customary Actions;
(c) BNI will not, and will not permit any Subsidiary of BNI to, sell,
lease, license or otherwise dispose of any material assets or property
except (i) pursuant to existing contracts or commitments, (ii) in the
ordinary course of business consistent with past practice and (iii) any
such sale, lease, license or other disposition that is a Customary Action;
(d) BNI will not, and will not permit any Subsidiary of BNI to, declare,
set aside, or pay any dividend or make any other distribution with respect
to any shares of BNI capital stock (other than cash dividends on BNI Common
Stock not in excess of the amounts set forth in Section 4.11(b) and having
record and payment dates determined as set forth in Section 7.8);
(e) Except (i) as expressly permitted by this Section 6.1, (ii) as
necessary in connection with the transactions contemplated hereby
(including the issuance of Rights to former holders of SFP Common Stock
upon consummation of the Merger) or (iii) pursuant to existing contracts
and commitments, BNI will not, and will not permit any Subsidiary of BNI
to, issue, deliver or sell, or authorize or propose the issuance, delivery
or sale of, any BNI Securities, any BNI Voting Debt or any securities
convertible into
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or exchangeable for, or any rights, warrants or options to acquire, any BNI
Securities or BNI Voting Debt;
(f) Except for (i) borrowings under existing credit facilities,
replacements therefor and refinancings thereof, (ii) borrowings not to
exceed $500 million in the aggregate under credit facilities in form and
substance reasonably satisfactory to SFP to finance the Offer (iii)
borrowings in the ordinary course of business consistent with past practice
or (iv) borrowings that are Customary Actions, BNI will not, and will not
permit any Subsidiary of BNI to, incur any indebtedness for borrowed money
or guarantee any such indebtedness;
(g) Except for loans, advances, capital contributions or investments made
in the ordinary course of business consistent with past practice, except
for loans, advances, capital contributions or investments that are
Customary Actions and, except for loans, advances, capital contributions or
investments for the purchase of shares of SFP Common Stock pursuant to the
Offer, BNI will not, and will not permit any Subsidiary of BNI to, make any
loans, advances or capital contributions to, or investments in, any other
Person (other than to BNI or any Subsidiary of BNI);
(h) (i) except for any of the actions referred to in this clause (i) that
is taken in the ordinary course of business consistent in magnitude and
character with past practice and with the terms of severance or termination
arrangements in effect or pending on the date hereof with respect to
individuals with comparable positions or responsibilities, and except for
any of such actions which, in the aggregate, are not material, as
hereinafter defined, BNI will not, and will not permit any of its
Subsidiaries to, grant any severance or termination pay to, or enter into
any termination or severance arrangement with, any of its directors,
executive officers or employees and (ii) except for any of the actions
referred to in this clause (ii) that is taken in the ordinary course of
business consistent in aggregate in magnitude and character with past
practice, and except for any of such actions which in the aggregate are not
material, as hereinafter defined, BNI will not, and will not permit any of
its Subsidiaries to, establish, adopt, enter into, amend or take action to
accelerate any rights or benefits under, or grant awards under, (A) any
plan or arrangement providing for options, stock, performance awards or
other forms of incentive or deferred compensation or (B) any collective
bargaining, bonus, profit sharing, thrift, compensation, restricted stock,
pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement for
the benefit of any of its directors, executive officers or employees. For
purposes of this subsection (h), "material" shall mean material in relation
to the overall compensation costs of BNI and its Subsidiaries.
(i) BNI will not, and will not permit any Subsidiary of BNI to, agree or
commit to do any of the actions prohibited by Sections 6.1(a) through
6.1(h).
SECTION 6.2. Stockholder Meeting. BNI shall cause a special meeting of its
stockholders (the "BNI Stockholder Meeting") to be duly called and held as soon
as reasonably practicable after the date of this Agreement for the purpose of
voting on the approval and adoption of this Agreement and the Merger. The board
of directors of BNI shall recommend approval and adoption of this Agreement and
the Merger by its stockholders; provided that prior to the BNI Stockholder
Meeting such recommendation may be withdrawn, modified or amended to the extent
that, as a result of the commencement or receipt of a Takeover Proposal (as
defined in Section 5.8) relating to BNI, the board of directors of BNI deems it
necessary to do so in the exercise of its fiduciary obligations to BNI
stockholders after being so advised by counsel.
SECTION 6.3. Access to Information. Subject to any confidentiality agreements
or other confidentiality obligations binding upon BNI or any of its
Subsidiaries, from the date hereof until the Effective Time, BNI will give SFP,
its counsel, financial advisors, auditors and other authorized representatives
full access to the offices, properties, books and records of BNI and its
Subsidiaries, will furnish to SFP, 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
BNI's employees, counsel and financial advisors to cooperate with SFP in its
investigation of the business of BNI and its Subsidiaries; provided that no
investigation pursuant to this Section shall affect any representation or
warranty given by BNI to SFP
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hereunder; and provided further that access to certain information will require
the entry of a protective order by the ICC, after which date full access will
be granted to such information consistent with this paragraph and subject to
the terms of such order.
SECTION 6.4. Notices of Certain Events. BNI shall promptly notify SFP of:
(i) 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;
(ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement; and
(iii) any actions, suits, claims, investigations or proceedings commenced
or, to the best of its knowledge threatened against, relating to or
involving or otherwise affecting BNI or any BNI Material Subsidiary which,
if pending on the date of this Agreement, would have been required to have
been disclosed pursuant to Section 4.13 or which relate to the consummation
of the transactions contemplated by this Agreement.
SECTION 6.5. Tax Matters. From the date hereof until the Effective Time, BNI
and its Subsidiaries will file all significant tax returns, statements, reports
and forms (collectively, the "BNI Post-Signing Returns") required to be filed
with any taxing authority in accordance with all applicable laws; (ii) BNI and
its Subsidiaries will timely pay all taxes shown as due and payable on the BNI
Post-Signing Returns that are so filed and as of the time of filing, the BNI
Post-Signing Returns will correctly reflect the facts regarding the income,
business, assets, operations, activities and the status of BNI and its
Subsidiaries in all material respects; (iii) BNI and its Subsidiaries will make
provision for all taxes payable by BNI and its Subsidiaries for which no BNI
Post-Signing Return has yet been filed; and (iv) BNI and its Subsidiaries will
promptly notify SFP of any action, suit, proceeding, investigation, audit or
claim pending against or with respect to BNI or any of its subsidiaries in
respect of any tax where there is a reasonable possibility of a determination
or decision against BNI which would reasonably be expected to have a
significant adverse effect on BNI's tax liabilities or tax attributes.
SECTION 6.6. Director and Officer Liability. (a) BNI shall indemnify and hold
harmless each person who is, or has been at any time prior to the date hereof
or who becomes prior to the Effective Time, an officer or director of SFP, in
respect of acts or omissions occurring prior to the Effective Time (the
"Indemnified Parties") (including but not limited to the transactions
contemplated by this Agreement) to the extent provided under SFP's certificate
of incorporation, bylaws and (A) indemnity agreements between SFP and any of
its officers or directors ("Indemnity Agreements") in effect on the date hereof
or (B) Indemnity Agreements that may be entered into by SFP from and after the
date hereof and prior to the Effective Time so long as such Agreements shall
contain terms and provisions substantially similar to Indemnity Agreements in
effect as of the date hereof; provided that such indemnification shall be
subject to any limitation imposed from time to time under applicable law. For
six years after the Effective Time, BNI shall provide, if available, officers'
and directors' liability insurance in respect of acts or omissions occurring
prior to the Effective Time, including but not limited to the transactions
contemplated by this Agreement, covering each such Person currently covered by
SFP's officers' and directors' liability insurance policy, or who becomes
covered by such policy prior to the Effective Time, 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,
BNI shall not be obligated to pay premiums in excess of two-hundred percent
(200%) of the amount per annum SFP paid in its last full fiscal year, which
amount has been disclosed to BNI but provided further that BNI shall
nevertheless be obligated to provide such coverage as may be obtained for such
amount.
(b) Any determination to be made as to whether any Indemnified Party has met
any standard of conduct imposed by law shall be made by legal counsel
reasonably acceptable to such Indemnified Party and BNI, retained at BNI's
expense.
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(c) This Section 6.6 is intended to benefit the Indemnified Parties, their
heirs, executors and personal representatives and shall be binding on
successors and assigns of BNI.
SECTION 6.7. No Solicitations. BNI will not, and BNI will use its reasonable
best efforts to ensure that its officers, directors, employees or other agents
of BNI do not, directly or indirectly: initiate, solicit or encourage, or take
any action to facilitate the making of, any offer or proposal which constitutes
or is reasonably likely to lead to any Takeover Proposal of BNI, or, in the
event of an unsolicited Takeover Proposal of BNI, except to the extent required
by their fiduciary duties under applicable law if so advised by outside
counsel, engage in negotiations or provide any confidential information or data
to any Person relating to any such Takeover Proposal. BNI shall notify SFP
orally and in writing of any such inquiries, offers or proposals (including,
without limitation, the terms and conditions of any such proposal and the
identity of the person making it), within 48 hours of the receipt thereof and
shall give SFP five days' advance notice of any agreement to be entered into
with or any information to be supplied to any Person making such inquiry, offer
or proposal. BNI shall immediately cease and cause to be terminated all
existing discussions and negotiations, if any, with any parties conducted
heretofore with respect to any Takeover Proposal of BNI.
ARTICLE VII
COVENANTS OF BNI AND SFP
The parties hereto agree that:
SECTION 7.1. 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 7.2. ICC Approval. BNI and SFP shall, and each shall cause each of
its Subsidiaries to, take all such actions as are necessary to (i) cooperate
with one another to prepare and present to the ICC as soon as practicable all
filings and other presentations in connection with seeking any ICC approval,
exemption or other authorization necessary to consummate the transactions
contemplated by this Agreement (including, without limitation, the matters
contemplated by Sections 5.3 and 6.3), (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 ICC approval by
persons not party to this Agreement, and (iv) take all such further action as
reasonably may be necessary to obtain a final order or orders of the ICC
approving such transactions consistent with this Agreement.
SECTION 7.3. Certain Filings; Proxy Materials. (a) BNI (i) will promptly
prepare and file with the SEC, will use its reasonable best efforts to have
cleared by the SEC and will thereafter mail to its stockholders as promptly as
practicable the BNI Proxy Statement and all other proxy materials for the BNI
Stockholder Meeting, (ii) will use its reasonable best efforts to obtain the
necessary approvals by its stockholders of this Agreement and the transactions
contemplated hereby (provided that prior to the BNI Stockholder Meeting the BNI
Board's recommendation may be withdrawn, modified or amended to the extent
that, as a result of the commencement or receipt of a Takeover Proposal
relating to BNI, the board of directors of BNI deems it necessary to do so in
the exercise of its fiduciary obligations to BNI stockholders after being so
advised by counsel), (iii) will otherwise comply with all legal requirements
applicable to such meeting and (iv) will make all other filings or recordings
required under applicable Delaware law in connection with the Merger. BNI will
prepare and file with the SEC the registration statement on Form S-4 (the "Form
S-4") (in which the BNI Proxy Statement will be included as a prospectus) and
will take any action (other than qualifying to do business in any jurisdiction
in which it is now not so qualified) required to be taken under any applicable
state Blue Sky law in connection with the issuance of BNI Common Stock.
(b) SFP (i) will promptly prepare and file with the SEC, will use its
reasonable best efforts to have cleared by the SEC and will thereafter mail to
its stockholders as promptly as practicable the SFP Proxy Statement
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and all other proxy materials for the SFP Stockholder Meeting, (ii) will use
its reasonable best efforts to obtain the necessary approvals by its
stockholders of this Agreement and the transactions contemplated hereby
(provided that prior to the SFP Stockholder Meeting the SFP Board's
recommendation may be withdrawn, modified or amended to the extent that, as a
result of the commencement or receipt of a Takeover Proposal relating to SFP,
the board of directors of SFP deems it necessary to do so in the exercise of
its fiduciary obligations to SFP stockholders after being so advised by
counsel), (iii) will otherwise comply with all legal requirements applicable to
such meeting and (iv) will make all other filings or recordings required under
applicable Delaware law in connection with the Merger.
SECTION 7.4. Public Announcements. BNI and SFP will consult with each other
before issuing any press release 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 prior to such consultation.
SECTION 7.5. 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 SFP, any deeds, bills of
sale, assignments or assurances and to take and do, in the name and on behalf
of SFP, 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 SFP acquired or to
be acquired by the Surviving Corporation as a result of, or in connection with,
the Merger.
SECTION 7.6. Antitakeover Statutes. If any Takeover Statute is or may become
applicable to the transactions contemplated hereby, each of BNI and SFP and the
members of their respective Boards of Directors will grant such approvals and
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 thereby and otherwise act to eliminate or minimize the
effects of any Takeover Statute on any of the transactions contemplated by this
Agreement.
SECTION 7.7. Cooperation. BNI and SFP shall together, or pursuant to an
allocation of responsibility to be agreed between them, coordinate and
cooperate (i) with respect to the timing of the BNI Stockholder Meeting and the
SFP Stockholder Meeting and shall use their reasonable best efforts to hold
such meetings on the same day, (ii) in connection with the preparation of the
SFP Disclosure Documents and the BNI Disclosure Documents, (iii) in determining
whether any action by or in respect of, or filing with, any governmental body,
agency, 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 (iv) in seeking any such actions, consents, approvals or waivers
or making any such filings, furnishing information required in connection
therewith or with the SFP Disclosure Documents and the BNI Disclosure Documents
and timely seeking to obtain any such actions, consents, approvals or waivers.
Subject to the terms and conditions of this Agreement, BNI and SFP will each
use its reasonable best efforts to have the Form S-4 declared effective under
the 1933 Act as promptly as practicable after the Form S-4 is filed, and (v)
shall, subject to applicable law, confer on a regular and frequent basis with
one or more representatives of one another to report operational matters of
significance to the Merger and the general status of ongoing operations insofar
as relevant to the Merger, provided that the parties will not confer on any
matter to the extent inconsistent with law.
SECTION 7.8. Dividends. From September 30, 1995 to the Effective Time, all
dividends paid by SFP and BNI to their respective stockholders shall be paid on
a quarterly basis, with identical record and payment dates, in amounts not
exceeding the amounts set forth in Section 5.1(d) or Section 6.1(d), as the
case may be.
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ARTICLE VIII
THE OFFER
SECTION 8.1. The Offer. (a) Provided that nothing shall have occurred that
would result in a failure to satisfy any of the conditions set forth in Annex I
hereto, SFP and BNI shall, as promptly as practicable, but in no event later
than December 23, 1994, commence separate tender offers (together, the "Offer")
to purchase, in the case of SFP, up to 38,000,000 shares of SFP Common Stock
and, in the case of BNI, up to 25,000,000 shares of SFP Common Stock (in each
case, together with the associated rights under the SFP Rights Plan), at a
price of $20.00 per share, net to the seller in cash, with SFP to be severally
obligated to purchase 0.60317 of any shares of SFP Common Stock accepted for
payment pursuant to the Offer and BNI severally obligated to purchase 0.39683
of any shares of SFP Common Stock accepted for payment pursuant to the Offer.
Notwithstanding any provision of this Agreement (or any Annex hereto) to the
contrary, no term of the Offer may be amended or modified without the written
consent of both parties hereto.
(b) The several obligations of BNI and SFP under 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
63,000,000 shares of SFP Common Stock and to the other conditions set forth in
Annex I hereto. Each of SFP and BNI expressly reserves the right to waive any
of the conditions to its obligation under the Offer, except that the Minimum
Condition may not be waived without the consent of each of SFP and BNI.
Furthermore, each of SFP and BNI shall have the right to determine, in its sole
reasonable discretion, whether the conditions to its obligations under the
Offer have been satisfied.
(c) As soon as practicable on the date of commencement of the Offer, SFP
shall file with the SEC an Issuer Tender Offer Statement on Schedule 13E-4 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 "SFP Offer Documents"). SFP and BNI each agrees
promptly to correct any information provided by it for use in the SFP Offer
Documents if and to the extent that it shall have become false or misleading in
any material respect. BNI and its counsel shall be given an opportunity to
review and comment on the Schedule 13E-4 prior to its being filed with the SEC.
(d) As soon as practicable on the date of commencement of the Offer, BNI
shall file with 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 "BNI Offer Documents"). BNI and SFP each agrees promptly to
correct any information provided by it for use in the BNI Offer Documents if
and to the extent that it shall have become false or misleading in any material
respect. SFP 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.
(e) Upon satisfaction (or, where permitted, waiver) of the conditions to the
Offer, BNI and SFP shall purchase shares of SFP Common Stock pursuant to the
Offer as set forth in Section 8.1(a) above, provided, however, that BNI shall
not be obligated to purchase more than 25,000,000 shares of SFP Common Stock,
and SFP shall not be obligated to purchase more than 38,000,000 shares of SFP
Common Stock.
SECTION 8.2. Action by SFP and BNI. (a) SFP represents that its Board of
Directors at a meeting duly called and held unanimously resolved to recommend
acceptance of the Offer by those of its stockholders who wish to receive cash
for a portion of their shares of SFP Common Stock. SFP and BNI agree to take
all steps necessary to cause the offer to purchase and form of the related
letter of transmittal to be disseminated to holders of shares of SFP Common
Stock as and to the extent required by applicable federal securities laws.
(b) As soon as practicable on the day that the Offer is commenced, SFP will
file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9") which shall reflect the recommendations of SFP's Board
of Directors with respect to the Offer described in Section 8.2(a). SFP and
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BNI each agree promptly to correct any information provided by it for use in
the Schedule 14D-9 if and to the extent that it shall have become false or
misleading in any material respect. SFP 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 SFP Common Stock, in each case as and to
the extent required by applicable federal securities laws. BNI 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.
ARTICLE IX
CONDITIONS TO THE MERGER
SECTION 9.1. Conditions to the Obligations of Each Party. The obligations of
SFP and BNI to consummate the Merger are subject to the satisfaction (or waiver
by the party for whose benefit such conditions exist except that the condition
set forth in clause (vii) may not be waived) of the following conditions:
(i) this Agreement shall have been adopted by the stockholders of SFP and
BNI in accordance with Delaware Law;
(ii) any applicable waiting period under the HSR Act relating to the
Merger shall have expired;
(iii) no court, arbitrator or governmental body, agency or official shall
have issued any order, and there shall not be any statute, rule or
regulation, restraining or prohibiting the consummation of the Merger or
the effective operation of the business of BNI, SFP and their respective
Subsidiaries after the Effective Time;
(iv) all actions by or in respect of or filings with any governmental
body, agency, official, or authority required to permit the consummation of
the Merger (other than ICC approval, which is addressed in clause (v)
below) shall have been obtained, but excluding any consent, approval,
clearance or confirmation the failure to obtain which could not reasonably
be expected to have a Material Adverse Effect on the Surviving Corporation
after the Effective Time;
(v) the ICC shall have issued a decision (which decision shall not have
been stayed or enjoined) that (A) constitutes a final order approving,
exempting or otherwise authorizing consummation of the Merger and all other
transactions contemplated by this Agreement (or subsequently presented to
the ICC by agreement of BNI and SFP) as may require such authorization and
(B) does not (1) require the inclusion of any other rail carriers or rail
properties material to the parties, (2) change the Exchange Ratio or (3)
impose on BNI, SFP or any of their respective Subsidiaries any other terms
or conditions (including, without limitation, labor protective provisions
but excluding conditions heretofore imposed by the ICC in New York Dock
Railway--Control--Brooklyn Eastern District, 360 I.C.C. 60 (1979)) that in the
reasonable opinion of the board of directors of BNI or of SFP, respectively,
significantly and adversely affect the economic benefits of the transactions
contemplated by this Agreement to BNI and its stockholders or SFP and its
stockholders, as the case may be;
(vi) SFP and BNI shall have obtained an opinion of nationally recognized
tax counsel to the effect that the Merger will be tax-free to BNI, SFP and
their respective stockholders for federal income tax purposes;
(vii) SFP and BNI shall have purchased shares of SFP Common Stock
pursuant to the Offer.
SECTION 9.2. Conditions to the Obligations of BNI. The obligations of BNI to
consummate the Merger are subject to the satisfaction (or waiver by BNI) of the
following further conditions:
(i) SFP shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Effective Time, and the representations and warranties of SFP shall have
been accurate in all material respects both when made and at and as of the
Effective Time as if made at and as of such time, except for the
representations and warranties of SFP contained in Section
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3.5(a), which shall be accurate in all respects both when made and at and
as of the Effective Time as if made at and as of that time;
(ii) all other statutory requirements for the valid consummation by SFP
of the transactions contemplated by this Agreement (including without
limitation the Spinoff and the Liquidation) shall have been fulfilled.
SECTION 9.3. Conditions to the Obligations of SFP. The obligations of SFP to
consummate the Merger are subject to the satisfaction (or waiver by SFP) of the
following further conditions:
(i) BNI shall have performed in all material respects all of its
respective obligations hereunder required to be performed by it at or prior
to the Effective Time, and (A) the representations and warranties of BNI
shall have been accurate in all material respects both when made and at and
as of the Effective Time as if made at and as of such time, except for the
representations and warranties of BNI in Section 4.5(a), which shall be
accurate in all respects when made and at and as of the Effective Time as
if made at and as of that time;
(ii) the BNI Common Stock required to be issued hereunder shall have been
approved for listing on the New York Stock Exchange, subject to official
notice of issuance;
(iii) all other statutory requirements for the valid consummation by SFP
of the transactions contemplated by this Agreement shall have been
fulfilled; and
(iv) the Spinoff shall have been consummated.
ARTICLE X
TERMINATION
SECTION 10.1. Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time (notwithstanding any
approval of this Agreement by the stockholders of BNI or SFP):
(i) by mutual written consent of BNI and SFP;
(ii) by either BNI or SFP, if the Merger has not been consummated by
December 31, 1997;
(iii) by either BNI or SFP, if any judgment, injunction, order or decree
enjoining BNI or SFP from consummating the Merger is entered and such
judgment, injunction, order or decree shall become final and nonappealable;
(iv) by BNI, if the Spinoff has not been completed by December 31, 1994
(it is understood that if BNI does not exercise the right to terminate
pursuant to this Section 10.1(iv) by January 30, 1995 this provision will
be deemed to be waived);
(v) by BNI, if any Person, entity or "group" (as defined in Section
13(d)(3) of the Exchange Act) other than BNI acquires beneficial ownership
of 50% or more of the outstanding Shares;
(vi) by SFP, if any Person, entity or group acquires beneficial ownership
of 50% or more of the outstanding BNI Common Stock;
(vii) by either BNI or SFP if the approvals of the stockholders of BNI or
SFP contemplated by this Agreement shall not have been obtained by reason
of the failure to obtain the required vote at a duly held meeting of
stockholders or of any adjournment thereof;
(viii) by BNI, if, prior to the SFP Stockholder Meeting, the board of
directors of SFP shall have withdrawn, modified or changed in a manner
adverse to BNI its approval or recommendation of this Agreement or the
Merger;
(ix) by SFP, if, prior to the BNI Stockholder Meeting, the board of
directors of BNI shall have withdrawn, modified or changed in a manner
adverse to SFP its approval or recommendation of this Agreement or the
Merger;
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(x) by BNI, upon a breach of any representation, warranty, covenant or
agreement of SFP, or if any representation or warranty of SFP shall become
untrue, in either case such that the conditions set forth in Section 9.2(i)
would be incapable of being satisfied by December 31, 1997 (or such later
date extended), provided that a wilful breach shall be deemed to cause such
conditions to be incapable of being satisfied by such date;
(xi) by SFP, upon a breach of any representation, warranty, covenant or
agreement of BNI, or if any representation or warranty of BNI shall become
untrue, in either case such that the conditions set forth in Section 9.3(i)
would be incapable of being satisfied by December 31, 1997 (or as otherwise
extended), provided that a wilful breach shall be deemed to cause such
conditions to be incapable of being satisfied by such date;
(xii) by SFP, upon payment to BNI of the fee described in Section
11.4(b), if prior to the purchase of shares of SFP Common Stock pursuant to
the Offer, (A) the board of directors of SFP shall have withdrawn or
modified in a manner adverse to BNI its approval or recommendation of the
Offer, this Agreement or the Merger in order to permit SFP to execute a
definitive agreement in connection with a Takeover Proposal or in order to
approve another tender offer for shares of SFP Common Stock, in either
case, as determined by the board of directors of SFP, on terms more
favorable to SFP's stockholders than the transactions contemplated hereby,
or (B) the board of directors of SFP shall have recommended any other
Takeover Proposal; and
(xiii) by either BNI or SFP, if the Offer is terminated and SFP and BNI
shall not have purchased shares of SFP Common Stock pursuant to the Offer.
SECTION 10.2. Effect of Termination. If this Agreement is terminated pursuant
to Section 10.1, this Agreement shall become void and of no effect with no
liability on the part of any party hereto, except that (a) the agreements
contained in Sections 3.16, 4.16, 5.9 and 11.4 shall survive the termination
hereof and (b) no such termination shall relieve any party of any liability or
damages resulting from any breach by that party of this Agreement.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. 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 BNI, to:
Burlington Northern Inc.
Attn: Douglas J. Babb, Esq.
3800 Continental Place
777 Main Street
Fort Worth, Texas 76102
Telecopy: (817) 333-2377
with a copy to:
Dennis S. Hersch, Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopy: (212) 450-4800
if to SFP, to:
Santa Fe Pacific Corporation
Attn: Jeffrey R. Moreland
1700 East Golf Road
Schaumburg, Illinois 60173
Telecopy: (708) 995-6847
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with a copy to:
Robert A. Helman, Esq.
Mayer, Brown & Platt
190 South La Salle Street
Chicago, Illinois 60603-3441
Telecopy: (312) 701-7711
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 (i) if given by telecopy,
when such telecopy is transmitted to the telecopy number specified in this
Section and the appropriate confirmation is received or (ii) if given by any
other means, when delivered at the address specified in this Section.
SECTION 11.2. Entire Agreement; Survival of Representations and
Warranties. (a) This Agreement (and any other agreements contemplated hereby or
executed by the parties or their designees as of the date of this Agreement),
and the Confidentiality and Standstill Agreement dated July 28, 1993 between
SFP and BNI (the "Confidentiality Agreement") constitute the entire agreement
among the parties with respect to the subject matter hereof and thereof and
supersede all prior agreements, understandings and negotiations, both written
and oral, between the parties with respect to such subject matter. No
representation, inducement, promise, understanding, condition or warranty not
set forth herein has been made or relied upon by any party hereto. None of this
Agreement, the Confidentiality Agreement or any other agreement contemplated
hereby or executed by the parties or their designees as of the date of this
Agreement (or any provision hereof or thereof) is intended to confer upon any
Person other than the parties hereto any rights or remedies (except that
Section 6.6, is intended to confer rights and remedies on SFP's officers and
directors).
(b) The representations and warranties and agreements contained herein shall
not survive the Effective Time or the termination of this Agreement except for
the agreements set forth in Sections 6.6 and 11.4.
SECTION 11.3. Amendments; No Waivers. (a) Any provision of this Agreement may
be amended or waived prior to the Effective Time if, and only if, such
amendment or waiver is in writing and signed, in the case of an amendment, by
SFP and BNI 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 SFP, no such amendment or waiver shall, without the further
approval of such stockholders, alter or change (i) the amount or kind of
consideration to be received in exchange for any shares of capital stock of
SFP, (ii) any term of the certificate of incorporation of the Surviving
Corporation or (iii) any of the terms or conditions of this Agreement if such
alteration or change would adversely affect the holders of any shares of
capital stock of SFP.
(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.
SECTION 11.4. Expenses; Certain Payments. (a) Except as otherwise provided in
this Section or agreed in writing by the parties, each party shall bear its own
expenses, including the fees and expenses of any attorneys, accountants,
investment bankers, brokers, finders or other intermediaries or other Persons
engaged by it, incurred in connection with this Agreement and the transactions
contemplated hereby.
(b) SFP agrees that if this Agreement shall be terminated pursuant to Section
10.1(v), (vii), (viii), (xii) or (xiii), it will pay BNI an amount equal to
$50,000,000 plus all out-of-pocket expenses, not to exceed $10,000,000,
incurred by BNI in connection with this Agreement, the Merger, the Offer and
all related transactions by wire transfer of immediately available funds
promptly, but in no event later than two business days, after such termination;
provided that no payment will be required pursuant to this Section 11.4(b) if
this Agreement is terminated pursuant to Section 10.1(vii), (viii) or (xiii)
unless, after the date hereof, a new
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Takeover Proposal involving SFP has been announced or made (it being understood
that any modification of Union Pacific Corporation's Takeover Proposal in
existence on the date hereof shall be deemed a new Takeover Proposal).
(c) SFP agrees that if this Agreement shall be terminated pursuant to Section
10.1(vii), (viii) or (xiii) and no payment is required by it pursuant to
Section 11.4(b), it will reimburse BNI for all out-of-pocket expenses incurred
by BNI in connection with this Agreement, the Merger, the Offer and all related
transactions. Such payment shall be made by wire transfer of immediately
available funds promptly, but in no event later than two business days, after
receipt by SFP from BNI of documentation of such expenses.
SECTION 11.5. 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.
SECTION 11.6. Governing Law. This Agreement shall be construed in accordance
with and governed by the law of the State of Delaware (without regard to
principles of conflict of laws).
SECTION 11.7. Jurisdiction. Any suit, action or proceeding seeking to enforce
any provision of, or based on any matter arising out of or in connection with,
this Agreement or the transactions contemplated hereby may be brought against
any of the parties in the United States District Court for the District of
Delaware or any state court sitting in the City of Wilmington, Delaware, and
each of the parties hereby consents to the exclusive jurisdiction of such
courts (and of the appropriate appellate courts) in any such suit, action or
proceeding and waives any objection to venue laid therein. Process in any such
suit, action or proceeding may be served on any party anywhere in the world,
whether within or without the State of Delaware. Without limiting the
foregoing, each of the parties hereto agrees that service of process upon such
party at the address referred in Section 11.1, together with written notice of
such service to such party, shall be deemed effective service of process upon
such party.
SECTION 11.8. Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if 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.
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.
Burlington Northern Inc.
/s/ Gerald Grinstein
By: _________________________________
Title: Chairman and Chief
Executive Officer
Santa Fe Pacific Corporation
/s/ Robert D. Krebs
By: _________________________________
Title: Chairman, President and
Chief Executive Officer
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ANNEX I
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, neither SFP nor BNI shall
be required to accept for payment or pay for any shares of SFP Common Stock,
and may terminate or amend its obligation to purchase shares of SFP Common
Stock under the Offer or may postpone the acceptance for payment of and payment
for shares of SFP Common Stock, if (i) at least 63,000,000 shares of SFP Common
Stock shall not have been tendered and not withdrawn pursuant to the Offer (the
"Minimum Condition"), (ii) this Agreement shall not have been adopted by the
stockholders of SFP and BNI in accordance with Delaware Law, (iii) the
applicable waiting period under the HSR Act shall not have expired or been
terminated, (iv) BNI (in the case of SFP) and SFP (in the case of BNI) shall
not have accepted (or shall not concurrently accept) shares of SFP Common Stock
for payment under the Offer or (v) at any time on or after the date of this
Agreement and prior to the acceptance for payment of shares of SFP Common
Stock, any of the following conditions exist:
(a) any court, arbitrator or governmental body, agency or official shall have
issued any order, or there shall be any statute, rule or regulation,
restraining or prohibiting the consummation of the Offer or the Merger or the
effective operation of the business of BNI, SFP and their respective
Subsidiaries after the Effective Time; or
(b) any actions by or in respect of or filings with any governmental body,
agency, official, or authority required to permit the consummation of the Offer
(other than with respect to the HSR Act) or the Merger (other than ICC
approval) shall not have been obtained, but excluding any consent, approval,
clearance or confirmation the failure to obtain which could not reasonably be
expected to have a Material Adverse Effect on the Surviving Corporation after
the Effective Time; or
(c) SFP (in the case of BNI) or BNI (in the case of SFP) shall have failed to
perform in any material respect any of its respective obligations under this
Agreement required to be performed by it at or prior to the consummation of the
Offer, or the representations and warranties of SFP (in the case of BNI) or BNI
(in the case of SFP) shall not have been accurate in all material respects both
when made and at and as of any time prior to the consummation of the Offer as
if made at and as of such time, except for the representations and warranties
of SFP and BNI in Sections 3.5(a) and 4.5(a), respectively, of the Agreement,
which shall be accurate in all respects when made and at and as of any time
prior to the consummation of the Offer as if made at and as of that time; or
(d) the Agreement shall have been terminated in accordance with its terms; or
(e) (i) SFP shall not be satisfied, in its sole discretion, that it has
obtained sufficient financing to enable it to satisfy its obligations under the
Offer and to effect the other transactions referred to in Section 5.1(f)(ii),
or (ii) BNI shall not be satisfied, in its sole discretion, that it has
obtained sufficient financing to enable it to satisfy its obligations under the
Offer (it being understood that each of SFP and BNI will use its reasonable
best efforts to ensure that this condition to its obligations under the Offer
is satisfied no later than December 31, 1994).
which, in the sole judgment of SFP or BNI in any such case, and regardless of
the circumstances (including any action or omission by SFP or BNI) giving rise
to any such condition, makes it inadvisable to proceed with such acceptance for
payment or payment; provided that the Minimum Condition may be waived only with
the consent of each of BNI and SFP.
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ANNEX II
REGISTRATION RIGHTS
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. The following terms, as used herein, have the
following meanings:
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under common control with such Person. For the
purposes of this definition, "control" when used with respect to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Demand Registration" means a Demand Registration as defined in Section 2.2.
"Piggy-Back Registration" means a Piggy-Back Registration as defined in
Section 2.3.
"Registrable Securities" means the shares of SFP Common Stock purchased by
BNI pursuant to the Offer until (i) a registration statement covering such SFP
Common Stock has been declared effective by the Commission and it has been
disposed of pursuant to such effective registration statement, (ii) such SFP
Common Stock is sold under circumstances in which all of the applicable
conditions of Rule 144 (or any similar provisions then in force) under the 1933
Act are met, (iii) such SFP Common Stock may be sold without registration
pursuant to Rule 144(k) or (iv) such SFP Common Stock has been otherwise
transferred, SFP has delivered a new certificate or other evidence of ownership
for such SFP Common Stock not bearing the legend required pursuant to this
Agreement and such SFP Common Stock may be resold without subsequent
registration under the 1933 Act.
"Underwriter" means a securities dealer who purchases any Registrable
Securities as principal and not as part of such dealer's market-making
activities.
ARTICLE II
REGISTRATION RIGHTS
SECTION 2.1. Demand Registration. (a) Request for Registration. At any time
or from time to time after the termination of the Agreement, BNI may make a
written request for registration under the 1933 Act of all or part of its
Registrable Securities (a "Demand Registration"); provided, that the SFP shall
not be obligated to effect more than two Demand Registrations in total with
respect to such issue of Registrable Securities. Such request will specify the
number of shares of Registrable Securities proposed to be sold and will also
specify the intended method of disposition thereof.
(b) Effective Registration. A registration will not count as a Demand
Registration until it has become effective.
(c) Managing Underwriting; Additional Demand Registrations. If BNI shall so
elect, the offering of such Registrable Securities pursuant to such Demand
Registration shall be in the form of an underwritten offering. BNI shall select
the book-running managing Underwriter in connection with such offering and any
additional investment bankers and managers to be used in connection with the
offering; provided that such managing Underwriter and additional investment
bankers and managers must be reasonably satisfactory to SFP. To the extent
Registrable Securities so requested to be registered are excluded from the
offering in accordance with Section 2.3, BNI shall have the right to one
additional Demand Registration under this Section with respect to such
Registrable Securities.
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SECTION 2.2. Piggy-Back Registration. If at any time SFP proposes to file a
registration statement under the 1933 Act with respect to an offering by SFP
for its own account or for the account of any of its respective securityholders
of any class of security (other than a registration statement on Form S-4 or S-
8 (or any substitute form that may be adopted by the Commission or a
registration filed), or filed in connection with an exchange offer or offering
of securities solely to SFP's existing securityholders) then SFP shall give
written notice of such proposed filing to BNI as soon as practicable (but in no
event less than 10 days before the anticipated filing date), and such notice
shall offer BNI the opportunity to register such number of shares of
Registrable Securities as BNI may request (a "Piggy-Back Registration"). SFP
shall use its reasonable best efforts to cause the managing Underwriter or
Underwriters of a proposed underwritten offering to permit the Registrable
Securities requested to be included in a Piggy-Back Registration to be included
on the same terms and conditions as any similar securities of SFP included
therein.
SECTION 2.3. Reduction of Offering. Notwithstanding anything contained
herein, if the managing Underwriter or Underwriters of an offering described in
Section 2.1 or 2.2 deliver a written opinion to BNI that the size of the
offering that is intended to be made is such that the success of the offering
would be materially and adversely affected by inclusion of all of the
Registrable Securities requested to be included, then the amount of securities
to be offered for the account of BNI shall be reduced to the extent necessary
to reduce the total amount of securities to be included in such offering to the
amount recommended by such managing Underwriter or Underwriters; provided that,
in the case of a Piggy-Back Registration, if securities are being offered for
the account of other persons or entities as well as SFP, then with respect to
the Registrable Securities intended to be offered by BNI, the proportion by
which the amount of such class of securities intended to be offered by BNI is
reduced shall not exceed the proportion by which the amount of such class of
securities intended to be offered by such other persons or entities is reduced.
ARTICLE III
REGISTRATION PROCEDURES
SECTION 3.1. Filings; Information. Whenever BNI requests that any Registrable
Securities be registered pursuant to Section 2.1 hereof, SFP will use its
reasonable best efforts to effect the registration of such Registrable
Securities in accordance with the intended method of disposition thereof as
quickly as practicable, and in connection with any such request:
(a) SFP will as expeditiously as reasonably practicable prepare and file
with the SEC a registration statement on any form for which SFP then qualifies
or which counsel for SFP shall deem appropriate and which form shall be
available for the sale of the Registrable Securities to be registered
thereunder in accordance with the intended method of distribution thereof, and
use its reasonable best efforts to cause such filed registration statement to
become and remain effective for a period of not less than 270 days; provided
that if SFP shall furnish to BNI a certificate signed by either its Chairman or
the Vice Chairman stating that in his good faith judgment it would be
significantly disadvantageous to SFP or its shareholders for such a
registration statement to be filed as expeditiously as reasonably practicable,
SFP shall have a period of not more than 90 days within which to file such
registration statement measured from the date of receipt of the request in
accordance with Section 2.1.
(b) SFP will, if requested, prior to filing a registration statement or
prospectus or any amendment or supplement thereto, furnish to BNI and each
Underwriter, if any, of the Registrable Securities covered by such registration
statement copies of such registration statement as proposed to be filed, and
thereafter furnish to BNI and such Underwriter, if any, such number of copies
of such registration statement, each amendment and supplement thereto (in each
case including all exhibits thereto and documents incorporated by reference
therein), the prospectus included in such registration statement (including
each preliminary prospectus) and such other documents as BNI or such
Underwriter may reasonably request in order to facilitate the disposition of
the Registrable Securities owned by BNI.
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(c) After the filing of the registration statement, SFP will promptly notify
BNI of any stop order issued or threatened by the SEC and take all reasonable
actions required to prevent the entry of such stop order or to remove it if
entered.
(d) SFP will use its reasonable best efforts to (i) register or qualify the
Registrable Securities under such other securities or blue sky laws of such
jurisdictions in the United States as BNI reasonably (in light of BNI's
intended plan of distribution) requests and (ii) cause such Registrable
Securities to be registered with or approved by such other governmental
agencies or authorities in the United States as may be necessary by virtue of
the business and operations of SFP and do any and all other acts and things
that may be reasonably necessary or advisable to enable BNI to consummate the
disposition of the Registrable Securities owned by BNI; provided that SFP will
not be required to (A) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this paragraph (d),
(B) subject itself to taxation in any such jurisdiction or (C) consent to
general service of process in any such jurisdiction.
(e) SFP will immediately notify BNI, at any time when a prospectus relating
thereto is required to be delivered under the 1933 Act, of the occurrence of an
event requiring the preparation of a supplement or amendment to such prospectus
so that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus will not contain an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and promptly make
available to BNI any such supplement or amendment.
(f) SFP will enter into customary agreements (including an underwriting
agreement in form customary for SFP) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of such
Registrable Securities.
(h) Subject, in the case of BNI, to the Confidentiality Agreement between BNI
and SFP dated as of July 28, 1993 or, in the case of any Underwriter or
Inspector retained by any Underwriter, customary confidentiality obligations,
SFP will make available for inspection by BNI, any Underwriter participating in
any disposition pursuant to such registration statement and any attorney,
accountant or other professional retained by BNI or such Underwriter
(collectively, the "Inspectors"), all financial and other records, pertinent
corporate documents and properties of SFP (collectively, the "Records") as
shall be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause SFP's officers, directors and employees to supply all
information reasonably requested by any Inspectors in connection with such
registration statement.
(i) SFP will furnish to BNI and to each Underwriter, if any, a signed
counterpart, addressed to BNI or such Underwriter, of (i) an opinion or
opinions of counsel to SFP and (ii) a comfort letter or comfort letters from
SFP's independent public accountants, each in form customary in primary
offerings by SFP form and covering such matters of the type customarily covered
by opinions or comfort letters, as the case may be, as BNI or the managing
Underwriter reasonably requests.
(j) SFP will otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
security-holders, as soon as reasonably practicable, its most recent quarterly
earnings statement beginning with the first full quarter after the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the 1933 Act and Rule 158 under the 1933 Act.
(k) SFP will use its reasonable best efforts to cause all such Registrable
Securities to be listed on each securities exchange on which similar securities
of the same class issued by SFP are then listed.
SFP may require BNI to promptly furnish in writing to SFP such information
regarding the distribution of the Registrable Securities as SFP may from time
to time reasonably request and such other information as may be legally
required in connection with such registration.
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BNI agrees that, upon receipt of any notice from SFP of the happening of any
event of the kind described in Section 3.1(e) hereof, BNI will forthwith
discontinue disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until BNI's receipt of the
copies of the supplemented or amended prospectus contemplated by Section 3.1(e)
hereof, and, if so directed by SFP, BNI will deliver to SFP all copies, other
than permanent file copies then in BNI's possession, of the most recent
prospectus covering such Registrable Securities at the time of receipt of such
notice. In the event SFP shall give such notice, SFP shall extend the period
during which such registration statement shall be maintained effective
(including the period referred to in Section 3.1(a) hereof) by the number of
days during the period from and including the date of the giving of notice
pursuant to Section 3.1(e) hereof to the date when SFP shall make available to
BNI a prospectus supplemented or amended to conform with the requirements of
Section 3.1(e) hereof.
SECTION 3.2. Registration Expenses. In connection with any registration
statement required to be filed hereunder, SFP shall pay the following
registration expenses incurred in connection with the registration hereunder
(the "Registration Expenses"): (i) all registration and filing fees, (ii) fees
and expenses of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the Registrable Securities), (iii) printing expenses, (iv)
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), (v) the fees
and expenses incurred in connection with the listing of the Registrable
Securities, (vi) reasonable fees and disbursements of counsel for SFP and
customary fees and expenses for independent certified public accountants
retained by SFP (including the expenses of any comfort letters or costs
associated with the delivery by independent certified public accountants of a
comfort letter or comfort letters requested pursuant to Section 3.1(h) hereof),
and (vii) the reasonable fees and expenses of any special experts retained by
SFP in connection with such registration. SFP shall have no obligation to pay
any underwriting fees, discounts or commissions attributable to the sale of
Registrable Securities, or any out-of-pocket expenses of BNI or its
Underwriters (or the agents who manage their accounts).
ARTICLE IV
INDEMNIFICATION AND CONTRIBUTION
SECTION 4.1. Indemnification by SFP. SFP agrees to indemnify and hold
harmless BNI, its officers, directors and agents, and each Person, if any, who
controls BNI within the meaning of Section 15 of the 1933 Act or Section 20 of
the Exchange Act from and against any and all losses, claims, damages and
liabilities caused by any untrue statement or alleged untrue statement of a
material fact contained in any registration statement or prospectus relating to
the Registrable Securities (as amended or supplemented if SFP shall have
furnished any amendments or supplements thereto) or any preliminary prospectus,
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information furnished in writing to SFP by BNI or on BNI's
behalf expressly for use therein; provided, however, that the foregoing
indemnity agreement with respect to any preliminary prospectus shall not inure
to the benefit of BNI, its officers, directors and agents, and each Person, if
any, who controls BNI within the meaning of Section 15 of the 1933 Act or
Section 20 of the Exchange Act if it is determined that it was the
responsibility of BNI to provide such person with a current copy of the
prospectus and such current copy of the prospectus would have cured the defect
giving rise to such loss, claim, damage or liability. SFP also agrees to
indemnify any Underwriters of the Registrable Securities, their officers and
directors and each person who controls such underwriters on substantially the
same basis as that of the indemnification of BNI provided in this Section 4.1.
SECTION 4.2. Indemnification by BNI. BNI agrees to indemnify and hold
harmless SFP, its officers, directors and agents and each Person, if any, who
controls SFP within the meaning of either Section 15 of the 1933 Act or Section
20 of the Exchange Act to the same extent as the foregoing indemnity from
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SFP to BNI, but only with reference to information relating to BNI furnished in
writing by BNI or on BNI's behalf expressly for use in any registration
statement or prospectus relating to the Registrable Securities, or any
amendment or supplement thereto, or any preliminary prospectus. In case any
action or proceeding shall be brought against SFP or its officers, directors or
agents or any such controlling person, in respect of which indemnity may be
sought against BNI, BNI shall have the rights and duties given to SFP, and SFP
or its officers, directors or agents or such controlling person shall have the
rights and duties given to BNI, by the preceding paragraph. BNI also agrees to
indemnify and hold harmless Underwriters of the Registrable Securities, their
officers and directors and each person who controls such Underwriters on
substantially the same basis as that of the indemnification of SFP provided in
this Section 4.2.
SECTION 4.3. Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to Section 4.1 or
4.2, such person (an "Indemnified Party") shall promptly notify the person
against whom such indemnity may be sought "Indemnifying Party") in writing and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Indemnified Party, and
shall assume the payment of all fees and expenses. In any such proceeding, any
Indemnified Party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
unless (i) the Indemnifying Party and the Indemnified Party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the Indemnified Party
and the Indemnifying Party and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them. It is understood that the Indemnifying Party shall not, in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the reasonable fees and expenses of more than one separate firm
of attorneys (in addition to any local counsel) at any time for all such
Indemnified Parties, and that all such fees and expenses shall be reimbursed as
they are incurred. In the case of any such separate firm for the Indemnified
Parties, such firm shall be designated in writing by the Indemnified Parties.
The Indemnifying Party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent, or if
there be a final judgment for the plaintiff, the Indemnifying Party shall
indemnify and hold harmless such Indemnified Parties from and against any loss
or liability (to the extent stated above) by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel as contemplated by the third sentence of
this paragraph, the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 business days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is
or could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional
release of such indemnified party from all liability arising out of such
proceeding.
SECTION 4.4. Contribution. If the indemnification provided for in this
Article 4 is unavailable to the Indemnified Parties in respect of any losses,
claims, damages or liabilities referred to herein, then each such Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such losses,
claims, damages or liabilities (i) as between SFP and BNI on the one hand and
the Underwriters on the other, in such proportion as is appropriate to reflect
the relative benefits received by SFP and BNI on the one hand and the
Underwriters on the other from the offering of the securities, or if such
allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits but also the relative
fault of SFP and BNI on the one hand and of the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations and (ii) as between SFP on the one hand and BNI on the other, in
such proportion as is appropriate to reflect the relative
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fault of SFP and of BNI in connection with such statements or omissions, as
well as any other relevant equitable considerations. The relative benefits
received by SFP and BNI on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total proceeds from the offering
(net of underwriting discounts and commissions but before deducting expenses)
received by SFP and BNI bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the
table on the cover page of the prospectus. The relative fault of SFP and BNI on
the one hand and of the Underwriters on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by SFP and BNI or by the
Underwriters. The relative fault of SFP on the one hand and of BNI on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by such party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
SFP and BNI agree that it would not be just and equitable if contribution
pursuant to this Section 4.4 were determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Party as a result of the losses, claims,
damages or liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 4.4, no Underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the
securities underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission, and BNI shall not be required to contribute any
amount in excess of the amount by which the total price at which BNI's
securities were offered to the public exceeds the amount of any damages which
BNI has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
ARTICLE V
MISCELLANEOUS
SECTION 5.1. Participation in Underwritten Registrations. No Person may
participate in any underwritten registration filed pursuant to Section 2.1
hereunder unless such Person (a) agrees to sell such Person's securities on the
basis provided in any underwriting arrangements approved by the Persons
entitled hereunder to approve such arrangements and (b) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements
and other documents reasonably required under the terms of such underwriting
arrangements and these registration rights.
SECTION 5.2. Rule 144. SFP covenants that it will file any reports required
to be filed by it under the Exchange Act and that it will take such further
action as BNI may reasonably request, all to the extent required from time to
time to enable BNI to sell Registrable Securities without registration under
the 1933 Act within the limitation of the exemptions provided by (a) Rule 144
under the 1933 Act, as such Rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the SEC. Upon the request of
BNI, SFP will deliver to BNI a written statement as to whether it has complied
with such requirements.
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SECTION 5.3. Holdback Agreements. (a) Restrictions on Public Sale by BNI. To
the extent not inconsistent with applicable law, when BNI's securities are
included in a registration statement, BNI agrees not to effect any public sale
or distribution of SFP Common Stock, or any securities convertible into or
exchangeable or exercisable for such securities, including a sale pursuant to
Rule 144 under the 1933 Act, during the 14 days prior to, and during the 90-day
period beginning on, the effective date of such registration statement (except
as part of such registration), if and to the extent requested by SFP in the
case of a non-underwritten public offering or if and to the extent requested by
the managing Underwriter or Underwriters in the case of an underwritten public
offering.
(b) Restrictions on Public Sale by SFP and Others. SFP agrees not to effect
any public sale or distribution of any securities of the class being registered
in accordance with Section 2.1 hereof, or any securities convertible into or
exchangeable or exercisable for such securities, during the 14 days prior to,
and during the 90-day period beginning on, the effective date of any
registration statement (except as part of such registration statement where BNI
consents) or the commencement of a public distribution of Registrable
Securities, including a sale pursuant to Rule 144 under the 1933 Act (except as
part of any such registration, if permitted); provided, however, that the
provisions of this paragraph (b) shall not prevent the conversion or exchange
of any securities pursuant to their terms into or for other securities or sales
or distributions pursuant to any dividend or interest reinvestment plan or
director or employer compensation plan.
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APPENDIX B
Goldman, Sachs & Co. 85 Broad Street New York, New York 10004
Tel: 212-902-1000
Goldman
Sachs
PERSONAL AND CONFIDENTIAL
December 23, 1994
Board of Directors
Santa Fe Pacific Corporation
1700 East Golf Road
Schaumburg, Illinois 60173-5860
Gentlemen and Madame:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of common stock, par value $1.00 per share (the "Common
Stock"), of Santa Fe Pacific Corporation (the "Company") of the Aggregate
Consideration (as defined below) to be received pursuant to the Agreement and
Plan of Merger, dated as of June 29, 1994, as amended to December 23, 1994,
among Burlington Northern Inc. ("BNI") and the Company (the "Agreement") in
connection with the merger of the Company with and into BNI (the "Merger").
The Agreement provides for a joint tender offer (the "Joint Tender Offer")
pursuant to which the Company and BNI will pay $20 per share for an aggregate
of 63 million shares of Common Stock. The Agreement further provides that
following completion of the Joint Tender Offer and the appropriate regulatory
approvals, the Company will be merged with and into BNI and each outstanding
Share (other than Shares already owned by BNI) will be exchanged for 0.40
shares of common stock, with no par value, of Burlington Northern Inc. ("BNI
Common Stock"). The aggregate of the cash and stock consideration to be
received by all of the holders of outstanding shares of Common Stock of the
Company pursuant to the Joint Tender Offer and Merger is herein referred to as
the "Aggregate Consideration".
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having performed various investment banking services
for the Company from time to time, including having acted as managing and co-
managing underwriter of public offerings of Common Stock of the Company in
October 1991 and June 1992, respectively, having acted as financial advisor on
the asset exchange between the Company and Hanson Natural Resources Company in
June 1993, having acted as managing underwriter of a public offering of Common
Stock of Santa Fe Pacific Gold Corporation, a subsidiary of the Company, in
June of 1994, having acted as co-managing underwriter of public offerings of 8
3/8% Notes due 2001 and 8 5/8% Notes due 2004 of the Company in January 1994,
as well as having acted as the Company's financial advisor in connection with,
and having participated in certain of the negotiations leading to, the
Agreement. We also have committed to participate as co-arranger and arranging
agent on the Company's bank financing and co-dealer managers in connection with
the Joint Tender Offer. We also have provided certain investment banking
services to BNI from time to time, including acting as co-managing underwriter
of a public offering of BNI Common Stock in November 1991, acting as managing
underwriter of a public offering of 6 1/4% Cumulative Convertible Preferred
Stock in November 1992, and acting as a co-managing underwriter in a public
offering of 7 1/2% Debentures due 2002 in July 1993, and we may provide
investment banking services to BNI in the future. We have also provided certain
investment banking services to Union Pacific Corporation ("UPC") from time to
time, including having acted as co-managing underwriter of a public offering of
7 7/8% Notes due 2002 in
<PAGE>
February 1992, a public offering of 8 5/8% Sinking Fund Debentures due 2022 in
May 1992, a public offering of 6% Notes due 2003 in August 1993, a public
offering of 7% Notes due 2000 in June 1994, a public offering of 6 1/8% Notes
due 2004 in January 1994, and as sole managing underwriter of a public offering
of 6.12% Equipment Trust Certificates due February 1, 2004 in January 1994.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Offer to Purchase dated December 23, 1994 of SFP and BNI; the
Joint Proxy Statement/Prospectus dated October 12, 1994, as amended and
supplemented to the date hereof; Annual Reports to Stockholders and Annual
Reports on Form 10-K of the Company and BNI for the five years ended December
31, 1993 (and any amendments thereto); certain interim reports to stockholders
and Quarterly Reports on Form 10-Q of the Company and BNI (and any amendments
thereto); certain other communications from the Company and BNI to their
respective stockholders; certain Current Reports on Form 8-K of the Company and
BNI; and certain internal financial analyses and forecasts for the Company and
BNI prepared by their respective managements. We also have reviewed the Proxy
Statement, dated October 28, 1994, as amended and supplemented to the date
hereof, of UPC, which solicits proxies in opposition to the Merger and the
Offer to Purchase, dated November 9, 1994 of UPC, as amended and supplemented
to the date hereof, which sets forth the proposal of UPC to acquire the
outstanding shares of Common Stock of the Company by means of a cash tender
offer and merger (the "UPC Proposal"). We also have held discussions with
members of the senior management of the Company and BNI regarding the past and
current business operations, financial condition and future prospects of their
respective companies. Furthermore, we have considered the views of the senior
management of the Company regarding the strategic importance of, and potential
synergies expected to be realized from, the Merger. In addition, we have
reviewed the reported price and trading activity for the Common Stock and BNI
Common Stock, compared certain financial and stock market information for the
Company and BNI with similar information for certain other companies the
securities of which are publicly traded, reviewed the financial terms of
certain recent business combinations in the railroad industry specifically and
in other industries generally and performed such other studies and analyses as
we considered appropriate.
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes for this opinion. In addition, we have not made an independent
evaluation or appraisal of the assets and liabilities of the Company or BNI or
any of their respective subsidiaries and we have not been furnished with any
such evaluation or appraisal. We have assumed with your consent that the
transaction will receive regulatory approval in the manner contemplated by the
Company.
Management of the Company has advised us that in its opinion there are
significant contingencies associated with the UPC Proposal and counsel to the
Company has advised the Company's Board of Directors and management that there
are significant legal uncertainties relating to whether or under what
circumstances regulatory authorities would permit a combination of the Company
and UPC. We have assumed with your consent that this advice was correct. We
believe that the effect upon the common stock of UPC resulting from the failure
to consummate the combination of the Company and UPC or from the conditions
which UPC may be required to accept in order to consummate such a combination
is uncertain. This uncertainty limits our ability to compare the aggregate
consideration to be received by the holders of the Common Stock of the Company
pursuant to the UPC Proposal with the Aggregate Consideration to be received
pursuant to the Joint Tender Offer and the Merger.
Based upon and subject to the foregoing and based upon such other matters as we
considered relevant, it is our opinion that as of the date hereof the Aggregate
Consideration to be received by all of the holders of
the outstanding shares of Common Stock of the Company pursuant to the Joint
Tender Offer and the Merger, considered as a unitary transaction, is fair to
such stockholders.
Very truly yours,
Goldman, Sachs & Co.
B-2
<PAGE>
Facsimile copies of the Letter of Transmittal will be accepted. The Letter of
Transmittal and certificates for SFP Common Stock 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:
First Chicago Trust Company of New York
By Mail: By Facsimile Transmission: By Hand:
(For Eligible Institutions Only)
Tenders & Exchanges (201) 222-4720 Tenders & Exchanges
P.O. Box 2564 Suite (201) 222-4721 14 Wall Street
4660 SFP Suite 4680 SFP
Jersey City, NJ 07303-2564 8th Floor
New York, NY 10005
Confirm Facsimile by Telephone:
(For Confirmation Only)
(201) 222-4707
Questions or request for assistance or additional copies of this Offer to
Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to any of the Information Agents or either of 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 Agents are:
D.F. KING & CO., INC. MACKENZIE KISSEL BLAKE INC.
PARTNERS INC.
77 Water Street 156 Fifth Avenue 25 Broadway, 6th Floor
New York, New York New York, New York 10010 New York, New York 10004
10005 CALL TOLL FREE (800) 322-2885 CALL TOLL FREE (800)
CALL TOLL FREE (800) 554-7733
697-6974
The Dealer Managers for the Offer are:
GOLDMAN, SACHS & CO. LAZARD FRERES & CO.
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES
OF
COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
SANTA FE PACIFIC CORPORATION
PURSUANT TO THE OFFER TO PURCHASE DATED DECEMBER 23, 1994
BY
BURLINGTON NORTHERN INC.
AND
SANTA FE PACIFIC CORPORATION
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, JANUARY 30, 1995, UNLESS THE OFFER IS EXTENDED.
To: FIRST CHICAGO TRUST COMPANY OF NEW YORK, Depositary
By Mail: By Facsimile By Hand or
Tenders & Exchanges Transmission: Overnight Courier:
P.O. Box 2564 Suite (For Eligible Tenders & Exchanges
4660SFP Institutions Only) 14 Wall Street
Jersey City, NJ 07303- (201) 222-4720 Suite 4680SFP
2564 (201) 222-4721 8th Floor
New York, NY 10005
Confirm Facsimile by Telephone:
(For Confirmation Only)
(201) 222-4707
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A 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 by stockholders if certificates for
shares of SFP Common Stock (as defined below) are to be forwarded herewith or,
unless an Agent's Message (as defined in the Offer to Purchase) is utilized,
if delivery of shares of SFP Common Stock is to be made by book-entry transfer
to the Depositary's account at The Depository Trust Company, Midwest
Securities Trust Company or Philadelphia Depository Trust Company (hereinafter
collectively referred to as the "Book-Entry Transfer Facilities") pursuant to
the procedures set forth under "The Tender Offer--3. Procedure for Tendering
SFP Common Stock" in the Offer to Purchase dated December 23, 1994.
Stockholders who tender shares of SFP Common Stock by book-entry transfer are
referred to herein as "Book-Entry Stockholders."
Stockholders who cannot deliver their shares of SFP Common Stock and all
other documents required hereby to the Depositary on or prior to the
Expiration Date (as defined in the Offer to Purchase) or who cannot complete
the procedures for book-entry transfer on a timely basis, must tender their
shares of SFP Common Stock pursuant to the guaranteed delivery procedure set
forth under "The Tender Offer--3. Procedure for Tendering SFP Common Stock" in
the Offer to Purchase. See Instruction 2. Delivery of documents to one of the
Book-Entry Transfer Facilities does not constitute delivery to the Depositary.
DESCRIPTION OF SHARES TENDERED
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(Please fill in, if blank, exactly as name(s) SHARES TENDERED (ATTACH
appear(s) on Share Certificates ADDITIONAL LIST IF NECESSARY)
- - -----------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES NUMBER OF
CERTIFICATE REPRESENTED BY SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
TOTAL SHARES
- - -----------------------------------------------------------------------------------------
</TABLE>
*Need not be completed by stockholders tendering by book-entry transfer.
**Unless otherwise indicated, it will be assumed that all shares of SFP
Common Stock represented by any certificates delivered to the Depositary
are being tendered. See Instruction 4.
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
[_]CHECK HERE IF TENDERED SHARES OF SFP COMMON STOCK 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 ______________________________________________
Account No. _____________________________________________________________ at
[_]The Depository Trust Company
[_]Midwest Securities Trust Company
[_]Philadelphia Depository Trust Company
Transaction Code No. _______________________________________________________
[_]CHECK HERE IF TENDERED SHARES OF SFP COMMON STOCK ARE BEING DELIVERED
PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE
DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Stockholder(s) _______________________________________
Window Ticket Number (if any) ______________________________________________
Date of Execution of Notice of Guaranteed Delivery _________________________
Name of Institution which Guaranteed Delivery ______________________________
If delivery is by book entry transfer:
Name of Tendering Institution ___________________________________________
[_] DTC [_] MSTC [_] PHILADEP (check one) Account No. _________________
Transaction Code No. ____________________________________________________
Ladies and Gentlemen:
The undersigned hereby tenders to Burlington Northern Inc., a Delaware
corporation ("BNI") and Santa Fe Pacific Corporation, a Delaware corporation
("SFP" and, together with BNI, the "Purchasers"), the above-described shares
of common stock, par value $1.00 per share (the "SFP Common Stock") of SFP
(including the associated preferred share purchase rights (the "SFP Rights")
issued pursuant to the Rights Agreement dated as of November 28, 1994 between
SFP and First Chicago Trust Company of New York, as Rights Agent) pursuant to
the Purchasers' offer to purchase up to 63,000,000 shares of SFP Common Stock
at a price of $20 per share, net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in the Offer
to Purchase dated December 23, 1994, receipt of which is hereby acknowledged,
and in this Letter of Transmittal (which together constitute the "Offer"). The
tender of any shares of SFP Common Stock pursuant to the Offer will include
the tender of associated SFP Rights. Unless the context otherwise requires,
all references to shares of SFP Common Stock shall include the associated SFP
Rights.
Subject to, and effective upon, acceptance for payment of the shares of SFP
Common Stock tendered herewith in accordance with the terms of the Offer,
including, if the Offer is extended or amended, the terms and conditions of
any such extension or amendment, the undersigned hereby sells, assigns and
transfers to or upon the order of the Purchasers all right, title and interest
in and to all the shares of SFP Common Stock that are being tendered hereby or
orders the registration of such shares delivered by book-entry transfer (and
any and all other shares of SFP Common Stock or other securities issued or
issuable in respect thereof on or after December 27, 1994 and any or all
dividends thereon or distributions with respect thereto (collectively,
"Distributions") and irrevocably appoints the Depositary the true and lawful
agent and attorney-in-fact of the undersigned with respect to such shares of
SFP Common Stock (and all Distributions), with full power of substitution
(such power of attorney being deemed to be an irrevocable power coupled with
an interest), to (a) deliver certificates for such shares of SFP Common Stock
(and all such other shares or securities), or transfer ownership of such
shares of SFP Common Stock (and all Distributions) on the account books
maintained by any of the Book-Entry Transfer Facilities, together, in any such
case, with all accompanying evidences of transfer and authenticity, to or upon
the order of the Purchasers upon receipt by the Depositary, as the
undersigned's agent, of the purchase price, (b) present such shares of SFP
Common Stock (and all Distributions) for transfer on the books of SFP and (c)
receive all benefits and otherwise exercise all rights of beneficial ownership
of such shares of SFP Common Stock (and all Distributions), all in accordance
with the terms of the Offer.
The undersigned hereby irrevocably appoints Denis E. Springer and Marsha K.
Morgan and each of them, the attorneys-in-fact and proxies of the undersigned,
each with full power of substitution, to exercise all voting and other rights
of the undersigned in such manner as each such attorney and proxy or his
substitute shall in his sole discretion deem proper, with respect to all of
the shares of SFP Common Stock tendered hereby which have been accepted for
payment by the Purchasers prior to the time of any vote or other action at any
meeting of stockholders of SFP (whether annual or special and whether or not
an adjourned meeting), by written consent or otherwise. This power of attorney
and proxy is coupled with an interest and is irrevocable and is granted in
consideration of, and is effective upon, the acceptance for payment of such
shares of SFP Common Stock by the Purchasers in accordance with the terms of
the Offer. Such acceptance for payment shall revoke, without any further
action, any other power of attorney or proxy granted by the undersigned at any
time with respect to such Shares, and no subsequent power of attorney or
proxies will be given or will be executed by the undersigned (and if given or
executed, will not be deemed to be effective). The undersigned understands
that the Purchasers reserve the right to require that, in order for such
shares of SFP Common Stock to be deemed validly tendered, immediately upon the
Purchasers' acceptance for payment of such shares of SFP Common Stock, the
Purchasers are able to exercise full voting rights with respect to such shares
of SFP Common Stock and other securities, including voting at any meeting of
stockholders.
<PAGE>
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the shares of SFP
Common Stock and all Distributions tendered hereby and that when the same are
accepted for payment by the Purchasers, the Purchasers will acquire good and
marketable title and unencumbered ownership thereto, free and clear of all
liens, restrictions, charges, security interests and encumbrances and not
subject to any adverse claims. The undersigned will, upon request, execute and
deliver any additional documents deemed by the Depositary or the Purchasers to
be necessary or desirable to complete the sale, assignment and transfer of the
shares of SFP Common Stock and all Distributions tendered hereby. In addition,
the undersigned will promptly remit and transfer to the Depositary for the
account of the Purchasers any and all Distributions in respect of the shares
of SFP Common Stock tendered hereby, accompanied by appropriate documentation
of transfer and, pending such remittance or appropriate assurance thereof, the
Purchasers shall be entitled to all rights and privileges as owner of any such
Distributions, and may withhold the entire purchase price or deduct from the
purchase price of shares of SFP Common Stock tendered hereby, the amount or
value thereof, as determined by the Purchasers in their sole discretion.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned. Except as stated in the Offer, this
tender is irrevocable.
The undersigned understands that tenders of shares of SFP Common Stock
pursuant to any one of the procedures described under "The Tender Offer -- 3.
Procedure for Tendering SFP Common Stock" in the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the
undersigned and the Purchasers upon the terms and subject to the conditions of
the Offer.
The undersigned recognizes that, under certain circumstances set forth in
the Offer to Purchase, the Purchasers may terminate or amend the Offer or may
not be required to accept for payment any of the shares of SFP Common Stock
tendered herewith or may accept for payment, pro rata with shares of SFP
Common Stock tendered by other stockholders, fewer than all of the shares of
SFP Common Stock tendered herewith.
Unless otherwise indicated under "Special Payment Instructions," please
issue the check for the purchase price and/or return any shares of SFP Common
Stock not tendered or accepted for payment in the name(s) of the undersigned.
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the purchase price and/or return any shares of SFP
Common Stock certificates not tendered or accepted for payment (and
accompanying documents, as appropriate) to the undersigned at the address
shown below the undersigned's signature(s). In the event that both "Special
Payment Instructions" and "Special Delivery Instructions" are completed,
please issue the check for the purchase price and/or return any shares of SFP
Common Stock not tendered or accepted for payment in the name(s) of, and
deliver said check and/or return certificates to, the person or persons so
indicated. Stockholders tendering shares of SFP Common Stock by book-entry
transfer may request that any shares of SFP Common Stock not accepted for
payment be returned by crediting such account maintained at such Book-Entry
Transfer Facility as such stockholder may designate by making an appropriate
entry under "Special Payment Instruction." The undersigned recognizes that the
Purchasers have no obligation pursuant to the "Special Payment Instructions"
to transfer any shares of SFP Common Stock from the name of the registered
holder thereof if the Purchasers do not accept for payment any of such shares
of SFP Common Stock.
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of shares of SFP
Common Stock purchased or Stock Certificates for shares of SFP Common Stock not
tendered or not purchased are to be issued in the name of someone other than
the undersigned.
Issue check and/or certificates to:
Name ___________________________________________________________________________
(PLEASE PRINT)
Address ________________________________________________________________________
- - --------------------------------------------------------------------------------
(ZIP CODE)
- - --------------------------------------------------------------------------------
(TAXPAYER IDENTIFICATION NO. OR SOCIAL SECURITY NO.) (COMPLETE SUBSTITUTE FORM
W-9)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of shares of SFP
Common Stock purchased or Stock Certificates for shares of SFP Common Stock 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 below the
undersigned's signature(s).
Mail check and/or certificates to:
Mail check and/or certificates to:
Name ___________________________________________________________________________
(PLEASE PRINT)
Address ________________________________________________________________________
________________________________________________________________________________
(ZIP CODE)
- - --------------------------------------------------------------------------------
SANTA FE PACIFIC CORPORATION
DIVIDEND REINVESTMENT PLAN SHARES
(SEE INSTRUCTION 12)
This section is to be completed ONLY if Shares held
in the Reinvestment Plan are to be tendered.
[_] By checking this box, the undersigned represents
that the undersigned is a participant in the
Reinvestment Plan and hereby tenders the following
number of Shares held in the Reinvestment Plan account
of the undersigned:
Shares*
* The undersigned understands and agrees that all Shares
held in the Reinvestment Plan account(s) of the
undersigned will be tendered if the above box is
checked and the space above is left blank.
SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW)
SIGN HERE
X [LEFT
--------------------------------------------------------- ARROW]
SIGNATURE(S) OF OWNER(S)
X
---------------------------------------------------------
Dated _____________________________________________, 199
Name(s)__________________________________________________
(PLEASE PRINT)
---------------------------------------------------------
Capacity (full title) ___________________________________
Address _________________________________________________
---------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone No. _____________________________
Tax Identification or Social Security No. _______________
(COMPLETE SUBSTITUTE W-9 ON REVERSE SIDE)
(Must be signed by registered holder(s) exactly as
name(s) appear(s) on stock certificate(s) or on a
security position listing or by person(s) authorized to
become registered holder(s) by certificates and
documents transmitted herewith. If signature is by a
trustee, executor, administrator, guardian, attorney-in-
fact, officer of a corporation or other person acting in
a fiduciary or representative capacity, please set forth
full title and see Instruction 5.)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Name of Firm ____________________________________________
Authorized Signature ____________________________________
Name ____________________________________________________
Address _________________________________________________
Area Code and Telephone Number __________________________
Dated ____________________________________________ , 199
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a financial
institution (including most banks, savings and loan associations and brokerage
houses) which is a participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Program or the Stock
Exchange Medallion Program (an "Eligible Institution"). Signatures on this
Letter of Transmittal need not be guaranteed (a) if this Letter of Transmittal
is signed by the registered holder(s) of the shares of SFP Common Stock (which
term, for purposes of this document, shall include any participant in one of
the Book-Entry Transfer Facilities whose name appears on a security position
listing as the owner of shares of SFP Common Stock) tendered herewith and such
holder(s) have not completed the instruction entitled "Special Payment
Instructions" on this Letter of Transmittal or (b) if such shares of SFP
Common Stock are tendered for the account of an Eligible Institution. See
Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARES OF SFP COMMON STOCK. This
Letter of Transmittal is to be used either if certificates are to be forwarded
herewith or if delivery of shares of SFP Common Stock is to be made by Agent's
Message in connection with a book-entry transfer pursuant to the procedures
set forth in "The Tender Offer--3. Procedure for Tendering SFP Common Stock"
of the Offer to Purchase. Certificates for all physically delivered shares of
SFP Common Stock, or a confirmation of a book-entry transfer into the
Depositary's account at one of the Book-Entry Transfer Facilities of all
shares of SFP Common Stock delivered electronically, as well as a properly
completed and duly executed Letter of Transmittal (or facsimile thereof) and
any other documents required by this Letter of Transmittal, must be received
by the Depositary at one of its addresses set forth on the front page of this
Letter of Transmittal by the Expiration Date. Stockholders who cannot deliver
their shares of SFP Common Stock and all other required documents to the
Depositary by the Expiration Date must tender their shares of SFP Common Stock
pursuant to the guaranteed delivery procedure set forth in "The Tender Offer--
3. Procedure for Tendering SFP Common Stock" of the Offer to Purchase.
Pursuant to such procedure: (a) such tender must be made by or through an
Eligible Institution, (b) a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Purchasers must
be received by the Depositary by the Expiration Date and (c) the certificates
for all physically delivered shares of SFP Common Stock, or a confirmation of
a book-entry transfer into the Depositary's account at one of the Book-Entry
Transfer Facilities of all shares of SFP Common Stock delivered
electronically, as well as a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) (or, in the case of a book-entry delivery,
an Agent's Message) and any other documents required by this Letter of
Transmittal, must be reviewed by the Depositary on the National Association of
Securities Dealers, Inc. Automatic Quotation System/National Market System
within five trading days after the date of execution of such Notice of
Guaranteed Delivery, all as provided in "The Tender Offer--3. Procedure for
Tendering SFP Common Stock." If shares of SFP Common Stock are forwarded
separately to the Depositary, each must be accompanied by a duly executed
Letter of Transmittal (or facsimile thereof).
The method of delivery of shares of SFP Common Stock Certificates, the
Letter of Transmittal and all other required documents including delivery
through Book-Entry Transfer Facilities, is at the option and sole risk of the
tending 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 issued, 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 of SFP Common Stock will be purchased. By executing this
Letter of Transmittal (or facsimile thereof), the tendering stockholder waives
any right to receive any notice of the acceptance for payment of the shares of
SFP Common Stock.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of shares of SFP Common Stock should be
listed on a separate schedule attached hereto and separately signed on each
page thereof in the same manner as this Letter of Transmittal is signed.
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If fewer than all the shares of SFP Common Stock represented by any
certificate delivered to the Depositary are to be tendered, fill in the number
of shares of SFP Common Stock which are to be tendered in the box entitled
"Number of Shares Tendered." In such case, a new certificate for the remainder
of the shares of SFP Common Stock represented by the old certificate will be
sent to the person(s) signing this Letter of Transmittal, unless otherwise
provided in the appropriate box on this Letter of Transmittal, as promptly as
practicable following the expiration or termination of the Offer. All shares
of SFP Common Stock represented by 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
of SFP Common Stock tendered hereby, the signature(s) must correspond with the
name(s) as written on the face of the certificates without alteration,
enlargement or any change whatsoever.
If any of the shares of SFP Common Stock tendered hereby is held of record
by two or more persons, all such persons must sign this Letter of Transmittal.
If any of the shares of SFP Common Stock tendered hereby are registered in
different names on different certificates, it will be necessary to complete,
sign and submit as many separate Letters of Transmittal as there are different
registrations of certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
shares of SFP Common Stock tendered hereby, no endorsements of certificates or
separate stock powers are required unless payment of the purchase price is to
be made, or shares of SFP Common Stock not tendered or not purchased are to be
returned, in the name of any person other than the registered holder(s).
Signatures on any such certificates or stock powers must be guaranteed by an
Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the shares of SFP Common Stock tendered hereby,
certificates must be endorsed or accompanied by appropriate stock powers, in
either case, signed exactly as the name(s) of the registered holder(s)
appear(s) on the certificates for such shares of SFP Common Stock.
Signature(s) on any such certificates or stock powers must be guaranteed by an
Eligible Institution.
<PAGE>
If this Letter of Transmittal or any 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 the Purchasers of the authority of such person so to act must be submitted.
6. STOCK TRANSFER TAXES. The Purchasers will pay any stock transfer taxes
with respect to the sale and transfer of any shares of SFP Common Stock to it
or its order pursuant to the Offer. If, however, payment of the purchase price
is to be made to, or shares of SFP Common Stock not tendered or not purchased
are to be returned in the name of, any person other than the registered
holder(s), or if a transfer tax is imposed for any reason other than the sale
or transfer of shares of SFP Common Stock to the Purchasers pursuant to the
Offer, then the amount of any stock transfer taxes (whether imposed on the
registered holder(s), such other person or otherwise) will be deducted from
the purchase price unless satisfactory evidence of the payment of such taxes,
or exemption therefrom, is submitted herewith.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for the purchase
price of any shares of SFP Common Stock purchased is to be issued, or any
shares of SFP Common Stock not tendered or not purchased are to be returned,
in the name of a person other than the person(s) signing this Letter of
Transmittal or if the check or any certificates for shares of SFP Common Stock
not tendered or not purchased are to be mailed to someone other than the
person(s) signing this Letter of Transmittal or to the person(s) signing this
Letter of Transmittal at an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed.
Stockholders tendering shares of SFP Common Stock by book-entry transfer may
request that shares of SFP Common Stock not purchased be credited to such
account at any of the Book-Entry Transfer Facilities as such stockholder may
designate under "Special Payment Instructions." If no such instructions are
given, any such shares of SFP Common Stock not purchased will be returned by
crediting the account at the Book-Entry Transfer Facilities designated above.
8. SUBSTITUTE FORM W-9. Under the federal income tax laws, the Depositary
will be required to backup withhold 31% of the amount of any payments made to
certain stockholders pursuant to the Offer. In order to avoid such backup
withholding, each tendering stockholder, and, if applicable, each other payee,
must provide the Depositary with such stockholder's or payee's correct
taxpayer identification number and certify that such stockholder or payee is
not subject to such backup withholding by completing the Substitute Form W-9
set forth above. In general, if a stockholder or payee is an individual, the
taxpayer identification number is the Social Security number of such
individual. If the Depositary is not provided with the correct taxpayer
identification number, the stockholder or payee may be subject to a $50
penalty imposed by the Internal Revenue Service ("IRS"). Certain stockholders
or payees (including, among others, all corporations and certain foreign
individuals) are not subject to these backup withholding and reporting
requirements. In order to satisfy the Depositary that a foreign individual
qualifies as an exempt recipient, such stockholder or payee must submit a
statement, signed under penalties of perjury, attesting to that individual's
exempt status. Such statements can be obtained from the Depositary. For
further information concerning backup withholding and instructions for
completing the Substitute Form W-9 (including how to obtain a taxpayer
identification number if you do not have one and how to complete the
Substitute Form W-9 if shares of SFP Common Stock are held in more than one
name), consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.
Failure to complete the Substitute Form W-9 will not, by itself, cause
shares of SFP Common Stock to be deemed invalidly tendered, but may require
the Depositary to withhold 31% of the amount of any payments made pursuant to
the Offer. Backup withholding is not an additional federal income tax. Rather,
the federal income tax liability of a person 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 provided that the required
information is furnished to the IRS.
NOTE: FAILURE TO COMPLETE AND RETURN THE SUBSTITUTE FORM W-9 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.
9. WITHHOLDING ON FOREIGN STOCKHOLDERS. The Depositary will withhold federal
income taxes equal to 30% of the gross payments payable to a foreign
stockholder or his agent with respect to purchases by SFP pursuant to the
Offer unless the Depositary determines that a reduced rate of withholding is
available pursuant to a tax treaty or an exemption from withholding is
applicable because such gross proceeds are effectively connected with the
conduct of a trade or business in the United States. The Depositary may
require a foreign stockholder to deliver to the Depositary a properly executed
IRS Form 1001 in order for the stockholder to claim a reduced rate of
withholding under the treaty. (Exemption from backup withholding does not
exempt a foreign stockholder from the 30% withholding.) For this purpose, a
foreign stockholder is any stockholder that is not (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created
or organized in or under the laws of the United States or any political
subdivision thereof, or (iii) an estate or trust the income of which is
subject to United States federal income taxation regardless of the source of
such income. The Depositary will determine a stockholder's status as a foreign
stockholder and eligibility for a reduced rate of, or an exemption from,
withholding by reference to the stockholder's address and to any outstanding
certificates or statements concerning eligibility for a reduced rate of, or
exemption from, withholding unless facts and circumstances indicate that
reliance is not warranted. In order to obtain an exemption from withholding on
the grounds that the gross proceeds paid pursuant to the Offer are effectively
connected with the conduct of a trade or business within the United States, a
foreign stockholder must deliver to the Depositary a properly executed IRS
Form 4224 before the date of payment of gross proceeds. Such forms can be
obtained from the Depositary or Information Agent. A foreign stockholder who
has not previously submitted the appropriate certificates or statements with
respect to a reduced rate of, or exemption from, withholding for which such
stockholder may be eligible should consider doing so in order to avoid excess
withholding. A foreign stockholder may be eligible to obtain a refund of all
or a portion of any tax withheld if the sale to SFP pursuant to the Offer is
not treated as a dividend for federal income tax purposes (see "The Tender
Offer--5. Federal Income Tax Consequences of the Offer to Tendering
Stockholders" of the Offer to Purchase) or is otherwise able to establish that
no tax or a reduced amount of tax was due. Foreign stockholders are strongly
urged to consult their tax advisors regarding the application of federal
income tax withholding, including eligibility for a withholding tax reduction
or exemption and the refund procedures.
<PAGE>
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance or
additional copies of the Offer to Purchase and this Letter of Transmittal may
be obtained from the Information Agents or Dealer Managers at their respective
addresses or telephone numbers set forth below.
11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s)
representing shares of SFP Common Stock has been lost, destroyed or stolen,
the stockholder should promptly notify the Depositary. Instructions will then
be given as to what steps must be taken to obtain a replacement
certificate(s). The Letter of Transmittal and related documents cannot be
processed until the procedures for replacing such missing certificate(s) have
been followed.
12. DIVIDEND REINVESTMENT PLAN. Stockholders who participate in SFP's
Dividend Reinvestment Plan who want to tender shares of SFP Common Stock held
under that plan pursuant to the Offer should mark the box under "SANTA FE
PACIFIC CORPORATION DIVIDEND REINVESTMENT PLAN SHARES" and indicate the number
of shares of SFP Common Stock that are to be tendered. If such box is marked
but the number of shares of SFP Common Stock to be tendered is not indicated,
all shares of SFP Common Stock held for the shareholder's account in the
Company's Dividend Reinvestment Plan will be tendered.
TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS
(SEE INSTRUCTION 8)
PAYER'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK
- - -------------------------------------------------------------------------------
SUBSTITUTE PART I--PLEASE PROVIDE YOUR ----------------------
FORM W-9 TIN IN THE BOX AT THE RIGHT Social security
DEPARTMENT OF THE AND CERTIFY BY SIGNING AND number
TREASURY INTERNAL DATING BELOW.
REVENUE SERVICE
OR
PAYER'S REQUEST FOR ----------------------
TAXPAYER Employer
IDENTIFICATION identification number
NUMBER (TIN)
- - -------------------------------------------------------------------------------
CERTIFICATION.--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification
number (or I am waiting for a number to issued to me);
(2) I am not subject to backup withholding 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.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have
been notified by the IRS that you are currently subject to backup
withholding because of underreporting or dividends on your tax return.
However, if after being notified by the IRS that you were subject to backup
withholding you received another notification from the IRS that you are no
longer subject to backup withholding, do not cross out such item (2).
- - -------------------------------------------------------------------------------
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.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING A TAX
IDENTIFICATION NUMBER.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (1) 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 (2) I intend to mail or deliver an application in
the near future. I understand that if I do not provide a taxpayer
identification number by the time of payment, 31% of all reportable
payments made to me will be withheld, but that such amounts will be
refunded to me if I then provide a Taxpayer Identification Number within
sixty (60) days.
Signature ____________________________________________________________ Date
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates of shares
of SFP Common Stock and any other required documents should be sent or
delivered by each stockholder of SFP or his broker, dealer, commercial bank,
trust company or other nominee to the Depositary at one of its addresses set
forth below:
Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Mail: By Facsimile By Hand or Overnight
Tenders & Exchanges Transmission: Courier:
P.O. Box 2564 (For Eligible Tenders & Exchanges
Suite 4660SFP Institutions Only) 14 Wall Street
Jersey City, N.J. (201) 222-4720 Suite 4680SFP
07303-2564 (201) 222-4721 8th Floor
New York, NY 10005
Confirm Facsimile by Telephone:
(For Confirmation Only)
(201) 222-4707
Questions and requests for assistance may be directed to the Information
Agents or the Dealer Managers at their respective addresses and telephone
numbers listed below. Additional copies of this Offer to Purchase, the Letter
of Transmittal and other tender offer materials may be obtained from the
Information Agents as set forth below, and will be furnished promptly at SFP's
expense. You may also contact your broker, dealer, commercial bank, trust
company or other nominee for assistance concerning this Offer.
The Information Agents are:
D.F. KING & CO., INC. MACKENZIE KISSEL BLAKE INC.
PARTNERS, INC.
77 Water Street New York, 156 Fifth Avenue New 25 Broadway, 6th Floor
New York 10005 CALL TOLL York, New York 10010 CALL New York, New York 10004
FREE (800) 697-6974 TOLL FREE (800) 322-2885 CALL TOLL FREE (800) 554-
7733
The Dealer Managers for the Offer are:
GOLDMAN, SACHS & CO. LAZARD FRERES & CO.
85 Broad Street One Rockefeller Plaza
New York, New York 10004 New York, New York 10020
<PAGE>
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>
<CAPTION>
- - ------------------------------------------------------------------------ ----------------------------------------------------------
Give the Give the EMPLOYER
For this type of account: SOCIAL SECURITY For this type of account: IDENTIFICATION number
number of: of:
- - ------------------------------------------------------------------------ ----------------------------------------------------------
<S> <C> <C> <C>
1. An individual's account The individual 9. A valid trust, estate or The legal entity (Do not
pension trust furnish the identifying
number of the personal
representative or
trustee unless the
legal entity itself is
not designated in the
account title.)(5)
2. Two or more individuals (joint The actual owner of the 10. Corporate account The corporation
account) account or, if combined funds,
any one of the individuals(1)
3. Husband and wife (joint account) The actual owner of the 11. Religious, charitable, or The organization
account or, if joint funds, educational organization
either person(1) account
4. Custodian account of a minor The minor(2) 12. Partnership account held The partnership
(Uniform Gift to Minors Act) in the name of the
business
5. Adult and minor (joint account) The adult or, if the minor is 13. Association, club, or other The organization
the only contributor, the tax-exempt organization
minor(1)
6. Account in the name of The ward, minor, or 14. A broker or registered The broker or nominee
guardian or committee for a incompetent person(3) nominee
designated ward, minor, or
incompetent person
7. a The usual revocable savings The grantor-trustee(1) 15. Account with the The public entity
trust account (grantor is also Department of Agriculture
trustee) in the name of a public
entity (such as a State or
b So-called trust account that The actual owner(4) local government, school
is not a legal or valid trust district, or prison) that
under State law receives agricultural
program payments
8. Sole proprietorship account The owner(4)
- - ------------------------------------------------------------------------ ----------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
Note: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
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, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or any
agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An exempt charitable remainder trust, or a 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.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the payer's trade or business and you have not provided your
correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
EXEMPT PAYEES DESCRIBED ABOVE MUST STILL COMPLETE THE SUBSTITUTE FORM W-9
ENCLOSED HEREWITH TO AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE
SUBSTITUTE FORM W-9 WITH THE PAYER, REMEMBERING TO CERTIFY YOUR TAXPAYER
IDENTIFICATION NUMBER ON PART III OF THE FORM AND WRITE "EXEMPT" ON THE FACE OF
THE FORM.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE. - Section 6109 requires most recipients of
dividend, interest, or other payments to give taxpayer identification numbers to
payers who must report the payments to IRS. IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Beginning January 1, 1993, payers
must generally withhold 31% of taxable interest, dividend, and certain other
payments to a payee who does not furnish a taxpayer identification number to a
payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income and such failure is due to negligence, a
penalty of 20% is imposed on any portion of an under-payment attributable to
that failure.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you make
a false statement with no reasonable basis which results in no imposition of
backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Falsifying certifications
or affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE
INTERNAL REVENUE SERVICE.
<PAGE>
NOTICE OF GUARANTEED DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
SANTA FE PACIFIC CORPORATION
PURSUANT TO THE OFFER TO PURCHASE DATED DECEMBER 23, 1994
OF
BURLINGTON NORTHERN INC.
AND
SANTA FE PACIFIC CORPORATION
This Notice of Guaranteed Delivery, or one substantially equivalent to the
attached form, must be used to accept the Offer (as defined below) if (i)
certificates for shares of Common Stock, par value $1.00 per share (the "SFP
Common Stock"), of Santa Fe Pacific Corporation ("SFP") and all other
documents required by the Letter of Transmittal cannot be delivered to the
Depositary by the expiration of the Offer (as defined in the Offer to
Purchase) or (ii) the procedures for delivery of book-entry transfer cannot be
completed on a timely basis. This Notice of Guaranteed Delivery may be
delivered by hand or sent by facsimile transmission or mail to the Depositary.
See "The Tender Offer--3. Procedure for Tendering SFP Common Stock" in the
Offer to Purchase.
The Depositary for the Offer is:
First Chicago Trust Company of New York
<TABLE>
<S> <C> <C>
By Facsimile By Hand or Overnight
By Mail: Transmission: Courier:
Tenders & Exchanges P.O. (for Eligible Institutions Only) Tenders & Exchanges 14
Box 2564 Suite 4660SFP (201) 222-4720 Wall Street--Suite
Jersey City, NJ 07303- 2564 (201) 222-4721 4680SFP 8th Floor New
York, NY 10005
Confirm Facsimile by Telephone:
(For Confirmation Only)
(201) 222-4707
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION
TO A NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID
DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature of 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>
Ladies and Gentlemen:
The undersigned hereby tenders to Burlington Northern Inc. ("BNI") and Santa
Fe Pacific Corporation ("SFP" and, together with BNI, the "Purchasers"), upon
the terms and subject to the conditions set forth in the Offer to Purchase
dated December 23, 1994 and the related Letter of Transmittal (which together
constitute the "Offer"), receipt of which is hereby acknowledged, the number
(indicated below) of shares of SFP Common Stock (including the associated
preferred share purchase rights (the "SFP Rights") issued pursuant to the
Rights Agreement dated as of November 28, 1994 between SFP and First Chicago
Trust Company of New York, as Rights Agent) pursuant to the guaranteed
delivery procedure set forth in "The Tender Offer--3. Procedure for Tendering
SFP Common Stock" of the Offer to Purchase.
Number of shares of SFP Common Stock Being Tendered Hereby __________________
Certificate No(s). SIGN HERE
(if available):
-------------------------------------
- - ------------------------------------- (SIGNATURE(S))
- - ------------------------------------- -------------------------------------
(NAME(S) OF RECORD HOLDERS)
If shares will be tendered by book- (PLEASE PRINT)
entry transfer:
-------------------------------------
Name of Tendering Institution _______ (ADDRESS)
Account No. ______________________ at -------------------------------------
(ZIP CODE)
[_] The Depository Trust Company
-------------------------------------
[_] Midwest Securities Trust Company (AREA CODE AND TELEPHONE NO.)
[_] Philadelphia Depository Trust
Company
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, branch or agency in
the United States, hereby (a) represents that the above named person(s)
"own(s)" the shares of SFP Common Stock and associated SFP Rights tendered
hereby within the meaning of Rule 14e-4 under the Securities Exchange Act of
1934, as amended, (b) represents that such tender complies with Rule 14e-4 and
(c) guarantees to deliver to the Depositary the shares of SFP Common Stock
tendered hereby, together with a properly completed and duly executed
Letter(s) of Transmittal (or 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 five New York Stock Exchange, Inc.
trading days of the date hereof.
- - ------------------------------------- -------------------------------------
(NAME OF FIRM) (AUTHORIZED SIGNATURE)
- - ------------------------------------- -------------------------------------
(ADDRESS) (NAME)
- - ------------------------------------- -------------------------------------
(ZIP CODE) (TITLE)
- - -------------------------------------
(AREA CODE AND TELEPHONE NO.)
Dated: _______________________, 199 .
DO NOT SEND STOCK CERTIFICATES WITH THIS FORM. YOUR STOCK CERTIFICATES MUST BE
SENT WITH THE LETTER OF TRANSMITTAL.
<PAGE>
GOLDMAN, SACHS & CO. LAZARD FRERES & CO.
85 BROAD STREET ONE ROCKEFELLER PLAZA
NEW YORK, NEW YORK NEW YORK, NEW YORK
10004 10020
OFFER TO PURCHASE FOR CASH
UP TO 63,000,000 SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
SANTA FE PACIFIC CORPORATION
AT
$20.00 NET PER SHARE
BY
BURLINGTON NORTHERN INC.
AND
SANTA FE PACIFIC CORPORATION
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, JANUARY 30, 1995, UNLESS THE OFFER IS EXTENDED.
December 23, 1994
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
We have been appointed by Burlington Northern Inc., a Delaware corporation
("BNI") and Santa Fe Pacific Corporation, a Delaware corporation ("SFP" and,
together with BNI, the "Purchasers"), to act as Dealer Managers in connection
with the Purchasers' offer to purchase up to 63,000,000 outstanding shares of
SFP's common stock, $1.00 par value per share (the "SFP Common Stock")
including the associated preferred share purchase rights), at $20.00 per share
of SFP Common Stock, net to the seller in cash, upon the terms and subject to
the conditions set forth in the Purchasers' Offer to Purchase dated December
23, 1994 (the "Offer to Purchase") and the related Letter of Transmittal
(which together constitute the "Offer").
THE OFFER IS SUBJECT TO SEVERAL CONDITIONS CONTAINED IN THE OFFER TO
PURCHASE, INCLUDING (1) AT LEAST 63,000,000 SHARES OF SFP COMMON STOCK BEING
VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (THE "MINIMUM
CONDITION"), (2) SFP AND BNI HAVING OBTAINED SUFFICIENT FINANCING ON TERMS
SATISFACTORY TO THEM TO PURCHASE 63,000,000 SHARES PURSUANT TO THE OFFER AND
(3) APPROVAL OF THE PROPOSED MERGER OF BNI AND SFP DESCRIBED IN THE OFFER TO
PURCHASE (THE "MERGER") BY THE STOCKHOLDERS OF SFI AND BNI. THE OFFER IS NOT
SUBJECT TO INTERSTATE COMMERCE COMMISSION APPROVAL OF THE MERGER. BNI AND SFP
DO NOT INTEND TO WAIVE THE MINIMUM CONDITION.
<PAGE>
For your information and for forwarding to your clients for whom you hold
shares of SFP Common Stock registered in your name or in the name of your
nominee, we are enclosing the following documents:
1. Offer to Purchase dated December 23, 1994.
2. Letter of Transmittal to tender shares for your use and for the
information of your clients, together with Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 providing information
relating to backup federal income tax withholding (facsimile copies of the
Letter of Transmittal may be used to tender shares of SFP Common Stock);
3. Notice of Guaranteed Delivery to be used to accept the Offer if the
certificates for the shares of SFP Common Stock being tendered and all
other required documents cannot be delivered to the Depositary by the
Expiration Date as defined in the Offer to Purchase or if procedures 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 of SFP Common Stock registered in your name or in
the name of your nominee, with space provided for obtaining such clients'
instructions with regard to the Offer; and
5. A letter to SFP stockholders from Robert D. Krebs, Chairman, President
and Chief Executive Officer of SFP.
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 MONDAY,
JANUARY 30, 1995, UNLESS THE OFFER IS EXTENDED.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchasers will accept for payment and pay for the shares
of SFP Common Stock which are validly tendered prior to the Expiration Date
and not theretofore properly withdrawn when, as and if the Purchasers give
oral or written notice to the Depositary of the Purchasers' acceptance of such
shares of SFP Common Stock for payment pursuant to the Offer. Payment for
shares of SFP Common Stock purchased pursuant to the Offer will in all cases
be made only after timely receipt by the Depositary of certificates for the
shares of SFP Common Stock or timely confirmation of a book-entry transfer of
such shares of SFP Common Stock into the Depositary's account at the
Depository Trust Company, the Midwest Securities Company or the Philadelphia
Depository Trust Company, pursuant to the procedures described in "The Tender
Offer--3. Procedure for Tendering SFP Common Stock" of the Offer to Purchase,
a properly completed and duly executed Letter of Transmittal (or manually
signed facsimile thereof) or an Agent's Message in connection with a book-
entry transfer, and all other documents required by the Letter of Transmittal.
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents on or prior to the
Expiration Date or to comply with the book-entry transfer procedure on a
timely basis, a tender may be effected by following the guaranteed delivery
procedures specified in "The Tender Offer--3. Procedure for Tendering SFP
Common Stock" in the Offer to Purchase.
The Purchasers will not pay any fees or commissions to any broker or dealer
or other person (other than to the Dealer Managers as described in the Offer
to Purchase) for soliciting tenders of shares of SFP Common Stock pursuant to
the Offer. The Purchasers will, however, upon request, reimburse brokers,
dealers, commercial banks and trust companies for reasonable and necessary
costs and expenses incurred by them in forwarding materials to their
customers. The Purchaser will pay all stock transfer taxes applicable to its
purchase of shares of SFP Common Stock pursuant to the Offer, subject to
Instruction 6 of the Letter of Transmittal.
2
<PAGE>
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, any of
the Information Agents or the undersigned at the addresses and telephone
numbers set forth on the back cover of the Offer to Purchase and the Letter of
Transmittal.
Very truly yours,
Goldman, Sachs & Co. Lazard Freres & Co.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY PERSON AS AN AGENT OF THE PURCHASERS, THE DEALER MANAGERS, THE
INFORMATION AGENTS 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>
OFFER TO PURCHASE FOR CASH
UP TO 63,000,000 SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
SANTA FE PACIFIC CORPORATION
AT
$20.00 NET PER SHARE
BY
BURLINGTON NORTHERN INC.
AND
SANTA FE PACIFIC CORPORATION
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, JANUARY 30, 1995, UNLESS THE OFFER IS EXTENDED.
December 23, 1994
To Our Clients:
Enclosed for your consideration are the Offer to Purchase dated December 23,
1994 (the "Offer to Purchase") and the related Letter of Transmittal (which,
together with any amendments or supplements thereto, constitute the "Offer")
in connection with the offer by Burlington Northern Inc., a Delaware
corporation ("BNI"), and Santa Fe Pacific Corporation, a Delaware corporation,
("SFP" and, together with BNI, the "Purchasers") to purchase up to 63,000,000
outstanding shares of SFP's common stock, $1.00 par value per share (the "SFP
Common Stock") (including the associated preferred share purchase rights (the
"SFP Rights") issued pursuant to the Rights Agreement dated as of November 28,
1994 between SFP and First Chicago Trust Company of New York, as Rights
Agent), at a price of $20.00 per share, net to the seller in cash, without
interest thereon, upon the terms and conditions set forth in the Offer. We are
the holder of record of shares of SFP Common Stock held for your account. A
tender of such shares of SFP Common Stock 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 OF SFP COMMON STOCK HELD BY US FOR YOUR ACCOUNT.
THE BOARD OF DIRECTORS OF SFP HAS UNANIMOUSLY APPROVED THE OFFER AND THE
MERGER AND RECOMMENDS THAT THOSE SFP STOCKHOLDERS WHO WISH TO RECEIVE CASH FOR
A PORTION OF THEIR SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES.
We request instructions as to whether you wish us to tender any or all of
the shares of SFP Common Stock held by us for your account, upon the terms and
subject to the conditions set forth in the Offer.
Please note carefully the following:
1. The tender price is $20.00 per share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set
forth in the Offer.
<PAGE>
2. The Offer, proration period and withdrawal rights expire at 12:00
Midnight, New York City time, on Monday, January 30, 1995, unless the
Offer is extended.
3. The Offer is being made for up to 63,000,000 shares of SFP Common
Stock. If more than 63,000,000 shares are validly tendered prior to the
Expiration Date (as defined in the Offer to Purchase) and are not
withdrawn, the Purchasers will, upon the terms and subject to the
conditions of the Offer, accept such shares for payment on a pro rata
basis, with adjustments to avoid purchases of fractional shares, based
upon the number of shares of SFP Common Stock validly tendered prior to
the Expiration Date and not withdrawn.
4. The Offer is conditioned upon, among other things, (1) at least
63,000,000 shares of SFP Common Stock being validly tendered and not
withdrawn before the expiration of the Offer (the "Minimum Condition"),
(2) SFP and BNI having obtained sufficient financing on terms satisfactory
to them to purchase 63,000,000 shares of SFP Common Stock pursuant to the
Offer and (3) approval of the proposed merger of BNI and SFP described in
the Offer to Purchase by the stockholders of SFP and BNI. See "The Tender
Offer--14. Conditions of the Offer" in the Offer to Purchase. BNI and SFP
do not intend to waive the Minimum Condition.
5. Any brokerage fees, commissions or stock transfer taxes applicable to
the sale of shares of SFP Common Stock to a Purchaser pursuant to the
Offer will be paid by such Purchaser, except as otherwise provided in
Instruction 6 of the Letter of Transmittal.
If you wish to have us tender any or all of your shares of SFP Common Stock,
please so instruct us by completing, executing, detaching and returning to us
the instruction form set forth below. An envelope to return your instructions
to us is enclosed. If you authorize tender of your shares of SFP Common Stock,
all such shares will be tendered unless otherwise specified on the instruction
form set forth below.
YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO
SUBMIT A TENDER ON YOUR BEHALF BY THE EXPIRATION OF THE OFFER. THE OFFER,
PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, JANUARY 30, 1995, UNLESS THE PURCHASERS EXTEND THE OFFER.
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of shares of SFP Common Stock 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 the laws of which
require that the Offer be made by a licensed broker or dealer, the Offer shall
be deemed to be made on behalf of the Purchasers by Goldman, Sachs & Co. and
Lazard Freres & Co. or one or more registered brokers or dealers licensed
under the laws of such jurisdiction.
<PAGE>
INSTRUCTIONS WITH RESPECT TO
OFFER TO PURCHASE FOR CASH
UP TO
63,000,000 SHARES OF COMMON STOCK
OF
SANTA FE PACIFIC CORPORATION
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase dated December 23, 1994 and the related Letter of Transmittal
(which collectively constitute the "Offer") in connection with the offer by
Burlington Northern Inc., a Delaware corporation and Santa Fe Pacific
Corporation, a Delaware corporation ("SFP"), to purchase up to 63,000,000
outstanding shares of SFP common stock, par value $1.00 per share (the "SFP
Common Stock") (including the associated preferred share purchase rights (the
"SFP Rights") issued pursuant to the Rights Agreement dated as of November 28,
1994 between SFP and First Chicago Trust Company of New York, as Rights
Agent).
This will instruct you to tender the number of shares of SFP Common Stock
indicated below 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.
Number of Shares to be Tendered: ___________ Shares/1/
Account Number: _____________________________________
Dated: ________________________, 199
_______________________________________________________________________________
SIGN HERE
Signature(s): ________________________________________________________________
_______________________________________________________________________________
Print Name(s): _______________________________________________________________
_______________________________________________________________________________
Print Address(es): ___________________________________________________________
_______________________________________________________________________________
Area Code and Telephone No: __________________________________________________
Taxpayer ID No. or Social Security No: _______________________________________
/1/ Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
<PAGE>
This advertisement is neither an offer to purchase nor a solicitation of an
offer to sell shares of SFP Common Stock (including the associated preferred
share purchase rights). The Offer is made solely by the Offer to Purchase
dated December 23, 1994 and the related Letter of Transmittal and is not being
made to, nor will tenders be accepted from, or on behalf of, holders of shares
of SFP Common Stock residing 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 that the Offer be made
by a licensed broker or dealer, the Offer shall be deemed to be made on behalf
of SFP and BNI by Goldman, Sachs & Co., Lazard Freres & Co., or one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
UP TO 63,000,000 SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
SANTA FE PACIFIC CORPORATION
AT
$20.00 NET PER SHARE
BY
BURLINGTON NORTHERN INC.
AND
SANTA FE PACIFIC CORPORATION
Burlington Northern Inc., a Delaware corporation ("BNI") and Santa Fe
Pacific Corporation, a Delaware corporation ("SFP" and, together with BNI, the
"Purchasers") are offering to purchase up to 63,000,000 outstanding shares of
SFP common stock, $1.00 par value (the "SFP Common Stock") (including the
associated preferred share purchase rights issued pursuant to the Rights
Agreement dated as of November 28, 1994 between SFP and First Chicago Trust
Company of New York, as Rights Agent), at $20.00 per share, net to the seller
in cash, upon the terms and subject to the conditions set forth in the Offer
to Purchase dated December 23, 1994 (the "Offer to Purchase") and in the
related Letter of Transmittal (which together constitute the "Offer"). On the
terms and subject to the conditions of the Offer, SFP will be severally
obligated to purchase up to 38,000,000 shares of SFP Common Stock validly
tendered and not withdrawn prior to the expiration of the Offer and BNI will
be severally obligated to purchase up to 25,000,000 shares of SFP Common Stock
validly tendered and not withdrawn prior to the expiration of the Offer, with
the obligation to purchase shares of SFP Common Stock tendered by an SFP
stockholder to be allocated between SFP and BNI as set forth in the Offer to
Purchase.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY,
JANUARY 30, 1995, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) AT LEAST 63,000,000
SHARES OF SFP COMMON STOCK BEING VALIDLY TENDERED AND NOT WITHDRAWN BEFORE THE
EXPIRATION OF THE OFFER (THE "MINIMUM CONDITION"), AND (2) SFP AND BNI HAVING
OBTAINED SUFFICIENT FINANCING ON TERMS SATISFACTORY TO THEM TO PURCHASE
63,000,000 SHARES OF SFP COMMON STOCK PURSUANT TO THE OFFER AND (3) APPROVAL
OF THE MERGER REFERRED TO BELOW BY THE STOCKHOLDERS OF SFP AND BNI. THE OFFER
IS NOT CONDITIONED ON INTERSTATE COMMERCE COMMISSION APPROVAL OF THE MERGER.
SEE "THE TENDER OFFER-14. CONDITIONS OF THE OFFER" IN THE OFFER TO PURCHASE.
<PAGE>
The Offer is being made pursuant to an Agreement and Plan of Merger dated as
of June 29, 1994, as amended (the "Merger Agreement"), between SFP and BNI.
The Merger Agreement provides that, on the terms and subject to the conditions
set forth therein, SFP will be merged with and into BNI (the "Merger"), with
BNI to be the surviving corporation and each outstanding share of SFP Common
Stock to be converted into the right to receive 0.40 shares of BNI common
stock, no par value per share.
THE PURPOSE OF THE OFFER IS TO ACQUIRE 63,000,000 OF THE OUTSTANDING SHARES
OF SFP COMMON STOCK AND TO FACILITATE THE MERGER, WHICH THE BOARD OF DIRECTORS
OF SFP BELIEVES IS IN THE BEST INTEREST OF SFP STOCKHOLDERS. THE OFFER ALSO
PROVIDES AN OPPORTUNITY TO EXISTING STOCKHOLDERS OF SFP TO SELL SHARES OF SFP
COMMON STOCK AT A PREMIUM OVER RECENT TRADING PRICES. SEE "THE TENDER OFFER-6.
PRICE RANGE OF SFP COMMON STOCK; DIVIDENDS" IN THE OFFER TO PURCHASE.
THE BOARD OF DIRECTORS OF SFP UNANIMOUSLY APPROVED THE OFFER AND THE MERGER
AND RECOMMENDS THAT THOSE SFP STOCKHOLDERS WHO WISH TO RECEIVE CASH FOR A
PORTION OF THEIR SHARES OF SFP COMMON STOCK ACCEPT THE OFFER AND TENDER THEIR
SHARES.
The Offer is subject to certain conditions set forth in the Offer to
Purchase. If any such condition is not satisfied, the Purchasers may, subject
to certain limitations set forth in the Merger Agreement and described in the
Offer to Purchase, (i) terminate the Offer and return all tendered shares of
SFP Common Stock to tendering stockholders, (ii) extend the Offer and, subject
to withdrawal rights as set forth below, retain all such shares of SFP Common
Stock until the expiration of the Offer as so extended or (iii) waive such
condition and, subject to any requirement to extend the time during which the
Offer is open, purchase all shares of SFP Common Stock validly tendered and
not withdrawn prior to the Expiration Date (as defined in the Offer to
Purchase).
If more than 63,000,000 shares of SFP Common Stock shall be properly
tendered prior to the Expiration Date and not withdrawn, the Purchasers will,
upon the terms and subject to the conditions of the Offer, purchase 63,000,000
shares of SFP Common Stock on a pro rata basis (with adjustments to avoid
purchases of fractional shares of SFP Common Stock) based upon the number of
shares of SFP Common Stock properly tendered prior to the Expiration Date and
not withdrawn. If fewer than 63,000,000 shares of SFP Common Stock shall have
been properly tendered prior to the Expiration Date and not withdrawn, the
Purchasers may (i) terminate the Offer and return all tendered shares of SFP
Common Stock to tendering stockholders, (ii) extend the Offer and, subject to
withdrawal rights as set forth below, retain all such shares of SFP Common
Stock until the expiration of the Offer as so extended or (iii) waive the
Minimum Condition and, subject to any requirement to extend the time during
which the Offer is open, purchase all shares of SFP Common Stock validly
tendered and not withdrawn prior to the Expiration Date. The Purchasers do not
intend to waive the Minimum Condition. Due to the difficulty of determining
the precise number of shares of SFP Common stock properly tendered and not
withdrawn, if proration is required, the Purchasers do not expect to announce
the final results of proration or pay for any shares of SFP Common Stock until
approximately 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. Holders of
shares of SFP Common Stock may obtain such preliminary information when it
becomes available from the Information Agents and may be able to obtain such
information from their brokers.
The Purchasers reserve the right, at any time or from time to time, to
extend the period of time during which the Offer is open by giving oral or
written notice of such extension to the First Chicago Trust Company of New
York (the "Depositary"). Any such extension will be followed as promptly as
practicable by public announcement thereof.
The Purchasers shall be deemed to have accepted for payment tendered shares
of SFP Common Stock when, as and if the Purchasers give oral or written notice
to the Depositary of their acceptance of the tenders of such shares of SFP
Common Stock. Payment for shares of SFP Common Stock accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of
<PAGE>
certificates for such shares of SFP Common Stock (or a confirmation of a book-
entry transfer of such shares of SFP Common Stock into the Depositary's
account at one of the Book-Entry Transfer Facilities (as defined in the Offer
to Purchase)), a properly completed and duly executed Letter of Transmittal
(or facsimile thereof) and any other required documents.
Tenders of shares of SFP Common Stock made pursuant to the Offer may be
withdrawn at any time prior to the Expiration Date. Thereafter, such tenders
are irrevocable, except that they may be withdrawn after Monday, February 20,
1995 unless theretofore accepted for payment as provided in this Offer to
Purchase. To be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth in the Offer to Purchase and must specify the
name of the person who tendered the shares of SFP Common Stock to be withdrawn
and the class, series and number of shares of SFP Common Stock to be
withdrawn. If the shares of SFP Common Stock to be withdrawn have been
delivered to the Depositary, a signed notice of withdrawal with (except in the
case of shares of SFP Common Stock tendered by an Eligible Institution (as
defined in the Offer to Purchase)) signatures guaranteed by an Eligible
Institution must be submitted prior to the release of such shares of SFP
Common Stock. In addition, such notice must specify, in the case of shares of
SFP Common Stock tendered by delivery of certificates, the name of the
registered holder (if different from that of the tendering stockholder) and
the serial numbers shown on the particular certificates evidencing the shares
of SFP Common Stock to be withdrawn or, in the case of shares tendered by
book-entry transfer, the name and number of the account at one of the Book-
Entry Transfer Facilities to be credited with the withdrawn shares of SFP
Common Stock.
The information required to be disclosed by Rules 14d-6(e)(1)(vii) and 13e-
4(d)(1) under the Securities Exchange Act of 1934 is contained in the Offer to
Purchase and is incorporated herein by reference.
The Offer to Purchase and the related Letter of Transmittal will be mailed
to record holders of shares of SFP Common Stock and will be furnished 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 for subsequent transmittal to beneficial owners of shares of
SFP Common Stock.
THE OFFER TO PURCHASE AND LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO
THE OFFER. Requests for copies of the Offer to Purchase and the related Letter
of Transmittal and other tender offer materials may be directed to the
Information Agents or to the Dealer Managers as set forth below, and copies
will be furnished promptly at the Purchaser's expense.
<PAGE>
The Information Agents for the Offer are:
D.F. KING & CO., INC. MACKENZIE KISSEL BLAKE INC.
PARTNERS, INC.
77 Water Street New 156 Fifth Avenue New 25 Broadway, 6th Floor
York, New York 10005 York, New York 10010 New York, New York 10004
CALL TOLL FREE (800) CALL TOLL FREE (800) CALL TOLL FREE (800)
697-6974 322-2885 554-7733
The Dealer Managers for the Offer are:
GOLDMAN, SACHS & CO. LAZARD FRERES & CO.
85 Broad Street One Rockefeller Plaza
New York, New York 10004 New York, New York 10020
December 23, 1994
<PAGE>
FOR IMMEDIATE RELEASE
MEDIA CONTACT:
Burlington Northern Inc. Santa Fe Pacific Corp. Abernathy MacGregor
Jim Sabourin Catherine Westphal Scanlon
(817) 333-1428 (708) 995-6273 Joele Frank
(212) 371-5999
BURLINGTON NORTHERN AND SANTA FE PACIFIC COMMENCE TENDER OFFERS FOR SANTA FE
SHARES AT $20 PER SHARE
FT. WORTH, TEXAS AND SCHAUMBURG, ILLINOIS, DECEMBER 23, 1994--Burlington
Northern Inc. and Santa Fe Pacific Corporation announced today that they had
commenced a joint tender offer for up to 63 million shares of Santa Fe common
stock at a price of $20 per share in cash.
The offer is scheduled to expire at 12:00 midnight EST on Monday, January 30,
1995. The offer is being made pursuant to a previously announced merger
agreement between BNI and Santa Fe.
BNI and Santa Fe said that the tender offer will be made only by an offer to
purchase and other offering documents, copies of which are being filed today
with the Securities and Exchange Commission and mailed to Santa Fe's
stockholders.
Goldman, Sachs & Co. and Lazard Freres & Co. are dealer managers for the
offer and D.F. King & Co., Inc., MacKenzie Partners, Inc. and Kissel-Blake Inc.
are the information agents.
<PAGE>
December 22, 1994
Burlington Northern Inc.
3200 Continental Plaza
777 Main Street
Fort Worth, TX 76102-5334
Attention of Robert F. McKenney
Senior Vice President and Treasurer
Burlington Northern Inc.
------------------------
$500,000,000 Tender Offer Facility
----------------------------------
Commitment Letter
-----------------
Ladies and Gentlemen:
We understand that Santa Fe Pacific Corporation ("Santa Fe") and
Burlington Northern Inc. ("Burlington") have amended their Agreement and Plan of
Merger dated as of June 29, 1994 and amended as of October 26, 1994 (the "Merger
Agreement"), to provide for the commencement by Santa Fe and Burlington of
tender offers (the "Tender Offers") pursuant to which Burlington and Santa Fe
would offer to purchase 25,000,000 and 38,000,000 shares, respectively, of the
issued and outstanding common stock of Santa Fe at a price of $20 per share in
cash. The Merger Agreement, as amended (the "Amended Merger Agreement"), will
provide that, following the purchase of shares in the Tender Offers and the
receipt of required approvals from the Interstate Commerce Commission, Santa Fe
will be merged with and into Burlington (the "Merger") and the capital stock of
Santa Fe outstanding immediately prior to the Merger (other than the shares
owned by Burlington) will be converted into the right to receive shares of
common stock of Burlington at an exchange ratio of 0.4 to 1.
In connection with the Tender Offer, you have advised us that you will
require a competitive advance and revolving credit facility in an aggregate
amount of
<PAGE>
2
$500,000,000 (the "Tender Offer Facility") to provide funds for the purchase of
shares by Burlington in its Tender Offer. It is contemplated that the principal
terms of the Tender Offer Facility will be as set forth in the Summary of Terms
and Conditions attached hereto as Exhibit A (the "Term Sheet").
Texas Commerce Bank National Association ("TCB") and Chemical Bank
("Chemical") are pleased to advise you of their commitments to provide up to
$500,000,000 in the aggregate of the Tender Offer Facility (to be divided
between TCB and Chemical as they shall agree). You hereby retain Chemical
Securities Inc. ("CSI"), and CSI hereby agrees, to serve as advisor and arranger
for the Tender Offer Facility and, in that capacity, to endeavor to arrange the
Tender Offer Facility with a syndicate of financial institutions satisfactory to
Burlington. You hereby engage TCB, and TCB hereby agrees, to serve as
administrative agent for the Tender Offer Facility.
It is anticipated that Chemical and/or TCB will also participate as
lenders in separate proposed credit facilities providing funds for the purchase
of shares by Santa Fe in its Tender Offer (the "Santa Fe Facilities").
It is a condition of TCB's and Chemical's commitments that CSI act as
sole advisor and arranger, and that TCB act as Administrative Agent, for the
Tender Offer Facility, and that each of CSI and TCB perform the functions and
exercise the authority customarily performed and exercised by them in such
capacities. The appointment of any co-agents for the Tender Offer Facility
would be subject to the approval of Burlington, CSI, TCB and Chemical.
TCB and Chemical reserve the right, prior to or after the execution of
definitive documentation with respect to the Tender Offer Facility, to syndicate
portions of their commitments to one or more financial institutions reasonably
acceptable to Burlington, TCB and Chemical that will become parties to such
definitive documentation (TCB, Chemical and the other financial institutions
becoming parties to such documentation being collectively called the "Lenders").
It is agreed that no Lender will receive compensation outside the terms
contained herein and in the Fee Letter referred to below in order to obtain its
commitment to participate in the Tender Offer Facility.
<PAGE>
3
You agree actively to assist CSI in completing promptly a syndication
of the Tender Offer Facility. Such assistance will include your arranging for
direct contact during the syndication of the Tender Offer Facility among senior
management and advisors of Burlington and the proposed syndicate Lenders. You
agree that you will endeavor to cause CSI's syndication efforts to benefit
materially from your existing lending relationships.
It is agreed that CSI, in consultation with Burlington, will manage
all aspects of the syndication, including, without limitation, decisions as to
the selection of institutions to be approached and when they will be approached,
when their commitments will be accepted, which institutions will participate,
the allocations of commitments among the syndicate lenders and the amount and
distribution of fees among the syndicate lenders. To assist CSI in its
syndication efforts, you agree promptly to provide, and to cause your advisors
to provide, CSI upon request with all information reasonably deemed necessary by
it in connection with the syndication, including, without limitation, all
information and projections prepared by you or on your behalf relating to the
transactions contemplated hereby. CSI, TCB and Chemical hereby agree, and CSI
agrees that it will obtain the agreement of the financial institutions to which
it delivers information furnished by CSI in the course of CSI's syndication
efforts, to (a) treat all information received from you (other than information
which is not confidential and information which is publicly available) in a
strictly confidential manner except with your prior written consent or where
such disclosure is required by applicable law or legal process or required by
regulators and (b) use such information solely in connection with the
transactions contemplated hereby.
As consideration for the commitment and agreements of CSI, TCB and
Chemical, hereunder, you agree to pay to TCB the fees set forth in the Fee
Letter dated the date hereof and delivered herewith (the "Fee Letter") on the
dates referred to therein. Once paid, such fees shall not be refundable.
You hereby represent and covenant that (a) all information (other than
financial projections) concerning Burlington, its subsidiaries and the
transactions contemplated hereby (the "Information") that is made available to
CSI, TCB or Chemical by you or any of your authorized representatives is or
will, when made available,
<PAGE>
4
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 in order to make the statements contained therein not materially
misleading in light of the circumstances under which such statements are made
and (b) all financial projections (the "Projections") prepared by you and made
available to CSI, TCB or Chemical have been or will be prepared in good faith
based upon assumptions believed by you to be reasonable. In arranging and
syndicating the Tender Offer Facility, CSI will be using and relying on the
Information and the Projections without independent verification thereof.
TCB's and Chemical's commitments hereunder are subject to (a) there
not occurring or becoming known to TCB and Chemical any material adverse change
in the business, condition (financial or otherwise) or prospects of Burlington,
(b) TCB's and Chemical's completion of their due diligence investigation of the
transactions contemplated hereby and of the business, condition (financial and
otherwise) and prospects of Burlington and their satisfaction with the results
of such investigation and with the terms of the Amended Merger Agreement, the
Tender Offers, the Merger and the financial, accounting and tax consequences of
the foregoing, (c) there not being other credit facilities or issues of debt
securities of Burlington being offered, placed or arranged which in the good
faith judgment of CSI would be likely materially to interfere with the
syndication of the Tender Offer Facility, (d) there not having occurred any
material adverse change in or disruption of financial, banking or capital market
conditions that in CSI's judgment would adversely affect the syndication of the
Tender Offer Facility, it being understood that the inability of CSI to
syndicate the Tender Offer Facility shall not, in and of itself, be deemed to be
an indication that such a material adverse change or disruption shall have
occurred, and (e) the negotiation, execution and delivery of definitive
documentation with respect to the Tender Offer Facility satisfactory to TCB,
Chemical and their counsel. To the extent not covered by or made clear under
the provisions hereof and of the Term Sheet, the terms and conditions of TCB's
and Chemical's commitments hereunder and of the Tender Offer Facility are
subject to the approval and agreement of TCB and Chemical.
Burlington agrees to indemnify and hold harmless CSI, TCB and Chemical
and their respective officers, directors, employees, affiliates, agents and
controlling
<PAGE>
5
persons from and against any and all losses, claims, damages, liabilities and
expenses, joint or several, caused by or arising out of any claim,
investigation, litigation or other proceeding brought or threatened relating to
this Commitment Letter or the transactions contemplated hereby, except to the
extent that any such losses, claims, damages, liabilities or expenses are
determined by the final judgment of a court of competent jurisdiction to have
resulted from or be attributable to CSI's, TCB's or Chemical's gross negligence
or willful misconduct. Burlington also agrees to reimburse CSI, TCB and
Chemical for all reasonable out-of-pocket expenses (including syndication
expenses, travel expenses and fees, charges and disbursements of counsel)
incurred in connection with CSI's, TCB's or Chemical's activities pursuant to
this Commitment Letter and the preparation of documentation for the Tender Offer
Facility, regardless of whether the transactions contemplated by this Commitment
Letter are consummated.
You agree that this Commitment Letter, the Term Sheet and the Fee
Letter and the contents hereof and thereof are confidential and will not without
the prior agreement of TCB and Chemical be disclosed by you or any person
acting on your behalf to any person; provided that (a) you may disclose such
--------
documents (i) to your officers, employees, directors, attorneys, accountants and
other advisors on a confidential basis, (ii) to the Board of Directors of Santa
Fe and Santa Fe's officers, employees, directors, attorneys, accountants and
other advisors, in each case on a confidential basis; and (iii) pursuant to any
subpoena or similar legal process or as otherwise required by applicable law,
and (b) following your execution hereof and of the Fee Letter, (i) you may file
a copy of this Commitment Letter and the Term Sheet (but not the Fee Letter) to
the extent required as part of any filing with the Securities and Exchange
Commission or any other governmental authority; (ii) you may refer to this
Commitment Letter (but not the Fee Letter) in any press release relating to the
Tender Offer or the Merger (it being agreed that references to this Commitment
Letter or to the Tender Offer Facility must be approved in advance by TCB and
Chemical to the extent practicable); and (iii) you may make such other public
disclosure of the terms and conditions hereof and of the Term Sheet (but not of
the Fee Letter) as in your opinion or the opinion of your counsel shall be
advisable.
If the foregoing correctly sets forth our agreement, please indicate
your acceptance of the terms
<PAGE>
6
hereof and of the Term Sheet and the Fee Letter by signing in the appropriate
spaces below and in the Fee Letter and returning to us the enclosed duplicate
originals of this Commitment Letter and the Fee Letter, together with the
amounts agreed pursuant to the Fee Letter to be payable upon acceptance hereof,
not later than 5:00 p.m., New York City time, on December 22, 1994, failing
which TCB's and Chemical's commitments hereunder will expire. TCB's and
Chemical's commitments will in any event terminate if definitive documentation
for the Tender Offer Facility shall not have been executed by March 31, 1995, or
if the initial borrowing shall not have occurred under the Tender Offer Facility
by April 30, 1995, unless, in each case, Burlington, TCB and Chemical shall
agree to an extension. The compensation, reimbursement and indemnification
provisions contained herein and in the Fee Letter shall survive any termination
hereof.
This Commitment Letter shall be governed by, and construed in
accordance with, the laws of the State of New York. This Commitment Letter
shall not be assignable by you without the prior written consent of CSI, TCB and
Chemical, and may not be amended or waived except by an instrument in writing
signed by you, CSI, TCB and Chemical. TCB may perform certain of the duties and
activities provided for herein through one or more affiliates, including CSI.
This Commitment Letter may be executed in any number of counterparts, each of
which shall be an original and all of which, when taken together, shall
constitute one agreement.
CSI, TCB and Chemical are pleased to have been given the opportunity
to be part of this important transaction. Based upon our discussions to date
and our
<PAGE>
7
review of the information that has been furnished to us, we would expect to be
able to complete arrangements for the Tender Offer Facility very expeditiously.
Very truly yours,
CHEMICAL SECURITIES INC.,
by
/s/ Elizabeth C. Chow
--------------------------
Name: Elizabeth C. Chow
Title: Managing Director
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION,
by
/s/ B. B. Wuthrich
--------------------------
Name: B. B. Wuthrich
Title: Vice President
CHEMICAL BANK,
by
/s/ R. Potter
--------------------------
Name: R. Potter
Title: Managing Director
Accepted and agreed to
as of the date first
written above by:
BURLINGTON NORTHERN INC.,
by
/s/ Robert F. McKenney
-------------------------
Name: Robert F. McKenney
Title: Senior Vice President
and Treasurer
<PAGE>
EXHIBIT A
Summary of Terms and Conditions
-------------------------------
$500,000,000 Tender Offer Facility
----------------------------------
<TABLE>
<CAPTION>
<S> <C>
BORROWER: Burlington Northern Inc., a Delaware
- - -------- corporation ("Burlington" or the
"Borrower").
ADVISOR, ARRANGER AND SYNDICATION Chemical Securities Inc. ("CSI").
- - ---------------------------------
AGENT:
- - -----
ADMINISTRATIVE AND CAF AGENTS: Texas Commerce Bank National
- - ----------------------------- Association ("TCB") will serve as
Administrative Agent. Chemical Bank
("Chemical") will administer auctions
under the CAF referred to below.
FACILITY: A $500,000,000 senior unsecured
- - -------- credit facility (the "Tender Offer
Facility") incorporating two
borrowing options: (i) a competitive
advance option (the "CAF") and (ii) a
revolving credit option (the
"Revolving Credit").
The CAF will be provided on an
uncommitted competitive advance basis
through an auction mechanism. The
Revolving Credit will be provided on
a committed basis. Availability
under each option will be reduced by
usage under the other option. Under
each option amounts borrowed and
repaid may be reborrowed subject to
availability under such Facility.
TENDER OFFERS AND MERGER: Pursuant to an amended Agreement and
- - ------------------------ Plan of Merger (the "Amended Merger
Agreement"), the Borrower and Santa
Fe Pacific Corporation ("Santa Fe")
will commence tender offers (each a
"Tender Offer" and, collectively, the
"Tender Offers") pursuant to which
they will offer to purchase
25,000,000 and
</TABLE>
<PAGE>
2
<TABLE>
<S> <C>
38,000,000 shares, respectively, of
the outstanding common stock of Santa
Fe at a price of $20 per share in
cash. The Amended Merger Agreement
will provide that, following the
purchase of shares in the Tender
Offers and the receipt of required
approvals from the Interstate
Commerce Commission, Santa Fe will be
merged with and into the Borrower
(the "Merger") and the capital stock
of Santa Fe outstanding immediately
prior to the Merger (other than
shares owned by the Borrower or Santa
Fe) will be converted into the right
to receive shares of common stock of
the Borrower at an exchange ratio of
0.4 to 1.
USE OF PROCEEDS: The proceeds of the Tender Offer
- - --------------- Facility will be used solely to
provide funds for the purchase by
Burlington, pursuant to its Tender
Offer, of shares of common stock of
Santa Fe.
AVAILABILITY: Funds will be made available
- - ------------- following the commencement of the
Tender Offers and the receipt of all
necessary stockholder approvals in
connection with the consummation of
the Merger and the transactions
contemplated hereby and thereby.
Loans under the Tender Offer Facility
will be available at any time after
the execution of a definitive credit
agreement (the "Closing Date") and
prior to the fifth anniversary
thereof.
FEES AND INTEREST RATES: As set forth in the attached Annex I.
- - -----------------------
CAF PROCEDURES: As set forth in the attached Annex II.
- - --------------
MATURITY: The Tender Offer Facility will mature
- - -------- on the fifth anniversary of the
Closing Date.
OPTIONAL All or a portion of the outstanding
- - -------- loans may be prepaid at any time and
PREPAYMENTS AND
- - ---------------
</TABLE>
<PAGE>
3
<TABLE>
<S> <C>
COMMITMENT REDUCTIONS: commitments may be terminated in
- - --------------------- whole or in part (in minimum amounts
of $5,000,000) at the Borrower's
option, subject to reimbursement of
redeployment costs in the case of
LIBOR loans if such prepayment occurs
other than at the end of an
applicable interest period.
CONDITIONS PRECEDENT: Usual for facilities and transactions of
- - -------------------- this type, those specified below
and others to be specified by the
Administrative Agent, including but
not limited to borrowing
certificates, satisfactory legal
opinions, accuracy of representations
and warranties, absence of defaults,
prepayment events or creation of
liens under debt instruments or other
agreements as a result of the
transactions contemplated hereby,
evidence of authority and compliance
with applicable laws and regulations
(including Hart-Scott-Rodino
Antitrust Improvements Act, Federal
Reserve margin regulations and laws
and regulations applicable to
carriers).
(i) The Lenders shall be satisfied
with the terms and conditions of the
Tender Offers and the Merger and all
agreements to be entered into in
connection therewith (including the
Amended Merger Agreement).
(ii) The boards of directors of the
Borrower and Santa Fe and the
shareholders of each shall have
approved the Merger Agreement and, in
the case of such boards of directors,
the Tender Offers in accordance with
applicable law and the charter and
by-laws of the Borrower and Santa Fe.
(iii) There shall be no litigation
or administrative proceedings or
other legal or regulatory
developments, actual or threatened
(other than the Interstate Commerce
Commission proceeding currently
pending in respect of the
Merger),
</TABLE>
<PAGE>
4
<TABLE>
<S> <C>
which, in the reasonable judgment of
the Lenders, would (a) be likely to
affect materially and adversely the
business, assets, condition
(financial or otherwise) or prospects
of the Borrower, or the ability of
the Borrower to perform its
obligations under the Credit
Agreement, (b) be materially
inconsistent with the assumptions
underlying the Projections or (c)
prevent or impose burdensome
conditions on the transactions
contemplated hereby which could
materially and adversely affect the
creditworthiness of the Borrower.
(iv) All waivers and consents
necessary for the consummation of the
transactions contemplated hereby in
respect of any indebtedness of the
Borrower shall have been obtained.
(v) The conditions to the acceptance
of shares in the Tender Offers shall
have been satisfied, and the Borrower
shall have accepted for purchase
25,000,000 shares of the outstanding
common stock of Santa Fe in
accordance with applicable law and
the terms of the Tender Offers (and
without any amendment or waiver of
the terms or conditions of the Tender
Offers which shall not have been
approved by the Lenders and which
could materially and adversely affect
the rights or interests of the
Lenders).
(vi) The Borrower shall have
delivered to the Lenders a
certificate of an appropriate senior
executive officer to the effect that
it is aware of no material
impediment, and has no reason to
believe that there will be a material
impediment, to the completion of the
Merger substantially on the terms
contemplated by the Amended Merger
Agreement and the proxy materials,
and without the imposition of
burdensome conditions.
</TABLE>
<PAGE>
5
<TABLE>
<S> <C>
DOCUMENTATION: A credit agreement incorporating
- - ------------- customary terms and conditions and
such other provisions as the
Administrative Agent may require in
the context of the transactions
contemplated hereby, including but
not limited to those set forth below.
The terms and conditions of the
credit agreement will, to the extent
consistent with this Term Sheet and
appropriate in the context of this
financing, be similar to those of the
Credit Agreement dated as of May 6,
1994, and the Term Loan Facility
dated as of November 14, 1994, among
Burlington, certain lenders and
Chemical Bank, as administrative
agent (the "Existing Facilities").
Representations and Warranties:
------------------------------
To include organization and powers,
authorization and enforceability,
absence of default or event of
default, governmental approvals,
absence of material adverse change,
financial statements (including pro
forma financial statements),
compliance with applicable laws and
regulations (including
Hart-Scott-Rodino Antitrust
Improvements Act, Federal Reserve
margin regulations and laws and
regulations applicable to carriers),
inapplicability of the Investment
Company Act of 1940 and the Public
Utility Holding Company Act of 1935,
taxes, ERISA, absence of material
litigation and customary
representations relating to the
Tender Offers, the Merger Agreement
and the transactions contemplated
thereby.
Affirmative Covenants:
---------------------
To include maintenance of corporate
existence and rights; compliance with
laws (including ERISA and laws
regulating carriers); performance of
obligations; maintenance of
properties
</TABLE>
<PAGE>
6
<TABLE>
<S> <C>
in good repair; maintenance of
appropriate and adequate insurance;
inspection of books and properties;
payment of taxes and other
liabilities; notice of defaults,
litigation and other adverse action;
delivery of financial statements,
compliance certificates and other
information; litigation and other
notices; and ERISA matters.
Negative Covenants:
------------------
To include limitations on liens,
indebtedness, sales of assets,
mergers and consolidations and sales
of accounts receivable.
Financial Covenants:
-------------------
To include (a) Tangible Net Worth of
at least $1,700,000,000 and (b) Debt
not to exceed the lesser of 140% of
Tangible Net Worth and $3,000,000,000
until completion of the Merger, and
$5,000,000,000 thereafter.
Events of Default:
-----------------
To include nonpayment of principal or
interest, violation of covenants,
material breach of representations
and warranties, cross default,
bankruptcy, material judgments, ERISA
and change of control.
COST AND YIELD PROTECTION: The usual for facilities of this
- - ------------------------- type, including but not limited to
prepayments, applicability of or
changes in capital adequacy and
capital requirements or their
interpretation, change in
circumstances, reserves (if
applicable), failures to borrow or
meet borrowing conditions, illegality
and taxes (including withholding
taxes).
ASSIGNMENTS AND PARTICIPATIONS: Lenders will be permitted to assign
- - ------------------------------ and participate loans, notes and
commitments. Assignments will be by
</TABLE>
<PAGE>
7
<TABLE>
<S> <C>
novation and will require the
Borrower's consent (not to be
unreasonably withheld).
Participations will be without
restriction and participants will
have the same benefits as syndicate
Lenders with regard to yield
protection and increased costs and
provision of information on the
Borrower. Voting rights of
participants will be limited to
changes in amounts, rates, fees and
maturity. Each assignment will be
subject to the payment of a service
fee to the Administrative Agent by
the parties to such assignment.
EXPENSES AND INDEMNIFICATION: All reasonable out-of-pocket expenses
- - ---------------------------- of the Administrative Agent (and the
Lenders for enforcement costs and
documentary taxes) associated with
(i) the syndication of the Tender
Offer Facility and (ii) the
preparation, execution and delivery,
waiver or modification and
enforcement of the Credit Agreement
and the other documentation
contemplated hereby (including the
fees, charges and disbursements of
counsel) are to be paid by the
Borrower.
The Borrower will indemnify TCB and
the Lenders and hold them harmless
from and against costs, expenses
(including fees, charges and
disbursements of counsel) and
liabilities related to the
transactions contemplated hereby on
substantially the terms set forth in
the documentation for the Existing
Facilities; provided that neither TCB
nor any Lender will be indemnified
for its gross negligence or wilful
misconduct.
GOVERNING LAW AND FORUM: New York.
- - -----------------------
</TABLE>
<PAGE>
8
<TABLE>
<S> <C>
COUNSEL FOR THE ADMINISTRATIVE AGENT: Cravath, Swaine & Moore.
- - ------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ANNEX I
<S> <C>
Facility Fee: A Facility Fee will accrue and be
- - ------------ payable to the Lenders on the aggregate
amount of the Tender Offer Facility
(whether drawn or undrawn), commencing
on the earlier of the Closing Date and
January 30, 1995, and payable in arrears
at the end of each calendar quarter and
upon any termination of the commitments.
The rate at which the Facility Fee
accrues will depend upon the Moody's and
S&P ratings applicable to the Borrower's
senior, unsecured non-credit enhanced
long-term debt ("Senior Unsecured Debt
Ratings") as set forth in the table
appearing at the end of this Annex 1.
Utilization Fee: A Utilization Fee will accrue on the
- - --------------- outstanding borrowings under the Tender
Offer Facility at rates depending upon
the Senior Unsecured Debt Ratings as set
forth in the table appearing at the end
of this Annex I. The Utilization Fee
will accrue at 50% of the applicable
rate set forth in the table on each day
on which outstanding borrowings exceed
33-1/3% of the aggregate commitments and
at the full rate set forth in the table
on each day on which outstanding
borrowings exceed 66-2/3% of the
aggregate commitments.
Interest Rates: Interest will be payable on the loans at
- - -------------- the following rates per annum:
(a) LIBOR plus spreads depending upon
the Senior Unsecured Debt Ratings
as set forth in the table appearing
at the end of this Annex I.
(b) ABR.
Interest on ABR borrowings will be
payable quarterly. Interest on LIBOR
borrowings will be payable at the end
of each relevant interest period (but
not less often than quarterly).
Interest shall be calculated on the
basis of the actual number of days
</TABLE>
<PAGE>
2
<TABLE>
<S> <C>
elapsed over a 365/366-day year for ABR
borrowings based on the Prime Rate, and
over a 360-day year for all other
borrowings.
ABR
---
Alternative Base Rate ("ABR")--the
highest of TCB's Prime Rate; the Federal
Funds Effective Rate plus 1/2 of 1%; and
the Base CD Rate plus 1%.
LIBOR
-----
One, two, three, or six month London
Interbank Offered Rate, adjusted for
statutory reserves as incurred
("LIBOR").
</TABLE>
<TABLE>
<CAPTION>
TENDER OFFER FACILITY FEE/LIBOR SPREAD TABLE
---------------------------------------------
LIBOR Facility Utilization
Ratings Spread Fee Fee
- - ------- ------ -------- -----------
<S> <C> <C> <C>
BBB/Baa2
or above .250% .150% .100%
BBB-/Baa3 .275% .200% .150%
BB+/Ba1 or
below .475% .250% .150%
</TABLE>
<TABLE>
<S> <C>
In the event of a split rating the
Facility Fee and the spread will be
based upon the lower rating. In the
event a rating shall not be available
from either rating agency, such rating
agency shall be deemed to have assigned
its lowest rating.
</TABLE>
<PAGE>
ANNEX II
CAF Procedures
--------------
Acting as Agent, Chemical will manage a CAF, whereby the Lenders may
bid on short term loans of the Borrower on an uncommitted basis. Each Lender
may bid up to the full amount of the requested borrowing regardless of its
individual commitment amount under the Tender Offer Facility. All
communications pursuant to the CAF shall be in writing and according to
predetermined formats as set forth in the definitive credit agreement.
CAF advances, regardless of which Lender or Lenders provide them, will
be deemed to utilize the commitments of all Lenders pro rata in accordance with
their respective shares in the Tender Offer Facility for purposes of determining
(i) the aggregate remaining availability under the Tender Offer Facility and
(ii) the remaining availability of each Lender under the Tender Offer Facility.
To access the CAF (i.e., request an auction) the Borrower will provide
----
notice to Chemical describing its borrowing request with regard to amount,
value, date, maturity date, and type of borrowing. The notice must be given in
advance of the actual borrowing as set forth in the definitive credit agreement.
The minimum amount of any CAF borrowing request will be $5 million and in
integral multiples of $1 million thereafter.
In accordance with a predetermined schedule, Chemical will relay to
the Lenders the information contained in the borrowing request. Each Lender, in
its sole discretion, may bid on these borrowings. To evidence its bid each
Lender will submit its bid to Chemical stating amount, interest rate and other
information as required. Chemical will submit its bid directly to the Borrower
at a mutually agreeable time in advance of its receipt of bids of the other
Lenders. Bids not submitted in the format required, or according to the
schedule as determined, will be rejected in Chemical's discretion.
Chemical will arrange the bids in ascending yield order and relay them
to the Borrower, who will be required, by a predetermined time, either (i) to
cancel the borrowing request or (ii) to award the mandate(s) on the basis of
yield. Each borrowing made under (ii) will be in a minimum amount of $5 million
and in integral multiples of $1 million thereafter. The Borrower will inform
Chemical of the
<PAGE>
2
winning bid(s) and Chemical will then inform the successful Lender(s).
The advances made in each auction will be under one
of the following options:
LIBOR Auction Advance
Fixed Rate Auction Advance
<PAGE>
LOGO BURLINGTON NORTHERN INC.
GERALD GRINSTEIN 3800 Continental Plaza
Chairman and 777 Main Street
Chief Executive Officer Fort Worth, Texas
76102-5384
(817) 333-2272
June 29, 1994
Mr. Robert D. Krebs
Chairman, President and
Chief Executive Officer
Santa Fe Pacific Corporation
1700 E. Golf Road
Schaumburg, IL 60173
Dear Rob:
This letter will confirm our mutual agreement regarding corporate governance
issues after the merger between Burlington Northern Inc. ("BNI") and Santa Fe
Pacific Corporation ("SFP"):
1. The Board of Directors of the merged company will be constituted as
follows: two-thirds of the Directors will be designated by BNI, and one-
third of the Directors will be designated by SFP. These designations will
be made before the merger is consummated.
2. I will serve as Chairman of the Board of the merged company, and you
will be the President and Chief Executive Officer of the merged company.
3. We will thoroughly review who would be best suited to be the officers
of the merged company and its subsidiaries. We will then submit our mutual
recommendations to the Board of Directors of the merged company, which will
be responsible for the careful selection of the officers to be elected or
appointed.
This mutual agreement has been authorized by each of our respective Boards of
Directors at meetings today. We acknowledge that this is an agreement
contemplated by the Merger Agreement between our respective companies.
Sincerely yours,
/s/ Gerald Grinstein
--------------------
Gerald Grinstein
for BNI
Agreed and accepted:
/s/ Robert D. Krebs
- - -----------------------
Robert D. Krebs for SFP
