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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Amendment No. 4
To
SCHEDULE 14D-9
Solicitation/Recommendation Statement Pursuant
to Section 14(d)(4) of the Securities Exchange Act of 1934
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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)
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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)
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With a copy to:
PAUL J. MILLER, ESQ.
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
(312) 876-8074
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This Amendment supplements and amends as Amendment No. 4 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 and Amendment No. 3 filed on April 7, 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"), and the
related Letter of Transmittal. Capitalized terms used and not otherwise defined
herein shall have the meanings set forth in the Schedule 14D-9.
Item 8. Additional Information
Item 8 of the Schedule 14D-9 is hereby supplemented by adding the following
information:
On April 6, 1995, the ICC served an order, effective on the same day,
directing the Company to execute and deliver, before or at the time of the
consummation of the common control of the Company's and Union Pacific's railroad
subsidiaries, certain amendments to agreements, previously entered into between
predecessors of CNW Railway and Soo, which provide, among other things, for
the admittance of third party carriers to certain joint facilities operated by
the CNW Railway and Soo. These amendments are intended to effectuate the
condition in favor of Soo that was granted by the ICC in its decision served
March 7, 1995. A copy of such order is attached hereto as Exhibit 99.39 and
incorporated herein by reference.
In addition, on April 6, 1995, Union Pacific issued a press release
announcing that, among other things, the ICC had set the final terms of the
previously imposed condition in favor of Soo to Union Pacific's exercise of
control over the Company's railroad subsidiaries. Union Pacific announced that
upon execution of the amendments referred to above, Union Pacific will have ICC
authority to exercise control over the Company, including the purchase of Shares
in the Offer and the Merger.
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Item 9. Material to be Filed as Exhibits
Item 9 of the Schedule 14D-9 is hereby supplemented by adding the
following information:
Exhibit 99.39 - Order of ICC, served April 6, 1995, setting the
final terms of a previously imposed condition to Union
Pacific's exercise of control over the Company's railroad
subsidiaries.
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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 10, 1995
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EXHIBIT INDEX
Exhibit No. Description
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Exhibit 99.39 Order of the ICC, served April 6, 1995, setting the
final terms of a previously imposed condition to Union
Pacific's exercise of control over the Company's
railroad subsidiaries.
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EXHIBIT 99.39
INTERSTATE COMMERCE COMMISSION
Finance Docket No. 32133
UNION PACIFIC CORPORATION, UNION PACIFIC RAILROAD COMPANY
AND MISSOURI PACIFIC RAILROAD COMPANY--CONTROL--CHICAGO
AND NORTH WESTERN TRANSPORTATION COMPANY AND CHICAGO AND
NORTH WESTERN RAILWAY COMPANY
Decision No. 26
Decided: April 4, 1995
INTRODUCTION
In Decision No. 25 in this proceeding, served on March 7,
1995, the Commission approved the proposed common control of Union
Pacific Railroad Company (UPRR), Missouri Pacific Railroad Company
(MPRR), and Chicago and North Western Railway Company (CNW), as
requested by those entities, Union Pacific Corporation (UPC), and
Chicago and North Western Transportation Company (Holdings)
(collectively, the primary applicants).(1)
We imposed certain conditions on our approval of common
control. One required the termination of certain contractual
provisions contained in joint facility agreements governing two
line segments (the Polo and Clinton segments) along Soo Line
Railroad Company's (Soo) Twin Cities-Kansas City route. The
provisions grant CNW (soon to be controlled by UP) the right to
veto any attempt by Soo to transfer an interest in those segments
to another carrier or to grant another railroad access to them by
virtue of trackage or haulage rights. The Commission determined
that if the veto power remained, the proposed common control of UP
and CNW would have an anticompetitive impact in the Upper Midwest-
South Central corridor, because the veto power would interfere with
Soo's ability to provide an effective competitive response to the
UP/CNW system.
In Decision No. 25, we directed CNW and Soo, by March 17,
1995, either to (1) submit jointly the agreed-upon details of the
lifting of the veto power on the Polo and Clinton line segments, or
(2) in the event they were unable to agree to the terms of Soo's
condition, each submit its own proposal as to how it would
implement Soo's condition. The Commission would then have time to
choose the better of the proposals and make it effective on the
date that Decision No. 25 is effective. The primary applicants and
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(1) In this decision, we will refer to the primary applicants in
their separate capacities as UP and CNW.
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S00 both filed their proposals with the Commission on March 17,
1995. The primary applicants designated their pleading as UP/CNW-
132; Soo designated its pleading as S00-9. On March 23, 1995, Soo
submitted a pleading entitled "Reply of Soo Line Railroad Company
to Applicants' Submission as to Implementation of Soo Condition."
(S00-10). On March 24, 1995, the primary applicants filed a
pleading entitled "Applicants' Reply as to Implementation of Soo
Condition." (UP/CNW-133).(2)
ARGUMENTS AND PROPOSAL SUBMITTED BY THE
PRIMARY APPLICANTS(3)
The primary applicants note that Soo's Kansas City-Chicago
line includes two joint facilities with CNW, the Polo facility and
the Clinton facility. The Polo facility consists of 37 miles of
paired tracks, one of which CNW owns and the other of which Soo
owns, and 5 miles of jointly-owned track. Currently, neither Soo
nor CNW can transfer its interest in the Polo facility, or admit
other railroads to the facility via trackage or haulage rights,
without the other's consent. The Clinton facility is an
interlocker and a 1400-foot approach track, both of which CNW owns.
Currently, Soo cannot admit third parties to the Clinton facility
or transfer its rights under the agreement without CNW's permis-
sion.
According to the primary applicants, Soo has already acknowl-
edged that CNW, as an independent railroad not controlled by UP,
already had an incentive to veto Soo's admission of third parties
to the joint facilities. In fact, CNW did veto a sale of Soo's
line to SP. The primary applicants state that Soo contended in
this proceeding that UP/CNW common control would have an
anticompetitive effect because it would increase the amount of
traffic as to which a UP/CNW system would have a veto incentive.
The primary applicants contend that Soo argued that the broader
veto incentive would reduce Soo's ability to work with connections
at Kansas City to provide new seamless competitive responses to
UP/CNW single-line or near-single-line service in the Upper
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(2) On March 27, 1995, the Iowa Department of Transpor-
tation (IADOT) also submitted a pleading entitled
"Reply of the Iowa Department of Transportation to
Proposed Terms for Implementation of Polo/Clinton
Condition." IADOT supports implementation of Soo's
proposal, and rejection of the primary applicants'
(3) The arguments discussion in this section come from
both UP/CNW-132 and UP/CNW-133.
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Midwest-South Central market. The primary applicants argue that it
was to alleviate this competitive problem that Soo proposed that
the Commission require the primary applicants to negotiate
"appropriate" modifications to the Polo and Clinton agreements.
The primary applicants allege that they have met with Soo and
attempted to reach agreement as to the terms for implementation of
the condition, and have reached agreement as to a number of
matters, but have thus far been unable to agree as to certain
issues regarding the scope of the condition.(4) The primary appli-
cants propose several terms to implement the Soo condition. They
note that their suggested terms for the two facilities are
substantially identical, differing only as necessary to reflect the
fact that, in contrast to the Polo facility, where CNW and Soo each
currently have ownership interests and veto rights, CNW owns 100%
of the Clinton facility and Soo does not have any right to veto
sales by CNW of the Clinton facility or admissions by CNW of third
railroads to it. The primary applicants' proposal is as follows:
As to the Polo Facility:
1. Subject to the provisions of paragraphs 2-5 below, Soo or
CNW may, without the consent of the other, (a) transfer
its interest in the facility and its rights under this
Agreement; (b) grant trackage rights over the facility;
and (c) handle traffic over the facility for the account
of others via haulage.
2. Soo or CNW may transfer its interest in the facility and
its rights under this Agreement or grant access to the
facility via trackage rights or haulage, without the
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(4) The primary applicants are concerned, they allege,
because after the issuance of Decision No. 25, UPC
and Holdings agreed on the terms of an acquisition
transaction under which UP Rail, Inc., a subsidiary
of UPC, will tender for all of the common stock of
Holdings at $35 per share, and will then be merged
into Holdings. The tender offer is to be consummat-
ed on April 21, 1995, and its consummation is condi-
tioned on the finality of the Commission's control
order. Since the primary applicants are moving
quickly to achieve the benefits of control, they
allege that it is important that the Soo condition
become effective on April 6, 1995, and ask that the
Commission resolve disputes about the Soo condition
by that date.
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consent of the other, (a) only to railroads that operate
south from Kansas City (i.e., Burlington Northern (BN),
Kansas City Southern (KCS), Santa Fe, Southern Pacific
(SP), UP and any future successors to their lines south
from Kansas City), and (b) only to handle traffic that
moves between a point in the Upper Midwest not served by
the other party, or the Twin Cities or Chicago, on the
one hand, and a point in the South Central region, on the
other hand. "Upper Midwest" means Montana, North Dakota,
South Dakota(5), Minnesota, Iowa, Wisconsin and Illinois,
and U.S.-Canada rail gateways located in Montana, North
Dakota, Minnesota, and Wisconsin. The "South Central"
region means Kansas, Oklahoma, Texas, Missouri, Arkansas,
Louisiana, Tennessee and Mississippi, and the U.S.-Mexico
border crossings located in Texas.
3. For traffic that Soo or CNW admits to the facility via
trackage rights or haulage, the other party shall receive
a fee of $3.15 per car, escalated using RCAF (unadjust-
ed), any successor index, or, if there is no successor
index, an agreed index.
4. One party's admission of additional users to the facility
must not impede the other party's ability to operate over
the facility. One party's admission of a user shall be
conclusively presumed not to impede the other party's
ability to operate if the total projected number of
trains of all railroads using the facility, over a 30-day
period, following said admission shall not exceed an
average of 35 per day. Improvements necessary to
accommodate admitted parties must be paid for solely by
the admitting party, and shall be owned by the party on
whose right-of-way they are constructed, or in the case
of jointly-owned right-of-way, shall be jointly owned by
CNW and Soo; the cost of maintaining such improvements
shall be shared in the same fashion as all maintenance
costs under this Agreement.
5. The traffic of any railroad admitted to the facilities
via trackage rights or haulage shall be accounted for as
if it were the traffic of the admitting party, and the
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(5) The primary applicants did not originally include
South Dakota in their definition of "Upper Midwest."
Soo pointed this out (SOO-10 at 14), and the primary
applicants amended the definition to include South
Dakota (UP/CNW-33 at 8).
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admitting party shall be jointly and severally liable,
together with the admitted railroad, to the non-admitting
party for M&O payment and liability associated with that
traffic, and for the fee provided for in paragraph 3
above. The admitting party shall collect these sums from
the admitted railroad and remit them to the non-admitting
party; however, the non-admitting party shall be free to
proceed directly against the admitted railroad. The
admitted railroad must agree to be bound by all the terms
of this Agreement. The rights of an admitted railroad or
a railroad to which Soo or CNW transfers its interest in
the facilities and its rights under this Agreement shall
be no greater than the rights under this Agreement of the
admitting or transferring party.
As to the Clinton Facility:
1. Subject to the provisions of paragraphs 2-5 below, Soo
may, without the consent of CNW, (a) transfer its rights
under this Agreement; (b) grant trackage rights over the
facility; and (c) handle traffic over the facility for
the account of others via haulage.
2. Soo may transfer its rights under this Agreement or grant
access to the facility via trackage rights or haulage,
without the consent of CNW, only to railroads that
operate south from Kansas City (i.e., BN, KCS, Santa Fe,
SP, UP and any future successors to their lines south
from Kansas City), and only to handle traffic that moves
between a point in the Upper Midwest not served by the
other party, or the Twin Cities or Chicago, on the one
hand, and a point in the South Central region, on the
other hand. "Upper Midwest" means Montana, North Dakota,
South Dakota, Minnesota, Iowa, Wisconsin and Illinois,
and U.S.-Canada rail gateways located in Montana, North
Dakota, Minnesota, and Wisconsin. The "South Central"
region means Kansas, Oklahoma, Texas, Missouri, Arkansas,
Louisiana, Tennessee and Mississippi, and the U.S.-Mexico
border crossings located in Texas.
3. For traffic that Soo admits to the facility via trackage
rights or haulage, CNW shall receive a fee of $0.10 per
car, escalated using RCAF (unadjusted), any successor
index, or, if there is no successor index, an agreed
index.
4. Soo's admission of additional users to the facility must
not impede CNW's ability to operate over the facility.
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Soo's admission of a user shall be conclusively presumed
not to impede CNW's ability to operate if the total
projected number of trains of all railroads using the
facility, over a 30-day period, following said admission
shall not exceed an average of 35 per day. Improvements
necessary to accommodate parties admitted by Soo shall be
paid for solely by Soo, and shall be owned and maintained
by CNW, with maintenance costs apportioned as presently
provided for in the Agreement.
5. The traffic of any railroad that Soo admits to the
facilities via trackage rights or haulage shall be
accounted for as if it were the traffic of Soo, and Soo
shall be jointly and severally liable, together with the
admitted railroad, to CNW for M&O payments and liability
associated with that traffic, and for the fee provided
for in paragraph 3 above. Soo shall collect these sums
from the admitted railroad and remit them to CNW;
however, CNW shall be free to proceed directly against
the admitted railroad. The admitted railroad must agree
to be bound by all terms of the Agreement. The rights of
a railroad admitted to the facility by Soo shall be no
greater than Soo's rights under the Agreement.
It is the primary applicants' position that these
provisions fully comply with the requirements of reciprocality.
They note that Soo's veto power on the Polo facility is eliminated
to the same extent as CNW's, and where Soo has an ownership
interest in the Polo facility, it receives the same compensation
from railroads admitted without its consent as does CNW.
In the primary applicants' opinion, the parties agree
regarding the substance of paragraphs 3, 4 and 5 pertaining to each
facility. The disagreement stems from the substance of para-
graph 2. The primary applicants contend that Soo, contrary to the
position which it has advanced throughout this proceeding, is
attempting to argue that the scope of the condition should be
completely uncoupled from the scope of the competitive harm it
alleged and the Commission found. According to the primary
applicants, Soo is now claiming that no geographic or carrier
limitations should apply to Soo's ability o transfer its interest
in the joint facilities, over CNW's objection. The primary
applicants state their belief that their limitations appropriately
tailor the condition to the competitive harm alleged by Soo and
found by the Commission, and even go beyond what is necessary to
address that harm. Without the restrictions, the primary appli-
cants maintain, the condition would be impermissibly overbroad.
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The primary applicants note that the Commission has held
that conditions must be narrowly tailored to address the specific
anticompetitive effect of the transaction, and must be rejected if
they go beyond that purpose. According to the primary applicants,
the Commission made this clear when it enumerated its criteria for
the imposition of conditions to address anticompetitive consequenc-
es for mergers and control transactions.(6) The primary applicants
discuss cases which allegedly support their contention that the
condition, without the geographic and carrier parameters they
advocate, is overbroad and should be rejected.(7)
It is the primary applicant's position that the parame-
ters they recommend in paragraph 2 properly tailor the Soo
condition. First, state the primary applicants, Soo expressly
defined the market in which it was claiming a competitive harm as
the Upper Midwest-South Central market. This is why the primary
applicants specify in paragraph 2 the traffic that Soo (and, for
the Polo facility, CNW) may, under the condition, allow another
railroad to handle over the joint facilities without the consent of
the other owner as Upper Midwest-South Central traffic.
The primary applicants also note that CNW already had
every incentive to exercise its veto power over admissions of third
parties with respect to Upper Midwest traffic bound to or from
points that CNW serves. The primary applicants allege that in
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(6) UP/CNW-132 at 11, citing Union Pacific Corp., Pacif-
ic Rail System, Inc., & Union Pacific R.R. -- Con-
trol -- Missouri Pacific Corp. & Missouri Pacific
R.R., 366 I.C.C. 462, 562-65 (1982), aff'd in rele-
vant part sub nom. Southern Pacific Transportation
Co. v. ICC, 736 F.2d 708 (D.C. Cir. 1984), cert.
denied, 469 U.S. 1208 (1985) (UP/MP/WP).
(7) UP/CNW-132 at 11-14, citing Santa Fe Southern Pacif-
ic Corp. -- Control -- Southern Pacific Transporta-
tion Co., 2 I.C.C. 2d 709, 855 (1986); Union Pacific
Corp., Union Pacific R.R. and Missouri Pacific R.R.
-- Control -- Missouri-Kansas-Texas R.R., 4 I.C.C.2d
409, 437 (1988), petition for review dismissed, 883
F.2d 1079 (D.C. Cir. 1989); Rio Grande Industries,
Inc., SPTC Holding, Inc., & Denver & Rio Grande
Western R.R. -- Control -- Southern Pacific Trans-
portation Co., 4 I.C.C. 2d 834, 855 (1988); Wiscon-
sin Central Transportation Corp. -- Continuance In
Control -- Fox Valley & Western, Ltd., 9 I.C.C.2d
233, 246 (1992) and 9 I.C.C.2d 730, 745 n.17 (1993).
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order to find a nexus between its condition and the control
transaction, Soo "resorted to" arguing that, for traffic bound to
or from Upper Midwest points not served by CNW, a UP-CNW system
might have an incentive to veto the admission of third parties even
though CNW today would not. According to the primary applicants,
the Commission accepted this Soo contention in finding a nexus
between the control transaction and Soo's condition request.
The primary applicants explain that the above stated
facts led to the language in paragraph 2 limiting removal of the
veto power to traffic bound to or from points in the Upper Midwest
not served by the other party. The primary applicants note that
Chicago and the Twin Cities are also included, despite the fact
that traffic to or from these CNW-served points does not fit Soo's
theory of competitive harm, in order to ensure that the largest
traffic points in the Upper Midwest can be served by any railroad
unilaterally admitted by Soo (and, for the Polo facility, CNW), and
that the condition is therefore clearly workable. Further, note
the primary applicants, traffic bound to or from South Central
points not served by UP is not excluded under their proposal, event
though such traffic would be competitively unaffected under Soo's
theory.
According to primary applicants, Soo emphasized that its
competitive claims rested on the notion that the alleged broader
UP-CNW veto incentive under the Polo and Clinton Agreements would
impede Soo's ability to work with its southern connections at
Kansas City to match the "seamless" Upper Midwest-South Central
service that UP-CNW would be able to offer. This is the reason
that paragraph 2 specifies that Soo (and, for the Polo facility,
CNW) may transfer its interest in the facilities or grant access to
the facilities via trackage rights or haulage, without the consent
of the other, only to the railroads that serve Kansas City from the
south -- BN, KSC, Santa Fe, SP and UP.
ARGUMENTS AND PROPOSAL SUBMITTED BY SOO(8)
Soo notes that the Commission agreed with Soo that the
Polo/Clinton restrictions could interfere with Soo's effecting a
competitive response to the combined UP/CNW system. Soo states
that the Commission determined that it would deal with that problem
by "imposing a condition, as requested by Soo." (emphasis supplied
by Soo). According to Soo, the Commission explicitly granted "the
condition requested by Soo" and found that the condition is
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(8) The arguments discussed in this section come both
from SOO-9 and SOO-10.
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consistent with the public interest. Soo notes that its requested
condition never referenced particular carriers or traffic move-
ments. The Commission itself, Soo states, did not impose any
qualifications on the condition.
It is Soo's position that its condition requires the
primary applicants to amend the Polo and Clinton Agreements "[1] to
permit Soo to transfer Soo's interest in the trackage governed by
those agreements, [2] to admit others to use the trackage governed
by those agreements, and [3] to permit Soo to handle traffic for
the account of others over the trackage governed by those agree-
ments," without UP/CNW's prior consent.(9)
According to Soo, the parties have reached no agreement
regarding language to implement the Polo/Clinton condition, despite
attempts to do so. Soo asserts that the draft proposal which it
originally sent to CNW consisted of draft supplements to the Polo
and Clinton Agreements, which allegedly implemented precisely the
terms listed above and were narrowly tailored to accomplish only
that purpose.
It is Soo's position that UP, in contrast, proposed a set
of terms designed to defeat the condition rather than to implement
it. Soo contends that UP exploited the Commission's order
directing the parties to agree to implementing terms by seeking to
renegotiate the nature of the condition itself. Soo notes that
Decision No. 25 neither authorized nor permitted the parties to
redefine the scope of the Polo/Clinton condition in the guise of
proposing language for its implementation. According to Soo, UP
designed its terms to preserve, for the most part, UP/CNW's veto
power over transactions involving the Polo and Clinton lines. Soo
notes that UP sought to dictate to Soo which carriers Soo may admit
to the Polo/Clinton segments and what traffic those carriers can
handle. Also, alleges Soo, UP insisted that the condition
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(9) Soo argues that the need for the condition is great-
er than it was on March 7, 1995, because of UP's
intention to acquire 100% of CNW's voting stock.
Soo states that UP and CNW will provide pure "sin-
gle-line" service to shippers. Therefore, argues
Soo, its is now more important that the Polo and
Clinton restrictions be removed, so that Soo can
work with other carriers to compete with the "mas-
sive" UP/CNW system.
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terminate, and that the veto power be restored if Soo ever sells
its interest in the lines to another carrier.(10)
It is Soo's position that these restrictions would render
the Polo-Clinton condition ineffective. Soo points out that under
the primary applicants' terms, UP/CNW's veto power would be removed
only for traffic that:
(1) Both originates and terminates in the Upper Midwest-South
Central corridor; and
(2) Originates or terminates in the Upper Midwest region at
a point not served by CNW (except the Twin Cities and Chica-
go); and
(3) Is handled by carriers who operate south of Kansas City
(i.e., BN, KCS, Santa Fe, SP or UP).
Soo states that the veto power would be preserved for all
traffic that moves in or through the Upper Midwest-South Central
corridor but does not originate or terminate at the particular
points, or move over the lines of the particular carriers,
specified by the primary applicants. Except for certain traffic
originating or terminating in the Twin Cities and Chicago, the
condition would not allow "seamless" competition for any traffic
handled by the UP/CNW system to or from points north of Kansas
City. Because Soo and UP do not presently serve any common point
north of Kansas City other than Chicago, the primary applicants are
essentially proposing that Soo be permitted to grant access to its
Kansas City line only to a limited list of "UP-approved" carriers,
and then only so long as those carriers agree not to use such
access to compete with UP/CNW for traffic to/from any Midwestern
station other than the Twin Cities or Chicago. Under this
approach, Soo would be permitted to offer "seamless" service in
competition with UP/CNW only for traffic moving to or from the Twin
Cities or Chicago, and then only if the traffic is also moving to
or from a point in the South Central states. Seamless service in
competition with UP/CNW for traffic moving to or from any other
point north of Kansas City would be prohibited.
Soo notes that the geographic restrictions would not
permit Soo and its connections to handle even the limited body of
traffic that the primary applicants Claim the Commission had in
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(10) The primary applicants' proposal does not reflect
this alleged restriction. We will assume that it is
no longer at issue.
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mind when imposing the Polo/Clinton condition -- the cars that move
between UP-served points and points not served by CNW. According
to Soo, nearly 40% of those cars move to or from points beyond the
"South Central" states. It is Soo's position that it never focused
its theory of competitive harm exclusively on traffic moving
between UP-served points south of Kansas City and points not served
by CNW north of that gateway.
Soo also claims that the primary applicants' proposal to
extend the restrictions to a buyer of Soo's Kansas City line
effectively precludes the possibility of any such sale transaction.
Furthermore, it is Soo's position that the restrictions would
render any grant of trackage rights to another carrier over Soo's
Kansas City line incapable of being implemented. Soo maintains
that the primary applicants' proposal would make viable and effi-
cient trackage rights operations on Soo's Kansas City line
virtually impossible, by requiring the tenant carrier to segregate
"permitted" and "prohibited" freight traffic, and permitting such
a carrier to handle only the limited "permitted traffic in its
trains moving across the Polo or Clinton segments. This, argues
Soo, would lead to disputes over interpretation and application of
the restrictions which the primary applicants propose, and would
require oversight of the condition by the Commission.
Soo notes that the primary applicants could have proposed
their restrictions in the evidentiary phase of this proceeding, but
elected not to do so, and instead simply opposed Soo's condition.
If they had submitted testimony allegedly supporting their proposed
limitations during the evidentiary phase of the proceeding, Soo
would have been able in its rebuttal to submit evidence addressing
the impact of those proposed restrictions.
Soo states that its proposal implements the condition in
accordance with the Commission's specific parameters, and states
that the proposed implementing terms which it submits should be
adopted in their entirety.(11) Soo's proposal would terminate the
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(11) The Commission ordered that the Polo/Clinton condi-
tion must (1) "Incorporate the essence of the pro-
posed condition," (2) require reciprocal implemen-
tation," and (3) take effect immediately upon UP's
exercise of control over CNW. The Commission de-
fined the essence of the proposed condition as
follows:
(continued...)
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veto power embodied in the Polo an Clinton agreements by deleting
the provisions requiring Soo to obtain CNW's permission to admit
third parties to the subject trackage or to sell Soo's interest
therein. Soo would replace those provisions with language
incorporating the essential terms required by Decision No. 25.
Soo proposes the following provisions to the Polo and
Clinton Agreements in order to implement the condition.(12) For the
Clinton Agreement, with regard to termination of the contract
provisions restricting transfer of Soo's interest in the covered
trackage, Soo's proposal states:
This Agreement shall be binding upon and inure to the benefit
of the parties hereto, their respective successors, lessees
and assigns. CNW and Soo each shall have the right to sell,
assign, or transfer any interest or right given it under this
Agreement without the consent of the other party.
Similarly, Soo proposes amendments to the Polo Agreements
eliminating the existing transfer limitations while taking account
of the joint facility arrangement under those agreements:
CNW and SOO each shall have the right to sell, assign or
transfer all or any part of its interest in the tracks and
- ------------
(11) (...continued)
The essence of the proposed condition is that
Soo must be allowed (1) to transfer its inter-
est in the trackage governed by the Po-
lo/Clinton Agreements, (2) to admit others to
use the trackage governed by those agreements,
and (3) to handle traffic for the account of
others over the trackage governed by those
agreements.
Soo attaches its proposal, consisting of 2 supple-
mental agreements amending the Polo and Clinton
Agreements, to SOO-9. Soo attaches revised supple-
mental agreements to SOO-10. In Soo's opinion,
execution of these revised supplemental agreements
before consummation of the control transaction would
implement the Polo/Clinton condition without further
Commission action.
(12) The examples given are excerpts only. The full text
of Soo's proposal is found in Appendix A to this
decision.
12
<PAGE>
facilities governed by this Agreement without the consent of
the other party; provided, however, that the party to which
such tracks or facilities are sold, assigned or transferred
shall agree in writing, without condition or reservation, to
be bound by, and to assume the obligations of CNW or SOO (as
applicable) with respect to such tracks or facilities under
this Agreement.
In order to incorporate both the termination of the
contract provisions prohibiting Soo's admission of third parties
to, and handling of traffic for the account of other carriers over,
the subject trackage, Soo proposes to include the following
provision in the Clinton Agreement:
SOO and CNW each shall have the right to admit other parties
to the use of the tracks and facilities governed by this
Agreement, and to handle traffic for the account of other
parties over the tracks and facilities governed by this
Agreement.
For each of the Polo Agreements, Soo proposes the follow-
ing amending language to eliminate the current reciprocal restric-
tions on third party access:
CNW and SOO each shall have the right to admit other parties
to the use of all or any part of the tracks and facilities
governed by this Agreement without the consent of the other
Party. CNW and SOO each shall have the right to handle
traffic for the account of other parties over the tracks and
facilities governed by this Agreement without the consent of
the other party.
Soo also notes that its proposal satisfies the Commission
directive that termination of the veto power in the agreements be
reciprocal. Both CNW and Soo would surrender their veto power
under the Polo and Clinton Agreements. Soo proposes to ensure that
the termination of the veto power shall take effect immediately
upon consummation of UP/CNW common control by amending the ordering
paragraphs of Decision No. 25 to direct CNW to execute and deliver
to Soo the proposed supplements to the Polo and Clinton Agreements
before consummation of the control transaction.
Soo also suggests another allegedly necessary provision.
Soo states that it fears that UP may challenge the condition before
a reviewing court after it exercises the control authority which
the Commission approved subject to Soo's requested condition. Soo
notes that the Commission and the courts recognize that an
applicant's consummation of a Commission approved merger or control
13
<PAGE>
transaction constitutes unequivocal acceptance of the conditions
which the Commission attached as part of its approval of the
transaction.(13) Therefore, Soo argues, if UP consummates control
of CNW before completing judicial review proceedings, it cannot
lawfully challenge the validity of the Polo/Clinton condition in
such proceedings. Soo requests that the Commission inform UP that
it cannot assume control authority while challenging the precondi-
tions to the exercise of such authority.(14)
- ------------
(13) SOO-9 at 11, citing New Orleans & Northeastern Rail-
road Co. v. Bozeman, 312 F.2d 264, 268 (5th Cir.
1963); Great Northern Pacific & Burlington Lines,
Inc. -- Merger -- Great Northern Railway Co., 348
I.C.C. 821, 828 (1977), remanded on other grounds
sub nom. Chicago, Milwaukee, St. Paul & Pacific
Railroad Co. -- Trackage Rights -- Louisville &
Nashville Railroad Co., 342 I.C.C. 578, 584, aff'd
sub nom. Louisville & Nashville Railroad Co. v.
United States, 369 F. Supp. 621 (W.D. Ky.) (3--
judge court), aff'd mem., 414 U.S. 1105 (1973).
(14) The language suggested by Soo provides that
"[c]onsummation of the common control of UP and CNW
by the primary applicants, as authorized in this
decision, shall constitute on the part of such
primary applicants acquiescence in and irrevocable
assent to the conditions stated in this decision."
Soo notes that similar provisions have been included
as conditions in other rail merger or control deci-
sions. Soo-9 at 13, citing Norfolk & Western Rail-
way Co. & New York, Chicago & St. Louis Railroad Co.
-- Merger, 324 I.C.C. 1, 14 & (1964), modified on
other grounds, 336 I.C.C. 148 (1969); North Western
Employees Transportation Corp. -- Purchase -- Chica-
go & North Western Railway Co., 342 I.C.C. 58, 100
(1972); Louisville & Nashville Railroad Co. --
Merger -- Monon Railroad, 338 I.C.C. 134, 200, 202
(1970), aff'd sub nom. Louisville & Nashville Rail-
road Co. v. United States, 369 F. Supp. 621 (W.D.
Ky. 1973); Great Northern Pacific & Burlington
Lines, Inc. -- Merger -- Great Northern Railway Co.,
331 I.C.C. 228, 359 (1967), modified on other
grounds, 331 I.C.C, 869, aff'd sub. nom. United
States vs. United States, 296 F. Supp. 853 (D.D.C.
1968) (3-judge court) aff'd, 396 U.S. 491 (1970).
14
<PAGE>
With regard to the primary applicants', proposal that
admitting and admitted carriers be jointly and severally responsi-
ble for "M&O" payments and liability associated with admitted
traffic, Soo states that it does not oppose the principle. Soo
includes implementing language in its revised supplements to the
Polo and Clinton Agreements which it attaches to SOO-10.
However, Soo is concerned about paragraph 4 of the prima-
ry applicants' proposal, particularly with regard to the Clinton
segment. According to Soo, in paragraph 4 the primary applicants
are seeking to create a new basis for vetoing "seamless" service
proposals which Soo might initiate, that basis being that the
admission of another carrier's traffic would impede the primary
applicants' own operations. Soo alleges that the parties discussed
adopting such a provision in their negotiations, but that Soo did
not agree to the terms set forth in Paragraph 4 of the primary
applicants' proposals.
Soo states that it is particularly concerned that the 35-
trains-per-day threshold requested by the primary applicants might
preclude the admission of a new carrier to the Clinton segment.
According to Soo, the primary applicants have not stated the number
of trains that now operate daily over the Clinton crossing: Soo
believes that the number might be at or near 35 per day. Soo
asserts that the primary applicants have offered no evidence
documenting the basis for their proposed maximum-train limitation,
except for the allegation that their figure represents their
assessment of the present capacity of the facilities. It is Soo's
position that, without more evidence regarding the capacity of the
Polo and Clinton segments and the number of trains currently
operated thereon, the Commission should not impose operating
restrictions that could serve no purpose other than to increase the
primary applicants', veto power on the Polo and Clinton lines.(15)
- ------------
(15) In UP/CNW-133, the primary applicants respond to
Soo's anxiety regarding this provision, stating that
the conclusive presumption feature was added at
Soo's request to the primary applicants' proposed
terms for both the Polo and the Clinton facilities.
The primary applicants state that they can delete
the 35-trains-per-day provision if Soo prefers. The
primary applicants add that it is their understand-
ing that Soo does not quarrel with the basic propo-
sitions that one party's admission of third rail-
roads shall not impede the other party's ability to
operate over the facility, and that improvements
(continued...)
15
<PAGE>
(15) (...continued)
necessary to accommodate third railroads admitted by
a party shall be paid for by that party.
16
<PAGE>
DISCUSSION AND CONCLUSIONS
When we granted Soo's request that UP-CNW common control
be conditioned upon the modification of the Polo and Clinton
agreements, we expected certain eventualities, which we described
in our decision approving the proposed common control. In allowing
the parties the opportunity to negotiate the implementation of the
condition, it was our intention to give them as much latitude as
possible, but we made clear our expectations that certain results
would follow. Those expectations, found on p. 90 of Decision No.
25, were, essentially, that the settlement would incorporate the
essence of the proposed corporation (as defined above); require
reciprocal implementation; and provide that the CNW veto power
would cease at the moment UP Rail, by converting to voting status
its non-voting stock interest in the CNW holding company, takes
control of CNW. We further defined the requirement of reciprocal
implementation by stating in a footnote that identical treatment
should be accorded to Soo's veto power on the Polo facility.
It appears that the parties have made progress in agree-
ing upon certain terms of the implementation of the condition.
However, the geographic and carrier limitations proposed by the
primary applicants cause contention between Soo and the primary
applicants. A careful reading of Decision No. 25 should indicate
to the parties that we did not envision such limitations on the
condition when we agreed that the condition was appropriate and
directed the parties to negotiate the details of its implementa-
tion. In discussing the Polo and Clinton facilities, at p. 89, we
stated as follows:
By and large, UP/CNW common control will have a procompetitive
impact in the Upper Midwest-South Central corridor. The
UP/CNW joint-line routing will become more efficient; UP and
CNW will be able to innovate, and to improve the quality of
the services they offer shippers. And, in typical pro-
competitive fashion, the increased efficiency of the UP/CNW
joint-line routing is likely to trigger competitive responses
by other railroads operating in the Upper Midwest-South
Central corridor.
One important railroad operating at the north end of that
corridor is Soo. It is not the only independent railroad
operating at the north end of that corridor. And its Kansas
city line, admittedly, is not the only independent line over
which traffic in that corridor can be transported. But we
think that Soo in general, and its Kansas City line in partic-
ular, are an important part of the competitive response to the
17
<PAGE>
instant transaction that will be mounted by independent
railroads operating in the Upper Midwest-South Central
corridor.
It is easy to perceive that the Commission based its
concern about Soo's continued viability in the Upper Midwest-South
Central corridor on the logic of the supposition that the combined
UP/CNW system would have more incentive to use the veto power on
the Polo and Clinton segments in that corridor. However, nowhere
in tho preceding discussion did we indicate that lifting the veto
power only for traffic moving within that corridor would be
appropriate. We did not state that competitive responses would be
effected by other railroads operating in the Upper Midwest-South
Central corridor and only in that corridor. We noted that Soo's
Kansas City line is particularly (not exclusively) important in the
potential competitive response to the UP/CNW transaction that will
be mounted by independent railroads operating in the Upper Midwest-
South central corridor. However, we did not indicate that those
independent railroads would be operating only in that corridor, or
moving from one end of the corridor to the other and nowhere else.
Language elsewhere in the decision indicates that we did
not envision the carrier limitations which primary applicants are
proposing. When we addressed whether or not the transaction would
threaten Chicago, Central & Pacific's (CC&P's) essential services,
and concluded that it would not, at p. 93, we stated:
. . . CC&P is, to a certain extent, a feeder line, and it is
therefore very much dependent on its connections with larger
class I railroads. CC&P, by way of example, originates a good
deal of grain, particularly in Iowa and in southern Minnesota.
Such grain as CC&P cannot terminate on its own lines must
necessarily be interchanged with another carrier. Potential
interchange partners include, among others, UP, BN, KCS
[footnote omitted], and Soo. These connections will continue
to exist with common control, and CC&P can use then to its
advantage (the Soo connection should improve with the elimina-
tion of the CNW veto power on the Polo and Clinton facili-
ties). It CC&P can provide efficient grain origination
services, it will find that its several class I connections
will be ready partners.
This language demonstrates that we did not expect carrier
restrictions on the condition, do not believe that such restric-
tions embody the essence of the condition, and in fact expect a
variety of creative competitive responses from Soo and its
connections. We believe Soo argues persuasively that the restric-
tions proposed by primary applicants in paragraph 2 of their
18
<PAGE>
proposal would unduly restrain Soo in crafting its competitive
responses. We will not approve the territorial and carrier
restrictions which the primary applicants advocate.
The primary applicants argue vehemently that, without the
restrictions they propose, the condition will be too broad and
overreaching. We do not agree. Under our standards for imposing
conditions, the anticompetitive problem leading to the condition
.must be related to the proposed common control transaction. As
the Commission articulated in Decision No. 25, it is. The common
control of UP and CNW could lead to some circumstances where the
combined entity could exercise the veto power when CNW alone would
not have. Without the protective condition, this could interfere
with competitive responses from other railroads, including Soo.
There is a clear nexus between the transaction and the ameliorative
condition. With that established, there is no rule that the
condition must be the least restrictive possible: rather, it must
be broad enough to rectify the competitive problem.
We believe that Soo's supplemental agreements, as sub-
mitted, adequately incorporate the essence of the imposed condi-
tion, as instructed. Soo has included some details in those
agreements which, while not central to the essence of the condi-
tion, appear not to be controversial. These include the $3.15 per
car rental fee on the Polo facility, certain provisions pertaining
to liability associated with admitted traffic, and responsibility
for M&O payments. We do not object to the inclusion of those
provisions in the amendments to the Polo and Clinton Agreements.
Soo's supplemental agreements do not address the possible
impediment of CNW's use of the lines when Soo admits third parties
onto the Polo and Clinton facilities, or the possible impediment of
Soo's use of the line when CNW admits third parties onto the Polo
facility. The primary applicants have stated their willingness to
revise this proposed provision by deleting the 35train-per-day
limitation. We will decline to order the parties to include a
provision addressing the impediment of one party's operations when
the other party admits third parties onto the line, as the record
is insufficient to allow formulation of specific terms. And, we do
not believe that such a provision is necessary to incorporate the
essence of the proposed condition. Moreover, the parties have some
agreement on the impropriety of one party impeding the other's
operations, and we urge that they continue to work together to
assure a workable arrangement. Indeed, we emphasize that, under
our criteria for imposing conditions to remedy anticompetitive
effects, a condition must be operationally feasible. UP/MP/WP, 366
I.C.C. at 565.
19
<PAGE>
Similarly, Soo does not appear to address compensation to
be paid by third parties which it will admit onto the Clinton
facility. As we do not believe that this is an essential detail
and the record is insufficient to allow us to determine a specific
amount, we will not take a position on appropriate compensation on
the Clinton facility here.
We are not persuaded of the necessity of Soo's proposed
language stating that the primary applicants' consummation of the
common control of UP and CNW shall constitute their irrevocable
assent to the conditions stated in this decision. The primary
applicants state that they object to the inclusion of such
language, but do not contest the proposition that they must adhere
to the Commission's conditions if they are to consummate the
transaction. They argue that they should not be precluded from, at
a later date, either (a) seeking the commission's leave to pursue
judicial review on discrete issues related to the Soo condition
while consummating the control transaction and adhering to the
condition, or (b) seeking reopening on a ground set forth in 49 CFR
1115.4. (UP/CNW-133 at 7-8).
We agree with the primary applicants on this issue.
While it is true that the primary applicants' consummation of the
transaction indicates their consent to abide by all conditions
which the Commission imposed, it is common for the Commission or a
reviewing court to revisit and modify conditions. Certain changes
could occur that would make a reexamination appropriate in this
instance. We decline to bind the primary applicants in the manner
which Soo suggests.
Soo's proposed supplemental agreements, attached as
Appendix A to this decision, fully and adequately implement the
condition requested by Soo and imposed by the Commission. We will
direct the parties to execute the agreements at the time of or
prior to consummation of UP/CNW common control.
This action will not significantly affect either the
quality of the human environment or the conservation of energy
resources.
20
<PAGE>
It is ordered:
1. CNW in directed to execute and deliver to Soo
amendments to the Polo and Clinton agreements in the form set forth
in Appendix A to this decision, before or at the time of the
consummation of the common control of UP and CNW.
2. This decision is effective on the service date.
By the Commission, Chairman Morgan, Vice Chairman Owen,
and Commissioners Simmons and McDonald.
Vernon A. Williams
Secretary
(SEAL)
21
<PAGE>
APPENDIX A
FORM OF AMENDMENT TO CLINTON AGREEMENT
SUPPLEMENTAL AGREEMENT
This SUPPLEMENTAL AGREEMENT (the "Agreement") dated as
of ___________, 1995, by and between Chicago and North Western
Railway Company, a Delaware corporation ("CNW"), and Soo Line
Railroad Company, a Minnesota corporation ("SOO").
WHEREAS, CNW and SOO are parties to that certain agree-
ment dated as of August 1, 1982, by and between Chicago and North
Western Transportation Company and Chicago, Milwaukee, St. Paul
and Pacific Railroad Company governing Soo's use of approximately
1400 feet of CNW track in the vicinity of Clinton, Iowa (the
"Clinton Agreement"); and
WHEREAS, in a decision served on March 7, 1995, in
Finance Docket No. 32133, Union Pacific Corporation, Union
Pacific Railroad Company and Missouri Pacific Railroad Company --
Control -- Chicago and North Western Transportation Company and
Chicago and North Western Railway Company, the Interstate Com-
merce Commission ("ICC") ordered, as a condition upon its autho-
rization of the control transaction at issue in that proceeding,
that CNW and SOO modify certain provisions of the Clinton Agree-
ment: and
WHEREAS, CNW and S00 have agreed upon such modifica-
tions to the Clinton Agreement;
NOW THEREFORE, CNW and SOO, in consideration of the
covenants and agreements herein contained and other good and
valuable consideration, and intending to be legally bound, hereby
agree as follows:
I. Modification of the Clinton Agreement
The parties hereby agree to delete the language of Sec-
tion 15.1 of the Clinton Agreement in its entirety, and to
substitute therefor the following language:
"This Agreement shall be binding upon and inure to the
benefit of the parties hereto, their respective succes-
sors, lessees and assigns. CNW and SOO each shall have
the right to sell, assign or transfer any interest or
1
<PAGE>
right given it under this Agreement without the consent
of the other party. SOO and CNW each shall have the
right to admit other parties to the use of the tracks
and facilities governed by this Agreement, and to
handle traffic for the account of other parties over
the tracks and facilities governed by this Agreement.
The cars, trains, equipment, lading and employees of
any party admitted by SOO to the use of the tracks and
facilities governed by this Agreement, and any equip-
ment or lading handled by SOO for the account of anoth-
er party over the tracks and facilities governed by
this Agreement, shall, for purposes of this Agreement,
be deemed the sole cars, trains, equipment, lading and
employees of SOO. The cars, trains, equipment, lading
and employees of any party admitted by CNW to the use
of the tracks and facilities governed by this Agree-
ment, and any equipment or lading handled by CNW for
the account of another party over the tracks and fa-
cilities governed by this Agreement, shall, for purpos-
es of this Agreement be deemed the sole cars, trains,
equipment, lading and employees of CNW. CNW or SOO (as
applicable) shall be jointly and severally liable to
SOO or CNW (as applicable) for all obligations of a
party admitted by CNW or Soo (as applicable) under the
terms of this Agreement. CNW or SOO (as applicable)
shall collect all amounts due from a party admitted by
it, and remit to SOO or CNW, (as applicable) any such
amount due to it. However, CNW or SOO (as applicable)
shall be free to proceed directly against the admitted
Party for the payment of such sums owed to it pursuant
to this Agreement."
II. Effective Date
This Supplemental Agreement shall be effective as of
the date upon which the control transaction authorized by the ICC
in Finance Docket No. 32133 referenced above is consummated,
whether by the conversion of the non-voting shares of Chicago and
North Western Transportation Company currently held by UP Rail,
Inc. to voting shares or by any other means.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
agreement to be duly executed as of the date first above written.
CHICAGO AND NORTH WESTERN
RAILWAY COMPANY
By:______________________
SOO LINE RAILROAD COMPANY
By:______________________
3
<PAGE>
FORM QF AMENDMENT TO POLO AGREEMENTS
SUPPLEMENTAL AGREEMENT
This SUPPLEMENTAL AGREEMENT (the "Agreement") dated as
of _________, 1995, by and between Chicago and North Western
Railway Company, a Delaware corporation ("CNW"), and Soo Line
Railroad Company, a Minnesota corporation ("SOO").
WHEREAS, CNW and SOO are parties to that certain
agreement dated as of August 1, 1931, by and between Chicago,
Milwaukee, St. Paul and Pacific Railroad Company and the St. Paul
and Kansas City Short Line Railroad Company (the "1931 Agree-
ment"), and that certain supplemental agreement dated as of June
1, 1945 by and between Henry A. Scandrett, Walter B. Cummings and
George T. Haight, Trustees of the property of Chicago, Milwaukee,
St. Paul and Pacific Railroad Company, and Joseph B. Fleming and
Aaron Colnon, Trustees of the Estate of The Chicago, Rock Island
and Pacific Railway Company (the "1945 Agreement") (which agree-
ments are referred to collectively hereinafter as the "Polo Line
Agreements"); and
WHEREAS, in a decision served on March 7, 1995, in Fi-
nance Docket No. 32133, Union Pacific Corporation, Union Pacific
Railroad Company and Missouri Pacific Railroad Company -- Control
- -- Chicago and North Western Transportation Company and Chicago
and North Western Railway Company, the Interstate Commerce
Commission ("ICC") ordered, as a condition upon its authorization
of the control transaction at issue in that proceeding, that CNW
and SOO modify certain provisions of the Polo Line Agreements;
and
WHEREAS, CNW and SOO have agreed upon such modifica-
tions to the Polo Line Agreements:
NOW THEREFORE, CNW and SOO, in consideration of the
covenants and agreements herein contained and other good and
valuable consideration, and intending to be legally bound, hereby
agree as follows:
I. Modification of the 1931 Agreement
The parties hereby agree to delete the language of
Article IX, Section 4 of the 1931 Agreement in its entirety, and
to substitute therefor the following language:
4
<PAGE>
"CNW and SOO each shall have the right to sell, assign
or transfer all or any part of its interest in the
tracks and facilities governed by this Agreement with-
out the consent of the other party; provided, however,
that the party to which such tracks or facilities are
sold, assigned or transferred shall agree in writing,
without condition or reservation, to be bound by, and
to assume the obligations of CNW or SOO (as applicable)
with respect to such tracks or facilities under, this
Agreement. CNW and SOO each shall have the right to
admit other par-ties to the use of all or any part of
the tracks and facilities governed by this Agreement
without the consent of the other party. CNW and SOO
each shall have the right to handle traffic for the
account of other parties over the tracks and facilities
governed by this Agreement without the consent of the
other party. The cars, trains, equipment and employees
of any party admitted by CNW to the use of the tracks
and facilities governed by this Agreement, and any
cars, trains or equipment handled by CNW for the ac-
count of another party over the tracks and facilities
governed by this Agreement, shall, for purposes of this
Agreement, be deemed the cars, trains, equipment and
employees of CNW. The cars, trains, equipment and em-
ployees of any party admitted by SOO to the use of the
tracks and facilities governed by this Agreement, and
any cars, trains or equipment handled by SOO for the
account of another party over the tracks and facilities
governed by this Agreement, shall, for purposes of this
Agreement, be deemed the cars, trains, equipment and
employees of SOO. For traffic of another party that
CNW or SOO admits to the tracks and facilities governed
by this Agreement via trackage rights or haulage, the
party whose traffic is so admitted shall pay an in-
terest rental fee of $3.15 per car, escalated using
RCAF (unadjusted), any successor index, or, if there is
no successor index, an index mutually agreed upon by
CNW and SOO. For all cars moving over the southernmost
line of the joint facility between Polo and Birmingham,
MO, the interest rental fee shall be payable to SOO.
For all cars moving over the northernmost line of the
joint facility between Polo and Birmingham, MO, the
interest rental fee shall be payable to CNW. CNW or
SOO (as applicable) shall be jointly and severally
liable to SOO or CNW (as applicable) for all obliga-
tions of a party admitted by CNW or SOO (as applicable)
under the terms of this Agreement. CNW or SOO (as ap-
plicable) shall collect all amounts due from a party
5
<PAGE>
admitted by it, and remit to SOO or CNW (as applicable)
any such amount due to it. However, CNW or SOO (as
applicable) shall be free to proceed directly against
the admitted party for the payment of such sums owed to
it pursuant to this Agreement."
II. Modification of the 1945 Agreement
The parties hereby agree to delete the language of
Article 1, section 2 of the 1945 Agreement in its entirety, and
to substitute therefor the following language:
"CNW and SOO each shall have the right to sell, assign
or transfer all or any part of its interest in the
tracks and facilities constituting the Joint Lines
without the consent of the other party; provided,
however, that the party to which such tracks or facili-
ties are sold, assigned or transferred shall agree in
writing, without condition or reservation, to be bound
by, and to assume the obligations of CNW or S00 (as
applicable) with respect to such tracks or facilities
under, this Agreement. CNW and SOO each snail have the
right to admit other parties to the use of all or any
part of the Joint Lines without the consent of the
other party. CNW and SOO each shall have the right to
handle traffic for the account of other parties over
the Joint Lines without the consent of the other party.
The cars, trains, equipment and employees of any party
admitted by CNW to the use of the Joint Lines, and any
cars, trains or equipment handled by CNW for the ac-
count of another party over the Joint Lines, shall, for
purposes of this Agreement, be deemed the cars, trains
and employees of CNW. The cars, trains, equipment and
employees of any party admitted by SOO to the use of
the Joint Lines, and any cars, trains or equipment
handled by SOO for the account of another party ever
the Joint Lines, shall, for purposes of this Agreement,
be deemed the cars, trains, equipment and employees of
SOO. CNW or SOO (as applicable) shall be jointly and
severally liable to SOO or CNW (as applicable) for all
obligations of a party admitted by CNW or SOO (as
applicable) under the terms of this Agreement. CNW or
SOO (as applicable) shall collect all amounts due from
a party admitted by it, and remit to SOO or CNW (as
applicable) any such amount due to it. However, CNW or
Soo (as applicable) shall be free to proceed directly
6
<PAGE>
against the admitted party for the payment of such sums
owed to it pursuant to this Agreement."
III. Effective Date
This Supplemental Agreement shall be effective as of
the date upon which the control transaction authorized by the ICC
In Finance Docket NO. 32133 referenced above is consummated,
whether by the conversion of the non-voting shares of Chicago and
North Western Transportation Company currently held by UP Rail,
Inc. to voting shares or by any other means.
IN WITNESS WHEREOF, the parties hereto have caused this
agreement to be duly executed an of the date first above written.
CHICAGO AND NORTH WESTERN
RAILWAY COMPANY
By:______________________
SOO LINE RAILROAD COMPANY
By:______________________
7
