<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
Amendment No. 5
To
SCHEDULE 14D-9
Solicitation/Recommendation Statement Pursuant
to Section 14(d)(4) of the Securities Exchange Act of 1934
----------------
CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY
(Name of Subject Company)
CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY
(Names of Person(s) Filing Statement)
Common Stock, Par Value $0.01 Per Share
(Title of Class of Securities)
167155 10 0
(CUSIP Number of Class of Securities)
________________
ROBERT SCHMIEGE
Chairman of the Board, President and Chief Executive Officer
Chicago and North Western Transportation Company
165 North Canal Street
Chicago, Illinois 60606-1551
(312) 559-7000
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications
on Behalf of the Person(s) filing Statement)
________________
With a copy to:
PAUL J. MILLER, ESQ.
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
(312) 876-8074
<PAGE>
This Amendment supplements and amends as Amendment No. 5 the
Solicitation/Recommendation Statement on Schedule 14D-9, originally
filed on March 23, 1995 and amended by Amendment No. 1 thereto
filed on March 30, 1995, Amendment No. 2 filed on April 3, 1995,
Amendment No. 3 filed on April 7, 1995 and Amendment No. 4 filed on
April 10, 1995 (the "Schedule 14D-9), by Chicago and North Western
Transportation Company, a Delaware corporation (the "Company"),
relating to the tender offer by UP Rail, Inc. (the "Purchaser"), a
Utah corporation and an indirect wholly-owned subsidiary of Union
Pacific Corporation, a Utah corporation ("Union Pacific"),
initially disclosed in a Tender Offer Statement on Schedule 14D-1,
dated March 23, 1995, to purchase all of the outstanding shares of
common stock, par value $.01 per share (the "Shares"), of the
Company at $35 per Share, net to the sellers thereof in cash, upon
the terms and subject to the conditions set forth in the Offer to
Purchase, dated March 23, 1995 (the "Offer to Purchase"), as
amended by the Supplement thereto filed on April 14, 1995 (the
"Supplement"), and the revised Letter of Transmittal. The Supple-
ment has been filed with the SEC as Exhibit 40 to the Schedule 14D-
9. Capitalized terms used and not otherwise defined herein shall
have the meanings set forth in the Schedule 14D-9.
Item 3. Identity and Background
Item 3(b) of the Schedule 14D-9 is hereby amended and
supplemented by adding the following information:
On April 13, 1994, the Purchaser and the Company entered into
an amendment to the Option Agreement to provide that the Purchaser
may only exercise its option to acquire additional shares from the
Company (thereby permitting a short-form merger) if the Purchaser
acquires more than 87.5% (previously 85%) but less than 90% of the
Shares in the Offer. A copy of such amendment has been filed with
the SEC as Exhibit 41 to the Schedule 14D-9, and is hereby
incorporated herein by reference.
The discussion set forth under the caption "SPECIAL FACTORS -
Interests of Certain Persons in the Transaction" in the Offer to
Purchase, which is incorporated by reference under Item 3(b) of the
Schedule 14D-9, has been amended and supplemented by Item 5 of the
Supplement, and Item 5 of the Supplement is hereby incorporated
herein by reference. Item 5 of the Supplement contains summaries
of certain of these arrangements. Such summaries do not purport to
be complete and are qualified in their entirety by reference to the
full text of the appropriate documents which have been filed with
the SEC as exhibits to the Schedule 14D-9, each of which is hereby
incorporated herein by reference.
1
<PAGE>
Item 4. The Solicitation or Recommendation
Item 4(b)(1) of the Schedule 14D-9 is hereby amended and
supplemented by adding the discussion set forth under Item 1 of
the Supplement, and Item 1 of the Supplement is hereby incorporated
by reference herein.
Item 4(b)(2) of the Schedule 14D-9 is hereby amended and
supplemented by adding the discussion set forth under Item 3 of
the Supplement, and Item 3 of the Supplement is hereby incorporated
by reference herein.
Item 5. Persons Retained, Employed or to be Compensated
Item 5 of the Schedule 14D-9 is hereby amended and supplement-
ed by adding the discussion set forth under Item 2 of the Supple-
ment, and Item 2 of the Supplement is hereby incorporated by reference
herein.
Item 8. Additional Information
Item 8 of the Schedule 14D-9 is hereby amended and supplement-
ed by adding the following information:
Purchaser has extended the period of time for which the Offer
and withdrawal rights are open until 12:00 midnight, New York City
time, on Monday, April 24, 1995, unless the Offer is further
extended.
Item 8 of the Schedule 14D-9 is also hereby amended and
supplemented by adding the discussion set forth under Item 6 of the
Supplement, and Item 6 of the Supplement is hereby incorporated by
reference herein. Item 6 of the Supplement contains summaries of
certain pending lawsuits and the status thereof. Such summaries do
not purport to be complete and are qualified in their entirety by
reference to the full text of the appropriate documents which have
been filed with the SEC as exhibits to the Schedule 14D-9, each of
which is hereby incorporated herein by reference.
Item 9. Material to be Filed as Exhibits
Item 9 of the Schedule 14D-9 is hereby supplemented by adding
the following information:
Exhibit 40 - Supplement to the Offer to Purchase dated
April 14, 1995.*
Exhibit 41 - Amendment to the Company Stock Option Agree-
ment, dated April 13, 1995, by and between the
Purchaser and the Company.
Exhibit 42 - Clarification Document, dated April 12, 1995,
among the Company, Union Pacific and the
Purchaser.
Exhibit 43 - Memorandum of Understanding, dated April 13,
1995, by and among counsel for the Company,
Union Pacific and the plaintiffs in the five
2
<PAGE>
purported class action suits previously filed
in the Court of Chancery in Delaware.
_______________________
* Items 1, 2, 3, 5 and 6 of the Supplement are hereby incorpo-
rated by reference in this Amendment. No other section of the
Supplement is incorporated by reference in this Amendment or
shall be deemed filed with the SEC by the Company for purposes
of the Exchange Act.
3
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement
is true, complete and correct.
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY
By: /s/ RONALD J. CUCHNA
Date: April 14, 1995
4
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
Exhibit 40 - Supplement to the Offer to Purchase dated
April 14, 1995.*
Exhibit 41 - Amendment to the Company Stock Option Agreement,
dated April 13, 1995, by and between the Pur-
chaser and the Company.
Exhibit 42 - Clarification Document, dated April 12, 1995,
among the Company, Union Pacific and the Pur-
chaser.
Exhibit 43 - Memorandum of Understanding, dated April 13,
1995, by and among counsel for the Company,
Union Pacific and the plaintiffs in the five
purported class action suits previously filed in
the Court of Chancery in Delaware.
_______________________
* Items 1, 2, 3, 5 and 6 of the Supplement are hereby incorpo-
rated by reference in this Amendment. No other section of the
Supplement is incorporated by reference in this Amendment or
shall be deemed filed with the SEC by the Company for purposes
of the Exchange Act.
5
<PAGE>
SUPPLEMENT TO
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY
AT
$35.00 NET PER SHARE
BY
UP RAIL, INC.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
UNION PACIFIC CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS HAVE BEEN EXTENDED UNTIL 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, APRIL 24, 1995,
UNLESS THE OFFER IS FURTHER EXTENDED.
------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES WHICH, WHEN ADDED TO THE SHARES OF NON-VOTING COMMON STOCK OF CHICAGO
AND NORTH WESTERN TRANSPORTATION COMPANY (THE 'COMPANY') BENEFICIALLY
OWNED BY UNION PACIFIC CORPORATION ('PARENT') AND UP RAIL, INC. (THE
'PURCHASER') (ASSUMING CONVERSION THEREOF INTO SHARES), CONSTITUTES AT
LEAST A MAJORITY OF THE SHARES OUTSTANDING ON A FULLY DILUTED BASIS
(ASSUMING CONVERSION OF THE NON-VOTING COMMON STOCK INTO SHARES)
AND (2) THE INTERSTATE COMMERCE COMMISSION'S APPROVAL OF PARENT'S
AND THE COMPANY'S APPLICATION FOR AN ORDER AUTHORIZING THE
COMMON CONTROL OF THE RAIL SUBSIDIARIES OF THE COMPANY AND
PARENT HAVING BECOME FINAL AND EFFECTIVE PRIOR TO THE
EXPIRATION OF THE OFFER. ON APRIL 6, 1995, THE INTERSTATE
COMMERCE COMMISSION (THE 'ICC') SERVED AN ORDER, EFFECTIVE
ON THE SAME DAY, SETTING THE FINAL TERMS OF THE PREVIOUSLY
IMPOSED CONDITION IN FAVOR OF THE SOO LINE RAILROAD
COMPANY ('SOO') TO PARENT'S EXERCISE OF CONTROL OVER
THE COMPANY'S RAILROAD SUBSIDIARIES. THE COMPANY IS
CONTRACTUALLY OBLIGATED, SUBJECT TO THE CONSUMMATION
OF THE OFFER, TO EXECUTE CERTAIN AMENDMENTS TO
AGREEMENTS, PREVIOUSLY ENTERED INTO BETWEEN THE
PREDECESSORS OF CHICAGO AND NORTH WESTERN
RAILWAY COMPANY ('CNW RAILWAY') AND SOO. UPON
SUCH EXECUTION, THE ICC ORDER WILL BE FINAL
AND EFFECTIVE, AND PARENT WILL HAVE ICC
AUTHORITY TO EXERCISE CONTROL OVER THE
COMPANY, INCLUDING THE PURCHASE OF
SHARES IN THE OFFER AND THE MERGER.
----------------------------------------------------------------------
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY (WITH ONE DIRECTOR
AFFILIATED WITH PARENT ABSENT AND NOT VOTING) APPROVED THE OFFER AND THE
MERGER, HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN
THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS (OTHER THAN
PARENT AND THE PURCHASER) AND RECOMMENDS THAT STOCKHOLDERS OF
THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT
TO THE OFFER.
------------------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should either (i) complete and sign the revised Letter of Transmittal (or
a facsimile thereof) in accordance with the instructions in the revised Letter
of Transmittal, have such stockholder's signature thereon guaranteed if required
by Instruction 1 to the revised Letter of Transmittal, mail or deliver the
revised Letter of Transmittal or such facsimile and any other required documents
to the Depositary and either deliver the certificates for such Shares to the
Depositary along with the revised Letter of Transmittal or facsimile or deliver
such Shares pursuant to the procedure for book-entry transfer set forth in 'THE
OFFER--Procedures for Tendering Shares' in the Offer to Purchase prior to the
expiration of the Offer or (ii) request such stockholder's broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
such stockholder. Tendering stockholders may continue to use the BLUE Letter of
Transmittal delivered with the Offer to Purchase. A stockholder having Shares
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee must contact such broker, dealer, commercial bank, trust company
or other nominee if such stockholder desires to tender such Shares.
A stockholder who desires to tender Shares and whose certificates for such
Shares are not immediately available or who cannot comply with the procedures
for book-entry transfer on a timely basis, may tender such Shares by following
the procedures for guaranteed delivery set forth in 'THE OFFER--Procedures for
Tendering Shares' in the Offer to Purchase.
Questions and requests for assistance or for additional copies of the Offer
to Purchase, this Supplement, the revised Letter of Transmittal or other tender
offer materials, may be directed to the Information Agent or the Dealer Manager
at their respective addresses and telephone numbers set forth on the back cover
of this Supplement.
------------------------
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
------------------------
The Dealer Manager for the Offer is:
CS First Boston
April 14, 1995
<PAGE>
TABLE OF CONTENTS
Page
----
INTRODUCTION.......................................... 1
SPECIAL FACTORS....................................... 2
Background of the Transaction....................... 2
Opinion of The Blackstone Group L.P. ............... 2
Summary of Presentation Materials to the Board...... 3
Opinion of CS First Boston Corporation.............. 3
Interests of Certain Persons in the Transaction..... 3
Certain Litigation.................................. 5
FINANCING OF THE TRANSACTION.......................... 5
DISSENTERS' RIGHTS.................................... 6
THE OFFER............................................. 6
1. Terms of the Offer................................ 6
2. Acceptance for Payment and Payment................ 6
5. Price Range of Shares; Dividends.................. 7
11. Certain Legal Matters; Regulatory Approvals....... 7
<PAGE>
To the Holders of Common Stock of Chicago and North Western Transportation
Company:
INTRODUCTION
The following information amends and supplements the Offer to Purchase,
dated March 23, 1995 (the 'Offer to Purchase'), of UP Rail, Inc. (the
'Purchaser'), a Utah corporation and an indirect wholly owned subsidiary of
Union Pacific Corporation, a Utah corporation ('Parent'), pursuant to which the
Purchaser is offering to purchase all outstanding shares of common stock, par
value $.01 per share (the 'Common Stock' or the 'Shares'), of Chicago and North
Western Transportation Company, a Delaware corporation (the 'Company'), at a
price of $35.00 per Share, net to the seller in cash (the 'Offer Price'), upon
the terms and subject to the conditions set forth in the Offer to Purchase, this
Supplement and in the revised Letter of Transmittal (which, as amended from time
to time, together constitute the 'Offer').
This Supplement should be read in conjunction with the Offer to Purchase.
This Supplement, among other things, sets forth certain additional information.
Except as set forth in this Supplement or the revised Letter of Transmittal, the
terms and conditions previously set forth in the Offer to Purchase and the
Letter of Transmittal remain applicable in all respects to the Offer.
Capitalized terms used but not defined in this Supplement have the meanings
assigned to them in the Offer to Purchase.
The purpose of the Offer is for Parent, through the Purchaser, to acquire
the entire equity interest in the Company. The Purchaser currently beneficially
owns all 12,835,304 of the issued and outstanding shares of Non-Voting Common
Stock of the Company, par value $.01 per share (the 'Non-Voting Common Stock')
which, assuming conversion thereof into Shares, represents 27.48% of the
outstanding Shares calculated on a fully diluted basis (assuming conversion of
the shares of Non-Voting Common Stock into Shares and exercise of outstanding
stock options). The Offer is being made pursuant to an Agreement and Plan of
Merger, dated as of March 16, 1995 (the 'Merger Agreement'), by and among the
Company, Parent and the Purchaser, a copy of which is attached to the Offer to
Purchase as Annex I. The Merger Agreement provides that, following the
completion of the Offer and the satisfaction or the waiver of certain
conditions, the Purchaser will be merged with and into the Company (the
'Merger'), with the Company as the surviving corporation (the 'Surviving
Corporation'). In the Merger, each outstanding Share (other than Shares held in
the treasury of the Company or owned by Parent, the Purchaser or any other
wholly owned subsidiary of Parent), will be converted into the right to receive
the Offer Price or any higher price per Share paid in the Offer, without
interest thereon. As a result of the Merger, the Surviving Corporation will
become an indirect wholly owned subsidiary of Parent. See 'SPECIAL
FACTORS--Purpose and Structure of the Transaction' and 'THE MERGER AGREEMENT' in
the Offer to Purchase. The time at which the Merger is consummated in accordance
with the Merger Agreement is hereinafter referred to as the 'Effective Time.'
The Offer and the Merger are sometimes collectively referred to herein as the
'Transaction.'
On April 13, 1995, the Purchaser and the Company entered into an amendment
to the Option Agreement to provide that the Purchaser may only exercise its
option to acquire additional Shares from the Company (thereby permitting a
short-form merger) if the Purchaser acquires more than 87.5% (previously 85%)
but less than 90% of the Shares in the Offer.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE HAVING BEEN
VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER
OF SHARES WHICH, WHEN ADDED TO THE SHARES OF NON-VOTING COMMON STOCK
BENEFICIALLY OWNED BY PARENT AND THE PURCHASER (ASSUMING CONVERSION THEREOF INTO
SHARES), CONSTITUTES AT LEAST A MAJORITY OF THE SHARES OUTSTANDING ON A FULLY
DILUTED BASIS (ASSUMING CONVERSION OF THE NON-VOTING COMMON STOCK INTO SHARES)
(THE 'MINIMUM CONDITION') AND (2) THE ICC'S APPROVAL OF PARENT'S AND THE
COMPANY'S APPLICATION FOR AN ORDER AUTHORIZING THE COMMON CONTROL OF THE RAIL
SUBSIDIARIES OF THE COMPANY AND PARENT HAVING BECOME FINAL AND EFFECTIVE PRIOR
TO THE EXPIRATION OF THE OFFER (THE 'ICC FINAL APPROVAL CONDITION'). ON APRIL 6,
1995, THE ICC SERVED AN ORDER, EFFECTIVE ON THE SAME DAY, SETTING THE FINAL
TERMS OF THE PREVIOUSLY IMPOSED CONDITION IN FAVOR OF SOO TO PARENT'S EXERCISE
OF CONTROL OVER THE COMPANY'S RAILROAD SUBSIDIARIES. THE COMPANY IS
CONTRACTUALLY OBLIGATED, SUBJECT TO THE CONSUMMATION OF THE OFFER, TO EXECUTE
CERTAIN AMENDMENTS TO AGREEMENTS, PREVIOUSLY ENTERED INTO BETWEEN THE
PREDECESSORS OF CNW
<PAGE>
RAILWAY AND SOO. UPON SUCH EXECUTION, THE ICC ORDER WILL BE FINAL AND EFFECTIVE,
AND PARENT WILL HAVE ICC AUTHORITY TO EXERCISE CONTROL OVER THE COMPANY,
INCLUDING THE PURCHASE OF SHARES IN THE OFFER AND THE MERGER.
THE BOARD OF DIRECTORS OF THE COMPANY (THE 'BOARD' OR 'BOARD OF DIRECTORS')
HAS UNANIMOUSLY (WITH MR. RICHARD K. DAVIDSON, PRESIDENT OF PARENT, ABSENT AND
NOT VOTING) APPROVED THE OFFER AND THE MERGER, DETERMINED THAT THE OFFER AND THE
MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF HOLDERS OF SHARES (OTHER THAN
PARENT AND THE PURCHASER) AND RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY ACCEPT
THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. See 'SPECIAL
FACTORS--Recommendation of the Board of Directors of the Company; Fairness of
the Transaction' in the Offer to Purchase.
THE BLACKSTONE GROUP L.P. ('BLACKSTONE') HAS DELIVERED TO THE BOARD ITS
WRITTEN OPINION TO THE EFFECT THAT, AS OF THE DATE OF THE MERGER AGREEMENT, THE
CASH CONSIDERATION TO BE RECEIVED BY THE HOLDERS OF SHARES PURSUANT TO THE OFFER
AND THE MERGER IS FAIR TO SUCH HOLDERS FROM A FINANCIAL POINT OF VIEW. See
'SPECIAL FACTORS--Opinion of The Blackstone Group L.P.' in the Offer to Purchase
and this Supplement.
THE OFFER TO PURCHASE, THIS SUPPLEMENT AND THE REVISED LETTER OF
TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE
ANY DECISION IS MADE WITH RESPECT TO THE OFFER.
The procedure for tendering Shares is set forth in 'THE OFFER--Procedures
for Tendering Shares' in the Offer to Purchase. Tendering stockholders may
continue to use the BLUE Letter of Transmittal and GRAY Notice of Guaranteed
Delivery delivered with the Offer to Purchase or may use the GREEN revised
Letter of Transmittal and PINK revised Notice of Guaranteed Delivery which are
being provided with this Supplement.
Stockholders who have validly tendered Shares and not withdrawn such
tenders and who wish to have such Shares purchased pursuant to the Offer need
not take any further action except for complying with the procedure for
guaranteed delivery if such procedure is being used.
1. The discussion set forth in 'SPECIAL FACTORS--Background of the
Transaction' in the Offer to Purchase is hereby amended and supplemented as
follows:
During late 1994 and January 1995, representatives of Blackstone discussed
with the Company's management the advantages in terms of potentially increased
negotiating leverage and disadvantages of adopting a stockholders' rights plan;
they also discussed this topic with members of the Company's Board (with Mr.
Davidson absent) following the Board's December 15, 1994 meeting.
At the February 28 Board meeting, again with Mr. Davidson absent, the
benefits and detriments of adoption of a stockholders' rights plan were
reviewed, counsel made a presentation of legal considerations, and the Board
concluded to defer adoption of a plan. The Board's conclusion was based on their
view that (i) a rights plan would dissuade Parent from making a friendly offer,
and that, given Parent's existing 29% stock ownership in the Company and the
absence of any realistic potential competitive bidders, a friendly offer was
likely to result in a higher ultimate price than a hostile offer; and (ii) a
rights plan could be adopted quickly if the need arose. A rights plan was not
thereafter adopted because Parent proceeded to negotiate directly with the
Company's Board and did not make a hostile offer for the Company.
2. The discussion set forth in 'SPECIAL FACTORS--Opinion of The Blackstone
Group L.P.' in the Offer to Purchase is hereby amended and supplemented by
adding to the end thereof:
Pursuant to the terms of the March 3, 1995 letter agreement, the Company
agreed to pay Blackstone a fee equal to $6,000,000, less one-half of the
$500,000 fee paid Blackstone pursuant to the December 14, 1994 letter agreement,
plus reasonable expenses. Blackstone's fee was contingent upon the signing of a
definitive agreement for a sale of, investment in, recapitalization by,
strategic alliance with or joint venture involving, the Company (the 'CNW
Transaction') and was payable as follows: (i) $4,750,000 upon the signing of
such an agreement; and (ii) the remaining $1,000,000 upon the earlier of the
consummation of the CNW Transaction and December 31, 1995. Two directors,
Messrs. Poling and Skinner, voted against the approval of Blackstone's fee
arrangement, on the basis of their view that the fee should be consistent with
the amount of time involved to
2
<PAGE>
complete the transaction. At no time did either Mr. Poling or Mr. Skinner
express any reservation about Blackstone's independence, ability or work.
Transtar, Inc. ('Transtar') is a holding company which, among other
businesses, is involved in the rail transportation business which operates in
certain of the same and neighboring geographic regions as the Company.
Blackstone and its affiliates hold a 51% interest in Transtar. The remaining 49%
is held by USX Corporation ('USX') and Transtar management. The Company's
business with Transtar accounts for less than 1% of the Company's revenues.
During 1993 and 1994, the Company informally engaged in discussions with
Blackstone and USX regarding a possible acquisition of Transtar. These
discussions ended in March 1994, at which point Mr. Schmiege had indicated to a
representative of USX a possible interest in pursuing a transaction in the
future. Company director Mr. Mossman, a Blackstone General Partner, and
Blackstone General Partners Messrs. Peterson and Schwarzman serve as Transtar
directors. Transtar was in no way involved in any aspect of the Merger
Agreement.
3. The discussion set forth in 'SPECIAL FACTORS--Summary of Presentation
Materials to the Board--Potential Value to Parent--Pro Forma Merger Analysis'
in the Offer to Purchase is hereby supplemented by revising the next to last
sentence of such section to read as follows:
In the Control Application, Parent and the Company projected that a merger
between the two companies would result in normalized annual synergies totaling
approximately $184 million in 1991 dollars. The Company's management determined
that in assessing the value of the Company to Parent, this $184 million should
be discounted, ascribing a relatively high level of probability to its
approximately $79 million cost reduction component and a substantially lower
level of probability to its approximately $105 million revenue enhancement
component.
4. The discussion set forth in 'SPECIAL FACTORS--Opinion of CS First
Boston Corporation' in the Offer to Purchase is hereby amended and supplemented
as follows:
The Comparable Company Analysis and the Discounted Cash Flow Analysis
performed by CS First Boston did not consider the value of the Synergies which
would be created by a merger between Parent and the Company in assessing the
Company's value. In order to determine the value of the Company to Parent as an
acquisition, it is therefore necessary to add the values derived by CS First
Boston's Synergies Analysis to the values derived by its Comparable Company
Analysis and Discounted Cash Flow Analysis. The values derived by performing
this addition do not necessarily reflect the price Parent would be willing to
pay to acquire the Company.
The ranges of values calculated by means of CS First Boston's Synergies
Analysis were based on the Synergies projected by Parent as described in the
Offer to Purchase under the section 'SPECIAL FACTORS--Plans for the Company
after the Offer and Merger.' Parent advised CS First Boston that it believed
that such Synergies were a reliable estimate of the actual Synergies that would
be created as a result of the Merger.
CS First Boston's analyses indicated, based on Parent's view of the
estimates of realistically attainable Synergies, that the full value of the
Synergies would be approximately $21.00-$25.00, on a per Share basis. The
percentages of retained Synergies set forth in CS First Boston's Synergies
Analysis represent an assumed range of Synergies to be added to the Comparable
Company Analysis and Discounted Cash Flow Analysis, and not the absolute level
of Synergies that would be realized as a result of the Merger.
5. The discussion set forth in 'SPECIAL FACTORS--Interests of Certain
Persons in the Transaction' in the Offer to Purchase is hereby amended and
supplemented as follows:
Negotiations concerning the Separate Payments began after the CNW Board
negotiated and approved the $35 per Share price. The Company expressed the view
to Parent that amounts to be paid under the Change of Control Employment
Agreements would not be adequate severance compensation, especially in light of
the covenants not to compete which would prevent recipients from pursuing
employment in the railroad industry for a period of one year following the
cessation of their employment with the Company.
The Offer to Purchase under the caption 'SPECIAL FACTORS--Interests of
Certain Persons in the Transaction' sets forth the estimated amounts payable to
executive officers under the Change of Control Employment Agreements upon
qualifying terminations of employment, after reduction, pursuant to the terms of
such agreements, for (i) the amount of the prorated guaranteed bonus (assuming
an April 24, 1995 termination) and (ii) portions of the payments made under the
Merger Agreement with respect to the value of the executive's
3
<PAGE>
unvested options, all as determined by the Company under the proposed
regulations issued by the Internal Revenue Service under Code Section 280G, at
the amounts indicated in the left column below. Those amounts are currently
estimated as shown in the right column below.
<TABLE>
<CAPTION>
INITIAL CURRENT
ESTIMATES ESTIMATES
----------- -----------
<S> <C> <C>
Mr. Bitter........................................ $ 437,112 $ 355,743
Mr. Lundberg...................................... 456,302 391,243
Mr. Martin........................................ 1,181,172 1,106,460
Mr. Peters........................................ 1,212,549 1,127,466
Mr. Waller........................................ 431,648 366,589
All officers with Change of Control Employment
Agreements....................................... 11,865,054 10,906,363
</TABLE>
As previously disclosed in the Offer to Purchase under the caption 'SPECIAL
FACTORS--Interests of Certain Persons in the Transaction,' the Company and UPRR
have offered three-year employment agreements to certain executives which, if
accepted by the executives, will replace the Change of Control Employment
Agreements which the executives now have with the Company. Each proposed
employment agreement provides that, during the employment period, an executive's
salary will not be less than the executive's current salary and the executive's
annual bonus will not be less than the executive's bonus with respect to 1994.
After January 1, 1996, the executive will receive the benefits provided to
comparable employees performing similar services and will be given service
credit under the benefit plans for all years of service for which the executive
received credit under the comparable plans of CNW Railway (subject to reduction
for similar benefits therefrom). If the executive's employment is terminated
during the employment period by the employer without cause (or by the executive
after a reduction in the executive's salary or bonus), the executive will be
paid a lump sum amount equal to the present value of the aggregate salary and
bonus otherwise payable under the proposed employment agreement. Under the
proposed employment agreement the executive will make certain commitments as to
confidentiality, noncompetition and the amendment of certain other agreements to
which the executive may be a party. It is anticipated that one executive, at his
request, will be offered a revised employment agreement which will permit him to
defer the receipt of any bonus from UPRR for 1995 or subsequent years.
Of the twenty-seven executives with Change of Control Employment
Agreements, it is currently estimated that approximately nine of such executives
will enter into such employment agreements, including Mr. Peters. In addition,
in order to implement the terms of the severance arrangements provided for in
the Merger Agreement and described in the Offer to Purchase, the Company, UPRR
and CNW Railway have offered severance agreements to such twenty-seven
executives. It is anticipated that those of such executives who do not enter
into the employment agreements will enter into the severance agreements. Under
most of the proposed severance agreements, the executive's employment would
terminate shortly after the consummation of the Offer, but a few individuals may
agree to continue employment for various transition periods, which will not
exceed nine months.
On April 12, 1995, the Company, Parent and the Purchaser entered into a
document clarifying their understanding of how certain provisions of the Merger
Agreement should be applied with respect to employees of the Company whose
employment is terminated prior to the Effective Time. Such clarification
document provides that if the employment of a Company employee is terminated
(voluntarily or otherwise) prior to the Effective Time, each Option which is
held by such employee immediately prior to the later of the date of the
consummation of the Offer or the date of such termination of employment will be
cancelled on the later of such dates (provided that any required consent to
cancellation has been given by the employee). Promptly upon such cancellation,
the Company will pay to such employee an amount equal to the excess, if any, of
the Offer Price over the exercise price per Share subject to such Option,
multiplied by the number of Shares subject thereto. The clarification document
also provides that the Company will pay to a 'Terminated Employee' (as defined
below), as soon as reasonably practical after the date of his or her termination
of employment, a prorated bonus calculated in accordance with the Merger
Agreement, provided that such prorated bonus shall be based on the Company's
performance through the end of the calendar quarter coinciding with or
immediately preceding such termination and prorated to the date of such
termination. For such purposes, a 'Terminated Employee' shall mean a Company
employee, (i) whose employment is terminated (whether voluntarily or otherwise)
prior to the Effective Time, (ii) who does not (either before or after such
termination) enter into a severance agreement with
4
<PAGE>
respect to such employment similar to the employment agreements described in the
second preceding paragraph, and (iii) who was, immediately prior to the
execution of the Merger Agreement, a participant in the Company's Bonus Plan. A
copy of the clarification document has been filed as an exhibit to the Schedule
14D-1 and the Schedule 13E-3.
6. The discussion set forth in 'SPECIAL FACTORS--Certain Litigation' in
the Offer to Purchase is hereby amended and supplemented as follows:
On March 28, 1995, an amended class action complaint, amending two of the
previously filed five purported class action suits (the 'Amended Class Action'),
was filed in the Court of Chancery in Delaware. The Amended Class Action
reiterated the claims which had been made in the earlier suits which it amended,
and also alleged, among other things, (i) that Blackstone, the investment bank
retained by the defendants to render a fairness opinion in connection with the
Offer, is not disinterested or independent and has a conflict of interest with
regard to the Offer, (ii) that the defendants breached or aided and abetted
breaches of their duties of good faith and loyalty by approving for themselves
and members of the Company's senior management lucrative compensation packages
and other financial benefits, (iii) that the defendants structured the
transaction in such a way as to prevent the Company's public stockholders from
voting on the Merger or exercising dissenters' rights, and (iv) that the
defendants breached their duties of candor and full disclosure by failing
adequately to disclose, among other things, the information described in this
paragraph, the reasons why the Company's Board failed to implement a
stockholders' rights plan and the reasons for alleged discrepancies and
variations between valuation ranges for the Shares as prepared by the financial
advisors of Parent and the Company, respectively.
On March 30, 1995, the Delaware Court of Chancery, in the Amended Class
Action, granted expedited discovery and scheduled a hearing on April 13, 1995,
for (i) plaintiffs' motion for a preliminary injunction and (ii) defendants'
motion to dismiss the case for lack of subject matter jurisdiction on grounds
that the ICC is the exclusive forum to consider plaintiffs' purported claims.
On April 13, 1995, counsel for the Company, Parent and the plaintiffs in
the pending class action lawsuits entered into a memorandum of understanding
(the 'Memorandum of Understanding') proposing to settle all of the pending class
action lawsuits relating to the Offer. Pursuant to the Memorandum of
Understanding, Parent and the Company agreed, among other things, (i) to
disseminate certain supplemental disclosures to the Company's stockholders
(which disclosures, among others, are included in this Supplement), (ii) to
modify the Option Agreement to provide that the Purchaser may only exercise its
option to acquire additional Shares from the Company (thereby permitting a
short-form merger) if the Purchaser acquires more than 87.5% (previously 85%)
but less than 90% of the Shares in the Offer, and (iii) to extend the Expiration
Date until ten (10) calendar days after the date of this Supplement. The
Memorandum of Understanding also provides that Parent and/or the Company will
pay plaintiffs' counsel fees in an amount not to exceed $525,000, inclusive of
expenses, subject to approval of the Delaware Court of Chancery.
The parties to the Memorandum of Understanding also agreed to work in good
faith to prepare and submit to the Delaware Court of Chancery for its approval
at the earliest practicable time a Stipulation of Settlement of the pending
class action lawsuits. If such Stipulation of Settlement is not executed or is
not approved by the Court, or if the Offer is not consummated, the proposed
settlement will be null and void and will not prejudice the rights of any party
with respect to such litigation. A copy of the Memorandum of Understanding has
been filed as an exhibit to the Schedule 14D-1 and Schedule 13E-3.
7. The discussion set forth in 'FINANCING OF THE TRANSACTION' in the Offer
to Purchase is hereby amended and supplemented as follows:
As was contemplated by the Commitment, on April 11, 1995, Parent entered
into a credit agreement (the '$1.1 Billion Credit Agreement') among Parent,
Chemical Bank and Citicorp Securities, Inc., as Co-Arrangers, Chemical
Securities, Inc., as Syndication Agent, and the other banks named therein, which
provides Parent with a revolving credit facility in the amount of $1.1 billion
which will mature on April 11, 2000. In addition, as was contemplated by the
Commitment, on April 11, 1995, Parent entered into a separately documented
credit agreement (the '$1.2 Billion Credit Agreement') among Parent, Chemical
Bank and Citicorp Securities, Inc., as Co-Arrangers, Chemical Securities, Inc.,
as Syndication Agent, and the other banks named therein, which provides Parent
with a revolving credit facility in the amount of $1.2 billion which will mature
on April 10, 1996. The terms of the $1.1 Billion Credit Agreement and $1.2
Billion Credit Agreement were set forth in
5
<PAGE>
'FINANCING OF THE TRANSACTION' in the Offer to Purchase. The Facility fee
relating to the $1.2 Billion Credit Agreement is .060% per annum in contrast to
the .190% per annum disclosed in the Offer to Purchase.
The Purchaser estimates that the total amount of funds required to purchase
all Shares validly tendered pursuant to the Offer, consummate the Merger and to
pay all related costs and expenses (inclusive of estimated expenses of the
Company other than the cost of refinancing certain indebtedness of the Company,
if any) will be approximately $1.2 billion. See 'THE OFFER--Fees and Expenses'
in the Offer to Purchase.
The Purchaser plans to obtain the necessary funds through capital
contributions or advances made by Parent. Parent plans to obtain the funds for
such capital contributions or advances from its available cash and working
capital and/or the proceeds of the Facility or Parent's commercial paper
program.
Parent's commercial paper program involves the private placement of
unsecured, commercial paper notes with maturities of up to 270 days. The
commercial paper generally has an effective interest rate approximating the then
market rate of interest for commercial paper of similar rating, currently
approximately 6.2%. Parent may refinance any commercial paper borrowings used to
finance the purchase of Shares pursuant to the Offer through private placements
of additional commercial paper, borrowings under the Facility contemplated by
the Commitment or, depending on market or business conditions, through such
other financing as Parent may deem appropriate.
On April 6, 1995, the ICC served an order which, among other things, (i)
exempts Parent from the requirement of filing applications under 49 U.S.C. 11301
with respect to the issuance of certain securities and/or assumption of certain
obligations or liabilities, which are expected to be required for the repayment
of obligations incurred in financing the Transaction and prepaying certain
indebtedness of the Company, in a principal amount not to exceed $2.3 billion
and (ii) set April 10, 1995, as the date upon which such decision would become
effective.
8. The discussion set forth in 'DISSENTERS' RIGHTS' of the Offer to
Purchase is hereby amended and supplemented as follows:
As previously disclosed in the Offer to Purchase under the caption
'DISSENTERS' RIGHTS,' Parent and the Company stated their intention to seek a
determination of the ICC that the terms of the Merger are just and reasonable.
On April 4, 1995, Parent, UPRR, MPRR and the Company submitted to the ICC a
petition for a determination that the terms of the Merger are just and
reasonable. To date, the ICC has not issued any determination in response to
such petition.
9. The discussion set forth in 'THE OFFER--Terms of the Offer' in the
Offer to Purchase is hereby amended and supplemented as follows:
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any extension or
amendment), the Purchaser will accept for payment and pay for all Shares validly
tendered prior to the Expiration Date (as hereinafter defined) and not withdrawn
in accordance with Section 4 in the Offer to Purchase. The term 'Expiration
Date' means 12:00 Midnight, New York City time, on Monday, April 24, 1995,
unless and until the Purchaser, in its sole discretion (but subject to the terms
of the Merger Agreement), shall have extended the period of time during which
the Offer is open, in which event the term 'Expiration Date' shall refer to the
latest time and date at which the Offer, as so extended by the Purchaser, shall
expire.
The Offer is conditioned upon, among other things, satisfaction of the
Minimum Condition and the ICC Final Approval Condition. On April 6, 1995, the
ICC served an order, effective on the same day, setting the final terms of the
previously imposed condition in favor of Soo to Parent's exercise of control
over the Company's railroad subsidiaries. The Company is contractually
obligated, subject to the consummation of the Offer, to execute certain
amendments to agreements, previously entered into between the predecessors of
CNW Railway and Soo. Upon such execution, the ICC order will be final and
effective, and Parent will have ICC authority to exercise control over the
Company, including the purchase of Shares in the Offer and the Merger.
10. The discussion set forth in 'THE OFFER--Acceptance for Payment and
Payment' in the Offer to Purchase is hereby amended and supplemented as follows:
Notwithstanding the fact that the Purchaser stated in the Offer to Purchase
that it reserved the right to assert the occurrence of a condition following
acceptance for payment of Shares but prior to payment for Shares in
6
<PAGE>
order to delay payment or cancel its obligation to pay for properly tendered
Shares, the Purchaser understands that all conditions of the Offer, other than
receipt of necessary governmental approvals, must be satisfied or waived prior
to the acceptance of Shares for payment. In addition, if, following acceptance
of payment for Shares, the Purchaser asserts such a governmental approval as a
condition and does not promptly pay for Shares tendered, the Purchaser will
promptly return such Shares.
11. The discussion set forth in 'THE OFFER--Price Range of Shares;
Dividends' in the Offer to Purchase is hereby amended and supplemented as
follows:
The following table sets forth, for the quarters indicated, the high and
low closing sales prices per Share on the NYSE as reported by the Dow Jones News
Service.
<TABLE>
<CAPTION>
MARKET PRICE
----------------
HIGH LOW
---- ---
<S> <C> <C>
FISCAL YEAR ENDED DECEMBER 31, 1993:
First Quarter............................................ $23 1/8 $19 1/8
Second Quarter........................................... 24 1/4 19 7/8
Third Quarter............................................ 23 19
Fourth Quarter........................................... 25 1/8 19 1/2
FISCAL YEAR ENDED DECEMBER 31, 1994:
First Quarter............................................ 28 1/8 24 1/8
Second Quarter........................................... 25 21 5/8
Third Quarter............................................ 24 1/4 19 3/8
Fourth Quarter........................................... 20 7/8 18 1/4
FISCAL YEAR ENDED DECEMBER 31, 1995:
First Quarter............................................ 34 7/8 19
Second Quarter (through April 13, 1995).................. 34 7/8 34 3/4
</TABLE>
Stockholders are urged to obtain a current market quotation for the Shares.
12. The discussion set forth in 'THE OFFER--Certain Legal Matters;
Regulatory Approvals' in the Offer to Purchase is hereby amended and
supplemented as follows:
ICC Matters. On April 6, 1995, the ICC served an order, effective on the
same day, setting the final terms of the previously imposed condition in favor
of Soo to Parent's exercise of control over the Company's railroad subsidiaries.
The Company is contractually obligated, subject to the consummation of the
Offer, to execute certain amendments to agreements, previously entered into
between the predecessors of CNW Railway and Soo. Upon such execution, the ICC
order will be final and effective, and Parent will have ICC authority to
exercise control over the Company, including the purchase of Shares in the Offer
and the Merger.
On April 4, 1995, Parent, UPRR, MPRR and the Company submitted to the ICC a
petition for a determination that the terms of the Merger are just and
reasonable. To date, the ICC has not issued any determination in response to
such petition.
UP RAIL, INC.
April 14, 1995
7
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal or revised
Letter of Transmittal will be accepted. The Letter of Transmittal or revised
Letter of Transmittal, certificates for Shares and any other required documents
should be sent or delivered by each stockholder of the Company or such
stockholder's broker, dealer, commercial bank, trust company or other nominee to
the Depositary at one of its addresses set forth below:
The Depositary for the Offer is:
CITIBANK, N.A.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Delivery: By Hand:
Citibank, N.A. Citibank, N.A. Citibank, N.A.
c/o Citicorp Data c/o Citicorp Data Corporate Trust Window
Distribution, Inc. Distribution, Inc. 111 Wall Street, 5th Floor
P.O. Box 1429 404 Sette Drive New York, New York
Paramus, New Jersey 07653 Paramus, New Jersey 07652
By Facsimile Transmission: By Telex:
(For Eligible Institutions Only) (710) 990-4964
(201) 262-3240 Answer Back: CDDI PARA
Confirm By Telephone:
(800) 422-2066
</TABLE>
-----------------------------
Questions and requests for assistance or for additional copies of the Offer
to Purchase, this Supplement, the revised Letter of Transmittal and the revised
Notice of Guaranteed Delivery may be directed to the Information Agent or the
Dealer Manager at their respective telephone numbers and locations listed below.
You may also contact your broker, dealer, commercial bank, trust company or
other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
MORROW & CO., INC.
<TABLE>
<S> <C> <C>
909 Third Avenue, 20th Floor 14755 Preston Road, Suite 725 39 South LaSalle Street
New York, New York 10022 Dallas, TX 75240 Chicago, Illinois 60603
(212) 754-8000 (214) 788-0977 (312) 444-1150
(Call Collect) (Call Collect) (Call Collect)
</TABLE>
or
Banks & Brokers Call Toll Free 1-800-662-5200
All Others Call Toll Free 1-800-566-9058
The Dealer Manager for the Offer is:
CS FIRST BOSTON
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
(212) 909-2000 (Call Collect)
<PAGE>
[EXECUTION COPY]
April 13, 1995
Chicago and North Western Transportation Company
165 North Canal Street
Chicago, Illinois 60606
Attn: Mr. Robert Schmiege
Chairman, President and CEO
Re: Amendment to Company Stock Option
Agreement
---------------------------------
Dear Ladies and Gentlemen:
Reference is made to the Company Stock Option
Agreement (the "Agreement"), dated as of March 16, 1995,
by and between UP Rail, Inc., a Utah corporation (the
"Purchaser"), and Chicago and North Western Transporta-
tion Company, a Delaware corporation (the "Company").
The Purchaser and the Company hereby agree to amend sub-
section (b) of Paragraph 1 of the Agreement, entitled
"Grant of Option," by changing the reference to the
minimum number of shares of Common Stock, $.01 par value
per share, of the Company which must be owned by the Pur-
chaser in order to exercise the Option from "85%" to
"87.5%." Except as specifically provided herein, the
Agreement shall remain in full force and effect and shall
not be modified in any respect.
Please indicate your acceptance of the provi-
sions hereof by signing the enclosed copy of this Amend-
ment and returning it to Carl W. Von Bernuth, Senior Vice
President and General Counsel, Union Pacific Corporation,
Martin Tower, Eighth and Eaton Avenues, Bethlehem, Penn-
sylvania 18018 (telecopier: 610-861-3137). If you elect
to deliver this Amendment by telecopier, please arrange
<PAGE>
Chicago and North Western Transportation Company
April 13, 1995
Page 2
for the executed original to follow by next-day courier
delivery.
Very truly yours,
UP RAIL, INC.
By
--------------------------------
Name:
Title:
ACCEPTED AND AGREED
on this 13th day of April, 1995:
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY
By
-----------------------
Name:
Title:
<PAGE>
CLARIFICATION OF
SECTIONS 2.3(b) and 5.4(f)
of
MERGER AGREEMENT
WHEREAS, the parties hereto, Union Pacific Corpora-
tion ("Parent"), UP Rail, Inc. ("Purchaser") and Chicago
and North Western Transportation Company (the "Company"),
have entered into an Agreement and Plan of Merger dated
as of March 16, 1995 (the "Merger Agreement"); and
WHEREAS, the parties hereto desire to clarify their
mutual understanding of how Sections 2.3 and 5.4(f)
should be applied with respect to Company employees whose
employment may be terminated prior to the "Effective
Time" or the date of "Closing" (both terms as defined in
the Merger Agreement); and
WHEREAS, the Company has confirmed that all "Op-
tions" (as defined in Section 2.3 of the Merger Agree-
ment) are either currently exercisable or have associated
with them limited stock appreciation rights which will
become exercisable upon the consummation of the "Offer"
(as defined in the Merger Agreement); and
WHEREAS, consequently, the economic value of all
Options could be realized at, or immediately after, the
consummation of the Offer, while Section 2.3(b) specifi-
cally authorizes a cash payment with respect to Options
only upon their cancellation at the Effective Time;
NOW, THEREFORE, the parties hereto agree as follows:
1. If the employment of a Company employee is
terminated (whether voluntarily or otherwise) prior to
the Effective Time, each Option which is held by such em-
ployee immediately prior to the later of the date of the
consummation of the Offer or the date of such termination
of employment shall be cancelled on the later of such
dates (provided that any required consent to cancellation
has been given by the employee). Promptly upon such
cancellation, the Company shall pay to such employee an
amount equal to the excess, if any, of the Offer Price
(as defined in the Merger Agreement) over the exercise
price per Share (as defined in the Merger Agreement)
subject thereto, multiplied by the number of Shares
subject thereto.
2. The Company will pay to a "Terminated
Employee" (as defined in the next sentence), as soon as
reasonably practical after the date of his or her termi-
<PAGE>
nation of employment, a prorated bonus calculated in
accordance with Section 5.4(f) of the Merger Agreement,
but based on the Company's performance through the end of
the calendar quarter coinciding with or immediately pre-
ceding such termination and a proration of the resulting
bonus amount to the date of such termination. "Termi-
nated Employee" shall mean a Company employee
(i) whose employment is terminated (whether volun-
tarily or otherwise) prior to the Effective Time,
(ii) who does not (either before or after such
termination) enter into a severance agreement with
respect to such employment similar to the agreements
offered to certain Company employees on or about
April 3, 1995 by the Company, Chicago and North
Western Railway Company and Union Pacific Railroad
Company, and
(iii) who was, immediately prior to the execution of
the Merger Agreement, a participant in the Company's
Bonus Plan.
3. This document may be executed in counter-
parts, each of which shall be deemed to be an original
but both of which together shall constitute one and the
same document.
IN WITNESS WHEREOF, Parent, Purchaser and the
Company have caused this document to be signed by their
respective officers thereunto duly authorized as of April
12, 1995.
UNION PACIFIC CORPORATION
By________________________
Name:
Title:
UP RAIL, INC.
By________________________
Name:
Title:
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY
By_______________________
Name:
Title:
2
<PAGE>
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
HERBERT FEIWEL, IRA ROLLOVER )
ACCOUNT, )
Plaintiff, )
) C.A. No. 14109
-against- )
)
JAMES E. MARTIN, JAMES J. MOSSMAN, )
JAMES R. THOMPSON, ROBERT SCHMIEGE,)
RICHARD K. DAVIDSON, HAROLD A. )
POLING, SAMUEL K. SKINNER, UNION )
PACIFIC COMPANY, CHICAGO AND NORTH )
WESTERN TRANSPORTATION COMPANY and )
UP RAIL INC. )
Defendants. )
- -----------------------------------
KENNETH STEINER, )
)
Plaintiff, )
)
-against- )
) C.A. No. 14111
RICHARD K. DAVIDSON, JAMES E. )
MARTIN, JAMES J. MOSSMAN, )
HAROLD A. POLING, ROBERT SCHMIEGE, )
SAMUEL K. SKINNER, JAMES R. )
THOMPSON, CHICAGO & NORTH WESTERN )
TRANSPORTATION COMPANY, UNION )
PACIFIC COMPANY and UP RAIL, INC., )
)
Defendants. )
)
- -----------------------------------
MOISE KATZ, )
)
Plaintiff, )
)
-against- ) C.A. No. 14112
)
JAMES E. MARTIN, JAMES J. MOSSMAN, )
JAMES R. THOMPSON, ROBERT SCHMIEGE,)
RICHARD K. DAVIDSON, HAROLD A. )
POLING, SAMUEL K. SKINNER, UNION )
PACIFIC COMPANY, CHICAGO AND NORTH )
WESTERN TRANSPORTATION COMPANY and )
<PAGE>
UP RAIL INC. )
Defendants. )
)
)
- -----------------------------------
CHARLES KOWAL and HARRY W. KENT, )
in his Individual Retirement )
Account, on their own behalf and )
on behalf of all others similarly )
)
Plaintiff, )
) C.A. No. 14115
-against- )
)
CHICAGO AND NORTHWESTERN TRANS- )
PORTATION COMPANY, UNION PACIFIC )
CORPORATION, RICHARD K. DAVIDSON, )
JAMES E. MARTIN, JAMES J. MOSSMAN, )
JAMES R. THOMPSON, ROBERT SCHMIEGE,)
HAROLD A. POLING, and SAMUEL K. )
SKINNER, )
Defendants. )
)
)
- -----------------------------------
MICHAEL GERBER, individually and on)
behalf of all others similarly )
situated, )
)
Plaintiff, )
) C.A. No. 14117
-against- )
)
JAMES E. MARTIN, JAMES J. MOSSMAN, )
JAMES R. THOMPSON, ROBERT SCHMIEGE,)
RICHARD K. DAVIDSON, HAROLD A. )
POLING, SAMUEL K. SKINNER, CHICAGO )
& NORTHWESTERN TRANSPORTATION )
COMPANY, UNION PACIFIC COMPANY )
and UP RAIL INC., )
)
Defendants. )
)
- -----------------------------------
2
<PAGE>
MEMORANDUM OF UNDERSTANDING
---------------------------
WHEREAS, plaintiffs in the above-referenced
stockholder class actions (collectively, the "Litiga-
tion") have challenged a proposed merger transaction and
certain ancillary agreements thereto ("the Merger" and
the "Merger Agreement") pursuant to which Chicago and
North Western Transportation Company ("CNW" or the "Com-
pany") would be merged with and into a subsidiary of
Union Pacific Corporation ("UP"); and
WHEREAS, plaintiffs have moved to preliminarily
enjoin the Merger, and the parties have engaged in expe-
dited discovery with respect thereto;
WHEREAS, counsel for the parties have engaged
in extensive, good faith discussions with regard to the
possible settlement of the Litigation; and
WHEREAS, as a result of those discussions,
defendants have agreed to make certain modifications to
the Stock Option Agreement and issue certain supplemental
disclosures with regard to the Merger; NOW, THEREFORE,
IT IS HEREBY AGREED, between and among the
parties hereto, that the following sets forth the terms
of their agreement to the settle the matter:
1. Defendants shall issue or cause to be
issued supplemental disclosures (the "Supplemental Dis-
3
<PAGE>
closures") concerning certain of the matters alleged in
plaintiffs' Amended Class Action Complaint (the "Amended
Complaint"), which Supplemental Disclosures shall be
mutually agreed upon by the counsel for the parties to
the Litigation;
2. Defendants shall cause UP's tender offer
for the publicly held shares of CNW, which offer is
presently scheduled to expire on April 19, 1995, to
remain open for a period of ten calendar days after the
mailing of the Supplemental Disclosures;
3. Defendants shall modify paragraph 1 of the
Company Stock Option Agreement, dated March 16, 1995, to
provide that UP's rights thereunder (or the rights of its
affiliates) shall accrue only upon its ownership of at
least 87.5% of the Company's common shares (assuming
conversion of UP's non-voting CNW common shares into CNW
common shares);
4. Defendants agree not to oppose any appli-
cation by plaintiffs' counsel for an award of attorneys'
fees and expenses in an aggregate amount not to exceed
$525,000. UP and/or CNW shall pay to plaintiffs' counsel
such fees and expenses as may be actually awarded by the
Court to an aggregate limit of $525,000. Defendants ex-
pressly reserve the right to oppose any other application
4
<PAGE>
for an award of attorneys' fees and expenses to be made
to the Court of Chancery or to any other court by, or on
behalf of, plaintiffs' counsel or any other persons. No
Defendant other than UP and CNW shall be liable or re-
sponsible for the payment of any attorneys' fees and
expenses which may be awarded in this Litigation.
5. The parties shall work in good faith to
prepare and submit to the Court of Chancery for approval
at the earliest practicable time, a Stipulation of Set-
tlement of the Litigation (the "Stipulation"). The
Stipulation will expressly provide, inter alia, that:
(a) the defendants have denied, and continue to deny,
that they have committed any violation of law or engaged
in any of the wrongful acts alleged in the Amended Com-
plaint or plaintiffs' motion for a preliminary injunc-
tion; (b) the defendants are entering into the Stipula-
tion solely because the proposed settlement would elimi-
nate the burden and expense of further litigation; and
(c) plaintiffs' counsel, having made a thorough investi-
gation of the facts, believe that the proposed settlement
is fair, reasonable and adequate and in the best inter-
ests of plaintiffs and the proposed class. The Stipula-
tion will further provide for, inter alia: (a) appropri-
ate certification of the class described in the Amended
5
<PAGE>
Complaint; (b) the entry of a judgment in appropriate
form, dismissing the Litigation with prejudice and bar-
ring any claims (including any claims for violation of
federal, state or common law) that have been or might
have been brought in any court, the Interstate Commerce
Commission or any other forum by any member of the pro-
posed class, relating to any matter that was or could
have been asserted in the Amended Complaint; and (c) the
delivery of releases in an appropriate form releasing any
claims for violation of, or arising under, federal, state
or common law, including but not limited to, the Inter-
state Commerce Act.
6. The settlement described herein shall be
subject to the approval of the Court of Chancery. Should
a Stipulation not be executed or not be approved by the
Court, or should the tender offer not be consummated in
accordance with the modified terms described herein, the
proposed settlement shall be null and void and of no
force and effect, and shall not be deemed to prejudice in
any way the position of any party with respect to this
litigation. In such event, neither the existence of this
Memorandum of Understanding nor its contents shall be
admissible in evidence or shall be referred to for any
6
<PAGE>
purpose in this litigation or in any other litigation or
proceeding.
7. This Memorandum of Understanding and the
proposed settlement described herein shall be governed
by, and construed in accordance with, the laws of the
State of Delaware.
8. This Memorandum of Understanding may be
modified or amended only by a writing signed by all of
the signatories hereto.
9. Plaintiffs and plaintiffs' counsel repre-
sent and warrant that none of the plaintiffs' claims or
causes of action referred to in the Amended Complaint or
this Memorandum of Understanding have been assigned,
encumbered or in any manner transferred in whole or in
part.
10. This Memorandum of Understanding shall be
binding upon and shall inure to the benefit of the par-
ties and their respective agents, successors, executors,
heirs and assigns.
11. By signing this Memorandum of Understand-
ing, plaintiffs' counsel represent and warrant that they
have authority to act on behalf of the plaintiffs in the
Litigation.
7
<PAGE>
12. The parties to this Memorandum of Under-
standing agree (a) to use their best efforts to achieve
the dismissal of the Litigation in accordance with the
terms of this Memorandum of Understanding, and (b) to
cause the timely occurrence of all events, transactions,
or other circumstances described herein.
13. This Memorandum of Understanding may be
signed in counterparts.
Dated: April 13, 1995
ROSENTHAL, MONHAIT, GROSS
& GODDESS, P.A.
Attorneys for Plaintiff
By: /s/ Joseph A. Rosenthal
---------------------------------
Joseph A. Rosenthal
First Federal Plaza
Suite 214
P.O. Box 1070
Wilmington, DE 19899
(302) 656-4433
MORRIS, NICHOLS, ARSHT & TUNNELL
Attorneys for Chicago & North
Western Transportation Company
and the Individual Defendants
By: /s/ William M. Lafferty
---------------------------------
William M. Lafferty, Esq.
1201 North Market Street
P.O. Box 1347
Wilmington, DE 19899-1347
(302) 658-9200
SKADDEN, ARPS, SLATE, MEAGHER
8
<PAGE>
& FLOM
Attorneys for Union Pacific
Corporation and UP Rail Inc.
By: /s/ Thomas J. Allingham
---------------------------------
Thomas J. Allingham, II
(Members of the Firm)
One Rodney Square
Wilmington, DE 19899
(302) 651-3000
9
