Securities and Exchange Commission
Washington, D.C. 20549
(Mark
One) FORM 10-K
(X) Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [fee required] For the Fiscal Year Ended December 31, 1994
or
( ) Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [no fee required] For the Transition period from
____ to ________
Commission file number 33-30874
CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY
(Exact name of registrant as specified in its charter)
Delaware 13-3526817
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
60606
165 North Canal Street (Zip code)
Chicago, Illinois
(Address of prinicpal executive offices) (312) 559-7000
(Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common Stock, $.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
As of March 1, 1995, the aggregate market value of common shares held by
nonaffiliates (based on the closing price as reported on the New York Stock
Exchange composite tape) was approximately $778 million.
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date:
CLASS OUTSTANDING AT MARCH 1, 1995
Common Stock 31,283,954 Shares
Non-Voting Common Stock 12,835,304 Shares
DOCUMENTS INCORPORATED BY REFERENCE:
PART OF FORM 10-K INTO WHICH
DOCUMENT DOCUMENT IS INCORPORATED
Sections of Annual Report to Shareholders for
Year Ended December 31, 1994 as specified herein. II and IV
Sections of the Company's Proxy Statement for the
Annual Meeting of Shareholders to be held in May, 1995 III<PAGE>
1
PART I
ITEM 1. BUSINESS
The Company
Chicago and North Western Transportation Company (together with its
subsidiaries, the "Company") is the holding company for the nation's eighth
largest railroad based on total operating revenues and miles of road operated,
transporting approximately 53 billion ton miles of freight in 1994. The
railroad was chartered in 1836 and currently operates approximately 5,400
miles of track in nine states in the Midwest and West. The Company's east-
west main line between Chicago and Omaha is the principal connection between
the lines of the Union Pacific Railroad and the lines of major eastern
railroads, providing the most direct transcontinental route in the nation's
central corridor.
The Company hauls a wide variety of freight, classified into five major
business groups: Energy (Coal); Agricultural Commodities; Automotive, Steel
and Chemicals; Intermodal; and Consumer Products. The Company's Energy
business group also includes its subsidiary, Western Railroad Properties,
Incorporated ("WRPI"), which transports low-sulfur coal in unit trains from
the southern Powder River Basin in Wyoming (the "Powder River Basin"), part of
the largest reserve of low-sulfur coal in the United States, and is one of
only two rail carriers originating traffic from the Powder River Basin. WRPI
provides service principally under long-term contracts and is a highly
efficient, low-cost operation. In addition to these major business groups,
the Company provides commuter service in the Chicago area under a service
contract with a regional transportation authority.
The Company, through its subsidiaries, is the successor to the business
of CNW Corporation, which was acquired in 1989 in a leveraged, going-private
transaction (the "Acquisition") led by Blackstone Capital Partners L.P.
("Blackstone"). The Company went public through a stock offering in 1992.
Blackstone and its affiliates sold substantially all their shares in
connection with a secondary stock offering in 1993.
On May 3, 1994, an amendment to the Company's restated Certificate of
Incorporation was approved by the Company's shareholders, changing the
Company's name from Chicago and North Western Holdings Corp. to Chicago and
North Western Transportation Company, effective May 6, 1994. The Company's
wholly-owned subsidiary, Chicago and North Western Transportation Company was
re-named Chicago and North Western Railway Company. During February of 1994,
the Company's intermediate holding company subsidiaries, Chicago and North
Western Acquisition Corp. and CNW Corporation, were eliminated by merger.
Recent Developments - Transaction with Union Pacific Corporation
On March 10, 1995, the Company and Union Pacific Corporation ("Union
Pacific") announced that they had agreed that Union Pacific will acquire 100%
of the Company's common stock at a price of $35 per share in cash, subject,
among other things, to negotiation and execution of a mutually satisfactory
definitive purchase agreement and approvals by the respective boards of
directors of the Company and Union Pacific. On March 16, 1995, the respective
boards of directors approved, and the Company, Union Pacific and Union
<PAGE>
2
Pacific's wholly owned subsidiary, UP Rail, Inc. ("UP Rail") executed, an
Agreement and Plan of Merger ("Merger Agreement"), dated as of March 16, 1995.
A copy of the Merger Agreement is filed as Exhibit 10.67, hereto, and
incorporated herein by reference. The Merger Agreement provides, among other
things, for the acquisition of all of the issued and outstanding shares of
common stock, par value $.01 per share, of the Company (the "Shares") by UP
Rail at a price of $35 per Share pursuant to a tender offer for all Shares,
(the "Offer") followed by a merger.
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 of
the Company, par value $.01 per share (the "Non-Voting Common Stock")
beneficially owned by Union Pacific and its wholly owned subsidiary, UP Rail,
Inc. (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 ("ICC") March 7, 1995 approval of Union Pacific's
application for an order authorizing the common control of the rail
subsidiaries of the Company and Union Pacific having become final and
effective prior to the expiration of the Offer. On April 6, 1995 (provided
that no stays have been entered by any court or the ICC prior to such time),
the ICC approval will be final and effective. However, there can be no
assurance that such ICC order will become effective at that time.
The Company and UP Rail also on March 16, 1995, executed the Company
Stock Option Agreement, which provides for the grant by the Company to Union
Pacific, subject to certain conditions (including Union Pacific ownership,
with its affiliates, of at least 85% and less than 90.01% of the number of
Shares then outstanding (assuming conversion of Union Pacific's shares of Non-
Voting Common Stock into Shares)) of an irrevocable option to purchase, at the
tender offer price per share, such number of Shares as, when added to the
number of Shares owned by Union Pacific and its affiliates immediately prior
to such purchase, would result in Union Pacific and its affiliates owning
immediately thereafter 90.01% of the then outstanding Shares. A copy of the
Company Stock Option Agreement is filed as Exhibit 10.68, hereto, and
incorporated herein by reference.
Freight Business Groups
The Company groups its freight traffic into five major business groups,
each of which is organized to service a particular commodity and customer
base. These business groups transport coal; agricultural commodities;
automotive, steel and chemical products; and consumer products; and provide
intermodal services, primarily hauling containers on double-stack trains under
agreements with large international marine shipping companies. The Company
seeks to maintain and enhance its competitive position by tailoring its
capabilities to fit its particular customer base in such areas as equipment
availability, scheduling, special purpose loading facilities and flexible
contract terms.<PAGE>
3
Set forth below is a five-year comparison of gross revenues and volumes
of the Company's five freight business groups.
<TABLE>
Net Freight Revenue and Loads by Business Group
(Revenue in millions, loads in thousands)
<CAPTION>
1994 1993 1992 1991 1990
Revenue Loads Revenue Loads Revenue Loads Revenue Loads Revenue Loads
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Energy (Coal):
Core RR $ 127.8 83.3 $ 110.8 76.6 $ 96.8 83.1 $ 107.9 89.9 $ 99.5 89.3
WRPI 225.1 824.0 204.9 708.9 169.0 554.9 176.4 572.7 150.8 483.4
Agricultural
Commodities 189.8 315.9 178.5 304.5 180.3 320.6 174.1 296.1 174.8 309.9
Automotive,
Steel and
Chemicals 208.9 358.1 188.9 332.3 178.0 318.0 166.3 291.9 194.1 296.5
Intermodal 125.2 765.4 116.3 714.0 111.2 689.2 105.9 618.0 97.0 593.4
Consumer
Products 143.0 217.1 133.3 215.3 137.5 226.4 137.9 224.8 133.5 221.0
Total $ 1,019.8 2,563.8 $ 932.7 2,351.6 $ 872.8 2,192.2 $ 868.5 2,093.4 $ 849.7 1,993.5
</TABLE>
Energy (Coal). Coal transportation is the Company's largest revenue-
producing activity, handled by both WRPI and the core railroad. WRPI, which
commenced operations in 1984, transports low-sulfur coal directly from ten of
the fifteen mines of the Powder River Basin in Wyoming to the lines of the
Union Pacific Railroad at South Morrill, Nebraska, for forwarding to
electricity generating facilities primarily in the midwestern and south
central states. WRPI originated 90.8% of the total coal loads handled by the
Company in 1994. In addition, the core railroad transports a substantial
volume of coal over its lines, including a significant number of trains
carrying WRPI coal which re-enter the core railroad at Council Bluffs, Iowa,
enroute to midwestern electricity generating facilities.
Western Railroad Properties, Incorporated. The Powder River Basin is
part of the largest reserve of sub-bituminous coal in the United States. In
recent years, coal from the Powder River Basin has experienced a growing
demand from electric utilities and other industrial customers due to the
comparatively low cost of the delivered product (on a BTU basis) and the low-
sulfur nature of the coal. The cost of the coal is lower because the reserves
are relatively close to the earth's surface. In addition to lower mining
costs, competition among the Powder River Basin mines and transportation
suppliers has resulted in lower delivered cost of Powder River Basin coal than
the delivered cost of local coal in most regions of the United States. Demand
for Powder River Basin coal has also increased due to the reduced
environmental impact because of its low-sulfur content. Demand for low-sulfur
coal has increased due to the passage of the 1990 Amendments to the Clean Air
Act. The Clean Air Act requires electric generating facilities to reduce
their sulfur dioxide emissions. Utilities can accomplish this by burning coal
with low-sulfur content, such as Powder River Basin coal, or by continuing to
burn high-sulfur coal through the use of scrubbing devices designed to remove
the sulfur from the smoke emissions or other balancing mechanisms.<PAGE>
4
WRPI Operating Statistics
(in millions)
1994 1993 1992 1991 1990
Tonnage 86.7 73.9 57.2 58.4 49.0
Revenues $225.1 $204.9 $169.0 $176.4 $150.8
Operating income $ 85.3 1/ $ 94.6 $ 80.7 $ 68.8 2/ $ 62.3
___________________
1/ 1994 operating income decreased compared with 1993 due to increased
operating expenses caused by congestion. A $69 million 1994-1995 capital
program to expand train handling capacity is expected to alleviate this
congestion.
2/ Operating income was reduced by a special charge of $6.8 million in 1991.
1992 tonnage and revenues decreased from 1991 levels due to abnormally
mild weather, which reduced the demand for electricity. In addition, first
quarter 1991 shipments were high to meet contracted minimum shipping
requirements deferred from 1990.
WRPI handles coal for customers principally under long-term transportation
contracts, with over 97% of WRPI's 1994 revenues derived from such contracts.
The large percentage of revenues under long-term contracts, combined with the
inherent stability of demand for coal from WRPI's electric utility customers,
has provided a stable source of revenue. During 1994, WRPI had 52 contracts
with electric utilities and other industrial users of low-sulfur coal. The
remaining terms of these contracts vary between four months and 20 years. The
ten largest WRPI customers accounted for approximately 66% of 1994 WRPI
revenues. The weighted average remaining life (based on tonnages) of the
transportation contracts at December 31, 1994, for these ten customers was
approximately seven years. Most of these facilities have been designed to
burn sub-bituminous, low-sulfur coal.
Core Railroad Coal. The core railroad's coal business is comprised
primarily of trains transporting western coal to midwestern utilities over the
Company's east-west main line. Such traffic accounted for 81% of the core
railroad's coal revenues in 1994. The top ten customers accounted for 86% of
1994 coal revenue of the core railroad. The core railroad's coal is shipped
principally under long-term contracts; the weighted remaining average life
(based on tonnages) at December 31, 1994 of the contracts for these ten
customers was approximately four years. Profit margins on the core railroad
coal movements are generally lower than on WRPI movements.
Agricultural Commodities. The core railroad is one of the largest rail
transporters of grain in the United States, operating over 750 miles of "grain
gathering" lines. More than 140 multiple-car grain loading facilities in
Iowa, Minnesota, Wisconsin, Illinois and Nebraska provide shipments to
processors, barge terminals or the gateways of Chicago, Omaha, Kansas City and
St. Louis for delivery to other carriers.
The agricultural commodities group consists of the following commodities:<PAGE>
5
Percent of 1994 Agricultural
Commodities Revenue
Corn and soybeans 30.5%
Wheat 7.6
Barley, oats and other grains 9.2
Subtotal grain 47.3%
Corn syrup 8.1%
Soybean meal and oil 9.3
Feed and flour 11.7
Malt 3.9
Subtotal grain products 33.0%
Agricultural chemicals 7.2%
Potash and sulfur 12.5
Total 100.0%
In 1994, approximately 70% of grain shipments was for domestic
processing and the balance was for feed lots and other users. 1994 grain
shipments decreased due to 1993 flooding in the Midwest, which reduced the
quantity and quality of the corn harvest in the Company's service territory.
The core railroad has historically benefitted from long-term relationships
with its grain customers. Continuation of these stable relationships is
important because changes in weather, government farm policies and import-
export demand makes the movement of agricultural products fluctuate
unpredictably. The agricultural commodities business is conducted primarily
with large grain firms, grain processing companies and fertilizer producers.
Automotive, Steel and Chemicals. The Automotive, Steel and Chemicals
business group serves domestic and international auto manufacturers, steel
producers, iron ore mining operations and industrial and petroleum chemical
firms.
The Company delivers parts to and transports finished domestic vehicles
from two assembly plants in Illinois and Wisconsin. The Company also
transports finished domestic and import vehicles to the Company's regional
distribution facilities in West Chicago, Illinois; St. Paul, Minnesota; and
Milwaukee, Wisconsin. In 1994, four auto customers accounted for 96% of total
automotive revenues.
The Company delivers scrap steel to and handles finished and semi-
finished steel from two steel mills in Illinois and Nebraska. In 1994, these
two firms produced 61% of C&NW total steel revenue. In addition, the Company
also transports steel and iron ore for the major integrated producers in the
United States. Three customers comprised 86% of total ore revenues through
the Escanaba, Michigan ore port in 1994.
The Company's chemical business is basically composed of shipments of raw
materials and chemicals from a petroleum refinery in Minnesota, a
ethylene/polyethylene producer in Iowa and overhead movements of industrial
chemicals, primarily soda ash destined for the Eastern U.S. These three
segments accounted for 53% of total chemical revenues for 1994.<PAGE>
6
Intermodal. The Intermodal business group provides the transportation of
various types of consumer products through a combination of railroad transport
and transport by water or motor carriers. Intermodal traffic includes the
movement of trailers-on-flat-car ("TOFC"); containers-on-flat-car ("COFC"); or
unit trains of double-stack container cars, where the Company has been a
pioneer. Intermodal transport has been among the fastest growing areas of the
railroad business in the past decade and technological advances have made
double-stack container service a highly cost-efficient method of transport
since 1984. Double-stack container traffic now accounts for approximately 82%
of the group's volume.
The Intermodal business group's primary business is supplying intermodal
transportation across the east-west main line directly to major international
containership lines involved in intermodal trade. In addition to providing
rail transportation, the Company provides terminal services to these customers
at the Company's "Global I" and "Global II" double-stack terminal facilities.
These facilities, located in the Chicago area, were specifically designed to
economically handle modern double-stack unit trains. The Company believes
that these facilities are among the nation's premier intermodal loading and
unloading facilities and are of continuing strategic importance to the
Company's ability to provide high quality intermodal service to its customers.
While the Company's intermodal volume has grown rapidly in the past
several years, from 581,000 loads in 1989 to 765,000 loads in 1994, net
revenues from intermodal services have grown less rapidly, from $97.0 million
in 1990 to $125.2 million in 1994. Volumes have shifted from higher revenue,
higher cost TOFC/COFC to the lower cost double-stack method of transport. The
lower unit costs associated with double-stack movements have been shared with
customers, resulting in higher profit margins for the Company and lower unit
costs for the customers.
Consumer Products. This business group includes a variety of consumer
oriented commodities including food products, paper and related products,
lumber and plywood, construction materials and some minerals such as silica
sand and bentonite clay. Due to the diversity of customers and the products
they ship, this business group, as a whole, closely tracks general economic
conditions, and is very sensitive to other railroad and truck competition.
Commuter Line
Since July 1, 1975, the Company has operated Chicago suburban commuter
service under a purchase of service agreement with a regional transportation
authority. The present agreement expires on December 31, 1998, and provides
for the Company to receive a small profit for operating the service in
addition to being reimbursed for the costs of commuter operations in excess of
revenue fares collected. In 1994, gross revenues from the Commuter Line were
approximately $82 million.
Under a related agreement, the Company received approximately $13 million
from the regional transportation authority during 1994 for the regional
transportation authority's share of track improvements in the commuter
operations territory.<PAGE>
7
Employees
The Company's employment levels and gross wages paid are shown in the
following table:
1994 1993 1992 1991 1990
Average employees for the year 7,122 6,980 7,018 7,549 8,060
Gross payroll (millions) $327 $306 $292 $294 $309
Competition
The Company is subject to significant competition for freight traffic
from rail, motor and water carriers. Strong competition among rail carriers
exists in most major rail corridors. The principal factor in the Company's
ability to compete for freight traffic is price. Quality of service and
efficiency of operations are also significant factors, particularly in the
intermodal area, where competition from motor carriers is substantial. Barge
lines and motor carriers have certain cost advantages over railroads because
they are not obligated to acquire, maintain or pay real estate taxes on the
rights-of-way they use. WRPI's principal competitor is the Burlington
Northern Railroad, a substantially larger carrier which has access to all of
the Powder River Basin mines.
Railroad Regulation
The core railroad and WRPI, along with other common carriers engaged in
interstate transportation, are subject to the regulatory jurisdiction of the
Interstate Commerce Commission ("ICC") in various matters, including rates
charged for transportation services (to the extent they are still regulated),
issuance of securities and assumption of obligations or liabilities, the
extension and abandonment of rail lines, and the consolidation, merger and
acquisition or control of carriers. ICC jurisdiction over rate matters
generally is limited to general rate increases and to situations where
railroads have market dominance and rates charged exceed a stated percentage
of the variable costs of providing service. The core railroad, WRPI and other
railroads are also subject to the jurisdiction of the Federal Railroad
Administration with respect to safety appliances and equipment, railroad
engines and cars, protection of employees and passengers, and safety standards
for track.
The conversion to Common Stock of the Non-Voting Common Stock of the
Company issued to UP Rail in connection with the Company's 1992
recapitalization (see Note 12 to Consolidated Financial Statements) requires
the approval of the ICC. On January 29, 1993, UP Rail filed a control
application with the ICC requesting the ICC issue an order that would permit
UP to, among other things, convert its shares of Non-Voting Common Stock into
Common Stock of the Company, vote such shares, acquire additional shares if it
determines to do so and (subject to the approval of the Company) coordinate
further the services of the railroad subsidiaries of UP and the Company, in
each of the above cases without the need to obtain any further control
authorization from the ICC. On December 13, 1994, the commissioners of the
ICC voted to approve the control application, subject to a standard labor
protection condition and a requirement that the Soo Line Railroad Company
("Soo") be permitted to admit third parties to certain joint facilities
<PAGE>
8
operated by Soo and the Company. On March 7, 1995, the ICC served its written
opinion on this matter, and on April 6, 1995 (provided that no stays have been
entered by any court or the ICC prior to such time), the approval will be
final and effective. See Item 1 "BUSINESS -- Recent Developments -
Transaction with Union Pacific Corporation" and Item 13 "Certain Relationships
and Related Transactions -- UP Rail and UP."
Labor relations in the railroad industry are governed by the Railway
Labor Act ("RLA") instead of the National Labor Relations Act. The national
collective bargaining agreements with the major national railway labor
organizations covering the union employees of certain railroads, including
certain subsidiaries of the Company, became open for modification in January
of 1995. Under the RLA, when these agreements are open for modification,
their terms remain in effect until new agreements are reached, and typically
neither management nor labor is permitted to take economic action (such as a
strike) until an extended process of negotiation, mediation and federal
investigation is completed.
Railroad industry personnel are covered by the Railroad Retirement Act
("RRA") instead of the Social Security Act. Employer contributions under the
RRA are currently approximately triple those under the Social Security Act.
Operating Statistics
Set forth below are certain operating statistics for the Company during
the last five years.
Freight Statistics
1994 1993 1992 1991 1990
Loadings
(thousands) 2,563.8 2,351.6 2,192.2 2,093.4 1,993.5
Freight train
miles (thousands) 14,642 13,219 11,809 11,365 11,353
Revenue ton miles
(millions) 53,119 46,114 40,986 40,601 37,205
Average length of
haul (miles) 307 299 288 292 296
Net tons per load 65.9 65.8 64.3 66.8 64.5
Distribution of Traffic (Loads)
1994 1993 1992 1991 1990
Originated 44.7% 43.7% 41.5% 41.4% 38.6%
Terminated 24.8 24.1 24.4 24.8 25.4
Overhead 1/ 17.6 18.3 18.1 18.1 18.5
Local 2/ 12.9 13.9 16.0 15.7 17.5
100.0% 100.0% 100.0% 100.0% 100.0%
1/ Overhead represents traffic over the Company's rail lines that is neither
originated nor terminated on such lines.
2/ Local represents traffic that is both originated and terminated on the
Company's rail lines.<PAGE>
9
The following table reflects the Company's operating expenses as a
percentage of revenues.
Operating Expense Ratios
Percent of Revenue
1994 1993 1992 1991 1990
Transportation 33.9% 33.5% 31.5% 33.4% 35.2%
Way and Structures 11.5 13.5 13.5 13.5 14.3
Equipment 20.5 18.9 19.4 19.0 17.6
Depreciation 6.5 6.6 6.6 6.8 7.6
Other Operating Expenses 7.2 7.0 8.3 7.8 8.2
Special Charges 1/ 0.4 0.5 3.0 11.8 1.4
80.0% 80.0% 82.3% 92.3% 84.3%
1/ Special charges comprise employee reduction and relocation costs of $4.8
million in 1994, $3.4 million in 1993, $30.0 million in 1992, $76.8
million in 1991 and $13.4 million in 1990; $39.0 million for environmental
and personal injury reserves in 1991; and $1.6 million for management fees
payable to a previous principal stockholder in 1993.
ITEM 2. PROPERTIES
Trackage and Rolling Stock. The status of the Company's trackage at
December 31, 1994 was as follows:
Miles of Track
Main line 1,997
Branch lines 2,506
Operated under trackage rights 885
Total railroad
(includes 2,962 miles of welded rail) 5,388
Additional main tracks 939
Yard switching and other track 2,463
Total railroad and yard tracks 8,790
Weight of Rail Owned (miles)
130 lbs. or greater 1,384
100 to 119 lbs. 3,016
Less than 100 lbs. 974
<PAGE>
10
At December 31, 1994, the Company's motive power and freight train car
fleets were as follows:
Rolling Stock Statistics 1/
Diesel locomotive units:
Owned 185
Leased 591
Total 776
Capacity (thousands of horsepower) 2,444
Average age since built or rebuilt (years) 12.1
Bad order ratio 2/ 15.3%
Covered
Box Flat Gondola Hoppers Hopper Other Total
Freight train car
and auto racks -
Owned 1,753 124 849 2,362 2,044 887 8,019
Leased 5,052 480 2,202 2,135 10,972 591 21,432
Total 6,805 604 3,051 4,497 13,016 1,478 29,451
Capacity (thousands
of tons) 3/ 524 25 286 409 1,286 15 2,545
Average age since
built or rebuilt
(years) 21.4
Bad order ratio 5.6%
<PAGE>
11
1/ Does not include the Commuter Line's fleet of 53 diesel units and 293
coaches, which are leased at a nominal cost.
2/ Bad order ratio reflects the ratio of unusable rolling stock to total
rolling stock. This ratio includes locomotives in shop for regularly
scheduled inspections and 56 locomotives (or 6.8% of the total) being
held for sale, potential rebuilding programs, spare parts or as a reserve
to accommodate surges in business levels.
3/ Excludes capacity of 1,266 auto racks, which are not rated in tons.
Western Railroad Properties, Incorporated. WRPI's trackage consists of a
103-mile line (the "Joint Line"), which is jointly owned with Burlington
Northern Railroad, the only other railroad originating service from the Powder
River Basin area, and a 107-mile line which connects the Joint Line to the
Union Pacific Railroad in western Nebraska.
A trust for the benefit of a subsidiary of the Union Pacific Corporation
(the "WRPI Trust") owns 101 miles of track and certain support facilities and
leases them to WRPI under a 75-year lease (the "Lease"). Lease rentals by
WRPI to the WRPI Trust provide a fixed return to the WRPI Trust plus a
contingent return to the WRPI Trust measured by a varying percentage of
available cash flow or operating revenues. Under the Lease, WRPI is required
to transport substantially all of its coal over this line, where it is
interchanged with the Union Pacific Railroad. WRPI owns the land under the
line and leases it to the WRPI Trust. The core railroad operates the line as
agent for WRPI under an operating agreement, with WRPI receiving all revenues
and being responsible for all operating expenses.
The Company believes that the amount and condition of its property, track
and rolling stock are adequate to maintain the current level of operations.
The Company anticipates future expenditures will be required to continue its
strategy to achieve low-cost leadership in its markets.
Capital and Maintenance Expenditures. Over the last five years, the
following track improvements and maintenance have been effected and the
following amounts have been spent to maintain and improve rail service.
Track Improvements
1994 1993 1992 1991 1990
Ties inserted
(new and reusable) 798,119 598,475 620,717 575,036 652,933
Miles of rail laid
(new and reusable) 468.5 183.8 170.6 167.7 145.3
Miles of track surfaced 2,561.0 3,544.0 2,868.0 3,089.0 3,290.0
Cubic yards of ballast
installed 901,582 607,283 748,496 480,275 593,256<PAGE>
12
Capital and Maintenance Expenditures
Maintenance (excluding)
Year Ended Capital Expenditures depreciation and rent
December 31, Road Equipment Road Equipment Total
1994 $131.9 $ 8.8 $109.5 $106.3 $ 356.5
1993 99.4 16.4 117.1 93.7 326.6
1992 79.4 3.9 111.3 86.0 280.6
1991 77.1 7.3 136.0 85.2 305.6
1990 60.1 1.7 120.2 90.3 272.3
Total $447.9 $38.1 $594.1 $461.5 $1,541.6
The Company allocates funds for capital and maintenance expenditures
based on its capital needs indicated by its long-term planning and
availability of internally generated funds or suitable long-term financing.
Capital expenditures in 1994 were $140.7 million, compared with $115.8
million in 1993, and $83.3 million in 1992. The majority of these
expenditures were for improvements to the railroad plant, structures and
equipment.
Not included in the chart above is $440 million (excluding $97.4 million
related to the sale and leaseback of certain locomotives and freight cars in
1990) representing the cost to lessors of freight cars and locomotives which
the Company leased during the five-year period. The Company acquired 63
locomotives and 1,598 freight cars under operating leases with a cost to the
lessors of approximately $279 million in 1994. The Company expects to acquire
52 locomotives and approximately 1,900 freight cars under operating leases
which have a cost to the lessors of approximately $185 million in 1995.
A $144 million capital expenditures program is presently budgeted for
1995. The majority of the capital expenditures program covers replacement of
rail, ties and other track material system-wide, expansion of train handling
capacity from the Powder River Basin by WRPI, and construction of new
facilities to serve shippers.
Other Property. The Company owns various facilities including those for
maintenance, stores and yards throughout its system. It leases, and at the
expiration of the lease in 1996 will at a nominal price become the owner of,
an iron ore handling facility at Escanaba, Michigan, which transports ore by
conveyor belts from car to boat or from car to stockpile to boat.
The Company is the lessor of certain real estate under approximately
1,600 leases for commercial, agricultural and industrial uses and owns
additional real estate available for such uses. The Company continues to
identify and sell real estate not needed for present or planned rail
operations. The Company owns several repair facilities, including a heavy
freight car repair facility at Clinton, Iowa, and other facilities for
locomotive heavy repair at Marshalltown, Iowa; Chicago, Illinois; and Proviso,
Illinois.<PAGE>
13
ITEM 3. LEGAL PROCEEDINGS
Environmental Matters
The Company's operations are subject to a variety of federal, state and
local environmental and pollution control statutes and regulations which
govern air emissions from equipment and facilities, discharges to water and
the generation, handling, storage, transportation, treatment and disposal of
hazardous substances. While over time, substantial expenditures by the
Company may be required to comply with such existing and future statutes and
regulations, the Company believes that, based on present information, such
compliance can be achieved without a material adverse effect on the financial
condition or competitive position of the Company.
The federal Comprehensive Environmental Response, Compensation and
Liability Act, as amended ("CERCLA") and many state "superfund" laws, subject
to certain limitations and defenses, impose strict, joint and several
liability on current and prior owners or operators of contaminated properties
and persons that arranged for disposal of hazardous substances at such
properties. The Company, as owner and prior owner of properties used in rail
or other industrial operations or leased to others for such purposes, is
subject to liability from such laws without regard to when contamination may
have occurred.
The Company is the lessor of real property under approximately 1,600
leases for commercial, agricultural and industrial uses and owns or leases
numerous other sites. The Company has provided reserves for environmental
exposure from current and former railroad operating properties, fueling
facilities, leased properties and pending litigation and enforcement actions.
The Company's environmental exposure is reevaluated periodically.
At December 31, 1994 the Company's reserve for environmental liabilities
was $30 million. No offsets were credited for possible insurance recoveries,
as the Company believes, to a large extent, it would not be able to obtain
such recoveries. The reserves were determined based on the Company's
anticipated cost of remediation at all known sites, including those where no
claim or enforcement action has been issued, taking into consideration the
extent of damage and the Company's remediation cost history. The Company has
not discounted its environmental liabilities as the timing of remediation
payments is uncertain. Environmental regulations and remediation processes
are subject to future change, and determining the actual cost of remediation
will require further investigation and remediation experience. Therefore, the
ultimate cost cannot be determined at this time. However, while such cost may
vary from the Company's current estimate, the Company believes the difference
between its reserve and the ultimate liability will not be material.
The Company has been named as a potentially responsible party ("PRP") in
three proceedings under CERCLA and in five state superfund matters, all but
one of which is in the Midwest. The Company is also a defendant in one
private CERCLA cost recovery action. The Company's reserves for environmental
proceedings include these cases. The Company has assumed that other PRPs will
pay appropriate shares of remediation obligations, except when the Company is
aware they are incapable of doing so. In such instances, the Company has
reapportioned the potential liability and provided a reserve.
Following is a listing of the sites of which the Company is currently
aware in which CERCLA or similar state superfund claims for remedial
investigation, feasibility study and/or remediation costs have been made:<PAGE>
14
Ninth Avenue Dump - This proceeding, ongoing since 1988, involves the
remediation of a contaminated dump area in Gary, Indiana designated by the
United States Environmental Protection Agency ("U.S. EPA") as a CERCLA site.
The Company is alleged to have been a generator of hazardous substances
deposited at the site. Approximately 180 other PRPs have also been identified
as generators or transporters. The U.S. EPA has previously issued unilateral
administrative orders under Section 106 of CERCLA to a large number of PRPs,
including the Company, to undertake an interim remedial action and final
remedial action based on the remedy selected in the original Record of
Decision. Subsequently, on September 13, 1994, the Regional Administrator of
U.S. EPA signed an amended Record of Decision amending the selected final site
remedy. On January 3, 1995, U.S. EPA issued an additional unilateral
administrative order to the Company and 94 other PRPs, which order requires
the Company and the named PRPs to undertake the final remedial action, as
amended. Work on the interim remedial action has been completed at a cost of
approximately $20 million. That remedial action was undertaken by a group of
PRPs which has subsequently brought suit in the U.S. District Court in the
Northern District of Indiana against the Company and 92 other defendants
seeking contribution for the costs incurred for the interim remediation and
for future costs to conduct the final remedial action. Total remediation
costs, including EPA's response and oversight costs and natural resources
damages are estimated by the PRPs' consultants to be $45,000,000. The Company
has had discussions with the participant group in order to resolve the claims
pending in the litigation and the requirements of the Order issued by U.S.
EPA.
Moss-American Site - The Company is the owner of approximately one-third
of an area in Milwaukee County, Wisconsin, which was designated by the U.S.
EPA as a CERCLA site during 1985. The remainder of the site is owned by
Milwaukee County. The site was previously occupied by Moss-American, a
division of Kerr-McGee Oil Company as a wood treatment facility and is
contaminated with creosote and other hazardous substances from the wood
treatment process. The Company purchased the property from Kerr-McGee in
1980. The U.S. EPA has previously completed a remedial investigation and
feasibility study and issued a Record of Decision which specified a
remediation plan estimated at approximately $26 million by U.S. EPA. Both the
Company and Milwaukee County have refused to undertake the remedy. Kerr-McGee
has agreed to the terms of a Consent Decree which obligates it to undertake
the remediation and has agreed to pay one million dollars of approximately
$1.9 million in U.S. EPA costs. The Company has filed comments with the
Department of Justice opposing the approval of the proposed Consent Decree
between U.S. EPA and Kerr-McGee. Milwaukee County has filed for leave to
intervene in the Consent Decree proceeding in the U.S. District Court in
Milwaukee and to oppose entry of the Consent Decree and to initiate suit
against U.S. EPA, the Wisconsin Department of Natural Resources ("Wisconsin
DNR"), Kerr-McGee and the Company. U.S. EPA has made a claim against the
Company and the County seeking approximately $900,000 of response costs. The
matter is in negotiation. Kerr-McGee has also indicated that it will seek
recovery from the Company for a percentage of the remediation costs. That
claim is also in negotiation. Subsequently, U.S. EPA has determined that the
treatment of contaminated soils in a bio-slurry reactor, as previously
specified in the Record of Decision, will not effectively remediate creosote
contaminated soils to levels acceptable to the Agency or the Wisconsin DNR.
Kerr-McGee has undertaken additional investigation of the site and is
negotiating with the Agency to select an appropriate method of remediation.
At this time, with no specified remedy or work plan, the cost of remediation
of the site cannot be estimated.<PAGE>
15
West Minneapolis Site - The Company is a defendant in a cost recovery
suit brought in the U.S. District Court in Minnesota during 1992 by Riverwalk
Partnership formerly known as Stanton-Harstad Properties ("Stanton-Harstad")
and the Minneapolis Community Development Agency ("MCDA"). Stanton-Harstad is
the former owner of some property located in Minneapolis, previously owned by
the Chicago, St. Paul, Minneapolis and Omaha Railway Company (the "Omaha"),
one of the Company's predecessors, which operated a rail yard, roundhouse and
coal gassification plant on the property in the early part of the twentieth
century. Stanton-Harstad alleges that it has incurred expenses of
approximately $250,000 for remediation of contamination discovered on the
property allegedly caused by prior rail operations of Omaha. The MCDA is
owner of property previously owned by Stanton-Harstad and Glacier Park, an
affiliate of Burlington Northern (the "BN Property") which lies adjacent to
the Omaha Property. Subsequent to the remediation performed by Stanton-
Harstad, MCDA incurred expenses alleged to be in excess of $2 million, for
remediation costs on both the Omaha and BN Properties. MCDA also alleged
damages for diminution in value and delay in development of its property.
Consolidated Container Corporation was named as a defendant in both suits, and
Burlington Northern Railroad and Glacier Park were named as defendants in the
suit brought by MCDA. The claims of MCDA against Consolidated Container,
Burlington Northern, Glacier Park and the Company have been settled. In
connection with that settlement, settling defendants have secured an
assignment of MCDA's claim against Stanton-Harstad. In addition, all of the
remaining parties have settled with Consolidated Container Company, leaving
only Stanton-Harstad's claim against the Company and the Company's third party
claims against Burlington Northern and Glacier Park.
Junker Landfill - During 1994, the Company received notice from the
Wisconsin DNR that it has been identified as a PRP for having generated
hazardous substances that were disposed of at the Junker Landfill in Hudson,
Wisconsin. The Wisconsin DNR is currently investigating the site and has
indicated that it will place the site on the National Priority List, which
would designate it as a CERCLA site. The Company has joined with other PRPs
to negotiate a plan of investigation and remediation for the site so that it
will not be listed. It is believed that approximately 700 companies sent
waste to Junker Landfill and may be designated as PRPs. Information regarding
potential cost of investigation and remediation is limited; however, the best
estimate is that such costs are approximately $6 million.
Marina Cliffs Barrel Dump Site - During 1994, the Company was notified by
the Wisconsin DNR that it and approximately one hundred other companies are
identified as PRPs for having generated hazardous substances that were
disposed of at the Marina Cliffs Barrel Dump Site in South Milwaukee,
Wisconsin. The Wisconsin DNR is currently investigating this site and has
indicated it may place the site on the National Priority List. At this time,
the Company has no specific information concerning the dump site or the
potential costs of investigation and remediation.
Environmental Pacific Corporation - During 1994, the Company received
notice from the California Environmental Protection Agency, Department of
Toxic Substances Control (the "California EPA"), that the Company and eighteen
other entities have been identified as generators of approximately one million
pounds of spent batteries which have been illegally transported and stored at
the site in Gardena, California. The batteries involved were originally
disposed of under contract with Environmental Pacific Corporation in Amity,
Oregon in accordance with applicable federal hazardous waste regulations. It
<PAGE>
16
is alleged by the California EPA that the batteries were not disposed of by
Environmental Pacific Corporation, but, rather, were transported to California
and that appropriate disposal from the California site will be required. The
Company has joined with the other generators to undertake disposal of the
batteries, the cost of which the PRPs estimate will not exceed $1 million.
Based on the information available, the batteries generated by the Company
constitute approximately 8% of those at the site.
DM&E Roundhouse - During 1994, the Company and the Dakota, Minnesota and
Eastern Railroad were identified by the U.S. EPA as PRPs for certain
contamination existing at the DM&E Roundhouse in Huron, South Dakota. This
facility was previously owned by the Company and sold to Dakota, Minnesota and
Eastern in 1986. Lagoons near the Roundhouse and adjacent properties are
alleged to be contaminated with hazardous substances discharged from the
Roundhouse. The Company and the DM&E have been requested to participate in an
investigation and remediation of the site. The Company and DM&E initiated a
preliminary site assessment. The U.S. EPA is reviewing the site assessment
and has requested additional investigation. At this time, the Company has no
estimate of potential remediation costs.
Ripon PP Landfill - The Company was notified by the Wisconsin DNR in 1994
that the Company is a PRP with respect to the Ripon PP Landfill. It is
alleged that the Company is a generator or transporter of waste that was
disposed in the Ripon PP Landfill between 1948 and 1967. At this time the
Company has no specific information as to the number of PRPs involved, the
specific environmental issues related to the landfill or the potential costs
of investigation and remediation.
During 1994, the Company settled environmental litigation with respect to
the following sites:
Union Scrap Iron and Metal Company III - During December 1994, the
Company and other PRPs entered into a consent and settlement agreement with
U.S. EPA at a cost to the Company within its existing reserve.
Rock, Michigan Groundwater - During June 1994, the Company entered into a
settlement agreement with the Michigan DNR whereby the Company reimbursed the
Michigan DNR for a portion of its investigation costs and was relieved of
additional liability for this matter.
Litigation
The Company is party to a number of other legal actions arising in the
ordinary course of business, including actions involving personal injury
claims. In management's opinion, the legal actions to which the Company is a
party will not in the aggregate have a material adverse effect on the
financial condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of 1994.<PAGE>
17
Executive Officers of the Registrant
Listed below are the names, present titles and ages of all executive
officers of the Company or its predecessor and the positions held during the
last five years. Each executive officer holds office until his successor
shall have been elected or appointed or until his death, resignation or
removal. There have been no arrangements or understandings between any
executive officer and any other person or persons pursuant to which he was
selected as an executive officer. There are no family relationships between
any executive officer and any director or other executive officer.
Name Age, Business Experience and Other Directorships
Robert Schmiege age 53, Chairman and Chief Executive Officer since
August of 1988; and a Director since July of 1988.
James E. Martin age 68, Director since May of 1992; Executive Vice
President-Operations since May of 1994; President of
the Belt Railway Company of Chicago from 1989 to April
of 1994.
F. Gordon Bitter age 52, Senior Vice President-Finance and Accounting
since October of 1994; Senior Vice President of The
Perkin-Elmer Corporation and President of the Metco
Division from 1992 to December of 1993; Senior Vice
President-Finance and Administration of the Perkin-
Elmer Corporation from 1990 to 1992, and Vice
President-Finance and Chief Financial Officer from May
1988 to December 1991.
Paul A. Lundberg age 43, Senior Vice President-Transportation Services
since May of 1994; Vice President-Labor Relations from
July of 1989 to April of 1994.
Arthur W. Peters age 52, Senior Vice President-Sales and Marketing since
June of 1988.
Dennis E. Waller age 48, Senior Vice President-Engineering and Equipment
since May of 1994; Vice President-Engineering and
Materials from October of 1990 to April of 1994; Vice
President-Motive Power and Materials from December of
1988 to September of 1990.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial
information for the Company for the periods and at the dates indicated. As
explained in Note 1(f) to the 1993 Consolidated Financial Statements,
effective January 1, 1992, the Company changed its method of accounting for
postretirement benefits other than pensions and effective January 1, 1991, the
Company changed its method of accounting for income taxes.
The historical financial information (other than operating data) for each
of the five years in the period ended December 31, 1994 was derived from
consolidated financial statements, of which the three most recent years are
incorporated by reference herein and were audited by Arthur Andersen LLP,
independent public accountants, whose reports thereon are incorporated by
reference herein.<PAGE>
18
Years ended December 31,
1994 1993 1992 1991 1990
(Dollars in millions)
except per share amounts)
Income Statement Data:
Operating revenues $1,129.8 $1,043.2 $ 985.0 $ 979.0 $960.7
Operating expenses 1/ 903.9 834.1 810.8 904.0 810.1
Operating income 225.9 209.1 174.2 75.0 150.6
Other income, net 7.1 11.0 8.1 11.1 7.5
Interest expense 97.5 105.4 126.1 156.8 174.6
Income (loss) before
income taxes 135.5 114.7 56.2 (70.7) (16.5)
Income (loss) before
extraordinary item and
cumulative effect 84.0 64.0 37.4 (43.5) (58.5)
Net income (loss) 2/ 84.0 53.2 (56.2) (72.5) (56.4)
Income (loss) available for
common shareholders 84.0 53.2 (114.9) (102.8) (76.1)
Income (loss) per share before
extraordinary item and
cumulative effect 3/ 1.86 1.44 (.58) (3.39) (3.59)
Net income (loss) per share 3/ 1.86 1.20 (3.15) (4.72) (3.49)
Years Ended December 31,
1994 1993 1992 1991 1990
Operating Data:
Revenue ton miles
(millions) 4/ 53,119 46,114 40,986 40,601 37,705
Operating ratio (%) 5/ 80.0 80.0 82.3 92.3 84.3
December 31,
1994 1993 1992 1991 1990
(Dollars in millions)
Balance Sheet Data:
Working capital $ (90.8) $ (51.9) $ (72.2) $ (75.6) $ (48.3)
Total assets 2,218.6 2,135.9 2,072.0 2,089.0 1,905.1
Long-term debt 1,033.7 1,142.8 1,227.9 1,224.3 1,213.1
Preferred Stock - - - 207.4 177.1
Common shareholders'
equity 315.9 226.2 144.0 (98.5) 4.4
1/ Special charges included in operating expenses consist of employee
reduction and relocation costs in 1994, 1993, 1992, 1991 and 1990, a
charge in 1993 for management fees payable to a previous principal
stockholder, and environmental and personal injury costs in 1991. Such
special charges totaled $4.8 million in 1994; $5.0 million in 1993; $30.0
million in 1992; $115.8 million in 1991; and $13.4 million in 1990.<PAGE>
19
2/ Net income for 1993 has been reduced by a $10.8 million extraordinary
loss related to the refinancing of long-term debt. The 1992 net loss
includes a $91.0 million extraordinary loss related to the
Recapitalization and a $2.6 million charge for the cumulative effect of a
change in the method of accounting for other postretirement benefits.
The 1991 net loss includes a $25.6 million charge for the cumulative
effect of a change in the method of accounting for income taxes and a
$3.4 million extraordinary loss on prepayment of long-term debt.
3/ Income (loss) per share is calculated after deducting preferred stock
dividends and accretion to liquidation value from net income (loss).
Such amounts totalled $58.7 million in 1992; $30.3 million in 1991 and
$19.7 million in 1990.
4/ Revenue ton miles equals the product of the weight in tons of freight
carried for hire and the distance in miles carried on the Company's
lines.
5/ Operating ratio is the ratio of operating expenses to operating revenues.
Special charges increased the operating ratio by 0.4, 0.5, 3.0, 11.8, and
1.4 percentage points for the years ended December 31, 1994, 1993, 1992,
1991 and 1990, respectively.
PART II
The following items are incorporated into this report by reference to the
sections of the Company's 1994 Annual Report to Shareholders shown below:
Annual Report Section Title
(If Applicable)
Item Description and Page Number
5 Market for the Registrant's Stock Listing,
Common Equity and Related inside back cover
Shareholders Matters.
7 Management's Discussion and Management Discussion and
Analysis of Financial Condition Analysis of Financial
and Results of Operations. Condition and Results
of Operations,
pages 16 through 21.
8 Financial Statements, Supplementary Pages 22 through 32.
Data and the Report of
Independent Public Accountants.
Event Subsequent to Date of Auditors' Report (Unaudited)
Reference is made to Part I, Item 1 "BUSINESS -- Recent
Developments - Transaction with Union Pacific Corporation"
for a discussion of Union Pacific's acquisition of the
Company.<PAGE>
20
Item 9. Disagreements on Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information with respect to the directors of the Company will be set
forth under the caption "Nominees for Election as Directors," "Directors
Continuing in Office Until 1996" and "Directors Continuing in Office until
1997" in the Company's Proxy Statement for the Annual Meeting of Shareholders
and is hereby incorporated by reference. The Annual Meeting is scheduled to
be held at 9:00 a.m. (CST), on May 2, 1995, at the Harris Trust and Savings
Bank Auditorium, 111 West Monroe, 8th Floor, Chicago, Illinois.
Information with regard to the Company's executive officers appears in
Part I of this Form 10-K under the caption "Executive Officers of the
Registrant."
Item 11. Executive Compensation
Information with respect to this item will be set forth under the
caption "Executive Compensation" in the Company's Proxy Statement for the
Annual Meeting of Shareholders and is hereby incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information with respect to this item will be set forth under the
caption "Security Ownership of Certain Beneficial Owners and Management" in
the Company's Proxy Statement for the Annual Meeting of Shareholders and is
hereby incorporated by reference.
Item 13. Certain Relationships and Related Transactions
Information with respect to this item will be set forth under the
caption "Certain Relationships and Related Transactions" in the Company's
Proxy Statement for the Annual Meeting of Shareholders and is hereby
incorporated by reference.
<PAGE>
21
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
Incorporated
Page by Reference to
Number Page Number in
of this Annual Report
Form 10-K to Shareholders
(a) 1. Financial Statements
Report of independent public accountants 32
Consolidated statement of income--years
ended December 31, 1992, 1993 and 1994 22
Consolidated balance sheet--
December 31, 1993 and 1994 23
Consolidated statement of cash flows--years
ended December 31, 1992, 1993 and 1994 24
Notes to Consolidated Financial Statements 25-31
(a) 2. Financial Statement Schedules
Report of independent public accountants 31
Selected Quarterly Financial Data for the
years ended December 31, 1993 and 1994 30
Schedule II -- Valuation and qualifying
accounts and reserves 30
<PAGE>
22
(a) 3. Exhibits
Many Company exhibits are incorporated by reference to previous filings
of the Company as defined below:
The Form S-8 filed on October 17, 1994 by Chicago and North
Western Transportation Company, file number 33-56047 (the "1994
Form S-8").
Quarterly Report of Chicago and North Western Transportation
Company for the quarter ended September 30, 1994 (the "3rd Quarter
1994 10-Q").
The Proxy Statement filed on March 28, 1994 by Chicago and North
Western Holdings Corp (the "1994 Proxy Statement").
The Form S-8 filed on December 10, 1993 by Chicago and North
Western Holdings Corp., file number 33-51405 (the "1993 Form S-
8").
The Form S-4 filed by Chicago and North Western Holdings Corp.,
file number 33-30874 (the "Form S-4").
The Form S-1 filed on March 27, 1992 by Chicago and North Western
Holdings Corp., file number 33-45265 (the "1992 Form S-1").
The Annual Report of Chicago and North Western Holdings Corp. on
Form 10-K for the year ended December 31, 1993, file number 33-
30874 (the "1993 10-K").
The Annual Report of Chicago and North Western Holdings Corp. on
Form 10-K for the year ended December 31, 1992, file number 33-
30874 (the "1992 10-K").
The Annual Report of Chicago and North Western Holdings Corp. on
Form 10-K for the year ended December 31, 1990, file number 33-
30874 (the "1990 10-K").
Number
3.1 Restated Certificate of Incorporation of Chicago and North Western
Holdings Corp. (incorporated by reference to Exhibit 4.1 to 1993
Form S-8).
3.1a Certificate of Amendment of Restated Certificate of Incorporation
filed May 5, 1994 (incorporated by reference to Exhibit 4.2 to the
1994 Form S-8).
* 3.2 By-Laws of Chicago and North Western Transportation Company
(formerly Chicago and North Western Holdings Corp.) current as of
May 9, 1994.
4.1 Specimen form of Certificate of Common Stock (incorporated by
reference to Exhibit 4.1 to the 1992 Form S-1).<PAGE>
23
Number
4.14 Second Participation and Loan Agreement dated as of December 20,
1990 among Western Railroad Properties, Incorporated as Lessee and
Citibank, N.A., not individually but solely as Trustee, as Lessor,
and UP Leasing Corporation, as Beneficial Owner, and Union Pacific
Corporation as Beneficial Owner Parent, and Chicago and North
Western Transportation Company and CNW Corporation and Chemical
Bank as Administrative Agent and Continental Bank, N.A. and the
Long-Term Credit Bank of Japan, Ltd., Chicago Branch, as Co-
Agents, and Banque Paribas, New York Branch and Manufacturers
Hanover Trust Company as Lead Managers (incorporated by reference
to Exhibit 10.19 to the 1990 10-K).
4.14a Amendment dated as of August 26, 1994, to the Second Participation
and Loan Agreement dated as of December 20, 1990 among Western
Railroad Properties, Incorporated as Lessee and Citibank, N.A.,
Trustee under the Trust Agreement, as Lessor, and UP Leasing
Corporation, as Beneficial Owner, and Union Pacific Corporation,
as Beneficial Owner Parent, and Chicago and North Western Railway
Company, as successor to Chicago and North Western Transportation
Company and CNW Corporation, and Chemical Bank, as Administrative
Agent and Continental Bank N.A. and The Long-Term Credit Bank of
Japan, Ltd., Chicago Branch, as Co-Agents, and Banque Paribas, New
York Branch, as Lead Manager (incorporated by reference to Exhibit
4.14a to the 3rd Quarter 1994 10-Q).
4.16 Credit Agreement among Chicago and North Western Transportation
Company, Chicago and North Western Holdings Corp., the Lenders
named therein, Bank of Montreal, as issuing bank, the Co-Agents
named therein and Chemical Bank, as Agent, dated as of March 27,
1992 (incorporated by reference to Exhibit 4.16 to the 1992 10-K).
4.16a First Amendment and Waiver dated as of April 7, 1992 to the Credit
Agreement dated as of March 27, 1992, among Chicago and North
Western Transportation Company, Chicago and North Western Holdings
Corp., the Lenders named therein, Bank of Montreal, as Issuing
Bank, the Co-Agents party thereto and Chemical Bank, as Agent
(incorporated by reference to Exhibit 4.16a to the 1992 10-K).
4.16b Amendment dated as of September 10, 1993, to the Credit Agreement
dated as of March 27, 1992, as previously amended, among Chicago
and North Western Transportation Company, Chicago and North
Western Holdings Corp., the Lenders named therein, Bank of
Montreal, as Issuing Bank, the Co-Agents party thereto and
Chemical Bank, as Agent (incorporated by reference to Exhibit
4.16b to the 1993 10-K).
4.16c Master Assignment and Acceptance Agreement, dated as of September
10, 1993, among Chicago and North Western Transportation Company,
Chicago and North Western Holdings Corp., the Lenders named
therein, Bank of Montreal, an Issuing Bank, the Co-Agents named
therein and Chemical Bank, as Agent (incorporated by reference to
Exhibit 4.16c to the 1993 10-K).<PAGE>
24
Number
4.16d Amendment dated as of August 26, 1994 to the Credit Agreement
dated as of March 27, 1992, as previously amended, among Chicago
and North Western Railway Company (formerly Chicago and North
Western Transportation Company), Chicago and North Western
Transportation Company (formerly Chicago and North Western
Holdings Corp.), the Lenders named therein, Bank of Montreal, as
Issuing Bank, the Co-Agents party thereto and Chemical Bank, as
Agent (incorporated by reference to Exhibit 4.16d of the 3rd
Quarter 1994 10-Q).
* 4.16e Amendment dated as of December 2, 1994 to the Credit Agreement
dated as of March 27, 1992, as previously amended, among Chicago
and North Western Railway Company (formerly Chicago and North
Western Transportation Company), Chicago and North Western
Transportation Company (formerly Chicago and North Western
Holdings Corp.), the lenders named therein, Bank of Montreal, as
Issuing Bank, the Co-Agents party thereto and Chemical Bank, as
Agent.
4.17 Senior Secured Note Purchase Agreement among Chicago and North
Western Transportation Company, Chicago and North Western Holdings
Corp., and the Purchasers listed on Schedule I thereto dated March
27, 1992 (incorporated by reference to Exhibit 4.17 to the 1992
10-K).
4.17a First Amendment and Waiver, dated as of April 7, 1992, to the
Senior Secured Note Purchase Agreement, dated as of March 27,
1992, among Chicago and North Western Transportation Company,
Chicago and North Western Holdings Corp., and The Purchasers named
there (incorporated by reference to Exhibit 4.17a to the 1992
10-K).
4.17b Second Amendment, dated as of August 26, 1994, to the Senior
Secured Note Purchase Agreement, dated as of March 27, 1992, as
previously amended, among Chicago and North Western Railway
Company (formerly Chicago and North Western Transportation
Company) (the Issuer), Chicago and North Western Transportation
Company (formerly Chicago and North Western Holdings Corp.) and
the Purchasers named therein (incorporated by reference to Exhibit
4.17b of the 3rd Quarter 1994 10-Q).
* 4.17c Third Amendment, dated as of August 26, 1994, to the Senior
Secured Note Purchase Agreement, dated as of March 27, 1992, as
previously amended, among Chicago and North Western Railway
Company (formerly Chicago and North Western Transportation
Company) (the Issuer), Chicago and North Western Transportation
Company (formerly Chicago and North Western Holdings Corp.) and
the Purchasers named therein.<PAGE>
25
Number
4.18 Master Collateral Agreement and Intercreditor Agreement among
certain participating creditors of Chicago and North Western
Transportation Company and Chemical Bank, as agent, dated as of
March 27, 1992 (incorporated by reference to Exhibit 4.18 to the
1992 10-K).
10.2 Second Amended and Restated Stockholders Agreement, dated as of
March 30, 1992, among Chicago and North Western Holdings Corp.,
CNW Corporation, Chicago and North Western Transportation Company,
Blackstone Capital Partners L.P., Blackstone Family Investment
Partnership L.P., Blackstone Advisory Directors Partnership L.P.,
Chemical Investments, Inc., The Prudential Insurance Company of
America, DLJ Capital Corporation, Union Pacific Corporation, UP
Rail, Inc. and the Management Group (incorporated by reference to
Exhibit 10.2 to the 1992 Form S-1).
10.2a Letter Agreement dated October 1, 1992 releasing certain persons
from the Second Amended and Restated Stockholders Agreement
(incorporated by reference to Exhibit 10.2a to the 1992 10-K).
10.2b Agreement dated as of December 1, 1992 among Chicago and North
Western Holdings Corp., Blackstone Capital Partners, L.P.,
Blackstone Family Investment Partnership, L.P., Blackstone
Advisory Directors Partnership, Chemical Investments Inc.,
Prudential Insurance Company of America, DLJ Capital Corporation,
Union Pacific Corporation, UP Rail, Inc., CNW Corporation, Chicago
and North Western Transportation Company and the Management Group
(incorporated by reference to Exhibit 10.2b to the 1992 10-K).
10.3 Registration Rights Agreement, dated as of July 14, 1989, among
Chicago and North Western Holdings Corp., Blackstone Capital
Partners L.P., DLJ Capital Corporation, Union Pacific Corporation
and the Management Group (the "Registration Rights Agreement")
(incorporated by reference to Exhibit 10.3 to Form S-4).
10.4 Amendment No. 1 to Registration Rights Agreement, dated as of July
24, 1989 (incorporated by reference to Exhibit 10.4 to Form S-4).
10.5 Exchange Agreement between Chicago and North Western Holdings
Corp. and UP Rail, Inc. dated March 30, 1992 (incorporated by
reference to Exhibit 10.5 to the 1992 10-K).
10.7 Gillette-Douglas Joint Line Agreement between Burlington Northern,
Inc. and Chicago and North Western Transportation Company
(incorporated by reference to Exhibit 10.9 to Form S-4).
10.8 Letter Agreement dated March 4, 1986 between Chicago and North
Western Transportation Company, Western Railroad Properties
Incorporated and Burlington Northern Railroad Company for the
purchase of an undivided one-half interest in Burlington
Northern's Coal Creek Junction and Caballo Junction, Wyoming line
of railroad (incorporated by reference to Exhibit 10.10 to Form S-
4).<PAGE>
26
Number
10.9 Agreement for Modification of Joint Line Agreement and for Interim
Trackage Rights dated April 21, 1986 (incorporated by reference to
Exhibit 10.11 to Form S-4).
*# 10.10 Chicago and North Western Transportation Company Supplemental
Pension Plan, amendment and restatement effective January 1, 1989.
10.14 One North Western Center Lease (incorporated by reference to
Exhibit 10.20 to Form S-4).
*# 10.15 Chicago and North Western Railway Company Profit Sharing and
Retirement Savings Program (as amended and restated January 1,
1989).
# 10.16 Bonus Plan of Chicago and North Western Holdings Corp., adopted
March 9, 1992 (incorporated by reference to Exhibit 10.16 to the
1992 10-K).
# 10.17 Chicago and North Western Transportation Company Executive
Retirement Plan, dated January 1, 1989 (incorporated by reference
to Exhibit 10.46 to the 1990 10-K).
10.19 Purchase of Service Agreement between Commuter Rail Division and
Chicago and North Western Transportation Company, October 1, 1984
to December 31, 1988 (incorporated by reference to Exhibit 10.22
to Form S-4).
* 10.26 Amendment No. 10 to Purchase of Service Agreement between Commuter
Rail Division and Chicago and North Western Railway to December
31, 1998.
# 10.27 Chicago and North Western Transportation Company Excess Benefit
Retirement Plan dated January 1, 1989 (incorporated by reference
to Exhibit 10.36 to the 1989 10-K).
# 10.34 Equity Incentive Plan for Key Employees of Chicago and North
Western Holdings Corp. and Subsidiaries (incorporated by reference
to Exhibit 10.48 to Form S-4).
# 10.35 Form of Non-Qualified Stock Option Agreement, dated as of July 14,
1989, between Chicago and North Western Holdings Corp., and
certain of the Management Investors (incorporated by reference to
Exhibit 10.49 to Form S-4).
# 10.42 Rollover Option Agreement, dated as of July 14, 1989, between
Chicago and North Western Holdings Corp. and Robert A. Jahnke
(incorporated by reference to Exhibit 10.57 to Form S-4).
# 10.43 Rollover Option Agreement, dated as of July 14, 1989, between
Chicago and North Western Holdings Corp. and Arthur W. Peters
(incorporated by reference to Exhibit 10.58 to Form S-4).<PAGE>
27
Number
# 10.44 Rollover Option Agreement, dated as of July 14, 1989, between
Chicago and North Western Holdings Corp. and Thomas A. Tingleff
(incorporated by reference to Exhibit 10.59 to Form S-4).
10.45 Agreement for UP Trackage Rights, dated as of July 14, 1989, by
and among Union Pacific Railroad Company, Missouri Pacific
Railroad Company, CNW Corporation and Chicago and North Western
Transportation Company (incorporated by reference to Exhibit 10.60
to Form S-4).
10.46 Supplemental Form of Agreement for UP Trackage Rights, dated as of
January 31, 1990 (incorporated by reference to Exhibit 10.39 to
the 1990 10-K).
10.47 Amendment to Agreement for UP Trackage Rights dated as of December
20, 1990 (incorporated by reference to Exhibit 10.40 to the 1990
10-K).
10.52 Letter of Intent, dated January 23, 1992 among Chicago and North
Western Holdings Corp., CNW Corporation, Union Pacific
Corporation, UP Rail, Inc. and UP Leasing Corporation
(incorporated by reference to Exhibit 10.52 to the 1992 Form S-1).
# 10.53 Chicago and North Western Holdings Corp. 1992 Equity Incentive
Plan dated April 7, 1992 (incorporated by reference to Exhibit
10.53 to the 1992 10-K).
# 10.53b Second Amendment to The Chicago and North Western Holdings Corp.
1992 Equity Incentive Plan (incorporated by reference to Exhibit
10.53b to the 1993 10-K).
# 10.54 Chicago and North Western Holdings Corp. 1994 Equity Incentive
Plan (incorporated by reference to Exhibit 22 to 1994 Proxy
Statement).
10.55 AT&T Corporate Center office sublease between AT&T Communications,
Inc. (as Landlord) and Chicago and North Western Transportation
Company (as Tenant) dated as of October 25, 1993 (incorporated by
reference to Exhibit 10.55 to 1993 10-K).
# 10.56 Chicago and North Western Holdings Corp. Directors' Deferred
Compensation Plan (incorporated by reference to Exhibit 10.56 to
1993 10-K).
# 10.57 Chicago and North Western Holdings Corp. Directors' Pension and
Retirement Savings Plan (incorporated by reference to Exhibit
10.57 to 1993 10-K).
# 10.58 Chicago and North Western Holdings Corp. Directors' Pension and
Retirement Savings Plan Trust (incorporated by reference to
Exhibit 10.58 to 1993 10-K).<PAGE>
28
Number
10.59 Agreement as of June 21, 1993 among Chicago and North Western
Holdings Corp., Blackstone Capital Partners L.P., Blackstone
Family Investment Partnership II L.P., Blackstone Advisory
Directors Partnership L.P., Chemical Investments, Inc., The
Prudential Insurance Company of America, DLJ Capital Corporation,
Donaldson, Lufkin & Jenrette Securities Corporation, Union Pacific
Corporation, UP Rail, Inc., CNW Corporation, Chicago and North
Western Transportation Company, Chicago and North Western
Acquisition Corporation, UP Leasing Corporation and certain
individuals (incorporated by reference to Exhibit 10.59 to 1993
10-K).
* 10.60 Letter Agreement dated December 14, 1994 between Chicago and North
Western Transportation Company and The Blackstone Group for
financial advisory services.
*# 10.61 Change of Control Employment Agreement among Chicago and North
Western Transportation Company, Chicago and North Western Railway
Company and F.G. Bitter.
*# 10.62 Change of Control Employment Agreement among Chicago and North
Western Transportation Company, Chicago and North Western Railway
Company and Paul A. Lundberg.
*# 10.63 Change of Control Employment Agreement among Chicago and North
Western Transportation Company, Chicago and North Western Railway
Company and James E. Martin.
*# 10.64 Change of Control Employment Agreement among Chicago and North
Western Transportation Company, Chicago and North Western Railway
Company and Arthur W. Peters.
*# 10.65 Change of Control Employment Agreement among Chicago and North
Western Transportation Company, Chicago and North Western Railway
Company and Dennis E. Waller.
*# 10.66 Form of Change of Control Employment Agreement among Chicago and
North Western Transportation Company, Chicago and North Western
Railway Company and Executives (entered into with each of 22 Vice
Presidents of Chicago and North Western Railway Company).
* 10.67 Agreement and Plan of Merger by and among Union Pacific
Corporation, UP Rail, Inc. and Chicago and North Western
Transportation Company dated as of March 16, 1995.
* 10.68 Company Stock Option Agreement dated as of March 16, 1995, among
UP Rail, Inc. and the Company.
*# 10.69 James Martin Retention Arrangement.
* 13. Chicago and North Western Transportation Company 1995 Annual
Report to Shareholders (only those portions incorporated by
reference in this Form 10-K are deemed "filed").
* 21. Subsidiaries of Chicago and North Western Transportation Company.<PAGE>
29
Number
* 27. Financial Data Schedule
28. Railroad Common Control Application before the Interstate Commerce
Commission, Finance Docket No. 32133, Union Pacific Corporation,
Union Pacific Railroad Company and Missouri Pacific Railroad
Company - Control - Chicago and North Western Holdings Corp. and
Chicago and North Western Transportation Company, volumes 1 - 4
(incorporated by reference to Exhibit 28 to the 1992 10-K).
* 99. Press Release issued by the Company on March 10, 1995.
* 99.1 Press Release issued by the Company and Union Pacific on March 17,
1995.
* Filed herewith.
# Management contract or compensatory plan or arrangement.
Note: On May 6, 1994, the name of Chicago and North Western Holdings Corp.
was changed to Chicago and North Western Transportation Company and the
name of its wholly-owned subsidiary, Chicago and North Western
Transportation Company was changed to Chicago and North Western Railway
Company.
No report on Form 8-K was filed in the fourth quarter of 1994.<PAGE>
30
SIGNATURES
Pursuant to the requirements of Section 12 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY
Principal Executive Officer
By /s/ Robert Schmiege
Robert Schmiege
Chairman, President and Chief Executive Officer
Principal Finance and Accounting Officer
By /s/ F. G. Bitter
F. G. BITTER
Senior Vice President-Finance and Accounting
March 22, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date Signed
/s/ Robert Schmiege Director March 22, 1995
Robert Schmiege
/s/ Richard K. Davidson Director March 22, 1995
Richard K. Davidson
/s/ James E. Martin Director March 22, 1995
James E. Martin
/s/ James Mossman Director March 22, 1995
James Mossman
/s/ Harold A. Poling Director March 22, 1995
Harold A. Poling
/s/ Samuel K. Skinner Director March 22, 1995
Samuel K. Skinner
/s/ James R. Thompson Director March 22, 1995
James R. Thompson<PAGE>
31
SCHEDULE II
CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Millions of dollars
Column A Column B Column C Column D Column E
Additions
Balance charged to Balance
at Costs Other Deductions at end
beginning and accounts describe of
Description of period expenses describe (1) period
Year Ended December 31, 1994
Reserves deducted
from assets to which
they apply--
Reserve for uncollectible
revenues and
other charges $ 4.1 $ 1.7 $ - $1.4 $ 4.4
Reserve for deferred
tax assets 37.6 - - 6.2 (2) 31.4
Year Ended December 31, 1993
Reserves deducted from
assets to which
they apply--
Reserve for uncollectible
revenues and
other charges $ 4.0 $ 0.9 $ - $ 0.8 $ 4.1
Reserve for deferred
tax assets 43.1 - - 5.5 (2) 37.6
Year Ended December 31, 1992
Reserves deducted
from assets to which
they apply--
Reserve for uncollectible
revenues and
other charges $ 4.0 $ 0.6 $ - $ 0.6 $ 4.0
Reserve for deferred
tax assets 52.1 - - 9.0 (2) 43.1
(1) Write off of uncollectible accounts, unless otherwise noted.
(2) Reduction for expiring fully-reserved investment
tax credits and change in estimated use of credits.<PAGE>
32
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Chicago and North Western Transportation Company:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in Chicago and North Western
Transportation Company's Annual Report to Shareholders incorporated by
reference in this Form 10-K, and have issued our report thereon dated January
27, 1995. Our audits were made for the purpose of forming an opinion on those
statements taken as a whole. The schedule listed in the Index to Financial
Statement Schedules is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 27, 1995<PAGE>
BY-LAWS
OF
CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY
(FORMERLY CHICAGO AND NORTH WESTERN HOLDINGS CORP.)
CURRENT AS OF MAY 9, 1994
ARTICLE I
MEETING OF STOCKHOLDERS
Section 1. Place of Meeting and Notice. Meetings of
the stockholders of the Corporation shall be held at such place
either within or without the State of Delaware as the Board of
Directors may determine.
Section 2. Annual and Special Meetings. Annual
meetings of stockholders shall be held, at a date, time and place
fixed by the Board of Directors and stated in the notice of
meeting, to elect Directors and to transact such other business
as may properly come before the meeting. Special meetings of the
stockholders for any purpose or purposes, unless otherwise
prescribed by statute or by the Certificate of Incorporation, may
be called at any time by the Board of Directors, or by a majority
of the members of the Board of Directors, or by a committee of
the Board of Directors which has been duly designated by the
Board of Directors and whose powers and authority as provided in
a resolution of the Board of Directors or these By-laws, include
the power to call such meetings. Special meetings of stockholders
of the Corporation may not be called by another person or
persons.
Section 3. Notice Requirements; Director
Nominations. (a) Except as otherwise provided by law, at least
10 and not more than 60 days before each meeting of stockholders,
written notice of the time, date and place of the meeting, and,
in the case of a special meeting, the purpose or purposes for
which the meeting is called, shall be given to each stockholder.
At each meeting of stockholders only such business may be
conducted as is (i) specified in the written notice of meeting
given by or at the direction of the Board of Directors of the
Corporation or Committee thereof, (ii) brought before the meeting
by the Board of Directors of the Corporation or Committee thereof
or by the Chairman of such meeting or (iii) specified in a
written notice given by or on behalf of a stockholder of record,
provided that written notice of such stockholder's intention to
make a proposal or proposals at such meeting has been given,
either by personal delivery or by United States mail, postage
prepaid, to the Secretary of the Corporation not later than (1)
with respect to proposals to be considered at an annual meeting
of stockholders, 60 calendar days in advance of the date in the
<PAGE>
- 2 -
current fiscal year of the Corporation corresponding to the date
the Corporation released in its proxy statement to stockholders
in connection with the annual meeting for the immediately
preceding year and (2) with respect to proposals to be considered
at a special meeting of stockholders, at the close of business on
the seventh day following the date on which notice of such
meeting is first given to stockholders. Each such notice of a
stockholder shall set forth: (i) the name and address of the
stockholder who intends to make the proposal and the number of
shares of the Corporation's capital stock owned or controlled by
such stockholder, (ii) a representation that the stockholder is
entitled to vote at such meeting and intends to appear in person
or by proxy at the meeting to make the proposal specified in the
notice and (iii) such other information regarding each proposal
to be made by such stockholder as would be required to be
included in a proxy statement filed pursuant to the then current
proxy rules of the Securities and Exchange Commission with
respect to such proposals. The Chairman of the meeting may
refuse to acknowledge any proposal not made in compliance with
the foregoing procedures.
(b) Nominations for the election of Directors may be
made by the Board, a committee appointed by the Board, any
stockholder entitled to vote generally in the election of
Directors or any stockholder entitled to nominate directors
pursuant to the Second Amended and Restated Stockholders
Agreement, dated as of March 30, 1992, among the Company, the
stockholders named therein (the "Stockholders Agreement") and the
other parties thereto. However, any stockholder entitled to vote
generally in the election of Directors (other than stockholders
party to the Stockholders Agreement) may nominate one or more
persons for election as Directors at a meeting only if written
notice of such stockholder's intent to make such nominations has
been given, either by personal delivery or by United States mail,
postage prepaid, to the Secretary of the Corporation not later
than (i) with respect to an election to be held at an annual
meeting of stockholders, 60 calendar days in advance of the date
in the current fiscal year of the Corporation corresponding to
the date the Corporation released its proxy statement to
stockholders in connection with the annual meeting for the
immediately preceding year and (ii) with respect to an election
to be held at a special meeting of stockholders for the election
of Directors, the close of business on the seventh day following
the date on which notice of such meeting is first given to
stockholders. Each such notice shall set forth: (i) the name and
address of the stockholder who intends to make the nomination and
of the person or persons to be nominated, (ii) a representation
that the stockholder is entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice, (iii) a
description of all arrangements or understandings between the
<PAGE>
- 3 -
stockholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination
or nominations are to be made by the stockholder, (iv) such other
information regarding each nominee proposed by such stockholder
as would be required to be included in a proxy statement filed
pursuant to the then current proxy rules of the Securities and
Exchange Commission, if the nominee were to be nominated by the
Board of Directors and (v) the consent of each nominee to serve
as a Director of the Corporation if so elected. The Chairman of
the meeting may refuse to acknowledge the nomination of any
person not made in compliance with the foregoing procedure.
Section 4. Quorum. At any meeting of stockholders,
the holders of record, present in person or by proxy, of a
majority of the Corporation's issued and outstanding shares of
capital stock entitled to vote at such meeting shall constitute a
quorum for the transaction of business, except as otherwise
provided by law. A quorum, once established, shall not be broken
by the withdrawal of holders of enough votes to leave less than a
quorum and the holders present may continue to transact business
notwithstanding such withdrawal. In the absence of a quorum, any
officer entitled to preside at or to act as secretary of the
meeting shall have power to adjourn the meeting from time to time
until a quorum is present.
Section 5. Voting. Except as otherwise provided by
law, the Certificate of Incorporation or these By-laws, all
matters submitted to a meeting of stockholders shall be decided
by vote of the holders of a majority of the stock having voting
power, present, in person or by proxy, at such meeting. At each
meeting of stockholders for the election of Directors at which a
quorum is present, the persons receiving a plurality of the votes
cast shall be elected Directors.
ARTICLE II
DIRECTORS
Section 1. Number, Election and Removal of
Directors. The number of Directors that shall constitute the
Board of Directors shall be not less than one nor more than
fifteen. The number of Directors shall be fixed or changed from
time to time, within the minimum and maximum, by the Board of
Directors. The Directors need not be stockholders. The
Directors shall be elected by the stockholders at their annual
meeting, except as may otherwise be provided in this Section 1 of
this Article II, and each Director elected shall hold office
until his successor is elected and qualified or until his death,
<PAGE>
- 4 -
retirement, resignation or removal. Except as may otherwise be
provided pursuant to Article FOURTH of the Certificate of
Incorporation with respect to any rights of holders of preferred
stock to elect additional Directors, should a vacancy in the
Board of Directors occur or be created (whether arising through
death, retirement, resignation or removal or through an increase
in the number of authorized Directors), such vacancy shall be
filled by the affirmative vote of a majority of the Directors
then in office (subject to the provisions of the Stockholders
Agreement), although less than a quorum. A Director so elected
to fill a vacancy shall serve for the remainder of the term of
the class to which he was elected.
Section 2. Meetings; Consent in Writing. Regular
meetings of the Board of Directors shall be held at such times
and places as may from time to time be fixed by the Board of
Directors or as may be specified in a notice of meeting. Special
meetings of the Board of Directors may be held at any time upon
the call of the President and shall be called by the President or
Secretary if directed by the Board of Directors. Telegraphic or
written notice of each special meeting of the Board of Directors
shall be sent to each Director not less than twenty-four hours
before such meeting. A meeting of the Board of Directors may be
held without notice immediately after the annual meeting of the
stockholders. Notice need not be given of regular meetings of
the Board of Directors. Unless otherwise restricted by the
Certificate of Incorporation or these By-laws, any action
required or permitted to be taken at any meeting of the Board of
Directors, or of any committee thereof, may be taken without a
meeting if all members of the Board of Directors or committee, as
the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board
of Directors or committee.
Section 3. Quorum. A majority of the total number of
Directors, or, in the case of a meeting of a committee of the
Board of Directors, a majority of the members, shall constitute a
quorum for the transaction of business. If a quorum is not
present at any meeting of the Board of Directors, the Directors
present may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until such a quorum is
present. Except as otherwise provided by law, the Certificate of
Incorporation or these By-laws, the act of a majority of the
Directors present at any meeting at which there is a quorum shall
be the act of the Board of Directors.
Section 4. (a) Committees of Directors. The Board of
Directors may, by resolution adopted by the affirmative vote of a
majority of the total number of Directors designate one or more
committees, including without limitation an Executive Committee,
to have and exercise such power and authority as the Board of
<PAGE>
- 5 -
Directors shall specify. In the absence or disqualification of a
member of a committee, the member or members thereof present at
any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint
other Directors to act at the meeting in place of any such absent
or disqualified member.
(b) The Executive Committee of the Corporation,
currently consisting of Robert Schmiege, Chairman, and Messrs.
James J. Mossman and James R. Birle, shall have and may exercise,
by majority vote of its members, all the powers and authority of
the Board of Directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; but
the Executive Committee shall not have the power or authority in
reference to amending the Certificate of Incorporation of the
Corporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and
assets, recommending to the stockholders a dissolution of the
Corporation or a revocation of a dissolution, amending the
By-laws of the Corporation, declaring a dividend or authorizing
the issuance of stock. All action taken by the Executive
Committee shall be reported to the Board of Directors at the
meeting thereof next succeeding such action.
ARTICLE III
OFFICERS
The officers of the Corporation shall consist of a
Chief Executive Officer, a President, a Secretary, a Treasurer
and such other additional officers with such titles as the Board
of Directors shall determine, all of whom shall be chosen by and
shall serve at the pleasure of the Board of Directors. Such
officers shall have the usual powers and shall perform all the
usual duties incident to their respective offices. All officers
shall be subject to the supervision and direction of the Board of
Directors. The authority, duties or responsibilities of any
officer of the Corporation may be suspended by the President with
or without cause. Any officer elected or appointed by the Board
of Directors may be removed by the Board of Directors with or
without cause.
<PAGE>
- 6 -
ARTICLE IV
GENERAL PROVISIONS
Section 1. Notices. Whenever any statute, the
Certificate of Incorporation or these By-laws require notice to
be given to any Director or stockholder, such notice shall be
deemed to have been given when it is sent by telegram, telex or
telecopy or hand delivered or deposited in the United States
mail, as the case may be. A waiver of such notice in writing
signed by the person or persons entitled thereto, whether before
or after the time stated in such notice, shall be equivalent to
the giving of such notice. Attendance of a Director at a meeting
shall constitute a waiver of notice of such meeting except where
a Director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not
lawfully called or convened.
Section 2. Fiscal Year. The fiscal year of the
Corporation shall be fixed by the Board of Directors.
ARTICLE V
INDEMNIFICATION, ETC.
Section 1. Right to Indemnification. Each person who
was or is made a party or is threatened to be made a party to or
is involved in or called as a witness in any action, suit or
proceeding, whether civil, criminal, administrative or
investigative, and any appeal therefrom (hereinafter,
collectively a "proceeding"), by reason of the fact that he or
she, or a person of whom he or she is the legal representative,
is, was or had agreed to become a director or officer or Delegate
(as defined herein) of the Company shall be indemnified and held
harmless by the Company to the fullest extent permitted under the
Delaware General Corporation Law (the "DGCL"), as the same now
exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the
Company to provide broader indemnification rights than the DGCL
permitted the Company to provide prior to such amendment) against
all expenses (including, but not limited to, attorneys' fees and
expenses of litigation) and all liabilities and losses
(including, but not limited to, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement)
incurred or suffered by such person in connection therewith;
provided, that except as provided in Section 3 hereof, the
<PAGE>
- 7 -
Company shall indemnify any such person seeking indemnity in
connection with a proceeding (or part thereof) initiated by such
person only if such proceeding (or part thereof) was authorized
by the Board of Directors of the Company.
For the purpose of this Article, a "Delegate" is any
person serving at the request of the Company as a director,
officer, trustee, fiduciary, partner, employee or agent of an
entity or enterprise other than the Company (including, but not
limited to, service with respect to employee benefit plans).
For the purpose of this Article, an "officer" is any
person elected, appointed or otherwise chosen by the Board of
Directors of the Company, in accordance with Article III of the
By-laws, and any attorney at law, who is an officer or employee
of the Company or of any subsidiary of the Company, when acting
as an attorney at law for the Company or any subsidiary of the
Company.
Section 2. Expenses. Expenses, including attorneys'
fees, incurred by a person referred to in Section 1 of this
Article in defending or otherwise being involved in a proceeding
shall be paid by the Company in advance of the final disposition
of such proceeding, including any appeal therefrom, upon receipt
of an undertaking (the "Undertaking") by or on behalf of such
person to repay such amount if it shall ultimately be determined
that he or she is not entitled to be indemnified by the Company;
provided, that in connection with a proceeding (or part thereof)
initiated by such person, except as provided in Section 3 hereof,
the Company shall pay such expenses in advance of the final
disposition only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Company. The
Undertaking shall provide that if the person to whom the expenses
were advanced has commenced proceedings in a court of competent
jurisdiction to secure a determination that he or she should be
indemnified by the Company, such person shall not be obligated to
repay the Company during the pendency of such proceeding.
Section 3. Protection of Rights. If a claim under
Section 1 is not promptly paid in full by the Company after a
written claim has been received by the Company or if expenses
pursuant to Section 2 have not been promptly advanced after a
written request for such advancement accompanied by the
Undertaking has been received by the Company, the claimant may at
any time thereafter bring suit against the Company to recover the
unpaid amount of claim or the advancement of expenses. If
successful, in whole or in part, in such suit such claimant shall
also be entitled to be paid the reasonable expense thereof. It
shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required
<PAGE>
- 8 -
Undertaking has been tendered to the Company) that the claimant
has not met the standards of conduct which make it permissible
under the DGCL for the Company to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be
on the Company. Neither the failure of the Company (including
its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination that indemnification
of the claimant is proper in the circumstances because he or she
has met the applicable standard of conduct, required under the
DGCL, nor an actual determination by the Company (including its
Board of Directors, independent legal counsel, or its
stockholders) that this claimant had not met such applicable
standard of conduct, shall be a defense to the action or create a
presumption that claimant had not met the applicable standard of
conduct.
Section 4. Employees and Agents. The Board of
Directors shall have the authority, by resolution, to provide for
such indemnification of employees or agents of the Company as it
shall deem appropriate.
Section 5. Non-Exclusivity of Rights. The rights
conferred on any person by this Article shall not be exclusive of
any other right which such person may have or hereafter acquire
under any statute, provision of the Certificate of Incorporation,
By-law, agreement, vote of stockholders or disinterested
directors or otherwise.
Section 6. Insurance. The Company may maintain
insurance, at its expense, to protect itself and any director,
officer, Delegate, employee, or agent, of the Company against any
expenses, liabilities or losses, whether or not the Company would
have the power to indemnify such person against such expenses,
liabilities, or losses under the DGCL.
Section 7. Contractual Nature. The provisions of this
Article shall be applicable to all proceedings, regardless of
when commenced, whether such arise out of events, acts or
omissions which occurred prior or subsequent to such adoption,
and shall continue as to a person who has ceased to be a
director, officer or Delegate and shall inure to the benefit of
the heirs, executors and administrators of such person. The
rights conferred by this Article shall be contract rights
enforceable by each person who, at any time that this Article is
in effect, serves or agrees to serve in any capacity which
entitles that person to indemnification hereunder, and any repeal
or other modification of this Article or any repeal or
modification of the DGCL or any other applicable law shall not
limit any rights of indemnification then existing or arising out
of events, acts or omissions occurring prior to such repeal or
modification, including, without limitation, the right to
<PAGE>
- 9 -
indemnification for proceedings commenced after such repeal or
modification to enforce this Article with regard to acts,
omissions or events arising prior to such repeal or modification.
Section 8. Subrogation. In the event of any payment
under this Article to a person indemnified hereunder, the Company
shall be subrogated to the extent of such payment to all of the
rights of recovery of such person, who shall execute all papers
required and take all action necessary to secure such rights,
including execution of such documents as are necessary to enable
the Company to bring suit to enforce such rights.
Section 9. Severability. If this Article or any
portion hereof shall be invalidated or held to be unenforceable,
such invalidity or unenforceability shall not affect the other
provisions hereof, and this Article shall be construed in all
respects as if such invalid or unenforceable provisions had been
omitted therefrom.
<PAGE>
AMENDMENT dated as of December 2,
1994, to the Credit Agreement dated as
of March 27, 1992, as previously amended
(the "Credit Agreement"), among CHICAGO
AND NORTH WESTERN RAILWAY COMPANY (as
successor to Chicago and North Western
Transportation Company), a Delaware
corporation (the "Borrower"), CHICAGO
AND NORTH WESTERN TRANSPORTATION COMPANY
(as successor to Chicago and North
Western Holdings Corp.), a Delaware
corporation ("Holdings"), the financial
institutions party thereto as lenders
(the "Lenders"), BANK OF MONTREAL, a
Canadian banking corporation, as issuing
bank (in such capacity, the "Issuing
Bank"), the Co-Agents named therein and
CHEMICAL BANK, as administrative agent
for the Lenders and the Issuing Bank (in
such capacity, the "Agent").
Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings assigned to such terms
in the Credit Agreement. The Borrower has requested that the
Lenders enter into this Amendment in order to amend certain
provisions of the Credit Agreement as set forth herein. The
undersigned Lenders have agreed to the requested amendments to
the Credit Agreement, subject to the terms and conditions set
forth herein. Accordingly, the parties hereto agree as follows:
SECTION 1. Amendments to Article VI. Effective as of
the Effective Time, Article VI of the Credit Agreement is hereby
amended as follows:
(a) Section 6.02 of the Credit Agreement is hereby
amended by inserting at the end of the second parenthetical
within the parenthesis the phrase "and other than dividends and
distributions on the Class B common stock of Environmental
Railroad Properties, Incorporated".
(b) Section 6.09 of the Credit Agreement is hereby
amended (i) by the deletion of "and" immediately prior to clause
(h) and (ii) by the insertion of the following new clause
immediately after clause (h):
"and (i) sales of assets not otherwise
permitted by any of the foregoing clauses,
provided that all assets sold pursuant to
this clause (i) shall be sold for
consideration not less than fair market value
and the aggregate fair market value of all
assets sold pursuant to this clause (i) shall
<PAGE>
2
not exceed $5,000,000 in any twelve-month
period;"
SECTION 2. Consent to Amendment. Each undersigned
Lender, by its execution of a counterpart hereof, consents to and
approves the amendment to the Note Purchase Agreement
substantially in the form of such amendment attached hereto as
Exhibit A.
SECTION 3. Representations and Warranties. Each of
Holdings and the Borrower represents and warrants to each of the
Lenders that:
(a) as of the Effective time, there exists no Default
or Event of Default;
(b) the representations and warranties set forth in
each Loan Document are true and correct in all material respects
at and as of the Effective Time with the same effect as though
made at and as of the Effective Time, except to the extent such
representations and warranties expressly relate to an earlier
date and except that it is understood that Chicago and North
Western Railway Company is the surviving corporation of mergers
of CNW, Chicago and North Western Transportation Company and
Acquisition Corp. and Chicago and North Western Transportation
Company is the successor to Holdings; and
(c) as of the Effective Time, each of Holdings, the
Borrower and each other subsidiary of Holdings that is a party to
any Loan Document is in compliance with all of the terms and
provisions set forth in the Credit Agreement and in each other
Loan Document on its part to be observed or performed.
SECTION 4. Conditions of Effectiveness. This
Amendment, including the amendment to the Credit Agreement set
forth above, shall become effective when the Collateral Agent (or
its counsel) shall have received counterparts of this Amendment
and the amendment to the Note Purchase Agreement substantially in
the form attached hereto as Exhibit A which, when taken together,
bear the signatures of Holdings, the Borrower and the Required
Creditors (as defined in the Intercreditor Agreement).
The Collateral Agent will notify the Borrower, the
Issuing Bank and the Lenders when the foregoing conditions have
been satisfied. The time at which such conditions are satisfied,
as reasonably determined by the Collateral Agent, is referred to
herein as the "Effective Time". The Collateral Agent's
determination of the Effective Time shall be conclusive absent
manifest error.
<PAGE>
3
SECTION 5. APPLICABLE LAW. THIS AMENDMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.
SECTION 6. Counterparts. This Amendment may be
executed in two or more counterparts, each of which shall
constitute an original, but all of which when taken together
shall constitute but one instrument.
SECTION 7. Agreement. Except as expressly amended
hereby, the Credit Agreement shall continue in full force and
effect in accordance with the provisions thereof on the date
hereof.
SECTION 8. Expenses. The Borrower shall pay all
reasonable out-of-pocket expenses incurred by the Agent and the
Collateral Agent in connection with this Amendment.
SECTION 9. Headings. The headings of this Amendment
are for the purposes of reference only and shall not limit or
otherwise affect the meaning hereof.
IN WITNESS WHEREOF, Holdings, the Borrower, the Agent,
the Issuing Bank and the Lenders have caused this Amendment to be
duly executed by their duly authorized officers, all as of the
date first above written.
CHICAGO AND NORTH WESTERN
RAILWAY COMPANY,
by
/s/ John E. Voldseth
Name: J. E. Voldseth
Title: Vice President-Finance
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY,
by
/s/ John E. Voldseth
Name: J. E. Voldseth
Title: Vice President-Finance
<PAGE>
4
LENDERS:
CHEMICAL BANK, individually
and as Agent,
by
/s/ Julie Soper
Name: Julie A. Soper
Title: Vice President
BANK OF MONTREAL, individually,
as Issuing Bank and as Co-Agent,
by
/s/ David J. Thompson
Name: David J. Thompson
Title: Director
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
individually and as Co-Agent,
by
/s/ Patricia Del Grande
Name: Patricia Del Grande
Title: Vice President
BANQUE PARIBAS, individually
and as Co-Agent,
by
/s/ Clark C. King, III
Name: Clark C. King, III
Title: Vice President
by
/s/ Albert A. Young, Jr.
Name: Albert A. Young, Jr.
Title: Senior Credit Officer
THE CHASE MANHATTAN BANK, N.A.,
individually and as Co-Agent,
by
/s/ F. M. Cox, III
Name: F. M. Cox, III
Title: Vice President
<PAGE>
5
BANK OF AMERICA ILLINOIS (formerly
known as CONTINENTAL BANK)
individually and as Co-Agent,
by
/s/ Paul R. Frey
Name: Paul R. Frey
Title: Senior Vice President
THE FIRST NATIONAL BANK OF CHICAGO,
individually and as Co-Agent,
by
/s/ G. F. Mackin
Name: Gerald F. Mackin
Title: Vice President
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD., individually and as Co-Agent,
by
/s/ Richard E. Stahl
Name: Richard E. Stahl
Title: Sr. Vice President and
Joint General Manager
NATIONAL WESTMINSTER BANK USA,
individually and as Co-Agent,
by
/s/ Gerard Painter
Name: Gerard Painter
Title: Vice President
ALLSTATE LIFE INSURANCE COMPANY,
by
/s/ Patricia W. Wilson
Name: Patricia W. Wilson
Title: Ass't. Vice President
by
/s/ Gary W. Fridley
Name: Gary W. Fridley
Title: Vice President
<PAGE>
6
ANCHOR NATIONAL LIFE INSURANCE
COMPANY,
by
Name:
Title:
THE BANK OF NEW YORK,
by
/s/ Charlotte Sohn
Name: Charlotte Sohn
Title: Assistant Vice President
CAISSE NATIONALE DE CREDIT
AGRICOLE,
by
/s/ David Bouhl
Name: David Bouhl
Title: F.V.P., Head of
Corporate Banking
Chicago
CANADIAN IMPERIAL BANK OF
COMMERCE,
by
/s/ J. W. Kunkle
Name: John W. Kunkle
Title: Authorized Signatory
CREDIT SUISSE,
by
/s/ Harry R. Olsen
Name: Harry R. Olsen
Title: Member of Senior
Management
by
/s/ K. R. Kristinsson
Name: Kristin R. Kristinsson
Title: Associate
<PAGE>
7
DRESDNER BANK AG, CHICAGO BRANCH
AND GRAND CAYMAN BRANCH,
by
/s/ John H. Schaus
Name: John H. Schaus
Title: First Vice President
by
/s/ Graham D. Lewis
Name: Graham D. Lewis
Title: Assistant Vice President
THE FIRST NATIONAL BANK OF BOSTON,
by
/s/ Dexter Freeman
Name: Dexter Freeman
Title: Vice President
INDUSTRIAL BANK OF JAPAN, LTD.,
by
/s/ Hiroaki Nakamura
Name: Hiroaki Nakamura
Title: Deputy General Manager
KEYPORT LIFE INSURANCE CO.,
by CHANCELLOR SENIOR SECURED
MANAGEMENTS, INC., as
Portfolio Advisor to:
by
/s/ Stephen M. Alfieri
Name: Stephen M. Alfieri
Title: Vice President
THE MITSUBISHI TRUST AND BANKING
CORPORATION,
by
/s/ Masaaki Yamagishi
Name: Masaaki Yamagishi
Title: Chief Manager
<PAGE>
8
THE NIPPON CREDIT BANK, LTD.,
by
/s/ Clifford Abramsky
Name: Clifford Abramsky
Title: Vice President & Manager
THE NORTHERN TRUST COMPANY,
by
Name:
Title:
PROSPECT STREET SENIOR
PORTFOLIO, L.P.,
by PROSPECT STREET SENIOR LOAN
CORP., as managing general
partner of PROSPECT STREET
SENIOR PORTFOLIO, L.P.,
by
/s/ Preston I. Carnes, Jr.
Name: Preston I. Carnes, Jr.
Title: Vice President
PROTECTIVE LIFE INSURANCE COMPANY,
by
/s/ Mark K. Okada
Name: Mark K. Okada
Title: Principal - Protective
Asset Management Co.
RESTRUCTURED OBLIGATIONS BACKED
BY SENIOR ASSETS, B.V. (ROSA)
by CHANCELLOR SENIOR SECURED
MANAGEMENT, INC., as
Portfolio Advisor,
by
/s/ Stephen M. Alfieri
Name: Stephen M. Alfieri
Title: Vice President
<PAGE>
9
SUN LIFE INSURANCE CO.,
by
/s/ Michael J. Campbell
Name: Michael J. Campbell
Title: Authorized Agent - Sun
Life Insurance Company
of America
THE TORONTO-DOMINION BANK,
by
/s/ Diane Bailey
Name: Diane Bailey
Title: Mgr. Cr. Admin.
THE TRAVELERS INDEMNITY COMPANY,
by
/s/ Paul T. Quistberg
Name: Paul T. Quistberg
Title: Assistant Investment
Officer
THE TRAVELERS INSURANCE COMPANY,
by
/s/ Paul T. Quistberg
Name: Paul T. Quistberg
Title: Assistant Investment
Officer
<PAGE>
EXHIBIT A
Third Amendment, dated as of December 2, 1994 (this "Third
Amendment"), to the Senior Secured Note Purchase Agreement, dated
as of March 27, 1992, as previously amended (the "Note Purchase
Agreement"), among Chicago and North Western Railway Company
(formerly Chicago and North Western Transportation Company) (the
"Issuer"), Chicago and North Western Transportation Company
(formerly Chicago and North Western Holdings Corp.) ("Holdings";
together with the Issuer, the "Companies") and the Purchasers
named therein.
<PAGE>
THIRD AMENDMENT
THIRD AMENDMENT, dated as of December 2, 1994 (this
"Third Amendment"), to the Senior Secured Note Purchase
Agreement, dated as of March 27, 1992, as previously amended (the
"Note Purchase Agreement"), among Chicago and North Western
Railway Company (formerly Chicago and North Western
Transportation Company) (the "Issuer"), Chicago and North Western
Transportation Company (formerly Chicago and North Western
Holdings Corp.) ("Holdings"; together with the Issuer, the
"Companies") and the Purchasers named therein.
W I T N E S S E T H :
WHEREAS, the Companies have requested that the
Purchasers and the Lenders amend the Note Purchase Agreement and
the Credit Agreement in the manner hereinafter set forth;
WHEREAS, the undersigned Purchasers are willing to
accede to the request of the Companies, upon the terms and
subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants contained herein, the parties hereby agree
as follows:
SECTION I. Defined Terms.
Unless otherwise defined herein, terms defined in the
Note Purchase Agreement and used herein are so used as so
defined.
SECTION II. Amendment to Article IX.
Section 9.07 is hereby amended (a) by the deletion of
"and" immediately prior to clause (h) and (b) by the insertion of
the following new clause immediately after clause (h):
"and (i) sales of assets not otherwise
permitted by any of the foregoing clauses,
provided that all assets sold pursuant to
this cause (i) shall be sold for
consideration not less than fair market value
and the aggregate fair market value of all
assets sold pursuant to this clause (i) shall
not exceed $5,000,000 in any twelve-month
period;"
<PAGE>
2
SECTION III. Effectiveness.
The Third Amendment shall become effective on and as of
the date that the required Creditors (as defined in the
Intercreditor Agreement) shall have evidenced their consent to
the terms hereof by executing this Third Amendment and the
Amendment to the Credit Agreement, substantially in the form of
Exhibit A hereto (the "Credit Agreement Amendment").
SECTION IV. Consent.
The Purchasers hereby consent to and approve the Credit
Agreement Amendment substantially in the form of Exhibit A
hereto.
SECTION V. Representations and Warranties.
After giving effect to the amendments contained herein,
each Company hereby confirms, reaffirms and restates (a) as of
the effective date of the Third Amendment, there exists no
Defaults or Event of Default; (b) the representations and
warranties of such Company set forth in Article II of the Note
Purchase Agreement, except to the extent such representations and
warranties expressly relate to an earlier date and except that it
is understood that Chicago and North Western Railway Company is
the surviving corporation of mergers of CNW, Chicago and North
Western Transportation Company and Acquisition Corp. and Chicago
and North Western Transportation Company is the successor to
Holdings; and (c) as of the effective date of the Third
Amendment, each of the Companies and each other subsidiary of
Holdings that is a party to any Note Document is in compliance
with all of the terms and provisions set forth in the Note
Purchase Agreement and in each other Note Document on its part to
be observed or performed.
SECTION VI. Miscellaneous.
1. Limited Effect. Except as expressly amended or
modified by this Third Amendment, all of the provisions and
covenants of the Note Purchase Agreement are and shall continue
to remain in full force and effect in accordance with the terms
thereof.
2. Counterparts. This Third Amendment may be
executed by one or more of the parties hereto in any number of
separate counterparts and all of said counterparts taken together
shall be deemed to constitute one and the same instrument.
3. Governing Law. THIS THIRD AMENDMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK.
<PAGE>
3
IN WITNESS WHEREOF, the parties hereto have caused this
Third Amendment to be duly executed by their respective
authorized officers as of the day and first year written.
CHICAGO AND NORTH WESTERN
RAILWAY COMPANY,
by
/s/ John E. Voldseth
Name: J. E. Voldseth
Title: Vice President-Finance
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY,
by
/s/ John E. Voldseth
Name: J. E. Voldseth
Title: Vice President-Finance
PURCHASERS:
AIG LIFE INSURANCE COMPANY,
by
Name:
Title:
AMERICAN CENTURION LIFE AND
ACCIDENT ASSURANCE COMPANY,
by
Name:
Title:
AMERICAN ENTERPRISE LIFE
INSURANCE COMPANY,
by
Name:
Title:
<PAGE>
4
AMERICAN INTERNATIONAL LIFE
ASSURANCE COMPANY OF NEW YORK,
by
Name:
Title:
AMERICAN LIFE & CASUALTY
INSURANCE COMPANY,
by
Name:
Title:
by
Name:
Title:
AMERICAN MANUFACTURERS MUTUAL
INSURANCE COMPANY,
by
/s/ F. Collechia
Name: F. Collechia
Title: Authorized Signatory
by
/s/ H. E. Guenther
Name: H. E. Guenther
Title: Authorized Signatory
ANEX LIFE ASSURANCE COMPANY,
by
Name:
Title:
<PAGE>
5
BANKERS UNITED LIFE ASSURANCE
COMPANY, as to successor to
General Service Life Insurance
Company,
by
Name:
Title:
CENTRAL LIFE ASSURANCE COMPANY,
by
Name:
Title:
CONNECTICUT GENERAL LIFE
INSURANCE COMPANY,
This entity is either the
registered owner of one or more
of the securities pertaining
hereto or is a beneficial owner
of one or more of such securities
owned by and registered in the
name of a nominee for that
entity.
by CIGNA INVESTMENTS, INC.
by
/s/ Stephen A. Osborn
Name: Stephen A. Osborn
Title: Managing Director
ELITE AND COMPANY,
by
Name:
Title:
<PAGE>
6
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES,
by
Name:
Title:
EQUITABLE LIFE INSURANCE COMPANY,
by
Name:
Title:
FARM BUREAU LIFE INSURANCE COMPANY,
by
Name:
Title:
FBL INSURANCE COMPANY,
by
Name:
Title:
FEDERAL KEMPER LIFE ASSURANCE
COMPANY,
by
/s/ F. Collecchia
Name: F. Collecchia
Title: Authorized Signatory
by
/s/ H. E. Guenther
Name: H. E. Guenther
Title: Authorized Signatory
<PAGE>
7
FIRST AUSA LIFE INSURANCE
COMPANY
by
/s/ Gregory W. Theobald
Name: Gregory W. Theobald
Title: VP & Asst. Secretary
GENERAL AMERICAN LIFE
INSURANCE COMPANY,
by
Name:
Title:
IDS LIFE INSURANCE COMPANY,
by
Name:
Title:
IDS LIFE INSURANCE COMPANY OF
NEW YORK,
by
Name:
Title:
INTERNATIONAL LIFE INVESTORS
INSURANCE COMPANY,
by
/s/ Gregory W. Theobald
Name: Gregory W. Theobald
Title: VP & Asst. Secretary
JACKSON NATIONAL LIFE
INSURANCE COMPANY,
by
/s/ John A. Knutson
Name: John A. Knutson
Title: Chief Operating Officer
<PAGE>
8
KEMPER INVESTORS LIFE
INSURANCE COMPANY,
by
/s/ F. Collecchia
Name: F. Collecchia
Title: Authorized Signatory
by
/s/ H. E. Guenther
Name: H. E. Guenther
Title: Authorized Signatory
LIFE INSURANCE COMPANY OF
NORTH AMERICA,
This entity is either the
registered owner of one or more
of the securities pertaining
hereto or is a beneficial owner
of one or more of such securities
owned by and registered in the
name of a nominee for that
entity.
by CIGNA INVESTMENTS, INC.,
by
/s/ Stephen A. Osborn
Name: Stephen A. Osborn
Title: Managing Director
MERRILL LYNCH LIFE INSURANCE
COMPANY,
by
Name:
Title:
MONUMENTAL LIFE INSURANCE COMPANY,
by
/s/ Gregory W. Theobald
Name: Gregory W. Theobald
Title: VP & Asst. Secretary
<PAGE>
9
NEW ENGLAND MUTUAL LIFE
INSURANCE COMPANY,
by
Name:
Title:
THE NORTH ATLANTIC LIFE
INSURANCE COMPANY OF AMERICA,
by
Name:
Title:
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY,
by
/s/ J. Thomas Christofferson
Name: J. Thomas Christofferson
Title: Vice President
NORTHWESTERN NATIONAL LIFE
INSURANCE COMPANY,
by
Name:
Title:
PFL LIFE INSURANCE COMPANY,
by
/s/ Gregory W. Theobald
Name: Gregory W. Theobald
Title: VP & Asst. Secretary
ST. LOUIS REINSURANCE CO.,
by
Name:
Title:
<PAGE>
10
SUN LIFE ASSURANCE COMPANY OF
CANADA,
by
/s/ John N. Whelihan
Name: John N. Whelihan
Title: Assistant Vice President
-For President
by
/s/ Jeffrey J. Skerry
Name: Jeffrey J. Skerry
Title: Assistant Counsel
-For Secretary
SUN LIFE ASSURANCE COMPANY OF
CANADA (U.S.),
by
/s/ L. Brock Thomson
Name: L. Brock Thomson
Title: Treasurer
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA,
by
Name:
Title:
THE TRAVELERS INDEMNITY COMPANY,
by
/s/ Paul T. Quistberg
Name: Paul T. Quistberg
Title: Assistant Investment
Officer
THE TRAVELERS INSURANCE COMPANY,
by
/s/ Paul T. Quistberg
Name: Paul T. Quistberg
Title: Assistant Investment
Officer
<PAGE>
11
THE TRAVELERS LIFE AND ANNUITY
COMPANY,
by
/s/ Paul T. Quistberg
Name: Paul T. Quistberg
Title: Assistant Investment
Officer
UNITED PACIFIC LIFE INSURANCE
COMPANY,
by
Name:
Title:
UNITED PRESIDENTIAL LIFE
INSURANCE COMPANY,
by
Name:
Title:
<PAGE>
EXHIBIT A
Amendment dated as of December 2, 1994, to the Credit Agreement
dated as of March 27, 1992, as previously amended (the "Credit
Agreement"), among Chicago and North Western Railway Company (as
successor to Chicago and North Western Transportation Company), a
Delaware corporation (the "Borrower"), Chicago and North Western
Transportation Company (as successor to Chicago and North Western
Holdings Corp.), a Delaware corporation ("Holdings"), the
financial institutions party thereto as lenders (the "Lenders"),
Bank of Montreal, a Canadian banking corporation, as issuing bank
(in such capacity, the "Issuing Bank"), the Co-Agents named
therein and Chemical Bank, as administrative agent for the
Lenders and the Issuing Bank (in such capacity, the "Agent").
<PAGE>
CHICAGO AND NORTH WESTERN RAILWAY COMPANY
SUPPLEMENTAL PENSION PLAN
(called the Chicago and North Western
Transportation Company Supplemental
Pension Plan until May 5, 1994)
Amendment and Restatement
Effective January 1, 1989
<PAGE>
TABLE OF CONTENTS
ARTICLE 1. - General . . . . . . . . . . . . . . . . . . . . 1
1.1 General . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2. - Definitions . . . . . . . . . . . . . . . . . . 1
2.1 "Accrued Benefit" . . . . . . . . . . . . . . . . 1
2.2 "Actuarial Equivalent" . . . . . . . . . . . . . 4
2.3 "Actuary" . . . . . . . . . . . . . . . . . . . . 4
2.4 "Affiliated Company" or "Affiliated Companies" . 4
2.5 "Authorized Leave of Absence" . . . . . . . . . . 4
2.6 "Average Monthly Compensation" . . . . . . . . . 4
2.7 "Beneficiary" . . . . . . . . . . . . . . . . . . 5
2.8 "Benefit Service" . . . . . . . . . . . . . . . . 5
2.9 "Board of Directors" . . . . . . . . . . . . . . 6
2.10 "Committee" . . . . . . . . . . . . . . . . . . . 6
2.11 "Commonly Controlled Entity" . . . . . . . . . . 6
2.12 "Company" . . . . . . . . . . . . . . . . . . . . 6
2.13 "Compensation" . . . . . . . . . . . . . . . . . 6
2.14 "Continuous Service" . . . . . . . . . . . . . . 7
2.15 "Effective Date" . . . . . . . . . . . . . . . . 8
2.16 "Employee" . . . . . . . . . . . . . . . . . . . 8
2.17 "Employer" . . . . . . . . . . . . . . . . . . . 8
2.18 "ERISA" . . . . . . . . . . . . . . . . . . . . . 8
2.19 "Hour of Service" . . . . . . . . . . . . . . . . 8
2.20 "Internal Revenue Code" . . . . . . . . . . . . . 10
2.21 "Normal Retirement Date" . . . . . . . . . . . . 10
2.22 "One-Year-Break-in-Service" . . . . . . . . . . . 10
2.23 "Parental Leave" . . . . . . . . . . . . . . . . 11
2.24 "Participant" . . . . . . . . . . . . . . . . . . 11
2.25 "Pensioner" . . . . . . . . . . . . . . . . . . . 11
2.26 "Plan" . . . . . . . . . . . . . . . . . . . . . 11
2.27 "Plan Year" . . . . . . . . . . . . . . . . . . . 11
2.28 "Primary Railroad Retirement Benefit" . . . . . . 11
2.29 "Required Beginning Date" . . . . . . . . . . . . 12
2.30 "Retirement Benefits" . . . . . . . . . . . . . . 12
2.31 "Termination of Employment" . . . . . . . . . . . 12
2.32 "Trust" . . . . . . . . . . . . . . . . . . . . . 13
2.33 "Trust Agreement" . . . . . . . . . . . . . . . . 13
2.34 "Trustee" . . . . . . . . . . . . . . . . . . . . 13
2.35 "Trust Fund" . . . . . . . . . . . . . . . . . . 13
2.36 "Vesting Service" . . . . . . . . . . . . . . . . 13
ARTICLE 3. - Participation . . . . . . . . . . . . . . . . . 14
3.1 Participation . . . . . . . . . . . . . . . . . . 14
ARTICLE 4. - Eligibility for the Amount of Retirement Benefits 15
4.1 Normal Retirement . . . . . . . . . . . . . . . . 15
4.2 Early Retirement . . . . . . . . . . . . . . . . 15
4.3 Termination with Right to Deferred Pension . . . 15
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4.4 Death Benefits Prior to Commencement of
Retirement Benefits . . . . . . . . . . . . . . . 16
4.5 Reduction for Other Pensions . . . . . . . . . . 16
4.6 Changes in Railroad Retirement Benefits . . . . . 17
4.7 Special Early Retirement Benefits . . . . . . . . 17
4.8 No Duplication of Benefits . . . . . . . . . . . 21
4.9 Payment of Profit Sharing Plan Benefits . . . . . 21
ARTICLE 5. - Form and Payment of Retirement Benefits . . . . 22
5.1 Normal Period of Payment . . . . . . . . . . . . 22
5.2 Facility of Payment . . . . . . . . . . . . . . . 24
5.3 Effect of Return of Benefit Checks . . . . . . . 24
5.4 Effect of Continuing in or Resuming Employment . 24
5.5 Commencement of Benefits . . . . . . . . . . . . 25
5.6 Spousal Consents . . . . . . . . . . . . . . . . 25
5.7 Eligible Rollover Distributions . . . . . . . . . 26
5.8 Deduction of Taxes from Amounts Payable and
Mandatory Withholding on Certain Eligible Rollover
Distributions . . . . . . . . . . . . . . . . . . 27
ARTICLE 6. - Plan Financing . . . . . . . . . . . . . . . . . 28
6.1 Funding Policy . . . . . . . . . . . . . . . . . 28
6.2 Contributions . . . . . . . . . . . . . . . . . . 28
6.3 Forfeitures . . . . . . . . . . . . . . . . . . . 28
6.4 Exclusive Benefit of Participants . . . . . . . . 28
6.5 Benefits Payable Only From Trust Fund . . . . . . 29
ARTICLE 7. - Administration . . . . . . . . . . . . . . . . . 29
7.1 Board of Directors Duties . . . . . . . . . . . . 29
7.2 Committee Membership . . . . . . . . . . . . . . 29
7.3 Committee Structure . . . . . . . . . . . . . . . 30
7.4 Committee Actions . . . . . . . . . . . . . . . . 30
7.5 Committee Duties . . . . . . . . . . . . . . . . 30
7.6 Committee Liability . . . . . . . . . . . . . . . 31
7.7 Committee Bonding . . . . . . . . . . . . . . . . 31
7.8 Allocations and Delegations of Responsibility . . 31
7.9 Information to Be Supplied by Employers . . . . . 32
7.10 Validity of Records . . . . . . . . . . . . . . . 32
7.11 Fiduciary Capacity . . . . . . . . . . . . . . . 32
7.12 Company as Agent . . . . . . . . . . . . . . . . 32
7.13 Fiduciary as Participant . . . . . . . . . . . . 32
7.14 Fiduciary Responsibility . . . . . . . . . . . . 33
ARTICLE 8. - Claims Procedure . . . . . . . . . . . . . . . . 33
8.1 Initial Claim for Benefits . . . . . . . . . . . 33
8.2 Review of Claim Denial . . . . . . . . . . . . . 34
ARTICLE 9. - Trustee and Trust Fund . . . . . . . . . . . . . 35
9.1 Trust Agreement . . . . . . . . . . . . . . . . . 35
9.2 Selection of Trustee . . . . . . . . . . . . . . 35
9.3 Trustee's Duties . . . . . . . . . . . . . . . . 35
9.4 Trust Income . . . . . . . . . . . . . . . . . . 35
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9.5 Expenses . . . . . . . . . . . . . . . . . . . . 35
9.6 Trust Entity . . . . . . . . . . . . . . . . . . 35
ARTICLE 10. - Affiliated Companies . . . . . . . . . . . . . 36
10.1 Procedure for Adoption . . . . . . . . . . . . . 36
10.2 Termination by Affiliated Company . . . . . . . . 36
ARTICLE 11. - Amendment and Termination . . . . . . . . . . . 36
11.1 Amendments . . . . . . . . . . . . . . . . . . . 36
11.2 Termination . . . . . . . . . . . . . . . . . . . 37
11.3 Disposition of Fund on Termination . . . . . . . 37
11.4 Disposition Medium . . . . . . . . . . . . . . . 37
ARTICLE 12. - Top Heavy Provisions . . . . . . . . . . . . . 37
12.1 Application . . . . . . . . . . . . . . . . . . . 37
12.2 Special Top Heavy Definitions . . . . . . . . . . 38
12.3 Special Top Heavy Provisions . . . . . . . . . . 46
ARTICLE 13. - Miscellaneous Provisions . . . . . . . . . . . 51
13.1 Non-Alienation of Benefits . . . . . . . . . . . 51
13.2 Qualified Domestic Relations Order . . . . . . . 51
13.3 No Contract of Employment . . . . . . . . . . . . 53
13.4 Termination of Employment on Retirement . . . . . 54
13.5 Limitation on Vesting . . . . . . . . . . . . . . 54
13.6 No Duplication of Benefit . . . . . . . . . . . . 54
13.7 Temporary Limitations on Retirement Benefits
Payable to Highly Compensated Participants . . . 54
13.8 Maximum Pensions . . . . . . . . . . . . . . . . 57
13.9 Limitation on Liability . . . . . . . . . . . . . 60
13.10 Small Pensions . . . . . . . . . . . . . . . . . 61
13.11 Company Merger . . . . . . . . . . . . . . . . . 61
13.12 Plan Merger . . . . . . . . . . . . . . . . . . . 61
13.13 Invalidity of Certain Provisions . . . . . . . . 61
13.14 Headings . . . . . . . . . . . . . . . . . . . . 61
13.15 Uniform and Non-Discriminatory Treatment . . . . 61
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<PAGE>
CHICAGO AND NORTH WESTERN
RAILWAY COMPANY
SUPPLEMENTAL PENSION PLAN
ARTICLE 1.
General
1.1 General. The Chicago and North Western Railway
Company Supplemental Pension Plan (called the Chicago and North
Western Transportation Company Supplemental Pension Plan until
May 5, 1994) (the "Plan") established, effective July 1, 1979, as
from time to time amended is hereby amended and restated as
herein set forth effective January 1, 1989. The purpose of the
Plan is to provide Employees with a supplement to retirement
benefits from the Chicago and North Western Railway Company
Profit Sharing and Retirement Savings Program (called the Chicago
and North Western Transportation Profit Sharing and Retirement
Savings Program until May 5, 1994) and Railroad Retirement to
assure retirement benefits of at least a specified minimum level.
The provisions of the Plan as herein amended and restated shall
apply to an Employee who terminates employment on or after
January 1, 1989 and shall not apply to any person not in the
active employment of an Employer on or after January 1, 1989
except as specifically provided herein. For purposes of this
Article l.l, a person receiving benefits under the Chicago and
North Western Railway Company Salary Continuance Plan (called the
Chicago and North Western Transportation Company Salary
Continuance Plan until May 5, 1994) shall be treated as in the
active employment of an Employer, and a person receiving benefits
under the Chicago and North Western Railway Company Long Term
Disability Plan (called the Chicago and North Western
Transportation Company Long Term Disability Plan until May 5,
1994) shall not be treated as in the active employment of an
Employer.
ARTICLE 2.
Definitions
The following terms shall have the meaning set forth below,
unless the context clearly indicates otherwise:
2.1 "Accrued Benefit" means a monthly amount payable to a
Participant commencing on or after his Normal Retirement Date in
the form of a single life annuity were the Participant to have a
Termination of Employment on the determination date, considering
Compensation and Benefit Service prior to Termination of
Employment, equal to (a) reduced by (b), (c), (d) and subject to
(e) below, and as further reduced under Articles 4.5 and 5.4:
<PAGE>
(a) 1-1/2% of the Employee's Average Monthly
Compensation multiplied by the Employee's years of Benefit
Service (up to a maximum of 40 years).
(b) 87-1/2% of the Employee's Primary Railroad
Retirement Benefit, (1) if the Participant has at least 15
years of Vesting Service, and (2) if the Participant has
less than 15 years of Vesting Service, 87-1/2% of the
Participant's Primary Railroad Retirement Benefit multiplied
by a fraction, the numerator of which is the Participant's
years of Vesting Service and the denominator of which is 15.
Furthermore, in the case of a person who has a Termination
of Employment prior to age 65, the amount described in this
Article 2.1(b) shall be equal to the amount described in
this Article 2.1(b), determined on the basis of the years of
Vesting Service the Employee would have if he remained
employed until age 65, multiplied by a fraction, the
numerator of which is the Employee's years of Vesting
Service as of the date of Termination of Employment, and the
denominator of which is the years of Vesting Service the
Employee would have if the Employee remained employed until
age 65.
(c) The Actuarial Equivalent, in the form of an
annuity payable to the Participant for life commencing on
the Participant's Normal Retirement Date or Termination of
Employment if later, equal to the sum of (i) and (ii) below,
determined as of the earlier of the Participant's Normal
Retirement Date or Termination of Employment for those who
terminate on or before Normal Retirement Date, and at the
Termination of Employment for those who terminate after
Normal Retirement Date:
(i) The vested part of the Employee's Employer
Contribution Account under the Chicago and North
Western Railway Company Profit Sharing and Retirement
Savings Program (called the Chicago and North Western
Transportation Company Profit Sharing and Retirement
Savings Program until May 5, 1994)(the "Profit Sharing
Plan").
(ii) The additional vested amount which would have
been in the Employee's Employer Contribution Account
under the Profit Sharing Plan (excluding any amount
credited with respect to service for a non-railroad
employer) had the Employee made Employee Matched
Contributions, Employee Elected Matched Contributions
and Post-1986 Employee Matched Contributions, as
applicable for the Plan Year, to the Profit Sharing
Plan (excluding any income with respect to amounts
credited with respect to service for a non-railroad
employer) in the maximum amount permitted under the
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<PAGE>
Profit Sharing Plan for each year during which he was
a Participant, determined by assuming that such
additional amounts would have consisted of an amount
that was the same percentage of the Participant's
Employee Matched Contributions, Employee Elected
Matched Contributions and Post-1986 Employee Matched
Contributions, as applicable under the Profit Sharing
Plan for each such year as Participants in the Profit
Sharing Plan actually received in each such year, plus
an amount equal to a participation in earnings, gains
and losses for each year equal to the average annual
earnings, gains and losses of all assets of the Profit
Sharing Plan for each year.
If an Employee has made any withdrawal under
subsection 5.4 of the Profit Sharing Plan or has,
prior to the determination date, received a
distribution from the Profit Sharing Plan, the
additional amount described in Article 2.1(c)(ii)
shall also include the additional amounts which would
have been in the Employee's Employer Contribution
Account if the Employee had not made such withdrawal
or received such distribution (including both (1) the
amount of any Employer contributions and Remainders
the Employee would have had added to his Employer
Contribution Account for the period subsequent to the
withdrawal during which the Employee was ineligible to
make Employee Elected Matched Contributions, Employee
Matched Contributions or Post-1986 Employee Matched
Contributions to the Profit Sharing Plan and (2) any
amounts withdrawn or distributed from the Employee's
Employer Contribution Account under the Profit Sharing
Plan) determined by assuming that such additional
amounts would have participated in earnings, gains and
losses for each year equal to the average annual
earnings, gains and losses of the Profit Sharing Plan
for each year.
(d) The Actuarial Equivalent, in the form of an
annuity payable to the Participant for life commencing on
the Participant's Normal Retirement Date, or Termination of
Employment, if later, of the sum of the vested part of the
Participant's Profit Sharing Excess Benefit Account under
the Chicago and North Western Railway Company Excess Benefit
Retirement Plan (called the Chicago and North Western
Transportation Company Excess Benefit Retirement Plan until
May 5, 1994) ("Excess Benefit Plan") and the vested part of
the Participant's Profit Sharing Executive Retirement
Benefit Account under the Chicago and North Western Railway
Company Executive Retirement Plan (called the Chicago and
North Western Transportation Company Executive Retirement
Plan until May 5, 1994) ("Executive Retirement Plan").
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<PAGE>
(e) (i) If the Participant's Termination of
Employment occurs after he qualifies for a
Normal Retirement Pension in accordance with
Article 4.2, the amounts under Articles
2.1(c)(i), 2.1(c)(ii) and 2.1(d) shall be valued
as of the Valuation Date or Accounting Date
immediately preceding the date of his
Termination of Employment, excluding the
Participant's share of Employer contributions
and Remainders, if any, in the Profit Sharing
Plan, the Excess Benefit Plan, and the Executive
Retirement Plan, for the year in which such
termination occurs; and
(ii) If the Participant's Termination of
Employment occurs before he qualifies for a
Normal Retirement Pension in accordance with
Article 4.1 or an Early Retirement Pension in
accordance with Article 4.2, the amounts under
Articles 2.1(c)(i), 2.1(c)(ii) and 2.1(d) shall
be valued as of the Valuation Date or Accounting
Date immediately following the date of his
Termination of Employment increased by the
Participant's share of Employer contributions
and Remainders, if any, in the Profit Sharing
Plan, the Excess Benefit Plan, and the Executive
Retirement Plan, for the year in which such
Termination of Employment occurs.
2.2 "Actuarial Equivalent" means a benefit having the same
value as the benefit which it replaces, as determined by, or with
the advice of, the Actuary, using generally accepted actuarial
methods and assumptions as provided in Appendix I.
2.3 "Actuary" means the individual actuary or firm of
actuaries selected by the Committee to provide actuarial services
in connection with the administration of the Plan.
2.4 "Affiliated Company" or "Affiliated Companies" means
any corporation or other trade or business in which the Company
directly or indirectly owns more than 50 percent of voting
control.
2.5 "Authorized Leave of Absence" means any absence
authorized by the Employer under the Employer's personnel
practices granted in a non-discriminatory manner.
2.6 "Average Monthly Compensation" means the average of
the Compensation received by the Employee while an Employee for a
period of employment for which he received Benefit Service under
Article 2.8 during the 60 consecutive full calendar months
immediately preceding the Participant's Termination of Employment
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<PAGE>
divided by 60, as determined in accordance with rules of uniform
application established by the Committee from time to time. For
purposes of this Article 2.6 calendar years and calendar months
immediately preceding a Termination of Employment and immediately
following a reemployment shall be treated as consecutive. If an
Employee has less than 60 such months, the average shall be based
upon the Employee's total compensation for such months divided by
the Employee's number of such months.
2.7 "Beneficiary" means any person other than a
Participant entitled to benefits under the terms of the Plan.
2.8 "Benefit Service" means an Employee's Vesting Service,
provided that:
(a) Not more than 40 years of Benefit Service may be
credited to a Participant;
(b) Any of the provisions herein to the contrary
notwithstanding, an Employee shall be credited with Benefit
Service for Vesting Service through the last day he is an
Employee but shall not be credited with Benefit Service for
Vesting Service earned after ceasing to be an Employee
unless he again becomes an Employee;
(c) An Employee shall not receive Benefit Service
for any time period during which the Employee was receiving
benefits under the Chicago and North Western Railway Company
Long Term Disability Plan (called the Chicago and North
Western Transportation Company Long Term Disability Plan
until May 5, 1994) ("Long Term Disability Plan");
(d) With respect to person's period (or periods) of
employment by an Employer or a Commonly Controlled Entity
during which the person was not an Employee, the amount of
Benefit Service credited for Vesting Service with respect to
such period (or periods) of employment both (1) for any such
period (or periods) of employment after the Effective Date,
and (2) for any person who was not an Employee on the
Effective Date, for any such period (or periods) of
employment shall be limited to a maximum of five (5) years;
(e) A person who becomes an Employee on or after
May 1, 1980, except as provided in Article 2.8(f), shall not
be credited with Benefit Service for Vesting Service earned
for Continuous Service while not an Employee except that
portion of such Vesting Service equal to such Vesting
Service multiplied by a fraction, the denominator of which
is the number of years from the date such person became an
Employee until the later of his Normal Retirement Date or
Termination of Employment, and the numerator of which is
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<PAGE>
such person's years of Benefit Service earned for Continuous
Service while an Employee;
(f) A person who, on or after January 1, 1980,
becomes an Employee by virtue of an Employer acquiring
personnel and/or operations of any other corporation, trade
or business, shall receive credit for service as Benefit
Service prior to the date of such acquisition only if, and
to the extent, the Board of Directors so provides; and
(g) A person who has a Parental Leave shall not
receive Benefit Service for periods of such leave.
2.9 "Board of Directors" means the board of directors of
the Company.
2.10 "Committee" means the committee appointed pursuant to
Article 7.1 to administer the Plan.
2.11 "Commonly Controlled Entity" means a corporation,
trade or business if it and an Employer are members of a
controlled group of corporations as defined in Section 414(b) of
the Internal Revenue Code, under common control as defined under
Section 414(c) of the Internal Revenue Code, members of an
affiliated service group as defined in Section 414(m) or members
of a group required to be aggregated under Section 414(o) of the
Internal Revenue Code; provided, however, that solely for the
purposes of Article 12.2(g) and of Section 12.2(q) when used in
the provisions pertaining to Maximum Pensions set forth in
Article 13.8, the standard of control under Sections 414(b) and
414(c) of the Internal Revenue Code shall be deemed to be "more
than 50%" rather than "at least 80%."
2.12 "Company" means the Chicago and North Western Railway
Company (called the Chicago and North Western Transportation
Company until May 5, 1994) or any successor corporation by
merger, consolidation, purchase or otherwise, which elects to
adopt the Plan and the Trust.
2.13 "Compensation" means the total compensation paid to an
Employee by an Employer, determined on accrual basis, for
services rendered to the Employer for the period of time he is an
Employee each Plan Year as reportable on federal income tax
withholding Form W-2 (including pay under the Company's Salary
Continuance Plan), increased by the Employee's Employee Elected
Matched Contributions and Employee Elected Unmatched
Contributions, if any, made under the terms of the Profit Sharing
Plan, attributable to compensation other than bonuses and
incentive compensation, but excluding any income from stock
options or stock appreciation rights benefits (including any
buyouts of option rights by the Company or a Commonly Controlled
Entity), any relocation expenses, bonuses, incentive
-6-
<PAGE>
compensation, deferred or contingent compensation or any non cash
compensation reportable on Form W-2. While receiving benefits
under the Chicago and North Western Railway Company Salary
Continuance Plan (called the Chicago and North Western
Transportation Company Salary Continuance Plan until May 5, 1994)
(the "Salary Continuance Plan"), an Employee shall be treated as
receiving Compensation equal to his rate of pay, increased by the
Employee's Employee Elected Matched Contributions and Employee
Elected Unmatched Contributions, if any, made under the terms of
the Profit Sharing Plan, attributable to compensation other than
bonuses and incentive compensation, in effect at the time he
first started receiving such benefits. However, solely for the
purposes of determining the limitations under Article 13.8 and
for purposes of Article XII, Compensation means the total
compensation paid to the Participant by an Employer for the Plan
Year, excluding any Employee Elected Matched Contributions,
Employee Elected Unmatched Contributions benefits under the Plan
or any other qualified plan described in Section 401(a) of the
Internal Revenue Code, or other deferred compensation, stock
options, and any other distribution which receives special tax
benefit. Except for purposes of Article 13.8, the amount of
compensation taken into account for any Plan Year pursuant to
Article 2.13 shall not exceed $200,000 for Plan Years beginning
on or after January 1, 1989 and before January 1, 1994, and
$150,000 for Plan Years beginning on or after January 1, 1994,
adjusted for subsequent years in accordance with Internal Revenue
Code Section 415(d)) (collectively referred to as the
"Compensation Cap"). In determining the Compensation of a
Participant for purposes of this Compensation Cap, the family
member attribution rules of Section 414(q)(6) of the Internal
Revenue Code shall apply, except that in applying such rules, the
term "family" shall include only the spouse of the Participant
and any lineal descendants of the Participant who have not
attained age 19 before the end of the Plan Year.
2.14 "Continuous Service" means the years and fractions of
years of an Employee's last period of employment by an Employer
(or a Commonly Controlled Entity), measured from the date of
employment to the date of Termination of Employment (excluding,
for periods before January 1, 1988, any employment subsequent to
the Employee's Normal Retirement Date); provided that,
(a) if an Employee who has a Termination of
Employment resumes employment with an Employer or a Commonly
Controlled Entity prior to his having a
One-Year-Break-in-Service, such Termination of Employment
shall be disregarded and his employment shall be treated as
continuous through the date he so resumes his employment.
Continuous Service shall also include any other employment
for any other employer or employers which is treated for
purposes of benefits under the Railroad Retirement Act as
continuous service with an Employer;
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<PAGE>
(b) any such service (i) for all purposes in the
case of service not for an Employer or Commonly Controlled
Entity and (ii) for all purposes except Vesting Service in
the case of service for an Employer or a Commonly Controlled
Entity with respect to a person who was not an Employee on
January 1, 1979 or which occurs after the Effective Date
during which service such person was a member of a
collective bargaining unit represented by a collective
bargaining agent which was subject to a collective
bargaining agreement shall be limited to not more than 5
years, and, provided further that the Employee provides the
Committee with (1) a statement from such employer or
employers as to the amount of such service and the amount of
the retirement benefits attributable to such service to
which the Employee becomes entitled, or if none, a statement
to that effect or (2) such other evidence as the Committee
in its discretion may determine to be acceptable; and
(c) a person who becomes an Employee by virtue of an
Employer acquiring personnel and/or operations of another
corporation, trade or business on or after January 1, 1980
shall be credited with Continuous Service for service not
with an Employer, an Affiliated Company or a Commonly
Controlled Entity prior to the date of such acquisition only
if, and to the extent, provided by the Board of Directors.
2.15 "Effective Date" means January 1, 1989.
2.16 "Employee" means any employee of an Employer (i) whose
rate of pay is not negotiated under a collective bargaining
agreement, or (ii) whose fringe benefits are not negotiated under
a collective bargaining agreement, excluding leased employees as
defined in Section 414(n)(2) of the Internal Revenue Code and
non-resident aliens employed by an Employer and rendering service
to an Employer outside of the United States.
2.17 "Employer" means the Company or any Affiliated Company
which, pursuant to the provisions of Article 10.1, has adopted
the Plan.
2.18 "ERISA" means the Employee Retirement Income Security
Act of 1974, as from time to time amended.
2.19 "Hour of Service" means each hour for which an
Employee or a leased employee, as defined in Section 416(i) of
the Internal Revenue Code, is paid, or entitled to payment, or
receives earned income from an Employer or a Commonly Controlled
Entity:
(a) for performance of duties;
-8-
<PAGE>
(b) on account of a period of time during which no
duties were performed, provided that except as herein
otherwise expressly provided, no more than 501 Hours of
Service shall be credited for any single continuous period
during which an Employee performs no duty, and provided that
no Hours of Service shall be credited for payments made or
due under a plan maintained solely for the purpose of
complying with applicable worker's compensation,
unemployment compensation or disability insurance laws, or
for reimbursement of medical expenses; and
(c) for which back pay, irrespective of mitigation
of damages, is awarded or agreed to by the Employer;
provided that Hours of Service credited under (a) or (b)
shall not be credited under (c).
Hours of Service credited to a Participant for the
performance of duties will be credited to the computation period
in which the duties are performed. The determination of Hours of
Service for reasons other than the performance of duties shall be
made in accordance with the provisions of Labor Department
Regulations Section 2530.200b-2(b), and Hours of Service shall be
credited to the computation periods to which the award or
agreement pertains. Except in the case of an Authorized Leave of
Absence, not more than 501 Hours of Service shall be credited for
any continuous period during which an employee performs no duty
or, in the case of service required to be credited for payments
of back pay awarded or agreed to, for a period during which an
employee did not or would not have performed duties.
To the extent not credited above, for periods of Authorized
Leave of Absence an Employee shall be credited with a number of
Hours of Service for each week of such Authorized Leave of
Absence equal to the Employee's weekly average number of Hours of
Service for the six-week period immediately preceding such
Authorized Leave of Absence.
To the extent not credited above, for periods of absence
from work on account of Parental Leave, as defined in Section
2.23, and solely for the purposes of determining whether he has a
One Year Break In Service and not for other purposes, an Employee
shall be credited with
(1) the Hours of Service which normally would
have been credited to such individual but for the
Parental Leave, or
(2) 8 Hours of Service per day of such absence
if the Plan is unable to determine the Hours of
Service which would have been credited to such
individual but for the Parental Leave.
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<PAGE>
An Employee's Hours of Service for absence on account of
Parental Leave shall not exceed the lesser of (1) 501 Hours of
Service or (2) the number of Hours of Service needed to prevent a
One Year Break In Service in the period specified in the
following sentence. Such Hours of Service, if any, shall be
credited to the Plan Year in which absence because of a Parental
Leave commenced except that if such Hours of Service are not
needed to prevent a One Year Break In Service in the Plan Year in
which the absence because of Parental Leave commenced and if such
Parental Leave continues into a subsequent Plan Year, the Hours
of Service shall be credited to the subsequent Plan Year.
For purposes of this Section 2.19 and for Section 12.2(j)
"One Year Break In Service" means a Plan Year within which an
Employee completes not more than 500 Hours of Service.
The following Service Equivalencies shall be applied to
credit each salaried Employee with the number of Hours of Service
which correspond to the payroll period of the Employee for each
payroll period of the Employee for which the Employee receives or
is entitled to receive any compensation:
Payroll Period Hours of Service Credited
Daily 10
Weekly 45
Semi-Monthly 95
Monthly 190
2.20 "Internal Revenue Code" means the Internal Revenue
Code of 1986, as amended, and any subsequent Internal Revenue
Code; if there is a subsequent Internal Revenue Code, any
references herein to Internal Revenue Code sections shall be
deemed to refer to comparable sections of any subsequent Internal
Revenue Code.
2.21 "Normal Retirement Date" means the day on which a
person attains age 65.
2.22 "One-Year-Break-in-Service" means a 12-consecutive
month period commencing with an Employee's Termination of
Employment or with the termination of a prior consecutive
One-Year-Break-in-Service, as applicable, within which Employee
is not employed by an Employer or a Commonly Controlled Entity,
excluding any period of time during which the Employee is
receiving benefits under the Company's Long Term Disability Plan;
provided that an Employee who is absent from work on account of
Parental Leave and who remains absent shall not be deemed to have
had a One-Year-Break-in-Service or the first in a series of
consecutive One-Year-Breaks-in-Service, as applicable, until the
earlier of the third anniversary of the first date the absence on
account of such Parental Leave commenced or the date twelve
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<PAGE>
months after the Parental Leave otherwise concludes if the
Parental Leave concludes without the Participant returning to
work with an Employer or Commonly Controlled Entity.
2.23 "Parental Leave" means a period during which an
individual is absent from work for any period:
(a) by reason of the pregnancy of the individual,
(b) by reason of the birth of a child of the
individual,
(c) by reason of the placement of a child with the
individual in connection with the adoption of such child by
such individual, or
(d) for purposes of caring for such child for a
period beginning immediately following such birth or
placement.
An absence from work shall not be a Parental Leave
unless the individual furnishes the Committee such timely
information as may reasonably be required to establish that the
absence from work was for one of the reasons specified above and
the number of days for which there was such an absence. Nothing
contained herein shall be construed to establish an Employer
policy of treating a Parental Leave as an Authorized Leave of
Absence.
2.24 "Participant" means each Employee who is participating
in the Plan pursuant to the provisions of Article III.
2.25 "Pensioner" means a person who, by virtue of having
been a Participant in the Plan, is receiving Retirement Benefits.
2.26 "Plan" means the Chicago and North Western Railway
Company Supplemental Pension Plan (called the Chicago and North
Western Transportation Company Supplemental Pension Plan until
May 5, 1994), as herein set forth, and as hereafter from time to
time amended.
2.27 "Plan Year" means the calendar year.
2.28 "Primary Railroad Retirement Benefit" means the
estimated monthly amount (based upon actual change in the average
wages from year to year as determined by the Social Security
Administration) available at age 65 for the benefit of a retired
Employee (excluding the supplemental annuity and excluding any
benefit available on behalf of a spouse or other dependent) under
the provisions of the Federal Railroad Retirement Act (including
both Tiers I and II) in effect on the date of his Termination of
Employment; provided that within a reasonable time following the
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later of his Termination of Employment and the time when a
Participant is notified of the benefit to which he is entitled,
the Participant may provide documentation of his actual salary
history to the Committee and if he does so and if the Committee
determines that such documentation is sufficient, the
Participant's actual salary history shall be used to determine
the amount of his Primary Railroad Retirement Benefit. If an
Employee has a Termination of Employment prior to age 65, the
amount shall be based upon the assumption that the Employee will
receive, until reaching age 65, compensation which would be
treated as wages for purposes of the Railroad Retirement Act at
the same rate as he received such compensation at the time of
Termination of Employment.
2.29 "Required Beginning Date" means (a) for an employee
who attains age 70-1/2 after December 31, 1987, April 1 (but not
before April 1, 1988) of the calendar year following the calendar
year in which a Participant reaches age 70-1/2, (b) for an
employee who attains age 70-1/2 before January 1, 1988, and who,
with respect to the Plan Year ending in the calendar year in
which he attains age 70-1/2, is not a five percent (5%) owner of
the Employer (as determined under Internal Revenue Code Section
416(i)), April 1 of the calendar year following the later of the
calendar year in which he attains the age of 70-1/2 or in which
he has a Termination of Employment, and (c) for an employee who
attains age 70-1/2 before January 1, 1988 and who, with respect
to the Plan Year ending in the calendar year in which he attains
age 70-1/2 is a five percent (5%) owner of the Employer, April 1
of the calendar year following the later of (1) the calendar year
in which the employee attains age 70-1/2 or (2) the earlier of
(A) the calendar year with or within which ends the plan year in
which the employee becomes a 5 percent (5%) owner, or (B) the
calendar year in which the employee retires.
2.30 "Retirement Benefits" means the benefits payable to a
Participant and, if applicable, the Participant's surviving
spouse under the provisions of the Plan.
2.31 "Termination of Employment" occurs upon the earliest
to occur of the following:
(a) an Employee leaves the employ of an Employer for
any reason;
(b) an Employee fails to report to work within 15
calendar days of notice of recall to work from layoff;
(c) an Employee fails to report for work at the
termination of an Authorized Leave of Absence; or
(d) an Employee is absent due to layoff or
disability, or both, which continues for more than one year
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(e.g. an Employee shall not be treated as having had a
Termination of Employment while receiving benefits under the
Company's Salary Continuance Plan (which provides disability
benefits for up to one year), but an Employee shall be
treated as having a Termination of Employment upon becoming
eligible to receive benefits under the Company's Long Term
Disability Plan (under which benefits commence after an
Employee has been disabled for a consecutive year period)).
Transfers of employment by an Employee from an Employer to
another Employer, an Affiliated Company or Commonly Controlled
Entity, or from one Affiliated Company or Commonly Controlled
Entity to another Affiliated Company, a Commonly Controlled
Entity or to an Employer, shall not constitute a Termination of
Employment of such Employee for purposes of the Plan. Continuous
Service shall not be considered to have been broken by absence of
any Employee due to his having entered the Armed Forces or
Merchant Marine of the United States and who has reemployment
rights under the law and complies with requirements of the law as
to reemployment and is reemployed.
2.32 "Trust" means the legal entity resulting from the
agreement between Company and the Trustee and any amendment
thereto, by which Employer Contributions shall be received, held,
invested and distributed to or for the benefit of Participants
and Beneficiaries.
2.33 "Trust Agreement" means the agreement between the
Company and the Trustee establishing the Chicago and North
Western Railway Company Supplemental Pension Trust (called the
Chicago and North Western Transportation Company Supplemental
Pension Trust until May 5, 1994) and any amendments thereto.
2.34 "Trustee" means the bank or trust company which shall
accept the appointment to execute the duties of the Trustee as
set forth in the Trust Agreement.
2.35 "Trust Fund" means any property, real or personal,
received by the Trustee, plus all income and gains and less
losses, expenses and distributions chargeable thereto.
2.36 "Vesting Service" means the sum of a Participant's
periods of Continuous Service, provided that:
(a) If a Participant has a One-Year-Break-In-
Service, the period of Continuous Service prior to the
One-Year-Break-In-Service shall be excluded until the
Participant has completed one year of Continuous Service
after the One-Year-Break-In-Service;
(b) If a Participant had no vested interest in his
Accrued Benefit prior to a One-Year-Break-In-Service and
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(1) effective for Plan Years commencing before January 1,
1985, if the number of consecutive One-Year-Breaks-In-
Service equals or exceeds the number of years of Vesting
Service before the One-Year-Break-In-Service and
(2) effective for Plan Years commencing after December 31,
1984, if the Participant's number of consecutive One-Year-
Breaks-In-Service equals or exceeds the Participant's number
of years of Vesting Service before a period of five
consecutive One-Year-Breaks-In-Service, Vesting Service
earned prior to the One-Year-Break-In-Service or five
consecutive One-Year-Breaks-In-Service, as applicable, shall
be excluded; provided that a Participant's Vesting Service
which could not be disregarded as of December 31, 1984 under
the rule stated in Section 2.36(b)(1) shall be disregarded
only if it is disregarded under the rule stated in Section
2.36(b)(2);
(c) A person who becomes an Employee on or after
May 1, 1980, except as provided in Article 2.36(d), for all
purposes hereunder except for purposes of determining
Benefit Service pursuant to Article 2.8, shall not be
credited with Vesting Service for Continuous Service except
Continuous Service with an Employer, an Affiliated Company
or a Commonly Controlled Entity;
(d) A person who becomes an Employee by virtue of an
Employer's acquisition of personnel and/or operations of
another corporation, trade or business on or after
January 1, 1980 shall be credited with Vesting Service for
service not with an Employer, Affiliated Company or a
Commonly Controlled Entity prior to such acquisition only
if, and to the extent, the Board of Directors shall provide;
and
(e) If a Participant has a Parental Leave which
continues for more than one year, periods of such Parental
Leave after the first anniversary of the date the leave
commenced shall not be counted as Vesting Service.
ARTICLE 3.
Participation
3.1 Participation. Each Employee shall be a Participant
in the Plan for so long as he remains an Employee, and each
Participant (i) who has completed at least five (5) years of
Vesting Service or who, if the Plan is a Top Heavy Plan, has a
vested interest pursuant to Article 12.3(b) and (ii) who has an
undistributed Accrued Benefit shall continue to be a Participant
after ceasing to be an Employee until he becomes a Pensioner or
he dies. Notwithstanding the foregoing, any person who becomes
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an Employee by virtue of an acquisition by an Employer of
personnel and/or operations of any corporation, trade or business
on or after January 1, 1980 shall not become a Participant,
unless and until the Board of Directors shall so provide.
ARTICLE 4.
Eligibility for the Amount of Retirement Benefits
4.1 Normal Retirement. A person who has reached Normal
Retirement Date, who either is an Employee or is otherwise
employed by an Employer or by an Affiliated Company or Commonly
Controlled Entity shall be entitled to a Normal Retirement
Pension equal to his Accrued Benefit upon Termination of
Employment and proper application in accordance with Article 8.1.
Such pension shall commence with the first full calendar month
following such Termination of Employment if application for
benefits is made not earlier than 90 days prior to such
Termination of Employment and not later than the close of first
full calendar month following such Termination of Employment;
otherwise, it shall commence with any subsequent calendar month
in which application is made (including payments without interest
for each month preceding the month benefits commence for each
month starting with the first full month following such
Termination of Employment).
4.2 Early Retirement. An Employee who has at least five
(5) years of Vesting Service or a former Employee entitled to
benefits under 4.3 who has had a Termination of Employment may,
at his election, become eligible for an Early Retirement Pension
on the first day of any calendar month following his 60th
birthday and prior to his Normal Retirement Date in the amount of
his Accrued Benefit reduced to its Actuarial Equivalent, upon
proper application in accordance with Article 8.1. Such pension
shall commence the first day of the later of the first full
calendar month following such Termination of Employment or the
month in which he attains age 60 if application for benefits is
made not earlier than 90 days prior to such month and not later
than the close of such month; otherwise, it shall commence with
any subsequent calendar month commencing within 90 days after the
month in which application is made.
4.3 Termination with Right to Deferred Pension. An
Employee with at least five (5) years of Vesting Service or, if
the Plan is a Top Heavy Plan, with a vested interest in his
Accrued Benefit pursuant to Article 12.3(b) who has a Termination
of Employment for any reason prior to his Normal Retirement Date,
and who has not fulfilled the requirements of Article 4.1 or 4.2,
shall upon proper application in accordance with Article 8.1 be
entitled to a Deferred Pension (unless thereafter he shall elect
an Early Retirement Pension under Article 4.2) in the amount of
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his Accrued Benefit. Such pension shall commence with the later
of (i) the first full calendar month following the former
Employee's Normal Retirement Date, or (ii) the calendar month in
which he makes application for such pension (including payments
without interest for each full calendar month following his
Normal Retirement Date) unless he elects an Early Retirement
Pension under Article 4.2.
4.4 Death Benefits Prior to Commencement of Retirement
Benefits.
(a) Qualification for Death Benefit. If a
Participant dies prior to the commencement of his Retirement
Benefits and, at the date of the Participant's death, the
Participant (i) has completed not less than five (5) years
of Vesting Service or, if the Plan is a Top Heavy Plan, has
a vested interest in his Accrued Benefit pursuant to
Article 12.3(b) and, in the case of a Participant who died
before August 23, 1984, had remained as an Employee until at
least age 60, and (ii) is survived by a spouse to whom the
Participant has been married for not less than one year, the
Participant's spouse shall receive a Surviving Spouse's
Pension under Article 4.4(b), if the Participant was at
least age 60 as of the date of his death, commencing in the
month following the Participant's death, and, if the
Participant died prior to attaining age 60, commencing in
the month following the date Participant would have attained
age 60 had the Participant survived; provided that if the
Actuarial Equivalent lump sum value of the monthly amount of
such pension is more than $3500, payments shall not commence
before the Participant would have attained his Normal
Retirement Date unless the Participant's surviving spouse
consents to receive the benefit before that date in the
manner provided in Article 5.6.
(b) Surviving Spouse's Pension. The monthly pension
payable to the surviving spouse of a Participant who has
satisfied the requirements of Article 4.4(a) shall be an
amount equal to the amount the spouse would have received,
had the Participant had a Termination of Employment on the
day of his death or, if earlier, on his actual termination
date and commenced to receive a Qualified Joint and Survivor
Pension the day before such Surviving Spouse's Pension
commences and died the day such pension commences.
4.5 Reduction for Other Pensions. If a Participant
receives a pension from any other pension plan, profit sharing
plan, or other retirement or deferred compensation plan other
than the Chicago and North Western Railway Company Profit Sharing
and Retirement Savings Program (called the Chicago and North
Western Transportation Company Profit Sharing and Retirement
Savings Program until May 5, 1994) ("Other Plans"), and if the
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computation of the Participant's Accrued Benefit includes any
years of Benefit Service for any years, which years (the "Common
Years") are also included in determining the Participant's
benefits (or for which the Participant accrued benefits) under
such Other Plans, except as otherwise provided by the Company and
attached as an exhibit to the Plan, the Participant's Accrued
Benefit shall be the Participant's Accrued Benefit, as computed
herein, reduced by the lesser of (i) the Actuarial Equivalent of
such portions of the Participant's benefits from such other plan
as are attributable to the Common Years or (ii) such portions of
the Participant's Accrued Benefit under the Plan as are
attributable to such Common Years, as determined by the
Committee. In determining the amount of reduction for other
benefits pursuant to this Article 4.5, a Participant shall be
treated as receiving or entitled to receive a benefit under
another retirement plan regardless of whether the assets of such
Plan are sufficient to provide the benefits specified thereunder.
4.6 Changes in Railroad Retirement Benefits. Any of the
provisions herein to the contrary notwithstanding, if the Primary
Railroad Retirement Benefits (computed as of any date as though
each Participant had a Termination of Employment on such date) of
Participants are decreased by legislation, rules or regulations,
each Participant's Accrued Benefit shall remain the amount of the
Participant's Accrued Benefit determined on the day immediately
preceding such decrease, and such Accrued Benefit shall not
thereafter increase unless within 180 days after the effective
date of such decrease the Company by action of the Board of
Directors shall otherwise elect.
4.7 Special Early Retirement Benefits.
(a) Those Participants listed in Appendix II who
have voluntarily retired under the Company's July and
August, 1985 Special Early Retirement Incentive Program, who
have at least ten (10) years of Vesting Service and who have
attained 55 years of age shall receive the Special Early
Retirement Benefit as provided in Article 4.7(b).
(b) The Special Early Retirement Benefit shall
consist of (1) and (2):
(1) The greater of the Participant's Accrued
Benefit under Article 2.1 or his Special Accrued
Benefit as defined in this Article 4.7(b)(1). A
Participant's Special Accrued Benefit means a monthly
amount payable to a Participant commencing at the time
specified in Appendix II in the form of a single life
annuity equal to (i) reduced by (ii), (iii) and (iv).
(i) 1-1/2% of the Employee's Special Average
Monthly Compensation multiplied by the
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Employee's years of Special Benefit Service (up
to a maximum of 40 years) reduced by 1/2 of 1%
for each of the first full 60 months that the
annuity starting date precedes Normal Retirement
Date.
(ii) (I) If the Participant has at least 15
years of Vesting Service, 87-1/2% of the
Employee's Primary Railroad Retirement Benefit,
and (II) if the Participant has less than 15
years of Vesting Service, 87-1/2% of the
Participant's Primary Railroad Retirement
Benefit multiplied by a fraction, the numerator
of which is the Participant's years of Vesting
Service and the denominator of which is 15.
Furthermore, in the case of a person who
commences to receive his Special Early
Retirement Benefit after he has attained the age
of 60 but has not yet attained the age on which
he is eligible to receive his Primary Railroad
Retirement Benefit, the amount described in this
Article 4.7(b)(1)(ii) shall be equal to the
amount described in the preceding sentence
reduced by 1/2 of 1% for each of the first full
60 months that the annuity starting dates
precedes his Normal Retirement Date and in the
case of a person who commences to receive his
Special Early Retirement Benefit before he
attains the age of 60, the amount described in
this Article 4.7(b)(1)(ii) shall be equal to the
amount described in the preceding sentence
reduced by 1/15th for each of the first five
years by which the annuity starting date
precedes age 65 and 1/30th for each of the next
five years (or portion of a year) by which the
annuity starting date precedes age 60.
(iii) The Actuarial Equivalent, in the form of
an annuity payable to the Participant for life
commencing on the Participant's Normal
Retirement Date, of the sum of (I) and (II)
below, in the case of a Participant who
commences to receive his Special Early
Retirement Benefit after he has attained the age
of 60 but has not yet attained the age on which
he is eligible to receive his Primary Railroad
Retirement Benefit, reduced by 1/2 of the 1% for
each of the first full 60 calendar months that
the annuity starting date precedes his Normal
Retirement Date and, in the case of a
Participant who commences to receive his Special
Early Retirement Benefit before he attains the
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age of 60, reduced by 1/15th for each of the
first five years by which the annuity starting
date precedes age 65 and 1/30th for each of the
next five years (or portion of a year) by which
the annuity starting date precedes age 60:
(I) The vested part of the Employee's
Employer Contribution Account under the
Chicago and North Western Railway Company
Profit Sharing and Retirement Savings
Program (the "Profit Sharing Plan").
(II) The additional vested amount which
would have been in the Employee's Employer
Contribution Account under the Profit
Sharing Plan had the Employee made
Employee Matched Contributions and
Employee Elected Matched Contributions, as
applicable for the Plan Year, to the
Profit Sharing Plan in the maximum amount
permitted under the Profit Sharing Plan
for each year during which he was a
Participant, determined by assuming that
such additional amounts would have
consisted of an amount that was the same
percentage of the Participant's Employee
Matched Contributions and Employee Elected
Matched Contributions, as applicable under
the Profit Sharing Plan for each such year
as Participants in the Profit Sharing Plan
actually received in each such year, plus
an amount equal to a participation in
earnings, gains and losses for each year
equal to the average annual earnings,
gains and losses of all assets of the
Profit Sharing Plan for each year.
(iv) The Actuarial Equivalent, in the form of
an annuity payable to the Participant for life
commencing on the Participant's Normal
Retirement Date, of the vested part of the
Participant's Profit Sharing Excess Benefit
Account under the Chicago and North Western
Transportation Company Excess Benefit Retirement
Plan ("Excess Benefit Plan"), in the case of a
Participant who commences to receive his Special
Early Retirement Benefit after he has attained
the age of 60 but has not yet attained the age
on which he is eligible to receive his Primary
Railroad Retirement Benefit, reduced by 1/2 of
the 1% for each of the first full 60 calendar
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months that the annuity starting date precedes
his Normal Retirement Date and, in the case of a
Participant who commences to receive his Special
Early Retirement Benefit before he attains the
age of 60, reduced by 1/15th for each of the
first five years by which the annuity starting
date precedes age 65 and 1/30th for each of the
next five years (or portion of a year) by which
the annuity starting date precedes age 60.
(v) The amounts under Articles
4.7(b)(1)(iii)(I), 4.7(b)(1)(iii)(II) and
4.7(b)(1)(iv) shall be valued as of the
Valuation Date or Accounting Date immediately
preceding the date of a Participant's
Termination of Employment excluding the
Participant's share of Employer contributions
and Remainders, if any, in the Profit Sharing
Plan and the Excess Benefit Plan, for the year
in which such termination occurs.
(vi) In the case of a Participant who is
married as of the date his Special Early
Retirement Benefit is to commence, the benefit
provided under Section 4.7(b)(1) shall be paid
only if the Participant's spouse shall consent
to the Participant's election to receive an
early retirement pension in accordance with the
provisions of Article 5.6.
(2) An annuity paid to each Participant listed
in Appendix II who is less than 60 years of age on
July 1, 1985, commencing on the date specified in
Appendix II in the amount of the Participant's monthly
estimated primary railroad retirement benefit payable
at the earliest date on which he is eligible to
receive his primary railroad retirement benefit
commencing on the first day of the calendar month
following the Participant's Termination of Employment
and ending at the earlier of the end of the calendar
month before the month in which the Participant is
first eligible to receive his primary railroad
retirement benefit or the month of the Participant's
death ("Railroad Retirement Supplement").
(c) (1) A Participant's "Special Average Monthly
Compensation" means, if the Participant is less than
60 years of age, the average of the monthly
Compensation the Employee would have received for the
60 months prior to the month in which he attained age
60 if he received his actual Compensation for the
months before his Termination of Employment and
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received his rate of pay as of the date of his
Termination of Employment for each month between the
month of his Termination of Employment and the month
in which he attained age 60 and, if the Participant is
at least 60 years of age, his Average Monthly
Compensation.
(2) A Participant's "Special Benefit Service"
means, if the Participant is less than 60 years of
age, his years of Benefit Service at his Termination
of Employment plus the additional years of Benefit
Service the Participant would have if he remained an
Employee and a Participant until he attained the age
of 60 and, if the Participant is at least 60 years of
age, his years of Benefit Service; provided that not
more than 40 years of Special Benefit Service may be
credited to a Participant.
4.8 No Duplication of Benefits. A person shall not
simultaneously receive benefits under more than one of the
foregoing Sections of Article IV.
4.9 Payment of Profit Sharing Plan Benefits. If all or a
portion of a vested Member's Net Balance Account under the
Chicago and North Western Railway Company Profit Sharing and
Retirement Savings Program (called the Chicago and North Western
Transportation Company Profit Sharing and Retirement Savings
Program until May 5, 1994) is to be paid in the form of a
Qualified Joint and Survivor Pension, as defined in subsection
2.46 thereof (which includes a single life annuity payable to the
member for life) or a Surviving Spouse's Pension as defined in
subsection 2.54 thereof, the portion of the Member's Net Balance
Account to be so paid shall be transferred to the Plan as
provided in subsection 5.5 of the Chicago and North Western
Railway Company Profit Sharing and Retirement Savings Program
(called the Chicago and North Western Transportation Company
Profit Sharing and Retirement Savings Program until May 5, 1994).
The amount so transferred shall be converted into a benefit in
the form of a single life annuity payable to the Participant on
the annuity starting date using the mortality assumptions
specified in Appendix I Part (a) and the interest rate
assumptions specified in Appendix I, Part (b)(i). Any such
benefit shall be paid in a form permitted in accordance with the
provisions of Article V commencing as of the date of transfer.
If in accordance with Article 5.1 such benefit is paid in a form
other than a single life annuity, the benefit paid shall be the
Actuarial Equivalent of such single life annuity determined in
accordance with the mortality assumptions specified in
Appendix I, Part (a) and the interest rate assumptions specified
in Appendix I, Part (b)(iii). If such benefit commences to be
paid on a date before the Normal Retirement Date, the amount
payable shall be the Actuarial Equivalent of the benefit payable
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at Normal Retirement Date determined in accordance with the last
sentence of Appendix I.
ARTICLE 5.
Form and Payment of Retirement Benefits
5.1 Normal Period of Payment. Retirement Benefits under
the Plan shall commence as of the month specified in the
applicable provisions in Article IV. Retirement Benefits shall
be payable as follows:
(a) A Participant who is married on the date on
which Retirement Benefits commence shall receive
Retirement Benefits in the form of a Qualified Joint
and Survivor Pension unless the Participant (in the
case of Retirement Benefits which commence after
December 31, 1984, with his spouse's consent in
accordance with Article 5.6) elects not to receive a
Qualified Joint and Survivor Pension in accordance
with Article 5.1(a)(ii).
(i) A Qualified Joint and Survivor Pension is
a monthly pension payable to the Participant for
life and, upon the Participant's death, if the
Participant's spouse survives the Participant, a
monthly pension payable to the Participant's
spouse for life equal to 50% of the pension
previously payable to the Participant. The
amount of such Qualified Joint and Survivor
Pension shall be the Actuarial Equivalent of
such Participant's Accrued Benefit or Special
Accrued Benefit, as applicable.
(ii) A Participant to whom Retirement Benefits
would be payable in the form of a Qualified
Joint and Survivor Pension pursuant to this
Article 5.1 shall have the right to waive a
Qualified Joint and Survivor Pension by
delivering written notice to the Committee (in
the case of Retirement Benefits which commence
after December 31, 1984, consented to by the
Participant's spouse in accordance with
Article 5.6) at any time prior to the first day
of the calendar month in which his Retirement
Benefits initially commence. No less than 30
days and no more than 90 days before the first
day of the first month which a benefit is
payable as an annuity and in accordance with
such regulations as the Secretary of the
Treasury may prescribe, the Committee shall
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provide each Participant with a written
explanation of the following:
(A) the terms and conditions of the
Qualified Joint and Survivor Pension,
(B) the Participant's right to make
(within the 90 day period before the annuity
starting date) and the effect of an election to
waive the Qualified Joint and Survivor Pension,
(C) in the case of Retirement Benefits
which commence after December 31, 1984, the
rights of the Participant's spouse to consent to
the Participant's election to waive the
Qualified Joint and Survivor Pension and the
effect of consenting to such waiver, and
(D) the Participant's right to make, and
the effect of, a revocation of an election to
waive the Qualified Joint and Survivor Pension.
(b) A Participant who is not married on the date on
which Retirement Benefits commence or who has elected not to
receive a Qualified Joint and Survivor Pension, in the case
of Retirement Benefits which commence after December 31,
1984 with the consent of his spouse in accordance with
Article 5.6 shall receive Retirement Benefits in the form of
a monthly pension payable to the Participant during his
lifetime, which terminates the month following the
Participant's death ("Single Life Annuity").
(c) A Participant who is eligible to receive a
Railroad Retirement Supplement as provided in Article
4.7(b)(2) shall receive such benefit in the form of (1) a
monthly annuity commencing on the date specified in Appendix
II and ending at the earlier of the end of the calendar
month before the month in which the Participant is first
eligible to receive his Primary Railroad Retirement Benefit
or the month of the Participant's death and (2) if a
Participant dies and is survived by the spouse to whom he
was married at the time of his Termination of Employment,
such surviving spouse shall be paid a monthly annuity equal
to 50% of the monthly amount of the benefit received by the
Participant commencing in the first full calendar month
after the Participant's death and ending at the earlier of
the end of the calendar month before the month in which the
Participant, had he survived, would have been eligible to
first receive his Primary Railroad Retirement Benefit or the
month of the surviving spouse's death.
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5.2 Facility of Payment. All Retirement Benefits shall be
paid to the payee either by a check which shall be endorsed
personally by the payee or, if the payee makes a written request
on a form approved by the Committee, by a deposit in the personal
savings or checking account of the payee; provided that if any
such payment or deposit shall be made in error or in excess of
the amount due, the payee shall be liable to return any such
payment or deposit or excessive portion of any payment or
deposit. If in the opinion of the Committee, any person to whom
benefits are payable is unable to care for his affairs because of
illness, accident or other incapacity, any payment due (unless
prior claim therefor shall have been made by a duly qualified
legal representative) may be paid for his benefit to his spouse,
parent, child, brother or sister, or to any other person as the
Committee may from time to time determine. If any payment due
any person under this Plan is unpaid at the time of the payee's
death, the Committee may determine the person equitably entitled
thereto to whom the payment shall be made (unless prior claim
therefor shall have been made by a duly qualified legal
representative prior to distribution). Any such payment under
this Article 5.2 shall, to the extent thereof, be a complete
discharge of any liability therefor.
5.3 Effect of Return of Benefit Checks. Each person
entitled to benefits under this Plan shall furnish the Committee
with the address to which his benefit checks all be mailed. If
any benefit check mailed by regular United States mail to the
last address appearing on the Committee's records is returned
because the addressee is not found at that address, the mailing
of benefit checks shall stop. Thereafter, if the Committee in a
manner satisfactory to the Committee receives written notice of
the proper address of the person entitled to receive such benefit
checks and is furnished with evidence satisfactory to the
Committee that such person is living, all amounts then due shall
be forwarded to such person at such address.
5.4 Effect of Continuing in or Resuming Employment. A
Participant who (a) continues in employment with an Employer
after his Normal Retirement Date or (b) is reemployed by an
Employer after beginning to receive Retirement Benefits under the
Plan, shall, subject to Section 5.5(b), have payment of his
Retirement Benefits suspended for each calendar month of such
employment or reemployment in which he is paid or entitled to
payment for an hour or more of service performed on each of 8 or
more days during such month. Any Benefit payments for such month
shall not thereafter be payable to such person. A person whose
Retirement Benefits are so suspended shall be given notice
thereof. If Benefit payments are made to a Participant for a
calendar month in which payments should have been suspended
hereunder, the amount of such payments may be offset against all
or any part of any subsequent payments. However, beginning with
the fourth full calendar month following the end of such
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suspension, such offset shall not exceed 25% of the amount of any
payment for any calendar month. If the Employee subsequently
retires, the Employee shall commence (or recommence) receiving
Retirement Benefits based on his Accrued Benefit, reduced by the
Actuarial Equivalent of any Retirement Benefits paid to the
Employee prior to Employee's Normal Retirement Date.
5.5 Commencement of Benefits. Any provision herein to the
contrary notwithstanding, upon application for Retirement
Benefits in accordance with Article 8.1, payment of Retirement
Benefits shall commence not later than the earlier of
(a) the sixtieth (60th) day after the latest of the
close of the Plan Year in which (1) the Participant reaches
Normal Retirement Date, (2) occurs the tenth (10th)
anniversary of the year in which the Participant commenced
participation in the Plan, or (3) the Participant has a
Termination of Employment; or
(b) the Required Beginning Date.
5.6 Spousal Consents.
(a) A valid spouse's consent to the waiver of a
Qualified Joint and Survivor Pension shall be:
(1) in a writing acknowledging the effect of
the consent;
(2) signed by the Participant's spouse and
witnessed by a notary public; and
(3) effective only for a spouse who gives the
consent.
However, the consent of a Participant's spouse shall not be
required if it is established to the satisfaction of a Plan
representative that such consent may not be obtained because
there is no spouse, or because the spouse cannot be located
or because of such other circumstances as the Secretary of
the Treasury may by regulations prescribe.
If the Participant's spouse at the time payment of his
Retirement Benefit commences consents to the payments, it
shall not be necessary to obtain the consent of any
subsequent spouse of the Participant to the continuance of
such payments.
(b) To the extent provided in any Qualified Domestic
Relations Order (as defined in Section 414(p) of the
Internal Revenue Code) if married to the Participant for at
least one year, the former spouse of a Participant shall be
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treated as the surviving spouse of such Participant for
purposes of receiving a Qualified Joint and Survivor Pension
and for providing a valid consent in accordance with this
Article 5.6.
5.7 Eligible Rollover Distributions.
(a) This Section applies to distributions made on or
after January 1, 1993. Notwithstanding any provision of the
Plan to the contrary that would otherwise limit a
distributee's election under this Section, a distributee may
elect, at the time and in the manner prescribed by the Plan
Administrator, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan
specified by the distributee in a direct rollover; provided,
however, that an eligible rollover distribution of less than
$200 shall not be eligible for a direct rollover.
(b) Definitions.
(i) "Eligible rollover distribution":
An eligible rollover distribution is any distribution
of all or any portion of the balance to the credit of
the distributee, except that an eligible rollover
distribution does not include: any distribution that
is one of a series of substantially equal periodic
payments (not less frequently than annually) made for
the life (or life expectancy) of the distributee or
the joint lives (or joint life expectancies) of the
distributee and the distributee's designated
beneficiary, or for a specified period of ten years or
more; any distribution to the extent such distribution
is required under Section 401(a)(9) of the Internal
Revenue Code; and the portion of any distribution that
is not includible in gross income.
(ii) "Eligible retirement plan": An
eligible retirement plan is an individual retirement
account described in Section 408(a) of the Internal
Revenue Code, an individual retirement annuity
described in Section 408(b) of the Internal Revenue
Code, an annuity plan described in Section 403(a) of
the Internal Revenue Code, or a qualified trust
described in Section 401(a) of the Internal Revenue
Code, that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible
rollover distribution to the surviving spouse, an
eligible retirement plan is an individual retirement
account or individual retirement annuity.
(iii) "Distributee": A distributee
includes an employee or former employee. In addition,
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the employee's or former employee's surviving spouse
and the employee's or former employee's spouse or
former spouse who is the alternate payee under a
qualified domestic relations order, as defined in
Section 414(p) of the Internal Revenue Code, are
distributees with regard to the interest of the spouse
or former spouse.
(iv) "Direct rollover": A direct
rollover is a distribution by the Plan made payable to
the trustee of the eligible retirement plan specified
by the distributee.
5.8 Deduction of Taxes from Amounts Payable and Mandatory
Withholding on Certain Eligible Rollover Distributions.
(a) The Trustee may deduct from the amount to
be distributed such amount as the Trustee, in its sole
discretion, deems proper to protect the Trustee and
the Trust against liability for the payment of death,
succession, inheritance, income, or other taxes, and
out of the money so deducted, the Trustee may
discharge any such liability and pay the amount
remaining to the Participant, the Beneficiary or the
deceased Participant's estate, as the case may be.
(b) In the case of an Eligible Rollover
Distribution that is subject to the income tax
withholding of Section 3405(c) of the Code, if
property (other than employer securities) is
distributed and the cash in the distribution is not
sufficient to satisfy the withholding obligation, the
Plan Administrator can sell the property or receive
cash from the Participant in amounts sufficient to pay
the withholding.
(c) The Administrator will not be liable for
failing to withhold on an Eligible Rollover
Distribution that is not in fact paid to an Eligible
Retirement Plan if the Administrator reasonably relied
on adequate information provided by the Participant
who elected the direct rollover. For purposes of the
foregoing provision, adequate information includes the
name of the recipient plan, a representation that the
recipient plan is an Eligible Retirement Plan, and any
other information necessary to accomplish the direct
rollover by the means selected for delivery.
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ARTICLE 6.
Plan Financing
6.1 Funding Policy. The Committee shall establish and
direct the implementation of a funding policy and method for the
Plan which shall be consistent with the objectives of the Plan
and with the Minimum Funding Standards established under Section
412 of the Internal Revenue Code. The Committee may in its
discretion rely upon the advice of the Actuary in establishing
and carrying out a funding policy and method.
6.2 Contributions. Each Employer shall make contributions
to the Trust Fund to fund benefits of the Plan for its Employees
in such amounts and at such times as the Committee determines, in
accordance with the funding policy and method of the Plan, shall
be made not later than the due date for the Employer's United
States income tax return (including extensions) for the year for
which such contribution is made. No contributions shall be made
under the Plan by any Participant. All Employer Contributions
are expressly conditioned upon the qualification of the Plan
under Section 401(a) of the Internal Revenue Code and upon the
deductibility of such contributions by the Employer under
Section 404 of the Internal Revenue Code.
6.3 Forfeitures. Forfeitures of benefits under the Plan
arising for any reason shall be applied to reduce the cost of the
Plan under the funding policy and method of the Plan and shall
not increase the benefits under the Plan otherwise payable to
Participants.
6.4 Exclusive Benefit of Participants. All Employer
Contributions under the Plan shall be paid to the Trustee and
deposited in the Trust Fund and shall be held, managed and
distributed solely in the interest of the Participants and
Beneficiaries for the exclusive purpose of (1) providing benefits
to Participants and Beneficiaries and (2) defraying reasonable
administrative expenses of the Plan and the Trust, to the extent
such expenses are not paid by the Employers, provided that:
(a) If, and to the extent, deduction for an Employer
Contribution under Section 404 of the Internal Revenue Code
is disallowed, Employer Contributions conditioned upon
deductibility shall be returned to the Employer within one
year after the disallowance of the deduction;
(b) If, and to the extent, an Employer Contribution
is made through mistake of fact, such Employer Contribution
shall be returned to the Employer within one year of the
payment of the contribution; and
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(c) If any amounts remain in the Trust Fund after
termination of the Plan and satisfying all liabilities of
the Plan to Participants, Pensioners and Beneficiaries, such
amounts shall be distributed to the Employers in such
amounts as the Committee in its sole discretion shall
determine.
6.5 Benefits Payable Only From Trust Fund. All Benefits
provided by this Plan shall be paid solely out of the Trust Fund,
and neither any Employer nor any agent or representative of an
Employer shall be liable in any manner for any such benefits.
ARTICLE 7.
Administration
7.1 Board of Directors Duties. The Board of Directors
shall have overall responsibility for the establishment,
amendment, termination, administration and operation of the Plan
and the investment of its assets, which responsibility it shall
discharge:
(a) by the appointment and removal (with or without
cause) of
(1) the members of the Committee, to which is
delegated the overall responsibility for the
interpretation, administration and operation of the
Plan;
(2) the Trustee, to which is delegated the
responsibility for the investment and safekeeping of
the assets of the Plan, except to the extent such
responsibility is delegated to one or more Investment
Managers; and
(3) if and to the extent it deems appropriate,
one or more Investment Managers to whom it may
delegate responsibility for the investment of all or
any part of the assets of the Plan; and
(b) by establishing and communicating to the Trustee
and any Investment Managers investment objectives and
guidelines, periodically reviewing and monitoring the
performance of the Committee, Trustee and any Investment
Managers.
7.2 Committee Membership. The Committee shall consist of
not less than three members, who shall be appointed by the Board
of Directors. They shall remain in office at the will of the
Board of Directors, and the Board of Directors may from time to
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time remove any of said members with or without cause and shall
appoint their successors. The Committee shall have the general
responsibility for the administration of the Plan and for
carrying out its provisions, and shall be the Plan Administrator.
7.3 Committee Structure. Each member of the Committee
shall be an officer or Employee of an Employer hereunder. Each
person upon becoming a member of the Committee, shall file an
acceptance thereof in writing with the secretary of the Company
and the secretary of the Committee. Any member of the Committee
may resign by delivering his written resignation to the secretary
of the Company and the secretary of the Committee, and such
resignation shall become effective upon the date specified
therein. In the event of a vacancy in membership, the remaining
members shall constitute the Committee with full power to act
until said vacancy is filled.
7.4 Committee Actions. The action of the Committee shall
be determined by the vote or other affirmative expression of a
majority of its members. The Committee shall choose a chairman
who shall be a member of the Committee and a secretary who may
(but need not) be a member of the Committee. The secretary shall
keep a record of all meetings and acts of the Committee and shall
have custody of all records and documents pertaining to its
operations. Either the chairman or the secretary may execute any
certificate or other written direction on behalf of the
Committee.
7.5 Committee Duties. The Committee on behalf of the
Participants, Pensioners and all other Beneficiaries of the Plan
and Trust shall enforce the Plan in accordance with the terms of
the Plan and the Trust Agreement and shall have all powers
necessary to accomplish that purpose, including but not by way of
limitation, the following:
(a) To issue rules and regulations necessary for the
proper conduct and administration of the Plan and to change,
alter, or amend such rules and regulations;
(b) To construe and interpret the Plan and Trust
Agreement;
(c) To determine all questions arising in its
administration, including those relating to the eligibility
of persons to become Participants; the rights of
Participants, Pensioners and their Beneficiaries, and
Employer Contributions; the amount and manner of accruals
and distribution of benefits hereunder; and its decision
thereon shall be final and binding upon all persons
hereunder;
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(d) To compute and certify to the Trustee the amount
and kind of benefits payable to Participants, Pensioners or
their Beneficiaries;
(e) To authorize all disbursements of the Trustee
from the Trust Fund;
(f) To employ and suitably compensate such
actuaries, accountants and attorneys (who may but need not
be the actuaries, accountants or attorneys of the Company),
other persons to render advice and clerical employees as it
may deem necessary to the performance of its duties;
(g) To communicate the Plan and its eligibility
requirements to the Employees and to notify Employees when
they become eligible to participate; and
(h) To make available to Participants upon request,
for examination during business hours, such records as
pertain exclusively to the examining Participant.
7.6 Committee Liability. The Committee and the members
thereof shall be free from all liability, joint or several, for
their acts as members of such Committee, except to the extent
that they may have been guilty of willful misconduct, except as
otherwise required by federal law.
7.7 Committee Bonding. The members of the Committee shall
serve without bond (except as otherwise required by federal law)
and without compensation for their service as such, but all
expenses of the Committee shall be paid by the Trust except to
the extent paid by the Employers.
7.8 Allocations and Delegations of Responsibility.
(a) The Board of Directors and the Committee shall
have the authority to delegate from time to time, by
instrument in writing filed in its minute books, all or any
part of its responsibilities under the Plan to such person
or persons as it may deem advisable (and may authorize such
person, upon receiving the written consent of the Board of
Directors or the Committee, to delegate such
responsibilities to such other person or persons as the
Board of Directors or the Committee shall authorize), and in
the same manner to revoke any such delegation of
responsibility. Any action of the delegate in the exercise
of such delegated responsibility shall have the same force
and effect for all purposes hereunder as if such action had
been taken by the Board of Directors or the Committee. An
Employer, the Board of Directors and the Committee shall not
be liable for any acts or omissions of any such delegate.
The delegate shall periodically report to the Board of
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Directors or the Committee concerning the discharge of the
delegated responsibilities.
(b) The Board of Directors and Committee shall have
the authority to allocate from time to time, by instrument
in writing filed in its minute books, any part of its
responsibilities under the Plan to one or more of its
members as it may deem advisable, and in the same manner to
revoke such allocation of responsibilities. Any action of
the member to whom responsibilities are allocated in the
exercise of such allocated responsibilities shall have the
same force and effect for all purposes hereunder as if such
action had been taken by the Board of Directors or the
Committee. An Employer, the Board of Directors and the
Committee shall not be liable for any acts or omissions of
such member. The member to whom responsibilities have been
allocated shall periodically report to the Board of
Directors or the Committee concerning the discharge of the
allocated responsibilities.
7.9 Information to Be Supplied by Employers. Employers
shall provide the Committee or its delegate with such information
as it shall from time to time need in the discharge of its
duties.
7.10 Validity of Records. The regularly kept records of
the Committee, Company and any Employer shall be conclusive
evidence of the Vesting Service and Benefit Service of an
Employee, his Compensation, his age, his status as an Employee,
the amount of his benefits under the Chicago and North Western
Railway Company Profit Sharing and Retirement Savings Program
(called the Chicago and North Western Transportation Company
Profit Sharing and Retirement Savings Program until May 5, 1994)
determined under Article 2.1(c) and 4.7(b)(1)(iii) hereof and all
other matters contained therein applicable to this Plan provided
that an Employee may request a correction in the records of his
age at any time prior to retirement, and such correction shall be
made if within 90 days after such request he furnishes his
support thereof -- birth certificate, baptismal certificate, or
other documentary proof of age -- satisfactory to the Committee.
7.11 Fiduciary Capacity. Any person or group of persons
may serve in more than one fiduciary capacity with respect to the
Plan.
7.12 Company as Agent. The Company and/or the Committee
shall act as agent for each Employer in the administration of the
Plan.
7.13 Fiduciary as Participant. A fiduciary who is also a
Participant or a Beneficiary shall receive any benefit to which
he may be entitled as a Participant or Beneficiary in the Plan so
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long as such benefit is computed and paid on a basis that is
consistent with the terms of the Plan as applied to all other
Participants and Beneficiaries.
7.14 Fiduciary Responsibility. If a Plan fiduciary acts in
accordance with ERISA, Title I, Subtitle B, Part 4:
(a) in relying on a Participant's election to waive
a Qualified Joint and Survivor Annuity or a revocation of
such an election or in determining that the Participant's
spouse has consented to a waiver or that the consent of the
Participant's spouse may not be obtained because there is no
spouse, the spouse cannot be located or other circumstances
prescribed by the Secretary of the Treasury by regulations,
then to the extent of payments made pursuant to such
consent, revocation or determination, the Plan and its
fiduciaries shall have no further liability.
(b) in treating a domestic relations order as being
(or not being) a Qualified Domestic Relations Order, or,
during any period in which the issue of whether a domestic
relations order is a Qualified Domestic Relations Order is
being determined (by the Committee, by a court of competent
jurisdiction, or otherwise), in segregating in a separate
account in the Plan or in an escrow account the amounts
which would have been payable to the alternate payee during
such period if the order had been determined to be a
Qualified Domestic Relations Order, in paying the amounts
segregated or held in escrow to the person entitled thereto
if within 18 months the domestic relations order (or a
modification thereof) is determined to be a Qualified
Domestic Relations Order, in paying such amounts to the
person entitled thereto if there had been no order, if
within 18 months the domestic relations order is determined
not to be qualified or if the issue is not resolved within
18 months and in prospectively applying a domestic relations
order which is determined to be qualified after the close of
the 18-month period, then the obligation of the Plan and its
fiduciaries to the Participant and each alternate payee
shall be discharged to the extent of any payment made
pursuant to such acts.
ARTICLE 8.
Claims Procedure
8.1 Initial Claim for Benefits. Each Participant,
Pensioner or other Beneficiary (a "Claimant") may submit his
claim for benefits to the Committee (or to such other person or
persons as may be designated by the Committee) in writing in such
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form as is provided or approved by the Committee. A Claimant
shall have no right to seek review of a denial of benefits, or to
bring any action in any court to enforce a claim for benefits
prior to his filing a claim for benefits and exhausting his
rights to review under Articles 8.1 and 8.2.
When a claim for benefits has been filed properly,
such claim for benefits shall be evaluated and the Claimant shall
be notified of the approval or the denial within ninety (90) days
after the receipt of such claim unless special circumstances
require an extension of time for processing the claim. If such
an extension of time for processing is required, written notice
of the extension shall be furnished to the Claimant prior to the
termination of the initial ninety (90) day period which shall
specify the special circumstances requiring an extension and the
date by which a final decision will be reached (which date shall
not be later than one hundred eighty (180) days after the date on
which the claim was filed). A Claimant shall be given a written
notice in which the Claimant shall be advised as to whether the
claim is granted or denied, in whole or in part. If a claim is
denied, in whole or in part, the Claimant shall be given written
notice which shall contain (1) the specific reasons for the
denial, (2) references to pertinent plan provisions upon which
the denial is based, (3) a description of any additional material
or information necessary to perfect the claim and an explanation
of why such material or information is necessary, and (4) the
Claimant's rights to seek review of the denial.
8.2 Review of Claim Denial. If a claim is denied, in
whole or in part, the Claimant shall have the right to request
that the Committee review the denial, provided that the Claimant
files a written request for review with the Committee within
sixty (60) days after the date on which the Claimant received
written notification of the denial. A Claimant (or his duly
authorized representative) may review pertinent documents and
submit issues and comments in writing to the Committee. Within
sixty (60) days after a request for review is received, the
review shall be made and Claimant shall be advised in writing of
the decision on review, unless special circumstances require an
extension of time for processing the review, in which case the
Claimant shall be given a written notification within such
initial sixty (60) day period specifying the reasons for the
extension and when such review shall be completed (provided that
such review shall be completed within one hundred and twenty
(120) days after the date on which the request for review was
filed). The decision on review shall be forwarded to the
Claimant in writing and shall include specific reasons for the
decision and references to plan provisions upon which the
decision is based. A decision on review shall be final and
binding on all persons for all purposes. If a Claimant shall
fail to file a request for review in accordance with the
procedures described in Articles 8.1 and 8.2, such Claimant shall
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have no right to review and shall have no right to bring an
action in any court and the denial of the claim shall become
final and binding on all persons for all purposes.
ARTICLE 9.
Trustee and Trust Fund
9.1 Trust Agreement. The Company has entered into a Trust
Agreement providing for the administration of the Chicago and
North Western Railway Company Supplemental Pension Trust (called
the Chicago and North Western Transportation Company Supplemental
Pension Trust until May 5, 1994). Said Trust Agreement as from
time to time amended shall continue in force and shall be deemed
to form a part of this Plan, and any and all rights or benefits
which may accrue to any person under this Plan shall be subject
to all the terms and provisions of the said Trust Agreement.
9.2 Selection of Trustee. As provided in the Trust
Agreement, the Board of Directors shall have the power to remove
the Trustee and to appoint a successor Trustee.
9.3 Trustee's Duties. The powers, duties and
responsibilities of the Trustee shall be as stated in the Trust
Agreement, and nothing contained in this Plan either expressly or
by implication shall be deemed to impose any additional powers,
duties or responsibilities upon the Trustee. All Employer
Contributions shall be paid into the Trust and all benefits
payable under the Plan shall be paid from the Trust. No Employer
shall have any rights or claims of any nature in or to the assets
of the Trust Fund except the right to require the Trustee to
hold, use, apply and pay such assets, in accordance with the
directions of the Committee, for the exclusive benefit of the
Participants and their Beneficiaries, except as otherwise
provided in Article 6.4.
9.4 Trust Income. The net income derived from the Trust
shall be accumulated and shall from time to time be invested as a
part of the Trust Fund.
9.5 Expenses. All clerical, legal and other expenses of
the Plan and the Trust and Trustee's fees shall be paid by the
Trust except to the extent paid by the Employers.
9.6 Trust Entity. The Trust under this Plan from its
inception shall be a separate entity aside and apart from
Employers or their assets. The Trust and the corpus and income
thereof shall in no event and in no manner whatsoever be subject
to the rights or claims of any creditor of any Employer.
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ARTICLE 10.
Affiliated Companies
10.1 Procedure for Adoption. Any Affiliated Company may,
by resolution of such Affiliated Company's board of directors,
adopt the Plan for the benefit of its employees upon
authorization of such action by the Board of Directors subject to
such terms and conditions (including but not limited to terms and
conditions concerning Vesting Service, Benefit Service, and
amount of Retirement Benefits) as may be imposed by the Board of
Directors.
10.2 Termination by Affiliated Company. Any Affiliated
Company may, by resolution of the board of directors of such
Affiliated Company, with the consent of the Board of Directors
and subject to such conditions as may be imposed by the Board of
Directors, terminate the Plan as to such Affiliated Company. If
any Affiliated Company shall terminate the Plan as to itself, the
portion of the Trust Fund attributable to the Employees of such
Affiliated Company shall be determined on the basis of records of
contributions, benefit payments, expenses and similar items,
maintained by or on behalf of the Company and/or the Committee
(or such other means as the Committee, with the advice of the
Actuary, shall deem appropriate), and such portion of the Trust
Fund shall be distributed to such Affiliated Company's
Pensioners, surviving spouses of such Affiliated Company's
Employees, such Affiliated Company's Employees and former
Employees (other than Employees whose employment is transferred
to an Employer, or to another Affiliated Company), as provided in
Articles 11.2 and 11.3 with respect to termination of the Plan by
the Company.
ARTICLE 11.
Amendment and Termination
11.1 Amendments. The Company, by resolution of the Board
of Directors, may amend, modify, change, revise or discontinue
this Plan at any time; provided, however, (a) that no amendment
shall increase the duties or liabilities of the Trustee, or the
Committee, without their written consent; (b) that no amendment
shall have the effect of vesting in any Employer any interest in
any funds, securities or other property subject to the terms of
this Plan and the Trust Agreement; (c) that no amendment shall
authorize or permit at any time any part of the corpus or income
of the Trust Fund to be used or diverted to purposes other than
for the exclusive benefit of participants and their
Beneficiaries; (d) that, except as provided in Article 11.3, no
amendment shall have any retroactive effect as to deprive any
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Participant or Beneficiary of any benefit already accrued or,
except to the extent permitted in regulations and rulings issued
by the Secretary of the Treasury, to eliminate with respect to a
benefit already accrued an optional form of benefit; provided
that no amendment made in conformance to provisions of the
Internal Revenue Code, or any other statute relating to
employees' trusts, or any official regulations or ruling issued
pursuant thereto, shall be considered prejudicial to the rights
of any Participant or Beneficiary.
11.2 Termination. It is the expectation of the Company
that it will continue the Plan and the payment of contributions
hereunder indefinitely, but the continuation of the Plan and the
payment of the Employer Contributions hereunder is not assumed as
a contractual obligation of the Company or any other Employer;
and the right is reserved by the Company or any other Employer at
any time to reduce, suspend or discontinue its contributions
hereunder, provided, however, that the Employer Contributions for
any Plan Year accrued or determined prior to the end of said year
shall not after the end of said year be retroactively reduced,
suspended or discontinued.
11.3 Disposition of Fund on Termination. Subject to the
provisions of Section 13.8, upon termination of the Plan, the
Trust Fund shall be liquidated by making provisions (if not
already so provided) for payments, after providing for the
expenses of the Plan and Trust Fund, to the extent the assets in
the Trust Fund are sufficient therefor, in the order of
precedence established under ERISA Section 4044.
11.4 Disposition Medium. The allocations referred to in
Article 11.3 may be implemented through the continuance of the
Trust Fund, through a new Trust Fund, or through the purchase of
insurance company annuity contracts, or by a combination of these
media.
ARTICLE 12.
Top Heavy Provisions
12.1 Application. The definitions in Article 12.2 shall
apply under this Article XII and the special rules in Article
12.3 shall apply, notwithstanding any other provisions of the
Plan, for any Plan Year in which the Plan is a Top Heavy Plan and
for such other Plan Years as may be specified herein. Anything
in this Article XII to the contrary notwithstanding, if a
multiple employer plan as described in Internal Revenue Code
Section 413(c), the provisions of this Article XII shall be
applied separately to each Employer (taken with the businesses
which are Commonly Controlled Entities with that Employer) taking
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account of benefits under the plan provided to employees of the
Employer or Commonly Controlled Entity because of service with
that Employer or Commonly Controlled Entity.
12.2 Special Top Heavy Definitions. The following special
definitions shall apply under this Article XII:
(a) "Aggregation Group" means the group of plans in
a Mandatory Aggregation Group, if any, that includes the
Plan, unless the inclusion of Related Plans in the
Permissive Aggregation Group would prevent the Plan from
being a Top Heavy Plan, in which case "Aggregation Group"
means the group of plans consisting of the Plan and each
other Related Plan in a Permissive Aggregation Group with
the Plan.
(1) "Mandatory Aggregation Group" means each
plan (considering the Plan and Related Plans) that,
during the Plan Year that contains the Determination
Date or any of the four preceding Plan Years,
(A) had a Participant who was a Key
Employee, or
(B) was necessary to be considered with
a plan in which a Key Employee participated in
order to enable the plan in which the Key
Employee participated to meet the requirements
of Section 401(a)(4) or Section 410 of the
Internal Revenue Code.
If the Plan is not described in (A) or (B) above, it
shall not be part of a Mandatory Aggregation Group.
(2) "Permissive Aggregation Group" means the
group of plans consisting of (A) the plans, if any, in
a Mandatory Aggregation Group with the Plan and
(B) any other Related Plan that, when considered as a
part of the Aggregation Group, does not cause the
Aggregation Group to fail to satisfy the requirements
of Section 401(a)(4) and Section 410 of the Internal
Revenue Code. A Related Plan in (B) of the preceding
sentence may include a simplified employee pension
plan, as defined in Internal Revenue Code Section
408(k), and a collectively bargained plan, if when
considered as a part of the Aggregation Group such
plan does not cause the Aggregation Group to fail to
satisfy the requirements of Section 401(a)(4) and
Section 410 of the Internal Revenue Code considering,
if the plan is a multiemployer plan as described in
Internal Revenue Code Section 414(f) or a multiple
employer plan as described in Section 413(c), benefits
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under the plan only to the extent provided to
employees of the employer because of service with the
employer and, if the plan is a simplified employee
pension plan, only the employer's contribution to the
plan.
(b) "Determination Date" means, with respect to a
plan year, the last day of the preceding plan year. If the
Plan is aggregated with other plans in the Aggregation
Group, the Determination Date for each other plan shall be,
with respect to any plan year, the Determination Date for
each such other plan which falls in the same calendar year
as the Determination Date for the Plan.
(c) "Highest Average Monthly Compensation" means one
sixtieth of a person's Compensation for a period consisting
of his sixty (60) consecutive calendar months in which his
Compensation was the highest preceding the date he ceases to
be an Employee. For purposes of this Section, a calendar
month ending on or next preceding the date a person ceases
to be an Employee and a calendar month beginning on or next
following the date such person becomes an Employee shall be
treated as consecutive. If a person has less than sixty
(60) consecutive calendar months of Compensation, Highest
Average Monthly Compensation shall mean the sum of the
person's Compensation divided by the number of months of
employment for which the person was compensated.
(d) "Key Employee" means, for the Plan Year
containing the Determination Date, any person or the
beneficiary of any person who is an Employee or former
Employee of an Employer or a Commonly Controlled Entity as
determined under Internal Revenue Code Section 416(i) and
who, at any time during the Plan Year containing the
Determination Date or any of the four (4) preceding Plan
Years (the "Measurement Period"), is a person described in
paragraph (1), (2), (3) or (4), subject to paragraph (5).
(1) An officer of the Employer or Commonly
Controlled Entity who:
(A) in any Measurement Period, in the
case of a Plan Year beginning after December 31,
1983, is an officer during the Plan Year and has
annual Compensation for the Plan Year in an
amount greater than fifty percent (50%) of the
amount in effect under Section 415(b)(1)(A) of
Internal Revenue Code for the calendar year in
which such Plan Year ends ($30,000 in 1984,
adjusted in subsequent years as determined in
accordance with regulations prescribed by the
Secretary of the Treasury or his delegate
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pursuant to the provisions of Section 415(d) of
the Internal Revenue Code); and
(B) in any Measurement Period, in the
case of a Plan Year beginning on or before
December 31, 1983, is an officer during the Plan
Year, regardless of his Compensation (except to
the extent that applicable law, regulations and
rulings indicate that the fifty percent (50%)
requirement set forth in subparagraph (A) above
is applicable).
No more than a total of fifty (50) persons (or, if
lesser, the greater of three (3) persons or ten
percent (10%) of all persons or beneficiaries of
persons who are employees or former employees) shall
be treated as Key Employees under this paragraph (1)
for any Measurement Period. In the case of an
Employer or Commonly Controlled Entity which is not a
corporation:
(i) in any Measurement Period, in
the case of a Plan Year beginning on or
before February 28, 1985 no persons shall
be treated as Key Employees under this
paragraph (1); and
(ii) in any Measurement Period, in
the case of a Plan Year beginning after
February 28, 1985, the term "officer" as
used in this subsection (d) shall include
administrative executives as described in
Section 1.416-1(T-13) of the Treasury
Regulations.
(2) One (1) of the ten (10) persons who,
during a Plan Year in the Measurement Period:
(A) have annual Compensation from the
Employer or a Commonly Controlled Entity for
such Plan Year greater than the amount in effect
under Section 415(c)(1)(A) of the Internal
Revenue Code for the calendar year in which such
Plan Year ends ($30,000 in 1984, adjusted in
subsequent years as determined in accordance
with regulations prescribed by the Secretary of
the Treasury or his delegate pursuant to the
provisions of Section 415(d) of the Internal
Revenue Code); and
(B) own (or are considered as owning
within the meaning of Internal Revenue Code
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Section 318) in such Plan Year, the largest
percentage interests in the Employer or a
Commonly Controlled Entity, in such Plan Year,
provided that no person shall be treated as a
Key Employee under this paragraph unless he owns
more than one-half percent (1/2%) interest in
the Employer or a Commonly Controlled Entity.
No more than a total of ten (10) persons or
beneficiaries of persons who are employees or former
employees shall be treated as Key Employees under this
paragraph (2) for any Measurement Period.
(3) A person who, for a Plan Year in the
Measurement Period, is a more than five percent (5%)
owner (or is considered as owning more than five
percent (5%) within the meaning of Internal Revenue
Code Section 318) of the Employer or a Commonly
Controlled Entity.
(4) A person, who, for a Plan Year in the
Measurement Period, is a more than one percent (1%)
owner (or is considered as owning more than one
percent (1%) within the meaning of Internal Revenue
Code Section 318) of the Employer or a Commonly
Controlled Entity and has an annual Compensation for
such Plan Year from the Employer and Commonly
Controlled Entities of more than $150,000.
(5) If the number of persons who meet the
requirements to be treated as Key Employees under
paragraph (1) or (2) exceed the limitation on the
number of Key Employees to be counted under
paragraph (1) or (2), those persons with the highest
annual Compensation in a Plan Year in the Measurement
Period for which the requirements are met and who are
within the limitation on the number of Key Employees
will be treated as Key Employees.
If the requirements of paragraph (1) or (2) are met by
a person in more than one (1) Plan Year in the
Measurement Period, each person will be counted only
once under paragraph (1) or (2):
(C) under paragraph (1), the Plan Year
in the Measurement Period in which a person who
was an officer and had the highest annual
Compensation shall be used to determine whether
the person will be treated as a Key Employee
under the preceding sentence;
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(D) under paragraph (2), the Plan Year
in the Measurement Period in which the ownership
percentage interest is the greatest shall be
used to determine whether the person will be
treated as a Key Employee under the preceding
sentence.
Notwithstanding the above provisions of paragraph (5),
a person may be counted in determining the limitation
under both paragraphs (1) and (2). In determining the
sum of the Present Value of Accrued Benefits for Key
Employees under subsection (1) of this Section, the
Present Value of Accrued Benefits for any person shall
be counted only once.
(e) "Non-Key Employee" means a person with an
accrued benefit or account balance in the Plan or any
Related Plan during the Measurement Period who is not a Key
Employee, and any beneficiary of such a person.
(f) "Present Value of Accrued Benefits" means for
any Plan Year an amount equal to the sum of (1), (2), and
(3), subject to (4), for each person who, in the Plan Year
containing the Determination Date was a Key Employee or a
Non-Key Employee:
(1) The sum of the actuarial present values of
a person's accrued benefits under this Plan and each
Related Defined Benefit Plan in the Aggregation Group,
expressed as a benefit commencing at Normal Retirement
Date (or the person's attained age, if later)
determined based on the following actuarial
assumptions:
(A) Interest rate 5%; and
(B) Mortality: 1984 Unisex Pension
Table;
and determined in accordance with Internal Revenue
Code Section 416(g). The present value of an accrued
benefit for any person who is employed by an employer
maintaining a plan on the Determination Date is
determined as of the most recent valuation date which
is within a 12-month period ending on the
Determination Date, provided however that:
(C) for the first plan year of the plan,
the present value for an employee is determined
as if the employee had a Termination of
Employment (i) on the Determination Date or
(ii) on such valuation date but taking into
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account the estimated accrued benefit as of the
Determination Date; and
(D) for the second and subsequent plan
years of the plan, the accrued benefit taken
into account for an employee is not less than
the accrued benefit taken into account for the
first plan year unless the difference is
attributable to using an estimate of the accrued
benefit as of the Determination Date for the
first plan year and using the actual accrued
benefit as of the Determination Date for the
second plan year.
For purposes of this paragraph (1), the valuation date
is the valuation date used by the plan for computing
plan costs for minimum funding, regardless of whether
a valuation is performed that year.
If the plan provides for a nonproportional
subsidy as described in Treasury Regulations Section
1.416-1 (T-26), the present value of accrued benefits
shall be determined taking into account the value of
nonproportional subsidized early retirement benefits
and nonproportional subsidized benefit options.
(2) The value of a person's accrued benefit
under each Related Defined Contribution Plan in the
Aggregation Group, determined as of the valuation date
coincident with or immediately preceding the
Determination Date, adjusted for contributions due as
of the Determination Date, as follows:
(A) in the case of a plan not subject to
the minimum funding requirements of Internal
Revenue Code Section 412, by including the
amount of any contributions actually made after
the valuation date but on or before the
Determination Date, and, in the first plan year
of a plan, by including contributions made after
the Determination Date that are allocated as of
a date in that first plan year; and
(B) in the case of a plan that is
subject to the minimum funding requirements, by
including the amount of any contributions that
would be allocated as of a date not later than
the Determination Date, plus adjustments to
those amounts as required under applicable
rulings, even though those amounts are not yet
required to be contributed or allocated (e.g.,
because they have been waived) and by including
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the amount of any contribution actually made (or
due to be made) after the valuation date but
before the expiration of the extended payment
period in Internal Revenue Code Section
412(c)(10).
(3) The aggregate value of amounts distributed
during the plan year that includes the Determination
Date or any of the four preceding plan years,
including amounts distributed under a terminated plan
which, if it had not been terminated, would have been
in the Aggregation Group.
(4) The following rules shall apply in
determining the Present Value of Accrued Benefits:
(A) Amounts attributable to qualified
voluntary employee contributions, as defined in
Section 219(e) of the Internal Revenue Code,
shall be excluded.
(B) In computing the Present Value of
Accrued Benefits with respect to rollovers or
plan-to-plan transfers, the following rules
shall be applied to determine whether amounts
which have been distributed during the 5-year
period ending on the Determination Date from or
accepted into this Plan or any plan in the
Aggregation Group shall be included in
determining the Present Value of Accrued
Benefits:
(i) Unrelated Transfers accepted into
the Plan or any plan in the Aggregation
Group after December 31, 1983, shall not
be included.
(ii) Unrelated Transfers accepted on or
before December 31, 1983, and all Related
Transfers accepted at any time into the
Plan or any plan in the Aggregation Group
shall be included.
(iii) Unrelated Transfers made from the
Plan or any plan in the Aggregation Group
shall be included.
(iv) Related Transfers made from the Plan
or any plan in the Aggregation Group shall
not be included (but shall be counted by
the accepting plan).
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(C) The Accrued Benefit of any
individual who has not received any Compensation
from an Employer maintaining the Plan at any
time during the five (5) year period ending on
the Determination Date shall be excluded.
(g) "Related Plan" means any other defined benefit
plan or a defined contribution plan (as defined in Section
415(k) of the Internal Revenue Code) maintained by an
Employer or a Commonly Controlled Entity, respectively
called a "Related Defined Benefit Plan" and a "Related
Defined Contribution Plan".
(h) "Related Transfer" means a rollover or a
plan-to-plan transfer which is either not initiated by the
Employee or is made between plans each of which is
maintained by a Commonly Controlled Entity.
(i) A "Top Heavy Aggregation Group" exists in any
Plan Year for which, as of the Determination Date, the sum
of the Present Value of Accrued Benefits for Key Employees
under all plans in the Aggregation Group exceeds sixty
percent (60%) of the sum of the Present Value of Accrued
Benefits for all employees under all plans in the
Aggregation Group; provided that, for purposes of
determining the sum of Present Value of Accrued Benefits for
all employees, there shall be excluded the Present Value of
Accrued Benefits of any Non-Key Employee who was a Key
Employee for any Plan Year preceding the Plan Year that
contains the Determination Date. For purposes of applying
the special rules herein with respect to a Super Top Heavy
Plan, a Top Heavy Aggregation Group will also constitute a
"Super Top Heavy Aggregation Group" if in any Plan Year as
of the Determination Date, the sum of the Present Value of
Accrued Benefits for Key Employees under all plans in the
Aggregation Group exceeds ninety percent (90%) of the sum of
the Present Value of Accrued Benefits for all employees
under all plans in the Aggregation Group.
(j) "Top Heavy Benefit Service" means the number of
Plan Years in which an Employee is a Participant and in
which he completes 1,000 Hours of Service excluding:
(1) Plan Years commencing before January 1,
1984;
(2) Plan Years in which the Plan is not a Top
Heavy Plan;
(3) If the Employee does not have any
nonforfeitable interest in his Accrued Benefit, years
of Top Heavy Benefit Service before any period of
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consecutive One-Year Breaks in Service if the number
of consecutive One-Year Breaks in Service equals or
exceeds the greater of
(A) five (5) consecutive One-Year Breaks
in Service, or
(B) the aggregate number of Plan Years
during which the Participant had 1,000 Hours of
Service before the consecutive One-Year Breaks
in Service;
(4) any years of Top Heavy Benefit Service
earned before a One-Year Break in Service until the
Employee has completed one Year of Eligibility Service
following the One-Year Break in Service;
(5) for purposes of determining a
Participant's years of Top Heavy Benefit Service
before a period of five consecutive One-Year Breaks in
Service and a Termination of Employment, Years of Top
Heavy Benefit Service after the period of five
consecutive One-Year Breaks in Service; and
(6) periods of Parental Leave.
(k) "Top Heavy Plan" means the Plan in any Plan Year
in which (1) either a Key Employee is a Participant or the
Plan is a member of a Mandatory Aggregation Group, and
(2) the Plan is a member of a Top Heavy Aggregation Group.
For purposes of applying the rules herein with respect to a
Super Top Heavy Plan, a Top Heavy Plan will also constitute
a "Super Top Heavy Plan" if the Plan in any Plan Year is a
member of a Super Top Heavy Aggregation Group, including a
Super Top Heavy Aggregation Group consisting solely of the
Plan.
(l) "Unrelated Transfer" means a rollover or a
plan-to-plan transfer which is both initiated by the
Employee and (1) made from a plan maintained by a Commonly
Controlled Entity to a plan maintained by an employer which
is not a Commonly Controlled Entity or (2) made to a plan
maintained by a Commonly Controlled Entity from a plan
maintained by an employer which is not a Commonly Controlled
Entity.
12.3 Special Top Heavy Provisions. For each Plan Year in
which the Plan is a Top Heavy Plan, the following rules shall
apply, except that the special provisions of this Article 12.3
shall not apply with respect to any employee included in a unit
of employees covered by an agreement which the Secretary of Labor
finds to be a collective bargaining agreement between employee
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representatives and one or more employees if there is evidence
that retirement benefits were the subject of good faith
bargaining between such employee representative and the Employer
or Employers:
(a) Minimum Benefits. For the first Plan Year in
which the Plan is a Top Heavy Plan and for every Plan Year
thereafter, regardless of whether the Plan is a Top Heavy
Plan, the Accrued Benefit of each Participant who is a
Non-Key Employee shall be a monthly amount payable for life
beginning at the earlier of (i) the Participant's Normal
Retirement Date or, if later, the Participant's Termination
of Employment, or (ii) the date the Participant reaches age
65 or, if later, the date of his third (3rd) anniversary in
the plan in an amount equal to the greater of:
(1) the Actuarial Equivalent of such
Participant's monthly benefit determined under
Article 2.1 (or under Section 4.7(b), if greater), or
(2) the lesser of (A) or (B), reduced by (C):
(A) 20% of the Participant's Highest
Average Monthly Compensation, or
(B) the sum of:
(i) the Actuarial Equivalent of
such Participant's monthly benefit
determined under Section 2.1 (or under
Section 4.7(b), if greater) as though he
had a Termination of Service on the last
day of the Plan Year ("Last Pre-Top Heavy
Year") immediately preceding the Plan Year
in which the Plan first became a Top Heavy
Plan, plus
(ii) the product of the positive
difference, if any, between
(I) 20% of such Participant's
Highest Average Monthly
Compensation, and
(II) the Actuarial Equivalent
of such Participant's monthly
benefit determined under Section 2.1
(or under Section 4.7(b), if
greater) as though he had a
Termination of Service on the last
day of the Last Pre-Top Heavy Year;
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multiplied by a fraction, the numerator of
which is such Participant's years of Top
Heavy Benefit Service (not in excess of
10), and the denominator of which is 10.
(C) the Actuarial Equivalent in the form
of an annuity payable to the Participant for
life commencing on the Participant's Normal
Retirement Date of the amount in the Employee's
Employer Contribution General Account and
Employer Matching Contribution Account under the
Chicago and North Western Railway Company Profit
Sharing and Retirement Savings Program.
(3) For purposes of determining whether a
Non-Key Employee is a Participant entitled to the
minimum benefit described in this paragraph (a), a
Non-Key Employee will be treated as a Participant even
if he is not otherwise a Participant or entitled to an
accrual under the Plan because:
(A) he is not employed on a specified
date,
(B) he is excluded from participation in
the Plan (or accrues no benefit) merely because
his compensation is less than a stated amount,
or
(C) he is excluded from participation in
the Plan (or accrues no benefit) merely because
of a failure to make mandatory employee
contributions.
(b) Vesting. For each Plan Year in which the Plan
is a Top Heavy Plan and for each Plan Year thereafter, the
vested right of a Participant who has at least one hour of
service after the Plan becomes a Top Heavy Plan to a
percentage of his Accrued Benefit (to the extent the Accrued
Benefit had not been forfeited prior to the Plan's becoming
a Top Heavy Plan) shall be determined under the following
table:
Years of Continuous Vested
Service Percentage
Less than 3 0%
3 or more 100%
(c) Limitations. In computing the limitations under
Article 13.8 hereof for years in which the Plan is a Top
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Heavy Plan, the special rules of Section 416(h) of the
Internal Revenue Code shall be applied in accordance with
applicable regulations and rulings so that, in determining
the denominator of the Defined Contribution Plan Fraction
and the Defined Benefit Plan Fraction, at each place at
which "1.25" would have been used, "1.00" shall be
substituted and in determining the numerator of the
transition fraction described in Section 415(e)(6)(B) of the
Internal Revenue Code by substituting $41,500 for $51,875,
unless the Plan is not a Super Top Heavy Plan and the
special requirements of Section 416(h)(2) of the Internal
Revenue Code have been satisfied.
(d) Transition Rule for a Top Heavy Plan.
Notwithstanding the provisions of Article 12.3(c), for each
Plan Year in which the Plan is a Top Heavy Plan and in which
the Plan does not meet the special requirements of Section
416(h)(2) of the Internal Revenue Code in order to use 1.25
in the denominator of the Defined Contribution Plan Fraction
and the Defined Benefit Plan Fraction, if an Employee was a
participant in one or more defined benefit plans and in one
or more defined contribution plans maintained by the
employer before the plans became Top Heavy Plans and if such
Participant's Combined Fraction exceeds 1.00 because of
accruals and additions that were made before the plans
became Top Heavy Plans, a factor equal to the lesser of 1.25
or such lesser amount (but not less than 1.00) as shall be
needed to make the Employee's Combined Fraction equal to
1.00 shall be used in the denominator of the Defined Benefit
Plan Fraction and the Defined Contribution Plan Fraction if
there are no further accruals or annual additions under any
Top Heavy Plans until the Participant's Combined Fraction is
not greater than 1.00 when a factor of 1.00 is used in the
denominators of the Defined Benefit Plan Fraction and the
Defined Contribution Plan Fraction. Any provisions herein
to the contrary notwithstanding, if the Plan is a Top Heavy
Plan and the Plan does not meet the special requirements of
Section 416(h)(2) of the Internal Revenue Code in order to
use 1.25 in the denominators of the Defined Benefit Plan
Fraction and the Defined Contribution Plan Fraction, there
shall be no further accruals under the Plan for a
Participant whose Combined Fraction is greater than 1.00
when a factor of 1.00 is used in the denominator of the
Defined Benefit Plan Fraction and the Defined Contribution
Plan Fraction, until such time as the Participant's Combined
Fraction is not greater than 1.00.
(e) Transition Rule for a Super Top Heavy Plan.
Notwithstanding the provisions of Article 12.3(c) and
12.3(d), for each Plan Year in which the Plan is a Super Top
Heavy Plan, (1) if an Employee was a participant in one or
more defined benefit plans and in one or more defined
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contribution plans maintained by the employer before the
plans became Super Top Heavy Plans, and (2) if such
Participant's Combined Fraction exceeds 1.00 because of
accruals and additions that were made before the plans
became Super Top Heavy Plans and if immediately before the
plans became Super Top Heavy Plans the Combined Fraction as
then computed did not exceed 1.00, then a factor equal to
the lesser of 1.25 or such lesser amount (but not less than
1.00) as shall be needed to make the Employee's Combined
Fraction equal to 1.00 shall be used in the denominator of
the Defined Benefit Plan Fraction and the Defined
Contribution Plan Fraction if there are no further accruals
or annual additions under any Super Top Heavy Plans until
the Participant's Combined Fraction is not greater than 1.00
when a factor of 1.00 is used in the denominators of the
Defined Benefit Plan Fraction and the Defined Contribution
Plan Fraction. Any provisions herein to the contrary
notwithstanding, if the Plan is a Super Top Heavy Plan,
there shall be no further accruals under the Plan for a
Participant whose Combined Fraction is greater than 1.00
when a factor of 1.00 is used in the denominator of the
Defined Benefit Plan Fraction and the Defined Contribution
Plan Fraction until the Participant's Combined Fraction is
not greater than 1.00.
(f) Terminated Plan. If the Plan becomes a Top
Heavy Plan after it has formally been terminated, has ceased
crediting service for benefit accruals and vesting and has
been or is distributing all plan assets to participants and
their Beneficiaries as soon as administratively feasible, or
if a terminated plan has distributed all benefits of
participants and their beneficiaries, the provisions of
Article 12.3 shall not apply to the Plan.
(g) Frozen Plans. If the Plan becomes a Top Heavy
Plan after benefit accruals have ceased but all assets have
not been distributed to participants or their beneficiaries,
the provisions of Article 12.3 shall apply to the Plan.
(h) Actuarial Increase of Suspended Top Heavy
Benefits. If benefit payments are suspended hereunder
pursuant to Article 5.4 on account of continuation in or
resumption of employment after a person's Normal Retirement
Date or after his benefit payments have begun, then upon
resumption of benefit payments, the amount of such person's
Top Heavy Benefits shall be increased to the Actuarial
Equivalent of such Top Heavy Benefits determined as of the
date benefit payments resume. For purposes of the preceding
sentence, "Top Heavy Benefits" means the amount described in
Article 12.3(a)(2).
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ARTICLE 13.
Miscellaneous Provisions
13.1 Non-Alienation of Benefits. No benefit payable at any
time under this Plan shall be subject in any manner to
alienation, sale, transfer, assignment, pledge, attachment, or
other legal processes, or encumbrance of any kind. Any attempt
to alienate, sell, transfer, assign, pledge or otherwise encumber
any such benefits, whether currently or thereafter payable, shall
be void. No benefit, nor any fund which may be established for
the payment of such benefits, shall, in any manner, be liable for
or subject to the debts or liabilities of any person entitled to
such benefits.
Notwithstanding the foregoing provisions of Article 13.1,
the Trustee, in accordance with the Committee's directions,
(a) shall comply with an order entered on or after
January 1, 1985 determined by the Committee to be a
Qualified Domestic Relations Order as provided in Article
13.2,
(b) shall comply with a domestic relations order
entered before January 1, 1985 if benefits are already being
paid under such order, and
(c) may treat an order entered before January 1,
1985 as a Qualified Domestic Relations Order even if it does
not meet the requirements of Article 13.2.
13.2 Qualified Domestic Relations Order.
(a) "Qualified Domestic Relations Order" means any
judgement, decree, or order (including approval of a
property settlement agreement):
(1) which is made pursuant to a state domestic
relations law (including a community property law),
(2) which relates to the provision of child
support, alimony payments, or marital property rights
to a spouse, former spouse, child, or other dependent
of a Participant,
(3) which creates or recognizes the existence
of an alternate payee's right to receive all or a
portion of the Participant's Accrued Benefit under the
Plan, and
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(b) A domestic relations order can be a Qualified
Domestic Relations Order only if such order clearly
specifies:
(1) the name and the last known mailing
address, if any, of the Participant and the name and
mailing address of each alternate payee covered by the
order,
(2) the amount or percentage of the
Participant's Accrued Benefit to be paid by the Plan
to each such alternate payee, or the manner in which
such amount or percentage is to be determined,
(3) the number of payments or period to which
such order applies, and
(4) each Plan to which such order applies.
(c) A domestic relations order can be a Qualified
Domestic Relations Order only if such order does not:
(1) require the Plan to provide any type or
form of benefit, or any option not otherwise provided
under the Plan,
(2) require the Plan to provide increased
benefits (determined on the basis of actuarial value),
or
(3) require the payment of benefits to an
alternate payee which are required to be paid to
another alternate payee under another order previously
determined to be a Qualified Domestic Relations Order.
A Participant's total retirement benefits from
Railroad Retirement benefits and Company retirement plans
are assured by this Plan as this Plan provides benefits in
the amount (if any) necessary when added to the sum of
(i) the Participant's benefits under the Profit Sharing Plan
described in Article 2.1(c) ("Profit Sharing Benefit") and
(ii) the portion of the Employee's Primary Railroad
Retirement Benefit designated in Section 2.1(b) hereof to
the amount specified in Article 2.1(a). Therefore, if the
Participant's Profit Sharing Benefit as specified in 2.1(c)
increases more rapidly than the amount of the total
retirement benefit as specified in Article 2.1(a), the
dollar amount of the Retirement Benefits hereunder would
diminish. Consequently, for a domestic relations court
order not to increase the actuarial value of a Participant's
benefits in accordance with Section 13.2(c)(2), the order
would either have to be expressed as a percent of the
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Participant's final Retirement Benefits under this Plan or,
if expressed as a dollar amount, would have to be subject to
the provision that such amount be not greater than 100% of
the Participant's Retirement Benefits determined as of the
date such benefits commence to be paid to the Participant.
Moreover, since for the foregoing reasons the amount of a
Participant's Retirement Benefits cannot be determined until
his benefit has commenced or his Normal Retirement Date,
whichever occurs first, an order purporting to direct
payment of benefits to an alternate payee prior to such date
could result in requiring benefits to be paid in excess of
the actuarial value of the Participant's Retirement Benefits
because the amount of the Participant's Retirement Benefits
may decrease until such date.
(d) In the case of any payment before a Participant
has had a Termination of Employment, a domestic relations
order shall not be treated as failing to meet the
requirements of Article 13.2(c)(1) solely because such order
requires that payment of benefits be made to an alternate
payee:
(1) on or after the date on which the
Participant attains (or would have attained) 60 years
of age.
(2) as if the Participant had retired on the
date on which such payment is to begin under such
order (but taking into account only the present value
of the benefits actually accrued and not taking into
account the present value of any employer subsidy for
early retirement), and
(3) in any form in which such benefits may be
paid under the Plan to the Participant (other than in
the form of a Qualified Joint and Survivor Annuity
with respect to the alternate payee and his or her
subsequent spouse).
(e) To the extent provided in any Qualified Domestic
Relations Order the former spouse of a Participant shall be
treated as the surviving spouse of such Participant for the
purposes of consenting to the Participant's waiver of a
Surviving Spouse's Pension or a Qualified Joint and Survivor
Annuity.
13.3 No Contract of Employment. Nothing contained in this
Plan shall be construed as a contract of employment between any
Employer and any Employee or as creating a right of any Employee
to be continued in the employment of any Employer.
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<PAGE>
13.4 Termination of Employment on Retirement. When an
Employee is retired, his employment relationship shall be
terminated, and his right to benefits shall be determined by the
terms of this Plan.
13.5 Limitation on Vesting. No person shall have any
vested right to benefits under this Plan until all of the
applicable requirements for such benefits set forth in Article IV
have been fulfilled, and then any such rights shall be subject to
the limitation of Article 6.5.
13.6 No Duplication of Benefit. No benefits shall be paid
to any person under more than one provision of this Plan for the
same period of time.
13.7 Temporary Limitations on Retirement Benefits Payable
to Highly Compensated Participants.
(a) For Plan Years beginning prior to January 1,
1994, any provision of the Plan to the contrary
notwithstanding, benefits and distributions under the Plan
shall be subject to the limitations imposed under this
section 13.7(a).
(1) If a Participant was among the 25 highest
paid employees of the employer on the latest of
(1) July 1, 1979, (2) the effective date of the
commencement of such employer's participation in the
Plan or (3) the date of the most recent amendment to
the Plan which substantially increased Retirement
Benefits (the latest of which shall hereafter be
referred to as the "Limitation Date") and if the
Participant's anticipated annual Retirement Benefits
from Employer Contributions exceed $1,500, except as
otherwise provided in subparagraphs (c), (d) and (e),
the Participant's Retirement Benefits shall be limited
as provided in subparagraph (b) if:
(i) the Plan is terminated within ten
years after the Limitation Date, or
(ii) the Retirement Benefits of a
Participant become payable within such ten-year
period.
If subparagraph (ii) above is applicable, the
restrictions shall remain in effect until the later of
the expiration of the ten-year period or the date on
which the full current costs have been funded.
(2) If a Participant is subject to the
provisions of this Section, the Retirement Benefits
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<PAGE>
payable to him shall not exceed the Retirement
Benefits which can be provided from the greatest of
the following:
(i) The Employer Contributions (or funds
attributable thereto) which would have been
applied to provide Retirement Benefits for the
Participant if the Plan had not been amended on
the Limitation Date and had continued without
change;
(ii) $20,000; or,
(iii) The sum of (A) the Employer
Contributions (or funds attributable thereto)
which would have been applied to provide
benefits for the Participant if the Plan had
been terminated on the day before the Limitation
Date (if applicable) and (B) an amount computed
by multiplying the number of years for which the
current costs of the Plan have been met after
the Limitation Date by 20% of the first $50,000
of the Participant's average annual compensation
during his last 5 years of employment;
provided, however, that the following limitations will
apply if they are greater than the applicable amounts
in Articles 13.7(b)(2) and 13.7(b)(3):
(i) in the case of a Participant who is a
substantial owner described in ERISA Section
4022(b)(5), the present value of the benefit
guaranteed for such Participant under ERISA
Section 4022, if the Plan has terminated, or the
present value of the benefit that would be
guaranteed, if the Plan terminates on the date
the benefit commences, determined in accordance
with regulations of the PBGC; or
(ii) in the case of a Participant subject to
Article 13.7(a) who is not a substantial owner
described in ERISA Section 4022(b)(5), the
present value of the maximum benefit described
in ERISA Section 4022(b)(3)(B) (determined on
the date the Plan terminates or on the date
benefits commence, whichever is earlier, and
determined in accordance with regulations of the
PBGC without regard to any other limitations in
ERISA Section 4022).
(3) The limitations described above may be
exceeded for the purpose of making current payments of
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<PAGE>
Retirement Benefits to retired Participants who would
otherwise be subject to such restrictions, provided
that:
(i) The contributions which may be used
for any such retired Participant in accordance
with the restrictions heretofore indicated are
applied to provide either a level amount of
pension in an optional form of benefit not
greater in amount than the level amount of
pension under the basic form of benefit,
(ii) the pension thus provided is
supplemented by monthly payments to the extent
necessary to provide the full pension in the
basic form called for by the Plan, and
(iii) such supplemental payments are made
only if (A) the full current costs of the Plan
have been met or (B) the aggregate of such
supplemental payments for all such retired
Participants does not exceed the aggregate
Employer Contributions already made under the
Plan in the year then current.
(4) The limitations in this Article shall
automatically become inoperative and of no effect upon
a ruling by the Internal Revenue Service that they are
not required.
(5) If regulations are issued modifying the
limitations described in this Article, the Plan shall
be amended in a timely fashion to incorporate such
modified regulations; and prior to such amendment, the
Plan shall be administered in accordance with the
modified regulations.
(b) For Plan Years beginning on or after January 1,
1994 any provision of the Plan to the contrary
notwithstanding, benefits and distributions under the Plan
shall be subject to the limitations imposed under this
Section 13.7(b).
(1) Definitions. The following special
definitions apply under this Section 13.7(b):
(i) "Benefit Payments," for purposes of
Section 13.7(b)(2) and (3), include loans
in excess of the amounts set forth in
Section 72(p)(2)(A) of the Internal
Revenue Code, any periodic income, any
withdrawal values payable to a living
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<PAGE>
Employee or former Employee, and death
benefits not provided for by insurance on
the Employee's or former Employee's life.
(ii) "Highly Compensated Participant"
means an Employee or a former Employee who
is one of the 25 Highly Compensated
Employees with the greatest Compensation
in the current or any prior Plan Year.
(2) Restriction on Benefits of Highly
Compensated Employees Upon Plan Termination. In the
event that the Plan is terminated, the Benefit
Payments to any Participant who is a Highly
Compensated Employee shall be limited to Benefit
Payments that are nondiscriminatory under Section
401(a)(4) of the Internal Revenue Code.
(3) Restrictions on Distributions to Highly
Compensated Participants. The annual payments to a
Highly Compensated Participant shall not exceed an
amount equal to the payments that would be made on
behalf of the Highly Compensated Participant under a
single life annuity that is the Actuarial Equivalent
of the sum of the Highly Compensated Participant's
Accrued Benefit and the Highly Compensated
Participant's other benefits under the Plan. The
limitation imposed under this Section 13.7(b)(3) shall
not apply, however, if
(i) after payment to a Highly
Compensated Participant of all Benefit Payments,
the value of Plan assets equals or exceeds 110
percent of the value of current liabilities (as
defined in Section 412(1)(7) of the Internal
Revenue Code),
(ii) the value of the Benefit Payments
for a Highly Compensated Participant is less
than 1 percent of the value of current
liabilities (as defined in Section 412(1)(7) of
the Internal Revenue Code) before distribution,
or
(iii) the present value of the Highly
Compensated Participant's vested Accrued Benefit
does not exceed $3,500 and is distributed
without the consent of the Participant or his
spouse in accordance with Section 13.10.
13.8 Maximum Pensions. Any provisions of the Plan to the
contrary notwithstanding, a Participant's Retirement Benefits,
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<PAGE>
when expressed as a yearly pension, shall not exceed the
Participant's Maximum Annual Benefit. For purposes of this
Section 13.8, Maximum Annual Benefit shall mean the lesser of
$90,000 (for 1984) or 100% of the Participant's average annual
Compensation for the Participant's highest three consecutive
calendar years reduced by the annual pension, if any, payable to
the Participant under any other defined benefit plan maintained
by the Employer (or any Commonly Controlled Entity) to the extent
attributable to contributions by the Employer (or any Commonly
Controlled Entity), subject to the following:
(a) If the form of Retirement Benefits payable to a
Participant is other than a Straight Life Annuity, and if
the contingent annuitant is not the Participant's spouse,
the Participant's Annual Retirement Benefits shall not
exceed the Actuarial Equivalent of the Maximum Annual
Benefit.
(b) If at the time Retirement Benefits commence the
Participant has not attained the social security retirement
age, the Maximum Annual Benefit shall be reduced to the
Actuarial Equivalent of the Maximum Annual Benefit
commencing at the social security retirement age.
(c) If the Participant has fewer than ten years of
participation in the Plan at retirement, the Maximum Annual
Benefit shall be multiplied by a fraction, of which the
numerator is his years of participation in the Plan and the
denominator is 10.
(d) If the Participant's Retirement Benefits begin
after the social security retirement age, the Maximum Annual
Benefit shall be increased so that it is the Actuarial
Equivalent of the Maximum Annual Benefit at the social
security retirement age.
(e) The $90,000 (for 1984) component of the Maximum
Annual Benefit shall be increased as permitted by applicable
governmental regulations and rulings to reflect
cost-of-living adjustments.
(f) The term, "social security retirement age" as
used in Article 13.8 means the age used as the retirement
age under section 216(l) of the Social Security Act applied
without regard to the age increase factor and as if the
early retirement age under section 216(l)(2) of such Act
were 62.
(g) Notwithstanding the foregoing provisions of
Article 13.8, if a Participant was a Participant before
January 1, 1983 and if such Participant's Accrued Benefit as
of the last day of the preceding Plan Year under the Plan
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<PAGE>
exceeds the limitation stated in the first paragraph of
Article 13.8, then the limitation under Article 13.8 with
respect to such Participant shall be equal to the
Participant's Accrued Benefit as of the last day of the
preceding Plan Year.
(h) If a Participant is also a participant in any
defined contribution plan of the Employer (or any Commonly
Controlled Entity), and if the sum of the Participant's
Defined Benefit Plan Fraction (as defined in Article
13.8(f)(1)) and the Participant's Defined Contribution Plan
Fraction (as defined in Article 13.8(f)(2)) exceeds 1.0
(such sum called the "Combination Fraction"), the
Participant's Maximum Annual Benefit shall be reduced to the
extent necessary to reduce such sum to 1.0.
(1) The "Defined Benefit Plan Fraction"
applicable to a Participant for any Plan Year is a
fraction, the numerator of which is the sum of the
Projected Annual Benefit of the Participant (as
defined in Section 12.2(g)) under all of the Related
Defined Benefit Plans in which he participates
(determined as of the close of the Plan Year) and the
denominator of which is the lesser of (i) the product
of 1.25 multiplied by the maximum dollar limitation on
a Participant's Projected Annual Benefit if the Plan
provided the maximum benefit allowable under Section
415(b) of the Code for such Plan Year, or (ii) the
product of 1.4 multiplied by 100% of the Participant's
Highest Average Compensation.
Notwithstanding the above, if the Participant
was a participant in one or more defined benefit plans
maintained by the Employer which were in existence on
July 1, 1982, the denominator of this fraction will
not be less than 1.25 multiplied by the sum of the
annual benefits under such plans which the Participant
had accrued as of December 31, 1982. The preceding
sentence applies only if the defined benefit plans
individually and in the aggregate satisfied the
requirements of Section 415 as in effect at the end of
the 1982 limitation year.
(2) The "Defined Contribution Plan Fraction"
applicable to a Participant for any Plan Year is a
fraction, the numerator of which is the sum of the
Participant's annual additions as of the close of such
Plan Year for that Plan Year and for all prior Plan
years under all of the Related Plans (as defined in
Section 12.2(g)) in which he participates, and the
denominator of which is the sum of the lesser of the
following amounts (determined for such Plan Year and
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<PAGE>
for each prior Plan Year of service with the Employer
or any Commonly Controlled Entity regardless of
whether a plan was in existence during those years):
(i) the product of 1.25 multiplied by the dollar
limitation in effect under Code Section 415(c)(1)(A)
for the Plan Year (determined without regard to the
special dollar limitation for employee stock ownership
plans), or (ii) the product of 1.4 multiplied by
twenty-five percent of the Participant's Compensation
for the Plan Year. An amount shall be subtracted from
the numerator of the Defined Contribution Plan
Fraction (such amount not to exceed such numerator),
consistent with regulations prescribed by the
Secretary of the Treasury, so that the sum of the
Defined Benefit Plan Fraction and the Defined
Contribution Plan Fraction does not exceed 1.0 for the
last Plan Year of the Plan beginning before January 1,
1983.
(i) Definitions
(1) "Highest Average Compensation" means the
average of a Participant's highest compensation for
three consecutive Plan Years (determined as of the
close of the Plan Year) of employment with the
employer (or the actual number of years of employment
for those Participants who are employed for less than
three consecutive years with the employer).
(2) "Projected Annual Benefit" means the
annual benefit a Participant would receive from
employer contributions under a defined benefit plan,
adjusted, in the case of any benefit payable in a form
other than a single life annuity or a qualified joint
and survivor annuity, to the actuarial equivalent of a
single life annuity, assuming (i) the Participant
continued employment until reaching the plan's Normal
Retirement Date (or his current age, if later),
(ii) his compensation remained unchanged and (iii) all
other relevant factors used to determine benefits
under the plan remained constant in the future.
13.9 Limitation on Liability. No Employer nor any agent or
representative of any Employer who is an employee, officer or
director of an Employer in any manner guarantees the Trust Fund
against loss or depreciation, and to the extent not prohibited by
federal law, none of them shall be liable (except for his own
gross negligence or willful misconduct) for any act or failure to
act done or omitted in good faith with respect to the Plan. No
Employer shall be responsible for any act or failure to act of
any Trustee appointed to administer the Trust Fund.
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<PAGE>
13.10 Small Pensions. If the lump sum Actuarial Equivalent
of the monthly amount of benefits payable hereunder to any
Pensioner or surviving spouse is not greater than $3,500, the
Committee may in its discretion direct that such benefits be paid
in the form of a lump sum notwithstanding any provisions of the
Plan to the contrary.
13.11 Company Merger. In the event that any successor
corporation to the Company, by merger, consolidation, purchase or
otherwise, shall elect to adopt the Plan, such successor
corporation shall be substituted hereunder for the Company upon
filing in writing with the Trustee its election so to do.
13.12 Plan Merger. The Plan shall not merge or consolidate
with, or transfer any assets or liabilities to any other plan,
unless each Participant would receive a benefit immediately after
the merger, consolidation or transfer (if the Plan were then
terminated) which is equal to or greater than the benefit he
would have been entitled to immediately before the merger,
consolidation or transfer (if the Plan were terminated).
13.13 Invalidity of Certain Provisions. If any provision of
this Plan shall be held invalid or unenforceable, such invalidity
or unenforceability shall not affect any other provisions hereof
and the Plan shall be construed and enforced as if such
provisions, to the extent invalid or unenforceable, had not been
included.
13.14 Headings. The headings of articles are included
solely for convenience of reference, and if there is any conflict
between such headings and the text of this Plan, the text shall
control.
13.15 Uniform and Non-Discriminatory Treatment. Any
discretion exercisable hereunder by the Company, an Employer, or
the Committee shall be exercised in a uniform and
nondiscriminatory manner.
CHICAGO AND NORTH WESTERN
RAILWAY COMPANY
By /s/ R. F. Ard
Vice President
ATTEST
Corporate Seal)
/s/ Robin Bourne-Caris
Secretary
Date December 30, 1994
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<PAGE>
APPENDIX I
For purposes of determining the Actuarial Equivalent under
Article 2.2 of the Plan, the mortality basis and interest rate
used shall be the following:
(a) Mortality Basis: The mortality Table used shall be
the UP-1984 Table without adjustment.
(b) Interest Rate: The interest rate used shall be
determined in accordance with (i), (ii), or (iii)
below:
(i) For purposes of determining the Actuarial
Equivalent under Article 2.1(c), 2.1(d), 2.1(e)
or 4.5 during a calendar year, the interest rate
used shall be the sum of the November 30 yield
to maturity for the Lehman Brothers Kuhn Loeb,
Long Term Government Agency Bond Index
(hereinafter called the "index") for the three
preceding calendar years divided by three with
the results rounded to the nearest quarter of a
percent. In the event that the index is not in
existence as of November 30 of any calendar
year, the November 30 twenty-year yield series
for the Treasury Constant Maturity Yield Series
shall be substituted for the index for all years
used in the determination of the interest rate
under this subparagraph (i). If neither such
index is or was in existence for a sufficient
period of time to permit a determination of the
above described three preceding calendar year
average rate of interest, such average rate of
interest shall be based upon the United States
Long Term Treasury Bonds with more than a 10
year maturity. For the purposes of determining
Actuarial Equivalent under Article 4.5, the
interest rate shall be determined and applied as
of the date on which a person receives or
commences to receive benefits under an Other
Plan, as defined in Article 4.5.
(ii) For purposes of determining the lump sum
Actuarial Equivalent under Article 13.10, the
interest rate used shall be the interest rate
which would be used (as of the date of
distribution) by the Pension Benefit Guaranty
Corporation for purposes of determining the
present value of a lump sum distribution on plan
termination.
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<PAGE>
(iii) Except as otherwise provided in Article XII and
Section 13.8, for all other Plan purposes, the
interest rate shall be 8%.
Notwithstanding the above provisions, for purposes of determining
the benefit payable under Article 4.2 upon Termination of
Employment, the Actuarial Equivalent shall be the Accrued Benefit
reduced by l/2 of l% for each full month that the benefit
commencement date precedes Normal Retirement Date.
For purposes of determining the benefit payable under
Article 4.9, the Actuarial Equivalent shall be the Accrued
Benefit reduced by 1/2 of 1% for each full month that the
+benefit commencement date precedes Normal Retirement Date to the
first full month after the Member attains age 55 and further
reduced for each full month that the benefit commencement date
precedes the first full month after the Member attains age 55
using the mortality assumptions specified in Part (a) above and
the interest rate assumptions specified in Part(b)(ii) above.
For purposes of determining the benefit payable under
Article 4.9, the Actuarial Equivalent shall be the Accrued
Benefit reduced by 1/2 of 1% for each full month that the benefit
commencement date precedes Normal Retirement Date to the first
full month after the Member attains age 55 and further reduced
for each full month that the benefit commencement date precedes
the first full month after which the Member attains age 55 using
the mortality assumptions specified in Part (a) above and the
interest rate assumptions specified in Part(b)(iii) above.
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CHICAGO AND NORTH WESTERN RAILWAY COMPANY
PROFIT SHARING AND RETIREMENT SAVINGS PROGRAM
(called
CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY
PROFIT SHARING AND RETIREMENT SAVINGS PROGRAM
until May 5, 1994)
As Amended and Restated
Effective January 1, 1989
<PAGE>
CHICAGO AND NORTH WESTERN RAILWAY COMPANY
PROFIT SHARING AND RETIREMENT SAVINGS PROGRAM
As Amended and Restated Effective January 1, 1989
(called
CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY
PROFIT SHARING AND RETIREMENT SAVINGS PROGRAM
until May 5, 1994)
INDEX
Page
Section 1. Establishment and Name . . . . . . . . . . . . . 1
1.1 Establishment and Name of the Plan . . . . . . . 1
Section 2. Definitions . . . . . . . . . . . . . . . . . . . 2
2.1 "Accounting Date" . . . . . . . . . . . . . . . . 2
2.2 "Actuarial Equivalent" . . . . . . . . . . . . . 2
2.3 "Affiliated Service Group" . . . . . . . . . . . 2
2.4 "Authorized Leave of Absence" . . . . . . . . . . 3
2.5 "Beneficiary" . . . . . . . . . . . . . . . . . . 4
2.6 "Board of Directors" . . . . . . . . . . . . . . 4
2.7 "Break In Service" . . . . . . . . . . . . . . . 4
2.8 "Code" . . . . . . . . . . . . . . . . . . . . . 4
2.9 "Committee" . . . . . . . . . . . . . . . . . . . 4
2.10 "Commonly Controlled Entity" . . . . . . . . . . 4
2.11 "Company" . . . . . . . . . . . . . . . . . . . . 4
2.12 "Company Contribution Base" . . . . . . . . . . . 5
2.13 "Credited Service" . . . . . . . . . . . . . . . 5
2.14 "Disability" . . . . . . . . . . . . . . . . . . 5
2.15 "Effective Date" . . . . . . . . . . . . . . . . 5
2.16 "Eligibility Computation Period" . . . . . . . . 5
2.17 "Employee" . . . . . . . . . . . . . . . . . . . 5
2.18 "Employee Elected Matched Contribution Account" . 6
2.19 "Employee Elected Unmatched Contribution
Account" . . . . . . . . . . . . . . . . . . . . 6
2.20 "Employee Matched Contribution Account" . . . . . 6
2.21 "Employee Unmatched Contribution Account" . . . . 6
2.22 "Employer" . . . . . . . . . . . . . . . . . . . 7
2.23 "Employer Contribution" . . . . . . . . . . . . . 7
2.24 "Employer Contribution General Account" . . . . . 7
2.25 "Employer Matching Contribution Account" . . . . 7
2.26 "Family Member" . . . . . . . . . . . . . . . . . 7
2.27 "Five-Percent Owner" . . . . . . . . . . . . . . 7
2.28 "Former Participant" . . . . . . . . . . . . . . 7
2.29 "Hardship" . . . . . . . . . . . . . . . . . . . 7
2.30 "Highly Compensated Employee" . . . . . . . . . . 8
2.31 "Hour of Service" . . . . . . . . . . . . . . . . 9
2.32 "Inactive Participant" . . . . . . . . . . . . . 10
2.33 "Investment Committee" . . . . . . . . . . . . . 10
-i-
<PAGE>
INDEX
(continued)
Page
2.34 "Member" . . . . . . . . . . . . . . . . . . . . 11
2.35 "Member's Net Balance Account" . . . . . . . . . 11
2.36 "Non-highly Compensated Employee" . . . . . . . . 11
2.37 "Normal Retirement Age" . . . . . . . . . . . . . 11
2.38 "OAI Rate" . . . . . . . . . . . . . . . . . . . 11
2.39 "Parental Leave" . . . . . . . . . . . . . . . . 12
2.40 "Participant" . . . . . . . . . . . . . . . . . . 12
2.41 "Pay" . . . . . . . . . . . . . . . . . . . . . . 12
2.42 "Plan Year" . . . . . . . . . . . . . . . . . . . 14
2.43 "Post-1986 Employee Matched Contribution
Account" . . . . . . . . . . . . . . . . . . . . 14
2.44 "Post-1986 Employee Unmatched Contribution
Account" . . . . . . . . . . . . . . . . . . . . 14
2.45 "Qualified Domestic Relations Order" . . . . . . 14
2.46 "Qualified Joint and Survivor Pension" . . . . . 14
2.47 "Railroad Retirement Excess Pay" . . . . . . . . 14
2.48 "Railroad Retirement Taxable Wage Base" . . . . . 14
2.49 "Related Plan" . . . . . . . . . . . . . . . . . 15
2.50 "Remainder" . . . . . . . . . . . . . . . . . . . 15
2.51 "Required Beginning Date" . . . . . . . . . . . . 15
2.52 "Social Security Excess Pay" . . . . . . . . . . 16
2.53 "Social Security Taxable Wage Base" . . . . . . . 16
2.54 "Surviving Spouse's Pension" . . . . . . . . . . 16
2.55 "Termination of Employment" . . . . . . . . . . . 16
2.56 "Top Paid Group" . . . . . . . . . . . . . . . . 16
2.57 "Trust" . . . . . . . . . . . . . . . . . . . . . 17
2.58 "Trustee" . . . . . . . . . . . . . . . . . . . . 17
2.59 "Trust Fund" . . . . . . . . . . . . . . . . . . 18
2.60 "Valuation Date" . . . . . . . . . . . . . . . . 18
2.61 "Vesting Service" . . . . . . . . . . . . . . . . 18
2.62 "Year of Eligibility Service" . . . . . . . . . . 18
2.63 "Year of Vesting Service" . . . . . . . . . . . . 18
Section 3. Eligibility and Participation . . . . . . . . . . 20
3.1 Eligibility and Participation . . . . . . . . . . 20
3.2 Eligibility and Participation by Employees of
Employers Other Than The Company . . . . . . . . 20
3.3 Military Service . . . . . . . . . . . . . . . . 20
Section 4. Employee Elected Contributions
and Employer Contributions . . . . . . . 21
4.1 Participants' Elections and Contributions . . . . 21
4.2 Employer Contributions and Allocations . . . . . 25
4.3 Employer Special Section 401(k) Contributions . . 29
4.4 Deadline for Employer Special Section 401(k)
Contributions . . . . . . . . . . . . . . . . . . 29
-ii-
<PAGE>
INDEX
(continued)
Page
4.5 Restrictions on Employee Elected Contributions,
Post-1986 Employee Contributions and Employer
Matching Profit Sharing Contributions . . . . . . 29
4.6 Multiple Use of Alternative Limitations . . . . . 33
4.7 Allocation of Income . . . . . . . . . . . . . . 34
4.8 Limitations on Contributions . . . . . . . . . . 35
4.9 Deadline for Contributions . . . . . . . . . . . 40
4.10 Order of Application of the Limitations of
Subsections 4.1(c), 4.5(b), 4.5(d), 4.6 and 4.8 . 40
Section 5. Benefits . . . . . . . . . . . . . . . . . . . . 41
5.1 Payment of Benefits in General . . . . . . . . . 41
5.2 Payment of the Vested Portion of the Member's
Net Balance Account on Termination of Employment 41
5.3 Payment of Vested Member's Net Balance Account
on Death . . . . . . . . . . . . . . . . . . . . 45
5.4 Withdrawals . . . . . . . . . . . . . . . . . . . 49
5.5 Payment of Life Annuities . . . . . . . . . . . . 52
5.6 Qualified Joint and Survivor Pension and
Surviving Spouse's Pension . . . . . . . . . . . 52
5.7 Spousal Consent to Waiver of Life Annuity or to
the Naming of Another Beneficiary . . . . . . . . 53
5.8 Lump Sum Payment without Election . . . . . . . . 54
5.9 Vested Interests . . . . . . . . . . . . . . . . 54
5.10 Incompetency . . . . . . . . . . . . . . . . . . 56
5.11 Deduction of Taxes from Amounts Payable . . . . . 56
5.12 Deadline for Payment of Benefits . . . . . . . . 57
5.13 Application for Distribution . . . . . . . . . . 57
5.14 Deferred Payments . . . . . . . . . . . . . . . . 58
5.15 Unclaimed Amounts . . . . . . . . . . . . . . . . 58
5.16 Eligible Rollover Distributions . . . . . . . . . 58
Section 6. Investment Funds, Accounts and Trust . . . . . . 60
6.1 Investment Funds . . . . . . . . . . . . . . . . 60
6.2 Investment Directions . . . . . . . . . . . . . . 60
6.3 Transfers Among Investment Funds . . . . . . . . 61
6.4 Investment Income to be Accumulated . . . . . . . 62
6.5 Accounts and Records . . . . . . . . . . . . . . 62
6.6 Adjustments to Reflect Net Worth of the Trust
Fund . . . . . . . . . . . . . . . . . . . . . . 63
6.7 Trust . . . . . . . . . . . . . . . . . . . . . . 65
Section 7. Top Heavy Provisions . . . . . . . . . . . . . . 66
7.1 Application . . . . . . . . . . . . . . . . . . . 66
7.2 Special Top Heavy Definitions . . . . . . . . . . 66
7.3 Special Top Heavy Provisions . . . . . . . . . . 74
-iii-
<PAGE>
INDEX
(continued)
Page
Section 8. Administration . . . . . . . . . . . . . . . . . 78
8.1 Committee . . . . . . . . . . . . . . . . . . . . 78
8.2 Administration . . . . . . . . . . . . . . . . . 78
8.3 Initial Claim for Benefits . . . . . . . . . . . 79
8.4 Review of Claim Denial . . . . . . . . . . . . . 79
8.5 Fiduciary Responsibility . . . . . . . . . . . . 80
8.6 Fiduciary as Member . . . . . . . . . . . . . . . 80
Section 9. Subsidiary or Affiliated Corporations . . . . . . 81
9.1 Subsidiary or Affiliated Corporations . . . . . . 81
Section 10. Amendment and Termination . . . . . . . . . . . . 82
10.1 Amendment and Termination . . . . . . . . . . . . 82
10.2 Termination of the Plan . . . . . . . . . . . . . 82
Section 11. Mergers . . . . . . . . . . . . . . . . . . . . . 84
11.1 Mergers . . . . . . . . . . . . . . . . . . . . . 84
Section 12. Miscellaneous . . . . . . . . . . . . . . . . . . 85
12.1 Nonalienation of Benefits . . . . . . . . . . . . 85
12.2 Qualified Domestic Relations Order . . . . . . . 85
12.3 Maximum Age Condition . . . . . . . . . . . . . . 87
12.4 Litigation . . . . . . . . . . . . . . . . . . . 88
12.5 Rights Against Employer . . . . . . . . . . . . . 88
12.6 Illegality of Particular Provision . . . . . . . 88
12.7 Effect of Mistake . . . . . . . . . . . . . . . . 88
12.8 Indemnification . . . . . . . . . . . . . . . . . 88
12.9 Applicable Laws . . . . . . . . . . . . . . . . . 89
12.10 Gender and Number . . . . . . . . . . . . . . . . 89
-iv-
<PAGE>
CHICAGO AND NORTH WESTERN RAILWAY COMPANY
PROFIT SHARING AND RETIREMENT SAVINGS PROGRAM
(called the
CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY
PROFIT SHARING AND RETIREMENT SAVINGS PROGRAM
until May 5, 1994)
Section 1. Establishment and Name
1.1 Establishment and Name of the Plan. Chicago and North
Western Transportation Company Profit Sharing and Retirement
Savings Program and the CNW Corporation Profit Sharing and
Retirement Savings Program were amended and restated as the
Chicago and North Western Transportation Company Profit Sharing
and Retirement Savings Program (hereinafter referred to as the
"Plan") effective January 1, 1989. The Plan, as amended and
restated effective January 1, 1989, is hereby reamended and
restated effective January 1, 1989 to incorporate into one
document the revisions complying with the Tax Reform Act of 1986
and subsequent legislation and regulations implementing the
foregoing. Except as otherwise specifically stated herein, the
provisions of the Chicago and North Western Transportation
Company Profit Sharing and Retirement Savings Program, as amended
and restated herein, shall apply to persons who are employees of
an Employer and who are credited with One Hour of Service on or
after January 1, 1989. Eligibility, benefits, payment of
benefits and the amount of benefits, if any, of a person whose
employment with an Employer terminated before January 1, 1989,
and who is not rehired by an Employer on or after January 1,
1989, shall, except as otherwise specifically provided herein, be
determined in accordance with the provisions of Chicago and North
Western Transportation Company Profit Sharing and Retirement
Savings Program or CNW Corporation Profit Sharing and Retirement
Savings Program, as applicable, as in effect on the date of the
Employee's Termination of Employment. Effective May 6, 1994 the
Plan shall be called the Chicago and North Western Railway
Company Profit Sharing and Retirement Savings Program.
<PAGE>
Section 2. Definitions
Whenever used in the Plan, the following terms shall have
the respective meanings set forth below unless otherwise
expressly provided herein, and when the defined meaning is
intended, the term is capitalized:
2.1 "Accounting Date" means the last day of each Plan
Year.
2.2 "Actuarial Equivalent" means a benefit having the same
value as the vested Member's Net Balance Account or the portion
thereof which it replaces, as determined by or with the advice of
the actuary of the Chicago and North Western Railway Company
Supplemental Pension Plan (called the Chicago and North Western
Transportation Company Supplemental Pension Plan through May 5,
1994) using generally accepted actuarial methods and the
assumptions as provided in Appendix I. Actuarial Equivalent is
used to convert a Member's Net Balance Account into an equivalent
in an annuity form which will be paid from the Chicago and North
Western Railway Company Supplemental Pension Plan (called the
Chicago and North Western Transportation Company Supplemental
Pension Plan through May 5, 1994) at the time the vested Member's
Net Balance Account or portion thereof is transferred thereto to
provide for the payment of the life annuity form of benefit as
provided in subsection 5.5.
2.3 "Affiliated Service Group" means one or more of the
following groups if it includes an Employer:
(a) a group which consists of an organization the
principal business of which is the performance of services
("first service organization") and one or more of the
organizations described in (1) or (2):
(1) any other organization the principal
business of which is the performance of services which
(A) is a shareholder or partner in the
first service organization (as determined in
accordance with applicable Treasury
Regulations); and
(B) regularly performs services for the
first service organization or is regularly
associated with the first service organization
in performing services for third persons, or
(2) any other organization if
(A) a significant portion of the
business of such organization is the performance
-2-
<PAGE>
of services for the first service organization
or for one or more organizations identified in
subsection 2.3(a)(1), or for both and the
services are of a type historically performed in
the service field of the first service
organization or an organization identified in
subsection 2.3(a)(1) by employees, and
(B) 10 percent or more of the interests
in such organization is held by persons who are
highly compensated employees (within the meaning
of section 414(q)) of the first service
organization or an organization described in
subsection 2.3(a)(1); or
(b) a group which consists of
(1) an organization;
(2) all organizations aggregated in accordance
with Code Sections 414(b), 414(c), 414(m) and 414(o)
with the organization identified in subsection
2.3(b)(1) the principal business of which is to
perform on a regular and continuing basis management
functions for an organization identified in subsection
2.3(b)(3), 2.3(b)(4) or 2.3(b)(5);
(3) an organization for which management
functions are performed;
(4) all organizations aggregated in accordance
with Code Sections 414(b), 414(c), 414(m) or 414(o)
with the organization identified in subsection
2.3(b)(3); and
(5) all organizations ("first organizations")
related to any organization identified in subsection
2.3(b)(3) or 2.3(b)(4) if the organization identified
in subsection 2.3(b)(3) or 2.3(b)(4) and the first
organizations would be related persons pursuant to
Code Section 144(a)(3) and the organization identified
in subsection 2.3(b)(3) or 2.3(b)(4) performs
management functions for the first organizations.
2.4 "Authorized Leave of Absence" means any absence
authorized by an Employer under the Employer's standard personnel
practices. An absence due to service in the Armed Forces of the
United States shall be considered an Authorized Leave of Absence
provided that the Employee returns to employment with the
Employer with reemployment rights provided by law.
-3-
<PAGE>
2.5 "Beneficiary" means the person or persons designated
by a Participant or the Plan, as applicable, in accordance with
the provisions of subsection 5.1, 5.2 or 5.3 to receive any
benefits which shall be distributable under the Plan on account
of the Participant's death.
2.6 "Board of Directors" means the board of directors of
the Company.
2.7 "Break In Service" means a twelve consecutive month
period during which a person has less than 500 Hours of Service
and a Termination of Employment. For the purpose of determining
Credited Service before completion of a Year of Eligibility
Service, such twelve consecutive month period shall be the
Eligibility Computation Period. For all other purposes, such
twelve consecutive month period shall be the Plan Year.
Notwithstanding the foregoing, for the purpose of determining
Vesting Service for Plan Years commencing before January 1, 1987,
each Plan Year in which the Member was not performing services
for an Employer, Commonly Controlled Entity or member of an
Affiliated Service Group on the last day of the Plan Year shall
be a Break In Service.
2.8 "Code" means the Internal Revenue Code of 1986 as now
in effect or hereafter amended. References to any section of the
Code shall be deemed to include similar sections of the Code as
renumbered or amended.
2.9 "Committee" means the individuals serving under the
Plan from time to time pursuant to appointment by the Board of
Directors of the Company in accordance with the provisions of the
Plan, which Committee shall be responsible for the general
administration of the Plan as set forth in the provisions of the
Plan.
2.10 "Commonly Controlled Entity" means a corporation,
trade or business if it and an Employer are members of a
controlled group of corporations as defined in Section 414(b) of
the Code, under common control as defined in Section 414(c) of
the Code or required to be aggregated with an Employer under
Section 414(o) of the Code; provided, however, that solely for
purposes of subsection 4.8 and of subsection 2.49 when used in
subsection 4.8, the standard of control under Sections 414(b) and
414(c) of the Code shall be deemed to be "more than 50%" rather
than "at least 80%."
2.11 "Company" means Chicago and North Western Railway
Company, a Delaware corporation, called the Chicago and North
Western Transportation Company, through May 5, 1994, or any
successor thereto that adopts the Plan.
-4-
<PAGE>
2.12 "Company Contribution Base" means consolidated net
income of the Company before Employer contributions under the
Plan, expenses of the incentive compensation plan for executives
or management, and income taxes, payable and deferred, excluding
prior period and extraordinary items and unusual or infrequent
items as determined by the Company in accordance with generally
accepted accounting principles and as reported on the Company's
financial statements to its stockholders and excluding or
including such items as the Board of Directors of the Company on
or before the date the contribution is made, may designate to be
other items which do not reflect ordinary, normal and recurring
items of the Company during the Plan Year; provided, however, if
the Board of Directors of the Company fails to make such
designation before the date the contribution is made, then such
items shall not be excluded or included.
2.13 "Credited Service" means all Years of Eligibility
Service; provided that, in the event a person has a Break In
Service his Years of Eligibility Service prior to the Break In
Service will not be credited until such person has completed a
Year of Eligibility Service after the Break In Service.
2.14 "Disability" means a physical or mental incapacity
resulting from personal injury or sickness which, in the opinion
of the Committee, prevents a Participant or an Inactive
Participant from performing the duties assigned to him by the
Employer, will be permanent or of long and continued duration,
and causes the Participant's or Inactive Participant's employment
with Employer to terminate.
2.15 "Effective Date" means January 1, 1989.
2.16 "Eligibility Computation Period" means a twelve
consecutive month period beginning on the date on which a person
performs his first Hour of Service for the Employer, any Commonly
Controlled Entity or Affiliated Service Group provided, however,
that if a person has a Break In Service, the Eligibility
Computation Period shall be a twelve consecutive month period
beginning on the date a person performs his first Hour of Service
after such Break In Service.
2.17 "Employee" means any employee of Employer -
(i) whose rate of pay is not negotiated under a
collective bargaining agreement, or
(ii) whose fringe benefits are not negotiated under a
collective bargaining agreement;
excluding non-resident aliens employed by Employer and rendering
service to an Employer outside of the United States. An employee
who is receiving benefits under or who is placed on Employer's
-5-
<PAGE>
long-term disability plan on or after January 1, 1984 shall not
be treated as an Employee until he returns as a full time
employee. A person who is a "leased employee" of an Employer, as
determined under Code Section 414(n)(2), shall not be an
Employee.
2.18 "Employee Elected Matched Contribution Account" means
that portion of the Member's Net Balance Account which evidences
the value of a Participant's Employee Elected Matched
Contributions, which are contributions elected by the Participant
in accordance with the provisions of subsection 4.1(a)(1) to be
made on the Employee's behalf by the Employer pursuant to the
Employee's election to have his compensation reduced and Code
Section 401(k) salary reduction contributions which were matched
under the CNW Corporation Profit Sharing and Retirement Savings
Plan before January 1, 1989 (and which shall be separately
accounted for), and which are matched by Employer Contributions
under the provisions of subsections 4.2(b)(1) and 4.2(b)(3),
including increases to (or decreases in) the net worth of the
Trust Fund attributable thereto.
2.19 "Employee Elected Unmatched Contribution Account"
means that portion of a Member's Net Balance Account which
evidences the value of a Participant's Employee Elected Unmatched
Contributions, which are contributions elected by the Participant
in accordance with the provisions of subsection 4.1(a)(2) to be
made on the Employee's behalf by the Employer pursuant to the
Employee's election to have his compensation reduced and which
are not matched by Employer contributions and Code Section 401(k)
salary reduction contributions which were made under the CNW
Corporation Profit Sharing and Retirement Savings Plan before
January 1, 1989 (and which shall be separately accounted for),
including increases to (or decreases in) the net worth of the
Trust Fund attributable thereto.
2.20 "Employee Matched Contribution Account" means that
portion of the Member's Net Balance Account which evidences the
value of a Participant's own contributions which were permitted
under the Plan before January 1, 1983 and which were matched by
Employer Contributions under the Plan before January 1, 1983,
including increases to (or decreases in) the net worth of the
Trust Fund attributable thereto.
2.21 "Employee Unmatched Contribution Account" means that
portion of the Member's Net Balance Account which evidences the
value of a Participant's own contributions which were permitted
under the Plan or the CNW Corporation Profit Sharing and
Retirement Savings Program before January 1, 1987 and which were
not matched by Employer Contributions, including increases to (or
decreases in) the net worth of the Trust Fund attributable
thereto.
-6-
<PAGE>
2.22 "Employer" means the Company and any Commonly
Controlled Entity which pursuant to Section 9 elects to adopt the
Plan and the Trust.
2.23 "Employer Contribution" means contributions to the
Plan by Employers pursuant to subsection 4.2(a) or 4.3.
2.24 "Employer Contribution General Account" means all the
Member's Employer Contributions allocated to Participant's
accounts pursuant to subsections 4.2(b) under the Plan or under
the CNW Corporation Profit Sharing and Retirement Savings Program
(excluding Employer Matching Contributions allocated to the
Participant's accounts pursuant to subsections 4.2(b)(1) and
4.2(b)(3) or 4.3 for Plan Years beginning after December 31,
1982, Employee Elected Matched Contributions and Employee Elected
Unmatched Contributions) and increases or decreases in the net
worth of the Trust Fund attributable thereto.
2.25 "Employer Matching Contribution Account" means the
portion of the Member's Net Balance Account which evidences the
value of his Employer Contributions (excluding Employee Elected
Matched Contributions and Employee Elected Unmatched
Contributions) and Remainders which have been credited to the
Member's Net Balance Account under the Plan pursuant to
subsections 4.2(b)(1), 4.2(b)(3) and 4.3 for Plan Years beginning
after December 31, 1982 and increases or decreases in the net
worth of the Trust Fund attributable thereto.
2.26 "Family Member" means an individual's spouse, lineal
ascendant or lineal descendant and the spouses of such lineal
ascendants and descendants including such relationships created
by legal adoption. An individual who is a Family Member on any
day of the Plan Year shall be a Family Member for the entire
year.
2.27 "Five-Percent Owner" means an employee who owns (or is
considered as owning within the meaning of Section 318 of the
Code) more than five percent of the outstanding stock or stock
possessing more than 5 percent of the total combined voting power
of the Employer, a Commonly Controlled Entity or a member of an
Affiliated Service Group as provided in Section 416(i)(1)(B)(i)
of the Code.
2.28 "Former Participant" means a Participant or Inactive
Participant who has a Termination of Employment but continues to
have an account in the Plan.
2.29 "Hardship" means an immediate and heavy financial need
of a Participant which may not be met by other resources
reasonably available to the Member as determined by the Committee
and applied to all Members in a nondiscriminatory manner.
-7-
<PAGE>
2.30 "Highly Compensated Employee" means, for a Plan Year,
a Participant who performs services for an Employer, Commonly
Controlled Entity or member of an Affiliated Service Group during
such Plan Year and who
(a) during the Plan Year preceding the Plan Year for
which the determination is being made ("Preceding Plan
Year"):
(1) was at any time a Five-Percent Owner;
(2) received Pay in excess of $81,720 (for
1989 and increased for cost of living adjustments in
future years as provided in Code Section 414(q)(1));
(3) receives Pay in excess of $54,480 (for
1989 and increased for cost of living adjustments in
future years as provided in Code Section 414(q)(1))
and is a member of the Top Paid Group;
(4) was at any time an officer of an Employer,
a Commonly Controlled Entity or a member of an
Affiliated Service Group and received Pay in excess of
50 percent of the amount in effect under Code Section
415(b)(1)(A) ($98,064 in 1989, as adjusted in
accordance with Section 415(d) of the Internal Revenue
Code); provided that, notwithstanding anything to the
contrary in this subsection 2.30, no more than 50
employees shall be treated as officers for any Plan
Year; or
(b) during the Plan Year for which the determination
is being made:
(1) is described in subsections 2.30(a)(1),
(2) or (4); and
(2) is one of the 100 employees of the group
consisting of the Employers, Commonly Controlled
Entities or members of an Affiliated Service Group who
received the most compensation from such entities; or
(c) for purposes of this subsection 2.30, the Pay of
any Highly Compensated Employee who is one of the ten (10)
most highly paid employees of the Employer, its Commonly
Controlled Entities or member of an Affiliated Service Group
determined (without regard to this subsection 2.30(c)) or of
any employee described in Section 2.30(a) or (b) with
respect to such group of entities shall include any Pay of a
Family Member of such Highly Compensated Employee and such
Family Member shall not be treated as an employee for
purposes of this subsection 2.30.
-8-
<PAGE>
The Plan Administrator may elect for any Plan Year to determine
the Highly Compensated Employees for such year by substituting
"$54,480" (in 1989, adjusted in subsequent years as determined in
accordance with regulations issued by the Secretary of the
Treasury or his delegate) for "$81,720" (in 1989, adjusted in
subsequent years as determined in accordance with regulations
issued by the Secretary of the Treasury or his delegate) in
subsection 2.30(a)(2) and ignoring subsection 2.30(a)(3).
2.31 "Hour of Service" means
(a) each hour for which a person is paid directly or
indirectly, or entitled to payment, by the Employer,
Commonly Controlled Entity or member of an Affiliated
Service Group,
(1) for performance of duties;
(2) on account of a period of time during
which no duties were performed, provided that, except
as herein otherwise expressly provided, no more than
501 Hours of Service shall be credited for any single
continuous period during which a person performs no
duty, and provided that no hours of service shall be
credited for payments made or due under a plan
maintained solely for the purpose of complying with
applicable workmen's compensation, unemployment
compensation or disability insurance laws, or for
reimbursement of medical expenses; and
(3) for which back pay, irrespective of
mitigation of damages, is awarded or agreed to by the
Employer or Commonly Controlled Entity, provided that
no more than 501 Hours of Service shall be credited
any single continuous period of time during which a
person did not or would not have performed duties.
(b) The determination of Hours of Service for
reasons other than the performance of duties shall be in
accordance with the provisions of Labor Department
Regulations Section 2530.200b-2(b), and Hours of Service
shall be credited to computation periods in accordance with
the provisions of Labor Department Regulations Section
2530.200b-2(c).
(c) To the extent not credited above, for each
calendar month during which an Employee is receiving pay
under Employer's salary continuance plan, for the purposes
of the Plan, such Employee shall be deemed to have the
number of Hours of Service equal to such Employee's Hours of
Service for the month immediately preceding the date such
Employee was placed on Employer's salary continuance plan.
-9-
<PAGE>
(d) To the extent not credited above, for periods of
absence from work on account of Parental Leave, an Employee
shall be credited with:
(1) the Hours of Service which normally would
have been credited to such individual but for the
Parental Leave, or
(2) eight (8) Hours of Service per day of such
absence if the Plan is unable to determine the Hours
of Service which would have been credited to such
individual but for the Parental Leave.
An Employee's Hours of Service for absence on account
of Parental Leave shall not exceed the lesser of 501 Hours
of Service or the number of Hours of Service as shall be
needed to prevent a Break In Service in the Eligibility
Computation Period (for purposes of determining Credited
Service) or in the Plan Year (for other purposes) in which
the Parental Leave commenced; provided that if such Hours of
Service are not needed to prevent a Break In Service in the
Eligibility Computation Period or in the Plan Year in which
absence because of a Parental Leave commenced, and the
Parental Leave continues into the next following Eligibility
Computation Period or Plan Year, then such Hours of Service
shall be credited in the Eligibility Computation Period or
Plan Year next following the Eligibility Computation Period
or Plan Year in which such absence commenced if needed to
prevent a Break In Service therein.
(e) Notwithstanding the foregoing, for the purpose
of determining Participant's Years of Vesting Service, Hours
of Service shall include hours of service determined as if
each Affiliated Service Group were a Commonly Controlled
Entity.
(f) Each Employee who is paid on a salaried basis
shall be credited with 95 Hours of Service for each
semi-monthly payroll period during which such Employee has
any Hours of Service.
2.32 "Inactive Participant" means a person who has been a
Participant but currently does not qualify as an Employee and who
continues to be Employed by an Employer or a Commonly Controlled
Entity.
2.33 "Investment Committee" means the committee appointed
by the board of directors of the Company to carry out the duties
of the Investment Committee under the CNW Corporation Master
Trust.
-10-
<PAGE>
2.34 "Member" means a Participant, an Inactive Participant
or a Former Participant.
2.35 "Member's Net Balance Account" means the separate
account maintained in the Plan in accordance with the provisions
of the Plan for each Member which represents his total
proportionate interest in the Trust Fund as of any Accounting
Date or Valuation Date, and which consists of the sum of his
Employee Matched Contribution Account, his Employee Elected
Matched Contribution Account, his Employee Elected Unmatched
Contribution Account, his Employee Unmatched Contribution
Account, his Post-1986 Employee Matched Contribution Account, his
Post-1986 Employee Unmatched Contribution Account, his Employer
Contribution General Account and his Employer Matching
Contribution Account accumulated under the Plan or the CNW
Corporation Profit Sharing and Retirement Savings Program
("Accounts"). A Member's Net Balance Account at any time during
a Plan Year (except on a Valuation Date or Accounting Date) shall
be the value of such Participant's Accounts as adjusted in
accordance with Section 6.6 as of the immediately preceding
Valuation Date or, if later, Accounting Date and on a Valuation
Date or Accounting Date it shall be the value of such Accounts as
adjusted in accordance with Section 6.6 on that Valuation Date or
Accounting Date.
2.36 "Non-highly Compensated Employee" means an employee of
an Employer, Commonly Controlled Entity or Affiliated Service
Group who is not a Highly Compensated Employee or a Family Member
of a Highly Compensated Employee.
2.37 "Normal Retirement Age" means a person's:
(1) 65th birthday; or
(2) age as of the date of his involuntary
termination without cause as determined by the Committee in
accordance with established Employer personnel policies, if
such termination occurs on or after his 60th birthday;
(3) solely for the purpose of the Plan, 60th
birthday if such person has at least 5 years of service; or
(4) age as of the date of his voluntary termination
with eligibility to receive a pension pursuant to the
Chicago and North Western Railway Company Supplemental
Pension Plan (called the Chicago and North Western
Transportation Company Supplemental Pension Plan until
May 5, 1994).
2.38 "OAI Rate" means the greater of 5.7 percent or the
percentage equal to the portion of the rate of tax under Code
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Section 3111(a) as in effect at the beginning of the Plan Year
which is attributable to old-age insurance.
2.39 "Parental Leave" means a period during which an
individual is absent from work for any period:
(1) by reason of the pregnancy of the individual;
(2) by reason of the birth of a child of the
individual;
(3) by reason of the placement of a child with the
individual in connection with the adoption of such child by
such individual, or
(4) for purposes of caring for such child for a
period beginning immediately following such birth or
placement.
An absence from work shall not be a Parental Leave unless
the individual furnished the Committee such timely information as
may reasonably be required to establish that the absence from
work was for one of the reasons specified above and the number of
days for which there was such an absence. Nothing contained
herein shall be construed to establish an Employer policy of
treating a Parental Leave as an Authorized Leave of Absence for
any purposes other than the crediting of Hours of Service as
provided in subsection 2.31.
2.40 "Participant" means any person who has met the
eligibility requirements of the Plan.
2.41 "Pay" means
(a) the total amount of compensation paid to an
Employee while a Participant by an Employer in each Plan
Year as reportable on federal income tax withholding
Form W-2 (including pay under an Employer's salary
continuance plan) increased by the Employee Elected Matched
Contributions and Employee Elected Unmatched Contributions,
if any, but reduced by any cash compensation paid in lieu of
vacation pay in a Plan Year to the extent such cash
compensation causes the Participant to receive annual cash
compensation (excluding bonus and incentive compensation) in
excess of the amount of annual cash compensation such
Participant would have received in such year if he were paid
one twenty-fourth of his annual compensation for each pay
period for which pay would normally have been paid in the
year, any income from stock options or stock appreciation
rights benefits including any buyout of option rights by the
Company or any Commonly Controlled Entity, any relocation
expenses, any non-cash compensation reportable on Form W-2
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or any bonus or incentive compensation received in a Plan
Year after the Plan Year in which the Participant has a
Termination of Employment. If a Participant is transferred
from a Commonly Controlled Entity or member of an Affiliated
Service Group which is not an Employer to an Employer, the
Pay of the participant for the year of transfer shall not
include his pay from the Commonly Controlled Entity or
member of an Affiliated Service Group which is not an
Employer for the portion of the year prior to such transfer.
(b) Notwithstanding subsection 2.41(a), for the
purposes of subsection 4.8 and Section 7, (i) Pay shall
include a Participant's total compensation paid to an
Employee by the Employer, any Commonly Controlled Entity and
member of an Affiliated Service Group in the Plan Year
including any income on the Member's Form W-2 attributable
to stock appreciation rights benefits paid in cash to such
Member and excluding Employee Elected Matched Contributions,
Employee Elected Unmatched Contributions, any other elected
contributions under Code Section 401(k) to a Related Plan or
other contributions to a Related Plan which are not included
in a Participant's taxable income in the year in which
contributed, amounts realized from the exercise of a
non-qualified stock option, compensation taxable under
Section 83 of the Code, amounts realized from the sale,
exchange or other disposition of stock acquired under a
qualified stock option and other amounts which receive a
special tax benefit.
(c) Notwithstanding subsections 2.41(a) and 2.41(b)
for purposes of subsections 2.30, 4.1(c), 4.1(d), 4.1(e) and
4.5, Pay shall mean Pay as defined in subsection 2.41(b)
increased by a Participant's Employee Elected Contributions,
and any elected deferred contributions made for the
Participant under any other Related Plan which provides for
deferrals under Code Section 401(k) or elected contributions
excluded from gross income pursuant to a cafeteria plan
under Code Section 125 maintained by an Employer, a Commonly
Controlled Entity or a member of an Affiliated Service
Group.
(d) Effective for Plan Years commencing on or after
January 1, 1989, and before January 1, 1994, Pay shall not
exceed $200,000, adjusted for the cost of living as provided
in Code Section 401(a)(17). Effective for Plan Years
beginning on or after January 1, 1994, Pay shall not exceed
$150,000, adjusted for cost of living as provided in Code
Section 401(a)(17). In determining whether a Participant's
Pay exceeds the applicable amount above, the Pay of each
Five-Percent Owner and of each Participant who is one of the
ten Highly Compensated Employees paid the greatest
compensation (determined before the aggregation of the Pay
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of any family member pursuant to Code section 414(q)(6))
shall include the Pay of such Participant's spouse and
lineal descendants who have not attained age 19 before the
end of the Plan year.
2.42 "Plan Year" means the calendar year.
2.43 "Post-1986 Employee Matched Contribution Account"
means that portion of the Member's Net Balance Account which
evidences the value of a Participant's own contributions which
are permitted under subsection 4.1(b)(1) or were permitted under
the CNW Corporation Profit Sharing Program before January 1,
1989, including increases to (or decreases in) the net worth of
the Trust Fund attributable thereto.
2.44 "Post-1986 Employee Unmatched Contribution Account"
means that portion of the Member's Net Balance Account which
evidences the value of a Participant's own contributions which
are permitted under subsection 4.1(b)(2) or under the CNW
Corporation Profit Sharing and Retirement Savings Program before
January 1, 1989 including increases to (or decreases in) the net
worth of the Trust Fund attributable thereto.
2.45 "Qualified Domestic Relations Order" means a Qualified
Domestic Relations Order as defined in subsection 12.2.
2.46 "Qualified Joint and Survivor Pension" means an
immediate monthly pension payable for life to a Member who is
married at the annuity commencement date and, upon the Member's
death, if the Member's spouse survives the Member, a monthly
pension payable to the Member's spouse for life equal to 50
percent of the pension previously payable to the Member. The
amount of such Qualified Joint and Survivor Pension shall be the
Actuarial Equivalent of the vested Member's Net Balance Account
which shall be transferred to the Chicago and North Western
Railway Company Supplemental Pension Trust (called the Chicago
and North Western Transportation Company Supplemental Pension
Trust until May 5, 1994) and the Member's Qualified Joint and
Survivor Pension shall be paid therefrom in accordance with the
Chicago and North Western Railway Company Supplemental Pension
Plan (called the Chicago and North Western Transportation Company
Supplemental Pension Plan until May 5, 1994). If a Member is not
married at the annuity commencement date, "Qualified Joint and
Survivor Pension" means an immediate monthly pension payable to
the Member for life.
2.47 "Railroad Retirement Excess Pay" means, with respect
to each Plan Year, the Participant's Pay in excess of the
Railroad Retirement Taxable Wage Base.
2.48 "Railroad Retirement Taxable Wage Base" means, for any
Plan Year, (a) the maximum amount of compensation which may be
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considered wages subject to an employer tax for such year under
the Federal Railroad Retirement Act as defined in Section 3221(b)
of the Code as in effect at the beginning of the Plan Year
("Railroad Retirement Tier II Tax"), and (b) with respect to
periods during which a Participant is receiving benefits under
the Employer's salary continuance plan, the maximum amount of
compensation of such Participant which is subject to an employer
tax for such year under the Railroad Retirement Tier II Tax.
2.49 "Related Plan" means any other qualified defined
contribution plan or qualified defined benefit plan (as defined
in Section 415(k) of the Code) maintained by an Employer, a
Commonly Controlled Entity or an Affiliated Service Group,
respectively called a "Related Defined Contribution Plan" and
"Related Defined Benefit Plan."
2.50 "Remainder" means the amount that remains in the
Employer Contribution Account of a Participant who has a
Termination of Employment before he is entitled to one hundred
percent thereof, after determining the distribution to which he
is entitled, and which is forfeited by the Member in accordance
with subsection 5.9 hereof. Remainders are reallocated to
accounts of Members as provided in subsections 4.2(b), 5.9 and
5.15 hereof.
2.51 "Required Beginning Date" means April 1 of the
calendar year following:
(a) for a Member who reaches age 70-1/2 prior to
January 1, 1988, the later of:
(1) the calendar year in which he reaches age
70-1/2, or
(2) if the Member is not a Five-Percent Owner
at any time during the Plan Year ending with or within
the calendar year in which he attains age 70-1/2 or
any of the four (4) prior Plan Years, the calendar
year in which he has a Termination of Employment;
provided that if any such Member becomes a
Five-Percent Owner during any Plan Year after he
attains age 70-1/2, the "Required Beginning Date" for
such Member shall be the April 1 of the calendar year
following the calendar year in which such Plan Year
ends, and
(b) for a Member who reaches age 70-1/2 on or after
January 1, 1988, the calendar year in which the Member
reaches age 70-1/2.
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2.52 "Social Security Excess Pay" means, with respect to
each Plan Year, the Participant's Pay in excess of the Social
Security Taxable Wage Base.
2.53 "Social Security Taxable Wage Base" means, for any
Plan Year, the maximum amount of compensation which may be
considered wages subject to an employer tax for purposes of
determining F.I.C.A. tax liability as defined in Section 3121(a)
of the Code as determined for the calendar year which includes
the first day of the Plan Year.
2.54 "Surviving Spouse's Pension" means an immediate
monthly pension payable in accordance with subsection 5.5 to the
surviving spouse of a Member who dies before the commencement of
benefits hereunder in accordance with subsection 5.3. The amount
of such Surviving Spouse's Pension shall be the Actuarial
Equivalent of the vested portion of the Member's Net Balance
Account which shall be transferred to the Chicago and North
Western Railway Company Supplemental Pension Plan (called the
Chicago and North Western Transportation Company Supplemental
Pension Plan until May 5, 1994) and paid to the Surviving Spouse
therefrom.
2.55 "Termination of Employment" means upon the occurrence
of the following: (i) resignation, (ii) discharge,
(iii) Disability, (iv) death, (v) retirement or (vi) the last day
of the Plan Year, in the case of a person who ceases to be
actively employed during a Plan Year and who is not actively
employed as of the last day of the Plan Year (except in the case
of a person on sick leave, on a period of Authorized Leave of
Absence, receiving benefits under an Employer's salary
continuance plan or is placed on Employer's long-term disability
plan unless it is determined that such person has a Disability).
The transfer of an Employee from the employment of one Employer
(or a Commonly Controlled Entity or member of an Affiliated
Service Group) to another Employer (or a Commonly Controlled
Entity or member of an Affiliated Service Group) shall not be a
Termination of Employment.
2.56 "Top Paid Group" means
(a) For purposes of subsection 2.30(a)(3), the Top
Paid Group in a Plan Year is the top 20%, ranked by Pay, of
all employees of the Employer, Commonly Controlled Entity or
member of an Affiliated Service Group who provide services
for the Employer, Commonly Controlled Entity or member of an
Affiliated Service Group during the Plan Year determined by
excluding:
(1) employees who are described in either (A)
or (B):
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(A) (I) employees who have completed
less than six (6) consecutive months of
service for an Employer;
(II) employees who normally work
less than 17-1/2 hours per week for at
least 50% of the total weeks worked by
such Employee during the year; or
(III) employees who normally work
less than one day during six (6) calendar
months during any year; and
(B) employees who have failed to
complete age or service requirements established
by the Employer that are shorter or lower than
those described in (A)(I), (II), or (III)
respectively, such requirements to be applied on
a consistent and uniform basis;
(2) employees who are nonresident aliens and
who receive no earned income (within the meaning of
Code Section 911(d)(2)) from the Employer that
constitutes U.S. source income (as described in Code
Section 861(a)(3)); and
(3) employees who are included in a unit of
employees covered by a collective bargaining agreement
if (i) 90% (or such lesser percent as the Secretary of
the Treasury shall by applicable Regulations or
rulings permit) of the employees of the Employer are
included in units of employees covered by collective
bargaining agreements and (ii) the Plan covers only
employees not covered by such collective bargaining
agreements unless the Company elects not to exclude
such Employees.
(b) An individual who is excluded under subsection
2.56(a)(1)(A) and (B) for purposes of determining the number
of employees in the Top Paid Group, shall nonetheless be
included in such Top Paid Group if he is in the top 20% of
the employees of all Employers, Commonly Controlled Entities
and members of any Affiliated Service Group who provided
services for the Employer or Commonly Controlled Entity for
the Plan Year.
2.57 "Trust" means the CNW Corporation Master Trust and any
amendment thereto.
2.58 "Trustee" means the trustee or trustees selected for
the Trust to hold and administer the Trust Fund, or any successor
thereto.
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2.59 "Trust Fund" means all securities, money and other
property held by the Trustee under the Trust for the Plan.
2.60 "Valuation Date" means the last day of each quarter of
each Plan Year (i.e., the last day of March, June and September)
other than an Accounting Date and such additional dates as the
Committee shall from time to time specify, and, with respect to
Funds D and E and such subsequently designated Funds as are
invested primarily in mutual funds, such additional dates as may
be provided by such Fund.
2.61 "Vesting Service" means the total Years of Vesting
Service.
2.62 "Year of Eligibility Service" means an Eligibility
Computation Period during which a person is employed by an
Employer, a Commonly Controlled Entity or an Affiliated Service
Group and during which such person has not less than 1000 Hours
of Service.
A person who, on or after January 1, 1985 becomes an
Employee by virtue of an Employer acquiring personnel and/or
operations of any other corporation, trade or business shall
receive credit for Years of Eligibility Service prior to the date
of such acquisition only if, and to the extent, the Board of
Directors of the Company so provides.
2.63 "Year of Vesting Service" means a Plan Year during
which a person is employed by the Employer (or any Commonly
Controlled Entity or member of an Affiliated Service Group)
during which such person has not less than 1000 Hours of Service,
excluding:
(a) for Participants who have one or more
consecutive Breaks In Service none of which occurred before
January 1, 1985, each Year of Vesting Service before the
Break In Service, if no portion of the Member's Employer
Contribution General Account was vested before the Break In
Service and if the number of consecutive Breaks In Service
equals or exceeds five consecutive Breaks In Service and for
Participants who have one or more consecutive Breaks In
Service at least one of which occurred before January 1,
1985, each Year of Vesting Service before the Break In
Service, if no portion of the Member's Employer Contribution
General Account was vested before the Break In Service and
if the number of consecutive Breaks In Service equals or
exceeds the number of Years of Vesting Service before the
Break In Service; and
(b) for purposes of determining the vested portion
of the Participant's Employer Contribution General Account
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accrued before five consecutive Breaks In Service, Vesting
Service after such Breaks In Service.
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Section 3. Eligibility and Participation
3.1 Eligibility and Participation. Each Employee who was
a Participant in the Chicago and North Western Transportation
Company Profit Sharing and Retirement Savings Program or the CNW
Corporation Profit Sharing and Retirement Savings Program on the
day before the Effective Date shall continue to be a Participant
under the Plan. Each Employee who transfers from the employment
of a Commonly Controlled Entity to the employment of an Employer
shall immediately become a Participant on the day he becomes an
Employee; provided that such Employee shall not become a
Participant before the January 1 or July 1 coincident with or
next following his completion of one year of Credited Service.
Each other Employee shall become a Participant as of the
January 1 or the July 1 (or such additional dates as the
Committee may from time-to-time permit) coincident with or next
following his completion of one year of Credited Service.
A person who becomes a Participant shall continue to
be a Participant as long as he remains an Employee. In the event
a Participant's employment conditions change so that he continues
to be employed by a Commonly Controlled Entity or a member of an
Affiliated Service Group but no longer qualifies as an Employee,
he shall become an Inactive Participant as of the date such
change occurs. A person who has an account under the Plan but is
no longer employed by an Employer, a Commonly Controlled Entity
or a member of an Affiliated Service Group shall be a Former
Participant. In the event an Inactive Participant's employment
conditions change, or a Former Participant who has not had a
Break In Service is reemployed, so that he again qualifies as an
Employee, he shall again become a Participant as of the date such
change or reemployment occurs. Notwithstanding any of the
foregoing, any person who has a Break In Service shall, on the
day following his completion of one Year of Credited Service
following such Break In Service, become a Participant
retroactively to the day such Participant resumes employment.
3.2 Eligibility and Participation by Employees of
Employers Other Than The Company. In the event that an Employer
other than the Company adopts the Plan and the Trust, as of the
effective date of such adoption, the Plan shall be applicable to
each Employee of such Employer who, as of such date has completed
at least one year of Credited Service.
3.3 Military Service. If, after the performance of an
Hour of Service, a person enters the military services of the
United States and subsequently reenters the service of the
Employer under any statute granting reemployment rights to
persons in the armed forces, such person shall be deemed to have
been on an Authorized Leave of Absence.
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Section 4. Employee Elected Contributions
and Employer Contributions
4.1 Participants' Elections and Contributions.
Participants may elect (i) Employee Elected Contributions,
including, as defined in subsection 4.1(a), Employee Elected
Matched Contributions and Employee Elected Unmatched
Contributions, and/or (ii) Post-1986 Employee Contributions,
including, as defined in subsection 4.1(b), Post-1986 Employee
Matched Contributions and Post-1986 Employee Unmatched
Contributions as follows:
(a) Employee Elected Contributions. Employee
Elected Contributions may be elected by any Participant in
accordance with this subsection 4.1 with respect to Pay,
including Pay (other than bonus and incentive compensation
received in the Plan Year following the Plan Year in which
the Participant has a Termination of Employment) received
after the Participant's Termination of Employment. A
Participant may elect to have the Employer make Employee
Elected Contributions commencing on the January 1 or July 1
on which he first becomes a Participant or on any January 1
thereafter or on such other dates as the Committee shall
from time to time permit, by filing with Employer a form
(furnished by the Committee) therefor at least 30 days, or
such lesser period as the Committee may from time to time
permit, before such date, if at such time he is an Employee.
The Participant's election shall be an election to reduce
the amount of his Pay from 2% to 15% in increments of 1%
which shall be treated as Employee Elected Matched
Contributions and Employee Elected Unmatched Contributions
as follows:
(1) Employee Elected Contributions of 2%, 3%,
4% or 5% of Pay shall be treated as Employee Elected
Matched Contributions and shall be matched by Employer
Matching Profit Sharing Contributions; and
(2) Employee Elected Contributions in excess
of 5% of Pay shall be treated as Employee Elected
Unmatched Contributions.
(b) Post-1986 Employee Contributions. Post-1986
Employee Contributions may be made by any Participant in
accordance with this subsection 4.1 with respect to Pay
including Pay (other than bonus and incentive compensation
received in the Plan Year following the Plan Year in which
the Participant has a Termination of Employment) received
after the Participant's Termination of Employment. A
Participant may make Post-1986 Employee Contributions
commencing on the January 1 or July 1 on which he first
becomes a Participant or on any January 1 thereafter or on
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such other dates as the Committee shall from time to time
permit, by filing with the Employer a form (furnished by the
Committee) therefor at least 30 days, or such lesser period
as the Committee may from time to time permit before such
date, if at such time he is an Employee. The Participant's
contribution choice shall be to have an amount from 2% to
15% of Pay withheld from Pay in increments of 1% which shall
be treated as Post-1986 Employee Matched Contributions and
Post-1986 Employee Unmatched Contributions as follows:
(1) Post-1986 Employee Contributions of 2%,
3%, 4% or 5% of Pay shall be treated as Post-1986
Employee Matched Contributions and shall be matched by
Employer Matching Profit Sharing Contributions;
(2) Post-1986 Employee Contributions in excess
of 5% of Pay shall be treated as Post-1986 Employee
Unmatched Contributions.
In no event shall the total of the amounts (i) elected
under subsection 4.1(a)(1) and (ii) contributed under
subsection 4.1(b)(1) which are matched by Employer Matching
Profit Sharing Contributions exceed 5% of a Participant's
Pay. In no event shall the total of Employee Elected
Contributions and Post-1986 Employee Contributions exceed
15% of a Participant's Pay.
For purposes of making the Employer Matching Profit
Sharing Contribution, Employee Elected Matched Contributions
shall be matched first and, to the extent permitted by the
limits of this subsection 4.1, then Post-1986 Employee
Matched Contributions shall be matched.
(c) Limit on Employee Elected Contributions.
Notwithstanding anything to the contrary herein, the sum of
the amount of a Participant's Employee Elected Contributions
and of his elected deferrals under any Related Defined
Contribution Plan for a Plan Year shall not exceed $7,627,
in 1989 (as adjusted in accordance with Code Section
402(g)(5) ("Limit on Employee Elected Contributions")). Any
Employee Elected Contributions over the Limit on Employee
Elected Contributions elected by a Participant shall be
treated as Post-1986 Employee Contributions. The Committee
may apply the Limit on Employee Elected Contributions by
permitting elections of any permissible percentage of Pay
until the limit is met during a given taxable year or may
apply the limit pro rata on a monthly or other periodic
basis permitting Employee Elected Contributions only up to
the ratable portion of the Limit on Employee Elected
Contributions in each period.
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(d) Changes in Elections and Payment of
Contributions. Adjustments in the amount of any
Participant's Employee Elected Contributions or Post-1986
Employee Contributions may be made by the Participant
effective as of any January 1 or such additional dates as
the Committee shall from time to time permit by filing with
his Employer a form (furnished by the Committee) therefor at
least 30 days, or such lesser period as the Committee may
from time to time permit, before the date on which such
adjustment is effective. The Employee Elected Contributions
shall be paid by the Employer to the Trustee for deposit in
the Trust Fund at such time as the Company shall from time
to time determine but not later than 30 days after the last
day of the Plan Year.
A Participant's Employee Elected Matched
Contributions, Employee Elected Unmatched Contributions,
Post-1986 Employee Matched Contributions and Post-1986
Employee Unmatched Contributions shall be credited to his
Employee Elected Matched Contribution Account, Employee
Elected Unmatched Contribution Account, Post-1986 Employee
Matched Contribution Account and Post-1986 Employee
Unmatched Contribution Account, respectively, in the Plan at
such times as the Committee shall deem advisable or
necessary; provided however, as of each Accounting Date and
Valuation Date on which a distribution to which a Member
becomes entitled is to be determined, a Member's account
shall reflect all Employee Elected Matched Contributions,
Employee Elected Unmatched Contributions, Post-1986 Employee
Matched Contributions and Post-1986 Employee Unmatched
Contributions with respect to Pay which he has received as
of the date of such distribution.
(e) Discontinuance, Reduction or Withdrawal of
Employee Elected and Post-1986 Employee Contributions.
(1) A Participant may elect to discontinue his
Employee Elected Contribution election and his
Post-1986 Employee Contribution election at any time
prospectively, by filing with his Employer a form
(furnished by the Committee) therefor at least thirty
days or such lesser period as the Committee in a
uniform and nondiscriminatory manner may from time to
time permit, before the date as of which he desires
such discontinuance to become effective.
(2) A Participant who ceases to qualify as an
Employee, but who continues to be employed by an
Employer, shall become an Inactive Participant, and
have his Employee Elected Contributions and Post-1986
Employee Contributions discontinued, effective as of
the date of such change of employment status.
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(3) A person whose Employee Elected
Contributions and Post-1986 Employee Contributions, if
any, are discontinued under paragraph (1) above may
elect to have the total of his Employee Elected
Contributions or Post-1986 Employee Contributions
resumed, effective as of any January 1 or July 1
following 6 months after the date such contributions
were discontinued by filing with Employer a form
(furnished by the Committee) therefor at least 30
days, or such lesser period as the Committee in a
uniform and nondiscriminatory manner from time to time
permits, before such date, if at that time he
qualifies as an Employee.
A person whose Employee Elected Contributions or
Post-1986 Employee Contributions are discontinued
under subsection 4.1(e)(2) shall have his Employee
Elected Contributions or Post-1986 Employee
Contributions resumed in the first pay period next
following the date on which he again becomes a
Participant under subsection 3.1.
(4) A Participant who files application for a
withdrawal distribution under subsection 5.4(a), (b),
(c) or (d) shall have his Employee Elected
Contributions and his Post-1986 Employee Contributions
discontinued as of the date of such distribution;
provided however that the aforementioned contributions
shall not be discontinued on account of a distribution
to an alternate payee made in accordance with a
Qualified Domestic Relations Order. Any Member who
receives a withdrawal distribution under subsection
5.4 may elect to have his Employee Elected
Contributions and his Post-1986 Employee Contributions
resumed effective as of any January 1 or July 1
following 12 months after such distribution, by filing
with the Employer a form (furnished by the Committee)
therefor at least 30 days, or such lesser period as
the Committee may from time to time permit, before
such date, if at that time he qualifies as a
Participant.
(f) Former Participants. A Former Participant shall
have any Employee Elected Contributions and Post-1986
Employee Contributions he is making as a Participant
discontinued, effective as of the date of his Termination of
Employment.
A Former Participant who does not have a Break In
Service and who is reemployed by Employer shall have his
Employee Elected Contributions and Post-1986 Employee
Contributions resumed in the first pay period next following
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the date on which he becomes a Participant under subsection
3.1.
(g) Notwithstanding the provisions of subsection
4.1(a) and (b), the following restrictions shall apply:
(1) If any amounts of Employee Elected
Contributions, Post-1986 Employee Contributions or the
elections with respect thereto for any Participant or
group of Participants are reasonably believed by the
Committee to be in excess of the amounts permitted
under subsection 4.5 or 4.6, the Committee shall, in
accordance with uniform and non-discriminatory rules
from time to time established by the Committee, reduce
the amount of such contributions and elections.
(2) The Committee may, in accordance with
uniform and nondiscriminatory rules it establishes
from time to time, require that Participants who are
Highly Compensated Employees for the Plan Year make
elections with respect to Employee Elected
Contributions or Post-1986 Employee Contributions
following and/or preceding the completion of such
elections by the Participants who are not Highly
Compensated Employees and the Committee may (A) limit
the amount by which each Participant who is a Highly
Compensated Employee may elect to reduce his Pay or
contribute and (B) permit each Participant who is not
a Highly Compensated Employee to elect to reduce his
Pay or contribute within higher limits than those for
Highly Compensated Employees, to the extent the
Committee determines it is helpful to satisfy the
requirements of subsection 4.5 or 4.6.
(3) For purposes of administering subsections
4.1(g)(1) and 4.1(g)(2), the Committee may treat the
Plan and any Related Plan which contains a cash or
deferred arrangement as one plan.
(h) Employee Unmatched Contributions. No Employee
Unmatched Contributions may be made after December 31, 1986.
Any Employee Unmatched Contributions made to the Plan before
January 1, 1987 shall remain credited to the Participant's
Employee Unmatched Contribution Account and shall be
invested and distributed in the manner provided for Employee
Unmatched Contribution Accounts hereunder.
4.2 Employer Contributions and Allocations.
(a) Contributions of Employers. For each Plan Year
each of the Employers shall contribute to the Plan, in
addition to the amount of contributions elected by
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Participants who are Employees of the Employer in accordance
with subsection 4.1 for the Plan Year, an amount equal to
the difference between (i) the greater of (1) or (2) plus
(ii) any amount designated in (3) minus (iii) the amount
specified in (4) below:
(1) An amount equal to the lesser of the
amount specified in (A) and (B) below:
(A) 5% of the Company Contribution
Base for the Plan Year; or
(B) $2,500,000, or, if greater, an
amount equal to $2,500,000 times a
fraction, the numerator of which is the
Bureau of Labor Statistics Consumer Price
Index for April of the Plan Year and the
denominator of which is the Bureau of
Labor Statistics Consumer price Index for
April, 1975. For purposes of determining
the numerator of the fraction for Plan
Years 1980 and subsequent years the Bureau
of Labor Statistics Consumer Price Index
shall be 'CPI-W', or if such index is
changed, replaced or eliminated, the
Bureau of Labor Statistics Consumer Price
Index which the Committee in its sole
discretion determines to be most similar
in characteristics to the Consumer Price
Index used for the immediately preceding
Plan Year.
(2) An amount equal to 20% of the
Employee Elected Matched Contributions and the
Post-1986 Employee Matched Contributions of each
Eligible Member who is an Employee of the
Company for purposes of subsection 4.2(b)(1)
below for that Plan Year.
(3) An amount equal to such amount of
discretionary profit sharing contributions as
the Board of Directors shall in its discretion
determine.
(4) An amount equal to the sum of
(i) the estimated aggregate amount of reductions
which would be made, in accordance with
subsection 4.8 with respect to Eligible Members,
as defined in subsection 4.2(b), who are
Employees of the Company, to Employer
Contributions (excluding Employee Elected
Matched Contributions and Employee Elected
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Unmatched Contributions) and Remainders if the
full amount determined under subsection
4.2(a)(1) or (2) were contributed to the Plan
and (ii) the estimated aggregate amount of
reductions which would be made because of
subsection 2.41(d) with respect to Eligible
Members, as defined in subsection 4.2(b), who
are Employees of the Company, to Employer
Contributions (excluding Employee Elected
Matched Contributions and Employee Elected
Unmatched Contributions) and Remainders if the
full amount determined under subsection
4.2(a)(1) or (2) were contributed to the Plan.
Such amount shall be a reasonable estimate of
the amount of such Employer Contribution
reductions based on the information available on
the date Employer Contributions are made to the
Trustee.
(b) Allocation of Contributions and Remainders
of Employers. The Employer Contributions specified
under subsection 4.2(a)(1) or (2), whichever is
greater, increased by any contributions made to the
Trust pursuant to Section 4.2(a)(3), reduced by the
amount specified in subsection 4.2(a)(4) and any
Remainders with respect to Member's Net Balance
Accounts of Participants who were Employees of the
Company that are to be reallocated under subsections
5.9 and 5.15, shall be allocated, subject to the
provisions of subsection 4.8, as of the last day of
the Plan Year for which such contributions are to be
made and in which such Remainders occur to each Member
who is an Employee of the Company and who is a
Participant or Inactive Participant as of that date, a
Former Participant who has a Termination of Employment
during the Plan Year on or after his Normal Retirement
Age or because of Disability or death or on account of
a Force Reduction, as defined in subsection 5.9(a), a
Participant who during such Plan Year transferred from
the employment of the Company or Employer to the
employment of a Commonly Controlled Entity which is
not an Employer (such persons to be referred to
collectively for purposes of this subsection 4.2(b) as
"Eligible Members") and for purposes of subsections
4.2(b)(1) and (3), "Eligible Member" shall also
include each Former Participant who had a Termination
of Employment during the Plan Year who had Employee
Elected Matched Contributions or Post-1986 Employee
Matched Contributions for the Plan Year, in the
following manner:
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(1) First Matching Allocation. An
amount equal to the amount of Employer Matching
Profit Sharing Contributions determined under
subsection 4.2(a)(2) shall be allocated and
credited as of the last day of such Plan Year to
the Employer Matching Contribution Accounts of
Eligible Members who made Employee Elected
Matched Contributions or Post-1986 Employee
Matched Contributions during such Plan Year.
Such amount shall be credited to such accounts
of such Members in the proportion that the sum
of the Employee Elected Matched Contributions
and Post-1986 Employee Matched Contributions of
each such Member for such Plan Year bears to the
sum of such Employee Elected Matched
Contributions and Post-1986 Employee Matched
Contributions of all such Members for such Plan
Year.
(2) Integrated Allocation. An amount
shall be allocated and credited to the
Participant's Employer Contribution General
Account of each Eligible Member who received
Railroad Retirement Excess Pay for the Plan
Year, equal to the lesser of (i) the amount of
Employer Contributions and Forfeitures for the
Plan Year remaining to be allocated after the
allocations made in accordance with subsection
4.2(b)(1) multiplied by a fraction the numerator
of which is the amount of the Eligible Member's
Railroad Retirement Excess Pay and the
denominator of which is the total amount of all
Eligible Member's Railroad Retirement Excess Pay
or (ii) an amount equal to 11.4 percent of the
Railroad Retirement Excess Pay of each such
Eligible Member.
(3) Second Matching Allocation. An
amount equal to the amount determined under the
formula in subsections 4.2(a)(2) or such lesser
amount as may be available after subsections
4.2(b)(1) and 4.2(b)(2) are applied shall be
allocated and credited as of the last day of
such Plan Year to the Employer Matching
Contribution Accounts of Eligible Members who
made Employee Elected Matched Contributions or
Post-1986 Employee Matched Contributions during
the Plan Year. Such amount shall be credited to
such accounts of such Members in the proportion
that the sum of the Employee Elected Matched
Contribution and Post-1986 Employee Matched
Contribution of each such Member for such Plan
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<PAGE>
Year bears to the sum of such Employee Elected
Matched Contributions and Post-1986 Employee
Matched Contributions of all such Members for
such Plan Year.
(4) Residual Allocation. Any remaining
amount contributed under subsection 4.2(a) shall
be allocated and credited as of the last day of
such Plan Year to the Employer Contribution
General Accounts of Eligible Members, in the
proportion that the Pay of each such Member for
such Plan Year bears to the Pay of all such
Members for such Plan Year.
(c) Employer Contributions Limited by Deductibility.
In no event shall the annual Employer Contribution exceed
the maximum amount which is deductible for federal tax
purposes for a contribution to the Plan for such Plan Year.
4.3 Employer Special Section 401(k) Contributions. For
each Plan Year, the Company, by action of its Board of Directors,
may elect to have the Company and the other Employers make a
contribution to the Plan on or before the last day of the next
Plan Year, in such amounts (if any) as the Board of Directors may
determine, which shall be allocated to the Employer Matching
Contribution Account of those Participants who for the Plan Year
are Non-highly Compensated Employees in proportion to the amount
of each such Participant's Employee Elected Matched Contributions
and Employee Elected Unmatched Contributions for the Plan Year.
If the Company elects to make such a contribution, each Employer
shall contribute a fractional portion thereof, the numerator of
which is the sum of the Employee Elected Matched Contributions
and the Employee Elected Unmatched Contributions for such Plan
Year of the Eligible Members employed by the Employer, and the
denominator of which is the sum of the Employee Elected Matched
Contribution and Employee Elected Unmatched Contributions for the
Plan Year of all such Eligible Members.
4.4 Deadline for Employer Special Section 401(k)
Contributions. Employer Special Section 401(k) Contributions for
each Plan Year shall be delivered to the Trustee on or before the
last day of the next Plan Year.
4.5 Restrictions on Employee Elected Contributions,
Post-1986 Employee Contributions and Employer Matching Profit
Sharing Contributions.
(a) Actual Deferral Percentage. The Actual Deferral
Percentage ("ADP") for a specified group of Participants for
a Plan Year shall be the average of 100 times the result
(calculated separately for each Participant in such group)
obtained by dividing the amount of Employee Elected
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<PAGE>
Contributions and, to the extent that the Committee in its
discretion so determines, Employer Special Section 401(k)
Contributions and Employer Matching Contributions, actually
allocated to each such Participant for such Plan Year by the
Employee's Pay for the Plan Year. As soon as practicable
after the end of the Plan Year, the Committee shall
calculate the ADPs for the Plan Year for the group of
Participants who are eligible to make elections under
subsection 4.1 for the Plan Year and who are Highly
Compensated Employees and for the group of such Participants
who are Non-highly Compensated Employees. If a Related Plan
which contains a cash or deferred arrangement and the Plan
are treated as one plan for purposes of Sections 401(a)(4)
or 410(b) of the Code, such plans shall be treated as one
arrangement under subsections 4.5(a) and 4.5(b). If a
Highly Compensated Employee is a participant under a cash or
deferred arrangement under the Plan and a Related Plan, such
plans shall be treated as one arrangement for purposes of
determining the actual deferral percentage for such
Participant.
(b) Required ADP Test and Adjustment. The ADP for
the group of Participants who are eligible to make elections
under subsection 4.1 and who are Highly Compensated
Employees for the Plan Year shall not exceed both (1) and
(2) ("Required ADP Test") below:
(1) the ADP for the Non-highly Compensated
Employees who are eligible to make elections under
subsection 4.1 for the Plan Year multiplied by 1.25,
or
(2) the lesser of (A) the ADP for the
Non-highly Compensated Employees who are eligible to
make elections under subsection 4.1 for the Plan Year
multiplied by 2 or (B) the ADP for the Non-highly
Compensated Employees plus 2%.
If the Required ADP Test for a Plan Year is not met, and if
the Company does not elect to have Special Section 401(k)
Contributions with respect to the Plan Year sufficient to
result in the ADP of the Highly Compensated Employees not
exceeding both the amounts in subsections 4.5(b)(1) and (2),
then the Committee shall reduce Employee Elected
Contributions (first Employee Elected Unmatched
Contributions and, then, Employee Elected Matched
Contributions) that Participants who are Highly Compensated
Employees have deferred (by reducing first the Employee
Elected Contributions of the Participant with the highest
Actual Deferral Percentage to equal that of the Highly
Compensated Employee with the next highest Actual Deferral
Percentage and repeating such reductions until the ADP for
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<PAGE>
the Highly Compensated Employees does not exceed the amount
in both subsections 4.5(b)(1) and 4.5(b)(2)).
Employee Elected Contributions of those Participants
who are Highly Compensated Employees which are reduced in
accordance with the foregoing in order for the Plan to
comply with the Required ADP test shall be recharacterized
as Post-1986 Employee Contributions. Such excess
contributions and any income allocable to such contributions
shall be recharacterized as the Participant's Post-1986
Employee Contributions and credited to the Participant's
Post-1986 Employee Matched Contribution Account to the
extent the limits on such contributions under subsection
4.1(b)(1) would not be exceeded and, any additional amounts
shall be placed in his Post-1986 Employee Unmatched
Contribution Account to the extent the limits on such
contributions under subsection 4.1(b)(2) would not be
exceeded; provided that such recharacterized contributions
are not required to be reduced pursuant to
subsection 4.5(d). If such excess Employee Elected
Contributions cannot be recharacterized within the limits of
subsection 4.5(d), such excess Employee Elected
Contributions and any income allocable to such contributions
in accordance with subsection 4.7 shall be distributed to
the Participant as soon as reasonably possible but not later
than the end of the Plan Year following the Plan Year for
which such contributions were made.
(c) Actual Contribution Percentage. The Actual
Contribution Percentage ("ACP") for a specified group of
Participants for a Plan Year shall be the average of 100
times the result (calculated separately for each Participant
in such group) obtained by dividing (1) the sum of Post-1986
Employee Matched Contributions, Post-1986 Employee Unmatched
Contributions, Employer Matching Contributions, Employer
Special Section 401(k) Contributions (the latter two to the
extent elected by the Committee and to the extent not used
in the calculation of the Required ADP Test) and, to the
extent that the Committee in its discretion so elects,
Employee Elected Contributions actually paid to the Plan for
each such Participant for such Plan Year by (2) the
Employee's Pay for the Plan Year. As soon as practicable
after the end of the Plan Year, the Committee shall
calculate the ACPs for the Plan Year for the group of
Participants who are eligible to make elections under
subsection 4.1 for the Plan Year and who are Highly
Compensated Employees and for the group of Participants who
are Non-highly Compensated Employees. If a Related Plan to
which employee contributions or matching contributions are
made and the Plan are treated as one plan for purposes of
Sections 401(a)(4) or 410(b) of the Code, such plans shall
be treated as one plan under subsections 4.5(c) and 4.5(d).
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<PAGE>
If a Highly Compensated Employee is eligible to participate
in a Related Plan to which matching contributions or
employee contributions are made, all such plans shall be
treated as one plan for purposes of determining the actual
contribution percentage for such Participant.
(d) Required Actual Contribution Percentage Test and
Adjustment. The ACP for the group of Highly Compensated
Employees, as defined in paragraph (f), for any Plan Year
shall not exceed both (1) and (2) ("Required ACP Test"),
below:
(1) the ACP for the Non-highly Compensated
Employees multiplied by 1.25, and
(2) the lesser of (A) the ACP for the
Non-highly Compensated Employees multiplied by 2 or
(B) the Contribution Percentage for the Non-highly
Compensated Employees plus 2%.
If the Required ACP Test for a Plan Year is not met, and if
the Company does not elect to have Special Section 401(k)
Contributions with respect to the Plan Year sufficient to
result in the ACP of the Highly Compensated Employees not
exceeding both the amounts in subsections 4.5(b)(1) and (2),
then the Committee shall reduce Post-1986 Employee
Contributions that Participants who are Highly Compensated
Employees may defer (by reducing first the Post-1986
Employee Contributions of the Participant with the highest
Actual Contribution Percentage to equal that of the Highly
Compensated Employee with the next highest Actual
Contribution Percentage and repeating such reductions until
the ACP for the Highly Compensated Employees does not exceed
the amount in both subsections 4.5(d)(1) and 4.5(d)(2)).
Such excess and any income allocable thereto as determined
in accordance with subsection 4.7 shall be distributed to
the Participant not later than the December 31 of the Plan
Year after the Plan Year with respect to which such
contributions were made.
(e) Excess Deferrals. If the sum of a Participant's
Employee Elected Contributions under the Plan and his
elected deferrals under any other 401(k) plan exceed the
Limit on Employee Elected Contributions as defined in
subsection 4.1(c) for a taxable year, ("Excess Deferrals")
the Participant may not later than March 1 following the
close of such taxable year (or, such later date as may be
permitted by the Committee) allocate such Excess Deferrals
among the plans to which they were made and not later than
April 15 following the close of such taxable year, any
amount so allocated to the Plan shall be distributed to the
Participant. If a Participant is a participant in any plan
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<PAGE>
described in Code Section 403(b) under which the Participant
makes elective deferrals, the limit on Employee Elected
Contributions shall be determined for purposes of this
subsection 4.5(e) in accordance with the provisions of Code
Sections 402(g)(4) and 402(g)(8) with respect to any
Participant who participates in a plan described in Section
403(b) or who is a qualified employee in a plan of a
qualified organization (as defined in Code Section
402(g)(8)) for a calendar year.
(f) Reductions of Employer Matching Contributions.
If Employee Elected Matched Contributions for a Plan Year
are reduced in accordance with subsection 4.5(b) or 4.5(e)
or if Post-1986 Employee Matched Contributions are reduced
in accordance with subsection 4.5(d) and such contributions
are distributed to the Participant, any Employer Matching
Contributions allocated with respect thereto (and any income
allocable thereto in accordance with subsection 4.7) shall
be reduced and distributed to the Participant not later than
the last day of the following Plan Year.
4.6 Multiple Use of Alternative Limitations. If after any
reduction provided for in subsection 4.5 is made, the average ADP
of Highly Compensated Employees exceeds the amount in subsection
4.5(b)(1) but does not exceed the lesser of the amounts in
subsection 4.5(b)(2) and the average ACP of Highly Compensated
Employees exceeds the amount in subsection 4.5(d)(1) but does not
exceed the lesser of the amounts in subsection 4.5(d)(2), the sum
of the average ADP and the average ACP for a Plan Year, of the
Highly Compensated Employees who are Participants (i) shall not
exceed the greater of (a) or (b), where:
(a) is the sum of (1) plus (2), where:
(1) is one hundred and twenty-five percent
(125%) of the greater of (A) the ADP for such Plan
Year of the Non-highly Compensated Employees who are
Participants, or (B) the ACP for such Plan Year of
such Non-highly Compensated Employees; and
(2) is two (2) plus the lesser of the amount
determined under subsection 4.6(a)(1)(A) or the amount
determined under subsection 4.6(a)(1)(B), but in no
event shall this amount exceed two hundred percent
(200%) of the lesser of the amount determined under
subsection 4.6(a)(1)(A) or the amount determined under
subsection 4.6(a)(1)(B).
(b) is the sum of (1) plus (2), where:
(1) is one hundred and twenty-five percent
(125%) of the lesser of (A) the ADP for such Plan Year
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<PAGE>
of the Non-highly Compensated Employees who are
Participants, or (B) the ACP for such Plan Year of
such Non-highly Compensated Employees; and
(2) is two (2) plus the greater of the amount
determined under subsection 4.6(b)(1)(A) or the amount
determined under subsection 4.6(b)(1)(B), but in no
event shall this amount exceed two hundred percent
(200%) of the greater of the amount determined under
section 4.6(b)(1)(A) or the amount determined under
subsection 4.6(b)(1)(B).
The Committee may establish, from time to time, such rules,
restrictions and limitations as it may deem appropriate to insure
that the greater of (a) and (b) is not exceeded. If the
Committee determines that the reduction or disallowance of Member
elections or Employee Elected Contributions is necessary with
respect to Highly Compensated Employees, the Committee may reduce
or disallow Employee Elected Contributions and the income thereon
as determined pursuant to subsection 4.7 for such Highly
Compensated Employees, including elections for Employee Elected
Contributions already made for the Plan Year, as provided in
subsection 4.5(b) or 4.5(d).
4.7 Allocation of Income. Income equal to the sum of the
amounts determined under (a) and (b) below shall be allocated to
and distributed with any amounts distributed to a Member pursuant
to subsections 4.5(b), 4.5(d) or 4.6 as follows:
(a) Income for Plan Year. Income for a completed
Plan Year with respect to contributions distributed in
accordance with subsection 4.1(c), 4.5(b), 4.5(d) or 4.6
shall equal the income for the Plan Year allocable to a
Member's Net Balance Account for such contributions (taking
the contributions allocated to each different type of
Account, separately) multiplied by a fraction the numerator
of which is the amount of such Contributions so distributed
and the denominator of which is the total of such account
balance as of the last day of the Plan Year reduced by all
earnings and gains and increased by all losses allocable to
such accounts for the Plan Year.
(b) Income for Period Between End of Plan Year and
Distribution. Income for the period between the end of a
Plan Year and the date of a distribution pursuant to
subsection 4.1(c), 4.5(b), 4.5(d) or 4.6 shall equal the
product of the number of calendar months which have elapsed
since the end of the preceding Plan Year and the date of the
distribution multiplied by 10 percent multiplied by the
income allocated to such distributed amounts under
subsection 4.7(a). For the purpose of determining the
number of calendar months which have elapsed, a distribution
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occurring on or before the fifteenth day of the month will
be treated as having been made on the last day of the
preceding month, and a distribution occurring after such
fifteenth day will be treated as having been made on the
first day of the next month.
(c) Allocation of Distributed Income to Accounts.
Income distributed with any amounts distributed to a
Participant pursuant to subsection, 4.5(b), 4.5(d) or 4.6
shall reduce the income allocated to a Member's Employee
Elected Contribution Account or Employer Matching
Contribution Account, in accordance with subsection 6.6, in
an amount equal to the total amount of such income
distributed.
4.8 Limitations on Contributions.
(a) Notwithstanding the provisions of subsections
4.1, 4.2 and 4.3 hereof, for any Plan Year the "Annual
Additions" of any Member shall not exceed the lesser of
(1) 25 percent of the Member's Pay or (2) the greater of
$30,000 or 25 percent of the dollar limitation in effect
under Code Section 415(b)(1)(A) for the Plan Year ($98,064
in 1989, adjusted in subsequent years for cost of living
adjustments determined in accordance with regulations
prescribed by the Secretary of Treasury or his delegate
pursuant to the provisions of Code Section 415(d)) ("Maximum
Annual Addition").
(b) "Annual Additions" means the sum of:
(1) Employer Contributions and Remainders
allocated to the Member's accounts pursuant to the
provisions of subsection 4.2 or 4.3.
(2) Employee Elected Matched Contributions.
(3) Employee Elected Unmatched Contributions.
(4) All Employer contributions and forfeitures
allocated to such Member under any other defined
contribution plan of the Employer (or of a Commonly
Controlled Entity or member of an Affiliated Service
Group).
(5) Solely with respect to the limitation
under subsection 4.8(a)(2) contributions allocated to
any individual medical account (as defined in Code
Section 401(h)) which is part of a defined benefit
plan maintained by an employer as provided in Code
Section 415(l) and any amount attributable to
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post-retirement medical benefits allocated to an
account established under Code Section 419(e)(1).
(6) Post-1986 Employee Matched Contributions.
(7) Post-1986 Employee Unmatched Contributions
and the Member's employee contributions under any
other plan of the Employer (or Commonly Controlled
Entity).
(8) Employer Special Section 401(k)
Contributions.
Notwithstanding the foregoing, if a Member
participates in any Related Defined Benefit Plan of the
Employer (or Commonly Controlled Entity or member of an
Affiliated Service Group), the sum of the "Defined Benefit
Plan Fraction" (as defined in subsection 4.8(d)) and the
"Defined Contribution Plan Fraction" (as defined in
subsection 4.8(d)(1)) for such Member shall not exceed 1.0
(called the "Combined Fraction"). If for any Plan Year the
Combined Fraction of a Member exceeds 1.0 after applying any
applicable limits on benefits of any such Related Defined
Benefit Plans, the Maximum Annual Addition of such Member
shall be reduced to the extent necessary to reduce the
Combined Fraction of such Member to 1.0.
(c) Application of Limitations. If for any Plan
Year a Member's actual Annual Additions exceed his Maximum
Annual Additions for such Plan Year, such excess (called the
"Annual Excess") shall not be contributed to the Trust or,
if contributed, shall not be allocated to such Member's
accounts, but shall be treated in the following manner:
(1) The Member's share of Employer
Contributions and Remainders, if any, allocated under
subsection 4.2(b)(4) shall be reduced up to the amount
of the Annual Excess.
(2) If any Annual Excess remains after
application of paragraph (1), the Member's share of
Employer Matching Profit Sharing Contributions and
Remainders, if any, allocated under subsection
4.2(b)(3) shall be reduced by the balance of his
Annual Excess.
(3) If any Annual Excess remains after
application of paragraph (2), the Member's share of
Employer Contributions and Remainders, if any,
allocated under subsection 4.2(b)(2) shall be reduced
by the balance of his Annual Excess.
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(4) If any Annual Excess remains after
application of paragraph (3), the Member's share of
Employer Matching Profit Sharing Contributions and
Remainders, if any, allocated under subsection
4.2(b)(1), shall be reduced by the balance of his
Annual Excess.
(5) If any Annual Excess remains after
application of paragraph (4), the Member's share of
Employer Special Section 401(k) Contributions
allocated to the Member's account under subsection 4.3
shall be reduced by the balance of his Annual Excess.
(6) If any Annual Excess remains after
application of paragraph (5), the Member's Post-1986
Employee Unmatched Contributions shall be reduced by
the balance of his Annual Excess. Any reductions in a
Member's Post-1986 Employee Unmatched Contributions
contributed to the Trust and any earnings thereon
shall be refunded to the Member as soon as
administratively convenient.
(7) If any Annual Excess remains after
application of paragraph (6), the Member's Post-1986
Employee Matched Contributions shall be reduced by the
balance of his Annual Excess. Any reductions in a
Member's Post-1986 Employee Matched Contributions
contributed to the Trust and any earnings thereon
shall be refunded to the Member as soon as
administratively convenient.
(8) If any Annual Excess remains after
application of paragraph (7), the Member's Employee
Elected Unmatched Contributions shall be reduced by
the balance of his Annual Excess. Any reductions in a
Member's Employee Elected Unmatched Contributions
contributed to the Trust and any earnings thereon
shall be refunded to the Member as soon as
administratively convenient.
(9) If any Annual Excess remains after
application of paragraph (8), the Member's share of
Employee Elected Matched Contributions shall be
reduced by the balance of his Annual Excess. Any
reductions in a Member's Employee Elected Matched
Contributions contributed to the Trust and any
earnings thereon shall be refunded to the Member.
(10) If a Member's allocations of Employer
Contributions and Remainders are reduced under
paragraphs (1) through (5) of subsection 4.8(c), the
amount shall be provided to the Member under the
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Chicago and North Western Railway Company Excess
Benefit Retirement Plan (called the Chicago and North
Western Transportation Company Excess Benefit
Retirement Plan until May 5, 1994) to the extent
therein provided.
(d) The "Defined Benefit Plan Fraction" applicable
to a Participant for any Plan Year is a fraction, the
numerator of which is the sum of the Projected Annual
Benefit of the Member under all the defined benefit plans of
the Employer (and Commonly Controlled Entity or member of an
Affiliated Service Group) in which he participates
(determined as of the close of the Plan Year) and the
denominator of which is the lesser of (i) the product of
1.25 multiplied by the maximum dollar limitation on a
Member's Projected Annual Benefit if the Plan provided the
maximum benefit allowable under Code Section 415(b) for such
Plan Year, or (ii) the product of 1.4 multiplied by 100% of
the Member's Highest Average Compensation.
Notwithstanding the above, if the Member was a
participant in one or more defined benefits plans of the
Employer or a Commonly Controlled Entity or member of an
Affiliated Service Group which were in existence on July 1,
1982, the denominator of this fraction will not be less than
1.25 multiplied by the sum of the annual benefits under such
plans which the Member has accrued as of December 31, 1982.
The preceding sentence applies only if the defined benefit
plans individually and in the aggregate satisfied the
requirements of Section 415 of the Code as in effect at the
end of the 1982 limitation year.
Notwithstanding the above, if the Participant was a
participant in one or more defined benefit plans maintained
by an Employer which were in existence on May 6, 1986, the
Participant's maximum annual retirement benefit will not be
less than the sum of the annual benefits under such plans
which the Participant had accrued as of the last day of the
plan year commencing before January 1, 1987, without regard
to changes in the terms and conditions of the plans after
May 5, 1986 or in the cost of living adjustments occurring
after May 5, 1986. The preceding sentence applies only if
the defined benefit plans individually and in the aggregate
satisfied the requirements under Section 415 of the Internal
Revenue Code as in effect at the end of the 1986 limitation
year.
(1) The "Defined Contribution Plan Fraction"
applicable to a member for any Plan Year is a
fraction, the numerator of which is the sum of the
Member's Annual Additions as of the close of such Plan
Year for that Plan Year and for all prior Plan Years
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under all of the Related Plans in which he
participates, and the denominator of which is the sum
of the lesser of the following amounts (determined for
such Plan Year and for each prior Plan Year of service
with the Employer, any Commonly Controlled Entity or
member of an Affiliated Service Group regardless of
whether a plan was in existence during those years):
(i) the product of 1.25 multiplied by the dollar
limitation in effect under Code Section 415(c)(1)(A)
for the Plan Year (determined without regard to the
special dollar limitation for employee stock ownership
plans), or (ii) the product of 1.4 multiplied by
twenty-five percent of the Member's Pay for the Plan
Year.
Notwithstanding the foregoing, at the election of the
Committee made in accordance with Code Section 415(e)(6) in
determining the Defined Contribution Plan Fraction for any
Plan Year ending after December 31, 1982, the denominator of
the Defined Contribution Plan Fraction with respect to each
Member for all Plan Years ending before January 1, 1983
shall be changed to an amount equal to the product of
(i) the denominator determined as described above for the
Plan Year ending in 1982, multiplied by (ii) a fraction,
(the "Transition Fraction") the numerator of which is the
lesser of (A) $51,875 or (B) 1.4 multiplied by twenty-five
percent of the Pay of the Member for the Plan Year ending in
1981, and the denominator of which is the lesser of
(A) $41,500 or (B) twenty-five percent of the Pay of the
Member in the Plan Year ending in 1981.
For the purpose of determining the Member's Defined
Contribution Fraction, any employee contributions made to
the Plan or to a Related Plan before January 1, 1987, shall
be considered Annual Additions only to the extent that they
were counted under the Plan as then in effect. In
calculating the Defined Contribution Fraction for Plan Years
before January 1, 1989, the $200,000 limit on Pay which
became effective on that date shall be ignored.
(2) Definitions
(A) "Highest Average Compensation" means the
average of a Member's highest Pay for three
consecutive Plan Years (determined as of the close of
the Plan Year) of employment with the employer (or the
actual number of years of employment for those Members
who are employed for less than three consecutive years
with the employer).
(B) "Projected Annual Benefit" means the
annual benefit a Member would receive from employer
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contributions under a defined benefit plan, adjusted,
in the case of any benefit payable in a form other
than a single life annuity or a qualified joint and
survivor annuity, to the actuarial equivalent of a
single life annuity, assuming (i) the Member continued
employment until reaching the plan's normal retirement
age (or his current age, if later), (ii) his
compensation remained unchanged and (iii) all other
relevant factors used to determine benefits under the
plan remained constant in the future.
4.9 Deadline for Contributions. Each Employer shall
contribute on behalf of each Participant the Employee Elected
Contributions and Post-1986 Employee Contributions for each Plan
Year to the Trustee, at such time as the Company shall from time
to time determine, as of the earliest date on which such
contributions can reasonably be segregated from the Employer's
general assets but not later than the earlier of (1) 90 days from
the date on which such amounts would otherwise have been payable
to the Active Participant in cash or (2) 30 days after the last
day of the Plan Year. Employer Contributions for each Plan Year
shall be paid to the Trustee not later than the due date of the
Employer's federal income tax return, including any extensions
thereof, for the calendar year with which the Plan Year ends.
4.10 Order of Application of the Limitations of Subsections
4.1(c), 4.5(b), 4.5(d), 4.6 and 4.8. Subsection 4.1(c) shall be
first applied to contributions under the Plan, second, subsection
4.5(b) shall be applied to contributions under the Plan, third,
subsection 4.5(d) shall be applied to contributions under the
Plan, fourth, subsection 4.6 shall be applied to contributions
under the Plan and, last, subsection 4.8 shall be applied to
contributions under the Plan.
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Section 5. Benefits
5.1 Payment of Benefits in General. A Participant's
benefits under this Plan shall be payable in accordance with the
provisions of this Article.
(a) If a Member has a Termination of Employment
because of retirement on or after his Normal Retirement Age,
Disability, or for any other reason other than death, the
vested portion of the Member's Net Balance Account shall be
payable in accordance with and subject to the limitations of
subsection 5.2.
(b) If a Member dies, his vested Member's Net
Balance Account shall be payable to his surviving spouse if
he is married; or to his other Beneficiary or Beneficiaries
if he is not married, or if he is married and names a
Beneficiary other than his surviving spouse in accordance
with subsection 5.3(e) in accordance with and subject to the
limitations of subsection 5.3.
(c) A Member may elect to receive a withdrawal of
all or part of the vested portion of his Member's Net
Balance Account in accordance with and subject to the
limitations of subsection 5.7.
(d) If a Member is otherwise entitled to a
distribution on account of retirement on or after Normal
Retirement Age, Disability, death or other Termination of
Employment, the Committee shall distribute Member's Net
Balance Accounts with small vested balances in accordance
with and subject to the limitations of subsection 5.8,
notwithstanding the provisions of subsections 5.2 and 5.3.
5.2 Payment of the Vested Portion of the Member's Net
Balance Account on Termination of Employment.
(a) Automatic Form of Distribution. If a Member has
a Termination of Employment for any reason other than the
Member's death and
(1) if any portion of the Member's Net Balance
Account is used to offset benefits in a Related
Defined Benefit Plan, unless the Member with his
spouse's consent as provided in subsections 5.6 and
5.7, elects to waive the Qualified Joint and Survivor
Pension and to receive a lump sum payment or
installment payments, as provided in subsection
5.2(b), the vested portion of the Member's Net Balance
Account shall be paid in the form of a Qualified Joint
and Survivor Pension in accordance with
subsection 5.5. Any Member's election to waive the
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Qualified Joint and Survivor Pension as provided in
this subsection 5.2(a)(1) shall apply to his entire
Member's Net Balance Account.
(2) if no portion of the Member's Net Balance
Account is used to offset benefits in a Related
Defined Benefit Plan, unless the Member elects in
accordance with subsection 5.2(b) to receive benefits
in a lump sum or installments, the vested portion of
the Member's Net Balance Account shall be distributed
to the Member in a lump sum within a reasonable time
after the last Accounting Date preceding the Member's
Required Beginning Date but before the Required
Beginning Date.
(b) Optional Forms of Distribution. If a Member has
a Termination of Employment for any reason other than the
Member's death, he may elect subject to subsection 5.2(a) to
have his vested Member's Net Balance Account (determined in
accordance with subsection 6.6) and any contributions with
respect thereto made to the Trust since the immediately
preceding Valuation Date or Accounting Date reduced by any
distributions made since such Valuation Date distributed at
such time as the Member shall elect in one lump sum, in
installment payments or in a combination of both; provided
that if a Member elects to receive such distribution before
the date of his Termination of Employment, the vested
portion of his Member's Net Balance Account will be valued
for purposes of a single sum distribution or the first
installment distribution as of the Valuation Date or
Accounting Date immediately preceding the date of his
Termination of Employment and if a Member does not elect
before the date of his Termination of Employment to receive
a distribution within a reasonable time thereafter, the
vested portion of his Member's Net Balance Account will be
valued for the purpose of such distribution as of the
Valuation Date or Accounting Date which next follows (by at
least 30 days or such lesser period as the Committee shall
from time to time permit) the date such distribution is
requested and will be distributed or commence to be
distributed within a reasonable time after such Valuation
Date or Accounting Date.
(c) Installment Payments. If a Member elects
installment payments in accordance with subsection 5.2(b),
such installments shall be paid annually, over a period
certain, not in excess of the life expectancy of the Member
or the joint and last survivor life expectancy of the Member
and his Beneficiary determined as provided in subsection
5.2(e), if such Beneficiary is an individual, in an amount
at least equal to the vested portion of the Member's Net
Balance Account as of the Accounting Date for the Plan Year
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preceding the Plan Year in which distributions commence
divided by the applicable life expectancy.
Notwithstanding the foregoing, commencing with the
Required Beginning Date each installment payment shall be an
amount not less than the amount determined by dividing the
Member's Net Balance Account as of the Accounting Date
immediately preceding the Plan Year for which the payment is
being made by the Member's life expectancy or the joint and
last survivor life expectancy of the Member and his
Beneficiary, as applicable, determined as provided in this
subsection; provided that if the Member's Beneficiary is not
his spouse:
(1) effective for Plan Years commencing before
January 1, 1989 the period over which installments are
paid shall not be longer than the period which would
result in the Member being expected, as of the date
benefit payments commence, to receive more than 50
percent (50%) of the value of the vested portion of
the Member's Net Balance Account; and
(2) effective for Plan Years commencing on or
after December 31, 1988, a distribution shall be made
for the Plan Year in which the Member attains the age
of 70-1/2 by the Required Beginning Date and for each
Plan Year thereafter by December 31 of the Plan Year
and the distribution shall not be less than the vested
portion of the Member's Net Balance Account as of
preceding Accounting Date divided by the following
applicable divisor:
Attained
Age of Member on
Birthday in Calendar Year Applicable Divisor
70 26.2
71 25.3
72 24.4
73 23.5
74 22.7
75 21.8
76 20.9
77 20.1
78 19.2
79 18.4
80 17.6
81 16.8
82 16.0
83 15.3
84 14.5
85 13.8
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86 13.1
87 12.4
88 11.8
89 11.1
90 10.5
91 9.9
92 9.4
93 8.8
94 8.3
95 7.8
96 7.3
97 6.9
98 6.5
99 6.1
100 5.7
101 5.3
102 5.0
103 4.7
104 4.4
105 4.1
106 3.8
107 3.6
108 3.3
109 3.1
110 2.8
111 2.6
112 2.4
113 2.2
114 2.0
115 and older 1.8
In no event shall annual installment payments be permitted
if the first annual installment payment would be less than
$500.
(d) Distributions to Disabled Members. If a Member
entitled to receive distributions under this subsection 5.2
receives payments under Employer's long term disability
plan, distributions shall not commence under this
subsection 5.2 until the earlier of the date such Member's
payments cease under the Employer's long term disability
plan or the date such Member attains age 65; provided
however, that, if such Member receives payment under
Employer's long term disability plan, prior to the date such
Member attains age 65 and if the Member consents, the
Committee may distribute from time to time to such Member
such portions (or all) of such Member's Net Balance Account
as the Committee determines to be necessary for the health,
support or maintenance of such Member.
(e) Determination of Life Expectancy. The life
expectancy of a Member and of his Beneficiary and the joint
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and last survivor life expectancy of the Member and his
Beneficiary shall be determined on the person's birthday in
the year in which the Member attains the age of 70-1/2 or
for which distributions are otherwise required to commence
as of the date installment payments commence pursuant to
Section 5.2(c) and shall be reduced by one for each calendar
year which has elapsed since the date on which such life
expectancy or joint and last survivor life expectancy was
determined. Except for such annual reductions, a Member's
life expectancy or the joint and last survivor life
expectancy of the Member and his Beneficiary shall not be
subject to subsequent redetermination.
(f) Changing Benefit Elections. A Member (with the
consent of his spouse as provided in subsection 5.7 if any
portion of his vested Member's Account is used to offset
benefits in a Related Defined Benefit Plan) may elect to
change the method and timing of payments; however, payments
shall be made not less rapidly than otherwise permitted in
this subsection 5.2.
5.3 Payment of Vested Member's Net Balance Account on
Death.
(a) Death of Member before Annuity Starting Date.
(1) Member's Net Balance Account Is Offset
Under a Related Defined Benefit Plan. If any portion
of the Member's Net Balance Account is used to offset
benefits in a Related Defined Benefit Plan and if the
Member dies before his vested Member's Net Balance
Account has been transferred to the Chicago and North
Western Railway Company Supplemental Pension Plan
(called the Chicago and North Western Transportation
Company Supplemental Pension Plan until May 5, 1994)
in accordance with subsection 5.5 and before the
vested portion of his Member's Net Balance Account has
been paid or commenced to be paid hereunder, unless
the Member elects, with his surviving spouse's consent
in accordance with subsection 5.7, or the surviving
spouse elects in accordance with subsection 5.6(b) to
waive the Surviving Spouse's Pension and to receive
the entire vested portion of the Member's Net Balance
Account in a lump sum or installments as provided in
subsections 5.3(b) or (c), the vested portion of the
Member's Net Balance Account shall be paid in the form
of a Surviving Spouse's Pension in accordance with
subsection 5.5.
(2) Member's Net Balance Account is Not Offset
Under a Related Defined Benefit Plan. If no portion
of the Member's Net Balance Account is used to offset
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benefits in a Related Defined Benefit Plan and if the
Member dies before his vested Member's Net Balance
Account has been distributed or has commenced to be
distributed and before the Member's Required Beginning
Date, the vested portion of the Member's Net Balance
Account shall be paid as elected by the Member or his
Beneficiary (designated in accordance with subsection
5.3(e)) as provided in subsection 5.3(b) or 5.3(c).
(b) Death of Member After Required Beginning Date.
Notwithstanding any other provisions of this Plan, or any
elections made by the Member or his Beneficiary if a Member
dies after his Required Beginning Date, but before the
entire vested portion of his Member's Net Balance Account is
distributed or transferred to the Chicago and North Western
Railway Company Supplemental Pension Plan (called the
Chicago and North Western Transportation Company
Supplemental Pension Plan until May 5, 1994), the balance of
the vested portion of his Member's Net Balance Account shall
be distributed to his surviving spouse or other Beneficiary
designated with his spouse's consent in accordance with
subsection 5.7 at least as rapidly as under the method of
distribution in effect on the date of the Member's death.
(c) Death of Member Before Required Beginning Date.
Notwithstanding any other provisions of this Plan but
subject to subsection 5.3(a)(1) or (2), as applicable, if a
Member dies at a time when his benefits are not being paid
in the form of a Qualified Joint and Survivor Pension,
before the entire vested portion of his Member's Net Balance
Account has been distributed and before his Required
Beginning Date, the vested portions of his Member's Net
Balance Account shall be paid to his Beneficiary within five
(5) years of the Member's death; except that any part of the
vested portion of his Member's Net Balance Account may be
paid in installments (i) to his Beneficiary, if his
Beneficiary is an individual, over a period not exceeding
such individual's life expectancy, (ii) to the extent
permitted under applicable regulations or rulings, to a
Trust for the benefit of an individual Beneficiary over a
period not exceeding such individual's life expectancy or
(iii) to the extent permitted by applicable regulations or
rulings to a trust for the benefit of more than one
individual Beneficiary over a period not exceeding the
shortest life expectancy of any such individual Beneficiary
beginning no later than:
(1) the last day of the Plan Year after the
Plan Year of the Member's death, or
(2) if later and if the Beneficiary is the
Member's surviving spouse, not later than the date on
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which the Member would have attained the age of 70-1/2
years.
The period over which the foregoing installment payments may
be paid shall be determined based upon the applicable life
expectancy of the Beneficiary as determined on his birthday
in the year in which benefit payments are required to
commence in accordance with this subsection 5.3(c). The
amount of each annual installment payment shall be at least
as large as the Member's Net Balance Account as of the
Accounting Date for the Plan Year preceding the Plan Year of
distribution divided by the life expectancy of the
Beneficiary determined in accordance with subsection 5.2(e).
If the surviving spouse of a Member is the
Beneficiary, and dies before distributions have begun to the
surviving spouse, distributions shall be made not later than
nor over a longer period than would be permitted in
accordance with the preceding portions of subsection 5.3(c)
if the date of the spouse's death were the date of the
Member's death.
If a Beneficiary has commenced to receive a
distribution under this subsection 5.3(c), and such
Beneficiary dies before the entire vested portion of the
Member's Net Balance Account has been distributed, the
remainder of the vested portion of the Member's Net Balance
Account shall be distributed to the Beneficiary's estate.
(d) Payment to Beneficiary. On the death of a
Member, the vested portion of the Member's Net Balance
Account shall be paid (1) in the form of a Surviving
Spouse's Pension, if the Member's Net Balance Account is
offset under a Related Defined Benefit Plan, as provided in
subsection 5.2(a)(1), or in the form of one lump sum or
annual installments as elected by the Member to the Member's
surviving spouse, if the Member's Net Balance Account is not
so offset, as provided in subsection 5.2(a)(2), or (2) to
another Beneficiary or Beneficiaries designated by the
Member in accordance with subsection 5.3(e) with his
surviving spouse's consent in accordance with subsection
5.7, unless such Beneficiary or Beneficiaries elect (and
they are not prohibited by an election of the Member from so
electing) to defer or otherwise change the timing or form of
the receipt of the vested portion of the Member's Net
Balance Account. If the Member's Net Balance Account is not
required to be paid in the form of a Surviving Spouse's
Pension in accordance with subsection 5.2(a)(1) and if the
Member fails to elect a form of payment and his Beneficiary
fails to elect a form of payment within a reasonable time
after the Member's death, the vested portion of the Member's
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Net Balance Account shall be paid in one lump sum to the
Member's Beneficiary.
(e) Designation of Beneficiary.
(1) On the death of a Member, whose Member's
Net Balance Account is not required to be paid in the
form of a Surviving Spouse's Pension in accordance
with subsection 5.2(a)(l), after payment of the vested
portion of his Member's Net Balance Account has
commenced to be paid and before the entire vested
portion of his Member's Net Balance Account has been
paid from the Plan, if the Member has a surviving
spouse, the Trustee shall pay the vested portion of
the Member's Net Balance Account (or remaining
Member's Net Balance Account, if any) to the Member's
surviving spouse, unless the Member (with his spouse's
consent in accordance with subsection 5.7) has named
another Beneficiary. If the Member does not have a
surviving spouse or if the member (with his spouse's
consent in accordance with subsection 5.7), has named
a Beneficiary other than his surviving spouse the
Trustee shall pay the vested portion of the Member's
Net Balance Account (or the remaining vested portion
of the Member's Net Balance account if any) to his
Beneficiary. To the extent the vested portion of the
Member's Net Balance Account is payable to his
surviving spouse, such spouse shall be treated as the
Member's Beneficiary under this Plan.
(2) On the death of a Member, whose Member's
Net Balance Account is not required to be paid in the
form of a Surviving Spouse's Pension in accordance
with subsection 5.2(a)(1), before payment of the
vested portion of his Member's Net Balance Account has
commenced to be paid, has been paid or has been
transferred to the Supplemental Pension Plan for
payment in the form of a life annuity, in accordance
with subsection 5.5, if the Member with his spouse's
consent in accordance with subsection 5.7 has waived
the Surviving Spouse's Pension, the Member's
Beneficiary shall be his surviving spouse unless the
Member with the consent of his spouse in accordance
with subsection 5.7, designates another Beneficiary or
Beneficiaries and the form in which the benefit is to
be paid on a Beneficiary Designation Form provided by
the Committee which may be changed from time to time
by filing a new Beneficiary Designation Form with the
Committee. No designation of Beneficiary or change of
Beneficiary shall be effective until it has been
delivered by the Member to the Committee and a copy of
such designation acknowledged by the Committee has
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been returned to the Member. If a Member is not
married or is married but designates, with his
spouse's consent in accordance with subsection 5.7, a
Beneficiary or Beneficiaries other than his surviving
spouse, and if such Member shall fail to file a valid
Beneficiary Designation Form, or if all persons
designated on the Beneficiary Designation Form shall
have predeceased the Member (or, in the case of a
Beneficiary other than an individual, shall have
ceased to exist prior to the Member's death), the
Trustee shall distribute the part of such vested
portion of the Member's Net Balance Account which is
subject to the Beneficiary Designation Form in one
lump sum to the Member's surviving spouse, if any,
and, if not, to the Member's estate.
(f) Payments to a Minor Child. Any amount paid to a
child, in accordance with regulations prescribed by the
Secretary of the Treasury, shall be treated as if it had
been paid to the Member's surviving spouse if such amount
will become payable to the surviving spouse upon such child
reaching majority (or such other events as the Secretary of
the Treasury may by regulations prescribe).
5.4 Withdrawals. Withdrawals from the accounts of a
Member may be made prior to his Termination of Employment in
accordance with this subsection 5.4; provided that if a portion
of the Member's Net Balance Account is used to offset benefits in
a Related Defined Benefit Plan, such withdrawal shall be
distributed in the form of a Qualified Joint and Survivor Pension
as provided in subsection 5.5, unless the Member with his
spouse's consent in accordance with subsection 5.7 elects to
waive the Qualified Joint and Survivor Annuity and to receive
such withdrawal in a single payment.
(a) Elective Withdrawals of Contributions from the
Employee Matched Contribution Account. A Member may at any
time file application for a withdrawal distribution of all
or any part of his Employee Matched Contributions credited
to his Employee Matched Contribution Account, or the value
of such withdrawable contributions, if lower, provided
that -
(1) such withdrawal shall not include any
Employee Matched Contributions that have not been
credited to such account for at least 60 months, nor
any earnings and gains on Employee Matched
Contributions; and
(2) the minimum withdrawal under this
paragraph (a) shall be an amount equal to the smaller
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of (i) 50% of the amount otherwise withdrawable
hereunder or (ii) $1,000.
In no event shall any Member be permitted to
make more than one such withdrawal in any Plan Year, unless
the Member has incurred a Hardship as determined by the
Committee under rules adopted by the Committee and applied
to all such Members in a nondiscriminatory manner.
(b) Hardship Withdrawal of Contributions from the
Employee Matched Contribution Account. A Member who has
withdrawn (or who is concurrently applying to withdraw) the
maximum amount permitted under paragraph (a) above may at
any time file application for a withdrawal distribution of
all or any part of his Employee Matched Contributions which
have been credited to his Employee Matched Contribution
Account for less than 60 months, or the value of such
withdrawable contributions, if lower. Such application
shall not be approved by the Committee unless the Member has
incurred a Hardship as determined by the Committee under
rules adopted by the Committee and applied to all such
Members in a nondiscriminatory manner. The amount of such
withdrawal distribution shall not exceed the amount required
to meet the immediate financial need created by Hardship as
determined by the Committee, and if approved, shall be paid
from the Member's Employee Matched Contribution Account.
(c) Withdrawal of Earnings and Gains on Employee
Matched Contributions. A Member who has withdrawn (or who
is concurrently applying to withdraw) the maximum amount
permitted under paragraphs (a) and (b) above may at any time
file application for a withdrawal distribution of an amount
not more than the net earnings and gains, if any, of the
Trust Fund attributable to his Employee Matched
Contributions that are then withdrawable under
paragraphs (a) and (b) above. Such application shall not be
approved by the Committee unless the Member has incurred a
Hardship as determined by the Committee under rules adopted
by the Committee and applied to all such Members in a
nondiscriminatory manner. The amount of such withdrawal
distribution shall not exceed the amount required to meet
the immediate financial need created by the Hardship, and if
approved shall be paid from the Member's Employee Matched
Contribution Account.
(d) Hardship Withdrawals from Employee Elected
Matched Contribution Account, Employee Elected Unmatched
Contribution Account, Post-1986 Employee Matched
Contribution Account, Post-1986 Employee Unmatched
Contribution Account and Employer Contribution Account. A
Member who has withdrawn (or who is concurrently applying to
withdraw) the maximum amount permitted under paragraphs (a),
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(b), (c) and (f) of this subsection 5.4, if any, may at any
time file application for a withdrawal on account of
Hardship of all or any part of his Post-1986 Employee
Unmatched Contribution Account, Post-1986 Employee Matched
Contribution Account, Employee Elected Unmatched
Contribution Account, Employee Elected Matched Contribution
Account, and the vested portion of his Employer Contribution
Account; provided that withdrawals shall be made from the
aforementioned accounts in the order listed above and
further provided that:
(1) No withdrawal on account of Hardship shall
be permitted of any portion of a Participant's
Employer Contribution Account that is attributable to
Employer Contributions and Remainders allocated to him
pursuant to subsection 4.2(b)(2) (or an Integrated
Allocation made under the CNW Corporation Profit
Sharing and Retirement Savings Program for periods
before January 1, 1989) (relating to Railroad
Retirement Excess Pay or Social Security Excess Pay).
(2) The maximum amount withdrawable on account
of Hardship shall not exceed the amount required to
meet the immediate financial need created by Hardship.
(3) Employer Matching Profit Sharing
Contributions (and the earnings and appreciation
thereon) and the earnings and appreciation credited to
Participants' Employee Elected Matched Contributions
and to Employee Elected Unmatched Contributions with
respect to periods commencing on or after January 1,
1989, allocated with respect thereto shall not be
withdrawn on account of Hardship.
(e) Effect of Withdrawals. A Member who receives a
withdrawal distribution pursuant to any of subsections
5.4(a), (b), (c) and (d) above shall have any Employee
Elected Matched Contributions, Employee Elected Unmatched
Contributions, Post-1986 Employee Matched Contributions and
Post-1986 Employee Unmatched Contributions he is making
discontinued as provided in subsection 4.1(e)(4) effective
as of the date of such distribution, but may resume such
contributions subject to the provisions of subsection
4.1(e)(4); provided, however, that the aforementioned
contributions shall not be discontinued on account of a
distribution from a Member's Net Balance Account to an
alternate payee in accordance with a Qualified Domestic
Relations Order.
(f) Withdrawals from the Employee Unmatched
Contribution Account. A Member may file application for a
withdrawal distribution of all or any part of the credit
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balance in his Employee Unmatched Contribution Account, at
such times and in accordance with such rules as the
Committee may establish.
(g) Withdrawal at or After Age 60. Any Member who
has attained age sixty (60), may file application for a
withdrawal distribution of all or any portion of his vested
Net Balance Account attributable to Employee Elected
Unmatched Contributions and Post-1986 Employee Unmatched
Contributions at such times and in accordance with such
rules as the Committee may establish.
5.5 Payment of Life Annuities. If a vested Member's Net
Balance Account or a portion thereof is paid in the form of a
Qualified Joint and Survivor Pension or if a benefit is paid to a
surviving spouse in the form of a Surviving Spouse's Pension,
such benefit shall be the Actuarial Equivalent on the annuity
commencement date of the vested Member's Net Balance Account or
the portion thereof to be paid in such life annuity form. The
vested Member's Net Balance Account or the portion thereof to be
paid in such life annuity form shall be transferred to the
Chicago and North Western Railway Company Supplemental Pension
Plan (called the Chicago and North Western Transportation Company
Supplemental Pension Plan until May 5, 1994) as of the annuity
starting date and the life annuity form of benefit shall be paid
to the Member or his surviving spouse therefrom. Once a Member's
Net Balance Account or portion thereof has been transferred to
the Chicago and North Western Railway Company Supplemental
Pension Plan (called the Chicago and North Western Transportation
Company Supplemental Pension Plan until May 5, 1994), the Member
and his Beneficiary shall have no further entitlement to benefits
under the Plan with respect to the Member's Net Balance Account
or portion thereof so transferred.
5.6 Qualified Joint and Survivor Pension and Surviving
Spouse's Pension. A Member or Surviving Spouse who is to receive
benefits in the form of a life annuity in accordance with
subsection 5.2(a)(1) or 5.3(a)(1) shall have the right to waive a
Qualified Joint and Survivor Pension (such waiver by the Member
shall be consented to by the Member's spouse in writing in
accordance with subsection 5.7) or Surviving Spouse's Pension,
respectively, by delivering written notice to the Committee, at
any time within the Applicable Election Period to receive all of
such benefits in another form of benefit. If a Member or his
Surviving Spouse is to receive benefits in the form of a
Qualified Joint and Survivor Pension or Surviving Spouse's
Pension as provided in subsection 5.2(a) or 5.3(a) the Committee
shall no less than 30 days and no more than 90 days before the
annuity starting date provide the Member or his Surviving Spouse,
by personal delivery or first class mail, with a written
explanation of:
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(a) the terms and conditions of the Qualified Joint
and Survivor Pension or Surviving Spouse's Pension;
(b) the Member's or Surviving Spouse's right to
make, and the effect of, an election to waive the Qualified
Joint and Survivor Pension or Surviving Spouse's Pension;
(c) the rights of the Member's spouse to consent to
the Member's election to waive the Qualified Joint and
Survivor Pension and the effect of consenting to such
waiver; and
(d) the Member's right to make, and the effect of, a
revocation of an election to waive the Qualified Joint and
Survivor Pension.
Any election made by a Member to receive a life
annuity form of benefit pursuant to this subsection 5.6 may
be revoked by such Member (with his spouse's consent in
accordance with subsection 5.7) by delivering written notice
to the Committee at any time prior to the Member's annuity
starting date and, once revoked, may be made again at any
time by delivering written notice to the Committee prior to
the Member's annuity starting date.
"Applicable Election Period" means, with respect to a Qualified
Joint and Survivor Pension, the 90 day period prior to the
annuity starting date and, with respect to the Surviving Spouse's
Pension, the period (i) beginning with the first day of the Plan
Year in which the Participant attains the age of 35, or, if
earlier, the date of the Participant's Termination of Employment,
but in no event before the Effective Date and (ii) ending on the
earlier of the annuity starting date or the date following the
Member's Termination of Employment on which benefits commence to
be paid in any form.
5.7 Spousal Consent to Waiver of Life Annuity or to the
Naming of Another Beneficiary.
(a) A valid spousal waiver of or consent to the
Member's waiver of a life annuity or to the naming of a
Beneficiary other than his spouse shall be designated:
(1) in writing acknowledging the effect of the
consent;
(2) witnessed by a notary public;
(3) effective only with respect to the
Beneficiary designated in the waiver or the
beneficiary designation unless such consent expressly
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permits subsequent designations of beneficiaries
without further spousal consent; and
(4) effective only for the spouse who
exercises the consent;
provided that notwithstanding the provisions of
subsection 5.2, 5.3, 5.4 or 5.6, the consent of a Member's
spouse shall not be required if it is established to the
satisfaction of the Committee that such consent may not be
obtained because there is no spouse, because the spouse
cannot be located or because of such other circumstances as
the Secretary of the Treasury may by regulations prescribe.
(b) To the extent provided in any Qualified Domestic
Relations Order (as defined in subsection 12.2), the former
spouse of a Member shall be treated as the surviving spouse
of such Member for purposes of this subsection 5.7 and
providing consent in accordance with this subsection 5.7.
5.8 Lump Sum Payment without Election. Notwithstanding
any provisions of this Section 5 to the contrary, if the Member
or Beneficiary is entitled to a distribution due to Member's
retirement on or after his Normal Retirement Age, death,
Disability or other Termination of Employment, and if the value
of the vested portion of a Member's Net Balance Account does not
exceed $3,500 at the time of a distribution, the Committee shall,
in accordance with uniform and non-discriminatory rules, direct
the distribution of such benefit, if any, within a reasonable
time following the Valuation Date or Accounting Date coinciding
with or next following the date such person is entitled to the
distribution regardless of any election or consent of the Member,
his spouse or other Beneficiary.
5.9 Vested Interests.
(a) Notwithstanding subsection 5.9(b), a Member
shall be 100% vested in his Member's Net Balance Account as
of the quarterly Valuation Date or annual Accounting Date
coinciding with or immediately preceding his Termination of
Employment, if before or on the date of his Termination of
Employment he attains his Normal Retirement Age, has a
Disability or dies or, for periods before January 1, 1995,
if such Member's Termination of Employment was on account of
a Force Reduction, as defined in the following sentence. A
Participant's Termination is on account of a "Force
Reduction" if the Participant voluntarily or involuntarily
has a Termination of Employment on account of a reduction of
the work force of the Employer as determined and applied by
the Employer in accordance with its personnel policies
applied in a uniform and non-discriminatory manner.
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(b) If subsection 5.9(a) does not apply, the vested
portion of a Member's Net Balance Account is the sum of:
(1) The full adjusted amount (as determined
under subsection 6.6) of his Employee Matched
Contribution Account, his Employee Elected Matched
Contribution Account, his Employee Elected Unmatched
Contribution Account, his Post-1986 Employee Matched
Contribution Account, his Post-1986 Employee Unmatched
Contribution Account and his Employer Matching
Contribution Account.
(2) The vested portion of the Member's
Employer Contribution General Account shall be
determined in accordance with the following table
based on his Vesting Service as of the date of such
Termination of Employment:
Vesting Service Vested Portion
Less than 5 years 0%
5 years or more 100%
(3) An amount equal to the full adjusted
amount (as determined under subsections 4.1(h) and
6.6) credited to his Employee Unmatched Contribution
Account valued as of the Valuation Date or Accounting
Date coinciding with or next following Termination of
Employment.
(c) Any part of a Member's General Employer
Contribution Account which is not distributable under this
subsection 5.9 because he is not entitled to 100% thereof as
above provided, shall be deemed a Remainder as of the last
day of the Plan Year in which occurs five consecutive Breaks
In Service. Until the unvested portion of the Former
Participant's Employer Contribution General Account becomes
a Remainder, it shall be held in a separate account for the
Participant. Remainders arising during a Plan Year shall be
added to the Employer Contributions for such Plan Year and
shall be allocated to Members entitled to share in the
Employer Contributions at the end of the Plan Year during
which the Remainders arose, as provided under subsection
4.2(b). If a Member who had a Termination of Employment on
or after January 1, 1987 is reemployed by an Employer,
Commonly Controlled Entity or member of an Affiliated
Service Group before the occurrence of five consecutive
Breaks In Service, that portion of the Member's Employer
Contribution General Account, if any, which was not vested
at the time of his Termination of Employment shall be
reinstated ("Reinstated Amount") to the Member's Employer
Contribution General Account as of the last day of the Plan
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Year of reemployment. For amounts which became Remainders
in Plan Years commencing in 1985 and 1986, such Reinstated
Amounts shall be taken out of Remainders for the Plan Year
of reemployment or, if such Remainders are insufficient, out
of the earnings of the Trust for the Plan Year of
reemployment provided that he is an employee of an Employer,
Commonly Controlled Entity or member of an Affiliated
Service Group as of the last day of the Plan Year of
reinstatement. Thereafter, the vested portion of such
Member's Employer Contribution General Account shall be
equal to the Reinstated Amount multiplied by the Member's
Vested Service.
(d) Notwithstanding the foregoing provisions of this
subsection 5.9, if a Member is transferred from the
employment of an Employer to the employment of another
Employer, or to a Commonly Controlled Entity or member of an
Affiliated Service Group which is not an Employer, his
Employer Contribution Account shall remain in the Plan and
the Member shall continue to vest therein based on his
employment with such Employer, Commonly Controlled Entity or
Affiliated Service Group.
5.10 Incompetency. Every person receiving or claiming
benefits under the Plan shall be conclusively presumed to be
mentally competent until the date on which the Committee receives
a written notice, in a form and manner acceptable to the
Committee that such person is incompetent and that a guardian,
conservator or other person legally vested with the care of his
estate has been appointed for him; provided, however, that if the
Committee shall find that any person to whom a benefit is payable
under the Plan is unable to care for his affairs because of
incompetency, any payment due (unless a prior claim therefor
shall have been made by a duly appointed legal representative)
may be paid to the spouse, a child, a parent, a brother or
sister, of said person, or the Committee may reimburse any person
or institution deemed by the Committee to have incurred expenses
for such person otherwise entitled to payment. In the event a
guardian or conservator of the estate of any person receiving or
claiming benefits under the Plan shall be appointed by a court of
competent jurisdiction, payments shall be made to such guardian
or conservator provided that proper proof of appointment and
continuing qualification is furnished in a form and manner
acceptable to the Committee. Any payment made in accordance with
this subsection 5.10 shall be a complete discharge of any
liability therefor under the Plan.
5.11 Deduction of Taxes from Amounts Payable.
(a) The Trustee may deduct from the amount to be
distributed such amount as the Trustee, in its sole
discretion, deems proper to protect the Trustee and the
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Trust against liability for the payment of death,
succession, inheritance, income, or other taxes, and out of
the money so deducted, the Trustee may discharge any such
liability and pay the amount remaining to the Member, the
Beneficiary or the deceased Member's estate, as the case may
be.
(b) In the case of an Eligible Rollover Distribution
that is subject to the income tax withholding of Section
3405(c) of the Code, if property (other than employer
securities) is distributed and the cash in the distribution
is not sufficient to satisfy the withholding obligation, the
Plan Administrator can sell the property or receive cash
from the Participant in amounts sufficient to pay the
withholding.
(c) The Administrator will not be liable for failing
to withhold on an Eligible Rollover Distribution that is not
in fact paid to an Eligible Retirement Plan if the
Administrator reasonably relied on adequate information
provided by the Participant who elected the direct rollover.
For purposes of the foregoing provision, adequate
information includes the name of the recipient plan, a
representation that the recipient plan is an Eligible
Retirement Plan, and any other information necessary to
accomplish the direct rollover by the means selected for
delivery.
5.12 Deadline for Payment of Benefits. Any provision
herein to the contrary notwithstanding, payment of benefits shall
commence (unless the Member elects otherwise) not later than the
60th day after the latest of the close of the Plan Year in which
(1) the Member attains age 65, (2) occurs the 10th anniversary of
the date on which the member commenced participation in the Plan,
or (3) the Member has a Termination of Employment; provided that
in no event shall payment of benefits commence after a Member's
Required Beginning Date.
5.13 Application for Distribution. Each person applying
for a distribution under the Plan shall furnish the Committee
with such documents, evidence, data or information in support of
his eligibility as the Committee considers necessary or
desirable. In the event any question or dispute shall arise as
to the proper person or persons to whom any payment shall be
made, the Committee may authorize the Trustee to withhold such
payment until a determination of such question or dispute shall
have been made, or until persons seeking such a distribution have
provided indemnification in such form, manner and amount as the
Committee in its sole discretion shall deem acceptable. The
Committee may determine the proper person or persons to whom any
benefit hereunder shall be paid, and, in so doing, may act upon
such information as on reasonable inquiry it may deem reliable,
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with respect to heirship, relationship, death, survivorship,
identity, financial hardship, or any other fact relative to such
determination. The Committee may rely upon any affidavit,
certificate, letter or other paper or document believed by it to
be genuine, and upon any evidence believed by it to be
sufficient; and shall have no liability for distribution made
hereunder, if made in good faith.
5.14 Deferred Payments. The unpaid balance of any part of
the Member's Net Balance Account which has not been distributed
or transferred to the Chicago and North Western Railway Company
Supplemental Pension Plan (called the Chicago and North Western
Transportation Company Supplemental Pension Plan until May 5,
1994) shall share in the adjustments to reflect the net worth of
the Trust Fund on each Accounting Date and Valuation Date as
provided in subsection 6.6.
5.15 Unclaimed Amounts. Unclaimed amounts shall consist of
the amounts of the accounts of Former Participants which are not
distributed because of the Plan Administrator's inability, after
reasonable search, to locate a Former Participant or Beneficiary
within a period of two years after the payment of benefits
becomes due. Unclaimed amounts shall be considered as
Remainders, shall be allocated as provided in subsection 4.2(b),
and shall be deemed to occur as of the end of said two year
period. If after such Remainder has been allocated in accordance
with subsection 4.2(b), an unclaimed amount is properly claimed
by the Former Participant or Beneficiary, the amount necessary to
make the payment(s) to the Former Participant or Beneficiary
shall be charged against either Remainders or the income and
expenses of the Trust for the Plan Year in which such payment(s)
are made, as determined by the Plan Administrator. Except as
provided above, the accounts of other Participants shall not be
re-adjusted on account of such payment(s).
5.16 Eligible Rollover Distributions.
(a) This Section applies to distributions made on or
after January 1, 1993. Notwithstanding any provision of the
Plan to the contrary that would otherwise limit a
distributee's election under this Section, a distributee may
elect, at the time and in the manner prescribed by the Plan
Administrator, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan
specified by the distributee in a direct rollover; provided,
however, that an eligible rollover distribution of less than
$200 shall not be eligible for a direct rollover.
(b) Definitions.
(i) "Eligible rollover distribution":
An eligible rollover distribution is any distribution
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of all or any portion of the balance to the credit of
the distributee, except that an eligible rollover
distribution does not include: any distribution that
is one of a series of substantially equal periodic
payments (not less frequently than annually) made for
the life (or life expectancy) of the distributee or
the joint lives (or joint life expectancies) of the
distributee and the distributee's designated
beneficiary, or for a specified period of ten years or
more; any distribution to the extent such distribution
is required under Section 401(a)(9) of the Code; and
the portion of any distribution that is not includible
in gross income.
(ii) "Eligible retirement plan": An
eligible retirement plan is an individual retirement
account described in Section 408(a) of the Code, an
individual retirement annuity described in
Section 408(b) of the Code, an annuity plan described
in Section 403(a) of the Code, or a qualified trust
described in Section 401(a) of the Code, that accepts
the distributee's eligible rollover distribution.
However, in the case of an eligible rollover
distribution to the surviving spouse, an eligible
retirement plan is an individual retirement account or
individual retirement annuity.
(iii) "Distributee": A distributee
includes an employee or former employee. In addition,
the employee's or former employee's surviving spouse
and the employee's or former employee's spouse or
former spouse who is the alternate payee under a
qualified domestic relations order, as defined in
Section 414(p) of the Code, are distributees with
regard to the interest of the spouse or former spouse.
(iv) "Direct rollover": A direct
rollover is a distribution by the Plan made payable to
the trustee of the eligible retirement plan specified
by the distributee.
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Section 6. Investment Funds, Accounts and Trust
6.1 Investment Funds. As of the Effective Date,
Investment Funds will be maintained by the Trustee for investment
purposes, as follows:
(a) An Equity Fund, or Fund B, which shall be
invested in common stocks, similar equity securities, or
other like property including, but not limited to, bank
pooled or common funds, mutual funds or insurance company
separate accounts invested in such securities.
(b) An Insurance Contract Fund, or Fund C, which
shall be invested in such contracts issued by an insurance
company as shall from time to time be determined by the
Board of Directors, including, but not limited to,
guaranteed income contracts, group annuity contracts,
immediate participation guarantee contracts, or deposit
administration contracts.
(c) Fund D, which shall be invested primarily in the
Windsor Fund maintained by the Vanguard Group of Investment
Companies, and which shall consist of separate subaccounts
for each Participant any portion of whose Employee Unmatched
Contribution Account is invested therein.
(d) Fund E, which shall be invested primarily in the
Vanguard Money Market Trust - Prime Portfolio maintained by
the Vanguard Group of Investment Companies, and which shall
consist of separate subaccounts for each Participant any
portion of whose Employee Unmatched Contribution Account is
invested therein.
(e) Such other subsequently-lettered funds as may be
established by the Investment Committee each of which shall
be invested primarily in one of the mutual funds offered by
the Vanguard Group of Investment Companies and shall consist
of separate subaccounts for each Participant any portion of
whose Employee Unmatched Contribution Account is invested
therein, provided such fund records the Trust Fund's
investment therein in the form of such separate accounts.
6.2 Investment Directions. When an Employee becomes a
Participant he shall specify, by written notice to the Committee,
to which of Funds B and/or C, his Employee Matched Contributions,
Employee Elected Matched Contributions, Employee Elected
Unmatched Contributions, Post-1986 Employee Matched
Contributions, Post-1986 Employee Unmatched Contributions and
Employer Contributions will be credited; he may specify such
percentages thereof (in increments of 10%) in any one or
combination of such Funds. If he fails to so specify, his
Employee Matched Contributions, Employee Elected Matched
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Contributions, Employee Elected Unmatched Contributions,
Post-1986 Employee Matched Contributions, Post-1986 Employee
Unmatched Contributions and Employer contributions shall be
credited to Fund C. He may change a direction with respect to
his Employee Matched Contributions, Employee Elected Matched
Contributions, Employee Elected Unmatched Contributions,
Post-1986 Employee Matched Contributions, Post-1986 Employee
Unmatched Contributions and Employer Contributions no more
frequently than two times per year, as specified by the
Committee, and subject to rules imposed by the Committee. A
Participant may also specify, by written notice to the Committee,
to which of Fund D and/or E and/or such other Fund as may be
established by the Committee and designated for such investment,
his Employee Unmatched Contributions (made in accordance with the
Plan prior to January 1, 1987) will be credited; he may specify
the portion of such Employee Unmatched Contributions which will
be invested in each of such Funds. If he fails to so specify,
his Employee Unmatched Contributions shall be invested in Fund E.
A Participant may change his investment direction with respect to
his Employee Unmatched Contributions at any time and from time to
time by filing a written election with the Committee, subject to
such rules and restrictions as the Committee may from time to
time impose.
6.3 Transfers Among Investment Funds.
(a) A Participant, Inactive Participant or Former
Participant may elect to transfer his balances (excluding
his Employee Unmatched Contribution Account balance) among
Fund B and Fund C. He may elect that 100% of his balance in
his Employer Contribution General Account, Employer Matching
Contribution Account, Employee Matched Contribution Account,
his Employee Elected Matched Contribution Account, Employee
Elected Unmatched Contribution Account, Post-1986 Employee
Matched Contribution Account and Post-1986 Employee
Unmatched Contribution Account, or any percentage (in
increments of 10%) thereof, be invested in any one or
combination of Fund B or Fund C. Such transfer may be made
no more frequently than two times per year, as specified by
the Committee, and subject to rules imposed by the
Committee.
(b) A Participant, Inactive Participant or Former
Participant may elect to transfer his balances among Fund D,
Fund E and such other Funds as may be designated by the
Committee for investment of Employee Unmatched
Contributions. He may elect that 100% of his balance in his
Employee Unmatched Contribution Account or any percentage
thereof, be invested in any one or combination of Fund D,
Fund E, or other Fund designated by the Committee for
investment of Employee Unmatched Contributions. Such
transfers may be made at any time and from time to time,
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subject to such rules and restrictions as the Committee may
from time to time impose.
6.4 Investment Income to be Accumulated. The income of
each Investment Fund shall be added to that Investment Fund and
each Investment Fund shall be invested without distinction
between principal and income.
6.5 Accounts and Records.
(a) The Accounts and Records of the Plan shall be
maintained by the Committee and shall accurately disclose
the status of the accounts of each Member or beneficiary in
the Plan. The Trust Fund shall be divided into separate
funds designated by letter, which shall respectively be
invested as set forth in the Trust.
(1) Each Participant shall have the following
accounts:
(A) Employee Elected Matched Contribution
Account to which shall be credited his Employee
Elected Matched Contributions;
(B) Employee Elected Unmatched Contribution
Account to which shall be credited his Employee
Elected Unmatched Contributions;
(C) Post-1986 Employee Matched Contribution
Account to which shall be credited his Post-1986
Employee Matched Contributions;
(D) Post-1986 Employee Unmatched Contribution
Account to which shall be credited his Post-1986
Employee Unmatched Contributions;
(E) Employer Contribution Account to which
shall be credited and separately accounted for
his Employer Matching Contribution Account and
Employer Contribution General Account, as
defined in subsections 2.25 and 2.24,
respectively;
(F) Employee Unmatched Contribution Account to
which shall be credited his Employee Unmatched
Contributions made before January 1, 1987; and
(G) Employee Matched Contribution Account to
which shall be credited his Employee Matched
Contributions made to the Plan before January 1,
1983.
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The sum of all such accounts shall be identified
as his Member's Net Balance Account.
(b) Each Member will be advised from time to time,
at least once each Plan Year, as to the status of his
Member's Net Balance Account.
(c) The total of Members' Employee Matched
Contribution Accounts, Employee Elected Matched Contribution
Accounts, Employee Elected Unmatched Contribution Accounts,
Post-1986 Employee Matched Contribution Accounts, Post-1986
Employee Unmatched Contribution Accounts, Employer Matching
Contribution Accounts and Employer Contribution General
Accounts shall be invested in Fund B and/or Fund C of the
Trust Fund or any one or combination thereof. The Employee
Unmatched Contribution Account shall be invested in Fund D,
Fund E and/or any other Fund established by the Committee
for investment of Employee Unmatched Contributions, or any
one or combination thereof. The Trust fund shall consist of
the separate funds, and each Member shall have an undivided
proportionate interest in Fund B and Fund C. Each Member's
undivided proportionate interest in each of Fund B and
Fund C of the Trust Fund shall be measured by the proportion
that his account or accounts in such fund bears to the total
accounts of all Members in that fund as of the dates that
such interest is being determined. Each Member shall have a
separate account in each Fund in which his Employee
Unmatched Contribution Account is invested, if the mutual
fund in which such Fund is invested maintains its records on
an individual account basis (including records maintained by
the mutual fund at the request of the Plan Administrator).
Each such separate account shall be separately credited with
contributions, earnings and gains and charged with losses,
expenses and distributions as of each Accounting Date,
Valuation Date, and each Additional Valuation Date provided
by the mutual fund in which such Fund is invested. If such
mutual fund does not maintain its accounts on such basis,
then each Member shall have an undivided proportionate
interest in such Fund, which interest shall be measured by
the proportion that his Employee Unmatched Contribution
Account invested in such Fund bears to the total accounts of
all Members in that Fund as of the dates that such interest
is being determined.
6.6 Adjustments to Reflect Net Worth of the Trust Fund.
(a) Adjustments as of Each Quarterly Valuation Date,
Each Annual Accounting Date and Additional Valuation Date.
As of each quarterly Valuation Date and Accounting Date, the
Committee, before crediting each Member's Employee Matched
Contribution Account, Employee Elected Matched Contribution
Account, Employee Elected Unmatched Contribution Account,
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Employee Unmatched Contribution Account, Post-1986 Employee
Matched Contribution Account and Post-1986 Employee
Unmatched Contribution Account, with contributions made
before that date and deposited after the immediately
preceding Valuation Date, Additional Valuation Date or
Accounting Date in Funds B, C, D and E (and such other Funds
as may from time to time be established hereunder) and, in
the case of an Accounting Date, before crediting the
Employer Matching Contribution Account or Employer
Contribution General Account with Employer Contributions and
Remainders for that Plan Year, shall adjust the net credit
balances in the Members' (or their Beneficiaries') accounts,
including those accounts not yet fully distributed, in the
respective Fund B, Fund C, Fund D, Fund E (or any other
Fund) upward or downward, pro rata, so that such net credit
balances in the accounts will equal the net worth (excluding
amounts described herein, then not credited to such account)
of the respective Funds of the Trust Fund as of that date,
using fair market values as determined by the Trustee and
reported to the Committee, after such net worth for the
appropriate Fund has been reduced by:
(1) Remainders, if any, which have occurred
for that Plan Year and which have thus not yet been
reallocated and credited to accounts; and
(2) any expenses chargeable to the appropriate
Fund B, Fund C, Fund D, Fund E (or any other Fund) of
the Trust Fund or any Participant's separate account
within any of such Funds, which have been incurred but
not yet paid from each respective fund of the Trust
Fund (or account therein).
After this adjustment, Employee Matched Contributions,
Post-1986 Employee Matched Contributions, Post-1986 Employee
Unmatched Contributions, Employee Elected Matched
Contributions or Employee Elected Unmatched Contributions
made after the immediately preceding Valuation Date, shall
be credited to the Members' Employee Matched Contribution
Accounts, Employee Elected Matched Contribution Accounts,
Employee Elected Unmatched Contribution Accounts, Employee
Unmatched Contribution Accounts, Post-1986 Employee Matched
Contribution Accounts and Post-1986 Employee Unmatched
Contribution Accounts as appropriate, and, in the case of
the Accounting Date, the Employer Contributions and
Remainders for such Plan Year shall be credited to the
Members' Employer Contribution Accounts, provided that
Employer Contributions shall not be included in a Member's
Employer Contribution Account for purposes of sharing in
adjustments described above until the Valuation Date or
Accounting Date next following a date not less than three
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calendar months following the date such Employer
Contribution is made.
(b) Determination by the Trustee. All
determinations made by the Trustee with respect to fair
market values and net worth shall be made in accordance with
generally accepted principles of trust accounting, and such
determination when so made by the Trustee and any
determinations by the Committee based thereon, shall be
conclusive and binding upon all persons having an interest
in the Plan.
6.7 Trust. The Company will enter into a Trust with
Trustee to establish the Trust Fund. The Trust shall be deemed
to form a part of the Plan and any and all rights and benefits
which may accrue to any Member or his beneficiaries under the
Plan shall be subject to all of the terms and provisions of this
Trust.
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Section 7. Top Heavy Provisions
7.1 Application. The definitions in subsection 7.2 shall
apply under this Section 7 and the special rules in
subsection 7.3 shall apply, notwithstanding any other provisions
of the Plan, for any Plan Year in which the Plan is a Top Heavy
Plan and for such other Plan Years as may be specified herein.
7.2 Special Top Heavy Definitions. The following special
definitions shall apply under this Section 7.
(a) "Aggregate Employer Contributions" means the sum
of all Employer Contributions and Remainders under this Plan
allocated for a Participant to the Plan and employer
contributions and forfeitures allocated for the Participant
to all Related Defined Contribution Plans in the Aggregation
Group; provided, however, that for Plan Years beginning
before January 1, 1985, elected deferrals under this Plan
and employer contributions attributable to salary reduction
or similar arrangement under Related Defined Contribution
Plans shall not be included in Aggregate Employer
Contributions and provided further that, for Plan Years
which begin after December 31, 1988, Employee Elected
Contributions, Employer Contributions and Remainders
allocated pursuant to subsections 4.2(b)(1) and 4.2(b)(3)
and any Special Section 401(k) Contributions shall not be
included for Non-Key Employees.
(b) "Aggregation Group" means the group of plans in
a Mandatory Aggregation Group, if any, that includes the
Plan, unless inclusion of Related Plans in the Permissive
Aggregation Group in the Aggregation Group would prevent the
Plan from being a Top Heavy Plan, in which case "Aggregation
Group" means the group of plans consisting of the Plan and
each other Related Plan in a Permissive Aggregation Group
with the Plan.
(1) "Mandatory Aggregation Group" means each
plan (considering the Plan and Related Plans) that,
during the Plan Year that contains the Determination
Date or any of the four preceding Plan Years,
(A) had a participant who was a Key
Employee, or
(B) was necessary to be considered with
a plan in which a Key Employee participated in
order to enable the plan in which the Key
Employee participated to meet the requirements
of Code Sections 401(a)(4) and Section 410.
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If the Plan is not described in (A) or (B) above, it
shall not be part of a Mandatory Aggregation Group.
(2) "Permissive Aggregation Group" means the
group of plans consisting of (A) the plans, if any, in
a Mandatory Aggregation Group with the Plan, and
(B) any other Related Plan, that, when considered as a
part of the Aggregation Group, does not cause the
Aggregation Group to fail to satisfy the requirements
of Code Sections 401(a)(4) and Section 410. A Related
Plan in (B) of the preceding sentence may include a
simplified employee pension plan, as defined in Code
Section 408(k), and a collectively bargained plan, if
when considered as a part of the Aggregation Group
such plan does not cause the Aggregation Group to fail
to satisfy the requirements of Code Sections 401(a)(4)
and Section 410 considering, if the plan is a
multiemployer plan as described in Code Section 414(f)
or a multiple employer plan as described in Code
Section 413(c), benefits under the plan only to the
extent provided to employees of the employer because
of service with the employer and, if the plan is a
simplified employee pension plan, only the employer's
contribution to the plan.
(c) "Determination Date" means, with respect to a
plan year, the last day of the preceding plan year or, in
the case of the first plan year, the last day of such plan
year. If the Plan is aggregated with other plans in the
Aggregation Group, the Determination Date for each other
plan shall be, with respect to any plan year, the
Determination Date for each such other plan which falls in
the same calendar year as the Determination Date for the
Plan.
(d) "Key Employee" means, for the Plan Year
containing the Determination Date, any person or the
beneficiary of any person who is an employee or former
employee of an Employer, a Commonly Controlled Entity or
Affiliated Service Group as determined under Code Section
416(i) and who, at any time during the Plan Year containing
the Determination Date or any of the four (4) preceding Plan
Years (the "Measurement Period"), is a person described in
paragraph (1), (2), (3) or (4), subject to paragraph (5).
(1) An officer of the Employer, Commonly
Controlled Entity or Affiliated Service Group who:
(A) in any Measurement Period, in the
case of a Plan Year beginning after December 31,
1983, is an officer during the Plan Year and has
annual Compensation for the Plan Year in an
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amount greater than fifty percent (50%) of the
amount in effect under Section 415(b)(1)(A) of
the Code for the calendar year in which such
Plan Year ends ($98,064 in 1989, as adjusted in
subsequent years in accordance with regulations
prescribed by the Secretary of the Treasury or
his delegate pursuant to the provisions of Code
Section 415(d)).
(B) in any Measurement Period, in the
case of a Plan Year beginning before January 1,
1984, is an officer during the Plan Year,
regardless of his compensation (except to the
extent that applicable law, regulations and
rulings indicate that the compensation
requirement set forth in subparagraph (A) above
is applicable).
(C) Notwithstanding the foregoing
subparagraphs (A) and (B), no more than a total
of fifty (50) persons (or, if lesser, the
greater of three (3) persons or ten percent
(10%) of all persons or beneficiaries of persons
who are employees or former employees) shall be
treated as Key Employees under this
paragraph (i) for any Measurement Period. In
the case of an Employer, Commonly Controlled
Entity or member of an Affiliated Service Group
which is not a corporation:
(i) in any Measurement Period, in
the case of a Plan Year beginning on or
before February 28, 1985, no persons shall
be treated as Key Employees under this
paragraph (1); and
(ii) in any Measurement Period, in
the case of a Plan Year beginning after
February 28, 1985, the term "officer" as
used in this subsection (d) shall include
administrative executives as described in
Section 1.416-1(T-13) of the Treasury
Regulations.
(2) One (1) of the ten (10) persons who,
during a Plan Year in the Measurement Period:
(A) have annual compensation from the
Employer, Commonly Controlled Entity or member
of an Affiliated Service Group for such Plan
Year greater than the amount in effect under
Section 415(c)(1)(A) of the Code for the
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calendar year in which such Plan Year ends
($30,000 in 1989 or one-fourth of the dollar
limitation in effect under Section 415(b)(1)(A)
of the Internal Revenue Code, adjusted in
subsequent years as determined in accordance
with regulations prescribed by the Secretary of
the Treasury or his delegate pursuant to the
provisions of Section 415(d) of the Code); and
(B) own (or are considered as owning
within the meaning of Code Section 318) in such
Plan Year, the largest percentage interests in
the Employer, Commonly Controlled Entity or
member of an Affiliated Service Group, in such
Plan Year, provided that no person shall be
treated as a Key Employee under this paragraph
unless he owns more than one-half of one percent
(0.5%) interest in the Employer, Commonly
Controlled Entity or member of an Affiliated
Service Group.
No more than a total of ten (10) persons or
beneficiaries of persons who are employees or former
employees shall be treated as Key Employees under this
paragraph (2) for any Measurement Period.
(3) A person who, for a Plan Year in the
Measurement Period, is a more than five percent (5%)
owner (or is considered as owning more than five
percent (5%) within the meaning of Code Section 318)
of the Employer, a Commonly Controlled Entity or
member of an Affiliated Service Group.
(4) A person who, for a Plan Year in the
Measurement Period, is a more than one percent (1%)
owner (or is considered as owning more than one
percent (1%) within the meaning of Code Section 318)
of the Employer, a Commonly Controlled Entity or
member of an Affiliated Service Group and has an
annual compensation for such Plan Year from the
Employer, Commonly Controlled Entity or member of an
Affiliated Service Group of more than $150,000.
(5) If the number of persons who meet the
requirements to be treated as Key Employees under
paragraph (1) or (2) exceed the limitation on the
number of Key Employees to be counted under
paragraph (1) or (2), those persons with the highest
annual compensation in a Plan Year in the Measurement
Period for which the requirements are met and who are
within the limitation on the number of Key Employees
will be treated as Key Employees.
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If the requirements of paragraph (1) or (2) are met by a
person in more than one (1) Plan Year in the Measurement
Period, each person will be counted only once under
paragraph (1) or (2):
(A) under paragraph (1), the Plan Year
in the Measurement Period in which a person who
was an officer and had the highest annual
compensation shall be used to determine whether
the person will be treated as a Key Employee
under the preceding sentence;
(B) under paragraph (2), the Plan Year
in the Measurement Period in which the ownership
percentage interest is the greatest shall be
used to determine whether the person will be
treated as a Key Employee under the preceding
sentence.
Notwithstanding the above provisions of paragraph (5),
a person may be counted in determining the limitation
under both paragraphs (1) and (2). In determining the
sum of the Present Value of Accrued Benefits for Key
Employees under subsection (h) of this Section, the
Present Value of Accrued Benefits for any person shall
be counted only once.
(e) "Non-Key Employee" means (i) a person (or the
beneficiary of a person) with an account balance in the Plan
or an account balance or accrued benefit in any Related Plan
in the Aggregation Group or (ii) an employee or a former
employee (or the beneficiary of such a person) who has
received a distribution during the Measurement Period and
(iii) who during the Measurement Period is not a Key
Employee.
(f) "Present Value of Accrued Benefits" means, for
any Plan Year, an amount equal to the sum of (1), (2) and
(3) for each person who, in the Plan Year containing the
Determination Date, was a Key Employee or a Non-Key
Employee.
(1) Subject to (4) below, the value of a
person's Accrued Benefit under the Plan and each
Related Defined Contribution Plan in the Aggregation
Group, determined as of the valuation date coincident
with or immediately preceding the Determination Date,
adjusted for contributions due as of the Determination
Date, as follows:
(A) in the case of a plan not subject to
the minimum funding requirements of Section 412
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of the Code, by including the amount of any
contributions actually made after the valuation
date but on or before the Determination Date,
and, in the first plan year of a plan, by
including contributions made after the
Determination Date that are allocated as of a
date in that first plan year; and
(B) in the case of a plan that is
subject to the minimum funding requirements, by
including the amount of any contributions that
would be allocated as of a date not later than
the Determination Date, plus adjustments to
those amounts as required under applicable
rulings, even though those amounts are not yet
required to be contributed or allocated (e.g.,
because they have been waived) and by including
the amount of any contributions actually made
(or due to be made) after the valuation date but
before the expiration of the extended payment
period in Code Section 412(c)(10).
(2) Subject to (4) below, the sum of the
actuarial present values of a person's accrued
benefits under each Related Defined Benefit Plan in
the Aggregation Group, expressed as a benefit
commencing at Normal Retirement Date (or the person's
attained age, if later) determined based on the
following actuarial assumptions:
(A) Interest rate 5%; and
(B) Mortality: 1984 Unisex Pension
Table;
and determined in accordance with Code Section 416(g),
provided, however, that if a defined benefit plan in
the Aggregation Group provides for different or
additional actuarial assumptions to be used in
determining the present value of accrued benefits
thereunder for the purpose of determining the top
heavy status thereof, then such different or
additional actuarial assumptions shall apply with
respect to each defined benefit plan in the
Aggregation Group and, further provided that the
accrued benefit of any Non-Key Employee shall be
determined under the method which is used for accrual
purposes for all Related Defined Benefit Plans or, if
no single accrual method is used in all such plans,
such accrued benefit shall be determined as if such
benefit accrued not more rapidly than the slowest
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accrual rate permitted under Code Section
411(b)(1)(C).
The present value of an accrued benefit for any person
who is employed by an employer maintaining a plan on
the Determination Date is determined as of the most
recent valuation date which is within a 12-month
period ending on the Determination Date, provided
however that:
(A) for the first plan year of the plan,
the present value for an employee is determined
as if the employee had a Termination of
Employment (i) on the Determination Date or
(ii) on such valuation date but taking into
account the estimated accrued benefit as of the
Determination Date; and
(B) for the second and subsequent plan
years of the plan, the accrued benefit taken
into account for an employee is not less than
the accrued benefit taken into account for the
first plan year unless the difference is
attributable to using an estimate of the accrued
benefit as of the Determination Date for the
first plan year and using the actual accrued
benefit as of the Determination Date for the
second plan year.
For purposes of this paragraph (2), the valuation date
is the valuation date used by the plan for computing
plan costs for minimum funding, regardless of whether
a valuation is performed that year.
If the plan provides for a nonproportional
subsidy as described in Treasury Regulations Section
1.416-1 (T-26), the present value of accrued benefits
shall be determined taking into account the value of
nonproportional subsidized early retirement benefits
and nonproportional subsidized benefit options.
(3) Subject to (4) below, the aggregate value
of amounts distributed during the plan year that
includes the Determination Date or any of the four
preceding plan years including amounts distributed
under a terminated plan which, if it had not been
terminated, would have been in the Aggregation Group.
(4) The following rules shall apply in
determining the Present Value of Accrued Benefits:
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(A) Amounts attributable to qualified
voluntary employee contributions, as defined in
Code Section 219(e), shall be excluded.
(B) In computing the Present Value of
Accrued Benefits with respect to rollovers or
plan-to-plan transfers, the following rules
shall be applied to determine whether amounts
which have been distributed during the five (5)
year period ending on the Determination Date
from or accepted into this Plan or any plan in
the Aggregation Group shall be included in
determining the Present Value of Accrued
Benefits:
(i) Unrelated Transfers accepted
into the Plan or any plan in the
Aggregation Group after December 31, 1983
shall not be included.
(ii) Unrelated Transfers accepted
on or before December 31, 1983 and all
Related Transfers accepted at any time
into the Plan or any plan in the
Aggregation Group shall be included.
(iii) Unrelated Transfers made from
the Plan or any plan in the Aggregation
Group shall be included.
(iv) Related Transfers made from
the Plan or any plan in the Aggregation
Group shall not be included by the
transferor plan (but shall be counted by
the accepting plan).
The Accrued Benefit of any individual who has not
performed services for an Employer maintaining the Plan at
any time during the five (5) year period ending on the
Determination Date shall be excluded in computing the
Present Value of Accrued Benefit.
(g) "Related Transfer" means a rollover or a
plan-to-plan transfer which is either not initiated by the
Employee or is made between plans each of which is
maintained by a Commonly Controlled Entity or member of an
Affiliated Service Group.
(h) A "Top Heavy Aggregation Group" exists in any
Plan Year for which, as of the Determination Date, the sum
of the Present Value of Accrued Benefits for Key Employees
under all plans in the Aggregation Group exceeds sixty
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percent (60%) of the sum of the Present Value of Accrued
Benefits for all employees under all plans in the
Aggregation Group; provided that, for purposes of
determining the sum of Present Value of Accrued Benefits for
all employees, there shall be excluded the Present Value of
Accrued Benefits of any Non-Key Employee who was a Key
Employee for any Plan Year preceding the Plan Year that
contains the Determination Date. For purposes of applying
the special rules herein with respect to a Super Top Heavy
Plan, a Top Heavy Aggregation Group will also constitute a
"Super Top Heavy Aggregation Group" if in any Plan Year as
of the Determination Date, the sum of the Present Value of
Accrued Benefits for Key Employees under all plans in the
Aggregation Group exceeds ninety percent (90%) of the sum of
the Present Value of Accrued Benefits for all employees
under all plans in the Aggregation Group.
(i) "Top Heavy Plan" means the Plan in any Plan Year
in which it is a member of a Top Heavy Aggregation Group,
including a Top Heavy Aggregation Group consisting solely of
the Plan. For purposes of applying the rules herein with
respect to a Super Top Heavy Plan, a Top Heavy Plan will
also constitute a "Super Top Heavy Plan" if the Plan in any
Plan Year is a member of a Super Top Heavy Aggregation
Group, including a Super Top Heavy Aggregation Group
consisting solely of the Plan.
(j) "Unrelated Transfer" means a rollover or a
plan-to-plan transfer which is both initiated by the
Employee and (1) made from a plan maintained by a Commonly
Controlled Entity or member of an Affiliated Service Group
to a plan maintained by an employer which is not a Commonly
Controlled Entity or member of an Affiliated Service Group
or (2) made to a plan maintained by a Commonly Controlled
Entity or member of an Affiliated Service Group from a plan
maintained by an employer which is not a Commonly Controlled
Entity or member of an Affiliated Service Group.
7.3 Special Top Heavy Provisions. For each Plan Year in
which the Plan is a Top Heavy Plan, the following rules shall
apply, except that the special provisions of this subsection 7.3
shall not apply with respect to any employee included in a unit
of employees covered by an agreement which the Secretary of Labor
finds to be a collective-bargaining agreement between employee
representatives and one or more employees if there is evidence
that retirement benefits were the subject of good faith
bargaining between such employee representative and the Employer
or Employers:
(a) Minimum Employer Contributions. In any Plan
Year in which the Plan is a Top Heavy Plan, the Employers
shall make additional Employer Contributions to the Plan as
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necessary for each Active Participant who is employed on the
last day of the Plan Year and who is a Non-Key Employee to
bring the amount of his Aggregate Employer Contributions for
the Plan Year up to at least three percent (3%) of his Pay,
or if the Plan is not required to be included in an
aggregation group in order to permit a defined benefit plan
in the aggregation group to satisfy the requirements of Code
Section 401(a)(4) or Section 410, such lesser amount as is
equal to the largest percentage of a Key Employee's Pay
allocated to the Key Employee as Aggregate Contributions.
For purposes of determining whether a Non-Key Employee is an
Active Participant entitled to have minimum Employer
Contributions made on his behalf, a Non-Key Employee will be
treated as an Active Participant even if he is not otherwise
an Active Participant (or accrues no benefit) under the Plan
because:
(1) he has failed to complete the requisite
number of hours of service (if any) after becoming a
Participant in the Plan,
(2) he is excluded from participation in the
Plan (or accrues no benefit) merely because his
compensation is less than a stated amount, or
(3) he is excluded from participation in the
Plan (or accrues no benefit) merely because of a
failure to make mandatory employee contributions or,
if the Plan is a 401(k) plan, because of a failure to
make elective 401(k) contributions.
(b) Vesting. For each Plan Year in which the Plan
is a Top Heavy Plan and for each Plan Year thereafter, the
vesting schedule under the Plan shall be three (3) year
cliff vesting under which each Member shall be zero percent
vested in Employer contributions, Remainders credited to his
Regular Account portion of his General Employer Contribution
Account and the Appreciation Account portion attributable to
such Employer contributions and Remainders until he has
three years of Vested Service after which a Member shall be
100% vested in his Employer Contribution Account.
(c) Limitations. In computing the limitations under
subsection 4.8 hereof for years in which the Plan is a Top
Heavy Plan, the special rules of Code Section 416(h) shall
be applied in accordance with applicable regulations and
rulings so that, in determining the denominator of the
Defined Contribution Plan Fraction and the Defined Benefit
Plan Fraction, at each place at which "1.25" would have been
used, "1.00" shall be substituted, unless the special
requirements of Code Section 416(h)(2) have been satisfied
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and by substituting $41,500 for $51,875 in the numerator of
the transition fraction described in Code Section
415(e)(6)(B).
(d) Transition Rule for a Top Heavy Plan.
Notwithstanding the provisions of subsection 7.3(c), for
each Plan Year in which the Plan is a Top Heavy Plan and in
which the Plan does not meet the special requirements of
Code Section 416(h)(2) in order to use 1.25 in the
denominator of the Defined Contribution Plan Fraction and
the Defined Benefit Plan Fraction, if an Employee was a
participant in one or more defined benefit plans and in one
or more defined contribution plans maintained by the
employer before the plans became Top Heavy Plans and if such
Participant's Combined Fraction exceeds 1.00 because of
accruals and additions that were made before the plans
became Top Heavy Plans, a factor equal to the lesser of 1.25
or such lesser amount (but not less than 1.00) as shall be
needed to make the Employee's Combined Fraction equal to
1.00 shall be used in the denominator of the Defined Benefit
Plan Fraction and the Defined Contribution Plan Fraction if
there are no further accruals or annual additions under any
Top Heavy Plans until the Participant's Combined Fraction is
not greater than 1.00 when a factor of 1.00 is used in the
denominators of the Defined Benefit Plan Fraction and the
Defined Contribution Plan Fraction. Any provisions herein
to the contrary notwithstanding, if the Plan is a Top Heavy
Plan and the Plan does not meet the special requirements of
Code Section 416(h)(2) in order to use 1.25 in the
denominator of the Defined Benefit Plan Fraction and the
Defined Contribution Plan Fraction, there shall be no
further Annual Additions for a Participant whose Combined
Fraction is greater than 1.00 when a factor of 1.00 is used
in the denominator of the Defined Benefit Plan Fraction and
the Defined Contribution Plan Fraction, until such time as
the Participant's Combined Fraction is not greater than
1.00.
(e) Transition Rule for a Super Top Heavy Plan.
Notwithstanding the provisions of subsections 7.3(c) and
7.3(d), for each Plan Year in which the Plan is a Super Top
Heavy Plan, (1) if an Employee was a participant in one or
more defined benefit plans and in one or more defined
contribution plans maintained by the employer before the
plans became Super Top Heavy Plans, and (2) if such
Participant's Combined Fraction exceeds 1.00 because of
accruals and additions that were made before the plans
became Super Top Heavy Plans and if immediately before the
plans became Super Top Heavy Plans the Combined Fraction as
then computed did not exceed 1.00, then a factor equal to
the lesser of 1.25 or such lesser amount (but not less than
1.00) as shall be needed to make the Employee's Combined
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Fraction equal to 1.00 shall be used in the denominator of
the Defined Benefit Plan Fraction and the Defined
Contribution Plan Fraction if there are no further accruals
or annual additions under any Super Top Heavy Plans until
the Participant's Combined Fraction is not greater than 1.00
when a factor of 1.00 is used in the denominators of the
Defined Benefit Plan Fraction and the Defined Contribution
Plan Fraction. Any provisions herein to the contrary
notwithstanding, if the Plan is a Super Top Heavy Plan,
there shall be no further Annual Additions for a Participant
whose Combined Fraction is greater than 1.00 when a factor
of 1.00 is used in the denominator of the Defined Benefit
Plan Fraction and the Defined Contribution Plan Fraction
until the Participant's Combined Fraction is not greater
than 1.00.
(f) Terminated Plan. If the Plan becomes a Top
Heavy Plan after it has formally been terminated, has ceased
crediting for benefit accruals and vesting and has been or
is distributing all plan assets to participants and their
beneficiaries as soon as administratively feasible or if a
terminated plan has distributed all benefits of participants
and their beneficiaries, the provisions of subsection 7.3
shall not apply to the Plan.
(g) Frozen Plans. If the Plan becomes a Top Heavy
Plan after contributions have ceased under the Plan but all
assets have not been distributed to participants or their
beneficiaries, the provisions of subsection 7.3 shall apply
to the Plan.
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Section 8. Administration
8.1 Committee. The Committee shall consist of not less
than three or more than five members, each of whom, when
appointed by the Board of Directors of the Company, shall serve
until his death or his resignation from the Committee, or his
Termination of Employment, or his replacement by the Board of
Directors of the Company. The Committee shall act by a majority
of its members at any meeting including a telephonic meeting, or
by a written instrument signed by a majority of its members
without the necessity of a meeting. Except as provided by
federal law, no member of the Committee shall be personally
liable because of an act, or failure to act, of the Committee, or
for any of his acts done or omitted to be done in good faith.
The Company shall indemnify and hold harmless all members of the
Committee for any act, or failure to act, of the Committee, or
for any of his acts done or omitted to be done in good faith.
8.2 Administration. The Committee shall be responsible
for the general administration of the Plan and shall have all
such powers as may be necessary to carry out the provisions
hereof, including, but not limited to, the power to interpret the
Plan. The decisions of the Committee shall be conclusive on all
persons. The Committee shall be the Plan Administrator. The
Committee may from time to time establish rules for the
administration of the Plan. Expenses incurred by the Committee
(including such expenses which are advanced by the Company)
relative to the administration of the Plan shall be paid from the
Trust Fund, unless paid by the Company. The Committee may
appoint one or more persons ("Fiduciary(ies)") who jointly or
severally shall have authority to control and manage the
operation and administration of the Plan. The Committee shall
have the authority to allocate responsibilities among the
Fiduciaries (including the Trustee of the Trust Fund). Any
Fiduciary, upon receiving the written consent of the Committee,
may designate one or more other persons ("Designated
Fiduciary(ies)") to carry out the Fiduciary's responsibilities
under the Plan. The procedure the Committee shall follow in
making any appointment, allocation or consent to designate shall
be by filing with the minutes of the Committee an instrument in
writing consented to by a majority of the members of the
Committee setting forth the appointment, allocation or consent to
designate. Any person or group of persons may serve in more than
one fiduciary capacity with respect to the Plan. A fiduciary or
Designated Fiduciary may employ one or more persons to render
advice with regard to any responsibility such Fiduciary or
Designated Fiduciary has under the Plan.
The Committee shall exercise, or direct the Trustee with
respect to the exercise of, all rights, privileges and
obligations with respect to the investments of Fund C.
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8.3 Initial Claim for Benefits. Each Participant, or
other beneficiary (a "Claimant") may submit his claim for
benefits to the Committee (or to such other person or persons as
may be designated by the Committee) in writing in such form as is
provided or approved by the Committee. A Claimant shall have no
right to seek review of a denial of benefits, or to bring any
action in any court to enforce a claim for benefits prior to his
filing a claim for benefits and exhausting his rights to review
under subsections 8.3 and 8.4.
When a claim for benefits has been filed properly,
such claim for benefits shall be evaluated and the Claimant shall
be notified of the approval or the denial within ninety (90) days
after the receipt of such claim unless special circumstances
require an extension of time for processing the claim. If such
an extension of time for processing is required, written notice
of the extension shall be furnished to the Claimant prior to the
termination of the initial ninety (90) day period which shall
specify the special circumstances requiring an extension and the
date by which a final decision will be reached (which date shall
not be later than one hundred and eighty (180) days after the
date on which the claim was filed). A Claimant shall be given a
written notice in which the Claimant shall be advised as to
whether the claim is granted or denied, in whole or in part. If
a claim is denied, in whole or in part, the Claimant shall be
given written notice which shall contain (1) the specific reasons
for the denial, (2) references to pertinent plan provisions upon
which the denial is based, (3) a description of any additional
material or information necessary to perfect the claim and an
explanation of why such material or information is necessary, and
(4) the Claimant's rights to seek review of the denial.
8.4 Review of Claim Denial. If a claim is denied, in
whole or in part, the Claimant shall have the right to request
that the Committee review the denial, provided that the Claimant
files a written request for review with the Committee within
sixty (60) days after the date on which the Claimant received
written notification of the denial. A Claimant (or his duly
authorized representative) may review pertinent documents and
submit issues and comments in writing to the Committee. Within
sixty (60) days after a request for review is received, the
review shall be made and the Claimant shall be advised in writing
of the decision on review, unless special circumstances require
an extension of time for processing the review, in which case the
Claimant shall be given a written notification within such
initial sixty (60) day period specifying the reasons for the
extension and when such review shall be completed (provided that
such review shall be completed within one hundred and twenty
(120) days after the date on which the request for review was
filed). The decision on review shall be forwarded to the
Claimant in writing and shall include specific reasons for the
decision and references to plan provisions upon which the
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decision is based. A decision on review shall be final and
binding on all persons for all purposes. If a Claimant shall
fail to file a request for review in accordance with the
procedures described in subsections 8.3 and 8.4 such Claimant
shall have no rights to review and shall have no right to bring
action in any court and the denial of the claim shall become
final and binding on all persons for all purposes.
8.5 Fiduciary Responsibility. If a Plan fiduciary acts in
accordance with ERISA, Title I, Subtitle B, Part 4:
(a) In determining that a Member's spouse has
consented to the naming of a Beneficiary other than the
spouse or that the consent of the Member's spouse may not be
obtained because there is no spouse, the spouse cannot be
located or other circumstances prescribed by the Secretary
of the Treasury by regulations, then to the extent of
payments made pursuant to such consent, or determination,
the Plan and its fiduciaries shall have no further
liability.
(b) In treating a domestic relations order as being
(or not being) a Qualified Domestic Relations Order, or,
during any period in which the issue of whether a domestic
relations order is a Qualified Domestic Relations Order is
being determined (by the Committee, by a court of competent
jurisdiction, or otherwise), in separately accounting for
the amounts which would have been payable to the alternate
payee during such period if the order had been determined to
be a Qualified Domestic Relations Order ("Segregated
Amounts"), in paying such Segregated Amounts to the person
entitled thereto if within 18 months the domestic relations
order (or a modification thereof) is determined to be a
Qualified Domestic Relations Order, in paying such
Segregated Amounts to the person entitled thereto if there
had been no order if within 18 months the domestic relations
order is determined not to be qualified or if the issue is
not resolved within 18 months, and in prospectively applying
a domestic relations order which is determined to be
qualified after the close of the 18-month period, then the
obligation of the Plan and its fiduciaries to the Member and
each alternate payee shall be discharged to the extent of
any payment made pursuant to such acts.
8.6 Fiduciary as Member. A fiduciary who is also a Member
Participant or a Beneficiary shall receive any benefit to which
he may be entitled as a Participant, Member or Beneficiary in the
Plan so long as such benefit is computed and paid on a basis that
is consistent with the terms of the Plan as applied to all other
Participants, Members and Beneficiaries.
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Section 9. Subsidiary or Affiliated Corporations
9.1 Subsidiary or Affiliated Corporations. Any Commonly
Controlled Entity may become an Employer under the Plan and the
Trust or may withdraw therefrom (or, being a party, shall
withdraw) at such time, in such manner and upon such terms and
conditions as the Board of Directors of Company shall determine.
Any Employer, other than Company, shall become a party to the
Plan and the Trust, as co-settlor with Company, upon the filing
with the Trustee of:
(a) a certified copy of a resolution of such
Employer's Board of Directors adopting the Plan and the
Trust; and
(b) a certified copy of a resolution of Company's
Board of Directors authorizing such Employer to become a
party to the Plan and the Trust;
and thereafter the Trustee shall receive and hold, as part of the
Trust Fund, subject to the provisions of the Trust, any
contributions made by such Employer and by Members who are
Employees of such Employer. In the event of withdrawal of any
Employer from the Plan and the Trust, the Trustee shall determine
the share of such withdrawing Employer in the Trust Fund. The
Trustee shall thereupon segregate such share and make disposition
thereof in accordance with the direction of the withdrawing
Employer's Board of Directors; provided that a distribution shall
not be made to a Member who is not otherwise entitled to a
distribution in accordance with Section 5 unless there has been a
disposition of the Employer's interest in a subsidiary or of
substantially all the assets used by the Employer in a trade or
business and the Employee continues employment with the
subsidiary or the corporation acquiring such assets or the
Company has terminated the Plan without establishment or
maintenance of another defined contribution plan (other than an
employee stock ownership plan as defined in Section 4975(e)(7))
and the distribution options provided under Section 5 shall be
available.
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Section 10. Amendment and Termination
10.1 Amendment and Termination. The Company expects the
Plan to be permanent, but since future conditions affecting the
Company cannot be anticipated or foreseen, the Company must
necessarily and does hereby reserve the right to amend, modify or
terminate the Plan at any time by action of its Board of
Directors. The Company may make such modifications or amendments
to the Plan that are necessary or appropriate to qualify or
maintain the Plan as a plan meeting the requirements of Code
Section 401(a) or 401(k) or any other applicable provisions of
the Code or the regulations issued thereunder. No part of the
corpus or income of the Trust Fund shall at any time be used for
or diverted to purposes other than for the exclusive benefit of
Members or their Beneficiaries, and no amendment shall divest any
Member of his interest herein, except as may be required by the
District Director of Internal Revenue or other governmental
authority. No amendment shall eliminate or reduce an optional
form of benefit with respect to benefits attributable to service
before the amendment was adopted except as may be permitted under
applicable regulations or rulings of the Treasury Department or
Department of Labor.
10.2 Termination of the Plan. Upon termination of the Plan
by the Company (after a favorable determination has been obtained
as specified in subsection 10.1), or upon complete discontinuance
of contributions to the Plan by the Company (after a favorable
determination has been obtained as specified in subsection 10.1),
the value of the proportionate interest of each Member having an
interest in the Trust Fund shall be determined as of the date of
such termination or discontinuance. The accounts of such Members
shall be one hundred percent vested and nonforfeitable, and
thereafter distribution shall be made to such Members as provided
in Section 5, except that there shall be no forfeitures of such
one hundred percent vested and nonforfeitable interests.
Upon the partial termination of the Plan by the
Company (after a favorable determination has been obtained as
specified in subsection 10.1), the value of the proportionate
interest of each Member having an interest in the Trust Fund, in
respect of whom the Plan shall have been partially terminated,
shall be determined as of the date of such partial termination.
The accounts of such Members, in respect of whom the partial
termination has occurred, shall be one hundred percent vested and
nonforfeitable, and thereafter distribution shall be made to such
Members as provided in Section 5, except that there shall be no
forfeitures of such one hundred percent vested and nonforfeitable
interests.
In the event of termination of the Plan, the Board of
Directors may direct that (a) the Trustee continue the Trust for
a specified period of time, or for such period of time as the
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Trustee, in its sole discretion, may deem to be in the best
interest of Members or their Beneficiaries or (b) any Member who
does not consent to the distribution of a Member's Net Balance
Account the vested portion of which is in excess of $3,500 or who
is not eligible to receive a distribution of his Member's Net
Balance Account pursuant to the foregoing provisions of
subsection 10.2 shall receive a benefit in the form of an annuity
contract providing the benefit options available hereunder which
can be purchased with the amount of such benefit from an
insurance company.
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Section 11. Mergers
11.1 Mergers. The Plan shall not merge or consolidate
with, or transfer any assets or liabilities to any other plan,
unless each Member would (if the Plan were then terminated)
receive a benefit immediately after the merger, consolidation or
transfer which is equal to or greater than the benefit he would
have been entitled to immediately before the merger,
consolidation or transfer (if the Plan were then terminated).
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<PAGE>
Section 12. Miscellaneous
12.1 Nonalienation of Benefits.
(a) Benefits payable under this Plan shall not be
subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, charge,
garnishment, execution or levy of any kind, either voluntary
or involuntary, prior to actually being received by the
person entitled to the benefit under the terms of the Plan;
and any attempt to anticipate, alienate, sell, transfer,
assign, pledge, encumber, charge, garnish, execute on, levy
or otherwise dispose of any right to benefits payable here
under, shall be void. The Trust Fund shall not in any
manner be liable for, or subject to, the debts, contracts,
liabilities, engagements or torts of any person entitled to
benefits hereunder. The foregoing subsection 12.1(a) shall
not preclude the (1) enforcement of a Federal tax levy made
pursuant to Code section 6331 or (2) collection by the
United States on a judgment resulting from an unpaid tax
assessment.
(b) Notwithstanding subsection 12.1(a), the Trustee
(1) shall comply with an order entered on or
after January 1, 1985 determined by the Committee to
be a Qualified Domestic Relations Order as provided in
subsection 12.2.
(2) shall comply with a domestic relations
order entered before January 1, 1985 if benefits are
already being paid under such order, and
(3) may treat an order entered before
January 1, 1985 as a Qualified Domestic Relations
order even if it does not meet the requirements of
subsection 12.2.
12.2 Qualified Domestic Relations Order.
(a) "Qualified Domestic Relations Order" means any
judgment, decree, or order (including approval of a property
settlement agreement):
(1) which is made pursuant to a state domestic
relations law (including a community property law),
(2) which relates to the provision of child
support, alimony payments, or marital property rights
to a spouse, former spouse, child, or other dependent
of a Member,
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<PAGE>
(3) which creates or recognizes the existence
of an alternate payee's right to receive all or a
portion of the Member's Net Balance Account under the
Plan, and
(4) with respect to which the requirements of
paragraphs (b) and (c) are met.
(b) A domestic relations order can be a Qualified
Domestic Relations Order only if such order clearly
specifies:
(1) The name and the last known mailing
address, if any, of the Member and the name and
mailing address of each alternate payee covered by the
order,
(2) the amount or percentage of the Member's
Net Balance Account to be paid by the Plan to each
such alternate payee, or the manner in which such
amount or percentage is to be determined,
(3) the number of payments or period to which
such order applies, and
(4) each Plan to which such order applies.
(c) A domestic relations order can be a Qualified
Domestic Relations Order only if such order does not:
(1) require the Plan to provide any type or
form of benefit, or any option not otherwise provided
under the Plan,
(2) require the Plan to provide increased
benefits (determined on the basis of actuarial value),
or
(3) require the payment of benefits to an
alternate payee which are required to be paid to
another alternate payee under another order previously
determined to be a Qualified Domestic Relations Order.
(d) In the case of any payment before a Member has
had a Termination of Employment, a domestic relations order
shall not be treated as failing to meet the requirements of
subsection 12.2(c)(1) solely because such order requires
that payment of benefits be made to an alternate payee:
(1) on or after the date on which the Member
attains (or would have attained) 50 years of age,
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(2) as if the Member had retired on the date
on which such payment is to begin under such order
(but taking into account only the present value of the
benefits actually accrued and not taking into account
the present value of any employer subsidy for early
retirement), and
(3) in any form in which such benefits may be
paid under the Plan to the Member (other than in the
form of a qualified joint and survivor annuity with
respect to the alternate payee and his or her
subsequent spouse).
(e) To the extent provided in any Qualified Domestic
Relations Order the former spouse of a Member if married to
the Member for at least one year, shall be treated as the
surviving spouse of such Member for the purpose of
consenting to the waiver of a Qualified Joint and Survivor
Pension or Surviving Spouse's Pension and to the naming of
another Beneficiary as provided in subsection 5.3 with
respect to the portion of a Member's Net Balance Account
subject to such Qualified Domestic Relations Order.
(f) Notwithstanding anything to the contrary in
subsections 6.2 and 6.3, if, pursuant to an order determined
by the Committee or its delegate to be a Qualified Domestic
Relations Order, a segregated account is established
containing the interest of an alternate payee, the alternate
payee shall direct the manner in which such segregated
account shall be invested in accordance with the procedures
under subsections 6.2 or 6.3, as applicable; provided that
any such segregated account shall continue to be invested in
accordance with the investment elections last given by the
Member before the establishment of the segregated account
until the alternate payee provides new investment
instructions.
(g) Unless otherwise further restricted in a
Qualified Domestic Relations Order, the Alternate Payee may
elect to receive a distribution (1) within or commencing
within a reasonable time after a Valuation Date or
Accounting Date which follows the date on which the Member
attains the age of 50 and which is at least 30 days (or such
lesser period as the Committee may from time to time permit)
after the date on which the Committee receives the Alternate
Payee's distribution election and (2) in any form in which
benefits may be paid pursuant to subsection 5.2 to the
Member.
12.3 Maximum Age Condition. Anything to the contrary
herein notwithstanding, eligibility to participate in the Plan
and to elect or receive allocations of contributions to the Trust
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<PAGE>
shall not be subject to any restrictions on account of a maximum
age condition.
12.4 Litigation. In the event that any person may bring
any legal or equitable action arising under the Plan against the
Trustee or Employer or the Committee, or in the event that
Employer or the Committee or the Trustee may find it necessary to
bring any legal or equitable action arising under the Plan
against any person, Employer or the Committee shall have the
right to join the Trustee as a party defendant or party plaintiff
in any such actions, and all expenses of defending or bringing
such action shall be paid by the Trustee from the Trust Fund.
12.5 Rights Against Employer. Neither the establishment of
the Plan, nor of the Trust, nor any modification thereof, nor any
distributions hereunder shall be construed as giving to any
Member or any person whomsoever any legal or equitable rights
against the Committee, Employer, or the officers, directors or
shareholders as such of Employer, or as giving any Employee or
Member the right to be retained in the employ of Employer. All
benefits payable under the Plan shall be paid or provided for
solely from the Trust Fund, and Employer shall have no liability
or responsibility for benefit distributions other than to make
contributions to the Trust Fund as herein provided.
12.6 Illegality of Particular Provision. The illegality of
any particular provision of this Plan or portion thereof shall
not affect the other provisions hereof or portions of provisions,
but the Plan shall be construed in all respects as if such
invalid provision or invalid portion of a provision were omitted.
12.7 Effect of Mistake. In the event of a mistake or
misstatement as to the age, eligibility, Pay, Service or
participation of a Member, or the allocations made to the account
of any Member, or the amount of distributions made or to be made
to a Member or other person, the Committee shall, to the extent
it deems possible, cause to be allocated from future Employer
contributions or future Remainders, or cause to be withheld or
accelerated, or otherwise made adjustments of, such amounts as
will in its judgment accord to such Member or other person, the
credits to the account or distributions to which he is properly
entitled under the Plan.
12.8 Indemnification. Each member of the Committee, each
member of the Board of Directors, each individual serving as
Trustee without compensation, and each and every Employee to whom
are delegated duties, responsibilities and authority with respect
to the Plan and the Trust shall be indemnified and held harmless
by the Company against all claims, liabilities, fines and
penalties and all expenses (including, but not limited to,
attorney fees) reasonably incurred by or imposed upon such member
of the Board of Directors, individual or Employee which arise as
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a result of his actions or failure to act in connection with the
operation and administration of the Plan and the Trust, to the
extent lawfully allowable and to the extent that such claim,
liability, fine, penalty or expense is not paid for by liability
insurance purchased by or paid for by the Company.
Notwithstanding the foregoing, the Company shall not indemnify
any person for any such amount incurred through any settlement or
compromise of any action unless the Company consents in writing
to such settlement or compromise. Expenses incurred in defending
a civil or criminal action, suit or proceeding may be paid by the
Company in advance of the final disposition of such action, suit
or proceeding as authorized by the Company in the specific case
upon receipt of an undertaking by or on behalf of the member of
the Committee, member of the Board of Directors, individual
Trustee or Employee to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by
the Company as authorized in this subsection 12.8.
12.9 Applicable Laws. Except as otherwise provided by
federal law, the Plan shall be governed by and construed
according to the laws of the State of Illinois, with the
exception of any Trust, which shall be governed by and construed
according to the laws of such State as may be agreed with the
Trustee, or in absence of such agreement the State in which the
principal office of the Trustee is located.
12.10 Gender and Number. Except when otherwise indicated by
the context, any masculine terminology herein shall also include
the feminine, and the definition of any term herein in the
singular shall also include the plural.
IN WITNESS WHEREOF, the Company has caused these presents to
be signed by its duly authorized officer and has caused its
corporate seal to be hereto affixed this 30th day of December,
1994.
CHICAGO AND NORTH WESTERN
RAILWAY COMPANY
/s/ R. F. Ard
By: R. F. Ard
ATTEST:
/s/ Robin Bourne-Caris
Secretary
(Corporate Seal)
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<PAGE>
APPENDIX I
For purposes of determining the Actuarial Equivalent under
subsection 2.2 of the Plan, the mortality basis and interest rate
used shall be the following:
(a) Mortality Basis: The mortality table used shall be
the UP-1984 Table without adjustment.
(b) Interest Rate: The interest rate used shall be
determined in accordance with (i) or (ii) below:
(i) For purposes of determining the Actuarial
Equivalent of a Member's Net Balance Account (or
portion thereof) converted to a single life
annuity (which shall be done regardless of
whether a Member's Net Balance Account or
portion thereof is paid as a single life annuity
or a Qualified Joint and Survivor Annuity) under
subsection 2.2 during a calendar year, the
interest rate used shall be the sum of the
November 30 yield to maturity for the Lehman
Brothers Kuhn Loeb, Long Term Government Agency
Bond Index (hereinafter called the "index") for
the three preceding calendar years divided by
three with the results rounded to the nearest
quarter of a percent. In the event that the
index is not in existence as of November 30 of
any calendar year, the November 30 twenty-year
yield series for the Treasury Constant Maturity
Yield Series shall be substituted for the index
for all years used in the determination of the
interest rate under this subparagraph (i). If
neither such index is or was in existence for a
sufficient period of time to permit a
determination of the above described three
preceding calendar year average rate of
interest, such average rate of interest shall be
based upon the United States Long Term Treasury
Bonds with more than a 10 year maturity. The
interest rate shall be determined and applied as
of the date on which the vested Member's Net
Balance Account or a portion thereof is
transferred to the Chicago and North Western
Railway Company Supplemental Pension Plan
(called the Chicago and North Western
Transportation Company Supplemental Pension Plan
until May 5, 1994) for the payment of benefits
in the form of a life annuity as provided in
subsection 5.5.
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(ii) For all other purposes including converting a
single life annuity into a Qualified Joint and
Survivor Annuity, the interest rate with respect
to life annuity benefits paid by the Chicago and
North Western Railway Company Supplemental
Pension Plan (called the Chicago and North
Western Transportation Company Supplemental
Pension Plan until May 5, 1994) with respect to
the vested Member's Net Balance Account or
portion thereof in accordance with
subsection 5.5 shall be 8%.
Notwithstanding the above provisions, for purposes of determining
the life annuity benefit payable under the Chicago and North
Western Railway Company Supplemental Pension Plan (called the
Chicago and North Western Transportation Company Supplemental
Pension Plan until May 5, 1994) with respect to the vested
Member's Net Balance Account or portion thereof, the Actuarial
Equivalent shall be the Accrued Benefit reduced by 1/2 of 1% for
each full month that the benefit commencement date precedes
Normal Retirement Age to the first full month after the Member
attains age 55 and further reduced for each full month that the
benefit commencement date precedes the first full month after the
Member attains age 55 using the mortality assumptions specified
in (a) above and the interest rate assumption specified in
(b)(ii) above.
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AMENDMENT NO. 10 TO PURCHASE OF SERVICE AGREEMENT
BETWEEN THE COMMUTER RAIL DIVISION AND THE
CHICAGO AND NORTH WESTERN RAILWAY COMPANY
The Commuter Rail Division of the Regional Transportation
Authority ("CRD") and the Chicago and North Western Railway
Company ("Railroad") hereby agree to amend the Purchase of
Service Agreement ("Agreement") between the CRD and the C&NW
dated October 1, 1984, as follows:
1. Section 3.01--Property Dispositions shall be amended to
read:
"(a) Railroad agrees that (1) it will not sell, lease,
abandon, scrap or otherwise dispose of any of the properties
described in subsection 3.01(b) below ('Contract Services
Property'), if such disposition will impair the performance by
Railroad of the Contract Services which are required to be
provided at the time of such disposition or any time during the
term of this Agreement; and (2) in any case not within clause (1)
above, it will not sell, lease, mortgage, abandon, scrap or
otherwise dispose of or encumber any Contract Services Property
unless, not less than 45 days prior to the earlier of the date of
such sale, lease, mortgage, abandonment, scrapping or other
disposition or the entering into by Railroad of any agreement
therefore, written notice thereof is given by Railroad to the
CRD, which notice shall set forth a description of the property
to be disposed of, and the price and other terms and conditions
of such proposed disposition. The requirements of clause (2)
above shall not apply to a disposition of property to a party
having eminent domain power or for public or quasi-public utility
purposes or to property leased if the lease is cancelable upon
not more than 90-day notice. With respect to Contract Services
Property which is used primarily for Contract Services, Railroad
shall offer in such notice, with the exception of notices of
mortgages, to transfer such property to the CRD at a price and on
other terms and conditions not less favorable than those of the
proposed disposition. If the CRD does not accept such offer
within such 45 days, the offer shall be deemed to be rejected."
2. Section 3.03 Chicago Passenger Terminal shall be amended by
deleting the entire section, and the deletion will be
replaced with:
"CRD owns the Chicago Passenger Terminal (CPT). Railroad
shall, during the term of this Agreement or any extension
thereof, continue to operate and maintain CPT to provide Contract
Services or Public Transportation Services in the same manner and
subject to the same terms of this Agreement as Railroad operates
and maintains its property described in Section 2.02 hereof and
in accordance with the sale agreement with Railroad of the CPT.
<PAGE>
CRD has agreement with the owners of CitiCorp Center
(Atrium) for commuter access, a ticket office and office space
and the Railroad shall, during the term of this Agreement,
continue to operate and maintain this space to provide Contract
Services or Public Transportation Services in the manner set
forth in the CRD agreements covering the Atrium."
3. Section 6.02(a)(2) Reimbursable Expenses shall be amended to
read:
"For the period prior to January 1, 1995, depreciation,
based on the original cost of property notwithstanding any
subsequent write-down on Railroad's books, shall, except as
limited by Section 6.02(b)(16), be treated as Reimbursable
Expenses, as set forth in Amendment No. 9. For the period
beginning January 1, 1995, depreciation, at the annual flat rate
of $1,635,489 and without adjustment during the term of this
Agreement, which, on a monthly basis, equals $136,290.75, shall,
except as limited by Section 6.02(b)(16), be treated as
Reimbursable Expenses."
4. Section 6.02(b)(19) Reimbursable Expenses shall be amended
to read:
"(19) Expenses chargeable to AFE's under the Railroad's
accounting system as in effect on January 1, 1994, unless such
expenditure has the prior written approval of the CRD, provided,
however, AFE expenses are Reimbursable Expenses to the extent
that expenses charged to each AFE do not exceed $10,000 per AFE
and that the accumulation of such AFE expenses incurred without
CRD approval does not exceed $50,000 in any Calendar Year;
and...."
5. Section 6.06 Additional Compensation shall be amended to
read:
"a) For the period beginning January 1, 1995, in addition
to Compensation, Railroad shall receive for each month during the
Agreement Term additional compensation in the amount of
$142,500.00 for an annual total of $1,710,000 ('Additional
Compensation')."
6. Section 6.06 Additional Compensation shall be amended by
adding:
"(d) The Parties agree to enter into a Benefit Sharing
Program ('BSP') which provides for the implementation of new
programs and procedures designed to promote cost savings in the
provision of commuter rail service. The Parties further agree to
share at a rate of 80% for Railroad and 20% for CRD all first-
year savings and for the following two years to share equally
savings incurred from the implementation of any BSP program
2
<PAGE>
originating with the Railroad. Upon 30 days written notice with
supporting documentation, CRD shall consider and respond in
writing within 15 days. No program will be implemented without
the express written consent of both parties."
7. Section 11.01(a) Duration shall be amended by deleting:
"December 31, 1994"
The deletion shall be replaced with:
"December 31, 1998"
8. Section 13.17 Railroad name Change shall be added:
"At the 1994 Annual Meeting, Railroad's shareholders voted
to change the name of Chicago and North Western Transportation
Company to 'Chicago and North Western Railway Company'. This
name change shall be made in each place that it appears in the
Agreement."
IN WITNESS WHEREOF, the parties have executed this Amendment
on the respective dates written below.
THE COMMUTER RAIL DIVISION OF THE CHICAGO AND NORTH WESTERN
REGIONAL TRANSPORTATION AUTHORITY RAILWAY COMPANY
By /s/ Philip A. Pagano By /s/ J. W. Conlon
Philip A. Pagano J. W. Conlon
Executive Director Senior Vice President
Administration
Signed on this 29th day of Signed on this 22nd day
December , 1994 of December , 1994
Attest /s/ Maureen Pochron Attest /s/ K. A. Dombrowski
3
<PAGE>
December 14, 1994
CONFIDENTIAL
Mr. Robert Schmiege
Chairman, President and CEO
Chicago and North Western Transportation Company
165 North Canal Street
Chicago, IL 60606
Dear Mr. Schmiege:
This will confirm that The Blackstone Group L.P. ("Blackstone")
has been retained by Chicago and North Western Transportation
Company ("CNW" or the "Company") to act as its exclusive
financial advisor with respect to: (i) the Company's review of
certain long-term shareholder value issues; and (ii) the
Company's discussions and proposed agreement (the "Settlement
Agreement") with Union Pacific Corporation ("UP") relating to
UP's proposed merger with Santa Fe Pacific Corporation. During
the term of this engagement, Blackstone agrees to provide the
Company strategic and financial advice, including assisting the
Company in analyzing, valuing, structuring, negotiating the terms
of and effecting the Settlement Agreement pursuant to the terms
and conditions of this letter agreement.
Blackstone's engagement shall be deemed to have commenced on
November 29, 1994. The term of the engagement shall be twelve
months from the date hereof, subject to termination by either the
Company or Blackstone at any time, with or without cause, upon
written notice to the other party, and without liability or
continuing obligation to CNW or to Blackstone (except for (i) any
compensation earned (including the minimum quarterly fee for two
quarters referred to below which shall be payable regardless of
the time of termination) and expenses incurred by Blackstone
prior to the date of termination and (ii) in the case of
termination by the Company, Blackstone's right to any fee
pursuant to this letter for the signing of the Settlement
Agreement within one year of such termination) and provided that
the separate letter agreement providing for the indemnification
of Blackstone by the Company will remain operative regardless of
such termination.
As compensation for Blackstone's services, the Company agrees to
pay Blackstone a fee equal to: (i) $250,000 per quarter for a
minimum of two quarters, payable in advance each quarter, from
the commencement of Blackstone's engagement (the "Retainer Fee");
and (ii) an amount not less than $1,000,000 and not greater than
$3,000,000 (such amount to be (such amount to be mutually agreed
upon by the Company and Blackstone based upon the terms of the
Settlement Agreement and the degree of Blackstone's involvement
in such negotiations), less any Retainer Fee paid, payable upon
signing of the Settlement Agreement (the "Settlement Fee"). In
addition to any fees that may be payable to Blackstone hereunder
<PAGE>
Chicago and North Western Transportation Company
Page 2
and regardless of whether any transaction (including any
settlement) is proposed or consummated, the Company hereby
agrees, from time to time upon request, to reimburse Blackstone
for all of Blackstone's reasonable travel and other out-of-pocket
expenses incurred (including Blackstone's legal expenses) in
connection with Blackstone's engagement hereunder; provided,
however, that all such legal expenses will be subject to prior
approval by the Company.
The Company agrees that in the event it is evaluating the
possibility of a merger or other sale transaction, it shall
retain Blackstone as its exclusive financial advisor with respect
thereto on terms customary for engagements of that type.
The Company acknowledges that all opinions and advice (written
and oral) given by Blackstone to the Company in connection with
this engagement are intended solely for the benefit and use of
the Company (including its management and directors) in
evaluating certain long-term shareholder value issues and the
Settlement Agreement. The Company agrees that no such opinions
or advice shall be used for any other means or reproduced,
disseminated, quoted or referred to, except as required by law,
at any time without the prior written consent of Blackstone,
which consent shall not be unreasonably withheld.
In connection with Blackstone's activities on the Company's
behalf, the Company will furnish to Blackstone all information
and data which Blackstone reasonably deems appropriate (the
"Information"). The Company will also provide Blackstone
reasonable access to its officers, directors and employees, as
well as to its independent accounts and to its counsel. The
Company hereby represents that the Information will not contain
any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein
not misleading in light of the circumstances under which such
statements are made, and will be complete and correct in all
material respects. The Company recognizes and confirms that
Blackstone (a) will use and rely primarily on the Information and
on information available from generally recognized public sources
in performing the services contemplated by this letter agreement
without having independently verified the same, (b) does not
assume responsibility for the accuracy or completeness of the
Information and such other information, (c) is entitled to rely
upon the Information without independent verification and
(d) will not make an appraisal of any assets in connection with
this assignment. All such information and data, whether oral or
written, will be kept confidential by Blackstone except such
information and data as has been made public, or such information
and data as the Company agrees, with regard to information
<PAGE>
Chicago and North Western Transportation Company
Page 3
supplied by it or on its behalf, may be disclosed, or such
information and data which Blackstone is required by law, upon
advice of counsel, to disclose, but only after reasonable prior
notice to the Company.
Blackstone and the Company have entered into a separate letter
agreement, attached hereto as ATTACHMENT A, providing for the
indemnification of Blackstone by the Company in connection with
the engagement hereunder.
This agreement shall be governed by and construed in accordance
with the laws of the state of New York applicable to contracts
executed and performed in that state. This agreement shall be
binding upon CNW, its successors and permitted assigns.
Please confirm that the foregoing is in accordance with your
understanding and agreement with Blackstone by signing and
returning the duplicate of this letter enclosed herewith.
Very truly yours,
THE BLACKSTONE GROUP L.P.
By /s/ J. Tomilson Hill
J. Tomilson Hill
CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY
By /s/ Robert Schmiege
Robert Schmiege
Chairman, President and CEO
<PAGE>
ATTACHMENT A
December 14, 1994
The Blackstone Group L.P.
345 Park Avenue
New York, NY 10154
Gentlemen:
INDEMNIFICATION AGREEMENT
This letter will confirm that we have engaged The Blackstone
Group L.P. ("Blackstone") to advise and assist us in connection
with respect to the matters referred to in our letter agreement
dated as of December 14, 1994 (the "Engagement Letter"). In
consideration of your agreement to act on our behalf in
connection with such matters, we agree to indemnify and hold
harmless you and your affiliates and your and their respective
partners (both general and limited), officers, directors,
employees and agents and each other person, if any, controlling
you or any of your affiliates (you and each such other person
being an "Indemnified Party") from and against any losses,
claims, damages, expenses and liabilities whatsoever, whether
they be joint or several, related to, arising out of or in
connection with the engagement (the "Engagement") under the
Engagement Letter and will reimburse each Indemnified Part for
all expenses (including fees, expenses and disbursements of
counsel) as they are incurred in connection with investigating,
preparing, pursuing, defending or assisting in the defense of any
action, claim, suit, investigation or proceeding related to,
arising out of or in connection with the Engagement or this
agreement, whether or not pending or threatened, whether or not
any Indemnified Party is a party, whether or not resulting in any
liability and whether or not such action, claim, suit,
investigation or proceeding is initiated or brought by us. We
will not, however, be liable under the foregoing indemnification
provision for any losses, claims, damages or liabilities (or
expenses relating thereto) that are finally judicially determined
by a court of competent jurisdiction to have primarily resulted
from the bad faith, gross negligence or willful misconduct of
Blackstone. We also agree that no Indemnified Party shall have
any liability (whether direct or indirect, in contract or tort or
otherwise) to us or our owners, parents, affiliates, security
holders or creditors for or in connection with the Engagement
except for any such liability for losses, claims, damages or
liabilities incurred by us that are finally judicially determined
by a court of competent jurisdiction to have primarily resulted
from the bad faith, gross negligence or willful misconduct of
Blackstone.
If the indemnification provided for in the preceding paragraph is
for any reason unavailable to an Indemnified Party in respect of
any losses, claims, damages or liabilities referred to herein,
then, in lieu of indemnifying such Indemnified Party hereunder,
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we shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or
liabilities (and expenses relating thereto) (i) in such
proportion as is appropriate to reflect the relative benefits
received (or anticipated to be received) by you, on the one hand,
and us, on the other hand, from the Engagement or (ii) if and
only if the allocation provided by clause (i) above is for any
reason not available, in such proportion as is appropriate to
reflect not only the relative benefits referred to in such clause
(i) but also the relative fault of each of you and us, as well as
any other relevant equitable considerations; provided, however,
to the extent permitted by applicable law, in no event shall your
aggregate contribution to the amount paid or payable exceed the
aggregate amount of fees actually received by you under the
Engagement Letter. For the purposes of this agreement, the
relative benefits to us and you of the Engagement shall be deemed
to be in the same proportion as (a) the total value paid or
contemplated to be paid or received or contemplated to be
received by us, our security holders and our creditors in the
transaction or transactions that are the subject to the
Engagement, whether or not any such transaction is consummated,
bears to (b) the fees paid or to be paid to Blackstone under the
Engagement Letter.
Neither party to this agreement will, without the prior written
consent of the other party (which consent will not be
unreasonably withheld), settle or compromise or consent to the
entry of any judgment in any pending or threatened claim, action,
suit or proceeding in respect of which indemnification may be
sought hereunder (a "Judgement"), whether or not we or any
Indemnified Party is an actual or potential party to such claim,
action, suit or proceeding. In the event that we week to settle
or compromise or consent to the entry of any Judgment, we agree
that such settlement, compromise or consent shall include an
unconditional release of Blackstone and each other Indemnified
Party hereunder from all liability arising out of such claim,
action, suit or proceeding.
Promptly after receipt by an Indemnified Party of notice of any
complaint or the commencement of any action or proceeding with
respect to which indemnification is being sought hereunder, such
person will notify us in writing of such complaint or of the
commencement of such action or proceeding, but failure so to
notify us will not relieve us from any liability which we may
have hereunder or otherwise, except to the extent that such
failure materially prejudices our rights. If we so elect or are
requested by such Indemnified Party, we will assume the defense
of such action or proceeding, including the employment of counsel
reasonably satisfactory to Blackstone and the payment of the fees
and disbursements of such counsel.
In the event, however, such Indemnified Party reasonably
determines in its judgment that having common counsel would
present such counsel with a conflict of interest or if we fail to
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assume the defense of the action or proceeding in a timely
manner, then such Indemnified Party may employ separate counsel
reasonably satisfactory to us to represent or defend it in any
such action or proceeding and we will pay the fees and
disbursements of such counsel; provided, however, that we will
not be required to pay the fees and disbursements of more than
one separate counsel for all Indemnified Parties in any
jurisdiction in any single action or proceeding. In any action
or proceeding the defense of which we assume, the Indemnified
Party will have the right to participate in such litigation and
to retain its own counsel at such Indemnified Party's own
expense.
The foregoing reimbursement, indemnity and contribution
obligations of the Company under this agreement shall be in
addition to any rights that an Indemnified Party may have at
common law or otherwise than under this agreement, and shall be
binding upon and inure to the benefit of any successors, assigns,
heirs and personal representatives of the Company and such
Indemnified Party.
The provisions of this agreement shall apply to the Engagement,
as well as any additional engagement of Blackstone by the Company
in connection with the matters which are the subject of the
Engagement, and any modification of the Engagement or additional
engagement and shall remain in full force and effect regardless
of any termination or the completion of your services under the
Engagement Letter.
This agreement and the Engagement Letter shall be governed by and
construed in accordance with the laws of the state of New York
applicable to contracts executed in and to be performed in that
state.
The effective date of this agreement shall be deemed to be
November 29, 1994 for all purposes hereunder.
Very truly yours,
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY
By /s/ Robert Schmiege
Robert Schmiege
Chairman, President and CEO
Accepted and Agreed
to as of the date first
written above:
THE BLACKSTONE GROUP L.P.
By /s/ J. Tomilson Hill
J. Tomilson Hill
<PAGE>
Change of Control
Employment Agreement
Among
Chicago and North Western Transportation Company,
Chicago and North Western Railway Company
and
Executive
<PAGE>
TABLE OF CONTENTS
Page
1. Certain Definitions . . . . . . . . . . . . . . . . . . 1
2. Employment Period . . . . . . . . . . . . . . . . . . . 3
3. Terms of Employment . . . . . . . . . . . . . . . . . . 3
4. Termination of Employment . . . . . . . . . . . . . . . 7
5. Obligations of CNW upon Termination . . . . . . . . . . 10
6. Certain Reduction of Payments by CNW . . . . . . . . . . 12
7. Non-exclusivity of Rights . . . . . . . . . . . . . . . 14
8. Confidentiality/NonCompetition . . . . . . . . . . . . . 14
9. Legal Fees and Other Expenses . . . . . . . . . . . . . 16
10. Full Settlement . . . . . . . . . . . . . . . . . . . . 16
11. Successors . . . . . . . . . . . . . . . . . . . . . . . 17
12. Miscellaneous . . . . . . . . . . . . . . . . . . . . . 17
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CHANGE OF CONTROL
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of the 20th day of December 1994,
is made by and among CHICAGO AND NORTH WESTERN TRANSPORTATION
COMPANY (the "Company"), a Delaware corporation having its
principal place of business in Chicago, Illinois, CHICAGO AND
NORTH WESTERN RAILWAY COMPANY ("CNW Railway"), (the Company and
CNW Railway collectively referred to herein as "CNW"), and
F. GORDON BITTER (the "Executive"), a resident of Illinois.
The Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and
its shareholders to assure that CNW will have the continued
dedication of the Executive, notwithstanding the possibility,
threat, or occurrence of a Change of Control (as defined below)
of the Company. The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the
personal uncertainties and risks created by a pending or
threatened Change of Control, to encourage the Executive's full
attention and dedication to CNW, and to provide the Executive
with compensation and benefits arrangements upon a Change of
Control which ensure that the compensation and benefits
expectations of the Executive will be satisfied and are
competitive with those of other major corporations. This
Agreement is intended to accomplish these objectives.
1. Certain Definitions
(a) The "Effective Date" shall be the first date on
which a Change of Control occurs during the "Change of Control
Period" (as defined in Section 1(b)). Anything in this Agreement
to the contrary notwithstanding, if the Executive's employment
with CNW is terminated prior to the date on which a Change of
Control occurs, and it is reasonably demonstrated that such
termination of employment (i) was at the request of a third party
who has taken steps reasonably calculated to effect the Change of
Control or (ii) otherwise arose in connection with or
anticipation of the Change of Control, then for all purposes of
this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" is the period
commencing on the date hereof and ending on the third anniversary
of such date; provided, however, that commencing on the date one
year after the date hereof, and on each annual anniversary of
such date (such date and each annual anniversary thereof is
hereinafter referred to as a "Renewal Date"), the Change of
Control Period shall be automatically extended so as to terminate
on the third anniversary of such Renewal Date, unless at least
60 days prior to the Renewal Date CNW shall give notice to the
Executive that the Change of Control Period shall not be so
extended.
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(c) "Change of Control". For the purpose of this
Agreement, a "Change of Control" shall mean any of the following
events:
(i) the acquisition by any person or group of
beneficial ownership of 40% or more of either the then
outstanding Stock or the combined voting power of the then
outstanding voting securities of the Company entitled to
vote generally in the election of directors, except that
(A) no such person or group shall be deemed to own
beneficially any securities held by the Company or a
Subsidiary (as defined below) or any employee benefit plan
(or any related trust) of the Company or a Subsidiary, and
(B) no Change of Control shall be deemed to have occurred
solely by reason of any such acquisition by a corporation
with respect to which, after such acquisition, more than 60%
of both the then outstanding common shares of such
corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled
to vote generally in the election of directors are then
beneficially owned, directly or indirectly, by the persons
who were the beneficial owners of the Stock and voting
securities of the Company immediately before such
acquisition in substantially the same proportion as their
ownership, immediately before such acquisition, of the then
outstanding Stock and the combined voting power of the then
outstanding voting securities of the Company entitled to
vote generally in the election of directors, as the case may
be;
(ii) individuals who, as of the date hereof,
constitute the Board (the "Incumbent Directors") cease for
any reason to constitute at least a majority of the Board;
provided that any individual who becomes a director after
the date hereof whose election, or nomination for election
by the Company's stockholders was approved by a vote or
written consent of at least two-thirds of the directors then
comprising the Incumbent Directors shall be considered as
though such individual were an Incumbent Director, but
excluding, for this purpose, any such individual whose
initial assumption of office is in connection with an actual
or threatened election contest relating to the election of
the directors of the Company (as such terms are used in Rule
14a-11 under the Securities Exchange Act of 1934, as amended
("1934 Act")); or
(iii) approval by the stockholders of the Company of
(A) a merger, reorganization or consolidation with respect
to which the individuals and entities who were the
respective beneficial owners of the Stock and voting
securities of the Company immediately before such merger,
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reorganization or consolidation do not, after such merger,
reorganization or consolidation, beneficially own, directly
or indirectly, more than 60% of, respectively, the then
outstanding common shares and the combined voting power of
the then outstanding voting securities entitled to vote
generally in the election of directors of the corporation
resulting from such merger, reorganization or consolidation,
(B) a liquidation or dissolution of the Company or (C) the
sale or other disposition of all or substantially all of the
assets of CNW.
For purposes of this definition, "person" means such term as
used in Securities Exchange Commission ("SEC") Rule 13d-5(b)
under the 1934 Act; "beneficial owner" means such term as defined
in SEC Rule 13d-3 under the 1934 Act; "group" means such term as
defined in Section 13(d) of the 1934 Act; "Subsidiary" means a
corporation as defined in Section 425(f) of the Internal Revenue
Code of 1986, as amended ("Code") with the Company being treated
as the employer corporation for purposes of this definition of
Subsidiary; and "Stock" means the common stock of the Company,
par value $.01, or any other common stock that the Company may
issue from time to time.
2. Employment Period. CNW hereby agrees to continue the
Executive in its employ, and, subject to Section 4 of the
Agreement, the Executive hereby agrees to remain in the employ of
CNW, for the period commencing on the Effective Date and ending
on the third anniversary of such date (the "Employment Period").
3. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the
Executive's position (including status, offices, titles,
reporting requirements and responsibilities), authority and
duties shall be at least commensurate in all material
respects with the most significant of those held, exercised
and assigned at any time during the 90-day period
immediately preceding the Effective Date, and (B) the
Executive's services shall be performed at the location
where the Executive was employed immediately preceding the
Effective Date or any office or location less than 50 miles
from such location.
(ii) During the Employment Period, and excluding any
periods of vacation, sick leave or disability to which the
Executive is entitled, the Executive agrees to devote the
Executive's full attention and time to the business and
affairs of CNW and, to the extent necessary to discharge the
duties assigned to the Executive hereunder, to use the
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Executive's best efforts to perform faithfully and
efficiently such duties. During the Employment Period, it
shall not be a violation of this Agreement for the Executive
to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and
(C) manage personal investments, so long as such activities
are consistent with the policies of CNW at the Effective
Date and do not significantly interfere with the performance
of the Executive's duties in accordance with this Agreement.
It is expressly understood and agreed that to the extent
that any such activities have been conducted by the
Executive prior to the Effective Date and were consistent
with the policies of CNW at the Effective Date, the
continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent
to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive's duties
hereunder.
(b) Compensation.
(i) Base Salary. During the Employment Period, CNW
Railway shall pay or cause to be paid to the Executive an
annual base salary in cash ("Guaranteed Base Salary"), which
shall be paid in a manner consistent with CNW Railway's
payroll practices immediately preceding the Effective Date
at a rate at least equal to twelve times the highest monthly
base salary paid or payable to the Executive by CNW Railway
in respect of the twelve-month period immediately preceding
the month in which the Effective Date occurs. During the
Employment Period, the Guaranteed Base Salary shall be
reviewed at least annually and shall be increased at any
time and from time to time as shall be substantially
consistent with increases in base salary awarded in the
ordinary course of business to other peer executives of CNW
Railway. Any increase in Guaranteed Base Salary shall not
serve to limit or reduce any other obligation to the
Executive under this Agreement. Guaranteed Base Salary
shall not be reduced after any such increase, and the term
Guaranteed Base Salary as used in this Agreement shall refer
to the Guaranteed Base Salary as so increased.
(ii) Guaranteed Bonus. (A) In addition to Guaranteed
Base Salary, CNW shall pay or cause to be paid to the
Executive a bonus (the "Guaranteed Bonus") for each
Performance Period which ends during the Employment Period.
For purposes of this Agreement, a "Performance Period" means
each period of time designated in accordance with the
Chicago and North Western Holdings Corp. Bonus Plan or any
other bonus arrangement ("Bonus Plan") which is based upon
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performance and approved by the Board or any duly designated
committee of the Board. The Guaranteed Bonus shall be at
least equal to the product of (I) a percentage equal to the
greatest of (a) the On Plan Percentage (as defined in
Section 3(b)(ii)(B)(I) below), or (b) the amount of the
Historical Bonus Percentage (as defined in Section
3(b)(ii)(B)(II) below), or (c) the Actual Bonus Percentage
(as defined in Section 3(b)(ii)(B)(III) below), multiplied
by (II) the Guaranteed Annual Salary.
(B) For purposes of this Section 3(b)(ii), the following
definitions apply:
(I) "On Plan Percentage" means the percentage
of Guaranteed Base Salary to which the Executive would
have been entitled under any Bonus Plan for the
Performance Period for which the Guaranteed Bonus is
awarded ("Current Performance Period") as if the
performance achieved 100% of performance goals
established pursuant to such Bonus Plan.
(II) "Historical Bonus Percentage" means the
highest Adjusted Bonus Percentage (as defined below) in
the three Performance Periods preceding the Effective
Date (individually referred to herein as a "Prior
Performance Period"). The "Adjusted Bonus Percentage"
for any such Prior Performance Period is equal to the
bonus accrued for such Prior Performance Period,
expressed as a percentage of the annual rate of base
salary earned by the Executive during such Prior
Performance Period, multiplied by the Adjustment
Fraction (as defined below). The "Adjustment Fraction"
is, with respect to each Prior Performance Period, a
fraction, the numerator of which is the number of
months in the Current Performance Period, and the
denominator of which is the number of months in each
Prior Performance Period.
(III) "Actual Bonus Percentage" means the
percentage of the rate of Guaranteed Base Salary for
the Current Performance Period which the Executive
would accrue as a bonus under any Bonus Plan if the
performance during the Current Performance Period were
measured by the actual performance during the Current
Performance Period; provided, however, that for
purposes of calculating the Guaranteed Bonus under
Section 5 hereof, "Actual Bonus Percentage" means the
percentage of the rate of Guaranteed Base Salary for
the Performance Period during which the Termination
Date (as defined below), occurred ("Termination
Performance Period") which the Executive would accrue
as a bonus under any Bonus Plan if the performance
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during such Termination Performance Period were
measured by the actual performance during the
Termination Performance Period prior to the Termination
Date projected to the last day of such Performance
Period.
(iii) Incentive, Savings and Retirement Plans. In
addition to Guaranteed Base Salary and Guaranteed Bonus
payable as hereinabove provided, the Executive shall be
entitled to participate during the Employment Period in all
incentive (including long-term incentives), savings and
retirement plans, practices, policies and programs
applicable to other peer executives of CNW, but in no event
shall such plans, practices, policies and programs provide
the Executive with incentive (including long-term
incentives), savings and retirement benefits which, in each
case, are less favorable, in the aggregate, than the most
favorable of those provided by CNW for the Executive under
such plans, practices, policies and programs as in effect at
any time during the 90-day period immediately preceding the
Effective Date.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the
case may be, shall be eligible for participation in and
shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by CNW (including,
and without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life,
dependent life, accidental death and travel accident
insurance plans and programs) and applicable to other peer
executives of CNW, but in no event shall such plans,
practices, policies and programs provide benefits which in
each case are less favorable, in the aggregate, than the
most favorable of those provided by CNW for the Executive
under such plans, practices, policies and programs as in
effect at any time during the 90-day period immediately
preceding the Effective Date.
(v) Fringe Benefits. During the Employment Period,
the Executive shall be entitled to fringe benefits in
accordance with the most favorable plans, practices,
programs and policies applicable to peer executives of CNW
Railway, but in no event shall such plans, practices,
policies and programs provide fringe benefits which in each
case are less favorable, in the aggregate, than the most
favorable of those provided by CNW Railway for the Executive
under such plans, practices, policies and programs in effect
at any time during the 90-day period immediately preceding
the Effective Date.
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(vi) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement
for all reasonable employment-related expenses incurred by
the Executive upon CNW Railway's receipt of accountings in
accordance with the most favorable policies, practices and
procedures applicable to peer executives of CNW Railway, but
in no event shall such policies, practices and procedures in
each case be less favorable, in the aggregate, than the most
favorable of those provided by CNW Railway for the Executive
under such policies, practices and procedures in effect at
any time during the 90-day period immediately preceding the
Effective Date.
(vii) Office and Support Staff. During the Employment
Period, the Executive shall be entitled to an office or
offices of a size and with furnishings and other
appointments, and to exclusive personal secretarial and
other assistance in accordance with the most favorable
policies, practices and procedures applicable to peer
executives of CNW Railway, but in no event shall such
policies, practices and procedures be less favorable, in the
aggregate, than the most favorable of those provided by CNW
Railway for the Executive under such policies, practices and
procedures in effect at any time during the 90-day period
immediately preceding the Effective Date.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance
with the most favorable plans, practices, policies and
programs applicable to peer executives of CNW Railway, but
in no event shall such plans, practices, policies and
programs provide paid vacation which is less favorable in
the aggregate than the most favorable of those provided by
CNW Railway for the Executive under such plans, practices,
policies and programs in effect at any time during the
90-day period immediately preceding the Effective Date.
4. Termination of Employment.
(a) Death or Disability. The Executive's employment
shall terminate automatically upon the Executive's death or
Disability during the Employment Period. Disability of the
Executive shall be deemed to have occurred on the date on which
the Executive is certified as having incurred a Disability by a
physician selected by CNW or its insurers and acceptable to the
Executive or the Executive's legal representative. If CNW
determines in good faith that the Disability of the Executive has
occurred during the Employment Period, it may give to the
Executive written notice in accordance with Section 11(e) of this
Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with CNW
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shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), unless
within the 30 days after such receipt, the Executive shall have
returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" means any medically
determinable physical or mental impairment that can be expected
to last for a continuous period of not less than six months, and
that renders the Executive unable to perform the duties required
under this Agreement.
(b) Cause. The Executive's employment may be
terminated during the Employment Period by CNW for Cause.
"Cause" means either of the following:
(i) conviction of the Executive of any felony or
other crime involving dishonesty, or moral turpitude; or
(ii) the Executive's habitual neglect of the
Executive's duties (other than on account of Disability),
except that Cause shall not mean:
(i) bad judgment or negligence other than habitual
neglect of duty;
(ii) any act or omission believed by the Executive in
good faith to have been in or not opposed to the interest of
CNW (without intent of the Executive to gain therefrom,
directly or indirectly, a profit to which the Executive was
not legally entitled);
(iii) any act or omission with respect to which a
determination could properly have been made by the Board
that the Executive met the applicable standard of conduct
for indemnification or reimbursement under the By-Laws of
CNW, any applicable indemnification agreement, or the laws
and regulations under which CNW is governed, in each case in
effect at the time of such act or omission; or
(iv) any act or omission with respect to which notice
of termination of employment of the Executive is given more
than twelve (12) months after the earliest date on which any
member of the Board who is not a party to the act or
omission, knew or should have known of such act or omission.
(c) Good Reason. The Executive's employment may be
terminated during the Employment Period by the Executive for Good
Reason. For purposes of this Agreement, "Good Reason" means any
one of the following events:
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(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles, reporting requirements
or responsibilities), authority or duties as contemplated by
Section 3(a) of this Agreement, or any other action by CNW
which results in a diminution or other material adverse
change in such position, authority or duties, excluding for
this purpose an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied by CNW
promptly after receipt of notice thereof given by the
Executive;
(ii) any failure by CNW to comply with any of the
provisions of Section 3(b) of this Agreement, other than an
isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by CNW promptly
after receipt of notice thereof given by the Executive;
(iii) CNW requiring the Executive to be based at any
office or location other than the location described in
Section 3(a)(i)(B) hereof;
(iv) any other material adverse changes to the terms
and conditions of the Executive's employment;
(v) any purported termination by CNW of the
Executive's employment otherwise than as expressly permitted
by this Agreement, it being understood that any such
purported termination shall not be effective for any other
purpose of this Agreement; or
(vi) any failure by CNW to comply with and satisfy
Section 11(c) of this Agreement.
For purposes of this Section 4(c), any good faith
determination of "Good Reason" made by the Executive shall be
conclusive.
(d) Notice of Termination. Any termination of the
Executive's employment by CNW for Cause or by the Executive for
Good Reason shall be communicated by Notice of Termination (as
defined below) to the other party hereto given in accordance with
Section 11(e) of this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice which
(i) indicates the specific termination provision in this
Agreement relied upon, (ii) sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated and (iii) if the Termination Date (as defined below) is
other than the date of receipt of such Notice of Termination,
specifies the Termination Date. The failure by the Executive to
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set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason shall not waive any
right of the Executive hereunder or preclude the Executive from
asserting such fact or circumstance in enforcing the Executive's
rights hereunder.
(e) Termination Date. "Termination Date" means the
date of receipt of the Notice of Termination or any later date
specified therein (which date shall be not more than fifteen days
after the giving of such notice), as the case may be; provided,
however, that (i) if the Executive's employment is terminated by
CNW other than for Cause or Disability, the Termination Date
shall be the date of receipt of such Notice of Termination and
(ii) if the Executive's employment is terminated by reason of
death or Disability, the Termination Date shall be the date of
death of the Executive or the Disability Effective Date, as the
case may be.
5. Obligations of CNW upon Termination.
(a) Termination of Employment for Good Reason or
Other Than for Cause or Disability. If, during the Employment
Period, CNW shall terminate Executive's employment other than for
Cause or Disability, or if the Executive shall terminate
employment under this Agreement for Good Reason, CNW shall pay to
the Executive, in addition to all vested rights arising from his
employment, as specified in Section 7 hereof, in a lump sum in
cash within three days after the Termination Date the aggregate
of the following amounts (hereinafter, the amounts described in
Section 5(a)(i)(A), (B), and (C) shall be called the "Accrued
Obligations"):
(A) to the extent not theretofore paid, the
Guaranteed Base Salary and any accrued vacation pay
through the Termination Date;
(B) the difference between (I) the product of
(1) the Guaranteed Bonus, multiplied by (2) a fraction,
the numerator of which is the number of days in the
Termination Performance Period which elapsed prior to
the Termination Date, and the denominator of which is
the total number of days in the Termination Performance
Period, and (II) the amount of any Guaranteed Bonus
paid to the Executive with respect to the Termination
Performance Period;
(C) in the case of compensation previously
deferred by the Executive, all amounts previously
deferred (together with any accrued earnings thereon)
and not yet paid by CNW;
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(D) an amount equal to the product of (I)
three (3), multiplied by (II) the sum of (1) the
Guaranteed Base Salary and (2) the Guaranteed Bonus
multiplied by a fraction, the numerator of which is
twelve and the denominator of which is the number of
months in the Termination Performance Period; and
(E) a payment equal to the value of the
Executive's accrued benefit under the Chicago and North
Western Transportation Company Supplemental Pension
Plan (the "Pension Plan") calculated as though the
Executive continued to accrue benefits under the
Pension Plan for a period of three years after the
Termination Date (the "Continuance Period"), reduced by
the value of the Executive's vested accrued benefit
under the Pension Plan as of the Termination Date; and
(F) for the Continuance Period, or such
longer period as any plan, program, practice or policy
may provide, CNW Railway shall continue to provide at
no cost to the Executive, except a cost equal to the
lesser of (I) the cost to the Executive immediately
prior to the Termination Date or (II) the cost to the
Executive immediately prior to the Effective Date, all
welfare benefits (including, but without limitation,
medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental
death and travel accident insurance plans and programs)
to the Executive and/or the Executive's family which
are at least as favorable as the most favorable plans,
practices, programs or policies of CNW Railway
applicable to other peer Executives, but which are in
no event less favorable than the most favorable plans,
practices, programs or policies of CNW Railway
applicable to other peer Executives and their families
during the 90-day period immediately preceding the
Effective Date.
(b) Termination of Employment for Cause. If the
Executive's employment shall be terminated by CNW for Cause
during the Employment Period, this Agreement shall terminate
without further obligations to the Executive, other than the
obligation to pay to the Executive in a lump sum in cash, within
30 days of the Termination Date, the Guaranteed Base Salary
through the Termination Date, plus the amount of any compensation
previously deferred by the Executive, plus any accrued vacation,
in each case to the extent theretofore unpaid.
(c) Termination of Employment Other Than for Good
Reason. If the Executive terminates employment during the
Employment Period other than for Good Reason, Disability or
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death, this Agreement shall terminate without further obligations
by CNW, other than the obligation to pay to the Executive all
Accrued Obligations in a lump sum in cash within 30 days of the
Notice Date.
(d) Termination of Employment for Disability. If
the Executive's employment is terminated by reason of the
Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the
Executive, other than the obligation to pay to the Executive all
Accrued Obligations in a lump sum in cash within 30 days of the
Termination Date. Anything in this Agreement to the contrary
notwithstanding, the Executive shall be entitled after the
Disability Effective Date to receive disability and other
benefits at least equal to those provided under the most
favorable plans, practices, policies and programs relating to
disability applicable to disabled peer executives of CNW and
their families, but in no event shall such plans, practices,
policies and programs provide benefits which in each case are
less favorable, in the aggregate, than the most favorable of
those provided by CNW for the Executive under such plans,
practices, policies or programs in effect at any time during the
90-day period immediately preceding the Effective Date.
(e) Termination of Employment Because of Death. If
the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's
legal representatives under this Agreement, other than the
obligation to pay to the Executive's estate or beneficiary all
Accrued Obligations in a lump sum in cash within 30 days of the
Notice Date. Anything in this Agreement to the contrary
notwithstanding, the Executive's family shall be entitled to
receive benefits at least equal to the most favorable benefits
provided by CNW to the surviving families of peer executives of
CNW under such plans, practices, policies and programs, but in no
event shall such plans, practices, policies or programs provide
benefits which in each case are less favorable, in the aggregate,
than the most favorable of those provided by CNW to the Executive
under such plans, practices, policies or programs in effect at
any time during the 90-day period immediately preceding the
Effective Date.
6. Certain Reduction of Payments by CNW.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment or distribution by CNW to or for the benefit of the
Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise) (a "Payment") would be nondeductible by CNW for
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Federal income tax purposes because of Section 280G of the Code,
then the aggregate present value of amounts payable or
distributable to or for the benefit of the Executive pursuant to
this Agreement (such payments or distributions pursuant to this
Agreement are hereinafter referred to as "Agreement Payments")
shall be reduced to the Reduced Amount. The "Reduced Amount"
shall be an amount expressed in present value which maximizes the
aggregate present value of Agreement Payments without causing any
Payment to be nondeductible by CNW because of Section 280G of the
Code. For purposes of this Section 6, present value shall be
determined in accordance with Section 280G(d)(4) of the Code.
(b) All determinations required to be made under
this Section 6 shall be made by Arthur Andersen (the "Accounting
Firm") which shall provide detailed supporting calculations both
to CNW and the Executive within 15 business days of the Date of
Termination or such earlier time as is requested by CNW and an
opinion to the Executive that he has substantial authority not to
report any Excise Tax on his Federal income tax return with
respect to the Agreement Payments. Any such determination by the
Accounting Firm shall be binding upon CNW and the Executive. The
Executive shall determine which and how much of the Agreement
Payments shall be eliminated or reduced consistent with the
requirements of this Section 6, provided that, if the Executive
does not make such determination within ten business days of the
receipt of the calculations made by the Accounting Firm, CNW
shall elect which and how much of the Agreement Payments shall be
eliminated or reduced consistent with the requirements of this
Section 6 and shall notify the Executive promptly of such
election. Within five business days thereafter, CNW shall pay to
or distribute to or for the benefit of the Executive such amounts
as are then due to the Executive under this Agreement.
(c) As a result of the uncertainty in the
application of Section 280G of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is
possible that Agreement Payments will have been made by CNW which
should not have been made ("Overpayment") or that additional
Agreement Payments which will not have been made by CNW could
have been made ("Underpayment"), in each case, consistent with
the calculations required to be made hereunder. In the event
that the Accounting Firm, based upon the assertion of a
deficiency by the Internal Revenue Service against the Executive
which the Accounting Firm believes has a high probability of
success determines that an Overpayment has been made, any such
Overpayment paid or distributed by CNW to or for the benefit of
the Executive shall be treated for all purposes as a loan ab
initio to the Executive which the Executive shall repay to CNW
together with interest at the applicable federal rate provided
for in Section 7872(f)(2) of the Code; provided, however, that no
such loan shall be deemed to have been made and no amount shall
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be payable by the Executive to CNW if and to the extent such
deemed loan and payment would not either reduce the amount on
which the Executive is subject to tax under Section 1 and
Section 4999 of the Code or generate a refund of such taxes. In
the event that the Accounting Firm, based upon controlling
precedent or other substantial authority, determines that an
Underpayment has occurred, any such Underpayment shall be
promptly paid by CNW to or for the benefit of the Executive
together with interest at the applicable federal rate provided
for in Section 7872(f)(2) of the Code.
7. Non-exclusivity of Rights.
(a) Waiver of Other Severance Rights. If the
Executive receives payments pursuant to Section 5(a) hereof, the
Executive hereby waives the right to receive severance payments
under any other plan, policy or agreement of CNW.
(b) Other Rights. Except as provided in
Section 6(a), nothing in this Agreement shall prevent or limit
the Executive's continuing or future participation in any
benefit, bonus, incentive or other plans, programs, policies or
practices, provided by CNW or any of its affiliated companies and
for which the Executive may qualify, nor shall anything herein
limit or otherwise affect such rights as the Executive may have
under any other agreements with CNW or any of their affiliated
companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan,
practice, policy or program of CNW or any of their affiliated
companies and any other payment or benefit required by law at or
subsequent to the Termination Date shall be payable in accordance
with such plan, practice, policy or program or applicable law
except as explicitly modified by this Agreement.
8. Confidentiality/NonCompetition.
(a) Confidentiality. Executive acknowledges that it
is the policy of the Company and its subsidiaries to maintain as
secret and confidential all valuable and unique information and
techniques acquired, developed or used by the Company and its
subsidiaries relating to their business, operations, employees
and customers, which gives the Company and its subsidiaries a
competitive advantage in the railroad industry and other
businesses in which the Company and its subsidiaries are engaged
("Confidential Information"). Executive recognizes that all such
Confidential Information is the sole and exclusive property of
the Company and its subsidiaries, and that disclosure of
Confidential Information would cause damage to the Company and
its subsidiaries. In consideration of the Company's entering
into this Agreement, Executive agrees that, except as required by
the duties of his employment with the Company and/or its
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subsidiaries, he will never directly or indirectly use, publish,
disseminate or otherwise disclose any Confidential Information
obtained during his employment with the Company and/or its
subsidiaries for so long as such information is valuable and
unique.
(b) Noncompetition/Nonsolicitation.
(i) Executive agrees that, during the period of his
employment with the Company and/or its subsidiaries and, if
Executive's employment is terminated for any reason,
thereafter for a period of one (1) year, Executive will not
at any time directly or indirectly, in any capacity, engage
or participate in, or become employed by or render advisory
or consulting or other services in connection with any
Prohibited Business as defined in Section 8(b)(iv).
(ii) Executive agrees that, during the period of his
employment with the Company and/or its subsidiaries and, if
Executive's employment is terminated for any reason,
thereafter for a period of one (1) year, Executive shall not
make any financial investment, whether in the form of equity
or debt, or own any interest, directly or indirectly, in any
Prohibited Business. Nothing in this Section 8(b)(ii)
shall, however, restrict Executive from making any
investment in any company whose stock is listed on a
national securities exchange or actively traded in the
over-the-counter market; provided that (A) such investment
does not give Executive the right or ability to control or
influence the policy decisions of any Prohibited Business,
and (B) such investment does not create a conflict of
interest between Executive's duties hereunder and
Executive's interest in such investment.
(iii) Executive agrees that, during the period of his
employment with the Company and/or its subsidiaries and, if
Executive's employment is terminated for any reason,
thereafter for a period of one (1) year, Executive shall not
(A) employ any employee of the Company and/or its
subsidiaries or (B) interfere with the Company's or any of
its subsidiaries' relationship with, or endeavor to entice
away from the Company and/or its subsidiaries any person,
firm, corporation, or other business organization who or
which at any time (whether before or after the date of
Executive's termination of employment), was an employee,
customer, vendor or supplier of, or maintained a business
relationship with, any business of the Company and/or its
subsidiaries which was conducted at any time during the
period commencing one year prior to the termination of
employment.
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(iv) For the purpose of this Section 8(b),
"Prohibited Business" shall be defined as any railroad,
freight carrier or other entity and any branch, office or
operation thereof, which is a direct and material competitor
of the Company wherever the Company does business, in the
United States or abroad, and which has established or seeks
to establish contact, in whatever form (including but not
limited to solicitation of sales, or the receipt or
submission of bids) with any entity who is at any time a
client, customer or supplier of the Company (including but
not limited to all subdivisions of the federal government.)
(c) Executive and the Company specifically agree
that, in the event that Executive shall breach his obligations
under this Section 8, the Company and its subsidiaries will
suffer irreparable injury and no adequate remedy for such breach,
and shall be entitled to injunctive relief therefor, and in
particular, without limiting the generality of the foregoing, the
Company shall not be precluded from pursuing any and all remedies
it may have at law or in equity for breach of such obligations.
9. Legal Fees and Other Expenses.
(a) Legal Fees and Expenses. CNW agrees to pay
promptly upon presentation of an invoice from the Executive, to
the full extent permitted by law, all legal fees, including
retainer fees, and expenses which the Executive may reasonably
incur as a result of any contest (regardless of the outcome
thereof) by CNW or others of the validity or enforceability of,
or liability under, any provision of this Agreement or any other
benefit plan, program or policy or any guarantee of performance
thereof (including, but not limited to, legal fees and expenses
as a result of any contest by the Executive about the amount of
any payment pursuant to Section 5 of this Agreement).
(b) Interest. In the event any amount due to the
Executive under this Agreement is not paid within 10 days of
request therefor, the Executive shall be entitled to receive
interest at the highest interest rate applicable to CNW in its
borrowing of funds from any third party during the period of
nonpayment and if such rate is not determinable, or if higher,
then at a rate two percent above the prime commercial lending
rate announced by Citibank, N.A. in effect from time to time
during the period of such nonpayment.
10. Full Settlement. CNW's obligation to make the payments
provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances,
including, without limitation, set-off, counterclaim, recoupment,
defense or other claim, right or action which CNW may have
against the Executive or others. In no event shall the Executive
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be obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement, nor shall the amount of
any payment hereunder be reduced by any compensation earned by
the Executive as result of employment by another employer.
11. Successors.
(a) This Agreement is personal to the Executive and
without the prior written consent of CNW shall not be assignable
by the Executive otherwise than by will or the laws of descent
and distribution. This Agreement shall inure to the benefit of
and be enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and
be binding upon CNW and its successors and assigns.
(c) CNW will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of CNW to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that CNW would be required to
perform it if no such succession had taken place. As used in
this Agreement, "CNW" shall mean the CNW as hereinbefore defined
and any successor to its business and/or assets as aforesaid
which assumes and agrees to perform this Agreement by operation
of law, or otherwise, and CNW and such successor shall be jointly
and severally liable hereunder.
12. Miscellaneous.
(a) If the Executive dies prior to receiving amounts
to which the Executive is entitled hereunder, such amounts shall
be paid in a lump sum payment to the beneficiary designated in
writing by the Executive and if no such beneficiary is
designated, to the Executive's estate.
(b) Benefits payable under this Agreement shall not
be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment,
execution or levy of any kind, either voluntary or involuntary,
prior to actually being received by the Executive, and any such
attempt to dispose of any right to benefits payable hereunder
shall be void.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(d) This Agreement shall not be altered, amended or
modified except by written instrument executed by CNW and
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Executive. A waiver of any term, covenant, agreement or
condition contained in this Agreement shall not be deemed a
waiver of any other term, covenant, agreement or condition, and
any waiver of any default in any such term, covenant, agreement
or condition shall not be deemed a waiver of any later default
thereof or of any other term, covenant, agreement or condition.
(e) All notices and other communications hereunder
shall be in writing and delivered by hand or by first class
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
__________________________
__________________________
__________________________
__________________________
If to CNW:
Chicago and Northwestern
Transportation Company
165 North Canal Street
Chicago, Illinois 60606
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(f) This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same instrument
originals.
(g) This Agreement shall be interpreted and
construed in accordance with the laws of the State of Illinois,
without regard to its choice of law principles. The captions of
this Agreement are not part of the provisions hereof and shall
have no force or effect.
(h) CNW may withhold from any amounts payable under
this Agreement such federal, state or local taxes as shall be
required to be withheld pursuant to any applicable law or
regulation.
(i) The Executive's failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a
waiver of such provision or any other provision thereof.
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(j) The obligations of CNW under this Agreement
shall be unfunded and unsecured. CNW shall not be required to
segregate any assets that may at any time be required to provide
benefits under this Agreement.
(k) This Agreement contains the entire understanding
of CNW and the Executive with respect to the subject matter
hereof.
IN WITNESS WHEREOF, the Executive has hereunto set his hand
and, pursuant to the authorization from its Board of Directors,
the Company and CNW Railway have caused these presents to be
executed in their name on their behalf, all as of the day and
year first above written.
/s/ F. G. Bitter
Executive
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY
BY: /s/ Robert Schmiege
CHICAGO AND NORTH WESTERN
RAILWAY COMPANY
BY: /s/ Robert Schmiege
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<PAGE>
Change of Control
Employment Agreement
Among
Chicago and North Western Transportation Company,
Chicago and North Western Railway Company
and
Executive
<PAGE>
TABLE OF CONTENTS
Page
1. Certain Definitions . . . . . . . . . . . . . . . . . . 1
2. Employment Period . . . . . . . . . . . . . . . . . . . 3
3. Terms of Employment . . . . . . . . . . . . . . . . . . 3
4. Termination of Employment . . . . . . . . . . . . . . . 7
5. Obligations of CNW upon Termination . . . . . . . . . . 10
6. Certain Reduction of Payments by CNW . . . . . . . . . . 12
7. Non-exclusivity of Rights . . . . . . . . . . . . . . . 14
8. Confidentiality/NonCompetition . . . . . . . . . . . . . 14
9. Legal Fees and Other Expenses . . . . . . . . . . . . . 16
10. Full Settlement . . . . . . . . . . . . . . . . . . . . 16
11. Successors . . . . . . . . . . . . . . . . . . . . . . . 17
12. Miscellaneous . . . . . . . . . . . . . . . . . . . . . 17
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CHANGE OF CONTROL
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of the 20th day of December 1994,
is made by and among CHICAGO AND NORTH WESTERN TRANSPORTATION
COMPANY (the "Company"), a Delaware corporation having its
principal place of business in Chicago, Illinois, CHICAGO AND
NORTH WESTERN RAILWAY COMPANY ("CNW Railway"), (the Company and
CNW Railway collectively referred to herein as "CNW"), and
PAUL A. LUNDBERG (the "Executive"), a resident of Illinois.
The Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and
its shareholders to assure that CNW will have the continued
dedication of the Executive, notwithstanding the possibility,
threat, or occurrence of a Change of Control (as defined below)
of the Company. The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the
personal uncertainties and risks created by a pending or
threatened Change of Control, to encourage the Executive's full
attention and dedication to CNW, and to provide the Executive
with compensation and benefits arrangements upon a Change of
Control which ensure that the compensation and benefits
expectations of the Executive will be satisfied and are
competitive with those of other major corporations. This
Agreement is intended to accomplish these objectives.
1. Certain Definitions
(a) The "Effective Date" shall be the first date on
which a Change of Control occurs during the "Change of Control
Period" (as defined in Section 1(b)). Anything in this Agreement
to the contrary notwithstanding, if the Executive's employment
with CNW is terminated prior to the date on which a Change of
Control occurs, and it is reasonably demonstrated that such
termination of employment (i) was at the request of a third party
who has taken steps reasonably calculated to effect the Change of
Control or (ii) otherwise arose in connection with or
anticipation of the Change of Control, then for all purposes of
this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" is the period
commencing on the date hereof and ending on the third anniversary
of such date; provided, however, that commencing on the date one
year after the date hereof, and on each annual anniversary of
such date (such date and each annual anniversary thereof is
hereinafter referred to as a "Renewal Date"), the Change of
Control Period shall be automatically extended so as to terminate
on the third anniversary of such Renewal Date, unless at least
60 days prior to the Renewal Date CNW shall give notice to the
Executive that the Change of Control Period shall not be so
extended.
<PAGE>
(c) "Change of Control". For the purpose of this
Agreement, a "Change of Control" shall mean any of the following
events:
(i) the acquisition by any person or group of
beneficial ownership of 40% or more of either the then
outstanding Stock or the combined voting power of the then
outstanding voting securities of the Company entitled to
vote generally in the election of directors, except that
(A) no such person or group shall be deemed to own
beneficially any securities held by the Company or a
Subsidiary (as defined below) or any employee benefit plan
(or any related trust) of the Company or a Subsidiary, and
(B) no Change of Control shall be deemed to have occurred
solely by reason of any such acquisition by a corporation
with respect to which, after such acquisition, more than 60%
of both the then outstanding common shares of such
corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled
to vote generally in the election of directors are then
beneficially owned, directly or indirectly, by the persons
who were the beneficial owners of the Stock and voting
securities of the Company immediately before such
acquisition in substantially the same proportion as their
ownership, immediately before such acquisition, of the then
outstanding Stock and the combined voting power of the then
outstanding voting securities of the Company entitled to
vote generally in the election of directors, as the case may
be;
(ii) individuals who, as of the date hereof,
constitute the Board (the "Incumbent Directors") cease for
any reason to constitute at least a majority of the Board;
provided that any individual who becomes a director after
the date hereof whose election, or nomination for election
by the Company's stockholders was approved by a vote or
written consent of at least two-thirds of the directors then
comprising the Incumbent Directors shall be considered as
though such individual were an Incumbent Director, but
excluding, for this purpose, any such individual whose
initial assumption of office is in connection with an actual
or threatened election contest relating to the election of
the directors of the Company (as such terms are used in Rule
14a-11 under the Securities Exchange Act of 1934, as amended
("1934 Act")); or
(iii) approval by the stockholders of the Company of
(A) a merger, reorganization or consolidation with respect
to which the individuals and entities who were the
respective beneficial owners of the Stock and voting
securities of the Company immediately before such merger,
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reorganization or consolidation do not, after such merger,
reorganization or consolidation, beneficially own, directly
or indirectly, more than 60% of, respectively, the then
outstanding common shares and the combined voting power of
the then outstanding voting securities entitled to vote
generally in the election of directors of the corporation
resulting from such merger, reorganization or consolidation,
(B) a liquidation or dissolution of the Company or (C) the
sale or other disposition of all or substantially all of the
assets of CNW.
For purposes of this definition, "person" means such term as
used in Securities Exchange Commission ("SEC") Rule 13d-5(b)
under the 1934 Act; "beneficial owner" means such term as defined
in SEC Rule 13d-3 under the 1934 Act; "group" means such term as
defined in Section 13(d) of the 1934 Act; "Subsidiary" means a
corporation as defined in Section 425(f) of the Internal Revenue
Code of 1986, as amended ("Code") with the Company being treated
as the employer corporation for purposes of this definition of
Subsidiary; and "Stock" means the common stock of the Company,
par value $.01, or any other common stock that the Company may
issue from time to time.
2. Employment Period. CNW hereby agrees to continue the
Executive in its employ, and, subject to Section 4 of the
Agreement, the Executive hereby agrees to remain in the employ of
CNW, for the period commencing on the Effective Date and ending
on the third anniversary of such date (the "Employment Period").
3. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the
Executive's position (including status, offices, titles,
reporting requirements and responsibilities), authority and
duties shall be at least commensurate in all material
respects with the most significant of those held, exercised
and assigned at any time during the 90-day period
immediately preceding the Effective Date, and (B) the
Executive's services shall be performed at the location
where the Executive was employed immediately preceding the
Effective Date or any office or location less than 50 miles
from such location.
(ii) During the Employment Period, and excluding any
periods of vacation, sick leave or disability to which the
Executive is entitled, the Executive agrees to devote the
Executive's full attention and time to the business and
affairs of CNW and, to the extent necessary to discharge the
duties assigned to the Executive hereunder, to use the
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Executive's best efforts to perform faithfully and
efficiently such duties. During the Employment Period, it
shall not be a violation of this Agreement for the Executive
to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and
(C) manage personal investments, so long as such activities
are consistent with the policies of CNW at the Effective
Date and do not significantly interfere with the performance
of the Executive's duties in accordance with this Agreement.
It is expressly understood and agreed that to the extent
that any such activities have been conducted by the
Executive prior to the Effective Date and were consistent
with the policies of CNW at the Effective Date, the
continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent
to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive's duties
hereunder.
(b) Compensation.
(i) Base Salary. During the Employment Period, CNW
Railway shall pay or cause to be paid to the Executive an
annual base salary in cash ("Guaranteed Base Salary"), which
shall be paid in a manner consistent with CNW Railway's
payroll practices immediately preceding the Effective Date
at a rate at least equal to twelve times the highest monthly
base salary paid or payable to the Executive by CNW Railway
in respect of the twelve-month period immediately preceding
the month in which the Effective Date occurs. During the
Employment Period, the Guaranteed Base Salary shall be
reviewed at least annually and shall be increased at any
time and from time to time as shall be substantially
consistent with increases in base salary awarded in the
ordinary course of business to other peer executives of CNW
Railway. Any increase in Guaranteed Base Salary shall not
serve to limit or reduce any other obligation to the
Executive under this Agreement. Guaranteed Base Salary
shall not be reduced after any such increase, and the term
Guaranteed Base Salary as used in this Agreement shall refer
to the Guaranteed Base Salary as so increased.
(ii) Guaranteed Bonus. (A) In addition to Guaranteed
Base Salary, CNW shall pay or cause to be paid to the
Executive a bonus (the "Guaranteed Bonus") for each
Performance Period which ends during the Employment Period.
For purposes of this Agreement, a "Performance Period" means
each period of time designated in accordance with the
Chicago and North Western Holdings Corp. Bonus Plan or any
other bonus arrangement ("Bonus Plan") which is based upon
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performance and approved by the Board or any duly designated
committee of the Board. The Guaranteed Bonus shall be at
least equal to the product of (I) a percentage equal to the
greatest of (a) the On Plan Percentage (as defined in
Section 3(b)(ii)(B)(I) below), or (b) the amount of the
Historical Bonus Percentage (as defined in Section
3(b)(ii)(B)(II) below), or (c) the Actual Bonus Percentage
(as defined in Section 3(b)(ii)(B)(III) below), multiplied
by (II) the Guaranteed Annual Salary.
(B) For purposes of this Section 3(b)(ii), the following
definitions apply:
(I) "On Plan Percentage" means the percentage
of Guaranteed Base Salary to which the Executive would
have been entitled under any Bonus Plan for the
Performance Period for which the Guaranteed Bonus is
awarded ("Current Performance Period") as if the
performance achieved 100% of performance goals
established pursuant to such Bonus Plan.
(II) "Historical Bonus Percentage" means the
highest Adjusted Bonus Percentage (as defined below) in
the three Performance Periods preceding the Effective
Date (individually referred to herein as a "Prior
Performance Period"). The "Adjusted Bonus Percentage"
for any such Prior Performance Period is equal to the
bonus accrued for such Prior Performance Period,
expressed as a percentage of the annual rate of base
salary earned by the Executive during such Prior
Performance Period, multiplied by the Adjustment
Fraction (as defined below). The "Adjustment Fraction"
is, with respect to each Prior Performance Period, a
fraction, the numerator of which is the number of
months in the Current Performance Period, and the
denominator of which is the number of months in each
Prior Performance Period.
(III) "Actual Bonus Percentage" means the
percentage of the rate of Guaranteed Base Salary for
the Current Performance Period which the Executive
would accrue as a bonus under any Bonus Plan if the
performance during the Current Performance Period were
measured by the actual performance during the Current
Performance Period; provided, however, that for
purposes of calculating the Guaranteed Bonus under
Section 5 hereof, "Actual Bonus Percentage" means the
percentage of the rate of Guaranteed Base Salary for
the Performance Period during which the Termination
Date (as defined below), occurred ("Termination
Performance Period") which the Executive would accrue
as a bonus under any Bonus Plan if the performance
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during such Termination Performance Period were
measured by the actual performance during the
Termination Performance Period prior to the Termination
Date projected to the last day of such Performance
Period.
(iii) Incentive, Savings and Retirement Plans. In
addition to Guaranteed Base Salary and Guaranteed Bonus
payable as hereinabove provided, the Executive shall be
entitled to participate during the Employment Period in all
incentive (including long-term incentives), savings and
retirement plans, practices, policies and programs
applicable to other peer executives of CNW, but in no event
shall such plans, practices, policies and programs provide
the Executive with incentive (including long-term
incentives), savings and retirement benefits which, in each
case, are less favorable, in the aggregate, than the most
favorable of those provided by CNW for the Executive under
such plans, practices, policies and programs as in effect at
any time during the 90-day period immediately preceding the
Effective Date.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the
case may be, shall be eligible for participation in and
shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by CNW (including,
and without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life,
dependent life, accidental death and travel accident
insurance plans and programs) and applicable to other peer
executives of CNW, but in no event shall such plans,
practices, policies and programs provide benefits which in
each case are less favorable, in the aggregate, than the
most favorable of those provided by CNW for the Executive
under such plans, practices, policies and programs as in
effect at any time during the 90-day period immediately
preceding the Effective Date.
(v) Fringe Benefits. During the Employment Period,
the Executive shall be entitled to fringe benefits in
accordance with the most favorable plans, practices,
programs and policies applicable to peer executives of CNW
Railway, but in no event shall such plans, practices,
policies and programs provide fringe benefits which in each
case are less favorable, in the aggregate, than the most
favorable of those provided by CNW Railway for the Executive
under such plans, practices, policies and programs in effect
at any time during the 90-day period immediately preceding
the Effective Date.
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(vi) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement
for all reasonable employment-related expenses incurred by
the Executive upon CNW Railway's receipt of accountings in
accordance with the most favorable policies, practices and
procedures applicable to peer executives of CNW Railway, but
in no event shall such policies, practices and procedures in
each case be less favorable, in the aggregate, than the most
favorable of those provided by CNW Railway for the Executive
under such policies, practices and procedures in effect at
any time during the 90-day period immediately preceding the
Effective Date.
(vii) Office and Support Staff. During the Employment
Period, the Executive shall be entitled to an office or
offices of a size and with furnishings and other
appointments, and to exclusive personal secretarial and
other assistance in accordance with the most favorable
policies, practices and procedures applicable to peer
executives of CNW Railway, but in no event shall such
policies, practices and procedures be less favorable, in the
aggregate, than the most favorable of those provided by CNW
Railway for the Executive under such policies, practices and
procedures in effect at any time during the 90-day period
immediately preceding the Effective Date.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance
with the most favorable plans, practices, policies and
programs applicable to peer executives of CNW Railway, but
in no event shall such plans, practices, policies and
programs provide paid vacation which is less favorable in
the aggregate than the most favorable of those provided by
CNW Railway for the Executive under such plans, practices,
policies and programs in effect at any time during the
90-day period immediately preceding the Effective Date.
4. Termination of Employment.
(a) Death or Disability. The Executive's employment
shall terminate automatically upon the Executive's death or
Disability during the Employment Period. Disability of the
Executive shall be deemed to have occurred on the date on which
the Executive is certified as having incurred a Disability by a
physician selected by CNW or its insurers and acceptable to the
Executive or the Executive's legal representative. If CNW
determines in good faith that the Disability of the Executive has
occurred during the Employment Period, it may give to the
Executive written notice in accordance with Section 11(e) of this
Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with CNW
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shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), unless
within the 30 days after such receipt, the Executive shall have
returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" means any medically
determinable physical or mental impairment that can be expected
to last for a continuous period of not less than six months, and
that renders the Executive unable to perform the duties required
under this Agreement.
(b) Cause. The Executive's employment may be
terminated during the Employment Period by CNW for Cause.
"Cause" means either of the following:
(i) conviction of the Executive of any felony or
other crime involving dishonesty, or moral turpitude; or
(ii) the Executive's habitual neglect of the
Executive's duties (other than on account of Disability),
except that Cause shall not mean:
(i) bad judgment or negligence other than habitual
neglect of duty;
(ii) any act or omission believed by the Executive in
good faith to have been in or not opposed to the interest of
CNW (without intent of the Executive to gain therefrom,
directly or indirectly, a profit to which the Executive was
not legally entitled);
(iii) any act or omission with respect to which a
determination could properly have been made by the Board
that the Executive met the applicable standard of conduct
for indemnification or reimbursement under the By-Laws of
CNW, any applicable indemnification agreement, or the laws
and regulations under which CNW is governed, in each case in
effect at the time of such act or omission; or
(iv) any act or omission with respect to which notice
of termination of employment of the Executive is given more
than twelve (12) months after the earliest date on which any
member of the Board who is not a party to the act or
omission, knew or should have known of such act or omission.
(c) Good Reason. The Executive's employment may be
terminated during the Employment Period by the Executive for Good
Reason. For purposes of this Agreement, "Good Reason" means any
one of the following events:
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(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles, reporting requirements
or responsibilities), authority or duties as contemplated by
Section 3(a) of this Agreement, or any other action by CNW
which results in a diminution or other material adverse
change in such position, authority or duties, excluding for
this purpose an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied by CNW
promptly after receipt of notice thereof given by the
Executive;
(ii) any failure by CNW to comply with any of the
provisions of Section 3(b) of this Agreement, other than an
isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by CNW promptly
after receipt of notice thereof given by the Executive;
(iii) CNW requiring the Executive to be based at any
office or location other than the location described in
Section 3(a)(i)(B) hereof;
(iv) any other material adverse changes to the terms
and conditions of the Executive's employment;
(v) any purported termination by CNW of the
Executive's employment otherwise than as expressly permitted
by this Agreement, it being understood that any such
purported termination shall not be effective for any other
purpose of this Agreement; or
(vi) any failure by CNW to comply with and satisfy
Section 11(c) of this Agreement.
For purposes of this Section 4(c), any good faith
determination of "Good Reason" made by the Executive shall be
conclusive.
(d) Notice of Termination. Any termination of the
Executive's employment by CNW for Cause or by the Executive for
Good Reason shall be communicated by Notice of Termination (as
defined below) to the other party hereto given in accordance with
Section 11(e) of this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice which
(i) indicates the specific termination provision in this
Agreement relied upon, (ii) sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated and (iii) if the Termination Date (as defined below) is
other than the date of receipt of such Notice of Termination,
specifies the Termination Date. The failure by the Executive to
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set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason shall not waive any
right of the Executive hereunder or preclude the Executive from
asserting such fact or circumstance in enforcing the Executive's
rights hereunder.
(e) Termination Date. "Termination Date" means the
date of receipt of the Notice of Termination or any later date
specified therein (which date shall be not more than fifteen days
after the giving of such notice), as the case may be; provided,
however, that (i) if the Executive's employment is terminated by
CNW other than for Cause or Disability, the Termination Date
shall be the date of receipt of such Notice of Termination and
(ii) if the Executive's employment is terminated by reason of
death or Disability, the Termination Date shall be the date of
death of the Executive or the Disability Effective Date, as the
case may be.
5. Obligations of CNW upon Termination.
(a) Termination of Employment for Good Reason or
Other Than for Cause or Disability. If, during the Employment
Period, CNW shall terminate Executive's employment other than for
Cause or Disability, or if the Executive shall terminate
employment under this Agreement for Good Reason, CNW shall pay to
the Executive, in addition to all vested rights arising from his
employment, as specified in Section 7 hereof, in a lump sum in
cash within three days after the Termination Date the aggregate
of the following amounts (hereinafter, the amounts described in
Section 5(a)(i)(A), (B), and (C) shall be called the "Accrued
Obligations"):
(A) to the extent not theretofore paid, the
Guaranteed Base Salary and any accrued vacation pay
through the Termination Date;
(B) the difference between (I) the product of
(1) the Guaranteed Bonus, multiplied by (2) a fraction,
the numerator of which is the number of days in the
Termination Performance Period which elapsed prior to
the Termination Date, and the denominator of which is
the total number of days in the Termination Performance
Period, and (II) the amount of any Guaranteed Bonus
paid to the Executive with respect to the Termination
Performance Period;
(C) in the case of compensation previously
deferred by the Executive, all amounts previously
deferred (together with any accrued earnings thereon)
and not yet paid by CNW;
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(D) an amount equal to the product of (I)
three (3), multiplied by (II) the sum of (1) the
Guaranteed Base Salary and (2) the Guaranteed Bonus
multiplied by a fraction, the numerator of which is
twelve and the denominator of which is the number of
months in the Termination Performance Period; and
(E) a payment equal to the value of the
Executive's accrued benefit under the Chicago and North
Western Transportation Company Supplemental Pension
Plan (the "Pension Plan") calculated as though the
Executive continued to accrue benefits under the
Pension Plan for a period of three years after the
Termination Date (the "Continuance Period"), reduced by
the value of the Executive's vested accrued benefit
under the Pension Plan as of the Termination Date; and
(F) for the Continuance Period, or such
longer period as any plan, program, practice or policy
may provide, CNW Railway shall continue to provide at
no cost to the Executive, except a cost equal to the
lesser of (I) the cost to the Executive immediately
prior to the Termination Date or (II) the cost to the
Executive immediately prior to the Effective Date, all
welfare benefits (including, but without limitation,
medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental
death and travel accident insurance plans and programs)
to the Executive and/or the Executive's family which
are at least as favorable as the most favorable plans,
practices, programs or policies of CNW Railway
applicable to other peer Executives, but which are in
no event less favorable than the most favorable plans,
practices, programs or policies of CNW Railway
applicable to other peer Executives and their families
during the 90-day period immediately preceding the
Effective Date.
(b) Termination of Employment for Cause. If the
Executive's employment shall be terminated by CNW for Cause
during the Employment Period, this Agreement shall terminate
without further obligations to the Executive, other than the
obligation to pay to the Executive in a lump sum in cash, within
30 days of the Termination Date, the Guaranteed Base Salary
through the Termination Date, plus the amount of any compensation
previously deferred by the Executive, plus any accrued vacation,
in each case to the extent theretofore unpaid.
(c) Termination of Employment Other Than for Good
Reason. If the Executive terminates employment during the
Employment Period other than for Good Reason, Disability or
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death, this Agreement shall terminate without further obligations
by CNW, other than the obligation to pay to the Executive all
Accrued Obligations in a lump sum in cash within 30 days of the
Notice Date.
(d) Termination of Employment for Disability. If
the Executive's employment is terminated by reason of the
Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the
Executive, other than the obligation to pay to the Executive all
Accrued Obligations in a lump sum in cash within 30 days of the
Termination Date. Anything in this Agreement to the contrary
notwithstanding, the Executive shall be entitled after the
Disability Effective Date to receive disability and other
benefits at least equal to those provided under the most
favorable plans, practices, policies and programs relating to
disability applicable to disabled peer executives of CNW and
their families, but in no event shall such plans, practices,
policies and programs provide benefits which in each case are
less favorable, in the aggregate, than the most favorable of
those provided by CNW for the Executive under such plans,
practices, policies or programs in effect at any time during the
90-day period immediately preceding the Effective Date.
(e) Termination of Employment Because of Death. If
the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's
legal representatives under this Agreement, other than the
obligation to pay to the Executive's estate or beneficiary all
Accrued Obligations in a lump sum in cash within 30 days of the
Notice Date. Anything in this Agreement to the contrary
notwithstanding, the Executive's family shall be entitled to
receive benefits at least equal to the most favorable benefits
provided by CNW to the surviving families of peer executives of
CNW under such plans, practices, policies and programs, but in no
event shall such plans, practices, policies or programs provide
benefits which in each case are less favorable, in the aggregate,
than the most favorable of those provided by CNW to the Executive
under such plans, practices, policies or programs in effect at
any time during the 90-day period immediately preceding the
Effective Date.
6. Certain Reduction of Payments by CNW.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment or distribution by CNW to or for the benefit of the
Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise) (a "Payment") would be nondeductible by CNW for
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Federal income tax purposes because of Section 280G of the Code,
then the aggregate present value of amounts payable or
distributable to or for the benefit of the Executive pursuant to
this Agreement (such payments or distributions pursuant to this
Agreement are hereinafter referred to as "Agreement Payments")
shall be reduced to the Reduced Amount. The "Reduced Amount"
shall be an amount expressed in present value which maximizes the
aggregate present value of Agreement Payments without causing any
Payment to be nondeductible by CNW because of Section 280G of the
Code. For purposes of this Section 6, present value shall be
determined in accordance with Section 280G(d)(4) of the Code.
(b) All determinations required to be made under
this Section 6 shall be made by Arthur Andersen (the "Accounting
Firm") which shall provide detailed supporting calculations both
to CNW and the Executive within 15 business days of the Date of
Termination or such earlier time as is requested by CNW and an
opinion to the Executive that he has substantial authority not to
report any Excise Tax on his Federal income tax return with
respect to the Agreement Payments. Any such determination by the
Accounting Firm shall be binding upon CNW and the Executive. The
Executive shall determine which and how much of the Agreement
Payments shall be eliminated or reduced consistent with the
requirements of this Section 6, provided that, if the Executive
does not make such determination within ten business days of the
receipt of the calculations made by the Accounting Firm, CNW
shall elect which and how much of the Agreement Payments shall be
eliminated or reduced consistent with the requirements of this
Section 6 and shall notify the Executive promptly of such
election. Within five business days thereafter, CNW shall pay to
or distribute to or for the benefit of the Executive such amounts
as are then due to the Executive under this Agreement.
(c) As a result of the uncertainty in the
application of Section 280G of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is
possible that Agreement Payments will have been made by CNW which
should not have been made ("Overpayment") or that additional
Agreement Payments which will not have been made by CNW could
have been made ("Underpayment"), in each case, consistent with
the calculations required to be made hereunder. In the event
that the Accounting Firm, based upon the assertion of a
deficiency by the Internal Revenue Service against the Executive
which the Accounting Firm believes has a high probability of
success determines that an Overpayment has been made, any such
Overpayment paid or distributed by CNW to or for the benefit of
the Executive shall be treated for all purposes as a loan ab
initio to the Executive which the Executive shall repay to CNW
together with interest at the applicable federal rate provided
for in Section 7872(f)(2) of the Code; provided, however, that no
such loan shall be deemed to have been made and no amount shall
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be payable by the Executive to CNW if and to the extent such
deemed loan and payment would not either reduce the amount on
which the Executive is subject to tax under Section 1 and
Section 4999 of the Code or generate a refund of such taxes. In
the event that the Accounting Firm, based upon controlling
precedent or other substantial authority, determines that an
Underpayment has occurred, any such Underpayment shall be
promptly paid by CNW to or for the benefit of the Executive
together with interest at the applicable federal rate provided
for in Section 7872(f)(2) of the Code.
7. Non-exclusivity of Rights.
(a) Waiver of Other Severance Rights. If the
Executive receives payments pursuant to Section 5(a) hereof, the
Executive hereby waives the right to receive severance payments
under any other plan, policy or agreement of CNW.
(b) Other Rights. Except as provided in
Section 6(a), nothing in this Agreement shall prevent or limit
the Executive's continuing or future participation in any
benefit, bonus, incentive or other plans, programs, policies or
practices, provided by CNW or any of its affiliated companies and
for which the Executive may qualify, nor shall anything herein
limit or otherwise affect such rights as the Executive may have
under any other agreements with CNW or any of their affiliated
companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan,
practice, policy or program of CNW or any of their affiliated
companies and any other payment or benefit required by law at or
subsequent to the Termination Date shall be payable in accordance
with such plan, practice, policy or program or applicable law
except as explicitly modified by this Agreement.
8. Confidentiality/NonCompetition.
(a) Confidentiality. Executive acknowledges that it
is the policy of the Company and its subsidiaries to maintain as
secret and confidential all valuable and unique information and
techniques acquired, developed or used by the Company and its
subsidiaries relating to their business, operations, employees
and customers, which gives the Company and its subsidiaries a
competitive advantage in the railroad industry and other
businesses in which the Company and its subsidiaries are engaged
("Confidential Information"). Executive recognizes that all such
Confidential Information is the sole and exclusive property of
the Company and its subsidiaries, and that disclosure of
Confidential Information would cause damage to the Company and
its subsidiaries. In consideration of the Company's entering
into this Agreement, Executive agrees that, except as required by
the duties of his employment with the Company and/or its
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subsidiaries, he will never directly or indirectly use, publish,
disseminate or otherwise disclose any Confidential Information
obtained during his employment with the Company and/or its
subsidiaries for so long as such information is valuable and
unique.
(b) Noncompetition/Nonsolicitation.
(i) Executive agrees that, during the period of his
employment with the Company and/or its subsidiaries and, if
Executive's employment is terminated for any reason,
thereafter for a period of one (1) year, Executive will not
at any time directly or indirectly, in any capacity, engage
or participate in, or become employed by or render advisory
or consulting or other services in connection with any
Prohibited Business as defined in Section 8(b)(iv).
(ii) Executive agrees that, during the period of his
employment with the Company and/or its subsidiaries and, if
Executive's employment is terminated for any reason,
thereafter for a period of one (1) year, Executive shall not
make any financial investment, whether in the form of equity
or debt, or own any interest, directly or indirectly, in any
Prohibited Business. Nothing in this Section 8(b)(ii)
shall, however, restrict Executive from making any
investment in any company whose stock is listed on a
national securities exchange or actively traded in the
over-the-counter market; provided that (A) such investment
does not give Executive the right or ability to control or
influence the policy decisions of any Prohibited Business,
and (B) such investment does not create a conflict of
interest between Executive's duties hereunder and
Executive's interest in such investment.
(iii) Executive agrees that, during the period of his
employment with the Company and/or its subsidiaries and, if
Executive's employment is terminated for any reason,
thereafter for a period of one (1) year, Executive shall not
(A) employ any employee of the Company and/or its
subsidiaries or (B) interfere with the Company's or any of
its subsidiaries' relationship with, or endeavor to entice
away from the Company and/or its subsidiaries any person,
firm, corporation, or other business organization who or
which at any time (whether before or after the date of
Executive's termination of employment), was an employee,
customer, vendor or supplier of, or maintained a business
relationship with, any business of the Company and/or its
subsidiaries which was conducted at any time during the
period commencing one year prior to the termination of
employment.
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(iv) For the purpose of this Section 8(b),
"Prohibited Business" shall be defined as any railroad,
freight carrier or other entity and any branch, office or
operation thereof, which is a direct and material competitor
of the Company wherever the Company does business, in the
United States or abroad, and which has established or seeks
to establish contact, in whatever form (including but not
limited to solicitation of sales, or the receipt or
submission of bids) with any entity who is at any time a
client, customer or supplier of the Company (including but
not limited to all subdivisions of the federal government.)
(c) Executive and the Company specifically agree
that, in the event that Executive shall breach his obligations
under this Section 8, the Company and its subsidiaries will
suffer irreparable injury and no adequate remedy for such breach,
and shall be entitled to injunctive relief therefor, and in
particular, without limiting the generality of the foregoing, the
Company shall not be precluded from pursuing any and all remedies
it may have at law or in equity for breach of such obligations.
9. Legal Fees and Other Expenses.
(a) Legal Fees and Expenses. CNW agrees to pay
promptly upon presentation of an invoice from the Executive, to
the full extent permitted by law, all legal fees, including
retainer fees, and expenses which the Executive may reasonably
incur as a result of any contest (regardless of the outcome
thereof) by CNW or others of the validity or enforceability of,
or liability under, any provision of this Agreement or any other
benefit plan, program or policy or any guarantee of performance
thereof (including, but not limited to, legal fees and expenses
as a result of any contest by the Executive about the amount of
any payment pursuant to Section 5 of this Agreement).
(b) Interest. In the event any amount due to the
Executive under this Agreement is not paid within 10 days of
request therefor, the Executive shall be entitled to receive
interest at the highest interest rate applicable to CNW in its
borrowing of funds from any third party during the period of
nonpayment and if such rate is not determinable, or if higher,
then at a rate two percent above the prime commercial lending
rate announced by Citibank, N.A. in effect from time to time
during the period of such nonpayment.
10. Full Settlement. CNW's obligation to make the payments
provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances,
including, without limitation, set-off, counterclaim, recoupment,
defense or other claim, right or action which CNW may have
against the Executive or others. In no event shall the Executive
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be obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement, nor shall the amount of
any payment hereunder be reduced by any compensation earned by
the Executive as result of employment by another employer.
11. Successors.
(a) This Agreement is personal to the Executive and
without the prior written consent of CNW shall not be assignable
by the Executive otherwise than by will or the laws of descent
and distribution. This Agreement shall inure to the benefit of
and be enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and
be binding upon CNW and its successors and assigns.
(c) CNW will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of CNW to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that CNW would be required to
perform it if no such succession had taken place. As used in
this Agreement, "CNW" shall mean the CNW as hereinbefore defined
and any successor to its business and/or assets as aforesaid
which assumes and agrees to perform this Agreement by operation
of law, or otherwise, and CNW and such successor shall be jointly
and severally liable hereunder.
12. Miscellaneous.
(a) If the Executive dies prior to receiving amounts
to which the Executive is entitled hereunder, such amounts shall
be paid in a lump sum payment to the beneficiary designated in
writing by the Executive and if no such beneficiary is
designated, to the Executive's estate.
(b) Benefits payable under this Agreement shall not
be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment,
execution or levy of any kind, either voluntary or involuntary,
prior to actually being received by the Executive, and any such
attempt to dispose of any right to benefits payable hereunder
shall be void.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(d) This Agreement shall not be altered, amended or
modified except by written instrument executed by CNW and
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Executive. A waiver of any term, covenant, agreement or
condition contained in this Agreement shall not be deemed a
waiver of any other term, covenant, agreement or condition, and
any waiver of any default in any such term, covenant, agreement
or condition shall not be deemed a waiver of any later default
thereof or of any other term, covenant, agreement or condition.
(e) All notices and other communications hereunder
shall be in writing and delivered by hand or by first class
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
__________________________
__________________________
__________________________
__________________________
If to CNW:
Chicago and Northwestern
Transportation Company
165 North Canal Street
Chicago, Illinois 60606
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(f) This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same instrument
originals.
(g) This Agreement shall be interpreted and
construed in accordance with the laws of the State of Illinois,
without regard to its choice of law principles. The captions of
this Agreement are not part of the provisions hereof and shall
have no force or effect.
(h) CNW may withhold from any amounts payable under
this Agreement such federal, state or local taxes as shall be
required to be withheld pursuant to any applicable law or
regulation.
(i) The Executive's failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a
waiver of such provision or any other provision thereof.
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(j) The obligations of CNW under this Agreement
shall be unfunded and unsecured. CNW shall not be required to
segregate any assets that may at any time be required to provide
benefits under this Agreement.
(k) This Agreement contains the entire understanding
of CNW and the Executive with respect to the subject matter
hereof.
IN WITNESS WHEREOF, the Executive has hereunto set his hand
and, pursuant to the authorization from its Board of Directors,
the Company and CNW Railway have caused these presents to be
executed in their name on their behalf, all as of the day and
year first above written.
/s/ Paul A. Lundberg
Executive
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY
BY: /s/ Robert Schmiege
CHICAGO AND NORTH WESTERN
RAILWAY COMPANY
BY: /s/ Robert Schmiege
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<PAGE>
Change of Control
Employment Agreement
Among
Chicago and North Western Transportation Company,
Chicago and North Western Railway Company
and
Executive
<PAGE>
TABLE OF CONTENTS
Page
1. Certain Definitions . . . . . . . . . . . . . . . . . . 1
2. Employment Period . . . . . . . . . . . . . . . . . . . 3
3. Terms of Employment . . . . . . . . . . . . . . . . . . 3
4. Termination of Employment . . . . . . . . . . . . . . . 7
5. Obligations of CNW upon Termination . . . . . . . . . . 10
6. Certain Reduction of Payments by CNW . . . . . . . . . . 12
7. Non-exclusivity of Rights . . . . . . . . . . . . . . . 14
8. Confidentiality/NonCompetition . . . . . . . . . . . . . 14
9. Legal Fees and Other Expenses . . . . . . . . . . . . . 16
10. Full Settlement . . . . . . . . . . . . . . . . . . . . 16
11. Successors . . . . . . . . . . . . . . . . . . . . . . . 17
12. Miscellaneous . . . . . . . . . . . . . . . . . . . . . 17
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CHANGE OF CONTROL
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of the 20th day of December 1994,
is made by and among CHICAGO AND NORTH WESTERN TRANSPORTATION
COMPANY (the "Company"), a Delaware corporation having its
principal place of business in Chicago, Illinois, CHICAGO AND
NORTH WESTERN RAILWAY COMPANY ("CNW Railway"), (the Company and
CNW Railway collectively referred to herein as "CNW"), and
J. E. MARTIN (the "Executive"), a resident of Illinois.
The Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and
its shareholders to assure that CNW will have the continued
dedication of the Executive, notwithstanding the possibility,
threat, or occurrence of a Change of Control (as defined below)
of the Company. The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the
personal uncertainties and risks created by a pending or
threatened Change of Control, to encourage the Executive's full
attention and dedication to CNW, and to provide the Executive
with compensation and benefits arrangements upon a Change of
Control which ensure that the compensation and benefits
expectations of the Executive will be satisfied and are
competitive with those of other major corporations. This
Agreement is intended to accomplish these objectives.
1. Certain Definitions
(a) The "Effective Date" shall be the first date on
which a Change of Control occurs during the "Change of Control
Period" (as defined in Section 1(b)). Anything in this Agreement
to the contrary notwithstanding, if the Executive's employment
with CNW is terminated prior to the date on which a Change of
Control occurs, and it is reasonably demonstrated that such
termination of employment (i) was at the request of a third party
who has taken steps reasonably calculated to effect the Change of
Control or (ii) otherwise arose in connection with or
anticipation of the Change of Control, then for all purposes of
this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" is the period
commencing on the date hereof and ending on the third anniversary
of such date; provided, however, that commencing on the date one
year after the date hereof, and on each annual anniversary of
such date (such date and each annual anniversary thereof is
hereinafter referred to as a "Renewal Date"), the Change of
Control Period shall be automatically extended so as to terminate
on the third anniversary of such Renewal Date, unless at least
60 days prior to the Renewal Date CNW shall give notice to the
Executive that the Change of Control Period shall not be so
extended.
<PAGE>
(c) "Change of Control". For the purpose of this
Agreement, a "Change of Control" shall mean any of the following
events:
(i) the acquisition by any person or group of
beneficial ownership of 40% or more of either the then
outstanding Stock or the combined voting power of the then
outstanding voting securities of the Company entitled to
vote generally in the election of directors, except that
(A) no such person or group shall be deemed to own
beneficially any securities held by the Company or a
Subsidiary (as defined below) or any employee benefit plan
(or any related trust) of the Company or a Subsidiary, and
(B) no Change of Control shall be deemed to have occurred
solely by reason of any such acquisition by a corporation
with respect to which, after such acquisition, more than 60%
of both the then outstanding common shares of such
corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled
to vote generally in the election of directors are then
beneficially owned, directly or indirectly, by the persons
who were the beneficial owners of the Stock and voting
securities of the Company immediately before such
acquisition in substantially the same proportion as their
ownership, immediately before such acquisition, of the then
outstanding Stock and the combined voting power of the then
outstanding voting securities of the Company entitled to
vote generally in the election of directors, as the case may
be;
(ii) individuals who, as of the date hereof,
constitute the Board (the "Incumbent Directors") cease for
any reason to constitute at least a majority of the Board;
provided that any individual who becomes a director after
the date hereof whose election, or nomination for election
by the Company's stockholders was approved by a vote or
written consent of at least two-thirds of the directors then
comprising the Incumbent Directors shall be considered as
though such individual were an Incumbent Director, but
excluding, for this purpose, any such individual whose
initial assumption of office is in connection with an actual
or threatened election contest relating to the election of
the directors of the Company (as such terms are used in Rule
14a-11 under the Securities Exchange Act of 1934, as amended
("1934 Act")); or
(iii) approval by the stockholders of the Company of
(A) a merger, reorganization or consolidation with respect
to which the individuals and entities who were the
respective beneficial owners of the Stock and voting
securities of the Company immediately before such merger,
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reorganization or consolidation do not, after such merger,
reorganization or consolidation, beneficially own, directly
or indirectly, more than 60% of, respectively, the then
outstanding common shares and the combined voting power of
the then outstanding voting securities entitled to vote
generally in the election of directors of the corporation
resulting from such merger, reorganization or consolidation,
(B) a liquidation or dissolution of the Company or (C) the
sale or other disposition of all or substantially all of the
assets of CNW.
For purposes of this definition, "person" means such term as
used in Securities Exchange Commission ("SEC") Rule 13d-5(b)
under the 1934 Act; "beneficial owner" means such term as defined
in SEC Rule 13d-3 under the 1934 Act; "group" means such term as
defined in Section 13(d) of the 1934 Act; "Subsidiary" means a
corporation as defined in Section 425(f) of the Internal Revenue
Code of 1986, as amended ("Code") with the Company being treated
as the employer corporation for purposes of this definition of
Subsidiary; and "Stock" means the common stock of the Company,
par value $.01, or any other common stock that the Company may
issue from time to time.
2. Employment Period. CNW hereby agrees to continue the
Executive in its employ, and, subject to Section 4 of the
Agreement, the Executive hereby agrees to remain in the employ of
CNW, for the period commencing on the Effective Date and ending
on the third anniversary of such date (the "Employment Period").
3. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the
Executive's position (including status, offices, titles,
reporting requirements and responsibilities), authority and
duties shall be at least commensurate in all material
respects with the most significant of those held, exercised
and assigned at any time during the 90-day period
immediately preceding the Effective Date, and (B) the
Executive's services shall be performed at the location
where the Executive was employed immediately preceding the
Effective Date or any office or location less than 50 miles
from such location.
(ii) During the Employment Period, and excluding any
periods of vacation, sick leave or disability to which the
Executive is entitled, the Executive agrees to devote the
Executive's full attention and time to the business and
affairs of CNW and, to the extent necessary to discharge the
duties assigned to the Executive hereunder, to use the
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Executive's best efforts to perform faithfully and
efficiently such duties. During the Employment Period, it
shall not be a violation of this Agreement for the Executive
to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and
(C) manage personal investments, so long as such activities
are consistent with the policies of CNW at the Effective
Date and do not significantly interfere with the performance
of the Executive's duties in accordance with this Agreement.
It is expressly understood and agreed that to the extent
that any such activities have been conducted by the
Executive prior to the Effective Date and were consistent
with the policies of CNW at the Effective Date, the
continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent
to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive's duties
hereunder.
(b) Compensation.
(i) Base Salary. During the Employment Period, CNW
Railway shall pay or cause to be paid to the Executive an
annual base salary in cash ("Guaranteed Base Salary"), which
shall be paid in a manner consistent with CNW Railway's
payroll practices immediately preceding the Effective Date
at a rate at least equal to twelve times the highest monthly
base salary paid or payable to the Executive by CNW Railway
in respect of the twelve-month period immediately preceding
the month in which the Effective Date occurs. During the
Employment Period, the Guaranteed Base Salary shall be
reviewed at least annually and shall be increased at any
time and from time to time as shall be substantially
consistent with increases in base salary awarded in the
ordinary course of business to other peer executives of CNW
Railway. Any increase in Guaranteed Base Salary shall not
serve to limit or reduce any other obligation to the
Executive under this Agreement. Guaranteed Base Salary
shall not be reduced after any such increase, and the term
Guaranteed Base Salary as used in this Agreement shall refer
to the Guaranteed Base Salary as so increased.
(ii) Guaranteed Bonus. (A) In addition to Guaranteed
Base Salary, CNW shall pay or cause to be paid to the
Executive a bonus (the "Guaranteed Bonus") for each
Performance Period which ends during the Employment Period.
For purposes of this Agreement, a "Performance Period" means
each period of time designated in accordance with the
Chicago and North Western Holdings Corp. Bonus Plan or any
other bonus arrangement ("Bonus Plan") which is based upon
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<PAGE>
performance and approved by the Board or any duly designated
committee of the Board. The Guaranteed Bonus shall be at
least equal to the product of (I) a percentage equal to the
greatest of (a) the On Plan Percentage (as defined in
Section 3(b)(ii)(B)(I) below), or (b) the amount of the
Historical Bonus Percentage (as defined in Section
3(b)(ii)(B)(II) below), or (c) the Actual Bonus Percentage
(as defined in Section 3(b)(ii)(B)(III) below), multiplied
by (II) the Guaranteed Annual Salary.
(B) For purposes of this Section 3(b)(ii), the following
definitions apply:
(I) "On Plan Percentage" means the percentage
of Guaranteed Base Salary to which the Executive would
have been entitled under any Bonus Plan for the
Performance Period for which the Guaranteed Bonus is
awarded ("Current Performance Period") as if the
performance achieved 100% of performance goals
established pursuant to such Bonus Plan.
(II) "Historical Bonus Percentage" means the
highest Adjusted Bonus Percentage (as defined below) in
the three Performance Periods preceding the Effective
Date (individually referred to herein as a "Prior
Performance Period"). The "Adjusted Bonus Percentage"
for any such Prior Performance Period is equal to the
bonus accrued for such Prior Performance Period,
expressed as a percentage of the annual rate of base
salary earned by the Executive during such Prior
Performance Period, multiplied by the Adjustment
Fraction (as defined below). The "Adjustment Fraction"
is, with respect to each Prior Performance Period, a
fraction, the numerator of which is the number of
months in the Current Performance Period, and the
denominator of which is the number of months in each
Prior Performance Period.
(III) "Actual Bonus Percentage" means the
percentage of the rate of Guaranteed Base Salary for
the Current Performance Period which the Executive
would accrue as a bonus under any Bonus Plan if the
performance during the Current Performance Period were
measured by the actual performance during the Current
Performance Period; provided, however, that for
purposes of calculating the Guaranteed Bonus under
Section 5 hereof, "Actual Bonus Percentage" means the
percentage of the rate of Guaranteed Base Salary for
the Performance Period during which the Termination
Date (as defined below), occurred ("Termination
Performance Period") which the Executive would accrue
as a bonus under any Bonus Plan if the performance
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during such Termination Performance Period were
measured by the actual performance during the
Termination Performance Period prior to the Termination
Date projected to the last day of such Performance
Period.
(iii) Incentive, Savings and Retirement Plans. In
addition to Guaranteed Base Salary and Guaranteed Bonus
payable as hereinabove provided, the Executive shall be
entitled to participate during the Employment Period in all
incentive (including long-term incentives), savings and
retirement plans, practices, policies and programs
applicable to other peer executives of CNW, but in no event
shall such plans, practices, policies and programs provide
the Executive with incentive (including long-term
incentives), savings and retirement benefits which, in each
case, are less favorable, in the aggregate, than the most
favorable of those provided by CNW for the Executive under
such plans, practices, policies and programs as in effect at
any time during the 90-day period immediately preceding the
Effective Date.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the
case may be, shall be eligible for participation in and
shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by CNW (including,
and without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life,
dependent life, accidental death and travel accident
insurance plans and programs) and applicable to other peer
executives of CNW, but in no event shall such plans,
practices, policies and programs provide benefits which in
each case are less favorable, in the aggregate, than the
most favorable of those provided by CNW for the Executive
under such plans, practices, policies and programs as in
effect at any time during the 90-day period immediately
preceding the Effective Date.
(v) Fringe Benefits. During the Employment Period,
the Executive shall be entitled to fringe benefits in
accordance with the most favorable plans, practices,
programs and policies applicable to peer executives of CNW
Railway, but in no event shall such plans, practices,
policies and programs provide fringe benefits which in each
case are less favorable, in the aggregate, than the most
favorable of those provided by CNW Railway for the Executive
under such plans, practices, policies and programs in effect
at any time during the 90-day period immediately preceding
the Effective Date.
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(vi) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement
for all reasonable employment-related expenses incurred by
the Executive upon CNW Railway's receipt of accountings in
accordance with the most favorable policies, practices and
procedures applicable to peer executives of CNW Railway, but
in no event shall such policies, practices and procedures in
each case be less favorable, in the aggregate, than the most
favorable of those provided by CNW Railway for the Executive
under such policies, practices and procedures in effect at
any time during the 90-day period immediately preceding the
Effective Date.
(vii) Office and Support Staff. During the Employment
Period, the Executive shall be entitled to an office or
offices of a size and with furnishings and other
appointments, and to exclusive personal secretarial and
other assistance in accordance with the most favorable
policies, practices and procedures applicable to peer
executives of CNW Railway, but in no event shall such
policies, practices and procedures be less favorable, in the
aggregate, than the most favorable of those provided by CNW
Railway for the Executive under such policies, practices and
procedures in effect at any time during the 90-day period
immediately preceding the Effective Date.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance
with the most favorable plans, practices, policies and
programs applicable to peer executives of CNW Railway, but
in no event shall such plans, practices, policies and
programs provide paid vacation which is less favorable in
the aggregate than the most favorable of those provided by
CNW Railway for the Executive under such plans, practices,
policies and programs in effect at any time during the
90-day period immediately preceding the Effective Date.
4. Termination of Employment.
(a) Death or Disability. The Executive's employment
shall terminate automatically upon the Executive's death or
Disability during the Employment Period. Disability of the
Executive shall be deemed to have occurred on the date on which
the Executive is certified as having incurred a Disability by a
physician selected by CNW or its insurers and acceptable to the
Executive or the Executive's legal representative. If CNW
determines in good faith that the Disability of the Executive has
occurred during the Employment Period, it may give to the
Executive written notice in accordance with Section 11(e) of this
Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with CNW
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shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), unless
within the 30 days after such receipt, the Executive shall have
returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" means any medically
determinable physical or mental impairment that can be expected
to last for a continuous period of not less than six months, and
that renders the Executive unable to perform the duties required
under this Agreement.
(b) Cause. The Executive's employment may be
terminated during the Employment Period by CNW for Cause.
"Cause" means either of the following:
(i) conviction of the Executive of any felony or
other crime involving dishonesty, or moral turpitude; or
(ii) the Executive's habitual neglect of the
Executive's duties (other than on account of Disability),
except that Cause shall not mean:
(i) bad judgment or negligence other than habitual
neglect of duty;
(ii) any act or omission believed by the Executive in
good faith to have been in or not opposed to the interest of
CNW (without intent of the Executive to gain therefrom,
directly or indirectly, a profit to which the Executive was
not legally entitled);
(iii) any act or omission with respect to which a
determination could properly have been made by the Board
that the Executive met the applicable standard of conduct
for indemnification or reimbursement under the By-Laws of
CNW, any applicable indemnification agreement, or the laws
and regulations under which CNW is governed, in each case in
effect at the time of such act or omission; or
(iv) any act or omission with respect to which notice
of termination of employment of the Executive is given more
than twelve (12) months after the earliest date on which any
member of the Board who is not a party to the act or
omission, knew or should have known of such act or omission.
(c) Good Reason. The Executive's employment may be
terminated during the Employment Period by the Executive for Good
Reason. For purposes of this Agreement, "Good Reason" means any
one of the following events:
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(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles, reporting requirements
or responsibilities), authority or duties as contemplated by
Section 3(a) of this Agreement, or any other action by CNW
which results in a diminution or other material adverse
change in such position, authority or duties, excluding for
this purpose an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied by CNW
promptly after receipt of notice thereof given by the
Executive;
(ii) any failure by CNW to comply with any of the
provisions of Section 3(b) of this Agreement, other than an
isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by CNW promptly
after receipt of notice thereof given by the Executive;
(iii) CNW requiring the Executive to be based at any
office or location other than the location described in
Section 3(a)(i)(B) hereof;
(iv) any other material adverse changes to the terms
and conditions of the Executive's employment;
(v) any purported termination by CNW of the
Executive's employment otherwise than as expressly permitted
by this Agreement, it being understood that any such
purported termination shall not be effective for any other
purpose of this Agreement; or
(vi) any failure by CNW to comply with and satisfy
Section 11(c) of this Agreement.
For purposes of this Section 4(c), any good faith
determination of "Good Reason" made by the Executive shall be
conclusive.
(d) Notice of Termination. Any termination of the
Executive's employment by CNW for Cause or by the Executive for
Good Reason shall be communicated by Notice of Termination (as
defined below) to the other party hereto given in accordance with
Section 11(e) of this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice which
(i) indicates the specific termination provision in this
Agreement relied upon, (ii) sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated and (iii) if the Termination Date (as defined below) is
other than the date of receipt of such Notice of Termination,
specifies the Termination Date. The failure by the Executive to
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set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason shall not waive any
right of the Executive hereunder or preclude the Executive from
asserting such fact or circumstance in enforcing the Executive's
rights hereunder.
(e) Termination Date. "Termination Date" means the
date of receipt of the Notice of Termination or any later date
specified therein (which date shall be not more than fifteen days
after the giving of such notice), as the case may be; provided,
however, that (i) if the Executive's employment is terminated by
CNW other than for Cause or Disability, the Termination Date
shall be the date of receipt of such Notice of Termination and
(ii) if the Executive's employment is terminated by reason of
death or Disability, the Termination Date shall be the date of
death of the Executive or the Disability Effective Date, as the
case may be.
5. Obligations of CNW upon Termination.
(a) Termination of Employment for Good Reason or
Other Than for Cause or Disability. If, during the Employment
Period, CNW shall terminate Executive's employment other than for
Cause or Disability, or if the Executive shall terminate
employment under this Agreement for Good Reason, CNW shall pay to
the Executive, in addition to all vested rights arising from his
employment, as specified in Section 7 hereof, in a lump sum in
cash within three days after the Termination Date the aggregate
of the following amounts (hereinafter, the amounts described in
Section 5(a)(i)(A), (B), and (C) shall be called the "Accrued
Obligations"):
(A) to the extent not theretofore paid, the
Guaranteed Base Salary and any accrued vacation pay
through the Termination Date;
(B) the difference between (I) the product of
(1) the Guaranteed Bonus, multiplied by (2) a fraction,
the numerator of which is the number of days in the
Termination Performance Period which elapsed prior to
the Termination Date, and the denominator of which is
the total number of days in the Termination Performance
Period, and (II) the amount of any Guaranteed Bonus
paid to the Executive with respect to the Termination
Performance Period;
(C) in the case of compensation previously
deferred by the Executive, all amounts previously
deferred (together with any accrued earnings thereon)
and not yet paid by CNW;
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(D) an amount equal to the product of (I)
three (3), multiplied by (II) the sum of (1) the
Guaranteed Base Salary and (2) the Guaranteed Bonus
multiplied by a fraction, the numerator of which is
twelve and the denominator of which is the number of
months in the Termination Performance Period; and
(E) a payment equal to the value of the
Executive's accrued benefit under the Chicago and North
Western Transportation Company Supplemental Pension
Plan (the "Pension Plan") calculated as though the
Executive continued to accrue benefits under the
Pension Plan for a period of three years after the
Termination Date (the "Continuance Period"), reduced by
the value of the Executive's vested accrued benefit
under the Pension Plan as of the Termination Date; and
(F) for the Continuance Period, or such
longer period as any plan, program, practice or policy
may provide, CNW Railway shall continue to provide at
no cost to the Executive, except a cost equal to the
lesser of (I) the cost to the Executive immediately
prior to the Termination Date or (II) the cost to the
Executive immediately prior to the Effective Date, all
welfare benefits (including, but without limitation,
medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental
death and travel accident insurance plans and programs)
to the Executive and/or the Executive's family which
are at least as favorable as the most favorable plans,
practices, programs or policies of CNW Railway
applicable to other peer Executives, but which are in
no event less favorable than the most favorable plans,
practices, programs or policies of CNW Railway
applicable to other peer Executives and their families
during the 90-day period immediately preceding the
Effective Date.
(b) Termination of Employment for Cause. If the
Executive's employment shall be terminated by CNW for Cause
during the Employment Period, this Agreement shall terminate
without further obligations to the Executive, other than the
obligation to pay to the Executive in a lump sum in cash, within
30 days of the Termination Date, the Guaranteed Base Salary
through the Termination Date, plus the amount of any compensation
previously deferred by the Executive, plus any accrued vacation,
in each case to the extent theretofore unpaid.
(c) Termination of Employment Other Than for Good
Reason. If the Executive terminates employment during the
Employment Period other than for Good Reason, Disability or
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death, this Agreement shall terminate without further obligations
by CNW, other than the obligation to pay to the Executive all
Accrued Obligations in a lump sum in cash within 30 days of the
Notice Date.
(d) Termination of Employment for Disability. If
the Executive's employment is terminated by reason of the
Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the
Executive, other than the obligation to pay to the Executive all
Accrued Obligations in a lump sum in cash within 30 days of the
Termination Date. Anything in this Agreement to the contrary
notwithstanding, the Executive shall be entitled after the
Disability Effective Date to receive disability and other
benefits at least equal to those provided under the most
favorable plans, practices, policies and programs relating to
disability applicable to disabled peer executives of CNW and
their families, but in no event shall such plans, practices,
policies and programs provide benefits which in each case are
less favorable, in the aggregate, than the most favorable of
those provided by CNW for the Executive under such plans,
practices, policies or programs in effect at any time during the
90-day period immediately preceding the Effective Date.
(e) Termination of Employment Because of Death. If
the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's
legal representatives under this Agreement, other than the
obligation to pay to the Executive's estate or beneficiary all
Accrued Obligations in a lump sum in cash within 30 days of the
Notice Date. Anything in this Agreement to the contrary
notwithstanding, the Executive's family shall be entitled to
receive benefits at least equal to the most favorable benefits
provided by CNW to the surviving families of peer executives of
CNW under such plans, practices, policies and programs, but in no
event shall such plans, practices, policies or programs provide
benefits which in each case are less favorable, in the aggregate,
than the most favorable of those provided by CNW to the Executive
under such plans, practices, policies or programs in effect at
any time during the 90-day period immediately preceding the
Effective Date.
6. Certain Reduction of Payments by CNW.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment or distribution by CNW to or for the benefit of the
Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise) (a "Payment") would be nondeductible by CNW for
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Federal income tax purposes because of Section 280G of the Code,
then the aggregate present value of amounts payable or
distributable to or for the benefit of the Executive pursuant to
this Agreement (such payments or distributions pursuant to this
Agreement are hereinafter referred to as "Agreement Payments")
shall be reduced to the Reduced Amount. The "Reduced Amount"
shall be an amount expressed in present value which maximizes the
aggregate present value of Agreement Payments without causing any
Payment to be nondeductible by CNW because of Section 280G of the
Code. For purposes of this Section 6, present value shall be
determined in accordance with Section 280G(d)(4) of the Code.
(b) All determinations required to be made under
this Section 6 shall be made by Arthur Andersen (the "Accounting
Firm") which shall provide detailed supporting calculations both
to CNW and the Executive within 15 business days of the Date of
Termination or such earlier time as is requested by CNW and an
opinion to the Executive that he has substantial authority not to
report any Excise Tax on his Federal income tax return with
respect to the Agreement Payments. Any such determination by the
Accounting Firm shall be binding upon CNW and the Executive. The
Executive shall determine which and how much of the Agreement
Payments shall be eliminated or reduced consistent with the
requirements of this Section 6, provided that, if the Executive
does not make such determination within ten business days of the
receipt of the calculations made by the Accounting Firm, CNW
shall elect which and how much of the Agreement Payments shall be
eliminated or reduced consistent with the requirements of this
Section 6 and shall notify the Executive promptly of such
election. Within five business days thereafter, CNW shall pay to
or distribute to or for the benefit of the Executive such amounts
as are then due to the Executive under this Agreement.
(c) As a result of the uncertainty in the
application of Section 280G of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is
possible that Agreement Payments will have been made by CNW which
should not have been made ("Overpayment") or that additional
Agreement Payments which will not have been made by CNW could
have been made ("Underpayment"), in each case, consistent with
the calculations required to be made hereunder. In the event
that the Accounting Firm, based upon the assertion of a
deficiency by the Internal Revenue Service against the Executive
which the Accounting Firm believes has a high probability of
success determines that an Overpayment has been made, any such
Overpayment paid or distributed by CNW to or for the benefit of
the Executive shall be treated for all purposes as a loan ab
initio to the Executive which the Executive shall repay to CNW
together with interest at the applicable federal rate provided
for in Section 7872(f)(2) of the Code; provided, however, that no
such loan shall be deemed to have been made and no amount shall
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be payable by the Executive to CNW if and to the extent such
deemed loan and payment would not either reduce the amount on
which the Executive is subject to tax under Section 1 and
Section 4999 of the Code or generate a refund of such taxes. In
the event that the Accounting Firm, based upon controlling
precedent or other substantial authority, determines that an
Underpayment has occurred, any such Underpayment shall be
promptly paid by CNW to or for the benefit of the Executive
together with interest at the applicable federal rate provided
for in Section 7872(f)(2) of the Code.
7. Non-exclusivity of Rights.
(a) Waiver of Other Severance Rights. If the
Executive receives payments pursuant to Section 5(a) hereof, the
Executive hereby waives the right to receive severance payments
under any other plan, policy or agreement of CNW.
(b) Other Rights. Except as provided in
Section 6(a), nothing in this Agreement shall prevent or limit
the Executive's continuing or future participation in any
benefit, bonus, incentive or other plans, programs, policies or
practices, provided by CNW or any of its affiliated companies and
for which the Executive may qualify, nor shall anything herein
limit or otherwise affect such rights as the Executive may have
under any other agreements with CNW or any of their affiliated
companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan,
practice, policy or program of CNW or any of their affiliated
companies and any other payment or benefit required by law at or
subsequent to the Termination Date shall be payable in accordance
with such plan, practice, policy or program or applicable law
except as explicitly modified by this Agreement.
8. Confidentiality/NonCompetition.
(a) Confidentiality. Executive acknowledges that it
is the policy of the Company and its subsidiaries to maintain as
secret and confidential all valuable and unique information and
techniques acquired, developed or used by the Company and its
subsidiaries relating to their business, operations, employees
and customers, which gives the Company and its subsidiaries a
competitive advantage in the railroad industry and other
businesses in which the Company and its subsidiaries are engaged
("Confidential Information"). Executive recognizes that all such
Confidential Information is the sole and exclusive property of
the Company and its subsidiaries, and that disclosure of
Confidential Information would cause damage to the Company and
its subsidiaries. In consideration of the Company's entering
into this Agreement, Executive agrees that, except as required by
the duties of his employment with the Company and/or its
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subsidiaries, he will never directly or indirectly use, publish,
disseminate or otherwise disclose any Confidential Information
obtained during his employment with the Company and/or its
subsidiaries for so long as such information is valuable and
unique.
(b) Noncompetition/Nonsolicitation.
(i) Executive agrees that, during the period of his
employment with the Company and/or its subsidiaries and, if
Executive's employment is terminated for any reason,
thereafter for a period of one (1) year, Executive will not
at any time directly or indirectly, in any capacity, engage
or participate in, or become employed by or render advisory
or consulting or other services in connection with any
Prohibited Business as defined in Section 8(b)(iv).
(ii) Executive agrees that, during the period of his
employment with the Company and/or its subsidiaries and, if
Executive's employment is terminated for any reason,
thereafter for a period of one (1) year, Executive shall not
make any financial investment, whether in the form of equity
or debt, or own any interest, directly or indirectly, in any
Prohibited Business. Nothing in this Section 8(b)(ii)
shall, however, restrict Executive from making any
investment in any company whose stock is listed on a
national securities exchange or actively traded in the
over-the-counter market; provided that (A) such investment
does not give Executive the right or ability to control or
influence the policy decisions of any Prohibited Business,
and (B) such investment does not create a conflict of
interest between Executive's duties hereunder and
Executive's interest in such investment.
(iii) Executive agrees that, during the period of his
employment with the Company and/or its subsidiaries and, if
Executive's employment is terminated for any reason,
thereafter for a period of one (1) year, Executive shall not
(A) employ any employee of the Company and/or its
subsidiaries or (B) interfere with the Company's or any of
its subsidiaries' relationship with, or endeavor to entice
away from the Company and/or its subsidiaries any person,
firm, corporation, or other business organization who or
which at any time (whether before or after the date of
Executive's termination of employment), was an employee,
customer, vendor or supplier of, or maintained a business
relationship with, any business of the Company and/or its
subsidiaries which was conducted at any time during the
period commencing one year prior to the termination of
employment.
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(iv) For the purpose of this Section 8(b),
"Prohibited Business" shall be defined as any railroad,
freight carrier or other entity and any branch, office or
operation thereof, which is a direct and material competitor
of the Company wherever the Company does business, in the
United States or abroad, and which has established or seeks
to establish contact, in whatever form (including but not
limited to solicitation of sales, or the receipt or
submission of bids) with any entity who is at any time a
client, customer or supplier of the Company (including but
not limited to all subdivisions of the federal government.)
(c) Executive and the Company specifically agree
that, in the event that Executive shall breach his obligations
under this Section 8, the Company and its subsidiaries will
suffer irreparable injury and no adequate remedy for such breach,
and shall be entitled to injunctive relief therefor, and in
particular, without limiting the generality of the foregoing, the
Company shall not be precluded from pursuing any and all remedies
it may have at law or in equity for breach of such obligations.
9. Legal Fees and Other Expenses.
(a) Legal Fees and Expenses. CNW agrees to pay
promptly upon presentation of an invoice from the Executive, to
the full extent permitted by law, all legal fees, including
retainer fees, and expenses which the Executive may reasonably
incur as a result of any contest (regardless of the outcome
thereof) by CNW or others of the validity or enforceability of,
or liability under, any provision of this Agreement or any other
benefit plan, program or policy or any guarantee of performance
thereof (including, but not limited to, legal fees and expenses
as a result of any contest by the Executive about the amount of
any payment pursuant to Section 5 of this Agreement).
(b) Interest. In the event any amount due to the
Executive under this Agreement is not paid within 10 days of
request therefor, the Executive shall be entitled to receive
interest at the highest interest rate applicable to CNW in its
borrowing of funds from any third party during the period of
nonpayment and if such rate is not determinable, or if higher,
then at a rate two percent above the prime commercial lending
rate announced by Citibank, N.A. in effect from time to time
during the period of such nonpayment.
10. Full Settlement. CNW's obligation to make the payments
provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances,
including, without limitation, set-off, counterclaim, recoupment,
defense or other claim, right or action which CNW may have
against the Executive or others. In no event shall the Executive
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be obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement, nor shall the amount of
any payment hereunder be reduced by any compensation earned by
the Executive as result of employment by another employer.
11. Successors.
(a) This Agreement is personal to the Executive and
without the prior written consent of CNW shall not be assignable
by the Executive otherwise than by will or the laws of descent
and distribution. This Agreement shall inure to the benefit of
and be enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and
be binding upon CNW and its successors and assigns.
(c) CNW will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of CNW to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that CNW would be required to
perform it if no such succession had taken place. As used in
this Agreement, "CNW" shall mean the CNW as hereinbefore defined
and any successor to its business and/or assets as aforesaid
which assumes and agrees to perform this Agreement by operation
of law, or otherwise, and CNW and such successor shall be jointly
and severally liable hereunder.
12. Miscellaneous.
(a) If the Executive dies prior to receiving amounts
to which the Executive is entitled hereunder, such amounts shall
be paid in a lump sum payment to the beneficiary designated in
writing by the Executive and if no such beneficiary is
designated, to the Executive's estate.
(b) Benefits payable under this Agreement shall not
be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment,
execution or levy of any kind, either voluntary or involuntary,
prior to actually being received by the Executive, and any such
attempt to dispose of any right to benefits payable hereunder
shall be void.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(d) This Agreement shall not be altered, amended or
modified except by written instrument executed by CNW and
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Executive. A waiver of any term, covenant, agreement or
condition contained in this Agreement shall not be deemed a
waiver of any other term, covenant, agreement or condition, and
any waiver of any default in any such term, covenant, agreement
or condition shall not be deemed a waiver of any later default
thereof or of any other term, covenant, agreement or condition.
(e) All notices and other communications hereunder
shall be in writing and delivered by hand or by first class
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
__________________________
__________________________
__________________________
__________________________
If to CNW:
Chicago and Northwestern
Transportation Company
165 North Canal Street
Chicago, Illinois 60606
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(f) This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same instrument
originals.
(g) This Agreement shall be interpreted and
construed in accordance with the laws of the State of Illinois,
without regard to its choice of law principles. The captions of
this Agreement are not part of the provisions hereof and shall
have no force or effect.
(h) CNW may withhold from any amounts payable under
this Agreement such federal, state or local taxes as shall be
required to be withheld pursuant to any applicable law or
regulation.
(i) The Executive's failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a
waiver of such provision or any other provision thereof.
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<PAGE>
(j) The obligations of CNW under this Agreement
shall be unfunded and unsecured. CNW shall not be required to
segregate any assets that may at any time be required to provide
benefits under this Agreement.
(k) This Agreement contains the entire understanding
of CNW and the Executive with respect to the subject matter
hereof.
IN WITNESS WHEREOF, the Executive has hereunto set his hand
and, pursuant to the authorization from its Board of Directors,
the Company and CNW Railway have caused these presents to be
executed in their name on their behalf, all as of the day and
year first above written.
/s/ James E. Martin
Executive
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY
BY: /s/ Robert Schmiege
CHICAGO AND NORTH WESTERN
RAILWAY COMPANY
BY: /s/ Robert Schmiege
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<PAGE>
Change of Control
Employment Agreement
Among
Chicago and North Western Transportation Company,
Chicago and North Western Railway Company
and
Executive
<PAGE>
TABLE OF CONTENTS
Page
1. Certain Definitions . . . . . . . . . . . . . . . . . . 1
2. Employment Period . . . . . . . . . . . . . . . . . . . 3
3. Terms of Employment . . . . . . . . . . . . . . . . . . 3
4. Termination of Employment . . . . . . . . . . . . . . . 7
5. Obligations of CNW upon Termination . . . . . . . . . . 10
6. Certain Reduction of Payments by CNW . . . . . . . . . . 12
7. Non-exclusivity of Rights . . . . . . . . . . . . . . . 14
8. Confidentiality/NonCompetition . . . . . . . . . . . . . 14
9. Legal Fees and Other Expenses . . . . . . . . . . . . . 16
10. Full Settlement . . . . . . . . . . . . . . . . . . . . 16
11. Successors . . . . . . . . . . . . . . . . . . . . . . . 17
12. Miscellaneous . . . . . . . . . . . . . . . . . . . . . 17
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CHANGE OF CONTROL
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of the 20th day of December 1994,
is made by and among CHICAGO AND NORTH WESTERN TRANSPORTATION
COMPANY (the "Company"), a Delaware corporation having its
principal place of business in Chicago, Illinois, CHICAGO AND
NORTH WESTERN RAILWAY COMPANY ("CNW Railway"), (the Company and
CNW Railway collectively referred to herein as "CNW"), and
ARTHUR W. PETERS (the "Executive"), a resident of Illinois.
The Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and
its shareholders to assure that CNW will have the continued
dedication of the Executive, notwithstanding the possibility,
threat, or occurrence of a Change of Control (as defined below)
of the Company. The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the
personal uncertainties and risks created by a pending or
threatened Change of Control, to encourage the Executive's full
attention and dedication to CNW, and to provide the Executive
with compensation and benefits arrangements upon a Change of
Control which ensure that the compensation and benefits
expectations of the Executive will be satisfied and are
competitive with those of other major corporations. This
Agreement is intended to accomplish these objectives.
1. Certain Definitions
(a) The "Effective Date" shall be the first date on
which a Change of Control occurs during the "Change of Control
Period" (as defined in Section 1(b)). Anything in this Agreement
to the contrary notwithstanding, if the Executive's employment
with CNW is terminated prior to the date on which a Change of
Control occurs, and it is reasonably demonstrated that such
termination of employment (i) was at the request of a third party
who has taken steps reasonably calculated to effect the Change of
Control or (ii) otherwise arose in connection with or
anticipation of the Change of Control, then for all purposes of
this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" is the period
commencing on the date hereof and ending on the third anniversary
of such date; provided, however, that commencing on the date one
year after the date hereof, and on each annual anniversary of
such date (such date and each annual anniversary thereof is
hereinafter referred to as a "Renewal Date"), the Change of
Control Period shall be automatically extended so as to terminate
on the third anniversary of such Renewal Date, unless at least
60 days prior to the Renewal Date CNW shall give notice to the
Executive that the Change of Control Period shall not be so
extended.
<PAGE>
(c) "Change of Control". For the purpose of this
Agreement, a "Change of Control" shall mean any of the following
events:
(i) the acquisition by any person or group of
beneficial ownership of 40% or more of either the then
outstanding Stock or the combined voting power of the then
outstanding voting securities of the Company entitled to
vote generally in the election of directors, except that
(A) no such person or group shall be deemed to own
beneficially any securities held by the Company or a
Subsidiary (as defined below) or any employee benefit plan
(or any related trust) of the Company or a Subsidiary, and
(B) no Change of Control shall be deemed to have occurred
solely by reason of any such acquisition by a corporation
with respect to which, after such acquisition, more than 60%
of both the then outstanding common shares of such
corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled
to vote generally in the election of directors are then
beneficially owned, directly or indirectly, by the persons
who were the beneficial owners of the Stock and voting
securities of the Company immediately before such
acquisition in substantially the same proportion as their
ownership, immediately before such acquisition, of the then
outstanding Stock and the combined voting power of the then
outstanding voting securities of the Company entitled to
vote generally in the election of directors, as the case may
be;
(ii) individuals who, as of the date hereof,
constitute the Board (the "Incumbent Directors") cease for
any reason to constitute at least a majority of the Board;
provided that any individual who becomes a director after
the date hereof whose election, or nomination for election
by the Company's stockholders was approved by a vote or
written consent of at least two-thirds of the directors then
comprising the Incumbent Directors shall be considered as
though such individual were an Incumbent Director, but
excluding, for this purpose, any such individual whose
initial assumption of office is in connection with an actual
or threatened election contest relating to the election of
the directors of the Company (as such terms are used in Rule
14a-11 under the Securities Exchange Act of 1934, as amended
("1934 Act")); or
(iii) approval by the stockholders of the Company of
(A) a merger, reorganization or consolidation with respect
to which the individuals and entities who were the
respective beneficial owners of the Stock and voting
securities of the Company immediately before such merger,
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reorganization or consolidation do not, after such merger,
reorganization or consolidation, beneficially own, directly
or indirectly, more than 60% of, respectively, the then
outstanding common shares and the combined voting power of
the then outstanding voting securities entitled to vote
generally in the election of directors of the corporation
resulting from such merger, reorganization or consolidation,
(B) a liquidation or dissolution of the Company or (C) the
sale or other disposition of all or substantially all of the
assets of CNW.
For purposes of this definition, "person" means such term as
used in Securities Exchange Commission ("SEC") Rule 13d-5(b)
under the 1934 Act; "beneficial owner" means such term as defined
in SEC Rule 13d-3 under the 1934 Act; "group" means such term as
defined in Section 13(d) of the 1934 Act; "Subsidiary" means a
corporation as defined in Section 425(f) of the Internal Revenue
Code of 1986, as amended ("Code") with the Company being treated
as the employer corporation for purposes of this definition of
Subsidiary; and "Stock" means the common stock of the Company,
par value $.01, or any other common stock that the Company may
issue from time to time.
2. Employment Period. CNW hereby agrees to continue the
Executive in its employ, and, subject to Section 4 of the
Agreement, the Executive hereby agrees to remain in the employ of
CNW, for the period commencing on the Effective Date and ending
on the third anniversary of such date (the "Employment Period").
3. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the
Executive's position (including status, offices, titles,
reporting requirements and responsibilities), authority and
duties shall be at least commensurate in all material
respects with the most significant of those held, exercised
and assigned at any time during the 90-day period
immediately preceding the Effective Date, and (B) the
Executive's services shall be performed at the location
where the Executive was employed immediately preceding the
Effective Date or any office or location less than 50 miles
from such location.
(ii) During the Employment Period, and excluding any
periods of vacation, sick leave or disability to which the
Executive is entitled, the Executive agrees to devote the
Executive's full attention and time to the business and
affairs of CNW and, to the extent necessary to discharge the
duties assigned to the Executive hereunder, to use the
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Executive's best efforts to perform faithfully and
efficiently such duties. During the Employment Period, it
shall not be a violation of this Agreement for the Executive
to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and
(C) manage personal investments, so long as such activities
are consistent with the policies of CNW at the Effective
Date and do not significantly interfere with the performance
of the Executive's duties in accordance with this Agreement.
It is expressly understood and agreed that to the extent
that any such activities have been conducted by the
Executive prior to the Effective Date and were consistent
with the policies of CNW at the Effective Date, the
continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent
to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive's duties
hereunder.
(b) Compensation.
(i) Base Salary. During the Employment Period, CNW
Railway shall pay or cause to be paid to the Executive an
annual base salary in cash ("Guaranteed Base Salary"), which
shall be paid in a manner consistent with CNW Railway's
payroll practices immediately preceding the Effective Date
at a rate at least equal to twelve times the highest monthly
base salary paid or payable to the Executive by CNW Railway
in respect of the twelve-month period immediately preceding
the month in which the Effective Date occurs. During the
Employment Period, the Guaranteed Base Salary shall be
reviewed at least annually and shall be increased at any
time and from time to time as shall be substantially
consistent with increases in base salary awarded in the
ordinary course of business to other peer executives of CNW
Railway. Any increase in Guaranteed Base Salary shall not
serve to limit or reduce any other obligation to the
Executive under this Agreement. Guaranteed Base Salary
shall not be reduced after any such increase, and the term
Guaranteed Base Salary as used in this Agreement shall refer
to the Guaranteed Base Salary as so increased.
(ii) Guaranteed Bonus. (A) In addition to Guaranteed
Base Salary, CNW shall pay or cause to be paid to the
Executive a bonus (the "Guaranteed Bonus") for each
Performance Period which ends during the Employment Period.
For purposes of this Agreement, a "Performance Period" means
each period of time designated in accordance with the
Chicago and North Western Holdings Corp. Bonus Plan or any
other bonus arrangement ("Bonus Plan") which is based upon
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<PAGE>
performance and approved by the Board or any duly designated
committee of the Board. The Guaranteed Bonus shall be at
least equal to the product of (I) a percentage equal to the
greatest of (a) the On Plan Percentage (as defined in
Section 3(b)(ii)(B)(I) below), or (b) the amount of the
Historical Bonus Percentage (as defined in Section
3(b)(ii)(B)(II) below), or (c) the Actual Bonus Percentage
(as defined in Section 3(b)(ii)(B)(III) below), multiplied
by (II) the Guaranteed Annual Salary.
(B) For purposes of this Section 3(b)(ii), the following
definitions apply:
(I) "On Plan Percentage" means the percentage
of Guaranteed Base Salary to which the Executive would
have been entitled under any Bonus Plan for the
Performance Period for which the Guaranteed Bonus is
awarded ("Current Performance Period") as if the
performance achieved 100% of performance goals
established pursuant to such Bonus Plan.
(II) "Historical Bonus Percentage" means the
highest Adjusted Bonus Percentage (as defined below) in
the three Performance Periods preceding the Effective
Date (individually referred to herein as a "Prior
Performance Period"). The "Adjusted Bonus Percentage"
for any such Prior Performance Period is equal to the
bonus accrued for such Prior Performance Period,
expressed as a percentage of the annual rate of base
salary earned by the Executive during such Prior
Performance Period, multiplied by the Adjustment
Fraction (as defined below). The "Adjustment Fraction"
is, with respect to each Prior Performance Period, a
fraction, the numerator of which is the number of
months in the Current Performance Period, and the
denominator of which is the number of months in each
Prior Performance Period.
(III) "Actual Bonus Percentage" means the
percentage of the rate of Guaranteed Base Salary for
the Current Performance Period which the Executive
would accrue as a bonus under any Bonus Plan if the
performance during the Current Performance Period were
measured by the actual performance during the Current
Performance Period; provided, however, that for
purposes of calculating the Guaranteed Bonus under
Section 5 hereof, "Actual Bonus Percentage" means the
percentage of the rate of Guaranteed Base Salary for
the Performance Period during which the Termination
Date (as defined below), occurred ("Termination
Performance Period") which the Executive would accrue
as a bonus under any Bonus Plan if the performance
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during such Termination Performance Period were
measured by the actual performance during the
Termination Performance Period prior to the Termination
Date projected to the last day of such Performance
Period.
(iii) Incentive, Savings and Retirement Plans. In
addition to Guaranteed Base Salary and Guaranteed Bonus
payable as hereinabove provided, the Executive shall be
entitled to participate during the Employment Period in all
incentive (including long-term incentives), savings and
retirement plans, practices, policies and programs
applicable to other peer executives of CNW, but in no event
shall such plans, practices, policies and programs provide
the Executive with incentive (including long-term
incentives), savings and retirement benefits which, in each
case, are less favorable, in the aggregate, than the most
favorable of those provided by CNW for the Executive under
such plans, practices, policies and programs as in effect at
any time during the 90-day period immediately preceding the
Effective Date.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the
case may be, shall be eligible for participation in and
shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by CNW (including,
and without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life,
dependent life, accidental death and travel accident
insurance plans and programs) and applicable to other peer
executives of CNW, but in no event shall such plans,
practices, policies and programs provide benefits which in
each case are less favorable, in the aggregate, than the
most favorable of those provided by CNW for the Executive
under such plans, practices, policies and programs as in
effect at any time during the 90-day period immediately
preceding the Effective Date.
(v) Fringe Benefits. During the Employment Period,
the Executive shall be entitled to fringe benefits in
accordance with the most favorable plans, practices,
programs and policies applicable to peer executives of CNW
Railway, but in no event shall such plans, practices,
policies and programs provide fringe benefits which in each
case are less favorable, in the aggregate, than the most
favorable of those provided by CNW Railway for the Executive
under such plans, practices, policies and programs in effect
at any time during the 90-day period immediately preceding
the Effective Date.
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(vi) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement
for all reasonable employment-related expenses incurred by
the Executive upon CNW Railway's receipt of accountings in
accordance with the most favorable policies, practices and
procedures applicable to peer executives of CNW Railway, but
in no event shall such policies, practices and procedures in
each case be less favorable, in the aggregate, than the most
favorable of those provided by CNW Railway for the Executive
under such policies, practices and procedures in effect at
any time during the 90-day period immediately preceding the
Effective Date.
(vii) Office and Support Staff. During the Employment
Period, the Executive shall be entitled to an office or
offices of a size and with furnishings and other
appointments, and to exclusive personal secretarial and
other assistance in accordance with the most favorable
policies, practices and procedures applicable to peer
executives of CNW Railway, but in no event shall such
policies, practices and procedures be less favorable, in the
aggregate, than the most favorable of those provided by CNW
Railway for the Executive under such policies, practices and
procedures in effect at any time during the 90-day period
immediately preceding the Effective Date.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance
with the most favorable plans, practices, policies and
programs applicable to peer executives of CNW Railway, but
in no event shall such plans, practices, policies and
programs provide paid vacation which is less favorable in
the aggregate than the most favorable of those provided by
CNW Railway for the Executive under such plans, practices,
policies and programs in effect at any time during the
90-day period immediately preceding the Effective Date.
4. Termination of Employment.
(a) Death or Disability. The Executive's employment
shall terminate automatically upon the Executive's death or
Disability during the Employment Period. Disability of the
Executive shall be deemed to have occurred on the date on which
the Executive is certified as having incurred a Disability by a
physician selected by CNW or its insurers and acceptable to the
Executive or the Executive's legal representative. If CNW
determines in good faith that the Disability of the Executive has
occurred during the Employment Period, it may give to the
Executive written notice in accordance with Section 11(e) of this
Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with CNW
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shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), unless
within the 30 days after such receipt, the Executive shall have
returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" means any medically
determinable physical or mental impairment that can be expected
to last for a continuous period of not less than six months, and
that renders the Executive unable to perform the duties required
under this Agreement.
(b) Cause. The Executive's employment may be
terminated during the Employment Period by CNW for Cause.
"Cause" means either of the following:
(i) conviction of the Executive of any felony or
other crime involving dishonesty, or moral turpitude; or
(ii) the Executive's habitual neglect of the
Executive's duties (other than on account of Disability),
except that Cause shall not mean:
(i) bad judgment or negligence other than habitual
neglect of duty;
(ii) any act or omission believed by the Executive in
good faith to have been in or not opposed to the interest of
CNW (without intent of the Executive to gain therefrom,
directly or indirectly, a profit to which the Executive was
not legally entitled);
(iii) any act or omission with respect to which a
determination could properly have been made by the Board
that the Executive met the applicable standard of conduct
for indemnification or reimbursement under the By-Laws of
CNW, any applicable indemnification agreement, or the laws
and regulations under which CNW is governed, in each case in
effect at the time of such act or omission; or
(iv) any act or omission with respect to which notice
of termination of employment of the Executive is given more
than twelve (12) months after the earliest date on which any
member of the Board who is not a party to the act or
omission, knew or should have known of such act or omission.
(c) Good Reason. The Executive's employment may be
terminated during the Employment Period by the Executive for Good
Reason. For purposes of this Agreement, "Good Reason" means any
one of the following events:
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(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles, reporting requirements
or responsibilities), authority or duties as contemplated by
Section 3(a) of this Agreement, or any other action by CNW
which results in a diminution or other material adverse
change in such position, authority or duties, excluding for
this purpose an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied by CNW
promptly after receipt of notice thereof given by the
Executive;
(ii) any failure by CNW to comply with any of the
provisions of Section 3(b) of this Agreement, other than an
isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by CNW promptly
after receipt of notice thereof given by the Executive;
(iii) CNW requiring the Executive to be based at any
office or location other than the location described in
Section 3(a)(i)(B) hereof;
(iv) any other material adverse changes to the terms
and conditions of the Executive's employment;
(v) any purported termination by CNW of the
Executive's employment otherwise than as expressly permitted
by this Agreement, it being understood that any such
purported termination shall not be effective for any other
purpose of this Agreement; or
(vi) any failure by CNW to comply with and satisfy
Section 11(c) of this Agreement.
For purposes of this Section 4(c), any good faith
determination of "Good Reason" made by the Executive shall be
conclusive.
(d) Notice of Termination. Any termination of the
Executive's employment by CNW for Cause or by the Executive for
Good Reason shall be communicated by Notice of Termination (as
defined below) to the other party hereto given in accordance with
Section 11(e) of this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice which
(i) indicates the specific termination provision in this
Agreement relied upon, (ii) sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated and (iii) if the Termination Date (as defined below) is
other than the date of receipt of such Notice of Termination,
specifies the Termination Date. The failure by the Executive to
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set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason shall not waive any
right of the Executive hereunder or preclude the Executive from
asserting such fact or circumstance in enforcing the Executive's
rights hereunder.
(e) Termination Date. "Termination Date" means the
date of receipt of the Notice of Termination or any later date
specified therein (which date shall be not more than fifteen days
after the giving of such notice), as the case may be; provided,
however, that (i) if the Executive's employment is terminated by
CNW other than for Cause or Disability, the Termination Date
shall be the date of receipt of such Notice of Termination and
(ii) if the Executive's employment is terminated by reason of
death or Disability, the Termination Date shall be the date of
death of the Executive or the Disability Effective Date, as the
case may be.
5. Obligations of CNW upon Termination.
(a) Termination of Employment for Good Reason or
Other Than for Cause or Disability. If, during the Employment
Period, CNW shall terminate Executive's employment other than for
Cause or Disability, or if the Executive shall terminate
employment under this Agreement for Good Reason, CNW shall pay to
the Executive, in addition to all vested rights arising from his
employment, as specified in Section 7 hereof, in a lump sum in
cash within three days after the Termination Date the aggregate
of the following amounts (hereinafter, the amounts described in
Section 5(a)(i)(A), (B), and (C) shall be called the "Accrued
Obligations"):
(A) to the extent not theretofore paid, the
Guaranteed Base Salary and any accrued vacation pay
through the Termination Date;
(B) the difference between (I) the product of
(1) the Guaranteed Bonus, multiplied by (2) a fraction,
the numerator of which is the number of days in the
Termination Performance Period which elapsed prior to
the Termination Date, and the denominator of which is
the total number of days in the Termination Performance
Period, and (II) the amount of any Guaranteed Bonus
paid to the Executive with respect to the Termination
Performance Period;
(C) in the case of compensation previously
deferred by the Executive, all amounts previously
deferred (together with any accrued earnings thereon)
and not yet paid by CNW;
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(D) an amount equal to the product of (I)
three (3), multiplied by (II) the sum of (1) the
Guaranteed Base Salary and (2) the Guaranteed Bonus
multiplied by a fraction, the numerator of which is
twelve and the denominator of which is the number of
months in the Termination Performance Period; and
(E) a payment equal to the value of the
Executive's accrued benefit under the Chicago and North
Western Transportation Company Supplemental Pension
Plan (the "Pension Plan") calculated as though the
Executive continued to accrue benefits under the
Pension Plan for a period of three years after the
Termination Date (the "Continuance Period"), reduced by
the value of the Executive's vested accrued benefit
under the Pension Plan as of the Termination Date; and
(F) for the Continuance Period, or such
longer period as any plan, program, practice or policy
may provide, CNW Railway shall continue to provide at
no cost to the Executive, except a cost equal to the
lesser of (I) the cost to the Executive immediately
prior to the Termination Date or (II) the cost to the
Executive immediately prior to the Effective Date, all
welfare benefits (including, but without limitation,
medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental
death and travel accident insurance plans and programs)
to the Executive and/or the Executive's family which
are at least as favorable as the most favorable plans,
practices, programs or policies of CNW Railway
applicable to other peer Executives, but which are in
no event less favorable than the most favorable plans,
practices, programs or policies of CNW Railway
applicable to other peer Executives and their families
during the 90-day period immediately preceding the
Effective Date.
(b) Termination of Employment for Cause. If the
Executive's employment shall be terminated by CNW for Cause
during the Employment Period, this Agreement shall terminate
without further obligations to the Executive, other than the
obligation to pay to the Executive in a lump sum in cash, within
30 days of the Termination Date, the Guaranteed Base Salary
through the Termination Date, plus the amount of any compensation
previously deferred by the Executive, plus any accrued vacation,
in each case to the extent theretofore unpaid.
(c) Termination of Employment Other Than for Good
Reason. If the Executive terminates employment during the
Employment Period other than for Good Reason, Disability or
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death, this Agreement shall terminate without further obligations
by CNW, other than the obligation to pay to the Executive all
Accrued Obligations in a lump sum in cash within 30 days of the
Notice Date.
(d) Termination of Employment for Disability. If
the Executive's employment is terminated by reason of the
Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the
Executive, other than the obligation to pay to the Executive all
Accrued Obligations in a lump sum in cash within 30 days of the
Termination Date. Anything in this Agreement to the contrary
notwithstanding, the Executive shall be entitled after the
Disability Effective Date to receive disability and other
benefits at least equal to those provided under the most
favorable plans, practices, policies and programs relating to
disability applicable to disabled peer executives of CNW and
their families, but in no event shall such plans, practices,
policies and programs provide benefits which in each case are
less favorable, in the aggregate, than the most favorable of
those provided by CNW for the Executive under such plans,
practices, policies or programs in effect at any time during the
90-day period immediately preceding the Effective Date.
(e) Termination of Employment Because of Death. If
the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's
legal representatives under this Agreement, other than the
obligation to pay to the Executive's estate or beneficiary all
Accrued Obligations in a lump sum in cash within 30 days of the
Notice Date. Anything in this Agreement to the contrary
notwithstanding, the Executive's family shall be entitled to
receive benefits at least equal to the most favorable benefits
provided by CNW to the surviving families of peer executives of
CNW under such plans, practices, policies and programs, but in no
event shall such plans, practices, policies or programs provide
benefits which in each case are less favorable, in the aggregate,
than the most favorable of those provided by CNW to the Executive
under such plans, practices, policies or programs in effect at
any time during the 90-day period immediately preceding the
Effective Date.
6. Certain Reduction of Payments by CNW.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment or distribution by CNW to or for the benefit of the
Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise) (a "Payment") would be nondeductible by CNW for
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Federal income tax purposes because of Section 280G of the Code,
then the aggregate present value of amounts payable or
distributable to or for the benefit of the Executive pursuant to
this Agreement (such payments or distributions pursuant to this
Agreement are hereinafter referred to as "Agreement Payments")
shall be reduced to the Reduced Amount. The "Reduced Amount"
shall be an amount expressed in present value which maximizes the
aggregate present value of Agreement Payments without causing any
Payment to be nondeductible by CNW because of Section 280G of the
Code. For purposes of this Section 6, present value shall be
determined in accordance with Section 280G(d)(4) of the Code.
(b) All determinations required to be made under
this Section 6 shall be made by Arthur Andersen (the "Accounting
Firm") which shall provide detailed supporting calculations both
to CNW and the Executive within 15 business days of the Date of
Termination or such earlier time as is requested by CNW and an
opinion to the Executive that he has substantial authority not to
report any Excise Tax on his Federal income tax return with
respect to the Agreement Payments. Any such determination by the
Accounting Firm shall be binding upon CNW and the Executive. The
Executive shall determine which and how much of the Agreement
Payments shall be eliminated or reduced consistent with the
requirements of this Section 6, provided that, if the Executive
does not make such determination within ten business days of the
receipt of the calculations made by the Accounting Firm, CNW
shall elect which and how much of the Agreement Payments shall be
eliminated or reduced consistent with the requirements of this
Section 6 and shall notify the Executive promptly of such
election. Within five business days thereafter, CNW shall pay to
or distribute to or for the benefit of the Executive such amounts
as are then due to the Executive under this Agreement.
(c) As a result of the uncertainty in the
application of Section 280G of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is
possible that Agreement Payments will have been made by CNW which
should not have been made ("Overpayment") or that additional
Agreement Payments which will not have been made by CNW could
have been made ("Underpayment"), in each case, consistent with
the calculations required to be made hereunder. In the event
that the Accounting Firm, based upon the assertion of a
deficiency by the Internal Revenue Service against the Executive
which the Accounting Firm believes has a high probability of
success determines that an Overpayment has been made, any such
Overpayment paid or distributed by CNW to or for the benefit of
the Executive shall be treated for all purposes as a loan ab
initio to the Executive which the Executive shall repay to CNW
together with interest at the applicable federal rate provided
for in Section 7872(f)(2) of the Code; provided, however, that no
such loan shall be deemed to have been made and no amount shall
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be payable by the Executive to CNW if and to the extent such
deemed loan and payment would not either reduce the amount on
which the Executive is subject to tax under Section 1 and
Section 4999 of the Code or generate a refund of such taxes. In
the event that the Accounting Firm, based upon controlling
precedent or other substantial authority, determines that an
Underpayment has occurred, any such Underpayment shall be
promptly paid by CNW to or for the benefit of the Executive
together with interest at the applicable federal rate provided
for in Section 7872(f)(2) of the Code.
7. Non-exclusivity of Rights.
(a) Waiver of Other Severance Rights. If the
Executive receives payments pursuant to Section 5(a) hereof, the
Executive hereby waives the right to receive severance payments
under any other plan, policy or agreement of CNW.
(b) Other Rights. Except as provided in
Section 6(a), nothing in this Agreement shall prevent or limit
the Executive's continuing or future participation in any
benefit, bonus, incentive or other plans, programs, policies or
practices, provided by CNW or any of its affiliated companies and
for which the Executive may qualify, nor shall anything herein
limit or otherwise affect such rights as the Executive may have
under any other agreements with CNW or any of their affiliated
companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan,
practice, policy or program of CNW or any of their affiliated
companies and any other payment or benefit required by law at or
subsequent to the Termination Date shall be payable in accordance
with such plan, practice, policy or program or applicable law
except as explicitly modified by this Agreement.
8. Confidentiality/NonCompetition.
(a) Confidentiality. Executive acknowledges that it
is the policy of the Company and its subsidiaries to maintain as
secret and confidential all valuable and unique information and
techniques acquired, developed or used by the Company and its
subsidiaries relating to their business, operations, employees
and customers, which gives the Company and its subsidiaries a
competitive advantage in the railroad industry and other
businesses in which the Company and its subsidiaries are engaged
("Confidential Information"). Executive recognizes that all such
Confidential Information is the sole and exclusive property of
the Company and its subsidiaries, and that disclosure of
Confidential Information would cause damage to the Company and
its subsidiaries. In consideration of the Company's entering
into this Agreement, Executive agrees that, except as required by
the duties of his employment with the Company and/or its
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subsidiaries, he will never directly or indirectly use, publish,
disseminate or otherwise disclose any Confidential Information
obtained during his employment with the Company and/or its
subsidiaries for so long as such information is valuable and
unique.
(b) Noncompetition/Nonsolicitation.
(i) Executive agrees that, during the period of his
employment with the Company and/or its subsidiaries and, if
Executive's employment is terminated for any reason,
thereafter for a period of one (1) year, Executive will not
at any time directly or indirectly, in any capacity, engage
or participate in, or become employed by or render advisory
or consulting or other services in connection with any
Prohibited Business as defined in Section 8(b)(iv).
(ii) Executive agrees that, during the period of his
employment with the Company and/or its subsidiaries and, if
Executive's employment is terminated for any reason,
thereafter for a period of one (1) year, Executive shall not
make any financial investment, whether in the form of equity
or debt, or own any interest, directly or indirectly, in any
Prohibited Business. Nothing in this Section 8(b)(ii)
shall, however, restrict Executive from making any
investment in any company whose stock is listed on a
national securities exchange or actively traded in the
over-the-counter market; provided that (A) such investment
does not give Executive the right or ability to control or
influence the policy decisions of any Prohibited Business,
and (B) such investment does not create a conflict of
interest between Executive's duties hereunder and
Executive's interest in such investment.
(iii) Executive agrees that, during the period of his
employment with the Company and/or its subsidiaries and, if
Executive's employment is terminated for any reason,
thereafter for a period of one (1) year, Executive shall not
(A) employ any employee of the Company and/or its
subsidiaries or (B) interfere with the Company's or any of
its subsidiaries' relationship with, or endeavor to entice
away from the Company and/or its subsidiaries any person,
firm, corporation, or other business organization who or
which at any time (whether before or after the date of
Executive's termination of employment), was an employee,
customer, vendor or supplier of, or maintained a business
relationship with, any business of the Company and/or its
subsidiaries which was conducted at any time during the
period commencing one year prior to the termination of
employment.
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(iv) For the purpose of this Section 8(b),
"Prohibited Business" shall be defined as any railroad,
freight carrier or other entity and any branch, office or
operation thereof, which is a direct and material competitor
of the Company wherever the Company does business, in the
United States or abroad, and which has established or seeks
to establish contact, in whatever form (including but not
limited to solicitation of sales, or the receipt or
submission of bids) with any entity who is at any time a
client, customer or supplier of the Company (including but
not limited to all subdivisions of the federal government.)
(c) Executive and the Company specifically agree
that, in the event that Executive shall breach his obligations
under this Section 8, the Company and its subsidiaries will
suffer irreparable injury and no adequate remedy for such breach,
and shall be entitled to injunctive relief therefor, and in
particular, without limiting the generality of the foregoing, the
Company shall not be precluded from pursuing any and all remedies
it may have at law or in equity for breach of such obligations.
9. Legal Fees and Other Expenses.
(a) Legal Fees and Expenses. CNW agrees to pay
promptly upon presentation of an invoice from the Executive, to
the full extent permitted by law, all legal fees, including
retainer fees, and expenses which the Executive may reasonably
incur as a result of any contest (regardless of the outcome
thereof) by CNW or others of the validity or enforceability of,
or liability under, any provision of this Agreement or any other
benefit plan, program or policy or any guarantee of performance
thereof (including, but not limited to, legal fees and expenses
as a result of any contest by the Executive about the amount of
any payment pursuant to Section 5 of this Agreement).
(b) Interest. In the event any amount due to the
Executive under this Agreement is not paid within 10 days of
request therefor, the Executive shall be entitled to receive
interest at the highest interest rate applicable to CNW in its
borrowing of funds from any third party during the period of
nonpayment and if such rate is not determinable, or if higher,
then at a rate two percent above the prime commercial lending
rate announced by Citibank, N.A. in effect from time to time
during the period of such nonpayment.
10. Full Settlement. CNW's obligation to make the payments
provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances,
including, without limitation, set-off, counterclaim, recoupment,
defense or other claim, right or action which CNW may have
against the Executive or others. In no event shall the Executive
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be obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement, nor shall the amount of
any payment hereunder be reduced by any compensation earned by
the Executive as result of employment by another employer.
11. Successors.
(a) This Agreement is personal to the Executive and
without the prior written consent of CNW shall not be assignable
by the Executive otherwise than by will or the laws of descent
and distribution. This Agreement shall inure to the benefit of
and be enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and
be binding upon CNW and its successors and assigns.
(c) CNW will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of CNW to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that CNW would be required to
perform it if no such succession had taken place. As used in
this Agreement, "CNW" shall mean the CNW as hereinbefore defined
and any successor to its business and/or assets as aforesaid
which assumes and agrees to perform this Agreement by operation
of law, or otherwise, and CNW and such successor shall be jointly
and severally liable hereunder.
12. Miscellaneous.
(a) If the Executive dies prior to receiving amounts
to which the Executive is entitled hereunder, such amounts shall
be paid in a lump sum payment to the beneficiary designated in
writing by the Executive and if no such beneficiary is
designated, to the Executive's estate.
(b) Benefits payable under this Agreement shall not
be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment,
execution or levy of any kind, either voluntary or involuntary,
prior to actually being received by the Executive, and any such
attempt to dispose of any right to benefits payable hereunder
shall be void.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(d) This Agreement shall not be altered, amended or
modified except by written instrument executed by CNW and
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Executive. A waiver of any term, covenant, agreement or
condition contained in this Agreement shall not be deemed a
waiver of any other term, covenant, agreement or condition, and
any waiver of any default in any such term, covenant, agreement
or condition shall not be deemed a waiver of any later default
thereof or of any other term, covenant, agreement or condition.
(e) All notices and other communications hereunder
shall be in writing and delivered by hand or by first class
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
__________________________
__________________________
__________________________
__________________________
If to CNW:
Chicago and Northwestern
Transportation Company
165 North Canal Street
Chicago, Illinois 60606
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(f) This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same instrument
originals.
(g) This Agreement shall be interpreted and
construed in accordance with the laws of the State of Illinois,
without regard to its choice of law principles. The captions of
this Agreement are not part of the provisions hereof and shall
have no force or effect.
(h) CNW may withhold from any amounts payable under
this Agreement such federal, state or local taxes as shall be
required to be withheld pursuant to any applicable law or
regulation.
(i) The Executive's failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a
waiver of such provision or any other provision thereof.
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(j) The obligations of CNW under this Agreement
shall be unfunded and unsecured. CNW shall not be required to
segregate any assets that may at any time be required to provide
benefits under this Agreement.
(k) This Agreement contains the entire understanding
of CNW and the Executive with respect to the subject matter
hereof.
IN WITNESS WHEREOF, the Executive has hereunto set his hand
and, pursuant to the authorization from its Board of Directors,
the Company and CNW Railway have caused these presents to be
executed in their name on their behalf, all as of the day and
year first above written.
/s/ Arthur W. Peters
Executive
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY
BY: /s/ Robert Schmiege
CHICAGO AND NORTH WESTERN
RAILWAY COMPANY
BY: /s/ Robert Schmiege
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Change of Control
Employment Agreement
Among
Chicago and North Western Transportation Company,
Chicago and North Western Railway Company
and
Executive
<PAGE>
TABLE OF CONTENTS
Page
1. Certain Definitions . . . . . . . . . . . . . . . . . . 1
2. Employment Period . . . . . . . . . . . . . . . . . . . 3
3. Terms of Employment . . . . . . . . . . . . . . . . . . 3
4. Termination of Employment . . . . . . . . . . . . . . . 7
5. Obligations of CNW upon Termination . . . . . . . . . . 10
6. Certain Reduction of Payments by CNW . . . . . . . . . . 12
7. Non-exclusivity of Rights . . . . . . . . . . . . . . . 14
8. Confidentiality/NonCompetition . . . . . . . . . . . . . 14
9. Legal Fees and Other Expenses . . . . . . . . . . . . . 16
10. Full Settlement . . . . . . . . . . . . . . . . . . . . 16
11. Successors . . . . . . . . . . . . . . . . . . . . . . . 17
12. Miscellaneous . . . . . . . . . . . . . . . . . . . . . 17
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CHANGE OF CONTROL
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of the 20th day of December 1994,
is made by and among CHICAGO AND NORTH WESTERN TRANSPORTATION
COMPANY (the "Company"), a Delaware corporation having its
principal place of business in Chicago, Illinois, CHICAGO AND
NORTH WESTERN RAILWAY COMPANY ("CNW Railway"), (the Company and
CNW Railway collectively referred to herein as "CNW"), and
DENNIS E. WALLER (the "Executive"), a resident of Illinois.
The Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and
its shareholders to assure that CNW will have the continued
dedication of the Executive, notwithstanding the possibility,
threat, or occurrence of a Change of Control (as defined below)
of the Company. The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the
personal uncertainties and risks created by a pending or
threatened Change of Control, to encourage the Executive's full
attention and dedication to CNW, and to provide the Executive
with compensation and benefits arrangements upon a Change of
Control which ensure that the compensation and benefits
expectations of the Executive will be satisfied and are
competitive with those of other major corporations. This
Agreement is intended to accomplish these objectives.
1. Certain Definitions
(a) The "Effective Date" shall be the first date on
which a Change of Control occurs during the "Change of Control
Period" (as defined in Section 1(b)). Anything in this Agreement
to the contrary notwithstanding, if the Executive's employment
with CNW is terminated prior to the date on which a Change of
Control occurs, and it is reasonably demonstrated that such
termination of employment (i) was at the request of a third party
who has taken steps reasonably calculated to effect the Change of
Control or (ii) otherwise arose in connection with or
anticipation of the Change of Control, then for all purposes of
this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" is the period
commencing on the date hereof and ending on the third anniversary
of such date; provided, however, that commencing on the date one
year after the date hereof, and on each annual anniversary of
such date (such date and each annual anniversary thereof is
hereinafter referred to as a "Renewal Date"), the Change of
Control Period shall be automatically extended so as to terminate
on the third anniversary of such Renewal Date, unless at least
60 days prior to the Renewal Date CNW shall give notice to the
Executive that the Change of Control Period shall not be so
extended.
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(c) "Change of Control". For the purpose of this
Agreement, a "Change of Control" shall mean any of the following
events:
(i) the acquisition by any person or group of
beneficial ownership of 40% or more of either the then
outstanding Stock or the combined voting power of the then
outstanding voting securities of the Company entitled to
vote generally in the election of directors, except that
(A) no such person or group shall be deemed to own
beneficially any securities held by the Company or a
Subsidiary (as defined below) or any employee benefit plan
(or any related trust) of the Company or a Subsidiary, and
(B) no Change of Control shall be deemed to have occurred
solely by reason of any such acquisition by a corporation
with respect to which, after such acquisition, more than 60%
of both the then outstanding common shares of such
corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled
to vote generally in the election of directors are then
beneficially owned, directly or indirectly, by the persons
who were the beneficial owners of the Stock and voting
securities of the Company immediately before such
acquisition in substantially the same proportion as their
ownership, immediately before such acquisition, of the then
outstanding Stock and the combined voting power of the then
outstanding voting securities of the Company entitled to
vote generally in the election of directors, as the case may
be;
(ii) individuals who, as of the date hereof,
constitute the Board (the "Incumbent Directors") cease for
any reason to constitute at least a majority of the Board;
provided that any individual who becomes a director after
the date hereof whose election, or nomination for election
by the Company's stockholders was approved by a vote or
written consent of at least two-thirds of the directors then
comprising the Incumbent Directors shall be considered as
though such individual were an Incumbent Director, but
excluding, for this purpose, any such individual whose
initial assumption of office is in connection with an actual
or threatened election contest relating to the election of
the directors of the Company (as such terms are used in Rule
14a-11 under the Securities Exchange Act of 1934, as amended
("1934 Act")); or
(iii) approval by the stockholders of the Company of
(A) a merger, reorganization or consolidation with respect
to which the individuals and entities who were the
respective beneficial owners of the Stock and voting
securities of the Company immediately before such merger,
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reorganization or consolidation do not, after such merger,
reorganization or consolidation, beneficially own, directly
or indirectly, more than 60% of, respectively, the then
outstanding common shares and the combined voting power of
the then outstanding voting securities entitled to vote
generally in the election of directors of the corporation
resulting from such merger, reorganization or consolidation,
(B) a liquidation or dissolution of the Company or (C) the
sale or other disposition of all or substantially all of the
assets of CNW.
For purposes of this definition, "person" means such term as
used in Securities Exchange Commission ("SEC") Rule 13d-5(b)
under the 1934 Act; "beneficial owner" means such term as defined
in SEC Rule 13d-3 under the 1934 Act; "group" means such term as
defined in Section 13(d) of the 1934 Act; "Subsidiary" means a
corporation as defined in Section 425(f) of the Internal Revenue
Code of 1986, as amended ("Code") with the Company being treated
as the employer corporation for purposes of this definition of
Subsidiary; and "Stock" means the common stock of the Company,
par value $.01, or any other common stock that the Company may
issue from time to time.
2. Employment Period. CNW hereby agrees to continue the
Executive in its employ, and, subject to Section 4 of the
Agreement, the Executive hereby agrees to remain in the employ of
CNW, for the period commencing on the Effective Date and ending
on the third anniversary of such date (the "Employment Period").
3. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the
Executive's position (including status, offices, titles,
reporting requirements and responsibilities), authority and
duties shall be at least commensurate in all material
respects with the most significant of those held, exercised
and assigned at any time during the 90-day period
immediately preceding the Effective Date, and (B) the
Executive's services shall be performed at the location
where the Executive was employed immediately preceding the
Effective Date or any office or location less than 50 miles
from such location.
(ii) During the Employment Period, and excluding any
periods of vacation, sick leave or disability to which the
Executive is entitled, the Executive agrees to devote the
Executive's full attention and time to the business and
affairs of CNW and, to the extent necessary to discharge the
duties assigned to the Executive hereunder, to use the
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Executive's best efforts to perform faithfully and
efficiently such duties. During the Employment Period, it
shall not be a violation of this Agreement for the Executive
to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and
(C) manage personal investments, so long as such activities
are consistent with the policies of CNW at the Effective
Date and do not significantly interfere with the performance
of the Executive's duties in accordance with this Agreement.
It is expressly understood and agreed that to the extent
that any such activities have been conducted by the
Executive prior to the Effective Date and were consistent
with the policies of CNW at the Effective Date, the
continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent
to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive's duties
hereunder.
(b) Compensation.
(i) Base Salary. During the Employment Period, CNW
Railway shall pay or cause to be paid to the Executive an
annual base salary in cash ("Guaranteed Base Salary"), which
shall be paid in a manner consistent with CNW Railway's
payroll practices immediately preceding the Effective Date
at a rate at least equal to twelve times the highest monthly
base salary paid or payable to the Executive by CNW Railway
in respect of the twelve-month period immediately preceding
the month in which the Effective Date occurs. During the
Employment Period, the Guaranteed Base Salary shall be
reviewed at least annually and shall be increased at any
time and from time to time as shall be substantially
consistent with increases in base salary awarded in the
ordinary course of business to other peer executives of CNW
Railway. Any increase in Guaranteed Base Salary shall not
serve to limit or reduce any other obligation to the
Executive under this Agreement. Guaranteed Base Salary
shall not be reduced after any such increase, and the term
Guaranteed Base Salary as used in this Agreement shall refer
to the Guaranteed Base Salary as so increased.
(ii) Guaranteed Bonus. (A) In addition to Guaranteed
Base Salary, CNW shall pay or cause to be paid to the
Executive a bonus (the "Guaranteed Bonus") for each
Performance Period which ends during the Employment Period.
For purposes of this Agreement, a "Performance Period" means
each period of time designated in accordance with the
Chicago and North Western Holdings Corp. Bonus Plan or any
other bonus arrangement ("Bonus Plan") which is based upon
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performance and approved by the Board or any duly designated
committee of the Board. The Guaranteed Bonus shall be at
least equal to the product of (I) a percentage equal to the
greatest of (a) the On Plan Percentage (as defined in
Section 3(b)(ii)(B)(I) below), or (b) the amount of the
Historical Bonus Percentage (as defined in Section
3(b)(ii)(B)(II) below), or (c) the Actual Bonus Percentage
(as defined in Section 3(b)(ii)(B)(III) below), multiplied
by (II) the Guaranteed Annual Salary.
(B) For purposes of this Section 3(b)(ii), the following
definitions apply:
(I) "On Plan Percentage" means the percentage
of Guaranteed Base Salary to which the Executive would
have been entitled under any Bonus Plan for the
Performance Period for which the Guaranteed Bonus is
awarded ("Current Performance Period") as if the
performance achieved 100% of performance goals
established pursuant to such Bonus Plan.
(II) "Historical Bonus Percentage" means the
highest Adjusted Bonus Percentage (as defined below) in
the three Performance Periods preceding the Effective
Date (individually referred to herein as a "Prior
Performance Period"). The "Adjusted Bonus Percentage"
for any such Prior Performance Period is equal to the
bonus accrued for such Prior Performance Period,
expressed as a percentage of the annual rate of base
salary earned by the Executive during such Prior
Performance Period, multiplied by the Adjustment
Fraction (as defined below). The "Adjustment Fraction"
is, with respect to each Prior Performance Period, a
fraction, the numerator of which is the number of
months in the Current Performance Period, and the
denominator of which is the number of months in each
Prior Performance Period.
(III) "Actual Bonus Percentage" means the
percentage of the rate of Guaranteed Base Salary for
the Current Performance Period which the Executive
would accrue as a bonus under any Bonus Plan if the
performance during the Current Performance Period were
measured by the actual performance during the Current
Performance Period; provided, however, that for
purposes of calculating the Guaranteed Bonus under
Section 5 hereof, "Actual Bonus Percentage" means the
percentage of the rate of Guaranteed Base Salary for
the Performance Period during which the Termination
Date (as defined below), occurred ("Termination
Performance Period") which the Executive would accrue
as a bonus under any Bonus Plan if the performance
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during such Termination Performance Period were
measured by the actual performance during the
Termination Performance Period prior to the Termination
Date projected to the last day of such Performance
Period.
(iii) Incentive, Savings and Retirement Plans. In
addition to Guaranteed Base Salary and Guaranteed Bonus
payable as hereinabove provided, the Executive shall be
entitled to participate during the Employment Period in all
incentive (including long-term incentives), savings and
retirement plans, practices, policies and programs
applicable to other peer executives of CNW, but in no event
shall such plans, practices, policies and programs provide
the Executive with incentive (including long-term
incentives), savings and retirement benefits which, in each
case, are less favorable, in the aggregate, than the most
favorable of those provided by CNW for the Executive under
such plans, practices, policies and programs as in effect at
any time during the 90-day period immediately preceding the
Effective Date.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the
case may be, shall be eligible for participation in and
shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by CNW (including,
and without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life,
dependent life, accidental death and travel accident
insurance plans and programs) and applicable to other peer
executives of CNW, but in no event shall such plans,
practices, policies and programs provide benefits which in
each case are less favorable, in the aggregate, than the
most favorable of those provided by CNW for the Executive
under such plans, practices, policies and programs as in
effect at any time during the 90-day period immediately
preceding the Effective Date.
(v) Fringe Benefits. During the Employment Period,
the Executive shall be entitled to fringe benefits in
accordance with the most favorable plans, practices,
programs and policies applicable to peer executives of CNW
Railway, but in no event shall such plans, practices,
policies and programs provide fringe benefits which in each
case are less favorable, in the aggregate, than the most
favorable of those provided by CNW Railway for the Executive
under such plans, practices, policies and programs in effect
at any time during the 90-day period immediately preceding
the Effective Date.
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(vi) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement
for all reasonable employment-related expenses incurred by
the Executive upon CNW Railway's receipt of accountings in
accordance with the most favorable policies, practices and
procedures applicable to peer executives of CNW Railway, but
in no event shall such policies, practices and procedures in
each case be less favorable, in the aggregate, than the most
favorable of those provided by CNW Railway for the Executive
under such policies, practices and procedures in effect at
any time during the 90-day period immediately preceding the
Effective Date.
(vii) Office and Support Staff. During the Employment
Period, the Executive shall be entitled to an office or
offices of a size and with furnishings and other
appointments, and to exclusive personal secretarial and
other assistance in accordance with the most favorable
policies, practices and procedures applicable to peer
executives of CNW Railway, but in no event shall such
policies, practices and procedures be less favorable, in the
aggregate, than the most favorable of those provided by CNW
Railway for the Executive under such policies, practices and
procedures in effect at any time during the 90-day period
immediately preceding the Effective Date.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance
with the most favorable plans, practices, policies and
programs applicable to peer executives of CNW Railway, but
in no event shall such plans, practices, policies and
programs provide paid vacation which is less favorable in
the aggregate than the most favorable of those provided by
CNW Railway for the Executive under such plans, practices,
policies and programs in effect at any time during the
90-day period immediately preceding the Effective Date.
4. Termination of Employment.
(a) Death or Disability. The Executive's employment
shall terminate automatically upon the Executive's death or
Disability during the Employment Period. Disability of the
Executive shall be deemed to have occurred on the date on which
the Executive is certified as having incurred a Disability by a
physician selected by CNW or its insurers and acceptable to the
Executive or the Executive's legal representative. If CNW
determines in good faith that the Disability of the Executive has
occurred during the Employment Period, it may give to the
Executive written notice in accordance with Section 11(e) of this
Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with CNW
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shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), unless
within the 30 days after such receipt, the Executive shall have
returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" means any medically
determinable physical or mental impairment that can be expected
to last for a continuous period of not less than six months, and
that renders the Executive unable to perform the duties required
under this Agreement.
(b) Cause. The Executive's employment may be
terminated during the Employment Period by CNW for Cause.
"Cause" means either of the following:
(i) conviction of the Executive of any felony or
other crime involving dishonesty, or moral turpitude; or
(ii) the Executive's habitual neglect of the
Executive's duties (other than on account of Disability),
except that Cause shall not mean:
(i) bad judgment or negligence other than habitual
neglect of duty;
(ii) any act or omission believed by the Executive in
good faith to have been in or not opposed to the interest of
CNW (without intent of the Executive to gain therefrom,
directly or indirectly, a profit to which the Executive was
not legally entitled);
(iii) any act or omission with respect to which a
determination could properly have been made by the Board
that the Executive met the applicable standard of conduct
for indemnification or reimbursement under the By-Laws of
CNW, any applicable indemnification agreement, or the laws
and regulations under which CNW is governed, in each case in
effect at the time of such act or omission; or
(iv) any act or omission with respect to which notice
of termination of employment of the Executive is given more
than twelve (12) months after the earliest date on which any
member of the Board who is not a party to the act or
omission, knew or should have known of such act or omission.
(c) Good Reason. The Executive's employment may be
terminated during the Employment Period by the Executive for Good
Reason. For purposes of this Agreement, "Good Reason" means any
one of the following events:
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(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles, reporting requirements
or responsibilities), authority or duties as contemplated by
Section 3(a) of this Agreement, or any other action by CNW
which results in a diminution or other material adverse
change in such position, authority or duties, excluding for
this purpose an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied by CNW
promptly after receipt of notice thereof given by the
Executive;
(ii) any failure by CNW to comply with any of the
provisions of Section 3(b) of this Agreement, other than an
isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by CNW promptly
after receipt of notice thereof given by the Executive;
(iii) CNW requiring the Executive to be based at any
office or location other than the location described in
Section 3(a)(i)(B) hereof;
(iv) any other material adverse changes to the terms
and conditions of the Executive's employment;
(v) any purported termination by CNW of the
Executive's employment otherwise than as expressly permitted
by this Agreement, it being understood that any such
purported termination shall not be effective for any other
purpose of this Agreement; or
(vi) any failure by CNW to comply with and satisfy
Section 11(c) of this Agreement.
For purposes of this Section 4(c), any good faith
determination of "Good Reason" made by the Executive shall be
conclusive.
(d) Notice of Termination. Any termination of the
Executive's employment by CNW for Cause or by the Executive for
Good Reason shall be communicated by Notice of Termination (as
defined below) to the other party hereto given in accordance with
Section 11(e) of this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice which
(i) indicates the specific termination provision in this
Agreement relied upon, (ii) sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated and (iii) if the Termination Date (as defined below) is
other than the date of receipt of such Notice of Termination,
specifies the Termination Date. The failure by the Executive to
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set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason shall not waive any
right of the Executive hereunder or preclude the Executive from
asserting such fact or circumstance in enforcing the Executive's
rights hereunder.
(e) Termination Date. "Termination Date" means the
date of receipt of the Notice of Termination or any later date
specified therein (which date shall be not more than fifteen days
after the giving of such notice), as the case may be; provided,
however, that (i) if the Executive's employment is terminated by
CNW other than for Cause or Disability, the Termination Date
shall be the date of receipt of such Notice of Termination and
(ii) if the Executive's employment is terminated by reason of
death or Disability, the Termination Date shall be the date of
death of the Executive or the Disability Effective Date, as the
case may be.
5. Obligations of CNW upon Termination.
(a) Termination of Employment for Good Reason or
Other Than for Cause or Disability. If, during the Employment
Period, CNW shall terminate Executive's employment other than for
Cause or Disability, or if the Executive shall terminate
employment under this Agreement for Good Reason, CNW shall pay to
the Executive, in addition to all vested rights arising from his
employment, as specified in Section 7 hereof, in a lump sum in
cash within three days after the Termination Date the aggregate
of the following amounts (hereinafter, the amounts described in
Section 5(a)(i)(A), (B), and (C) shall be called the "Accrued
Obligations"):
(A) to the extent not theretofore paid, the
Guaranteed Base Salary and any accrued vacation pay
through the Termination Date;
(B) the difference between (I) the product of
(1) the Guaranteed Bonus, multiplied by (2) a fraction,
the numerator of which is the number of days in the
Termination Performance Period which elapsed prior to
the Termination Date, and the denominator of which is
the total number of days in the Termination Performance
Period, and (II) the amount of any Guaranteed Bonus
paid to the Executive with respect to the Termination
Performance Period;
(C) in the case of compensation previously
deferred by the Executive, all amounts previously
deferred (together with any accrued earnings thereon)
and not yet paid by CNW;
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(D) an amount equal to the product of (I)
three (3), multiplied by (II) the sum of (1) the
Guaranteed Base Salary and (2) the Guaranteed Bonus
multiplied by a fraction, the numerator of which is
twelve and the denominator of which is the number of
months in the Termination Performance Period; and
(E) a payment equal to the value of the
Executive's accrued benefit under the Chicago and North
Western Transportation Company Supplemental Pension
Plan (the "Pension Plan") calculated as though the
Executive continued to accrue benefits under the
Pension Plan for a period of three years after the
Termination Date (the "Continuance Period"), reduced by
the value of the Executive's vested accrued benefit
under the Pension Plan as of the Termination Date; and
(F) for the Continuance Period, or such
longer period as any plan, program, practice or policy
may provide, CNW Railway shall continue to provide at
no cost to the Executive, except a cost equal to the
lesser of (I) the cost to the Executive immediately
prior to the Termination Date or (II) the cost to the
Executive immediately prior to the Effective Date, all
welfare benefits (including, but without limitation,
medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental
death and travel accident insurance plans and programs)
to the Executive and/or the Executive's family which
are at least as favorable as the most favorable plans,
practices, programs or policies of CNW Railway
applicable to other peer Executives, but which are in
no event less favorable than the most favorable plans,
practices, programs or policies of CNW Railway
applicable to other peer Executives and their families
during the 90-day period immediately preceding the
Effective Date.
(b) Termination of Employment for Cause. If the
Executive's employment shall be terminated by CNW for Cause
during the Employment Period, this Agreement shall terminate
without further obligations to the Executive, other than the
obligation to pay to the Executive in a lump sum in cash, within
30 days of the Termination Date, the Guaranteed Base Salary
through the Termination Date, plus the amount of any compensation
previously deferred by the Executive, plus any accrued vacation,
in each case to the extent theretofore unpaid.
(c) Termination of Employment Other Than for Good
Reason. If the Executive terminates employment during the
Employment Period other than for Good Reason, Disability or
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death, this Agreement shall terminate without further obligations
by CNW, other than the obligation to pay to the Executive all
Accrued Obligations in a lump sum in cash within 30 days of the
Notice Date.
(d) Termination of Employment for Disability. If
the Executive's employment is terminated by reason of the
Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the
Executive, other than the obligation to pay to the Executive all
Accrued Obligations in a lump sum in cash within 30 days of the
Termination Date. Anything in this Agreement to the contrary
notwithstanding, the Executive shall be entitled after the
Disability Effective Date to receive disability and other
benefits at least equal to those provided under the most
favorable plans, practices, policies and programs relating to
disability applicable to disabled peer executives of CNW and
their families, but in no event shall such plans, practices,
policies and programs provide benefits which in each case are
less favorable, in the aggregate, than the most favorable of
those provided by CNW for the Executive under such plans,
practices, policies or programs in effect at any time during the
90-day period immediately preceding the Effective Date.
(e) Termination of Employment Because of Death. If
the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's
legal representatives under this Agreement, other than the
obligation to pay to the Executive's estate or beneficiary all
Accrued Obligations in a lump sum in cash within 30 days of the
Notice Date. Anything in this Agreement to the contrary
notwithstanding, the Executive's family shall be entitled to
receive benefits at least equal to the most favorable benefits
provided by CNW to the surviving families of peer executives of
CNW under such plans, practices, policies and programs, but in no
event shall such plans, practices, policies or programs provide
benefits which in each case are less favorable, in the aggregate,
than the most favorable of those provided by CNW to the Executive
under such plans, practices, policies or programs in effect at
any time during the 90-day period immediately preceding the
Effective Date.
6. Certain Reduction of Payments by CNW.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment or distribution by CNW to or for the benefit of the
Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise) (a "Payment") would be nondeductible by CNW for
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Federal income tax purposes because of Section 280G of the Code,
then the aggregate present value of amounts payable or
distributable to or for the benefit of the Executive pursuant to
this Agreement (such payments or distributions pursuant to this
Agreement are hereinafter referred to as "Agreement Payments")
shall be reduced to the Reduced Amount. The "Reduced Amount"
shall be an amount expressed in present value which maximizes the
aggregate present value of Agreement Payments without causing any
Payment to be nondeductible by CNW because of Section 280G of the
Code. For purposes of this Section 6, present value shall be
determined in accordance with Section 280G(d)(4) of the Code.
(b) All determinations required to be made under
this Section 6 shall be made by Arthur Andersen (the "Accounting
Firm") which shall provide detailed supporting calculations both
to CNW and the Executive within 15 business days of the Date of
Termination or such earlier time as is requested by CNW and an
opinion to the Executive that he has substantial authority not to
report any Excise Tax on his Federal income tax return with
respect to the Agreement Payments. Any such determination by the
Accounting Firm shall be binding upon CNW and the Executive. The
Executive shall determine which and how much of the Agreement
Payments shall be eliminated or reduced consistent with the
requirements of this Section 6, provided that, if the Executive
does not make such determination within ten business days of the
receipt of the calculations made by the Accounting Firm, CNW
shall elect which and how much of the Agreement Payments shall be
eliminated or reduced consistent with the requirements of this
Section 6 and shall notify the Executive promptly of such
election. Within five business days thereafter, CNW shall pay to
or distribute to or for the benefit of the Executive such amounts
as are then due to the Executive under this Agreement.
(c) As a result of the uncertainty in the
application of Section 280G of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is
possible that Agreement Payments will have been made by CNW which
should not have been made ("Overpayment") or that additional
Agreement Payments which will not have been made by CNW could
have been made ("Underpayment"), in each case, consistent with
the calculations required to be made hereunder. In the event
that the Accounting Firm, based upon the assertion of a
deficiency by the Internal Revenue Service against the Executive
which the Accounting Firm believes has a high probability of
success determines that an Overpayment has been made, any such
Overpayment paid or distributed by CNW to or for the benefit of
the Executive shall be treated for all purposes as a loan ab
initio to the Executive which the Executive shall repay to CNW
together with interest at the applicable federal rate provided
for in Section 7872(f)(2) of the Code; provided, however, that no
such loan shall be deemed to have been made and no amount shall
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be payable by the Executive to CNW if and to the extent such
deemed loan and payment would not either reduce the amount on
which the Executive is subject to tax under Section 1 and
Section 4999 of the Code or generate a refund of such taxes. In
the event that the Accounting Firm, based upon controlling
precedent or other substantial authority, determines that an
Underpayment has occurred, any such Underpayment shall be
promptly paid by CNW to or for the benefit of the Executive
together with interest at the applicable federal rate provided
for in Section 7872(f)(2) of the Code.
7. Non-exclusivity of Rights.
(a) Waiver of Other Severance Rights. If the
Executive receives payments pursuant to Section 5(a) hereof, the
Executive hereby waives the right to receive severance payments
under any other plan, policy or agreement of CNW.
(b) Other Rights. Except as provided in
Section 6(a), nothing in this Agreement shall prevent or limit
the Executive's continuing or future participation in any
benefit, bonus, incentive or other plans, programs, policies or
practices, provided by CNW or any of its affiliated companies and
for which the Executive may qualify, nor shall anything herein
limit or otherwise affect such rights as the Executive may have
under any other agreements with CNW or any of their affiliated
companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan,
practice, policy or program of CNW or any of their affiliated
companies and any other payment or benefit required by law at or
subsequent to the Termination Date shall be payable in accordance
with such plan, practice, policy or program or applicable law
except as explicitly modified by this Agreement.
8. Confidentiality/NonCompetition.
(a) Confidentiality. Executive acknowledges that it
is the policy of the Company and its subsidiaries to maintain as
secret and confidential all valuable and unique information and
techniques acquired, developed or used by the Company and its
subsidiaries relating to their business, operations, employees
and customers, which gives the Company and its subsidiaries a
competitive advantage in the railroad industry and other
businesses in which the Company and its subsidiaries are engaged
("Confidential Information"). Executive recognizes that all such
Confidential Information is the sole and exclusive property of
the Company and its subsidiaries, and that disclosure of
Confidential Information would cause damage to the Company and
its subsidiaries. In consideration of the Company's entering
into this Agreement, Executive agrees that, except as required by
the duties of his employment with the Company and/or its
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subsidiaries, he will never directly or indirectly use, publish,
disseminate or otherwise disclose any Confidential Information
obtained during his employment with the Company and/or its
subsidiaries for so long as such information is valuable and
unique.
(b) Noncompetition/Nonsolicitation.
(i) Executive agrees that, during the period of his
employment with the Company and/or its subsidiaries and, if
Executive's employment is terminated for any reason,
thereafter for a period of one (1) year, Executive will not
at any time directly or indirectly, in any capacity, engage
or participate in, or become employed by or render advisory
or consulting or other services in connection with any
Prohibited Business as defined in Section 8(b)(iv).
(ii) Executive agrees that, during the period of his
employment with the Company and/or its subsidiaries and, if
Executive's employment is terminated for any reason,
thereafter for a period of one (1) year, Executive shall not
make any financial investment, whether in the form of equity
or debt, or own any interest, directly or indirectly, in any
Prohibited Business. Nothing in this Section 8(b)(ii)
shall, however, restrict Executive from making any
investment in any company whose stock is listed on a
national securities exchange or actively traded in the
over-the-counter market; provided that (A) such investment
does not give Executive the right or ability to control or
influence the policy decisions of any Prohibited Business,
and (B) such investment does not create a conflict of
interest between Executive's duties hereunder and
Executive's interest in such investment.
(iii) Executive agrees that, during the period of his
employment with the Company and/or its subsidiaries and, if
Executive's employment is terminated for any reason,
thereafter for a period of one (1) year, Executive shall not
(A) employ any employee of the Company and/or its
subsidiaries or (B) interfere with the Company's or any of
its subsidiaries' relationship with, or endeavor to entice
away from the Company and/or its subsidiaries any person,
firm, corporation, or other business organization who or
which at any time (whether before or after the date of
Executive's termination of employment), was an employee,
customer, vendor or supplier of, or maintained a business
relationship with, any business of the Company and/or its
subsidiaries which was conducted at any time during the
period commencing one year prior to the termination of
employment.
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(iv) For the purpose of this Section 8(b),
"Prohibited Business" shall be defined as any railroad,
freight carrier or other entity and any branch, office or
operation thereof, which is a direct and material competitor
of the Company wherever the Company does business, in the
United States or abroad, and which has established or seeks
to establish contact, in whatever form (including but not
limited to solicitation of sales, or the receipt or
submission of bids) with any entity who is at any time a
client, customer or supplier of the Company (including but
not limited to all subdivisions of the federal government.)
(c) Executive and the Company specifically agree
that, in the event that Executive shall breach his obligations
under this Section 8, the Company and its subsidiaries will
suffer irreparable injury and no adequate remedy for such breach,
and shall be entitled to injunctive relief therefor, and in
particular, without limiting the generality of the foregoing, the
Company shall not be precluded from pursuing any and all remedies
it may have at law or in equity for breach of such obligations.
9. Legal Fees and Other Expenses.
(a) Legal Fees and Expenses. CNW agrees to pay
promptly upon presentation of an invoice from the Executive, to
the full extent permitted by law, all legal fees, including
retainer fees, and expenses which the Executive may reasonably
incur as a result of any contest (regardless of the outcome
thereof) by CNW or others of the validity or enforceability of,
or liability under, any provision of this Agreement or any other
benefit plan, program or policy or any guarantee of performance
thereof (including, but not limited to, legal fees and expenses
as a result of any contest by the Executive about the amount of
any payment pursuant to Section 5 of this Agreement).
(b) Interest. In the event any amount due to the
Executive under this Agreement is not paid within 10 days of
request therefor, the Executive shall be entitled to receive
interest at the highest interest rate applicable to CNW in its
borrowing of funds from any third party during the period of
nonpayment and if such rate is not determinable, or if higher,
then at a rate two percent above the prime commercial lending
rate announced by Citibank, N.A. in effect from time to time
during the period of such nonpayment.
10. Full Settlement. CNW's obligation to make the payments
provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances,
including, without limitation, set-off, counterclaim, recoupment,
defense or other claim, right or action which CNW may have
against the Executive or others. In no event shall the Executive
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be obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement, nor shall the amount of
any payment hereunder be reduced by any compensation earned by
the Executive as result of employment by another employer.
11. Successors.
(a) This Agreement is personal to the Executive and
without the prior written consent of CNW shall not be assignable
by the Executive otherwise than by will or the laws of descent
and distribution. This Agreement shall inure to the benefit of
and be enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and
be binding upon CNW and its successors and assigns.
(c) CNW will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of CNW to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that CNW would be required to
perform it if no such succession had taken place. As used in
this Agreement, "CNW" shall mean the CNW as hereinbefore defined
and any successor to its business and/or assets as aforesaid
which assumes and agrees to perform this Agreement by operation
of law, or otherwise, and CNW and such successor shall be jointly
and severally liable hereunder.
12. Miscellaneous.
(a) If the Executive dies prior to receiving amounts
to which the Executive is entitled hereunder, such amounts shall
be paid in a lump sum payment to the beneficiary designated in
writing by the Executive and if no such beneficiary is
designated, to the Executive's estate.
(b) Benefits payable under this Agreement shall not
be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment,
execution or levy of any kind, either voluntary or involuntary,
prior to actually being received by the Executive, and any such
attempt to dispose of any right to benefits payable hereunder
shall be void.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(d) This Agreement shall not be altered, amended or
modified except by written instrument executed by CNW and
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Executive. A waiver of any term, covenant, agreement or
condition contained in this Agreement shall not be deemed a
waiver of any other term, covenant, agreement or condition, and
any waiver of any default in any such term, covenant, agreement
or condition shall not be deemed a waiver of any later default
thereof or of any other term, covenant, agreement or condition.
(e) All notices and other communications hereunder
shall be in writing and delivered by hand or by first class
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
__________________________
__________________________
__________________________
__________________________
If to CNW:
Chicago and Northwestern
Transportation Company
165 North Canal Street
Chicago, Illinois 60606
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(f) This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same instrument
originals.
(g) This Agreement shall be interpreted and
construed in accordance with the laws of the State of Illinois,
without regard to its choice of law principles. The captions of
this Agreement are not part of the provisions hereof and shall
have no force or effect.
(h) CNW may withhold from any amounts payable under
this Agreement such federal, state or local taxes as shall be
required to be withheld pursuant to any applicable law or
regulation.
(i) The Executive's failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a
waiver of such provision or any other provision thereof.
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<PAGE>
(j) The obligations of CNW under this Agreement
shall be unfunded and unsecured. CNW shall not be required to
segregate any assets that may at any time be required to provide
benefits under this Agreement.
(k) This Agreement contains the entire understanding
of CNW and the Executive with respect to the subject matter
hereof.
IN WITNESS WHEREOF, the Executive has hereunto set his hand
and, pursuant to the authorization from its Board of Directors,
the Company and CNW Railway have caused these presents to be
executed in their name on their behalf, all as of the day and
year first above written.
/s/ Dennis E. Waller
Executive
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY
BY: /s/ Robert Schmiege
CHICAGO AND NORTH WESTERN
RAILWAY COMPANY
BY: /s/ Robert Schmiege
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<PAGE>
Change of Control
Employment Agreement
Among
Chicago and North Western Transportation Company,
Chicago and North Western Railway Company
and
Executive
<PAGE>
TABLE OF CONTENTS
Page
1. Certain Definitions . . . . . . . . . . . . . . . . . . 1
2. Employment Period . . . . . . . . . . . . . . . . . . . 3
3. Terms of Employment . . . . . . . . . . . . . . . . . . 3
4. Termination of Employment . . . . . . . . . . . . . . . 7
5. Obligations of CNW upon Termination . . . . . . . . . . 10
6. Certain Reduction of Payments by CNW . . . . . . . . . . 12
7. Non-exclusivity of Rights . . . . . . . . . . . . . . . 14
8. Confidentiality/NonCompetition . . . . . . . . . . . . . 14
9. Legal Fees and Other Expenses . . . . . . . . . . . . . 16
10. Full Settlement . . . . . . . . . . . . . . . . . . . . 16
11. Successors . . . . . . . . . . . . . . . . . . . . . . . 17
12. Miscellaneous . . . . . . . . . . . . . . . . . . . . . 17
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CHANGE OF CONTROL
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of the __th day of December 1994,
is made by and among CHICAGO AND NORTH WESTERN TRANSPORTATION
COMPANY (the "Company"), a Delaware corporation having its
principal place of business in Chicago, Illinois, CHICAGO AND
NORTH WESTERN RAILWAY COMPANY ("CNW Railway"), (the Company and
CNW Railway collectively referred to herein as "CNW"), and ______
______ (the "Executive"), a resident of .
The Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and
its shareholders to assure that CNW will have the continued
dedication of the Executive, notwithstanding the possibility,
threat, or occurrence of a Change of Control (as defined below)
of the Company. The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the
personal uncertainties and risks created by a pending or
threatened Change of Control, to encourage the Executive's full
attention and dedication to CNW, and to provide the Executive
with compensation and benefits arrangements upon a Change of
Control which ensure that the compensation and benefits
expectations of the Executive will be satisfied and are
competitive with those of other major corporations. This
Agreement is intended to accomplish these objectives.
1. Certain Definitions
(a) The "Effective Date" shall be the first date on
which a Change of Control occurs during the "Change of Control
Period" (as defined in Section 1(b)). Anything in this Agreement
to the contrary notwithstanding, if the Executive's employment
with CNW is terminated prior to the date on which a Change of
Control occurs, and it is reasonably demonstrated that such
termination of employment (i) was at the request of a third party
who has taken steps reasonably calculated to effect the Change of
Control or (ii) otherwise arose in connection with or
anticipation of the Change of Control, then for all purposes of
this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" is the period
commencing on the date hereof and ending on the third anniversary
of such date; provided, however, that commencing on the date one
year after the date hereof, and on each annual anniversary of
such date (such date and each annual anniversary thereof is
hereinafter referred to as a "Renewal Date"), the Change of
Control Period shall be automatically extended so as to terminate
on the third anniversary of such Renewal Date, unless at least
60 days prior to the Renewal Date CNW shall give notice to the
Executive that the Change of Control Period shall not be so
extended.
<PAGE>
(c) "Change of Control". For the purpose of this
Agreement, a "Change of Control" shall mean any of the following
events:
(i) the acquisition by any person or group of
beneficial ownership of 40% or more of either the then
outstanding Stock or the combined voting power of the then
outstanding voting securities of the Company entitled to
vote generally in the election of directors, except that
(A) no such person or group shall be deemed to own
beneficially any securities held by the Company or a
Subsidiary (as defined below) or any employee benefit plan
(or any related trust) of the Company or a Subsidiary, and
(B) no Change of Control shall be deemed to have occurred
solely by reason of any such acquisition by a corporation
with respect to which, after such acquisition, more than 60%
of both the then outstanding common shares of such
corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled
to vote generally in the election of directors are then
beneficially owned, directly or indirectly, by the persons
who were the beneficial owners of the Stock and voting
securities of the Company immediately before such
acquisition in substantially the same proportion as their
ownership, immediately before such acquisition, of the then
outstanding Stock and the combined voting power of the then
outstanding voting securities of the Company entitled to
vote generally in the election of directors, as the case may
be;
(ii) individuals who, as of the date hereof,
constitute the Board (the "Incumbent Directors") cease for
any reason to constitute at least a majority of the Board;
provided that any individual who becomes a director after
the date hereof whose election, or nomination for election
by the Company's stockholders was approved by a vote or
written consent of at least two-thirds of the directors then
comprising the Incumbent Directors shall be considered as
though such individual were an Incumbent Director, but
excluding, for this purpose, any such individual whose
initial assumption of office is in connection with an actual
or threatened election contest relating to the election of
the directors of the Company (as such terms are used in Rule
14a-11 under the Securities Exchange Act of 1934, as amended
("1934 Act")); or
(iii) approval by the stockholders of the Company of
(A) a merger, reorganization or consolidation with respect
to which the individuals and entities who were the
respective beneficial owners of the Stock and voting
securities of the Company immediately before such merger,
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<PAGE>
reorganization or consolidation do not, after such merger,
reorganization or consolidation, beneficially own, directly
or indirectly, more than 60% of, respectively, the then
outstanding common shares and the combined voting power of
the then outstanding voting securities entitled to vote
generally in the election of directors of the corporation
resulting from such merger, reorganization or consolidation,
(B) a liquidation or dissolution of the Company or (C) the
sale or other disposition of all or substantially all of the
assets of CNW.
For purposes of this definition, "person" means such term as
used in Securities Exchange Commission ("SEC") Rule 13d-5(b)
under the 1934 Act; "beneficial owner" means such term as defined
in SEC Rule 13d-3 under the 1934 Act; "group" means such term as
defined in Section 13(d) of the 1934 Act; "Subsidiary" means a
corporation as defined in Section 425(f) of the Internal Revenue
Code of 1986, as amended ("Code") with the Company being treated
as the employer corporation for purposes of this definition of
Subsidiary; and "Stock" means the common stock of the Company,
par value $.01, or any other common stock that the Company may
issue from time to time.
2. Employment Period. CNW hereby agrees to continue the
Executive in its employ, and, subject to Section 4 of the
Agreement, the Executive hereby agrees to remain in the employ of
CNW, for the period commencing on the Effective Date and ending
on the third anniversary of such date (the "Employment Period").
3. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the
Executive's position (including status, offices, titles,
reporting requirements and responsibilities), authority and
duties shall be at least commensurate in all material
respects with the most significant of those held, exercised
and assigned at any time during the 90-day period
immediately preceding the Effective Date, and (B) the
Executive's services shall be performed at the location
where the Executive was employed immediately preceding the
Effective Date or any office or location less than 50 miles
from such location.
(ii) During the Employment Period, and excluding any
periods of vacation, sick leave or disability to which the
Executive is entitled, the Executive agrees to devote the
Executive's full attention and time to the business and
affairs of CNW and, to the extent necessary to discharge the
duties assigned to the Executive hereunder, to use the
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Executive's best efforts to perform faithfully and
efficiently such duties. During the Employment Period, it
shall not be a violation of this Agreement for the Executive
to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and
(C) manage personal investments, so long as such activities
are consistent with the policies of CNW at the Effective
Date and do not significantly interfere with the performance
of the Executive's duties in accordance with this Agreement.
It is expressly understood and agreed that to the extent
that any such activities have been conducted by the
Executive prior to the Effective Date and were consistent
with the policies of CNW at the Effective Date, the
continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent
to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive's duties
hereunder.
(b) Compensation.
(i) Base Salary. During the Employment Period, CNW
Railway shall pay or cause to be paid to the Executive an
annual base salary in cash ("Guaranteed Base Salary"), which
shall be paid in a manner consistent with CNW Railway's
payroll practices immediately preceding the Effective Date
at a rate at least equal to twelve times the highest monthly
base salary paid or payable to the Executive by CNW Railway
in respect of the twelve-month period immediately preceding
the month in which the Effective Date occurs. During the
Employment Period, the Guaranteed Base Salary shall be
reviewed at least annually and shall be increased at any
time and from time to time as shall be substantially
consistent with increases in base salary awarded in the
ordinary course of business to other peer executives of CNW
Railway. Any increase in Guaranteed Base Salary shall not
serve to limit or reduce any other obligation to the
Executive under this Agreement. Guaranteed Base Salary
shall not be reduced after any such increase, and the term
Guaranteed Base Salary as used in this Agreement shall refer
to the Guaranteed Base Salary as so increased.
(ii) Guaranteed Bonus. (A) In addition to Guaranteed
Base Salary, CNW shall pay or cause to be paid to the
Executive a bonus (the "Guaranteed Bonus") for each
Performance Period which ends during the Employment Period.
For purposes of this Agreement, a "Performance Period" means
each period of time designated in accordance with the
Chicago and North Western Holdings Corp. Bonus Plan or any
other bonus arrangement ("Bonus Plan") which is based upon
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<PAGE>
performance and approved by the Board or any duly designated
committee of the Board. The Guaranteed Bonus shall be at
least equal to the product of (I) a percentage equal to the
greatest of (a) the On Plan Percentage (as defined in
Section 3(b)(ii)(B)(I) below), or (b) the amount of the
Historical Bonus Percentage (as defined in Section
3(b)(ii)(B)(II) below), or (c) the Actual Bonus Percentage
(as defined in Section 3(b)(ii)(B)(III) below), multiplied
by (II) the Guaranteed Annual Salary.
(B) For purposes of this Section 3(b)(ii), the following
definitions apply:
(I) "On Plan Percentage" means the percentage
of Guaranteed Base Salary to which the Executive would
have been entitled under any Bonus Plan for the
Performance Period for which the Guaranteed Bonus is
awarded ("Current Performance Period") as if the
performance achieved 100% of performance goals
established pursuant to such Bonus Plan.
(II) "Historical Bonus Percentage" means the
highest Adjusted Bonus Percentage (as defined below) in
the three Performance Periods preceding the Effective
Date (individually referred to herein as a "Prior
Performance Period"). The "Adjusted Bonus Percentage"
for any such Prior Performance Period is equal to the
bonus accrued for such Prior Performance Period,
expressed as a percentage of the annual rate of base
salary earned by the Executive during such Prior
Performance Period, multiplied by the Adjustment
Fraction (as defined below). The "Adjustment Fraction"
is, with respect to each Prior Performance Period, a
fraction, the numerator of which is the number of
months in the Current Performance Period, and the
denominator of which is the number of months in each
Prior Performance Period.
(III) "Actual Bonus Percentage" means the
percentage of the rate of Guaranteed Base Salary for
the Current Performance Period which the Executive
would accrue as a bonus under any Bonus Plan if the
performance during the Current Performance Period were
measured by the actual performance during the Current
Performance Period; provided, however, that for
purposes of calculating the Guaranteed Bonus under
Section 5 hereof, "Actual Bonus Percentage" means the
percentage of the rate of Guaranteed Base Salary for
the Performance Period during which the Termination
Date (as defined below), occurred ("Termination
Performance Period") which the Executive would accrue
as a bonus under any Bonus Plan if the performance
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during such Termination Performance Period were
measured by the actual performance during the
Termination Performance Period prior to the Termination
Date projected to the last day of such Performance
Period.
(iii) Incentive, Savings and Retirement Plans. In
addition to Guaranteed Base Salary and Guaranteed Bonus
payable as hereinabove provided, the Executive shall be
entitled to participate during the Employment Period in all
incentive (including long-term incentives), savings and
retirement plans, practices, policies and programs
applicable to other peer executives of CNW, but in no event
shall such plans, practices, policies and programs provide
the Executive with incentive (including long-term
incentives), savings and retirement benefits which, in each
case, are less favorable, in the aggregate, than the most
favorable of those provided by CNW for the Executive under
such plans, practices, policies and programs as in effect at
any time during the 90-day period immediately preceding the
Effective Date.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the
case may be, shall be eligible for participation in and
shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by CNW (including,
and without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life,
dependent life, accidental death and travel accident
insurance plans and programs) and applicable to other peer
executives of CNW, but in no event shall such plans,
practices, policies and programs provide benefits which in
each case are less favorable, in the aggregate, than the
most favorable of those provided by CNW for the Executive
under such plans, practices, policies and programs as in
effect at any time during the 90-day period immediately
preceding the Effective Date.
(v) Fringe Benefits. During the Employment Period,
the Executive shall be entitled to fringe benefits in
accordance with the most favorable plans, practices,
programs and policies applicable to peer executives of CNW
Railway, but in no event shall such plans, practices,
policies and programs provide fringe benefits which in each
case are less favorable, in the aggregate, than the most
favorable of those provided by CNW Railway for the Executive
under such plans, practices, policies and programs in effect
at any time during the 90-day period immediately preceding
the Effective Date.
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(vi) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement
for all reasonable employment-related expenses incurred by
the Executive upon CNW Railway's receipt of accountings in
accordance with the most favorable policies, practices and
procedures applicable to peer executives of CNW Railway, but
in no event shall such policies, practices and procedures in
each case be less favorable, in the aggregate, than the most
favorable of those provided by CNW Railway for the Executive
under such policies, practices and procedures in effect at
any time during the 90-day period immediately preceding the
Effective Date.
(vii) Office and Support Staff. During the Employment
Period, the Executive shall be entitled to an office or
offices of a size and with furnishings and other
appointments, and to exclusive personal secretarial and
other assistance in accordance with the most favorable
policies, practices and procedures applicable to peer
executives of CNW Railway, but in no event shall such
policies, practices and procedures be less favorable, in the
aggregate, than the most favorable of those provided by CNW
Railway for the Executive under such policies, practices and
procedures in effect at any time during the 90-day period
immediately preceding the Effective Date.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance
with the most favorable plans, practices, policies and
programs applicable to peer executives of CNW Railway, but
in no event shall such plans, practices, policies and
programs provide paid vacation which is less favorable in
the aggregate than the most favorable of those provided by
CNW Railway for the Executive under such plans, practices,
policies and programs in effect at any time during the
90-day period immediately preceding the Effective Date.
4. Termination of Employment.
(a) Death or Disability. The Executive's employment
shall terminate automatically upon the Executive's death or
Disability during the Employment Period. Disability of the
Executive shall be deemed to have occurred on the date on which
the Executive is certified as having incurred a Disability by a
physician selected by CNW or its insurers and acceptable to the
Executive or the Executive's legal representative. If CNW
determines in good faith that the Disability of the Executive has
occurred during the Employment Period, it may give to the
Executive written notice in accordance with Section 11(e) of this
Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with CNW
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<PAGE>
shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), unless
within the 30 days after such receipt, the Executive shall have
returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" means any medically
determinable physical or mental impairment that can be expected
to last for a continuous period of not less than six months, and
that renders the Executive unable to perform the duties required
under this Agreement.
(b) Cause. The Executive's employment may be
terminated during the Employment Period by CNW for Cause.
"Cause" means either of the following:
(i) conviction of the Executive of any felony or
other crime involving dishonesty, or moral turpitude; or
(ii) the Executive's habitual neglect of the
Executive's duties (other than on account of Disability),
except that Cause shall not mean:
(i) bad judgment or negligence other than habitual
neglect of duty;
(ii) any act or omission believed by the Executive in
good faith to have been in or not opposed to the interest of
CNW (without intent of the Executive to gain therefrom,
directly or indirectly, a profit to which the Executive was
not legally entitled);
(iii) any act or omission with respect to which a
determination could properly have been made by the Board
that the Executive met the applicable standard of conduct
for indemnification or reimbursement under the By-Laws of
CNW, any applicable indemnification agreement, or the laws
and regulations under which CNW is governed, in each case in
effect at the time of such act or omission; or
(iv) any act or omission with respect to which notice
of termination of employment of the Executive is given more
than twelve (12) months after the earliest date on which any
member of the Board who is not a party to the act or
omission, knew or should have known of such act or omission.
(c) Good Reason. The Executive's employment may be
terminated during the Employment Period by the Executive for Good
Reason. For purposes of this Agreement, "Good Reason" means any
one of the following events:
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<PAGE>
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles, reporting requirements
or responsibilities), authority or duties as contemplated by
Section 3(a) of this Agreement, or any other action by CNW
which results in a diminution or other material adverse
change in such position, authority or duties, excluding for
this purpose an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied by CNW
promptly after receipt of notice thereof given by the
Executive;
(ii) any failure by CNW to comply with any of the
provisions of Section 3(b) of this Agreement, other than an
isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by CNW promptly
after receipt of notice thereof given by the Executive;
(iii) CNW requiring the Executive to be based at any
office or location other than the location described in
Section 3(a)(i)(B) hereof;
(iv) any other material adverse changes to the terms
and conditions of the Executive's employment;
(v) any purported termination by CNW of the
Executive's employment otherwise than as expressly permitted
by this Agreement, it being understood that any such
purported termination shall not be effective for any other
purpose of this Agreement; or
(vi) any failure by CNW to comply with and satisfy
Section 11(c) of this Agreement.
For purposes of this Section 4(c), any good faith
determination of "Good Reason" made by the Executive shall be
conclusive.
(d) Notice of Termination. Any termination of the
Executive's employment by CNW for Cause or by the Executive for
Good Reason shall be communicated by Notice of Termination (as
defined below) to the other party hereto given in accordance with
Section 11(e) of this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice which
(i) indicates the specific termination provision in this
Agreement relied upon, (ii) sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated and (iii) if the Termination Date (as defined below) is
other than the date of receipt of such Notice of Termination,
specifies the Termination Date. The failure by the Executive to
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set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason shall not waive any
right of the Executive hereunder or preclude the Executive from
asserting such fact or circumstance in enforcing the Executive's
rights hereunder.
(e) Termination Date. "Termination Date" means the
date of receipt of the Notice of Termination or any later date
specified therein (which date shall be not more than fifteen days
after the giving of such notice), as the case may be; provided,
however, that (i) if the Executive's employment is terminated by
CNW other than for Cause or Disability, the Termination Date
shall be the date of receipt of such Notice of Termination and
(ii) if the Executive's employment is terminated by reason of
death or Disability, the Termination Date shall be the date of
death of the Executive or the Disability Effective Date, as the
case may be.
5. Obligations of CNW upon Termination.
(a) Termination of Employment for Good Reason or
Other Than for Cause or Disability. If, during the Employment
Period, CNW shall terminate Executive's employment other than for
Cause or Disability, or if the Executive shall terminate
employment under this Agreement for Good Reason, CNW shall pay to
the Executive, in addition to all vested rights arising from his
employment, as specified in Section 7 hereof, in a lump sum in
cash within three days after the Termination Date the aggregate
of the following amounts (hereinafter, the amounts described in
Section 5(a)(i)(A), (B), and (C) shall be called the "Accrued
Obligations"):
(A) to the extent not theretofore paid, the
Guaranteed Base Salary and any accrued vacation pay
through the Termination Date;
(B) the difference between (I) the product of
(1) the Guaranteed Bonus, multiplied by (2) a fraction,
the numerator of which is the number of days in the
Termination Performance Period which elapsed prior to
the Termination Date, and the denominator of which is
the total number of days in the Termination Performance
Period, and (II) the amount of any Guaranteed Bonus
paid to the Executive with respect to the Termination
Performance Period;
(C) in the case of compensation previously
deferred by the Executive, all amounts previously
deferred (together with any accrued earnings thereon)
and not yet paid by CNW;
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(D) an amount equal to the product of (I)
three (3), multiplied by (II) the sum of (1) the
Guaranteed Base Salary and (2) the Guaranteed Bonus
multiplied by a fraction, the numerator of which is
twelve and the denominator of which is the number of
months in the Termination Performance Period; and
(E) a payment equal to the value of the
Executive's accrued benefit under the Chicago and North
Western Transportation Company Supplemental Pension
Plan (the "Pension Plan") calculated as though the
Executive continued to accrue benefits under the
Pension Plan for a period of three years after the
Termination Date (the "Continuance Period"), reduced by
the value of the Executive's vested accrued benefit
under the Pension Plan as of the Termination Date; and
(F) for the Continuance Period, or such
longer period as any plan, program, practice or policy
may provide, CNW Railway shall continue to provide at
no cost to the Executive, except a cost equal to the
lesser of (I) the cost to the Executive immediately
prior to the Termination Date or (II) the cost to the
Executive immediately prior to the Effective Date, all
welfare benefits (including, but without limitation,
medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental
death and travel accident insurance plans and programs)
to the Executive and/or the Executive's family which
are at least as favorable as the most favorable plans,
practices, programs or policies of CNW Railway
applicable to other peer Executives, but which are in
no event less favorable than the most favorable plans,
practices, programs or policies of CNW Railway
applicable to other peer Executives and their families
during the 90-day period immediately preceding the
Effective Date.
(b) Termination of Employment for Cause. If the
Executive's employment shall be terminated by CNW for Cause
during the Employment Period, this Agreement shall terminate
without further obligations to the Executive, other than the
obligation to pay to the Executive in a lump sum in cash, within
30 days of the Termination Date, the Guaranteed Base Salary
through the Termination Date, plus the amount of any compensation
previously deferred by the Executive, plus any accrued vacation,
in each case to the extent theretofore unpaid.
(c) Termination of Employment Other Than for Good
Reason. If the Executive terminates employment during the
Employment Period other than for Good Reason, Disability or
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death, this Agreement shall terminate without further obligations
by CNW, other than the obligation to pay to the Executive all
Accrued Obligations in a lump sum in cash within 30 days of the
Notice Date.
(d) Termination of Employment for Disability. If
the Executive's employment is terminated by reason of the
Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the
Executive, other than the obligation to pay to the Executive all
Accrued Obligations in a lump sum in cash within 30 days of the
Termination Date. Anything in this Agreement to the contrary
notwithstanding, the Executive shall be entitled after the
Disability Effective Date to receive disability and other
benefits at least equal to those provided under the most
favorable plans, practices, policies and programs relating to
disability applicable to disabled peer executives of CNW and
their families, but in no event shall such plans, practices,
policies and programs provide benefits which in each case are
less favorable, in the aggregate, than the most favorable of
those provided by CNW for the Executive under such plans,
practices, policies or programs in effect at any time during the
90-day period immediately preceding the Effective Date.
(e) Termination of Employment Because of Death. If
the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's
legal representatives under this Agreement, other than the
obligation to pay to the Executive's estate or beneficiary all
Accrued Obligations in a lump sum in cash within 30 days of the
Notice Date. Anything in this Agreement to the contrary
notwithstanding, the Executive's family shall be entitled to
receive benefits at least equal to the most favorable benefits
provided by CNW to the surviving families of peer executives of
CNW under such plans, practices, policies and programs, but in no
event shall such plans, practices, policies or programs provide
benefits which in each case are less favorable, in the aggregate,
than the most favorable of those provided by CNW to the Executive
under such plans, practices, policies or programs in effect at
any time during the 90-day period immediately preceding the
Effective Date.
6. Certain Reduction of Payments by CNW.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment or distribution by CNW to or for the benefit of the
Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise) (a "Payment") would be nondeductible by CNW for
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Federal income tax purposes because of Section 280G of the Code,
then the aggregate present value of amounts payable or
distributable to or for the benefit of the Executive pursuant to
this Agreement (such payments or distributions pursuant to this
Agreement are hereinafter referred to as "Agreement Payments")
shall be reduced to the Reduced Amount. The "Reduced Amount"
shall be an amount expressed in present value which maximizes the
aggregate present value of Agreement Payments without causing any
Payment to be nondeductible by CNW because of Section 280G of the
Code. For purposes of this Section 6, present value shall be
determined in accordance with Section 280G(d)(4) of the Code.
(b) All determinations required to be made under
this Section 6 shall be made by Arthur Andersen (the "Accounting
Firm") which shall provide detailed supporting calculations both
to CNW and the Executive within 15 business days of the Date of
Termination or such earlier time as is requested by CNW and an
opinion to the Executive that he has substantial authority not to
report any Excise Tax on his Federal income tax return with
respect to the Agreement Payments. Any such determination by the
Accounting Firm shall be binding upon CNW and the Executive. The
Executive shall determine which and how much of the Agreement
Payments shall be eliminated or reduced consistent with the
requirements of this Section 6, provided that, if the Executive
does not make such determination within ten business days of the
receipt of the calculations made by the Accounting Firm, CNW
shall elect which and how much of the Agreement Payments shall be
eliminated or reduced consistent with the requirements of this
Section 6 and shall notify the Executive promptly of such
election. Within five business days thereafter, CNW shall pay to
or distribute to or for the benefit of the Executive such amounts
as are then due to the Executive under this Agreement.
(c) As a result of the uncertainty in the
application of Section 280G of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is
possible that Agreement Payments will have been made by CNW which
should not have been made ("Overpayment") or that additional
Agreement Payments which will not have been made by CNW could
have been made ("Underpayment"), in each case, consistent with
the calculations required to be made hereunder. In the event
that the Accounting Firm, based upon the assertion of a
deficiency by the Internal Revenue Service against the Executive
which the Accounting Firm believes has a high probability of
success determines that an Overpayment has been made, any such
Overpayment paid or distributed by CNW to or for the benefit of
the Executive shall be treated for all purposes as a loan ab
initio to the Executive which the Executive shall repay to CNW
together with interest at the applicable federal rate provided
for in Section 7872(f)(2) of the Code; provided, however, that no
such loan shall be deemed to have been made and no amount shall
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be payable by the Executive to CNW if and to the extent such
deemed loan and payment would not either reduce the amount on
which the Executive is subject to tax under Section 1 and
Section 4999 of the Code or generate a refund of such taxes. In
the event that the Accounting Firm, based upon controlling
precedent or other substantial authority, determines that an
Underpayment has occurred, any such Underpayment shall be
promptly paid by CNW to or for the benefit of the Executive
together with interest at the applicable federal rate provided
for in Section 7872(f)(2) of the Code.
7. Non-exclusivity of Rights.
(a) Waiver of Other Severance Rights. If the
Executive receives payments pursuant to Section 5(a) hereof, the
Executive hereby waives the right to receive severance payments
under any other plan, policy or agreement of CNW.
(b) Other Rights. Except as provided in
Section 6(a), nothing in this Agreement shall prevent or limit
the Executive's continuing or future participation in any
benefit, bonus, incentive or other plans, programs, policies or
practices, provided by CNW or any of its affiliated companies and
for which the Executive may qualify, nor shall anything herein
limit or otherwise affect such rights as the Executive may have
under any other agreements with CNW or any of their affiliated
companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan,
practice, policy or program of CNW or any of their affiliated
companies and any other payment or benefit required by law at or
subsequent to the Termination Date shall be payable in accordance
with such plan, practice, policy or program or applicable law
except as explicitly modified by this Agreement.
8. Confidentiality/NonCompetition.
(a) Confidentiality. Executive acknowledges that it
is the policy of the Company and its subsidiaries to maintain as
secret and confidential all valuable and unique information and
techniques acquired, developed or used by the Company and its
subsidiaries relating to their business, operations, employees
and customers, which gives the Company and its subsidiaries a
competitive advantage in the railroad industry and other
businesses in which the Company and its subsidiaries are engaged
("Confidential Information"). Executive recognizes that all such
Confidential Information is the sole and exclusive property of
the Company and its subsidiaries, and that disclosure of
Confidential Information would cause damage to the Company and
its subsidiaries. In consideration of the Company's entering
into this Agreement, Executive agrees that, except as required by
the duties of his employment with the Company and/or its
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subsidiaries, he will never directly or indirectly use, publish,
disseminate or otherwise disclose any Confidential Information
obtained during his employment with the Company and/or its
subsidiaries for so long as such information is valuable and
unique.
(b) Noncompetition/Nonsolicitation.
(i) Executive agrees that, during the period of his
employment with the Company and/or its subsidiaries and, if
Executive's employment is terminated for any reason,
thereafter for a period of one (1) year, Executive will not
at any time directly or indirectly, in any capacity, engage
or participate in, or become employed by or render advisory
or consulting or other services in connection with any
Prohibited Business as defined in Section 8(b)(iv).
(ii) Executive agrees that, during the period of his
employment with the Company and/or its subsidiaries and, if
Executive's employment is terminated for any reason,
thereafter for a period of one (1) year, Executive shall not
make any financial investment, whether in the form of equity
or debt, or own any interest, directly or indirectly, in any
Prohibited Business. Nothing in this Section 8(b)(ii)
shall, however, restrict Executive from making any
investment in any company whose stock is listed on a
national securities exchange or actively traded in the
over-the-counter market; provided that (A) such investment
does not give Executive the right or ability to control or
influence the policy decisions of any Prohibited Business,
and (B) such investment does not create a conflict of
interest between Executive's duties hereunder and
Executive's interest in such investment.
(iii) Executive agrees that, during the period of his
employment with the Company and/or its subsidiaries and, if
Executive's employment is terminated for any reason,
thereafter for a period of one (1) year, Executive shall not
(A) employ any employee of the Company and/or its
subsidiaries or (B) interfere with the Company's or any of
its subsidiaries' relationship with, or endeavor to entice
away from the Company and/or its subsidiaries any person,
firm, corporation, or other business organization who or
which at any time (whether before or after the date of
Executive's termination of employment), was an employee,
customer, vendor or supplier of, or maintained a business
relationship with, any business of the Company and/or its
subsidiaries which was conducted at any time during the
period commencing one year prior to the termination of
employment.
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<PAGE>
(iv) For the purpose of this Section 8(b),
"Prohibited Business" shall be defined as any railroad,
freight carrier or other entity and any branch, office or
operation thereof, which is a direct and material competitor
of the Company wherever the Company does business, in the
United States or abroad, and which has established or seeks
to establish contact, in whatever form (including but not
limited to solicitation of sales, or the receipt or
submission of bids) with any entity who is at any time a
client, customer or supplier of the Company (including but
not limited to all subdivisions of the federal government.)
(c) Executive and the Company specifically agree
that, in the event that Executive shall breach his obligations
under this Section 8, the Company and its subsidiaries will
suffer irreparable injury and no adequate remedy for such breach,
and shall be entitled to injunctive relief therefor, and in
particular, without limiting the generality of the foregoing, the
Company shall not be precluded from pursuing any and all remedies
it may have at law or in equity for breach of such obligations.
9. Legal Fees and Other Expenses.
(a) Legal Fees and Expenses. CNW agrees to pay
promptly upon presentation of an invoice from the Executive, to
the full extent permitted by law, all legal fees, including
retainer fees, and expenses which the Executive may reasonably
incur as a result of any contest (regardless of the outcome
thereof) by CNW or others of the validity or enforceability of,
or liability under, any provision of this Agreement or any other
benefit plan, program or policy or any guarantee of performance
thereof (including, but not limited to, legal fees and expenses
as a result of any contest by the Executive about the amount of
any payment pursuant to Section 5 of this Agreement).
(b) Interest. In the event any amount due to the
Executive under this Agreement is not paid within 10 days of
request therefor, the Executive shall be entitled to receive
interest at the highest interest rate applicable to CNW in its
borrowing of funds from any third party during the period of
nonpayment and if such rate is not determinable, or if higher,
then at a rate two percent above the prime commercial lending
rate announced by Citibank, N.A. in effect from time to time
during the period of such nonpayment.
10. Full Settlement. CNW's obligation to make the payments
provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances,
including, without limitation, set-off, counterclaim, recoupment,
defense or other claim, right or action which CNW may have
against the Executive or others. In no event shall the Executive
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be obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement, nor shall the amount of
any payment hereunder be reduced by any compensation earned by
the Executive as result of employment by another employer.
11. Successors.
(a) This Agreement is personal to the Executive and
without the prior written consent of CNW shall not be assignable
by the Executive otherwise than by will or the laws of descent
and distribution. This Agreement shall inure to the benefit of
and be enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and
be binding upon CNW and its successors and assigns.
(c) CNW will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of CNW to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that CNW would be required to
perform it if no such succession had taken place. As used in
this Agreement, "CNW" shall mean the CNW as hereinbefore defined
and any successor to its business and/or assets as aforesaid
which assumes and agrees to perform this Agreement by operation
of law, or otherwise, and CNW and such successor shall be jointly
and severally liable hereunder.
12. Miscellaneous.
(a) If the Executive dies prior to receiving amounts
to which the Executive is entitled hereunder, such amounts shall
be paid in a lump sum payment to the beneficiary designated in
writing by the Executive and if no such beneficiary is
designated, to the Executive's estate.
(b) Benefits payable under this Agreement shall not
be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment,
execution or levy of any kind, either voluntary or involuntary,
prior to actually being received by the Executive, and any such
attempt to dispose of any right to benefits payable hereunder
shall be void.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(d) This Agreement shall not be altered, amended or
modified except by written instrument executed by CNW and
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Executive. A waiver of any term, covenant, agreement or
condition contained in this Agreement shall not be deemed a
waiver of any other term, covenant, agreement or condition, and
any waiver of any default in any such term, covenant, agreement
or condition shall not be deemed a waiver of any later default
thereof or of any other term, covenant, agreement or condition.
(e) All notices and other communications hereunder
shall be in writing and delivered by hand or by first class
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
__________________________
__________________________
__________________________
__________________________
If to CNW:
Chicago and Northwestern
Transportation Company
165 North Canal Street
Chicago, Illinois 60606
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(f) This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same instrument
originals.
(g) This Agreement shall be interpreted and
construed in accordance with the laws of the State of Illinois,
without regard to its choice of law principles. The captions of
this Agreement are not part of the provisions hereof and shall
have no force or effect.
(h) CNW may withhold from any amounts payable under
this Agreement such federal, state or local taxes as shall be
required to be withheld pursuant to any applicable law or
regulation.
(i) The Executive's failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a
waiver of such provision or any other provision thereof.
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(j) The obligations of CNW under this Agreement
shall be unfunded and unsecured. CNW shall not be required to
segregate any assets that may at any time be required to provide
benefits under this Agreement.
(k) This Agreement contains the entire understanding
of CNW and the Executive with respect to the subject matter
hereof.
IN WITNESS WHEREOF, the Executive has hereunto set his hand
and, pursuant to the authorization from its Board of Directors,
the Company and CNW Railway have caused these presents to be
executed in their name on their behalf, all as of the day and
year first above written.
______________________________
Executive
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY
BY: _________________________
CHICAGO AND NORTH WESTERN
RAILWAY COMPANY
BY: _________________________
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AGREEMENT AND PLAN OF MERGER
by and among
UNION PACIFIC CORPORATION,
UP RAIL, INC.
and
CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY
dated as of
March 16, 1995
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I THE OFFER AND MERGER . . . . . . . . . . 1
Section 1.1 The Offer . . . . . . . . . . . . . . . . 1
Section 1.2 Company Actions . . . . . . . . . . . . . 3
Section 1.3 Directors . . . . . . . . . . . . . . . . 4
Section 1.4 The Merger . . . . . . . . . . . . . . . 6
Section 1.5 Effective Time . . . . . . . . . . . . . 7
Section 1.6 Closing . . . . . . . . . . . . . . . . . 7
Section 1.7 Directors and Officers of the
Surviving Corporation . . . . . . . 7
Section 1.8 Stockholders' Meeting . . . . . . . . . . 7
Section 1.9 Merger Without Meeting of
Stockholders . . . . . . . . . . . . 8
ARTICLE II CONVERSION OF SHARES . . . . . . . . . . 9
Section 2.1 Conversion of Capital Stock . . . . . . . 9
Section 2.2 Exchange of Certificates . . . . . . . . 9
Section 2.3 Company Option Plans and
Agreements . . . . . . . . . . . . . 10
Section 2.4 No Dissenter's Rights . . . . . . . . . . 12
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF THE COMPANY . . . . . . . . . . . 12
Section 3.1 Organization . . . . . . . . . . . . . . 12
Section 3.2 Capitalization . . . . . . . . . . . . . 13
Section 3.3 Corporate Authorization;
Validity of Agreement;
Company Action . . . . . . . . . . . 15
Section 3.4 Consents and Approvals; No
Violations . . . . . . . . . . . . . 16
Section 3.5 SEC Reports and Financial
Statements . . . . . . . . . . . . . 17
Section 3.6 Absence of Certain Changes . . . . . . . 17
Section 3.7 Information in Proxy
Statement . . . . . . . . . . . . . . . . 18
Section 3.8 Employee Benefit Plans; ERISA . . . . . . 18
Section 3.9 Litigation; Compliance with
Law . . . . . . . . . . . . . . . . 20
Section 3.10 Taxes . . . . . . . . . . . . . . . . . . 21
Section 3.11 Environmental Matters . . . . . . . . . . 21
Section 3.12 Opinion of Financial Advisors . . . . . . 22
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER . . . . 22
Section 4.1 Organization . . . . . . . . . . . . . . 22
i
<PAGE>
Page
Section 4.2 Authorization; Validity of
Agreement; Necessary Action . . . . 23
Section 4.3 Consents and Approvals;
No Violations . . . . . . . . . . . 23
Section 4.4 Information in Proxy
Statement; Schedule 14D-9 . . . . . 24
Section 4.5 Financing . . . . . . . . . . . . . . . . 24
ARTICLE V COVENANTS . . . . . . . . . . . . . . . . 24
Section 5.1 Interim Operations of the
Company . . . . . . . . . . . . . . 24
Section 5.2 Access to Information . . . . . . . . . . 27
Section 5.3 Consents and Approvals . . . . . . . . . 27
Section 5.4 Employee Benefits . . . . . . . . . . . . 28
Section 5.5 No Solicitation . . . . . . . . . . . . . 31
Section 5.6 Additional Agreements . . . . . . . . . . 33
Section 5.7 Publicity . . . . . . . . . . . . . . . . 33
Section 5.8 Notification of Certain
Matters . . . . . . . . . . . . . . 33
Section 5.9 Directors' and Officers'
Insurance and Indemnification . . . 34
Section 5.10 Conversion of Non-Voting
Common Stock . . . . . . . . . . . . 35
Section 5.11 ICC Determination . . . . . . . . . . . . 36
ARTICLE VI CONDITIONS . . . . . . . . . . . . . . . 36
Section 6.1 Conditions to Each Party's
Obligation To Effect the Merger . . 36
Section 6.2 Conditions to Parent's
Obligation To Effect the Merger . . 37
ARTICLE VII TERMINATION . . . . . . . . . . . . . . . 37
Section 7.1 Termination . . . . . . . . . . . . . . . 37
Section 7.2 Effect of Termination . . . . . . . . . . 39
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . 40
Section 8.1 Fees and Expenses . . . . . . . . . . . . 40
Section 8.2 Finders' Fees . . . . . . . . . . . . . . 40
Section 8.3 Amendment and Modification . . . . . . . 41
Section 8.4 Nonsurvival of Representations
and Warranties . . . . . . . . . . . 41
Section 8.5 Notices . . . . . . . . . . . . . . . . . 41
Section 8.6 Interpretation . . . . . . . . . . . . . 42
Section 8.7 Counterparts . . . . . . . . . . . . . . 42
ii
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Page
Section 8.8 Entire Agreement; No Third
Party Beneficiaries;
Rights of Ownership . . . . . . . . 43
Section 8.9 Severability . . . . . . . . . . . . . . 43
Section 8.10 Governing Law . . . . . . . . . . . . . . 43
Section 8.11 Assignment . . . . . . . . . . . . . . . 43
CONDITIONS TO THE TENDER OFFER . . . . . . . . . . . . . Annex A
iii
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 16,
1995, by and among Union Pacific Corporation, a Utah corporation
("Parent"), UP Rail, Inc., a Utah corporation and an indirect,
wholly owned subsidiary of Parent (the "Purchaser"), and Chicago
and North Western Transportation Company, a Delaware corporation
(the "Company").
WHEREAS, the Boards of Directors of Parent, the
Purchaser and the Company have approved, and deem it advisable
and in the best interests of their respective shareholders to
consummate, the acquisition of the Company by Parent upon the
terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and
the respective representations, warranties, covenants and
agreements set forth herein, the parties hereto agree as follows:
ARTICLE I
THE OFFER AND MERGER
Section 1.1 The Offer. (a) As promptly as
practicable (but in no event later than five business days after
the public announcement of the execution hereof), the Purchaser
shall commence (within the meaning of Rule 14d-2 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
an offer (the "Offer") to purchase for cash all of the issued and
outstanding shares of Common Stock, par value $.01 per share
(referred to herein as either the "Shares" or "Company Common
Stock"), of the Company at a price of $35.00 per Share, net to
the seller in cash (such price, or such higher price per Share as
may be paid in the Offer, being referred to herein as the "Offer
Price"), subject to there being validly tendered and not
withdrawn prior to the expiration of the Offer, that number of
Shares which, together with the shares of Non-Voting Common
Stock, par value $.01 per Share (the "Non-Voting Shares"), of the
Company beneficially owned by Parent or the Purchaser (assuming
conversion of such Non-Voting Shares into Shares), represent at
least a majority of the Shares outstanding on a fully diluted
basis (assuming conversion of the Non-Voting Shares into Shares)
(the "Minimum Condition") and to the other conditions set forth
in Annex A hereto. The Purchaser shall, on the terms and subject
to the prior satisfaction or waiver (except that the Minimum
Condition may not be waived) of the conditions of the Offer,
accept for payment and pay for Shares tendered as soon as
practicable after it is permitted to do so under the Exchange
Act. The obligations of the Purchaser to commence the Offer and
to accept for payment and to pay for any Shares validly tendered
on or prior to the expiration of the Offer and not withdrawn
shall be subject only to the Minimum Condition and the other
conditions set forth in Annex A hereto. The Offer shall be made
<PAGE>
by means of an offer to purchase (the "Offer to Purchase")
containing the terms set forth in this Agreement, the Minimum
Condition and the other conditions set forth in Annex A hereto.
Without the written consent of the Company (such consent to be
authorized by the Board of Directors of the Company or a duly
authorized committee thereof), the Purchaser shall not amend or
waive the Minimum Condition and shall not decrease the Offer
Price or decrease the number of Shares sought, or amend any other
condition of the Offer in any manner adverse to the holders of
the Shares, provided, however, that if on the initial scheduled
expiration date of the Offer (as it may be extended), all
conditions to the Offer shall not have been satisfied or waived,
the Offer may be extended from time to time until June 30, 1995
without the consent of the Company. In addition, the Offer Price
may be increased and the Offer may be extended to the extent
required by law in connection with such increase in each case
without the consent of the Company.
(b) As soon as practicable on the date the Offer
is commenced, Parent and the Purchaser shall file with the United
States Securities and Exchange Commission (the "SEC") (i) a
Tender Offer Statement on Schedule 14D-1 with respect to the
Offer (together with all amendments and supplements thereto and
including the exhibits thereto, the "Schedule 14D-1") which will
include, as exhibits, the Offer to Purchase and a form of letter
of transmittal and summary advertisement (collectively, together
with any amendments and supplements thereto, the "Offer
Documents"), and (ii) a Rule 13e-3 Transaction Statement on
Schedule 13E-3 (together with any supplements or amendments
thereto, the "Schedule 13E-3") with respect to the Offer. Parent
and the Purchaser represent that the Offer Documents and the
Schedule 13E-3 will comply in all material respects with the
provisions of applicable federal securities laws and, on the date
filed with the SEC and on the date first published, sent or given
to the Company's stockholders, shall not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading, except that no representation is
made by Parent or the Purchaser with respect to information
supplied by the Company in writing for inclusion in the Offer
Documents or the Schedule 13E-3. Each of Parent and the Purchas-
er further agrees to take all steps necessary to cause the Offer
Documents and the Schedule 13E-3 to be filed with the SEC and to
be disseminated to holders of Shares, in each case as and to the
extent required by applicable federal securities laws. Each of
Parent and the Purchaser, on the one hand, and the Company, on
the other hand, agrees promptly to correct any information
provided by it for use in the Offer Documents and/or the Schedule
13E-3 if and to the extent that it shall have become false and
misleading in any material respect, and Parent and the Purchaser
further agree to take all steps necessary to cause the Offer
2
<PAGE>
Documents and/or the Schedule 13E-3, as the case may be, as so
corrected to be filed with the SEC and to be disseminated to
holders of Shares, in each case as and to the extent required by
applicable federal securities laws. The Company and its counsel
shall be given the opportunity to review the Schedule 14D-1 and
the Schedule 13E-3 before they are filed with the SEC. In
addition, Parent and the Purchaser agree to provide the Company
and its counsel in writing with any comments Parent, the
Purchaser or their counsel may receive from time to time from the
SEC or its staff with respect to the Offer Documents or the
Schedule 13E-3 promptly after the receipt of such comments.
Section 1.2 Company Actions.
(a) The Company hereby approves of and consents
to the Offer and represents that the Board of Directors, at a
meeting duly called and held, has unanimously (with Richard K.
Davidson absent and not voting) (i) determined that each of the
Offer and the Merger (as defined in Section 1.4) is fair to and
in the best interests of the Company's stockholders (other than
Parent and the Purchaser), (ii) approved this Agreement and the
transactions contemplated hereby, including the Offer and the
Merger (collectively, the "Transactions"), (iii) resolved to
recommend that the stockholders of the Company accept the Offer,
tender their Shares thereunder to the Purchaser and approve and
adopt this Agreement and the Merger; provided, however, that such
recommendation may be withdrawn, modified or amended only to the
extent that the Board of Directors of the Company determines,
based on an opinion of outside legal counsel to the Company, that
the failure to take such action would likely result in a breach
of the Board of Directors' fiduciary duties under applicable
laws; and (iv) to the extent required, approved this Agreement,
the Offer, the Merger, the Company Stock Option Agreement (as
defined in Section 1.9) and the transactions contemplated hereby
and thereby for purposes of Section 203 of the Delaware General
Corporation Law ("DGCL"). The Company further represents that
The Blackstone Group L.P. ("Blackstone") has delivered to the
Board of Directors of the Company its opinion that 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.
(b) Concurrently with the commencement of the
Offer, the Company shall file with the SEC a Solici-
tation/Recommendation Statement on Schedule 14D-9 (together with
all amendments and supplements thereto and including the exhibits
thereto, the "Schedule 14D-9") which shall contain the
recommendation referred to in clauses (i), (ii) and (iii) of
Section 1.2(a) hereof and will join in the filing of the Schedule
13E-3. The Company represents that the Schedule 14D-9 and the
Schedule 13E-3 will comply in all material respects with the
provisions of applicable federal securities laws and, on the date
3
<PAGE>
filed with the SEC and on the date first published, sent or given
to the Company's stockholders, shall not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading, except that no representation is
made by the Company with respect to information supplied by
Parent or the Purchaser for inclusion in the Schedule 14D-9 or
the Schedule 13E-3. The Company further agrees to take all steps
necessary to cause the Schedule 14D-9 and the Schedule 13E-3 to
be filed with the SEC and to be disseminated to holders of
Shares, in each case as and to the extent required by applicable
federal securities laws. Each of the Company, on the one hand,
and Parent and the Purchaser, on the other hand, agrees promptly
to correct any information provided by it for use in the Schedule
14D-9 and the Schedule 13E-3 if and to the extent that it shall
have become false and misleading in any material respect and the
Company further agrees to take all steps necessary to cause the
Schedule 14D-9 and the Schedule 13E-3 as so corrected to be filed
with the SEC and to be disseminated to holders of the Shares, in
each case as and to the extent required by applicable federal
securities laws. Parent and its counsel shall be given the
opportunity to review the Schedule 14D-9 and the Schedule 13E-3
before it is filed with the SEC. In addition, the Company agrees
to provide Parent, the Purchaser and their counsel in writing
with any comments the Company or its counsel may receive from
time to time from the SEC or its staff with respect to the
Schedule 14D-9 and the Schedule 13E-3 promptly after the receipt
of such comments.
(c) In connection with the Offer, the Company
will promptly furnish or cause to be furnished to the Purchaser
mailing labels, security position listings and any available
listing or computer file containing the names and addresses of
the record holders of the Shares as of a recent date, and shall
furnish the Purchaser with such information and assistance as the
Purchaser or its agents may reasonably request in communicating
the Offer to the stockholders of the Company.
Section 1.3 Directors.
(a) Promptly upon the purchase of and payment for
any Shares by the Purchaser or any other subsidiary of Parent
pursuant to the Offer which, together with the Non-Voting Shares,
represents at least a majority of the outstanding shares of
Company Common Stock (on a fully diluted basis and assuming
conversion of the Non-Voting Shares into Shares), Parent shall be
entitled to designate such number of directors, rounded up to the
next whole number, on the Board of Directors of the Company as is
equal to the product of the total number of directors on such
Board (giving effect to the existing representatives of Parent
serving on the Board of Directors, including representatives
4
<PAGE>
which Parent has the right to designate under the 1993 Agreement
(as defined in Section 3.2), and the directors designated by
Parent pursuant to this sentence) multiplied by the ratio of the
aggregate number of Shares and Non-Voting Shares (if any)
beneficially owned by the Purchaser, Parent and any of their
affiliates to the total number of Shares and Non-Voting Shares
(if any) then outstanding. Promptly after consummation of the
Offer, the Company shall, upon request of the Purchaser, use its
best efforts promptly either to increase the size of its Board of
Directors or, at the Company's election, secure the resignations
of such number of its incumbent directors as is necessary to
enable Parent's designees to be so elected or appointed to the
Company's Board, and shall cause Parent's designees to be so
elected or appointed. At such time, the Company shall also cause
persons designated by Parent to constitute the same percentage
(rounded up to the next whole number) as is on the Company's
Board of Directors of (i) each committee of the Company's Board
of Directors, (ii) each board of directors (or similar body) of
each Subsidiary (as defined in Section 3.1) of the Company and
(iii) each committee (or similar body) of each such board, in
each case only to the extent permitted by applicable law or the
rules of any stock exchange on which the Company Common Stock is
listed. Notwithstanding the foregoing, until the Effective Time
(as defined in Section 1.5 hereof), the Company and Parent shall
use all reasonable efforts to retain as members of its Board of
Directors at least three (3) directors who are directors of the
Company on the date hereof and are not representatives of Parent
(the "Company Directors"); provided, that subsequent to the
purchase of and payment for Shares pursuant to the Offer, Parent
shall always have its designees represent at least a majority of
the entire Board of Directors. As used in this Agreement, the
term "Company Directors" shall initially mean each of Messrs.
James R. Thompson, Samuel K. Skinner and Harold A. Poling;
provided that in the event that any of such initial directors
resigns or otherwise ceases to be a director for any reason, then
the other Company Directors shall have the right, by majority
vote, to designate a replacement for such directors (and such
replacement shall be a "Company Director"). If for any reason at
any time prior to the Effective Time no Company Directors then
remain, the other directors shall use reasonable best efforts to
designate three persons to be the Company Directors, none of whom
shall be directors, officers, employees or affiliates of Parent
or the Purchaser.
(b) The Company's obligations under Section 1.3(a)
shall be subject to Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder. The Company shall promptly take
all actions required pursuant to such Section 14(f) and Rule
14f-1 in order to fulfill its obligations under this Section
1.3(a), including mailing to stockholders as part of the Schedule
14D-9 the information required by such Section 14(f) and Rule
14f-1, as is necessary to enable Parent's designees to be elected
5
<PAGE>
to the Company's Board of Directors. Parent or the Purchaser
will supply the Company any information with respect to either of
them and their nominees, officers, directors and affiliates
required by such Section 14(f) and Rule 14f-1. The provisions of
this Section 1.3(a) are in addition to and shall not limit any
rights which the Purchaser, Parent or any of their affiliates may
have as a holder or beneficial owner of Shares or Non-Voting
Shares as a matter of law with respect to the election of
directors or otherwise (except that, as provided above, the
number of directors that Parent shall have the right to designate
pursuant to this Section 1.3 shall include the representatives
which Parent has the right to designate under the 1993
Agreement).
(c) The concurrence of a majority of the Company
Directors shall be required for any amendment or termination of
this Agreement by the Company, any waiver of any of the Company's
rights hereunder or otherwise pursuant to Section 8.3 hereof, any
extension of the time for performance of Parent's or the
Purchaser's obligations or other acts hereunder, or any other
action taken by the Company's Board of Directors in connection
with this Agreement (including actions to enforce this
Agreement); provided, that if there shall be no such directors
notwithstanding the reasonable best efforts of the other
directors to appoint Company Directors, such actions may be
effected by majority vote of the entire Board of Directors of the
Company.
Section 1.4 The Merger. Subject to the terms and
conditions of this Agreement, at the Effective Time (as defined
in Section 1.5 hereof), the Company and the Purchaser shall
consummate a merger (the "Merger") pursuant to which (a) the
Purchaser shall be merged with and into the Company and the
separate corporate existence of the Purchaser shall thereupon
cease, (b) the Company shall be the successor or surviving
corporation in the Merger and shall continue to be governed by
the laws of the State of Delaware, and (c) the separate corporate
existence of the Company with all its rights, privileges,
immunities, powers and franchises shall continue unaffected by
the Merger. Pursuant to the Merger, (x) the Restated Certificate
of Incorporation of the Company, as in effect immediately prior
to the Effective Time, shall be the Certificate of Incorporation
of the Surviving Corporation (as defined below) until thereafter
amended as provided by law and such Restated Certificate of
Incorporation, and (y) the By-laws of the Purchaser, as in effect
immediately prior to the Effective Time, shall be the By-laws of
the Surviving Corporation until thereafter amended as provided by
law, the Restated Certificate of Incorporation and such By-laws.
The corporation surviving the Merger is sometimes hereinafter
referred to as the "Surviving Corporation." The Merger shall
have the effects set forth in the DGCL and the Utah Business
Corporation Act ("UBCA").
6
<PAGE>
Section 1.5 Effective Time. Parent, the Purchaser and
the Company will cause appropriate Certificates of Merger or, if
applicable, Certificates of Ownership and Merger (the
"Certificates of Merger") to be executed and filed on the date of
the Closing (as defined in Section 1.6) (or on such other date as
Parent and the Company may agree) with the Secretary of State of
the State of Delaware (the "Secretary of State") as provided in
the DGCL and with the Division of Corporations and Commercial
Code of the State of Utah (the "Division") as provided in the
UBCA. The Merger shall become effective on the date on which the
Certificates of Merger have been duly filed with the Secretary of
State and the Division or such time as is agreed upon by the
parties and specified in the Certificates of Merger, and such
time is hereinafter referred to as the "Effective Time."
Section 1.6 Closing. The closing of the Merger (the
"Closing") will take place at 10:00 a.m., New York time, on a
date to be specified by the parties, which shall be no later than
the first business day after satisfaction or waiver of all of the
conditions set forth in Article VI hereof (the "Closing Date"),
at the offices of Skadden, Arps, Slate, Meagher & Flom, 919 Third
Avenue, New York, New York 10022, unless another date or place
is agreed to in writing by the parties hereto.
Section 1.7 Directors and Officers of the Surviving
Corporation. The directors and officers of the Purchaser at the
Effective Time shall, from and after the Effective Time, be the
directors and officers, respectively, of the Surviving Corpora-
tion until their successors shall have been duly elected or
appointed or qualified or until their earlier death, resignation
or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and By-laws.
Section 1.8 Stockholders' Meeting.
(a) If required by applicable law in order to
consummate the Merger, the Company, acting through its Board of
Directors, shall, in accordance with applicable law:
(i) duly call, give notice of, convene and
hold a special meeting of its stockholders (the "Special
Meeting") as soon as practicable following the acceptance
for payment and purchase of Shares by the Purchaser pursuant
to the Offer for the purpose of considering and taking
action upon this Agreement;
(ii) prepare and file with the SEC a
preliminary proxy or information statement relating to the
Merger and this Agreement and use its best efforts (x) to
obtain and furnish the information required to be included
by the SEC in the Proxy Statement (as hereinafter defined)
and, after consultation with Parent, to respond promptly to
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<PAGE>
any comments made by the SEC with respect to the preliminary
proxy or information statement and cause a definitive proxy
or information statement (the "Proxy Statement") to be
mailed to its stockholders and (y) to obtain the necessary
approvals of the Merger and this Agreement by its
stockholders; and
(iii) subject to the fiduciary obligations
of the Board under applicable law as advised by independent
counsel, include in the Proxy Statement the recommendation
of the Board that stockholders of the Company vote in favor
of the approval of the Merger and the adoption of this
Agreement.
(b) Not later than promptly following the
consummation of the Offer and receipt of the ICC Final Approval
(as defined in Section 3.4 hereof), Parent will convert or cause
to be converted all of its Non-Voting Shares into Shares. Parent
agrees that it will vote, or cause to be voted, all of the Shares
then owned by it, the Purchaser or any of its other subsidiaries
and affiliates in favor of the approval of the Merger and the
adoption of this Agreement.
Section 1.9 Merger Without Meeting of Stockholders.
Notwithstanding Section 1.8 hereof, in the event that Parent, the
Purchaser or any permitted assignee of Purchaser shall acquire at
least 90% of the outstanding shares of the capital stock of the
Company, pursuant to the Offer, the Company Stock Option
Agreement (as defined below), the conversion of Non-Voting Shares
into Shares or, subsequent to consummation of the Offer, by any
other means, the parties hereto agree, at the request of Parent
and subject to Article VI hereof, to take all necessary and
appropriate action to cause the Merger to become effective as
soon as practicable after such acquisition, without a meeting of
stockholders of the Company, in accordance with Section 253 of
the DGCL and Sections 1104 and 1107 of the UBCA. In connection
therewith, Parent and the Company are entering into a Company
Stock Option Agreement, dated as of the date hereof (the "Company
Stock Option Agreement"), pursuant to which, subject to Parent
having previously acquired at least 85% of the outstanding Shares
(assuming conversion of the Non-Voting Shares into Shares) and
other conditions set forth therein, Parent shall have the right
to purchase from the Company a sufficient number of Shares such
that such Shares purchased pursuant to the Company Stock Option
Agreement, together with all Shares owned by Parent or the
Purchaser, would represent 90% of the outstanding Shares and
permit the Merger to be effected in accordance with Section 253
of the DGCL and Sections 1104 and 1107 of the UBCA (a "Short-form
Merger"). Parent agrees to effect a Short-form Merger promptly
following the exercise of the option under the Company Stock
Option Agreement.
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ARTICLE II
CONVERSION OF SHARES
Section 2.1 Conversion of Capital Stock. As of the
Effective Time, by virtue of the Merger and without any action on
the part of the holders of any shares of Company Common Stock or
common stock, par value $.01 per share, of the Purchaser (the
"Purchaser Common Stock"):
(a) Purchaser Common Stock. The issued and
outstanding shares of the Purchaser Common Stock shall be
converted into and become such number of fully paid and
nonassessable shares of common stock of the Surviving Corporation
as the Company had outstanding immediately prior to the Effective
Time.
(b) Cancellation of Treasury Stock and
Parent-Owned Stock. All shares of Company Common Stock that are
owned by the Company as treasury stock and any shares of Company
Common Stock and Non-Voting Shares owned by Parent, the Purchaser
or any other wholly owned Subsidiary (as defined in Section 3.1
hereof) of Parent shall be cancelled and retired and shall cease
to exist and no stock of Parent or other consideration shall be
delivered in exchange therefor.
(c) Conversion of Shares. Each issued and
outstanding share of Company Common Stock (other than shares to
be cancelled in accordance with Section 2.1(b)) shall be
converted into the right to receive the Offer Price, payable to
the holder thereof, without interest (the "Merger
Consideration"), upon surrender of the certificate formerly
representing such share of Company Common Stock in the manner
provided in Section 2.2. All such shares of Company Common
Stock, when so converted, shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to
exist, and each holder of a certificate representing any such
shares shall cease to have any rights with respect thereto,
except the right to receive the Merger Consideration therefor
upon the surrender of such certificate in accordance with Section
2.2, without interest.
Section 2.2 Exchange of Certificates.
(a) Paying Agent. Parent shall designate a bank
or trust company to act as agent for the holders of shares of
Company Common Stock in connection with the Merger, which Paying
Agent shall be reasonably satisfactory to the Company (the
"Paying Agent"), to receive the funds to which holders of shares
of Company Common Stock shall become entitled pursuant to Section
2.1(c). Such funds shall be invested by the Paying Agent as
directed by Parent or the Surviving Corporation.
9
<PAGE>
(b) Exchange Procedures. As soon as reasonably
practicable after the Effective Time, the Paying Agent shall mail
to each holder of record of a certificate or certificates, which
immediately prior to the Effective Time represented outstanding
shares of Company Common Stock (the "Certificates"), whose shares
were converted pursuant to Section 2.1 into the right to receive
the Merger Consideration (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the
Certificates to the Paying Agent and shall be in such form and
have such other provisions as Parent and the Company may
reasonably specify) and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for payment of the
Merger Consideration. Upon surrender of a Certificate for
cancellation to the Paying Agent or to such other agent or agents
as may be appointed by Parent, which agents shall be reasonably
satisfactory to the Company, together with such letter of
transmittal, duly executed, the holder of such Certificate shall
be entitled to receive in exchange therefor the Merger
Consideration for each share of Company Common Stock formerly
represented by such Certificate and the Certificate so
surrendered shall forthwith be cancelled. If payment of the
Merger Consideration is to be made to a person other than the
person in whose name the surrendered Certificate is registered,
it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or shall be otherwise in
proper form for transfer and that the person requesting such
payment shall have paid any transfer and other taxes required by
reason of the payment of the Merger Consideration to a person
other than the registered holder of the Certificate surrendered
or shall have established to the satisfaction of the Surviving
Corporation that such tax either has been paid or is not
applicable. Until surrendered as contemplated by this Section
2.2, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive the Merger
Consideration in cash as contemplated by this Section 2.2.
(c) After the Effective Time there shall be no
transfers on the stock transfer books of the Surviving
Corporation of the Shares which were outstanding immediately
prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they
shall be cancelled and exchanged for the Merger Consideration as
provided in this Article II.
Section 2.3 Company Option Plans and Agreements.
(a) The Company shall (i) terminate its 1989
Equity Incentive Plan for Key Employees, 1992 Equity Incentive
Plan and 1994 Equity Incentive Plan (collectively, the "Plans"),
immediately prior to the Effective Time without prejudice to the
rights of the holders of options awarded pursuant thereto and
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(ii) grant no additional options or similar rights under the
Plans or otherwise on or after the date hereof. As used
hereafter in this Section 2.3, "Options" shall include each
employee stock option granted by the Company, whether pursuant to
the Plans, pursuant to certain Rollover Option Agreements dated
as of July 14, 1989 or otherwise.
(b) The Company shall use its best efforts to
obtain the consent of each holder of any Options (whether or not
then exercisable) that it does not have the right to cancel to
the cancellation of, and shall cancel, his Options (irrespective
of their exercise price), or, in the case of Options that the
Company has the right to cancel, shall cancel such Options, such
cancellation (whether or not consent is required therefor) to
take effect as of the Effective Time. The preceding sentence
shall not apply to (i) Options with respect to which the holder
thereof holds, and agrees, prior to consummation of the Offer, to
exercise limited stock appreciation rights ("LSARs") prior to the
Effective Time and does exercise such LSARs prior to the
Effective Time, and (ii) Options (whether or not then
exercisable) held by employees of the Company that Parent or its
affiliates have agreed to employ and who agree prior to
consummation of the Offer to cancel such Options effective as of
the Effective Time in consideration for issuance at such time of
Options on common stock of Parent ("Parent Options"), Parent
being obligated with respect thereto to issue Parent Options to
each such employee which Options cover common stock having an
aggregate Fair Market Value on the date of issuance of such
Options equal to the aggregate value at the Offer Price of stock
of the Company subject to such Options held by such employee and
having an aggregate spread between Fair Market Value (as defined
below) and exercise price equal to the aggregate spread on such
employee's Options between the Offer Price and the weighted
average exercise price of such Options. As soon as practicable
after the date hereof, the Company shall notify each holder of
Options as to the alternatives made available pursuant to this
Section 2.3. Parent Options shall have the same expiration dates
as corresponding Options and terms and conditions (other than any
reload feature or "Change in Control" feature) not materially
less favorable than those of corresponding Options. In
consideration of each cancellation of Options (except those
cancelled in consideration of Parent Options and those cancelled
on exercise of LSARs), the Company shall pay to such holders,
promptly upon such cancellation, in respect of each Option
(whether or not then exercisable and whether or not the Company
had the right to cancel the Option, provided, however, that in
the case of Options requiring a consent to the cancellation
thereof, such consent shall have been obtained), an amount equal
to the excess, if any, of the Offer Price over the exercise price
per Share subject thereto, multiplied by the number of Shares
subject thereto. "Fair Market Value" means the average closing
price on the New York Stock Exchange Composite Tape for common
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stock of Parent on each of the ten trading days preceding the day
on which the Effective Time occurs.
Section 2.4 No Dissenter's Rights. In accordance with
Schwabacher v. United States, 334 U.S. 192 (1948), stockholders
of the Company will not have any dissenter's rights; provided,
however, that if (a) the parties, at Parent's sole discretion,
elect to seek, for mergers within a corporate family, and obtain,
a declaratory order that the class exemption is available for the
Merger or (b) the Interstate Commerce Commission (or any
successor agency) (the "ICC") or a court of competent
jurisdiction determines that dissenter's rights are available to
holders of Shares, then holders of Shares shall be provided with
dissenter's rights in accordance with the DGCL.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and the
Purchaser that, except as disclosed (including, in the case of
financial statements, provided for) in the Company's Form 10-K
for the fiscal year ended December 31, 1994 ("Form 10-K") or the
Annual Report to Stockholders for the fiscal year ended
December 31, 1994 (the "Annual Report"), each as heretofore filed
with the SEC or delivered to Parent in draft form prior to the
date hereof (including, without limitation, any financial
statements and related notes or schedules included in such
documents and all exhibits and schedules included or expressly
incorporated by reference therein on or prior to the date
hereof):
Section 3.1 Organization. Each of the Company and its
Subsidiaries is a corporation, partnership or other entity duly
organized, validly existing, duly qualified or licensed to do
business and in good standing under the laws of the jurisdiction
of its incorporation or organization and in each jurisdiction in
which the nature of the business conducted by it makes such
qualification or licensing necessary, and has all requisite
corporate or other power and authority and all necessary
governmental approvals to own, lease and operate its properties
and to carry on its business as now being conducted, except where
the failure to be so organized, existing and in good standing or
to have such power, authority, and governmental approvals would
not have a Material Adverse Effect on the Company. As used in
this Agreement, the word "Subsidiary" means, with respect to any
party, any corporation or other organization, whether
incorporated or unincorporated, of which (i) such party or any
other Subsidiary of such party is a general partner (excluding
such partnerships where such party or any Subsidiary of such
party do not have a majority of the voting interest in such
partnership) or (ii) at least a majority of the securities or
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other interests having by their terms ordinary voting power to
elect a majority of the Board of Directors or others performing
similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by
such party or by any one or more of its Subsidiaries, or by such
party and one or more of its Subsidiaries. As used in this
Agreement, any reference to any event, change or effect having a
"Material Adverse Effect" on or with respect to any entity means
such event, change or effect, individually or in the aggregate
with such other events, changes, or effects, is materially
adverse to the financial condition or businesses of such entity
and its Subsidiaries, taken as a whole. Exhibit 21 to the Form
10-K sets forth a complete list of the Company's active
Subsidiaries. The Company's inactive subsidiaries have no
material operations and no liabilities which would have or be
likely to have a Material Adverse Effect on the Company.
Section 3.2 Capitalization. (a) The authorized
capital stock of the Company consists only of 125,000,000 shares
of Company Common Stock, 125,000,000 shares of Company Non-Voting
Common Stock, $0.01 par value (the "Non-Voting Common Stock") and
15,000,000 preferred shares, $0.01 par value (the "Preferred
Stock"). As of the date hereof, (i) 31,330,631 shares of Company
Common Stock are issued and outstanding, (ii) 12,835,304 shares
of Non-Voting Common Stock are issued and outstanding,
(iii) 25,479 shares of Company Common Stock and no shares of
Company Non-Voting Common Stock are issued and held in the
treasury of the Company, and (iv) 2,592,067 shares of Company
Common Stock are reserved for issuance upon exercise of then
outstanding Options granted under the Option Plans and 12,835,304
shares of Company Common Stock are reserved for issuance upon
conversion of the Non-Voting Common Stock. As of the date
hereof, there are no shares of Preferred Stock issued and
outstanding. All the outstanding shares of the Company's capital
stock are, and all shares which may be issued pursuant to the
exercise of outstanding Options or upon exercise of the option
under the Company Stock Option Agreement will be, when issued in
accordance with the respective terms thereof, duly authorized,
validly issued, fully paid and non-assessable. As of the date
hereof, the Company has no outstanding stock appreciation rights
except for limited stock appreciation rights granted in tandem
with Options. There are no bonds, debentures, notes or other
indebtedness having voting rights (or convertible into securities
having such rights) ("Voting Debt") of the Company or any of its
Subsidiaries issued and outstanding. Except as set forth above
and except for the transactions contemplated by this Agreement
and the Company Stock Option Agreement and except as set forth in
Section 3.2 of the disclosure schedule delivered by the Company
to Parent on or prior to the date hereof (the "Disclosure
Schedule"), as of the date hereof, there are no existing options,
warrants, calls, pre-emptive rights, subscriptions or other
rights, convertible securities, agreements, arrangements or
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commitments of any character, relating to the issued or unissued
capital stock of the Company or any of its Subsidiaries,
obligating the Company or any of its Subsidiaries to issue,
transfer or sell or cause to be issued, transferred or sold any
shares of capital stock or Voting Debt of, or other equity
interest in, the Company or any of its Subsidiaries or securities
convertible into or exchangeable for such shares or equity
interests or obligations of the Company or any of its
Subsidiaries to grant, extend or enter into any such option,
warrant, call, subscription or other right, convertible security,
agreement, arrangement or commitment. Except as set forth in
Section 3.2 of the Disclosure Schedule, there are no outstanding
contractual obligations of the Company or any of its Subsidiaries
to (i) repurchase, redeem or otherwise acquire any Shares or the
capital stock of the Company or any subsidiary or affiliate of
the Company or (ii) to provide funds to make any investment (in
the form of a loan, capital contribution or otherwise) in (x) any
Subsidiary which is not wholly-owned or (y) any other entity.
Except as permitted by this Agreement and except for Options
which by their terms can not be cancelled as set forth in Section
3.2 of the Disclosure Schedule, following the Merger, neither the
Company (or the Surviving Corporation) nor any of its
Subsidiaries will have any obligation to issue, transfer or sell
any shares of its capital stock pursuant to any employee benefit
plan or otherwise.
(b) Except as set forth in Section 3.2 of the
Disclosure Schedule, all of the outstanding shares of capital
stock of each of the Subsidiaries are beneficially owned by the
Company, directly or indirectly, and all such shares have been
validly issued and are fully paid and nonassessable and, except
for security interests arising under the Credit Agreement, dated
as of March 27, 1992, as amended to date, among the Company,
Chemical Bank, as agent, and the banks named therein (the "Credit
Agreement"), the Senior Secured Note Purchase Agreement, dated as
of March 27, 1992, as amended to date, among Chicago and North
Western Transportation Company, the Company (as Guarantor), and
the Purchasers listed therein (the "Note Agreement"), and the
Pledge Agreement, dated as of December 20, 1990 between Chicago
and North Western Railway Company and Citibank, N.A., as trustee,
and the Mortgage Trust Deed and Security Agreement, dated as of
December 20, 1990, among Citibank, N.A., as trustee, and Chemical
Bank, as administrative agent et. al, are owned by either the
Company or one of its Subsidiaries free and clear of all liens,
charges, claims or encumbrances.
(c) Except for the Second Amended and Restated
Stockholders Agreement, dated as of March 30, 1992, as amended,
among the Company, Parent and certain other parties (the
"Stockholders Agreement"), and an agreement, dated as of June 21,
1993 (the "1993 Agreement") among the parties to the Stockholders
Agreement, there are no voting trusts or other agreements or
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understandings to which the Company or any of its Subsidiaries is
a party with respect to the voting of the capital stock of the
Company or any of the Subsidiaries. None of the Company or its
Subsidiaries is required to redeem, repurchase or otherwise
acquire shares of capital stock of the Company, or any of its
Subsidiaries, respectively, as a result of the transactions
contemplated by this Agreement. Parent and the Company agree to
terminate, and agree to use their reasonable best efforts to
cause the other parties thereto to terminate, as of the Effective
Time, the Stockholders Agreement, the 1993 Agreement and the
Registration Rights Agreement, dated July 14, 1989, as amended,
among Parent, Blackstone Capital Partners L.P. and certain other
parties thereto.
Section 3.3 Corporate Authorization; Validity of
Agreement; Company Action. (a) The Company has full corporate
power and authority to execute and deliver this Agreement and,
subject to obtaining any necessary approval of its stockholders
as contemplated by Section 1.8 hereof with respect to the Merger,
to consummate the transactions contemplated hereby. The
execution, delivery and performance by the Company of this
Agreement, and the consummation by it of the transactions
contemplated hereby, have been duly and validly authorized by its
Board of Directors and, except for those actions contemplated by
Section 1.2(a) hereof and obtaining any approval of its
stockholders as contemplated by Section 1.8 hereof with respect
to the Merger, no other corporate action on the part of the
Company is necessary to authorize the execution and delivery by
the Company of this Agreement and the consummation by it of the
transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Company and, assuming due
authorization, execution and delivery of this Agreement by Parent
and the Purchaser, is a valid and binding obligation of the
Company enforceable against the Company in accordance with its
terms, except that (i) such enforcement may be subject to
applicable bankruptcy, insolvency or other similar laws, now or
hereafter in effect, affecting creditors' rights generally, and
(ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses
and to the discretion of the court before which any proceeding
therefor may be brought.
(b) The Board of Directors of the Company has
duly and validly approved and taken all corporate action required
to be taken by the Board of Directors for the consummation of the
transactions contemplated by this Agreement, including the Offer,
the acquisition of Shares pursuant to the Offer and the Merger or
the Company Stock Option Agreement, including, but not limited
to, all actions, to the extent required, necessary to render the
provisions of Section 203 of the DGCL inapplicable to such
transactions. The affirmative vote of the holders of a majority
of the Shares is the only vote of the holders of any class or
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series of Company capital stock necessary to approve the Merger.
Except as previously disclosed to Parent in writing, neither the
Offer nor the Merger, individually or taken together, is a
transaction that constitutes a change in control under any of the
Company's stock option or restricted stock plans, any other
benefit plan in which any employee of the Company or any of its
Subsidiaries participates or any Company Agreement (as defined in
Section 3.4).
Section 3.4 Consents and Approvals; No Violations.
Except (A) as disclosed in Section 3.4 of the Disclosure
Schedule, (B) for filings, permits, authorizations, consents and
approvals as may be required under, and other applicable
requirements of, the Exchange Act, (C) for the filing and
recordation of the Certificate of Merger as required by the DGCL
and the UBCA, (D) for any applicable state takeover laws, (E) for
the applicable requirements relating to a determination by the
ICC that the terms of the Merger are just and reasonable, and
(F) for the ICC's approval of Parent's application for an order
authorizing the common control (within the meaning of the
Interstate Commerce Act) of the rail subsidiaries of the Company
and Parent having become final and effective (the "ICC Final
Approval"), neither the execution, delivery or performance of
this Agreement by the Company nor the consummation by the Company
of the transactions contemplated hereby nor compliance by the
Company with any of the provisions hereof will (i) conflict with
or result in any breach of any provision of the certificate of
incorporation or by-laws or similar organizational documents of
the Company or of any of its Subsidiaries, (ii) require any
filing with, or permit, authorization, consent or approval of,
any court, arbitral tribunal, administrative agency or commission
or other governmental or other regulatory authority or agency (a
"Governmental Entity"), except where the failure to obtain such
permits, authorizations, consents or approvals or to make such
filings would not have a Material Adverse Effect on the Company,
(iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give
rise to any right of termination, amendment, cancellation or
acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, guarantee, other evidence
of indebtedness, lease, license, contract, agreement or other
instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound (a "Company Agreement") or
(iv) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to the Company, any of its Subsidiaries
or any of their properties or assets, except in the case of (iii)
or (iv) for such violations, breaches or defaults which would
not, individually or in the aggregate, have a Material Adverse
Effect on the Company, and which will not materially impair the
ability of the Company to consummate the transactions
contemplated hereby.
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Section 3.5 SEC Reports and Financial Statements. The
Company has filed with the SEC, and has heretofore made available
to Parent true and complete copies of, all forms, reports,
schedules, statements and other documents required to be filed by
it and its Subsidiaries since January 1, 1992 under the Exchange
Act or the Securities Act of 1933, as amended (the "Securities
Act") (as such documents have been filed prior to the date
hereof, and amended since the time of their filing prior to the
date hereof, collectively, the "Company SEC Documents"). As of
their respective dates or, if amended, as of the date of the last
such amendment, the Company SEC Documents, including, without
limitation, any financial statements or schedules included
therein (a) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading and (b) complied in all material respects with the
applicable requirements of the Exchange Act and the Securities
Act, as the case may be, and the applicable rules and regulations
of the SEC thereunder. Each of the consolidated financial
statements included in the Company SEC Documents have been
prepared from, and are in accordance with, the books and records
of the Company and its consolidated subsidiaries, comply in all
material respects with applicable accounting requirements and
with the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a
consistent basis during the periods involved (except as may be
indicated in the notes thereto including the effect of such notes
on earlier financial statements and except that the quarterly
financial statements contain all footnote disclosures required by
Regulation S-X but not all footnotes required by GAAP) and fairly
present the consolidated financial position and the consolidated
results of operations and cash flows (and changes in financial
position, if any) of the Company and its consolidated
subsidiaries as at the dates thereof or for the periods presented
therein.
Section 3.6 Absence of Certain Changes. Except as
disclosed in the Company SEC Documents filed prior to the date of
this Agreement, from December 31, 1994 until the date of this
Agreement, the Company and its Subsidiaries have conducted their
respective businesses and operations consistent with past
practice only in the ordinary and usual course and there have not
occurred (i) any events, changes, or effects (including the
incurrence of any liabilities or obligations of any nature,
whether or not accrued, contingent or otherwise) having or, which
would be reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on the Company; (ii) except
as set forth in Section 3.6 of the Disclosure Schedule, any
declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to
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the equity interests of the Company or of any of its
Subsidiaries; or (iii) any change by the Company or any of its
Subsidiaries in accounting principles or methods, except insofar
as may be required by a change in GAAP. Since December 31, 1994,
except as set forth in Section 3.6 of the Disclosure Schedule,
neither the Company nor any of its Subsidiaries has taken any of
the actions prohibited by Section 5.1(b),(c)(i), (ii) and (v),
(d), (g), (h), (j) or (k) hereof. Section 3.6 of the Disclosure
Schedule sets forth the amount of principal and unpaid interest
outstanding under each instrument evidencing indebtedness of the
Company and its Subsidiaries (other than immaterial indebtedness)
which will accelerate or become due or result in a right of
redemption or repurchase on the part of the holder of such
indebtedness (with or without due notice or lapse of time) as a
result of this Agreement, the Offer or the Merger or the other
transactions contemplated hereby.
Section 3.7 Information in Proxy Statement. The Proxy
Statement (or any amendment thereof or supplement thereto) will,
at the date mailed to Company stockholders and at the time of the
meeting of Company stockholders to be held in connection with the
Merger, not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading,
except that no representation is made by the Company with respect
to statements made therein based on information supplied by
Parent or the Purchaser in writing for inclusion in the Proxy
Statement. The Proxy Statement will comply in all material
respects with the provisions of the Exchange Act and the rules
and regulations thereunder.
Section 3.8 Employee Benefit Plans; ERISA. To the
best knowledge of the Company:
(a) There are no material employee benefit plans,
arrangements, contracts or agreements (including, without
limitation, employment agreements, change of control employment
agreements and severance agreements) of any type (including but
not limited to plans described in section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")),
maintained, or contributed to, by the Company, any of its
Subsidiaries or any trade or business, whether or not
incorporated (an "ERISA Affiliate"), that together with the
Company would be deemed a "single employer" within the meaning of
section 4001(b)(15) of ERISA, with respect to which the Company
or any of its Subsidiaries has or may have a liability, other
than those listed on Section 3.8(a) of the Disclosure Schedule
(the "Benefit Plans"). Neither the Company nor any ERISA
Affiliate has any formal plan or commitment, whether legally
binding or not, to create any additional Benefit Plan or modify
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or change any existing Benefit Plan that would affect any
employee or terminated employee of the Company or any Subsidiary.
(b) With respect to each Benefit Plan: (i) if
intended to qualify under section 401(a), 401(k) or 403(a) of the
Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder (the "Code"), such plan so
qualifies, and its trust is exempt from taxation under section
501(a) of the Code; (ii) such plan has been administered in all
material respects in accordance with its terms and applicable
law; (iii) no breaches of fiduciary duty have occurred which
might reasonably be expected to give rise to material liability
on the part of the Company or the Subsidiaries; (iv) no disputes
are pending, or, to the knowledge of the Company, threatened that
might reasonably be expected to give rise to material liability
on the part of the Company or the Subsidiaries; (v) no prohibited
transaction (within the meaning of Section 406 of ERISA) has
occurred that might reasonably be expected to give rise to
material liability on the part of the Company or the
Subsidiaries; and (vi) all contributions and premiums due as of
the date hereof (including any extensions for such contributions
and premiums) have been made in full.
(c) Full payment has been made, or will be made
in accordance with section 404(a)(6) of the Code, of all amounts
which the Company or its Subsidiaries are required to pay under
the terms of each of the Benefit Plans as of the last day of the
most recent plan year thereof ended prior to the date of this
Agreement, and all such amounts which become payable through the
Effective Time will be paid by the Company or its Subsidiaries at
or prior to the Effective Time, except for annual contributions
by the Company for calendar 1994, which are due and payable in
the ordinary course on or before the Company's tax return due
date, including any extensions.
(d) Neither the Company nor any ERISA Affiliate
has incurred any liability under Title IV of ERISA since the
effective date of ERISA that has not been satisfied in full.
Except as identified in Section 3.8(d) of the Disclosure
Schedule, neither the Company nor any ERISA Affiliate maintains
(or contributes to), or has maintained (or has contributed to)
within the last six years, any employee benefit plan that is
subject to Title IV of ERISA.
(e) With respect to each Benefit Plan that is a
"welfare plan" (as defined in section 3(1) of ERISA): except as
specifically disclosed in Section 3.8 of the Disclosure Schedule,
no such plan provides medical or death benefits with respect to
current or former employees of the Company or any of its
Subsidiaries beyond their termination of employment, other than
on an employee-pay-all basis.
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(f) Except as specifically set forth on Schedule
3.8, the consummation of the transactions contemplated by this
Agreement will not (i) entitle any individual to severance pay or
accelerate the time of payment or vesting, or increase the
amount, of compensation or benefits due to any individual,
(ii) constitute or result in a prohibited transaction under
section 4975 of the Code or section 406 or 407 of ERISA or
(iii) subject the Company, any of its Subsidiaries, any ERISA
Affiliate, any of the Benefit Plans, any related trust, any
trustee or administrator thereof, or any party dealing with the
Benefit Plans or any such trust to either a civil penalty
assessed pursuant to section 409 or 502(i) of ERISA or a tax
imposed pursuant to section 4976 or 4980B of the Code.
(g) Except as set forth in Section 3.8(g) of the
Disclosure Schedule, there is no Benefit Plan that is a
"multiemployer plan," as such term is defined in section 3(37) of
ERISA.
(h) With respect to each Benefit Plan, the
Company has delivered to Parent accurate and complete copies of
all plan texts, summary plan descriptions, summaries of material
modifications, trust agreements and other related agreements
including all amendments to the foregoing; the two most recent
annual reports; the most recent annual and periodic accounting of
plan assets; the most recent determination letter received from
the United States Internal Revenue Service (the "Service"); and
the two most recent actuarial reports, to the extent any of the
foregoing may be applicable to a particular Benefit Plan.
Section 3.9 Litigation; Compliance with Law.
(a) Except as disclosed in the Company SEC
Documents filed prior to the date of this Agreement or as
disclosed in Section 3.9 of the Disclosure Schedule, there is no
suit, claim, action, proceeding or investigation pending (other
than suits, claims, actions or proceedings which have not been
served and as to which none of the Chief Executive Officer, the
Chief Financial Officer or the most senior legal officer of the
Company has knowledge) or, to the best knowledge of the Chief
Executive Officer, Chief Financial Officer or the most senior
legal officer of the Company, threatened against, the Company or
any of its Subsidiaries which, individually or in the aggregate,
is likely, individually or in the aggregate, to have a Material
Adverse Effect on the Company, or materially impair the ability
of the Company to consummate the Offer, the Merger or the other
transactions contemplated hereby.
(b) To the best knowledge of the Company, the
Company and its Subsidiaries have complied in a timely manner
with all laws, statutes, regulations, rules, ordinances, and
judgments, decrees, orders, writs and injunctions, of any court
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or governmental entity relating to any of the property owned,
leased or used by them, or applicable to their business,
including, but not limited to, equal employment opportunity,
discrimination, occupational safety and health, environmental,
interstate commerce and antitrust laws, except where the failure
to so comply would not, individually or in the aggregate, have a
Material Adverse Effect on the Company.
Section 3.10 Taxes. (a) The Company and its
Subsidiaries have (i) duly filed (or there has been filed on
their behalf) with the appropriate governmental authorities all
material Tax Returns (as hereinafter defined) required to be
filed by them on or prior to the date hereof, and (ii) duly paid
in full or made provision in accordance with GAAP (or there has
been paid or provision has been made on their behalf) for the
payment of all material Taxes (as hereinafter defined) for all
periods ending through the date hereof.
(b) Other than payroll tax issues being reviewed
by the Internal Revenue Service Appeals Division, no federal,
state, local or foreign audits or other administrative
proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of the Company or its
Subsidiaries wherein an adverse determination or ruling in any
one such proceeding or in all such proceedings in the aggregate
could have a Material Adverse Effect on the Company.
(c) The federal income Tax Returns of the Company
and its Subsidiaries have been examined by the Internal Revenue
Service (or the applicable statutes of limitation for the
assessment of federal income Taxes for such periods have expired)
for all periods through and including December 31, 1990 (except
for the 1985, 1987 and 1989B tax years), and no material
deficiencies were asserted as a result of such examinations which
have not been resolved and fully paid.
(d) "Taxes" shall mean all federal, state, local
and foreign taxes, and other assessments of a similar nature
(whether imposed directly or through withholding), including any
interest, additions to tax, or penalties applicable thereto.
"Tax Returns" shall mean all federal, state, local and foreign
tax returns, declarations, statements, reports, schedules, forms
and information returns and any amended Tax Returns relating to
Taxes.
Section 3.11. Environmental Matters. (a) Except as
set forth in the Company SEC Documents or otherwise previously
disclosed in writing by the Company to Parent, to the best
knowledge of the Chief Executive Officer, Chief Financial
Officer, the most senior legal officer, and the most senior legal
officer directly in charge of environmental matters of the
Company, there are no Environmental Liabilities (as defined
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below) of the Company that have had or are likely to have a
Material Adverse Effect on the Company.
(b) As used in this Agreement, "Environmental
Laws" means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances,
rules, judgments, orders, decrees, codes, plans, injunctions,
permits, concessions, grants, franchises, licenses, agreements
and governmental restrictions relating to the environment or to
emissions, discharges or releases of pollutants, contaminants,
Hazardous Substances or wastes into the environment, including
without limitation ambient air, surface water, ground water or
land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, Hazardous Substances or
wastes or the clean-up or other remediation thereof.
"Environmental Liabilities" with respect to any person means any
and all liabilities of or relating to such Person or any of its
Subsidiaries (including any entity which is, in whole or in part,
a predecessor of such Person or any of its Subsidiaries), whether
vested or unvested, contingent or fixed, actual or potential,
known or unknown, which (i) arise under or relate to matters
covered by Environmental Laws and (ii) relate to actions
occurring or conditions existing on or prior to the date of this
Agreement. "Hazardous Substances" means any toxic, radioactive,
caustic or otherwise hazardous substance, including petroleum,
its derivatives, by-products and other hydrocarbons, or any
substance having any constituent elements displaying any of the
foregoing characteristics, including, without limitation, any
substance regulated under Environmental Laws.
Section 3.12 Opinion of Financial Advisors. The
Company has received an opinion from Blackstone to the effect
that 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, a copy of which opinion
will be delivered to Parent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER
Parent and the Purchaser represent and warrant to the
Company as follows:
Section 4.1 Organization. Each of Parent and the
Purchaser is a corporation duly organized, validly existing and
in good standing under the laws of Utah and has all requisite
corporate or other power and authority and all necessary
governmental approvals to own, lease and operate its properties
and to carry on its business as now being conducted, except where
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the failure to be so organized, existing and in good standing or
to have such power, authority, and governmental approvals would
not have a Material Adverse Effect on Parent. Parent and each of
its Subsidiaries is duly qualified or licensed to do business and
in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary,
except where the failure to be so duly qualified or licensed and
in good standing would not, in the aggregate, have a Material
Adverse Effect on Parent.
Section 4.2 Authorization; Validity of Agreement;
Necessary Action. Each of Parent and the Purchaser has full
corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement and the
consummation of the Merger and of the other transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent and the Purchaser and no
other corporate proceedings on the part of Parent and the
Purchaser are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This Agreement has
been duly executed and delivered by Parent and the Purchaser, as
the case may be, and, assuming due authorization, execution and
delivery of this Agreement by the Company, is a valid and binding
obligation of each of Parent and the Purchaser, as the case may
be, enforceable against them in accordance with its respective
terms, except that (i) such enforcement may be subject to
applicable bankruptcy, insolvency or other similar laws, now or
hereafter in effect, affecting creditors' rights generally, and
(ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses
and to the discretion of the court before which any proceeding
therefor may be brought.
Section 4.3 Consents and Approvals; No Violations.
Except (A) for filings, permits, authorizations, consents and
approvals as may be required under, and other applicable
requirements of, the Exchange Act, (B) the filing and recordation
of the Certificate of Merger as required by the DGCL and the
UBCA, (C) any applicable state takeover laws, (D) the applicable
requirements relating to a determination by the ICC that the
terms of the Merger are just and reasonable, and (E) the ICC
Final Approval, neither the execution, delivery or performance of
this Agreement by Parent and the Purchaser nor the consummation
by Parent and the Purchaser of the transactions contemplated
hereby nor compliance by Parent and the Purchaser with any of the
provisions hereof will (i) conflict with or result in any breach
of any provision of the respective articles of incorporation or
by-laws of Parent and the Purchaser, (ii) require any filing
with, or permit, authorization, consent or approval of, any
Governmental Entity (except where the failure to obtain such
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permits, authorizations, consents or approvals or to make such
filings would not have a material adverse effect on Parent and
its Subsidiaries taken as a whole), (iii) result in a violation
or breach of, or constitute (with or without due notice or lapse
of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, any of the
terms, conditions or provisions of any material note, bond,
mortgage, indenture, license, lease, contract, agreement or other
instrument or obligation to which Parent or any of its
Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound or (iv) violate any order,
writ, injunction, decree, statute, rule or regulation applicable
to Parent, any of its Subsidiaries or any of their properties or
assets, except in the case of (iii) and (iv) for violations,
breaches or defaults which would not, individually or in the
aggregate, materially impair the ability of Parent or Purchaser
to consummate the Offer, the Merger or the other transactions
contemplated hereby.
Section 4.4 Information in Proxy Statement; Schedule
14D-9. None of the information supplied by Parent or the
Purchaser for inclusion or incorporation by reference in the
Proxy Statement or the Schedule 14D-9 will, at the date mailed to
stockholders and at the time of the meeting of stockholders to be
held in connection with the Merger, contain any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made,
not misleading.
Section 4.5 Financing. Either Parent or the
Purchaser has, or will have prior to the satisfaction of the
conditions to the Offer, sufficient funds available (through
existing credit arrangements or otherwise) to purchase all of the
Shares outstanding on a fully diluted basis and to refinance the
indebtedness referred to in Section 3.6 of the Disclosure
Schedule.
ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company. The
Company covenants and agrees that, except (i) as expressly
provided in this Agreement, or (ii) with the prior written
consent of Parent after the date hereof, and prior to the time
the directors of the Purchaser have been elected to, and shall
constitute a majority of, the Board of Directors of the Company
pursuant to Section 1.3 (the "Appointment Date"):
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(a) the business of the Company and its
Subsidiaries shall be conducted only in the ordinary and usual
course consistent with past practice and, to the extent
consistent therewith, each of the Company and its Subsidiaries
shall use its reasonable best efforts to preserve its business
organization intact and maintain its existing relations with
customers, suppliers, employees, creditors and business partners;
(b) the Company will not, directly or indirectly,
split, combine or reclassify the outstanding Company Common
Stock, Non-Voting Common Stock or any outstanding capital stock
of any of the Subsidiaries of the Company;
(c) neither the Company nor any of its
Subsidiaries shall: (i) amend its articles of incorporation or
by-laws or similar organizational documents; (ii) except as set
forth in Section 5.1(c) of the Disclosure Schedule, declare, set
aside or pay any dividend or other distribution payable in cash,
stock or property with respect to its capital stock (other than
dividends paid by a wholly-owned Subsidiary in the ordinary
course of business consistent with past practice); (iii) issue,
sell, transfer, pledge, dispose of or encumber any additional
shares of, or securities convertible into or exchangeable for, or
options, warrants, calls, commitments or rights of any kind to
acquire, any shares of capital stock of any class of the Company
or its Subsidiaries, other than issuances pursuant to the
exercise of Options outstanding on the date hereof or pursuant to
the conversion of the Non-Voting Shares into Shares; (iv)
transfer, lease, license, sell, mortgage, pledge, dispose of, or
encumber any material assets other than in the ordinary and usual
course of business and consistent with past practice, or incur or
modify any material indebtedness; or (v) except as set forth in
Section 5.1(c) of the Disclosure Schedule, redeem, purchase or
otherwise acquire directly or indirectly any of its capital
stock;
(d) neither the Company nor any of its
Subsidiaries shall: (i) except as set forth in Section 5.1(d) of
the Disclosure Schedule, promote any employee or grant any
increase in the compensation payable or to become payable by the
Company or any of its Subsidiaries to any employee, provided,
however, the Company may increase compensation (x) as required
pursuant to collective bargaining agreements and (y) for
employees other than executive officers, on the anniversary date
of the employee whose compensation is being increased provided
that such employee's compensation has not been increased since
his prior anniversary date and provided further that the
percentage increase on his 1995 anniversary date does not exceed
4% or (A) adopt any new, or (B) amend or otherwise increase, or
accelerate the payment or vesting of the amounts payable or to
become payable under any existing, bonus, incentive compensation,
deferred compensation, severance, profit sharing, stock option,
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stock purchase, insurance, pension, retirement or other employee
benefit plan agreement or arrangement; or (ii) enter into any, or
amend any existing, employment or severance agreement with or,
except in accordance with the existing written policies of the
Company, grant any severance or termination pay to any officer,
director or employee of the Company or any of its Subsidiaries;
(e) neither the Company nor any of its
Subsidiaries shall modify, amend or terminate any of its material
Company Agreements or waive, release or assign any material
rights or claims, except in the ordinary course of business and
consistent with past practice;
(f) neither the Company nor any of its
Subsidiaries shall permit any material insurance policy naming it
as a beneficiary or a loss payable payee to be cancelled or
terminated without notice to Parent, except in the ordinary
course of business and consistent with past practice;
(g) neither the Company nor any of its
Subsidiaries shall: (i) incur or assume any long-term debt in
excess of $1,000,000 in the aggregate, or except in the ordinary
course of business, incur or assume any short-term indebtedness
in amounts not consistent with past practice; (ii) assume,
guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations
of any other person, except in the ordinary course of business
and consistent with past practice; (iii) make any loans, advances
or capital contributions to, or investments in, any other person
(other than to wholly owned Subsidiaries of the Company or
customary loans or advances to employees in accordance with past
practice); or (iv) except as disclosed in Section 5.1(g) of the
Disclosure Schedule enter into any material commitment or
transaction (including, but not limited to, any borrowing,
capital expenditure or purchase, sale or lease of assets) other
than capital expenditures pursuant to the Company's capital
expenditures budget that aggregate since December 31, 1994 not
more than $75,000,000;
(h) neither the Company nor any of its
Subsidiaries shall change any of the accounting principles used
by it unless required by GAAP;
(i) neither the Company nor any of its
Subsidiaries shall pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction of any such claims, liabilities or
obligations, (x) in the ordinary course of business and
consistent with past practice, of claims, liabilities or
obligations reflected or reserved against in, or contemplated by,
the consolidated financial statements (or the notes thereto) of
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the Company and its consolidated Subsidiaries, (y) incurred in
the ordinary course of business and consistent with past practice
or (z) which are legally required to be paid, discharged or
satisfied (provided that if such claims, liabilities or
obligations referred to in this clause (z) are legally required
to be paid and are also not otherwise payable in accordance with
clauses (x) or (y) above, the Company will notify Parent in
writing if such claims, liabilities or obligations exceed,
individually or in the aggregate, $10 million in value,
reasonably in advance of their payment);
(j) neither the Company nor any of its
Subsidiaries will adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or any of
its Subsidiaries or any agreement relating to a Takeover Proposal
(as hereafter defined) (other than the Merger); and
(k) neither the Company nor any of its
Subsidiaries will enter into an agreement, contract, commitment
or arrangement to do any of the foregoing, or to authorize,
recommend, propose or announce an intention to do any of the
foregoing.
Section 5.2 Access to Information. The Company shall
(and shall cause each of its Subsidiaries to) afford to the
officers, employees, accountants, counsel, financing sources and
other representatives of Parent, access, during normal business
hours, during the period prior to the Effective Time, to all of
its and its Subsidiaries' properties, books, contracts,
commitments and records and, during such period, the Company
shall (and shall cause each of its Subsidiaries to) furnish
promptly to the Parent (a) a copy of each report, schedule,
registration statement and other document filed or received by it
during such period pursuant to the requirements of federal
securities laws and (b) all other information concerning its
business, properties and personnel as Parent may reasonably
request. Until the Effective Time, Parent will hold any such
information which is nonpublic in confidence in accordance with
the provisions of the confidentiality agreement between the
Company and the Parent (the "Confidentiality Agreement"), subject
to the requirements of applicable law. Notwithstanding anything
in the Confidentiality Agreement to the contrary, materials
furnished to Parent pursuant to this Section 5.2 may be used by
Parent for strategic and integration planning purposes.
Section 5.3 Consents and Approvals. Each of the
Company, Parent and the Purchaser will take all reasonable
actions necessary to comply promptly with all legal requirements
which may be imposed on it with respect to this Agreement and the
transactions contemplated hereby (which actions shall include,
without limitation, furnishing all information in connection with
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<PAGE>
approvals of or filings with any Governmental Entity) and will
promptly cooperate with and furnish information to each other in
connection with any such requirements imposed upon any of them or
any of their Subsidiaries in connection with this Agreement and
the transactions contemplated hereby. Each of the Company,
Parent and the Purchaser will, and will cause its Subsidiaries
to, take all reasonable actions necessary to obtain (and will
cooperate with each other in obtaining) any consent,
authorization, order or approval of, or any exemption by, any
Governmental Entity or other public or private third party
required to be obtained or made by Parent, the Purchaser, the
Company or any of their Subsidiaries in connection with the Offer
or the Merger or the taking of any action contemplated thereby or
by this Agreement.
Section 5.4 Employee Benefits.
With respect to employee benefits matters, Parent,
Purchaser and Company agree as follows:
(a) Parent agrees to cause the Surviving Corporation
and its Subsidiaries to honor and assume the Change of Control
Employment Agreements listed on Schedule 5.4(a) hereto. If
Parent shall notify Company prior to the Effective Time that
Parent wishes to substitute alternate contractual arrangements
(to become effective as of the Effective Time) with one or more
of the employees who currently have Change of Control Employment
Agreements, the Company agrees to use its best efforts to
facilitate Parent's negotiations with any such employee and to
cooperate in making any such contractual changes which are
agreed-upon by Parent and such employee. Each individual
employee who (i) receives a lump sum payment in cash of all
benefits under Section 5(a) of a Change of Control Employment
Agreement, (ii) agrees to amend the Second Amended and Restated
Stockholders Agreement, dated as of March 30, 1992, as amended,
an agreement, dated as of June 21, 1993 among the parties to such
Stockholders Agreement, and the Registration Rights Agreement,
dated July 14, 1989, as amended (collectively, the "Three
Agreements"), to provide that they shall terminate upon the
Effective Time of the Merger and to waive (effective as of the
Effective Time) any and all rights under each of the Three
Agreements to which such employee is a party, and (iii) waives
any claims such employee may have against the Company except for
routine benefit claims under the Company's benefit plans pursuant
to their terms and any rights to indemnification by the Company
under Section 5.9 of this Agreement, will also receive a separate
payment ("Extra Payment") from the Company representing his or
her individual share of $15 million on a pro rata basis in the
proportion that his or her individual 1995 annualized
compensation (current salary and maximum bonus) bears to the
total 1995 annualized compensation (current salary and maximum
bonus) of all of the 27 executives who have Change of Control
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Employment Agreements, provided that if the amount an employee
would receive from the sum of amounts paid ("Relevant
Compensation") under the Change of Control Employment Agreement,
the Extra Payment and all other compensation and benefits paid to
the employee which would not be deductible (in whole or in part)
as a result of Section 280G of the Code, net of all applicable
federal, state and local income and excise taxes ("Applicable
Taxes") thereon, would be smaller than the amount such employee
would receive from Relevant Compensation net of Applicable Taxes
if the amount of the Extra Payment were reduced, then the Extra
Payment shall be reduced (but not below zero) to the amount which
results in the employee receiving the largest possible amount
from Relevant Compensation net of Applicable Taxes.
(b) No employee of the Company who is not an executive
officer of the Company and whose compensation or benefits are not
the subject of a collective bargaining agreement, and who has not
entered into a Change of Control Employment Agreement with the
Company shall be terminated during the 18-month period following
the Effective Date for the sole purpose of a reduction in force
without being permitted to participate in a two-part cash
severance program (voluntary and involuntary) consistent with,
and no less generous than, that offered by Parent to certain of
its employees in December 1994, under the Union Pacific Railroad
Company Marketing and Sales Department 1994 Voluntary Force
Reduction Program.
(c) With respect to the Chicago and North Western
Railway Company Supplemental Pension Plan (the "Pension Plan"),
the Chicago and North Western Railway Company Profit Sharing and
Retirement Savings Program (the "Savings Program"), the Chicago
and North Western Transportation Company Executive Retirement
Plan (the "Executive Retirement Plan"), and the Chicago and North
Western Transportation Company Excess Benefit Retirement Plan
(the "Excess Benefit Plan"), hereinafter referred to collectively
as the "Retirement Plans," Parent, the Purchaser, and the Company
agree as follows:
(i) Each employee of the Company who, as of the
date hereof, is eligible to participate in one or more of
the Retirement Plans shall, until December 31, 1995,
continue to be eligible to participate in each Retirement
Plan in which he was eligible to participate as of the date
hereof, subject to the terms and conditions of the
applicable Retirement Plan as in effect from time to time
(which, until December 31, 1995, shall remain, to the extent
lawful (and, where applicable, consistent with the tax
qualification of the Retirement Plan), consistent in all
material respects with the terms and conditions of the
Retirement Plan in effect at the Effective Time). Under the
Savings Program the Company contribution for 1995 shall be
equal to the 1995 Company contribution which would occur if
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the Company Contribution Base (as defined under the Savings
Program) for 1995 equalled the Company Contribution Base for
the calendar quarter ending March 31, 1995 (excluding any
expenses of the transaction contemplated by the Agreement)
multiplied by four (4).
(ii) Each of the Retirement Plans shall be
amended to provide that no benefits shall accrue thereunder
after December 31, 1995.
(iii) Effective January 1, 1996, each employee of
the Company on that date who was an active participant in
the Pension Plan as of December 31, 1995 shall become a
participant in the Pension Plan for Salaried Employees of
Union Pacific Corporation and Affiliates (the "UPPP") and
shall be credited thereunder (A) with compensation paid by
the Company before January 1, 1996, as determined in
accordance with the terms of the Pension Plan as in effect
on the date of this Agreement, (B) for eligibility, vesting,
retirement eligibility, and benefit accrual purposes, with
the service with which he was credited for such purposes
under the Pension Plan as of December 31, 1995, and (C) with
compensation and service from and after January 1, 1996, in
accordance with the applicable provisions of the UPPP;
provided that the benefits to which each such employee shall
be entitled under the UPPP shall be reduced by the actuarial
equivalent of the benefits to which the employee is
entitled, as of December 31, 1995, under the Pension Plan
and the actuarial equivalent of the amount described in
Article 2.1(c) and (d) of the Pension Plan as in effect on
the date of this Agreement, and determined as of December
31, 1995. For purposes of this paragraph (iii), actuarial
equivalence shall be determined in accordance with the
applicable provisions of Appendix I to the Pension Plan as
in effect on the date of this Agreement.
(iv) Effective January 1, 1996, each employee of
the Company on that date who was an active participant in
the Savings Program as of December 31, 1995 shall be
eligible to participate in the Union Pacific Corporation
Thrift Plan (the "Thrift Plan") in accordance with the terms
of the Thrift Plan as in effect from time to time and shall
be credited thereunder, for eligibility and vesting
purposes, with the service he was credited with for such
purposes under the Savings Program as of December 31, 1995,
and for service from and after January 1, 1996, in
accordance with the terms of the Thrift Plan as in effect
from time to time.
(v) From and after January 1, 1996, each employee
of the Company on that date who was an active participant in
the Executive Retirement Plan, the Excess Benefit Plan, or
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both as of December 31, 1995 shall be entitled to
participate in any excess benefit or other unfunded deferred
compensation plan that supplements the UPPP or the Thrift
Plan and in which similarly situated employees of Parent are
then entitled to participate.
(d) Each of the Company's employee benefit plans shall
be amended to provide that if an employee of the Company as of
the date hereof, whose compensation or benefits at such date are
not the subject of a collective bargaining agreement (a
"Nonagreement Employee"), is transferred to employment with the
Parent or the Purchaser after such date and before January 1,
1996, the Nonagreement Employee shall be permitted to participate
in the plan pursuant to the terms of the plan and shall not be
prohibited from such participation solely by reason of such
transfer, provided that the Nonagreement Employee is otherwise
eligible to participate in the plan in accordance with the terms
and conditions thereof.
(e) Except to the extent otherwise provided in this
Agreement, from and after January 1, 1996, each Nonagreement
Employee of the Company at the Effective Time who is a
Nonagreement Employee of the Parent, Company, or Purchaser on
January 1, 1996 shall be entitled to participate in, and to
receive benefits under, the employee benefit plans of the
Company, Parent, and the Purchaser, in accordance with terms and
conditions that are comparable to the terms and conditions that
apply to similarly situated employees of the Purchaser or Parent.
Except with respect to the Retirement Plans, each such employee
of the Company whose compensation or benefits are not subject to
a collective bargaining agreement shall at all times on and after
January 1, 1996 be given full credit for all past service under
all employee benefit plans of Parent, Purchaser and all
affiliates to the extent to which credit is given for such
service under the Company's similar benefit plans, subject to
reduction for any benefits to which such employee is entitled
from the Company under its similar benefit plans.
(f) The Company will pay, as soon as reasonably
practical after the date of Closing, bonuses under its Bonus Plan
in an amount determined by projecting to December 31, 1995 the
Company's performance (measured using the performance measures
established by the Compensation Committee for 1995, calculating
such bonuses without giving effect to the expenses of the
transaction contemplated by the Agreement) through the date of
Closing and prorating the resulting bonus amounts to the date of
Closing.
Section 5.5 No Solicitation. (a) The Company (and
its Subsidiaries and affiliates) will not, and the Company (and
its Subsidiaries and affiliates) will use their best efforts to
ensure that their respective officers, directors, employees,
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investment bankers, attorneys, accountants and other agents do
not, directly or indirectly: (i) initiate, solicit or encourage,
or take any action to facilitate the making of, any offer or
proposal which constitutes or is reasonably likely to lead to any
Takeover Proposal (as defined below) of the Company or any
Subsidiary or affiliate or an inquiry with respect thereto, or,
(ii) in the event of an unsolicited Takeover Proposal for the
Company or any Subsidiary or affiliate, engage in negotiations or
discussions with, or provide any information or data to any
Person relating to any Takeover Proposal, except to the extent
that the Company's Board of Directors determines, based on the
opinion of outside legal counsel to the Company, that the failure
to engage in such negotiation or discussions or provide such
information would likely result in a breach of the Board of
Directors' fiduciary duties under applicable law. The Company
shall notify Parent and the Purchaser orally and in writing of
any such offers, proposals or Takeover Proposals (including,
without limitation, the terms and conditions thereof and the
identity of the Person making it), within 24 hours of the receipt
thereof, unless the Company's Board of Directors determines,
based on the opinion of outside legal counsel to the Company,
that giving such notice would result in a breach of the Board of
Directors' fiduciary duties under applicable law. The Company
shall, and shall cause its Subsidiaries and affiliates, and their
respective officers, directors, employees, investment bankers,
attorneys, accountants and other agents to, immediately cease and
cause to be terminated all existing discussions and negotiations,
if any, with any parties conducted heretofore with respect to any
Takeover Proposal relating to the Company. Notwithstanding
anything to the contrary, nothing contained in this Section 5.5
shall prohibit the Company or its Board of Directors from
(i) issuing a press release or otherwise publicly disclosing the
terms of any Takeover Proposal; (ii) communicating to the
Company's stockholders a position as required by Rule 14e-2
promulgated under the Exchange Act; or (iii) making any
disclosure to the Company's stockholders which the Board of
Directors of the Company determines, based on the opinion of
outside legal counsel to the Company, that the Company would
likely be required to make under applicable law (including,
without limitation, laws relating to the fiduciary duties of
directors).
(b) As used in this Agreement, "Takeover
Proposal" when used in connection with any Person shall mean any
tender or exchange offer involving such Person, any proposal for
a merger, consolidation or other business combination involving
such Person or any Subsidiary of such Person, any proposal or
offer to acquire in any manner a substantial equity interest in,
or a substantial portion of the business or assets of, such
Person or any Subsidiary of such Person, any proposal or offer
with respect to any recapitalization or restructuring with
respect to such Person or any Subsidiary of such Person or any
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proposal or offer with respect to any other transaction similar
to any of the foregoing with respect to such Person or any
Subsidiary of such Person; provided, however, that, as used in
this Agreement, the term "Takeover Proposal" shall not apply to
any transaction of the type described in this subsection (b)
involving Parent, the Purchaser or their affiliates. As used in
this Agreement, "Person" shall mean any corporation, partnership,
person or other entity or group (including the Company and its
affiliates and representatives, but excluding Parent or any of
its affiliates or representatives).
Section 5.6 Additional Agreements. Subject to the
terms and conditions herein provided, each of the parties hereto
agrees to use all reasonable efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things
necessary, proper or advisable, whether under applicable laws and
regulations or otherwise, and to remove any injunctions or other
impediments or delays, legal or otherwise, to consummate and make
effective the Merger and the other transactions contemplated by
this Agreement. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors of
the Company and Parent shall use all reasonable efforts to take,
or cause to be taken, all such necessary actions. Parent and the
Company further agree to use their reasonable best efforts to
make final and effective the ICC Final Approval.
Section 5.7 Publicity. So long as this Agreement is
in effect and subject to Section 5.5 hereof, neither the Company,
Parent nor any of their respective affiliates shall issue or
cause the publication of any press release or other announcement
with respect to the Merger, this Agreement or the other
transactions contemplated hereby without the prior consultation
of the other party, except as may be required by law or by any
listing agreement with a national securities exchange. Nothing
contained in this Section 5.7 shall prohibit Parent or its
affiliates from issuing a press release or otherwise publicly
commenting on, without prior consultation, any matter disclosed
by the Company or its Board of Directors without prior
consultation pursuant to clause (iii) of the last sentence of
Section 5.5(a) hereof.
Section 5.8 Notification of Certain Matters. The
Company shall give prompt notice to Parent and Parent shall give
prompt notice to the Company, of (i) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of
which would cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect
at or prior to the Effective Time and (ii) any material failure
of the Company or Parent, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; provided, however, that the
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delivery of any notice pursuant to this Section 5.8 shall not
limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
Section 5.9 Directors' and Officers' Insurance and
Indemnification. Parent agrees that at all times after
consummation of the Offer, it shall indemnify, or shall cause the
Company (or the Surviving Corporation if after the Effective
Time) and its Subsidiaries to indemnify, each person who is now,
or has been at any time prior to the date hereof, an employee,
agent, director or officer of the Company or of any of the
Company's Subsidiaries, successors and assigns (individually an
"Indemnified Party" and collectively the "Indemnified Parties"),
to the same extent and in the same manner as is now provided in
the respective charters or by-laws of the Company and such
Subsidiaries or otherwise in effect on the date hereof, with
respect to any claim, liability loss, damage, cost or expense
(whenever asserted or claimed) ("Indemnified Liability") based in
whole or in part on, or arising in whole or in part out of, any
matter existing or occurring at or prior to the Effective Time.
Parent shall, and shall cause the Company (or the Surviving
Corporation if after the Effective Time) to, maintain in effect
for not less than 6 years after consummation of the Offer the
current policies of directors' and officers' liability insurance
maintained by the Company and its Subsidiaries on the date hereof
(provided that Parent may substitute therefor policies having at
least the same coverage and containing terms and conditions which
are no less advantageous to the persons currently covered by such
policies as insured) with respect to matters existing or
occurring at or prior to the Effective Time; provided, however,
that if the aggregate annual premiums for such insurance at any
time during such period shall exceed 300% of the per annum rate
of premium currently paid by the Company and its Subsidiaries for
such insurance on the date of this Agreement, then Parent shall
cause the Company (or the Surviving Corporation if after the
Effective Time) to, and the Company (or the Surviving Corporation
if after the Effective Time) shall, provide the maximum coverage
that shall then be available at an annual premium equal to 300%
of such rate, and Parent, in addition to the indemnification
provided above in this Section 5.9, shall indemnify the
Indemnified Parties for the balance of such insurance coverage on
the same terms and conditions as though Parent were the insurer
under those policies. Without limiting the foregoing, in the
event any Indemnified Party becomes involved in any capacity in
any action, proceeding or investigation based in whole or in part
on, or arising in whole or in part out of, any matter, including
the transactions contemplated hereby, existing or occurring at or
prior to the Effective Time, then to the extent permitted by law
Parent shall, or shall cause the Company (or the Surviving
Corporation if after the Effective Time) to, periodically advance
to such Indemnified Party its legal and other expenses (including
the cost of any investigation and preparation incurred in
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connection therewith), subject to the provision by such
Indemnified Party of an undertaking to reimburse the amounts so
advanced in the event of a final determination by a court of
competent jurisdiction that such Indemnified Party is not
entitled thereto. Promptly after receipt by an Indemnified Party
of notice of the assertion (an "Assertion") of any claim or the
commencement of any action against him in respect to which
indemnity or reimbursement may be sought against Parent, the
Company, the Surviving Corporation or a Subsidiary of the Company
or the Surviving Corporation ("Indemnitors") hereunder, such
Indemnified Party shall notify any Indemnitor in writing of the
Assertion, but the failure to so notify any Indemnitor shall not
relieve any Indemnitor of any liability it may have to such
Indemnified Party hereunder except to the extent that such
failure shall have materially and irreversibly prejudiced
Indemnitor in defending against such Assertion. Indemnitors
shall be entitled to participate in and, to the extent
Indemnitors elect by written notice to such Indemnified Party
within 30 days after receipt by any Indemnitor of notice of such
Assertion, to assume the defense of such Assertion, at their own
expense, with counsel chosen by Indemnitors and reasonably
satisfactory to such Indemnified Party. Notwithstanding that
Indemnitors shall have elected by such written notice to assume
the defense of any Assertion, such Indemnified Party shall have
the right to participate in the investigation and defense
thereof, with separate counsel chosen by such Indemnified Party,
but in such event the fees and expenses of such counsel shall be
paid by such Indemnified Party unless such separate counsel is
required due to a conflict of interest, in which case the
Indemnitors shall be responsible for the fees and expenses of one
separate counsel for all such Indemnified Parties. No
Indemnified Party shall settle any Assertion without the prior
written consent of Parent, nor shall Parent settle any Assertion
without either (i) the written consent of all Indemnified Parties
against whom such Assertion was made, or (ii) obtaining a general
release from the party making the Assertion for all Indemnified
Parties as a condition of such settlement. The provisions of
this Section 5.9 are intended for the benefit of, and shall be
enforceable by, the respective Indemnified Parties.
Section 5.10 Conversion of Non-Voting Common Stock.
The Company agrees to acquiesce in the two conditions contained
in the ICC's decision in Finance Docket No. 32133 served on
March 7, 1995, subject to the consummation of the Offer. The
Company agrees to cooperate with Parent, and join in any filings
or submissions to the ICC, in connection with obtaining the ICC
Final Approval; provided, however, that notwithstanding the
foregoing, prior to consummation of the Offer, neither party
shall be deemed to waive any rights under Section 9 of the
Stockholders Agreement with respect to any conditions in the ICC
Final Approval. On or after April 6, 1995 (provided no stays
have been entered by any court or by the ICC prior to such time
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in connection with Parent's application with the ICC for an order
authorizing the common control of the rail subsidiaries of Parent
and the Company) or on such later date that the parties shall
receive the ICC Final Approval, and provided that Purchaser shall
have consummated the Offer or, if the Offer shall not have been
consummated, the provisions of Section 9 of the Stockholders
Agreement relating to the conditions of the ICC Final Approval
shall have been satisfied, the Company shall, not later than the
next business day immediately following the receipt of the
request of Parent or the Purchaser, accompanied by delivery to
the Company's transfer agent of certificates representing
Purchaser's shares of Non-Voting Common Stock, convert
Purchaser's shares of Non-Voting Common Stock into shares of
Company Common Stock and appoint two Parent designees to the
Board of Directors of the Company.
Section 5.11 ICC Determination. The Company agrees to
support, and if requested by Parent, to join in, the application
of Parent to the ICC requesting a determination that the terms of
the Merger are just and reasonable or, alternatively, a
declaratory order of the ICC that no such determination is
required, and the Company agrees to take such further action as
is necessary or desirable to obtain such determination or order.
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation To
Effect the Merger. The respective obligation of each party to
effect the Merger shall be subject to the satisfaction on or
prior to the Closing Date of each of the following conditions:
(a) Stockholder Approval. This Agreement shall
have been approved and adopted by the requisite vote of the
holders of Company Common Stock, if required by applicable law
and the Restated Certificate of Incorporation, in order to
consummate the Merger;
(b) Statutes; Consents. No statute, rule, order,
decree or regulation shall have been enacted or promulgated by
any foreign or domestic government or any governmental agency or
authority of competent jurisdiction which prohibits the
consummation of the Merger and all foreign or domestic
governmental consents, orders and approvals required for the
consummation of the Merger and the transactions contemplated
hereby shall have been obtained and shall be in effect at the
Effective Time;
(c) Injunctions. There shall be no order or
injunction of a foreign or United States federal or state court
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or other governmental authority of competent jurisdiction in
effect precluding, restraining, enjoining or prohibiting
consummation of the Merger and there shall be no suit, action,
proceeding or investigation by a Governmental Entity seeking to
restrain, enjoin or prohibit the Merger; and
(d) Purchase of Shares in Offer. Parent, the
Purchaser or their affiliates shall have purchased shares of
Company Common Stock pursuant to the Offer.
Section 6.2 Conditions to Parent's Obligation to
Effect the Merger. The obligation of Parent to effect the Merger
shall be subject to the ICC having made a determination that the
terms of the Merger are just and reasonable or having issued a
declaratory order that no such determination is required.
ARTICLE VII
TERMINATION
Section 7.1 Termination. Anything herein or elsewhere
to the contrary notwithstanding, this Agreement may be terminated
and the Merger contemplated herein may be abandoned at any time
prior to the Effective Time, whether before or after stockholder
approval thereof:
(a) By the mutual consent of the Board of
Directors of Parent and the Board of Directors of the Company.
(b) By either of the Board of Directors of the
Company or the Board of Directors of Parent:
(i) if shares of Company Common Stock shall
not have been purchased pursuant to the Offer on or prior to
June 30, 1995; provided, however, that the right to
terminate this Agreement under this Section 7.1(b)(i) shall
not be available to any party whose failure to fulfill any
material obligation under this Agreement has been the cause
of, or resulted in, the failure of Parent or the Purchaser,
as the case may be, to purchase shares of Company Common
Stock pursuant to the Offer on or prior to such date; or
(ii) if any Governmental Entity shall have
issued an order, decree or ruling or taken any other action
(which order, decree, ruling or other action the parties
hereto shall use their reasonable efforts to lift), in each
case permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement
and such order, decree, ruling or other action shall have
become final and non-appealable.
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(c) By the Board of Directors of the Company:
(i) if, prior to the purchase of shares of
Company Common Stock pursuant to the Offer, the Board of
Directors of the Company shall have (A) withdrawn, or
modified or changed in a manner adverse to Parent or the
Purchaser its approval or recommendation of the Offer, this
Agreement or the Merger in order to approve and permit the
Company to execute a definitive agreement relating to a
Takeover Proposal, and (B) determined, based on an opinion
of outside legal counsel to the Company, that the failure to
take such action as set forth in the preceding clause (A)
would likely result in a breach of the Board of Directors'
fiduciary duties under applicable law; or
(ii) if, prior to the purchase of Company
Common Stock pursuant to the Offer, Parent or the Purchaser
breaches or fails in any material respect to perform or
comply with any of its material covenants and agreements
contained herein or breaches its representations and
warranties in any material respect; or
(iii) if Parent or the Purchaser shall have
terminated the Offer, or the Offer shall have expired,
without Parent or the Purchaser, as the case may be,
purchasing any shares of Company Common Stock pursuant
thereto; provided that the Company may not terminate this
Agreement pursuant to this Section 7.1(c)(iii) if the
Company is in material breach of this Agreement; or
(iv) if, due to an occurrence that if
occurring after the commencement of the Offer would result
in a failure to satisfy any of the conditions set forth in
Annex A hereto, Parent, the Purchaser or any of their
affiliates shall have failed to commence the Offer on or
prior to five business days following the date of the
initial public announcement of the Offer; provided, that the
Company may not terminate this Agreement pursuant to this
Section 7.1(c)(iv) if the Company is in material breach of
this Agreement.
(d) By the Board of Directors of Parent:
(i) if, due to an occurrence that if
occurring after the commencement of the Offer would result
in a failure to satisfy any of the conditions set forth in
Annex A hereto, Parent, the Purchaser, or any of their
affiliates shall have failed to commence the Offer on or
prior to five business days following the date of the
initial public announcement of the Offer; provided that
Parent may not terminate this Agreement pursuant to this
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Section 7.1(d)(i) if Parent is in material breach of this
Agreement; or
(ii) if (A) prior to the purchase of shares
of Company Common Stock pursuant to the Offer, the Board of
Directors of the Company shall have withdrawn, or modified
or changed (including by amendment of the Schedule 14D-9) in
a manner adverse to Parent or the Purchaser its approval or
recommendation of the Offer, this Agreement or the Merger or
shall have recommended a Takeover Proposal, or shall have
executed an agreement in principle (or similar agreement) or
definitive agreement providing for a Takeover Proposal or
other business combination with a person or entity other
than Parent, the Purchaser or their affiliates (or the Board
of Directors of the Company resolves to do any of the
foregoing), or (B) it shall have been publicly disclosed or
Parent or the Purchaser shall have learned that any person,
entity or "group" (as that term is defined in Section
13(d)(3) of the Exchange Act) (an "Acquiring Person"), other
than Parent or its affiliates or any group of which any of
them is a member, shall have acquired beneficial ownership
(determined pursuant to Rule 13d-3 promulgated under the
Exchange Act) of more than 30% of any class or series of
capital stock of the Company (including the Shares), through
the acquisition of stock, the formation of a group or
otherwise, or shall have been granted an option, right, or
warrant, conditional or otherwise, to acquire beneficial
ownership of more than 30% of any class or series of capital
stock of the Company (including the Shares); or
(iii) if Parent or the Purchaser, as the
case may be, shall have terminated the Offer, or the Offer
shall have expired without Parent or the Purchaser, as the
case may be, purchasing any shares of Company Common Stock
thereunder, provided that Parent may not terminate this
Agreement pursuant to this Section 7.1(d)(iii) if it or the
Purchaser has failed to purchase shares of Company Common
Stock in the Offer in violation of the material terms
thereof.
Section 7.2 Effect of Termination. In the event of
the termination of this Agreement as provided in Section 7.1,
written notice thereof shall forthwith be given to the other
party or parties specifying the provision hereof pursuant to
which such termination is made, and this Agreement shall
forthwith become null and void, and there shall be no liability
on the part of the Parent, the Purchaser or the Company except
(A) for fraud or for material breach of this Agreement and (B) as
set forth in Sections 8.1 and 8.2 hereof.
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ARTICLE VIII
MISCELLANEOUS
Section 8.1 Fees and Expenses. (a) Except as
contemplated by this Agreement, including Section 8.1(b) hereof,
all costs and expenses incurred in connection with this Agreement
and the consummation of the transactions contemplated hereby
shall be paid by the party incurring such expenses.
(b) If (w) the Board of Directors of the Company
shall terminate this Agreement pursuant to Section 7.1(c)(i)
hereof, (x) the Board of Directors of Parent shall terminate this
Agreement pursuant to Section 7.1(d)(ii) hereof, (y) the Board of
Directors of the Company shall terminate this Agreement pursuant
to Section 7.1(c) (iii) or 7.1(c)(iv) or the Board of Directors
or Parent shall terminate this Agreement pursuant to Section
7.1(d)(iii) and within one (1) year of any such termination under
this clause (y), a Person shall acquire or beneficially own a
majority of the then outstanding shares of Company Common Stock
or shall have obtained representation on the Company's Board of
Directors or shall enter into a definitive agreement with the
Company with respect to a Takeover Proposal or similar business
combination or (z) the Board of Directors of Parent shall
terminate this Agreement pursuant to Section 7.1(d)(i) due to
(I) a material breach of the representations and warranties of
the Company set forth in this Agreement or (II) a material breach
of, or failure to perform or comply with, any material
obligation, agreement or covenant contained in this Agreement,
including but not limited to the covenants contained in Section
5.1 hereof, by the Company, then in any such case as described in
clause (w), (x), (y) or (z) (each such case of termination being
referred to as a "Trigger Event"), the Company agrees that it
shall promptly assume and pay, or reimburse Parent for, all
reasonable fees and expenses incurred, or to be incurred by
Parent, the Purchaser and their affiliates (including the fees
and expenses of legal counsel, accountants, financial advisors,
other consultants, financial printers and financing sources) in
connection with the Offer, the Merger and the consummation of the
transactions contemplated by this Agreement, in an amount not to
exceed $3 million in the aggregate.
Section 8.2 Finders' Fees. (a) Except for
Blackstone, a copy of whose engagement agreement has been or will
be provided to Parent and whose fees will be paid by the Company,
there is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act
on behalf of the Company or any of its Subsidiaries who might be
entitled to any fee or commission from the Company or any of its
Subsidiaries upon consummation of the transactions contemplated
by this Agreement.
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(b) Except for CS First Boston Corporation, a
copy of whose engagement agreement has been or will be provided
to the Company and whose fees will be paid by Parent, there is no
investment banker, broker, finder or other intermediary which has
been retained by or is authorized to act on behalf of Parent or
any of its Subsidiaries who might be entitled to any fee or
commission from Parent or any of its Subsidiaries upon
consummation of the transactions contemplated by this Agreement.
Section 8.3 Amendment and Modification. Subject to
applicable law, this Agreement may be amended, modified and
supplemented in any and all respects, whether before or after any
vote of the stockholders of the Company contemplated hereby, by
written agreement of the parties hereto, by action taken by their
respective Boards of Directors (which in the case of the Company
shall include approvals as contemplated in Section 1.3(c)), at
any time prior to the Closing Date with respect to any of the
terms contained herein; provided, however, that after the
approval of this Agreement by the stockholders of the Company, no
such amendment, modification or supplement shall reduce or change
the Merger Consideration.
Section 8.4 Nonsurvival of Representations and
Warranties. None of the representations and warranties in this
Agreement or in any schedule, instrument or other document
delivered pursuant to this Agreement shall survive the Effective
Time.
Section 8.5 Notices. All notices and other
communications hereunder shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or
sent by an overnight courier service, such as Federal Express, to
the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to Parent or the Purchaser, to:
Union Pacific Corporation
Martin Tower, Eighth and
Eaton Avenues
Bethlehem, Pennsylvania 18018
Attention: Chairman and Chief
Executive Officer
Telephone No.: (610) 861-3200
Telecopy No.: (610) 861-3111
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with a copy to:
Paul T. Schnell, Esq.
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Telephone No.: (212) 735-3000
Telecopy No.: (212) 735-2001
and
(b) if to the Company, to:
Chicago and North Western
Transportation Company
165 North Canal Street
Chicago, Illinois 60606
Attention: Chairman and Chief
Executive Officer
Telephone No.: (312) 559-6172
Telecopy No.: (312) 559-7169
with a copy to:
Paul J. Miller, Esq.
Sonnenschein, Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606-6404
Telephone No.: (312) 876-8000
Telecopy No.: (312) 876-7934
Section 8.6 Interpretation. When a reference is made
in this Agreement to Sections, such reference shall be to a
Section of this Agreement unless otherwise indicated. Whenever
the words "include", "includes" or "including" are used in this
Agreement they shall be deemed to be followed by the words
"without limitation". The phrase "made available" in this
Agreement shall mean that the information referred to has been
made available if requested by the party to whom such information
is to be made available. The phrases "the date of this
Agreement", "the date hereof", and terms of similar import,
unless the context otherwise requires, shall be deemed to refer
to March 16, 1995. As used in this Agreement, the term
"affiliate(s)" shall have the meaning set forth in Rule l2b-2 of
the Exchange Act.
Section 8.7 Counterparts. This Agreement may be
executed in two or more counterparts, all of which shall be
considered one and the same agreement and shall become effective
when two or more counterparts have been signed by each of the
parties and delivered to the other parties, it being understood
that all parties need not sign the same counterpart.
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Section 8.8 Entire Agreement; No Third Party
Beneficiaries; Rights of Ownership. This Agreement and the
Confidentiality Agreement (including the documents and the
instruments referred to herein and therein except to the extent
superseded hereby): (a) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter
hereof, and (b) except as provided in Section 5.9 are not
intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
Section 8.9 Severability. If any term, provision,
covenant or restriction of this Agreement is held by a court of
competent jurisdiction or other authority to be invalid, void,
unenforceable or against its regulatory policy, the remainder of
the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no
way be affected, impaired or invalidated.
Section 8.10 Governing Law. This Agreement shall be
governed and construed in accordance with the laws of the State
of Delaware without giving effect to the principles of conflicts
of law thereof.
Section 8.11 Assignment. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of
law or otherwise) without the prior written consent of the other
parties, except that the Purchaser may assign, in its sole
discretion, any or all of its rights, interests and obligations
hereunder to Parent or to any direct or indirect wholly owned
Subsidiary of Parent. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and
assigns.
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IN WITNESS WHEREOF, Parent, the Purchaser and the
Company have caused this Agreement to be signed by their
respective officers thereunto duly authorized as of the date
first written above.
UNION PACIFIC CORPORATION
By:/s/ Drew Lewis
Name:
Title:
UP RAIL, INC.
By:/s/ Carl von Bernuth
Name:
Title:
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY
By:/s/ Robert Schmiege
Name: Robert Schmiege
Title: Chairman, President and
Chief Executive Officer
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ANNEX A
CONDITIONS TO THE TENDER OFFER
Notwithstanding any other provisions of the Offer, and
in addition to (and not in limitation of) the Purchaser's rights
to extend and amend the Offer at any time in its sole discretion
(subject to the provisions of the Merger Agreement), the
Purchaser shall not be required to accept for payment or, subject
to any applicable rules and regulations of the SEC, including
Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's
obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for, and may delay
the acceptance for payment of or, subject to the restriction
referred to above, the payment for, any tendered Shares, and may
terminate the Offer as to any Shares not then paid for, if
(i) the Minimum Condition has not been satisfied prior to the
expiration of the Offer, (ii) the Interstate Commerce
Commission's ("ICC") approval of Parent's application for an
order authorizing the common control, within the meaning of the
Interstate Commerce Act, of the rail subsidiaries of the Company
and Parent shall not have become final and effective prior to the
expiration of the Offer, or (iii) at any time on or after
March 16, 1995 and prior to the acceptance for payment of any
such Shares, any of the following events shall occur or shall be
determined by the Purchaser to have occurred:
(a) there shall have been instituted or pending
any action, proceeding, application, claim or suit, or any
statute, rule, regulation, judgment, order or injunction
promulgated, entered, enforced, enacted, proposed, issued or
applicable to the Offer or the Merger by any domestic or foreign
federal, state or local governmental regulatory or administrative
agency or authority or court or legislative body or commission
which directly or indirectly (l) prohibits or makes illegal, or
imposes any material adverse limitations on, Parent's or the
Purchaser's ownership or operation of all or a material portion
of the businesses or assets of the Company and its Subsidiaries,
taken as a whole, or compels Parent or the Purchaser or their
respective Subsidiaries and affiliates to dispose of or hold
separate any material portion of the business or assets of the
Company or its Subsidiaries, in each case taken as a whole,
(2) prohibits, or makes illegal the acceptance for payment,
payment for or purchase of Shares or the consummation of the
Offer or the Merger, (3) restricts the ability of the Purchaser,
or renders the Purchaser unable, to accept for payment, pay for
or purchase some or all of the Shares, (4) imposes material
limitations on the ability of the Purchaser or Parent effectively
to exercise full rights of ownership of the Shares, including,
without limitation, the right to vote the Shares purchased by it
on all matters properly presented to the Company's stockholders,
(5) prohibits, restricts, results in a delay, or imposes material
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limitations on the ability of Purchaser to convert the Non-Voting
Shares into Shares, or (6) otherwise materially adversely affects
the financial condition, businesses or results of operations of
the Company and its Subsidiaries, taken as a whole; provided that
in each such case Parent shall have used all reasonable efforts
to cause any such judgment, order or injunction to be vacated or
lifted;
(b) the representations and warranties of the
Company set forth in the Merger Agreement shall not have been
true and correct when made, except (i) those representations and
warranties that address matters only as of a particular date are
true and correct as of such date, and (ii) where the failure of
such representations and warranties to have been true and correct
when made (without giving effect to any limitation as to
"materiality" or "material adverse effect" set forth therein),
does not have, and is not likely to have, individually or in the
aggregate, a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole, or the Company shall have
breached or failed in any material respect to perform or comply
with any material obligation, agreement or covenant required by
the Merger Agreement to be performed or complied with by it;
(c) (i) it shall have been publicly disclosed or
Parent or the Purchaser shall have otherwise learned that any
person, entity or "group" (as defined in Section 13(d)(3) of the
Exchange Act), other than Parent or its affiliates or any group
of which any of them is a member, shall have acquired beneficial
ownership (determined pursuant to Rule 13d-3 promulgated under
the Exchange Act) of more than 30% of the outstanding shares of
any class or series of capital stock of the Company (including
the Shares), through the acquisition of stock, the formation of a
group or otherwise, or shall have been granted an option, right
or warrant, conditional or otherwise, to acquire beneficial
ownership of more than 30% of any class or series of capital
stock of the Company (including the Shares); or (ii) any person
or group shall have entered into a definitive agreement or
agreement in principle with the Company with respect to a
Takeover Proposal or other business combination with the Company;
(d) the Company's Board of Directors shall have
withdrawn, or modified or changed in a manner adverse to Parent
or the Purchaser (including by amendment of the Schedule 14D-9)
its recommendation of the Offer, the Merger Agreement, or the
Merger, or recommended another proposal or offer, or shall have
resolved to do any of the foregoing; or
(e) the Merger Agreement shall have been
terminated in accordance with its terms;
which in the sole judgment of Parent or the Purchaser, in any
such case, and regardless of the circumstances (including any
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action or inaction by Parent or the Purchaser giving rise to such
condition) makes it inadvisable to proceed with the Offer or with
such acceptance for payment or payments.
The foregoing conditions are for the sole benefit of
the Purchaser and Parent and may be waived by Parent or the
Purchaser, in whole or in part at any time and from time to time
in the sole discretion of Parent or the Purchaser. The failure
by Parent or the Purchaser at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right
and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
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COMPANY STOCK OPTION AGREEMENT
COMPANY STOCK OPTION AGREEMENT, dated as of March 16,
1995, by and between UP RAIL, INC., a Utah corporation (the
"Purchaser"), and CHICAGO AND NORTH WESTERN TRANSPORTATION
COMPANY, a Delaware corporation (the "Company").
WHEREAS, concurrently with the execution and delivery
of this Agreement, the Purchaser, Union Pacific Corporation, a
Utah corporation and the indirect parent of the Purchaser
("Parent"), and the Company are entering into an Agreement and
Plan of Merger (the "Merger Agreement") providing, among other
things, for the acquisition by Parent of the Company through a
tender offer by the Purchaser (the "Offer") for all of the
outstanding shares of Common Stock, $.01 par value per Share, of
the Company (the "Shares") and the subsequent merger (the
"Merger") of the Purchaser with and into the Company;
NOW, THEREFORE, in consideration of the respective
representations, warranties, covenants and agreements set forth
herein, the adequacy of which is hereby acknowledged, and
intending to be legally bound hereby, the parties hereto agree as
follows:
1. Grant of Option. The Company hereby grants the
Purchaser an irrevocable option (the "Option") at its election to
purchase at the price per Share paid by the Purchaser in the
Offer (the "Option Price") such number of authorized but unissued
Shares (the "Option Shares") as, when added to the number of
Shares owned by Parent and its affiliates immediately prior to
such purchase, would result in Parent and its affiliates owning
<PAGE>
immediately thereafter 90.01% of the then outstanding Shares
(assuming conversion of the Purchaser's non-voting shares of
Common Stock of the Company into Shares); provided, however, that
the Option is subject to the conditions that (a) the Purchaser
shall have accepted all Shares validly tendered pursuant to the
Offer for payment; (b) the Purchaser, together with its
affiliates, shall own at least 85% and less than 90.01% of the
number of Shares then outstanding (assuming conversion of the
Purchaser's non-voting shares of Common Stock of the Company into
Shares); and (c) as a result of the exercise of the Option the
Purchaser and its affiliates shall own at least 90.01% of the
outstanding Shares (assuming conversion of the Purchaser's
non-voting shares of Common Stock of the Company into Shares).
2. Closing. Provided that the Purchaser exercises
the Option, and that the conditions thereto in Section 1 above
are satisfied, the purchase and sale hereunder shall occur at a
closing (the "Closing") as promptly as practicable following the
purchase of Shares by the Purchaser pursuant to the Offer.
3. Expiration of Option. The Option shall expire at
the Effective Time (as defined in the Merger Agreement).
4 Payment of Option Price and Delivery of
Certificates for Shares. At the Closing, (a) the Company will
deliver to the Purchaser a certificate or certificates
representing the number of Option Shares being purchased upon
exercise of the Option, registered in the name of the Purchaser
or such subsidiary thereof as the Purchaser shall designate, and
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(b) in full payment for the Option Shares, the Purchaser will
deliver to the Company the aggregate price for the Option Shares
being purchased by wire transfer of immediately available funds
or certified or bank check.
5. Representations and Warranties of the Company.
The Company represents and warrants to the Purchaser that (a) the
Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the
corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby; (b) the
execution and delivery of this Agreement by the Company and the
consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of
the Company and no other proceedings on the part of the Company
are necessary to authorize this Agreement or any of the
transactions contemplated hereby; and (c) this Agreement has been
duly executed and delivered by the Company and, assuming due
authorization, execution and delivery of this Agreement by the
Purchaser, constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its
terms.
6. Representations and Warranties of the Purchaser.
The Purchaser represents and warrants to the Company that (a) the
Purchaser is a corporation duly organized, validly existing and
in good standing under the laws of the State of Utah and has the
corporate power and authority to enter into this Agreement and to
3
<PAGE>
consummate the transactions contemplated hereby; (b) the
execution and delivery of this Agreement by the Purchaser and the
consummation by the Purchaser of the transactions contemplated
hereby have been duly authorized by all necessary corporate
action on the part of the Purchaser and no other proceedings on
the part of the Purchaser are necessary to authorize this
Agreement or any of the transactions contemplated hereby; and
(c) this Agreement has been duly executed and delivered by the
Purchaser and, assuming due authorization, execution and delivery
of this Agreement by the Company, constitutes a valid and binding
obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms.
7. Filings and Consents. The Purchaser and the
Company each will use its best efforts to make all filings with,
and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions
contemplated by this Agreement.
8. Covenant of the Company. The Company shall not
engage in any action or omit to take any action which would have
the effect of preventing or disabling the Company from delivering
the Option Shares to the Purchaser upon exercise of the Option or
otherwise performing its obligations under this Agreement.
9. Parties in Interest; Assignment. No party to this
Agreement may assign any of its rights or obligations under this
Agreement without the prior written consent of the other party
hereto, except that the rights and obligations of the Purchaser
4
<PAGE>
hereunder may be assigned by the Purchaser to any direct or
indirect wholly-owned subsidiary or Parent of the Purchaser, but
no such assignment shall relieve the Purchaser of its obligations
hereunder. This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the successors and permitted
assigns of the parties hereto.
10. Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any of the
provisions of this Agreement were not performed in accordance
with the terms hereof or were otherwise breached and that each
party shall be entitled to specific performance of the terms
hereof, in addition to any other remedy at law or equity.
11. Entire Agreement; Amendment. This Agreement, and
the documents referred to herein or delivered pursuant hereto
which form a part hereof, contain the entire understanding of the
parties hereto with respect to its subject matter. There are no
restrictions, agreements, promises, warranties, covenants or
undertakings with respect to the subject matter hereof other than
those expressly set forth herein or therein. This Agreement
supersedes all prior agreements and understandings between the
parties with respect to its subject matter. This Agreement may
not be amended except by an instrument in writing duly executed
on behalf of both parties.
12. Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall
be deemed given if delivered personally or by telex or telegram
5
<PAGE>
or mailed by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties as follows:
(a) If to the Company:
Chicago and North Western
Transportation Company
165 North Canal Street
Chicago, IL 60606
Attention: Chairman and Chief
Executive Officer
with copies to:
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, IL 60606
Attention: Paul J. Miller, Esq.
(b) If to the Purchaser:
Union Pacific Corporation
Martin Tower
Eighth & Eaton Avenues
Bethlehem, PA 18018
Attention: Chairman and Chief
Executive Officer
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: Paul T. Schnell, Esq.
or to such other address as either party may have furnished to
the other in writing in accordance herewith, except that notices
of changes of address shall only be effective upon receipt.
13. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of
6
<PAGE>
Delaware without giving effect to the provisions thereof relating
to conflicts of law.
14. Severability of Provisions. If any term,
provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants
and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
15. Further Assurances. From time to time, at the
other party's request and without further consideration, the
Company and the Purchaser will execute and deliver all such
further documents and instruments and take all such further
action as may be necessary in order to consummate the
transactions contemplated hereby, including, without limitation,
to vest in the Purchaser good title to the Option Shares
purchased hereunder.
16. Descriptive Headings. The headings contained in
this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this
Agreement.
17. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original but
both of which together shall constitute one and the same
document.
7
<PAGE>
IN WITNESS WHEREOF, the Purchaser and the Company have
caused this Agreement to be signed by their respective officers
thereunto duly authorized as of the date first written above.
UP RAIL, INC.
By /s/ Carl von Bernuth
Name:
Title:
CHICAGO AND NORTH WESTERN
TRANSPORTATION COMPANY
By /s/ Robert Schmiege
Name: Robert Schmiege
Title: Chairman, President and
Chief Executive Officer
8
<PAGE>
James Martin Retention Arrangement
In connection with the retention of Mr. James Martin as
Executive Vice President - Operations of the Company, effective
May 2, 1994, Mr. Martin, received a payment of $125,000 at the
time of his retention, and, based on the recommendation at that
time of the Chief Executive Officer, is expected to receive in
addition to his normal compensation, a service bonus of $125,000
when he retires.<PAGE>
Market for the Registrant's Common Equity and Related Stockholders Matters
Stock Listing
The company's common stock is traded on the New York, Midwest,
Philadelphia and Boston Stock Exchanges under the symbol CNW.
High Low
Fourth quarter 1994 20-7/8 18-1/4
Third quarter 1994 24-1/4 19-3/8
Second quarter 1994 25 21-5/8
First quarter 1994 28-1/8 24-1/8
Dividends
No dividends have been paid on the common stock during 1994 (see Note
6(e) to Consolidated Financial Statements).
Shareholders
As of December 31, 1994, there were 1,070 holders of record.
1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS: 1994 - 1993
In 1994, operating revenues increased by $86.6 million due to increased
traffic in all of the Company's business groups. Western coal shipments
increased to 86.7 million tons, a 16.1% increase, while core railroad coal
shipments, including western coal moving to Midwest destinations, increased
15.9%. Traffic in the Auto, Steel and Chemicals and Intermodal groups each
increased in excess of 7%. Agricultural Commodities traffic increased 3.7%
despite the poor 1993 harvest caused by Midwest flooding. A record harvest
occurred in 1994, leaving an abundance of high-quality corn in the Company's
service territory.
Operating expenses for the year increased $69.8 million primarily due to
increased costs related to the additional traffic and congestion on both the
core railroad and the Company's subsidiary, Western Railroad Properties,
Incorporated ("WRPI"), caused by capacity constraints on WRPI. The Company
continued programs to enhance productivity in 1994, which has allowed its
operating ratio to remain stable at 80.0% despite the increased costs related
to congestion. The Company is expanding WRPI's train handling capacity
through a $80 million capital expenditure program during 1994 and 1995. Under
this program, the Company placed 20.6 miles of double-track in service prior
to year-end, which is already providing relief from congestion. The Company
has acquired $279 million of equipment in 1994 under operating leases and
plans to acquire an additional $185 million in 1995 to efficiently handle
increased traffic volumes on WRPI and the core railroad.
Interest expense decreased $7.9 million in 1994 primarily due to the
repayment of $73 million of debt and a negotiated interest rate reduction.
Operating Revenues
As reflected in the following table, freight revenues were $1,019.8
million in 1994, an increase of $87.1 million (or 9.3%) compared with 1993.
Freight rates in 1994 decreased for the Energy business group due to contracts
that were entered into or renewed at rates lower than those previously
realized.<PAGE>
2
Revenue Comparison by Business Group)
(dollars in millions) 1994 1993
Percent Percent Percent
change of net of net
Net from freight Net freight
revenues 1993 revenues revenues revenues
Energy (Coal):
WRPI $ 225.1 9.9 % 22.1% $ 204.9 22.0%
Core railroad 127.8 15.3 12.5 110.8 11.9
Agricultural Commodities 189.8 6.3 18.6 178.5 19.1
Automotive, Steel
and Chemicals 208.9 10.6 20.5 188.9 20.2
Intermodal 125.2 7.7 12.3 116.3 12.5
Consumer Products 143.0 7.3 14.0 133.3 14.3
Net freight revenues $1,019.8 9.3 % 100.0% $ 932.7 100.0%
Commuter 82.4 (3.2) 85.1
Other 27.6 8.7 25.4
Operating revenues $1,129.8 8.3 % $1,043.2
Load Comparison by Business Group
(loads in thousands) 1994 1993
Percent
Change Percent Percent
Total from of total Total of total
loads 1993 loads loads loads
Energy (Coal):
WRPI 824.0 16.2% 32.1% 708.9 30.1%
Core railroad 1/ 83.3 8.7 3.2 76.6 3.3
Agricultural Commodities 315.9 3.7 12.3 304.5 12.9
Automotive, Steel
and Chemicals 358.1 7.8 14.0 332.3 14.1
Intermodal 765.4 7.2 29.9 714.0 30.4
Consumer
Products 217.1 0.8 8.5 215.3 9.2
Total loads 2,563.8 9.0 100.0% 2,351.6 100.0%
1/ Excludes 284,400 and 240,600 loads in 1994 and 1993, respectively, which
originated on WRPI (and are treated as WRPI loads) and moved over the core
railroad to midwestern utilities.<PAGE>
3
Energy (Coal) - Coal transportation, primarily to utility customers, is
the Company's largest single revenue-producing activity. WRPI volume and
revenues increased due to new contracts and increased coal originations for
existing customers handled from the southern Powder River Basin in Wyoming
(the "Powder River Basin"). Core railroad coal traffic, including western
coal moving over the core railroad to midwestern utilities, increased 15.9%,
primarily due to increased WRPI originations. Of the total coal loads handled
in 1994, 90.8% originated on WRPI compared with 90.7% in 1993. Western coal
growth capacity is being enhanced through a $80 million capital program during
1994 and 1995 to increase train handling capacity and improve operations.
This expansion is necessary to meet the increasing demand for low-sulfur coal
from the Powder River Basin. Coal shipments and revenue for 1995 are expected
to be higher than 1994.
Agricultural Commodities - Volume and revenues increased despite the poor
1993 harvest caused by midwestern flooding. Shipments of raw grains increased
due to an improved soybean crop. Corn shipments decreased due to the poor
1993 harvest; however, barley and wheat were used as replacements in the corn
feeder market, partially offsetting the decrease in corn. Potash and sulfur
shipments increased due to additional business diverted from the Soo Line
because of its strike and to strong advance sales of fertilizer. Grain
shipments are expected to increase in 1995 due to a record 1994 corn harvest.
Automotive, Steel and Chemicals - Volume and revenues increased compared
with 1993. Automobile shipments increased due to higher production and market
share gains from General Motors' Janesville, Wisconsin, plant; increased
overhead volumes resulting from industry-wide increase in automobile
production and sales; and the resumption of shipments from Chrysler's
Belvidere, Illinois, plant, which was closed from May 1993 until November 1993
for model changeover. Metallic ore shipments increased as a result of new
business in 1994 and reduced shipments in 1993 due to a mine workers' strike;
the gain was partially offset by the loss of an ore contract. Petroleum and
inorganic chemicals shipments increased compared to 1993 due to increased
traffic resulting from the Soo Line strike and to increased shipments of
asphalt resulting from increased production and market share gains.
Industrial chemical shipments increased due to increased shipments of soda ash
from various Wyoming origins. Volume and revenues in 1995 are expected to
remain flat.
Intermodal - Volume and revenues increased due to increased traffic from
existing international steamship and TOFC (trailer-on-flat-car) customers.
Volume increases were slightly higher than revenue increases as a result of
traffic moving at lower rates due to market pressures. Volume and revenue
increases are expected to continue in 1995.
Consumer Products - Volume and revenues increased compared with 1993.
Fresh fruit and vegetables increased due to a better crop of Idaho potatoes,
which resulted in more rail shipments in 1994 than in 1993. Volume and
revenue for pulp mill fibers increased due to increased shipments of scrap
paper and logs; revenue increased at a greater rate than loads due to low
rated traffic lost to a competitor in 1993 being replaced by new shipments
having a longer haul and higher revenues. Volume and revenue increases are
expected to continue in 1995.<PAGE>
4
Operating Expenses
Operating expenses in 1994 were $69.8 million (or 8.4%) higher than 1993
primarily due to increased traffic volumes and congestion, which resulted in
increased spending for employee compensation and benefits, fuel, materials and
purchased services and car hire. The Company's capital program to expand WRPI
train handling capacity is expected to alleviate this congestion and improve
operating efficiency.
Operating Expense Comparison
Percent change
(dollars in millions) 1994 from 1993 1993
Compensation and benefits $416.8 7.0 % $389.5
Diesel fuel 85.2 21.5 70.1
Material & purchased services 82.7 9.7 75.4
Hire of freight equipment 72.3 16.4 62.1
Other rents 75.6 5.1 71.9
Depreciation 73.8 7.3 68.8
Casualties 44.9 6.1 42.3
Other* 47.8 (2.4) 49.0
Operating expenses before
special charges $899.1 8.4 $829.1
Special charges 4.8 (4.0) 5.0
Total operating expenses $903.9 8.4 $834.1
*Other includes property taxes, utilities, vehicle operating costs, FRA and
railroad association fees and other general expenses.
Compensation and benefits expense increased due to new employees hired
for train and engine service, increased overtime related to volume increases
and congestion, and training costs for new personnel. Fringe benefit costs
increased due to an increase in the health and welfare insurance rate and
increased profit sharing and management incentive compensation. Payroll taxes
increased due to the increased number of employees.
Diesel fuel expense increased due to a 17.1% increase in consumption and
a 3.7% increase in the average price per gallon. Consumption increased due to
a 15.4% increase in revenue ton miles and less efficient operations due to
traffic congestion.
Material and purchased services increased due to reduced billings for
repairing foreign line cars and increased maintenance, crew-related costs and
intermodal contractor fees due to increased traffic volumes and congestion.
Hire of freight equipment increased due to increased traffic levels and
congestion. Other rents increased due to new locomotive leases, partially
offset by reduced computer rentals due to lease expirations and lower WRPI
contingent rent.
Depreciation increased due to increased traffic levels on WRPI where
track structure components are depreciated on the unit of production method
and increases in the depreciation base due to property additions.<PAGE>
5
During 1994, the Company accrued a $4.8 million special charge for
employee severance and related costs for an employee reduction program
covering management personnel. During 1993, the Company accrued a special
charge of $5.0 million for severance and related costs, relocation costs
related to the closing of a diesel shop and a management fee payable to one of
the Company's previous principal shareholders.
Other Income, Net
See Note 3 to Consolidated Financial Statements for a summary of other
income, net.
Interest Expense
1994 interest expense decreased $7.9 million compared with 1993 due to
the Company's refinancing of the Term and Standby Loans in September 1993, and
lower average debt levels, partially offset by increasing interest rates.
Included in interest expense is amortization of financing fees totaling $7.2
million in 1994 and $8.1 million in 1993.
Income Taxes
The income tax provision for 1994 increased due to increased pretax
income; the prior year included the impact of the increase in the federal
corporate tax rate on prior years' deferred taxes.
Due to the availability of approximately $132 million of net operating
losses and $43 million of investment tax credits, the Company does not
anticipate payment of significant amounts of income taxes until 1996. See
Note 2 to Consolidated Financial Statements.
RESULTS OF OPERATIONS: 1993 - 1992
In 1993, operating revenues increased $58.2 million, primarily due to a
23.1% increase in coal traffic volume. Increased coal revenues were partially
offset by significant losses of corn traffic due to substantial flooding in
the upper Midwest during June through September of 1993. Operating expenses,
excluding special charges, increased $48.3 million, reflecting the effects of
midwestern flooding and increased traffic levels. The Company believes the
net effect of reduced revenues and increased expenses related to the flooding
was approximately $14 million pretax.
The Company continued to improve its capital structure in 1993 through a
negotiated interest rate reduction for a portion of its senior secured debt
facilities through prepayments of debt, including the remaining outstanding
15.5% senior subordinated debentures and through the issuance of 1,371,265
shares of common stock in connection with a secondary stock offering.<PAGE>
6
Operating Revenues
As reflected in the following table, net freight revenues were $932.7
million in 1993, an increase of $59.9 million (or 6.9%). Revenues and volumes
compared with 1992 were higher in the Energy; Automotive, Steel and Chemicals;
and Intermodal business groups. Freight rates in 1993 decreased for the
Energy business group due to contracts that were entered into or renewed at
rates lower than those previously realized.
Revenue Comparison by Business Group
(dollars in millions) 1993 1992
Percent Percent Percent
change of net of net
Net from freight Net freight
revenues 1992 revenues revenues revenues
Energy (Coal):
WRPI $ 204.9 21.2 % 22.0% $169.0 19.4%
Core Railroad 110.8 14.5 11.9 96.8 11.1
Agricultural Commodities 178.5 (1.0) 19.1 180.3 20.7
Automotive, Steel
and Chemicals 188.9 6.1 20.2 178.0 20.4
Intermodal 116.3 4.6 12.5 111.2 12.7
Consumer Products 133.3 (3.1) 14.3 137.5 15.7
Net freight revenues $ 932.7 6.9 % 100.0% $872.8 100.0%
Commuter 85.1 (4.8) 89.4
Other 25.4 11.4 22.8
Operating revenues $1,043.2 5.9 % $985.0
Load Comparison by Business Group
(loads in thousands) 1993 1992
Percent
change Percent Percent
Total from of total Total of total
loads 1992 loads loads loads
Energy (Coal):
WRPI 708.9 27.8 % 30.1% 554.9 25.3%
Core Railroad 1/ 76.6 (7.8) 3.3 83.1 3.8
Agricultural Commodities 304.5 (5.0) 12.9 320.6 14.6
Automotive, Steel
and Chemicals 332.3 4.5 14.1 318.0 14.5
Intermodal 714.0 3.6 30.4 689.2 31.5
Consumer Products 215.3 (4.9) 9.2 226.4 10.3
Total loads 2,351.6 7.3 100.0% 2,192.2 100.0%
1/ Excludes 240,600 and 174,100 loads in 1993 and 1992, respectively, which
originated on WRPI (and are treated as WRPI loads) and moved over the core
railroad to midwestern utilities.<PAGE>
7
Energy (Coal) - WRPI volume and revenues increased due to new contracts
and increased coal originations for existing customers. The increases were
also partially due to lower than expected shipments in 1992 due to mild
weather. Core railroad coal traffic, including western coal moving over the
core railroad to midwestern utilities, increased 23.3% due to increased WRPI
originations. Of the total coal loads handled in 1993, 90.7% originated on
WRPI compared with 87.3% in 1992.
Agricultural Commodities - Volume and revenues decreased due to
midwestern flooding that reduced the quantity and quality of the corn harvest
in the Company's service territory. This decrease was partially offset by an
increase in fertilizer shipments required to replace soil nutrients lost due
to the flooding.
Automotive, Steel and Chemicals - Volume and revenues increased as a
result of increased automobile production; improved market share from General
Motors' Janesville, Wisconsin plant; increased demand and market share for
steel shipments from on-line mills; increased soda ash shipments to glass
producers and new plastics business. These increases were partially offset by
reduced traffic due to Chrysler's Belvidere, Illinois, assembly plant being
closed for model changeover during the latter half of 1993.
Intermodal - Volume and revenues increased due to growth from existing
customers. Volume increases were slightly higher than revenue increases as a
result of traffic moving at lower rates due to market pressures.
Consumer Products - Volume and revenues decreased primarily as a result
of business that was diverted to a competitor.
Operating Expenses
Operating expenses in 1993 were $23.3 million (or 2.9%) higher than 1992.
1993 operating expenses, before special charges, were $48.3 million (or 6.2%)
higher than 1992 primarily due to increased traffic volumes and the effects of
midwestern flooding, causing increased expense for employee compensation and
benefits, fuel and material and purchased services; as well as increased
environmental reserves.
Operating Expense Comparison
Percent change
(dollars in millions) 1993 from 1992 1992
Compensation and benefits $389.5 3.3 % $376.9
Diesel fuel 70.1 18.8 59.0
Material & purchased services 75.4 18.4 63.7
Hire of freight equipment 62.1 6.9 58.1
Other rents 71.9 (1.2) 72.8
Depreciation 68.8 6.0 64.9
Casualties 42.3 16.9 36.2
Other 49.0 (0.4) 49.2
Operating expenses before
special charges $829.1 6.2 $780.8
Special charges 5.0 NM 30.0
Total operating expenses $834.1 2.9 $810.8
NM - not meaningful.<PAGE>
8
Compensation and benefits expense, excluding special charges for employee
reductions and relocations, increased as a result of higher wage levels and
increased train crew costs due to traffic increases and midwestern flooding,
partially offset by a slight decline in the average number of employees.
Payroll taxes decreased due primarily to the elimination of the railroad
unemployment insurance repayment tax and a reduction in the number of
employees. Other fringe benefits increased due to increased health and
welfare costs and increased accruals for profit sharing and management
incentive compensation.
Diesel fuel expense increased due to a 12.8% increase in revenue ton
miles, less efficient operations due to midwestern flooding, severe winter
weather early in the year and a 0.9% increase in the average price per gallon.
Material and purchased services increased due to reduced billings for
repairing foreign line cars; increased joint facility expenses; and increased
maintenance and transportation expenses due to increased traffic volumes and
midwestern flooding.
Depreciation increased primarily due to increased traffic levels on WRPI
where track structure components are depreciated on the unit of production
method.
Casualties increased due to an increased charge for environmental
liability and a 1992 reduction in personal injury expense due to the favorable
settlement of a serious personal injury case.
During 1993, the Company accrued a special charge of $5.0 million for
severance and related costs, relocation costs related to the closing of a
diesel shop and a management fee payable to one of the Company's previous
principal shareholders. During 1992, the Company accrued a special charge of
$30.0 million for employee reductions related to the consolidation of its
customer service functions and the closing of a diesel shop.
Other Income, Net
See Note 3 to Consolidated Financial Statements for a summary of other
income, net.
Interest Expense
1993 interest expense decreased $20.7 million compared with 1992 due to a
recapitalization, lower average interest rates and reduced debt levels.
Interest expense included amortization of financing fees totaling $8.1 million
in 1993 and $8.7 million in 1992.
Income Taxes
The income tax provision for 1993 increased $31.9 million compared with
1992 primarily due to a $58.5 million increase in taxable income and an
increase in the federal corporate tax rate. Approximately $7.1 million of the
increase is related to the impact of the higher corporate rate on prior years'
deferred taxes.<PAGE>
9
Other Matters
The Company is a party to several proceedings before federal and state
regulatory agencies relating to environmental issues. The Company has been
named a potentially responsible party in several administrative proceedings
for the cleanup of various waste sites, including some Superfund sites. In
the opinion of management, based on the information currently available and
reserves provided for such costs, the ultimate liability resulting from these
environmental matters will not materially affect the results of operations or
financial position of the Company. See Note 8 to Consolidated Financial
Statements.
Liquidity
At December 31, 1994, the Company's working capital totaled a negative
$90.8 million, while cash and cash equivalents totaled $105.4 million. The
Company historically operates with negative working capital due to a higher
turnover rate for receivables than accounts payable. Consolidated
indebtedness is substantial in relation to its common shareholders' equity.
As of December 31, 1994, the Company had long-term indebtedness, including
current maturities, of $1.1 billion and common shareholders' equity of $316
million. The Company's ratio of debt to total capitalization decreased to
78.1% at December 31, 1994 from 84.2% at December 31, 1993.
The Company's cash requirements for financing activities are comprised of
interest and principal payments under its outstanding indebtedness. The
Company is required to make scheduled principal repayments of approximately
$95 million in 1995; $106 million in 1996; $93 million in 1997; $175 million
in 1998; $145 million in 1999; and additional amounts thereafter. WRPI's Loan
agreement requires accelerated debt payments subsequent to December 31, 1996
if there is excess cash flow as defined in the agreement.
The Company's cash requirements for investing activities are comprised of
capital expenditures, primarily for track improvements. During 1994, the
Company amended its credit agreement to eliminate a capital expenditures
limitation covenant.
The Company believes that its cash flow from operations will allow it to
meet its liquidity requirements, including debt service and capital
expenditures, during the foreseeable future. However, the Company's ability
to make principal and interest payments on its outstanding indebtedness and to
comply with the financial covenants under its debt agreements, including a
current ratio, an interest coverage ratio, a leverage ratio and a net worth
test, is dependent upon the Company's future performance and business growth,
which are subject to financial, economic, competitive and other factors
affecting the Company and its subsidiaries, many of which are beyond the
Company's control.
The Company's debt agreements and certain other agreements materially
restrict the Company from paying dividends on or redeeming capital stock. See
Note 6(e) to the Consolidated Financial Statements.<PAGE>
10
Capital Expenditures
The Company allocates funds for capital expenditures based on its capital
needs indicated by its long-term planning and availability of internally
generated funds or suitable long-term financing.
Capital expenditures for 1994 were $140.7 million, which included
expansion of train handling capacity from the Powder River Basin by WRPI,
expansion of the Company's Global Two double-stack terminal and construction
of new facilities to serve shippers.
The Company's 1995 capital expenditures are currently budgeted at
approximately $144 million. The majority of the capital expenditures program
covers replacement of rail, ties and other track material system-wide,
expansion of WRPI train handling capacity and construction of new facilities
to serve shippers.
The Company acquired 128 locomotives and 1,598 freight cars under
operating leases with a cost to the lessors of approximately $279 million in
1994. The Company expects to acquire 52 locomotives and approximately 1,900
freight cars under operating leases which have a cost to the lessors of
approximately $185 million in 1995.
<PAGE>
1
CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Millions of dollars except for per share amounts
Years Ended December 31,
1994 1993 1992
Operating revenues $1,129.8 $1,043.2 $ 985.0
Operating expenses 903.9 834.1 810.8
Operating income $ 225.9 $ 209.1 $ 174.2
Other income, net 7.1 11.0 8.1
Interest expense 97.5 105.4 126.1
Income before income taxes $ 135.5 $ 114.7 $ 56.2
Income taxes 51.5 50.7 18.8
Income before extraordinary item
and cumulative effect of a
change in method of accounting $ 84.0 $ 64.0 $ 37.4
Extraordinary loss on prepayment of
long-term debt, net of income taxes - (10.8) (91.0)
Cumulative effect of a change in method
of accounting for other postretirement
benefits, net of income taxes - - (2.6)
Net income (loss) $ 84.0 $ 53.2 $ (56.2)
Preferred stock dividends - - 11.9
Excess of liquidation value over
carrying value of preferred
stock called for redemption - - 46.8
Income (loss) available for
common shareholders $ 84.0 $ 53.2 $ (114.9)
Earnings (loss) per common share:
Before extraordinary item and
cumulative effect of a change
in method of accounting $ 1.86 $ 1.44 $ (.58)
Extraordinary item - (.24) (2.50)
Cumulative effect of a change in
method of accounting - - (.07)
Total $ 1.86 $ 1.20 $(3.15)
Shares used in earnings per share
computation (thousands) 45,092 44,261 36,457
See accompanying Notes to Consolidated Financial Statements.<PAGE>
2
CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
Millions of dollars
December 31,
1994 1993
ASSETS
Current assets:
Cash and cash equivalents $ 105.4 $ 70.9
Accounts receivable 143.7 140.9
Materials and supplies 27.6 27.7
Prepaid expenses and other 6.2 9.3
Total current assets $ 282.9 $ 248.8
Property:
Road $2,055.0 $1,938.6
Equipment 148.5 155.3
Accumulated depreciation (330.7) (273.1)
Net property $1,872.8 $1,820.8
Other assets $ 62.9 $ 66.3
Total assets $2,218.6 $2,135.9
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 212.1 $ 179.4
Payroll and vacation pay 35.6 35.3
Interest 10.7 10.9
Taxes 19.9 16.2
Total, excluding long-term debt
due within one year $ 278.3 $ 241.8
Long-term debt due within one year 95.4 58.9
$ 373.7 $ 300.7
Casualties and environmental reserves 76.7 78.3
Other liabilities 68.6 84.3
Deferred income taxes 350.0 303.6
Long-term debt, excluding amounts
due within one year 1,033.7 1,142.8
Total liabilities $1,902.7 $1,909.7
Shareholders' equity:
Common stock, par value $.01 per share,
authorized 250,000,000 shares of
which 125,000,000 are non-voting;
issued and outstanding 44,063,235
and 43,650,561 shares, respectively
(of which 12,835,304 are non-voting) $ 0.4 $ 0.4
Capital surplus 543.2 537.5
Retained income (227.7) (311.7)
Total shareholders' equity $ 315.9 $ 226.2
Total liabilities and shareholders' equity $2,218.6 $2,135.9
See accompanying Notes to Consolidated Financial Statements.<PAGE>
3
CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Millions of dollars
Years Ended December 31,
1994 1993 1992
Cash flow from operating activities:
Net income (loss) $ 84.0 $ 53.2 $ (56.2)
Items not affecting cash flow from
operating activities:
Depreciation 73.9 68.8 64.9
Amortization of debt cost 7.2 8.1 8.7
Gain from sales of property, net (1.0) (4.4) (1.9)
Deferred income taxes 49.3 49.4 18.8
Extraordinary items, net - 10.8 91.0
Cumulative effect of a change
in method of accounting - - 2.6
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (2.8) (11.2) 25.2
(Increase) decrease in other current
assets except cash 3.2 3.8 7.1
Increase (decrease) in accounts payable
and accruals 36.5 5.6 (39.3)
Other, net (20.7) (3.5) 7.2
Net cash flow from operating activities $ 229.6 $ 180.6 $ 128.1
Cash flow from financing activities:
Proceeds from debt financing $ 0.1 $ 6.7 $ 758.5
Proceeds from sale of common stock 2.8 26.4 216.0
Payments on debt (57.2) (50.9) (54.1)
Prepayment on long-term debt (16.0) (32.9) (842.9)
Repurchase of interest rate swap agreements - - (7.2)
Redeem preferred stock - - (124.7)
Net cash flow used for
financing activities $ (70.3) $ (50.7) $ (54.4)
Cash flow from investing activities:
Additions to property $(140.7) $(115.4) $ (83.3)
Proceeds from property dispositions 14.5 9.9 12.8
Other, net 1.4 2.3 (2.5)
Net cash flow used for
investing activities $(124.8) $(103.2) $ (73.0)
Increase in cash and cash equivalents $ 34.5 $ 26.7 $ 0.7
Cash and cash equivalents -
Beginning of period 70.9 44.2 43.5
End of period $ 105.4 $ 70.9 $ 44.2
See accompanying Notes to Consolidated Financial Statements.<PAGE>
4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING POLICIES
a) Principles of Consolidation.
The consolidated financial statements reflect the results of
operations and financial position of the Company and its subsidiaries.
All significant intercompany transactions have been eliminated. The
Company's primary subsidiaries are the Chicago and North Western Railway
Company (the "Railway") and Western Railroad Properties, Incorporated
("WRPI").
WRPI's operations consist of the movement of unit coal trains from
the southern Powder River Basin in Wyoming to a connection with the Union
Pacific Railroad in Nebraska. The Railway operates WRPI under an agency
agreement. WRPI's assets include a 103-mile rail line, jointly owned
with the Burlington Northern Railroad; 101 miles of track and support
facilities financed by a capital lease with a trust ("WRPI Trust") for
the benefit of a subsidiary of Union Pacific Corporation (together with
its subsidiaries "UP"); a wholly-owned, six-mile rail line; and certain
other assets.
b) Derivative Financial Instruments.
The Company uses a program of financial derivatives to limit its
exposure to interest rate volatility and fuel commodity price risks.
Derivatives are not held or issued for trading purposes and, therefore,
are not marked to market.
The Company is exposed to losses in the event of nonperformance by
counterparties to its derivative instruments. The Company anticipates
that the counterparties, each a financial institution with a minimum of
an "A" rating, will be able to fully satisfy their obligations under the
contracts.
The Company's interest rate program includes the use of swap
agreements and caps. Gains and losses are reported as interest expense
in the period realized. (See note 4 for descriptions of the classes of
interest rate derivatives.)
The Company's fuel program uses collars and caps. Gains or losses
are reported as fuel expense in the period realized. As of December 31,
1994, the Company had purchased collars with a floor of 44 cents per
gallon and a ceiling of 56 cents per gallon covering ten million gallons
of fuel per month (the Company's approximate usage) for January through
June 1995.
c) Revenue Recognition.
The Company recognizes transportation revenue proportionately as
shipments move from origin to destination.<PAGE>
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Cont'd.)
d) Cash Equivalents.
Cash equivalents are highly liquid short-term investments purchased
less than ninety days from maturity and recorded at cost.
e) Materials and Supplies.
Materials and supplies, which consist mainly of fuel oil and items to
be used for maintenance and capital additions to road and equipment
properties, are stated at average cost.
f) Property and Depreciation.
Property balances include assets under capital leases with costs
(before accumulated depreciation) of $255.9 million and $256.6 million at
December 31, 1994 and 1993, respectively.
Depreciation is provided at composite straight-line rates except for
the track structure components of WRPI, which are depreciated on the unit
of production method. For 1994, 1993 and 1992, the overall depreciation
provision approximated an annual rate of 4.2%, 4.4% and 4.2%,
respectively, of depreciable property.
Additions and renewals constituting a unit of property are
capitalized. Other renewals, repairs and maintenance are charged to
expense. Track removal costs and costs of units of property retired or
replaced, less salvage, are charged to accumulated depreciation.
Overhead costs related to assets constructed by Company personnel are
capitalized.
g) Changes in Method of Accounting.
Effective January 1, 1992, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions" and SFAS No. 112,
"Employers' Accounting for Postemployment Benefits."<PAGE>
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Cont'd.)
2. INCOME TAXES
The provision (benefit) for income taxes consisted of the following:
Years ended December 31,
1994 1993 1992
(Millions of dollars)
Provision (benefit) from:
Continuing operations $ 51.5 $ 50.7 $ 18.8
Extraordinary loss - (6.6) (57.0)
Change in method of accounting - - (1.5)
Total income tax provision (benefit) $ 51.5 $ 44.1 $(39.7)
Current - Federal $ 2.2 $ 1.3 $ -
- State - - -
Deferred 20.0 26.7 3.9
Loss carryover benefit used (generated) 29.3 16.1 (40.8)
Reduction of deferred tax asset
valuation allowance - - (2.8)
Total income tax provision (benefit) $ 51.5 $ 44.1 $(39.7)
The 1993 provision includes a $7.1 million charge to reflect the effect
of the increase in the federal corporate tax rate on the deferred tax balance
as of December 31, 1992.
Total income taxes reflected in the Consolidated Statement of Income
differ from the amounts computed by applying the federal statutory corporate
tax rate as follows:
Years ended December 31,
1994 1993 1992
(Millions of dollars)
Tax provision (benefit):
At the federal statutory rate $ 45.2 $ 32.5 $(30.4)
Change in federal corporate tax rate - 7.1 -
Reduction of deferred tax asset
valuation allowance - - (2.8)
Federal income tax provision $ 45.2 $ 39.6 $(33.2)
State income tax provision 6.3 4.5 (6.5)
Total income tax provision (benefit) $ 51.5 $ 44.1 $(39.7)
As of December 31, 1994, the Company has net operating losses (NOLs) of
approximately $132 million and $50 million for regular and alternative minimum
taxes (AMTs), respectively. The Company's NOLs are recognized for financial
statement purposes as a reduction of the deferred tax liability and expire as
follows:
2000 $ 27 million
2002 5 million
2008 100 million<PAGE>
7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Cont'd.)
In addition, the Company has approximately $43 million of investment tax
credits for tax return purposes which expire as follows:
1995 $ 10 million 1999 $ 9 million
1996 8 million 2000 5 million
1997 5 million 2001 2 million
1998 4 million
These investment tax credits are subject to certain limitations as to
their future use. For financial statement purposes, the Company has
established a $31 million valuation reserve for credits which are unlikely to
be used. The estimate of NOLs and ITCs likely to be used was determined
using internal Company projections of future taxable income. The Company
generated book income before income taxes of $136 million in 1994 and $97
million in 1993 and a book loss before income taxes of $96 million in 1992.
Taxable gains for 1994 and 1993 were somewhat lower, while the taxable loss
for 1992 is somewhat higher, primarily due to temporary differences related to
property additions. The Company's projections to support the recognition of
these deferred tax assets do not require continued operating income
improvements.
The components of the deferred tax liability include:
Amounts as of
December 31,
1994 1993
(millions of dollars)
Deferred tax liabilities:
Depreciation and basis differences $ 534.6 $ 512.9
All other 8.0 15.4
Total deferred tax liabilities $ 542.6 $ 528.3
Deferred tax assets:
Property treated as leased for tax purposes $ (57.6) $ (59.6)
Tax loss carryforwards (50.2) (79.5)
Accruals and reserves (60.4) (59.2)
Investment tax credit carryforwards, net of
valuation reserves of $31.4 and $37.6 (11.5) (11.5)
All other (12.9) (14.9)
Total deferred tax assets $(192.6) $(224.7)
Net deferred income tax liability $ 350.0 $ 303.6
3. OTHER INCOME, NET:
Years ended December 31,
(millions of dollars) 1994 1993 1992
Interest income $ 4.3 $ 2.5 $ 2.8
Gains from sales of property and investments 1.0 6.0 1.9
Rents from property not used for operations 3.2 3.9 3.7
Financing commitment and amendment fees (1.8) (0.6) (0.8)
Proceeds from note receivable
previously written-off 3.3 - -
Other, net (2.9) (0.8) 0.5
Total $ 7.1 $11.0 $ 8.1
<PAGE>
8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Cont'd.)
4. LONG-TERM DEBT
a) Non-Current Portion of Long-Term Debt:
Amounts as of
December 31,
1994 1993
(Millions of dollars)
C&NW Railway:
9.92% Senior Secured Notes
due from 1998 to 2001 $ 465.0 $ 465.0
Term Loan due from 1996 to 1997 39.1 72.5
Standby Loan due from 1996 to 1998 96.6 132.7
Equipment and other obligations
due from 1996 to 2006 33.5 41.5
Capital lease obligations due from
1996 to 2005 (Note 5) 15.2 18.7
Total C&NW Railway $ 649.4 $ 730.4
WRPI:
Term Loan due from 1996 to 2002 $ 248.4 $ 275.8
Capital lease with WRPI Trust
due from 1996 to 2002 (Note 5) 104.7 104.7
Capital lease with UP due from
1996 to 2011 (Note 5) 31.2 31.9
Total WRPI $ 384.3 $ 412.4
Total $1,033.7 $1,142.8
b) C&NW Railway Debt.
The 9.92% Senior Secured Notes are fixed rate obligations; however,
in order to take advantage of relatively low floating rates, the Company,
in 1992 reverse swapped $425 million of those obligations to floating
through January, 1996. Under the terms of those reverse swaps, the
Company receives an average of 7.8% and pays three-month LIBOR.
The Term Loan and Standby Loan bear interest at a floating rate equal
to (at the Company's option) either: i) the Adjusted LIBOR Rate plus
1.5%; ii) the Alternate Base Rate plus 0.5% or iii) the Adjusted CD rate
plus 1.625% (in each case as defined in the credit agreement). The
composite interest rates for C&NW Railway debt net of the effect of
interest rate cap, swap and reverse swap agreements at December 31, 1994,
1993 and 1992, were 8.4%, 7.1% and 8.3%, respectively. As of December
31, 1994 and 1993, interest rates on $635.5 million and $678.7 million,
respectively, of debt floated with short-term interest rates; these
amounts included $425 million of fixed rate debt referred to above,
reverse swapped to floating.
The Company has hedged the interest rate exposure related to its
floating rate Railway debt, including fixed rate debt reserve swapped to
floating, by entering into interest rate swap agreements covering $450
million of debt through April 15, 1995, whereby the railroad pays an
average fixed rate of 6.3% and receives the three-month LIBOR. The
railroad is also a party to interest rate swap agreements covering $260
million of debt from April 15, 1995 to January 15, 1996 whereby the
railroad pays an average fixed rate of 6.8% and receives the three-month
LIBOR.<PAGE>
9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Cont'd.)
Additionally, the railway has entered various interest rate cap
agreements under which LIBOR is effectively capped as follows:
$250 million; LIBOR capped at 5.0% through 4/15/95
$100 million; LIBOR capped at 7.0% from 4/15/95 to 1/15/96
$100 million; LIBOR capped at 5.0% from 4/15/95 to 1/15/96
See Note 12 for a discussion of the Company's 1992 recapitalization.
c) WRPI Debt.
WRPI's debt consists of a Term Loan, a capital lease obligation to
WRPI Trust and a capital lease obligation to UP.
The Term Loan and capital lease with WRPI Trust bear interest at
floating rates calculated at the option of WRPI or the WRPI Trust, as
applicable, equal to either: i) the Adjusted LIBOR Rate plus 1.25%; ii)
the Alternate Base Rate plus 0.25% or iii) the Adjusted CD Rate plus
1.375% (in each case as defined in WRPI's debt agreement). The capital
lease with UP bears interest at 12% per annum.
The composite interest rates, net of the effect of interest rate cap
and swap agreements as of December 31, 1994, 1993 and 1992 were 8.5%,
7.1% and 7.2%, respectively.
WRPI has hedged its floating rate interest exposure by entering
interest rate swap agreements covering $165 million of debt, through
February 7, 1996, whereby WRPI pays an average fixed rate of 8.2% and
receives three month LIBOR. Additionally, WRPI has entered various
interest rate cap agreements under which LIBOR on $200 million of debt is
effectively capped at 7.0% from April 15, 1995 to January 15, 1996 and
LIBOR on $300 million of debt is effectively capped at 8.0% from January
15, 1996 to January 15, 1997.
d) Annual Debt Payments.
Scheduled principal payments (including capital lease obligations)
due in 1995 through 1999 are as follows:
C&NW
Railway WRPI Total
(millions of dollars)
1995 $ 72.7 $ 22.7 $ 95.4
1996 80.9 25.0 105.9
1997 60.5 32.1 92.6
1998 137.5 37.2 174.7
1999 121.6 22.9 144.5
The WRPI Term Loan and capital lease obligation to WRPI Trust require
accelerated debt payments subsequent to December 31, 1996 if there is
excess cash flow as defined in the WRPI Loan agreement.<PAGE>
10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Cont'd.)
e) Principal Encumbrances.
Borrowings under the Railway's Senior Secured Notes and Term and
Standby Loans are secured by the assets and guarantees of all of the
Company's subsidiaries other than WRPI. Borrowings under WRPI's Term
Loan and capital lease with WRPI Trust are secured by WRPI's assets,
excluding certain intercompany loans.
f) Extraordinary Items.
The 1993 extraordinary loss resulted from the refinancing of a
portion of the Railway's Term and Standby Loans. The total pretax loss
was $17.4 million and the related income tax benefit was $6.6 million.
The 1992 extraordinary loss resulted primarily from the retirement of
debentures in connection with the Recapitalization (see Note 12). The
total pretax loss was $148.0 million and the related income tax benefit
was $57.0 million.
5. LONG-TERM LEASES
The Company has substantial lease commitments for rolling stock, vehicles
and portions of the track structure and related facilities of WRPI. Those
leases which meet the criteria established by SFAS No. 13 are capitalized.
The remainder are reported as operating leases.
Minimum annual rental commitments for noncancelable leases at December
31, 1994 were as follows:
Capital leases
Operating
C&NW Railway WRPI leases
(Millions of dollars)
1995 $ 5.1 $ 13.5 $ 117.5
1996 4.1 13.5 115.8
1997 2.7 13.5 108.3
1998 2.7 13.5 103.6
1999 2.7 13.5 100.8
After 1999 9.8 178.7 735.2
Total $ 27.1 $246.2 $1,281.2
Less imputed interest
(at rates from 6.15% to 12.5%) 8.6 109.6
Present value of net minimum
lease payments $ 18.5 $136.6
The Company's lease agreements have terms of 3 to 28 years and expiration
dates ranging from 1995 to 2018. The majority of the leases contain options
allowing the Company a right of first refusal to purchase the leased property
at the end of the lease for fair market value, or at a set percentage of its
cost.
Lease rental expense for operating leases, including cancelable leases,
was $126.6 million in 1994 and $111.3 million in 1993 and 1992.<PAGE>
11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Cont'd.)
The above amounts include insignificant amounts of rental income from
subleases. Excluded from such amounts are contingent rentals on freight cars
based on off-line car hire earnings of $0.5 million, $0.3 million and $0.9
million in 1994, 1993 and 1992, respectively. Also excluded from the above
amounts are contingent rentals payable by WRPI out of its cash flow of $14.0
million for 1994, $18.2 million for 1993 and $15.6 million for 1992.
6. SHAREHOLDERS' EQUITY
a) Changes in Shareholders' Equity.
(millions of dollars)
Common Capital Retained
stock surplus income
December 31, 1991 $ 0.2 $112.5 $(211.2)
Issuance of common stock 0.2 395.7 (38.8)
Net loss for the period - - (56.2)
Exercise of stock options - 0.3 -
Dividends on and accretion of
preferred stock* - - (11.9)
Excess of liquidation value over
carrying value of preferred stock
called for redemption* - - (46.8)
December 31, 1992 $ 0.4 $508.5 $(364.9)
Net income for the period - - 53.2
Issuance of common stock - 24.4 -
Exercise of stock options - 4.6 -
December 31, 1993 $ 0.4 $537.5 $(311.7)
Net income for the period - - 84.0
Exercise of stock options - 5.7 -
December 31, 1994 $ 0.4 $543.2 $(227.7)
*Preferred dividends of the Company, all paid in additional shares, were
13% per annum for each share of UP Convertible Preferred Stock, and 17%
per annum for each share of Merger Preferred Stock. See Note 12 for
discussion of preferred stock redemption.
b) Preferred Stock.
The authorized capital stock of the Company includes 15 million
shares of preferred stock, par value $.01 per share. There is no
preferred stock outstanding at December 31, 1994.<PAGE>
12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Cont'd.)
c) Secondary Stock Offering.
In 1993 Blackstone Capital Partners, L.P. ("Blackstone"), DLJ Capital
Corporation ("DLJ"), and related investors sold substantially all of
their respective shares in a secondary offering at $19.25 per share. UP
Rail, Inc. ("UP Rail"), a subsidiary of Union Pacific Corporation,
purchased 500,000 shares from the selling shareholders, thereby
increasing its ownership to 12,835,304 shares, all of which are non-
voting. On January 29, 1993, Union Pacific Corporation filed an
application with the ICC requesting approval to convert the non-voting
common stock to common stock. On December 13, 1994, the ICC in a voting
conference orally approved the conversion subject to certain conditions;
however, on release of a written Commission order the Company and Union
Pacific must determine if the conditions to the conversion are
acceptable. The Company must accept the conditions if they are
acceptable to the Union Pacific and if the cost of compliance can
reasonably be determined and if the Union Pacific shall have fully and
adequately indemnified the Company and its affiliates.
In connection with the secondary offering, the underwriters exercised
overallotment options under which the Company issued an additional
1,371,265 shares of common stock for which it received net proceeds after
underwriting discount and issuance expenses of approximately $24.4
million. Such net proceeds were used for the payment of a portion of the
amounts owing under the Company's debt agreements.
d) Stock Option Agreements.
1,820,012 options on common stock, with an exercise price of $5.88,
were granted in 1989 and an additional 247,582 such options were granted
in 1990. As of December 31, 1994, 785,218 options had been exercised,
113,484 had been canceled and 1,168,892 were exercisable. In addition,
323,542 options, all of which are exercisable, with exercise prices
between $1.09 and $2.07 were granted in 1989 to certain executives. As
of December 31, 1994, 62,500 of the 323,542 options have been exercised.
All options expire on the tenth anniversary of the grant date or earlier
under certain circumstances.
1,000,000 options, with an exercise price of $21.375 were granted on
December 8, 1992. An additional 359,500 options were granted during
1994, with exercise prices between $20.125 and $22.625. These options
become exercisable for 20% of the shares subject thereto, annually,
beginning on the first anniversary of the grant date and expire on the
tenth anniversary of the grant date. As of December 31, 1994, 16,400
options have been exercised, 32,800 have been canceled and 374,800 are
exercisable. Additionally, 740,107 and 2,000,000 options are available
to be granted under the 1992 and 1994 stock option plans, respectively.
e) Dividend Restrictions.
The Company's debt agreements limit the payment of dividends or
making other distributions with respect to the common stock to 10% of
income, as defined by the debt agreements, plus the amount of proceeds
from equity issuances subsequent to the Recapitalization. As of December
31, 1994, the Company's potential dividend payments were limited to
approximately $40 million.<PAGE>
13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Cont'd.)
7. EMPLOYEE BENEFIT PLANS
a) Pensions.
The Company has a noncontributory defined benefit pension plan for
employees who are not covered by a collective bargaining agreement. The
benefits are based on years of service and the employee's average
compensation over the last five years of employment. These benefits are
reduced by eligible retirement benefits under the Company's Profit
Sharing and Retirement Savings Plan and the Railroad Retirement Act. The
Company makes annual contributions to the plan based on actuarial
determinations and cash requirements. The plan's assets are invested in
a guaranteed investment contract with an insurance company.
Net pension expense was $0.3 million in each of 1994, 1993 and 1992,
which consisted primarily of interest on the projected benefit
obligation. The projected benefit obligation was $5.7 million and $7.0
million as of December 31, 1994 and 1993, respectively.
The Company has accrued pension liabilities of $4.1 million and $4.3
million as of December 31, 1994 and 1993, respectively, consisting of the
projected benefit obligation and unrecognized net gains (losses) less the
fair value of plan assets. The fair value of plan assets was $2.3
million and $2.9 million as of December 31, 1994 and 1993, respectively.
Pension expense was determined using a weighted average discount rate
of 7.0% for 1994 and 8.25% for 1993. The projected benefit obligation
was determined using a weighted average discount rate of 8.5% at December
31, 1994 and 7.0% at December 31, 1993. The expected long-term rate of
return on plan assets was 8.75%. The assumed rate of compensation
increase was 6.0% at December 31, 1994 and 1993.
b) Postemployment Benefits
SFAS No. 106 primarily affects the Company's plan under which life
insurance is provided for retired employees not covered under collective
bargaining agreements. The Company's plan is unfunded. Operating
expense of $0.4 million was recognized in each of 1994, 1993, and 1992,
consisting primarily of interest on the accumulated postretirement
benefit obligation.
Certain employees not covered by collective bargaining agreements
also have received postretirement health care benefits to age 65 under
special employee severance programs. The amount paid for these benefits,
which was accrued by the Company prior to the employees' retirement was
$1.6 million in 1994, $1.2 million in 1993 and $1.1 million in 1992.
The Company provides health care benefits through a multi-employer
insurance plan for retired employees between the ages of 62 and 65 who
are covered by collective bargaining agreements. The cost of these
benefits for retired employees was $1.6 million in 1994 and $1.7 million
in 1993 and 1992.<PAGE>
14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Cont'd.)
8. CONTINGENT LIABILITIES AND COMMITMENTS
The Company expects to expend $144 million for 1995 capital projects and
plans to acquire equipment under operating leases with a cost to the lessors
of $185 million.
The Company's operations are subject to a variety of federal, state and
local environmental and pollution control statutes and regulations. The
Company has been named as a potentially responsible party ("PRP") in three
proceedings under the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), and in five state Superfund
matters, all but one of which is in the Midwest. The Company is also a
defendant in one private CERCLA cost recovery action. The current estimate of
the total cost of remediation for CERCLA, state and private cost recovery
proceedings to all PRPs aggregates approximately $82 million. The Company has
assumed that other PRPs will pay appropriate shares of remediation
obligations, except when the Company is aware they are incapable of doing so.
In such instances, the Company has reapportioned the potential liability and
provided a reserve.
The Company is the lessor of real property under approximately 1,600
leases for commercial, agricultural and industrial uses and owns or leases
numerous other sites. The Company has additionally provided reserves for
environmental exposure from current and former railroad operating properties,
fueling facilities, leased properties and pending litigation and enforcement
actions. The Company's environmental exposure is reevaluated periodically.
At December 31, 1994, the Company's reserve for environmental liabilities
was $30 million. No offsets were credited for possible insurance recoveries,
as the Company believes, to a large extent, it would not be able to obtain
such recoveries. The reserve was determined based on the Company's
anticipated cost of remediation at all known sites, including those where no
claim or enforcement action has been issued, taking into consideration the
extent of damage and the Company's remediation cost history. The Company has
not discounted its environmental liabilities as the timing of remediation
payments is uncertain. Environmental regulations and remediation processes
are subject to future change, and determining the actual cost of remediation
will require further investigation and remediation experience. Therefore, the
ultimate cost cannot be determined at this time. However, while such cost may
vary from the Company's current estimate, the Company believes the difference
between its reserve and the ultimate liability will not be material.
The Railroad is a party to service interruption insurance agreements under
which additional premiums of up to a maximum of $18.7 million may arise in the
event of work stoppages on other railroads. Conversely, the Railroad is
entitled to receive payments under certain conditions if a work stoppage
occurs on its property.
The Company is a party to a number of other legal actions arising in the
ordinary course of business, including actions involving personal injury
claims. The Company believes that the legal actions will not have a material
adverse impact upon the financial position or results of operations of the
Company.<PAGE>
15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Cont'd.)
9. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(millions of dollars except per share amounts)
1994 Quarters Ended March 31 June 30 September 30 December 31
Operating revenues $273.9 $282.6 $290.7 $282.6
Operating income 48.2 53.3 67.9 56.5 a/
Net income 16.0 21.5 27.1 19.4
Net income per share .35 .47 .60 .43
(millions of dollars except per share amounts)
1993 Quarters Ended March 31 June 30 September 30 December 31
Operating revenues $254.7 $257.0 $262.9 $268.6
Operating income 45.6 52.7 49.2 b/ 61.6
Income before
extraordinary item 14.6 18.7 6.2 24.5
Net income (loss) 14.6 18.7 (4.6) c/ 24.5
Income before extraordinary
item per share .33 .43 .14 .54
Net income (loss) per share .33 .43 (.10) .54
a/ Includes $4.8 million charge for employee buyouts and related costs.
b/ Includes $5.0 million charge for employee buyouts, relocation costs and a
management fee payable to one of the Company's previous principal
shareholders.
c/ Includes a $10.8 million extraordinary charge from a debt refinancing.
10. RELATED PARTY TRANSACTIONS
Union Pacific Corporation and its subsidiaries ("UP") are related parties
as a result of their ownership of common stock of the Company. Blackstone is
a related party as James J. Mossman, a general partner, is a member of the
Company's Board of Directors. DLJ was formerly a related party as a result of
its or its affiliates' ownership of common stock of the Company
The Company paid Blackstone $250,000 in 1994 and $1.0 million in each of
1993 and 1992 for management and advisory fees, and $1.2 million in 1992 with
respect to the Recapitalization. The Company paid DLJ $1.2 million in fees in
1992 related to the Recapitalization. In addition, DLJ, acting as a lead
underwriter, realized aggregate selling concessions of $2.3 million in
connection with the Company's 1993 secondary offering and $4.1 million in
connection with the Company's 1992 stock offering.<PAGE>
16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Cont'd.)
In connection with the Recapitalization, the Company exchanged 10,153,304
shares of non-voting common stock for the outstanding UP Convertible Preferred
Stock and an additional cash investment of $28 million. In connection with
the secondary offering, UP Rail purchased an additional 500,000 shares of non-
voting common stock. See Note 6(c).
Approximately 67% of the Company's total loads in 1994, 65% in 1993 and
62% in 1992 were interchanged with the UP with revenue shared in accordance
with standard industry procedures. Pursuant to a trackage rights agreement,
approved by the Interstate Commerce Commission, among the Company and
subsidiaries of UP, the Company hauls certain traffic for subsidiaries of UP
under terms that preserve the Company's revenue on that traffic. Note 5
details WRPI capital lease payments (including contingent rent payable out of
cash flow) made to a trust for the benefit of a subsidiary of UP.
11. OTHER DISCLOSURES
a) Additional Disclosures for Consolidated Statement of Cash Flows.
The following cash payments occurred in the periods shown:
1994 1993 1992
(millions of dollars)
Interest $ 90.0 $103.0 $118.6
Income taxes 2.7 .9 -
Noncash financing activities of the Company consisted of UP
convertible preferred stock dividends of $4.8 million and a $141.4
million exchange of UP convertible preferred stock for non-voting common
stock in 1992.
b) Cash Resources.
The Company has a credit line available through a $50 million
revolving credit facility. Approximately $45 million was available under
this credit line as of December 31, 1994.
c) Concentration of Credit Risk.
The Company is not dependent upon a single customer or on a few
customers. However, approximately 35% of the Company's 1994 traffic was
coal, primarily destined to electric utilities in the United States.
Approximately 67% of the Company's 1994 traffic was interchanged with
subsidiaries of the Union Pacific Corporation.<PAGE>
17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Cont'd.)
d) Fair Value of Financial Instruments.
The estimated fair value of the Company's financial instruments as of
December 31, 1994 was as follows:
Carrying Fair
value value
(millions of dollars)
Assets:
Cash and cash equivalents $ 105.4 $ 105.4
Other current assets 177.5 177.5
Investments 5.5 5.5
Interest rate and fuel price hedges - 9.9
Liabilities:
Current liabilities 373.7 373.7
Long-term debt 1,033.7 1,060.1
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments:
Current Assets and Current Liabilities: The carrying value
approximates fair value due to the short maturity of these items.
Investments: The Company has a minor amount of assets accounted for
on the cost basis for which the Company believes the carrying value
approximates fair value.
Long-Term Debt: The fair value of long-term debt and related swaps
is estimated based on quoted market prices for similar issues.
12. RECAPITALIZATION
On April 7, 1992, the Company issued 20,069,463 shares of common stock,
of which 9,916,159 shares were issued to the public and 10,153,304 non-voting
shares were issued to UP Rail as part of a recapitalization plan (the
"Recapitalization") to: (i) eliminate dividends on its 17% cumulative
exchangeable preferred stock, par value $.01 per share (the "merger preferred
stock") and 13% cumulative convertible exchangeable senior pay-in-kind
preferred stock, par value $.01 per share (the "UP convertible preferred
stock") issued in connection with the acquisition of CNW Corporation in 1989
(the "Acquisition"); (ii) increase common shareholders' equity; and (iii)
reduce the interest costs of the Company's consolidated indebtedness. The
principal sources of funds in the Recapitalization were: (i) the public
common stock issuance; (ii) new senior secured debt facilities for borrowings
of up to $850 million; and (iii) an investment by UP Rail of $28 million,
along with the surrender of the UP convertible preferred stock in exchange for
the issuance of non-voting common stock to UP Rail.<PAGE>
18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Cont'd.)
The proceeds of the Recapitalization (approximately $1.2 billion) were
used to: (i) redeem all of the issued and outstanding shares of merger
preferred stock at an aggregate redemption price equal to its liquidation
value plus accrued and unpaid dividends to the redemption date of May 8, 1992;
(ii) prepay all borrowings outstanding under the credit agreement (the "Merger
Credit Agreement") entered into in connection with the Acquisition; (iii)
retire $362 million of the 15-1/2% senior subordinated debentures due 2001
(the "Debentures") issued by a subsidiary of the Company in connection with
the Acquisition; (iv) exchange all of the issued and outstanding shares of UP
convertible preferred stock (plus an additional cash investment by UP Rail of
$28 million) for 10,153,304 shares of non-voting common stock; (v) fund a
portion of employee severance costs; (vi) terminate certain interest rate swap
agreements; and (vii) pay financing and transaction costs. In connection with
the Recapitalization, the Company recorded a first quarter after-tax
extraordinary charge to earnings of approximately $91 million (net of $57
million of income taxes) related to the retirement of the Debentures and the
termination of the Merger Credit Agreement and a charge of approximately $47
million to accrete the merger preferred stock to its liquidation value.
Concurrent with the common stock issuance, the Company effected an 32.25-
for-one stock split. Share and per share data included in the Consolidated
Financial Statements have been restated for the stock split.
On a pro forma basis, as of January 1, 1992, the Recapitalization would
have reduced 1992 interest expense by $9.2 million and eliminated all
preferred stock dividends.<PAGE>
19
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Chicago and North Western Transportation Company:
We have audited the accompanying consolidated balance sheets of Chicago
and North Western Transportation Company (a Delaware corporation) and
subsidiaries as of December 31, 1994 and 1993, and the related consolidated
statements of income and cash flows for each of the three years in the period
ended December 31, 1994. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Chicago and North
Western Transportation Company and subsidiaries as of December 31, 1994 and
1993, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles.
As explained in Note 1(g) to the financial statements, effective January
1, 1992, the Company changed its method of accounting for other postretirement
benefits.
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 27, 1995<PAGE>
SUBSIDIARIES OF CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY
State of
Incorporation
Chicago and North Western Railway Company Delaware
Environmental Railroad Properties, Incorporated Delaware
Midwestern Railroad Properties, Incorporated Delaware
North Western Leasing Company Delaware
Signage, Inc. Delaware
Western Railroad Properties, Incorporated Delaware
Wisconsin Town Lot Company Wisconsin
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
December 31, 1994 Consolidated Statement of Income and Balance Sheet of
Chicago and North Western Transportation Company and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 105,400
<SECURITIES> 0
<RECEIVABLES> 143,700
<ALLOWANCES> 300
<INVENTORY> 27,600
<CURRENT-ASSETS> 282,900
<PP&E> 2,203,500
<DEPRECIATION> 330,700
<TOTAL-ASSETS> 2,218,600
<CURRENT-LIABILITIES> 373,700
<BONDS> 1,033,700
<COMMON> 400
0
0
<OTHER-SE> 315,500
<TOTAL-LIABILITY-AND-EQUITY> 2,218,600
<SALES> 0
<TOTAL-REVENUES> 1,129,800
<CGS> 0
<TOTAL-COSTS> 903,900
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 300
<INTEREST-EXPENSE> 97,500
<INCOME-PRETAX> 135,500
<INCOME-TAX> 51,500
<INCOME-CONTINUING> 84,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 84,000
<EPS-PRIMARY> 1.86
<EPS-DILUTED> 1.86
</TABLE>
Release Date: Immediate NEWS RELEASE
Media Contacts: Gary Schuster
UNP
(610) 861-3382
Michael W. Payette
CNW
(312) 633-4310
UNION PACIFIC AND CHICAGO AND NORTH WESTERN
ANNOUNCE TRANSACTION
Chicago, Illinois, March 10, 1995 -- Union Pacific Corporation
(UNP) and Chicago and North Western Transportation Company (CNW)
announced today that they have agreed that Union Pacific will
acquire 100% of CNW's common stock at a price of $35 per share in
cash. The transaction is subject, among other things, to
negotiation and execution of a mutually satisfactory definitive
purchase agreement and approvals by the companies' respective
boards of directors.
"I am very excited about this transaction. The Chicago and
North Western is an excellent managed and maintained railroad
with a great route to Chicago," said Union Pacific Corporation
Chairman and CEO Drew Lewis. "This is a strategic move that will
make Union Pacific an even greater mover of southern Powder River
Basin coal, grain, intermodal and other products."
Union Pacific is a transportation and natural resource
company based in Bethlehem, Pennsylvania, with sales of
approximately $8 billion.
- more -
<PAGE>
- 2 -
The Chicago and North Western Transportation Company is the
holding company for the Chicago and North Western Railway
Company, a leading railroad freight hauler in the central
transcontinental corridor and major transporter of coal, grain
and double-stack containers.
# # # #
<PAGE>
Release Date: Immediate NEWS RELEASE
Media Contacts: Harvey Turner
UNP
(610) 861-3388
Michael W. Payette
CNW
(312) 633-4310
UNION PACIFIC AND CHICAGO AND NORTH WESTERN
EXECUTE DEFINITIVE AGREEMENT
Chicago, Illinois, March 17, 1995 -- Union Pacific Corporation
(UNP) and Chicago and North Western Transportation Company (CNW)
announced today that they have executed a definitive agreement
reflecting the previously announced transaction in which Union
Pacific will acquire 100 percent of CNW's common stock at a price
of $35 per share in cash. Union Pacific will shortly commence a
tender offer for all CNW shares. Following the consummation of
the tender offer, Union Pacific will acquire the remaining
outstanding CNW shares in a merger for $35 per share in cash.
"This acquisition will strengthen our capacity to compete in
the key western freight corridors," said Drew Lewis, Union
Pacific chairman and CEO. "It will increase Union Pacific's
growing intermodal traffic from the major West Coast ports to the
Midwest and enhance our low-sulfur coal shipments out of the
Powder River Basin in Wyoming to the Mississippi Valley and the
East. We are delighted to have this fine railroad joining the
Union Pacific family."
- more -
<PAGE>
- 2 -
"In addition to providing a substantial premium for our
shareholders," said Robert Schmiege, chairman, president and CEO
of the CNW, "this merger offers an opportunity for our customers
and virtually all of our employees to participate in a larger
railroad with broader horizons, greater resources and enhanced
opportunities for the marketing of our customers' products and
our employees' professional growth."
Union Pacific is a transportation and natural resource
company based in Bethlehem, Pennsylvania, with sales of
approximately $8 billion.
The Chicago and North Western Transportation Company is the
holding company for the Chicago and North Western Railway
Company, a leading railroad freight hauler in the central
transcontinental corridor and major transporter of coal, grain
and double-stack containers.
# # # #
<PAGE>
