<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 24, 1995
BURLINGTON NORTHERN INC.
(exact name of registrant as specified in it charter)
Delaware 1-8159 41-1400580
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
3800 Continental Plaza, 777 Main Street, Fort Worth, Texas 76102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (817) 333-2000
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events
On January 24, 1995, Burlington Northern Inc. ("BNI") issued a press release. A
copy of the press release is attached hereto as Exhibit 99.1, which exhibit is
incorporated herein by reference.
On January 25, 1995 BNI filed supplemental joint proxy materials relating to its
proposed merger with Santa Fe Pacific with the Securities and Exchange
Commission, attached hereto, as Exhibit 99.2 which exhibit is incorporated
herein by reference.
Item 7(c). Exhibits
Exhibit 99.1 -- Press Release of Burlington Northern Inc. dated January 24,
1995.
Exhibit 99.2 -- Supplemental Joint Proxy Materials dated January 25, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereto duly authorized.
BURLINGTON NORTHERN INC.
/s/ Edmund W. Burke
-------------------
Edmund W. Burke
Executive Vice President,
Law and Secretary
Date: January 25, 1995
----------------
2
<PAGE>
EXHIBITS INDEX
Exhibits Sequentially
Numbered Page
Exhibit 99.1 Press Release of Burlington Northern Inc. dated 4
January 24, 1995.
Exhibit 99.2 Supplemental Joint Proxy Materials.
3
<PAGE>
EXHIBIT 99.1
Contact: Richard Russack (BN) FOR IMMEDIATE RELEASE
(817) 333-6116
Catherine Westphal (Santa Fe)
(708) 995-6273
Burlington Northern and Santa Fe Amend Merger Agreement;
Alleghany Corp., George McFadden to Vote
15.3 Million Santa Fe Shares in Favor of Merger
FORT WORTH, Texas, and SCHAUMBURG, Ill., January 24, 1995 -- Burlington
Northern Inc. (BN) and Santa Fe Pacific Corporation (Santa Fe) today announced
that they have amended their merger agreement to permit Santa Fe under certain
conditions to purchase up to 10 million shares of its common stock after
shareholder approval of the merger and prior to its consummation. The total
number of BN shares that would be issued upon consummation of the merger remains
fixed. Thus, if Santa Fe purchased all 10 million shares the exchange ratio
would be adjusted upwards from .40 to .4347 shares of BN common stock for each
Santa Fe share following government approval of the merger. The joint tender
offer underway by BN and Santa Fe to purchase 63 million Santa Fe shares at $20
per share is not affected by this amendment.
BN and Santa Fe also announced that Alleghany Corporation, which owns
13.494 million shares of Santa Fe (or approximately 7.2 percent of the
outstanding shares), and Mr. George McFadden, who owns 1.8 million shares of
Santa Fe (or approximately 0.9 percent of the outstanding shares), have signed
agreements with BN and Santa Fe to vote in favor of adoption of the merger
agreement as long as at the time of the Santa Fe shareholder meeting (scheduled
for Feb. 7, 1995), Santa Fe's board of directors continues to recommend the
merger to its shareholders.
more . . .
<PAGE>
BN, SANTA FE AMEND MERGER AGREEMENT / ADD TWO
In addition, Santa Fe said that its board of directors amended the
shareholder rights plan to raise the ownership threshold from 10 percent to 15
percent before the rights are triggered. Alleghany, which had requested this
amendment as a condition to signing the voting agreement, has indicated to Santa
Fe that its management will seek authorization from the Alleghany board of
directors to purchase up to 14.9 percent of Santa Fe's outstanding shares at
times and under conditions that management deems appropriate. Santa Fe also
announced that the distribution date under its shareholder rights plan has been
changed from Jan. 31, 1995 to Feb. 28, 1995.
Burlington Northern Inc. (NYSE:BNI) is the parent company of Burlington
Northern Railroad, one of the world's leading providers of transportation and
logistics services, and operator of the longest rail system in North America,
with more than 23,000 miles of track reaching across 25 states and two Canadian
provinces.
Santa Fe Pacific Corporation (NYSE:SFX) is the parent company of The
Atchison, Topeka and Santa Fe Railway Company, which operates in 12 states and
offers service to Mexico. In addition, Santa Fe owns a 44-percent interest in
Santa Fe Pacific Pipeline Partners, L.P.
# # #
<PAGE>
LOGO
BURLINGTON NORTHERN INC.
3800 CONTINENTAL PLAZA
777 MAIN STREET
FORT WORTH, TEXAS 76102-5384
January 25, 1995
DEAR STOCKHOLDER:
On January 23, 1995, your Board of Directors unanimously approved Amendment
No. 3 to the Merger Agreement between Burlington Northern Inc. ("BNI") and
Santa Fe Pacific Corporation ("SFP"). Pursuant to Amendment No. 3, SFP is
permitted, subsequent to consummation of the joint tender offer of BNI and SFP
and prior to the consummation of the merger contemplated by the Merger
Agreement, to repurchase for cash up to 10,000,000 shares of SFP common stock
provided certain conditions are satisfied (the "Repurchase Program") Because
the total number of shares BNI will issue in the merger will be unaffected by
these repurchases, the effect of any repurchases will be to increase the
exchange ratio. If Santa Fe purchases all 10 million shares, the exchange ratio
will be adjusted upwards from .40 shares to a maximum of .4347 shares of BNI
common stock for each Santa Fe share. All other substantive terms of the Merger
Agreement remain the same.
The joint tender offer by BNI and SFP to purchase 63 million shares of SFP
common stock is not affected by this Amendment.
The attached Supplemental Joint Proxy Materials include information
concerning the revised Merger Agreement, describe a number of recent
developments since the Joint Proxy Statement/Prospectus dated January 13, 1995
previously delivered to you (the "Original Joint Proxy Statement/Prospectus")
and include other important information relating to BNI, SFP and the proposed
merger. These Supplemental Joint Proxy Materials modify and supersede certain
information contained in the Original Joint Proxy Statement/Prospectus and
should be read in conjunction with the Original Joint Proxy
Statement/Prospectus. Both documents include important information, and you are
urged to give these documents your careful attention and consideration.
As indicated in the Original Joint Proxy Statement/Prospectus, a Special
Meeting of Stockholders of BNI at which the merger will be considered and voted
upon will be held at Burlington Northern Railroad Company, 3017 Lou Menk Drive,
Fort Worth, Texas 76131-2815, on February 7, 1995 at 10:00 a.m., Fort Worth
time.
The merger is contingent upon, among other things, approval by the Interstate
Commerce Commission (the "ICC"). The merger would be consummated shortly after
ICC approval is obtained and other conditions to the merger are satisfied or
waived.
The merger will provide significant benefits to BNI's stockholders. In their
application to the ICC for approval of the merger, BNI and SFP state that the
merger is expected to result in an increase in operating income of
approximately $560 million per year, most of which will be achieved in the
first three years following the merger. There can be no assurance, however,
that these potential benefits will be realized or that the ICC will not impose
conditions on the operations of the merged entity that will affect its ability
to fully achieve any one or more of these benefits. Moreover, in order to
achieve the increases in operating
<PAGE>
income mentioned above, it is expected that certain nonrecurring cash costs
would be incurred, which would include relocation, employee separation and
retraining and capital improvement costs. The ICC application states that those
costs are approximately $350 million, a substantial portion of which will be
incurred during the first year following consummation of the BNI-SFP merger.
Additionally, the expected increase in operating income does not include the
noncash effects of applying purchase accounting, which will reduce operating
income. A more detailed description of what BNI and SFP have stated in the ICC
application, as well as some important caveats about this information, is
provided at pages 88 through 90 of the Original Joint Proxy
Statement/Prospectus.
Your Board of Directors believes that the merger is fair to and in the best
interests of BNI and its stockholders, and will create a strong, new rail
carrier with a diversified traffic base and excellent financial prospects. YOUR
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE MERGER.
Approval of the merger requires the affirmative vote of a majority of the
outstanding shares of BNI common stock.
Whether or not you plan to attend the Special Meeting, PLEASE COMPLETE, SIGN
AND DATE THE ACCOMPANYING CREAM PROXY CARD WITH A BLUE STRIPE AND RETURN IT IN
THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE. If you have already submitted
a proxy card, you do not need to submit the accompanying proxy card unless you
wish to change your vote. A vote indicated on a previously submitted proxy card
will be deemed to be a corresponding vote on the merger, including the
modification described above, unless you submit a subsequent proxy card
changing your vote. Your prompt cooperation is greatly appreciated.
If you are present at the Special Meeting, you may, of course, withdraw your
proxy and vote your shares in person.
Very truly yours,
/s/ Gerald Grinstein
------------------------------------
Gerald Grinstein
Chairman and Chief Executive Officer
<PAGE>
LOGO
SANTA FE PACIFIC CORPORATION
1700 EAST GOLF ROAD
SCHAUMBURG, ILLINOIS 60173-5860
January 25, 1995
DEAR STOCKHOLDER:
I am happy to report that the merger agreement between Santa Fe Pacific
Corporation ("Santa Fe") and Burlington Northern Inc. ("Burlington Northern")
has been amended to permit, under certain circumstances, stock repurchases by
Santa Fe that would result in an increase in the exchange ratio for the
merger. The amendment allows Santa Fe to repurchase up to 10 million of its
shares between the closing of the Burlington Northern-Santa Fe tender offer
and the consummation of the merger if certain conditions are satisfied.
Because the total number of shares Burlington Northern will issue in the
merger will be unaffected by these repurchases, the effect of any repurchases
will be to increase the exchange ratio. If Santa Fe purchases all 10 million
shares, the exchange ratio will be adjusted upwards from .40 to a maximum of
.4347 shares of Burlington Northern common stock for each Santa Fe share.
The joint tender offer by Burlington Northern and Santa Fe to purchase 63
million Santa Fe shares at $20 per share is not affected by this amendment.
The Special Meeting of Stockholders of Santa Fe to vote on the merger will
be held at the Arlington Park Hilton Conference Center, 3400 West Euclid
Avenue, Arlington Heights, Illinois on February 7, 1995 at 3:00 p.m., Chicago
time.
The attached Supplemental Joint Proxy Materials reflect the recent amendment
to the merger agreement. You should review both the attached Supplemental
Joint Proxy Materials and the Original Joint Proxy Statement/Prospectus
carefully.
The merger will provide significant benefits to Santa Fe's stockholders. In
their application to the Interstate Commerce Commission (the "ICC") for
approval of the merger, Burlington Northern and Santa Fe state that the merger
is expected to result in an increase in operating income of approximately $560
million per year, most of which will be achieved in the first three years
following the merger.
There can be no assurance that these potential benefits will be realized or
that the ICC will not impose conditions on the operations of the merged entity
that will affect its ability to fully achieve any one or more of these
benefits. Moreover, in order to achieve the increases in operating income
mentioned above, it is expected that certain nonrecurring cash costs would be
incurred, which would include relocation, employee separation and retraining
and capital improvement costs. The ICC application states that those costs are
approximately $350 million, a substantial portion of which will be incurred
during the first year following consummation of the Burlington Northern-Santa
Fe merger. Additionally, the expected increase in operating income does not
include the noncash effects of applying purchase accounting, which will reduce
operating income. A more detailed description of what Burlington Northern and
Santa Fe have stated in the ICC application, as well as some important caveats
about this information, is provided on pages 88 through 90 of the Original
Joint Proxy Statement/Prospectus.
As you are probably aware, Union Pacific Corporation ("Union Pacific") has
made a competing proposal to acquire Santa Fe (the "Union Pacific Proposal").
Santa Fe's Board of Directors recommends that you do not tender your shares to
Union Pacific. The Board has determined that the Union Pacific Proposal is
less favorable for Santa Fe shareholders than the transactions under Santa
Fe's amended merger agreement with Burlington Northern.
<PAGE>
In reaching this determination, the Santa Fe Board concluded that a
Burlington Northern-Santa Fe combination is an excellent strategic fit,
presents substantial long-term benefits because of anticipated increases in
operating income from the merger (which are expected to result from both
operating efficiencies and increased revenues) and is likely to receive ICC
approval, or approval from any government agency or executive department to
which the present ICC jurisdiction over railroad mergers is likely to be
transferred. The Santa Fe-Burlington Northern tender offer allows shareholders
who wish to do so to receive cash for a portion of their shares without waiting
for regulatory approval, while at the same time the Santa Fe-Burlington
Northern merger agreement allows stockholders to participate on a tax-free
basis in the ownership of the combined company.
The Board also believes that, given the substantial long-term benefits of a
Santa Fe/Burlington Northern merger, the value of the aggregate consideration
available to Santa Fe's stockholders under the Santa Fe-Burlington Northern
tender offer and merger exceeds the value of the consideration available to
Santa Fe's stockholders under the Union Pacific Proposal. In addition, the
stock to be received in the Santa Fe-Burlington Northern merger would be tax-
free while the Union Pacific Proposal would be a fully taxable transaction.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE BURLINGTON NORTHERN-
SANTA FE MERGER AND RECOMMENDS THAT YOU VOTE FOR THE BURLINGTON NORTHERN-SANTA
FE MERGER.
Whether or not you plan to attend the Special Meeting, PLEASE COMPLETE, SIGN
AND DATE THE ACCOMPANYING WHITE PROXY CARD WITH A BLUE STRIPE AND RETURN IT IN
THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE. If you have already submitted
a proxy card, you do not need to submit the accompanying proxy card unless you
wish to change your vote. A vote indicated on a previously submitted proxy card
will be deemed to be a corresponding vote on the merger, including the
modification described above, unless you submit a subsequent proxy card
changing your vote. Your prompt cooperation is greatly appreciated.
If you are present at the Special Meeting, you may, of course, withdraw your
proxy and vote your shares in person.
Very truly yours,
/s/ Rob Krebs
-----------------------------
Robert D. Krebs
Chairman, President and Chief
Executive Officer
<PAGE>
BURLINGTON NORTHERN INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 7, 1995
TO THE STOCKHOLDERS OF BURLINGTON NORTHERN INC.:
A Special Meeting of the Stockholders of Burlington Northern Inc. ("BNI")
will be held at Burlington Northern Railroad Company, 3017 Lou Menk Drive, Fort
Worth, Texas 76131-2815, on February 7, 1995 at 10:00 a.m., Fort Worth time,
for the purpose of considering and voting upon the following:
1. The approval and adoption of an Agreement and Plan of Merger dated as
of June 29, 1994, as amended by an Amendment thereto dated as of October
26, 1994, Amendment No. 2 thereto dated as of December 18, 1994 and
Amendment No. 3 thereto dated as of January 24, 1995 (as so amended, the
"Merger Agreement") between BNI and Santa Fe Pacific Corporation ("SFP"). A
copy of Amendment No. 3 is set forth as Appendix A to the attached
Supplemental Joint Proxy Materials. Pursuant to the Merger Agreement, among
other things, (i) SFP is to merge with and into BNI (the "Merger"), with
BNI to be the surviving corporation in the Merger, (ii) each share of
common stock, par value $1.00 per share, of SFP outstanding at the
effective time of the Merger (other than shares held by SFP as treasury
stock or held by BNI or its subsidiaries) will be converted into the right
to receive between 0.40 shares and 0.4347 shares of common stock, no par
value, of BNI and (iii) BNI will issue up to 63 million shares of its
common stock to SFP stockholders, all as more fully set forth in the Merger
Agreement and described in the attached Supplemental Joint Proxy Materials
and the Joint Proxy Statement/Prospectus of BNI and SFP dated January 13,
1995 previously distributed to BNI stockholders (the "Original Joint Proxy
Statement/Prospectus"). These Supplemental Joint Proxy Materials modify and
supersede certain information in the Original Joint Proxy
Statement/Prospectus and should be read in conjunction with the Original
Joint Proxy Statement/Prospectus.
2. Such other business as may properly come before the Special Meeting or
any adjournment or postponement thereof.
Only stockholders of record at the close of business on December 27, 1994 are
entitled to receive notice of and to vote at the Special Meeting or any
adjournment or postponement thereof.
Whether or not you expect to attend the Special Meeting, please fill in, date
and sign the accompanying CREAM PROXY CARD WITH A BLUE STRIPE and mail it
promptly in the enclosed prepaid return envelope. If you have already submitted
a proxy card, you do not need to submit the accompanying proxy card unless you
wish to change your vote. A vote indicated on a previously submitted proxy card
will be deemed to be a corresponding vote on the Merger Agreement unless you
submit a subsequent proxy card changing your vote. If you attend the Special
Meeting, you may vote in person if you wish, even if you have previously
returned your proxy card.
By Order of the Board of Directors.
/s/ Edmund W. Burke
-------------------------
Edmund W. Burke
Executive Vice President,
Law and Secretary
Fort Worth, Texas
January 25, 1995
<PAGE>
SANTA FE PACIFIC CORPORATION
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 7, 1995
TO THE STOCKHOLDERS OF SANTA FE PACIFIC CORPORATION:
A Special Meeting of Stockholders of Santa Fe Pacific Corporation ("SFP")
will be held at the Arlington Park Hilton Conference Center, 3400 West Euclid
Avenue, Arlington Heights, Illinois on February 7, 1995 at 3:00 p.m., Chicago
time, for the purpose of considering and voting upon the following:
1. The approval and adoption of an Agreement and Plan of Merger dated as
of June 29, 1994, as amended by an Amendment thereto dated as of October
26, 1994, Amendment No. 2 thereto dated as of December 18, 1994 and
Amendment No. 3 thereto dated as of January 24, 1995 (as so amended, the
"Merger Agreement") between Burlington Northern Inc. ("BNI") and SFP. A
copy of Amendment No. 3 is set forth as Appendix A to the attached
Supplemental Joint Proxy Materials. Pursuant to the Merger Agreement, among
other things, (i) SFP is to merge with and into BNI (the "Merger"), with
BNI to be the surviving corporation in the Merger, (ii) each share of
common stock, par value $1.00 per share, of SFP outstanding at the
effective time of the Merger (other than shares held by SFP as treasury
stock or held by BNI or its subsidiaries) will be converted into the right
to receive between 0.40 shares and 0.4347 shares of common stock, no par
value, of BNI and (iii) BNI will issue up to 63 million shares of its
common stock to SFP stockholders, all as more fully set forth in the Merger
Agreement and described in the attached Supplemental Joint Proxy Materials
and the Joint Proxy Statement/Prospectus of BNI and SFP dated January 13,
1995 previously distributed to SFP stockholders (the "Original Joint Proxy
Statement/Prospectus"). These Supplemental Joint Proxy Materials modify and
supersede certain information in the Original Joint Proxy
Statement/Prospectus and should be read in conjunction with the Original
Joint Proxy Statement/Prospectus.
2. Such other business as may properly come before the Special Meeting or
any adjournment or postponement thereof.
Only stockholders of record at the close of business on December 27, 1994 are
entitled to receive notice of and to vote at the Special Meeting or any
adjournment or postponement thereof.
Whether or not you expect to attend the Special Meeting, please fill in, date
and sign the accompanying WHITE PROXY CARD WITH A BLUE STRIPE and mail it
promptly in the enclosed prepaid return envelope. If you have already submitted
the previously distributed proxy card, you do not need to submit the
accompanying proxy card unless you wish to change your vote. A vote indicated
on a previously submitted proxy card will be deemed to be a corresponding vote
on the Merger Agreement unless you submit a subsequent proxy card changing your
vote. If you attend the Special Meeting, you may vote in person if you wish,
even if you have previously returned your proxy card.
By Order of the Board of Directors.
/s/ M.K. Morgan
--------------------
Marsha K. Morgan
Corporate Secretary
Schaumburg, Illinois
January 25, 1995
<PAGE>
BURLINGTON NORTHERN INC.
AND
SANTA FE PACIFIC CORPORATION
----------------
SUPPLEMENTAL JOINT PROXY MATERIALS
FOR SPECIAL MEETINGS OF STOCKHOLDERS
TO BE HELD FEBRUARY 7, 1995
----------------
These Supplemental Joint Proxy Materials relate to the proposed merger (the
"Merger") of Santa Fe Pacific Corporation, a Delaware corporation ("SFP"), with
and into Burlington Northern Inc., a Delaware corporation ("BNI"), pursuant to
the Agreement and Plan of Merger dated as of June 29, 1994, as amended by an
Amendment thereto dated as of October 26, 1994, Amendment No. 2 thereto dated
as of December 18, 1994 and Amendment No. 3 thereto dated as of January 24,
1995. These Supplemental Joint Proxy Materials are being furnished to
stockholders of each of BNI and SFP in connection with the solicitation of
proxies to be used at the respective Special Meetings of BNI and SFP to be held
for the purposes described herein and in the Original Joint Proxy
Statement/Prospectus referred to below.
These Supplemental Joint Proxy Materials modify and supersede certain
information included in the Joint Proxy Statement/Prospectus dated January 13,
1995 of BNI and SFP previously distributed to BNI and SFP stockholders (the
"Original Joint Proxy Statement/Prospectus") and should be read in conjunction
with the Original Joint Proxy Statement/Prospectus. Capitalized terms used but
not defined herein shall have the meanings assigned to those terms in the
Original Joint Proxy Statement/Prospectus.
All information contained 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.
These Supplemental Joint Proxy Materials and the accompanying forms of proxy
are first being mailed to stockholders of each of BNI and SFP on or about
January 26, 1995.
----------------
The date of these Supplemental Joint Proxy Materials is January 25, 1995.
<PAGE>
INTRODUCTION
On June 29, 1994, Burlington Northern Inc. ("BNI") and Santa Fe Pacific
Corporation ("SFP") entered into the Agreement and Plan of Merger (the
"Original Merger Agreement" and, as amended to the date hereof, the "Merger
Agreement"), pursuant to which SFP would be merged with and into BNI and
stockholders of SFP would become stockholders of BNI. Pursuant to the Original
Merger Agreement, each share of common stock, par value $1.00 per share, of SFP
(the "SFP Common Stock") would have been converted into 0.27 shares of common
stock, no par value per share, of BNI (the "BNI Common Stock") upon
consummation of the merger contemplated thereby. Special meetings of the
stockholders of BNI and SFP to consider and approve the Original Merger
Agreement were scheduled for November 18, 1994, and a Joint Proxy
Statement/Prospectus dated October 12, 1994 of BNI and SFP was distributed by
BNI and SFP to their respective stockholders.
On October 26, 1994, BNI and SFP entered into an Amendment to the Original
Merger Agreement to increase the exchange ratio in the proposed merger 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.
On December 18, 1994, BNI and SFP entered into Amendment No. 2 to the
Original Merger Agreement ("Amendment No. 2") to further increase the exchange
ratio in the proposed merger from 0.34 shares of BNI Common Stock per share of
SFP Common Stock to 0.40 shares of BNI Common Stock per share of SFP Common
Stock. Concurrently with the execution of Amendment No. 2, BNI and SFP
announced a joint tender offer (the "Offer") for up to 63 million shares of SFP
Common Stock. Pursuant to Amendment No. 2, SFP also agreed that if the Merger
Agreement is terminated, under certain circumstances, it will pay BNI an amount
equal to $50 million plus reimbursement of expenses up to $10 million. In
connection with the approval of Amendment No. 2, BNI and SFP rescheduled the
dates of their respective stockholder meetings to January 27, 1995, which date
was subsequently changed to February 7, 1995, and a Joint Proxy
Statement/Prospectus dated January 13, 1995 of BNI and SFP (the "Original Joint
Proxy Statement/Prospectus") was distributed by BNI and SFP to their respective
stockholders.
On January 24, 1995, BNI and SFP entered into Amendment No. 3 to the Original
Merger Agreement ("Amendment No. 3"). Pursuant to Amendment No. 3, SFP will be
permitted, subsequent to the consummation of the Offer and prior to
consummation of the merger contemplated by the Merger Agreement (the "Merger"),
to repurchase up to 10,000,000 shares of SFP Common Stock provided certain
conditions are satisfied (the "Repurchase Program"). Pursuant to Amendment No.
3, repurchases of SFP Common Stock under the Repurchase Program would have the
effect of increasing the fraction of a share of BNI Common Stock into which
each share of SFP Common Stock will be converted (the "Exchange Ratio"), from a
minimum of 0.40 shares to a maximum of 0.4347 shares of BNI Common Stock. The
Exchange Ratio would increase because the total number of shares of BNI Common
Stock which would be received by all SFP stockholders as a group in the Merger
would remain unchanged while the total number of shares of SFP Common Stock
outstanding would be reduced by the number of shares of SFP Common Stock
repurchased by SFP pursuant to the Repurchase Program. See "Amendment No. 3 to
Merger Agreement" below. The exercise of options for SFP Common Stock would
reduce the maximum exchange ratio from 0.4347 to a lower number that would vary
with the number of options exercised. If all granted but unexercised SFP
options as of December 31, 1994 were exercised and 10,000,000 shares of SFP
Common Stock were repurchased, the Exchange Ratio would be 0.4308.
Subject to the limitations set forth in the Merger Agreement and the SFP
Credit Agreements (as defined below), repurchases under the Repurchase Program,
including the amount and timing of any such repurchases, will be in the sole
discretion of SFP. There can be no assurance that SFP will make any repurchases
under the Repurchase Program whether or not such repurchases would be permitted
under the terms of the Merger Agreement and the SFP Credit Agreements. SFP
anticipates, as of this time, that at least $50 million for repurchases would
be available under the terms of the Merger Agreement and the SFP Credit
Agreement in 1995. See "Certain Financial Information."
2
<PAGE>
All other substantive terms of the proposed merger are identical to those set
forth in the Merger Agreement prior to Amendment No. 3 and the Original Joint
Proxy Statement/Prospectus. The terms of the Offer are not affected by
Amendment No. 3.
These Supplemental Joint Proxy Materials modify and supersede certain
information contained in the Original Joint Proxy Statement/Prospectus and
describe certain significant recent developments. These Supplemental Joint
Proxy Materials should be read in conjunction with the Original Joint Proxy
Statement/Prospectus.
These Supplemental Joint Proxy Materials are being furnished to stockholders
of BNI in connection with the solicitation of proxies by the BNI Board of
Directors for use at the Special Meeting of Stockholders of BNI (the "BNI
Special Meeting") to be held at Burlington Northern Railroad Company, 3017 Lou
Menk Drive, Fort Worth, Texas 76131-2815, on February 7, 1995 at 10:00 a.m.,
Fort Worth time, and at any adjournment or postponement thereof.
These Supplemental Joint Proxy Materials are also being furnished to the
stockholders of SFP in connection with the solicitation of proxies by the SFP
Board of Directors for use at the Special Meeting of Stockholders of SFP (the
"SFP Special Meeting") to be held at the Arlington Park Hilton Conference
Center, 3400 West Euclid Avenue, Arlington Heights, Illinois on February 7,
1995 at 3:00 p.m., Chicago time, and at any adjournment or postponement
thereof.
At the BNI Special Meeting and the SFP Special Meeting, the common
stockholders of BNI and SFP, respectively, will be asked to adopt and approve
the Merger Agreement between BNI and SFP, pursuant to which SFP is to merge
with and into BNI, with BNI to be the surviving corporation in the Merger. In
the Merger, each holder of SFP Common Stock will receive not less than 0.40 nor
more than 0.4347 shares of BNI Common Stock per share of SFP Common Stock
(subject to shares of SFP Common Stock being repurchased under the Repurchase
Program and stock option exercises).
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.
These Supplemental Joint Proxy Materials and the accompanying forms of proxy
are first being mailed to stockholders of BNI and SFP on or about January 26,
1995.
AMENDMENT NO. 3 TO MERGER AGREEMENT
The following is a brief summary of certain provisions of Amendment No. 3, a
copy of which is attached as Appendix A to this Supplement and is incorporated
herein by reference. The summary does not purport to be complete and is
qualified in its entirety by reference to Amendment No. 3. ALL STOCKHOLDERS OF
BNI AND SFP ARE URGED TO READ AMENDMENT NO. 3 IN ITS ENTIRETY. Capitalized
terms not defined herein have the meanings set forth in the Merger Agreement.
Amendment No. 3 provides that SFP may repurchase up to a maximum of
10,000,000 shares of SFP Common Stock in the Repurchase Program if, but only
if, (a) such repurchase is permitted under the credit agreements to be entered
into by SFP in connection with the Offer (the "SFP Credit Agreements"), as such
agreements are in effect at the time the Offer is consummated (whether or not
such agreements are in effect at the time of any such repurchase and without
regard to any waiver of any term thereof) and (b) for any repurchases after
March 31, 1995, (i) SFP's total debt (defined as the sum of short-term debt
plus current maturities of long-term debt plus long-term debt, all as shown on
the consolidated balance sheet of SFP and its consolidated subsidiaries in
accordance with generally accepted accounting principles ("GAAP") ) as of its
most recent quarter-end prior to such repurchase does not exceed the levels set
forth below and (ii) cash capital expenditures on a cumulative basis from
January 1, 1995, as of the most recent quarter-end prior to such repurchase,
are at least at the levels set forth below.
3
<PAGE>
Amendment No. 3 further provides that the Exchange Ratio in the Merger would
be equal to a fraction, (i) the numerator of which is 0.40, and (ii) the
denominator of which is (A) the number of shares of SFP Common Stock
outstanding (but excluding treasury stock and SFP Common Stock beneficially
owned by BNI or acquired in the Offer by BNI) immediately prior to the
Effective Time divided by (B) the sum of (1) the number of shares of SFP Common
Stock outstanding (but excluding treasury stock and SFP Common Stock
beneficially owned by BNI or acquired in the Offer by BNI) immediately prior to
the Effective Time and (2) the aggregate number of shares of SFP Common Stock
repurchased by SFP pursuant to the Repurchase Program. The exchange ratio will
be adjusted in a corresponding manner if the Alternative Merger (as defined in
the Original Joint Proxy Statement/Prospectus) is effected.
As a result of the foregoing, repurchases under the Repurchase Program would
have the effect of increasing the Exchange Ratio from 0.40 shares of BNI Common
Stock per share of SFP Common Stock (which would remain the Exchange Ratio if
no shares are repurchased under the Repurchase Program), to a maximum of 0.4347
shares of BNI Common Stock per share of SFP Common Stock if the maximum
10,000,000 shares of SFP Common Stock are repurchased and SFP options are
exercised.
SFP Credit Agreements. It is anticipated that the SFP Credit Agreements will
provide, among other things, that SFP may not declare or pay any dividend
(other than dividends payable solely in SFP Common Stock) on, or make any
payment on account of, or set apart assets for a sinking or other analogous
fund for, the purchase, redemption, defeasance, retirement or other acquisition
of, any shares of any class of capital stock of SFP (other than pursuant to the
Offer) or any warrants or options to purchase any such capital stock, whether
outstanding on the date of the SFP Credit Agreements or thereafter outstanding,
or make any other distribution in respect thereof, either directly or
indirectly, whether in cash or property or in obligations of SFP or any
subsidiary (such declarations, payments, setting apart, purchases, redemptions,
defeasance, retirements, acquisitions and distributions being "Restricted
Payments"), except that, so long as no default or event of default under the
SFP Credit Agreements exist or would exist after giving effect thereto:
(a) SFP may make Restricted Payments on any date in an amount equal to
the amount of the Primary Restricted Payments Basket (as defined below) on
such date less the aggregate amount of Restricted Payments previously made
pursuant to this clause (a); provided that no Restricted Payments may be
made from amounts constituting part of the Primary Restricted Payments
Basket under clause (b) of the definition of Primary Restricted Payments
Basket unless SFP met the Eligibility Test (as defined below) for the
immediately preceding fiscal quarter; and
(b) in addition to the Restricted Payments permitted pursuant to the
foregoing clause (a), SFP may make Restricted Payments in any fiscal
quarter if (i) SFP met the Eligibility Test for the immediately preceding
fiscal quarter, (ii) the amount of such Restricted Payments do not exceed
the Additional Restricted Payments Basket (as defined below) on the date of
such Restricted Payments less the aggregate amount of Restricted Payments
previously made pursuant to this clause (b), and (iii) simultaneously with
making such Restricted Payments, SFP makes a prepayment in respect of the
term loans under the SFP Credit Agreements in an amount at least equal to
the amount of such Restricted Payments.
For purposes of the foregoing covenant, the following terms will have the
following meanings:
"Additional Restricted Payments Basket": means, on any date, an amount equal
to 50% of the sum of Excess Adjusted Consolidated Cash Flow for each fiscal
quarter of SFP ended after the date of the SFP Credit Agreements and prior to
such date.
"Adjusted Consolidated Cash Flow": means, for any period, consolidated income
from continuing operations for such period, plus depreciation and amortization,
deferred income taxes and merger-related costs (without duplication, net of tax
benefit, if any), in each case to the extent deducted in determining such
consolidated income from continuing operations as determined in accordance with
GAAP applied on a consistent basis, less consolidated capital expenditures for
such period provided that not more than $45 million in the aggregate (less the
amount of income tax expense associated therewith) may be included for merger-
related costs in calculating Adjusted Consolidated Cash Flow during the term of
the SFP Credit Agreements.
4
<PAGE>
"Eligibility Test": SFP shall be deemed to have met the Eligibility Test for
any fiscal quarter if Adjusted Consolidated Cash Flow for such fiscal quarter
exceeds the amount set forth for such fiscal quarter under the column "Cash
Flow Target" below.
<TABLE>
<CAPTION>
CASH FLOW TARGET
QUARTER ENDED (IN MILLIONS)
- ------------- ----------------
<S> <C>
03/31/95................ $ 8.0
06/30/95................ (28.0)
09/30/95................ 3.0
12/31/95................ 63.0
03/31/96................ 31.0
06/30/96................ 8.0
09/30/96................ 40.0
12/31/96................ 92.0
03/31/97................ 42.0
06/30/97................ 25.0
09/30/97................ 60.0
12/31/97................ 113.0
03/31/98................ 49.0
</TABLE>
<TABLE>
<CAPTION>
CASH FLOW TARGET
QUARTER ENDED (IN MILLIONS)
- ------------- ----------------
<S> <C>
06/30/98................ $ 36.0
09/30/98................ 73.0
12/31/98................ 125.0
03/31/99................ 58.0
06/30/99................ 49.0
09/30/99................ 89.0
12/31/99................ 141.0
03/31/00................ 58.0
06/30/00................ 49.0
09/30/00................ 89.0
12/31/00................ 141.0
03/31/01................ 58.0
06/30/01................ 49.0
</TABLE>
"Excess Adjusted Consolidated Cash Flow": means, for any fiscal quarter, the
amount, if any, by which Adjusted Consolidated Cash Flow for such fiscal
quarter exceeds the amount set forth for such fiscal quarter under the column
"Cash Flow Target" above.
"Primary Restricted Payments Basket": means, on any calculation date, the sum
of (a) the Basic Amount plus (b) $5,000,000 for each fiscal quarter ended after
the date of the SFP Credit Agreements in which SFP met the Eligibility Test.
For purposes of the foregoing, the "Basic Amount" shall be (i) for any
calculation date during the fiscal quarter ending March 31, 1995, $30,000,000,
(ii) for any calculation date during the fiscal quarter ending June 30, 1995,
$40,000,000 and (iii) for any calculation date thereafter, $50,000,000.
Indebtedness; Capital Expenditure Requirements. In addition, the amounts of
indebtedness and capital expenditures referred to in clause (b) of the second
paragraph of this Section are:
<TABLE>
<CAPTION>
CUMULATIVE
CASH CAPITAL DEBT
EXPENDITURES BALANCE AT
1995 AT QUARTER-END QUARTER-END
---- -------------- -----------
(IN MILLIONS)
<S> <C> <C>
1st Quarter....................................... $ 78 $2,160
2nd Quarter....................................... 194 2,140
3rd Quarter....................................... 301 2,125
4th Quarter....................................... 360 2,045
<CAPTION>
1996
----
<S> <C> <C>
1st Quarter....................................... 423 2,101
2nd Quarter....................................... 533 2,092
3rd Quarter....................................... 628 2,073
4th Quarter....................................... 675 2,017
<CAPTION>
1997
----
<S> <C> <C>
1st Quarter....................................... 738 2,071
2nd Quarter....................................... 848 2,015
3rd Quarter....................................... 943 1,997
4th Quarter....................................... 990 1,850
</TABLE>
5
<PAGE>
ADDITIONAL RECENT DEVELOPMENTS
Union Pacific Proposal; Discussions Concerning Amendment No. 3. On January
17, 1995, Drew Lewis, the Chairman and Chief Executive Officer of Union Pacific
Corporation ("UPC"), sent the following letter to Robert D. Krebs, Chairman,
President and Chief Executive Officer of SFP.
January 17, 1995
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 inform you that Union Pacific has revised its acquisition
proposal to increase the price to $18.50 per share in cash and to seek to
acquire 100% of Santa Fe's outstanding shares in the tender offer.
By using our Interstate Commerce Commission approved voting trust, your
shareholders would receive immediate payment of the entire purchase price in
our transaction, without bearing any risk relating to ICC approval of our
combination with Santa Fe. By contrast, the new leveraged Burlington Northern
transaction would require a delay of up to several years for payment of two-
thirds of the purchase price to Santa Fe shareholders, and would require your
shareholders to bear the risk of ICC approval.
In addition to the all-cash advantage of our offer, we believe our
transaction is superior to the Burlington Northern acquisition when one
discounts BN's purchase price for the time delay in payment, the ICC risk of
non-consummation of the BN transaction and the uncertain value of the BN stock
to be received.
Our preference remains to negotiate a merger agreement with Santa Fe. As your
own advisors stated, we were very close to completing negotiation of a merger
agreement before you announced your new transaction with Burlington Northern.
We should be able to conclude our negotiations very quickly in light of our
revised offer. We continue to believe it is a violation of your Board's
fiduciary duties for Santa Fe to resist negotiating a transaction with Union
Pacific.
If you refuse to negotiate with us, we would be prepared to purchase shares
in our tender offer without a merger agreement, provided that your shareholders
tender at least 90% of Santa Fe's outstanding shares and other impediments such
as the rights plan are eliminated. In order to complete the acquisition on a
unilateral basis, we would first ask the ICC to approve an amendment to our
voting trust agreement that would enable the trustee to cause Santa Fe,
following the acquisition of Santa Fe shares, to agree to cooperate with us in
obtaining ICC approval of a Santa Fe/Union Pacific combination. We would seek
ICC approval of the amended voting trust agreement once Santa Fe shareholders
vote to disapprove the Burlington Northern merger.
Our offer, including the conditions to our transaction, remains unchanged in
all other material respects. Given your rejection of our alternative $20 all-
stock proposal made several months ago, we confirm our withdrawal of such
alternative proposal.
Sincerely,
/s/ Drew
6
<PAGE>
On January 18, 1995, UPC amended its previously announced proposal to acquire
SFP to provide that UPC would acquire all outstanding shares of SFP Common
Stock for $18.50 per share in cash. The UPC proposal contemplates a tender
offer followed by a second-step merger (the "UPC Proposal") in which all
remaining outstanding shares of SFP Common Stock would be converted into $18.50
per share in cash.
In January 1995, SFP renewed its suggestion that BNI consider the possibility
of amending the Original Merger Agreement in the manner contemplated by
Amendment No. 3. BNI initially made no substantive response to this suggestion.
SFP also continued discussing this suggestion with Alleghany Corporation
("Alleghany"), a substantial SFP stockholder.
Between January 19 and 24, representatives of BNI, SFP and their legal and
financial advisors discussed the possibility of adopting Amendment No. 3. BNI's
legal and financial advisors also discussed the proposed amendment with
representatives of Alleghany.
The SFP Board met on January 22, 1995 to consider the UPC Proposal. After
hearing from management and SFP's financial and legal advisors, the Board
decided to recommend that SFP stockholders not accept the UPC Proposal. The
Board determined that the UPC Proposal is less favorable for SFP stockholders
than the transactions under SFP's Merger Agreement with BNI.
In reaching this determination, the SFP Board concluded that a BNI
combination is an excellent strategic fit, presents substantial long-term
benefits because of anticipated increases in operating income from the Merger
(which are expected to result from both operating efficiencies and increased
revenues) and is likely to receive Interstate Commerce Commission ("ICC")
approval, or approval from any government agency or executive department to
which the present ICC jurisdiction over railroad mergers is likely to be
transferred. The Board also noted that the SFP/BNI tender offer allows
stockholders who wish to do so to receive cash for a portion of their shares
without waiting for regulatory approval, while at the same time the SFP/BNI
Merger Agreement allows stockholders to participate on a tax-free basis in the
ownership of the combined company.
The Board also noted that, in its judgment, given the substantial long-term
benefits of a SFP/BNI Merger, the value of the aggregate consideration
available to SFP's stockholders under the SFP/BNI Offer and Merger exceeds the
value of the consideration available to SFP's stockholders under the UPC
Proposal. The Board further noted that the stock to be received in the SFP/BNI
Merger would be tax-free while the UPC Proposal would be a fully taxable
transaction.
The Board also received on January 22, 1995 an oral opinion from its
financial advisor, Goldman, Sachs & Co. ("Goldman Sachs"), that, as of January
22, based on various considerations and assumptions, the aggregate of the cash
and stock consideration to be received by all of the holders of outstanding
shares of SFP Common Stock pursuant to the BNI/SFP Offer and Merger (the
"Aggregate Consideration"), considered as a unitary transaction, is fair to
such holders. In connection with this opinion, Goldman Sachs updated its
evaluation of the UPC Proposal in light of the transactions contemplated by the
then existing BNI Merger Agreement (the "BNI Transactions"). Since the UPC
Proposal is for 100% cash, it has a nominal value of $18.50 per share of SFP
Common Stock. Based on the foregoing, the analysis indicated that the UPC
Proposal represented a 2.1% premium over the $18.125 closing price of SFP
Common Stock on January 20, 1995. Based upon a BNI share price of $50.75
(closing price on January 20, 1995), Goldman Sachs calculated the nominal value
of the BNI Transactions prior to Amendment No. 3 to be $20.20 per share of SFP
Common Stock, consisting of $20.00 per share in cash for 33.2% of SFP Common
Stock ($6.64) and 0.40 shares of BNI Common Stock per share of SFP Common Stock
for 66.8% of SFP Common Stock ($13.56). Based on the foregoing, the analysis
indicated that the BNI Transactions represented a 11.4% premium over the
$18.125 closing price of SFP Common Stock on January 20, 1995. Based upon a BNI
share price ranging from $44.00 to $53.00, Goldman Sachs calculated the per
share nominal value of the BNI Transactions to range from $18.40 to $20.80.
Goldman Sachs compared these values with the results of a discounted market
price analysis based upon a BNI share price ranging from $46.00 to $54.00.
After the
7
<PAGE>
application of a discount factor of 10% to the value of the stock portion of
the BNI Transactions (on a dividend adjusted basis), the per share value of the
BNI Transactions ranged from $17.38 to $19.32; at a discount factor of 15% such
per share value ranged from $16.91 to $18.77.
Goldman Sachs also presented an illustrative analysis of the discounted
implied value of the BNI Transactions. In connection with this analysis,
Goldman Sachs assumed 1997 earnings per share of the combined company to be
$6.82 based on financial projections prepared by the senior managements of SFP
and BNI and assuming that the synergies expected to be realized from the Merger
(excluding certain non-recurring cash costs associated with the Merger) would
be $336 million in the first year after the Merger is consummated (which was
assumed to be 1997). Using a price/earnings multiple for premier railroad
stocks from 11x to 13x, Goldman Sachs calculated the midpoint of the implied
share price for BNI at December 31, 1996 to be $81.84. The foregoing
calculations indicated that the discounted implied value of the BNI
Transactions would be $23.18 per share of SFP Common Stock, consisting of
$20.00 per share in cash for 33.2% of SFP Common Stock ($6.64) and 66.8% of the
present value (assuming a 15% discount rate discounted for two years) of 0.40
shares of BNI Common Stock (based upon the midpoint calculated above of $81.84)
per share of SFP Common Stock ($16.54). In preparing this illustrative
analysis, Goldman Sachs assumed, with the consent of SFP, that the financial
forecasts for SFP and BNI after giving effect to the Merger, including, without
limitation, projected cost savings and operating synergies resulting from the
Merger, had been reasonably prepared on a basis reflecting the best currently
available judgments and estimates of SFP and BNI and that such forecasts would
be realized in the amounts and at the times contemplated thereby.
Goldman Sachs confirmed its January 22, 1995 oral opinion by delivery of its
written opinion dated the date hereof. See the full text of the opinion of
Goldman Sachs dated the date hereof (attached hereto as Appendix C), which
takes account of Amendment No. 3 and sets forth assumptions made, matters
considered and limits on the review undertaken by Goldman Sachs.
At its January 22 meeting, the SFP Board also discussed the possibility of
amending the Merger Agreement in the manner contemplated by Amendment No. 3 and
of amending SFP's Shareholder Rights Plan (the "Shareholder Rights Plan"), as
requested by Alleghany, to provide that the Rights thereunder would not be
triggered until a stockholder acquired 15% or more of SFP's outstanding Common
Stock (the "Rights Plan Amendment"). The threshold for triggering the Rights
under the original Shareholder Rights Plan was 10%.
Also on January 22, 1995, Mr. Krebs sent the following letter to Mr. Lewis:
Mr. Drew Lewis
Chairman and Chief Executive Officer
Union Pacific Corporation
Martin Tower
Eighth and Eaton Avenues
Bethlehem, Pennsylvania 18018
Dear Drew:
This is in response to your letter to me dated January 17, 1995 in which you
informed me that Union Pacific was amending its tender offer for shares of
Santa Fe common stock and is seeking to negotiate a merger agreement with Santa
Fe.
As you know, Santa Fe is a party to a merger agreement, as amended, with
Burlington Northern which provides for a strategic combination of the two
companies, with significantly enhanced value for Santa Fe stockholders. The
Santa Fe Board of Directors, at a meeting held today, has determined that Union
Pacific's amended tender offer is less favorable for Santa Fe stockholders than
the transactions under Santa Fe's amended merger agreement with Burlington
Northern.
8
<PAGE>
In reaching this determination, the Santa Fe Board concluded that a
Burlington Northern-Santa Fe combination is an excellent strategic fit,
presents substantial long-term benefits because of anticipated increases in
operating income from the merger (which are expected to result from both
operating efficiencies and increased revenues) and is likely to receive ICC
approval, or approval from any government agency or executive department to
which the present ICC jurisdiction over railroad mergers is likely to be
transferred. The Board also noted that the Santa Fe/Burlington Northern tender
offer allows stockholders who wish to do so to receive cash without waiting for
regulatory approval, while at the same time the Santa Fe/Burlington Northern
merger agreement allows stockholders to participate on a tax-free basis in the
ownership of the combined company.
The Board also noted that, in its judgment, given the substantial long-term
benefits of a Santa Fe/Burlington Northern merger, the value of the aggregate
consideration available to Santa Fe stockholders under the Santa Fe/Burlington
Northern tender offer and merger exceeds the value of the consideration
available to Santa Fe stockholders under the amended Union Pacific tender
offer. The Board further noted that the stock to be received in the Santa
Fe/Burlington Northern merger would be tax-free while the Union Pacific tender
offer would be a fully taxable transaction.
The Board also received on January 22, 1995 an oral opinion from its
financial advisor, Goldman, Sachs & Co., that the aggregate of the cash and
stock consideration to be received by all of the holders of outstanding shares
of Santa Fe common stock pursuant to the Burlington Northern/Santa Fe tender
offer and merger considered as a unitary transaction, is fair to such holders.
In light of these factors, the Board has decided not to terminate the
Burlington Northern merger agreement in order to pursue a merger agreement with
Union Pacific. In addition, the Board will continue to recommend to Santa Fe
stockholders that they not tender their shares to Union Pacific.
The Board also asked me to reemphasize that it has never put the company up
for sale. Instead, the Board has agreed to a strategic combination with
Burlington Northern which is likely to achieve a significant long-term increase
in value for Santa Fe stockholders. The Board remains committed to optimizing
long-term growth in the value of Santa Fe stock.
Sincerely,
/s/ Robert D. Krebs
Voting Agreements. In connection with the execution of Amendment No. 3, two
stockholders of SFP, Alleghany and Mr. George McFadden ("McFadden"), executed
agreements (the "Voting Agreements") with BNI and SFP to vote all SFP Common
Stock beneficially owned by them as of the December 27, 1994 record date for
the SFP stockholder vote on the Merger in favor of the Merger Agreement at any
special meeting of SFP's stockholders being held for such purpose for which the
record date is December 27, 1994, provided only that SFP's Board of Directors
continues to recommend that the stockholders of SFP vote for approval of the
Merger Agreement. In connection with Alleghany committing to vote its SFP
Common Stock in favor of the Merger Agreement, SFP adopted the Rights Plan
Amendment. As of December 27, 1994, the record date for such special meeting,
Alleghany beneficially owned 13,494,000 shares (or approximately 7.2%) of the
then outstanding shares of SFP Common Stock and McFadden beneficially owned
1,809,800 shares (or approximately 0.9%) of the outstanding shares of SFP
Common Stock.
9
<PAGE>
In Amendment No. 3 to its Schedule 13D filed by Alleghany with the Securities
and Exchange Commission on January 24, 1995, Alleghany indicated that it
presently intends to tender or cause the tender pursuant to the Offer of all of
the shares of SFP Common Stock which it beneficially owns, and to reinvest the
proceeds from such tender in purchases of SFP Common Stock. Based on
information set forth in such Schedule 13D, the Board of Directors of Alleghany
has authorized purchases of additional shares of SFP Common Stock up to an
aggregate beneficial ownership by Alleghany of 9.9% of SFP Common Stock. In
addition, Alleghany's Schedule 13D states that Alleghany management has
indicated that it intends to request the Board of Directors of Alleghany to
authorize additional purchases up to an aggregate beneficial ownership by
Alleghany of 14.9% of SFP Common Stock. There can be no assurance that
Alleghany will make any such purchases.
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
BNI. At a meeting on January 23, 1995, the Board of Directors of BNI, by
unanimous vote, approved Amendment No. 3 to the Original Merger Agreement and
the transactions contemplated thereby and the Voting Agreements. 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, including the proposed Voting Agreements; and a
presentation of Lazard Freres & Co. ("Lazard"), BNI's financial advisor, as to
the financial aspects of Amendment No. 3. 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 January
23, 1995, an exchange ratio of 0.40 (the "Exchange Ratio") of a share of BNI
Common Stock per share of SFP Common Stock, which will be adjusted upwards (to
a maximum Exchange Ratio of 0.4347 shares of BNI Common Stock per share of SFP
Common Stock) if SFP purchases shares of SFP Common Stock in the Repurchase
Program, with the effect that the same aggregate number of shares of BNI Common
Stock will be issued to SFP stockholders in the Merger regardless of whether
SFP Common Stock is repurchased under the Repurchase Program, together with the
consideration to be paid by BNI pursuant to the Offer, when taken as a whole,
was fair to the holders of BNI Common Stock from a financial point of view.
Lazard has also delivered its written opinion confirming, as of the date of
these Supplemental Proxy Materials, its oral opinion of January 23, 1995.
THE FULL TEXT OF THE WRITTEN OPINION OF LAZARD DATED THE DATE OF THESE
SUPPLEMENTAL JOINT PROXY MATERIALS, WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS
CONSIDERED AND THE REVIEW UNDERTAKEN WITH REGARD TO SUCH OPINION, IS ATTACHED
AS APPENDIX B TO THESE SUPPLEMENTAL JOINT PROXY MATERIALS. BNI STOCKHOLDERS ARE
URGED TO, AND SHOULD, READ THE OPINION CAREFULLY AND IN ITS ENTIRETY. LAZARD'S
OPINION IS DIRECTED ONLY TO THE EXCHANGE RATIO AND THE CONSIDERATION TO BE PAID
BY BNI IN THE OFFER, WHEN TAKEN AS A WHOLE, AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY STOCKHOLDER OF BNI AS TO HOW SUCH STOCKHOLDER SHOULD VOTE
AT THE SPECIAL MEETING OF STOCKHOLDERS OF BNI. THE SUMMARY OF THE OPINION OF
LAZARD SET FORTH IN THESE SUPPLEMENTAL JOINT PROXY MATERIALS SHOULD BE READ IN
CONJUNCTION WITH THE SUMMARY OF LAZARD'S OPINION DATED JANUARY 13, 1995 SET
FORTH IN THE ORIGINAL JOINT PROXY STATEMENT/PROSPECTUS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF ITS WRITTEN OPINION DATED THE DATE OF
THESE SUPPLEMENTAL JOINT PROXY MATERIALS.
In arriving at its oral and written opinions dated January 23, 1995 and the
date of these Supplemental Joint Proxy Materials, respectively, and in
discussing its January 23, 1995 opinion with BNI's Board of Directors, Lazard
performed various financial analyses which analyses were substantially similar
to those described in the Original Joint Proxy Statement/Prospectus. In
performing its analyses, Lazard made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of BNI or SFP. The analyses
performed by Lazard are not necessarily indicative of actual values or actual
future results, which may be significantly more or less favorable than
suggested by such analyses. Additionally, analyses relating to the values of
businesses do not purport to be appraisals or to reflect actual market
valuations or trading ranges, which may vary significantly from amounts set
forth above.
10
<PAGE>
SFP. At a meeting on January 24, 1995, the SFP Board of Directors, after
hearing presentations from SFP's management and financial and legal advisors,
approved Amendment No. 3 and the Voting Agreements. In connection with the
Voting Agreements, the SFP Board adopted the Rights Plan Amendment. The Board
also changed the Distribution Date under the Shareholder Rights Plan from
January 31, 1995 to February 28, 1995.
In connection with its presentation to the SFP Board on January 24 and the
opinion attached hereto as Appendix C, Goldman Sachs updated its evaluation of
the BNI Transactions taking into account Amendment No. 3 to the Original Merger
Agreement. After taking into account Amendment No. 3, Goldman Sachs calculated
the nominal value of the BNI Transactions under two different scenarios.
Assuming that SFP does not repurchase any shares of SFP Common Stock under the
Repurchase Program and based upon a BNI share price of $50.625 (closing price
on January 23, 1995), Goldman Sachs calculated such nominal value of the BNI
Transactions to be $20.17 per share of SFP Common Stock, consisting of $20.00
per share in cash for 33.2% of SFP Common Stock ($6.64) and 0.40 shares of BNI
Common Stock per share of SFP Common Stock for 66.8% of SFP Common Stock
($13.53). Based upon a BNI share price ranging from $44.00 to $53.00, Goldman
Sachs calculated the per share nominal value of the BNI Transactions under this
scenario to range from $18.40 to $20.80. Assuming that SFP repurchases the
maximum of 10 million shares of SFP Common Stock under the Repurchase Program
and based upon a BNI share price of $50.625 (closing price on January 23,
1995), Goldman Sachs calculated such nominal value of the BNI Transactions to
range from $21.21 to $21.34 per share of SFP Common Stock, consisting of $20.00
per share in cash for 33.2% of SFP Common Stock ($6.64) and 0.4308 to 0.4347
shares of BNI Common Stock per share of SFP Common Stock for 66.8% of SFP
Common Stock ($14.57 to $14.70). Based upon a BNI share price ranging from
$44.00 to $53.00, Goldman Sachs calculated the per share nominal value of the
BNI Transactions to range from $19.42 to $22.03 assuming an exchange ratio of
0.4347. The exchange ratio of 0.4347 assumes that no SFP stock options are
exercised prior to the consummation of the Merger and that 115.3 million SFP
shares (excluding treasury stock and SFP Common Stock beneficially owned by BNI
or acquired in the Offer by BNI) are outstanding immediately prior to the
consummation of the Merger. The calculation of the nominal value at this
exchange ratio also assumes that a stockholder who tenders shares and is
prorated to receive cash for 33.2% of its shares will not sell its remaining
shares in the open market after the Offer is completed and before consummation
of the Merger and that SFP purchases 10 million of its shares in the open
market after the Offer is completed and before consummation of the Merger. The
exchange ratio of 0.4308 assumes all granted but unexercised SFP stock options
as of December 31, 1994 were exercised prior to the consummation of the Merger.
11
<PAGE>
THE SPECIAL MEETINGS
PURPOSE OF THE BNI AND SFP SPECIAL MEETINGS
The purpose of the BNI and SFP Special Meetings is to consider and vote upon
the adoption and approval of the Merger Agreement. Pursuant to the Merger
Agreement, upon consummation of the Merger, SFP will be merged with and into
BNI, with each share of SFP Common Stock to be converted into the right to
receive between 0.40 shares and 0.4347 shares of BNI Common Stock (or Holdings
Common Stock, as the case may be).
EACH OF THE BOARDS OF DIRECTORS OF BNI AND SFP HAS, BY UNANIMOUS VOTE,
APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT ITS STOCKHOLDERS VOTE FOR
APPROVAL OF THE MERGER AGREEMENT.
VOTING AND REVOCATION OF PROXIES
A CREAM PROXY CARD WITH A BLUE STRIPE for use at the BNI Special Meeting or a
WHITE PROXY CARD WITH A BLUE STRIPE for use at the SFP Special Meeting, as the
case may be, accompany these Supplemental Joint Proxy Materials. A stockholder
may use the appropriate PROXY CARD if he or she is unable to attend the meeting
in person or wishes to have his or her shares voted by proxy even if he or she
does attend the meeting. A proxy may be revoked by the person giving it at any
time before it is exercised by providing written notice of such revocation to
the Secretary of BNI or SFP, as the case may be, by submitting a proxy having a
later date, or by appearing at the meeting and electing to vote in person. Any
proxy validly submitted and not revoked will be voted in the manner specified
therein by the stockholder. IF A PROXY IS SUBMITTED BUT NO SPECIFICATION IS
MADE THEREIN, SHARES OF BNI COMMON STOCK OR SFP COMMON STOCK, AS THE CASE MAY
BE, REPRESENTED BY PROXY WILL BE VOTED FOR APPROVAL OF THE MERGER AGREEMENT. If
you have already submitted a previously distributed proxy card, you do not need
to submit the accompanying proxy card unless you wish to change your vote. A
vote indicated on a previously submitted proxy card will be deemed to be a
corresponding vote on the Merger Agreement unless you submit a subsequent proxy
card changing your vote. Because approval of the Merger Agreement by BNI
stockholders requires the affirmative vote of a majority of the shares of BNI
Common Stock outstanding as of the Record Date, and approval of the Merger
Agreement by SFP stockholders requires the affirmative vote of a majority of
the shares of SFP Common Stock outstanding as of the Record Date, failures to
submit a proxy, abstentions and broker non-votes will have the effect of a vote
against approval of the Merger Agreement. Neither BNI's nor SFP's Board of
Directors knows of any other matter that will be presented for action at either
of the Special Meetings. If, however, any other matter properly comes before
either of the Special Meetings, the persons named in the proxy or their
substitutes will vote thereon in accordance with their judgment.
CERTAIN FINANCIAL INFORMATION
The Repurchase Program. Pursuant to the Repurchase Program, SFP will be
permitted, but not obligated, to repurchase shares of SFP Common Stock (with a
resulting increase in the Exchange Ratio) if, but only if, permitted under the
Merger Agreement and the SFP Credit Agreements. See "Amendment No. 3 to Merger
Agreement" for a summary of certain of the terms of such Agreements. Under the
terms of both agreements, however, SFP will be allowed to repurchase up to $30
million of SFP Common Stock prior to April 1, 1995 without regard to
performance requirements or other limitations. After such date, SFP will be
permitted to make repurchases of up to $40 million (during the second quarter
of 1995) and up to $50 million after June 30, 1995 (which amounts generally
will be reduced by repurchases made prior thereto) subject only to compliance
with the capital expenditure and total debt provisions of the Merger Agreement.
If SFP were to repurchase $50 million of SFP Common Stock at an average
purchase price of $20 per share of SFP Common Stock (the same price as the
Offer and as assumed in the pro forma financial statements included in the
Original Joint Proxy Statement/Prospectus), the Pro Forma BNI with SFP
Investment financial statements would not be affected and the SFP Recapitalized
Pro Forma financial statements would be affected
12
<PAGE>
as follows: (i) pro forma long-term debt would increase or cash would decrease
and stockholders' equity would decrease by $50 million, respectively, (ii) pro
forma annual income from continuing operations would be approximately $3
million lower, and (iii) pro forma annual earnings per share would be
unchanged, reflecting the lower pro forma income from continuing operations
offset by the lower number of SFP shares outstanding. The estimated impact of
this repurchase on the Pro Forma Combined financial statements would be as
follows: (i) pro forma long-term debt would increase or cash would decrease and
goodwill would increase by $50 million, respectively, (ii) pro forma annual
income from continuing operations would decrease by approximately $4 million,
and (iii) pro forma annual earnings per share would decrease by approximately
$.03. At the $50 million repurchase level, the Exchange Ratio would increase to
approximately 0.408.
For all other repurchases, SFP must satisfy the various criteria set forth in
the Merger Agreement and the SFP Credit Agreements. The combined impact of
these restrictions is generally that additional repurchases can only be
completed if SFP's future performance exceeds the cash flow targets set forth
in the SFP Credit Agreements. These cash flow targets assume SFP financial
performance which generally exceeds those accomplished by SFP for the pro forma
periods presented in the Original Joint Proxy Statement/Prospectus.
Accordingly, while SFP expects to have the ability to accomplish some level of
repurchases, in order to accomplish a repurchase of the full amount of
10,000,000 shares, SFP would have to achieve future financial results which
substantially exceed those accomplished by SFP for the pro forma periods
presented. See the pro forma financial information set forth in the Original
Joint Proxy Statement/Prospectus for information with respect thereto.
SFP anticipates that, as of this time, that at least $50 million for
repurchases would be available under the terms of the Merger Agreement and SFP
Credit Agreements in 1995. However, there can be no assurance that, even if
permitted under the SFP Credit Agreements and the Merger Agreement, SFP will
repurchase shares of SFP Common Stock under the Repurchase Program or, if it
does, the amount, timing or prices of any such repurchase, all of which will be
in the sole discretion of SFP.
Additional Financial Considerations. As more fully set forth in the Original
Joint Proxy Statement/Prospectus, in their application to the ICC for approval
of the merger, BNI and SFP state that the Merger is expected to result in an
increase in operating income of approximately $560 million per year, most of
which will be achieved in the first three years following consummation of the
Merger.
There can be no assurance that these potential benefits will be realized or
that the ICC will not impose conditions on the operations of the merged entity
that will affect its ability to fully achieve any one or more of these
benefits. Moreover, in order to achieve the increases in operating income
mentioned above, it is expected that certain nonrecurring cash costs would be
incurred, which would include relocation, employee separation and retraining
and capital improvement costs. The ICC application states that those costs are
approximately $350 million, a substantial portion of which will be incurred
during the first year following consummation of the Merger. Additionally, the
expected increase in operating income does not include the noncash effects of
applying purchase accounting, which will reduce operating income. A more
detailed description of what BNI and SFP have stated in the ICC application, as
well as some important caveats about this information, is provided at pages 88
through 90 of the Original Joint Proxy Statement/Prospectus.
MARKET PRICES
On January 24, 1995, the closing prices of BNI Common Stock and SFP Common
Stock as reported in The Wall Street Journal were $50 per share and $18 per
share, respectively.
BNI and SFP stockholders are urged to obtain current market quotations for
the BNI Common Stock and the SFP Common Stock in connection with voting their
shares.
13
<PAGE>
CERTAIN ADDITIONAL INFORMATION
Litigation. On January 18, 1995, UPC filed with the Delaware Chancery Court
a motion seeking leave to file a Second Amended and Supplemental Complaint. The
Second Amended and Supplemental Complaint that is the subject of UPC's motion
proposes to add allegations based on certain events occurring after UPC filed
its First Amended and Supplemental Complaint. In particular, the Second Amended
and Supplemental Complaint seeks to add allegations that UPC's January 17, 1995
revised tender offer is purportedly superior to the proposed SFP-BNI merger,
that SFP and BNI's proposed purchase of approximately 33 percent of SFP's
shares threatens to irreparably harm SFP's stockholders, that SFP is
purportedly "for sale" and that SFP's directors have breached their fiduciary
duties to SFP and its stockholders by purportedly refusing to negotiate with
UPC on a "fair and equal basis" regarding UPC's tender offer and merger
proposal, by adopting on November 28, 1994 and purportedly threatening to
employ the SFP Shareholder Rights Plan and by agreeing to a purportedly
excessive termination fee and expense reimbursement provision payable to BNI
under certain conditions if the proposed SFP-BNI merge is not consummated, all
of which purportedly constitutes a course of conduct intended to improperly
coerce SFP stockholders to favor the proposed SFP-BNI merger. The Second
Amended and Supplemental Complaint further proposes to allege that BNI
purportedly has aided and abetted SFP's directors in these alleged breaches by
insisting on and agreeing to the termination fee and expense reimbursement
provisions. The Second Amended and Supplemental Complaint proposes to seek, as
additional relief to that requested in its First Amended and Supplemental
Complaint, a mandatory injunction requiring SFP to adopt "fair and equitable"
procedures for the acceptance and consideration of competing bids for SFP, an
injunction against the operation of the SFP Shareholder Rights Plan or,
alternatively, requiring SFP's directors to redeem the shareholder rights or
render them inapplicable or unenforceable to UPC's tender offer and merger
proposal, an injunction against BNI from purportedly aiding and abetting SFP's
directors' alleged breaches of their fiduciary duties and a declaration that
the termination fee and expense reimbursement provisions of the SFP-BNI Merger
Agreement are invalid and unenforceable. UPC's motion for leave to file the
Second Amended and Supplemental Complaint is currently pending before the
Chancery Court. BNI, SFP and SFP's directors believe that the Second Amended
and Supplemental Complaint is meritless and intend to oppose it vigorously.
SFP Rights Plan. On January 24, 1995, SFP's Board of Directors amended the
Rights Agreement dated as of November 28, 1994 between SFP and the Rights Agent
party to the Rights Agreement. Prior to the Rights Plan Amendment, if any
person (other than SFP, its affiliates or any person receiving newly-issued
shares of SFP Common Stock directly from SFP) were to become the beneficial
owner of 10% (the "Flip-In Percentage") or more of the then outstanding shares
of Common Stock, each holder of a Right would thereafter have the right to
receive, upon exercise at the then current exercise price of the Right, SFP
Common Stock (or, in certain circumstances, cash, property or other securities
of SFP) having a value equal to two times the exercise price of the Right.
Among other amendments, the Rights Plan Amendment increased the Flip-In
Percentage to 15%. The SFP Rights Agreement does not apply to any acquisition
of shares of SFP Common Stock by BNI pursuant to the terms of the Merger
Agreement and consequently the provisions of the Shareholder Rights Plan would
not apply to the Offer of the Merger. A more detailed description of the
Shareholder Rights Plan is provided under "Rights Plans-SFP Rights Plan" in the
Original Joint Proxy Statement/Prospectus.
Regulatory Developments. A number of proposals are under discussion by
various committees of the United States Congress which in general contemplate
the termination of funding for the ICC and the transfer of its functions to
other Federal agencies. The proposals contemplate transfer of the ICC's
authority over rail mergers to the Department of Transportation or Department
of Justice. BNI and SFP believe that it is likely the time period for obtaining
merger approval will be shorter under these proposals than under the present
regulatory framework. There can be no assurance that any such proposal will be
enacted or, if enacted, what effect any such proposal might have on the timing
or eventual approval of the Merger.
14
<PAGE>
LEGAL MATTERS
Under the Merger Agreement, after approval of the Merger by SFP's
stockholders, SFP's Board will no longer have any right to negotiate with or
provide confidential information to third parties, and SFP will not be able to
accept a better offer for a business combination. BNI's Board is subject to the
same restrictions after approval of the Merger by its stockholders. The
Chancery Court has noted that it retains the power to grant relief sought by
any of the plaintiffs, regardless of SFP stockholder approval at the SFP
Special Meeting. See "Other Matters--Certain Pending Litigation" in the
Original Joint Proxy Statement/Prospectus. However, SFP believes that a fully-
informed stockholder vote in favor of the Merger may preclude relief for the
plaintiffs.
15
<PAGE>
APPENDIX A
AMENDMENT NO. 3
TO
AGREEMENT AND PLAN OF MERGER
<PAGE>
AMENDMENT NO. 3
TO
AGREEMENT AND PLAN OF MERGER
AMENDMENT NO. 3 dated as of January 24, 1995 (this "Amendment") between
Burlington Northern Inc., a Delaware corporation ("BNI"), and Santa Fe Pacific
Corporation, a Delaware corporation ("SFP").
WHEREAS, BNI and SFP have previously entered into that certain Agreement and
Plan of Merger dated as of June 29, 1994 between BNI and SFP, as amended by the
Amendment thereto dated as of October 26, 1994 and Amendment No. 2 thereto
dated as of December 18, 1994 (as amended, the "Merger Agreement"); and
WHEREAS, the respective Boards of Directors of BNI and SFP have determined
that it is in the best interests of BNI or SFP, as the case may be, and its
respective stockholders to amend the Merger Agreement as hereinafter set forth
and have duly approved this Amendment and authorized its execution and
delivery.
NOW, THEREFORE, the parties hereto agree as follows:
1. All capitalized terms used herein, unless otherwise defined herein,
shall have the meanings given them in the Merger Agreement, and each
reference in the Merger Agreement to "this Agreement", "hereof", "herein",
"hereunder" or "hereby" and each other similar reference shall be deemed to
refer to the Merger Agreement as amended hereby. All references to the
Merger Agreement in any other agreement between BNI and SFP relating to the
transactions contemplated by the Merger Agreement shall be deemed to refer
to the Merger Agreement as amended hereby.
2. Section 1.2(a)(i) of the Merger Agreement is hereby amended by
replacing subparagraph (a)(i) of such section in its entirety with the
following:
(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 as
otherwise provided in Section 1.2(a)(ii) below, be converted into a
fraction of a share of common stock, no par value (the "BNI Common
Stock"), of BNI (x) the numerator of which is 0.40, and (y) the
denominator of which is equal to (A) the number of shares of SFP
Common Stock outstanding (but excluding treasury stock and SFP
Common Stock beneficially owned by BNI or acquired in the Offer by
BNI) immediately prior to the Effective Time divided by (B) an
amount equal to the sum of (i) the number of shares of SFP Common
Stock outstanding (but excluding treasury stock and SFP Common Stock
beneficially owned by BNI or acquired in the Offer by BNI)
immediately prior to the Effective Time, and (ii) the aggregate
number of shares of SFP Common Stock repurchased by SFP, as
permitted in Section 5.1(j) hereof (such fraction being defined
herein as the "Exchange Ratio"), provided that in no event may the
Exchange Ratio exceed 0.4347; and
3. Section 1.8(c) of the Merger Agreement is hereby amended by replacing
subparagraph (c) of such section in its entirety with the following:
(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 a fraction of a share of common stock of BNSF, $.01 par value per
share (the "BNSF Common Stock"), (x) the numerator of which is 0.40 and (y)
the denominator of which is equal to (A) the number of shares of SFP Common
Stock outstanding (but excluding treasury stock and SFP Common Stock
beneficially owned by BNI or acquired in the Offer by BNI) immediately
prior to such Effective Time divided by (B) an amount equal to the sum of
(a) the number of shares of SFP Common Stock outstanding (but excluding
treasury stock and SFP Common Stock beneficially owned
A-1
<PAGE>
by BNI or acquired in the Offer by BNI) immediately prior to such Effective
Time and (b) the aggregate number of shares of SFP Common Stock repurchased
by SFP, as permitted in Section 5.1(j) hereof, provided that the fraction
determined pursuant to this clause (i) shall not exceed 0.4347, (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, and (iii) each share of BNSF
Common Stock held by BNI or SFP shall be cancelled. The numbers calculated
pursuant to this subparagraph (c) shall be adjusted as provided in Section
1.5 hereof if any of the events described in Section 1.5 occur.
4. Section 1.8(g) of the Merger Agreement is hereby amended by replacing
subparagraph (g) of such section in its entirety with the following:
(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(g), 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 interests to which
all holders of SFP Common Stock are 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.
5. Section 5.1 of the Merger Agreement is hereby amended to add a new
subsection (j), which shall provide as follows:
(j) Notwithstanding anything to the contrary in this Agreement, SFP
will be permitted to repurchase up to 10,000,000 shares of SFP Common
Stock at any time (or from time to time as long as the aggregate of
such shares repurchased does not exceed 10,000,000) between the time
shares of SFP Common Stock are purchased pursuant to the Offer and the
Effective Time, if, but only if, (a) such repurchase is permitted by
the credit agreements referred to in clause (ii) of subparagraph (f)
above entered into by SFP in connection with the Offer, as such
agreements are in effect at the time such Offer is consummated (whether
or not such agreements are in effect at the time of any such repurchase
and without regard to any waiver of any provision thereof) and (b) for
any purchases after March 31, 1995, SFP's total debt (which shall equal
the sum of short-term debt plus current maturities of long-term debt
plus long-term debt, all as shown on the consolidated balance sheet of
SFP and its consolidated subsidiaries in accordance with generally
accepted accounting principles), as of the most recent quarter-end
prior to such repurchase, does not exceed the levels set forth in Annex
A hereto and cash capital expenditures on a cumulative basis from
January 1, 1995, as of the most recent quarter-end prior to such
repurchase, are at least at the level shown in Annex A.
6. This Amendment shall be construed in accordance with and governed by
the law of the State of Delaware (without regard to principles of conflict
of laws).
A-2
<PAGE>
7. This Amendment 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 Amendment shall
become effective when each party hereto shall have received counterparts
hereof signed by all of the other parties hereto.
8. Except as expressly amended hereby, the Merger Agreement shall remain
in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment 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
A-3
<PAGE>
ANNEX A
<TABLE>
<CAPTION>
CUMULATIVE
CASH CAPITAL DEBT
EXPENDITURES BALANCE AT
1995 AT QUARTER-END QUARTER-END
---- -------------- -----------
(IN MILLIONS)
<S> <C> <C>
1st Quarter................................... 78 2,160
2nd Quarter................................... 194 2,140
3rd Quarter................................... 301 2,125
4th Quarter................................... 360 2,045
<CAPTION>
1996
----
<S> <C> <C>
1st Quarter................................... 423 2,101
2nd Quarter................................... 533 2,092
3rd Quarter................................... 628 2,073
4th Quarter................................... 675 2,017
<CAPTION>
1997
----
<S> <C> <C>
1st Quarter................................... 738 2,071
2nd Quarter................................... 848 2,015
3rd Quarter................................... 943 1,997
4th Quarter................................... 990 1,850
</TABLE>
A-4
<PAGE>
APPENDIX B
OPINION OF LAZARD FRERES & CO.
<PAGE>
[LAZARD FRERES & CO. LETTERHEAD]
January 25, 1995
The Board of Directors
Burlington Northern Inc.
3800 Continental Plaza
777 Main Street
Fort Worth, Texas 76102
Dear Members of the Board:
We understand that Burlington Northern Inc. ("BN") and Santa Fe Pacific
Corporation ("SF") have entered into an Agreement and Plan of Merger dated as
of June 29, 1994, as amended by the Amendment thereto dated as of October 26,
1994, the Amendment thereto dated as of December 18, 1994 and the Amendment
thereto dated as of January 24, 1995 (as so amended, the "Agreement"), pursuant
to which, among other things, SF shall be merged with and into BN, with BN as
the surviving corporation (the "Merger"). The Agreement required each of SF and
BN to commence tender offers (the "Tender Offers") at $20 per share for an
aggregate of 63 million of the outstanding shares of common stock, par value
$1.00 per share (the "SF Common Stock"), of SF, with SF tendering for 38
million such shares and BN tendering for 25 million such shares (the "BN Tender
Offer"). The Tender Offers are being made pursuant to an Offer to Purchase
dated December 23, 1994, as supplemented on January 13, 1995 (the "Offer to
Purchase"). The Agreement permits SF to repurchase in the open market up to 10
million shares of SF Common Stock if certain conditions are satisfied (the
"Repurchase Program"). The Agreement also provides that, upon consummation of
the Merger, each share of SF Common Stock outstanding immediately prior to the
effective time of the Merger (but excluding treasury stock and SF Common Stock
beneficially owned by BN or acquired in the BN Tender Offer), shall be
converted into 0.40 (the "Exchange Ratio") of a share of common stock, no par
value (the "BN Common Stock") of BN, which Exchange Ratio will be adjusted
upwards (to a maximum Exchange Ratio of 0.4347 shares of BN Common Stock per
share of SF Common Stock) if SF purchases shares of SF Common Stock in the
Repurchase Program, with the effect that the same aggregate number of shares of
BN Common Stock will be issued to holders of SF Common Stock in the Merger
regardless of whether SF Common Stock is repurchased under the Repurchase
Program. We understand that the closing of the Tender Offers by BN and SF are
conditioned on BN's and SF's stockholders approval of the Merger. The terms and
conditions of the Merger are more fully set forth in the Agreement and the
terms and conditions of the Tender Offers are more fully set forth in the Offer
to Purchase.
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of BN Common Stock of the Exchange Ratio and the
consideration to be paid in the BN Tender Offer, when taken as a whole.
Lazard Freres & Co. has acted as financial advisor to BN in connection with
this transaction (including acting as the dealer manager in the BN Tender
Offer) and will receive a fee for our services, a substantial portion of which
is contingent upon the closing of the transaction. In connection with this
opinion, we have:
(i) reviewed the terms and conditions of the Agreement, of the Offer to
Purchase and the supplement thereto;
(ii) analyzed certain historical business and financial information
relating to BN and SF, including the Annual Reports to Stockholders and
Annual Reports on Form 10-K of BN and SF for each of the fiscal years ended
December 31, 1989 through 1993 (and any amendments thereto), Quarterly
Reports on Form 10-Q of BN and SF for the quarters ended March 31, June 30
and September 30 for each of
B-1
<PAGE>
the same fiscal years and for the quarters ended March 31, June 30 and
September 30, 1994 (and any amendments thereto), Current Reports on Form 8-
K of BN dated June 29, October 6, October 26, November 18, December 18,
1994 and January 19, 1995 and Current Reports on Form 8-K of SF dated June
29, August 3, October 5, October 19, October 28, November 2, November 28,
1994 and January 19, 1995 (and any amendments thereto);
(iii) reviewed certain financial forecasts and other data provided to us
by BN and SF relating to their respective businesses;
(iv) held discussions with members of the senior management of BN and SF
with respect to the businesses and prospects of BN and SF, respectively,
the strategic objectives of each, and possible benefits which might be
realized following the Merger;
(v) reviewed public information with respect to certain other companies
in lines of businesses we believe to be comparable to the businesses of BN
and SF;
(vi) reviewed the financial terms of certain recent business combinations
involving companies in lines of businesses we believe to be comparable to
those of BN and SF, and in other industries generally;
(vii) analyzed the pro forma financial impact of the Tender Offers and
the Merger on BN and SF;
(viii) reviewed the historical stock prices and trading volumes of the BN
Common Stock and SF Common Stock;
(ix) reviewed the Joint Proxy Statement/Prospectus dated October 12,
1994, the Supplemental Joint Proxy Statement/Prospectus dated October 28,
1994, the Joint Proxy Statement/Prospectus dated January 13, 1995 and the
Supplemental Joint Proxy Materials dated the date hereof; and
(x) conducted such other financial studies, analyses and investigations
as we deemed appropriate.
We have relied upon the accuracy and completeness of the financial and other
information provided by BN and SF to us and have not assumed any responsibility
for independent verification of such information or any independent valuation
or appraisal of any of the assets of BN or SF. With respect to the financial
forecasts referred to above, we have assumed that they have been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the respective managements of BN and SF as to the future financial
performance of their businesses. Further, our opinion is necessarily based on
economic, monetary, market and other conditions as in effect on, and the
information made available to us as of, the date hereof.
In rendering our opinion, we have also assumed that obtaining the necessary
regulatory and governmental approvals for the Merger, including approval of the
Interstate Commerce Commission, may significantly delay the consummation of the
Merger, and that, in the course of obtaining such approvals, no restriction
will be imposed that will have a material adverse effect on the contemplated
benefits of the Merger to BN.
Our engagement and the opinion expressed herein are solely for the benefit of
BN's Board of Directors and are not on behalf of, and are not intended to
confer rights or remedies upon, SF, any stockholders of BN or SF or any other
person other than BN's Board of Directors. It is understood that, except for
inclusion in a proxy statement relating to the Merger, this letter may not be
disclosed or otherwise referred to without our prior written consent, except as
may otherwise be required by law or by a court of competent jurisdiction.
Based on and subject to the foregoing and such other factors as we deem
relevant, we are of the opinion that, as of the date hereof, the Exchange Ratio
and the consideration to be paid by BN in the BN Tender Offer, when taken as a
whole, is fair to the holders of BN Common Stock from a financial point of
view.
Very truly yours,
/s/ Lazard Freres & Co.
------------------------
Lazard Freres & Co.
B-2
<PAGE>
APPENDIX C
OPINION OF GOLDMAN, SACHS & CO.
<PAGE>
[Goldman, Sachs & Co. Letterhead & Logo]
PERSONAL AND CONFIDENTIAL
January 25, 1995
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 January 24, 1995,
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 shares of
common stock, with no par value, of Burlington Northern Inc. ("BNI Common
Stock") in accordance with the Exchange Ratio provided for in the Agreement.
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 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
C-1
<PAGE>
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, as
amended and supplemented to the date hereof; 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 of 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.
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,
/s/ Goldman, Sachs & Co.
- ------------------------
Goldman, Sachs & Co.
C-2
<PAGE>
BURLINGTON
NORTHERN
INC.
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT NOTICE OF
Your management will appreciate SPECIAL MEETING OF
the prompt return of your signed STOCKHOLDERS
proxy so the shares you own will AND
be represented at the Special PROXY STATEMENT
Meeting of Stockholders.
- --------------------------------------------------------------------------------
To be held at
Burlington Northern Railroad Company
3017 Lou Menk Drive
Fort Worth, Texas
February 7, 1995
10:00 a.m. Fort Worth Time
<PAGE>
SANTA FE
PACIFIC
CORPORATION
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT NOTICE OF
Your management will appreciate SPECIAL MEETING OF
the prompt return of your signed STOCKHOLDERS
proxy so the shares you own will AND
be represented at the Special PROXY STATEMENT
Meeting of Stockholders.
- --------------------------------------------------------------------------------
To be held at
Arlington Park Hilton Conference Center
3400 West Euclid Avenue
Arlington Heights, Illinois
February 7, 1995
3:00 p.m. Chicago Time
