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Wisconsin Central Shareholders Committee to Maximize Value
8600 West Bryn Mawr Avenue--Suite 500N
Chicago, Illinois 60631-3579
Telephone: 773-714-8669
November 13, 2000
Dear Wisconsin Central Employee Shareholder:
I am writing a special letter to our employee shareholders in connection
with the proposals of the Wisconsin Central Shareholders Committee to Maximize
Value. I continue to believe in you! WC employees are the finest group of rail
employees ever, and you can play an important role in restoring WC to its
proper position as an industry leader!
I want to comment on two aspects of our Committee's solicitation to
shareholders that are of particular importance to WC employees.
Handling of Proxies (Consent Cards)
I know that employees are concerned about management knowing how they have
voted. Several employees have told me that management has stated that they
will know how employees vote. This is untrue.
In fact, signed and dated white consent cards will be held by us, and will
never be seen by the Company until we believe a majority of shareholders have
signed onto our program. At that point, it should only be a short period of
time before the existing Board and top management will be out of office.
I am disappointed that employees have been threatened, but am not
surprised. It looks like a dirty fight ahead, and I expect to be attacked for
leading this shareholder revolt. You have the sole legal right to determine
how to vote your shares, and no one has the right to suggest that management
will monitor your decision. That such a situation could occur only increases
my determination to restore the teamwork and respect for all employees that
seems to have disappeared under current management.
The Committee's Position on Sale of the Company
Our Committee was formed to maximize shareholder value, and if our consent
solicitation is successful we will focus on that objective. Wisconsin
Central's value as a stand-alone railroad can be maximized by restoring the
growth we once took for granted, and also through a strong commitment to our
historic values of customer service, productivity, safety and control of
costs. With your help, we will work diligently to again bring these strengths
to the forefront.
However, synergies in revenues and operating expenses may make WC more
valuable as part of a larger system. If this turns out to be true, and we
receive an attractive offer from one of the major rail systems, we must
consider it seriously. Our shareholders expect no less, and our Committee is
supporting a sale of WC if the price is right.
We would suggest as part of such a sale that WC remain as a separate
company with its own management and employees. That is the only way that the
truly unique culture of WC could remain. We earned an enviable record of
customer service, productivity, and competitiveness in the past. It would be
in the great interest of an acquirer to see that this culture was maintained
at WC, and would be an excellent example to the balance of their rail system.
It is no secret that large railroads have not fared well in integrating
operations after mergers. In many such cases, the culture of the acquired
company was no better than that of the acquirer, but WC is different, and
therein lays our strength.
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Let me give you an example. Many large railroads have contracted out major
segments of their motive power maintenance. At WC, we occasionally contracted
out motive power projects as well. Our experience was that our own people did
a better job at lower cost than did the contract shops. I would expect that WC
would set the pace for major railroads in such maintenance activities, and as
such would be able to earn major rebuilding projects from the parent company.
With WC's record of productivity and quality, I have no doubt that we would do
well within a larger system if just allowed to be what we are, Wisconsin
Central!
You may view this as "having your cake and eating it too." It is. It would
put our Company in the hands of one of the strong national rail systems while
retaining our uniquely successful corporate culture.
CSX followed a similar policy in its recent purchase of the Paducah &
Louisville. The P&L has remained separate, and continues to excel very much as
it did as a customer-focused and well-managed regional railroad. This is a
good example to follow.
Our Committee has no talks underway with potential acquirers. As you know,
the Surface Transportation Board presently has a moratorium on rail merger
applications. We would not sell unless offered an attractive price and other
acceptable terms.
Contrast this careful program with the mimicking of our program by the
Company, and its hiring of Goldman Sachs to "advise"! In our view, Goldman
Sachs has neither the knowledge nor the standing in the rail industry to make
a deal that secures top price for the shareholders while considering employee
interests.
One word of caution. I remember when the Fox River Valley was being sold to
WC, union organizers successfully played up employee concerns, telling them
that they would receive no "labor protection" unless they belonged to a union.
This, also, was and is untrue. Labor protection in the case of mergers and
acquisitions applies to all employees, and is not dependent on union
membership. Union organizers took unfair advantage of worried FRVR employees,
and in many cases their activities resulted in implementing arrangements
inferior to arrangements made available to non-union employees.
If WC is sold under the conditions suggested by the Committee, disruption
to the workforce should be minimal in any case, and labor protection would
then not be an issue.
I felt I should mention this matter, as a number of employees told me that
morale is in the pits due to cutbacks imposed by management, thereby providing
a fertile field for the unions. I truly hope this does not become true, but
recognize the disappointment that many feel with management's abandonment of
the close relationship we once cherished.
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If the Committee is successful, my first objective will be to address
employee issues and take steps to restore the family spirit that was at the
heart of the phenomenal success we experienced. I sincerely regret that
present management seems to have disregarded the principles that worked so
well for all of us, our shareholders included.
While the objective of the Committee is to maximize shareholder value, I
never found this objective inconsistent with fostering excellent employee
relations, including good pay and benefits. In fact, I believe shareholder
value will never be achieved without total employee support, and I was
fortunate to have been backed by the best team in the business.
Some friends from Fond du Lac told me that someone in the shops asked Mr.
McCarren during the recent employee meeting "How can I believe you now, when
you didn't tell us the real reasons for Burkhardt's departure?" I understand
that Mr. McCarren's reply was that he "wanted me to go out on a high note."
Well, Mr. McCarren's definition of a "high note" doesn't match mine, just
as we differ on management style and Company performance issues. I have
considered inviting you to meetings to discuss these issues, but
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the thought of someone outside writing down the names of those attending has
caused me to abandon the idea. Instead, we will have those meetings after
victory, when we will really have something to celebrate. And that will be my
"high note"!
I am disappointed that Mr. McCarren once again didn't tell you the truth
when he reportedly said at recent employee meetings "this management will
never sell Wisconsin Central." It is increasingly evident why this Board and
management is so poorly thought of by WC employees.
Please give the Committee your support by signing, dating and returning the
enclosed WHITE consent card. You can be assured that we will hold the cards
until we believe we have enough to take control.
I invite you to stand beside us in this historic moment. I truly appreciate
your many calls of support.
I would like to be advised of any further attempts by Company
representatives to intimidate you with regard to your rights as a shareholder.
This is a decision you, and you alone, have the right to make.
I always enjoy hearing from you, and wish you and your families the very
best.
With warm regards,
Sincerely,
/s/ Edward A. Burkhardt
Edward A. Burkhardt
Chairman
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