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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark
One)
(X) Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarter Ended September 30, 1994.
( ) Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to
Commission File No. 33-30874
CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY
Delaware Corporation - I.R.S. No. 13-3526817
165 North Canal Street
Chicago, Illinois 60606
Registrant's Telephone Number (312) 559-6156
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports); and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Chicago and North Western Transportation Company has the following common
shares, par value $.01 per share, outstanding at October 15, 1994:
Common 44,059,760<PAGE>
2
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Introductory Statement
The following (a) condensed balance sheet as of December 31, 1993, which has
been derived from audited financial statements, and (b) unaudited, interim
financial statements included herein have been prepared by the Company
pursuant to the published rules and regulations of the Securities and Exchange
Commission and, in the case of interim financial statements, in the opinion of
management, reflect all adjustments (which adjustments consist only of normal
recurring items) necessary to present fairly the results of operations of the
Company. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the information
presented not misleading. These financial statements should be read in
conjunction with the financial statements and the notes thereto included in
the Company's 1993 Annual Report on Form 10-K.<PAGE>
3
CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
Millions of dollars except for per share amounts
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
Operating revenues $290.7 $262.9 $847.2 $774.6
Operating expenses 222.8 213.7 677.8 627.1
Operating income $ 67.9 $ 49.2 $169.4 $147.5
Other income, net 1.2 1.4 6.9 9.2
Interest expense 25.4 26.5 72.1 81.4
Income before income taxes $ 43.7 $ 24.1 $104.2 $ 75.3
Income taxes:
Currently payable $ 0.8 $ 0.4 $ 1.2 $ 1.0
Deferred 15.8 17.5 38.4 34.8
Total income taxes $ 16.6 $ 17.9 $ 39.6 $ 35.8
Income before extraordinary item $ 27.1 $ 6.2 $ 64.6 $ 39.5
Extraordinary loss, net - (10.8) - (10.8)
Net income (loss) $ 27.1 $ (4.6) $ 64.6 $ 28.7
Earnings (loss) per common share:
Before extraordinary item $ 0.60 $ 0.14 $ 1.43 $ 0.90
Extraordinary item - (0.24) - (0.24)
Total $ 0.60 $(0.10) $ 1.43 $ 0.66
Shares used in earnings per
share computation (thousands) 45,109 44,524 45,108 43,824
See accompanying notes to condensed consolidated financial statements.<PAGE>
4
CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
September 30, December 31,
1994 1993
(millions of dollars)
Current assets:
Cash and temporary cash investments $ 103.4 $ 70.9
Accounts receivable, net 136.3 140.9
Materials and supplies, at average cost 38.4 27.7
Prepaid expenses and other 11.6 9.3
Total current assets $ 289.7 $ 248.8
Property:
Road $2,020.1 $1,938.6
Equipment 147.3 155.3
Accumulated depreciation (319.1) (273.1)
Net property $1,848.3 $1,820.8
Other assets $ 65.3 $ 66.3
Total assets $2,203.3 $2,135.9
See accompanying notes to condensed consolidated financial statements.<PAGE>
5
CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, December 31,
1994 1993
(millions of dollars)
Current liabilities:
Accounts payable and accrued expenses $ 173.0 $ 179.4
Payroll and vacation pay 42.2 35.3
Interest 13.0 10.9
Taxes 20.3 16.2
Long-term debt due within one year 85.0 58.9
Total current liabilities $ 333.5 $ 300.7
Casualties and environmental reserve $ 81.7 $ 78.3
Other liabilities 92.4 84.3
Deferred income taxes 339.1 303.6
Long-term debt, excluding amounts due
within one year:
C&NW Railway $ 670.3 $ 730.4
WRPI 389.9 412.4
Total long-term debt $1,060.2 $1,142.8
Stockholders' equity:
Common stock, par value $.01 per share,
authorized 250,000,000 shares, issued
44,085,239 shares and outstanding
44,059,760 shares (of which 12,835,304
are non-voting) at September 30, 1994 $ 0.4 $ 0.4
Capital surplus 543.1 537.5
Retained income (247.1) (311.7)
$ 296.4 $ 226.2
Total liabilities and stockholders' equity $2,203.3 $2,135.9
See accompanying notes to condensed consolidated financial statements.<PAGE>
6
CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended
September 30,
1994 1993
(millions of dollars)
Cash flow from operating activities:
Net income $ 64.6 $ 28.7
Items not affecting cash flow from
operating activities:
Depreciation 55.2 51.3
Amortization of debt cost 5.4 6.4
Gain from sales of property, net (0.9) (4.0)
Deferred income taxes 38.4 34.8
Extraordinary item, net - 10.8
Cash provided from operating activities
before changes in assets and liabilities $162.7 $128.0
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 4.6 (11.0)
(Increase) decrease in other current assets
except cash (13.0) (5.5)
Increase (decrease) in accounts payable and accruals 6.7 14.8
Increase (decrease) in noncurrent reserves for
special charges (5.7) (7.0)
Other, net 13.0 (6.5)
Net cash flow from (used for) operating activities $168.3 $112.8
Cash flow from financing activities:
Proceeds from sale of common stock $ 2.7 $ 25.9
Net proceeds from debt financing 0.1 0.6
Payments on debt (40.9) (44.3)
Prepayment on long-term debt (16.0) (6.9)
Net cash from (used for) financing activities $(54.1) $(24.7)
Cash flow from investing activities:
Additions to property $(91.9) $(71.7)
Proceeds from property dispositions 12.3 7.1
Other, net (2.1) 1.8
Net cash flow from (used for) investing activities $(81.7) $(62.8)
Increase (decrease) in cash and temporary
cash investments $ 32.5 $ 25.3
Cash and temporary cash investments:
Beginning of period 70.9 44.2
End of period $103.4 $ 69.5
See accompanying notes to condensed consolidated financial statements.<PAGE>
7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1) Other income, net consists of the following:
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
(millions of dollars)
Interest income $ 1.2 $ 0.7 $ 2.7 $ 1.8
Gain from sales of property
and investment, net 0.9 0.3 0.9 5.6
Rents from property not
used in operations 0.6 1.0 2.2 2.9
Financing commitment and
amendment fees (1.6) (0.2) (1.8) (0.4)
Proceeds from note receivable
previously written-off - - 3.3 -
Other, net 0.1 (0.4) (0.4) (0.7)
$ 1.2 $ 1.4 $ 6.9 $ 9.2
2) Loan Agreement Amendments.
During the third quarter, the Company's loan agreements were amended to
eliminate the requirement to make accelerated debt payments based on
excess cash flows as defined in the loan agreements and to eliminate the
covenant limiting capital expenditures. WRPI's loan agreement was
amended, eliminating the requirement to make accelerated debt payments
based on cash flows for the period April 1, 1994 through December 31, 1996
and fixing the interest rate margin at its current level, thereby
eliminating future scheduled margin increases. The Company paid fees of
$1.4 million in connection with these amendments, which were charged
against other income.
3) Additional disclosures to Condensed Consolidated Statement of Cash Flows
(millions of dollars) are as follows:
The following cash payments were made in the periods shown:
Nine Months Ended
September 30.
1994 1993
Interest $64.2 $79.5
Income taxes 1.7 0.8
The Company considers all short-term investments which have an original
maturity of less than ninety days as cash equivalents.<PAGE>
8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Cont'd.)
4) Contingent liabilities.
The Company's operations are subject to a variety of federal, state and
local environmental and pollution control statutes and regulations. The
Company has been named as a potentially responsible party ("PRP") in four
proceedings under the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), and in five state
Superfund matters. The Company is also a defendant in one private CERCLA
cost recovery action. The current estimate of the total cost of
remediation for these proceedings to all PRPs aggregates approximately $84
million. In determining its reserves, the Company has assumed that other
PRPs will pay appropriate shares of remediation obligations, except when
the Company is aware other PRP's are incapable of doing so.
Additionally, the Company has environmental exposure from current and
former railroad operating properties, fueling facilities, leased
properties and pending litigation and enforcement actions. The Company's
environmental exposure is reevaluated periodically. At September 30, the
Company's total reserve for environmental liabilities was $30 million.
5) Extraordinary item.
The 1993 extraordinary loss resulted from the refinancing of a portion of
the Company's loan agreements. The pretax loss was $17.4 million and the
related income tax benefit was $6.6 million.<PAGE>
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - 1994 COMPARED TO 1993
OPERATING REVENUES
Net freight revenues were $262.9 million in the third quarter of 1994, an
increase of $29.0 million, or 12.4%. The total number of loads handled in the
third quarter of 1994 was 654,418, an increase of 59,193 loads, or 9.9%. Net
freight revenues were $765.5 million for the nine months ended September 30,
1994, an increase of $74.9 million or 10.8%. The total number of loads
handled in the nine months ended September 30, 1994 was 1,915,319, an increase
of 181,415 loads or 10.5%. The balance of the operating revenues resulted
from the Company's commuter and other operations.
Freight Revenue Comparison by Business Group (millions of dollars)
Three Months Ended Nine Months Ended
September 30, September 30,
Percent Percent
1994 1993 Change 1994 1993 Change
Energy $ 89.0 $ 78.7 13.1 % $265.2 $228.3 16.2 %
Agricultural Commodities 52.3 46.2 13.2 142.1 137.7 3.2
Intermodal 32.4 30.8 5.2 92.6 85.0 8.9
Automotive, Steel
and Chemicals 50.9 43.3 17.6 158.2 140.0 13.0
Consumer Products 38.3 34.9 9.7 107.4 99.6 7.8
Freight revenues $262.9 $233.9 12.4 $765.5 $690.6 10.8
Commuter 20.6 21.2 (2.8) 61.0 65.0 (6.2)
Other 7.2 7.8 (7.7) 20.7 19.0 8.9
Total operating revenues $290.7 $262.9 10.6 $847.2 $774.6 9.4
Load Comparison by Business Group (loads in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
Percent Percent
1994 1993 Change 1994 1993 Change
Energy 225.0 197.1 14.2 % 681.7 564.9 20.7 %
Agricultural Commodities 86.0 77.0 11.7 236.4 235.6 0.3
Intermodal 198.2 189.5 4.6 563.4 523.9 7.5
Automotive, Steel
and Chemicals 85.5 73.8 15.9 270.3 247.6 9.2
Consumer Products 59.7 57.8 3.3 163.5 161.9 1.0
Total loads 654.4 595.2 9.9 1,915.3 1,733.9 10.5
<PAGE>
10
OPERATING REVENUES - (Cont'd.)
ENERGY--Volume and revenues increased for the third quarter and nine months
because of increased shipments of coal originating in the southern Powder
River Basin in Wyoming. Volume increases were due to new contracts and
additional volume to existing customers. Western coal shipments increased 15%
and 22% for the quarter and nine months, respectively, and core railroad coal
shipments increased 24% and 20% for the quarter and nine months, respectively.
Revenues increased less than volume due to new and renewed contracts at rates
lower than those in place in 1993. Coal shipments for the remainder of the
year are expected to increase over 1993 levels. Western Coal growth capacity
is being enhanced through a $45 million capital program to increase the
capacity and improve operations of the Company's Western Railroad Properties,
Incorporated (WRPI) coal hauling line. This program includes the construction
of an additional 20.4 miles of track on WRPI's joint line and 24.8 miles on
the connector line, the majority of which will be completed by December, 1994.
This expansion is necessary to meet the increasing demand for low-sulfur coal
from the southern Powder River Basin.
AGRICULTURAL COMMODITIES--Volume and revenues increased for the third quarter
as shipments of raw grains increased 12% due to overhead movements of wheat
and barley to feeder markets; potash and sulfur shipments increased due to
earlier than expected fertilizer sales and traffic gains realized due to a
strike against a competing railroad (the "Soo Strike"). Volume and revenues
increased for the nine months due to the increases in fertilizer shipments.
Revenue increases were greater than volume increases due to changes in the
traffic mix. Traffic for the remainder of 1994 is expected to remain flat
compared to 1993 levels.
INTERMODAL--Volume and revenues for the third quarter and nine months
increased due to increased traffic from existing international steamship and
TOFC customers. Revenue increases are higher than volume increases due to a
shift in traffic mix to higher unit revenue TOFC. These increases are
expected to continue for the remainder of 1994.
AUTOMOTIVE, STEEL AND CHEMICALS--Volume and revenues increased for the third
quarter and nine months. Automobile shipments increased 28% for the quarter
and 16% for the nine months due to higher production and market share gains
from General Motors' Janesville, Wisconsin, plant; increased overhead volumes
resulting from an industry-wide increase in automobile production and sales;
and an increase from the resumption of shipments from Chrysler's Belvidere,
Illinois plant, which was closed from May of 1993 until November of 1993 for
retooling. Metallic ore shipments increased for the quarter and nine months
as a result of reduced shipments in 1993 due to a mine workers strike; the
gain in the current quarter was partially offset by the loss of an ore
contract. Third quarter and nine months petroleum and inorganic chemical
shipments increased due to the Soo Strike while industrial chemicals shipments
increased due to increased shipments of soda ash from Wyoming. Revenue
increases were greater than volume increases due to changes in traffic mix.
Traffic for the remainder of 1994 is expected to increase compared to 1993.
CONSUMER PRODUCTS--Volume and revenues increased for the third quarter and
nine months due to increased shipments of potatoes and miscellaneous
manufactured products; additionally, the current quarter benefitted from
increased shipments of lumber and construction materials. Revenue increases
for the quarter and nine months exceeded volume increases due to the use of
additional higher-rated private cars and changes in traffic mix. Traffic for
the remainder of 1994 is expected to increase compared to 1993 levels.<PAGE>
11
OPERATING EXPENSES
Operating expenses were $222.8 million for the quarter, an increase of $9.1
million, or 4.3%. Operating expenses were $677.8 million for the nine months,
an increase of $50.7 million, or 8.1%. The increases for the quarter and nine
months are primarily due to increases in traffic volume and increased
congestion on the Company's WRPI subsidiary. A portion of the Company's 1994
capital expenditures program covers expansion of WRPI's joint line to
alleviate this congestion. The table below compares operating expenses by
category.
Operating Expenses (millions of dollars)
Three Months Ended Nine Months Ended
September 30, September 30,
Percent Percent
1994 1993 Change 1994 1993 Change
Compensation and benefits $108.6 $100.8 7.7 % $313.1 $293.3 6.8 %
Diesel fuel 19.7 15.7 25.5 63.7 50.0 27.4
Material & purchased services 18.5 19.4 (4.6) 64.7 59.4 8.9
Hire of freight equipment 18.1 15.6 16.0 55.9 46.9 19.2
Other rents 19.6 17.9 9.5 56.1 53.6 4.7
Depreciation 18.3 16.9 8.3 55.2 51.2 7.8
Casualties 15.9 10.3 54.4 35.7 28.7 24.4
Other* 4.1 12.1 (66.1) 33.4 39.0 (14.4)
Special charge - 5.0 N/M - 5.0 N/M
Total expenses $222.8 $213.7 4.3 $677.8 $627.1 8.1
*Other includes property taxes, utilities, vehicle operating costs, FRA and
railroad association fees and other general expenses.
Compensation and benefits expense increased for the quarter and nine months
due to increased overtime and new hires for train and engine service to handle
increased volume and WRPI congestion, training costs for new personnel, and
increased motive power repairs. Fringe benefit costs increased compared with
1993 due to an increase in the health and welfare insurance rate, and
increased profit sharing expense. Compensation and benefits expense as a
percentage of operating revenues was 37.4% in the third quarter of 1994
compared with 38.3% in 1993 and 37.0% for the nine months ended September 30,
1994 compared with 37.9% in 1993.
Diesel fuel expense for the third quarter increased due to a 16% increase in
consumption related to the increase in traffic and congestion on WRPI and a 8%
increase in the average price per gallon. Diesel fuel expense for the nine
months increased due to a 20% increase in consumption related to the increase
in traffic, WRPI congestion and severe winter weather and a 7% increase in the
average price per gallon.
Material and purchased services for the third quarter decreased as a result of
reduced expenses related to capital projects. Material and purchased services
for the nine months increased due to decreased car repair billings related to
severe winter weather, increased car repair billings from foreign lines,
increased crew-related costs and intermodal contractor fees and the first
quarter correction of a prior period error, partially offset by reduced
expenses related to capital projects.<PAGE>
12
OPERATING EXPENSES - (Cont'd.)
Hire of freight equipment for the third quarter and nine months increased due
to increased traffic, WRPI congestion, and new equipment leases.
Additionally, this expense increased for the nine months due to severe winter
weather.
Other rents increased for the third quarter and nine months due to new
locomotive leases, partially offset by reduced computer rentals and lower WRPI
contingent rent.
Depreciation expense increased for the third quarter and nine months due to
increased traffic levels on WRPI, where track structure components are
depreciated on the unit of production method, and increases in the depreciable
base due to property additions.
Casualty expense, which includes personal injury, environmental and insurance
expense, increased for the quarter and nine months due to a $5.0 million
charge for a major loss and damage claim and increased damage repairs to
foreign line cars, partially offset by a decrease in personal injury expense.
The increase in casualty expense for the nine months was also attributable to
increased occupational hazard claims, partially offset by a credit resulting
from a favorable settlement of a personal injury case in 1994.
Other expenses decreased for the quarter and nine months due to a $9.8 million
credit related to a revision in estimated revenue reserve requirements,
partially offset for the nine months by a $2.8 million increase in estimated
medical benefits payable to retired management personnel.
The Company has offered an early retirement/severance program to management
employees, which will result in a special charge to fourth quarter earnings of
approximately $4 million, pretax.
OTHER INCOME, NET
Other income, net, decreased for the third quarter due to fees of $1.4 million
paid in connection with amendments to the Company's loan agreements, partially
offset by increased interest income and land sale gains. Other income
decreased for the nine months due to a gain of $5.3 million related to sales
of a telecommunications easement and other land in 1993 which did not recur in
1994 and $1.4 million of loan agreement amendment fees. These decreases were
partially offset by a $3.3 million gain on a previously written off note
receivable and increased interest income. See Note 1 to Condensed
Consolidated Financial Statements for a summary of other income, net.
INTEREST EXPENSE
Interest expense decreased by $9.3 million for the nine months and $1.1
million for the quarter compared to 1993 due to the Company's refinancing of
the Term and Standby portions of its Debt Facilities in September of 1993 and
lower debt levels, partially offset by increased interest rates.<PAGE>
13
INCOME TAXES
The income tax provision decreased for the third quarter compared to 1993 due
to a $7.1 million provision recorded in 1993 related to the revaluation of
deferred income taxes recorded in prior years due to higher federal corporate
income tax rates, partially offset by increased pretax income. The income tax
provision for nine months increased compared to 1993 due to increased pretax
income, partially offset by the 1993 deferred tax revaluation.
EARNINGS PER SHARE
Earnings per share before extraordinary items for the third quarter of 1994
were $0.60 compared to $0.14 in 1993. Earnings per share before extraordinary
items for the nine months of 1994 were $1.43 compared to $0.90 in 1993.
Earnings per share increases on a percentage basis were less than net income
increases due to an increase in the outstanding shares caused by the issuance
of an additional 1,371,265 shares in connection with a secondary stock
offering in July of 1993 and exercises of management stock options.
LIQUIDITY
At September 30, 1994, cash and temporary cash investments totaled $103.4
million, and the Company's working capital totaled a negative $43.8 million.
The Company has historically been able to operate with negative working
capital due to a higher turnover rate for receivables than accounts payable.
The Company has consolidated indebtedness that is substantial in relation to
its common stockholders' equity. As of September 30, 1994, the Company had
long-term indebtedness, including current maturities, of $1.1 billion and
common stockholders' equity of $296.4 million.
The Company's cash requirements for financing and investing activities through
the end of 1994 are comprised of interest and principal payments under its
loan agreements and capital expenditures. The Company's and WRPI's loan
agreements previously required additional debt payments based on calculations
of excess cash flow as defined in their respective agreements. During the
third quarter, the Company's loan agreements were amended to eliminate the
requirement for such additional payments, and the WRPI loan agreement was
amended to eliminate additional WRPI payments for the period April 1, 1994
through December 31, 1996. These amendments will increase the Company's
ability to internally fund capital expenditures requirements. Such additional
payments made prior to these amendments are reflected as prepayments of long-
term debt on the condensed consolidated statement of cash flows.
The Company believes that its cash flow from operations, together with
approximately $45 million available to it under a revolving credit agreement
will allow it to meet its liquidity and capital expenditure requirements
during the foreseeable future. However, the Company's ability to make
principal and interest payments on its outstanding indebtedness and to comply
with the financial covenants under its loan agreements, is dependent upon the
Company's future performance and business growth, which are subject to
financial, economic, competitive and other factors, many of which are beyond
the Company's control.<PAGE>
14
LIQUIDITY - (Cont'd.)
The loan agreements materially restrict the Company from paying dividends on
or redeeming capital stock.
The Company uses a program of financial derivatives or hedges to limit its
exposure to interest rate and fuel commodity market risks and to comply with
provisions of its debt agreements. The Company uses both swaps and caps in
its interest rate hedging program. Through the end of 1996, under $200
million of indebtedness is unhedged.
The Company uses diesel fuel caps and floors to reduce diesel fuel market
risk. The Company currently uses approximately ten million gallons of fuel
per month for its freight operations. The Company has caps and floors
covering 3.0 million gallons per month and fixed price purchase commitments
covering 6.4 million gallons per month through December, 1994. Additionally,
the Company has collars covering 10.0 million gallons per month for the first
six months of 1995.
CAPITAL AND MAINTENANCE EXPENDITURES
Capital expenditures in the first nine months of 1994 were $91.9 million. A
$155 million capital expenditure program is presently authorized for the
Company in 1994, although some of these expenditures may not be incurred until
1995. The majority of the capital expenditures program covers replacement of
rail, ties, and other track material system-wide, expansion of train handling
capacity from the southern Powder River Basin by WRPI, and construction of new
facilities to serve shippers. The Company has taken delivery of locomotives
and freight cars under operating leases with a cost to lessors of $212 million
in the first nine months of 1994 and expects to acquire additional equipment
under operating leases with a cost to lessors of $71 million during the
remainder of 1994.<PAGE>
15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
JUNKER LANDFILL, HUDSON, WISCONSIN -- During July, 1994, the Company
received notice from the Wisconsin Department of Natural Resources that it has
been identified as a potentially responsible party ("PRP") for having
generated waste that was disposed on at the Junker Landfill in Hudson,
Wisconsin. The Wisconsin Department of Natural Resources ("Wisconsin DNR") is
currently investigating the site and has indicated that it may place the site
on the National Priority List, which would designate it as a Superfund Site.
The Company has joined with other PRP's to negotiate a plan of investigation
and remediation for the site so that it will not be placed on the National
Priority List. It is believed that approximately 700 companies sent waste to
the Junker Landfill and may be designated as PRP's. The best estimate at this
time is that investigation and remediation costs will be approximately $6
million. Management does not believe that the ultimate resolution of this
matter will have a material adverse affect on the financial position or
results of operations.
MOSS-AMERICAN SITE -- In connection with the Moss-American Site in
Milwaukee County, Wisconsin, previously reported in Item 3 of the Company's
1993 Form 10-K, the U.S. Environmental Protection Agency ("U.S. EPA") has
determined that the treatment of contaminated soils in a bio slurry reactor,
as previously specified in the Record of Decision, will not effectively
remediate creosote contaminated soils to levels acceptable to the Agency or
the Wisconsin DNR. Kerr-McGee has undertaken additional investigation of the
site and is negotiating with the Agency to select an appropriate method of
remediation. At this time, with no specified remedy or work plan, the cost of
remediation of the site cannot be estimated. The Company is continuing to
negotiate a settlement with U.S. EPA for its past response costs. Management
continues to believe that the ultimate resolution of this matter will not have
a material adverse affect on the financial position or results of operations
of the Company.
There have been no material changes to other previously reported
litigation.<PAGE>
16
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Number Description
* 4.14 Second Participation and Loan Agreement dated as
of December 20, 1990 among Western Railroad
Properties, Incorporated as Lessee and Citibank,
N.A., not individually but solely as Trustee, as
Lessor, and UP Leasing Corporation, as Beneficial
Owner, and Union Pacific Corporation as
Beneficial Owner Parent, and Chicago and North
Western Transportation Company and CNW
Corporation (subsequently succeeded by Chicago
and North Western Railway Company) and Chemical
Bank as Administrative Agent and Continental
Bank, N.A. and the Long-Term Credit Bank of
Japan, Ltd., Chicago Branch, as Co-Agents, and
Banque Paribas, New York Branch and Manufacturer
Hanover Trust Company as Lead Managers (Exhibit
10.19 to the 1990 10-K).
# 4.14a Amendment dated as of August 26, 1994, to the
Second Participation and Loan Agreement dated as
of December 20, 1990 among Western Railroad
Properties, Incorporated as Lessee and Citibank,
N.A., Trustee under the Trust Agreement, as
Lessor, and UP Leasing Corporation, as Beneficial
Owner, and Union Pacific Corporation, as
Beneficial Owner Parent, and Chicago and North
Western Railway Company, as successor to Chicago
and North Western Transportation Company and CNW
Corporation, and Chemical Bank, as Administrative
Agent and Continental Bank N.A. and The Long-Term
Credit Bank of Japan, Ltd., Chicago Branch, as
Co-Agents, and Banque Paribas, New York Branch,
as Lead Manager.
* 4.16 Credit Agreement among Chicago and North Western
Transportation Company (name subsequently changed
to Chicago and North Western Railway Company),
Chicago and North Western Holdings Corp. (name
subsequently changed to Chicago and North Western
Transportation Company), the Lenders named
therein, Bank of Montreal, as Issuing Bank, the
Co-Agents party thereto and Chemical Bank, as
Agent, dated as of March 27, 1992 (Exhibit 4.16
to the 1992 10-K).<PAGE>
17
Number Description
* 4.16a First Amendment and Waiver dated as of April 7,
1992 to the Credit Agreement dated as of March
27, 1992, among Chicago and North Western
Transportation Company (name subsequently changed
to Chicago and North Western Railway Company),
Chicago and North Western Holdings Corp. (name
subsequently changed to Chicago and North Western
Transportation Company), the Lenders named
therein, Bank of Montreal, as Issuing Bank, the
Co-Agents party thereto and Chemical Bank, as
Agent (Exhibit 4.16a to the 1992 10-K).
* 4.16b Amendment dated as of September 10, 1993 to the
Credit Agreement dated as of March 27, 1992, as
previously amended, among Chicago and North
Western Transportation Company (name subsequently
changed to Chicago and North Western Railway
Company), Chicago and North Western Holdings
Corp. (name subsequently changed to Chicago and
North Western Transportation Company), the
Lenders named therein, Bank of Montreal, as
Issuing Bank, the Co-Agents party thereto and
Chemical Bank, as Agent (Exhibit 4.16b to the
1993 10-K).
# 4.16d Amendment dated as of August 26, 1994 to the
Credit Agreement dated as of March 27, 1992, as
previously amended, among Chicago and North
Western Railway Company (formerly Chicago and
North Western Transportation Company), Chicago
and North Western Transportation Company
(formerly Chicago and North Western Holdings
Corp.), the Lenders named therein, Bank of
Montreal, as Issuing Bank, the Co-Agents party
thereto and Chemical Bank, as Agent.
* 4.17 Senior Secured Note Purchase Agreement among
Chicago and North Western Transportation Company
(name subsequently changed to Chicago and North
Western Railway Company), Chicago and North
Western Holdings Corp. (name subsequently changed
to Chicago and North Western Transportation
Company), and the Purchasers listed on Schedule I
thereto dated March 27, 1992 (Exhibit 4.17 to the
1992 10-K).<PAGE>
18
Number Description
* 4.17a First Amendment and Waiver, dated as of April 7,
1992, to the Senior Secured Note Purchase
Agreement, dated as of March 27, 1992, among
Chicago and North Western Transportation Company
(name subsequently changed to Chicago and North
Western Railway Company), Chicago and North
Western Holdings Corp. (name subsequently changed
to Chicago and North Western Transportation
Company), and the Purchasers named therein
(Exhibit 4.17a to the 1992 10-K).
# 4.17b Second Amendment, dated as of August 26, 1994, to
the Senior Secured Note Purchase Agreement, dated
as of March 27, 1992, as previously amended,
among Chicago and North Western Railway Company
(formerly Chicago and North Western
Transportation Company) (the Issuer), Chicago and
North Western Transportation Company (formerly
Chicago and North Western Holdings Corp.) and the
Purchasers named therein.
# 27 Financial Data Schedule
----------------------------
* Incorporated by reference.
# Filed herewith.
(b) Reports on Form 8-K
No report on Form 8-K was filed on behalf of the Company during
the quarter ended September 30, 1994.<PAGE>
19
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 thereunto duly authorized.
CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY
By:
Date: November 14, 1994 /s/ F. GORDON BITTER
F. GORDON BITTER
Senior Vice President-Finance and Accounting
Date: November 14, 1994 /s/ JAMES P. DALEY
JAMES P. DALEY
Senior Vice President, General Counsel and Secretary<PAGE>
<PAGE>
AMENDMENT dated as of August 26,
1994, to the Second Participation and
Loan Agreement dated as of December 20,
1990 (the "Loan Agreement"), among
WESTERN RAILROAD PROPERTIES,
INCORPORATED, a Delaware corporation
("the Lessee"), CITIBANK, N.A., a
national banking association, as Trustee
under the Trust Agreement (the
"Lessor"), the financial institutions
listed herein as lenders (the
"Lenders"), UP LEASING CORPORATION, a
Delaware corporation (the "Beneficial
Owner"), UNION PACIFIC CORPORATION, a
Utah corporation (the "Beneficial Owner
Parent"), CHICAGO AND NORTH WESTERN
RAILWAY COMPANY (as successor to Chicago
and North Western Transportation Company
and CNW Corporation), a Delaware
corporation; CHEMICAL BANK, a New York
banking corporation, as administrative
agent (in such capacity, the
"Administrative Agent"), CONTINENTAL
BANK N.A. and THE LONG-TERM CREDIT BANK
OF JAPAN, LTD., CHICAGO BRANCH, as Co-
Agents, and BANQUE PARIBAS, NEW YORK
BRANCH, as Lead Manager.
Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings assigned to such terms
in the Loan Agreement. The Lessee has requested that the parties
hereto enter into this Agreement in order to amend certain
provisions of the Loan Agreement as set forth herein. The
parties hereto have agreed to the requested amendments to the
Loan Agreement, subject to the terms and conditions set forth
herein. Accordingly, the parties hereto agree as follows:
SECTION 1. Amendments to Article I. Effective as of
the Effective Time, Appendix A of the Loan Agreement is hereby
amended to include the definitions set forth below, in the
appropriate alphabetical positions:
"ECF Payment Date" shall mean the Rent Payment
Date that occurs on March 15 of each year (or, if any such
day is not a Business Day, the next succeeding Business
Day).
"Relevant Annual Period" shall mean with respect
to each ECF Payment Date, the twelve-month period beginning
on January 1 and ending on December 31 of the preceding
year.<PAGE>
2
SECTION 2. Amendments to Article II. Effective as of
the Effective Time, Article II of the Loan Agreement is hereby
amended as follows:
(a) Section 2.01 of the Loan Agreement is hereby
amended by deleting paragraph (f) thereof in its entirety and
replacing it with the following:
(f) Interest on Loans. (i) Subject to the
provisions of Section 2.01(g), the Loans comprising each ABR
Borrowing shall bear interest (computed in accordance with
Section 2.01(h)) at a rate per annum equal to the Alternate
Base Rate plus 0.25%.
(ii) Subject to the provisions of Section
2.01(g), the Loans comprising each CD Borrowing shall bear
interest (computed in accordance with Section 2.01(h)) at a
rate per annum equal to the Adjusted CD Rate for the
Interest Period in effect for such Borrowing plus 1.375%.
(iii) Subject to the provisions of Section
2.01(g), the Loans comprising each Eurodollar Borrowing
shall bear interest (computed in accordance with Section
2.01(h)) at a rate per annum equal to the Adjusted LIBO Rate
for the Interest Period in effect for such Borrowing plus
1.25%.
(iv) Interest on each Loan shall be payable on
the Interest Payment Dates applicable to such Loan except as
otherwise provided in this Agreement.
(b) Section 2.01 of the Loan Agreement is hereby
amended by deleting paragraph (m)(iv)(A) in its entirety and
replacing it with the following:
(iv)(A) On each ECF Payment Date commencing
March 15, 1998, the Lessee Borrowings and the Lessor
Borrowings shall be prepaid in an aggregate amount equal to
the Excess Cash Flow for the Relevant Annual Period less the
aggregate amount of all Tax Sharing Payments being made by
the Lessee on such ECF Payment Date and all Tax Sharing
Payments made by the Lessee on the three immediately
preceding Rent Payment Dates (the "Targeted Excess Cash Flow
Prepayments"); provided, however, that prepayments pursuant
to this subsection (iv)(A) shall not be required to be made
on any ECF Payment Date to the extent that the cumulative
amount of such prepayments pursuant to this subsection
(iv)((A) and of prepayments (if any) pursuant to subsections
(i) and (ii) above made during the period from and including
June 16, 1994, to and including such ECF Payment Date equals
or exceeds the amount set forth below opposite such ECF
Payment Date:<PAGE>
3
Total Cumulative
ECF Targeted Excess Cash Flow
Payment Date and Optional Prepayments
March 15, 1998 $ 10,945,000
March 15, 1999 $ 31,430,000
March 15, 2000 $ 57,671,250
March 15, 2001 $ 78,687,500
March 15, 2002 $100,270,000
Each Targeted Excess Cash Flow Prepayment shall be made by
the Lessee and shall be applied to repay Lessee Borrowings
exclusively until Pro Rata Payment Time. Thereafter, each
such Targeted Excess Cash Flow Prepayment (including the
balance of any such prepayment a portion of which was
applied to pay Lessee Borrowings in order for Pro Rata
Payment Time to occur) shall be made by the Lessee and the
Lessor pro rata (based on the respective outstanding
principal amounts of the Lessee Loans and the Lessor Loans)
and applied, in the case of accounts payable by the Lessee,
to pay Lessee Borrowings and, in the case of amounts payable
by the Lessor, to pay Lessor Borrowings.
(b) Section 2.01 of the Loan Agreement is hereby
amended by deleting paragraph (m)(iv)(B) in its entirety and
replacing it with the following:
(B) On each ECF Payment Date commencing
March 15, 1998, the Lessee Borrowings and the Lessor
Borrowings shall be prepaid in an aggregate amount equal to
25% of the amount equal to (i) Excess Cash Flow for the
Relevant Annual Period, minus (ii) the Targeted Excess Cash
Flow Prepayments required to be made on such ECF Payment
Date and minus (iii) the aggregate amount of all Tax Sharing
Payments being made by the Lessee on such ECF Payment Date
and all Tax Sharing Payments made by the Lessee on the three
immediately preceding Rent Payment Dates (the "Additional
Excess Cash Flow Prepayments"). Each Additional Excess Cash
Flow Prepayment shall be made by the Lessee and shall be
applied to repay Lessee Borrowings exclusively until Pro
Rata Payment Time. Thereafter, each such Additional Excess
Cash Flow Prepayment (including the balance of any such
prepayment a portion of which was applied to pay Lessee
Borrowings in order for Pro Rata Payment Time to occur)
shall be made by the Lessee and the Lessor pro rata (based
on the respective outstanding principal amounts of the
Lessee Loans and the Lessor Loans) and applied, in the case
of amounts payable by the Lessee, to pay Lessee Borrowings
and, in the case of amounts payable by the Lessor, to pay
Lessor Borrowings.<PAGE>
4
SECTION 3. Representations and Warranties. The Lessee
represents and warrants to each of the Lenders and the other
parties hereto that:
(a) as of the Effective Time, there exists no Lease
Default, Lessee Mortgage Default, Lease Event of Default or
Lessee Mortgage Event of Default;
(b) the representations and warranties of the Lessee
set forth in the Loan Agreement are true and correct in all
material respects at and as of the Effective Time with the same
effect as though made at and as of the Effective Time, except to
the extent such representations and warranties expressly relate
to an earlier date and except that it is understood that Chicago
and North Western Railway Company is the surviving corporation of
mergers of CNW, Acquisition Corp. and Chicago and North Western
Transportation Company; and
(c) as of the Effective Time, the Lessee is in
compliance with all of the terms and provisions set forth in the
Loan Agreement and in each other Project Agreement on its part to
be observed or performed.
SECTION 4. Conditions of Effectiveness. This
Agreement, including the amendments to the Loan Agreement set
forth above, shall become effective upon the satisfaction of the
following conditions:
(a) The Administrative Agent (or its counsel) shall
have received counterparts of this Agreement which, when taken
together, bear the signatures of the Lessee, the Lessor, the
Beneficial Owner and each Lender.
(b) The Administrative Agent shall have received
(i) for the account of each Lender, a fee equal to 0.15% of the
sum of such Lender's Loans and (ii) reimbursement of any
out-of-pocket expenses incurred by the Administrative Agent in
connection with the preparation, execution and delivery of this
Agreement and the transactions contemplated hereby and thereby
(to the extent that notice of the amount of such expenses is
given to the Lessee prior to the date of effectiveness of this
Agreement).
(c) The Administrative Agent shall have received
(i) an Officer's Certificate of the Lessee, dated the date of
effectiveness of this Agreement, confirming the representations
made in Section 4 of this Agreement and (ii) the favorable
written opinion of James P. Daley, Esq., general counsel for the
Lessee, dated the date of effectiveness of the Agreement,
addressed to the Lenders, and substantially in the form of
Exhibit A hereto. The Lessee hereby directs in its general<PAGE>
5
counsel to deliver the opinion referred to in clause (ii) above,
it being understood that the Lenders will and may rely thereon.
The Administrative Agent will notify the Lessee and the
Lenders when the foregoing conditions have been satisfied and,
upon receipt of such notice, the Lessee will notify the
Beneficial Owner thereof. The time at which such conditions are
satisfied, as reasonably determined by the Administrative Agent,
is referred to herein as the "Effective Time". The
Administrative Agent's determination of the Effective Time shall
be conclusive absent manifest error.
SECTION 6. APPLICABLE LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.
SECTION 7. Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall
constitute an original, but all of which when taken together
shall constitute but one instrument.
SECTION 8. Agreement. Except as expressly amended
hereby, the Loan Agreement shall continue in full force and
effect in accordance with the provisions thereof on the date
hereof.
SECTION 9. Expenses. The Lessee shall pay all
reasonable out-of-pocket expenses incurred by the Administrative
Agent in connection with this Agreement.
SECTION 10. Headings. The headings of this Agreement
are for the purposes of reference only and shall not limit or
otherwise affect the meaning hereof.
IN WITNESS WHEREOF, the Lessee, the Lessor, the
Beneficial Owner and the Lenders have caused this Agreement to be
duly executed by their duly authorized officers, all as of the
date first above written.
WESTERN RAILROAD PROPERTIES,
INCORPORATED,
by
/s/ John E. Voldseth
Name: John E. Voldseth
Title: Vice President Finance<PAGE>
6
CITIBANK, N.A., not individually
but solely as Trustee under the
Amended and Restated Trust
Agreement, dated as of
December 20, 1990 with UP Leasing
Corporation,
by
/s/ Patrick DeFelice
Name: Patrick DeFelice
Title: Vice President
UP LEASING CORPORATION,
by
/s/ John E. Dowling
Name: John E. Dowling
Title: Vice President
CHICAGO AND NORTH WESTERN RAILWAY
COMPANY,
by
/s/ John E. Voldseth
Name: John E. Voldseth
Title: Vice President Finance
CHEMICAL BANK, as Administrative
Agent and Lender,
by
/s/ Julie A. Soper
Name: Julie A. Soper
Title: Vice President
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD., CHICAGO BRANCH,
as Co-Agent and Lender,
by
/s/ Richard E. Stahl
Name: Richard E. Stahl
Title: Senior Vice President
and Joint General
Manager<PAGE>
7
CONTINENTAL BANK,
as Co-Agent and Lender,
by
/s/ Paul R. Frey
Name: Paul R. Frey
Title: Senior Vice President
BANQUE PARIBAS, NEW YORK BRANCH,
as Lead Manager and Lender,
by
/s/ Clark C. King, III
Name: Clark C. King, III
Title: Vice President
by
/s/ Peter Toal
Name: Peter Toal
Title: Regional General Manager
BARCLAYS BANK PLC,
by
/s/ S. Khettry
Name: S. Khettry
Title: Managing Director
CIBC, INC.,
by
/s/ John J. Mack
Name: John J. Mack
Title: Vice President
UNION BANK OF SWITZERLAND,
by
/s/ Eileen Tabios
Name: Eileen Tabios
Title: Vice President
by
/s/ John J. Asburne
Name: John J. Asburne
Title: Vice President<PAGE>
8
CHASE MANHATTAN BANK, N.A.,
by
/s/ Francis M. Cox, III
Name: Francis M. Cox, III
Title: Vice President
CREDIT SUISSE,
by
/s/ Andrew B. Leon
Name: Andrew B. Leon
Title: Associate
by
/s/ Louis D. Iaconetti
Name: Louis D. Iaconetti
Title: Associate
KANSALLIS-OSAKE-PANKKI,
by
/s/ Timo Aittola
Name: Timo Aittola
Title: Senior Vice President
by
/s/ Nicholas A. Matacchier
Name: Nicholas A. Matacchier
Title: Assistant Vice President
THE TRAVELERS INSURANCE COMPANY,
by
/s/ Paul T. Quistberg
Name: Paul T. Quistberg
Title: Assistant Investment
Officer
NATIONAL WESTMINSTER BANK USA,
by
/s/ W. Wakefield Smith
Name: W. Wakefield Smith
Title: Vice President<PAGE>
9
THE NORTHERN TRUST COMPANY,
by
/s/ Kelly L. Otto
Name: Kelly L. Otto
Title: Commerce Banking Officer
MERCANTILE BANK OF ST. LOUIS
NATIONAL ASSOCIATION,
by
/s/ Sally H. Roth
Name: Sally H. Roth
Title: Vice President
POSTIPANKKI LTD.,
NEW YORK BRANCH,
by
/s/ Sakari Pihlaja
Name: Sakari Pihlaja
Title: Executive Vice President
by
/s/ Charles P. Wise, Jr.
Name: Charles P. Wise, Jr.
Title: Vice President
THE DAI-ICHI KANGYO BANK, LTD.,
CHICAGO BRANCH,
by
/s/ Masami Tsuboi
Name: Masami Tsuboi
Title: Vice President
THE MITSUBISHI TRUST AND
BANKING CORPORATION,
by
/s/ Masaaki Yamagishi
Name: Masaaki Yamagishi
Title: Chief Manager<PAGE>
10
THE TOKAI BANK, LTD.,
CHICAGO BRANCH,
by
/s/ Hiroshi Hirunami
Name: Hiroshi Hirunami
Title: Assistant General
Manager
FIRST NATIONAL BANK OF BOSTON,
by
/s/ Dexter Freeman
Name: Dexter Freeman
Title: Vice President
ALLSTATE LIFE INSURANCE COMPANY,
by
/s/ Gary W. Fridley
Name: Gary W. Fridley
Title: Vice President
by
/s/ Barry Paul
Name: Barry Paul
Title: Vice President
ALLSTATE INSURANCE COMPANY,
by
/s/ Gary W. Fridley
Name: Gary W. Fridley
Title: Vice President
by
/s/ Barry Paul
Name: Barry Paul
Title: Vice President<PAGE>
11
CHANCELLOR SENIOR SECURED
MANAGEMENT, INC., as Portfolio
Advisor to:
KEYPORT LIFE INSURANCE COMPANY,
by
/s/ Christopher E. Jansen
Name: Christopher E. Jansen
Title: Managing Director
UNION PACIFIC CORPORATION,
by
/s/ John E. Dowling
Name: John E. Dowling
Title: Vice President<PAGE>
EXHIBIT A
August 26, 1994
TO: Each of the lenders (the "Lenders") parties to the Amendment
dated as of August 26, 1994 (the "Amendment") to the Second
Participation and Loan Agreement dated as of December 20,
1990 (the "Loan Agreement"), among Western Railroad
Properties, Incorporated, as Lessee, Citibank, N.A., as
Lessor, the Lenders party thereto, UP Leasing Corporation,
as Beneficial Owner, Union Pacific Corporation, as
Beneficial Owner Parent, Chicago and North Western Railway
Company (as successor to Chicago and North Western
Transportation Company and CNW Corporation), Chemical Bank,
as Administrative Agent, Continental Bank N.A. and The
Long-Term Credit Bank of Japan, Ltd., Chicago Branch, as
Co-Agents, and Banque Paribas, New York Branch, as Lead
Manager.
Ladies and Gentlemen:
This opinion is furnished to you pursuant to
Section 5(c)(ii) of the Amendment. Unless otherwise defined
herein, terms defined in the Amendment and the Loan Agreement are
used herein as therein defined.
I have acted as in-house counsel to Western Railroad
Properties, Incorporated, a Delaware corporation (the "Lessee")
and am General Counsel of Chicago and North Western Railway
Company (as successor to Chicago and North Western Transportation
Company and CNW Corporation ("CNWR", and, together with the
Lessee, the "CNW Parties"). I or attorneys on my staff or on the
legal staffs of the CNW Parties are familiar with the
organization and operations of the CNW Parties.
I or attorneys on my staff have reviewed original
executed copies of, or facsimile transmissions or photocopies of
execution copies of the Amendment, the Master Assignment
Agreement, the Loan Agreement (and any Notes for each Lender
executed by the Lessee or Lessor), the Lease, the Land Lease, the
Mortgages, the Pledge Agreement and the Trust Agreement (the
above documents are hereinafter collectively referred to as the
"Documents"). In addition, in connection with this opinion, I or
attorneys on my staff have examined the originals or copies,
certified or otherwise identified to my satisfaction, of such
corporate records, agreements, documents and other instruments
(including memoranda prepared by outside counsel) and such<PAGE>
certificates or comparable documents of public officials and of
officers and representatives of the CNW Parties and have made
such other and further investigations, as I or other attorneys on
my staff have deemed relevant and necessary as a basis for the
opinions hereinafter set forth. For purposes of this opinion, I
or attorneys on my staff have assumed, with your permission, the
genuineness of all signatures, the legal capacity of natural
persons, the authenticity of all documents submitted to me or
them as originals, the conformity to originals of all facsimile
transmissions or photocopies of (i) such records, instruments,
certificates and other documents and (ii) executed or execution
copies of such agreements, and that the parties to the Documents
other than the CNW Parties have the corporate power and authority
to enter into and perform each of the Documents and that each of
the Documents has been duly authorized, executed and delivered by
each such other party.
As to questions of fact relevant to this opinion, I
have relied upon certificates of officers and representatives of
the CNW Parties or public officials.
Based upon and subject to the foregoing, and subject to
the qualifications and exceptions set forth herein, I am of the
opinion that:
1. Each of the CNW Parties has the requisite
corporate power and authority, and all material licenses,
permits, franchises, consents and approvals, to own its property
and assets and to carry on its business as now conducted except
in any case where the failure to hold or be in compliance with
any of the foregoing would not individually or in the aggregate
have a material adverse effect on the CNW Parties. Each of the
CNW Parties also has the requisite corporate power and authority
to execute, deliver and perform the Amendment.
2. The execution, delivery and performance by the CNW
Parties of the Amendment will not:
(i) violate any provision of the articles of
incorporation or by-laws of the CNW Parties or violate
(x) any provision of law, statute, rule or regulation or any
order, writ, injunction or decree of any court or
governmental instrumentality of (1) the State of Illinois or
the General Corporation Law of the State of Delaware or of
the United States of America or (2) to the best of my
knowledge and the knowledge of attorneys on my staff, any
other jurisdiction of the United States, or (y) any
indenture, certificate of designation for preferred stock,
agreement or other instrument known to us after due inquiry
to which any of the CNW Parties is a party or by which any
of them or any of their property is bound,
(ii) be in conflict with, result in a breach of
or constitute (with notice or lapse of time or both) a
default under any such indenture, agreement or other
instrument, or
(iii) result in the creation or imposition of (or
the obligation to create or impose) any material Lien upon<PAGE>
any of the property or assets of any of the CNW Parties
under any such indenture, agreement or other instrument.
3. The Amendment has been duly executed and delivered
by CNWR. The Loan Agreement, as amended by the Amendment, and
the other Documents continue to constitute valid and legally
binding obligations of each of the CNW Parties that is a party
thereto, enforceable against each such CNW Parties in accordance
with their respective terms, except to the extent that the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally and by general equitable
principles (regardless of whether enforcement is sought in equity
or at law).
4. To the best of my knowledge and the knowledge of
attorneys on my staff, no order, consent, approval, license,
authorization or validation of, or filing, recording or
registration with, or exemption by, the ICC or any other
Governmental Authority in the states in which the CNW Parties
conduct business, is required to be obtained or made by any CNW
Party to authorize, or is required in connection with the
execution, delivery and performance of, the Amendment (except
such as have been obtained or made and are in full force and
effect).
The attorneys on my staff and I are admitted to
practice in the State of Illinois and this opinion accordingly is
limited to the laws thereof, the General Corporation Law of the
State of Delaware and the laws of the United States. However, I
also advise you that nothing has come to our attention with
respect to the laws of other applicable jurisdictions that is
inconsistent with the conclusions expressed herein. I recognize
that the Amendment is governed by the laws of the State of New
York and that neither I nor any of the attorneys on my staff are
admitted to practice in the State of New York. In giving the
opinion expressed in paragraph 3, I have assumed that the laws of
the State of New York are in all relevant respects consistent
with the laws of the State of Illinois. Finally, I advise you
that we customarily review, either ourselves or with assistance
of local counsel, questions that arise from time to time relating
to the application to the business of the CNW Parties of the laws
of the jurisdictions in which the CNW Parties have material
operations.
Very truly yours,
/s/ James P. Daley
James P. Daley
Senior Vice President
General Counsel and Secretary<PAGE>
SCHEDULE I
The Corporations
Chicago and North Western Railway Company
Midwestern Railroad Properties, Incorporated
North Western Leasing Company
Signage, Inc.
Wisconsin Town Lot Company
CNW Realco, Inc.<PAGE>
<PAGE>
AMENDMENT dated as of August 26,
1994, to the Credit Agreement dated as
of March 27, 1992, as previously amended
(the "Credit Agreement"), among CHICAGO
AND NORTH WESTERN RAILWAY COMPANY (as
successor to Chicago and North Western
Transportation Company), a Delaware
corporation (the "Borrower"), CHICAGO
AND NORTH WESTERN TRANSPORTATION COMPANY
(as successor to Chicago and North
Western Holdings Corp.), a Delaware
corporation ("Holdings"), the financial
institutions party thereto as lenders
(the "Lenders"), BANK OF MONTREAL, a
Canadian banking corporation, as issuing
bank (in such capacity, the "Issuing
Bank"), the Co-Agents named therein and
CHEMICAL BANK, as administrative agent
for the Lenders and the Issuing Bank (in
such capacity, the "Agent").
Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings assigned to such terms
in the Credit Agreement. The Borrower has requested that the
Lenders enter into this Agreement in order to amend certain
provisions of the Credit Agreement as set forth herein. The
undersigned Lenders have agreed to the requested amendments to
the Credit Agreement, subject to the terms and conditions set
forth herein. Accordingly, the parties hereto agree as follows:
SECTION 1. Amendments to Article I. Effective as of
the Effective Time, Article I of the Credit Agreement is hereby
amended as follows:
(a) Section 1.01 of the Credit Agreement is hereby
amended by deleting in their entirety the definitions of the
terms "Designated Capital Expenditure", "Designated Payment" and
"Excess Cash Flow".
(b) The definition of the term "Designated Dividends"
set forth in Article I of the Credit Agreement is hereby amended
by (i) deleting the words "Designated Payments, Designated
Capital Expenditures" from clause (iii) of the proviso therein
and (ii) inserting after the words "Residual Equity Proceeds" in
such clause (iii) the words "and increases to the Dividend
Amount".
(c) The definition of the term "Dividend Amount" set
forth in Article I of the Credit Agreement is hereby amended to
read in its entirety as follows:
"Dividend Amount" shall mean, at any time, an
amount equal to the sum of (a) if positive, 10% of the<PAGE>
2
aggregate net income of Holdings and its consolidated
subsidiaries for the period from and including October 1,
1993, to and including the end of the most recent fiscal
quarter of Holdings ended prior to such time for which
financial statements have been delivered to the Agent,
treated as a single accounting period, computed in
accordance with GAAP consistently applied but excluding any
non-cash extraordinary or nonrecurring gains or losses, plus
(b) the Net Proceeds of any issuance of shares of Holdings
Common Stock after July 1, 1993 (including pursuant to the
exercise of stock options held by management); provided that
the Borrower notifies the Credit Agreement Creditors within
180 days after receipt by Holdings of the Net Proceeds (i)
that such Net Proceeds are being designated by the Borrower
to increase the Dividend Amount, (ii) of the amount so
designated and (iii) that the amount so designated does not,
together with the aggregate amount of Designated Dividends
and Residual Equity Proceeds previously designated in
respect of such Net Proceeds, exceed the aggregate amount of
such Net Proceeds, minus (c) the aggregate amount of
dividends paid by Holdings after October 1, 1993, and prior
to such time. Except to the extend the Borrower notifies
the Credit Agreement Creditors within 180 days after receipt
by Holdings of the Net Proceeds of any issuance of shares of
Holdings Common Stock referred to in clause (b) above that
such Net Proceeds are being designated for Designated
Dividends or Residual Equity Proceeds, the Borrower shall be
deemed to have notified the Credit Agreement Creditors that
such Net Proceeds are being designated to increase the
Dividend Amount.
(d) The definition of the term "Net Proceeds" set
forth in Article I of the Credit Agreement is hereby amended by
deleting the parenthetical in clause (ii) of the proviso therein.
(e) The definition of the term "Permitted Business
Acquisitions" set forth in Article I of the Credit Agreement is
hereby amended by deleting in its entirety the phrase "and the
aggregate consideration paid (including any assumptions of
Indebtedness and the fair market value of any non-cash
consideration) to make each such acquisition is included as a
Capital Expenditure in the quarter in which such acquisition is
consummated for purposes of computing the limits prescribed by
Section 6.03".
(f) The definition of the term "Residual Equity
Proceeds" set forth in Article I of the Credit Agreement is
hereby amended by (i) deleting the words "Designated Capital
Expenditures or Designated Payments" from clause (ii) of the
proviso therein and (ii) inserting the phrase "or applied to
increase the Dividend Amount" at the end of clause (ii) of the
proviso therein.<PAGE>
3
SECTION 2. Amendments to Article II. Effective as of
the Effective Time, Article II of the Credit Agreement is hereby
amended as follows:
(a) Section 2.11(c) of the Credit Agreement is hereby
amended by deleting paragraph (ii) thereof in its entirety.
(b) Section 2.12 of the Credit Agreement is hereby
amended by deleting the references in paragraph (c) thereof to
"Section 2.12(f)" and deleting paragraph (f) thereof in its
entirety.
(c) Section 2.12(g) of the Credit Agreement is hereby
amended by deleting the phrase ", a payment of Excess Cash Flow"
from clause (i) thereof.
(d) Section 2.12(h) of the Credit Agreement is hereby
amended by deleting clause (ii) thereof in its entirety.
SECTION 3. Amendments to Article VI. Effective as of
the Effective Time, Article VI of the Credit Agreement is hereby
amended as follows:
(a) Section 6.01 of the Credit Agreement is hereby
amended by deleting the words "permitted under Section 6.03" from
clause (e) thereof.
(b) Article VI of the Credit Agreement is hereby
amended by deleting Section 6.03 thereof in its entirety.
(c) Section 6.04 of the Credit Agreement is hereby
amended by deleting clause (iv) of the proviso appearing in
clause (h) thereof.
(d) Section 6.05(b) of the Credit Agreement is hereby
amended by deleting clause (v) thereof in its entirety.
(e) Section 6.07 of the Credit Agreement is hereby
amended by deleting the words "permitted by Section 6,03" from
clause (a) thereof.
(f) Section 6.08(e) of the Credit Agreement is hereby
amended by inserting at the end of clause (i) thereof the phrase
", provided that the aggregate consideration paid (including any
assumptions of Indebtedness and the fair market value of any
non-cash consideration) for Permitted Business Acquisitions made
on and after August 26, 1994, shall not exceed $200,000,000".
SECTION 4. Consent to Amendment. Each undersigned
Lender, by its execution of a counterpart hereof, consents to and
approves the amendment to the Note Purchase Agreement<PAGE>
4
substantially in the form of such amendment attached hereto as
Exhibit A.
SECTION 5. Representations and Warranties. Each of
Holdings and the Borrower represents and warrants to each of the
Lenders that:
(a) as of the Effective Time, there exists no Default
or Event of Default;
(b) the representations and warranties set forth in
each Loan Document are true and correct in all material respects
at and as of the Effective Time with the same effect as though
made at and as of the Effective Time, except to the extent such
representations and warranties expressly relate to an earlier
date and except that it is understood that Chicago and North
Western Railway Company is the surviving corporation of mergers
of CNW, Chicago and North Western Transportation Company and
Acquisition Corp. and Chicago and North Western Transportation
Company is the successor to Holdings; and
(c) as of the Effective Time, each of Holdings, the
Borrower and each other subsidiary of Holdings that is a party to
any Loan Document is in compliance with all of the terms and
provisions set forth in the Credit Agreement and in each other
Loan Document on its part to be observed or performed.
SECTION 6. Conditions of Effectiveness. This
Agreement, including the amendments to the Credit Agreement set
forth above, shall become effective upon the satisfaction of the
following conditions:
(a) The Agent (or its counsel) shall have received
counterparts of this Agreement which, when taken together, bear
the signatures of Holdings, the Borrower and the Required
Lenders.
(b) The Collateral Agent (or its counsel) shall have
received counterparts of this Agreement and the amendment to the
Note Purchase Agreement substantially in the form attached hereto
as Exhibit A which, when taken together, bear the signatures of
Holdings, the Borrower and the Required Creditors (as defined in
the Intercreditor Agreement).
(c) The Agent shall have received (i) for the account
of each Lender that has delivered an executed counterpart hereof
to the Agent at or prior to the Effective Time, a fee equal to
0.10% of the sum of such Lender's Loans, Letter of Credit
Exposure and unused Commitments (calculated as of the Effective
Time) and (ii) reimbursement of any out-of-pocket expenses
incurred by the Agent or the Collateral Agent in connection with
the preparation, execution and delivery of this Agreement and the<PAGE>
5
amendment to the Note Purchase Agreement contemplated hereby (to
the extent that notice of the amount of such expenses is given to
the Borrower prior to the date of effectiveness of this
Agreement).
(d) The Agent shall have received (i) a certificate,
dated the date of effectiveness of this Agreement and signed by a
Financial Officer of Holdings and the Borrower, confirming the
representations made in Section 5 of this Agreement and (ii) the
favorable written opinion of James P. Daley, Esq., general
counsel for Holdings and the Borrower, dated the date of
effectiveness of this Agreement, addressed to the Lenders, and
substantially in the form attached hereto as Exhibit B. Each of
Holdings and the Borrower hereby directs its general counsel to
deliver the opinion referred to in clause (ii) above, it being
understood that the Lenders will and may rely thereon.
The Agent will notify the Borrower, the Issuing Bank
and the Lenders when the foregoing conditions have been
satisfied. The time at which such conditions are satisfied, as
reasonably determined by the Agent, is referred to herein as the
"Effective Time". The Agent's determination of the Effective
time shall be conclusive absent manifest error.
SECTION 7. APPLICABLE LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.
SECTION 8. Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall
constitute an original, but all of which when taken together
shall constitute but one instrument.
SECTION 9. Agreement. Except as expressly amended
hereby, the Credit Agreement shall continue in full force and
effect in accordance with the provisions thereof on the date
hereof.
SECTION 10. Expenses. The Borrower shall pay all
reasonable out-of-pocket expenses incurred by the Agent and the
Collateral Agent in connection with this Agreement.
SECTION 11. Headings. The headings of this Agreement
are for the purposes of reference only and shall not limit or
otherwise affect the meaning hereof.<PAGE>
6
IN WITNESS WHEREOF, Holdings, the Borrower, the Agent,
the Issuing Bank and the Lenders have caused this Agreement to be
duly executed by their duly authorized officers, all as of the
date first above written.
CHICAGO AND NORTH WESTERN
RAILWAY COMPANY,
by
/s/ John E. Voldseth
Name: John E. Voldseth
Title: Vice President Finance
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY,
by
/s/ John E. Voldseth
Name: John E. Voldseth
Title: Vice President Finance
CHEMICAL BANK,
by
/s/ Julie A. Soper
Name: Julie A. Soper
Title: Vice President
BANK OF MONTREAL,
by
/s/ Randall B. Becker
Name: Randall B. Becker
Title: Managing Director<PAGE>
7
BANQUE PARIBAS,
by
/s/ Clark C. King, III
Name: Clark C. King, III
Title: Vice President
by
/s/ Peter Toal
Name: Peter Toal
Title: Regional General Manager
THE CHASE MANHATTAN BANK,
N.A.,
by
/s/ Francis M. Cox, III
Name: Francis M. Cox, III
Title: Vice President
CONTINENTAL BANK,
by
/s/ Paul R. Frey
Name: Paul R. Frey
Title: Senior Vice President
THE FIRST NATIONAL BANK OF
CHICAGO,
by
/s/ Gerald F. Mackin
Name: Gerald F. Mackin
Title: Vice President
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD.,
by
/s/ Richard E. Stahl
Name: Richard E. Stahl
Title: Senior Vice President
and Joint General
Manager<PAGE>
8
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
by
/s/ Patricia DelGrande
Name: Patricia DelGrande
Title: Vice President
NATIONAL WESTMINSTER BANK USA,
by
/s/ W. Wakefield Smith
Name: W. Wakefield Smith
Title: Vice President
ALLSTATE LIFE INSURANCE
COMPANY,
by
/s/ Gary W. Fridley
Name: Gary W. Fridley
Title: Vice President
by
/s/ Barry Paul
Name: Barry Paul
Title: Vice President
ANCHOR NATIONAL LIFE INSURANCE
COMPANY,
by
/s/ Michael J. Campbell
Name: Michael J. Campbell
Title: Authorized Agent
THE FIRST NATIONAL BANK OF
BOSTON,
by
/s/ Dexter Freeman
Name: Dexter Freeman
Title: Vice President<PAGE>
9
THE BANK OF NEW YORK,
by
/s/ Charlotte Sohn
Name: Charlotte Sohn
Title: Assistant Vice President
CANADIAN IMPERIAL BANK OF
COMMERCE,
by
/s/ John J. Mack
Name: John J. Mack
Title: Authorized Signatory
CAISSE NATIONALE DE CREDIT
AGRICOLE,
by
/s/ David Bouhl
Name: David Bouhl
Title: First Vice President
Head of Corporate
Banking-Chicago
CREDIT SUISSE,
by
/s/ Geoffrey M. Craig
Name: Geoffrey M. Craig
Title: Member of Senior
Management
by
/s/ Kristinn R. Kristinsson
Name: Kristinn R. Kristinsson
Title: Associate<PAGE>
10
DRESDNER BANK AG, CHICAGO
BRANCH AND GRAND CAYMAN
BRANCH,
by
/s/ John H. Schaus
Name: John H. Schaus
Title: First Vice President
by
/s/ Graham D. Lewis
Name: Graham D. Lewis
Title: Assistant Vice President
THE MITSUBISHI TRUST AND
BANKING CORPORATION,
by
/s/ Masaaki Yamagishi
Name: Masaaki Yamagishi
Title: Chief Manager
THE NIPPON CREDIT BANK, LTD.,
by
/s/ Elizabeth S. Tarbell
Name: Elizabeth S. Tarbell
Title: Assistant Vice President
THE NORTHERN TRUST COMPANY,
by
/s/ Kelly L. Otto
Name: Kelly L. Otto
Title: Commercial Banking
Officer<PAGE>
11
PROSPECT STREET SENIOR
PORTFOLIO, L.P.,
by PROSPECT STREET SENIOR
LOAN CORP., as managing
general partner of PROSPECT
STREET SENIOR PORTFOLIO,
L.P.,
by
/s/ Preston I. Carnes
Name: Preston I. Carnes
Title: Vice President
THE TORONTO-DOMINION BANK,
by
/s/ David G. Parker
Name: David G. Parker
Title: Manager Credit
Administration
THE TRAVELERS INSURANCE
COMPANY,
by
/s/ Paul T. Quistberg
Name: Paul T. Quistberg
Title: Assistant Investment
Officer
THE TRAVELERS INDEMNITY COMPANY,
by
/s/ Paul T. Quistberg
Name: Paul T. Quistberg
Title: Assistant Investment
Officer
PROTECTIVE LIFE INSURANCE
COMPANY,
by
/s/ Mark K. Okada
Name: Mark K. Okada
Title: Principal Protective
Asset Management Co.<PAGE>
12
CHANCELLOR SENIOR SECURED
MANAGEMENT, INC., as Portfolio
Advisor to:
RESTRUCTURED OBLIGATIONS BACKED
BY SENIOR ASSETS, B.V. (ROSA)
by
/s/ Stephen M. Alfieri
Name: Stephen M. Alfieri
Title: Vice President
CHANCELLOR SENIOR SECURED
MANAGEMENT, INC., as Portfolio
Advisor to:
KEYPORT LIFE INSURANCE COMPANY,
by
/s/ Stephen M. Alfieri
Name: Stephen M. Alfieri
Title: Vice President
SUN LIFE INSURANCE CO.,
by
/s/ Michael J. Campbell
Name: Michael J. Campbell
Title: Authorized Agent
INDUSTRIAL BANK OF JAPAN, LTD.,
by
/s/ Hiroki Yamada
Name: Hiroki Yamada
Title: General Manager<PAGE>
EXHIBIT A
Second Amendment, dated as of August 26, 1994, to the Senior
Secured Note Purchase Agreement, dated as of March 27, 1992, as
previously amended, among Chicago and North Western Railway
Company (formerly Chicago and North Western Transportation
Company) (the Issuer), Chicago and North Western Transportation
Company (formerly Chicago and North Western Holdings Corp.) and
the Purchasers named therein.<PAGE>
EXHIBIT B
August 26, 1994
TO: Each of the lenders (the "Lenders") parties to the Amendment
dated as of August 26, 1994 (the "Amendment") to the Credit
Agreement dated as of March 27, 1992, as previously amended
(the "Credit Agreement") among Chicago and North Western
Railway Company, as Borrower, Chicago and North Western
Transportation Company, as Guarantor, the lenders party
thereto, Bank of Montreal, as Issuing Bank, and Chemical
Bank, as Agent.
Ladies and Gentlemen:
This opinion is furnished to you pursuant to
Section 6(d) of the Amendment. Unless otherwise defined herein,
terms defined in the Amendment and the Credit Agreement are used
herein as therein defined.
I am General Counsel of Chicago and North Western
Railway Company (as successor to Chicago and North Western
Transportation Company), a Delaware corporation (the "Borrower").
Each of the corporations listed on Schedule I hereto
(collectively referred to together with the Borrower and the
Guarantor as the "Corporations") are wholly-owned direct or
indirect subsidiaries of Chicago and North Western Transportation
Company (as successor to Chicago and North Western Holdings
Corp.), a Delaware corporation. As General Counsel of the
Borrower, I or attorneys on my staff or on the legal staffs of
the Corporations and the Borrower are familiar with the
organization and operations of the Corporations and their legal
affairs are encompassed by my duties as General Counsel for the
Borrower.
I or attorneys on my staff have reviewed original
executed copies of, or facsimile transmissions or photocopies of
execution copies of the Amendment, the Master Assignment
Agreement, the Credit Agreement (and any Notes for each Lender
executed by the Borrower), the Pledge Agreement, the Security
Agreement, the Guarantee Agreement, the Mortgages, and the
Intercreditor Agreement (the above documents are hereinafter
collectively referred to as the "Documents"). In addition, in
connection with this opinion, I or attorneys on my staff have
examined the originals or copies, certified or otherwise
identified to my satisfaction, of such corporate records,
agreements, documents and other instruments (including memoranda<PAGE>
prepared by outside counsel) and such certificates or comparable
documents of public officials and of officers and representatives
of the Corporations and have made such other and further
investigations, as I or other attorneys on my staff have deemed
relevant and necessary as a basis for the opinions hereinafter
set forth. For purposes of this opinion, I or attorneys on my
staff have assumed, with your permission, the genuineness of all
signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to me or them as
originals, the conformity to originals of all facsimile
transmissions or photocopies of (i) such records, instruments,
certificates and other documents and (ii) executed or execution
copies of such agreements, and that the parties to the Documents
other than the Corporations have the corporate power and
authority to enter into and perform each of the Documents and
that each of the Documents has been duly authorized, executed and
delivered by each such other party.
As to questions of fact relevant to this opinion, I
have relied upon certificates of officers and representatives of
the Corporations or public officials.
Based upon and subject to the foregoing, and subject to
the qualifications and exceptions set forth herein, I am of the
opinion that:
1. Each of the Borrower and the Guarantor has the
requisite corporate power and authority, and all material
licenses, permits, franchises, consents and approvals, to own its
property and assets and to carry on its business as now conducted
except in any case where the failure to hold or be in compliance
with any of the foregoing would not individually or in the
aggregate have a material adverse effect on the Borrower or the
Guarantor. Each of the Borrower and the Guarantor also has the
requisite corporate power and authority to execute, deliver and
perform the Amendment.
2. The execution, delivery and performance by the
Borrower and the Guarantor of the Amendment will not:
(i) violate any provision of the articles of
incorporation or by-laws of the Borrower or the Guarantor or
violate (x) any provision of law, statute, rule or
regulation or any order, writ, injunction or decree of any
court or governmental instrumentality of (1) the State of
Illinois or the General Corporation Law of the State of
Delaware or of the United States of America or (2) to the
best of my knowledge and the knowledge of attorneys on my
staff, any other jurisdiction of the United States, or
(y) any indenture, certificate of designation for preferred
stock, agreement or other instrument known to us after due
inquiry to which any of the Corporations is a party or by
which any of them or any of their property is bound,
(ii) be in conflict with, result in a breach of
or constitute (with notice or lapse of time or both) a
default under any such indenture, agreement or other
instrument, or<PAGE>
(iii) result in the creation or imposition of (or
the obligation to create or impose) any material Lien upon
any of the property or assets of any of the Corporations
under any such indenture, agreement or other instrument.
3. The Amendment has been duly executed and delivered
by each of the Borrower and the Guarantor. The Credit Agreement,
as amended by the Amendment, and the other Documents continue to
constitute valid and legally binding obligations of each of the
Corporations that is a party thereto, enforceable against each
such Corporation in accordance with their respective terms,
except to the extent that the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights
generally and by general equitable principles (regardless of
whether enforcement is sought in equity or at law).
4. To the best of my knowledge and the knowledge of
attorneys on my staff, no order, consent, approval, license,
authorization or validation of, or filing, recording or
registration with, or exemption by, the ICC or any other
Governmental Authority in the states in which the Corporations
conduct business, is required to be obtained or made by any
Corporation to authorize, or is required in connection with the
execution, delivery and performance of, the Amendment (except
such as have been obtained or made and are in full force and
effect).
The attorneys on my staff and I are admitted to
practice in the State of Illinois and this opinion accordingly is
limited to the laws thereof, the General Corporation Law of the
State of Delaware and the laws of the United States. However, I
also advise you that nothing has come to our attention with
respect to the laws of other applicable jurisdictions that is
inconsistent with the conclusions expressed herein. I recognize
that the Amendment is governed by the laws of the State of
New York and that neither I nor any of the attorneys on my staff
are admitted to practice in the State of New York. In giving the
opinion expressed in paragraph 3, I have assumed that the laws of
the State of New York are in all relevant respects consistent
with the laws of the State of Illinois. Finally, I advise you
that we customarily review, either ourselves or with assistance
of local counsel, questions that arise from time to time relating
to the application to the business of the Corporations of the
laws of the jurisdictions in which the Corporations have material
operations.
Very truly yours,
/s/ James P. Daley
James P. Daley
Senior Vice President
General Counsel and Secretary<PAGE>
SCHEDULE I
The Corporations
Chicago and North Western Railway Company
Midwestern Railroad Properties, Incorporated
North Western Leasing Company
Signage, Inc.
Wisconsin Town Lot Company
CNW Realco, Inc.<PAGE>
<PAGE>
SECOND AMENDMENT
AMENDMENT dated as of August 26, 1994 (this "Second
Amendment"), to the Senior Secured Note Purchase Agreement, dated
as of March 27, 1992, as previously amended (the "Note Purchase
Agreement"), among Chicago and North Western Railway Company
(formerly Chicago and North Western Transportation Company) (the
"Issuer"), Chicago and North Western Transportation Company
(formerly Chicago and North Western Holdings Corp.) ("Holdings";
together with the Issuer, the "Companies") and the Purchasers
named therein.
W I T N E S S E T H:
WHEREAS, the Companies have requested that the
Purchasers and the Lenders amend the Note Purchase Agreement and
the Credit Agreement in the manner hereinafter set forth;
WHEREAS, the undersigned Purchasers are willing to
accede to the request of the Companies, upon the terms and
subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants contained herein, the parties hereby agree
to as follows:
SECTION I. Defined Terms.
Unless otherwise defined herein, terms defined in the
Note Purchase Agreement and used herein are so used as so
defined.
SECTION II. Amendments.
The Note Purchase Agreement is hereby amended as
follows:
1. Mandatory Prepayment. (a) Section 7.02 of the
Note Purchase Agreement is hereby amended by deleting paragraph
(b) in its entirety.
(b) Section 7.02(c) of the Note Purchase Agreement is
hereby amended by deleting the reference to Section 7.02(b)
appearing in clause (i) thereof and by deleting the phrase "or,
in the case of a prepayment in respect of Excess Cash Flow, set
forth a reasonably detailed calculation of the amount of Excess
Cash Flow and the amounts to be offered to the Purchasers in
accordance with Section 7.02(b)" appearing in clause (ii)
thereof.<PAGE>
2
(c) Section 7.02(d) of the Note Purchase Agreement is
hereby amended by deleting the phrase "or Excess Cash Flow"
appearing in the second sentence thereof.
2. Defined Terms. Section 11.01 of the Note Purchase
Agreement is hereby amended by deleting in their entirety the
definitions of the terms "Designated Capital Expenditure",
"Designated Dividends", "Designated Payment" and "Excess Cash
Flow".
SECTION III. Effectiveness.
The Second Amendment shall become effective on and as
of the date that (i) the Required Creditors (as defined in the
Intercreditor Agreement) shall have evidenced their consent to
the terms hereof by executing this Second Amendment and the
Amendment to the Credit Agreement, substantially in the form of
Exhibit A hereto (the "Credit Agreement Amendment"); (ii) the
Credit Agreement Amendment becomes effective; (iii) each
Purchaser that has delivered an executed counterpart hereof to
the Collateral Agent (or its counsel) at or prior to the date of
effectiveness of this Second Amendment shall have received
payment of a fee equal to 0.07% of the sum of the outstanding
principal amount of such Purchaser's Notes (calculated as of the
date of effectiveness of this Second Amendment); (iv) Cravath,
Swaine & Moore, special counsel for the Purchasers, shall have
received payment of their fees and disbursements incurred in
connection with the preparation, execution and delivery of this
Second Amendment and the amendment to the Credit Agreement
contemplated hereby (to the extent that notice of the amount of
such fees and disbursements is given to the Issuer prior to the
date of effectiveness of this Second Amendment); (v) Cravath,
Swaine & Moore shall have received (a) a certificate, dated the
date of effectiveness of this Second Amendment and signed by a
Financial Officer of Holdings and the Issuer, confirming the
representations made in Section V of this Second Amendment and
(b) the favorable written opinion of James P. Daley, Esq.,
general counsel for Holdings and the Issuer, dated the date of
effectiveness of this Second Amendment, addressed to the
Purchasers, and substantially in the form attached hereto as
Exhibit B. Each of Holdings and the Issuer hereby directs its
general counsel to deliver the opinion referred to in clause (b)
above, it being understood that the Purchasers will and may rely
thereon.
SECTION IV. Consent.
The Purchasers hereby consent to and approve the Credit
Agreement Amendment substantially in the form of Exhibit A
hereto.<PAGE>
3
SECTION V. Representations and Warranties.
After giving effect to the amendments contained herein,
each Company hereby confirms, reaffirms and restates the
representations and warranties of such Company set forth in
Article II of the Note Purchase Agreement, except to the extent
such representations and warranties expressly relate to an
earlier date and except that it is understood that Chicago and
North Western Railway Company is the surviving corporation of
mergers of CNW, Chicago and North Western Transportation Company
and Acquisition Corp. and Chicago and North Western
Transportation Company is the successor to Holdings.
SECTION VI. Miscellaneous.
1. Limited Effect. Except as expressly amended or
modified by this Second Amendment, all of the provisions and
covenants of the Note Purchase Agreement are and shall continue
to remain in full force and effect in accordance with the terms
thereof.
2. Counterparts. This Second Amendment may be
executed by one or more of the parties hereto in any number of
separate counterparts and all of said counterparts taken together
shall be deemed to constitute on end the same instrument.
3. Governing Law. THIS SECOND AMENDMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this
Second Amendment to be duly executed by their respective
authorized officers as of the day and first year written.
CHICAGO AND NORTH WESTERN
RAILWAY COMPANY,
by
/s/ John E. Voldseth
Name: John E. Voldseth
Title: Vice President
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY,
by
/s/ John E. Voldseth
Name: John E. Voldseth
Title: Vice President<PAGE>
4
JACKSON NATIONAL LIFE
INSURANCE COMPANY,
by
/s/ John A. Knutson
Name: John A. Knutson
Title: Chief Operating Officer
CONNECTICUT GENERAL LIFE
INSURANCE COMPANY,
by CIGNA INVESTMENTS, INC.,
by
/s/ Stephen A. Osborn
Name: Stephen A. Osborn
Title: Managing Director
KEMPER INVESTORS LIFE
INSURANCE COMPANY,
by
/s/ H. E. Guenther
Name: H. E. Guenther
Title: Authorized Signatory
by
/s/ F. Collecchia
Name: F. Collecchia
Title: Authorized Signatory
FEDERAL KEMPER LIFE ASSURANCE
COMPANY
by
/s/ H. E. Guenther
Name: H. E. Guenther
Title: Authorized Signatory
by
/s/ F. Collecchia
Name: F. Collecchia
Title: Authorized Signatory<PAGE>
5
AMERICAN MANUFACTURERS MUTUAL
INSURANCE COMPANY,
by
/s/ H. E. Guenther
Name: H. E. Guenther
Title: Authorized Signatory
by
/s/ F. Collecchia
Name: F. Collecchia
Title: Authorized Signatory
TEACHERS INSURANCE AND
ANNUNITY ASSOCIATION OF
AMERICA,
by
/s/ William Stuart Shepetin
Name: William Stuart Shepetin
Title: Director-Private
Placements
IDS LIFE INSURANCE COMPANY,
by
/s/ Lorraine R. Hart
Name: Lorraine R. Hart
Title: Vice President,
Investments
AMEX LIFE ASSURANCE COMPANY,
by
/s/ David M. Kuplic
Name: David M. Kuplic
Title: Vice President-
Investments
AMERICAN CENTURION LIFE AND
ACCIDENT ASSURANCE COMPANY,
by
/s/ David M. Kuplic
Name: David M. Kuplic
Title: Vice President-
Investments<PAGE>
6
IDS LIFE INSURANCE COMPANY OF
NEW YORK,
by
/s/ Lorraine R. Hart
Name: Lorraine R. Hart
Title: Investment Officer
AMERICAN ENTERPRISE LIFE
INSURANCE COMPANY,
by
/s/ Lorraine R. Hart
Name: Lorraine R. Hart
Title: Vice President,
Investments
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY,
by
/s/ A. Kipp Koester
Name: A. Kipp Koester
Title: Vice President
MERRILL LYNCH LIFE INSURANCE
COMPANY,
by
/s/ David M. Dunford
Name: David M. Dunford
Title: Senior Vice President
BANKERS UNITED LIFE ASSURANCE
COMPANY, as the successor to,
GENERAL SERVICE LIFE INSURANCE
COMPANY,
by
/s/ Gregory W. Theobald
Name: Gregory W. Theobald
Title: Vice President and
Assistant Secretary<PAGE>
7
FIRST AUSA LIFE INSURANCE
COMPANY,
by
/s/ Gregory W. Theobald
Name: Gregory W. Theobald
Title: Vice President and
Assistant Secretary
PFL LIFE INSURANCE COMPANY,
by
/s/ Gregory W. Theobald
Name: Gregory W. Theobald
Title: Vice President and
Assistant Secretary
MONUMENTAL LIFE INSURANCE
COMPANY,
by
/s/ Gregory W. Theobald
Name: Gregory W. Theobald
Title: Vice President and
Assistant Secretary
INTERNATIONAL LIFE INVESTORS
INSURANCE COMPANY,
by
/s/ Gregory W. Theobald
Name: Gregory W. Theobald
Title: Vice President and
Assistant Secretary
THE TRAVELERS INSURANCE
COMPANY,
by
/s/ Paul T. Quistberg
Name: Paul T. Quistberg
Title: Assistant Investment
Officer<PAGE>
8
THE TRAVELERS INDEMNITY
COMPANY,
by
/s/ Paul T. Quistberg
Name: Paul T. Quistberg
Title: Assistant Investment
Officer
THE TRAVELERS LIFE AND ANNUITY
COMPANY,
by
/s/ Paul T. Quistberg
Name: Paul T. Quistberg
Title: Assistant Investment
Officer
THE VARIABLE ANNUITY LIFE
INSURANCE COMPANY,
by
Name:
Title:
EQUITABLE LIFE INSURANCE
COMPANY,
by
/s/ Sheryl Rothman
Name: Sheryl Rothman
Title: Investment Officer
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES,
by
/s/ Sheryl Rothman
Name: Sheryl Rothman
Title: Investment Officer<PAGE>
9
NEW ENGLAND MUTUAL LIFE
INSURANCE COMPANY,
by
Name:
Title:
SUN LIFE ASSURANCE COMPANY OF
CANADA (U.S.),
by
/s/ L. Brock Thomson
Name: L. Brock Thomson
Title: Treasurer
SUN LIFE ASSURANCE COMPANY OF
CANADA,
by
/s/ John N. Whelihan
Name: John N. Whelihan
Title: Assistant Vice President
-for President
by
/s/ Jeffrey J. Skerry
Name: Jeffrey J. Skerry
Assistant Counsel
-for Secretary
AMERICAN INTERNATIONAL LIFE
ASSURANCE COMPANY OF NEW YORK,
by
/s/ Jerome T. Muldowney
Name: Jerome T. Muldowney
Title: Senior Vice President
AIG LIFE INSURANCE COMPANY,
by
/s/ Jerome T. Muldowney
Name: Jerome T. Muldowney
Title: Senior Vice President<PAGE>
10
UNITED PACIFIC LIFE INSURANCE
COMPANY,
by
Name:
Title:
LIFE INSURANCE COMPANY OF
NORTH AMERICA,
by CIGNA INVESTMENTS, INC.,
by
/s/ Stephen A. Osborn
Name: Stephen A. Osborn
Title: Managing Director
NORTHWESTERN NATIONAL LIFE
INSURANCE COMPANY,
by
Name:
Title:
THE NORTH ATLANTIC LIFE
INSURANCE COMPANY OF AMERICA,
by
Name:
Title:
FARM BUREAU LIFE INSURANCE
COMPANY,
by
/s/ Richard D. Warming
Name: Richard D. Warming
Title: Vice President-
Chief Investment Officer<PAGE>
11
FBL INSURANCE COMPANY
by
/s/ Richard D. Warming
Name: Richard D. Warming
Title: Vice President-
Chief Investment Officer
CENTRAL LIFE ASSURANCE COMPANY,
by
/s/ Robert B. Lindstrom
Name: Robert B. Lindstrom
Title: Vice President
GENERAL AMERICAN LIFE
INSURANCE COMPANY,
by
Name:
Title:
WASHINGTON NATIONAL INSURANCE
COMPANY,
by
/s/ C. Bruce Dunn
Name: C. Bruce Dunn
Title: Director of Investments
UNITED PRESIDENTIAL LIFE
INSURANCE COMPANY,
by
/s/ Dennis A. Taylor
Name: Dennis A. Taylor
Title: Senior Vice President,
Chief Financial Officer
and Treasurer<PAGE>
12
AMERICAN LIFE & CASUALTY
INSURANCE COMPANY,
by
/s/ John F. Williamson
Name: John F. Williamson
Title: Vice President
by
/s/ David C. Gobberdiel
Name: David C. Gobberdiel
Title: Vice President
ELITE AND COMPANY,
by
Name:
Title:
ST. LOUIS REINSURANCE CO.,
by
Name:
Title:<PAGE>
EXHIBIT A
Amendment dated as of August 26, 1994 to the Credit Agreement
dated as of March 27, 1992, as previously amended, among Chicago
and North Western Railway Company (formerly Chicago and North
Western Transportation Company), Chicago and North Western
Transportation Company (formerly Chicago and North Western
Holdings Corp.), the Lenders named therein, Bank of Montreal, as
Issuing Bank, the Co-Agents party thereto and Chemical Bank, as
Agent.<PAGE>
EXHIBIT B
August 26, 1994
TO: Each of the purchasers (the "Purchasers") parties to the
Second Amendment dated as of August 26, 1994 (the
"Amendment") to the Senior Secured Note Purchase Agreement
dated as of March 27, 1992 (the "Note Purchase Agreement"),
among Chicago and North Western Transportation Company
(formerly Chicago and North Western Holdings Corp.), as
Guarantor, Chicago and North Western Railway Company
(formerly Chicago and North Western Transportation Company),
as Issuer, and each Purchaser named therein.
Ladies and Gentlemen:
This opinion is furnished to you pursuant to
Section III(v)(b) of the Amendment. Unless otherwise defined
herein, terms defined in the Amendment and the Credit Agreement
are used herein as therein defined.
I am General Counsel of Chicago and North Western
Railway Company (as successor to Chicago and North Western
Transportation Company), a Delaware corporation (the "Issuer").
Each of the corporations listed on Schedule I hereto
(collectively referred to together with the Issuer as the
"Corporations") are wholly-owned direct or indirect subsidiaries
of Chicago and North Western Transportation Company (as successor
to Chicago and North Western Holdings Corp.), a Delaware
corporation (the "Guarantor"). As General Counsel of the Issuer,
I or attorneys on my staff or on the legal staffs of the
Corporations and the Issuer are familiar with the organization
and operations of the Corporations and their legal affairs are
encompassed by my duties as General Counsel for the Issuer.
I or attorneys on my staff have reviewed original
executed copies of, or facsimile transmissions or photocopies of
execution copies of the Amendment, the Note Purchase Agreement
(and any Note or Notes for each Purchaser executed by the
Issuer), the Pledge Agreement, the Security Agreement, the
Guarantee Agreement, the Mortgages, the Credit Agreement (and the
Credit Agreement Notes executed by the Issuer), and the
Intercreditor Agreement (the above documents are hereinafter
collectively referred to as the "Documents"). In addition, in
connection with this opinion, I or attorneys on my staff have
examined the originals or copies, certified or otherwise
identified to my satisfaction, of such corporate records,
agreements, documents and other instruments (including memoranda
prepared by outside counsel) and such certificates or comparable
documents of public officials and of officers and representatives<PAGE>
of the Corporations and have made such other and further
investigations, as I or other attorneys on my staff have deemed
relevant and necessary as a basis for the opinions hereinafter
set forth. For purposes of this opinion, I or attorneys on my
staff have assumed, with your permission, the genuineness of all
signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to me or them as
originals, the conformity to originals of all facsimile
transmissions or photocopies of (i) such records, instruments,
certificates and other documents and (ii) executed or execution
copies of such agreements, and that the parties to the Documents
other than the Corporations have the corporate power and
authority to enter into and perform each of the Documents and
that each of the Documents has been duly authorized, executed and
delivered by each such other party.
As to questions of fact relevant to this opinion, I
have relied upon certificates of officers and representatives of
the Corporations or public officials.
Based upon and subject to the foregoing, and subject to
the qualifications and exceptions set forth herein, I am of the
opinion that:
1. Each of the Corporations and the Guarantor has the
requisite corporate power and authority, and all material
licenses, permits, franchises, consents and approvals, to own its
property and assets and to carry on its business as now conducted
except in any case where the failure to hold or be in compliance
with any of the foregoing would not individually or in the
aggregate have a material adverse effect on the Corporations or
the Guarantor. Each of the Issuer and the Guarantor also has the
requisite corporate power and authority to execute, deliver and
perform the Amendment.
2. The execution, delivery and performance by the
Issuer and the Guarantor of the Amendment will not:
(i) violate any provision of the articles of
incorporation or by-laws of the Issuer or the Guarantor or
violate (x) any provision of law, statute, rule or
regulation or any order, writ, injunction or decree of any
court or governmental instrumentality of (1) the State of
Illinois or the General Corporation Law of the State of
Delaware or of the United States of America or (2) to the
best of my knowledge and the knowledge of attorneys on my
staff, any other jurisdiction of the United States, or
(y) any indenture, certificate of designation for preferred
stock, agreement or other instrument known to us after due
inquiry to which any of the Corporations is a party or by
which any of them or any of their property is bound,
(ii) be in conflict with, result in a breach of
or constitute (with notice or lapse of time or both) a
default under any such indenture, agreement or other
instrument, or
(iii) result in the creation or imposition of (or
the obligation to create or impose) any material Lien upon<PAGE>
any of the property or assets of any of the Corporations
under any such indenture, agreement or other instrument.
3. The Amendment has been duly executed and delivered
by each of the Issuer and the Guarantor. The Note Purchase
Agreement, as amended by the Amendment, and the other Documents
continue to constitute valid and legally binding obligations of
each of the Corporations that is a party thereto, enforceable
against each such Corporation in accordance with their respective
terms, except to the extent that the enforceability thereof may
be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to or affecting creditors' rights
generally and by general equitable principles (regardless of
whether enforcement is sought in equity or at law).
4. To the best of my knowledge and the knowledge of
attorneys on my staff, no order, consent, approval, license,
authorization or validation of, or filing, recording or
registration with, or exemption by, the ICC or any other
Governmental Authority in the states in which the Corporations
conduct business, is required to be obtained or made by any
Corporation to authorize, or is required in connection with the
execution, delivery and performance of, the Amendment (except
such as have been obtained or made and are in full force and
effect).
The attorneys on my staff and I are admitted to
practice in the State of Illinois and this opinion accordingly is
limited to the laws thereof, the General Corporation Law of the
State of Delaware and the laws of the United States. However, I
also advise you that nothing has come to our attention with
respect to the laws of other applicable jurisdictions that is
inconsistent with the conclusions expressed herein. I recognize
that the Amendment is governed by the laws of the State of
New York and that neither I nor any of the attorneys on my staff
are admitted to practice in the State of New York. In giving the
opinion expressed in paragraph 3, I have assumed that the laws of
the State of New York are in all relevant respects consistent
with the laws of the State of Illinois. Finally, I advise you
that we customarily review, either ourselves or with assistance
of local counsel, questions that arise from time to time relating
to the application to the business of the Corporations of the
laws of the jurisdictions in which the Corporations have material
operations.
Very truly yours,
James P. Daley
Senior Vice President
General Counsel and Secretary<PAGE>
SCHEDULE I
The Corporations
Chicago and North Western Railway Company
Midwestern Railroad Properties, Incorporated
North Western Leasing Company
Signage, Inc.
Wisconsin Town Lot Company
CNW Realco, Inc.<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
September 30, 1994 Condensed Consolidated Statement of Income and Balance
Sheet of Chicago and North Western Transportation Company and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 103,400
<SECURITIES> 0
<RECEIVABLES> 136,200
<ALLOWANCES> 200
<INVENTORY> 38,400
<CURRENT-ASSETS> 289,700
<PP&E> 2,167,400
<DEPRECIATION> 319,100
<TOTAL-ASSETS> 2,203,300
<CURRENT-LIABILITIES> 333,500
<BONDS> 1,060,200
<COMMON> 400
0
0
<OTHER-SE> 296,000
<TOTAL-LIABILITY-AND-EQUITY> 2,203,300
<SALES> 0
<TOTAL-REVENUES> 847,200
<CGS> 0
<TOTAL-COSTS> 677,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 200
<INTEREST-EXPENSE> 72,100
<INCOME-PRETAX> 104,200
<INCOME-TAX> 39,600
<INCOME-CONTINUING> 64,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 64,600
<EPS-PRIMARY> 1.43
<EPS-DILUTED> 1.43
</TABLE>
